Stockholder
Proposals for 2020 Annual Meeting of Stockholders and 2020 Proxy Materials
Proposals of holders
of our voting securities intended to be presented at our 2020 fiscal year Annual Meeting of stockholders 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 October 22, 2019, and not later than the close of business on November 21, 2019,
together with written notice of the stockholder’s intention to present a proposal for action at the fiscal 2020 Annual
Meeting of stockholders, unless our annual meeting date occurs more than 30 days before or 30 days after February 19, 2020.
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 2020 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 stockholder, the number of voting securities held by the stockholder of
record, a statement that the stockholder 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 stockholders, 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 stockholders does not differ materially from its evaluation of candidates recommended from other sources.
Any stockholder 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 stockholder should also include
his or her contact information and a statement of his or her share ownership. The Committee may request further information about
stockholder 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 stockholder 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 4 -Approval of the issuance of such number of shares of common stock exceeding 19.99% of our
outstanding common stock, issuable upon conversion of the 369 shares of Series C Preferred Stock, including shares issuable for
dividends and conversion premiums thereon sold pursuant to that certain Stock Purchase Agreement entered into with an institutional
investor on October 29, 2018, and to approve the terms of such October 2018 Stock Purchase Agreement”, beginning on page
24, “Proposal 5 - Approve the issuance of such number of shares of common stock exceeding 19.99% of our outstanding common
stock, issuable upon conversion of the 2,941 shares of Series C Preferred Stock, including shares issuable for dividends and conversion
premiums thereon which can be sold pursuant to that certain Stock Purchase Agreement entered into with an institutional investor
on November 23, 2018, and to approve the terms of such November 2018 Stock Purchase Agreement, as amended”, beginning on
page 30, and “Proposal 8 - Approval of the Issuance of Up to 40,000 Shares of Common Stock Upon the Exercise of Warrants
to Purchase 40,000 Shares of Common Stock Granted to Our Former CEO as Part of a Separation and Release Agreement”, beginning
on page 43, of this Proxy Statement are incorporated by reference to the Company’s Annual Report on Form 10-K for the year
ended March 31, 2018, as filed with the SEC on July 2, 2018, 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
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Houston, Texas
January 9, 2019
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
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ABOVE SPACE IS FOR OFFICE USE ONLY
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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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1. 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 stockholders 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)
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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.
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Nevada Secretary of State Amend Profit-After
Revised: 1-5-15
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ARTICLE FOUR
. CAPITAL STOCK
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A.
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General Authorization.
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The Corporation has the authority to issue
Two Hundred and Sixty Million (260,000,000) shares of stock consisting of:
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(1)
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Common Stock
. Two Hundred and Fifty Million (250,000,000) shares of common stock, having a par value of $0.001 per share (the “
Common Stock
”); and
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(2)
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Preferred Stock
. Ten Million (10,000,000) shares of Preferred Stock having a par value of $0.001 per share (the “
Preferred Stock
”).
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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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(1)
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Number of Shares
.
The Common Stock shall consist of Two Hundred and Fifty Million (250,000,000) shares.
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(2)
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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 Stockholders are entitled to vote, which voting rights shall not be cumulative in any election of Directors.
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(3)
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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 Stockholders shall have all other rights of stockholders.
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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)
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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)
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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)
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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)
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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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(5)
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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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(6)
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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)
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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)
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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)
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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)
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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)
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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)
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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.
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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
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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
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ABOVE SPACE IS FOR OFFICE USE ONLY
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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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1. 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 stockholders 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)
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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.
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Nevada Secretary of State Amend Profit-After
Revised: 1-5-15
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ARTICLE FOUR
. CAPITAL STOCK
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A.
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General Authorization.
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The Corporation has the authority to issue
Two Hundred and Sixty Million (260,000,000)
1
shares
of stock consisting of:
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(1)
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Common Stock
. Two Hundred and Fifty Million (250,000,000)
1
shares of common stock, having a par value of $0.001 per share (the “
Common Stock
”); and
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(2)
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Preferred Stock
. Ten Million (10,000,000) shares of Preferred Stock having a par value of $0.001 per share (the “
Preferred Stock
”).
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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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(1)
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Number of Shares
.
The Common Stock shall consist of Two Hundred and Fifty Million (250,000,000)
1
shares.
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(2)
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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 Stockholders are entitled to vote, which voting rights shall not be cumulative in any election of Directors.
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(3)
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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 Stockholders shall have all other rights of stockholders.
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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)
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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)
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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)
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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)
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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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1
[Assuming that Proposal 2 is approved.]
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(5)
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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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(6)
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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)
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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)
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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)
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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)
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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)
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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)
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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.
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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.
Reverse Stock
Split of Outstanding Common Stock
Effective as of the
effective date set forth under “
Effective date and time of filing
” on this Certificate of Amendment to
Articles of Incorporation (or in the absence of such date, on the date such Amendment to the Articles of Incorporation is filed
with the Secretary of State of Nevada)(the “
Effective Time
”), every
[5 to 25, depending on
the final ratio approved by the Board of Directors]
shares of the Corporation’s common stock (but not any shares
of Preferred Stock), issued and outstanding immediately prior to the Effective Time, or held in treasury prior to the Effective
Time (collectively the “
Old Capital Stock
”), shall be automatically reclassified and combined into One
(1) share of common stock (the “
Reverse Stock Split
”). Any stock certificate that, immediately prior
to the Effective Time, represented shares of Old Capital Stock will, from and after the Effective Time, automatically and without
the necessity of presenting the same for exchange, represent the number of shares as equals the quotient obtained by dividing the
number of shares of Old Capital Stock represented by such certificate immediately prior to the Effective Time by
[5
to 25, depending on the final ratio approved by the Board of Directors]
, subject to any adjustments for fractional
shares as set forth below; provided, however, that each person holding of record a stock certificate or certificates that
represented shares
of Old Capital Stock shall receive, upon surrender of such certificate or certificates, a new certificate or certificates evidencing
and representing the number of shares of capital stock to which such person is entitled under the foregoing reclassification. No
fractional shares of capital stock shall be issued as a result of the Reverse Stock Split. In lieu of any fractional share of capital
stock to which a stockholder would otherwise be entitled, the Corporation shall issue that number of shares of capital stock as
rounded up to the nearest whole share. The Reverse Stock Split shall have no effect on the number of authorized shares of capital
stock, previously designated series of preferred stock (except to the extent such split adjusts the conversion ratio thereof) or
the par value thereof as set forth above in the preceding paragraphs.
APPENDIX C
STOCK PURCHASE AGREEMENT
This Stock Purchase
Agreement (“
Agreement
”) is made and entered into on October 26, 2018 (“
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 $3.5 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 Regulation S and 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 to purchase 369 Preferred Shares of Company at $10,000.00 per share
with a 5.0% original issue discount (“
OID
”) for the sum of $3,500,000.00 (“
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 (the “
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, subject to
Section IV.L
below
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 or identified by Investor prior to the Effective Date, no material breach or default has occurred
under any Transaction Document or any other agreement between Company and Investor;
5.
The
Company has duly authorized shares of Common Stock reserved for issuance to Investor in an amount equal to thrice the number of
shares sufficient to immediately issue all Conversion Shares potentially issuable under this Agreement and any other agreements
with Investor at such time;
6.
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
7.
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 369 Preferred Shares by payment to Company
of $3,500,000.00, by wire transfer of immediately available funds to an account designated by Company.
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 pursuant to the foregoing sentence, 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
, t
he 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
.
Following the closing, the Company will obtain an exception to any shareholder approval requirement from NYSE American or obtain
shareholder approval.
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.
Offshore
Transaction
.
Company has not, and will not, engage in any directed selling efforts in the United States in respect of the
Shares. Company and its Affiliates have complied, and will comply, with the offering restriction requirements of Regulation S.
Company has offered, and will offer, the Shares only to Investor.
17.
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
,
no further 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
.
Except as disclosed on
Schedule III.B.8
with regard to the initial Closing only, 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 have 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; (b) not a registered broker-dealer, member of FINRA, or an affiliate thereof;
and (c) not a U.S. Person, and is not acquiring the Preferred Shares for the account or beneficial ownership of any U.S. Person.
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.
3.
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 file a preliminary proxy within 30 days after the Effective Date for
stockholder approval of this Agreement and the issuance of the Conversion Shares, (“
Approval
”),
set a meeting for the first reasonable date after clearing Commission comments, and use its commercially reasonable best efforts
to obtain Approval by its next annual meeting of stockholders. 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 beneficially owned or controlled by it, sign or solicit any proxies, 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
. 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.
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 and will use its commercially reasonable best efforts
to obtain approval to list the Conversion Shares as soon as practicable.
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.
Prior
Securities
.
Investor acknowledges and agrees that a Trigger Event occurred with respect to all of the Prior Securities.
Investor acknowledges and agrees that, as of the Effective Date, no Trigger Event has occurred with respect to the Preferred Shares
being issued pursuant to this Agreement.
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.
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.
T.
Use
of Proceeds
.
The proceeds from the Purchase Amount will be used by Company as set forth in
the Disclosure Schedule.
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 Cayman 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 the U.S. District Court for the Southern District of Texas or the Southern
District of New York 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 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.
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Company:
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CAMBER ENERGY, INC.
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By:
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Name:
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Title:
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Investor:
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Investor Name
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By:
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Name:
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Title:
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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.
“
Closing
” has the
meaning set forth in
Section II.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.
“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
.
“
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.
“Prior Agreements”
means all Stock Purchase Agreements and Securities Purchase Agreements for the sale of the Prior Securities, and all Transaction
Documents related thereto.
“Prior Securities”
include the $530,000 face amount redeemable convertible subordinated debenture, $4.5 million common stock purchase warrant, and
all shares of Preferred previously issued in connection with the Prior Agreements.
“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.
“
Regulation
S
” means Regulation S 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.
“
U.S. Person
”
has the meaning set forth in Regulation S
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.
October 26, 2018
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 Discover Growth Fund (“
Investor
”), by Company,
to fulfill the requirement under the Stock Purchase Agreement, dated October 26, 2018, 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
October 26, 2018
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 Discover Growth Fund (“
Investor
”), by Company,
to fulfill the requirement under the Stock Purchase Agreement, dated October 26, 2018, 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 D
LUCAS ENERGY, INC.
CERTIFICATE OF DESIGNATIONS OF PREFERENCES,
POWERS,
RIGHTS AND LIMITATIONS
OF
SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK
The undersigned, Anthony C. Schnur,
hereby certifies that:
1. The
undersigned is the Chief Executive Officer and Acting Chief Financial Officer, respectively, of Lucas Energy, Inc., a Nevada corporation
(the “
Corporation
”);
2. The
Corporation is authorized to issue 10,000,000 shares of preferred stock, $0.001 par value, of which (i) 2,000 shares are designated
as Series A convertible preferred stock, of which 500 shares are issued and outstanding, and (ii) 3,000 shares are designated as
Series B redeemable convertible preferred stock (the “
Series B Preferred Stock
”), of which no shares are issued
and outstanding; and
3. The
following resolutions were duly adopted by the Board of Directors:
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 Certificate
of Designations of Preferences, Powers, Rights and Limitations of Series C Redeemable Convertible Preferred Stock, 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, as follows:
NOW, THEREFORE,
BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of Preferred Stock for cash, notes
or exchange of other securities, rights or property and does hereby fix and determine the powers, rights, preferences, restrictions
and other matters relating to such series of Preferred Stock 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) pari
passu with respect to the Series B Preferred Stock; (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, other than shares of Series B Preferred Stock issued in the Acquisition,
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 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.
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 Acquisition;
(b) Corporation issues convertible or equity securities that are senior to the Series C Preferred Stock in any respect, (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; (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.
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 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
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 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.
“
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.
j.
“
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.
k. “Maximum
Triggering Level”
means $3.75 per share of Common Stock.
l.
“
Minimum
Triggering Level
” means $2.75 per share of Common Stock.
m.
“
Spread
Adjustment
” means 100 basis points.
n.
“
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.
o.
“
Trading
Day
” means any day on which the Common Stock is traded on the Trading Market.
p.
“
Trading
Market
” means the NYSE MKT 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.
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 MKT rules, except that such limitation will
not apply following stockholder approval in accordance with the requirements of NYSE MKT rules or a waiver from NYSE MKT (“
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.
RESOLVED, FURTHER,
that the chairman, chief executive officer, chief financial officer, president or any vice-president, and the secretary or any
assistant secretary, of the Corporation be and they hereby are authorized and directed to prepare and file a Designation of Preferences,
Rights and Limitations of Series C Preferred Stock in accordance with the foregoing resolution and the provisions of Nevada law.
IN WITNESS WHEREOF,
the undersigned have executed this Certificate this 25th day of August 2016.
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Signed:
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/s/ Anthony C. Schnur
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Name:
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Anthony C. Schnur
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Title:
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Chief Executive Officer
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Signed:
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/s/ Anthony C. Schnur
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Name:
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Anthony C. Schnur
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Title:
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Acting Chief Financial Officer
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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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USE BLACK INK ONLY - DO NOT HIGHLIGHT
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ABOVE SPACE IS FOR OFFICE USE ONLY
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Certificate
of Amendment to Certificate of Designation
For Nevada Profit
Corporations
(Pursuant to
NRS 78.1955 - After Issuance of Class or Series)
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CAMBER ENERGY, INC. [C31179-2003]
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2.
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Stockholder approval pursuant to statute has been obtained.
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3.
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The class or series of stock being amended:
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SERIES C REDEEMABLE CONVERTIBLE PREFERRED
STOCK
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4.
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By a resolution adopted by the board of directors, the certificate of designation is being amended as follows or the new class or series is:
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Section I.G.7(a) of the Designation (specifically,
the 2nd Section I.G.7, "Issuance Limitation" - "Beneficial Ownership") is amended to read as set forth on Exhibit A.
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5.
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Effective date of filing: (optional)
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(must not be later than 90 days after the certificate is filed)
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X
/s/ Robert Schleizer
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Signature of Officer
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Filing Fee: $175.00
IMPORTANT:
Failure to include any of
the above information and submit with the proper fees may cause this filing to be rejected.
Nevada Secretary of State
NRS Amend Designation
This form must be accompanied by appropriate
fees.
EXHIBIT A
“
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 9.99% 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. 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.”
APPENDIX E
STOCK
PURCHASE AGREEMENT
This
Stock Purchase Agreement (“
Agreement
”) is made and entered into on
November 23, 2018 (“
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 $28 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 2,941 Preferred
Shares at $10,000.00 per share (“
Face Value
”)
with a 5.0% original issue discount (“
OID
”)
for the sum of $28,000,000.00 (“
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 with regard to the Initial Closing only, 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, no material breach or default has occurred under any Transaction
Document with respect to any Preferred or any other agreement between Company
and Investor or any Affiliate of Investor;
5.
Except
with regard to the Initial Closing only, the Company has
duly authorized
shares of Common Stock reserved for issuance to Investor in an amount equal to
thrice the number of shares sufficient to immediately issue all Conversion
Shares potentially issuable under this Agreement and any other agreements with
Investor at such time;
6.
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;
7.
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; and
8.
Except
with regard to the Initial Closing only, Company has obtained Approval and
listing of all Conversion Shares on NYSE American.
D.
Initial
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 106 Preferred Shares by payment to Company of $1,000,000.00, by wire
transfer of immediately available funds to an account designated by Company (the
“
Initial Closing
”).
E.
Subsequent
Closings
.
Subject to the terms and
conditions herein, at any one or more times, from time to time after the Initial
Closing, Company may in its sole and absolute discretion provide Investor with
10 days’ written notice that Investor must purchase any number of Preferred
Shares designated by Company, for payment of the Face Value less the OID with
respect to such shares (each, a “
Subsequent Closing
”); provided that on
each respective Subsequent Closing date, all conditions in
Section II.C
must have been fully satisfied as of such date, and the Floor Price and Base
Volume must have occurred since the prior Closing, and that if such conditions
and Base Volume are not met on the date initially set for such Closing, each
Closing will occur as soon thereafter as they are met. At each Subsequent
Closing, Company will issue and deliver to Investor a Transfer Agent book entry
representing the purchased Preferred Shares, and Investor will purchase and
make payment for the specified number of additional Preferred Shares by payment
to Company of the relevant amount by wire transfer of immediately available
funds to an account designated by Company.
Notwithstanding
the foregoing, (a) following a Trigger Event, Investor and (b) at any time,
Company may by written notice terminate Company’s right to sell, and Investor’s
right to purchase, additional Preferred Shares pursuant to the terms of this
Section
II.E
.
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 pursuant to the foregoing
sentence, 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
,
t
he
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.
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.
Offshore
Transaction
.
Company has not, and will not, engage in any directed
selling efforts in the United States in respect of the Shares. Company and its
Affiliates have complied, and will comply, with the offering restriction
requirements of Regulation S. Company has offered, and will offer, the Shares
only to Investor.
17.
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
, no
further 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
.
Except as disclosed on
Schedule III.B.8
with regard to the initial
Closing only, 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 an
“
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.
3.
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 file a
preliminary proxy for stockholder approval of this Agreement and the issuance of
the Conversion Shares (“
Approval
”) at
its next annual meeting of stockholders. 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 beneficially owned or controlled by it, sign or
solicit any proxies, 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
. 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.
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 and will use its commercially
reasonable best efforts to obtain approval to list the Conversion Shares as soon
as practicable.
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.
Prior
Securities
.
Investor acknowledges and agrees that a Trigger Event
occurred with respect to all of the Prior Securities, except for the October
2018 Securities. Investor acknowledges and agrees that, as of the Effective
Date, no Trigger Event has occurred with respect to the Preferred Shares being
issued pursuant to the October 2018 Securities or this Agreement.
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.
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.
T.
Use
of Proceeds
.
The proceeds from the
Purchase Amount will be used by Company as set forth in the Disclosure
Schedule.
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 Cayman 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 the U.S. District Court for the Southern District of Texas or the
Southern District of New York 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:
CAMBER
ENERGY, INC.
Investor:
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
.
“
Base
Volume
” means, with respect to each Closing after the Initial Closing, for
each $1 million in Purchase amount, an aggregate dollar trading volume of at
least $10 million has 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.
“
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
”
means the Initial Closing and each Subsequent Closing.
“
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.
“
Excluded
Days
” include any and all Trading Days on which Investor is prevented,
delayed or unable to resell any Common Stock, including without limitation any
Conversion Shares issued pursuant to this Agreement or any other agreement with
Investor into the open market for any reason whatsoever, including without
limitation Investor has issued a Delivery Notice but has not received the number
of Conversion Shares stated in the notice in electronic form and fully cleared
for trading.
“
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.
“
Floor
Price
” means, with respect to each subsequent Closing, a volume weighted
average price on NYSE American for the prior Trading Day of at least $0.10 per
share of Common Stock.
“
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.
“
Investor
”
has
the meaning set forth in the first paragraph of the Agreement.
“
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
.
“
October
2018 Securities
” means those shares of Preferred sold by Company to
Investor in October 2018.
“
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.
“Prior
Agreements”
means all Stock Purchase Agreements and Securities Purchase
Agreements for the sale of the Prior Securities, and all Transaction Documents
related thereto.
“
Prior
Securities
” include the $530,000 face amount redeemable convertible
subordinated debenture, $4.5 million common stock purchase warrant, and all
shares of Preferred previously issued in connection with the Prior
Agreements.
“
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
.
“
Regulation
D
” means Regulation D under the Securities Act and the rules promulgated by
the Commission thereunder.
“
Regulation
S
” means Regulation S 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.
November
23, 2018
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 November 23, 2018, 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
November
23, 2018
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 November 23, 2018, 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.
FIRST
AMENDMENT TO STOCK PURCHASE AGREEMENT
This First
Amendment to Stock Purchase Agreement (“
Amendment
”) is made and
entered into on December 3, 2018 (“
Amendment Date
”), by and
between Camber Energy, Inc., a Nevada corporation, (“
Company
”),
and the investor whose name appears below (“
Investor
”).
Recitals
A.
On
November 23, 2018, Company and Investor entered into a Stock Purchase Agreement
(“
Agreement
”) pursuant to which Investor agreed to purchase shares
of Series C Redeemable Convertible Preferred Stock (“
Preferred
”)
convertible into shares of Common Stock of the Company (“
Common
Stock
”) pursuant to a Certificate of Designations of Preferences,
Powers, Rights and Limitations of Series C Redeemable Convertible Preferred
Stock filed by the Company with the Secretary of State of Nevada on August 25,
2016, as amended to date (“
Certificate
”).
B.
As
an accommodation to Company and in order to help facilitate implementation of
Company’s business plan, Investor is willing to amend the Agreement in
accordance with the terms hereof.
C.
Certain
capitalized terms used herein, but not otherwise defined herein, have the
meanings given to such terms in the Agreement and/or the Certificate.
Agreement
In
consideration of the premises, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Company and Investor
agree as follows:
1.
Amendments
to Agreement
.
Effective on the Amendment Date, the Agreement
shall be deemed amended, restated and superseded by the following:
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(a)
|
In
Section II.D of the Agreement, 106
is changed to 263, and $1,000,000.00 is changed to
$2,500,000.00; and
|
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(b)
|
In
the definition of Base Volume in
Exhibit I of the Agreement, $1 million is changed to
$800,000.00.
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2.
Acknowledgement
.
Company
hereby acknowledges and agrees that Investor has at all times fully and
completely complied with all of its obligations under the Agreement, the
Certificate and all other Transaction Documents between Company and Investor,
and that all Delivery Notices and calculations provided by Investor to Company
were and are fully correct and accurate in all respects.
3.
Ratification
.
Except
as expressly provided herein, the Agreement, which is incorporated by reference
as though set forth in full herein, and Certificate are hereby ratified and
affirmed in all respects, and remain in full force and effect. Except as
expressly provided herein, the execution of this Amendment shall not operate as
a waiver of any right, power or remedy of the Investor, constitute a waiver of
any provision of any of the Agreement, Certificate or any Transaction Document
or serve to effect a novation of the obligations under the Agreement,
Certificate or any Transaction Document. Except as expressly provided herein,
the Agreement and all Transaction Documents between Company and Investor shall
continue in full force and effect and nothing herein shall act as a waiver of
any of the Investor’s rights under any of the foregoing.
IN
WITNESS WHEREOF
, the parties hereto have caused this Amendment to be duly
executed by their respective authorized signatories on the Amendment
Date.
Company:
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CAMBER
ENERGY, INC.
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By:
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Name:
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Title:
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Investor:
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Investor
Name
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By:
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Name:
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Title:
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APPENDIX F
CAMBER
ENERGY, INC.
AMENDED
AND RESTATED 2014 STOCK INCENTIVE PLAN
ARTICLE
I -- PREAMBLE
1.1
This 2014 Stock Incentive Plan of Camber Energy, Inc.
(the “
Company
”) is intended to secure for the Company and its
Affiliates the benefits arising from ownership of the Company’s Common Stock by
the Employees, Officers, Directors and Consultants of the Company and its
Affiliates, all of whom are and will be responsible for the Company’s future
growth. The Plan is designed to help attract and retain for the Company and its
Affiliates personnel of superior ability for positions of exceptional
responsibility, to reward Employees, Officers, Directors and Consultants for
their services and to motivate such individuals through added incentives to
further contribute to the success of the Company and its Affiliates. With
respect to persons subject to Section 16 of the Act, transactions under this
Plan are intended to satisfy the requirements of Rule 16b-3 of the Act.
1.2 Awards
under the Plan may be made to an Eligible Person in the form of (i) Incentive
Stock Options (to Eligible Employees only); (ii) Nonqualified Stock Options;
(iii) Restricted Stock; (iv) Stock Awards; (v) Performance Shares; or (vi) any
combination of the foregoing.
1.3 The
Company’s board of directors adopted the Plan on December 27, 2013. The Plan
shall be effective December 27, 2013 (the “
Effective Date
”),
subject to approval by the shareholders of the Company to the extent necessary
to satisfy the requirements of the Code, the Act, or other applicable federal or
state law. Unless sooner terminated as provided elsewhere in this Plan, this
Plan shall terminate upon the close of business on the day next preceding the
tenth (10th) anniversary of the Effective Date. Award Agreements outstanding on
such date shall continue to have force and effect in accordance with the
provisions thereof.
1.4 The
Plan shall be governed by, and construed in accordance with, the laws of the
State of Nevada (except its choice-of-law provisions).
1.5 Capitalized
terms shall have the meaning provided in Article II unless otherwise provided in
this Plan or any related Award Agreement.
ARTICLE
II -- DEFINITIONS
DEFINITIONS
.
Except where the context otherwise indicates, the following definitions
apply:
2.1 “
Act
”
means the Securities Exchange Act of 1934, as now in effect or as hereafter
amended.
2.2 “
Affiliate
”
means any parent corporation or subsidiary corporation of the Company, whether
now or hereinafter existing, as those terms are defined in Sections 424(e) and
(f), respectively, of the Code.
2.3 “
Award
”
means an award granted to a Participant in accordance with the provisions of the
Plan, including, but not limited to, Stock Options, Restricted Stock, Stock
Awards, Performance Shares, or any combination of the foregoing.
2.4 “
Award
Agreement
” means the separate written agreement evidencing each Award
granted to a Participant under the Plan.
2.5 “
Board
of Directors
” or “
Board
” means the Board of Directors of
the Company, as constituted from time to time.
2.6 “
Bylaws
”
shall mean the Bylaws of the Company as amended from time to time.
2.7 “
Change
of Control
” means (i) the adoption of a plan of merger or consolidation
of the Company with any other corporation or association as a result of which
the holders of the voting capital stock of the Company as a group would receive
less than 50% of the voting capital stock of the surviving or resulting
corporation; (ii) the approval by the Board of Directors of an agreement
providing for the sale or transfer (other than as security for obligations of
the Company) of substantially all the assets of the Company; or (iii) in the
absence of a prior expression of approval by the Board of Directors, the
acquisition of more than 20% of the Company’s voting capital stock by any person
within the meaning of Rule 13d-3 under the Act (other than the Company or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Company).
2.8 “
Code
”
means the Internal Revenue Code of 1986, as amended, and the regulations and
interpretations promulgated thereunder.
2.9 “
Committee
”
means a committee of two or more members of the Board appointed by the Board in
accordance with Section 3.2 of the Plan. In the event the Company has not
designated a Committee pursuant to Section 3.2 of the Plan,
“
Committee
” shall refer to the Compensation Committee of the
Company (in the event the Compensation Committee has authority to administer the
Plan) or the Board of Directors of the Company.
2.10 “
Common
Stock
” means the Company’s common stock.
2.11 “
Company
”
means Camber Energy, Inc., a Nevada corporation.
2.12. “
Consultant
”
means any person, including an advisor engaged by the Company or an Affiliate to
render bona fide consulting or advisory services to the Company or an Affiliate,
other than as an Employee, Director or Non-Employee Director.
2.13 “
Director
”
means a member of the Board of Directors of the Company.
2.14 “
Disability
”
means the permanent and total disability of a person within the meaning of
Section 22(e)(3) of the Code.
2.15 “
Effective
Date
” shall be the date set forth in Section 1.3 of the Plan.
2.16 “
Eligible
Employee
” means an Eligible Person who is an Employee of the Company or
any Affiliate.
2.17 “
Eligible
Person
” means any Employee, Officer, Director, Non-Employee Director or
Consultant of the Company or any Affiliate, except for instances where services
are in connection with the offer or sale of securities in a capital-raising
transaction, or they directly or indirectly promote or maintain a market for the
Company’s securities, subject to any other limitations as may be provided by the
Code, the Act, or the Board. In making such determinations, the Board may take
into account the nature of the services rendered by such person, his or her
present and potential contribution to the Company’s success, and such other
factors as the Board in its discretion shall deem relevant.
2.19 “
Employee
”
means an individual who is a common-law employee of the Company or an Affiliate
including employment as an Officer. Mere service as a Director or payment of a
director’s fee by the Company or an Affiliate shall not be sufficient to
constitute “
employment
” by the Company or an Affiliate.
2.20 “
ERISA
”
means the Employee Retirement Income Security Act of 1974, as now in effect or
as hereafter amended
2.21 “
Fair
Market Value
” means, as of any date and unless the Committee determines
otherwise, the value of Common Stock determined as follows:
(a) If
the Common Stock is listed on any established stock exchange or a national
market system, including without limitation the NYSE Amex, Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market
Value will be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system for the day of
determination, as reported in The Wall Street Journal or such other source as
the Committee deems reliable;
(b) If
the Common Stock is regularly quoted by a recognized securities dealer but
selling prices are not reported for the date in question, the Fair Market Value
will be the mean between the high bid and low asked prices for the Common Stock
for the day of determination, as reported in The Wall Street Journal or such
other source as the Committee deems reliable; or
(c) In
the absence of an established market for the Common Stock, the Fair Market Value
will be determined in good faith by the Committee.
(d) The
Committee also may adopt a different methodology for determining Fair Market
Value with respect to one or more Awards if a different methodology is necessary
or advisable to secure any intended favorable tax, legal or other treatment for
the particular Award(s) (for example, and without limitation, the Committee may
provide that Fair Market Value for purposes of one or more Awards will be based
on an average of closing prices (or the average of high and low daily trading
prices) for a specified period preceding the relevant date).
2.22 “
Grant
Date
” means, as to any Award, the latest of:
(a) the
date on which the Board authorizes the grant of the Award; or
(b) the
date the Participant receiving the Award becomes an Employee or a Director of
the Company or its Affiliate, to the extent employment status is a condition of
the grant or a requirement of the Code or the Act; or
(c) such
other date (later than the dates described in (a) and (b) above) as the Board
may designate and as set forth in the Participant’s Award Agreement.
2.23 “
Immediate
Family
” means any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law and shall include adoptive
relationships.
2.24
“
Incentive Stock Option
” means a Stock
Option intended to qualify as an incentive stock option within the meaning of
Section 422 of the Code and is granted under Article IV of the Plan and
designated as an Incentive Stock Option in a Participant’s Award Agreement.
2.25 “
Non-Employee
Director
” shall have the meaning set forth in Rule 16b-3 under the
Act.
2.26 “
Nonqualified
Stock Option
” means a Stock Option not intended to qualify as an
Incentive Stock Option and is not so designated in the Participant’s Award
Agreement.
2.27 “
Officer
”
means a person who is an officer of the Company within the meaning of Section 16
of the Act.
2.28 “
Option
Period
” means the period during which a Stock Option may be exercised
from time to time, as established by the Board and set forth in the Award
Agreement for each Participant who is granted a Stock Option.
2.29 “
Option
Price
” means the purchase price for a share of Common Stock subject to
purchase pursuant to a Stock Option, as established by the Board and set forth
in the Award Agreement for each Participant who is granted a Stock Option.
2.30 “
Outside
Director
” means a Director who either (i) is not a current employee of
the Company or an “
affiliated corporation
” (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an “
affiliated corporation
”
receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an
“
affiliated corporation
” at any time and is not currently
receiving direct or indirect remuneration from the Company or an
“
affiliated corporation
” for services in any capacity other than
as a Director or (ii) is otherwise considered an “
outside
director
” for purposes of Section 162(m) of the Code.
2.31 “
Participant
”
means an Eligible Person to whom an Award has been granted and who has entered
into an Award Agreement evidencing the Award or, if applicable, such other
person who holds an outstanding Award.
2.32 “
Performance
Objectives
” shall have the meaning set forth in Article IX of the
Plan.
2.33 “
Performance
Period
” shall have the meaning set forth in Article IX of the Plan.
2.34 “
Performance
Share
” means an Award under Article IX of the Plan of a unit valued by
reference to the Common Stock, the payout of which is subject to achievement of
such Performance Objectives, measured during one or more Performance Periods, as
the Board, in its sole discretion, shall establish at the time of such Award and
set forth in a Participant’s Award Agreement.
2.35 “
Plan
”
means this Camber Energy, Inc. 2014 Stock Incentive Plan, as it may be amended
from time to time.
2.36 “
Reporting
Person
” means a person required to file reports under Section 16(a) of
the Act.
2.37 “
Restricted
Stock
” means an Award under Article VII of the Plan of shares of Common
Stock that are at the time of the Award subject to restrictions or limitations
as to the Participant’s ability to sell, transfer, pledge or assign such shares,
which restrictions or limitations may lapse separately or in combination at
such time or times, in installments or otherwise, as the Board, in its sole
discretion, shall determine at the time of such Award and set forth in a
Participant’s Award Agreement.
2.38 “
Restriction
Period
” means the period commencing on the Grant Date with respect to
such shares of Restricted Stock and ending on such date as the Board, in its
sole discretion, shall establish and set forth in a Participant’s Award
Agreement.
2.39 “
Retirement
”
means retirement as determined under procedures established by the Board or in
any Award, as set forth in a Participant’s Award Agreement.
2.40 “
Rule
16b-3
” means Rule 16b-3 promulgated under the Act or any successor to
Rule 16b-3, as in effect from time to time. Those provisions of the Plan which
make express reference to Rule 16b-3, or which are required in order for certain
option transactions to qualify for exemption under Rule 16b-3, shall apply only
to a Reporting Person.
2.41 “
Stock
Award
” means an Award of shares of Common Stock under Article VIII of
the Plan.
2.42 “
Stock
Option
” means an Award under Article IV or Article V of the Plan of an
option to purchase Common Stock. A Stock Option may be either an Incentive Stock
Option or a Nonqualified Stock Option.
2.43 “
Ten
Percent Stockholder
” means an individual who owns (or is deemed to own
pursuant to Section 424(d) of the Code), at the time of grant, stock possessing
more than ten percent (10%) of the total combined voting power of all classes
of stock of the Company or any of its Affiliates.
2.44 “
Termination
of Service
” means (i) in the case of an Eligible Employee, the
discontinuance of employment of such Participant with the Company or its
Subsidiaries for any reason other than a transfer to another member of the group
consisting of the Company and its Affiliates and (ii) in the case of a Director
who is not an Employee of the Company or any Affiliate, the date such
Participant ceases to serve as a Director. The determination of whether a
Participant has discontinued service shall be made by the Board in its sole
discretion. In determining whether a Termination of Service has occurred, the
Board may provide that service as a Consultant or service with a business
enterprise in which the Company has a significant ownership interest shall be
treated as employment with the Company.
ARTICLE
III – ADMINISTRATION
3.1 The
Plan shall be administered by the Board of Directors of the Company. The Board
shall have the exclusive right to interpret and construe the Plan, to select the
Eligible Persons who shall receive an Award, and to act in all matters
pertaining to the grant of an Award and the determination and interpretation of
the provisions of the related Award Agreement, including, without limitation,
the determination of the number of shares subject to Stock Options and the
Option Period(s) and Option Price(s) thereof, the number of shares of Restricted
Stock or shares subject to Stock Awards or Performance Shares subject to an
Award, the vesting periods (if any) and the form, terms, conditions and duration
of each Award, and any amendment thereof consistent with the provisions of the
Plan. The Board may adopt, establish, amend and rescind such rules, regulations
and procedures as it may deem appropriate for the proper administration of the
Plan, make all other determinations which are, in the Board’s judgment,
necessary or desirable for the proper administration of the Plan, amend the Plan
or a Stock Award as provided in Article XI, and terminate or suspend the Plan as
provided in Article XI. All acts, determinations and decisions of the Board made
or taken pursuant to the Plan or with respect to any questions arising in
connection with the administration and interpretation of the Plan or any Award
Agreement, including the severability of any and all of the provisions thereof,
shall be conclusive, final and binding upon all persons.
3.2 The
Board may, to the full extent permitted by and consistent with applicable law
and the Company’s Bylaws, and subject to Subparagraph 3.2(b) herein below,
delegate any or all of its powers with respect to the administration of the Plan
to the Company’s Compensation Committee or another Committee of the Company
consisting of not fewer than two members of the Board each of whom shall qualify
(at the time of appointment to the Committee and during all periods of service
on the Committee) in all respects as a Non-Employee Director and as an Outside
Director.
(a) If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references in
the Plan to the Board shall thereafter be to the Committee or subcommittee),
subject, however, to such resolutions, not consistent with the provisions of the
Plan, as may be adopted from time to time by the Board.
(b) The
Board may abolish the Committee at any time and reassume all powers and
authority previously delegated to the Committee.
(c) In
addition to, and not in limitation of, the right of any Committee so designated
by the Board to administer this Plan to grant Awards to Eligible Persons under
this Plan, the full Board of Directors and/or the Company’s Compensation
Committee may from time to time grant Awards to Eligible Persons pursuant to the
terms and conditions of this Plan, subject to the requirements of the Code, Rule
16b-3 under the Act or any other applicable law, rule or regulation. In
connection with any such grants, the Board of Directors and/or the Company’s
Compensation Committee shall have all of the power and authority of the
Committee to determine the Eligible Persons to whom such Awards shall be granted
and the other terms and conditions of such Awards.
3.3 Without
limiting the provisions of this Article III, and subject to the provisions of
Article X, the Board is authorized to take such action as it determines to be
necessary or advisable, and fair and equitable to Participants and to the
Company, with respect to an outstanding Award in the event of a Change of
Control as described in Article X or other similar event. Such action may
include, but shall not be limited to, establishing, amending or waiving the
form, terms, conditions and duration of an Award and the related Award
Agreement, so as to provide for earlier, later, extended or additional times for
exercise or payments, differing methods for calculating payments, alternate
forms and amounts of payment, an accelerated release of restrictions or other
modifications. The Board may take such actions pursuant to this Section 3.3 by
adopting rules and regulations of general applicability to all Participants or
to certain categories of Participants, by including, amending or waiving terms
and conditions in an Award and the related Award Agreement, or by taking action
with respect to individual Participants from time to time.
3.4
Subject to the provisions of Section 3.9, the maximum aggregate number of shares of Common
Stock which may be issued pursuant to Awards under the Plan shall be
Two Million Five Hundred Thousand (2,500,000)
.
Such shares of Common Stock shall be made available from authorized and unissued shares of the Company.
(a) For
all purposes under the Plan, each Performance Share awarded shall be counted as
one share of Common Stock subject to an Award.
(b) If,
for any reason, any shares of Common Stock (including shares of Common Stock
subject to Performance Shares) that have been awarded or are subject to issuance
or purchase pursuant to Awards outstanding under the Plan are not delivered or
purchased, or are reacquired by the Company, for any reason, including but not
limited to a forfeiture of Restricted Stock or failure to earn Performance
Shares or the termination, expiration or cancellation of a Stock Option, or any
other termination of an Award without payment being made in the form of shares
of Common Stock (whether or not Restricted Stock), such shares of Common Stock
shall not be charged against the aggregate number of shares of Common Stock
available for Award under the Plan and shall again be available for Awards under
the Plan. In no event, however, may Common Stock that is surrendered or
withheld to pay the exercise price of a Stock Option or to satisfy tax
withholding requirements be available for future grants under the Plan.
(c) The
foregoing subsections (a) and (b) of this Section 3.4 shall be subject to any
limitations provided by the Code or by Rule 16b-3 under the Act or by any other
applicable law, rule or regulation.
3.5
Each Award granted under the Plan shall be evidenced by a written Award
Agreement, which shall be subject to and shall incorporate (by reference or
otherwise) the applicable terms and conditions of the Plan and shall include any
other terms and conditions (not inconsistent with the Plan) required by the
Board.
3.6 The
Company shall not be required to issue or deliver any certificates for shares of
Common Stock under the Plan prior to:
(a) any
required approval of the Plan by the shareholders of the Company; and
(b) the
completion of any registration or qualification of such shares of Common Stock
under any federal or state law, or any ruling or regulation of any governmental
body that the Company shall, in its sole discretion, determines to be necessary
or advisable.
3.7 The
Board may require any Participant acquiring shares of Common Stock pursuant to
any Award under the Plan to represent to and agree with the Company in writing
that such person is acquiring the shares of Common Stock for investment purposes
and without a view to resale or distribution thereof. Shares of Common Stock
issued and delivered under the Plan shall also be subject to such stop-transfer
orders and other restrictions as the Board may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Common Stock is then listed and any
applicable federal or state laws, and the Board may cause a legend or legends to
be placed on the certificate or certificates representing any such shares to
make appropriate reference to any such restrictions. In making such
determination, the Board may rely upon an opinion of counsel for the
Company.
3.8
Except as otherwise expressly provided in the Plan or in an Award Agreement
with respect to an Award, no Participant shall have any right as a shareholder
of the Company with respect to any shares of Common Stock subject to such
Participant’s Award except to the extent that, and until, one or more
certificates representing such shares of Common Stock shall have been delivered
to the Participant. No shares shall be required to be issued, and no
certificates shall be required to be delivered, under the Plan unless and until
all of the terms and conditions applicable to such Award shall have, in the sole
discretion of the Board, been satisfied in full and any restrictions shall have
lapsed in full, and unless and until all of the requirements of law and of all
regulatory bodies having jurisdiction over the offer and sale, or issuance and
delivery, of the shares shall have been fully complied with.
3.9 The
total amount of shares with respect to which Awards may be granted under the
Plan and rights of outstanding Awards (both as to the number of shares subject
to the outstanding Awards and the Option Price(s) or other purchase price(s) of
such shares, as applicable) shall be appropriately adjusted for any increase or
decrease in the number of outstanding shares of Common Stock of the Company
resulting from payment of a stock dividend on the Common Stock, a stock split or
subdivision or combination of shares of the Common Stock, or a reorganization or
reclassification of the Common Stock, or any other change in the structure of
shares of the Common Stock. The foregoing adjustments and the manner of
application of the foregoing provisions shall be determined by the Board in its
sole discretion. Any such adjustment may provide for the elimination of any
fractional shares which might otherwise become subject to an Award. All
adjustments made as the result of the foregoing in respect of each Incentive
Stock Option shall be made so that such Incentive Stock Option shall continue to
be an Incentive Stock Option, as defined in Section 422 of the Code.
3.10 No
director or person acting pursuant to authority delegated by the Board shall be
liable for any action or determination under the Plan made in good faith. The
members of the Board shall be entitled to indemnification by the Company in the
manner and to the extent set forth in the Company’s Articles of Incorporation,
as amended, Bylaws or as otherwise provided from time to time regarding
indemnification of Directors.
3.11 The
Board shall be authorized to make adjustments in any performance based criteria
or in the other terms and conditions of outstanding Awards in recognition of
unusual or nonrecurring events affecting the Company (or any Affiliate, if
applicable) or its financial statements or changes in applicable laws,
regulations or accounting principles. The Board may correct any defect, supply
any omission or reconcile any inconsistency in the Plan or any Award Agreement
in the manner and to the extent it shall deem necessary or desirable to reflect
any such adjustment. In the event the Company (or any Affiliate, if applicable)
shall assume outstanding employee benefit awards or the right or obligation to
make future such awards in connection with the acquisition of another
corporation or business entity, the Board may, in its sole discretion, make such
adjustments in the terms of outstanding Awards under the Plan as it shall deem
appropriate.
3.12 Subject
to the express provisions of the Plan, the Board shall have full power and
authority to determine whether, to what extent and under what circumstances any
outstanding Award shall be terminated, canceled, forfeited or suspended.
Notwithstanding the foregoing or any other provision of the Plan or an Award
Agreement, all Awards to any Participant that are subject to any restriction or
have not been earned or exercised in full by the Participant shall be terminated
and canceled if the Participant is terminated for cause, as determined by the
Board in its sole discretion.
ARTICLE
IV -- INCENTIVE STOCK OPTIONS
4.1 The
Board, in its sole discretion, may from time to time on or after the Effective
Date grant Incentive Stock Options to Eligible Employees, subject to the
provisions of this Article IV and Articles III and VI and subject to the
following conditions:
(a) Incentive
Stock Options shall be granted only to Eligible Employees, each of whom may be
granted one or more of such Incentive Stock Options at such time or times
determined by the Board.
(b) The
Option Price per share of Common Stock for an Incentive Stock Option shall be
set in the Award Agreement, but shall not be less than (i) one hundred percent
(100%) of the Fair Market Value of the Common Stock at the Grant Date, or (ii)
in the case of an Incentive Stock Option granted to a Ten Percent Stockholder,
one hundred ten percent (110%) of the Fair Market Value of the Common Stock at
the Grant Date.
(c) An
Incentive Stock Option may be exercised in full or in part from time to time
within ten (10) years from the Grant Date, or such shorter period as may be
specified by the Board as the Option Period and set forth in the Award
Agreement; provided, however, that, in the case of an Incentive Stock Option
granted to a Ten Percent Stockholder, such period shall not exceed five (5)
years from the Grant Date; and further, provided that, in any event, the
Incentive Stock Option shall lapse and cease to be exercisable upon a
Termination of Service or within such period following a Termination of Service
as shall have been determined by the Board and set forth in the related Award
Agreement; and provided, further, that such period shall not exceed the period
of time ending on the date three (3) months following a Termination of Service,
unless employment shall have terminated:
(i) as
a result of Disability, in which event such period shall not exceed the period
of time ending on the date twelve (12) months following a Termination of
Service; or
(ii) as
a result of death, or if death shall have occurred following a Termination of
Service (other than as a result of Disability) and during the period that the
Incentive Stock Option was still exercisable, in which event such period may not
exceed the period of time ending on the earlier of the date twelve (12) months
after the date of death;
and
provided, further, that such period following a Termination of Service or death
shall in no event extend beyond the original Option Period of the Incentive
Stock Option.
(d) The
aggregate Fair Market Value of the shares of Common Stock with respect to which
any Incentive Stock Options (whether under this Plan or any other plan
established by the Company) are first exercisable during any calendar year by
any Eligible Employee shall not exceed one hundred thousand dollars ($100,000),
determined based on the Fair Market Value(s) of such shares as of their
respective Grant Dates; provided, however, that to the extent permitted under
Section 422 of the Code, if the aggregate Fair Market Values of the shares of
Common Stock with respect to which Stock Options intended to be Incentive Stock
Options are first exercisable by any Eligible Employee during any calendar year
(whether such Stock Options are granted under this Plan or any other plan
established by the Company) exceed one hundred thousand dollars ($100,000), the
Stock Options or portions thereof which exceed such limit (according to the
order in which they were granted) shall be treated as Nonqualified Stock
Options.
(e) No
Incentive Stock Options may be granted more than ten (10) years from the
Effective Date.
(f) The
Award Agreement for each Incentive Stock Option shall provide that the
Participant shall notify the Company if such Participant sells or otherwise
transfers any shares of Common Stock acquired upon exercise of the Incentive
Stock Option within two (2) years of the Grant Date of such Incentive Stock
Option or within one (1) year of the date such shares were acquired upon the
exercise of such Incentive Stock Option.
4.2 Subject
to the limitations of Section 3.4, the maximum aggregate number of shares of
Common Stock subject to Incentive Stock Option Awards shall be the maximum
aggregate number of shares available for Awards under the Plan.
4.3 The
Board may provide for any other terms and conditions which it determines should
be imposed for an Incentive Stock Option to qualify under Section 422 of the
Code, as well as any other terms and conditions not inconsistent with this
Article IV or Articles III or VI, as determined in its sole discretion and set
forth in the Award Agreement for such Incentive Stock Option.
4.4 Each
provision of this Article IV and of each Incentive Stock Option granted
hereunder shall be construed in accordance with the provisions of Section 422 of
the Code, and any provision hereof that cannot be so construed shall be
disregarded.
ARTICLE
V -- NONQUALIFIED STOCK OPTIONS
5.1 The
Board, in its sole discretion, may from time to time on or after the Effective
Date grant Nonqualified Stock Options to Eligible Persons, subject to the
provisions of this Article V and Articles III and VI and subject to the
following conditions:
(a) Nonqualified
Stock Options may be granted to any Eligible Person, each of whom may be granted
one or more of such Nonqualified Stock Options, at such time or times determined
by the Board.
(b) The
Option Price per share of Common Stock for a Nonqualified Stock Option shall be
set in the Award Agreement and may be less than one hundred percent (100%) of
the Fair Market Value of the Common Stock at the Grant Date; provided, however,
that the exercise price of each Nonqualified Stock Option granted under the Plan
shall in no event be less than the par value per share of the Company’s Common
Stock.
(c ) A
Nonqualified Stock Option may be exercised in full or in part from time to time
within the Option Period specified by the Board and set forth in the Award
Agreement; provided, however, that, in any event, the Nonqualified Stock Option
shall lapse and cease to be exercisable upon a Termination of Service or within
such period following a Termination of Service as shall have been determined by
the Board and set forth in the related Award Agreement.
5.2 The
Board may provide for any other terms and conditions for a Nonqualified Stock
Option not inconsistent with this Article V or Articles III or VI, as determined
in its sole discretion and set forth in the Award Agreement for such
Nonqualified Stock Option.
ARTICLE
VI -- INCIDENTS OF STOCK OPTIONS
6.1 Each
Stock Option shall be granted subject to such terms and conditions, if any, not
inconsistent with this Plan, as shall be determined by the Board and set forth
in the related Award Agreement, including any provisions as to continued
employment as consideration for the grant or exercise of such Stock Option and
any provisions which may be advisable to comply with applicable laws,
regulations or rulings of any governmental authority.
6.2 Except
as hereinafter described, a Stock Option shall not be transferable by the
Participant other than by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the Participant only by the
Participant or the Participant’s guardian or legal representative. In the event
of the death of a Participant, any unexercised Stock Options may be exercised to
the extent otherwise provided herein or in such Participant’s Award Agreement by
the executor or personal representative of such Participant’s estate or by any
person who acquired the right to exercise such Stock Options by bequest under
the Participant’s will or by inheritance. The Board, in its sole discretion, may
at any time permit a Participant to transfer a Nonqualified Stock Option for no
consideration to or for the benefit of one or more members of the Participant’s
Immediate Family (including, without limitation, to a trust for the benefit of
the Participant and/or one or more members of such Participant’s Immediate
Family or a corporation, partnership or limited liability company established
and controlled by the Participant and/or one or more members of such
Participant’s Immediate Family), subject to such limits as the Board may
establish. The transferee of such Nonqualified Stock Option shall remain subject
to all terms and conditions applicable to such Nonqualified Stock Option prior
to such transfer. The foregoing right to transfer the Nonqualified Stock Option,
if granted by the Board shall apply to the right to consent to amendments to the
Award Agreement.
6.3 Shares
of Common Stock purchased upon exercise of a Stock Option shall be paid for in
such amounts, at such times and upon such terms as shall be determined by the
Board, subject to limitations set forth in the Stock Option Award Agreement.
The Board may, in its sole discretion, permit the exercise of a Stock Option by
payment in cash or by tendering shares of Common Stock (either by actual
delivery of such shares or by attestation), or any combination thereof, as
determined by the Board. In the sole discretion of the Board, payment in shares
of Common Stock also may be made with shares received upon the exercise or
partial exercise of the Stock Option, whether or not involving a series of
exercises or partial exercises and whether or not share certificates for such
shares surrendered have been delivered to the Participant. The Board also may,
in its sole discretion, permit the payment of the exercise price of a Stock
Option by the voluntary surrender of all or a portion of the Stock Option.
Shares of Common Stock previously held by the Participant and surrendered in
payment of the Option Price of a Stock Option shall be valued for such purpose
at the Fair Market Value thereof on the date the Stock Option is exercised.
6.4 The
holder of a Stock Option shall have no rights as a shareholder with respect to
any shares covered by the Stock Option (including, without limitation, any
voting rights, the right to inspect or receive the Company’s balance sheets or
financial statements or any rights to receive dividends or non-cash
distributions with respect to such shares) until such time as the holder has
exercised the Stock Option and then only with respect to the number of shares
which are the subject of the exercise. No adjustment shall be made for dividends
or other rights for which the record date is prior to the date such stock
certificate is issued.
6.5 The
Board may permit the voluntary surrender of all or a portion of any Stock Option
granted under the Plan to be conditioned upon the granting to the Participant of
a new Stock Option for the same or a different number of shares of Common Stock
as the Stock Option surrendered, or may require such voluntary surrender as a
condition precedent to a grant of a new Stock Option to such Participant.
Subject to the provisions of the Plan, such new Stock Option shall be
exercisable at such Option Price, during such Option Period and on such other
terms and conditions as are specified by the Board at the time the new Stock
Option is granted. Upon surrender, the Stock Options surrendered shall be
canceled and the shares of Common Stock previously subject to them shall be
available for the grant of other Stock Options.
6.6 The
Board may at any time offer to purchase a Participant’s outstanding Stock
Option for a payment equal to the value of such Stock Option payable in cash,
shares of Common Stock or Restricted Stock or other property upon surrender of
the Participant’s Stock Option, based on such terms and conditions as the Board
shall establish and communicate to the Participant at the time that such offer
is made.
6.7 The
Board shall have the discretion, exercisable either at the time the Award is
granted or at the time the Participant discontinues employment, to establish as
a provision applicable to the exercise of one or more Stock Options that, during
a limited period of exercisability following a Termination of Service, the Stock
Option may be exercised not only with respect to the number of shares of Common
Stock for which it is exercisable at the time of the Termination of Service but
also with respect to one or more subsequent installments for which the Stock
Option would have become exercisable had the Termination of Service not
occurred.
ARTICLE
VII -- RESTRICTED STOCK
7.1 The
Board, in its sole discretion, may from time to time on or after the Effective
Date award shares of Restricted Stock to Eligible Persons as a reward for past
service and an incentive for the performance of future services that will
contribute materially to the successful operation of the Company and its
Affiliates, subject to the terms and conditions set forth in this Article
VII.
7.2 The
Board shall determine the terms and conditions of any Award of Restricted Stock,
which shall be set forth in the related Award Agreement, including without
limitation:
(a) the
purchase price, if any, to be paid for such Restricted Stock, which may be zero,
subject to such minimum consideration as may be required by applicable law;
(b) the
duration of the Restriction Period or Restriction Periods with respect to such
Restricted Stock and whether any events may accelerate or delay the end of such
Restriction Period(s);
(c) the
circumstances upon which the restrictions or limitations shall lapse, and
whether such restrictions or limitations shall lapse as to all shares of
Restricted Stock at the end of the Restriction Period or as to a portion of the
shares of Restricted Stock in installments during the Restriction Period by
means of one or more vesting schedules;
(d) whether
such Restricted Stock is subject to repurchase by the Company or to a right of
first refusal at a predetermined price or if the Restricted Stock may be
forfeited entirely under certain conditions;
(e) whether
any performance goals may apply to a Restriction Period to shorten or lengthen
such period; and
(f) whether
dividends and other distributions with respect to such Restricted Stock are to
be paid currently to the Participant or withheld by the Company for the account
of the Participant.
7.3 Awards
of Restricted Stock must be accepted within a period of thirty (30) days after
the Grant Date (or such shorter or longer period as the Board may specify at
such time) by executing an Award Agreement with respect to such Restricted Stock
and tendering the purchase price, if any. A prospective recipient of an Award of
Restricted Stock shall not have any rights with respect to such Award, unless
such recipient has executed an Award Agreement with respect to such Restricted
Stock, has delivered a fully executed copy thereof to the Board and has
otherwise complied with the applicable terms and conditions of such Award.
7.4 In
the sole discretion of the Board and as set forth in the Award Agreement for an
Award of Restricted Stock, all shares of Restricted Stock held by a Participant
and still subject to restrictions shall be forfeited by the Participant upon the
Participant’s Termination of Service and shall be reacquired, canceled and
retired by the Company. Notwithstanding the foregoing, unless otherwise provided
in an Award Agreement with respect to an Award of Restricted Stock, in the event
of the death, Disability or Retirement of a Participant during the Restriction
Period, or in other cases of special circumstances (including hardship or other
special circumstances of a Participant whose employment is involuntarily
terminated), the Board may elect to waive in whole or in part any remaining
restrictions with respect to all or any part of such Participant’s Restricted
Stock, if it finds that a waiver would be appropriate.
7.5 Except
as otherwise provided in this Article VII, no shares of Restricted Stock
received by a Participant shall be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of during the Restriction Period.
7.6 Upon
an Award of Restricted Stock to a Participant, a certificate or certificates
representing the shares of such Restricted Stock will be issued to and
registered in the name of the Participant. Unless otherwise determined by the
Board, such certificate or certificates will be held in custody by the Company
until (i) the Restriction Period expires and the restrictions or limitations
lapse, in which case one or more certificates representing such shares of
Restricted Stock that do not bear a restrictive legend (other than any legend as
required under applicable federal or state securities laws) shall be delivered
to the Participant, or (ii) a prior forfeiture by the Participant of the shares
of Restricted Stock subject to such Restriction Period, in which case the
Company shall cause such certificate or certificates to be canceled and the
shares represented thereby to be retired, all as set forth in the Participant’s
Award Agreement. It shall be a condition of an Award of Restricted Stock that
the Participant deliver to the Company a stock power endorsed in blank relating
to the shares of Restricted Stock to be held in custody by the Company.
7.7 Except
as provided in this Article VII or in the related Award Agreement, a Participant
receiving an Award of shares of Restricted Stock Award shall have, with respect
to such shares, all rights of a shareholder of the Company, including the right
to vote the shares and the right to receive any distributions, unless and until
such shares are otherwise forfeited by such Participant; provided, however, the
Board may require that any cash dividends with respect to such shares of
Restricted Stock be automatically reinvested in additional shares of Restricted
Stock subject to the same restrictions as the underlying Award, or may require
that cash dividends and other distributions on Restricted Stock be withheld by
the Company or its Affiliates for the account of the Participant. The Board
shall determine whether interest shall be paid on amounts withheld, the rate of
any such interest, and the other terms applicable to such withheld amounts.
ARTICLE
VIII -- STOCK AWARDS
8.1 The
Board, in its sole discretion, may from time to time on or after the Effective
Date grant Stock Awards to Eligible Persons in payment of compensation that has
been earned or as compensation to be earned, including without limitation
compensation awarded or earned concurrently with or prior to the grant of the
Stock Award, subject to the terms and conditions set forth in this Article
VIII.
8.2 For
the purposes of this Plan, in determining the value of a Stock Award, all shares
of Common Stock subject to such Stock Award shall be set in the Award Agreement
and may be less than one hundred percent (100%) of the Fair Market Value of the
Common Stock at the Grant Date.
8.3 Unless
otherwise determined by the Board and set forth in the related Award Agreement,
shares of Common Stock subject to a Stock Award will be issued, and one or more
certificates representing such shares will be delivered, to the Participant as
soon as practicable following the Grant Date of such Stock Award. Upon the
issuance of such shares and the delivery of one or more certificates
representing such shares to the Participant, such Participant shall be and
become a shareholder of the Company fully entitled to receive dividends, to vote
and to exercise all other rights of a shareholder of the Company.
Notwithstanding any other provision of this Plan, unless the Board expressly
provides otherwise with respect to a Stock Award, as set forth in the related
Award Agreement, no Stock Award shall be deemed to be an outstanding Award for
purposes of the Plan.
ARTICLE
IX -- PERFORMANCE SHARES
9.1 The
Board, in its sole discretion, may from time to time on or after the Effective
Date award Performance Shares to Eligible Persons as an incentive for the
performance of future services that will contribute materially to the successful
operation of the Company and its Affiliates, subject to the terms and conditions
set forth in this Article IX.
9.2 The
Board shall determine the terms and conditions of any Award of Performance
Shares, which shall be set forth in the related Award Agreement, including
without limitation:
(a) the
purchase price, if any, to be paid for such Performance Shares, which may be
zero, subject to such minimum consideration as may be required by applicable
law;
(b) the
performance period (the “Performance Period”) and/or performance objectives (the
“Performance Objectives”) applicable to such Awards;
(c) the
number of Performance Shares that shall be paid to the Participant if the
applicable Performance Objectives are exceeded or met in whole or in part;
and
(d) the
form of settlement of a Performance Share.
9.3 At
any date, each Performance Share shall have a value equal to the Fair Market
Value of a share of Common Stock.
9.4 Performance
Periods may overlap, and Participants may participate simultaneously with
respect to Performance Shares for which different Performance Periods are
prescribed.
9.5 Performance
Objectives may vary from Participant to Participant and between Awards and shall
be based upon such performance criteria or combination of factors as the Board
may deem appropriate, including, but not limited to, minimum earnings per share
or return on equity. If during the course of a Performance Period there shall
occur significant events which the Board expects to have a substantial effect on
the applicable Performance Objectives during such period, the Board may revise
such Performance Objectives.
9.6 In
the sole discretion of the Board and as set forth in the Award Agreement for an
Award of Performance Shares, all Performance Shares held by a Participant and
not earned shall be forfeited by the Participant upon the Participant’s
Termination of Service. Notwithstanding the foregoing, unless otherwise provided
in an Award Agreement with respect to an Award of Performance Shares, in the
event of the death, Disability or Retirement of a Participant during the
applicable Performance Period, or in other cases of special circumstances
(including hardship or other special circumstances of a Participant whose
employment is involuntarily terminated), the Board may determine to make a
payment in settlement of such Performance Shares at the end of the Performance
Period, based upon the extent to which the Performance Objectives were satisfied
at the end of such period and pro-rated for the portion of the Performance
Period during which the Participant was employed by the Company or an Affiliate;
provided, however, that the Board may provide for an earlier payment in
settlement of such Performance Shares in such amount and under such terms and
conditions as the Board deems appropriate or desirable.
9.7 The
settlement of a Performance Share shall be made in cash, whole shares of Common
Stock or a combination thereof and shall be made as soon as practicable after
the end of the applicable Performance Period. Notwithstanding the foregoing, the
Board in its sole discretion may allow a Participant to defer payment in
settlement of Performance Shares on terms and conditions approved by the Board
and set forth in the related Award Agreement entered into in advance of the time
of receipt or constructive receipt of payment by the Participant.
9.8 Performance
Shares shall not be transferable by the Participant. The Board shall have the
authority to place additional restrictions on the Performance Shares including,
but not limited to, restrictions on transfer of any shares of Common Stock that
are delivered to a Participant in settlement of any Performance Shares.
ARTICLE
X -- CHANGES OF CONTROL OR OTHER FUNDAMENTAL CHANGES
10.1 Upon
the occurrence of a Change of Control and unless otherwise provided in the Award
Agreement with respect to a particular Award:
(a) all
outstanding Stock Options shall become immediately exercisable in full, subject
to any appropriate adjustments in the number of shares subject to the Stock
Option and the Option Price, and shall remain exercisable for the remaining
Option Period, regardless of any provision in the related Award Agreement
limiting the exercisability of such Stock Option or any portion thereof for any
length of time;
(b) all
outstanding Performance Shares with respect to which the applicable Performance
Period has not been completed shall be paid out as soon as practicable as
follows:
(i) all
Performance Objectives applicable to the Award of Performance Shares shall be
deemed to have been satisfied to the extent necessary to earn one hundred
percent (100%) of the Performance Shares covered by the Award;
(ii) the
applicable Performance Period shall be deemed to have been completed upon
occurrence of the Change of Control;
(iii) the
payment to the Participant in settlement of the Performance Shares shall be the
amount determined by the Board, in its sole discretion, or in the manner stated
in the Award Agreement, as multiplied by a fraction, the numerator of which is
the number of full calendar months of the applicable Performance Period that
have elapsed prior to occurrence of the Change of Control, and the denominator
of which is the total number of months in the original Performance Period;
and
(iv) upon
the making of any such payment, the Award Agreement as to which it relates shall
be deemed terminated and of no further force and effect.
(c) all
outstanding shares of Restricted Stock with respect to which the restrictions
have not lapsed shall be deemed vested, and all such restrictions shall be
deemed lapsed and the Restriction Period ended.
10.2 Anything
contained herein to the contrary notwithstanding, upon the dissolution or
liquidation of the Company, each Award granted under the Plan and then
outstanding shall terminate; provided, however, that following the adoption of a
plan of dissolution or liquidation, and in any event prior to the effective date
of such dissolution or liquidation, each such outstanding Award granted
hereunder shall be exercisable in full and all restrictions shall lapse, to the
extent set forth in Section 10.1(a), (b) and (c) above.
10.3 After
the merger of one or more corporations into the Company or any Affiliate, any
merger of the Company into another corporation, any consolidation of the Company
or any Affiliate of the Company and one or more corporations, or any other
corporate reorganization of any form involving the Company as a party thereto
and involving any exchange, conversion, adjustment or other modification of the
outstanding shares of the Common Stock, each Participant shall, at no additional
cost, be entitled, upon any exercise of such Participant’s Stock Option, to
receive, in lieu of the number of shares as to which such Stock Option shall
then be so exercised, the number and class of shares of stock or other
securities or such other property to which such Participant would have been
entitled to pursuant to the terms of the agreement of merger or consolidation or
reorganization, if at the time of such merger or consolidation or
reorganization, such Participant had been a holder of record of a number of
shares of Common Stock equal to the number of shares as to which such Stock
Option shall then be so exercised. Comparable rights shall accrue to each
Participant in the event of successive mergers, consolidations or
reorganizations of the character described above. The Board may, in its sole
discretion, provide for similar adjustments upon the occurrence of such events
with regard to other outstanding Awards under this Plan. The foregoing
adjustments and the manner of application of the foregoing provisions shall be
determined by the Board in its sole discretion. Any such adjustment may provide
for the elimination of any fractional shares which might otherwise become
subject to an Award. All adjustments made as the result of the foregoing in
respect of each Incentive Stock Option shall be made so that such Incentive
Stock Option shall continue to be an Incentive Stock Option, as defined in
Section 422 of the Code.
ARTICLE
XI -- AMENDMENT AND TERMINATION
11.1 Subject
to the provisions of Section 11.2, the Board of Directors at any time and from
time to time may amend or terminate the Plan as may be necessary or desirable to
implement or discontinue the Plan or any provision hereof. To the extent
required by the Act or the Code, however, no amendment, without approval by the
Company’s shareholders, shall:
(a) materially
alter the group of persons eligible to participate in the Plan;
(b)
except as provided in Section 3.4, change the maximum
aggregate number of shares of Common Stock that are available for Awards under
the Plan;
(c) alter
the class of individuals eligible to receive an Incentive Stock Option or
increase the limit on Incentive Stock Options set forth in Section 4.1(d) or the
value of shares of Common Stock for which an Eligible Employee may be granted
an Incentive Stock Option.
11.2 No
amendment to or discontinuance of the Plan or any provision hereof by the Board
of Directors or the shareholders of the Company shall, without the written
consent of the Participant, adversely affect (in the sole discretion of the
Board) any Award theretofore granted to such Participant under this Plan;
provided, however, that the Board retains the right and power to:
(a)
annul any Award if the Participant is terminated for cause as
determined by the Board; and
(b)
convert any outstanding Incentive Stock Option to a
Nonqualified Stock Option.
11.3 If
a Change of Control has occurred, no amendment or termination shall impair the
rights of any person with respect to an outstanding Award as provided in Article
X.
ARTICLE
XII -- MISCELLANEOUS PROVISIONS
12.1 Nothing
in the Plan or any Award granted hereunder shall confer upon any Participant any
right to continue in the employ of the Company or its Affiliates or to serve as
a Director or shall interfere in any way with the right of the Company or its
Affiliates or the shareholders of the Company, as applicable, to terminate the
employment of a Participant or to release or remove a Director at any time.
Unless specifically provided otherwise, no Award granted under the Plan shall be
deemed salary or compensation for the purpose of computing benefits under any
employee benefit plan or other arrangement of the Company or its Affiliates for
the benefit of their respective employees unless the Company shall determine
otherwise. No Participant shall have any claim to an Award until it is actually
granted under the Plan and an Award Agreement has been executed and delivered to
the Company. To the extent that any person acquires a right to receive payments
from the Company under the Plan, such right shall, except as otherwise provided
by the Board, be no greater than the right of an unsecured general creditor of
the Company. All payments to be made hereunder shall be paid from the general
funds of the Company, and no special or separate fund shall be established and
no segregation of assets shall be made to assure payment of such amounts, except
as provided in Article VII with respect to Restricted Stock and except as
otherwise provided by the Board.
12.2
The Plan and the grant of Awards shall be subject to all applicable federal and
state laws, rules, and regulations and to such approvals by any government or
regulatory agency as may be required. Any provision herein relating to
compliance with Rule 16b-3 under the Act shall not be applicable with respect to
participation in the Plan by Participants who are not subject to Section 16 of
the Act.
12.3 The
terms of the Plan shall be binding upon the Company, its successors and
assigns.
12.4 Neither
a Stock Option nor any other type of equity-based compensation provided for
hereunder shall be transferable except as provided for in Section 6.2. In
addition to the transfer restrictions otherwise contained herein, additional
transfer restrictions shall apply to the extent required by federal or state
securities laws. If any Participant makes such a transfer in violation hereof,
any obligation hereunder of the Company to such Participant shall terminate
immediately.
12.5 This
Plan and all actions taken hereunder shall be governed by the laws of the State
of Nevada.
12.6 Each
Participant exercising an Award hereunder agrees to give the Board prompt
written notice of any election made by such Participant under Section 83(b) of
the Code, or any similar provision thereof.
12.7 If
any provision of this Plan or an Award Agreement is or becomes or is deemed
invalid, illegal or unenforceable in any jurisdiction, or would disqualify the
Plan or any Award Agreement under any law deemed applicable by the Board, such
provision shall be construed or deemed amended to conform to applicable laws, or
if it cannot be construed or deemed amended without, in the determination of the
Board, materially altering the intent of the Plan or the Award Agreement, it
shall be stricken, and the remainder of the Plan or the Award Agreement shall
remain in full force and effect.
12.8 The
grant of an Award pursuant to this Plan shall not affect in any way the right or
power of the Company or any of its Affiliates to make adjustments,
reclassification, reorganizations, or changes of its capital or business
structure, or to merge or consolidate, or to dissolve, liquidate or sell, or to
transfer all or part of its business or assets.
12.9 The
Plan is not subject to the provisions of ERISA or qualified under Section 401(a)
of the Code.
12.10
If a Participant is required to pay to the Company an amount with respect to
income and employment tax withholding obligations in connection with (i) the
exercise of a Nonqualified Stock Option, (ii) certain dispositions of Common
Stock acquired upon the exercise of an Incentive Stock Option, or (iii) the
receipt of Common Stock pursuant to any other Award, then the issuance of Common
Stock to such Participant shall not be made (or the transfer of shares by such
Participant shall not be required to be effected, as applicable) unless such
withholding tax or other withholding liabilities shall have been satisfied in a
manner acceptable to the Company. To the extent provided by the terms of an
Award Agreement, the Participant may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of Common Stock
under an Award by any of the following means (in addition to the Company’s right
to withhold from any compensation paid to the Participant by the Company) or by
a combination of such means: (i) tendering a cash payment; (ii) authorizing the
Company to withhold shares of Common Stock from the shares of Common Stock
otherwise issuable to the Participant as a result of the exercise or acquisition
of Common Stock under the Award, provided, however, that no shares of Common
Stock are withheld with a value exceeding the minimum amount of tax required to
be withheld by law; or (iii) delivering to the Company owned and unencumbered
shares of Common Stock.
Adopted
by the Board of Directors on December 27, 2013, and ratified by the stockholders of the Company on February 13,
2014. Amended by the Board of Directors on February 8, 2016 and ratified by the stockholders of the Company on March 29,
2016. Amended by the Board of Directors on December 17, 2018 and ratified by the stockholders of the Company on February
[ ], 2019.
CAMBER
ENERGY, INC.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL
MEETING OF STOCKHOLDERS – February 19, 2019 AT 10:30 A.M. local time
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CONTROL
ID:
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REQUEST
ID:
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The
undersigned stockholder of CAMBER ENERGY, INC., a Nevada corporation (the “
Company
”), hereby acknowledges
receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement of the Company, each dated on or around January
9, 2019, and hereby appoints Louis G. Schott and Robert Schleizer (the “
Proxies
”) proxies and attorneys-in-fact,
each with full power of substitution, on behalf and in the name of the undersigned, to represent the undersigned at the 2019
annual Meeting of Stockholders of the Company, to be held on February 19, 2019 at 10:30 A.M. central standard time at 1415
Louisiana, Suite 3500, Houston, Texas 77002 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. You 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:
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Please
mark, sign, date, and return this Proxy Card promptly using the enclosed envelope.
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FAX:
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Complete
the reverse portion of this Proxy Card and Fax to
202-521-3464.
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INTERNET:
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https://www.iproxydirect.com/CEI
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PHONE:
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1-866-752-VOTE(8683)
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ANNUAL
MEETING OF THE STOCKHOLDERS OF
CAMBER ENERGY, INC.
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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
1
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FOR
ALL
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WITHHOLD
ALL
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FOR
ALL
EXCEPT
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Election
of Directors:
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☐
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☐
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Robert
Schleizer
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☐
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Louis
G. Schott
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☐
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Control
ID:
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Fred
Zeidman
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☐
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REQUEST
ID:
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James
G. Miller
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Proposal
2
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→
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FOR
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AGAINST
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ABSTAIN
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Amend
the Company’s Articles of Incorporation (as amended, the “
Articles
”) to increase the number of our
authorized shares of common stock from 20,000,000 to 250,000,000.
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☐
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☐
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☐
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Proposal
3
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→
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FOR
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AGAINST
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ABSTAIN
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Authorize
the Board to effect a reverse stock split of our outstanding common stock in a ratio of between one-for-five and one-for-twenty-five,
in their sole discretion, without further stockholder approval, by amending the Company’s Articles of Incorporation,
at any time prior to the earlier of (a) the one year anniversary of this annual meeting; and (b) the date of our 2020 annual
meeting of stockholders, provided that all fractional shares as a result of the split shall be automatically rounded up to
the next whole share.
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☐
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Proposal
4
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FOR
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AGAINST
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ABSTAIN
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Approval
of the issuance of such number of shares of common stock exceeding 19.99% of our outstanding common stock, issuable upon conversion
of the 369 shares of Series C Redeemable Convertible Preferred Stock (“
Series C Preferred Stock
”), including
shares issuable for dividends and conversion premiums thereon sold pursuant to that certain Stock Purchase Agreement entered
into with an institutional investor on October 29, 2018, and to approve the terms of such October 2018 Stock Purchase Agreement.
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☐
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☐
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Proposal
5
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→
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FOR
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AGAINST
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ABSTAIN
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Approval
of the issuance of such number of shares of common stock exceeding 19.99% of our outstanding common stock, issuable upon conversion
of the 2,941 shares of Series C Preferred Stock, including shares issuable for dividends and conversion premiums thereon sold
and which may be sold, pursuant to that certain Stock Purchase Agreement entered into with an institutional investor on November
23, 2018 (and amended on December 3, 2018), and to approve the terms of such Stock Purchase Agreement (as amended to date,
the “
November 2018 Purchase Agreement
”).
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☐
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☐
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☐
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Proposal
6
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→
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FOR
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AGAINST
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ABSTAIN
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Ratification
of an amendment (the “
Stock Plan Amendment
”) to the Company’s Amended and Restated 2014 Stock Incentive
Plan (the “
2014 Plan
”) to increase the number of shares of common stock available under the 2014 Plan from
1,600 to 2,500,000 shares.
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☐
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☐
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☐
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Proposal
7
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→
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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, 2019.
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☐
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☐
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☐
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Proposal
8
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→
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FOR
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AGAINST
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ABSTAIN
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Approval
of the issuance of up to 40,000 shares of common stock upon the exercise of warrants to purchase 40,000 shares of common stock
granted to our former CEO as part of a Separation and Release Agreement.
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☐
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☐
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☐
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Proposal
9
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→
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FOR
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AGAINST
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ABSTAIN
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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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☐
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☐
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☐
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Proposal
10
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Transacting
any other business as may properly come before the meeting.
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MARK
“
X
” HERE IF YOU PLAN TO ATTEND THE MEETING: ☐
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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 and “
For
” Each of Proposals 2 through 9, 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:
________________________, 2019
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(Print
Name of Stockholder and/or Joint Tenant)
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(Signature
of Stockholder)
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(Second
Signature if held jointly)
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