UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
SCHEDULE 14A
INFORMATION
Proxy Statement Pursuant to
Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
| ☒ |
Preliminary Proxy
Statement |
| ☐ |
Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2)) |
| ☐ |
Definitive Proxy Statement |
| ☐ |
Definitive Additional Materials |
| ☐ |
Soliciting Material Under
§240.14a-12 |
CAMBER ENERGY, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
| ☒ |
No fee required. |
| ☐ |
Fee computed on table below per
Exchange Act Rules 14a-6(i)(1) and 0-11. |
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(1) |
Title of each class of securities to
which transaction applies: |
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(2) |
Aggregate number of securities to which
transaction applies: |
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(3) |
Per unit price or
other underlying value of transaction computed pursuant to Exchange
Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined): |
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(4) |
Proposed maximum aggregate value of
transaction: |
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(5) |
Total fee paid: |
| ☐ |
Fee paid previously with preliminary
materials: |
| ☐ |
Check box if any
part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing. |
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(1) |
Amount Previously Paid: |
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(2) |
Form, Schedule or Registration
Statement No.: |
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(3) |
Filing Party: |
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(4) |
Date Filed: |
1415 Louisiana, Suite 3500
Houston, Texas 77002
NOTICE OF 2021 ANNUAL
MEETING OF SHAREHOLDERS
To Be Held January 18, 2021
Dear Shareholders:
The Company Energy, Inc. (“we”, “us”, “Camber”
or the “Company”) cordially invites you to attend our
2020 fiscal year annual meeting of shareholders. The meeting will
be held on January 18, 2021, at 10:00 a.m. (Houston time). The
meeting will be held virtually via live audio webcast at
https://www.issuerdirect.com/virtual-event/CEI
(please note this link is case sensitive). At the meeting we will
be considering and voting on the following matters:
1. Electing three
directors to the Company’s Board of Directors (the “Board”),
each to serve a term of one year;
2. Ratification of the
appointment of Marcum LLP as the Company’s independent registered
public accounting firm for the fiscal year ending March 31,
2021;
3. To consider a
non-binding advisory vote on compensation of our named executive
officers;
4. To approve the filing
of an amendment to the Company’s Articles of Incorporation to
increase the number of our authorized shares of common stock from
25,000,000 to 75,000,000;
5. Proposal to approve the
terms of that certain Stock Purchase Agreement which was entered
into between the Company and an institutional investor on June 22,
2020 (the “June 2020 Purchase Agreement”) and the issuance
of shares of common stock upon the conversion of the 630 shares of
Series C Redeemable Convertible Preferred Stock (“Series C
Preferred Stock”) sold pursuant thereto, including shares of
common stock exceeding 20% of the Company’s outstanding common
stock as of June 22, 2020 (i.e., over 20% of the 11,721,729 shares
outstanding as of June 22, 2020), including shares issuable for
dividends and conversion premiums on such 630 shares of Series C
Preferred Stock; and
6.
To consider and vote upon a Proposal to authorize our Board, in its
discretion, to adjourn the annual meeting to another place, or a
later date or dates, if necessary or appropriate, to solicit
additional proxies in favor of the Proposals listed above at the
time of the Annual Meeting.
Shareholders who owned our common stock and Series C Preferred
Stock, at the close of business on November 30, 2020 (the
“Record Date”), may attend and vote at the meeting, provided
that the Series C Preferred Stock holders have no voting rights on
the Proposals above. A shareholders list will be available at our
offices at 1415 Louisiana, Suite 3500, Houston, Texas 77002 for a
period of ten days prior to the meeting. We hope that you will be
able to attend the meeting.
The enclosed Proxy Statement is also available
at https://www.iproxydirect.com/CEI. This website also
includes copies of the form of proxy and the
Company’s Annual
Report on Form 10-K for the year ended March 31, 2020, which
was filed with the SEC on June 29, 2020. Shareholders may also
request a copy of the Proxy Statement and the Company’s Annual
Report by contacting our main office at (210) 998-4035.
Whether or not you plan to attend the meeting, please vote
electronically via the Internet or by telephone, or, if you
requested paper copies of the proxy materials, please complete,
sign, date and return the accompanying proxy card in the enclosed
postage-paid envelope. See “How do I cast my vote?”
in the Proxy Statement for more details.
We look forward to seeing you at the meeting.
|
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By
order of the Board of Directors, |
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/s/ Louis G.
Schott |
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Louis G.
Schott |
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Interim Chief
Executive Officer |
Houston, Texas
November [ ], 2020
TABLE OF CONTENTS
Appendixes:
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● |
Appendix
A – Form of Certificate of Amendment to Articles of
Incorporation (see Proposal 4) |
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Appendix B –
Stock Purchase Agreement relating to the purchase of $6 million in
shares of Series C Redeemable Convertible Preferred Stock dated
June 22, 2020 (see Proposal 5) |
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Appendix C –
Camber Energy, Inc. Amended and Restated Certificate of
Designations of Preferences, Powers, Rights and Limitations of
Series C Redeemable Convertible Preferred Stock as filed with the
Secretary of State of Nevada on July 8, 2019, as amended to date
(see Proposal 5) |
1415 Louisiana, Suite 3500
Houston, Texas 77002
PROXY STATEMENT
GENERAL INFORMATION
The Company Energy, Inc. (“Camber,” “we,”
“us”, “our” or the “Company”) has made
these materials available to you on the Internet or, upon your
request, has delivered printed versions of these materials to you
by mail, in connection with the Company’s solicitation of proxies
for use at our 2021 fiscal year annual meeting of shareholders (the
“Annual Meeting” or the “Meeting”) to be held on
January 21, 2021 at 10:00 a.m. (Houston time), and at any
postponement(s) or adjournment(s) thereof. The meeting
will be held virtually via live audio webcast at https://www.issuerdirect.com/virtual-event/CEI
(please note this link is case sensitive). These materials were
first sent or given to shareholders on December 1, 2020. You are
invited to attend the Annual Meeting and are requested to vote on
the Proposals described in this Proxy Statement.
Information Contained In
This Proxy Statement
The information in this Proxy Statement relates to the Proposals to
be voted on at the Annual Meeting. Included with this Proxy
Statement is a copy of the Company’s
Annual Report on Form 10-K for the year ended March 31, 2020,
which was filed with the SEC on June 29, 2020 (the “Annual
Report”). If you requested printed versions of these materials
by mail, these materials also include the proxy card or vote
instruction form for the Annual Meeting.
Important Notice Regarding
the Availability of Proxy Materials
Pursuant to rules adopted by the Securities and Exchange
Commission, the Company uses the Internet as the primary means of
furnishing proxy materials to shareholders. Accordingly, the
Company is sending a Notice of Internet Availability of Proxy
Materials (the “Notice”) to the Company’s shareholders.
All shareholders will have the ability to access the proxy
materials (including the Company’s Annual Report, which does not
constitute a part of, and shall not be deemed incorporated by
reference into, this Proxy Statement or the enclosed form of proxy,
except as set forth below under “Documents
Incorporated By Reference”)) via the Internet
at https://www.iproxydirect.com/CEI or
request a printed set of the proxy materials. Instructions on how
to access the proxy materials over the Internet or to request a
printed copy may be found in the Notice. The Notice contains a
control number that you will need to vote your shares. Please keep
the Notice for your reference through the meeting date. In
addition, shareholders may request to receive proxy materials in
printed form by mail or electronically by email on an ongoing
basis. The Company encourages shareholders to take advantage of the
availability of the proxy materials on the Internet to help reduce
the environmental impact of its annual meetings.
DEFINITIONS
Unless the context requires otherwise, references to the
“Company,” “we,” “us,” “our,”
“Camber” and “Camber Energy, Inc.” refer specifically
to Camber Energy, Inc. and its consolidated subsidiaries.
In addition, unless the context otherwise requires and for the
purposes of this Proxy Statement only:
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“Code” means the Internal Revenue
Code of 1986, as amended from time to time; |
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“Exchange Act” refers to the
Securities Exchange Act of 1934, as amended; |
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“SEC” or the “Commission”
refers to the United States Securities and Exchange Commission;
and |
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“Securities Act” refers to the
Securities Act of 1933, as amended. |
INFORMATION CONCERNING
SOLICITATION AND VOTING
Our Board is soliciting proxies for the 2021 fiscal year annual
meeting of shareholders and at any adjournments or postponements of
the meeting. This Proxy Statement contains important information
for you to consider when deciding how to vote on the matters
brought before the meeting. Please read it carefully.
The Company will pay the costs of soliciting proxies from
shareholders. Our directors, officers and regular employees may
solicit proxies on behalf of the Company, without additional
compensation, personally or by telephone.
REVERSE STOCK SPLITS
Effective on December 24, 2018, the Company, with the approval of
the Company’s Board of Directors, pursuant to Section
78.207 of the Nevada Revised Statutes (NRS), affected a
1-for-25 reverse stock split of the Company’s (a) authorized
shares of common stock; and (b) issued and outstanding shares
of common stock. The reverse stock split was affected pursuant to
the filing of a Certificate of Change pursuant to Nevada Revised
Statutes Section 78.209, with the Secretary of State of
the State of Nevada.
Additionally, pursuant to the authorization provided by the
Company’s shareholders at the Company’s February 19, 2019, annual
meeting (pursuant to which the Company’s shareholders granted
authority to the Board of Directors, in its sole discretion, to
determine whether to proceed with a reverse stock split and, if the
Board of Directors so determined, to select the reverse stock
ratio, in a ratio of between 1-for-5 and 1-for-25), the Board of
Directors approved, on July 1, 2018, a 1-for-25 reverse stock split
of the Company’s issued and outstanding shares of common stock,
which went effective on July 8, 2019.
On October 28, 2019, the Company, with the approval of the
Company’s Board of Directors, pursuant to Section
78.207 of the Nevada Revised Statutes (NRS), filed a
Certificate of Change with the Secretary of State of Nevada to
affect a 1-for-50 reverse stock split of the Company’s
(a) authorized shares of common stock (from 250,000,000 shares
to 5,000,000 shares); and (b) issued and outstanding shares of
common stock. The reverse stock split was effective on October 29,
2019. The effect of the reverse stock split was to combine every 50
shares of outstanding common stock into one new share, with a
proportionate 1-for-50 reduction in the Company’s authorized shares
of common stock, but with no change in the par value per share of
the common stock. The result of the reverse stock split was to
reduce, as of the effective date of the reverse stock split, the
number of common stock shares outstanding from approximately 74.5
million shares to approximately 1.5 million shares (prior to
rounding).
Effective on April 17, 2020, the Company filed a Certificate of
Amendment to its Articles of Incorporation with the Secretary of
State of Nevada to increase its authorized shares of common stock
to 25 million shares of common stock.
The information and disclosures set forth in this Proxy Statement
have been retroactively adjusted to reflect the prior reverse stock
splits.
QUESTIONS AND ANSWERS
General Questions
and Answers
| Q: |
Who can vote at the meeting? |
| A: |
The Board set November 30, 2020, as
the record date for the meeting. You can attend and vote at the
meeting if you were a holder of our common stock or, Series C
Preferred Stock, at the close of business on the record date,
provided that the Series C Preferred Stock holders have no voting
rights on the Proposals above. On the record date there
were 25,000,000 shares of common stock issued and outstanding,
and 2,693 shares of Series C Preferred Stock issued and outstanding
(which have no voting rights at the annual meeting), voting in
aggregate 25,000,000 total voting shares at the meeting. |
| Q: |
What Proposals
will be voted on at the meeting? |
|
A: |
Six Proposals are
scheduled to be voted upon at the meeting: |
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The
election of directors. |
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To
ratify the appointment of Marcum LLP as the Company’s independent
registered public accounting firm for the fiscal year ending March
31, 2021. |
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To
consider a non-binding advisory vote on the frequency of the
advisory vote on compensation of our named executive officers. |
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To
consider and vote upon a Proposal to approve the filing of an
amendment to the Company’s Articles of Incorporation to increase
the number of our authorized shares of common stock from 25,000,000
to 75,000,000. |
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To
consider and vote upon a Proposal to approve the terms of the June
2020 Purchase Agreement and the issuance of shares of common stock
upon the conversion of the 630 shares of Series C Preferred Stock
sold pursuant thereto, including shares of common stock exceeding
20% of the Company’s outstanding common stock as of June 22, 2020,
including shares issuable for dividends and conversion premiums on
such 630 shares of Series C Preferred Stock. |
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To consider and
vote upon a Proposal to authorize our Board, in its discretion, to
adjourn the Annual Meeting to another place, or a later date or
dates, if necessary or appropriate, to solicit additional proxies
in favor of the Proposals listed above at the time of the Annual
Meeting. |
|
Q: |
Why did I
receive a one-page notice in the mail regarding the Internet
availability of proxy materials instead of a full set of proxy
materials? |
|
A: |
Pursuant to rules
adopted by the SEC, we have elected to provide access to our proxy
materials over the Internet. Accordingly, on or about December 1,
2020, we are sending a Notice of Internet Availability of Proxy
Materials to our shareholders of record and beneficial owners. All
shareholders will have the ability, beginning on or about December
1, 2020, to access the proxy materials on the website referred to
in the Notice of Internet Availability of Proxy Materials or
request to receive a printed set of the proxy materials.
Instructions on how to access the proxy materials over the Internet
or to request a printed copy may be found in the Notice of Internet
Availability of Proxy Materials. In addition, shareholders may
request to receive proxy materials in printed form by mail or
electronically by email on an ongoing basis. |
|
Q: |
Can I vote my
shares by filling out and returning the Notice of Internet
Availability of Proxy Materials? |
|
A: |
No. The Notice of
Internet Availability of Proxy Materials identifies the items to be
voted on at the meeting, but you cannot vote by marking the Notice
of Internet Availability of Proxy Materials and returning it. The
Notice of Internet Availability of Proxy Materials provides
instructions on how to vote via the Internet, by telephone or by
requesting and returning a paper proxy card, or by submitting a
ballot in person at the meeting. |
|
Q: |
How can I get
electronic access to the proxy materials? |
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A: |
The Notice of
Internet Availability of Proxy Materials will provide you with
instructions regarding how to: |
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View
our proxy materials for the meeting on the Internet; and |
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Instruct us to
send future proxy materials to you electronically by email. |
Choosing to receive future proxy materials by email will save us
the cost of printing and mailing documents to you and will reduce
the impact of our annual meetings on the environment. If you choose
to receive future proxy materials by email, you will receive an
email next year with instructions containing a link to those
materials and a link to the proxy voting site. Your election to
receive proxy materials by email will remain in effect until you
terminate it.
|
Q: |
How do I cast
my vote? |
|
A: |
For shareholders
whose shares are registered in their own names, as an alternative
to voting at the meeting, you may vote via the Internet, by fax, by
telephone or, for those shareholders who request a paper proxy card
in the mail, by mailing a completed proxy card. The Notice of
Internet Availability of Proxy Materials provides information on
how to vote via the Internet, fax or by telephone or request a
paper proxy card and vote by mail. Those shareholders who request a
paper proxy card and elect to vote by mail should sign and return
the mailed proxy card in the prepaid and addressed envelope that
was enclosed with the proxy materials, and your shares will be
voted at the meeting in the manner you direct. In the event that
you return a signed proxy card on which no directions are
specified, your shares will be voted as recommended by our Board on
all matters, and in the discretion of the proxy holders as to any
other matters that may properly come before the meeting or any
postponement or adjournment of the meeting. |
If your shares are registered in the name of a broker, bank or
other nominee (typically referred to as being held in “street
name”), you will receive instructions from your broker, bank or
other nominee that must be followed in order for your broker, bank
or other nominee to vote your shares per your instructions. Many
brokerage firms and banks have a process for their beneficial
holders to provide instructions via the Internet, via fax or over
the telephone. If Internet, fax or telephone voting is unavailable
from your broker, bank or other nominee, please request a paper
copy of the proxy and complete and return the voting instruction
card in the addressed, postage paid envelope provided.
In the event you do not provide instructions on how to vote, your
broker may have authority to vote your shares. Under the rules that
govern brokers who are voting with respect to shares that are held
in street name, brokers have the discretion to vote such shares on
routine matters, but not on non-routine matters. Routine matters
include the ratification of the appointment of independent
auditors, the approval of the amendment to our Articles of
Incorporation to increase our authorized common stock, the approval
of the shares of common stock issuable upon conversion of the
Series C Preferred Stock and approval of the June 2020 Purchase
Agreementand, and the approval to adjourn the meeting, but not the
election of directors, the vote to approve executive compensation
(collectively, the “non-routine matters”). Your vote
is especially important. If your shares are held by a broker,
your broker cannot vote your shares for these non-routine matters
unless you provide voting instructions. Therefore, please
instruct your broker regarding how to vote your shares on these
matters promptly. See “Vote Required” for
further information.
If you hold shares through a broker, bank or other nominee and wish
to be able to vote at the meeting in person, you must obtain a
legal proxy from your broker, bank or other nominee and present it
to the inspector of election with your ballot at the meeting.
|
Q: |
Can I revoke or
change my proxy? |
|
A: |
Yes. You may
revoke or change a previously delivered proxy at any time before
the meeting by delivering another proxy with a later date, by
voting again via the Internet, fax or by telephone, or by
delivering written notice of revocation of your proxy to our
Secretary at our principal executive offices before the beginning
of the meeting. You may also revoke your proxy by attending the
meeting and voting in person, although attendance at the meeting
will not, in and of itself, revoke a valid proxy that was
previously delivered. If you hold shares through a broker, bank or
other nominee, you must contact that nominee to revoke any prior
voting instructions. You also may revoke any prior voting
instructions by voting in person at the meeting if you obtain a
legal proxy as described above. |
| Q: |
How does the
Board recommend I vote on the Proposals? |
|
A: |
The Board
recommends you vote “FOR” each of the nominees to our
Board, “FOR” the ratification of the appointment of
Marcum LLP as our independent registered public accounting firm for
the fiscal year ending March 31, 2021, “FOR” approval
of the compensation of our named executive officers;
“FOR” the approval of the amendment to our Articles
of Incorporation to increase our authorized common stock;
“FOR”the approval of the shares of common stock
issuable upon conversion of the Series C Preferred Stock and
approval of the June 2020 Purchase Agreement; and
“FOR” the approval to adjourn the meeting to a later
date, as described above. |
|
Q: |
Who will count
the vote? |
|
A: |
The inspector of
election will count the vote. |
|
A: |
A quorum is the
number of shares that must be present to hold the meeting. The
quorum requirement for the meeting is 33% of the outstanding voting
shares as of the record date, present in person or represented by
proxy. Your shares will be counted for purposes of determining if
there is a quorum if you are present and vote in person at the
meeting; or have voted on the Internet, by fax, by telephone or by
properly submitting a proxy card or voting instruction card by
mail. Abstentions and broker non-votes also count toward the
quorum. An abstention will have the same practical effect as a vote
against the ratification of the appointment of our independent
registered public accounting firm, the approval of the compensation
of our named executive officers (which is non-binding), the
approval of the amendment to our Articles of Incorporation to
increase our authorized common stock, the approval of the shares of
common stock issuable upon conversion of the Series C Preferred
Stock and approval of the June 2020 Purchase Agreement, and the
Proposal to approve the adjournment of the meeting, if necessary.
“Broker non-votes” occur when brokers, banks or other
nominees that hold shares on behalf of beneficial owners do not
receive voting instructions from the beneficial owners prior to the
meeting and do not have discretionary voting authority to vote
those shares. |
|
Q: |
What vote is
required to approve each item? |
|
A: |
The following
table sets forth the voting requirement with respect to each of the
Proposals: |
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Proposal 1 – Election
of directors. |
|
The three nominees for
election as directors at the Annual Meeting who receive the
greatest number of “FOR” votes cast by the
shareholders, a plurality, will be elected as our directors. |
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Proposal 2 – Ratification of
appointment of independent registered public accounting firm. |
|
To be approved by shareholders,
this Proposal must receive the affirmative “FOR” vote
of the holders of a majority of the shares represented at the
meeting, in person or by proxy, and entitled to vote. |
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|
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|
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Proposal 3 – Non-binding advisory
vote to approve and ratify the compensation of our named executive
officers. |
|
To be approved by shareholders,
this Proposal must receive the affirmative “FOR” vote
of the holders of a majority of the shares represented at the
meeting, in person or by proxy, and entitled to vote, provided that
this Proposal is non-binding. |
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|
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Proposal 4 – Approval of the filing
of an amendment to the Company’s Articles of Incorporation to
increase the number of our authorized shares of common stock from
25,000,000 to 75,000,000. |
|
To be approved by shareholders,
this Proposal must receive the affirmative “FOR” vote
of the holders of a majority of the shares outstanding, and
entitled to vote. |
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|
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Proposal 5 – Approval of the terms
of the June 2020 Purchase Agreement and the issuance of shares of
common stock upon the conversion of the 630 shares of Series C
Preferred Stock sold pursuant thereto, including shares of common
stock exceeding 20% of the Company’s outstanding common stock as of
June 22, 2020, including shares issuable for dividends and
conversion premiums on such 630 shares of Series C Preferred
Stock. |
|
To be approved by
shareholders, this Proposal must receive the affirmative
“FOR” vote of the holders of a majority of the shares
represented at the meeting, in person or by proxy, and entitled to
vote. |
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Proposal 6 – Approval to adjourn
the Annual Meeting to another place, or a later date or dates, if
necessary or appropriate, to solicit additional proxies in favor of
the Proposals listed above at the time of the Annual Meeting. |
|
To be approved by shareholders,
this Proposal must receive the affirmative “FOR” vote
of the holders of a majority of shares represented at the meeting,
in person or by proxy, and entitled to vote. |
| Q: |
What does it mean if I get more
than one Notice of Internet Availability of Proxy
Materials? |
| A: |
Your shares are probably registered
in more than one account. Please provide voting instructions for
all Notices of Internet Availability of Proxy Materials, proxy and
voting instruction cards you receive. |
| Q: |
How many votes can I
cast? |
| A: |
Holders of our common stock receive
one vote for each share of common stock which they hold as of the
Record Date. Holders of our Series C Preferred Stock have the right
to cast no votes on the Proposals described above. |
| Q: |
Where can I find the voting
results of the meeting? |
| A: |
The preliminary voting results will
be announced at the meeting. The final results will be published in
a current report on Form 8-K to be filed by us with the SEC within
four business days of the meeting. |
INSTRUCTIONS FOR THE
VIRTUAL ANNUAL MEETING
This year our annual meeting will be a completely virtual meeting.
There will be no physical meeting location. The meeting will only
be conducted via live audio webcast.
To participate in the virtual meeting, visit https://www.issuerdirect.com/virtual-event/CEI
(please note this link is case sensitive) and enter the control
number included on your notice of Internet availability of the
proxy materials, on your proxy card, or on the instructions that
accompanied your proxy materials.
You may vote during the meeting by following the instructions
available on the meeting website during the meeting. To the best of
our knowledge, the virtual meeting platform is fully supported
across browsers (Internet Explorer, Firefox, Chrome, and Safari)
and devices (desktops, laptops, tablets, and cell phones) running
the most updated version of applicable software and plugins.
Participants should ensure they have a strong Internet connection
wherever they intend to participate in the meeting. Participants
should also allow plenty of time to log in and ensure that they can
hear streaming audio prior to the start of the meeting.
Questions pertinent to meeting matters will be answered during the
meeting, subject to time constraints. Questions which are not
pertinent to meeting matters will not be answered.
FORWARD LOOKING
STATEMENTS
Statements in this Proxy Statement that are “forward-looking
statements” are based on current expectations and assumptions
that are subject to risks and uncertainties. In some cases,
forward-looking statements can be identified by terminology such as
“may,” “should,” “potential,”
“continue,” “expects,” “anticipates,”
“intends,” “plans,” “believes,”
“estimates,” and similar expressions. These forward-looking
statements are based on our current estimates and assumptions and,
as such, involve uncertainty and risk. Actual results
could differ materially from projected results.
We do not assume any obligation to update information contained in
this document, except as required by federal securities laws.
Although this Proxy Statement may remain available on our website
or elsewhere, its continued availability does not indicate that we
are reaffirming or confirming any of the information contained
herein. Neither our website nor its contents are a part
of this Proxy Statement.
PROPOSAL 1
ELECTION OF DIRECTORS
At the meeting, three directors are to be elected. Each director is
to hold office until the next annual meeting of shareholders or
until his successor is elected and qualified. After identifying the
members of our Board who are up for re-election in fiscal 2021 and
reviewing the criteria that the Nominating and Governance Committee
uses when evaluating director nominees, the Board nominated the
three directors for election at the meeting based on the
recommendation of the Nominating and Governance Committee. All of
the director nominees are already serving as members of the Board
of Directors of the Company.
In considering individual director nominees and Board committee
appointments, our Nominating and Governance Committee seeks to
achieve a balance of knowledge, experience and capability on the
Board and Board committees and to identify individuals who can
effectively assist the Company in achieving our short-term and
long-term goals, protecting our shareholders’ interests and
creating and enhancing value for our shareholders. In so doing, the
Nominating and Governance Committee considers a person’s diversity
attributes (e.g., professional experiences, skills, background,
race and gender) as a whole and does not necessarily attribute
any greater weight to one attribute. Moreover, diversity in
professional experience, skills and background, and diversity in
race and gender, are just a few of the attributes that the
Nominating and Governance Committee takes into account. In
evaluating prospective candidates, the Nominating and Governance
Committee also considers whether the individual has personal and
professional integrity, good business judgment and relevant
experience and skills, and whether such individual is willing and
able to commit the time necessary for Board and Board committee
service.
While there are no specific minimum requirements that the
Nominating and Governance Committee believes must be met by a
prospective director nominee, the Nominating and Governance
Committee does believe that director nominees should possess
personal and professional integrity, have good business judgment,
have relevant experience and skills, and be willing and able to
commit the necessary time for Board and Board committee service.
Furthermore, the Nominating and Governance Committee evaluates each
individual in the context of the Board as a whole, with the
objective of recommending individuals that can best perpetuate the
success of our business and represent shareholder interests through
the exercise of sound business judgment using their diversity of
experience in various areas. We believe our current directors
possess diverse professional experiences, skills and backgrounds,
in addition to (among other characteristics) high standards of
personal and professional ethics, proven records of success in
their respective fields and valuable knowledge of our business and
our industry.
Nominees
The following table and accompanying descriptions indicate the name
of each director nominee, including their age, principal occupation
or employment, and the year in which each person first became an
officer or director.
|
Name |
Position |
Date First
Elected/Appointed as
Director |
Age |
|
Robert Schleizer |
Chief Financial Officer and Director |
October 6, 2017 |
66 |
|
Fred Zeidman |
Director |
January 11,
2018 |
74 |
|
James G. Miller |
Director |
July 10,
2018 |
72 |
Directors
Robert
Schleizer, Chief Financial Officer And Director
Mr. Schleizer has served as
Chief Financial Officer (beginning as Interim Chief Financial
Officer) since June 2, 2017, as a member of the Board of
Directors since October 6, 2017, and as Treasurer of the Company
since January 9, 2018. Mr. Schleizer, has over 30 years of
financial and operational experience serving private and public
companies in financial and organization restructuring, crisis
management, acquisitions and divestitures, and equity and debt
financings across multiple industries. He is a co-founder of
BlackBriar Advisors LLC, a business renewal and acceleration firm,
where he has served as Managing Partner since 2010. Prior to
BlackBriar, Mr. Schleizer served as Chief Financial Officer and
Director for Xponential, Inc., a public holding company that owned
34 specialty finance and retail stores, from 2001 to 2013, and as a
Managing Director for BBK, an international financial advisory,
where he provided restructuring and refinancing financial advisory
services. Mr. Schleizer holds a Bachelor of Science in Accounting
from Arizona State University and is a Certified Insolvency
Restructuring Advisor (“CIRA”) and Certified Turnaround
Professional. Effective August 17, 2017, Mr. Schleizer was
appointed as Interim Chief Financial Officer and principal
accounting/financial officer of Enerjex Resources, Inc., a position
he held until March 26, 2018.
Director Qualifications:
Mr. Schleizer has served as a director of many private and public
companies in the past and his industry financial expertise makes
him an asset to the Company and qualified to serve as director of
the Company.
Fred S. Zeidman,
Director
In December 2014, Mr. Zeidman was appointed as Chairman of Gordian
Group LLC, a U.S. investment bank specializing in board level
advice in complex, distressed or “story” financial matters.
Mr. Zeidman currently serves as Director of External Affairs of
MCNA Dental, lead Director of Straight Path Communications, Inc.,
Director REMA and Director Prosperity Bank in Houston. He was
formerly Restructuring Officer of TransMeridian Exploration Inc.
and Chief Bankruptcy Trustee of AremisSoft Corp.
Mr. Zeidman, Chairman Emeritus of the United States Holocaust
Memorial Council was appointed by President George W. Bush in March
2002 and served in that position from 2002-2010. A prominent
Houston based business and civic leader, Mr. Zeidman also is
Chairman Emeritus of the University of Texas Health Science System
Houston and Director and Chief Financial Officer of the Texas Heart
Institute. He is on the board of the Development Corp of Israel
(Israel Bonds) and served on the Board of the National World
War II Museum.
Over the course of his distinguished 50 year career, Mr. Zeidman
has been involved in numerous high-profile workouts, restructurings
and reorganizations. He was the former CEO, President and Chairman
of Seitel, Inc., a Houston-based onshore seismic data provider
where he was instrumental in the successful turnaround of the
Company. He held the post of Chairman of the Board and CEO of
Unibar Corporation, the largest domestic independent drilling
fluids company, until its sale to Anchor Drilling Fluids in
1992.
Mr. Zeidman holds a Bachelor’s degree from Washington University in
St. Louis and a Master’s in Business Administration from New York
University.
Director Qualifications:
The Board of Directors believes that Mr. Zeidman is highly
qualified to serve as a member of the Board due to his significant
experience serving as a director of public and private companies
and institutions and his substantial understanding of the oil and
gas industry in general.
James G. Miller,
Director
Mr. Miller is a retired corporate executive, having served as
president and CEO of several energy companies. Since February 2020,
Mr. Miller has served on the Board of Directors of Fiduciary
Benchmarks Insights, LLC. He has previously served on the Board of
Directors of companies listed on NYSE, NASDAQ and the Australian
Stock Exchange. From 2009 until 2016, Mr. Miller served as a
Director of Guardian 8 Holdings. From December 31, 2010 through
March 2018, he was a Director of Enerjex Resources, Inc. (NYSE
American), an oil and gas exploration and production company, and
chaired the Audit Committee. In March 2018, Enerjex executed a
merger which concluded his Board service.
He also served on the Board of Trustees of The Nature Conservancy,
Missouri Chapter, for 16 years and is a past Board Chair.
Mr. Miller holds a BS in Electrical Engineering and an MBA in
management from the University of Wisconsin-Madison.
Director Qualifications:
The Board of Directors believes that Mr. Miller is highly qualified
to serve as a member of the Board due to his experience having
served as president and CEO of several energy companies and serving
on the Board of Directors of several publicly-traded companies.
Vote Required
The three nominees for election as directors at the Annual Meeting
who receive the greatest number of votes cast by the shareholders,
a plurality, will be elected as our directors. As a result, broker
non-votes and abstentions will not be counted in determining which
nominees received the largest number of votes cast. You may vote
“FOR” all nominees, “AGAINST” all
nominees or withhold your vote for any one or more of the
nominees.
Board
Recommendation
Our Board recommends a vote “FOR” all three nominees
to the Board.
PROPOSAL 2
RATIFICATION OF
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
General
The Audit Committee has selected Marcum LLP, independent registered
public accounting firm (“Marcum”), to audit our consolidated
financial statements for the fiscal year ending March 31, 2021.
Marcum has been our independent registered public accounting since
July 1, 2018, when Marcum merged with GBH CPAs, PC
(“GBH”) who had served as our independent registered
public accounting prior to that since September 29, 2015. We are
asking the shareholders to ratify the appointment of Marcum as our
independent registered public accounting firm for the fiscal year
ending March 31, 2021. Marcum was appointed by the Audit Committee
in accordance with its charter.
In the event shareholders fail to ratify the appointment, the Audit
Committee may reconsider this appointment. Even if the appointment
is ratified, the Audit Committee, in its discretion, may direct the
appointment of a different independent accounting firm at any time
during the year if the Audit Committee determines that such a
change would be in the Company’s and our shareholders’ best
interests.
The Company does not anticipate a representative from Marcum to be
present at the annual shareholders meeting. In the event that a
representative of Marcum is present at the Annual Meeting, the
representative will have the opportunity to make a statement if
he/she desires to do so and the Company will allow such
representative to be available to respond to appropriate
questions.
The Audit Committee has approved all services provided by Marcum
and GBH. Representatives of Marcum do not plan to attend the Annual
Meeting.
Audit Fees
The aggregate fees billed by our independent auditors, GBH, which
combined its practice with Marcum effective July 1, 2018, and
Marcum, for professional services rendered for the audit of our
annual financial statements included in our Annual Reports on Form
10-K for the years ended March 31, 2020 and 2019, and for the
review of quarterly financial statements included in our Quarterly
Reports on Form 10-Q for the quarters ending June 30, September 30,
and December 31, 2019 and 2018, were:
| |
|
2020 |
|
|
2019 |
|
| Marcum |
|
$ |
553,493 |
|
|
$ |
104,500 |
|
| GBH CPAs, PC |
|
|
— |
|
|
|
93,500 |
|
| |
|
$ |
553,493
|
|
|
$ |
200,019 |
|
The aggregate fees billed by our independent auditors consisted of
audit fees ($320,003 and $200,019 for 2020 and 2019, respectively),
audit related fees ($85,490 and $0, in 2020 and 2019, respectively,
with such fees for 2020 related to the Company’s Form S-4 filings
with the SEC in connection with the Company’s planned merger with
Viking) and other fees ($148,000 and $0, respectively, for 2020 and
2019, with such 2020 expenses relating to the Company’s Form 8-K
filings relating to the Company’s acquisition of Lineal, now
divested). Audit fees, audit related and other fees incurred by the
Company were pre-approved by the Audit Committee.
We do not use the auditors for financial information system design
and implementation. Such services, which include designing or
implementing a system that aggregates source data underlying the
financial statements or that generates information that is
significant to our financial statements, are provided internally or
by other service providers. We do not engage the auditors to
provide compliance outsourcing services.
The Audit Committee has considered the nature and amount of fees
billed by GBH and believes that the provision of services for
activities unrelated to the audit is compatible with maintaining
GBH’s and Marcum’s independence.
Policy on Audit Committee
Pre-Approval of Audit and Non-Audit Services of Independent
Registered Public Accounting Firm
The Audit Committee’s policy is to pre-approve all audit and
non-audit services provided by the independent registered public
accounting firm. These services may include audit services,
audit-related services, tax services and other services.
Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to the particular service or category
of services and is generally subject to a specific budget. The
committee may delegate the authority to pre-approve the retention
of the independent registered public accounting firm for permitted
non-audit services to one or more members of the committee,
provided that such persons are required to present the pre-approval
of any permitted non-audit service to the committee at the next
meeting following any such pre-approval. None of the fees paid to
the independent registered public accounting firm under the
categories Audit-Related, Tax and All Other Fees described above
were approved by the committee after services were rendered
pursuant to the de minimis exception established
by the SEC.
Vote Required
The approval of the ratification of the appointment of Marcum as
our independent registered public accounting firm for the fiscal
year ending March 31, 2021 requires the affirmative vote of the
holders of a majority of the shares represented at the meeting, in
person or by proxy, and entitled to vote. As a result, abstentions
will have the same practical effect as votes against this Proposal.
Broker non-votes will have no effect on the outcome of this
Proposal. However, because brokers generally have discretionary
authority to vote on the ratification of our independent auditors,
broker non-votes are generally not expected to result from the vote
on this Proposal. For the approval of the ratification of the
appointment of Marcum, you may vote “FOR” or
“AGAINST” or abstain from voting.
Board
Recommendation
Our Board recommends that you vote “FOR” the
ratification of appointment of Marcum as our independent registered
public accounting firm for the fiscal year ending March 31,
2021.
PROPOSAL 3
NON-BINDING ADVISORY VOTE ON
EXECUTIVE COMPENSATION
General
In accordance with the requirements of Section 14A of the
Exchange Act and the related rules of the SEC, we are including in
this Proxy Statement a separate proposal, which gives our
shareholders the opportunity to approve or not approve the
compensation of our Named Executive Officers (as defined under
“Executive
Compensation”, below) by voting for or against the
resolution below (commonly referred to
as “Say-on-Pay”). While our Board and Compensation
Committee intend to carefully consider the shareholder vote
resulting from the proposal, the final vote will not be binding on
us and is advisory in nature.
In considering their vote, shareholders are encouraged to review
with care the information regarding our executive compensation
program as discussed under “Executive
Compensation”, below, and the accompanying compensation tables
and narratives.
Our Compensation Committee
oversees all aspects of our executive compensation program,
annually reviews each component of our executive compensation
program and seeks to ensure that the compensation program for our
executive officers is aligned with the interests of our
shareholders and the compensation practices of our peer companies
(with whom we compete for executive management personnel). Our
executive compensation program is also designed to attract,
motivate and retain a highly qualified executive management team
and to appropriately reward our executive officers for their
contribution to the achievement of our short-term and long-term
business goals and the creation and enhancement of shareholder
value. The Compensation Committee is guided by the following
key principles in determining the compensation of our executive
officers:
| |
● |
Competition Among
Peers. The Compensation Committee believes that our
compensation program should reflect the competitive recruiting and
retention conditions in the Company’s industry, so that we can
attract, motivate and retain top industry talent. |
| |
|
|
| |
● |
Accountability for Our
Performance. The Compensation Committee also
believes that our compensation program should be tied in part to
our financial and operational performance, so that our executive
officers are held accountable through their compensation for the
performance of the Company based on our achievement of certain
pre-determined financial and operational goals. |
| |
|
|
| |
● |
Accountability for Individual
Performance. In addition, the Compensation Committee
believes that our compensation program should be tied in part to
the executive officer’s achievement of pre-determined individual
performance goals, to encourage and promote individual
contributions to the Company’s overall performance. |
We believe that our executive compensation program (1) has
played a significant role in our ability to attract, motivate and
retain a highly qualified executive team to manage the Company, and
(2) is structured in the best manner possible to support the
achievement of our short-term and long-term business goals and the
creation and enhancement of shareholder value.
In accordance with the requirements of Section 14A of the Exchange
Act and the related rules of the SEC, the Company is providing
shareholders with the opportunity to cast an advisory
(non-binding) vote on the compensation programs of our named
executive officers. Accordingly, you may vote on the following
resolution at the meeting:
“RESOLVED, that the compensation of the Company’s named
executive officers as disclosed in the Company’s Proxy Statement
for the Company’s 2021 Annual Meeting of Shareholders, pursuant to
Item 402(m) through
(q) of Regulation S-K, including the compensation
tables and narrative discussion, be, and hereby is, APPROVED.”
The Company’s current policy (to be modified from time-to-time by
the Board and approved from time-to-time on a non-binding basis by
shareholders, as discussed below under “2019 Advisory Vote on
Executive Compensation”) is to provide shareholders with
an opportunity to approve the compensation of the named executive
officers every one year at the annual meeting of shareholders.
Ratification of this appointment is effective upon the affirmative
vote of a majority of the votes cast on such proposal provided that
a quorum exists at the Annual Meeting. Abstentions with respect to
the ratification of this appointment will have the effect of a vote
against ratification of this proposal. Properly executed proxies
will be voted at the Annual Meeting in accordance with the
instructions specified on the proxy; if no such instructions are
given, the persons named as agents and proxies in the enclosed form
of proxy will vote such proxy “FOR” the ratification
of this Proposal.
As noted above, the vote solicited by this Proposal is advisory in
nature and its outcome will not be binding on the Board or the
Compensation Committee, nor will the outcome of the vote require
the Board or the Compensation Committee to take any action.
Moreover, the outcome of the vote will not be construed as
overruling any decision of the Board or the Compensation Committee,
or creating or implying any additional fiduciary duty of the Board
or the Compensation Committee. However, the Board and the
Compensation Committee will carefully consider the outcome of the
vote when considering future executive compensation
arrangements.
2019 Advisory Vote on
Executive Compensation
We provide our shareholders with the opportunity to cast an
advisory vote on the frequency of future votes on executive
compensation (the “Say-On-Pay Proposal”) every three
years. At the 2019 annual meeting of our shareholders held on March
11, 2020, shareholders holding 4.8% of the total shares eligible to
be voted at the annual meeting, 12% of the shares voted at the
annual meeting and 83.5% of the votes cast on the proposal, voted
to hold votes on our Named Executive Officers’ compensation on a
yearly basis. As a result, we plan to hold votes on our Named
Executive Officers’ compensation until the next vote on the
frequency of future Say-On-Pay Proposal votes.
Additionally, at the 2019 annual meeting of our shareholders held
on March 11, 2020, shareholders holding 5.1% of the total shares
eligible to be voted at the annual meeting, 13% of the shares voted
at the annual meeting and 88.5% of the votes cast on the proposal,
voted in favor of our Named Executive Officers’ 2019 compensation.
The Board and the Compensation Committee considered these favorable
results and did not make significant changes to our executive
compensation program because it believes this advisory shareowner
vote indicates strong support for our current compensation
policies.
Vote Required
The approval of the advisory vote on the compensation of our named
executive officers requires the affirmative vote of the holders of
a majority of the shares represented at the meeting, in person or
by proxy, and entitled to vote. As a result, abstentions will have
the same practical effect as votes against this proposal. Broker
non-votes will have no effect on the outcome of this proposal. For
the approval of the advisory vote on the compensation of our named
executive officers, you may vote “FOR” or
“AGAINST” or abstain from voting.
Board
Recommendation
The Board recommends that you vote “FOR” the
approval, on an advisory basis, of the compensation of our named
executive officers as disclosed in the accompanying compensation
tables and the related narrative disclosure contained in this Proxy
Statement.
PROPOSAL 4
THE AMENDMENT TO THE COMPANY’S ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF OUR AUTHORIZED SHARES OF COMMON STOCK FROM
25,000,000 TO 75,000,000
General
Our Articles of Incorporation, as amended (the “Articles”),
currently authorize the issuance of up to 25,000,000 shares of
common stock. As of the date of this Proxy Statement, all
25,000,000 shares of common stock were issued and outstanding and
no shares of common stock were available for future issuance. In
order to ensure sufficient shares of common stock will be available
for issuance by us, our Board has approved and has recommended that
our shareholders approve an amendment to our Articles of
Incorporation to increase our authorized shares of common stock
from 25,000,000 shares to 75,000,000 shares (the “Increase
In Authorized Shares”).
We desire to authorize additional shares of common stock to ensure
that enough shares will be available [a] for issuance of shares of
common stock upon conversion of currently outstanding Series C
Preferred Stock, including, but not limited to, the shares issuable
upon conversion of, including shares issuable for dividends,
interest and conversion premiums thereon, and [b] in the event the
Board determines that it is necessary or appropriate to
(i) raise additional capital through the sale of equity
securities, (ii) acquire another company or its assets
(provided that the increased number of shares of common stock will
be sufficient to allow for the acquisition of Viking Energy Group,
Inc. (“Viking”), as discussed below, and we plan to request
shareholder approval again in the future for an increase in
authorized shares of common stock to allow us to complete such
Viking transaction), (iii) provide equity incentives to
employees and officers, (iv) permit future forward stock
splits in the form of stock dividends or (v) satisfy other
corporate purposes. The availability of additional shares of common
stock is particularly important in the event that the Board needs
to undertake any of the foregoing actions on an expedited basis and
thus to avoid the time and expense of seeking shareholder approval
in connection with the contemplated issuance of common stock.
On February 3, 2020, the Company entered into an Agreement and Plan
of Merger (as amended and restated to date, the “Merger
Agreement”) with Viking. The Merger Agreement provides that,
upon the terms and subject to the conditions set forth therein, a
to-be-formed, wholly-owned subsidiary of the Company (“Merger
Sub”), will merge with and into Viking (the “Merger”),
with Viking surviving the Merger as a wholly-owned subsidiary of
the Company. At the effective time of the Merger, which is subject
to various closing conditions, which may not be satisfied (the
“effective time”), (a) each share of Viking common stock
issued and outstanding immediately prior to the effective time
(other than Viking shares owned by the Company, Viking and Merger
Sub) will be converted into the right to receive the pro rata share
(when including the Viking preferred stock conversion rights
(defined below)) of 80% of the Company’s post-effective time
capitalization, taking into account the number of shares of common
stock of the Company outstanding on a fully-diluted basis, but
without taking into account any shares of common stock which the
holder of the Company’s Series C Preferred Stock can receive upon
conversion of the Series C Preferred Stock (which are currently
convertible into approximately 118,181,407 shares of common stock,
subject to a 9.99% beneficial ownership limitation and to further
adjustment as provided in the designation of such Series C
Preferred Stock); and (b) each share of Viking preferred stock
outstanding immediately prior to the effective time will be
converted into one (1) share of the Company’s Series A Preferred
Stock, which preferred stock will have the right to vote, and
convert into, that number of shares of the Company’s common stock
that its holder would have received in the Merger, had such holder
fully converted the Viking preferred stock into Viking common stock
immediately prior to the effective time (which we refer to as the
“Viking preferred stock conversion rights”). Holders of
Viking common stock will have any fractional shares of Camber
common stock after the Merger rounded up to the nearest whole
share.
The increase in authorized common stock will not have any immediate
effect on the rights of existing shareholders. However, the Board
will have the authority to issue authorized common stock without
requiring future shareholder approval of such issuances, except as
may be required by applicable law or the NYSE American, up to the
increased amount of authorized shares (i.e., 75,000,000 shares).
For example, the rules of the NYSE American require that we obtain
shareholder approval prior to the issuance of shares of common
stock in a private financing at a price less than the greater of
the book value or market value of our common stock, where the total
number of shares which may be issued pursuant to such transactions
equals or exceeds 20% of the outstanding common stock prior to
issuance. To the extent that additional authorized shares are
issued in the future, they may decrease the existing shareholders’
percentage equity ownership and, depending on the price at which
they are issued, could be dilutive to the existing shareholders. It
is currently anticipated that substantially all of the 50,000,000
shares of authorized but unissued shares of common stock which will
be made available through the increase in authorized shares of
common stock will be issued in connection with the conversion of
outstanding shares of Series C Preferred Stock, pursuant to their
terms, as discussed in greater detail below under Proposal 5. Such
conversions, as discussed in Proposal 5, will
cause substantial dilution to existing shareholders.
The increased proportion of unissued authorized shares, compared to
issued shares could, under certain circumstances, have an
anti-takeover effect (for example, by permitting issuances that
would dilute the stock ownership of a person seeking to effect a
change in the composition of our Board or contemplating a tender
offer or other transaction for our combination with another
company). However, the Amendment (defined below) is not being
proposed in response to any effort of which we are aware to
accumulate shares of our common stock or obtain control of our
Company, nor is it part of a plan by management to recommend a
series of similar amendments to our Board and
shareholders.
The holders of common stock have no preemptive rights and the Board
has no plans to grant such rights with respect to any such
shares.
The form of the proposed amendment to our Articles of Incorporation
to affect the increase in authorized shares of common stock will be
in substantially the form as attached to this Proxy Statement
as Appendix
A (the “Amendment”).
Shareholders should be aware that because we currently have no
authorized but unissued shares of common stock remaining, the
holders of our Series C Preferred Stock are currently prevented
from converting shares of Series C Preferred Stock (and conversion
premiums thereon) into our common stock. We calculate that the
holders of Series C Preferred Stock are still due a significant
number of shares of common stock upon conversion of the 2,693
currently outstanding shares of Series C Preferred Stock (when
including conversion premiums thereon), which number of shares will
exceed the increased number of shares of common stock which would
be authorized assuming the Amendment is affected.
The Amendment will become effective on the date of effectiveness
set forth in the Amendment when filed with the Secretary of State
of the State of Nevada.
As of the date of this Proxy Statement, we do not have any
definitive plans, agreements, or understandings with respect to the
additional authorized shares that will become available for
issuance after the Amendment has been implemented, except for
shares of common stock which may be issued upon conversion of the
Series C Preferred Stock. Notwithstanding the above, as discussed
above we have entered into an Agreement and Plan of Merger (as
amended and restated) with Viking. Such Merger is subject to
various conditions and requirements. One of those conditions
requires us, prior to affecting such Merger, to seek approval from
our shareholders for a further increase in authorized but unissued
shares of common stock to provide sufficient additional authorized
but unissued shares of common stock to allow us to issue the
shareholders of Viking shares of common stock in the Merger and we
do not anticipate the increase in authorized shares requested
pursuant to this Proposal 4 being sufficient to allow us to
complete the Merger, nor do we have any current plans to issue any
shares of common stock which will be available for issuance after
the Amendment has been implemented in connection with the proposed
Merger.
Separate from the above, Discover Growth Fund, the holder of our
Series C Preferred Stock, is currently due 15,348 shares of common
stock which are currently held in abeyance subject to the Company
increasing its authorized shares of common stock, which the Company
plans to issue following the effectiveness of the Amendemnt,
provided such Amendment is approved by shareholders at the Annual
Meeting.
No Appraisal
Rights
Under Nevada law, our shareholders are not entitled to appraisal
rights with respect to the increase to the number of authorized
shares of common stock.
Vote Required
The affirmative vote of the holders of a majority of our
outstanding voting shares entitled to vote at the meeting is
required to approve this Proposal. Abstentions will have the same
effect as shares voted against this proposal. Broker non-votes will
have the same effect as shares voted against this proposal. For the
approval of this Proposal, you may vote “FOR” or
“AGAINST” or abstain from voting.
Board
Recommendation
Our Board recommends that you vote “FOR” the adoption
of the amendment to the Articles of Incorporation to increase the
number of shares of authorized common stock.
PROPOSAL 5
APPROVAL OF THE TERMS OF THE JUNE 2020 PURCHASE AGREEMENT AND THE
ISSUANCE OF SHARES OF COMMON STOCK UPON THE CONVERSION OF THE 630
SHARES OF SERIES C PREFERRED STOCK SOLD PURSUANT THERETO, INCLUDING
SHARES OF COMMON STOCK EXCEEDING 20% OF THE COMPANY’S OUTSTANDING
COMMON STOCK AS OF JUNE 22, 2020, INCLUDING SHARES ISSUABLE FOR
DIVIDENDS AND CONVERSION PREMIUMS ON SUCH 630 SHARES OF SERIES C
PREFERRED STOCK
General
On and effective June 22, 2020, the Company and Discover Growth
Fund, an institutional investor (“Discover”) entered
into a Stock Purchase Agreement (the “June 2020 Purchase
Agreement”).
Under the terms of the June 2020 Purchase Agreement, Discover
purchased 630 shares of the Company’s Series C Preferred Stock, for
$6 million, at a 5% original issue discount to the $10,000 face
value of each such share of preferred stock (the “Face
Value”).
Discover (and/or parties associated with Discover) had
previously purchased shares of Series C Preferred Stock and other
securities from the Company as discussed below under “Certain
Relationships and Related Party Transactions - Discover
Transactions”, beginning on page 40.
The Company has used a portion of the proceeds from the June 2020
sale of the Series C Preferred Stock to purchase the February 2020
Secured Note from Viking as discussed and defined below under
“Viking Investment”.
Pursuant to the June 2020 Purchase Agreement, as long as Discover
holds any shares of Series C Preferred Stock, the Company agreed
that, except as contemplated in connection with the Merger, the
Company would not issue or enter into or amend an agreement
pursuant to which the Company may issue any shares of common stock,
other than (a) for restricted securities with no registration
rights, (b) in connection with a strategic acquisition,
(c) in an underwritten public offering, or (d) at a fixed
price; or issue or amend any debt or equity securities convertible
into, exchangeable or exercisable for, or including the right to
receive, shares of common stock (i) at a conversion price,
exercise price or exchange rate or other price that is based upon
or varies with, the trading prices of or quotations for the shares
of common stock at any time after the initial issuance of the
security or (ii) with a conversion, exercise or exchange price
that is subject to being reset at some future date after the
initial issuance of the security or upon the occurrence of
specified or contingent events directly or indirectly related to
the business of the Company or the market for the common stock.
Additionally, provided that the Company has not materially breached
the terms of the June 2020 Purchase Agreement, the Company may at
any time, in its sole and absolute discretion, repurchase from
Discover all, but not less than all, of the then outstanding shares
of Series C Preferred Stock sold pursuant to the agreement by
paying to Discover 110% of the aggregate Face Value of all such
shares.
The Company also agreed to provide Discover a right of first offer
to match any offer for financing the Company receives from any
person while the shares of Series C Preferred Stock sold pursuant
to the June 2020 Purchase Agreement are outstanding, except for
debt financings not convertible into common stock, which are
excluded from such right to match.
Finally, the Company agreed that if the Company issues any security
with any term more favorable to the holder of such security or with
a term in favor of the holder of such security that was not
similarly provided to Discover, then the Company would notify
Discover of such additional or more favorable term and such term,
at Discover’s option, may become a part of the transaction
documents with Discover.
The June 2020 Purchase Agreement includes customary provisions
requiring that the Company indemnify Discover against certain
losses; representations and warranties and covenants.
The Company also agreed pursuant to the June 2020 Purchase
Agreement that if the Viking Merger does not close by the required
date approved by the parties thereto (as such may be extended from
time to time, which required closing date is currently December 31,
2020), the Company is required, at Discover’s option in its sole
and absolute discretion, to immediately repurchase from Discover
all then outstanding Series C Preferred Stock shares acquired by
Discover pursuant to the June 2020 Purchase Agreement, by paying to
Discover 110% of the aggregate Face Value of all such shares (the
“Repurchase Requirement”), which totals $6,930,000.
Separately, Viking agreed that if the Merger Agreement is
terminated prior to the closing of the Merger, Viking will owe the
Company, in addition to the required repayment of the Secured Notes
(defined below under “Viking Investment”), an additional
amount equal to (i) 115.5% of the original principal amount of
the Secured Notes, minus (ii) the amount due to the Company
pursuant to the terms of the Secured Notes upon repayment thereof
(the “Additional Payment”). As an example, if when the
Viking Merger Agreement is terminated, $9,200,000 were due to the
Company under the Secured Notes (assuming all interest due
thereunder had been paid as of the date due), Viking would owe the
Company (i) $9,200,000 multiplied by 1.155 = $10,626,000,
minus (ii) $9,200,000, or a total Additional Payment of
$1,426,000, in addition to the amount due under the Secured
Notes.
Finally, we agreed to include proposals relating to the approval of
the June 2020 Purchase Agreement and the issuance of the shares of
common stock upon conversion of the Series C Preferred Stock sold
pursuant to the June 2020 Purchase Agreement, as well as an
increase in authorized common stock to fulfill the Company’s
obligations to issue such shares, at the meeting held to approve
the Merger or a separate meeting, and to use commercially
reasonable best efforts to obtain such approvals as soon as
possible and in any event prior to December 31, 2020, which
proposals the Company is asking shareholders to approve at the
Annual Meeting.
The Company loaned $4.2 million of the funds provided by the June
2020 Purchase Agreement to Viking in connection with the purchase
of the June Secured Note, as discussed and defined in greater
detail below under “Viking Investment”.
The Board has unanimously determined that it is advisable and in
the best interests of the Company and its shareholders to be able
to issue shares of its common stock upon the conversion of the
Series C Preferred Stock (including shares issuable for dividends
and conversion premiums thereon)(collectively, the “Series C
Conversion Shares”), and unanimously recommends that the
shareholders vote “FOR” approval of the
issuance of such number of shares of common stock exceeding 20% of
its outstanding common stock, issuable upon conversion of the 630
shares of Series C Preferred Stock, including shares issuable for
dividends and conversion premiums thereon sold pursuant to the June
2020 Purchase Agreement and ratification of the terms of such June
2020 Purchase Agreement.
A vote “FOR” this Proposal is a vote for issuance of
the Series C Conversion Shares, which includes the potential
issuance of 20% or more of our outstanding shares of common stock
as of the June 22, 2020 date that the June 2020 Purchase Agreement
was entered into between us and Discover (i.e., over 20% of the
11,721,729 shares outstanding as of June 22, 2020), and approval of
the June 2020 Purchase Agreement.
Please refer to the June 2020 Purchase Agreement and the
designation of the Company’s Series C Preferred Stock (as amended),
which are attached as Appendix
B and Appendix C to
this Proxy Statement, respectively, for further details and more
information regarding the terms and conditions of the June 2020
Purchase Agreement and Series C Preferred Stock as summarized
above.
Series C
Redeemable Convertible Preferred Stock
Our Series C Preferred Stock was originally designated on August
25, 2016. The designation of the Series C Preferred Stock was
amended on July 25, 2018 and amended and restated on July 8, 2019.
All such amendments to date have been included in the description
of the Series C Preferred Stock below.
Holders of the Series C Preferred Stock are entitled to cumulative
dividends in the amount of 24.95% per annum (adjustable up to
34.95% if a trigger event, as described in the Certificate of
Designations of the Series C Preferred Stock occurs
(see Appendix
C), payable upon redemption, conversion, or maturity, and
when, as and if declared by our Board of Directors in its
discretion, provided that upon any redemption, conversion, or
maturity, seven years of dividends are due and payable on such
redeemed, converted or matured stock. The Series C Preferred Stock
ranks senior to the common stock. The Series C Preferred Stock has
no right to vote on any matters, questions or proceedings of the
Company including, without limitation, the election of directors
except: (a) during a period where a dividend (or part of a
dividend) is in arrears; (b) on a proposal to reduce the
Company’s share capital; (c) on a resolution to approve the
terms of a buy-back agreement; (d) on a proposal to wind up
the Company; (e) on a proposal for the disposal of all or
substantially all of the Company’s property, business and
undertakings; and (f) during the winding-up of the
Company.
The Series C Preferred Stock may be converted into shares of common
stock (“Conversion Shares”) at any time at the option
of the holder, or at our option if certain equity conditions (as
defined in the certificate of designation for the Series C
Preferred Stock (see Appendix C)), are met.
Upon conversion, we will pay the holders of the Series C Preferred
Stock being converted an amount, in cash or stock at our sole
discretion, equal to the dividends that such shares would have
otherwise earned if they had been held through the maturity date
(i.e., seven years), and issue to the holders such number of shares
of Common stock equal to $10,000 per share of Series C Preferred
Stock multiplied by the number of such shares of Series C Preferred
Stock divided by the applicable Conversion Price (as defined in the
certificate of designation for the Series C Preferred
Stock)(see Appendix C).
The conversion premium under the Series C Preferred Stock is
payable and the dividend rate under the Series C Preferred Stock is
adjustable. Specifically, the conversion rate of such premiums and
dividends equals 95% of the average of the lowest 5 individual
daily volume weighted average prices during the Measuring Period,
not to exceed 100% of the lowest sales prices on the last day of
the Measuring Period, less $0.05 per share of common stock, unless
a triggering event has occurred, in which case the conversion rate
equals 85% of the lowest daily volume weighted average price during
the Measuring Period, less $0.10 per share of common stock not to
exceed 85% of the lowest sales prices on the last day of such
Measuring Period, less $0.10 per share. The “Measuring
Period” is the beginning February 3, 2020, and ending, if no
trigger event has occurred, 30 trading days, and if a trigger event
has occurred, 60 trading days, after the applicable number of
shares stated in the initial exercise/conversion notice have
actually been received into the Investor’s designated brokerage
account in electronic form and fully cleared for trading.
Triggering events are described in the designation of the Series C
Preferred Stock (see Appendix C), but
include items which would typically be events of default under a
debt security, including filing of reports late with the SEC.
The Series C Preferred Stock has a maturity date that is seven
years after the date of issuance and, if the Series C Preferred
Stock has not been wholly converted into shares of common stock
prior to such date, we may redeem the Series C Preferred Stock on
such date by repaying to the investor in cash 100% of the Face
Value plus an amount equal to any accrued but unpaid dividends
thereon. 100% of the Face Value, plus an amount equal to any
accrued but unpaid dividends thereon, automatically becomes payable
in the event of a liquidation, dissolution or winding up by us.
We may not issue any other preferred stock that is pari passu or
senior to the Series C Preferred Stock with respect to any rights
for a period of one year after the earlier of such date (i) a
registration statement is effective and available for the resale of
all shares of common stock issuable upon conversion of the Series C
Preferred Stock, or (ii) Rule 144 under the Securities Act is
available for the immediate unrestricted resale of all shares of
common stock issuable upon conversion of the Series C Preferred
Stock.
The Series C Preferred Stock is subject to a beneficial ownership
limitation, which prevents any holder of the Series C Preferred
Stock from converting such Series C Preferred Stock into common
stock, if upon such conversion, the holder would beneficially own
greater than 9.99% of our outstanding common stock.
The issuance of the Conversion Shares is subject to NYSE American
approval and approval of our shareholders.
Our Board has unanimously determined that it is advisable and in
the best interests of the Company and our shareholders to be able
to issue shares of our common stock upon the conversion of the
Series C Preferred Stock (including shares issuable for dividends
and conversion premiums thereon)(collectively, the “Series C
Conversion Shares”), and unanimously recommends that the
shareholders vote ”FOR” approval of the
issuance of such number of shares of common stock exceeding 20% of
our outstanding common stock, issuable upon conversion of the 630
shares of Series C Preferred Stock, including shares issuable for
dividends and conversion premiums thereon sold pursuant to the June
2020 Purchase Agreement and ratification of the terms of such June
2020 Purchase Agreement.
A vote “FOR” this Proposal is a vote for issuance of
the Series C Conversion Shares and approval of the June 2020
Purchase Agreement.
Please refer to the June 2020 Purchase Agreement and the
designation of our Series C Preferred Stock (as amended), which are
attached as Appendix
B and Appendix C to this
Proxy Statement, respectively, for further details and more
information regarding the terms and conditions of the June 2020
Purchase Agreement and Series C Preferred Stock as summarized
above.
Viking Investment
On February 3, 2020, the Company entered into an Agreement and Plan
of Merger (as amended and restated to date, the “Merger
Agreement”) with Viking Energy Group, Inc.
(“Viking”). The Merger Agreement provides that, upon the
terms and subject to the conditions set forth therein, a
to-be-formed, wholly-owned subsidiary of the Company (“Merger
Sub”), will merge with and into Viking (the “Merger”),
with Viking surviving the Merger as a wholly-owned subsidiary of
the Company.
As a condition to closing the Merger, the Company was required to
loan Viking (a) $5,000,000, with Camber (i) receiving a
$5,000,000 promissory note from Viking, accruing interest at 10.5%
per annum, and (ii) acquiring a 25% interest in Viking’s
subsidiary Elysium Energy Holdings, LLC (“Elysium”) on
February 3, 2020; and (b) $4,200,000, with the Company (i)
receiving a $4,200,000 promissory note from Viking, accruing
interest at 10.5% per annum, and (ii) acquiring a 5% interest in
Elysium on June 25, 2020.
On February 3, 2020, Viking and the Company entered into a
Securities Purchase Agreement (the “February SPA”), pursuant
to which Camber made the $5,000,000 loan to Viking. The loan was
evidenced by a 10.5% Secured Promissory Note (the “February
Secured Note”) issued to Camber, the repayment of which
was secured by the terms of a Security and Pledge Agreement (the
“February Pledge”).
On June 25, 2020, Camber loaned Viking an additional $4.2 million,
pursuant to the terms of a Securities Purchase Agreement, which was
entered into on the same date (the “June 2020 SPA”, and
together with the February SPA, the “SPAs”). The $4.2
million loan was evidenced by a 10.5% Secured Promissory Note (the
“June 2020 Secured Note”, and together with the February
2020 Secured Note, the “Secured Notes”), the repayment of
which was secured by the terms of a Security and Pledge Agreement
(the “June 2020 Pledge”, and together with the February
Pledge, the “Pledges”).
The Secured Notes accrue interest at the rate of 10.5% per annum,
payable quarterly, and are due and payable on February 3, 2022. The
notes include standard events of default, including certain
defaults relating to the trading status of Viking’s common stock
and change of control transactions involving Viking. The Secured
Notes can be prepaid at any time with prior notice as provided
therein, and together with a prepayment penalty equal to 10.5% of
the original amount of the applicable Secured Note being
repaid.
The Secured Notes are convertible into common shares of Viking at a
conversion price of $0.24 per share at any time beginning 30 days
after the date of the applicable Secured Notes, until the
15th day after Viking’s common stock has traded at
an average daily price of at least $0.55 for 15 consecutive
business days, provided that the Company is restricted from
converting any portion of the Secured Notes into Viking’s common
stock if upon such conversion the Company would beneficially own
more than 4.99% of Viking’s common stock (which percentage may be
increased or decreased to up to 9.99%, with 61 days’ prior written
notice to Viking).
In addition to the Company’s other conversion rights under the
Secured Notes, the Company also has the right to convert the
Secured Notes (principal and interest) into the securities
offered by Viking in connection with Viking’s first public offering
following the date of the Secured Notes, at a conversion price
equal to eighty-five percent (85%) of the offering price of
the applicable security (representing a fifteen percent
(15%) discount) in such public offering.
The Pledges provide the Company, pari passu with the other
investors in Viking’s 506(c) secured note offering, a security
interest (subject to certain prerequisites) in Viking’s 75%
ownership of Elysium and 100% of Ichor Energy Holdings, LLC
(“Ichor”). Additionally, pursuant to a separate Security and
Pledge Agreement entered into on February 3, 2020 and amended and
restated on June 25, 2020, Viking provided Camber a junior security
interest in the membership, common stock and/or ownership interests
of all of Viking’s existing and future, directly owned or majority
owned subsidiaries, to secure the repayment of the Secured Note
(the “Second Pledge”).
As additional consideration for the Company making the loans to
Viking and entering into the Merger Agreement, Viking assigned the
Company 25% of Elysium pursuant to the terms of an Assignment of
Membership Interests dated February 3, 2020 (the “First
Assignment”) and an additional 5% of Elysium pursuant to the
terms of an Assignment of Membership Interests dated June 25, 2020
(collectively, such 30% interest, the “Assigned Elysium
Interests”).
In the event the Merger Agreement is terminated by any party for
any reason, Viking will owe the Company an additional amount equal
to (i) 115.5% of the original principal amount of the Secured
Notes, minus (ii) the amount due to the Company pursuant to the
terms of the Secured Notes upon repayment thereof (the
“Additional Payment”). As an example, if when the Merger
Agreement is terminated, $9,200,000 were due to the Company under
the Secured Notes (assuming all interest due thereunder had been
paid as of the date due), Viking would owe the Company (i)
$9,200,000 multiplied by 1.155 = $10,626,000, minus (ii)
$9,200,000, or a total Additional Payment of $1,426,000, in
addition to the amount due under the Secured Notes.
Separately, if the Merger does not close by the required date
approved by the parties thereto (as such may be extended from time
to time, which date is currently December 31, 2020), the Company is
required, at Discover’s option, in its sole and absolute
discretion, to immediately repurchase from Discover all then
outstanding the Company Series C Preferred Stock shares acquired by
Discover pursuant to the June 2020 Purchase Agreement, by paying to
Discover 110% of the aggregate Face Value of all such shares (the
Repurchase Requirement), which amount (630 shares of Series C
Preferred Stock), currently totals $6,930,000.
The Acquisition Notes will be forgiven in the event the Merger
closes.
The Company will retain all, a portion, or none of its 30% interest
in Elysium, as a termination/breakup fee (together with the
Additional Payment discussed above) if the Merger Agreement is
terminated in the following circumstances:
|
Reason for Termination |
|
Percentage of Elysium
Retained by the Company
|
|
| Termination of the Merger
Agreement by mutual agreement of the parties because certain
requirements of the closing of the Merger do not occur (regarding
receipt of exchange listing and regulatory approvals or the
registration statement on Form S-4 of which this joint proxy
statement/prospectus is a part, will not be declared effective)
have a reasonable likelihood of not being satisfied through no
fault of the Company or Viking |
|
|
20 |
%* |
| |
|
|
|
|
| Termination of the Merger Agreement
due to either (i) the Company’s determination not to proceed with
the Merger even though Viking has substantially performed its
obligations pursuant to the Merger Agreement (except as discussed
below), or (ii) a matter raised in the Company’s disclosure
schedule which was (A) not disclosed by the Company in its SEC
reports, (B) could reasonably result in a material adverse effect
on the Company in excess of $500,000, and (c) which Viking objected
to within 5 business days of disclosure by the Company to
Viking |
|
|
0 |
%* |
| |
|
|
|
|
| Termination of the Merger Agreement
due to the failure of the Company’s shareholders to approve the
terms of the Merger |
|
|
15 |
%* |
| |
|
|
|
|
| Termination of the Merger Agreement by
either party due to any other reason not set forth above through no
fault of the Company |
|
|
25 |
%* |
| |
|
|
|
|
| In the event the Secured Notes are not
repaid within 90 days of the date of termination and the Additional
Payment (defined above) is not made |
|
|
30 |
% |
*Assumes the payment of Secured Notes within 90 days of the date of
termination of the Merger Agreement and that the Additional Payment
is made.
In the event of
termination of the Merger Agreement through no fault of Viking due
to the failure of the Company stockholders to approve the Company
share issuance and charter amendment, the Company is required to
issue Viking 300,000 restricted shares of the Company common stock
as a termination fee, subject to Viking confirming its status as an
‘accredited investor’ and making certain other customary
representations to the Company in order to allow the Company to
claim an exemption from registration for such issuance, and subject
to NYSE American additional listing approval of such shares.
Certain Prior Transactions
Involving Discover
The June 2020 Purchase Agreement is one of several transactions the
Company has completed with Discover since April 2016, all of which
are described in greater detail below under “Certain Relationships and
Related Party Transactions – Discover Transactions”, beginning
on page 40.
Reasons for the
Issuance
The approval of its ability to issue shares of the Company’s common
stock upon the conversion of the Series A Preferred Stock and the
June 2020 Purchase Agreement was a required term and condition of
the June 2020 Purchase Agreement.
Reasons for Shareholder
Approval
The Company’s common stock is listed on the NYSE American. Section
713(a) of the NYSE American rules requires shareholder
approval in connection with a transaction involving the sale,
issuance, or potential issuance by the issuer of common stock (or
securities convertible into common stock) equal to 20% or more
of presently outstanding shares of common stock at a price less
than the greater of book value or market value. Section
713(b) of the NYSE American rules requires shareholder
approval in connection with a transaction involving the issuance or
potential issuance of additional shares which would result in a
change of control of the issuer (which is typically considered the
issuance of more than 20% of an issuer’s outstanding common
stock).
Because the shares of its common stock issuable upon conversion of
the 630 shares of Series C Preferred Stock (including shares
issuable for dividends and conversion premiums
thereon) represent greater than 20% of the Company’s
outstanding common stock as of the June 22, 2020 date that the June
2020 Purchase Agreement (defined below) was entered into
between the Company and the investor party thereto (i.e., over 20%
of the 11,721,729 shares outstanding as of June 22, 2020), the
Company is asking its shareholders to approve the issuance of such
number of shares of common stock exceeding 20% of its outstanding
common stock, issuable upon conversion of the 630 shares of Series
C Preferred Stock sold pursuant to the terms of the June 2020
Purchase Agreement, including shares issuable for dividends and
conversion premiums thereon, and to ratify the terms of such June
2020 Purchase Agreement.
Shareholder approval of this Proposal is being sought solely to
comply with the terms of the June 2020 Purchase Agreement and
Section 713 of the NYSE American rules governing the issuance of
securities when any such issuances in the aggregate would exceed
20% of an issuer’s outstanding capital stock or might be considered
a change of control (as defined by NYSE American).
Effect upon Rights of Existing
Shareholders
The Company’s current shareholders will continue to own their
existing shares after the transaction described in this proposal.
If shareholders approve this proposal, the Series C Preferred Stock
(including dividends and conversion premiums thereon) sold
pursuant to the June 2020 Purchase Agreement will be convertible
into shares of common stock, pursuant to the terms thereof, without
additional shareholder approval.
If the Company shareholders approve this proposal, the principal
effect upon the rights of existing shareholders upon the conversion
of the Series C Preferred Stock will be a dilution in their current
percentage ownership in the Company. Upon conversion of all 630
shares of Series C Preferred Stock sold pursuant to the June 2020
Purchase Agreement, Discover will be due in the aggregate a
significant portion of the Company’s outstanding shares of common
stock, not including any shares of common stock Discover can hold
upon conversion of outstanding convertible securities of the
Company which Discover already holds separate from the shares sold
pursuant to the June 2020 Purchase Agreement (i.e., Discover
already holds an additional 2,063 shares of Series C Preferred
Stock which are convertible into shares of the Company on the same
terms as the 630 shares of Series C Preferred Stock sold pursuant
to the June 2020 Purchase Agreement). The issuance of shares of
common stock pursuant to the conversion of the Series C Preferred
Stock and the sale of such shares by such holders into the public
market, also could materially and adversely affect the market price
of the Company’s common stock.
Additionally, as discussed above, the Company agreed pursuant to
the June 2020 Purchase Agreement that if the Merger does not close
by the required date approved by the parties thereto (currently
December 31, 2020, as such date may be mutually extended by the
parties to the Merger), the Company is required, at Discover’s
option in its sole and absolute discretion, to immediately
repurchase from Discover all then outstanding Series C Preferred
Stock shares acquired by Discover pursuant to the June 2020
Purchase Agreement, by paying to Discover 110% of the aggregate
Face Value of all such shares (the Repurchase Requirement), which
totals $6,930,000.
The total number of shares of common stock currently issuable in
connection with this proposal is approximately 27,647,340, which
consists of (i) 38,769 shares of common stock issuable upon
conversion of the Series C Preferred Stock, and
(ii) approximately 27,608,571 additional shares of common
stock that the Company may issue, at its sole discretion in lieu of
cash, as conversion premiums or in payment of interest or dividends
on such Series C Preferred Stock, assuming the payment of dividends
on the Series C Preferred Stock solely in shares of common stock,
for a period of seven years, which is the maturity date of each of
the securities, and not taking into account any decrease in the
trading price of the Company’s common stock subsequent to the date
hereof. The number of additional shares of common stock that the
Company may issue as conversion premiums or in payment of dividends
is dependent on the dividend rate and conversion premium rate which
can range from 0% to 24.95% (or up to 34.95% upon a trigger
event) depending on the Company’s underlying stock price at
the time of conversion or maturity and assuming no trigger event
has occurred, and which percentage is currently 24.95%, and is
subject to true-ups in the event the price of its common stock
decreases from the date of conversion through the applicable
Measuring Period (defined and discussed above under “Series C
Redeemable Convertible Preferred Stock”). For purposes of the
dividend and conversion premium calculations in the preceding
sentences, the Company (i) assumed the dividend rate and
conversion premium rate to be 24.95% per annum, and
(ii) estimated, solely for the purposes of such hypothetical
calculation, $0.3985 to be 95% of the average of the lowest 5
individual daily volume weighted average prices during the period
from February 3, 2020, to the conversion date, not to exceed 100%
of the lowest sales prices on the last day of such period, less
$0.05 per share of common stock (or $0.95 per share)(the “VWAP
Measurement”) with respect to the Series C Preferred
Stock. If the VWAP Measurement is, in any case, an amount less than
the amount assumed in the preceding sentences and/or the interest
rate, dividend rate and conversion premium rate is, in any case,
higher than the rate assumed in the preceding sentences, or in the
event the trading price of its common stock decreases from the date
of issuance through the applicable Measurement Period, additional
shares of common stock will be issuable, which may cause
substantial dilution to existing shareholders. Because the
beginning date for the Measuring Period for all outstanding shares
of Series C Preferred Stock is February 3, 2020, the conversion
price of the conversion premiums on such Series C Preferred Stock
will never be above approximately $0.3985 per share (as adjusted
for future reverse stock splits, if any)(the current estimated
lowest conversion price in the period from February 3, 2020 to the
date of this Proxy Statement), regardless of the actual trading
price of the Company’s common stock.
The total maximum number of shares of common stock issuable in
connection with this proposal is 11,002,988,769, which consists of
(i) 38,769 shares of common stock issuable upon conversion of
the Series C Preferred Stock, and (ii) 11,002,950 additional
shares of common stock issuable as conversion premiums on such
Series C Preferred Stock, assuming the payment of dividends on the
Series C Preferred Stock solely in shares of common stock, for a
period of seven years, which is the maturity date of each of the
securities, and assuming that the applicable conversion price of
the conversion premiums due pursuant to the terms of the Series C
Preferred Stock is equal to, or less than, the par value of the
Company’s common stock, $0.001 per share, which is the lowest
legally allowed conversion price for such Series C Preferred Stock
conversion premiums, which lower limit on conversions is not
subject to adjustment in connection with the proposed reverse stock
split.
Risks Relating to the Series C
Preferred Stock
The full amount of premiums, interest and dividends through
the maturity date of the Series C Preferred Stock is due upon the
repayment/redemption (where applicable), or conversion, as
applicable, of the Series C Preferred Stock.
The Series C Preferred
Stock provides that all applicable dividends, which initially
accrued in the amount of 24.95% per annum and which increase or
decrease subject to the terms of the Series C Preferred Stock,
based on among other things, the trading price of the Company’s
common stock, up to a maximum of 34.95% per annum, are due upon
conversion or repayment/redemption (where applicable) thereof,
for the full seven year term of such securities.
The requirement that the Company pay all premiums, interest and
dividends through maturity and the adjustable nature of such
premium, interest and dividend rates, may force it to issue
Discover significant additional shares of common stock, which may
cause significant dilution to existing shareholders. The
requirement that the Company pay all premiums, interest and
dividends through maturity may make it too costly for it to repay
or redeem, as applicable, Discover’s securities, prior to
conversion thereof, as applicable.
The number of shares of common stock issuable in
consideration for premiums, interest and dividends through maturity
on the Series C Preferred Stock continue to be adjustable after the
conversion of such securities.
Pursuant to the terms of the Series C Preferred Stock, the
conversion rate of such securities in connection with the premiums
and dividends due on such securities through maturity (7 years,
regardless of when converted), continues to be adjustable after the
issuance of such securities. Specifically, such securities remain
adjustable, based on a discount to the lowest daily volume weighted
average price during a measuring period which begins on February 3,
2020 and continues for a period of 30 or 60 days (depending on
whether or not a Triggering Event has occurred)
after the applicable number of shares stated in the
initial conversion notice have actually been received into
Discover’s designated brokerage account in electronic form and
fully cleared for trading (subject to certain extensions described
in the applicable securities). Because Discover is limited to
holding not more than 9.99% of the Company’s common stock upon
exercise/conversion of any security, Discover will not receive all
of the shares due upon any conversion, until it has sold shares and
been issued additional shares and as such, the beginning date for
the applicable 30 or 60 day period after conversion is impossible
to determine and may be a significant additional number of days
after the initial conversion by Discover. Additionally, because the
beginning date for the Measuring Period for all outstanding shares
of Series C Preferred Stock is February 3, 2020, the conversion
price of the conversion premiums on such Series C Preferred Stock
will never be above approximately $0.3985 per share (as adjusted
for future reverse stock splits, if any)(the current estimated
lowest conversion price in the period from February 3, 2020 to the
date of this Proxy Statement), regardless of the actual trading
price of the Company’s common stock.
In the event of a decrease in the Company’s stock price during the
applicable measuring periods, the conversion rate of the premiums
and dividends due on such applicable securities will adjust
downward and Discover will be due additional shares of common
stock, which issuances may cause further significant dilution to
existing shareholders and the sale of such shares may cause the
value of the Company’s common stock to decline in value.
Furthermore, it is likely that the sale by Discover of the shares
of common stock which Discover receives in connection with any
conversion, during the applicable measuring period, will cause the
value of the Company’s common stock to decline in value and the
conversion rate to decrease and will result in Discover being due
additional shares of common stock during the measuring period,
which will trigger additional decreases in the value of the
Company’s common stock upon further public sales by Discover. If
this were to occur, Discover would be entitled to receive an
increasing number of shares, upon conversion of the remaining
securities, which could then be sold, triggering further price
declines and conversions for even larger numbers of shares, which
would cause additional dilution to its existing shareholders and
would likely cause the value of its common stock to
decline.
The issuance of common stock upon conversion of the Series C
Preferred Stock will cause immediate and substantial
dilution.
The issuance of common stock upon
conversion of the Series C Preferred Stock, at such time as we have
future availability of authorized but unissued shares of common
stock, either after the increase in authorized shares of common
stock, the approval for which is being sought pursuant to Proposal
No. 4 hereof and/or after the reverse stock split), will result in
immediate and substantial dilution to the interests of other
shareholders. Although Discover may not receive shares of common
stock exceeding 9.99% of its outstanding shares of common stock
immediately after affecting such conversion, this restriction does
not prevent Discover from receiving shares up to the 9.99% limit,
selling those shares, and then receiving the rest of the shares it
is due, in one or more tranches, while still staying below the
9.99% limit. If Discover chooses to do this, it will cause
substantial dilution to the then holders of its common stock.
Additionally, the continued sale of shares issuable upon successive
conversions will likely create significant downward pressure on the
price of its common stock as Discover sells material amounts of the
Company’s common stock over time and/or in a short period of time.
This could place further downward pressure on the price of its
common stock and in turn result in Discover receiving an ever
increasing number of additional shares of common stock upon
conversion of its securities, and adjustments thereof, which in
turn will likely lead to further dilution, reductions in the
exercise/conversion price of Discover’s securities and even more
downward pressure on its common stock, which could lead to its
common stock becoming devalued or worthless.
Discover holds an
approximately $74 million liquidation preference in the
Company.
Each share of Series C Preferred Stock held by Discover includes a
liquidation preference, payable to Discover upon any liquidation,
dissolution or winding up of the Company, whether voluntary or
involuntary, after payment or provision for payment of debts and
other liabilities of the Company, prior to any
distribution or payment made to the holders of preferred stock or
common stock, by reason of their ownership thereof equal to
$10,000, plus an amount equal to any accrued but unpaid dividends
thereon. Because the dividends currently require that interest be
paid on the Face Value of 24.95% per annum, for the entire seven
year term of the Series C Preferred Stock (even if payable sooner
than seven years after the issuance date), the total liquidation
value required to be paid to Discover upon a liquidation,
dissolution or winding up of the Company is approximately $74
million as of the date of this Proxy Statement. As referenced
above, this liquidation preference would be payable prior to any
amount being distributed to the holders of its common stock.
Because the Company’s net assets total significantly less than $74
million, it is likely that its common shareholders would not
receive any amount in the event the Company was liquidated,
dissolved or wound up, and that Discover would instead receive the
entire amount of available funds after liquidation.
Discover, as holder of the Company’s Series C Preferred
Stock, effectively has the ability to consent to any material
transaction involving the Company including the Merger.
Due to the restrictions placed on the Company as a result of the
Series C Preferred Stock, including, but not limited to the
significant liquidation preference discussed above and the fact
that, as long as Discover holds any shares of Series C Preferred
Stock, the Company agreed that the Company would not issue or enter
into or amend an agreement pursuant to which the Company may issue
any shares of common stock, other than (a) for restricted
securities with no registration rights, (b) in connection with
a strategic acquisition, (c) in an underwritten public
offering, or (d) at a fixed price; or issue or amend any debt
or equity securities convertible into, exchangeable or exercisable
for, or including the right to receive, shares of common stock
(i) at a conversion price, exercise price or exchange rate or
other price that is based upon or varies with, the trading prices
of or quotations for the shares of common stock at any time after
the initial issuance of the security or (ii) with a
conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of the
security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or
the market for the common stock. Discover has to effectively
consent to any material transaction involving the Company. In the
event Discover does not consent to any such transaction, we may be
prohibited (either effectively or otherwise) from completing a
material transaction in the future, including, but not limited to a
combination or acquisition which may be accretive to shareholders.
Furthermore, Discover may condition the approval of a future
transaction, which conditions may not be favorable to shareholders.
It is contemplated that Discover will be required to consent to the
terms of the Merger in connection with the completion for the
Merger, for the Merger to close. As such, in the event Discover
fails to approve the Merger, it is likely the Merger won’t be able
to move forward and will be terminated, notwithstanding the fact
that Discover has expressed its non-binding approval of the Merger
previously.
The Company’s Series C Preferred Stock holder, Discover,
holds rights of first refusal to provide further funding and
favored nation rights.
The Company has granted Discover a right of first offer to match
any offer for financing the Company receives while the shares of
Series C Preferred Stock sold pursuant to the June 2020 Purchase
Agreement (and the other purchase agreements entered with Discover)
are outstanding, except for debt financings not convertible into
common stock, which are excluded from such right to match. Such
right of first refusal may delay or prevent the Company from
raising funding in the future.
The Company also agreed that if it issues any security with any
term more favorable to the holder of such security or with a term
in favor of the holder of such security that was not similarly
provided to Discover, then the Company would notify Discover of
such additional or more favorable term and such term, at Discover’s
option, may become a part of the transaction documents with
Discover, including the Series C Preferred Stock and the agreements
relating to the sale thereof. Such favored nations provision may
make it more costly to complete transactions in the future, may
prevent future transactions from occurring and/or may provide
Discover additional rights than it currently has, all of which may
cause significant dilution to existing shareholders, and/or cause
the value of the Company’s, or the combined company’s common stock
to decline in value. Such rights and obligations will continue to
bind the combined company following the closing of the Merger.
Discover, subject to
applicable contractual restrictions, and/or a third party, may sell
short the Company’s common stock, which could have a depressive
effect on the price of its common stock.
Discover is currently
prohibited from selling the Company’s stock short; however, in the
event a trigger event occurs under the Series C Preferred Stock
such restriction is waived. Additionally, nothing prohibits a third
party from selling the Company’s common stock short based on their
belief that due to the dilution caused by the conversions/exercises
of the securities held by Discover, that the trading price of the
Company’s common stock will decline in value. The significant
downward pressure on the price of the Company’s common stock as
Discover sells material amounts of its common stock could encourage
investors to short sell its common stock. This could place further
downward pressure on the price of the Company’s common stock and in
turn result in Discover receiving additional shares of common stock
upon exercise/conversion of its securities, and adjustments
thereof.
The Shares of Series C
Preferred Stock sold pursuant to the June 2020 Purchase Agreement
include the obligation for the Company to redeem such shares under
certain circumstances.
The Company agreed pursuant to the June 2020 Purchase Agreement
that if the Merger does not close by the required date approved by
the parties thereto (currently December 31, 2020, but subject to
extensions with the mutual agreement of the parties to the Merger
Agreement), and, the Company is required, at Discover’s option in
its sole and absolute discretion, to immediately repurchase from
Discover all then outstanding Series C Preferred Stock shares
acquired by Discover pursuant to the June 2020 Purchase Agreement,
by paying to Discover 110% of the aggregate face value of all such
shares ($6,930,000), provided that if the Merger is terminated,
Viking has agreed to pay the Company, a break-up fee equal to
(i) 115.5% of the original principal amount of the Secured
Notes, minus (ii) the amount due to the Company pursuant to
the terms of the Secured Notes upon repayment thereof (the
“Additional Payment”). As an example, if when the Merger
Agreement is terminated, $9,200,000 were due to the Company under
the Secured Notes (assuming all interest due thereunder had been
paid as of the date due), Viking would owe the Company
(i) $9,200,000 multiplied by 1.155 = $10,626,000, minus
(ii) $9,200,000, or a total Additional Payment of $1,426,000,
in addition to the amount due under the Secured Notes. The amounts
due from Viking in connection with the repayment of the Secured
Notes and Additional Payment, if timely paid, should enable the
Company to redeem the Series C Preferred Stock required to be
redeemed upon termination of the Merger. The required redemption of
the Series C Preferred Stock, if legally authorized under Nevada
law, could reduce the amount of cash the Company has available for
working capital and could require the Company to raise additional
funding in the future, which funding may not be available on
favorable terms, if at all.
Because the conversion discounts
related to the conversion premiums payable in connection with the
Series C Preferred Stock are fixed, and not based on percentages,
the percentage of such discounts increase as the Company’s stock
price declines.
As described above, the conversion rate of such premiums and
dividends payable on the Series C Preferred Stock equals 95% of the
average of the lowest 5 individual daily volume weighted average
prices during the Measuring Period (which begins on February
3, 2020 for all outstanding shares of Series C Preferred Stock),
not to exceed 100% of the lowest sales prices on the last day of
the Measuring Period (the “Non-Triggering Event Percentage
Discounted VWAP”), less $0.05 per share of common stock, unless
a triggering event (described in the Series C Preferred Stock
Designation) has occurred, in which case the conversion rate
equals 85% of the lowest daily volume weighted average price during
the Measuring Period (the “Triggering Event Percentage
Discounted VWAP” and together with the Non-Triggering Event
Percentage Discounted VWAP, as applicable, the “Percentage
Discounted VWAP”), less $0.10 per share of common stock, not to
exceed 85% of the lowest sales prices on the last day of such
Measuring Period, less $0.10 per share. Because the $0.05 and $0.10
discounts (the “Fixed Conversion Discounts”) which
apply to the already discounted Percentage Discounted VWAPs are
fixed, the percentage of such discounts increase as the value of
its common stock decreases. For example, see the table below:
$0.05
Discount to Percentage
Discounted VWAP |
|
|
$0.10
Discount to Percentage
Discounted VWAP |
|
|
Percentage
Discounted
VWAP
|
|
|
Conversion
Price* |
|
|
Percentage of
Discount
($0.05) Compared
to
Percentage
Discounted
VWAP
|
|
|
Percentage
Discounted
VWAP
|
|
|
Conversion
Price* |
|
|
Percentage of
Discount
($0.10) Compared
to
Percentage
Discounted
VWAP
|
|
| $ |
2.00 |
|
|
$ |
1.95 |
|
|
|
2.5 |
% |
|
$ |
2.00 |
|
|
$ |
1.90 |
|
|
|
5.0 |
% |
| $ |
1.75 |
|
|
$ |
1.70 |
|
|
|
2.9 |
% |
|
$ |
1.75 |
|
|
$ |
1.65 |
|
|
|
5.7 |
% |
| $ |
1.50 |
|
|
$ |
1.45 |
|
|
|
3.3 |
% |
|
$ |
1.50 |
|
|
$ |
1.40 |
|
|
|
6.7 |
% |
| $ |
1.25 |
|
|
$ |
1.20 |
|
|
|
4.0 |
% |
|
$ |
1.25 |
|
|
$ |
1.15 |
|
|
|
8.0 |
% |
| $ |
1.00 |
|
|
$ |
0.95 |
|
|
|
5.0 |
% |
|
$ |
1.00 |
|
|
$ |
0.90 |
|
|
|
10.0 |
% |
| $ |
0.75 |
|
|
$ |
0.70 |
|
|
|
6.7 |
% |
|
$ |
0.75 |
|
|
$ |
0.65 |
|
|
|
13.3 |
% |
| $ |
0.50 |
|
|
$ |
0.45 |
|
|
|
10.0 |
% |
|
$ |
0.50 |
|
|
$ |
0.40 |
|
|
|
20.0 |
% |
| $ |
0.25 |
|
|
$ |
0.20 |
|
|
|
20.0 |
% |
|
$ |
0.25 |
|
|
$ |
0.15 |
|
|
|
40.0 |
% |
| $ |
0.10 |
|
|
$ |
0.05 |
|
|
|
50.0 |
% |
|
$ |
0.10 |
|
|
$ |
0.001 |
|
|
|
99.0 |
% |
| $ |
0.05 |
|
|
$ |
0.001 |
|
|
|
98.0 |
% |
|
$ |
0.05 |
|
|
$ |
0.001 |
|
|
|
98.0 |
% |
*
Minimum conversion price is $0.001 per share (the par value of the
Company’s common stock).
As a result, as shown above, as the trading price of the Company’s
common stock decreases in value, the percentage discount to the
Percentage Discounted VWAP which each further $0.05/$0.10 discount
results in, increases exponentially, and in certain cases may
result in the ultimate conversion price being less than 0, which
would result in a conversion price of $0.001 per share, the par
value of the Company’s common stock, and the minimum conversion
price which the Series C Preferred Stock is convertible at.
Notwithstanding the above, because the beginning date for the
Measuring Period for all outstanding shares of Series C Preferred
Stock is February 3, 2020, the conversion price of the conversion
premiums on such Series C Preferred Stock will never be above
approximately $0.3985 per share (as adjusted for future reverse
stock splits, if any)(the current estimated lowest conversion price
in the period from February 3, 2020 to the date of this Proxy
Statement), regardless of the actual trading price of the Company’s
common stock.
The effects of the Fixed Conversion Discounts will be further
affected by a decrease in the trading price of the Company’s common
stock following a reverse stock split. If the Company completes a
reverse stock split of its outstanding shares of common stock, the
$0.05/$0.10 Fixed Conversion Discounts will be automatically
adjusted to by such reverse stock split (i.e., such amounts will
equal increased by the amount of the reverse stock split).
Interests of Directors, Officers
and Affiliates
None of the Company’s current directors, officers or affiliates has
an interest in the Series C Preferred Stock.
Registration
Rights
The Company has agreed to provide piggy back registration rights
for the resale of the shares of common stock issuable upon
conversion of the Series C Preferred Stock. Upon such registration,
these shares will be freely tradable in the public market without
restriction (other than restrictions imposed on any affiliates of
the Company).
Vote Required
A majority of the votes cast is required by the NYSE American rules
to approve the issuance of such number of shares of common stock
exceeding 20% of our outstanding common stock, issuable upon
conversion of the 630 shares of Series C Preferred Stock sold
pursuant to the terms of the June 2020 Purchase Agreement,
including shares issuable for dividends and conversion premiums
thereon and to ratify the terms of such June 2020 Purchase
Agreement. Abstentions will have the same practical effect as votes
against this Proposal. Broker non-votes will have no effect on the
outcome of this Proposal.
Consequences of Not Approving this
Proposal
If the Company does not obtain shareholder approval of this
proposal at the special meeting, the Company may choose to seek
shareholder approval of this proposal again at a later date, or may
be required to redeem the Series C Preferred Stock sold in June
2020 for cash, which the Company estimates would total between
$6.93 million and $17.3 million if redeemed prior to maturity,
depending on the terms available to the Company for such redemption
(and whether a breach of the purchase agreements entered into with
Discover to sell such Series C Preferred Stock has occurred).
Recommendation of the
Board
The Company’s board has unanimously determined that the issuance of
shares of common stock upon the conversion of the Series C
Preferred Stock (including shares issuable for dividends and
conversion premiums thereon) is fair to, and advisable and in
the best interests of, the Company and its
shareholders. The Company’s Board unanimously recommends
that shareholders vote “FOR” the issuance of such number of
shares of common stock exceeding 20% of its outstanding common
stock, issuable upon conversion of the 630 shares of Series C
Preferred Stock sold under the June 2020 Purchase Agreement,
including shares issuable for dividends and conversion premiums
thereon, which includes the potential issuance of 20% or more of
our outstanding shares of common stock as of the June 22, 2020 date
that the June 2020 Purchase Agreement was entered into between us
and Discover (i.e., over 20% of the 11,721,729 shares outstanding
as of June 22, 2020), and ratification of the terms of such June
2020 Purchase Agreement.
The Board recommends a vote “FOR” the Series C Preferred
Stock proposal.
PROPOSAL 6
ADJOURNMENT OF THE ANNUAL MEETING
General
Our shareholders may be asked to consider and act upon one or more
adjournments of the Annual Meeting, if necessary or appropriate, to
solicit additional proxies in favor of any or all of the other
Proposals set forth in this Proxy Statement.
If a quorum is not present at the Annual Meeting, our shareholders
may be asked to vote on the Proposal to adjourn the Annual Meeting
to solicit additional proxies. If a quorum is present at the Annual
Meeting, but there are not sufficient votes at the time of the
Annual Meeting to approve one or more of the Proposals, our
shareholders may also be asked to vote on the Proposal to approve
the adjournment of the Annual Meeting to permit further
solicitation of proxies in favor of the other Proposals. However, a
shareholder vote may be taken on one of the Proposals in this Proxy
Statement prior to any such adjournment if there are sufficient
votes for approval on such Proposal.
If the adjournment Proposal is submitted for a vote at the Annual
Meeting, and if our shareholders vote to approve the adjournment
Proposal, the meeting will be adjourned to enable the Board to
solicit additional proxies in favor of one or more Proposals. If
the adjournment Proposal is approved, and the Annual Meeting is
adjourned, the Board will use the additional time to solicit
additional proxies in favor of any of the Proposals to be presented
at the Annual Meeting, including the solicitation of proxies from
shareholders that have previously voted against the relevant
Proposal.
The Board believes that, if the number of voting shares voting in
favor of any of the Proposals presented at the Annual Meeting is
insufficient to approve a Proposal, it is in the best interests of
our shareholders to enable the Board, for a limited period of time,
to continue to seek to obtain a sufficient number of additional
votes in favor of the Proposal. Any signed proxies received by us
in which no voting instructions are provided on such matter will be
voted in favor of an adjournment in these circumstances. The time
and place of the adjourned meeting will be announced at the time
the adjournment is taken. Any adjournment of the Annual Meeting for
the purpose of soliciting additional proxies will allow our
shareholders who have already sent in their proxies to revoke them
at any time prior to their use at the Annual Meeting as adjourned
or postponed.
Vote Required
The approval of the adjournment of the Annual Meeting, if necessary
or appropriate, to another place, date or time, if deemed necessary
or appropriate, in the discretion of the Board of Directors,
requires the vote of a majority of the shares of stock entitled to
vote which are present, in person or by proxy at the Annual
Meeting. As a result, abstentions will have the same practical
effect as votes against this Proposal. Broker non-votes will have
no effect on the outcome of this Proposal. For the approval of the
adjournment, you may vote “FOR” or
“AGAINST” or abstain from voting.
Board
Recommendation
The Board recommends that you vote “FOR” the approval
of the adjournment of the Annual Meeting, if necessary or
appropriate, to another place, date or time, if deemed necessary or
appropriate, in the discretion of the Board of Directors.
VOTING RIGHTS AND
PRINCIPAL SHAREHOLDERS
Security Ownership of
Certain Beneficial Owners and Management
The following table presents certain information as of November [
], 2020, as to:
| |
● |
each shareholder known by us to be
the beneficial owner of more than five percent of our outstanding
shares of common stock, |
The percentages shown in the table under the column
“Percent” are based on 25,000,000 shares of common stock
outstanding as of November [ ], 2020.
Beneficial ownership is determined in accordance with the rules of
the SEC and includes voting and/or investing power with respect to
securities. These rules generally provide that shares of common
stock subject to options, warrants or other convertible securities
that are currently exercisable or convertible, or exercisable or
convertible within 60 days of the Record Date, are deemed to be
outstanding and to be beneficially owned by the person or group
holding such options, warrants or other convertible securities for
the purpose of computing the percentage ownership of such person or
group, but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person or
group.
To our knowledge, except as indicated in the footnotes to this
table and pursuant to applicable community property laws, the
persons named in the table have sole voting and investment power
with respect to all shares of common stock shown as beneficially
owned by them, subject to applicable community property laws.
Unless otherwise indicated, the address for each of the officers or
directors listed in the table below is 1415 Louisiana, Suite 3500,
Houston, Texas 77002.
|
Shareholder |
|
Number
of Shares of
Common Stock |
|
|
Percent of
Common Stock |
|
|
| Executive Officers
and Directors |
|
|
|
|
|
|
|
|
|
| Louis G.
Schott |
|
|
— |
|
|
|
— |
% |
|
| Robert
Schleizer |
|
|
— |
|
|
|
— |
% |
|
| Fred S.
Zeidman |
|
|
— |
|
|
|
— |
% |
|
| James G.
Miller |
|
|
— |
|
|
|
— |
% |
|
|
Richard N. Azar II(+)(1) |
|
|
7 |
|
|
|
* |
% |
|
| All Executive
Officers and Directors as a Group (Four Persons) |
|
|
— |
|
|
|
— |
% |
|
| |
|
|
|
|
|
|
|
|
|
| Greater than 5%
Shareholders |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Discover Growth Fund(2) |
|
|
2,475,000 |
(3) |
|
|
9.99 |
% |
|
|
* |
Indicates beneficial ownership of less than 1% of the
outstanding common stock. |
|
(+) |
Named Executive Officer who no longer has any affiliation or
contact with the Company. Information disclosed is based solely on
our review of our record shareholders’ list, without independent
verification, and including for purposes of the table above,
ownership only in the name of the applicable holder and those
entities which the holder is listed as a contact person for. The
applicable shareholder may actually beneficially own more or less
shares than as disclosed above. |
|
(1) |
Address: P.O. Box 6172 San Antonio, Texas 78209. |
|
(2) |
103 South Church Street, 4th Floor, Grand
Cayman KYI-002, Cayman Islands. The holder holds 2,693 shares of
Series C Redeemable Convertible Preferred Stock; provided that the
Company may not issue shares which, when aggregated with all other
shares of common stock then deemed beneficially owned by the
holder, would result in the reporting person holding at any one
time more than 9.99% of all common stock outstanding immediately
after giving effect to such issuance. To the best of the Company’s
knowledge, David Sims has voting and dispositive control over the
securities held by Discover Growth Fund. |
|
(3) |
This represents the maximum number of shares of common stock
issuable to Discover upon the conversion of the Series C Preferred
Stock, subject to Discover’s 9.99% ownership limitation set forth
in the designation of the Series C Preferred Stock, provided that
the Company currently has no available authorized but unissed
shares available for the issuance of these shares. |
Change of Control
The Company is not aware of any arrangements which may at a
subsequent date result in a change of control of the Company,
except in connection with the pending Viking Merger.
INFORMATION
ABOUT OUR EXECUTIVE OFFICERS
All of our executive officers are listed in the following
table:
|
Name |
|
Age |
|
Position |
| Louis G. Schott |
|
54 |
|
Interim Chief Executive
Officer |
| Robert Schleizer |
|
66 |
|
Chief Financial Officer, Treasurer,
Secretary and Director |
Louis G. Schott, Interim Chief Executive
Officer
Mr. Schott has served as the Interim Chief Executive Officer of the
Company since May 25, 2018. Mr. Schott has over 25 years of legal
and business experience with 20 years in the oil and gas industry,
including a strong background in restructuring, mergers and
acquisitions, public company regulations and requirements, title,
energy finance, business development, general negotiations and
land. Mr. Schott’s recent restructuring experience includes
restructurings within and outside of bankruptcy and both public,
traded on the TSX and NYSE American, and private entities.
Prior to being engaged as Interim Chief Executive Officer of the
Company, Mr. Schott served as an advisor to the Company (a position
he held between December 2017 and the date he was appointed as
Interim Chief Executive Officer, May 25, 2018) and is also an
advisor to other companies in various stages of growth.
Mr. Schott was recently the Interim Chief Executive Officer of
EnerJex Resources, Inc., a Nevada corporation listed on the NYSE
American (“EnerJex”), a position which he held from February
2017 to March 2018. As CEO, he led restructuring efforts, cost
reductions and the successful completion of a merger between
EnerJex and a privately held company (AgEagle Aerial Systems,
Inc.).
Mr. Schott was previously General Counsel and Treasurer of TexOak
Petro Holdings LLC (“TexOak”) and its subsidiaries
including Equal Energy (“Equal”), from 2009 through August
2016, where he actively performed all legal functions, including
corporate structure and governance, negotiation of oil and gas
acquisitions and divestitures, drafting review and certification of
all corporate and financial documents, legal and land due
diligence, corporate finance, litigation management, risk
management, insurance, corporate policies, and human resource
management. At TexOak, Mr. Schott successfully managed two mergers
including the merger with Equal, a Canadian public company dually
listed on the New York Stock Exchange and the Toronto Stock
Exchange and Equal’s subsequent privatization and redomestication.
Mr. Schott was also instrumental in working with the CEO and the
Board in guiding Petroflow’s predecessor through restructuring and
bankruptcy emerging as a private company with no debt and capital
to grow.
Prior to joining TexOak’s subsidiary, Petroflow, in 2005, Mr.
Schott served in various senior roles with TDC Energy
(“TDC”) from 1996 through 2005. Prior to TDC, Mr.
Schott was an oil and gas attorney with Liskow & Lewis in New
Orleans.
Mr. Schott is a graduate of Tulane University with an MBA and a
Juris Doctorate. Mr. Schott is also a non-practicing unlicensed
Certified Public Accountant.
Robert Schleizer, Chief Financial Officer and
Director
Mr. Schleizer’s biographical information is presented above
in Proposal
1, beginning on page 7.
EXECUTIVE
COMPENSATION
Summary
Executive Compensation Table
The following table sets
forth information concerning the compensation of our interim Chief
Executive Officer (“CEO”), Chief Financial Officer
(“CFO”) and the most highly compensated executive
officer other than the CEO and CFO who was serving as an executive
officer of the Company at the end of March 31, 2020 and 2019 (the
Company did not have any executive officers other than its CEO and
CFO as of March 31, 2020), and up to two additional individuals for
whom disclosure would have been required had they been serving as
an executive officer at the end of the last completed fiscal year
(collectively, the “Named Executive Officers”).
| Name
and Principal Position |
|
Fiscal
Year |
|
|
Consulting
Fees/Salary |
|
|
Bonus |
|
|
Stock
Awards |
|
|
All Other
Compensation* |
|
|
Total |
|
| Louis G. Schott |
|
2020 |
|
|
$ |
300,000 |
(4) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
34,453 |
(5) |
|
$ |
334,453 |
|
| Interim Chief Executive
Officer(1) |
|
2019 |
|
|
$ |
300,000 |
(4) |
|
$ |
25,000 |
|
|
$ |
— |
|
|
$ |
33,120 |
(5) |
|
$ |
358,120 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Robert Schleizer |
|
2020 |
|
|
$ |
200,000 |
(6) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
53,333 |
(6) |
|
$ |
253,333 |
|
| Chief Financial
Officer(2) |
|
2019 |
|
|
$ |
200,000 |
(6) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
26,666 |
(6) |
|
$ |
226,666 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Richard N. Azar II |
|
2019 |
|
|
$ |
90,000 |
(7) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
214,000 |
|
|
$ |
304,000 |
|
| Former Chief Executive
Officer(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Does not include perquisites and other personal benefits, or
property, unless the aggregate amount of such compensation is more
than $10,000.
No executive officer earned any non-equity incentive plan
compensation or nonqualified deferred compensation during the
periods reported above. The value of the Stock Awards in the table
above was calculated based on the fair value of such securities
calculated in accordance with Financial Accounting Standards Board
Accounting Standards Codification Topic 718.
(1) Mr. Schott has served
as the Interim Chief Executive Officer of the Company since May 25,
2018.
(2) Mr. Schleizer has
served as Chief Financial Officer (beginning as Interim Chief
Financial Officer) since June 2, 2017, as a member of the
Board of Directors of the Company since October 6, 2017, and as
Treasurer of the Company since January 9, 2018.
(3) From June 2, 2017 to
May 25, 2018, Mr. Richard N. Azar II served as the Interim Chief
Executive Officer (through January 9, 2018) and then Chief
Executive Officer of the Company. On December 28, 2017, the Board
approved compensation of $10,000 per month to Mr. Azar for services
which he rendered over the last seven months of calendar 2017, and
compensation of $35,000 per month beginning in January 2018, for
future services as CEO, which services as CEO were terminated in
May 2018. Effective on June 21, 2018, Mr. Azar resigned as a member
of the Board of Directors.
(4) Mr. Schott works on a
consulting basis through Fides Energy LLC.
(5) Represents amounts
paid to Mr. Schott in connection with reimbursement for health
insurance premiums.
(6) Mr. Schleizer is the
Managing Partner of BlackBriar Advisors LLC (“BlackBriar”).
In addition to financial management, BlackBriar provides
accounting, treasury, administrative and financial reporting
services to the Company. Total fees paid by the Company to
BlackBriar during the years ended March 31, 2020 and 2019 were
$485,000 and $713,000, respectively, of which Mr. Schleizer
attributed $200,000 to his services as Chief Financial Officer for
each of 2020 and 2019. Mr. Schleizer also received director’s fees
from the Company for the years ended March 31, 2020 and March 31,
2019 of $53,333 and $26,666, respectively.
(7) Includes $90,000 paid
to McClowd Dynamics, Ltd. (an entity which Mr. Azar owns and
controls) in fiscal 2019.
Employment
Agreements
We do not currently have any employment agreements in place with
our executive officers.
Engagement Agreement
Effective on May 25, 2018, the Board of Directors of the Company
appointed Mr. Louis G. Schott as Interim Chief Executive Officer of
the Company. In connection with Mr. Schott’s appointment as
Interim Chief Executive Officer of the Company, the Company entered
into an engagement letter with Fides Energy LLC (“Fides”).
Pursuant to the letter, Fides agreed to supply Mr. Schott’s
services to the Company as Interim Chief Executive Officer and we
agreed to pay Fides $25,000 per month for the use of Mr. Schott’s
services. The agreement can be terminated by either party with 90
days’ notice and terminates automatically upon the death of Mr.
Schott. Pursuant to the agreement, Mr. Schott is also eligible to
receive bonus compensation at the discretion of the Board of
Directors.
Letter Agreement
Effective on December 1, 2017, the Company entered into a letter
agreement with BlackBriar Advisors LLC (“BlackBriar”),
pursuant to which BlackBriar agreed to provide advisory and
accounting services to the Company and to make Mr. Robert Schleizer
available to the Company as the Company’s Chief Financial Officer.
In consideration for such services, the Company agreed to pay
BlackBriar a fee of $40,000 per month, and to reimburse BlackBriar
for reasonable customary and necessary expenses including for
travel and related costs. BlackBriar is also eligible for bonuses
in the discretion of the Compensation Committee of the Company. The
letter agreement includes customary indemnification obligations and
can be terminated at any time upon written notice of either
party.
Amendment to
Engagement Agreement and Letter Agreement
On August 31, 2020, the Company entered into first amendments to
the letter agreements with Fides and BlackBriar, to provide that
(a) Mr. Schott, through Fides, will continue to provide
services to the Company for a period of six months following the
closing of the Merger, on similar terms as set forth in such
original letter agreement, except in a non-executive capacity and
that the Company will reimburse Mr. Schott for the costs of his and
his family’s health insurance through such six month term; and
(b) Mr. Schleizer, through BlackBriar, will continue to
provide services to the Company for a period of three months
following the closing of the Merger, on similar terms as set forth
in such original letter agreement, except in a non-executive
capacity and for total consideration of $30,000 per month (compared
to $40,000 per month currently).
Transaction
Payments and Bonuses
In connection with the Merger, on August 31, 2020, the Company’s
Board of Directors entered into Past Service Payment and Success
Bonus Agreements with each non-executive member of the Board of
Directors of the Company (i.e., Mr. Ziedman and Mr. Miller), and
each of Louis G. Schott, Camber’s Interim Chief Executive Officer
and Robert Schleizer, Camber’s Chief Financial Officer
(collectively, the “Merger Compensation Agreements”).
Pursuant to such agreements: each non-executive director, and each
officer, of Camber, is to receive, contingent upon closing the
Merger, $100,000 in consideration for past services provided to the
Company through the date of the Merger as a member of the Board of
Directors/officer (none of which compensation is currently included
in the table above), and $50,000 as a success bonus for the
Company’s successful completion of the Merger, in cash ($600,000 in
aggregate); contingent on such non-executive director/officer’s,
continued service to the Company at the same level of service he is
currently performing, through the effective date of the Merger. The
consideration payable to the officers and directors of the Company
upon the closing of the Merger will reduce the cash available for
the combined company’s activities; and may result in conflicts of
interest between such officers and directors and other stockholders
of the Company.
Such compensation and bonuses will be payable following the
effective time of the Merger, less applicable withholdings and
deductions.
Outstanding Equity Awards at Fiscal Year
End
None of our Named Executive Officers had any stock options or stock
awards outstanding as of March 31, 2020.
COMPENSATION OF
DIRECTORS
The following table sets forth compensation information with
respect to our non-executive directors during our fiscal year ended
March 31, 2020.
|
Name |
|
Fees Earned
or Paid in
Cash ($)* |
|
|
Option
Awards ($)
|
|
|
All Other
Compensation ($) |
|
|
Total ($) |
|
| Fred S. Zeidman |
|
$ |
53,333 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
53,333 |
|
| James G. Miller |
|
$ |
53,333 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
53,333 |
|
The table above does not include the amount of any expense
reimbursements paid to the above directors. No directors received
any Stock Awards, Non-Equity Incentive Plan Compensation, or
Nonqualified Deferred Compensation Earnings during the period
presented. Does not include perquisites and other personal
benefits, or property, unless the aggregate amount of such
compensation is more than $10,000.
Additionally, in connection with the Merger, on August 31, 2020,
the Company’s Board of Directors entered into Past Service Payment
and Success Bonus Agreements with each non-executive member of the
Board of Directors of the Company (i.e., Mr. Zeidman and Mr.
Miller), and each of Louis G. Schott, Camber’s Interim Chief
Executive Officer and Robert Schleizer, Camber’s Chief Financial
Officer. Pursuant to such agreements: each non-executive director,
and each officer, of Camber, is to receive, contingent upon closing
the Merger, $100,000 in consideration for past services provided to
the Company through the date of the Merger as a member of the Board
of Directors/officer (none of which compensation is currently
included in the table above), and $50,000 as a success bonus for
the Company’s successful completion of the Merger, in cash
($600,000 in aggregate); contingent on such non-executive
director/officer’s, continued service to the Company at the same
level of service he is currently performing, through the effective
date of the Merger. The consideration payable to the officers and
directors of the Company upon the closing of the Merger will reduce
the cash available for the combined company’s activities; and may
result in conflicts of interest between such officers and directors
and other stockholders of the Company.
Such compensation and bonuses will be payable following the
effective time of the Merger, less applicable withholdings and
deductions.
EQUITY COMPENSATION PLAN
INFORMATION
The Company shareholders approved the 2014 Stock Incentive Plan (as
amended to date, the “2014 Plan”) at the annual
shareholder meeting held on February 13, 2014, which has since been
amended. The 2014 Plan provides the Company with the ability to
offer (i) incentive stock options (to eligible employees
only); (ii) nonqualified stock options; (iii) restricted
stock; (iv) stock awards; (v) shares in performance of
services; or (vi) any combination of the foregoing, to
employees, consultants and contractors as provided in the 2014
Plan.
The Company shareholders approved the Lucas Energy, Inc. 2012 Stock
Incentive Plan (“2012 Incentive Plan”) at the annual
shareholder meeting held on December 16, 2011. The 2012 Incentive
Plan provides the Company with the ability to offer
(i) incentive stock options (to eligible employees only);
(ii) nonqualified stock options; (iii) restricted stock;
(iv) stock awards; (v) shares in performance of services;
or (vi) any combination of the foregoing, to employees,
consultants and contractors as provided in the 2012 Incentive
Plan.
As a result of the reverse stock splits described above, the number
of shares of common stock authorized for initial issuance or grant,
under the 2012 Incentive Plan and 2014 Incentive Plan are nominal.
Moving forward the Company does not anticipate making any further
awards under the 2012 Incentive Plan or 2014 Incentive Plan.
The Plans are administered by the Compensation Committee and/or the
Board in its discretion (the “Committee”). The Committee
interprets the Plans and has broad discretion to select the
eligible persons to whom awards will be granted, as well as the
type, size and terms and conditions of each award, including the
exercise price of stock options, the number of shares subject to
awards, the expiration date of awards, and the vesting schedule or
other restrictions applicable to awards.
The following table provides information as of March 31, 2020, with
respect to securities that may be issued under our equity
compensation plans:
| Plan
Category |
|
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights (a) |
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights (b) |
|
|
Number of securities
available for future
issuance under equity
compensation plans
(excluding those in column (a)) |
|
|
Equity compensation plans approved by the security holders |
|
2 |
|
|
$ |
40,429,700 |
|
|
2,000 |
|
|
Equity compensation plans not approved by the security holders |
|
— |
|
|
— |
|
|
— |
|
|
Total |
|
2 |
|
|
$ |
40,429,700 |
|
|
2,000 |
|
| |
(a) |
Includes any compensation plan and
individual compensation arrangement of the Company under which
equity securities of the Company are authorized for issuance to
employees, or non-employees including directors, consultants,
advisors, vendors, customers, suppliers or lenders in exchange for
consideration in the form of goods or services, as of March 31,
2020. |
| |
(b) |
Includes the weighted average
exercise price of outstanding options, warrants, and rights
identified in (a). |
AUDIT COMMITTEE REPORT
The Audit Committee represents and assists the Board of Directors
in fulfilling its responsibilities for general oversight of the
integrity of the Company’s financial statements, the Company’s
compliance with legal and regulatory requirements, the independent
registered public accounting firm’s qualifications and
independence, the performance of the Company’s internal audit
function and independent registered public accounting firm, and
risk assessment and risk management. The Audit Committee manages
the Company’s relationship with its independent registered public
accounting firm (which reports directly to the Audit Committee).
The Audit Committee has the authority to obtain advice and
assistance from outside legal, accounting or other advisors as the
Audit Committee deems necessary to carry out its duties and
receives appropriate funding, as determined by the Audit Committee,
from the Company for such advice and assistance.
In connection with the fiscal year 2020 audited financial
statements of the Company, the Audit Committee of the Board of
Directors of the Company (1) reviewed and discussed the audited
financial statements with the Company’s management; (2) discussed
with the Company’s independent auditors the applicable requirements
of the Public Company Accounting Oversight Board (PCAOB) and the
Securities and Exchange Commission; (3) received the written
disclosures and the letter from the independent auditors required
by the applicable requirements of the PCAOB regarding the
independent auditors’ communications with the Audit Committee
concerning independence; (4) discussed with the independent
auditors the independent auditors’ independence; and (5) considered
whether the provision of non-audit services by the Company’s
principal auditors is compatible with maintaining auditor
independence.
Based upon these reviews and discussions, the Audit Committee
recommended to the Board of Directors, and the Board of Directors
approved, that the audited financial statements for fiscal year
2020 be included in the Company’s Annual Report on Form 10-K for
the fiscal year ended March 31, 2020, for filing with the
Securities and Exchange Commission.
The undersigned members of the Audit Committee have submitted this
Report to the Board of Directors.
AUDIT COMMITTEE
/s/ James G. Miller, Chairman
/s/ Fred S. Zeidman
DESCRIPTION OF CAPITAL STOCK
The total number of shares of all classes of stock that the Company
has authority to issue is 35,000,000, consisting of 25,000,000
shares of common stock, par value $0.001 per share, and 10,000,000
shares of preferred stock, par value $0.001 per share. As of the
filing date of this Proxy Statement, the Company had
(i) 25,000,000 shares of common stock outstanding; (ii)
5,000 designated shares of Series C Preferred Stock, 2,693 of which
were outstanding; and (iii) 28,092 designated shares of Series A
Preferred Stock, none of which were outstanding.
Common Stock
Holders of our common stock: (i) are entitled to share ratably
in all of our assets available for distribution upon liquidation,
dissolution or winding up of our affairs; (ii) do not have
preemptive, subscription or conversion rights, nor are there any
redemption or sinking fund provisions applicable thereto; and
(iii) are entitled to one vote per share on all matters on
which shareholders may vote at all shareholder meetings. Each
shareholder is entitled to receive the dividends as may be declared
by our directors out of funds legally available for dividends. Our
directors are not obligated to declare a dividend. Any future
dividends will be subject to the discretion of our directors and
will depend upon, among other things, future earnings, the
operating and financial condition of our Company, our capital
requirements, general business conditions and other pertinent
factors.
The presence of the persons entitled to vote 33% of the outstanding
voting shares on a matter before the shareholders shall constitute
the quorum necessary for the consideration of the matter at a
shareholders meeting.
The vote of the holders of a majority of the votes cast on the
matter at a meeting at which a quorum is present shall constitute
an act of the shareholders, except for the election of directors,
who shall be appointed by a plurality of the shares entitled to
vote at a meeting at which a quorum is present. The common stock
does not have cumulative voting rights, which means that the
holders of a majority of the common stock voting for election of
directors can elect 100% of our directors if they choose to do
so.
Preferred Stock
Subject to the terms contained in any designation of a series of
preferred stock, the Board of Directors is expressly authorized, at
any time and from time to time, to fix, by resolution or
resolutions, the following provisions for shares of any class or
classes of preferred stock:
| 1) |
The designation of such class or
series, the number of shares to constitute such class or series
which may be increased (but not below the number of shares of that
class or series then outstanding) by a resolution of the Board
of Directors; |
| 2) |
Whether the shares of such class or
series shall have voting rights, in addition to any voting rights
provided by law, and if so, the terms of such voting rights; |
| 3) |
The dividends, if any, payable on
such class or series, whether any such dividends shall be
cumulative, and, if so, from what dates, the conditions and dates
upon which such dividends shall be payable, and the preference or
relation which such dividends shall bear to the dividends payable
on any share of stock of any other class or any other shares of the
same class; |
| 4) |
Whether the shares of such class or
series shall be subject to redemption by the Company, and, if so,
the times, prices and other conditions of such redemption or a
formula to determine the times, prices and such other
conditions; |
| 5) |
The amount or amounts payable upon
shares of such series upon, and the rights of the holders of such
class or series in, the voluntary or involuntary liquidation,
dissolution or winding up, or upon any distribution of the assets,
of the Company; |
| 6) |
Whether the shares of such class or
series shall be subject to the operation of a retirement or sinking
fund, and, if so, the extent to and manner in which any such
retirement or sinking fund shall be applied to the purchase or
redemption of the shares of such class or series for retirement or
other corporate purposes and the terms and provisions relative to
the operation thereof; |
| 7) |
Whether the shares of such class or
series shall be convertible into, or exchangeable for, shares of
stock of any other class or any other series of the same class or
any other securities and, if so, the price or prices or the rate or
rates of conversion or exchange and the method, if any, of
adjusting the same, and any other terms and conditions of
conversion or exchanges; |
| 8) |
The limitations and restrictions,
if any, to be effective while any shares of such class or series
are outstanding upon the payment of dividends or the making of
other distributions on, and upon the purchase, redemption or other
acquisition by the Company of the common stock or shares of stock
of any other class or any other series of the same class; |
| 9) |
The conditions or restrictions, if
any, upon the creation of indebtedness of the Company or upon the
issuance of any additional stock, including additional shares of
such class or series or of any other series of the same class or of
any other class; |
| 10) |
The ranking (be it pari passu,
junior or senior) of each class or series vis-à-vis any other
class or series of any class of preferred stock as to the payment
of dividends, the distribution of assets and all other
matters; |
| 11) |
Facts or events to be ascertained
outside the articles of incorporation of the Company, or the
resolution establishing the class or series of stock, upon which
any rate, condition or time for payment of distributions on any
class or series of stock is dependent and the manner by which the
fact or event operates upon the rate, condition or time of payment;
and |
| 12) |
Any other powers, preferences and
relative, participating, optional and other special rights, and any
qualifications, limitations and restrictions thereof, insofar as
they are not inconsistent with the provisions of our articles of
incorporation, as amended, to the full extent permitted by the laws
of the State of Nevada. |
The powers, preferences and relative, participating, optional and
other special rights of each class or series of preferred stock,
and the qualifications, limitations or restrictions thereof, if
any, may differ from those of any and all other series at any time
outstanding.
Series A Convertible Preferred Stock
The 28,092 designated shares of Series A Preferred Stock of the
Company, which were designated with the Secretary of State of
Nevada on August 31, 2020, have substantially similar rights as the
Series C Preferred Stock of Viking (as amended), as adjusted for
the exchange ratio of the Merger, and were designated to help
facilitate the closing of the Merger. Specifically, each
outstanding share of Series A Preferred Stock will vote an
aggregate of (a) 4,900 voting shares, multiplied by
(b) the exchange ratio of the Merger, on all shareholder
matters, voting together with the common stock as a single class
(which voting rights will equal the same voting rights that would
have applied had the Series C Preferred Stock of Viking been fully
converted into Viking common stock immediately prior to the
effective time of the Merger)(described herein as the “voting
shares”); will receive, upon the occurrence of a liquidation of
the Company, the same amount of consideration that would have been
due if such shares of Series A Preferred Stock had been converted
into common stock of the Company immediately prior to such
liquidation; and provide rights for such shares of Series A
Preferred Stock to convert, at the option of the holder thereof,
into a number of shares of common stock equal to (a) 4,900
shares, multiplied by (b) the exchange ratio of the Merger
(which will equal the number of shares of common stock which would
have been issuable to the holders of the Series C Preferred Stock
of Viking in the Merger, had such Series C Preferred Stock been
converted into common stock of Viking immediately prior to the
effective time of the Merger)(described herein as the
“conversion shares”). Such Series A Preferred Stock does not
have any redemption rights and shares equally in any dividends
authorized by the Board of Directors for distribution to common
shareholders, on an as-converted basis. The designation of the
Series A Preferred Stock also provides that such number of voting
shares and conversion shares as calculated as discussed above,
shall be updated by the Company following the Merger, without any
required approval of the holders of such Series C Preferred Stock,
to include the actual numerical value of such voting shares and
conversion shares, upon closing of the Merger.
Series C Redeemable Convertible Preferred Stock
The Company’s Series C Redeemable Convertible Preferred Stock is
described above under “Proposal 5—Approval of
the Issuance of Such Number of Shares of Common Stock Exceeding 20%
of Our Outstanding Common Stock, Issuable Upon Conversion of the
630 Shares of Series C Preferred Stock, Including Shares Issuable
for Dividends and Conversion Premiums Thereon, Sold Pursuant to the
June 2020 Purchase Agreement and to Approve the Terms of Such June
2020 Purchase Agreement”– “Series C Redeemablve Convertible
Preferred Stock”, beginning on page 17.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Related Party
Transactions
There have been no other transactions between
us and any officer, director, or any shareholder owning
greater than five percent (5%) of our outstanding voting
shares, or any member of the above referenced individual’s
immediate family, since April 1, 2018, and there is not currently
any proposed transaction, in which the Company was or is to be a
participant, where the amount involved exceeds $120,000, and
in which we had or will have a direct or indirect material
interest, except as set forth below or otherwise disclosed
above under “Executive
Compensation”—“Summary
Executive Compensation Table”, beginning on page 31, and
“Engagement
Agreement”, “Letter Agreement”,
“Amendment to
Engagement Agreement and Letter Agreement”, and “Transaction
Payments and Bonuses”, beginning on page 32, which information,
as applicable, is incorporated by reference into this “Certain
Relationships and Related Transactions” section.
N&B Energy Asset Disposition Agreement
On July 12, 2018, the Company entered into an Asset Purchase
Agreement (the “Sale Agreement”), as seller, with N&B
Energy, LLC (“N&B Energy”) as purchaser, which
entity is affiliated with Richard N. Azar II, the Company’s former
Chief Executive Officer and former director, and Donnie B. Seay,
the Company’s former director. Pursuant to the Sale Agreement, the
Company agreed to sell to N&B Energy a substantial portion of
its assets, including all of the assets acquired pursuant to the
terms of a December 31, 2015 Asset Purchase Agreement with Segundo
Resources, LLC (“Segundo”, which entity is controlled by Mr.
Azar) and certain other more recent acquisitions, other than
the production payment and overriding royalty interests discussed
below (the “Disposed Assets”). In consideration for the
Disposed Assets, N&B Energy agreed to pay the Company $100 in
cash, to assume all of the Company’s obligations and debt owed
under its outstanding loan agreement with International Bank of
Commerce (“IBC Bank”), which had a then outstanding
principal balance of approximately $36.9 million and Segundo agreed
to enter into the Segundo Settlement, described below.
Segundo Settlement
On July 12, 2018, the Company entered into a Compromise Settlement
Agreement and Mutual Release with Segundo, which is owned and
controlled by Mr. Azar, in partial consideration for N&B Energy
agreeing to enter into the Sale Agreement. Pursuant to the Segundo
Settlement, Segundo surrendered 1 share of common stock valued at
$1,191,875 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) for
cancellation (which cancellation occurred in October 2018), and
released the Company from any and all claims which Segundo
previously alleged were owed under the terms of the December 31,
2015 Asset Purchase Agreement. the Company and Segundo also
provided each other full releases in connection with the December
31, 2015 Asset Purchase Agreement and Segundo agreed to indemnify
the Company and hold it harmless against any claims made by the
other sellers under the December 31, 2015 Asset Purchase
Agreement.
First Amendment to Sale Agreement
Also on August 3, 2018, the Company and N&B Energy entered into
a First Amendment to Asset Purchase Agreement (the “First
Amendment”), which amended the terms of the Sale Agreement to
(a) modify, clarify and replace certain of the exhibits to the
original Sale Agreement, including the terms of the overriding
royalty interests and production payment agreed to be granted to
the Company as part of such Sale Agreement; (b) amend the Sale
Agreement to remove the requirement that the Company obtain
shareholder approval prior to the closing of such Sale Agreement;
and (c) include a deadline of August 31, 2018, for N&B
Energy’s due diligence under the Sale Agreement.
Additionally, in order to avoid the significant time required to
file a proxy statement with the Securities and Exchange Commission,
clear comments with the Securities and Exchange Commission, hold a
meeting and obtain shareholder approval, and because such
shareholder approval was not required pursuant to applicable law or
the rules of the NYSE American, the Company’s management determined
to not seek shareholder approval, but to instead seek a third-party
opinion as to the fairness of the transaction to the Company’s
shareholders.
Second Amendment to Sale Agreement
On September 24, 2018, the Company, N&B Energy and CE
Operating, LLC, the Company’s wholly-owned subsidiary (“CE
Operating”), entered into a Second Amendment to Asset Purchase
Agreement (the “Second Amendment”), which amended the terms
of the Sale Agreement. Pursuant to the Second Amendment, the
Company, N&B Energy and CE Operating agreed (a) to clarify
that all of the representations of the Company made in the Sale
Agreement relating to portions of the Disposed Assets held in the
name of CE Operating shall be deemed made by CE Operating and not
the Company and that CE Operating shall be deemed a party to the
Sale Agreement, solely in order to make such representations; and
(b) to extend the deadline for closing the transactions
contemplated by the Sale Agreement to September 26, 2018, or such
other date as the Company and N&B shall agree upon in
writing.
Assumption Agreement
On September 26, 2018, the Company entered into an Assumption
Agreement (the “Assumption Agreement”) with IBC Bank;
CE Operating; N&B Energy, which entity is affiliated with
Richard N. Azar, II, the Company’s former Chief Executive Officer
and former director (“Azar”), and Donnie B. Seay, the
Company’s former director (“Seay”); Azar; RAD2 Minerals,
Ltd., an entity owned and controlled by Azar (“RAD2”); Seay;
and DBS Investments, Ltd., an entity owned and controlled by Seay.
Azar, Seay, RAD2, and DBS are collectively referred to as the
“Guarantors”.
Pursuant to the Assumption Agreement, N&B Energy agreed to
assume all of the Company’s liabilities and obligations owed to IBC
Bank under the Company’s prior note, loan agreement and related
documents with IBC Bank (collectively, the “Loan
Documents”), the amount due under and in connection which was
secured by (a) an Oil and Gas Mortgage, Security Agreement,
Financing Statement and Assignment of Production
(Oklahoma) dated August 25, 2016, covering all of the
Company’s right, title and interest in and to certain oil, gas and
mineral leases and/or minerals, mineral interests and estates
located in Lincoln, Payne, and Logan Counties, Oklahoma;
(b) an Oil and Gas Mortgage, Security Agreement, Financing
Statement and Assignment of Production (Oklahoma) dated August
1, 2018, covering all of the Company’s right, title, and interest
in and to certain oil, gas, and mineral leases and/or mineral
interests and estates located in Okfuskee County, Oklahoma
(collectively, the “Orion Interests”); and (c) the
Mortgage, Deed of Trust, Assignment, Security Agreement and
Financing Statement dated as of August 25, 2016, covering the
Company’s mineral interests located in Glasscock County, Texas
(collectively, the “West Texas Properties”).
Additionally, pursuant to the Assumption Agreement, IBC Bank
approved the transactions contemplated by the Sale Agreement and
the assumption by N&B Energy of all of the amounts and
liabilities which the Company owed to IBC Bank (the “IBC
Obligations”) and N&B Energy agreed to assume all of
the IBC Obligations. Finally, pursuant to the Assumption Agreement,
IBC Bank released and forever discharged the Company and CE
Operating and each of their current and former officers, directors,
and shareholders, from all covenants, agreements, obligations,
claims and demands of any kind, whether in law or at equity, which
IBC Bank then had, arising out of or related to the amounts which
the Company owed to IBC Bank under the Note, Loan Agreement or
mortgages and/or under such documents or agreements, and further
agreed to release the lien which IBC Bank then held on the West
Texas Properties.
N&B Energy Sale Agreement Closing
On September 26, 2018, the transactions contemplated by the Sale
Agreement closed and N&B Energy assumed all of the IBC
Obligations (pursuant to the Assumption Agreement described
above) and paid the Company $100 in cash, and the Company
transferred ownership of the Disposed Assets to N&B Energy.
Notwithstanding the sale of the Disposed Assets, the Company
retained its assets in Glasscock County and Hutchinson Counties,
Texas and also retained 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
retained an overriding royalty
interest on certain other undeveloped leasehold interests, pursuant
to an Assignment of Production Payment and Assignment
of Overriding Royalty Interests.
The effective date of the Sale Agreement was August 1, 2018. The
Assets were assigned “as is” with all faults.
As a result of the Assumption Agreement and the Sale Agreement, the
Company reduced its liabilities by $37.9 million and its assets by
approximately $12.1 million.
Discover
Transactions
On October 5, 2017, the Company and Discover Growth Fund
(“Discover Growth”) entered into a Stock Purchase Agreement,
amended on March 2, 2018 (as amended, the “October 2017 Purchase
Agreement”) pursuant to which the Company agreed to sell,
pursuant to the terms thereof, 1,683 shares of its Series C
Preferred Stock for $16 million (a 5% original issue discount to
the face value of such shares), subject to certain conditions set
forth therein.
During the years ended March 31, 2020 and 2019, the Company sold
525 shares and 1,577 shares, respectively, of Series C Preferred
Stock to Discover pursuant to the terms of the February 2020
Purchase Agreement (discussed and defined below), the October
2018 Purchase Agreement (discussed and defined below) and
November 2018 Purchase Agreement (discussed and defined below), for
total proceeds of $5 million and $15 million, respectively.
Since March 31, 2020, the Company has sold an additional 630 shares
of Series C Preferred to Discover pursuant to the terms of the June
2020 Purchase Agreement, discussed above under Proposal 5—“Viking Investment”,
beginning on page 18, for $6 million in proceeds.
During the year ended March 31, 2019, Discover converted 404 shares
of the Series C Preferred Stock with a face value of $4.04 million,
and a total of 3,794 shares of common stock were issued, which
includes additional shares for conversion premiums and true ups in
connection with those conversions through March 31, 2019.
During the year ended March 31, 2020, Discover and Discover Growth,
which purchased shares of Series C Preferred Stock from us in
December 2018 and which subsequently transferred all of its shares
of Series C Preferred Stock to Discover, converted 11 shares of the
Series C Preferred Stock with a face value of $110,000, and a total
of 4,899,442 shares of common stock were issued, which includes
additional shares for conversion premiums and true ups in
connection with those conversions through March 31, 2020.
The Series C Preferred Stock holder (Discover) did not convert
any shares of Series C Preferred Stock into common stock during the
period from January 1, 2020 to March 31, 2020. Since July 1, 2020,
and through the date of this Proxy Statement, (a) Discover
converted 181 shares of Series C Preferred Stock into 11,854,819
shares of common stock, of which all but 15,348 shares (which are
currently held in abeyance subject to the Company increasing its
authorized shares of common stock), have been fully issued to date,
and which conversions of 181 shares of Series C Preferred Stock
occurred on August 5, 2020 (30 Series C Preferred Stock shares),
August 12, 2020 (29 Series C Preferred Stock shares), August 21,
2020 (31 Series C Preferred Stock shares), August 26, 2020 (31
Series C Preferred Stock shares), August 27, 2020 (60 Series C
Preferred Stock shares), September 9, 2020 (38 Series C Preferred
Stock shares), September 15, 2020 (37 Series C Preferred Stock
shares); and September 29, 2020 (2 Series C Preferred Stock
shares); and (b) Discover was issued an additional 4,974,192
shares of common stock in connection with the conversion of shares
of Series C Preferred into common stock during the quarter ended
June 30, 2020, which shares were previously held in abeyance,
subject to Discover’s 9.99% ownership limitation set forth in the
designation of the Series C Preferred Stock.
As of the date of this Proxy Statement, Discover, the holder of the
Series C Preferred Stock is still due approximately 118,196,755
shares of common stock upon the conversion of the outstanding
Series C Preferred Stock (ignoring the 9.99% beneficial ownership
limitation governing the Series C Preferred Stock and including
15,348 shares which are currently held in abeyance subject to the
Company increasing its authorized shares of common stock), when
including conversion premiums thereon, based on the Company’s
calculation of the current conversion price thereof, which number
of shares is subject to increase exponentially as the value of the
Company’s common stock declines in value.
On April 6, 2016, the Company entered into a Securities Purchase
Agreement with Discover, pursuant to which the Company issued a
redeemable convertible subordinated debenture, with a face value of
$530,000, initially convertible into shares of common stock at a
conversion price equal to $101,562.50 per share. The debenture
matures in seven years and accrues interest at a rate of 6.0% per
annum. Due to the prior decline in the price of the Company’s
common stock and that a trigger event occurred on June 30, 2016 as
a result of the delay in filing the Company’s Annual Report on Form
10-K for the year ended March 31, 2016, the premium rate on the
debenture increased from 6% to 34% and the conversion discount
became (a) 85% of the lowest daily volume weighted average
price during the measuring period (60 days prior to and 60 days
after the last date that Discover receives the last of the shares
due), less $78,125 per share of common stock which resulting value
is not to exceed (b) 85% of the lowest sales price on the last
day of such period less $78,125 per share.
On October 31, 2018, Discover converted the entire $495,000
remaining balance of principal owed under the terms of a
convertible debenture, into an aggregate of 642 shares of common
stock, including 5 shares of common stock issuable upon conversion
of the principal amount thereof (at a conversion price of
$101,562.50 per share), and 637 shares in connection with
conversion premiums due thereon (at an initial conversion price, as
calculated as provided in such debenture, of $1,912.50 per share).
A total of 80 of such shares were issued to Discover in connection
with the initial conversion and the remaining shares were held in
abeyance subject to Discover’s 9.99% ownership limitation, to be
issued from time to time, at the request of Discover. Subsequent to
the October 31, 2018 conversion date, Discover was due an
additional 38,116 shares of common stock in connection with true
ups associated with the original issuance, as a result of the
conversion price of the conversion premiums falling to $31.25 per
share pursuant to the terms of the convertible debenture, all of
which shares have been issued to date.
On October 29, 2018 and effective October 26, 2018, the Company and
Discover, entered into a Stock Purchase Agreement (as amended from
time to time, the “October 2018 Purchase Agreement”).
Under the terms of the October 2018 Purchase Agreement, Discover
purchased 369 shares of Series C Preferred Stock on the closing
date of the agreement, October 29, 2018, for $3.5
million.
Pursuant to the October 2018 Purchase Agreement, as long as
Discover holds any shares of Series C Preferred Stock, the Company
agreed that it would not issue or enter into or amend an agreement
pursuant to which it may issue any shares of common stock, other
than (a) for restricted securities with no registration
rights, (b) in connection with a strategic acquisition,
(c) in an underwritten public offering, or (d) at a fixed
price; or issue or amend any debt or equity securities convertible
into, exchangeable or exercisable for, or including the right to
receive, shares of common stock (i) at a conversion price,
exercise price or exchange rate or other price that is based upon
or varies with, the trading prices of or quotations for the shares
of common stock at any time after the initial issuance of the
security or (ii) with a conversion, exercise or exchange price
that is subject to being reset at some future date after the
initial issuance of the security or upon the occurrence of
specified or contingent events directly or indirectly related to
the business of the Company or the market for the common stock.
Additionally, provided that the Company has not materially breached
the terms of the October 2018 Purchase Agreement, the Company may
at any time, in its sole and absolute discretion, repurchase from
Discover all, but not less than all, of the then outstanding shares
of Series C Preferred Stock sold pursuant to the agreement by
paying to Discover 110% of the aggregate face value of all such
shares.
The Company also agreed to provide Discover a right of first offer
to match any offer for financing the Company may receive from any
person while the shares of Series C Preferred Stock sold pursuant
to the October 2018 Purchase Agreement are outstanding, except for
debt financings not convertible into common stock, which are
excluded from such right to match.
Finally, the Company agreed that if it issues any security with any
term more favorable to the holder of such security or with a term
in favor of the holder of such security that was not similarly
provided to Discover, then it would notify Discover of such
additional or more favorable term and such term, at Discover’s
option, may become a part of the transaction documents with
Discover.
The October 2018 Purchase Agreement includes customary provisions
requiring that the Company indemnify Discover against certain
losses; representations and warranties and covenants.
November 2018 Purchase Agreement
On November 23, 2018 and effective November 23, 2018, the Company
and Discover entered into a Stock Purchase Agreement, which was
amended on December 3, 2018 (as amended to date, and from time to
time, the “November 2018 Purchase Agreement”).
Under the terms of the November 2018 Purchase Agreement, Discover
purchased 263 shares of Series C Preferred Stock, in consideration
for $2.5 million on December 4, 2018.
Pursuant to the November 2018 Purchase Agreement, as long as
Discover holds any shares of Series C Preferred Stock, the Company
agreed that it would not issue or enter into or amend an agreement
pursuant to which it may issue any shares of common stock, other
than (a) for restricted securities with no registration
rights, (b) in connection with a strategic acquisition,
(c) in an underwritten public offering, or (d) at a fixed
price; or issue or amend any debt or equity securities convertible
into, exchangeable or exercisable for, or including the right to
receive, shares of common stock (i) at a conversion price,
exercise price or exchange rate or other price that is based upon
or varies with, the trading prices of or quotations for the shares
of common stock at any time after the initial issuance of the
security, or (ii) with a conversion, exercise or exchange
price that is subject to being reset at some future date after the
initial issuance of the security or upon the occurrence of
specified or contingent events directly or indirectly related to
the business of the Company or the market for the common stock.
Additionally, provided that the Company has not materially breached
the terms of the November 2018 Purchase Agreement, the Company may
at any time, in its sole and absolute discretion, repurchase from
Discover all, but not less than all, of the then outstanding shares
of Series C Preferred Stock sold pursuant to the agreement by
paying to Discover 110% of the aggregate face value of all such
shares.
The Company also agreed to provide Discover a right of first offer
to match any offer for financing it may receive from any person
while the shares of Series C Preferred Stock sold pursuant to the
November 2018 Purchase Agreement are outstanding, except for debt
financings not convertible into common stock, which are excluded
from such right to match.
Finally, the Company agreed that if the Company issues any security
with any term more favorable to the holder of such security or with
a term in favor of the holder of such security that was not
similarly provided to Discover, then the Company would notify
Discover of such additional or more favorable term and such term,
at Discover’s option, may become a part of the transaction
documents with Discover.
The November 2018 Purchase Agreement includes customary provisions
requiring that the Company indemnify Discover against certain
losses; representations and warranties and covenants.
February 2020 Stock Purchase Agreement
On and effective February 3, 2020, the Company and Discover entered
into a Stock Purchase Agreement (the “February 2020 Purchase
Agreement”).
Under the terms of the February 2020 Purchase Agreement, Discover
purchased 525 shares of Series C Preferred Stock for $5 million, at
a 5% original issue discount to the $10,000 face value of such
preferred stock (the “Face Value”).
Pursuant to the February 2020 Purchase Agreement, as long as
Discover holds any shares of Series C Preferred Stock, the Company
agreed that, except as contemplated in connection with the Merger,
it would not issue or enter into or amend an agreement pursuant to
which the Company may issue any shares of common stock, other than
(a) for restricted securities with no registration rights,
(b) in connection with a strategic acquisition, (c) in an
underwritten public offering, or (d) at a fixed price. the
Company also agreed that it would not issue or amend any debt or
equity securities convertible into, exchangeable or exercisable
for, or including the right to receive, shares of common stock
(i) at a conversion price, exercise price or exchange rate or
other price that is based upon or varies with, the trading prices
of or quotations for the shares of common stock at any time after
the initial issuance of the security or (ii) with a
conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of the
security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or
the market for the common stock.
Additionally, provided that the Company has not materially breached
the terms of the 2020 February Purchase Agreement, the Company may
at any time, in its sole and absolute discretion, repurchase from
Discover all, but not less than all, of the then outstanding shares
of Series C Preferred Stock sold pursuant to the agreement by
paying to Discover 110% of the aggregate face value of all such
shares.
The Company also agreed to provide Discover a right of first offer
to match any offer for financing the Company receives from any
person while the shares of Series C Preferred Stock sold pursuant
to the 2020 February Purchase Agreement are outstanding, except for
debt financings not convertible into common stock, which are
excluded from such right to match.
Finally, the Company agreed that if it issues any security with any
term more favorable to the holder of such security or with a term
in favor of the holder of such security that was not similarly
provided to Discover, then the Company would notify Discover of
such additional or more favorable term and such term, at Discover’s
option, may become a part of the transaction documents with
Discover.
The Company also agreed pursuant to the 2020 February Purchase
Agreement that if the Merger did not close by the required date
approved by the parties thereto (as such may be extended from time
to time), and if the amount of funds loaned by the Company to
Viking in connection with the February Secured Note, plus any
applicable interest is returned to the Company by Viking, the
Company is required, at Discover’s option in its sole and absolute
discretion, to immediately repurchase from Discover all then
outstanding Series C Preferred Stock shares acquired by Discover
pursuant to the 2020 February Purchase Agreement, by paying to
Discover 110% of the aggregate Face Value of all such shares.
However, this requirement was terminated pursuant to the Company’s
entry into the June 22, 2020 Amendment to February 2020 Purchase
Agreement with Discover discussed below under “Amendment to
February 2020 Stock Purchase Agreement”.
Waiver and Amendment Agreement
On February 3, 2020, the Company and Discover entered into a
Waivers and Amendments to Stock Purchase Agreements (the
“Preferred Amendment”), pursuant to which Discover
(a) waived any and all Trigger Events (as defined in the
certificate of designation of the Series C Preferred Stock (the
“Designation”)) that had occurred prior to February 3,
2020, (b) agreed that all calculations provided for in the
Designation would be made as if no such Trigger Event had occurred,
and (c) waived any right to receive any additional shares of
common stock based upon any such Trigger Event, with respect to all
shares of Series C Preferred Stock, other than any which have
already been converted.
The Investor also (a) waived any and all breaches and defaults
that have occurred through February 3, 2020, and (b) waived
all rights and remedies with respect to such breaches and
defaults.
The Preferred Amendment also provided that the Company was required
to file a proxy to hold a shareholder meeting to approve an
increase in the Company’s authorized common stock to 25 million
shares as soon as possible (which meeting was held on, and such
shareholders approved the increase in such shares on, April 16,
2020), and use its commercially reasonable best efforts to cause
such increase to be declared effective as soon as possible, and in
any event within 90 days of February 3, 2020; provided that such
increase became effective on April 17, 2020. Discover also agreed
that all calculations provided for in the Designation would be made
as if no such prior Trigger Event had occurred, and to waive any
right to receive any additional shares of common stock based upon
any such prior Trigger Event.
Discover agreed, pursuant to the Preferred Amendment, that the
conversion rate of conversion premiums pursuant to the Designation
would remain (a) 95% of the average of the lowest 5 individual
daily volume weighted average prices during the applicable
Measuring Period (as defined in the Designation), not to exceed
100% of the lowest sales prices on the last day of the Measuring
Period, less $0.05 per share of common stock, unless a triggering
event has occurred, and that such $0.05 per share discount would
not be adjusted in connection with the Company’s previously
reported reverse stock splits; and (b) 85% of the average of
the lowest individual daily volume weighted average price during
the applicable Measuring Period (as defined in the Designation),
not to exceed 100% of the lowest sales prices on the last day of
the Measuring Period, less $0.10 per share of common stock, if a
triggering event has occurred, and that such $0.10 per share
discount would not be adjusted in connection with the Company’s
previously reported reverse stock splits.
The Preferred Amendment
also provided that the Measuring Period (as defined in the
Designation) would begin on the date of the Agreement,
February 3, 2020, for all outstanding shares of Series C Preferred
Stock; and that the Designation would be amended to provide that
holders of the Series C Preferred Stock will vote with holders of
common stock as a single class, on an as converted basis subject to
the beneficial ownership limitation set forth in the Designation;
provided that the NYSE American has since advised the Company that
such amendment would not be possible under the current rules of the
NYSE American. Because the beginning date for the Measuring Period
for all outstanding shares of Series C Preferred Stock is February
3, 2020, the conversion price of the conversion premiums on such
Series C Preferred Stock will never be above approximately $0.3985
per share (as adjusted for future reverse stock splits, if any)(the
current estimated lowest conversion price in the period from
February 3, 2020 to the date of this Proxy Statement), regardless
of the actual trading price of the Company’s common stock.
The Company used the funds received pursuant to the February 2020
Purchase Agreement to purchase the February Secured Note from
Viking, as discussed in greater detail under Proposal 5—“Viking Investment”,
beginning on page 18.
June 2020
Purchase Agreement
On and effective June 22, 2020, the Company and Discover entered
into the June 2020 Purchase Agreement, discussed and described
above under Proposal 5, which
discussion is incorporated by reference in this Section.
Separately, as discussed above under Proposal 5—“Viking Investment”,
beginning on page 18, Viking agreed that if the Merger Agreement is
terminated prior to the closing of the Merger, Viking will owe the
Company, in addition to the required repayment of the Secured
Notes, an additional amount equal to (i) 115.5% of the
original principal amount of the Secured Notes, minus (ii) the
amount due to the Company pursuant to the terms of the Secured
Notes upon repayment thereof.
Amendment to February 2020 Stock Purchase
Agreement
On June 22, 2020, the Company and Discover entered into an
Amendment to Stock Purchase Agreement (the “SPA Amendment”),
pursuant to which Discover agreed to terminate the obligation set
forth in the February 2020 Purchase Agreement, discussed above,
which would have required the Company to redeem the 525 shares of
Series C Preferred Stock sold by the Company pursuant to the
February 2020 Purchase Agreement, together with a 10% prepayment
penalty thereon (totaling an aggregate of $5,775,000), in the event
the Merger was terminated.
Lineal
Transactions
Securities Exchange Agreement and Termination Agreement
In connection with an Agreement and Plan of Merger entered into on
July 9, 2019 with Lineal, the Company entered into (a) a
Security Exchange Agreement dated July 8, 2019 (the “Exchange
Agreement”), by and between the Company and Discover; and
(b) a Termination Agreement dated July 8, 2019, by and between
the Company and Discover Growth, both of which agreements have
since terminated prior to any transactions contemplated thereunder
becoming effective as a result of the Redemption Agreement
(discussed below).
Redemption
Agreement
On December 31, 2019 (the “Effective Date”), the Company
entered into, and closed the transactions contemplated by, a
Preferred Stock Redemption Agreement (the “Redemption
Agreement” and the redemption contemplated thereby, the
“Redemption”), by and between the Company, Lineal Star
Holdings, LLC, the Company’s wholly-owned subsidiary at the time of
the entry into the Redemption Agreement (“Lineal”), Lineal’s
wholly-owned subsidiaries, and the holders of the Company’s Series
E Redeemable Convertible Preferred Stock (“Series E Preferred
Stock”) and Series F Redeemable Preferred Stock
(“Series F Preferred Stock”, and the holders of the Series E
Preferred Stock and Series F Preferred Stock, the “Preferred
Holders”).
Effective on July 9, 2019, the Company had acquired 100% ownership
of Lineal from the Preferred Holders, then members of Lineal, in
consideration for 1,000,000 shares of Series E Preferred Stock and
16,750 shares of Series F Preferred Stock, pursuant to the terms of
an Agreement and Plan of Merger entered into on July 9, 2019 (the
“Lineal Merger”).
The certificate of designations providing for the rights and
preferences of the Series E Preferred Stock and Series F Preferred
Stock allowed for certain rights of the Preferred Holders,
including, in certain cases, the redemption, at the option of the
Preferred Holders, of all shares of Series E Preferred Stock and
Series F Preferred Stock, for 100% of the outstanding interests of
Lineal held by the Company.
Pursuant to the Redemption Agreement, the parties thereto mutually
agreed to unwind the Lineal Merger and allow for the redemption in
full of Lineal by the Preferred Holders. The mutual determination
to move forward with such redemption transaction was due partially
to the fact that Lineal had, since the date of the Lineal Merger,
been unable to complete a further acquisition or combination which
would allow the post-Lineal Merger combined company to meet the
initial listing standards of the NYSE American. This was a
requirement to the Company having to seek shareholder approval for
the terms of the Series E Preferred Stock (including the voting
rights (i.e., the right, together with the Series F Preferred
Stock, to vote 80% of the Company’s voting shares) and
conversion rights (i.e., the right to convert into between 67-70%
of the Company’s post-shareholder approval
capitalization) associated therewith). Consequently, and
because no definitive timeline was able to be established for when
the Company believed it would meet the NYSE American initial
listing standards and consequently, when shareholder approval would
be sought or received for the terms of the Series E Preferred Stock
and Series F Preferred Stock, the Preferred Holders and the Company
determined it was in their mutual best interests to unwind the
Lineal Merger by way of the Redemption.
Pursuant to the Redemption Agreement, effective as of December 31,
2019, each holder of Series E Preferred Stock transferred such
Series E Preferred Stock to the Company in consideration for their
pro rata share (except as discussed below in connection with the
Series F Preferred Stock holder, who was also a holder of Series E
Preferred Stock) of 100% of the Common Shares of Lineal and
the holder of the Series F Preferred Stock transferred such Series
F Preferred Stock (and such Series E Preferred Stock shares held by
such holder) to the Company in consideration for 100% of the
Preferred Shares of Lineal and as a result, ownership of 100% of
Lineal was transferred back to the Preferred Holders, the original
owners of Lineal prior to the Lineal Merger. Additionally, all of
the Series E Preferred Stock and Series F Preferred Stock of the
Company was automatically cancelled and deemed redeemed by the
Company and the Series F Holder waived and forgave any and all
accrued dividends on the Series F Preferred Stock.
The Redemption Agreement also provided for (a) the entry by
Lineal and the Company into a new promissory note in the amount of
$1,539,719, evidencing the repayment of a promissory note in the
original amount of $1,050,000 provided by Lineal to the Company at
the time of the closing of the Lineal Merger, together with
additional amounts loaned by the Company to Lineal through December
31, 2019 (the “New Note”); (b) the loan by the Company
to Lineal of an additional $800,000, which was evidenced by a
promissory note in the amount of $800,000, entered into by Lineal
in favor of the Company on December 31, 2019 (“Note No. 2”);
and (c) the termination of the prior Plan of Merger and
Funding and Loan Agreement entered into in connection therewith
(pursuant to which all funds previously held in a segregated
account for future Lineal acquisitions, less amounts loaned
pursuant to Note No. 2, were released back to the Company).
The Redemption Agreement also required the Company to obtain a tail
directors and officers liability insurance policy for six years
following the effective date of the Redemption, which must be in
place prior to December 31, 2020 and provided for (i) mutual
general releases by (a) Lineal, its subsidiaries, and each
Preferred Holder, subject to certain limited exceptions in the
event of a third-party claim and (b) the Company;
(ii) non-disparagement and confidentiality obligations of the
parties; and (iii) indemnification obligations, each as
described in greater detail in the Redemption Agreement.
The New Note, issued by Lineal as borrower, in the amount of
$1,539,719, accrues interest, payable quarterly in arrears,
beginning on March 31, 2020, at 10% per annum (18% upon the
occurrence of an event of default), and continuing until December
31, 2021, when all interest and principal is due. The New Note
contains a provision whereby payments of principal and interest
owed under the note are suspended and interest does not accrue if
the Company fails to pay certain indemnification obligations under
the Redemption Agreement, and if such amounts continue unpaid for
30 days, then the amount of principal and interest due under the
note is offset by the amount of such unpaid obligations. The New
Note contains standard and customary events of default, including
cross-defaults with Note No. 2, and if a change of control of
Lineal occurs (as described in the New Note) which is not
pre-approved by the Company.
Note No. 2, issued by Lineal as borrower, in the amount of
$800,000, accrues interest, payable quarterly in arrears, beginning
on March 31, 2020, at 8% per annum (18% upon the occurrence of an
event of default), and continuing until December 31, 2021, when all
interest and principal is due. The New Note contains a provision
whereby payments of principal and interest owed under the note are
suspended and interest does not accrue if the Company fails to pay
certain indemnification obligations under the Redemption Agreement,
and if such amounts continue unpaid for 30 days then the amount of
principal and interest due under the note is offset by the amount
of such unpaid obligations (provided there is only one offset under
either of the New Note and Note No. 2, with priority being given to
the New Note). The New Note contains standard and customary events
of default, including cross-defaults with the New Note, if a change
of control of Lineal occurs (as described in the New
Note) which is not pre-approved by the Company or if Lineal
distributes cash or other assets to its members, other than amounts
to cover taxes of the members, as described in greater detail in
the New Note.
The result of the Redemption was to effectively unwind the Lineal
Merger, effective as of December 31, 2019.
COVID-19 has impacted the operations of Lineal and Lineal and has
notified the Company that it currently has insufficient liquidity
to make scheduled interest payments due under the New Note and Note
No. 2. The Company is in negotiations with Lineal to restructure
the notes as of the date of this Proxy Statement.
Compensation
Agreements
Separation and Release Agreement
Effective on May 25, 2018, Richard N. Azar II resigned as Chief
Executive Officer of the Company. Pursuant to a Separation
Agreement entered into with Mr. Azar, he released the Company from
claims in connection with various employment related statutes and
laws and the Company agreed to pay him a severance payment of
$150,000 and to grant him warrants to purchase 32 shares of the
Company’s common stock at an exercise price of $12,187.50 per
share.
Related Party Office Space
Use
BlackBriar, of which Mr. Robert Schleizer, the Chief Financial
Officer of the Company is the Managing Partner, is providing the
Company’s office space without charge to the Company.
CORPORATE GOVERNANCE
The Company promotes accountability for adherence to honest and
ethical conduct; endeavors to provide full, fair, accurate, timely
and understandable disclosure in reports and documents that the
Company files with the SEC and in other public communications made
by the Company; and strives to be compliant with applicable
governmental laws, rules and regulations.
Board Leadership Structure
Our Board has the responsibility for selecting the appropriate
leadership structure for the Company. In making leadership
structure determinations, the Board considers many factors,
including the specific needs of the business and what is in the
best interests of the Company’s stockholders. Currently, our Board
does not have a Chairman. The Board believes that its programs for
overseeing risk, as described below, would be effective under a
variety of leadership frameworks and therefore do not materially
affect its choice of structure.
Risk Oversight
Effective risk oversight is an important priority of the Board.
Because risks are considered in virtually every business decision,
the Board discusses risk throughout the year generally or in
connection with specific proposed actions. The Board’s approach to
risk oversight includes understanding the critical risks in the
Company’s business and strategy, evaluating the Company’s risk
management processes, allocating responsibilities for risk
oversight, and fostering an appropriate culture of integrity and
compliance with legal responsibilities.
The Board exercises direct oversight of strategic risks to the
Company. The Audit Committee reviews and assesses the Company’s
processes to manage business and financial risk and financial
reporting risk. It also reviews the Company’s policies for risk
assessment and assesses steps management has taken to control
significant risks. The Compensation Committee oversees risks
relating to compensation programs and policies. In each case
management periodically reports to our Board or relevant committee,
which provides the relevant oversight on risk assessment and
mitigation.
Family
Relationships
There are no family relationships among our directors or executive
officers.
Arrangements between
Officers and Directors
To our knowledge, there is no arrangement or understanding between
any of our officers and any other person, including directors,
pursuant to which the officer was selected to serve as an
officer.
Other Directorships
No directors of the Company are also directors of issuers with a
class of securities registered under Section 12 of the Exchange Act
(or which otherwise are required to file periodic reports under the
Exchange Act).
Involvement in Certain
Legal Proceedings
To the best of our knowledge, during the past ten years, none of
our directors or executive officers were involved in any of the
following: (1) any bankruptcy petition filed by or against any
business of which such person was a general partner or executive
officer either at the time of the bankruptcy or within two years
prior to that time; (2) any conviction in a criminal
proceeding or being a named subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses);
(3) being subject to any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining,
barring, suspending or otherwise limiting his involvement in any
type of business, securities or banking activities; (4) being
found by a court of competent jurisdiction (in a civil action), the
SEC or the Commodities Futures Trading Commission to have violated
a federal or state securities or commodities law, (5) being
the subject of, or a party to, any Federal or State judicial or
administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of (i) any Federal or State securities or
commodities law or regulation; (ii) any law or regulation
respecting financial institutions or insurance companies including,
but not limited to, a temporary or permanent injunction, order of
disgorgement or restitution, civil money penalty or temporary or
permanent cease-and-desist order, or removal or prohibition order;
or (iii) any law or regulation prohibiting mail or wire fraud
or fraud in connection with any business entity; or (6) being
the subject of, or a party to, any sanction or order, not
subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange
Act), any registered entity (as defined in Section 1(a)(29) of
the Commodity Exchange Act), or any equivalent exchange,
association, entity or organization that has disciplinary authority
over its members or persons associated with a member.
Information Concerning the
Board and its Committees
All directors hold office until the next annual meeting of
shareholders and until their successors have been duly elected and
qualified. There are no agreements with respect to the election of
directors. We have previously compensated our directors for service
on the Board and committees thereof through the issuance of shares
of common stock, stock options and cash compensation for meeting
fees. Additionally, we reimburse directors for expenses incurred by
them in connection with the attendance at meetings of the Board and
any committee thereof (as described below). The Board annually
appoints the executive officers of the Company and the executive
officers serve at the discretion of the Board.
Executive Sessions of the
Board
The independent members of the Board of the Company meet in
executive session (with no management directors or management
present) from time to time, but at least once annually. The
executive sessions include whatever topics the independent
directors deem appropriate.
Communicating with our
Board
Shareholders may contact the Board about bona fide issues or
questions about the Company by writing the Secretary at the
following address: Attn: Secretary, Camber Energy, Inc., 1415
Louisiana, Suite 3500, Houston, Texas 77002.
Our Secretary, upon receipt of any communication other than one
that is clearly marked “Confidential,” will note the date
the communication was received, open the communication, make a copy
of it for our files and promptly forward the communication to the
director(s) to whom it is addressed. Upon receipt of any
communication that is clearly marked “Confidential,” our
Secretary will not open the communication, but will note the date
the communication was received and promptly forward the
communication to the director(s) to whom it is addressed. If
the correspondence is not addressed to any particular Board member
or members, the communication will be forwarded to a Board member
to bring to the attention of the Board.
Board of Directors and
Committee Meetings
For the fiscal year ending March 31, 2020, the Board held 14
meetings and took various other actions via the unanimous written
consent of the Board and the various committees described below.
All directors attended at least 75% of the Board of Directors
meetings and committee meetings relating to the committees on which
each director served. All of the then current directors attended
our fiscal year 2020 Annual Shareholder meeting held on March 11,
2020. The Company encourages, but does not require all directors to
be present at annual meetings of shareholders.
Board of Directors
Committee Membership
Our Board of Directors has the authority to appoint committees to
perform certain management and administration functions. The Board
currently has a standing Audit Committee, Compensation Committee,
and Nominating and Governance Committee. Mr. Fred Zeidman and Mr.
James G. Miller are “independent” members of the Board, as
defined in Section 803(A) of the NYSE American Company Guide.
Committee membership and the functions of those committees are
described below.
|
|
Audit Committee |
Compensation
Committee |
Nominating and
Governance
Committee |
| Robert
Schleizer |
|
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| Fred S. Zeidman |
M |
C |
C |
| James G. Miller |
C |
M |
M |
C - Chairman of Committee.
M
– Member.
Audit Committee
The Board has selected the members of the Audit Committee based on
the Board’s determination that the members are financially literate
and qualified to monitor the performance of management and the
independent auditors and to monitor our disclosures so that our
disclosures fairly present our business, financial condition and
results of operations.
The Audit Committee’s function is to provide assistance to the
Board in fulfilling the Board’s oversight functions relating to the
integrity of the Company’s financial statements, the Company’s
compliance with legal and regulatory requirements, the independent
auditor’s qualifications and independence and the performance of
the Company’s independent auditors, and perform such other
activities consistent with its charter and our Bylaws as the
Committee or the Board deems appropriate. The Audit Committee
produces an annual report for inclusion in our Proxy Statement. The
Audit Committee is directly responsible for the appointment,
retention, compensation, oversight and evaluation of the work of
the independent registered public accounting firm (including
resolution of disagreements between our management and the
independent registered public accounting firm regarding financial
reporting) for the purpose of preparing or issuing an audit
report or related work. The Audit Committee shall review and
pre-approve all audit services, and non-audit services that exceed
a de minimis standard, to be provided to us by our independent
registered public accounting firm. The Audit Committee carries out
all functions required by the NYSE American, the SEC and the
federal securities laws.
The Audit Committee has the sole authority, at its discretion and
at our expense, to retain, compensate, evaluate and terminate our
independent auditors and to review, as it deems appropriate, the
scope of our annual audits, our accounting policies and reporting
practices, our system of internal controls, our compliance with
policies regarding business conduct and other matters. In addition,
the Audit Committee has the authority, at its discretion and at our
expense, to retain special legal, accounting or other advisors to
advise the Audit Committee.
The Board has determined that Mr. Fred Zeidman and Mr. James G.
Miller are “independent,” and that Mr. Miller is an
“audit committee financial expert” (as defined in the SEC
rules) because he has the following attributes: (i) an
understanding of generally accepted accounting principles in the
United States of America (“GAAP”) and financial
statements; (ii) the ability to assess the general application
of such principles in connection with accounting for estimates,
accruals and reserves; (iii) experience analyzing and
evaluating financial statements that present a breadth and level of
complexity of accounting issues that are generally comparable to
the breadth and complexity of issues that can reasonably be
expected to be raised by our financial statements; (iv) an
understanding of internal control over financial reporting; and
(v) an understanding of audit committee functions. Mr. Miller
has acquired these attributes by means of having held various
positions that provided relevant experience, as described in his
biographical information above.
For the fiscal year ending
March 31, 2020, the Audit Committee held four formal meetings, and
took various actions via a unanimous written consent of the
committee. The Audit Committee’s charter is available on our
website at www.camber.energy at
“Governance” - “Policies” and was filed
as Exhibit 14.3 to our Annual Report on Form 10-K/A for
the year ended March 31, 2009, filed with the Commission on
July 29, 2009.
Compensation
Committee
The Compensation Committee is responsible for the administration of
our stock compensation plans, approval, review and evaluation of
the compensation arrangements for our executive officers and
directors and oversees and advises the Board on the adoption of
policies that govern the Company’s compensation and benefit
programs. In addition, the Compensation Committee has the
authority, at its discretion and at our expense, to retain advisors
to advise the Compensation Committee. The Compensation Committee
may delegate its authority to subcommittees of independent
directors, as it deems appropriate.
For the fiscal year ending
March 31, 2019, the Compensation Committee held no formal meetings,
but did take various actions via a unanimous written consent of the
committee. The Compensation Committee’s charter is available on our
website at www.camber.energy at “Governance” -
“Policies” and was filed as Exhibit
14.5 to our Annual
Report on Form 10-K/A for the year ended March 31, 2009, filed with
the Commission on July 29, 2009.
Compensation Committee
Interlocks and Insider Participation
The current members of the Compensation Committee are Messrs. Fred
S. Zeidman (Chairman) and James G. Miller, who are each independent
members of our Board of Directors. No member of the Compensation
Committee is an employee or a former employee of the Company.
During fiscal 2020, none of our executive officers served on the
compensation committee (or its equivalent) or board of directors of
another entity whose executive officer served on our Compensation
Committee. Accordingly, the Compensation Committee members have no
interlocking relationships required to be disclosed under SEC rules
and regulations.
Nominating and Governance
Committee
The Nominating and Governance Committee is responsible for
(1) assisting the Board by identifying individuals qualified
to become Board members; (2) recommending individuals to the
Board for nomination as members of the Board and its committees;
(3) leading the Board in its annual review of the Board’s
performance; (4) monitoring the attendance, preparation and
participation of individual directors and to conduct a performance
evaluation of each director prior to the time he or she is
considered for re-nomination to the Board; (5) reviewing and
recommending to the Board responses to shareowner proposals;
(6) monitoring and evaluating corporate governance issues and
trends; (7) providing oversight of the corporate governance
affairs of the Board and the Company, including consideration of
the risk oversight responsibilities of the full Board and its
committees; (8) assisting the Board in organizing itself to
discharge its duties and responsibilities properly and effectively;
and (9) assisting the Board in ensuring proper attention and
effective response to shareholder concerns regarding corporate
governance. We have not paid any third party a fee to assist in the
process of identifying and evaluating candidates for director.
The Nominating and Governance Committee uses a variety of methods
for identifying and evaluating director nominees. The Nominating
and Governance Committee also regularly assesses the appropriate
size of the Board and whether any vacancies on the Board are
expected due to retirement or other circumstances. In addition, the
Nominating and Governance Committee considers, from time to time,
various potential candidates for directorships. Candidates may come
to the attention of the Nominating and Governance Committee through
current Board members, professional search firms, shareholders or
other persons. These candidates may be evaluated at regular or
special meetings of the Nominating and Governance Committee and may
be considered at any point during the year.
The Nominating and Governance Committee evaluates director nominees
at regular or special Committee meetings pursuant to the criteria
described above and reviews qualified director nominees with the
Board. The Committee selects nominees that best suit the Board’s
current needs and recommends one or more of such individuals for
election to the Board.
The Nominating and Governance Committee will consider candidates
recommended by shareholders, provided the names of such persons,
accompanied by relevant biographical information, are properly
submitted in writing to the Secretary of the Company in accordance
with the manner described below. The Secretary will send properly
submitted shareholder recommendations to the Committee. Individuals
recommended by shareholders in accordance with these procedures
will receive the same consideration received by individuals
identified to the Committee through other means. The Committee also
may, in its discretion, consider candidates otherwise recommended
by shareholders without accompanying biographical information, if
submitted in writing to the Secretary.
In addition, the Company’s Bylaws permit shareholders to nominate
directors at an annual meeting of shareholders or at a special
meeting at which directors are to be elected in accordance with the
notice of meeting pursuant to the requirements of the Company’s
Bylaws and applicable NYSE American and SEC rules and
regulations.
For the fiscal year ending
March 31, 2019, the Nominating and Governance Committee held no
formal meetings, but did take various actions via a unanimous
written consent of the committee. The Nominating and Governance
Committee’s charter is available on our website
at www.camber.energy at “Governance” -
“Policies” and was filed as Exhibit 99.2 to
the Company’s Annual Report on Form 10-K for the year ended March
31, 2013, filed with the Commission on June 28, 2013.
Director Nominations
Process
As described above, the Nominating and Governance Committee will
consider qualified director candidates recommended in good faith by
shareholders, provided those nominees meet the requirements of NYSE
American and applicable federal securities law. The Nominating and
Governance Committee’s evaluation of candidates recommended by
shareholders does not differ materially from its evaluation of
candidates recommended from other sources. Any shareholder wishing
to recommend a nominee should submit the candidate’s name,
credentials, contact information and his or her written consent to
be considered as a candidate. These recommendations should be
submitted in writing to the Company, Attn: Secretary, Camber
Energy, Inc., 1415 Louisiana, Suite 3500, Houston, Texas 77002. The
proposing shareholder should also include his or her contact
information and a statement of his or her share ownership. The
Committee may request further information about shareholder
recommended nominees in order to comply with any applicable laws,
rules, the Company’s Bylaws or regulations or to the extent such
information is required to be provided by such shareholder pursuant
to any applicable laws, rules or regulations.
Director Independence
During the year ended March 31, 2020, the Board determined that 67%
of the Board is independent under the definition of independence
and in compliance with the listing standards of the NYSE American
listing requirements. Based upon these standards, the Board has
determined that Mr. Miller and Mr. Zeidman are “independent”
members of the Board of Directors as defined in Section
803(A) of the NYSE American Company Guide, and Mr. Schleizer
is not “independent” due to his status as an officer of the
Company (see “Information About
Our Executive Officers”, above beginning on page 30).
Code of Ethics
On November 29, 2016, the Board of Directors approved and adopted
an amended and restated Code of Business and Ethical Conduct (the
“Revised Code”), which applies to all officers, directors
and employees. The Revised Code replaced the Company’s prior Code
of Ethics adopted in June 2009 and reflects, among other matters,
clarifications and revisions relating to conflicts of interest,
confidentiality, compliance with laws, reporting and enforcement,
and other matters intended to update the Company’s Code of
Ethics.
You can access our Revised Code on our website
at www.camber.energy, and any shareholder who so requests may
obtain a free copy of our Code of Ethics by submitting a written
request to our Secretary. Additionally, the Code of Ethics was
filed as an exhibit to the Company’s Form 8-K dated November 29,
2016, filed with the SEC on December 5, 2016, as Exhibit
14.1 thereto.
We intend to disclose any amendments or future amendments to our
Revised Code and any waivers with respect to our Revised Code
granted to our principal executive officer, our principal financial
officer, or any of our other employees performing similar functions
on our website at www.camber.energy within four business
days after the amendment or waiver. In such case, the disclosure
regarding the amendment or waiver will remain available on our
website for at least 12 months after the initial disclosure. There
have been no waivers granted with respect to our Revised Code to
any such officers or employees.
The Revised Code includes a policy on reporting illegal or
unethical business or workplace conduct by employees, officers or
members of the Board, which replaced our prior Whistleblower
Protection Policy adopted in 2009.
Policy on Equity
Ownership
The Company does not have a policy on equity ownership at this
time.
Policy Against
Hedging
The Company recognizes that hedging against losses in Company
shares may disturb the alignment between shareholders and
executives that equity awards are intended to build. As such, while
the Company does not currently have a formal policy which prohibits
short sales of Company stock and/or trading in derivatives (such as
put and call options) that relate to Company securities, such
transactions are discouraged by the officers and directors, none of
which own any equity in the Company as of the date of this
proxy.
Compensation
Recovery
Under the Sarbanes–Oxley Act of 2002 (the “Sarbanes-Oxley
Act”), in the event of misconduct that results in a financial
restatement that would have reduced a previously paid incentive
amount, we can recoup those improper payments from our Interim
Chief Executive Officer and Chief Financial Officer. We plan to
implement a clawback policy in the future, although we have not yet
implemented such policy to date.
DELINQUENT SECTION
16(A) REPORTS
Section 16(a) of the Exchange Act requires our directors and
officers, and the persons who beneficially own more than ten
percent of our common stock, to file reports of ownership and
changes in ownership with the SEC. Copies of all filed reports are
required to be furnished to us pursuant to Rule 16a-3 promulgated
under the Exchange Act.
Based solely upon our review of the Section 16(a) filings that
have been furnished to us and representations by our directors and
executive officers (where applicable), we believe that all filings
required to be made under Section 16(a) during fiscal 2020 and
through the date of this filing, were timely made.
Pursuant to SEC rules, we are not required to disclose in this
filing any failure to timely file a Section 16(a) report that
has been disclosed by us in a prior annual report or proxy
statement.
DISSENTERS’ RIGHTS
Under Nevada law there are no dissenters’ rights available to our
shareholders in connection with any of the Proposals.
ADDITIONAL INFORMATION
The Company’s Forms 10-K, 10-Q, 8-K and all amendments to those
reports are available without charge through the Company’s website
at https://ir.camber.energy/sec-filings as
soon as reasonably practicable after they are electronically filed
with, or furnished to, the Securities and Exchange Commission.
Information on our website does not constitute part of this Proxy
Statement.
The Company will provide, without charge, to each person to whom a
Proxy Statement is delivered, upon written or oral request of such
person and by first class mail or other equally prompt upon receipt
of such request, a copy of any of the filings described above.
Individuals may request a copy of such information by sending a
request to the Company, Attn: Corporate Secretary, Camber Energy,
Inc., 1415 Louisiana Street, Suite 3500, Houston, Texas 77002.
OTHER MATTERS
As of the date of this Proxy Statement, our management has no
knowledge of any business to be presented for consideration at the
Annual Meeting other than that described above. If any other
business should properly come before the Annual Meeting or any
adjournment thereof, it is intended that the shares represented by
properly executed proxies will be voted with respect thereto in
accordance with the judgment of the persons named as agents and
proxies in the enclosed form of proxy.
The Board of Directors does not intend to bring any other matters
before the Annual Meeting of stockholders and has not been informed
that any other matters are to be presented by others.
INTEREST OF CERTAIN
PERSONS IN OR OPPOSITION TO MATTERS TO BE ACTED UPON
(a) No officer or director
of the Company has any substantial interest in the matters to be
acted upon, other than his role as an officer or director of the
Company.
(b) No director of the
Company has informed the Company that he intends to oppose the
action taken by the Company set forth in this proxy statement.
STOCKHOLDER PROPOSALS
Shareholder Proposals for
2022 Annual Meeting of
Shareholders and 2022 Proxy Materials
Proposals of holders of our voting securities intended to be
presented at our 2022 fiscal year Annual Meeting of shareholders
and included in our proxy statement and form of proxy relating to
such meeting pursuant to Rule 14a-8 of Regulation 14A must be
received by us, addressed to our Secretary, at our principal
executive offices at 1415 Louisiana, Suite 3500, Houston, Texas
77002, not earlier than the close of business on [__________],
2021, and not later than the close of business on [__________],
2021, together with written notice of the shareholder’s intention
to present a proposal for action at the fiscal 2022 Annual Meeting
of shareholders, unless our annual meeting date occurs more than 30
days before or 30 days after [__________], 2021. In that case, we
must receive proposals not earlier than the close of business on
the 120th day prior to the date of the fiscal 2022 annual meeting
and not later than the close of business on the later of the 90th
day prior to the date of the annual meeting or, if the first public
announcement of the date of the Annual Meeting is less than 100
days prior to the date of the meeting, the 10th day following the
day on which we first make a public announcement of the date of the
meeting. The notice must be personally delivered to the Company or
sent by first class certified mail, return receipt requested,
postage prepaid, and must include the name and address of the
shareholder, the number of voting securities held by the
shareholder of record, a statement that the shareholder holds such
shares beneficially and the text of the proposal to be presented
for vote at the meeting, a statement in support of the proposal,
and must otherwise comply with Rule 14a-8 of Regulation 14A and the
requirements of our Bylaws.
The proposal should state as clearly as possible the proposal and
should be accompanied by a supporting statement. The proposal,
including the accompanying supporting statement, may not exceed 500
words. Upon receipt of any such proposal, the Company will
determine whether or not to include such proposal in the proxy
statement and proxy in accordance with regulations governing the
solicitation of proxies. The Company reserves the right to reject,
rule out of order, or take other appropriate action with respect to
any proposal that does not comply with these and other applicable
rules and requirements. As the rules of the SEC make clear, simply
submitting a proposal does not guarantee that it will be
included.
Nominations For
Directors
The Nominating and Governance Committee will consider qualified
director candidates recommended in good faith by shareholders, by
the same deadlines set forth above under “Shareholder Proposals
for 2022 Annual Meeting of Shareholders and 2022 Proxy
Materials”, provided those nominees meet the requirements of
NYSE American and applicable federal securities law, and the
requirements of the Company’s Bylaws. The Nominating and Governance
Committee’s evaluation of candidates recommended by shareholders
does not differ materially from its evaluation of candidates
recommended from other sources. Any shareholder wishing to
recommend a nominee should submit the candidate’s name,
credentials, contact information and his or her written consent to
be considered as a candidate. These recommendations should be
submitted in writing to the Company, Attn: Secretary, Camber
Energy, Inc., 1415 Louisiana, Suite 3500, Houston, Texas 77002. The
proposing shareholder should also include his or her contact
information and a statement of his or her share ownership. The
Committee may request further information about shareholder
recommended nominees in order to comply with any applicable laws,
rules or regulations or to the extent such information is required
to be provided by such shareholder pursuant to any applicable laws,
rules or regulations.
DOCUMENTS
INCORPORATED BY REFERENCE
In accordance with Item 13(b)(2) of the SEC’s Schedule 14A,
certain financial and other information required to be disclosed in
connection with “Proposal 5 - Approval of
the Issuance of Such Number of Shares of Common Stock Exceeding 20%
of Our Outstanding Common Stock, Issuable Upon Conversion of the
630 Shares of Series C Preferred Stock, Including Shares Issuable
for Dividends and Conversion Premiums Thereon, Sold Pursuant to the
June 2020 Purchase Agreement and to Approve the Terms of Such June
2020 Purchase Agreement”, of this Proxy Statement are
incorporated by reference to the Company’s Annual
Report on Form 10-K for the year ended March 31, 2020, which
was filed with the SEC on June 29, 2020, a copy of which has been
made available with this proxy statement, and specifically to the
sections included therein entitled as follows: (i) “Selected
Financial Data”; (ii) “Financial
Statements and Supplementary Data”; (iii) “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations”; (iv) “Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure”; and (v) “Quantitative
and Qualitative Disclosures About Market Risk”. We are
delivering to security holders with this proxy statement the
aforementioned information incorporated by reference in accordance
with Item 13(b)(2) of Schedule 14A.
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Sincerely, |
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/s/ Louis G. Schott |
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Louis G. Schott |
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Interim Chief Executive
Officer |
Houston, Texas
November [ ], 2020
APPENDIX A
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*090204* |
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BARBARA K. CEGAVSKE
Secretary of State
202 North Carson Street
Carson City, Nevada 89701-4201
(775) 684-5708
Website: www.nvsos.gov |
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Certificate of Amendment |
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(PURSUANT TO NRS 78.385 AND 78.390) |
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| USE BLACK INK ONLY -
DO NOT HIGHLIGHT |
ABOVE SPACE IS FOR
OFFICE USE ONLY |
Certificate of Amendment to Articles of Incorporation
For Nevada Profit Corporations
(Pursuant to NRS 78.385 and 78.390 - After Issuance of
Stock)
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Name of corporation: |
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Camber Energy, Inc. |
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| 2.
The articles have been amended as follows: (provide article
numbers, if available) |
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Article Four Capital Stock is deleted and replaced in its entirety
with Article Four set forth on the attachment hereto (which shall
have no effect on any previously designated series of preferred
stock) |
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3. The vote by which the shareholders holding shares in the
corporation entitling them to exercise at least a majority of the
voting power, or such greater proportion of the voting power as may
be required in the case of a vote by classes or series, or as may
be required by the provisions of the articles of incorporation*
have voted in favor of the amendment is:
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| 4. Effective date and
time of filing: (optional) |
Date: |
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Time: |
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(must not be later than
90 days after the certificate is filed) |
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5. Signature: (required)
*lf any proposed amendment would alter or change any preference or
any relative or other right given to any class or series of
outstanding shares, then the amendment must be approved by the
vote, in addition to the affirmative vote otherwise required, of
the holders of shares representing a majority of the voting power
of each class or series affected by the amendment regardless to
limitations or restrictions on the voting power thereof.
IMPORTANT: Failure to include any of the above
information and submit with the proper fees may cause this filing
to be rejected.
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| This form must be accompanied by
appropriate fees. |
Nevada Secretary of State Amend
Profit-After
Revised: 1-5-15 |
ARTICLE FOUR. CAPITAL STOCK
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| A. |
General Authorization. |
The Corporation has the authority to issue Eighty-Five Million
(85,000,000) shares of stock consisting of:
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(1) |
Common Stock. Sixty-Five
Million (75,000,000) shares of common stock, having a par
value of $0.001 per share (the “Common Stock”);
and |
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(2) |
Preferred Stock. Ten Million
(10,000,000) shares of Preferred Stock having a par value of
$0.001 per share (the “Preferred Stock”). |
All capital stock when issued shall be fully paid and
nonassessable. No holder of shares of stock of this Corporation is
entitled as such to any pre-emptive or preferential rights to
subscribe to any unissued stock or any other securities which the
Corporation may now or hereafter issue.
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| B. |
Common Stock. |
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| (1) |
Number of
Shares. The Common Stock shall consist of
Sixty-Five Million (65,000,000) shares. |
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| (2) |
Voting. Except as
provided in these Articles of Incorporation or by applicable law,
each holder of Common Stock is entitled to one vote for each share
of Common Stock held of record on all matters as to which Common
Shareholders are entitled to vote, which voting rights shall not be
cumulative in any election of Directors. |
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| (3) |
Other Rights. Each
share of Common Stock issued and outstanding shall be identical in
all respects with each other such share, and no dividends shall be
paid on any shares of Common Stock unless the same dividend is paid
on all shares of Common Stock outstanding at the time of such
payment. Except for and subject to those rights expressly granted
to the holders of Preferred Stock and except as may be provided by
the laws of the State of Nevada, the Common Shareholders shall have
all other rights of shareholders. |
Subject to the terms contained in any designation of a series of
Preferred Stock, the Board of Directors is expressly authorized, at
any time and from time to time, to fix, by resolution or
resolutions, the following provisions for shares of any class or
classes of Preferred Stock of the Corporation:
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| (1) |
The designation of such class or
series, the number of shares to constitute such class or series
which may be increased (but not below the number of shares of that
class or series then outstanding) by a resolution of the Board
of Directors; |
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| (2) |
Whether the shares of such class or
series shall have voting rights, in addition to any voting rights
provided by law, and if so, the terms of such voting rights; |
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| (3) |
The dividends, if any, payable on
such class or series, whether any such dividends shall be
cumulative, and, if so, from what dates, the conditions and dates
upon which such dividends shall be payable, and the preference or
relation which such dividends shall bear to the dividends payable
on any share of stock of any other class or any other shares of the
same class; |
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| (4) |
Whether the shares of such class or
series shall be subject to redemption by the Corporation, and, if
so, the times, prices and other conditions of such redemption or a
formula to determine the times, prices and such other
conditions; |
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The amount or amounts
payable upon shares of such series upon, and the rights of the
holders of such class or series in, the voluntary or involuntary
liquidation, dissolution or winding up, or upon any distribution of
the assets, of the Corporation; |
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Whether the shares of
such class or series shall be subject to the operation of a
retirement or sinking fund, and, if so, the extent to and manner in
which any such retirement or sinking fund shall be applied to the
purchase or redemption of the shares of such class or series for
retirement or other corporate purposes and the terms and provisions
relative to the operation thereof; |
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| (7) |
Whether the shares of such class or
series shall be convertible into, or exchangeable for, shares of
stock of any other class or any other series of the same class or
any other securities and, if so, the price or prices or the rate or
rates of conversion or exchange and the method, if any, of
adjusting the same, and any other terms and conditions of
conversion or exchanges; |
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| (8) |
The limitations and restrictions,
if any, to be effective while any shares of such class or series
are outstanding upon the payment of dividends or the making of
other distributions on, and upon the purchase, redemption or other
acquisition by the Corporation of the Common Stock or shares of
stock of any other class or any other series of the same
class; |
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| (9) |
The conditions or restrictions, if
any, upon the creation of indebtedness of the Corporation or upon
the issuance of any additional stock, including additional shares
of such class or series or of any other series of the same class or
of any other class; |
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| (10) |
The ranking (be it pari passu,
junior or senior) of each class or series vis-à-vis any other
class or series of any class of Preferred Stock as to the payment
of dividends, the distribution of assets and all other
matters; |
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| (11) |
Facts or events to be ascertained
outside the articles of incorporation of the Corporation, or the
resolution establishing the class or series of stock, upon which
any rate, condition or time for payment of distributions on any
class or series of stock is dependent and the manner by which the
fact or event operates upon the rate, condition or time of
payment; |
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| (12) |
Any other powers,
preferences and relative, participating, optional and other special
rights, and any qualifications, limitations and restrictions
thereof, insofar as they are not inconsistent with the provisions
of the Articles of Incorporation of this Corporation, to the full
extent permitted by the laws of the State of Nevada. |
The powers, preferences and relative, participating, optional and
other special rights of each class or series of Preferred Stock,
and the qualifications, limitations or restrictions thereof, if
any, may differ from those of any and all other series at any time
outstanding.
APPENDIX B
STOCK PURCHASE
AGREEMENT
This Stock Purchase Agreement
(“Agreement”) is made and entered into on June 22, 2020
(“Effective Date”), by and between Camber Energy, Inc., a
Nevada corporation (“Company”), and the investor whose name
appears on the signature page hereto
(“Investor”).
Recitals
A. The
parties desire that, upon the terms and subject to the conditions
herein, Investor will purchase $6 million in shares of Series C
Redeemable Convertible Preferred Stock of the Company;
and
B. The
offer and sale of the Securities provided for herein are being made
pursuant to the exemptions from registration under Section 4(a)(2)
of the Act as a transaction by an issuer not involving any public
offering, and as an offshore private placement of restricted
securities pursuant to Rule 506 of Regulation D.
Agreement
In consideration of the foregoing,
the receipt and adequacy of which are hereby acknowledged, Company
and Investor agree as follows:
I. Definitions.
In addition to the terms defined elsewhere in this Agreement and
the Transaction Documents, capitalized terms that are not otherwise
defined have the meanings set forth in the Glossary of Defined
Terms attached hereto as Exhibit 1 or the other Transaction
Documents.
II. Purchase
and Sale.
A. Purchase
Amount. Subject to the terms
and conditions herein and the satisfaction of the conditions to
Closings set forth below, Investor hereby irrevocably agrees
(pursuant to the terms of this Agreement below, including the
Company Option), to purchase 630 Preferred Shares at $10,000.00 per
share (“Face Value”) with
a 5.0% original issue discount (“OID”) for the sum of $6,000,000.00
(“Purchase Amount”).
B. Deliveries.
The following documents will be fully executed and delivered at the
Closing:
1. This
Agreement;
2. Legal
Opinion, in the form attached hereto as Exhibit
2;
3. Officer’s
Certificate, in the form attached hereto as Exhibit
3;
4. Secretary’s
Certificate, in the form attached hereto as Exhibit 4;
and
5. A
stock certificate or Transfer Agent book entry for the number of
purchased Preferred Shares in the name of Investor.
C. Closing
Conditions. The consummation
of the transactions contemplated by this Agreement (each, a
“Closing”) is subject to
the satisfaction of each of the following
conditions:
1. All
documents, instruments and other writings required to be delivered
by Company to Investor pursuant to any provision of this Agreement
or in order to implement and effect the transactions contemplated
herein have been fully executed and delivered, including without
limitation those enumerated in Section II.B
above;
2. The
Common Stock is listed for and currently trading on the same or
higher Trading Market and except as set forth in Schedule
II.C.2, Company is in compliance with all requirements to
maintain listing on the Trading Market and there is no notice of
any suspension or delisting with respect to the trading of the
shares of Common Stock on such Trading Market ;
3. The
representations and warranties of Company and Investor set forth in
this Agreement are true and correct in all material respects as if
made on such date (except for representations and warranties
expressly made as of a specified date, which will be true as of
such date);
4. Except for those
prior breaches known to or identified by Investor prior to the
Effective Date, or which have been waived by the Investor, no
material breach or default has occurred under any Transaction
Document with respect to any Preferred Share or any other agreement
between Company and Investor or any Affiliate of Investor;
5. There
is not then in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated in any Transaction
Document, or requiring any consent or approval which will not have
been obtained, other than Approval, nor is there any completed,
pending, threatened or, to Company’s knowledge, contemplated
proceeding or investigation which may have the effect of
prohibiting or adversely affecting any of the transactions
contemplated by this Agreement, including without limitation the
sale, issuance, listing, trading, or resale of any Shares on the
Trading Market; no statute, rule, regulation, executive order,
decree, ruling or injunction will have been enacted, entered,
promulgated or adopted by any court or governmental authority of
competent jurisdiction that prohibits the transactions contemplated
by this Agreement, and no actions, suits or proceedings will be
completed, in progress, pending, threatened or, to Company’s
knowledge, contemplated by any person other than Investor or any
Affiliate of Investor, that seek to enjoin or prohibit the
transactions contemplated by this Agreement; and
6. Any
rights of first refusal, preemptive rights, rights of
participation, or any similar right to participate in the
transactions contemplated by this Agreement, if any, have been
waived in writing.
D. Closing.
Immediately when all conditions
set forth in Section II.C have been fully satisfied, Company will issue
and sell to Investor and Investor will purchase 630 Preferred
Shares by payment to Company of $6,000,000.00, by wire transfer of
immediately available funds to an account designated by Company
(the “Closing”).
III. Representations
and Warranties.
A. Representations
Regarding Transaction. Except
as set forth under the corresponding section of the Disclosure
Schedules, if any, Company hereby represents and warrants to, and
as applicable covenants with, Investor as of the
Closing:
1. Organization
and Qualification. Company and each Subsidiary is an entity
duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation or organization, as applicable, with the requisite
power and authority to own and use its properties and assets and to
carry on its business as currently conducted, except where the
failure to do so would not reasonably be expected to result in a
Material Adverse Effect. Neither Company nor any Subsidiary is in
violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other
organizational or charter documents, except as would not reasonably
be expected to result in a Material Adverse Effect. Each of Company
and each Subsidiary is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, would not reasonably be expected to result in a
Material Adverse Effect and there is no completed, pending or, to
the knowledge of Company, contemplated or threatened proceeding in
any such jurisdiction revoking, limiting or curtailing or seeking
to revoke, limit or curtail such power and authority or
qualification.
2. Authorization; Enforcement.
Company has the requisite corporate
power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations hereunder or thereunder. The
execution and delivery of each of the Transaction Documents by
Company and the consummation by it of the transactions contemplated
hereby or thereby have been duly authorized by all necessary action
on the part of Company and no further consent or action is required
by Company. Each of the Transaction Documents has been, or upon
delivery will be, duly executed by Company and, when delivered in
accordance with the terms hereof, will constitute the valid and
binding obligation of Company, enforceable against Company in
accordance with its terms, except (a) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (b) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (c)
insofar as indemnification and contribution provisions may be
limited by applicable law.
3. No
Conflicts. The execution, delivery and performance of the
Transaction Documents by Company, the issuance and sale of the
Shares and the consummation by Company of the other transactions
contemplated thereby do not and will not (a) conflict with or
violate any provision of Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or
charter documents, (b) conflict with, or constitute a default (or
an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the
properties or assets of Company or any Subsidiary, or give to
others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of,
any material agreement, credit facility, debt or other instrument
(evidencing Company or Subsidiary debt or otherwise) or other
understanding to which Company or any Subsidiary is a party or by
which any property or asset of Company or any Subsidiary is bound
or affected, (c) conflict with or result in a violation of any
material law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to
which Company or a Subsidiary is subject (including U.S. federal
and state securities laws and regulations), or by which any
material property or asset of Company or a Subsidiary is bound or
affected, or (d) conflict with or violate the terms of any material
agreement by which Company or any Subsidiary is bound or to which
any property or asset of Company or any Subsidiary is bound or
affected; except in the case of each of clauses (b), (c) and (d),
such as would not reasonably be expected to result in a Material
Adverse Effect.
4. Litigation.
Except as set forth in Schedule III.A.4, there is no action,
suit, inquiry, notice of violation, proceeding or investigation
pending, threatened, or, to the knowledge of Company, contemplated
against or affecting Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an
“Action”), which would reasonably be expected to adversely
affect or challenge the legality, validity or enforceability of any
of the Transaction Documents or the issuance, listing, trading, or
resale of any Shares on the Trading Market. The Commission has not
issued any stop order or other order suspending the effectiveness
of any registration statement filed by Company or any Subsidiary
under the Exchange Act or the Act.
5. Filings, Consents and
Approvals. Except as
set forth in Schedule III.A.5, neither Company nor any
Subsidiary is required to obtain any consent, waiver, authorization
or order of, give any notice to, or make any filing or registration
with, any court or other federal, state, local or other
governmental authority or other Person in connection with the
execution, delivery and performance by Company of the Transaction
Documents, other than required federal and state securities filings
and such filings and approvals as are required to be made or
obtained under the applicable Trading Market rules in connection
with the transactions contemplated hereby, each of which has been,
or if not yet required to be filed will be, timely
filed.
6. Issuance
of Shares. The Shares are duly authorized and, when issued
and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens.
7. Disclosure; Non-Public
Information. Company
will issue a press release and timely file a current report on Form
8-K (“Current Report”) by 8:30 am Eastern time on the
Trading Day after the Effective Date describing the material terms
and conditions of this Agreement, a copy of which will be provided
to Investor prior to the Effective Date. All information that
Company has provided to Investor that constitutes or might
constitute material, non-public information will be included in the
Current Report. Notwithstanding any other provision, except with
respect to information that will be, and only to the extent that it
actually is, timely publicly disclosed by Company by the date of
Approval, neither Company nor any other Person acting on its behalf
has provided Investor or its representatives, agents or attorneys
with any information that constitutes or might constitute material,
non-public information, including without limitation this Agreement
and the Exhibits and Disclosure Schedules hereto.
No information contained in the
Disclosure Schedules constitutes material non-public information.
There is no adverse material information regarding Company that has
not been publicly disclosed prior to the Effective Date. Company
understands and confirms that Investor will rely on the foregoing
representations and covenants in effecting transactions in
securities of Company. All disclosure provided to Investor
regarding Company, its business and the transactions contemplated
hereby, including without limitation the Disclosure Schedules,
furnished by or on behalf of Company with respect to the
representations and warranties made herein are true and correct in
all material respects and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order
to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
8. No
Integrated Offering. Neither Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would cause this offering to be integrated with prior offerings by
Company that cause a violation of the Act or any applicable
stockholder approval provisions, including, without limitation,
under the rules and regulations of the Trading Market.
9. Financial
Condition. Except as set forth on Schedule III.A.9,
the Public Reports set forth as of the dates thereof all
outstanding secured and unsecured Indebtedness of Company or any
Subsidiary, or for which Company or any Subsidiary has commitments,
and any material default with respect to any Indebtedness. Company
does not intend to incur debts beyond its ability to pay such debts
as they mature, taking into account the timing and amounts of cash
to be payable on or in respect of its debt.
10. Section
5 Compliance. No representation or warranty or other
statement made by Company in the Transaction Documents contains any
untrue statement or omits to state a material fact necessary to
make any of them, in light of the circumstances in which it was
made, not misleading. Company is not aware of any facts or
circumstances that would cause the transactions contemplated by the
Transaction Documents, when consummated, to violate Section 5 of
the Act or other federal or state securities laws or
regulations.
11. Investment
Company. Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Preferred Shares, will
not be or be an Affiliate of, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended. Company
will conduct its business in a manner so that it will not become
subject to the Investment Company Act.
12. Acknowledgments
Regarding Investor. Company’s decision to enter into this
Agreement has been based solely on the independent evaluation by
Company and its representatives, and Company acknowledges and
agrees that:
a. Investor
is not, has never been, and as a result of the transactions
contemplated by the Transaction Documents will not become an
officer, director, insider, control person, to Company’s knowledge,
10% or greater shareholder, or otherwise an affiliate of Company as
defined under Rule 12b-2 of the Exchange Act;
b. Investor
and Investor’s representatives have not made and do not make any
representations, warranties or agreements with respect to the
Shares, this Agreement, or the transactions contemplated by the
Transaction Documents other than those specifically set forth in
Section III.C below; Company has not relied upon, and
expressly disclaims reliance upon, any and all written or oral
statements or representations made by any persons prior to this
Agreement;
c. The
conversion of Preferred Shares and resale of Conversion Shares will
result in dilution, which may be substantial; the number of
Conversion Shares will increase in certain circumstances; and
Company’s obligation to issue and deliver Conversion Shares in
accordance with this Agreement and the Certificate of Designations
is absolute and unconditional regardless of the dilutive effect
that such issuances may have; and
d. Investor
is acting solely in the capacity of arm’s length purchaser with
respect to this Agreement and the transactions contemplated hereby;
neither Investor nor any of its Affiliates, agents or
representatives has or is acting as a legal, financial, investment,
accounting, tax or other advisor to Company, or fiduciary of
Company, or in any similar capacity; neither Investor nor any of
its Affiliates, agents or representatives has provided any legal,
financial, investment, accounting, tax or other advice to Company;
any statement made in connection with this Agreement or the
transactions contemplated hereby is not advice or a recommendation,
and is merely incidental to Investor’s purchase of the
Shares.
13. Prior
Agreements. Investor has at all times fully and completely
complied in all respects with the Prior Agreements. All Delivery
Notices and all calculations relating to the Prior Agreements
provided to Company by Investor or its representatives prior to the
Effective Date of this Agreement were and are fully correct and
accurate in all respects. All Delivery Notices and calculations
provided to Company by Investor or its representatives prior to the
Effective Date are hereby acknowledged and deemed to be correct for
any and all purposes.
14. Approval.
Company will use its commercially reasonable best efforts to obtain
an exception to any shareholder approval requirement from NYSE
American or to obtain Approval, and additional listing of all
Conversion Shares as soon as possible, and in any event no later
than December 31, 2020.
15. No
Bad Actor Disqualification. Neither Company, any
predecessor of Company, any affiliate of Company, any director,
executive officer, other officer of Company participating in the
offering, or any beneficial owner of 20% or more of Company’s
outstanding voting equity securities is subject to any bad actor
disqualification as provided in Rule 506(d) of Regulation D, and
Company is not aware of any facts or circumstances that, with the
passage of time, would reasonably be expected to cause such
disqualification.
16. Shell
Status. Company is not now and has never been a shell
company as defined in Rule 12b-2 of the Exchange Act.
B. Representations
Regarding Company. Except as
set forth in any Public Reports or attached exhibits as of the
Effective Date, or under the corresponding section of the
Disclosure Schedules, if any, Company hereby represents and
warrants to, and as applicable covenants with, Investor as of the
Closing:
1. Capitalization.
The capitalization of the Company as of the Effective Date is as
described in the Public Reports. No Person has any right of first
refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the
Transaction Documents which has not been waived or satisfied.
Except as a result of the purchase and sale of the Shares, the
Prior Securities, or as otherwise disclosed on Schedule
III.B.1, there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which
Company or any Subsidiary is or may become bound to issue
additional shares of Common Stock or securities convertible into or
exercisable for shares of Common Stock. The issuance and sale of
the Shares will not obligate Company to issue shares of Common
Stock or other securities to any Person, other than Investor, and
will not result in a right of any holder of Company securities to
adjust the exercise, conversion, exchange, or reset price under
such securities. All of the outstanding shares of capital stock of
Company are validly issued, fully paid and nonassessable, have been
issued in material compliance with all federal and state securities
laws, and none of such outstanding shares was issued in violation
of any preemptive rights or similar rights to subscribe for or
purchase securities. Except as disclosed on Schedule
III.B.1, nofurther approval or authorization of any
stockholder, the Board of Directors of Company or others is
required for the issuance and sale of the Shares. There are no
stockholders’ agreements, voting agreements or other similar
agreements with respect to Company’s capital stock to which Company
is a party or, to the knowledge of Company, between or among any of
Company’s stockholders.
2. Subsidiaries.
All of the direct and indirect subsidiaries of Company are set
forth in the Public Reports or the corresponding section of the
Disclosure Schedules. Company owns, directly or indirectly, all of
the capital stock or other equity interests of each Subsidiary, and
all of such directly or indirectly owned capital stock or other
equity interests are owned free and clear of any Liens. All
the issued and outstanding shares of capital stock of each
Subsidiary are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive and similar rights to
subscribe for or purchase securities.
3. Public
Reports; Financial Statements. The Company has filed all
required Public Reports for the one year preceding the Effective
Date. As of their respective dates or as subsequently amended, the
Public Reports complied in all material respects with the
requirements of the Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, as
applicable, and none of the Public Reports, when filed, contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of
Company included in the Public Reports, as amended, comply in all
material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been
prepared in accordance with GAAP, except as may be otherwise
specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material
respects the financial position of Company and its consolidated
subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end
audit adjustments.
4. Material
Changes. Since the end of the most recent year for which an
Annual Report on Form 10-K has been filed with the Commission,
except as disclosed on Schedule III.B.4, (a) there has been
no event, occurrence or development that has had, or that would
reasonably be expected to result in, a Material Adverse Effect, (b)
Company has not incurred any liabilities (contingent or otherwise)
other than (i) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice, and (ii)
liabilities not required to be reflected in Company’s financial
statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (c) Company has not altered its method of
accounting, (d) Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock, and (e) Company has not issued any
equity securities to any officer, director or Affiliate, except
pursuant to existing Company equity incentive plans. Company does
not have pending before the Commission any request for confidential
treatment of information.
5. Litigation.
Except as disclosed on Schedule III.B.8, there is no
Action completed, pending, threatened or, to the knowledge of
Company, contemplated, that would reasonably be expected to result
in a Material Adverse Effect. Neither Company nor any Subsidiary,
nor any director or officer thereof, nor to the knowledge of
Company any greater than 5% shareholder or any director or officer
thereof, is or has been the subject of any Action involving a claim
of violation of or liability under federal or state securities laws
or a claim of breach of fiduciary duty. There has not been, is not
pending or threatened, or to the knowledge of Company, is not
contemplated, any investigation by the Commission, Department of
Justice or law enforcement involving Company or any current or
former director or officer of Company, or to the knowledge of
Company greater than 5% shareholder of Company.
6. No
Bankruptcy. There has not been any petition or application
filed, or any judicial or administrative proceeding commenced which
has not been discharged, by or against the Company or any
Subsidiary or with respect to any of the properties or assets of
Company or any Subsidiary under any applicable law relating to
bankruptcy, insolvency, reorganization, fraudulent transfer,
compromise, arrangement of debt, creditors’ rights and no
assignment has been made by the Company or any Subsidiary for the
benefit of creditors.
7. Labor
Relations. No material labor dispute exists or, to the
knowledge of Company, is imminent with respect to any of the
employees of Company, which would reasonably be expected to result
in a Material Adverse Effect.
8. Compliance.
Neither Company nor any Subsidiary (a) is in material default under
or in material violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would
result in a default by Company or any Subsidiary under), nor has
Company or any Subsidiary received notice of a claim that it is in
material default under or that it is in material violation of, any
indenture, loan or credit agreement or any other similar agreement
or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has
been waived), (b) is in violation of any order of any court,
arbitrator or governmental body, or (c) is or has been in violation
of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local
laws applicable to its business, except in each case as would not
reasonably be expected to have a Material Adverse Effect.
9. Regulatory
Permits. Company and each Subsidiary possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary
to conduct their respective businesses as described in the Public
Reports, except where the failure to possess such permits would
not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect (“Material Permits”),
and neither Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any
Material Permit.
10. Title
to Assets. Except as disclosed on Schedule III.B.10,
Company and each Subsidiary have good and marketable title in fee
simple to all real property owned by them that is material to the
business of Company and each Subsidiary and good and marketable
title in all personal property owned by them that is material to
the business of Company and each Subsidiary, in each case free and
clear of all Liens, except for Liens that do not materially affect
the value of such property and do not materially interfere with the
use made and proposed to be made of such property by Company and
each Subsidiary and Liens for the payment of federal, state or
other taxes, the payment of which is neither delinquent nor subject
to penalties. Any real property and facilities held under lease by
Company and each Subsidiary are held by them under valid,
subsisting and enforceable leases of which Company and each
Subsidiary are in compliance.
11. Patents
and Trademarks. Company and each Subsidiary have, or have
rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that are necessary or material
for use in connection with their respective businesses as described
in the Public Reports and which the failure to do so would have a
Material Adverse Effect (collectively, “Intellectual Property
Rights”). Neither Company nor any Subsidiary has received a
written notice that the Intellectual Property Rights used by
Company or any Subsidiary violates or infringes upon the rights of
any Person. To the knowledge of Company, all such Intellectual
Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property
Rights of Company or each Subsidiary.
12. Insurance.
Company and each Subsidiary are insured by insurers of recognized
financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which
Company and each Subsidiary are engaged, including but not limited
to directors and officers insurance coverage at least equal to the
Purchase Amount. To Company’s knowledge, such insurance contracts
and policies are accurate and complete in all material respects.
Neither Company nor any Subsidiary has any reason to believe that
it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business
without an increase in cost that would constitute a Material
Adverse Effect.
13. Transactions
with Affiliates and Employees. None of the officers or
directors of Company and, to the knowledge of Company, none of the
employees of Company is presently a party to any transaction with
Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of Company, any entity in which
any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each
case in excess of $120,000 other than (i) for payment of salary or
consulting fees for services rendered, (ii) reimbursement for
expenses incurred on behalf of Company and (iii) for other employee
benefits, including stock option agreements under any equity
incentive plan of Company.
14. Sarbanes-Oxley;
Internal Accounting Controls. Company is in material
compliance with all provisions of the Sarbanes-Oxley Act of 2002,
which are applicable to it as of the date of the Closing. Company
presented in its most recently filed periodic report under the
Exchange Act the conclusions of the certifying officers about the
effectiveness of Company’s disclosure controls and procedures based
on their evaluations as of the evaluation date. Since the date of
the most recently filed periodic Public Report, there have been no
significant changes in Company’s internal accounting controls or
its disclosure controls and procedures or, to Company’s knowledge,
in other factors that could materially affect Company’s internal
accounting controls or its disclosure controls and
procedures.
15. Certain
Fees. No brokerage or finder’s fees or commissions are or
will be payable to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by this Agreement.
Notwithstanding any other provision, Investor will have no
obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type
contemplated in this section that may be due in connection with the
transactions contemplated by this Agreement or the other
Transaction Documents.
16. Registration
Rights. Except as disclosed on Schedule III.B.16 no
Person has any right to cause Company to effect the registration
under the Act of any securities of Company.
17. Listing and Maintenance
Requirements. The
Common Stock is registered pursuant to Section 12 of the Exchange
Act, and Company has taken no action designed to, or which to its
knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has
Company received any notification that the Commission is
contemplating terminating such registration. Except as disclosed on
Schedule III.B.17, Company has not, in the 12 months
preceding the Effective Date, received notice from any Trading
Market on which the Common Stock is or has been listed or quoted to
the effect that Company is not in compliance with the listing or
maintenance requirements of such Trading Market. Company is, and
has no reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements.
18. Application
of Takeover Protections. Company and its Board of Directors
have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under Company’s
Certificate of Incorporation (or similar charter documents) or the
laws of its state of incorporation that is or could become
applicable to Investor as a result of Investor and Company
fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation Company’s
issuance of the Shares and Investor’s ownership of the
Shares.
19. Tax
Status. Company and each of its Subsidiaries has made or
filed all federal, state and foreign income and all other tax
returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that Company and
each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported
taxes). Company has not executed a waiver with respect to the
statute of limitations relating to the assessment or collection of
any foreign, federal, statute or local tax. None of Company’s tax
returns is presently being audited by any taxing authority. Company
would not be classified as a PFIC for its most recently completed
taxable year, and does not expect to be classified as a PFIC for
its current taxable year.
20. Foreign
Corrupt Practices. Neither Company, nor to the knowledge of
Company, any agent or other person acting on behalf of Company, has
(a) directly or indirectly, used any corrupt funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (b) made any
unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or
campaigns from corporate funds, (c) failed to disclose fully any
contribution made by Company, or made by any person acting on its
behalf of which Company is aware, which is in violation of law, or
(d) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
21. Accountants.
Company’s accountants are set forth in the Public Reports and such
accountants are an independent registered public accounting
firm.
22. No
Disagreements with Accountants or Lawyers. There are no
material disagreements presently existing, or reasonably
anticipated by Company to arise, between Company and the
accountants or lawyers formerly or presently employed by
Company.
23. Powers
of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company or any Subsidiary, except such as
would not reasonably be expected to result in a Material Adverse
Effect.
24. Computer
and Technology Security. Company has taken all reasonable
steps to safeguard the information technology systems utilized in
the operation of the business of Company, including the
implementation of procedures to minimize the risk that such
information technology systems have any disabling codes or
instructions, timer, copy protection device, clock, counter or
other limiting design or routing and any back door, virus,
malicious code or other software routines or hardware components
that in each case permit unauthorized access or the unauthorized
disablement or unauthorized erasure of data or other software by a
third party, and, to Company’s knowledge, to date there have been
no successful unauthorized intrusions or breaches of the security
of the information technology systems.
25. Data
Privacy. Company has: (a) complied with, and is presently
in compliance with, all applicable laws in connection with data
privacy, information security, data security and/or personal
information; (b) complied with, and is presently in material
compliance with, its policies and procedures applicable to data
privacy, information security, data security, and personal
information; (c) not experienced any incident in which personal
information or other sensitive data was or may have been stolen or
improperly accessed; and Company is not aware of any facts
suggesting the likelihood of the foregoing, including without
limitation, any breach of security or receipt of any notices or
complaints from any Person regarding personal information or other
data.
C. Representations
and Warranties of Investor. Investor hereby represents and warrants to
Company as of the Closing as follows:
1. Organization;
Authority. Investor is an entity validly existing and in
good standing under the laws of the jurisdiction of its
organization with full right, company power and authority to enter
into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations
thereunder. The execution, delivery and performance by Investor of
the transactions contemplated by this Agreement have been duly
authorized by all necessary company or similar action on the part
of Investor. Each Transaction Document to which it is a party has
been, or will be, duly executed by Investor, and when delivered by
Investor in accordance with the terms hereof, will constitute the
valid and legally binding obligation of Investor, enforceable
against it in accordance with its terms, except (a) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (b) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies, and (c)
insofar as indemnification and contribution provisions may be
limited by applicable law.
2. Investor
Status. At the time Investor was offered the Preferred
Shares, it was, and at the Effective Date it is: (a) an accredited
investor as defined in Rule 501(a) under the Act; and (b) not a
registered broker-dealer, member of FINRA, or an affiliate
thereof.
3. Experience
of Investor. Investor, either alone or together with its
representatives, has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares,
and has so evaluated the merits and risks of such investment.
Investor is able to bear the economic risk of an investment in the
Shares and, at the present time, is able to afford a complete loss
of such investment.
4. Ownership.
Investor is acquiring the Preferred Shares as principal for its own
account. Investor will not engage in hedging transactions with
regard to the Conversion Shares unless in compliance with the Act.
Investor will not resell, transfer or assign the Preferred Shares,
and will resell the Conversion Shares only pursuant to registration
under the Act or an available exemption therefrom.
5. No
Short Sales. Neither Investor nor any Affiliate holds any
short position in, nor has engaged in any Short Sales of the Common
Stock, or engaged in any hedging transactions with regard to the
Shares prior to the Effective Date.
IV. Securities
and Other Provisions.
A. Investor
Due Diligence. Investor will
have the right and opportunity to conduct customary due diligence
with respect to any Registration Statement or Prospectus in which
the name of Investor or any Affiliate of Investor
appears.
B. Furnishing
of Information. For as long
as Investor owns any Shares, Company will timely file all reports
required to be filed by Company pursuant to the Exchange Act. As
long as Investor owns any Shares, Company will prepare and make
publicly available such information as is required for Investor to
sell its Conversion Shares under Rule 144. Company further
covenants that, as long as Investor owns any Shares, Company will
take such further action as Investor may reasonably request, all to
the extent required from time to time to enable Investor to sell
its Conversion Shares without registration under the Act within the
limitation of the exemptions provided by Rule
144.
C. Integration.
Company will not sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of
any security, as defined in Section 2 of the Act, that would be
integrated with the offer or sale of the Shares to Investor for
purposes of the rules and regulations of any Trading Market such
that it would require stockholder approval prior to the closing of
such other transaction unless stockholder approval is obtained
before the closing of such subsequent
transaction.
D. Disclosure
and Publicity. Company will
provide to Investor for review and approval prior to filing or
issuing any current, periodic or public report, proxy or
registration statement, press release, public statement or
communication relating to or referencing Investor, any Transaction
Documents or the transactions contemplated
thereby.
E. Shareholders
Rights Plan. No claim will be
made or enforced by Company or, to the knowledge of Company, any
other Person that Investor is an “Acquiring Person” under any
shareholders rights plan or similar plan or arrangement in effect
or hereafter adopted by Company, or that Investor could be deemed
to trigger the provisions of any such plan or arrangement, in
either such case, by virtue of receiving Shares under the
Transaction Documents or under any other agreement between Company
and Investor. Company will conduct its business in a manner so that
it will not become subject to the Investment Company Act of 1940,
as amended.
F. No
Non-Public Information. Company covenants and agrees that neither it
nor any other Person acting on its behalf will, provide Investor or
its agents or counsel with any information that Company believes or
reasonably should believe may constitute material non-public
information. Neither Investor nor any Affiliate of Investor has or
will have any duty of trust or confidence that is owed directly,
indirectly, or derivatively, to Company or the stockholders of
Company, or to any other Person who is the source of material
non-public information regarding Company. Company understands and
confirms that Investor will be relying on the foregoing in
effecting transactions in securities of Company, including without
limitation sales of the Conversion Shares.
G. Indemnification
of Investor.
1. Obligation to Indemnify. Subject to
the provisions of this Section IV.G, Company will indemnify and
hold Investor, its Affiliates, managers and advisors, and each of
their officers, directors, shareholders, partners, employees,
representatives, agents and attorneys, and any person who controls
Investor within the meaning of Section 15 of the Act or Section 20
of the Exchange Act (collectively, “Investor Parties” and each a
“Investor Party”), harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, reasonable costs and
expenses, including all judgments, amounts paid in settlements,
court costs and reasonable attorneys’ fees and costs of
investigation (collectively, “ Losses”) that any Investor Party may
suffer or incur as a result of or relating to (a) any breach of any
of the representations, warranties, covenants or agreements made by
Company in this Agreement or in the other Transaction Documents,
(b) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, Prospectus,
Prospectus Supplement, or any information incorporated by reference
therein, or arising out of or based upon any omission or alleged
omission to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading, or (c) any action by a creditor or
stockholder of Company who is not an Affiliate of an Investor
Party, challenging the transactions contemplated by the Transaction
Documents; provided, however, that Company will not be obligated to
indemnify any Investor Party for any Losses finally adjudicated to
be caused solely by (i) a false statement of material fact
contained within written information provided by such Investor
Party expressly for the purpose of including it in the applicable
Registration Statement, Prospectus, Prospectus Supplement, or (ii)
such Investor Party’s unexcused material breach of an express
provision of this Agreement or another Transaction
Document.
2. Procedure
for Indemnification. If any action will be brought against
an Investor Party in respect of which indemnity may be sought
pursuant to this Agreement, such Investor Party will promptly
notify Company in writing, and Company will have the right to
assume the defense thereof with counsel of its own choosing.
Investor Parties will have the right to employ separate counsel in
any such action and participate in the defense thereof, but the
reasonable fees and expenses of such counsel will be at the expense
of Investor Parties except to the extent that (a) the employment
thereof has been specifically authorized by Company in writing, (b)
Company has failed after a reasonable period of time to assume such
defense and to employ counsel or (c) in such action there is, in
the reasonable opinion of such separate counsel, a material
conflict with respect to the dispute in question on any material
issue between the position of Company and the position of Investor
Parties such that it would be inappropriate for one counsel to
represent Company and Investor Parties. Company will not be liable
to Investor Parties under this Agreement (i) for any settlement by
an Investor Party effected without Company’s prior written consent,
which will not be unreasonably withheld or delayed; or (ii) to the
extent, but only to the extent that a loss, claim, damage or
liability is either attributable to Investor’s breach of any of the
representations, warranties, covenants or agreements made by
Investor in this Agreement or in the other Transaction Documents.
In no event will the Company be liable for the reasonable fees and
expenses for more than one separate firm of attorneys (plus local
counsel as applicable) to represent all Investor
Parties.
Other than the liability
of Investor to Company for uncured material breach of the express
provisions of this Agreement, no Investor Party will have any
liability to Company or any Person asserting claims on behalf of or
in right of Company as a result of acquiring the Shares under this
Agreement.
H. Shareholder
Approval. Company will
include proposals relating to the approval of this Agreement, the
issuance of the Conversion Shares, and an increase in authorized
common stock to fulfill its agreed obligations
(“Approval”) at the
meeting held to approve the Merger or a separate meeting in the
event the Merger is terminated prior to shareholder approval, and
will use its commercially reasonable best efforts to obtain
Approval as soon as possible and in any event prior to December 31,
2020. Company, its board of directors, and each of its officers and
directors will vote all common shares owned or controlled by them
and all proxies given to them in favor of the proposal. Company
will at all times maintain a reserve from its duly authorized
Common Stock for issuance pursuant to the Transaction Documents,
authorized shares of Common Stock in an amount equal to thrice the
number of shares sufficient to immediately issue all Conversion
Shares potentially issuable at such time.
I. Activity
Restrictions. Investor hereby
grants an irrevocable proxy to Company’s board of directors to vote
all Conversion shares beneficially owned or controlled by Investor
as of the record date in favor of Approval. Except for the
foregoing, for so long as Investor or any of its Affiliates holds
any Shares, neither Investor nor any Affiliate will: (1) vote any
shares of Common Stock or Preferred Stock beneficially owned or
controlled by it, sign or solicit any proxies except as requested
by the Board of Directors of Company, or seek to advise or
influence any Person with respect to any voting securities of
Company; (2) engage or participate in any actions, plans or
proposals which relate to or would result in (a) acquiring
additional securities of Company, alone or together with any other
Person, which would result in beneficially owning or controlling
more than 9.99% of the total outstanding Common Stock or other
voting securities of Company, (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation,
involving Company or any of its Subsidiaries, (c) a sale or
transfer of a material amount of assets of Company or any of its
Subsidiaries, (d) any change in the present board of directors or
management of Company, including any plans or proposals to change
the number or term of directors or to fill any existing vacancies
on the board, (e) any material change in the present capitalization
or dividend policy of Company, (f) any other material change in
Company’s business or corporate structure, including but not
limited to, if Company is a registered closed-end investment
company, any plans or proposals to make any changes in its
investment policy for which a vote is required by Section 13 of the
Investment Company Act of 1940, (g) changes in Company’s charter,
bylaws or instruments corresponding thereto or other actions which
may impede the acquisition of control of Company by any Person, (h)
a class of securities of Company being delisted from a national
securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities
association, (i) a class of equity securities of Company becoming
eligible for termination of registration pursuant to Section
12(g)(4) of the Act, or (j) any action, intention, plan or
arrangement similar to any of those enumerated above; or (3)
request Company or its directors, officers, employees, agents or
representatives to amend or waive any provision of this
section.
J. No
Shorting. Provided no Trigger Event has occurred, for so
long as Investor holds any Shares, neither Investor nor any of its
Affiliates will engage in or effect, directly or indirectly, any
Short Sale of Common Stock. For the avoidance of doubt, selling
against delivery of Conversion Shares after delivery of a
Conversion Notice is not a Short Sale. There will be no restriction
or limitation of any kind on Investor’s right or ability to sell or
transfer any or all of the Conversion Shares at any time, in its
sole and absolute discretion. Investor may not sell, transfer or
assign any Preferred Shares or any of its rights under this
Agreement.
K. Stock
Splits. If Company at any
time on or after the Effective Date subdivides (by any stock split,
stock dividend, recapitalization or otherwise) or combines (by
combination, reverse stock split or otherwise) one or more classes
of its outstanding shares of Common Stock into a greater or lesser
number of shares, the share numbers, prices and other amounts set
forth in this Agreement, as in effect immediately prior to such
subdivision or combination, will be proportionately reduced or
increased, as applicable, effective at the close of business on the
date the subdivision or combination becomes
effective.
L. Subsequent
Financings. Except as
otherwise contemplated in connection with the Merger, as long as
Investor holds any Preferred Shares, Company will not: (1) enter
into any agreement that in any way restricts its ability to enter
into any agreement, amendment or waiver with Investor, including
without limitation any agreement to offer, sell or issue to
Investor any preferred stock, common stock or other securities of
Company; (2) issue or enter into or amend an agreement pursuant to
which it may issue any shares of Common Stock, other than (a) for
restricted securities with no registration rights, (b) in
connection with a strategic acquisition, (c) in an underwritten
public offering, or (d) at a fixed price; or (3) issue or amend any
debt or equity securities convertible into, exchangeable or
exercisable for, or including the right to receive, shares of
Common Stock (a) at a conversion price, exercise price or exchange
rate or other price that is based upon or varies with, the trading
prices of or quotations for the shares of Common Stock at any time
after the initial issuance of the security or (b) with a
conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of the
security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or
the market for the Common Stock. For sake of clarity, Company may
enter into an unregistered financing of debt or restricted stock at
any fixed price with no registration rights and may undertake the
transactions contemplated in connection with Merger without
restriction.
M. Principal
Market. Company will timely
submit all necessary notification and supporting documentation
required for the listing of all possible Conversion Shares with
NYSE American, after the approval by the stockholders of the
Company of the issuance of such shares, at a duly called
stockholders meeting, and will use its commercially reasonable best
efforts to obtain approval to list the Conversion Shares as soon as
possible, and in any event within 90 days after the Effective
Date.
N. Restrictive
Legend. The Shares have not
been registered under the Act and may not be resold in the United
States unless registered or an exemption from registration is
available. Company is required to refuse to register any transfer
of the Conversion Shares not made pursuant to registration under
the Act or an available exemption from registration. Upon the
issuance thereof, and only until such time as the same is no longer
required under the applicable securities laws and regulations, the
certificates representing any of the Shares will bear a legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR ANY U.S.
STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, MAY NOT BE
OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OR TO
U.S. PERSONS EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT. IN
ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE
CONDUCTED unless in
compliance with the ACT.
Certificates representing Conversion
Shares will be issued without such legend or at Investor’s option
issued by electronic delivery at the applicable balance account at
DTC, if either (i) the Conversion Shares are registered for resale
under the Act, or (ii) Investor provides an opinion of its counsel
to the effect that the Conversion Shares may be issued without
restrictive legend.
O. Repurchase
Obligation. If the Merger does not close by the required
date approved by the parties thereto, Company shall, at Investor’s
option in its sole and absolute discretion, immediately repurchase
from Investor all then outstanding Preferred Shares issued pursuant
to this Agreement by paying to Investor 110.0% of the aggregate
Face Value of all such shares, by wire transfer of immediately
available funds to an account designated by Investor, which funds
shall be due no later than one business day after Company’s receipt
of the Purchase Amount, plus any applicable interest from the
counterparty to the Merger.
P. Repurchase
Right. Provided Company has
not materially breached this Agreement, Company may at any time, in
its sole and absolute discretion, repurchase from Investor all, but
not less than all, then outstanding Preferred Shares issued
pursuant to this Agreement by paying to Investor 110.0% of the
aggregate Face Value of all such shares, by wire transfer of
immediately available funds to an account designated by
Investor.
Q. Piggyback
Registration Rights. Company
will include on the next registration statement Company files with
the Commission, or on the subsequent registration statement if such
registration statement is withdrawn, all potentially issuable
Conversion Shares. This obligation shall not apply to registration
statements filed on Form S-4.
R. Right
of First Refusal. If at any time while any Preferred Shares are
outstanding, Company has a bona fide offer of equity capital or
financing from any person, that Company intends to act upon, then
Company must first offer such opportunity to Investor to provide
such capital or financing to Company on the same terms as each
respective person’s terms. Except as otherwise provided in any
Transaction Documents, should Investor be unwilling or unable to
provide such capital or financing to Company within 10 Trading Days
from Investor’s receipt of written notice of the offer from
Company, then Company may obtain such capital or financing from
that respective person upon the exact same terms and conditions
offered by Company to Investor, which transaction must be completed
within 90 days after the date of the notice. If Company does not
receive the capital or financing from the respective person within
90 days after the date of the respective notice, then Company must
again offer the capital or financing opportunity to Investor as
described above, and the process detailed above shall be repeated.
Notwithstanding anything to the contrary in the foregoing, this
provision shall not apply to a debt financing that is not
convertible to stock.
S. Favored
Nations. So long as any
Preferred Shares are outstanding, upon any issuance by Company or
any of its subsidiaries of any security with any term more
favorable to the holder of such security or with a term in favor of
the holder of such security that was not similarly provided to
Investor, then Company will notify Investor of such additional or
more favorable term and such term, at Investor’s option, shall
become a part of the transaction documents with Investor. The types
of terms contained in another security that may be more favorable
to the holder of such security include, but are not limited to,
terms addressing conversion discounts, prepayment rate, conversion
look back periods, interest rates, original issue discounts, stock
sale price, private placement price per share, and warrant
coverage.
V. General
Provisions.
A. Notice.
Unless a different time of day or
method of delivery is specifically provided in the Transaction
Documents, any and all notices or other communications or
deliveries required or permitted to be provided hereunder will be
in writing and will be deemed given and effective on the earliest
of: (a) the date of transmission, if such notice or communication
is delivered via facsimile or electronic mail prior to 5:00 p.m.
Eastern time on a Trading Day and an electronic confirmation of
delivery is received by the sender, (b) the next Trading Day after
the date of transmission, if such notice or communication is
delivered later than 5:00 p.m. Eastern time or on a day that is not
a Trading Day, (c) the next Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such
notice is required to be given. The addresses for such notices and
communications are such other address as may be designated in
writing, in the same manner, by such Person.
B. Amendments;
Waivers. No provision of this
Agreement may be waived or amended except in a written instrument
signed, in the case of an amendment, by Company and Investor or, in
the case of a waiver, by the party against whom enforcement of any
such waiver is sought. No waiver of any default with respect to any
provision, condition or requirement of this Agreement will be
deemed to be a continuing waiver in the future or a waiver of any
subsequent default or a waiver of any other provision, condition or
requirement hereof, nor will any delay or omission of either party
to exercise any right hereunder in any manner impair the exercise
of any such right.
C. No
Third-Party Beneficiaries. Except as otherwise set forth in
Section IV.G, this Agreement and
the Transaction Documents will inure solely to the benefit of the
parties hereto, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person. Other than the
Investor Parties described in Section IV.G, a Person who is not a party to this
Agreement will not have any rights under the Contracts (Rights of
Third Parties) Law, 2014 of the Cayman Islands to enforce any term
of this Agreement or any Transaction Document.
D. Fees and
Expenses. Except as otherwise provided in this Agreement,
each party will pay the fees and expenses of its own advisers,
counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of the Transaction
Documents. Company acknowledges and agrees that Investor’s counsel
solely represents Investor, and does not represent Company or its
interests in connection with the Transaction Documents or the
transactions contemplated thereby. Company will pay all stamp and
other taxes and duties, if any, levied in connection with the sale
or issuance of the Shares to Investor.
E. Severability.
If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Agreement will not in
any way be affected or impaired thereby and the parties will
attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, will
incorporate such substitute provision in this Agreement.
F. Replacement of
Certificates. If any certificate or instrument evidencing
any Shares is mutilated, lost, stolen or destroyed, Company will
issue or cause to be issued in exchange and substitution for and
upon cancellation thereof, or in lieu of and substitution therefor,
a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to Company of such loss, theft or
destruction and customary and reasonable indemnity, if requested.
The applicants for a new certificate or instrument under such
circumstances will also pay any reasonable third-party costs
associated with the issuance of such replacement certificates.
G. Governing
Law. All matters between the
parties, including without limitation questions concerning the
construction, validity, enforcement and interpretation of the
Transaction Documents will be governed by and construed and
enforced in accordance with the laws of the U.S. Virgin Islands,
without regard to the principles of conflicts of law that would
require or permit the application of the laws of any other
jurisdiction, except for corporation law matters applicable to
Company which will be governed by the corporate law of its
jurisdiction of formation. The parties hereby waive all rights to a
trial by jury. In any action, arbitration or proceeding, including
appeal, arising out of or relating to any of the Transaction
Documents or otherwise involving the parties, the prevailing party
will be awarded its reasonable attorneys’ fees and other costs and
expenses reasonably incurred in connection with the investigation,
preparation, prosecution or defense of such action or
proceeding.
H. Arbitration.
Any dispute, controversy, claim
or action of any kind arising out of, relating to, or in connection
with this Agreement, or in any way involving Company and Investor
or their respective Affiliates, including any issues of
arbitrability, will be resolved solely by final and binding
arbitration in English before a retired judge at JAMS
International, or its successor, in the Territory of the Virgin
Islands, pursuant to the most expedited and Streamlined Arbitration
Rules and Procedures available. Any interim or final award may be
entered and enforced by any court of competent jurisdiction. The
final award will include the prevailing party’s reasonable
arbitration, expert witness and attorney fees, costs and expenses.
Notwithstanding the foregoing, Investor may in its sole discretion
bring an action in aid of arbitration.
I. Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of
Investor and Company will be entitled to specific performance under
the Transaction Documents, and equitable and injunctive relief to
prevent any actual or threatened breach under the Transaction
Documents, to the full extent permitted under applicable laws.
Without limitation of the foregoing, Company acknowledges and
agrees that the rights and benefits of Investor pursuant to Section
I.G.1. of the Certificate of Designations are unique and that no
adequate remedy exists at law if Company breaches or fails to
timely perform any of its obligations thereunder, that it would be
difficult to determine the amount of damages resulting therefrom,
that it would cause irreparable injury to Investor, and that any
potential harm to Company would be adequately and fully compensable
with monetary damages. Accordingly, Investor will be entitled to a
compulsory remedy of immediate specific performance, temporary,
interim, preliminary and final injunctive relief to enforce the
provisions thereof, including without limitation requiring Company
and its transfer agent, attorneys, officers and directors to
immediately take all actions necessary to issue and deliver the
number of Conversion Shares stated by Investor, which requirements
will not be stayed for any reason, without the necessity of posting
any bond. Company hereby absolutely, unconditionally and
irrevocably waives all objections and rights to oppose any motion,
application or request by Investor to issue any number of
Conversion Shares, and all rights to stay or appeal any resulting
order, and any opposition or appeal by Company or on its behalf
will be immediately and automatically dismissed. In addition,
Company acknowledges and agrees that it would have an adequate
remedy at law for any violation of Section I.G.1. of the
Certificate of Designations by Investor, that it would not be
difficult to determine the amount of damages resulting therefrom,
that it would not cause irreparable injury to Company, and that any
potential harm to Company would be adequately and fully compensable
with monetary damages. Accordingly, Company will not be entitled
any equitable relief to restrain the provisions thereof, including
without limitation preventing Investor, Investor’s brokers or
Company’s transfer agent from issuing, receiving or reselling
Conversion Shares. Company hereby absolutely, unconditionally and
irrevocably waives all rights to bring any action, motion,
application or request to enjoin any issuance of Conversion Shares,
and any action or motion by Company or on its behalf will be
immediately and automatically dismissed. Nothing provided for in
this provision will limit either party’s ability to recover
monetary damages.
J. Payment Set
Aside. To the extent that
Company makes a payment or payments to Investor pursuant to any
Transaction Document or Investor enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to Company, a trustee, receiver or any other
person under any law, including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action,
then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied will be revived and
continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
K. Headings.
The headings herein are for
convenience only, do not constitute a part of this Agreement and
will not be deemed to limit or affect any of the provisions
hereof.
L. Time
of the Essence. Time is of
the essence with respect to all provisions of this Agreement and
all Transaction Documents.
M. Survival.
The representations and warranties contained herein will survive
the Closing and the delivery of the Shares until all Preferred
Shares issued to Investor have been converted or repurchased.
Neither party will be under any obligation to update or supplement
any of its representations or warranties following the Closing due
to a change that occurred after the Closing.
N. Construction.
The parties agree that each of them and/or their respective counsel
has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party will not be employed in the interpretation of the Transaction
Documents or any amendments hereto. The language used in this
Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rules of strict construction
will be applied against any party. All currency references in any
Transaction Document are to U.S. dollars.
O. Further
Assurances. Each party will
take all further actions and execute all further documents as may
be reasonably necessary to implement the provisions and carry out
the intent of this Agreement fully and
effectively.
P. Execution.
This Agreement may be executed in
two or more counterparts, all of which when taken together will be
considered one and the same agreement and will become effective
when counterparts have been signed by each party and delivered to
the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is
delivered by portable document format, facsimile or electronic
transmission, such signature will create a valid and binding
obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such
signature page were an original thereof.
Q. Entire
Agreement. This Agreement, including the Exhibits hereto, which
are hereby incorporated herein by reference, contains the entire
agreement and understanding of the parties, and supersedes all
prior and contemporaneous agreements, term sheets, letters,
discussions, communications and understandings, both oral and
written, which the parties acknowledge have been merged into this
Agreement. No party, representative, advisor, attorney or agent has
relied upon any collateral contract, agreement, assurance, promise,
understanding, statement or representation not expressly set forth
herein. The parties hereby absolutely, unconditionally and
irrevocably waive all rights and remedies, at law and in equity,
directly or indirectly arising out of or relating to, or which may
arise as a result of, any Person’s reliance on any such statement
or assurance.
IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be duly executed by their
respective authorized signatories on the Effective Date.
Company:
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Exhibit 1
Glossary of Defined
Terms
“$” means the currency of the
United States of America, in which all dollar amounts in the
Transaction Documents will be expressed.
“Act” means the U.S.
Securities Act of 1933, as amended, and the rules and regulations
promulgated by the Commission thereunder.
“Action” has the meaning set
forth in Section III.A.4.
“Affiliate” means any Person
that, directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with a
Person, as such terms are used in and construed under Rule 144
under the Act.
“Agreement” means this Stock
Purchase Agreement.
“Approval” has the meaning set
forth in Section IV.H.
“Certificate of Designations”
means the Certificate of Designation for Series C Redeemable
Convertible Preferred Stock filed by Company with the Secretary of
State of the State of Nevada on August 25, 2016, Document Number
00010398344-82, as amended to date.
“Closing” has the meaning set
forth in Section I.D.
“Commission” means the U.S.
Securities and Exchange Commission.
“Common Stock” means the
Common Stock of Company and any replacement or substitute thereof,
or any share capital into which such Common Stock will have been
changed or any share capital resulting from a reclassification of
such Common Stock.
“Company” has the meaning set
forth in the first paragraph of the Agreement.
“Conversion Shares” includes
all shares of Common Stock potentially issuable in relation to the
Preferred Shares, including Common Stock that must be issued upon
conversion of any Preferred Shares, and Common Stock that must or
may be issued in payment of any Dividends or Conversion Premium (as
defined in the Certificate of Designations).
“Disclosure Schedules” means
the disclosure schedules of Company delivered concurrently
herewith. The Disclosure Schedules will contain no material
non-public information.
“DTC” means The Depository
Trust Company, or any successor performing substantially the same
function for Company.
“Exchange Act” means the U.S.
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated by the Commission thereunder.
“Effective Date” has the
meaning set forth in the first paragraph of the
Agreement.
“Equity Conditions” has the
meaning set forth in the Certificate of Designations.
“GAAP” means U.S. generally
accepted accounting principles applied on a consistent basis during
the periods involved.
“Indebtedness” means (a) any
liabilities for borrowed money or amounts owed in excess of
$500,000, other than trade accounts payable incurred in the
ordinary course of business, (b) all guaranties, endorsements and
other contingent obligations in respect of Indebtedness of others,
whether or not the same are or should be reflected in Company ’s
balance sheet, or the notes thereto, except guaranties by
endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business, and (c)
the present value of any lease payments in excess of $500,000 due
under leases required to be capitalized in accordance with
GAAP.
“Intellectual Property Rights”
has the meaning set forth in Section III.B.10.
“Legal Opinion” has the
meaning set forth in Section I.B.3.
“Liens” means (a) a lien,
charge, security interest or encumbrance in excess of $500,000, or
(b) a right of first refusal, preemptive right or other restriction
(other than restrictions under securities laws).
“Material Adverse Effect”
includes any material adverse effect on (a) the legality, validity
or enforceability of any Transaction Document, or (b) the results
of operations, assets, business, or financial condition of Company
and the Subsidiaries, taken as a whole, which is not disclosed in
the Public Reports prior to the Effective Date, or (c) Company’s
ability to perform in any material respect on a timely basis its
obligations under any Transaction Document or (d) the sale,
issuance, registration, listing, resale and trading on the Trading
Market of the Conversion Shares.
“Material Permits” has the
meaning set forth in Section III.B.8.
“Merger” means the Merger
referenced in the Current Report on Form 8-K filed by Company on
January 24, 2020, as such Merger terms may be modified or amended
from time to time.
“Officer’s Certificate” has
the meaning set forth in Section II.B.4.
“Person” means an individual
or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock
company, government, or an agency or subdivision thereof, or other
entity of any kind.
“Preferred” means the Series C
Redeemable Convertible Preferred Stock of the Company.
“Preferred Shares” means the
shares of Preferred Stock to be issued to Investor pursuant to this
Agreement.
“Public Reports” includes all
reports filed or required to be filed by Company under the Act or
the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two full fiscal years preceding the Effective Date
and thereafter.
“Purchase Amount” has the meaning set forth in Section
II.A.1.
“Investor” has the meaning set forth in the first paragraph
of the Agreement.
“Regulation D” means
Regulation D under the Securities Act and the rules promulgated by
the Commission thereunder.
“Secretary’s Certificate” has
the meaning set forth in Section II.B.5.
“Shares” include the Preferred
Shares and the Conversion Shares.
“Short Sale” means a “short
sale” as defined in Rule 200 of Regulation SHO of the Exchange
Act.
“Subsidiary” means any Person
owned or controlled by the Company, or in which Company, directly
or indirectly, owns a majority of the capital stock or similar
interest that would be disclosable pursuant to Regulation S-K, Item
601(b)(21).
“Trading Day” means any day on
which the Common Stock is traded on the Trading Market; provided
that it will not include any day on which the Common Stock is (a)
scheduled to trade for less than 5 hours, or (b) suspended from
trading.
“Trading Market”
has the meaning set forth in the Certificate of
Designations.
“Transaction Documents” means
this Agreement, the Certificate of Designations, and the other
agreements, certificates and documents referenced herein or the
form of which is attached hereto, and the exhibits, schedules and
appendices hereto and thereto.
Exhibit 2
Legal Opinion
1. The
Company is a corporation validly existing and in good standing
under the laws of the state of its incorporation.
2. The
Company has the requisite corporate power and authority to execute,
deliver and perform its obligations under the Transaction
Documents, to sell and issue the Shares under the Purchase
Agreement and to issue the Common Stock issuable upon conversion of
the Shares pursuant to the Certificate of Designations (the
“Conversion Shares”).
3. The
Shares have been duly authorized by the Company, and upon issuance
and delivery against payment therefor in accordance with the terms
of the Purchase Agreement, the Shares will be validly issued, fully
paid and nonassessable. The Conversion Shares issuable upon
conversion of the Shares have been duly authorized and reserved for
issuance, and upon issuance and delivery upon conversion thereof in
accordance with the terms of the Certificate of Designations, will
be validly issued, fully paid and nonassessable. The rights,
preferences and privileges of the Shares are as stated in the
Certificate of Designation. Such issuance of the Shares and the
Conversion Shares will not be subject to any statutory or, to our
knowledge, contractual preemptive rights of any stockholder of the
Company.
4. The
execution, delivery and performance of the Transaction Documents
have been duly authorized by all necessary corporate action on the
part of the Company, and the Transaction Documents have been duly
executed and delivered by the Company.
5. Each
Transaction Document constitutes a valid and binding agreement of
the Company enforceable against the Company in accordance with its
terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or
other similar laws affecting creditors’ rights, and subject to
general equity principles and to limitations on availability of
equitable relief, including specific performance.
6. The
execution and delivery of the Transaction Documents by the Company
does not, and the Company’s performance of its obligations
thereunder will not (a) violate the Certificate of Incorporation or
the Bylaws, each as in effect on the date hereof, (b) violate in
any material respect any federal or Nevada state law, rule or
regulation, or judgment, order or decree of any state or federal
court or governmental or administrative authority, in each case
that, to our knowledge, is applicable to the Company or its
properties or assets (except to the extent such violation would not
have a material adverse effect on the Company’s business,
properties, assets, financial condition or results of operations or
prevent the performance by the Company of any material obligation
under the Transaction Documents), or (c) to our knowledge, require
the authorization, consent, approval of or other action of, notice
to or filing or qualification with, any Nevada state or federal
governmental authority, except (i) as have been, or will be prior
to the Closing, duly obtained or made, (ii) any filings which may
be required under applicable federal securities, state securities
or blue sky laws, and (iii) the filing and effectiveness of the
Registration Statement, except to the extent failure to be so
obtained or made would not have a material adverse effect on the
Company’s business, properties, assets, financial condition or
results of operations or its ability to consummate the transactions
contemplated under the Transaction Documents.
7. The
Company is not, and immediately after the consummation of the
transactions contemplated by the Transaction Documents will not be,
an investment company within the meaning of Investment Company Act
of 1940, as amended.
8. To
our knowledge, there is no claim, action, suit, proceeding,
arbitration, investigation or inquiry, pending or threatened,
before any court or governmental or administrative body or agency,
or any private arbitration tribunal, against the Company that
challenges the validity or enforceability of, or seeks to enjoin
the performance of, the Transaction Documents.
Exhibit 3
Form of Officer’s
Certificate
CAMBER ENERGY, INC.
June 22, 2020
The undersigned hereby certifies
that:
The undersigned is the duly appointed
Chief Executive Officer of Camber Energy, Inc., a Nevada
corporation (“Company”).
This Officer’s Certificate
(“Certificate”) is being delivered to ____________________
(“Investor”), by Company, to fulfill the requirement under
the Stock Purchase Agreement, dated June 22, 2020, between Investor
and Company (“Agreement”). Terms used and not defined in
this Certificate have the meanings set forth in the
Agreement.
The representations and warranties of
Company set forth in Sections III.A and III.B of the Agreement are
true and correct in all material respects as if made on the above
date (except for any representations and warranties that are
expressly made as of a particular date, in which case such
representations and warranties will be true and correct in all
material respects as of such particular date), and no default has
occurred under the Agreement, or any other agreement with Investor
or any Affiliate of Investor.
Company is not, and will not be as a
result of the Closing, in default of the Agreement, any other
agreement with Investor or any Affiliate of Investor.
All of the conditions to the Closing
required to be satisfied by Company prior to the Closing have been
satisfied in their entirety.
IN WITNESS WHEREOF, the undersigned has executed this Officer’s
Certificate as of the date set forth above.
Exhibit 4
Form of Secretary’s
Certificate
June 22, 2020
The undersigned hereby certifies
that:
The undersigned is the duly appointed
Secretary of Camber Energy, Inc., a Nevada corporation (the
“Company”).
This Secretary’s Certificate
(“Certificate”) is being delivered to ____________________
(“Investor”), by Company, to fulfill the requirement under
the Stock Purchase Agreement, dated June 22, 2020, between Investor
and Company (“Agreement”). Terms used and not defined in
this Certificate have the meanings set forth in the
Agreement.
Attached hereto as Exhibit “A”
is a true, correct and complete copy of the Certificate of
Incorporation of Company, as in effect on the Effective
Date.
Attached hereto as Exhibit “B”
is a true, correct and complete copy of the Bylaws of Company, as
in effect on the Effective Date.
Attached hereto as Exhibit “C”
is a true, correct and complete copy of the resolutions of the
Board of Directors of Company authorizing the Agreement, the
Transaction Documents, and the transactions contemplated thereby.
Such resolutions have not been amended or rescinded and remain in
full force and effect as of the date hereof.
IN WITNESS WHEREOF, the undersigned
has executed this Secretary’s Certificate as of the date set forth
above.
APPENDIX C
CAMBER ENERGY, INC.
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATIONS OF PREFERENCES, POWERS,
RIGHTS AND LIMITATIONS
OF
SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK
Pursuant to Section 78.1955 of the Nevada Revised Statutes
(the “NRS”), Camber Energy, Inc., a company organized and
existing under the State of Nevada (the “Corporation”),
DOES HEREBY CERTIFY that, (a) the Board of Directors, by unanimous
written consent of all members of the Board of Directors on July 2,
2019; and (b) the stockholders of the Series C Redeemable
Convertible Preferred Stock of the Corporation, voting as a class,
on June 28, 2019, duly adopted this Amended and Restated
Certificate of Designations of Preferences, Powers, Rights and
Limitations of Series C Redeemable Convertible Preferred Stock, by
adoption of a resolution which reads as follows, and which shall
amend, replace and supersede the Certificate of Designations of
Preferences, Powers, Rights and Limitations of Series C Redeemable
Convertible Preferred Stock, previously filed by the
Corporation with the Secretary of State of Nevada on August 25,
2016 and amended on July 25, 2018 (as amended to date, the
“Prior Designation”), which resolution is and reads as
follows:
WHEREAS, the Certificate of Incorporation of the Corporation
provides for a class of its authorized stock known as preferred
stock, comprised of 10,000,000 shares, $0.001 par value per share
(the “Preferred Stock”), issuable from time to time in one
or more series;
WHEREAS, the Board of Directors of the Corporation is authorized to
fix the dividend rights, dividend rate, powers, voting rights,
conversion rights, rights and terms of redemption and liquidation
preferences of any wholly unissued series of Preferred Stock and
the number of shares constituting any Series and the designation
thereof, of any of them;
WHEREAS, it is the desire of the Board of Directors of the
Corporation, pursuant to its authority as aforesaid and as set
forth in this Amended and Restated Certificate of Designations of
Preferences, Powers, Rights and Limitations of Series C Redeemable
Convertible Preferred Stock (the “Designation”), to
designate the rights, preferences, restrictions and other matters
relating to the Series C Redeemable Convertible Preferred Stock,
which will consist of up to 5,000 shares of the Preferred Stock
which the Corporation has the authority to issue, and which shall
amend, supersede and replace the Prior Designation, as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Preferred Stock shall have
the following powers, rights, preferences, and restrictions as
follows:
I. Terms
of Preferred Stock.
A. Designation
and Amount. A series of Preferred Stock is hereby
designated as the Corporation’s Series C Redeemable Convertible
Preferred Stock, par value of $0.001 per share (the “Series C
Preferred Stock”), the number of shares of which so designated
are 5,000 shares of Series C Preferred Stock; which Series C
Preferred Stock will not be subject to increase without any consent
of the holders of the Series C Preferred Stock (each a
“Holder” and collectively, the “Holders”) that may be
required by applicable law.
B. Ranking
and Voting.
1. Ranking.
The Series C Preferred Stock will, with respect to dividend rights
and rights upon liquidation, winding-up or dissolution, rank: (a)
senior to the Corporation’s Common Stock, $0.001 par value per
share (“Common Stock”); (b) junior to the Series E
Redeemable Convertible Preferred Stock and Series F Redeemable
Convertible Preferred Stock, as such may be designated as of the
date of this Designation, or which may be designated by the
Corporation after the date of this Designation (the “Series E
and F Preferred”) as to the Lineal Star Assets but senior to
the Series E and F Preferred as to all other assets of the Company;
(c) senior, pari passu or junior with respect to any other series
of Preferred Stock, as set forth in the Certificate of Designations
of Preferences, Powers, Rights and Limitations with respect to such
Preferred Stock; and (d) junior to all existing and future
indebtedness of the Corporation. Without the prior written consent
of the Holders of a majority of the outstanding shares of Series C
Preferred Stock (voting separately as a single class), the
Corporation may not issue any additional shares of Series C
Preferred Stock, or any other Preferred Stock that is pari passu or
senior to the Series C Preferred Stock with respect to any rights
for a period of 1 year after the earlier of such date (i) a
registration statement is effective and available for the resale of
all Conversion Shares, or (ii) Securities Act Rule 144 is available
for the immediate unrestricted resale of all Conversion Shares,
other than the Series E and Series F Preferred Stock.
2. Voting.
Except as required by applicable law or as set forth herein, the
holders of shares of Series C Preferred Stock will have no right to
vote on any matters, questions or proceedings of this Corporation
including, without limitation, the election of directors except:
(a) during a period where a dividend (or part of a dividend) is in
arrears; (b) on a proposal to reduce the Company’s share capital;
(c) on a resolution to approve the terms of a buy-back agreement;
(d) on a proposal to wind up the Company; (e) on a proposal for the
disposal of all or substantially all the Company’s property,
business and undertaking; and (f) during the winding-up of the
entity.
C. Dividends.
1. Commencing
on the date of the issuance of any such shares of Series C
Preferred Stock (each respectively an “Issuance Date”), each
outstanding share of Series C Preferred Stock will accrue
cumulative dividends (“Dividends”), at a rate equal to 6.0%
per annum, subject to adjustment as provided in this Certificate of
Designations (“Dividend Rate”), of the Face Value.
Dividends will be payable with respect to any shares of Series C
Preferred Stock upon any of the following: (a) upon redemption of
such shares in accordance with Section I.F; (b) upon
conversion of such shares in accordance with Section I.G;
and (c) when, as and if otherwise declared by the board of
directors of the Corporation.
2. Dividends,
as well as any applicable Conversion Premium payable hereunder,
will be paid: (a) in the Corporation’s sole and absolute
discretion, immediately in cash; or (b) if Corporation notifies
Holder it will not pay all or any portion in cash, or to the extent
cash is not paid and received as soon as practicable, and in any
event within 1 Trading Day after the Notice Time, for any reason
whatsoever, in shares of Common Stock valued at (i) if there has
never been a Trigger Event, (A) 95.0% of the average of the 5
lowest individual daily volume weighted average prices of the
Common Stock on the Trading Market during the applicable
Measurement Period, which may be non-consecutive, less $0.05 per
share of Common Stock, not to exceed (B) 100% of the lowest sales
price on the last day of such Measurement Period less $0.05 per
share of Common Stock (ii) following any Trigger Event, (A) 85.0%
of the lowest daily volume weighted average price during any
Measurement Period for any conversion by Holder, less $0.10 per
share of Common Stock, not to exceed (B) 85.0% of the lowest sales
price on the last day of any Measurement Period, less $0.10 per
share of Common Stock. In no event will the value of Common Stock
pursuant to the foregoing be below the par value per share. All
amounts that are required or permitted to be paid in cash pursuant
to this Certificate of Designations will be paid by wire transfer
of immediately available funds to an account designated by
Holder.
3. So
long as any shares of Series C Preferred Stock are outstanding, the
Company will not repurchase shares of Common Stock other than as
payment of the exercise or conversion price of a convertible
security or payment of withholding tax, and no dividends or other
distributions will be paid, declared or set apart with respect to
any Common Stock, except for Purchase Rights.
D. Protective
Provision.
1.
So long as any shares of Series C Preferred Stock are outstanding,
the Corporation will not, without the affirmative approval of the
Holders of a majority of the shares of the Series C Preferred Stock
then outstanding (voting separately as one class), (i) alter or
change adversely the powers, preferences or rights given to the
Series C Preferred Stock or alter or amend this Certificate of
Designations, (ii) authorize or create any class of stock ranking
as to distribution of dividends senior to the Series C Preferred
Stock, (iii) amend its certificate of incorporation or other
charter documents in breach of any of the provisions hereof,
(iv) increase the authorized
number of shares of Series C Preferred Stock or (v) enter into any agreement with respect
to the foregoing.
2. A
“Deemed Liquidation Event” will mean: (a) a merger or
consolidation in which the Corporation is a constituent party or a
subsidiary of the Corporation is a constituent party and the
Corporation issues shares of its capital stock pursuant to such
merger or consolidation, except (i) any such merger or
consolidation involving the Corporation or a subsidiary in which
the Corporation is the surviving or resulting corporation, (ii) any
merger effected exclusively to change the domicile of the
Corporation, (iii) any transaction or series of transactions in
which the holders of the voting securities of the Company
outstanding immediately prior to such transaction continue to
retain more than 50% of the total voting power of such surviving
entity, or (iv) the Merger; (b) Corporation issues convertible or
equity securities that are senior to the Series C Preferred Stock
in any respect, other than the securities issued in the Merger; (c)
Holder does not receive the number of Conversion Shares stated in a
Delivery Notice with 5 Trading Days of the Notice Time; (d) trading
of the Common Stock is halted or suspended by the Trading Market or
any U.S. governmental agency for 10 or more consecutive trading
days; or (e) the sale, lease, transfer, exclusive license or other
disposition, in a single transaction or series of related
transactions, by the Corporation or any subsidiary of the
Corporation of all or substantially all the assets of the
Corporation and its subsidiaries taken as a whole, or the sale or
disposition (whether by merger or otherwise) of one or more
subsidiaries of the Corporation if substantially all of the assets
of the Corporation and its subsidiaries taken as a whole are held
by such subsidiary or subsidiaries, except where such sale, lease,
transfer, exclusive license or other disposition is to a wholly
owned subsidiary of the Corporation, other than the Merger and
except otherwise agreed to by holders holding a majority of the
then outstanding Series C Preferred Stock.
3. The
Corporation will not have the power to close or effect a voluntary
Deemed Liquidation Event unless the agreement or plan of merger or
consolidation for such transaction provides that the consideration
payable to the stockholders of the Corporation will be allocated
among the holders of capital stock of the Corporation in accordance
with Section I.E, and the required amount is paid to Holder
prior to or upon closing, effectuation or occurrence of the Deemed
Liquidation Event.
E. Liquidation.
1. Upon
any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, after payment or provision for
payment of debts and other liabilities of the Corporation, prior to
any distribution or payment made to the holders of Preferred Stock
or Common Stock by reason of their ownership thereof, the Holders
of Series C Preferred Stock will be entitled to be paid out of the
assets of the Corporation (other than the Lineal Star Assets)
available for distribution to its stockholders an amount with
respect to each share of Series C Preferred Stock equal to
$10,000.00 (“Face Value”), plus an amount equal to any
accrued but unpaid Dividends thereon (collectively with the Face
Value, the “Liquidation Value”).
2.
If, upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the amounts payable
with respect to the shares of Series C Preferred Stock are not paid
in full, the holders of shares of Series C Preferred Stock will
share equally and ratably with the holders of shares of Preferred
Stock and Common Stock in any distribution of assets of the
Corporation (other than the Lineal Star Assets) in proportion to
the liquidation preference and an amount equal to all accumulated
and unpaid Dividends, if any, to which each such holder is
entitled.
3. If,
upon any liquidation, dissolution or winding up of the Corporation,
the assets of the Corporation will be insufficient to make payment
in full to all Holders, then the assets distributable to the
Holders will be distributed among the Holders at the time
outstanding, ratably in proportion to the full amounts to which
they would otherwise be respectively entitled.
F. Redemption.
1.
Corporation’s
Redemption Option. On the Dividend Maturity Date, the
Corporation may redeem any or all shares of Series C Preferred
Stock by paying Holder in cash an amount per share equal to 100% of
the Liquidation Value for the shares redeemed.
2.
Early
Redemption. Prior to the Dividend Maturity Date, provided
that no Trigger Event has occurred, the Corporation will have the
right at any time upon 30 Trading Days’ prior written notice, in
its sole and absolute discretion, to redeem all or any portion of
the shares of Series C Preferred Stock then outstanding by paying
Holder in cash an amount per share of Series C Preferred Stock (the
“Early Redemption Price”) equal to the sum of the following:
(a) 100% of the Face Value, plus (b) the Conversion Premium, minus
(c) any Dividends that have been paid, for each share of Series C
Preferred Stock redeemed.
3.
Credit
Risk Adjustment.
a.
The
Dividend Rate will adjust downward by an amount equal to the Spread
Adjustment for each amount, if any, equal to the Adjustment Factor
that the Measuring Metric rises above the Maximum Triggering Level,
down to a minimum of 0.0%.
b.
The
Dividend Rate will adjust upward by an amount equal to the Spread
Adjustment for each amount, if any, equal to the Adjustment Factor
that the Measuring Metric falls below the Minimum Triggering Level,
up to a maximum of 24.95%. In addition, the Dividend Rate will
adjust upward by 10.0% following the occurrence of any Trigger
Event.
c.
The
adjusted Dividend Rate used for calculation of the Liquidation
Value, Conversion Premium, Early Redemption Price and Dividend, as
applicable, and the amount of Dividends owed will be calculated and
determined based upon the Measuring Metric at close of the Trading
Market immediately prior to the Notice Time.
4.
Mandatory
Redemption. If the Corporation determines to liquidate,
dissolve or wind-up its business and affairs, or upon closing or
occurrence of any Deemed Liquidation Event, the Corporation will
after the redemption of the Series E and Series F Preferred Stock
for ownership of Lineal Holdings, LLC, to the extent allowed under
applicable law, but thereafter, prior to or concurrently with the
closing, effectuation or occurrence any such action, redeem the
Series C Preferred Stock for cash, by wire transfer of immediately
available funds to an account designated by Holder, at the Early
Redemption Price set forth in Section I.F.2 if the event is
prior to the Dividend Maturity Date, or at the Liquidation Value if
the event is on or after the Dividend Maturity Date.
5.
Mechanics
of Redemption. In order to redeem any of the Holders’
Series C Preferred Stock then outstanding, the Corporation must
deliver written notice (each, a “Redemption Notice”) to each
Holder setting forth (a) the number of shares of Series C Preferred
Stock that the Corporation is redeeming, (b) the applicable
Dividend Rate, Liquidation Value and Early Redemption Price, and
(c) the calculation of the amount paid. Upon receipt of full
payment in cash for a complete redemption, each Holder will
promptly submit to the Corporation such Holder’s Series C Preferred
Stock certificates. In connection with a mandatory redemption, the
notice will be delivered as soon as the number of shares can be
determined, and in all other instances at least 30 Trading Days
prior to payment. For the avoidance of doubt, the delivery of a
Redemption Notice will not affect Holder’s rights under Section
I.G until after receipt of cash payment by Holder at the
required time.
G.
Conversion.
1.
Mechanics
of Conversion.
a.
One or
more shares of the Series C Preferred Stock may be converted, in
part or in whole, into shares of Common Stock, at any time or times
after the Issuance Date, in the sole and absolute discretion of
Holder or, subject to the terms and conditions hereof, the
Corporation; (i) if at the option of Holder, by delivery of one or
more written notices to the Corporation or its transfer agent
(each, a “Holder Conversion Notice”), of the Holder’s
election to convert any or all of its Series C Preferred Stock; or
(ii) if at the option of the Corporation, if the Equity Conditions
are met, delivery of written notice to Holder (each, a
“Corporation Conversion Notice,” with the Holder Conversion
Notice, each a “Conversion Notice,” and with the Redemption
Notice, each an “Initial Notice”), of the Corporation’s
election to convert the Series C Preferred Stock.
b.
Each
Delivery Notice will set forth the number of shares of Series C
Preferred Stock being converted, the minimum number of Conversion
Shares and the amount of Dividends and any applicable Conversion
Premium due as of the time the Delivery Notice is given (the
“Notice Time”), and the calculation thereof.
b.
If the Corporation notifies Holder by 10:00 a.m. Eastern time on
the Trading Day after the Notice Time that it is paying all or any
portion of Dividends or Conversion Premium, and actually pays in
cash by the next Trading Day, time being of the essence, the full
amount of Dividends and Conversion Premium stated in the Delivery
Notice, no further amount will be due with respect thereto.
c.
As soon
as practicable, and in any event within 1 Trading Day of the Notice
Time, time being of the essence, the Corporation will do all of the
following: (i) transmit the Delivery Notice by facsimile or
electronic mail to the Holder, and to the Corporation’s transfer
agent (the “Transfer Agent”) with instructions to comply
with the Delivery Notice; (ii) either (A) if the Corporation is
approved through The Depository Trust Corporation (“DTC”),
authorize and instruct the credit by the Transfer Agent the
aggregate number of Conversion Shares set forth in the Delivery
Notice, to Holder’s or its designee’s balance account with the DTC
Fast Automated Securities Transfer (FAST) Program, through its
Deposit/Withdrawal at Custodian (DWAC) system, or (B) only if the
Corporation is not approved through DTC, issue and surrender to a
common carrier for overnight delivery to the address as specified
in the Delivery Notice a certificate registered in the name of
Holder or its designee, for the number of Conversion Shares set
forth in the Delivery Notice, bearing no restrictive legend unless
a registration statement covering the Conversion Shares is not
effective and neither Company nor Investor provides an opinion of
counsel to the effect that Conversion Shares may be issued without
restrictive legend; and (iii) if it contends that the Delivery
Notice is in any way incorrect, a through explanation of why and
its own calculation, or the Delivery Notice will conclusively be
deemed correct for all purposes. The Corporation will at all times
diligently take or cause to be taken all actions reasonably
necessary to cause the Conversion Shares to be issued as soon as
practicable.
d.
If during the Measurement Period the Holder is entitled to receive
additional Conversion Shares with regard to an Initial Notice,
Holder may at any time deliver one or more additional written
notices to the Corporation or its transfer agent (each, an
“Additional Notice” and with the Initial Notice, each a
“Delivery Notice”) setting forth the additional number of
Conversion Shares to be delivered, and the calculation thereof.
e.
If the Corporation for any reason does not issue or cause to be
issued to the Holder within 3 Trading Days after the date of a
Delivery Notice, the number of Conversion Shares stated in the
Delivery Notice, then, in addition to all other remedies available
to the Holder, as liquidated damages and not as a penalty, the
Corporation will pay in cash to the Holder on each day after such
3rd Trading Day that the issuance of such Conversion Shares is not
timely effected an amount equal to 2% of the product of (i) the
aggregate number of Conversion Shares not issued to the Holder on a
timely basis and to which the Holder is entitled and (ii) the
highest Closing Price of the Common Stock between the date on which
the Corporation should have issued such shares to the Holder and
the actual date of receipt of Conversion Shares by Holder. It is
intended that the foregoing will serve to reasonably compensate
Holder for any delay in delivery of Conversion Shares, and not as
punishment for any breach by the Corporation. The Corporation
acknowledges that the actual damages likely to result from delay in
delivery are difficult to estimate and would be difficult for
Holder to prove.
f.
Notwithstanding
any other provision: all of the requirements of Section I.F
and this Section I.G are each independent covenants; the
Corporation’s obligations to issue and deliver Conversion Shares
upon any Delivery Notice are absolute, unconditional and
irrevocable; any breach or alleged breach of any representation or
agreement, or any violation or alleged violation of any law or
regulation, by any party or any other person will not excuse full
and timely performance of any of the Corporation’s obligations
under these sections; and under no circumstances may the
Corporation seek or obtain any temporary, interim or preliminary
injunctive or equitable relief to prevent or interfere with any
issuance of Conversion Shares to Holder.
g. If
for any reason whatsoever Holder does not timely receive the number
of Conversion Shares stated in any Delivery Notice, Holder will be
entitled to a compulsory remedy of immediate specific performance,
temporary, interim and, preliminary and final injunctive relief
requiring Corporation and its transfer agent, attorneys, officers
and directors to immediately issue and deliver the number of
Conversion Shares stated by Holder, which requirement will not be
stayed for any reason, without the necessity of posting any bond,
and which Corporation may not seek to stay or appeal.
h. No
fractional shares of Common Stock are to be issued upon conversion
of Series C Preferred Stock, but rather the Corporation will issue
to Holder scrip or warrants registered on the books of the
Corporation (certificated or uncertificated) which will entitle
Holder to receive a full share upon the surrender of such scrip or
warrants aggregating a full share. The Holder will not be required
to deliver the original certificates for the Series C Preferred
Stock in order to effect a conversion hereunder. The Corporation
will pay any and all taxes which may be payable with respect to the
issuance and delivery of any Conversion Shares.
2.
Holder
Conversion. In the event of a conversion of any Series C
Preferred Stock pursuant to a Holder Conversion Notice, the
Corporation will (a) satisfy the payment of Dividends and
Conversion Premium with respect to the shares of Series C Preferred
Stock converted as provided in Section I.C.2, and (b) issue
to the Holder of such Series C Preferred Stock a number of
Conversion Shares equal to (i) the Face Value multiplied by (ii)
the number of such Series C Preferred Stock subject to the Holder
Conversion Notice divided by (iii) the applicable Conversion Price
with respect to such Series C Preferred Stock; all in accordance
with the procedures set forth in Section I.G.1.
3.
Corporation Conversion. The Corporation will have the
right to send the Holder a Corporation Conversion Notice at any
time in its sole and absolute discretion, if the Equity Conditions
are met as of the time such Corporation Conversion Notice is given.
Upon any conversion of any Series C Preferred Stock pursuant to a
Corporation Conversion Notice, the Corporation will on the date of
such notice (a) satisfy the payment of Dividends and Conversion
Premium with respect to the shares of Series C Preferred Stock
converted as provided in Section I.C.2, and (b) issue to the
Holder of such Series C Preferred Stock a number of Conversion
Shares equal to (i) the Face Value multiplied by (ii) the number of
such Series C Preferred Stock subject to the Holder Conversion
Notice divided by (iii) the applicable Conversion Price with
respect to such Series C Preferred Stock; all in accordance with
the procedures set forth in Section I.G.1.
4.
Stock Splits. If the Corporation at any time on or after
the filing of this Certificate of Designations subdivides (by any
stock split, stock dividend, recapitalization or otherwise) one or
more classes of its outstanding shares of Common Stock into a
greater number of shares, the applicable Conversion Price,
Adjustment Factor, Maximum Triggering Level, Minimum Triggering
Level, and other share based metrics in effect immediately prior to
such subdivision will be proportionately reduced and the number of
shares of Common Stock issuable will be proportionately increased.
If the Corporation at any time on or after such Issuance Date
combines (by combination, reverse stock split or otherwise) one or
more classes of its outstanding shares of Common Stock into a
smaller number of shares, the applicable Conversion Price,
Adjustment Factor, Maximum Triggering Level, Minimum Triggering
Level, and other share based metrics in effect immediately prior to
such combination will be proportionately increased and the number
of Conversion Shares will be proportionately decreased. Any
adjustment under this Section will become effective at the close of
business on the date the subdivision or combination becomes
effective.
5.
Rights. In addition to any adjustments pursuant to
Section I.G.4, if at any time the Corporation grants, issues
or sells any options, convertible securities or rights to purchase
stock, warrants, securities or other property pro rata to the
record holders of any class of shares of Common Stock (the
“Purchase Rights”), then Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which Holder could have acquired if Holder had held
the number of shares of Common Stock acquirable upon conversion of
all Preferred Stock held by Holder immediately before the date on
which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase
Rights.
6.
Notices.
The holders of shares of Series C Preferred Stock are entitled to
the same rights as the holders of Common Stock with respect to
rights to receive notices, reports and audited accounts from the
Company and with respect to attending stockholder meetings.
7.
Definitions.
The following terms will have the following meanings:
a. “Adjustment
Factor” means $0.10 per share of Common Stock.
b. “Acquisition”
means the closing of the acquisition of assets contemplated by that
certain Asset Purchase Agreement dated December 30, 2015 between
Company and the sellers named therein, as disclosed in the current
report on Form 8-K filed with the Securities & Exchange
Commission on December 31, 2015.
c.
“Closing
Price” means, for any security as of any date, the last closing
bid price for such security on the Trading Market, or, if the
Trading Market begins to operate on an extended hours basis and
does not designate the closing bid price, then the last bid price
of such security prior to 4:00 p.m., Eastern time, or, if the
Trading Market is not the principal securities exchange or trading
market for such security, the last closing bid price of such
security on the principal securities exchange or trading market
where such security is listed or traded, or if the foregoing do not
apply, the last closing bid price of such security in the
over-the-counter market on the electronic bulletin board for such
security, or, if no closing bid price is reported for such
security, the average of the bid prices of any market makers for
such security as reported in the “pink sheets” by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.).
d. “Conversion
Premium” for each share of Series C Preferred Stock means the
Face Value, multiplied by the product of (i) the applicable
Dividend Rate, and (ii) the number of whole years between the
Issuance Date and the Dividend Maturity Date.
e. “Conversion
Price” means a price per share of Common Stock equal to $3.25
per share of Common Stock, subject to adjustment as otherwise
provided herein.
f. “Conversion
Shares” means all shares of Common Stock that are required to
be or may be issued upon conversion of Series C Preferred
Stock.
g. “Dividend
Maturity Date” means the date that is 7 years after the
Issuance Date.
h. “Equity
Conditions” means on each day during the Measurement Period,
(i) the Common Stock is not under chill or freeze from DTC, the
Common Stock is designated for trading on OTCQB or higher market
and will not have been suspended from trading on such market, and
delisting or suspension by the Trading Market has not been
threatened or pending, either in writing by such market or because
Company has fallen below the then effective minimum listing
maintenance requirements of such market; (ii) the Corporation has
delivered Conversion Shares upon all conversions or redemptions of
the Series C Preferred Stock in accordance with their terms to the
Holder on a timely basis; (iii) the Corporation will have no
knowledge of any fact that would cause both of the following (A) a
registration statement not to be effective and available for the
resale of all Conversion Shares, and (B) Section 3(a)(9) under the
Securities Act of 1933, as amended, not to be available for the
issuance of all Conversion Shares, or Regulation S or Securities
Act Rule 144 not to be available for the resale of all the
Conversion Shares underlying the Series C Preferred Stock without
restriction; (iv) there has been a minimum of $5 million in
aggregate trading volume over the last 20 consecutive Trading Days;
(v) all shares of Common Stock to which Holder is entitled have
been timely received into Holder’s designated account in electronic
form fully cleared for trading; (vi) the Corporation otherwise will
have been in compliance with and will not have breached any
provision, covenant, representation or warranty of any Transaction
Document; (vii) the Measuring Metric is at least $1.50; (viii) no
Trigger Event will have occurred; (ix) the Corporation will have
been assigned all right and title to the properties being acquired
in the Acquisition, or cumulative assignments representing not less
than 90% of the value of the assets described; and (x) the
properties being assigned to the Corporation in the Acquisition
will have daily production of not less than 700 barrels of oil
equivalent per day as of the most recent production data available,
not more than 75 days old.
i. “Lineal
Star Assets” means the securities and assets of Lineal Star
Holdings, LLC and its existing and future subsidiaries.
j.
“Maximum Triggering Level” means $3.75 per share of Common
Stock.
k. “Measurement
Period” means the period beginning, if no Trigger Event has
occurred 30 Trading Days, and if a Trigger Event has occurred 60
Trading Days, before the Notice Date, and ending, if no Trigger
Event has occurred 30 Trading Days, and if a Trigger Event has
occurred 60 Trading Days, after the number of Conversion Shares
stated in the initial Notice have actually been received into
Holder’s designated brokerage account in electronic form and fully
cleared for trading; provided that for each day during the
Measurement Period on which less than all of the conditions set
forth in Section I.G.6.h exist, 1 Trading Day will be added
to what otherwise would have been the end of the Measurement
Period.
l.
“Measuring Metric” means the volume weighted average price
of the Common Stock on any Trading Day following the Issuance Date
of the Series C Preferred Stock.
m. “Merger”
means any combination, through any sale of securities or merger,
between the Company and Lineal Star Holdings, LLC, a Delaware
limited liability company or its affiliates.
n.
“Minimum Triggering Level” means $2.75 per share of Common
Stock.
o.
“Spread
Adjustment” means 100 basis points.
p.
“Stock
Purchase Agreement” means the Stock Purchase Agreement or other
agreement pursuant to which any share of Series C Preferred Stock
is issued, including all exhibits thereto and all related
Transaction Documents as defined therein.
q.
“Trading Day” means any day on which the Common Stock is
traded on the Trading Market.
r. “Trading
Market” means the NYSE American or whatever is at the
applicable time, the principal U.S. trading exchange or market for
the Common Stock. All Trading Market data will be measured as
provided by the appropriate function of the Bloomberg Professional
service of Bloomberg Financial Markets or its successor performing
similar functions.
s. “Transaction
Documents” means Preferred Stock Purchase Agreement dated April
6, 2016; Securities Purchase Agreement dated April 6, 2016; Stock
Purchase Agreement dated October 5, 2017; Stock Purchase Agreement
dated October 26, 2018; and Stock Purchase Agreement dated November
23, 2018 each as amended from time to time, and all documents
ancillary thereto.
7.
Issuance
Limitation.
a.
Beneficial
Ownership. Notwithstanding any other provision, at no time
may the Corporation issue shares of Common Stock to Holder which,
when aggregated with all other shares of Common Stock then deemed
beneficially owned by Holder, would result in Holder owning more
than 4.99% of all Common Stock outstanding immediately after giving
effect to such issuance, as determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder; provided, however, that Holder may increase such amount
to 9.99% upon not less than 61 days’ prior notice to the
Corporation. To the extent that any conversion would otherwise
result in exceeding the beneficial ownership limitation set forth
in the preceding sentence, the Delivery Notice will specify the
number of shares that may be delivered without exceeding the
limitation, and any issuance beyond such extent will be held in
abeyance until such time as it would not result in Holder exceeding
the beneficial ownership limitation. No provision of this paragraph
may be waived by Holder or the Corporation.
b.
Principal
Market Regulation. Company will not issue any Conversion
Shares under this Certificate of Designations, the Warrant issued
to Holder on the Issuance Date, the Securities Purchase Agreement
with Investor dated the Issuance Date, the Debenture or the Common
Stock Purchase Warrant issued to Investor pursuant thereto, if the
issuance would exceed the aggregate number of shares of Common
Stock the Company may issue without breaching Company’s obligations
under NYSE American rules, except that such limitation will not
apply following stockholder approval in accordance with the
requirements of NYSE American rules or a waiver from NYSE American
(“Approval”).
8.
Conversion
at Maturity. On the Dividend Maturity Date, all remaining
outstanding Series C Preferred Stock will automatically be
converted into shares of Common Stock.
H.
Trigger Event.
1.
Any
occurrence of any one or more of the following will constitute a
“Trigger Event”:
(a) Holder
does not timely receive the number of Conversion Shares stated in
any Conversion Notice pursuant to this Certificate of Designations
or any other agreement with Holder for any reason whatsoever, time
being of the essence, including without limitation the issuance of
restricted shares if counsel for Corporation or Holder provides a
legal opinion that shares may be issued without restrictive
legend;
(b) Any
violation of or failure to timely perform any covenant or provision
of this Certificate of Designations, the Stock Purchase Agreement,
any Transaction Document or any other agreement with Holder,
related to payment of cash, registration or delivery of Conversion
Shares, time being of the essence;
(c) Any
violation of or failure to perform any covenant or provision of
this Certificate of Designations, the Stock Purchase Agreement, any
Transaction Document or any other agreement with Holder, which in
the case of a default that is curable, is not related to payment of
cash, registration or delivery of Conversion Shares, and has not
occurred before, is not cured within 5 Trading Days of written
notice thereof;
(d) Any
representation or warranty made in the Securities Purchase
Agreement, any Transaction Document or any other agreement with
Holder will be untrue, incorrect, or misleading in any material
respect as of the date when made or deemed made;
(e) The
occurrence of any default or event of default under any material
agreement, lease, document or instrument to which the Corporation
or any subsidiary other than CATI Operating LLC, a Texas limited
liability company (“CATI”) is obligated, including without
limitation of an aggregate of at least $500,000 of
indebtedness;
(f)
While any Registration Statement is required to be maintained
effective, the effectiveness of the Registration Statement lapses
for any reason, including, without limitation, the issuance of a
stop order, or the Registration Statement, or the prospectus
contained therein, is unavailable to Holder sale of all Conversion
Shares for any 5 or more Trading Days, which may be
non-consecutive;
(g)
The
suspension from trading or the failure of the Common Stock to be
trading or listed on the Trading Market;
(h) The
Corporation notifies Holder, including without limitation, by way
of public announcement or through any of its attorneys, agents or
representatives, of its intention not to comply, as required, with
a Conversion Notice pursuant to this Certificate of Designations or
any other agreement with Holder, at any time, including without
limitation any objection or instruction to its transfer agent not
to comply with any notice from Holder;
(i)
Bankruptcy,
insolvency, reorganization or liquidation proceedings or other
proceedings for the relief of debtors will be instituted by or
against the Corporation or any subsidiary other than CATI and, if
instituted against the Corporation or any subsidiary other than
CATI by a third party, an order for relief is entered or the
proceedings are not dismissed within 30 days of their
initiation;
(j)
The
appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, or other similar official of the
Corporation or any subsidiary other than CATI or of any substantial
part of its property, or the making by it of an assignment for the
benefit of creditors, or the execution of a composition of debts,
or the occurrence of any other similar federal, state or foreign
proceeding, or the admission by it in writing of its inability to
pay its debts generally as they become due, the taking of corporate
action by the Corporation or any subsidiary other than CATI in
furtherance of any such action or the taking of any action by any
person to commence a foreclosure sale or any other similar action
under any applicable law;
(k) A final
judgment or judgments for the payment of money aggregating in
excess of $500,000 are rendered against the Corporation or any of
its subsidiaries other than CATI and are not stayed or satisfied
within 30 days of entry;
(l)
The
Corporation does not for any reason timely comply with the
reporting requirements of the Securities Exchange Act of 1934, as
amended, and the regulations promulgated thereunder, including
without limitation timely filing when first due all periodic
reports;
(m) Any
regulatory, administrative or enforcement proceeding is initiated
against Corporation or any subsidiary (except to the extent an
adverse determination would not have a material adverse effect on
the Company’s business, properties, assets, financial condition or
results of operations or prevent the performance by the Company of
any material obligation under the Transaction Documents); or
(n) Any
material provision of this Certificate of Designations shall at any
time for any reason, other than pursuant to the express terms
thereof, cease to be valid and binding on or enforceable against
the parties thereto, or the validity or enforceability thereof will
be contested by any party thereto, or a proceeding will be
commenced by the Corporation or any subsidiary or any governmental
authority having jurisdiction over any of them, seeking to
establish the invalidity or unenforceability thereof, or the
Corporation or any subsidiary denies that it has any liability or
obligation purported to be created under this Certificate of
Designations.
2.
It
is intended that all adjustments made following a Trigger Event
will serve to reasonably compensate Holder for the consequences and
increased risk following a Trigger Event, and not as a penalty or
punishment for any breach by the Corporation. The Corporation
acknowledges that the actual damages likely to result from a
Trigger Event are difficult to estimate and would be difficult for
Holder to prove.
II.
General.
A. Notices.
Any and all notices to the Corporation will be addressed to the
Corporation’s Chief Executive Officer at the Corporation’s
principal place of business on file with the Secretary of State of
the State of Nevada. Any and all notices or other communications or
deliveries to be provided by the Corporation to any Holder
hereunder will be in writing and delivered personally, by
electronic mail or facsimile, sent by a nationally recognized
overnight courier service addressed to each Holder at the
electronic mail, facsimile telephone number or address of such
Holder appearing on the books of the Corporation, or if no such
electronic mail, facsimile telephone number or address appears, at
the principal place of business of the Holder. Any notice or other
communication or deliveries hereunder will be deemed given and
effective on the earliest of (1) the date of transmission, if such
notice or communication is delivered via facsimile or electronic
mail prior to 5:30 p.m. Eastern time, (2) the date after the date
of transmission, if such notice or communication is delivered via
facsimile or electronic mail later than 5:30 p.m. but prior to
11:59 p.m. Eastern time on such date, (3) the second business day
following the date of mailing, if sent by nationally recognized
overnight courier service, or (4) upon actual receipt by the party
to whom such notice is required to be given, regardless of how
sent.
B.
Lost
or Mutilated Preferred Stock Certificate. Upon receipt of
evidence reasonably satisfactory to the Corporation (an affidavit
of the registered Holder will be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate
evidencing shares of Series C Preferred Stock, and in the case of
any such loss, theft or destruction upon receipt of indemnity
reasonably satisfactory to the Corporation (provided that if the
Holder is a financial institution or other institutional investor
its own agreement will be satisfactory) or in the case of any such
mutilation upon surrender of such certificate, the Corporation
will, at its expense, execute and deliver in lieu of such
certificate a new certificate of like kind representing the number
of shares of such class represented by such lost, stolen, destroyed
or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate.
C.
Headings. The headings contained herein are for
convenience only, do not constitute a part of this Certificate of
Designations and will not be deemed to limit or affect any of the
provisions hereof.
NOW THEREFORE BE IT RESOLVED, that the Designation is hereby
approved, affirmed, confirmed, and ratified; and it is further
RESOLVED, that each officer of the Corporation be and hereby
is authorized, empowered and directed to execute and deliver, in
the name of and on behalf of the Corporation, any and all
documents, and to perform any and all acts necessary to reflect the
Board of Directors approval and ratification of the resolutions set
forth above; and it is further
RESOLVED, that in addition to and without limiting the
foregoing, each officer of the Corporation and the Corporation’s
attorney be and hereby is authorized to take, or cause to be taken,
such further action, and to execute and deliver, or cause to be
delivered, for and in the name and on behalf of the Corporation,
all such instruments and documents as he may deem appropriate in
order to effect the purpose or intent of the foregoing resolutions
(as conclusively evidenced by the taking of such action or the
execution and delivery of such instruments, as the case may be) and
all action heretofore taken by such officer in connection with the
subject of the foregoing recitals and resolutions be, and it hereby
is approved, ratified and confirmed in all respects as the act and
deed of the Corporation; and it is further
RESOLVED, that this Designation may be executed in several
counterparts, each of which is an original; that it shall not be
necessary in making proof of this Designation or any counterpart
hereof to produce or account for any of the other.
[Remainder of page left intentionally blank. Signature page
follows.]
IN WITNESS WHEREOF, the
Corporation has caused this “Amended and Restated
Certificate of Designations of Preferences, Powers, Rights and
Limitations of Series C Redeemable Convertible Preferred
Stock” to be duly executed and
approved this 8th day of July 2019.
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By: |
/s/ Louis G. Schott |
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Name: Louis G.
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Its: Interim CEO |
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CAMBER ENERGY, INC.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
ANNUAL
MEETING OF SHAREHOLDERS – January 21, 2021 AT 10:00 A.M. LOCAL
TIME
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CONTROL ID: |
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REQUEST ID: |
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The undersigned shareholder of Camber Energy, Inc., a Nevada
corporation (the “Company”), hereby acknowledges receipt of
the Notice of Annual Meeting of Shareholders and Proxy Statement of
the Company, each dated on or around December 1, 2020, and hereby
appoints Louis G. Schott and Robert Schleizer (the
“Proxies”), or any one of them, with full power of
substitution and authority to act in the absence of the other, each
as proxies and attorneys-in-fact, to cast all votes that the
undersigned is entitled to cast at, and with all powers that the
undersigned would possess if personally present at, the 2021 annual
meeting of shareholders of the Company, to be held on January 21,
2021, at 10:00 a.m. Central Time, at https://www.issuerdirect.com/virtual-event/CEI
(please note this link is case sensitive), and at any adjournment
or adjournments thereof, and to vote all shares of the Company that
the undersigned would be entitled to vote if then and there
personally present, on the matters set forth on the reverse side,
and all such other business as may properly come before the
meeting. I/we hereby revoke all proxies previously given. |
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(CONTINUED AND TO BE SIGNED ON
REVERSE SIDE.) |
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VOTING INSTRUCTIONS |
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If you vote by phone, fax or
internet, please DO NOT mail your proxy card. |
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MAIL: |
Please mark, sign, date, and return
this Proxy Card promptly using the enclosed envelope. |
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FAX: |
Complete the reverse portion of this Proxy Card
and Fax to 202-521-3464. |
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INTERNET: |
https://www.iproxydirect.com/CEI |
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PHONE: |
1-866-752-VOTE(8683) |
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ANNUAL
MEETING OF THE SHAREHOLDERS OF
CAMBER ENERGY, INC. |
PLEASE
COMPLETE, DATE, SIGN AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR
BLACK INK AS SHOWN HERE: ☒ |
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PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS |
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Proposal
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FOR |
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WITHOLD |
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Election
of Directors |
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Robert
Schleizer |
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Fred
S. Zeidman |
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CONTROL ID: |
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James
G. Miller |
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REQUEST ID: |
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Proposal
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FOR |
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AGAINST |
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ABSTAIN |
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Ratification
of the appointment of Marcum LLP as the Company’s independent
registered public accounting firm for the fiscal year ending March
31, 2021.
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Proposal
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AGAINST |
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To
approve, by non-binding vote, the compensation of the Company’s
named executive officers. |
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Proposal
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FOR |
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AGAINST |
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ABSTAIN |
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To
approve an amendment to the Company’s Articles of Incorporation to
increase the number of our authorized shares of common stock from
25,000,000 to 75,000,000. |
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Proposal
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FOR |
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AGAINST |
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ABSTAIN |
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To
approve the terms of the June 2020 Purchase Agreement and the
issuance of shares of common stock upon the conversion of the 630
shares of Series C Preferred Stock sold pursuant thereto, including
shares of common stock exceeding 20% of the Company’s outstanding
common stock as of June 22, 2020, including shares issuable for
dividends and conversion premiums on such 630 shares of Series C
Preferred Stock. |
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Proposal
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AGAINST |
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To
consider and vote upon a Proposal to authorize our Board, in its
discretion, to adjourn the annual meeting to another place, or a
later date or dates, if necessary or appropriate, to solicit
additional proxies in favor of the Proposals listed above at the
time of the Annual Meeting. |
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MARK “X” HERE IF YOU PLAN TO
ATTEND THE MEETING: ☐ |
| This Proxy, when
properly executed will be voted as provided above, or if no
contrary direction is indicated, it will be voted “For All”
In Proposal 1, “For” Each of Proposals 2 through 6, and for
all such other business as may properly come before the meeting in
the sole determination of the Proxies. |
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MARK HERE FOR ADDRESS
CHANGE ☐ New
Address (if applicable):
____________________________
____________________________
____________________________
IMPORTANT: Please sign
exactly as your name or names appear on this Proxy. When shares are
held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as
such. If signer is a partnership, please sign in partnership name
by authorized person.
Dated: ________________________,
2021
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(Print Name of Shareholder and/or
Joint Tenant) |
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| (Signature of Shareholder) |
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| (Second Signature if held jointly) |
Camber Energy (AMEX:CEI)
Historical Stock Chart
From Dec 2020 to Jan 2021
Camber Energy (AMEX:CEI)
Historical Stock Chart
From Jan 2020 to Jan 2021
