Camber Energy, Inc. 8-K [cei-8k_100317.htm] 

Exhibit 10.1

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement (“Agreement”) is made and entered into on October
4, 2017 (“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 $16 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 1,684 Preferred Shares of Company at $10,000.00 per share
with a 5.0% original issue discount (“OID”) for the sum of $16,000,000.00
(“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.

Except as described on Schedule II.C.2 with regard to the first four Closings
only, the Common Stock is listed for and currently trading on the same or higher
Trading Market and, subject to Section IV.L below, 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 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.

Except as described on Schedule II.C.5 with regard to the first four Closings
only, 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.

Except as described on Schedule II.C.6 with regard to the first four Closings
only, 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

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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 212 Preferred Shares by payment to Company of $2,000,000.00, by wire
transfer of immediately available funds to an account designated by Company.

E.

Subsequent Closings. Subject to the terms and conditions herein, 10 days after
the initial Closing Investor will purchase 106 Preferred Shares by payment to
Company of $1,000,000.00, 10 days after the second Closing Investor will
purchase 105 Preferred Shares by payment to Company of $1,000,000.00, 10 days
after the third Closing Investor will purchase 105 Preferred Shares by payment
to Company of $1,000,000.00, 10 days after the fourth Closing Investor will
purchase 105 Preferred Shares by payment to Company of $1,000,000.00, 30 days
after the fifth Closing Investor will purchase 525 Preferred Shares by payment
to Company of $5,000,000.00, and 30 days after the sixth Closing Investor will
purchase 525 Preferred Shares by payment to Company of $5,000,000.00; provided
that on each respective Closing date, all conditions in Section II.C must have
been fully satisfied as of such date, with respect to the second through fifth
Closings the Floor Price and Base Volume must have occurred, and with respect to
the final two Closings five times the 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 the 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.

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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.

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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.

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9.

Financial Condition. Except as set forth on Schedule III.A.9, the Public Reports
set forth as of the dates thereof all outstanding secured and unsecured
Indebtedness of Company or any Subsidiary, or for which Company or any
Subsidiary has commitments, and any material default with respect to any
Indebtedness. Company does not intend to incur debts beyond its ability to pay
such debts as they mature, taking into account the timing and amounts of cash to
be payable on or in respect of its debt.

10.

Section 5 Compliance. No representation or warranty or other statement made by
Company in the Transaction Documents contains any untrue statement or omits to
state a material fact necessary to make any of them, in light of the
circumstances in which it was made, not misleading. Company is not aware of any
facts or circumstances that would cause the transactions contemplated by the
Transaction Documents, when consummated, to violate Section 5 of the Act or
other federal or state securities laws or regulations.

11.

Investment Company. Company is not, and is not an Affiliate of, and immediately
after receipt of payment for the Preferred Shares, will not be or be an
Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended. Company will conduct its business in a manner
so that it will not become subject to the Investment Company Act.

12.

Acknowledgments Regarding Investor. Company’s decision to enter into this
Agreement has been based solely on the independent evaluation by Company and its
representatives, and Company acknowledges and agrees that:

a.

Investor is not, has never been, and as a result of the transactions
contemplated by the Transaction Documents will not become an officer, director,
insider, control person, to Company’s knowledge, 10% or greater shareholder, or
otherwise an affiliate of Company as defined under Rule 12b-2 of the Exchange
Act;

b.

Investor and Investor’s representatives have not made and do not make any
representations, warranties or agreements with respect to the Shares, this
Agreement, or the transactions contemplated by the Transaction Documents other
than those specifically set forth in Section III.C below; Company has not relied
upon, and expressly disclaims reliance upon, any and all written or oral
statements or representations made by any persons prior to this Agreement;

c.

The conversion of Preferred Shares and resale of Conversion Shares will result
in dilution, which may be substantial; the number of Conversion Shares will
increase in certain circumstances; and Company’s obligation to issue and deliver
Conversion Shares in accordance with this Agreement and the Certificate of
Designations is absolute and unconditional regardless of the dilutive effect
that such issuances may have; and

d.

Investor is acting solely in the capacity of arm’s length purchaser with respect
to this Agreement and the transactions contemplated hereby; neither Investor nor
any of its Affiliates, agents or representatives has or is acting as a legal,
financial, investment, accounting, tax or other advisor to Company, or fiduciary
of Company, or in any similar capacity; neither Investor nor any of its
Affiliates, agents or representatives has provided any legal, financial,
investment, accounting, tax or other advice to Company; any statement made in
connection with this Agreement or the transactions contemplated hereby is not
advice or a recommendation, and is merely incidental to Investor’s purchase of
the Shares.

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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. Shareholder approval for the Prior Securities was obtained on August
23, 2016. The limitations of Section I.G.7.b of Certificate of Designations will
not apply to the Preferred Shares. 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:

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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. Except with regard to the Quarterly Report
on Form 10-Q for the period ending June 30, 2017 which will be filed within 30
days after the Effective Date, 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.

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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.

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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 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.

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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.

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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.

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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.

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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. Within 30 days after the Effective Date the Company
will file its Quarterly Report on Form 10-Q for the period ended June 30, 2017,
and thereafter 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.

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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.

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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.

Reservation of Shares. Company will file a preliminary proxy within 10 days
after the Effective Date to effect a share combination without decreasing its
authorized shares or, alternatively, to effect an increase in its authorized
number of shares of Common Stock, and if necessary for stockholder approval of
this Agreement and the issuance of the Conversion Shares, (collectively,
“Approval”), set a meeting for the first possible date after clearing Commission
comments, and use its commercially reasonable best efforts to obtain Approval as
soon as practicable, and in any event within 90 days after the Effective Date.
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 thereafter 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.

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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.

17 

 

 

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 on June 30, 2016. 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.

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U.

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. Company has paid a flat rate documentation fee of $10,000 to
Investor’s counsel incurred in connection with drafting this Agreement and the
other Transaction Documents. 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.

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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.

20 

 

 

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.

21 

 

 

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.

22 

 

 

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.

 

By:     Name:     Title:    

 

Investor: 

 

Investor Name

 

By:     Name:     Title:    

 

23 

 

 

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 subsequent Closing, 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.

“CATI” means CATI Operating LLC, a Texas limited liability company.

“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.

“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 $0.15 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. Indebtedness does not include any of the
foregoing set forth in clauses (a) through (c) with respect to CATI.

“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). Liens does not include any of
the foregoing set forth in clauses (a) and (b) with respect to CATI.

 

 

 

“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 the Stock Purchase Agreement and Securities Purchase
Agreement between Investor and Company dated April 6, 2016, 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 527
shares of Preferred previously issued to Investor 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

Officer’s Certificate

CAMBER ENERGY, INC.

October 4, 2017

The undersigned hereby certifies that:

The undersigned is the duly appointed Chief Financial 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 4, 2017, 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.

Signed:     Name:     Title:    

 

 

 

 

Exhibit 4

Secretary’s Certificate

October 4, 2017

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 4, 2017, 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.

Signed:     Name:     Title: