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Item 1.01.
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Entry into a Material Definitive Agreement.
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On
October 5, 2017, Camber Energy, Inc. (the “
Company
”, “
we
” and “
us
”) and
an institutional investor (the “
Investor
”), entered into a Stock Purchase Agreement (the “
October
2017 Purchase Agreement
”), pursuant to which the Company may receive aggregate consideration of $16 million, subject
to certain conditions set forth therein.
Under
the terms of the October 2017 Purchase Agreement, (1) the Investor purchased 212 shares of Series C Preferred Stock on the closing
date of the agreement, October 4, 2017 (the “
Initial Closing
”), for $2 million, and agreed, subject to certain
closing conditions set forth in the agreement, to purchase (2) 106 shares of Series C Preferred Stock for $1,000,000, 10 days
after the Initial Closing; (3) 105 shares of Series C Preferred Stock for $1,000,000, 10 days after the second closing; (4) 105
shares of Series C Preferred Stock for $1,000,000, 10 days after the third closing; (5) 105 shares of Series C Preferred Stock
for $1,000,000, 10 days after the fourth closing; (6) 525 shares of Series C Preferred Stock for $5,000,000, 30 days after the
fifth closing; and (7) 525 shares of Series C Preferred Stock for $5,000,000, 30 days after the sixth Closing.
The
Company plans to use the proceeds from the sale of the Series C Preferred Stock for working capital, workovers on existing wells,
drilling and completion of additional wells, repayment of vendor balances and payments to International Bank of Commerce (“IBC”),
in anticipation of regaining compliance.
Pursuant
to the October 2017 Purchase Agreement, as long as the Investor holds any shares of Series C Preferred Stock, we agreed that we
would not issue or enter into or amend an agreement pursuant to which we 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 (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.
Additionally,
provided that we have not materially breached the terms of the October 2017 Purchase Agreement, we may at any time, in our sole
and absolute discretion, repurchase from Investor all, but not less than all, of the then outstanding shares of Series C Preferred
Stock sold pursuant to the agreement by paying to Investor 110% of the aggregate face value of all such shares.
We
also agreed to provide the Investor a right of first offer to match any offer for financing we receive from any person while the
shares of Series C Preferred Stock sold pursuant to the October 2017 Purchase Agreement are outstanding, except for debt financings
not convertible into common stock, which are excluded from such right to match.
Finally,
we agreed that if we issue 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 we would notify Investor of such additional or more
favorable term and such term, at Investor’s option, may become a part of the transaction documents with Investor.
The
October 2017 Purchase Agreement includes customary provisions requiring that the Company indemnify the Investor against certain
losses; representations and warranties and covenants.
The
foregoing summary of the terms of the October 2017 Purchase Agreement is subject to, and qualified in its entirety by, the form
of such document, a copy of which is attached hereto as
Exhibit 10.1
and incorporated in this
Item 1.01
by reference
in its entirety.
Series
C Redeemable Convertible Preferred Stock
Holders
of the Series C Preferred Stock are entitled to cumulative dividends in the amount of 6.0% per annum, 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 and pari passu with respect to our Series B Preferred 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 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), 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 (the “
Face
Value
”) 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).
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 the Measuring Period, less $0.10 per share. The “
Measuring
Period
” is the period beginning, if no trigger event has occurred, 30 trading days, and if a trigger event has occurred,
60 trading days, before the applicable notice has been provided regarding the exercise or conversion of the applicable security,
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 (subject to certain extensions described in the
applicable securities, which have been triggered to date). Triggering events are described in the designation of the Series C
Preferred Stock, but include items which would typically be events of default under a debt security, including filing of reports
late with the Commission.
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 (other than the Series B 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
foregoing summary of the terms of the Series C Preferred Stock is subject to, and qualified in its entirety by, the Certificate
of Designation of Series C Preferred Stock incorporated by reference as
Exhibit 3.1
hereto, which is incorporated in this
Item 1.01
by reference.
Conditions
to closing the sale of the additional shares of Series C Preferred Stock described above include, that except with regard to the
first four closings described above, the Company’s common stock is required to be listed for and currently trading on the
NYSE American market or a higher trading market; the Company is required to be in compliance with all requirements to maintain
such listing and there cannot be any notice of any suspension or delisting with respect to the trading of the shares of common
stock on such trading market; except with regard to the first four closings only, the Company is required to have duly authorized
shares of common stock reserved for issuance to Investor in an amount equal to three times the number of shares sufficient to
immediately issue all shares of common stock potentially issuable upon conversion of the Series C Preferred Stock sold to Investor
under the October 2017 Purchase Agreement (collectively, the “
Conversion Shares
”) and any other agreements
with Investor; except with regard to the initial closing only, the Company is required to obtain approval and listing of all Conversion
Shares on the NYSE American; for the second through fifth closings only, (i) an aggregate dollar trading volume of at least $10
million must have traded on NYSE American during regular trading hours, from the trading day after the immediately prior closing
until the trading day immediately before the relevant closing, but expressly excluding all volume traded on any days that the
Investor is prevented or delayed from reselling shares of common stock (“
Excluded Days
”); and (ii) the Company’s
common stock is required to have a volume weighted average price on the NYSE American for the prior trading day of at least $0.15
per share of common stock; and with respect to the final two closings, an aggregate dollar trading volume of at least $50 million
must have traded on NYSE American during regular trading hours, from the trading day after the immediately prior closing until
the trading day immediately before the relevant closing, but expressly excluding all volume traded on any Excluded Days, and if
any such conditions are not met on the date initially set for such closing, each closing will occur as soon thereafter as they
are met, if ever. The closing of the additional sales of Series C Preferred Stock as described above are subject to closing conditions
which may not be met timely, if at all, and as such, we may not ever sell any additional shares of Series C Preferred Stock under
the October 2017 Purchase Agreement after the Initial Closing.
As
we do not currently have a sufficient number of shares of authorized but unissued shares of common stock to allow for the issuance
of the Conversion Shares, we agreed, pursuant to the October 2017 Purchase Agreement, to file a preliminary proxy statement within
10 days after the Initial Closing date to increase our authorized but unissued shares of common stock (either through a reverse
stock split or increase in authorized shares or both), and if necessary to seek stockholder approval of the October 2017 Purchase
Agreement and the issuance of the Conversion Shares under applicable NYSE American rules and regulations (collectively, the “
Approval
”),
to set a meeting for the first possible date after clearing Securities and Exchange Commission (“
Commission
”)
comments thereon, and to use our commercially reasonable best efforts to obtain Approval as soon as practicable, and in any event
within 90 days after the Initial Closing date.
We
also agreed to include on the next registration statement we file with the Commission, or on the subsequent registration statement
if such registration statement is withdrawn, all potentially issuable Conversion Shares.
In
conclusion, the Company plans to issue $16.84 million in face amount shares of Series C Redeemable Convertible Preferred Stock
(the “
Series C Preferred Stock
”), at a 5% original issue discount (i.e., for aggregate consideration of $16
million). In total, an aggregate of 1,684 shares of Series C Preferred Stock, which each have a face amount of $10,000 per share
were agreed to be sold.
Item 2.01
Completion of Acquisition
or Disposition of Assets.
As previously reported
in the Company’s Current Report on Form 8-K filed with the Commission on September 12, 2017, the cure period on the note
of the Company’s wholly-owned subsidiary CATI Operating LLC (“
CATI
”) expired on September 11, 2017, and
as of such date, all principal, interest and unpaid costs thereunder were immediately due and payable (which totaled $6.9 million
as of March 31, 2017 and approximately $7.1 million as of the date of acceleration). As stated previously, the loan was non-recourse
to the public Company itself, but was recourse to CATI.
In September 2017,
the lender foreclosed on the assets of CATI which secured the note and on October 3, 2017, the trustee of those assets, for the
benefit of the lender, sold all of the assets in public auction foreclosure sales which took place in Gonzales County and Karnes
County, Texas. The funds raised in the foreclosure sales satisfied in full the amount owed under the note and as such, the Company’s
obligations through CATI to the lender under the note and otherwise were extinguished, provided however, that effective as of October
3, 2017, the Company no longer holds any rights to the assets previously held by CATI.