Item
1.01 Entry into a Material Definitive Agreement
N&B
Energy Asset Disposition Agreement
On
July 12, 2018, Camber Energy, Inc. (the “
Company
”, “
we
” and “
us
”) entered
into an Asset Purchase Agreement (the “
Sale Agreement
”), as seller, with N&B Energy LLC, as purchaser, which
entity is affiliated with Richard N. Azar II, our former Chief Executive Officer and former director, and Donnie B. Seay, our former
director (“
N&B Energy
”). Pursuant to the Sale Agreement and the terms and conditions thereof, we agreed
to sell to N&B Energya substantial portion of our assets, including all of the assets we acquired pursuant to the terms of
our December 31, 2015 Asset Purchase Agreement with Segundo Resources, LLC (“
Segundo
”), which is owned and controlled
by Mr. Azar, and other sellers, and certain other more recent acquisitions, other than the production payment and overriding royalty
interests discussed below (the “
Assets
”). In consideration for the Assets, N&B Energy agreed to pay us $100
in cash, to assume all of our obligations and debt owed under our outstanding loan agreement and related note with International
Bank of Commerce (“
IBC
”), which has an outstanding principal balance of approximately $36.9 million as of the
date of this Report (such documents evidencing such assumption to be negotiated prior to closing, defined herein as the “
Assumption
Documents
”) and Segundo agreed to enter into the Segundo Settlement, described below.
In
the event the transaction is approved by the Company’s shareholders and closes, the Company will retain its assets in Glasscock
County and Hutchinson Counties, Texas and will also retain a 12.5% production payment (effective until a total of $2.5 million
has been received); a 3% overriding royalty interest in its existing Okfuskee County, Oklahoma asset; and will retain
an
overriding royalty interest on certain other undeveloped leasehold interests
.
The
parties currently anticipate the closing of the acquisition, which is subject to various closing conditions, including those described
below, to occur in or around September 2018, and to be effective as of the first day of the month preceding the month of closing.
For example, if closing occurs during the month of September 2018, the effective date will be August 1, 2018. The Assets will be
assigned “
as is
” with all faults.
The
Board of Directors of the Company has (i) adopted and declared advisable the Sale Agreement and the transactions contemplated by
the Sale Agreement, upon the terms and subject to the conditions set forth in the Sale Agreement; and (ii) determined that the
Sale Agreement and the transactions contemplated by the Sale Agreement are fair to, and in the best interests of, the Company and
its stockholders.
The
parties have made customary representations, warranties and covenants in the Sale Agreement including, among others, covenants
relating to (1) the conduct of each party’s business during the interim period between the execution of the Sale Agreement
and the consummation of the transactions described therein, (2) the Company’s obligations to facilitate its stockholders’
consideration of, and voting upon, the transactions contemplated by the Sale Agreement, and (3) the indemnification obligations
of the parties, subject to the limits of liability, deductibles and other terms set forth in the Sale Agreement.
The
acquisition is subject to customary closing conditions, including (1) approval of the disposition of the Assets by the stockholders
of the Company, (2) the approval of IBC and entry into assumption agreements between IBC, the Company, N&B Energy and the guarantors
of the Company’s IBC debt to provide for among other things, the release of the Company from any and all obligations owed
under such debt and related releases; (3) receipt of required regulatory approvals; (4) the absence of any law or order prohibiting
the consummation of the acquisition; and (5) satisfaction of due diligence by N&B Energy. Each party’s obligation to
complete the acquisition is also subject to certain additional customary conditions, including (a) subject to certain exceptions,
the accuracy of the representations and warranties of the other parties, and (b) performance in all material respects by the other
parties of its obligations under the Sale Agreement.
Each
of the Company and the N&B Energy agreed to pay all costs and expenses incurred by them in connection with the Sale Agreement.
The
Sale Agreement also includes customary termination provisions for both the Company and N&B Energy, which include, subject to
the terms of the Sale Agreement and in certain circumstances rights to cure or other prerequisites, that the Sale Agreement can
be terminated by us, if (i) our stockholders fail to approve the Asset Purchase at a meeting called for such purpose; (ii) if N&B
Energy fails to provide all required closing deliverables; (iii) if we fail to obtain all required consents; or (iv) if N&B
Energy breaches any representation or warranty in the Sale Agreement, subject to the right to cure; and by N&B Energy, (i)
if our stockholders fail to approve the Asset Purchase at a meeting called for such purpose; (ii) if we fail to provide all required
closing deliverables; (iii) if we breach any representation or warranty in the Sale Agreement, subject to the right to cure; or
(iv) if we seek bankruptcy protection or are involuntarily placed into bankruptcy and such bankruptcy is not dismissed within 60
days. The Sale Agreement can also be terminated by either party with five days prior written notice if the acquisition has not
been completed by September 30, 2018, provided that such failure is not the result of the breach of the agreement by the terminating
party. The Sale Agreement may also be terminated by either party if IBC has confirmed in writing that it will not approve and consent
to the terms of the Sale Agreement, or if the Assumption Documents are not acceptable to either us or N&B Energy.
Segundo Settlement Agreement
On July 12, 2018, we
entered into a Compromise Settlement Agreement and Mutual Release with Segundo (the “
Segundo Settlement
”),
in partial consideration for N&B Energy agreeing to enter into the Sale Agreement. Pursuant to the Segundo Settlement,
Segundo agreed to surrender to us 15,237 shares of common stock valued at $76.25 per share as of the effective date of the
closing of the acquisition contemplated by the December 31, 2015 Asset Purchase Agreement (which closing effective date was
April 1, 2016), and to release us from any and all claims which Segundo previously alleged was owed
under the terms of the December 31, 2015 Asset Purchase Agreement. We and Segundo also provided each other full releases in
connection with the December 31, 2015 Asset Purchase Agreement and Segundo agreed to indemnify us and hold us harmless
against any claims made by the other sellers under the December 31, 2015 Asset Purchase Agreement.
* * * * * * * * *
The
foregoing description of the Sale Agreement and production payment and overriding royalties and Segundo Settlement does not purport
to be complete and is qualified in its entirety by reference to the Sale Agreement, production payment and overriding royalties,
and Segundo Settlement, copies of which are attached hereto as
Exhibit 2.1
(which exhibit includes copies of the form of
production payment and overriding royalties as exhibits thereto) and
Exhibit 10.1
, respectively, to this Current Report
on Form 8-K and incorporated herein by reference. The representations, warranties and covenants contained in the Sale Agreement
(1) were made only for purposes of that agreement and as of specific dates, (2) are solely for the benefit of the parties to the
Sale Agreement, (3) may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures
made for the purposes of allocating contractual risk between the parties to the Sale Agreement instead of establishing these matters
as facts, and (4) may be subject to standards of materiality applicable to the parties that differ from those applicable to investors.
Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date
of the Sale Agreement, which subsequent information may or may not be fully reflected in the parties’ public disclosures.
The representations and warranties contained in the Sale Agreement were made only for the purpose of the Sale Agreement as of specific
dates and may have been qualified by certain disclosures between the parties and a contractual standard of materiality different
from those generally applicable to stockholders, among other limitations. The representations and warranties were made for the
purpose of allocating contractual risk between the parties to the Sale Agreement and should not be relied upon as a disclosure
of factual information relating to any of the parties.