LOCK-UP/LEAK-OUT AGREEMENT
This LOCK-UP/LEAK-OUT AGREEMENT (this “Agreement”) is made and entered into as of February 8, 2013, by and between Cellteck, Inc., a Nevada corporation (the “Company”) and LowCal Industries, LLC, a Wyoming limited liability company (“Shareholder”). For all purposes of this Agreement, “Shareholder” includes any affiliate or controlling person of Shareholder, and any other agent, representative or other person with whom Shareholder is acting in concert.
RECITALS
A. Contemporaneously with the execution of this Agreement, the Company’s wholly owned subsidiary, EOS Petro, Inc. and Shareholder are executing the Loan Agreement and Secured Promissory Note attached hereto as Exhibit A (the “Note and Loan Agreement”).
B. In consideration for the loan contemplated in the Note and Loan Agreement and pursuant to the terms of a Series B Convertible Preferred Stock Purchase Agreement executed by the Company and Shareholder concurrently herewith (the “Stock Purchase Agreement”), the Company has agreed to issue shares of the Company’s Series B Preferred Stock to Shareholder (the “Loan Shares”).
C. The Company’s articles of incorporation set forth the designations, powers, preferences and other rights of each share of the Company’s Series B Preferred Stock, and a copy of such rights are attached hereto as Exhibit B.
D. On October 12, 2012, pursuant to an Agreement and Plan of Merger dated July 16, 2012 (the “Merger Agreement”) the Company completed a merger transaction (the “Merger”). In the Merger Agreement, the Company agreed to implement a reverse stock split at an exchange ratio of 1-for-800 of the Company’s outstanding shares of common stock as soon as reasonably practicable following the completion of the Merger (the “Merger Reverse Split”). The terms and conditions of this Merger Reverse Split are set forth in an amendment to the Merger Agreement dated January 16, 2013, a copy of which is attached hereto as Exhibit C.
E. The Company has conditioned Shareholder’s receipt of the Loan Shares upon the full execution of this Agreement.
F. Shareholder has agreed to enter into this Agreement, which shall restrict the public sale, assignment, transfer, conveyance, hypothecation or alienation of: (i) all shares of the Company’s common stock now beneficially owned or hereafter acquired (by any means whatsoever) by Shareholder; (ii) all shares of the Company’s Series B Preferred Stock, including the Loan Shares, now beneficially owned or hereafter acquired (by any means whatsoever) by Shareholder; and (iii) all shares of the Company’s common stock issuable upon conversion of Series B Preferred Stock (the foregoing shares, collectively, the “Shares”).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and of the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. Except as otherwise expressly provided herein, commencing on the execution and delivery of this Agreement and ending on the earlier to occur of: (a) August 8, 2013; (b) the day on which the Company is listed and begins trading on either The NASDAQ Global Select Market or The NASDAQ Global Market operated by NASDAQ OMX Group, Inc., the New York Stock Exchange operated by NYSE Euronext, the NYSE Amex Market operated by NYSE, or any successor or equivalent thereto, (c) the twentieth consecutive trading day on which the trading volume of the Company’s common stock on such markets on which it may trade, including the “over-the-counter market” exceeds 80,000 shares (subject to appropriate adjustment in the case of all stock splits, dividends or similar events after the date of this Agreement other than the Merger Reverse Split, which shall not cause any adjustments in this Section 1) (the “Lock-Up Period”), Shareholder may only publicly sell its Shares subject to the following conditions:
1.1 At any time during the Lock-Up Period, Shareholder may publicly sell during any rolling three-month period up to five percent (5.0%) of the Shares beneficially owned by such Shareholder at the beginning of such three-month period.
1.2 All Shares subject to this Agreement will bear an applicable legend referencing this Agreement and will be subject to irrevocable instructions delivered to the transfer agent concurrently herewith in form and substance satisfactory to the Shareholder to ensure prompt compliance with the terms of this Agreement, including providing for releases of the Shares or removal of legends as set forth in such instructions. Such instructions will include a direction requiring the transfer agent to deliver to each party to this Agreement upon request a report setting forth the shareholdings of each party hereto and any transfers of such shares that may have occurred.
1.3 The Shareholder agrees that it will not, directly or indirectly, engage in any short selling, hypothecation of Shares or by any other manner or method sell or lend Shares that would be averse to the publicly traded shares of Company during the Lock-Up Period.
1.4 Any transferee of any of the Shares covered by this Agreement, other than purchasers in transactions in accordance with Section 1.1 or purchasers in transactions permitted under a waiver by the Company pursuant to Section 2, shall be subject to all of the terms and conditions of this Agreement, including, without limitation, all restrictions on the resale of such Shares, and for all such purposes, any such transferee shall be a “Shareholder” as defined herein.
1.5 Any purported transfer of Shares in violation of this Agreement shall be void and of no force or effect, and no such transfer shall be made or recorded on the books of the Company.
2. Notwithstanding anything to the contrary set forth herein, the Company may, in its sole discretion and in good faith, at any time and from time to time, waive any of the conditions or restrictions contained herein.
3. In the event of: (a) a completed tender offer to purchase all or substantially all of the Company’s issued and outstanding securities; or (b) a merger, consolidation or other reorganization of the Company with or into an unaffiliated entity, then this Agreement shall terminate as of the closing of such transaction and the Shares restricted pursuant hereby shall be released from such restrictions.
4. Except as otherwise provided in this Agreement or any other agreements between the parties hereto, the Shareholder shall be entitled to its respective beneficial rights of ownership of the Shares, including the right to vote the Shares for any and all purposes.
5. All notices and other communications hereunder shall be in writing and shall be acceptable if (a) delivered personally or by telecopy, or (b) if sent by registered or certified mail (return receipt requested) and postage prepaid, or (c) if sent by reputable overnight courier, so long as the parties to this Agreement receive such notices at the addresses set forth in the Stock Purchase Agreement or at such other address for a party as shall be specified by like notice. All notices shall be deemed to be given on the same day if delivered by hand or telecopy or on the following business day if sent by overnight delivery or the second business day following the date of mailing.
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6. The resale restrictions on the Shares set forth in this Agreement shall be in addition to all other restrictions on transfer imposed by applicable United States and state securities laws, rules and regulations.
7. If the Company or Shareholder fails to fully adhere to the terms and conditions of this Agreement, such party shall be liable to the other party hereto for any damages suffered by any party hereto by reason of any such breach of the terms and conditions hereof. Shareholder agrees that in the event of a breach of any of the terms and conditions of this Agreement by Shareholder, that in addition to all other remedies that may be available in law or in equity to the non-defaulting parties, the non-defaulting party may seek a preliminary and permanent injunction, without bond or surety, and an order of a court requiring such defaulting Shareholder to cease and desist from violating the terms and conditions of this Agreement and specifically requiring such Shareholder to perform his/her/its obligations hereunder is fair and reasonable by reason of the inability of the parties to this Agreement to presently determine the type, extent or amount of damages that the Company or its other shareholders may suffer as a result of any breach or continuation thereof.
8. This Agreement sets forth the entire understanding of the parties hereto with respect to the subject matter hereof, and may not be amended except by a written instrument executed by the parties hereto.
9. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada. In the event of default hereunder, the non-defaulting party shall be entitled to recover reasonable attorney’s fees incurred in the enforcement of this Agreement.
11. Shareholder represents that before executing this Agreement he or she had the opportunity to consult with competent legal counsel of his or her own choosing, carefully read the Agreement, and has been fully and fairly advised as to its terms. The parties hereto agree that any rule of law or decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived.
12. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original for all purposes and all of which shall be deemed, collectively, one agreement. The parties hereto, and their respective successors and assigns, are hereby authorized to rely upon the signature of each person on this Agreement, which are delivered by facsimile, electronic signature or scanned electronic e-mail attachment, as constituting a duly authorized, irrevocable, actual, current delivery of this Agreement with original ink signatures of each such person. Signatures of the parties transmitted by facsimile or scanned e-mail attachment shall be deemed to be their original signatures for all purposes. This Agreement shall become effective when executed and delivered by the parties hereto.
13. In case any one or more of the provision contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal or unenforceable provision shall be reformed and construed so that it will be valid, legal and enforceable to the maximum extent permitted by law.
[Remainder of Page Left Intentionally Blank; Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Lock-Up/Leak-Out Agreement as of the day and year first above written.
| “COMPANY” | ||
| CELLTECK, INC., | ||
| a Nevada corporation | ||
| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |
| Its: | Chairman | |
| “SHAREHOLDER” | ||
| LOWCAL INDUSTRIES, LLC, | ||
| a Wyoming limited liability company | ||
| By: | /s/ ▇▇▇▇▇▇ ▇▇▇▇ | |
| Its: | Managing Member | |
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Exhibit A
THE ISSUANCE AND SALE OF THE SECURITIES EVIDENCED BY THIS LOAN AGREEMENT AND PROMISSORY NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
| Principal Amount: $1,250,000 | Issue Date: February 8, 2013 |
| Note Purchase Price: $1,240,000.00 |
LOAN AGREEMENT AND SECURED PROMISSORY NOTE
This LOAN AGREEMENT AND SECURED PROMISSORY NOTE (this “Note”) is made between EOS Petro, Inc., a Delaware corporation (“Borrower”) whose office is located ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (fax +1.310-552.1556) and LowCal Industries, LLC, a Wyoming limited liability company (“Holder”), whose office is located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ [email ▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇].
Borrower is a wholly-owned subsidiary of Cellteck, Inc., a Nevada corporation (“Cellteck”). After the execution and delivery of this Note, Borrower and Cellteck intend to implement a transaction pursuant to which, among other things, Cellteck’s name will be changed to “EOS Petro, Inc.” and Borrower’s name will be changed to Eos Global Petro, Inc. All references in this Note to Cellteck shall be deemed to also be references to the same entity after its name is changed, and references to Borrower shall mean the entity that is EOS Petro, Inc. as of this date and the same entity after its name is changed.
Borrower and Holder agree as follows:
ARTICLE I
THE LOAN
1.1 The Loan and Funding. Borrower has requested Holder to make a loan to Borrower by purchasing, for One Million Two Hundred Forty Thousand and 00/100 Dollars ($1,240,000), this Note in the principal sum of One Million Two Hundred Fifty Thousand and 00/100 Dollars ($1,250,000.00) (the “Loan”). Holder has agreed to purchase this Note from Borrower on the terms and conditions set forth in this Note and the related documents referenced herein. The purchase price of this Note shall be funded in two (2) tranches of $500,000 and $740,000, with the first $500,000 tranche funded on February 8, 2013, the second $740,000 tranche funded on February 15, 2013 (the “Closing Date”), subject in each case to the satisfaction or waiver of conditions precedent to funding.
1.2 Security for Loan. Repayment of the Loan shall be secured by (i) granting to Holder a lien on, assignment of and security interest in and to certain oil and gas property rights that are held by Borrower (the “Collateral”) pursuant to a Mortgage, Assignment of Production, Security Agreement and Financing Statement (the “Assignment”) dated concurrently herewith, (ii) the Guaranty (the “Guaranty”) of Cellteck, and (iii) a first priority position or call right for an amount equal to the then-outstanding principal balance of and accrued interest on this Note on the first draw down by either Borrower or Cellteck of the $20,000,000 Equity Line of Credit (the “GEM Equity Line of Credit”) with Global Emerging Markets (“GEM”) (the “GEM Priority Call Rights”).
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1.3 Sale of Cellteck Stock. Cellteck has agreed to sell to Holder for an aggregate of Ten Thousand and 00/100 Dollars ($10,000.00) and Holder has agreed to purchase from Cellteck for an aggregate of Ten Thousand and 00/100 Dollars ($10,000.00), Five Hundred Thousand (500,000) shares of Series B Convertible Preferred Stock of Cellteck (the “Stock”). The Stock shall be sold and purchased coincident with the funding of the first tranche of the purchase price of this Note pursuant to a Series B Convertible Preferred Stock Purchase Agreement between Holder and Cellteck (the “Stock Purchase Agreement”).
1.4 Repayment. Borrower hereby promises to pay to the Holder the total sum of One Million Three Hundred Twelve Thousand Five Hundred and 00/100 Dollars ($1,312,500.00), at or before August 13, 2013 to retire the Loan and this Note, the quoted sum of which includes the principal sum of the Loan and guaranteed, accrued interest (together, the “Obligation”). As used herein, the term “Holder” shall mean the initial holder named above and any subsequent holder of this Note, whichever is applicable from time to time.
1.5 Use of Proceeds. The proceeds of the purchase price of this Note shall be used as follows: (i) a majority of such proceeds shall be used to develop the oil and gas properties subject to the Assignment, (ii) the secondary use of such proceeds is to pay any unpaid costs associated with Cellteck’s planned reverse-stock split transaction, and (iii) any remaining amount shall be used as general working capital by Borrower and Cellteck and their subsidiaries.
ARTICLE II
GENERAL PROVISIONS
2.1 Maturity Date. The maturity date of the Loan and this Note is August 13, 2013, or the earlier date to which payment of the Loan has been accelerated pursuant to the provisions hereof (the “Maturity Date”).
2.2 Interest Rate. Interest payable on the outstanding stated principal amount of this Note shall accrue at the annual rate of ten percent (10%) (“Contract Rate”) and be payable on the Maturity Date, accelerated or otherwise, when the principal and remaining accrued but unpaid interest shall be due and payable, or sooner as described below.
2.3 Default Rate. From and after the Maturity Date, or an earlier date on which all sums owing under this Note become due by acceleration or otherwise, all sums owing under this Note (both principal and interest) will bear interest until paid in full at a rate equal to five percent (5%) per annum in excess of the Contract Rate ("Default Rate").
2.4 Prepayment; Application of Payments. This Note may be prepaid by the Borrower in whole or in part, at any time before the Maturity Date without premium or penalty. All prepayments and payments on this Note shall be applied first to outstanding interest and then to the outstanding principal balance of this Note.
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2.5 Security. The Obligation shall be secured by the Assignment, the Guaranty and the GEM Priority Call Rights.
2.6 Perfection. Within seven business days of the Closing Date, Borrower shall cause the Assignment to be recorded in the real estate records in the location where the underlying real property is located. Borrower shall also (i) file and record such collateral assignments, financing statements and other documents in such offices as shall be necessary or appropriate to perfect and establish the priority of the liens granted by the Assignment and (ii) take all such other actions as Holder shall determine to be necessary or appropriate to perfect and establish the priority of the liens granted by the Assignment. Holder shall cooperate (at Borrower’s expense) with Borrower in all such actions and activities, including by signing and delivering any documents reasonably requested by Borrower to perfect and establish the priority of the liens granted by the Assignment.
2.7 Attorney in Fact.
(a) Borrower hereby appoints Holder the attorney in fact of Borrower for the purpose of carrying out the provisions of this Note and the Assignment and taking any action and executing any instruments which Holder may deem necessary or advisable to accomplish the purposes of this Note and the Assignment, to preserve the validity, perfection and priority of the liens granted by the Assignment and, following any default, to exercise its rights, remedies, powers and privileges under this Note and the Assignment. This appointment as attorney in fact is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, Holder shall be entitled under this Note and the Assignment upon the occurrence and continuation of any Event of Default (i) to make, sign, file and record any security instruments, (ii) to ask, demand, collect, ▇▇▇ for, recover, receive and give receipt and discharge for amounts due and to become due under and in respect of all or any part of the Collateral; (iii) to receive, endorse and collect any instruments or other drafts, instruments, documents and chattel paper in connection with clause (ii) above (including any draft or check representing the proceeds of insurance or the return of unearned premiums); (iv) to file any claims or take any action or proceeding that Holder may deem necessary or advisable for the collection of all or any part of the Collateral, including the collection of any compensation due and to become due under any contract or agreement with respect to all or any part of the Collateral; and (v) to execute, in connection with any sale or disposition of the Collateral, any endorsements, assignments, bills of sale or other instruments of conveyance or transfer with respect to all or any part of the Collateral.
(b) Without limiting the rights and powers of Holder under Section 2.7(a), Borrower hereby appoints Holder as its attorney in fact, effective as of the date hereof and terminating upon the satisfaction in full of the Obligation, for the purpose of (i) preparing, executing on behalf of Borrower, filing, and recording collateral assignment and financing statement documents with appropriate state and county agencies to perfect and enforce the liens granted by the Assignment, (ii) filing such applications with such state agencies and (iii) executing such other documents and instruments on behalf of, and taking such other action in the name of, Borrower as Holder may deem necessary or advisable to accomplish the purposes of this Note and the Assignment (including the purpose of creating in favor of Holder a perfected lien on the property and exercising the rights and remedies of Holder hereunder). This appointment as attorney in fact is irrevocable and coupled with an interest.
ARTICLE III
CONDITIONS TO FUNDING
The obligation of Holder to fund each tranche of the purchase price of this Note shall be subject to the satisfaction or waiver by Holder of all of the following conditions:
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3.1 Authorization. The execution, delivery and performance of this Note, the Assignment, and the Compliance/Oversight Agreement (as defined below) shall have been duly authorized by all necessary corporate action on the part of Borrower, and Borrower shall have delivered to Holder, the Certificate of Borrower’s Chief Executive Officer and Secretary certifying to the same. The execution, delivery and performance of the Stock Purchase Agreement and the Guaranty shall have been duly authorized by all necessary corporate action on the part of Cellteck, and Cellteck shall have delivered to Holder, the Certificate of Cellteck’s Chief Executive Officer and Secretary certifying to the same.
3.2 Execution and Delivery of Agreements. Borrower shall have executed and delivered to Holder, this Note, the Assignment and the Compliance/Oversight Agreement between Borrower and Holder of even date herewith (the “Compliance/Oversight Agreement”). Cellteck shall have executed and delivered to Holder, the Guaranty and the Stock Purchase Agreement. Such agreements shall be in full force and effect.
3.3 Absence of Defaults. No breach or default under any representation, warranty or covenant, and no event that with the giving of notice or the passage of time would constitute a breach or default under any representation, warranty or covenant, by Borrower or Cellteck shall have occurred under or with respect to any of this Note, the Assignment, the Compliance/Oversight Agreement, the Guaranty or the Stock Purchase Agreement. Each of Borrower and Cellteck shall have delivered to Holder, the Certificate of its Chief Executive Officer and Chief Financial Officer certifying to the same.
3.4 GEM Priority Call Rights. Borrower shall have furnished Holder with a letter from, or agreement by, GEM acknowledging this Note and agreeing that proceeds drawn on the GEM Equity Line of Credit may be used first to repay this Note, and such letter or agreement shall be satisfactory in form and substance to Holder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BORROWER
Except as disclosed in the Cellteck’s documents filed with the Securities and Exchange Commission (the “SEC”), the Borrower represents and warrants to Holder as of the date hereof:
4.1 Organization and Standing; Charter and Bylaws. Borrower is a corporation duly organized and validly existing under, and by virtue of, the laws of the State of Delaware and is in good standing under such laws. The Borrower is qualified to do business as a foreign corporation in every jurisdiction in which the failure to so qualify would have a material adverse effect on the business, assets, liabilities, condition (financial or otherwise), results of operation or prospects of the Borrower (“Material Adverse Effect”). The Borrower has the requisite corporate power and authority to own and operate its properties and assets and to carry on its business as presently conducted.
4.2 Corporate Power. The Borrower has all requisite legal and corporate power and authority to enter into this Note, the Assignment and the Compliance/Oversight Agreement, to sell this Note and to carry out and perform its other obligations under the terms of this Note, the Assignment and the Compliance/Oversight Agreement.
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4.3 Capitalization; Subsidiaries. All of capital stock of the Borrower is owned by Cellteck. There are no warrants, options, subscriptions or other rights or preferences (including conversion or preemptive rights) outstanding to acquire capital stock of Borrower, or notes, securities or other instruments convertible into or exchangeable for capital stock of Borrower, nor any agreements or understandings with respect to the issuance thereof. Borrower has two subsidiaries: EOS Atlantic Oil & Gas Ltd., a Ghanaian limited liability company, and Plethora Energy, Inc., a Delaware corporation. Borrower owns all of the capital stock of Plethora Energy, Inc. and 90% of the capital stock of EOS Atlantic Oil & Gas Ltd. The other 10% of EOS Atlantic Oil & Gas Ltd. is owned by Baychester Petroleum Ltd., one of Borrower’s Ghanaian-based consultants.
4.4 Authorization. All corporate action on the part of the Borrower and Cellteck, and their respective directors, officers and shareholders necessary for the authorization, execution, delivery and performance of all obligations of the Borrower under this Note, the Assignment and the Compliance/Oversight Agreement and all other documents contemplated hereby and thereby and for the authorization, issuance and delivery by the Borrower of this Note has been taken. This Note, the Assignment and the Compliance/Oversight Agreement have been duly executed and delivered by the Borrower and constitute the valid and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors’ rights generally, and except that the availability of the remedy of specific performance or other equitable relief is subject to the discretion of the court before which any proceeding therefor may be brought.
4.5 Compliance with Other Instruments. The Borrower is not in violation of any term of its Articles of Incorporation or Bylaws, of any provision of any mortgage, indenture, contract, agreement or instrument to which it is a party or by which it or its assets are bound, or any judgment, decree or order binding upon the Borrower. The execution, delivery and performance of and compliance with this Agreement, and the delivery of this Note, the Assignment and the Compliance/Oversight Agreement will not result in any such violation or be in conflict with or constitute a default under any of the terms or provisions of any document described in the first sentence of this section, or result in the creation of any mortgages, pledges, liens, leases, encumbrances or charges (“Encumbrance”) upon any of the properties or assets of the Borrower pursuant to any such term or provision. There is no such provision that materially and adversely affects the business, assets, liabilities, condition (financial or otherwise), results of operations or prospects of the Borrower.
4.6 No Adverse Litigation. The Borrower is not a party to any pending litigation which seeks to enjoin or restrict the Borrower’s ability to sell or transfer this Note, or enter into this Note, the Assignment and the Compliance/Oversight Agreement, nor is any such litigation threatened against the Borrower. Furthermore, there is no litigation pending or threatened against the Borrower which, if decided adversely to the Borrower, could adversely affect the Borrower’s ability to consummate the transactions contemplated herein or repay the Obligation.
4.7 Consents. No consent, order, approval or authorization of, or declaration, filing or registration with, any Governmental Authority or any person is required to be made or obtained by the Borrower in connection with the execution and delivery or the consummation of this Note, the Assignment and the Compliance/Oversight Agreement and the transactions contemplated hereby or thereby.
4.8 Title to Property and Assets.
(a) Except as set forth in title documentation delivered to Lender, Borrower owns the properties and assets covered by the Assignment free and clear of all Encumbrances. There is no pending nor, to the knowledge of Borrower, threatened condemnation, eminent domain or similar proceeding with respect to any of the properties covered by the Assignment.
(b) The assets of Borrower are sufficient to carry on the business of Borrower as currently conducted.
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4.9 Compliance with Applicable Laws. Borrower has complied and is in compliance in all material respects with all material laws, statutes, rules, regulations, ordinances and orders of all governmental entities, agencies or other bodies (“Laws”) applicable to Borrower and its assets, properties and businesses the violation of which or non-compliance with which could have a Material Adverse Effect. Borrower has not received any notice of any asserted material violation of, and it has no basis to believe it is not in compliance in all material respects with, any such Laws. No investigation or review by any governmental entity with respect to Borrower or any of its businesses, assets or properties is pending or, to the knowledge of Borrower, has been threatened, nor has any governmental entity indicated an intention to conduct any such investigation or review. Borrower has filed with all proper authorities all material statements and reports required by any Law to which Borrower is subject, and Borrower possesses all material licenses, franchises, permits and governmental authorizations necessary in the conduct of its businesses in the manner in which and in the jurisdictions where Borrower presently conducts such businesses. There are no unresolved reports, warning letters or other documents received from or issued by any governmental entity that indicate or suggest a material lack of compliance with applicable regulatory requirements by Borrower. As used herein, the term “Borrower’s knowledge”, “knowledge of Borrower” or similar terms shall mean the actual knowledge, or matters that could have been known after due inquiry (including, without limitation, inquiry of other persons within its organization having knowledge of the subject matter and any professionals retained with respect to any such matter), of any officer or director of Borrower.
4.10 Material Contracts. Borrower has performed all obligations required to be performed by it to date under each material contract to which it is a party or under which it derives substantial benefits (“Contracts”) and is not (with or without the lapse of time or the giving of notice, or both) in breach or default thereunder. To the knowledge of Borrower, each of the parties to the Contracts other than Borrower has performed all obligations required to be performed by such party to date under the Contracts and is not (with or without the lapse of time or the giving of notice, or both) in breach or default thereunder. Each Contract is a legal, valid and binding obligation of the parties thereto and is in full force and effect.
4.11 Environmental Matters. Neither Borrower nor any predecessor of any of Borrower is in material violation of any Environmental Law. For purposes of this Agreement, “Environmental Laws” means any United States federal, state or local laws, regulations and enforceable governmental orders relating to pollution or protection of the environment, human health and safety, or natural resources, including, without limitation the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., and the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq.
4.12 Disclosure. No representation or warranty contained in this Note, the Assignment, the Guaranty or the Stock Purchase Agreement or information furnished by Borrower to Lender pursuant hereto or in connection with the transaction contemplated by this Note, the Assignment, the Guaranty or the Stock Purchase Agreement contains any untrue statement of material fact or omits to state a material fact about or concerning it or its subsidiaries or their respective businesses and assets.
4.13 Representations and Warranties of Cellteck. Each representation and warranty of Cellteck made in the Stock Purchase Agreement and the Guaranty is true and correct all respects.
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ARTICLE V
EVENT OF DEFAULT
The occurrence of any of the following events of default (“Event of Default”) shall, at the option of the Holder hereof, make all sums of principal and interest then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, upon demand, without presentment, or grace period, all of which hereby are expressly waived, except as set forth below:
5.1 Failure to Pay Principal or Interest. The Borrower fails to pay any principal or interest due under this Note when due, including any applicable grace period.
5.2 Breach of Covenant. (i) The Borrower breaches any material covenant or other term or condition of this Note, the Assignment or the Compliance/Oversight Agreement, in any material respect and such breach, if subject to cure, continues for a period of five (5) business days after written notice to the Borrower from the Holder, or (ii) Cellteck breaches any material covenant or other term or condition of the Guaranty or the Stock Purchase Agreement, in any material respect and such breach, if subject to cure, continues for a period of five (5) business days after written notice to Cellteck from the Holder.
5.3 Breach of Representations and Warranties. (i) Any material representation or warranty of the Borrower made herein, in the Assignment, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith shall be false or misleading in any material respect as of the date made, or (ii) any material representation or warranty of Cellteck made in the Guaranty, the Stock Purchase Agreement or in any agreement, statement or certificate given in writing pursuant thereto or in connection herewith shall be false or misleading in any material respect as of the date made.
5.4 Liquidation. Any dissolution, liquidation or winding up of Borrower or Cellteck or any substantial portion of their respective businesses.
5.5 Cessation of Operations. Any cessation of operations by Borrower or Cellteck or Borrower or Cellteck admits it is otherwise generally unable to pay its debts as such debts become due.
5.6 Maintenance of Assets. The failure by Borrower to maintain any material oil and gas properties, leases, interests or rights, including, without limitation, any such properties, leases, interests or rights covered by the Assignment, or any personal, real property or other assets which are necessary to conduct its business (whether now or in the future).
5.7 Receiver or Trustee. The Borrower or any material subsidiary of Borrower or Cellteck shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed.
5.8 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law, or the issuance of any notice in relation to such event, for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of Borrower or Cellteck.
5.9 Delisting. Delisting of the Cellteck’s common stock from any principal market on which it is listed or quoted, failure to comply with the requirements for continued listing on a principal market for a period of five (5) consecutive trading days, or notification from a principal market that Cellteck is not in compliance with the conditions for such continued listing on such principal market.
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5.10 Non-Payment. A default by the Borrower or Cellteck under any one or more obligations in an aggregate monetary amount in excess of $200,000 for more than twenty (20) days after the due date, unless the Borrower or Cellteck is contesting the validity of such obligation in good faith.
5.11 Failure to Deliver Common Stock. Cellteck’s failure to timely deliver to the Holder certificates representing the Stock at or prior to the funding of the initial tranche of the purchase price of this Note.
5.12 Financial Statement Restatement. The restatement of any financial statements filed by Cellteck with the SEC for any date or period from two years prior to the date hereof and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statements, have constituted a Material Adverse Effect.
5.13 Executive Officers Breach of Duties. Any of Borrower’s named executive officers or directors is convicted of a criminal violation of securities laws, or a settlement in excess of $250,000 is reached by any such officer or director relating to a violation of securities laws, breach of fiduciary duties or self-dealing.
ARTICLE VI
CERTAIN COVENANTS
6.1 Corporate Existence. From the funding of the initial tranche of the purchase price of this Note and for so long as this Note is outstanding, the Borrower shall, and shall cause each of its material subsidiaries to (i) conduct its operations in the ordinary course of business consistent with past practice, (ii) maintain its corporate existence and (iii) maintain and protect its oil and gas properties, leases, interests or rights, including, without limitation, any such properties, leases, interests or rights covered by the Assignment and all other material assets used and useful in the business of the Borrower and its material subsidiaries.
6.2 Filing Status. For so long as the Note is outstanding, Borrower shall cause Cellteck to timely file all reports required to be filed with the SEC pursuant to the Exchange Act, and Borrower shall cause Cellteck not to terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would otherwise permit such termination.
6.3 SEC Filings. For so long as the Note is outstanding, (i) Borrower shall use its commercially reasonable efforts to cause Cellteck to timely file with the SEC, within the time periods specified in the SEC’s rules and regulations, all quarterly and annual financial information required to be filed with the SEC on Forms 10-Q and 10-K, all current reports required to be filed with the SEC on Form 8-K and any other information required to be filed with the SEC; (ii) Borrower shall cause Cellteck not to terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would otherwise permit such termination and (iii) Borrower shall cause Cellteck to deliver (A) copies of all such filings with the SEC to the Holder within one (1) day after the filing thereof with the SEC, unless the foregoing are filed with the SEC through ▇▇▇▇▇ and are immediately available to the public through ▇▇▇▇▇ and (B) facsimile copies of all press releases issued by Cellteck, Borrower or any of its subsidiaries on the same day as the release thereof, except to the extent any such release is available through Bloomberg Financial Markets (or any successor thereto) contemporaneously with such issuance.
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6.4 Listing. Borrower shall cause Cellteck to use its commercially reasonable efforts to take all actions necessary to remain eligible for quotation of its securities on the OTC Bulletin Board and to cause the common stock of Cellteck to be quoted thereon, unless listed on another nationally recognized stock exchange, interdealer quotation system or market. Borrower shall use its commercially reasonable efforts to promptly secure the listing of all of the Stock upon each national stock exchange, interdealer quotation system or market, if any, upon which shares of common stock are then listed and shall maintain, so long as any other shares of such stock shall be so listed, such listing of all shares of the Stock. Borrower cause Cellteck not to take any action which would be reasonably expected to result in the suspension or termination of trading of its common stock on the OTC Bulletin Board or other such nationally recognized stock exchange, interdealer quotation system or market. Borrower shall pay or cause Cellteck to pay all fees and expenses in connection with satisfying its obligations under this Section 6.4.
6.5 Use of GEM proceeds. When it is first permitted to do so under the terms of the GEM Equity Line of Credit, Borrower shall draw, or shall cause Cellteck to draw, and pay to Holder, the full amount necessary to repay this Note and all amounts owing hereunder. Borrower shall not use, and shall cause Cellteck not to use, the proceeds of any borrowings or advances under the GEM Equity Line of Credit for any purpose other than the repayment of this Note and any amounts due hereunder until this Note and such amounts have been paid in full.
ARTICLE VII
MISCELLANEOUS
7.1 Failure or Indulgence Not Waiver; Borrower Waiver. No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. Moreover, Borrower waives presentment for payment, protest and notice of protest and nonpayment of this Note.
7.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the first business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: (i) if to the Borrower to the address and facsimile number set forth on the front page of this Note, Attn: CEO, and (ii) if to the Holder, to the name, address and facsimile number set forth on the front page of this Note.
7.3 Amendment Provision. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.
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7.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns. The Borrower may not assign its obligations under this Note.
7.5 Cost of Collection. If default is made in the payment of this Note, Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees.
7.6 Governing Law. This Note is payable at the offices of Holder in California and shall be governed by and construed in accordance with the laws of the State of California without regard to conflicts of laws principles that would result in the application of the substantive laws of another jurisdiction. Any action brought by either party against the other concerning the transactions contemplated by this Agreement must be brought only in the civil or state courts of California or in the federal courts located in California, County of Los Angeles. Both parties and the individual signing this Note on behalf of the Borrower agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision of this Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Borrower in any other jurisdiction to collect on the Borrower's obligations to Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other decision in favor of the Holder.
7.7 Maximum Payments. Notwithstanding any provision to the contrary contained in this Note, the Assignment or any instrument or agreement executed by Borrower evidencing, having reference to or securing this Note, it is expressly provided that in no case or event shall the aggregate of any amounts accrued or paid pursuant to this Note which under applicable laws are or may be deemed to constitute interest ever exceed the maximum nonusurious interest rate permitted by applicable California or federal laws, whichever permit the higher rate. In this connection, Borrower and Holder stipulate and agree that it is their common and overriding intent to contract in strict compliance with applicable usury laws. In furtherance thereof, none of the terms of this Note shall ever be construed to create a contract to pay, as consideration for the use, forbearance or detention of money, interest at a rate in excess of the maximum rate permitted by applicable laws. Borrower shall never be liable for interest in excess of the maximum rate permitted by applicable laws. If, for any reason whatever, such interest paid or received during the full term of the applicable indebtedness produces a rate which exceeds the maximum rate permitted by applicable laws, Holder shall credit against the principal of such indebtedness (or, if such indebtedness shall have been paid in full, shall refund to the payor of such interest) such portion of said interest as shall be necessary to cause the interest paid to produce a rate equal to the maximum rate permitted by applicable laws. All sums paid or agreed to be paid to Holder for the use, forbearance or detention of money shall, to the extent required to avoid or minimize usury and to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of the applicable indebtedness so that the interest rate thereon does not exceed the maximum nonusurious interest rate permitted by applicable California or federal laws, whichever permit the higher rate. In the event such interest (whether designated as interest, service charges, points, or otherwise) does exceed the maximum legal rate, it shall be (a) canceled automatically to the extent that such interest exceeds the maximum legal rate; (b) if already paid, at the option of Holder, either be rebated to Borrower or credited on the principal amount of the Note; or if the Note has been prepaid in full, then such excess shall be rebated to Borrower. The provisions of this Section shall control all agreements, whether now or hereafter existing and whether written or oral, between Borrower and Holder.
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7.8 Non-Business Days. Whenever any payment or any action to be made shall be due on a Saturday, Sunday or a public holiday under the laws of the State of California, such payment may be due or action shall be required on the next succeeding business day and, for such payment, such next succeeding day shall be included in the calculation of the amount of accrued interest payable on such date.
7.9 Redemption. This Note may not be redeemed or called without the consent of the Holder except as described in this Note.
7.10 Expenses. Borrower and Holder shall each pay their respective legal and other fees and expenses associated with all aspects of the transaction contemplated by this Note; provided, however, that Borrower shall reimburse, or cause Cellteck to reimburse, Holder for its legal fees and expenses in connection with the transactions contemplated hereby up to $25,000. Such reimbursement shall be payable upon maturity of this Note.
7.11 Judicial Reference. Borrower, and, by its acceptance of this Note, Holder, acknowledge and agree that any controversy or claim arising out of or relating to this Note or any of the Guaranty, the Assignment, the Stock Purchase Agreement, the Lock-up/Leak-Out Agreement between Holder and Cellteck entered into concurrently herewith, the Compliance/Oversight Agreement between Holder and Borrower entered into concurrently herewith, or breach hereof or thereof, shall be resolved by a referee appointed by the Superior Court for the County of Los Angeles, California (“Superior Court”) in accordance with the provisions of Section 638 et seq. of the California Code of Civil Procedure. In this regard, Borrower and Holder agree that in the event they are unable agree upon a resolution to any such controversy or claim, either party shall have the right to serve a written demand for judicial reference of such claim or controversy on the other party. The two parties shall then negotiate in good faith for a mutually acceptable referee. In the event that parties have not agreed upon a referee within ten (10) business days after written demand for such reference has been made, each party shall submit to the Superior Court the names of up to three nominees for appointment as referee, in accordance with the provisions of Section 640 of the California Code of Civil Procedure. The referee, once agreed upon by the parties or appointed by the Superior Court, shall have full and complete authority to hear and determine any and all of the issues in an action or proceeding, whether of fact or of law, and to report a statement of decision. In connection with such reference procedure, the parties shall have all rights and powers afforded to a civil litigant in the Superior Court, including the ability to conduct full discovery and obtain responses under oath. The referee shall be governed by the rules of civil procedure for actions filed in California superior courts as set forth in the California Code of Civil Procedure, except to the extent the parties stipulate the referee may deviate therefrom. The parties shall evenly divide the cost of the referee’s fees. The referee shall have the power, as part of any award, to include these fees as an element of recovery. The decision of the referee upon the whole issue shall stand as the decision of the Superior Court, and upon the filing of the statement of decision with the clerk of the Superior Court, judgment may be entered thereon in the same manner as if the action had been tried by the Superior Court. Notwithstanding the rights to appeal set forth in Section 645 of the California Code of Civil Procedure, the parties agree that the referee’s award shall be considered final, and not subject to appeal or collateral attack.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have caused this Loan Agreement and Secured Promissory Note to be signed in their respective name by a duly authorized officer as of the 8th day of February, 2013.
| “Maker” | ||
| EOS Petro, Inc. | ||
| By: | ||
| Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | ||
| Title: Chairman of the Board | ||
| “Holder” | ||
| LowCal Industries, LLC | ||
| By: | ||
| Name: ▇▇▇▇▇▇ ▇▇▇▇ | ||
| Title: Managing Member | ||
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Exhibit B
CERTIFICATE OF DESIGNATIONS,
POWERS, PREFERENCES AND RIGHTS OF
THE SERIES B VOTING CONVERTIBLE
PREFERRED STOCK
OF
Pursuant to Nevada Revised Statutes § 78.1955
Cellteck Inc. (the “Company”), organized and existing under the laws of the State of Nevada, does, by its Secretary and under its corporate seal, hereby certify that pursuant to the authority contained in Article 11 of its Articles of Incorporation, as amended, and in accordance with the provisions of Section 78.1955 of the Nevada Revised Statutes, its Board of Directors has adopted the following resolution creating the following class and series of the Company’s Preferred Stock and determining the voting powers, designations, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof, of such classes and series:
RESOLVED, that, pursuant to authority conferred upon the Board of Directors by the Articles of Incorporation of the Company, as amended, (the “Articles of Incorporation”), there is hereby created the following series of Preferred Stock:
· 44,000,000 shares shall be designated Series B Voting Convertible Preferred Stock, par value $.0001 per share (the “Series B Preferred Stock”).
The designations, powers, preferences, and rights and the qualifications, limitations and restrictions of the Series B Preferred Stock in addition to those set forth in the Articles of Incorporation shall be as follows:
Section 1. Designation and Amount. 44,000,000 shares of the unissued preferred stock of the Company shall be designated as Series B Voting Convertible Preferred Stock, par value $.0001 per share.
Section 2. Definitions.
(a) “Board of Directors” means the Board of Directors of the Company or any duly authorized committee thereof.
(b) “Capitalization Amendment” means an amendment to the Company’s Articles of Incorporation for the authorization of a sufficient number of shares of Common Stock to convert all issued and outstanding shares of Series B Preferred Stock into Common Stock pursuant to Board of Director approval and the Stockholder Approval.
(c) “Common Stock” means common stock of the Company.
(d) “Stockholder Approval” means the approval by the stockholders of the Company of an amendment to the Company’s Articles of Incorporation sufficient to permit immediate conversion of all issued and outstanding shares of Series B Preferred Stock into Common Stock either (i) increasing the authorized number of shares of Common Stock pursuant to Section 78.390 of the Nevada Revised Statutes or (ii) effecting a reverse stock split of the outstanding shares of Common Stock pursuant to Section 78.2055 of the Nevada Revised Statutes.
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Section 3. Dividends. (a) So long as any shares of the Series B Preferred Stock remain outstanding, if the Company declares any dividend or distribution of cash, securities (including rights, warrants, options or evidences of indebtedness) or properties or assets other than shares of Common Stock to be paid from time to time out of any assets legally available for such payment (to the extent dividends or distributions consist of shares of Common Stock an adjustment will be made pursuant to Section 6(a) hereof), then the Company shall simultaneously declare a dividend or distribution on shares of Series B Preferred Stock in the amount of dividends or distributions that would be made with respect to shares of Series B Preferred Stock if such shares were converted into shares of Common Stock on the record date for such dividend or distribution (regardless of whether or not actual conversion at such time would be permissible under Section 4 hereof). No dividend or distribution shall be payable to holders of shares of Common Stock unless the full dividends or distributions contemplated by this Section are paid at the same time in respect of the Series B Preferred Stock.
(a) Each dividend or distribution shall be payable to holders of the Series B Preferred Stock as they appear in the records of the Company at the close of business on the same record date as the record date for the payment of the corresponding dividend or distribution to the holders of shares of Common Stock.
(b) Dividends on the Series B Preferred Stock are non-cumulative. If the Company does not declare a dividend on the Common Stock or the Series B Preferred Stock in respect of any period, the holders of the Series B Preferred Stock shall have no right to receive any dividend for such dividend period, and the Company shall have no obligation to pay a dividend for such dividend period, whether or not dividends are declared and paid for any future dividend period with respect to the Series B Preferred Stock or the Common Stock or any other series of the Company’s preferred stock.
(c) If the Conversion Date (as defined below) with respect to any of the shares of Series B Preferred Stock occurs prior to the record date for the payment of any dividend or distribution on the Common Stock, the holder of such shares of Series B Preferred Stock to be converted shall not have the right to receive any corresponding dividends or distributions on the Series B Preferred Stock (but for the avoidance of doubt the holder thereof shall receive that dividend or distribution payable to holders of Common Stock on the relevant payment date if such holder is the holder of record of shares of Common Stock on the record date for that dividend or distribution). If the Conversion Date with respect to the shares of Series B Preferred Stock occurs after the record date for any declared dividend or distribution and prior to the payment date for that dividend or distribution, the holder thereof shall receive that dividend or distribution on the relevant payment date if such holder of Common Stock was the holder of record of shares of Series B Preferred Stock on the record date for that dividend or distribution.
Section 4. Conversion.
(a) The Company shall at all times maintain an agent for the purpose of the conversion of shares of Series B Preferred Stock (the “Conversion Agent”), which may be an officer or agent of the Company.
(b) If Stockholder Approval has been obtained, upon the filing the Capitalization Amendment with the State of Nevada and the effectiveness of the Capitalization Amendment under Nevada law (the date of such effectiveness, the “Conversion Date”), the Company shall promptly instruct the Conversion Agent to convert into Common Stock, without further action by any person, all then outstanding shares of Series B Preferred Stock.
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(c) Each share of Series B Preferred Stock to be converted in accordance with this Section shall automatically be converted into 800 shares of Common Stock, subject to adjustment from time to time as described herein (the “Conversion Rate”).
Section 5. Conversion Procedures.
(a) In the event of an automatic conversion of the Series B Preferred Stock pursuant to Section 4, effective at the close of business on the Conversion Date the outstanding shares of Series B Preferred Stock shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent, and provided further that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such automatic conversion unless the certificates formerly evidencing such shares of Series B Preferred Stock are either delivered to the Company or its transfer agent, or the holder notifies the Company or its transfer agent that such certificates have been lost, stolen, or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates. The Company shall, as soon as practicable after such delivery, or such agreement and indemnification in the case of a lost certificate, issue and deliver at such office to such holder of Series B Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid; provided, however, that notwithstanding the foregoing, upon such delivery of certificates formerly representing the Series B Preferred Stock or of agreement and indemnification in the case of a lost certificate, the Company may determine that the shares of Common Stock issued upon the conversion of the Series B Preferred Stock shall be uncertificated, in which case the Company or its transfer agent will make the appropriate entries into the records of the Company and the Company shall not be obligated to issue a stock certificate for such shares of Common Stock.
(b) Effective at the close of business on the Conversion Date, dividends shall no longer be declared on any such converted share of Series B Preferred Stock and such share of Series B Preferred Stock shall cease to be outstanding, in each case, subject to the right of the holder of Series B Preferred Stock to receive any declared and unpaid dividends on such share to the extent provided herein and any other payments to which such holder is otherwise entitled hereunder.
(c) No allowance or adjustment, except as expressly provided herein, shall be made in respect of dividends payable to holders of the Common Stock of record as of any date prior to the close of business on the Conversion Date with respect to any share of Series B Preferred Stock. Prior to the close of business on the Conversion Date with respect to any share of Series B Preferred Stock, shares of Common Stock issuable upon conversion thereof shall not be deemed outstanding for any purpose, and the holder of such share of Series B Preferred Stock shall have no rights with respect to the Common Stock issuable upon conversion (including voting rights, rights to respond to tender offers for the Common Stock or other securities issuable upon conversion and rights to receive any dividends or other distributions on the Common Stock or other securities issuable upon conversion) by virtue of holding such share of Series B Preferred Stock.
(d) The person or persons entitled to receive the Common Stock upon conversion of Series B Preferred Stock shall be treated for all purposes as the record holder(s) of such shares of Common Stock and/or securities as of the close of business on the Conversion Date with respect thereto. In the event that a holder shall not by written notice designate the name in which shares of Common Stock, securities or other property to be issued or paid upon conversion of shares of Series B Preferred Stock should be registered or paid or the manner in which such shares should be delivered, the Company shall be entitled to register and deliver such shares, and make such payment, in the name of the holder and in the manner shown on the records of the Company.
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(e) No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the conversion of any shares of Series B Preferred Stock. All fractions shall be rounded up to the nearest share. If more than one share of Series B Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series B Preferred Stock so surrendered.
(f) The Company shall pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on the conversion of shares of Series B Preferred Stock pursuant to Section 4 and this Section; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any registration or transfer involved in the issue or delivery of Common Stock in a name other than that of the registered holder of Series B Preferred Stock converted or to be converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid.
Section 6. Adjustments.
(a) If the Company shall (i) pay a dividend or make any other distribution with respect to its Common Stock which consists in whole or in part of shares of its Common Stock, (ii) subdivide or reclassify its Common Stock into a greater number of shares or (iii) combine or reclassify its Common Stock into a lesser number of shares, then in each of clause (i), (ii) and (iii), the Conversion Rate shall be adjusted (regardless of whether or not actual conversion at such time would be permissible under Section 4 hereof) so that a holder of any shares of Series B Preferred Stock thereafter converted shall be entitled to receive the number and kind of other securities that such holder of Series B Preferred Stock would have owned or been entitled to receive after the happening of such dividend, subdivision, combination, or other reclassification had such shares of Series B Preferred Stock been converted immediately prior to the happening of such reclassification or any record date with respect thereto. An adjustment made pursuant to this Section shall become effective on the date of the dividend payment, subdivision, combination or issuance and shall be applied from the record date with respect thereto, if any, for such event. Such adjustment shall be made successively.
(b) If the Company shall be a party to any transaction, including a merger, consolidation, sale of all or substantially all of the Company’s assets, reorganization, liquidation or recapitalization of the Common Stock (each of the foregoing being referred to as a “Transaction”), in each case as a result of which shares of Common Stock shall be converted into the right to receive stock, securities or other property (including cash or any combination thereof), then, in connection with such Transaction, the Company shall make provision for the Series B Preferred Stock to be converted into the amount of shares of stock and other securities and the right to receive the property receivable (including cash) by a holder of that number of shares of Common Stock into which one share of Series B Preferred Stock was convertible immediately prior to such Transaction (regardless of whether or not actual conversion into Common Stock at such time would be permissible under Section 4 hereof) and upon consummation of the Transaction the Series B Preferred Stock shall be automatically converted into such amount of stock and other securities and the right to receive property at the same time and in the same manner as the Common Stock is so converted (or as promptly as practicable thereafter). Any shares of stock and other securities and property shall be payable to the holder upon surrender of the shares of Series B Preferred Stock or as otherwise provided for as if such delivery were of Common Stock pursuant to Section 5(a). The Company shall not be a party to any Transaction unless the terms of such Transaction are consistent with the provisions of this Section.
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(c) Notwithstanding the foregoing, in any case in which this Section 5 provides that an adjustment shall become effective immediately after a record date for an event, the Company may defer until the occurrence of such event issuing to the holder of any shares of Series B Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion before giving effect to such adjustment.
(d) If the Company shall take any action affecting the shares of Common Stock, other than any action described in this Section 5, which in the reasonable opinion of the Board of Directors would adversely affect the conversion rights of the holders of Series B Preferred Stock, then the number of shares of Common Stock that a share of Series B Preferred Stock is convertible into immediately before such action shall be adjusted, to the extent permitted by applicable law or regulation, in such manner and at such time as the Board of Directors may determine in good faith to be equitable in the circumstances. Any such determinations shall be memorialized in writing and shall be maintained on file at the Company’s principal executive office and shall be made available to any stockholder upon request.
(e) Whenever the number of shares of Common Stock into which one share of Series B Preferred Stock is convertible is adjusted as herein provided, the chief financial officer of the Company or his or her designee(s) shall compute the required adjustment in accordance with the foregoing provisions and shall prepare a certificate setting forth such adjustment and showing in reasonable detail the facts upon which such adjustment is based. A copy of such certificate shall be filed promptly with the Conversion Agent and mailed to each holder of shares of Series B Preferred Stock at such holder’s last address as shown on the stock books of the Company.
(f) The Company shall not, without the consent of a majority of the shares of the outstanding Series B Preferred Stock, voting separately as a class, make a publicly-announced tender offer for its Common Stock unless the Company provides to all holders of the Series B Preferred Stock the right to participate in the tender offer on the same terms and conditions as holders of Common Stock, provided that any Series B Preferred Stock tendered shall receive, upon surrender of the Series B Preferred Stock to the Company, the consideration payable with respect to the number of shares of Common Stock into which the Series B Preferred Stock so tendered would be convertible at the time immediately prior to the consummation of the tender offer (regardless of whether or not actual conversion at such time would be permissible under Section 4 hereof).
Section 7. Reservation of Common Stock.
(a) Upon the effectiveness of the Capitalization Amendment, the Company shall at all times reserve and keep available, free from all liens, charges and security interests and not subject to any preemptive rights, out of the aggregate of its authorized but unissued shares of Common Stock or its issued shares of Common Stock held in its treasury, or both, solely for the purpose of effecting the conversion of Series B Preferred Stock, the full number of shares of Common Stock then deliverable upon the conversion of all outstanding shares of Series B Preferred Stock.
(b) Notwithstanding the foregoing, the Company shall be entitled to deliver upon conversion of shares of Series B Preferred Stock, as herein provided, shares of Common Stock acquired by the Company (in lieu of the issuance of authorized and unissued shares of Common Stock), so long as any such acquired shares are free and clear of all liens, charges, security interests or encumbrances (other than liens, charges, security interests and other encumbrances created by the holders of the Series B Preferred Stock).
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(c) All shares of Common Stock delivered upon conversion of the Series B Preferred Stock shall be duly authorized, validly issued, fully paid and non-assessable, free and clear of all liens, claims, security interests and other encumbrances and not subject to any preemptive rights (other than liens, charges, security interests and other encumbrances created by the holders the Series B Preferred Stock).
(d) The Company hereby covenants and agrees that, if at any time the Common Stock shall be listed on the NASDAQ Stock Market or any other national securities exchange or automated quotation system, the Company shall, if permitted by the rules of such exchange or automated quotation system, list and keep listed, all the Common Stock issuable upon conversion of the Series B Preferred Stock; provided, however, that if the rules of such exchange or automated quotation system permit the Company to defer the listing of such Common Stock until the first conversion of Series B Preferred Stock into Common Stock in accordance with the provisions hereof, the Company covenants to list such Common Stock issuable upon conversion of the Series B Preferred Stock in accordance with the requirements of such exchange or automated quotation system at such time.
Section 8. Liquidation, Dissolution and Winding Up.
(a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the assets of the Company available for distribution to its stockholders shall be distributed among the holders of the outstanding shares of Series B Preferred Stock and Common Stock, pro rata, in proportion to the shares of Common Stock then held by them and the shares of Common Stock which they then have the right to acquire upon conversion of the shares of Series B Preferred Stock then held by them (regardless of whether or not actual conversion at such time would be permissible under Section 4 hereof).
(b) The Company’s consolidation or merger with or into any other entity, the consolidation or merger of any other entity with or into the Company, or the sale of all or substantially all of the Company’s property or business shall not constitute its liquidation, dissolution or winding up.
Section 9. Maturity. The Series B Preferred Stock shall be perpetual unless converted in accordance with this Certificate of Designation.
Section 10. No Redemption; No Sinking Fund.
(a) The shares of Series B Preferred Stock shall not be subject to redemption by the Company or at the option of any holder of Series B Preferred Stock; provided, however, that the Company may purchase or otherwise acquire outstanding shares of Series B Preferred Stock by mutual agreement with any holder or holders thereof.
(b) The shares of Series B Preferred Stock shall not be subject to or entitled to the operation of a retirement or sinking fund.
Section 11. Voting Rights.
(a) In addition to the special voting provisions of Section 11(b), on any matter presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting), holders of Series B Preferred Stock shall vote together with the holders of Common Stock as a single class and each holder of outstanding shares of Series B Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series B Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter.
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(b) So long as any shares of Series B Preferred Stock are outstanding, the Company shall not without the consent or vote of the holders of a majority of the outstanding shares of the Series B Preferred Stock, voting separately as a class, amend, alter or repeal or otherwise change (including in connection with any merger or consolidation or otherwise) any provision of the Articles of Incorporation or this Certificate of Designation, if such amendment would increase the authorized shares of the Series B Preferred Stock or alter or change the powers, preferences or special rights of the shares of the Series B Preferred Stock so as to affect the Series B Preferred Stock adversely.
Section 12. Exclusion of Other Rights. Except as may otherwise be required by law or specifically set forth in this Certificate of Designation and the Articles of Incorporation, as they may be amended from time to time, the Series B Preferred Stock shall not have any other powers, preferences and relative, participating, optional or other special rights.
Section 13. Severability of Provisions. If any voting powers, preferences and relative, participating, optional and other special rights of the Series B Preferred Stock and qualifications, limitations and restrictions thereof set forth in this Certificate of Designation are invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other voting powers, preferences and relative, participating, optional and other special rights of the Series B Preferred Stock and qualifications, limitations and restrictions thereof set forth in this Certificate of Designation that can be given effect without the invalid, unlawful or unenforceable voting powers, preferences and relative, participating, optional or other special rights of the Series B Preferred Stock and qualifications, limitations and restrictions thereof shall, nevertheless, remain in full force and effect, and no voting powers, preferences and relative, participating, optional or other special rights of the Series B Preferred Stock and qualifications, limitations and restrictions thereof herein set forth shall be deemed dependent upon any other such voting powers, preferences and relative, participating, optional or other special rights of the Series B Preferred Stock and qualifications, limitations and restrictions thereof unless so expressed herein.
Section 14. Reissuance of Series B Preferred Stock. Shares of Series B Preferred Stock that have been duly converted into Common Stock or otherwise reacquired in any manner, including shares purchased by the Company or exchanged or converted, shall not be reissued as Series B Preferred Stock and shall upon compliance with any applicable provisions of the laws of the State of Delaware have the status of authorized but unissued shares of preferred stock of the Company undesignated as to series. The Company may from time to time take such appropriate action as may be necessary to reduce the authorized number of shares of Series B Preferred Stock.
Section 15. Mutilated or Missing Series B Preferred Stock Certificates. If any certificate representing any shares of the Series B Preferred Stock shall be mutilated, lost, stolen or destroyed, the Company shall issue, in exchange and in substitution for and upon cancellation of the mutilated certificate, or in lieu of and substitution for such certificate, a new certificate of like tenor and representing an equivalent amount of shares of Series B Preferred Stock of the same class, but only upon receipt of evidence of such loss, theft or destruction of such certificate and indemnity, if requested, satisfactory to the Company and the transfer agent (if other than the Company).
Section 16. Fractional Shares. The Series B Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder’s fractional shares, to receive dividends, participate in dividends and distributions and to have the benefit of all other rights of holders of the Series B Preferred Stock, including the conversion provisions provided in Section 4.
Signature on following page.
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IN WITNESS WHEREOF, the Company has caused this Certificate to be duly executed on its behalf by its Secretary this 25th day of September, 2012.
| CELLTECK INC. | ||
| /s/ ▇▇▇ ▇▇▇▇▇ | ||
| By: ▇▇▇ ▇▇▇▇▇ | ||
| Its: President | ||
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Exhibit C
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this “First Amendment”), dated as of January 16, 2013, is by and among Cellteck, Inc., a Nevada corporation (“Cellteck”) and Eos Petro, Inc., a Delaware corporation and wholly-owned subsidiary of Cellteck (“Eos”).
WHEREAS, on October 12, 2012, pursuant to an Agreement and Plan of Merger dated July 16, 2012 (the “Merger Agreement”) between Cellteck, Eos, and Eos Merger Sub, Inc., a Delaware corporation that was previously a wholly-owned subsidiary of Cellteck (“Merger Sub”), Merger Sub merged into Eos, with Eos being the surviving entity (the “Merger”). As a result of the Merger, Eos became a wholly-owned subsidiary of Cellteck. Cellteck, Eos and Merger Sub are sometimes referred to herein, individual as a “Party” and collectively, as the “Parties.”
WHEREAS, it was the Parties’ original intent to effectuate a reverse stock split of the issued and outstanding shares of Cellteck’s common stock as soon as reasonably practicable following the closing of the Merger (the “Stock Split”). Such intent was memorialized in Section 8.3(b)(i) of the Merger Agreement, which states in its entirety that, as soon as is reasonably practicable following the closing, Cellteck shall effect or implement the following action:
(i) Effect a reverse stock split on a 1-for-800 basis of the outstanding Parent Common Stock (the “Stock Split”), except that the number of shares to be issued to any holder which would have less than 100 shares as a result of the Stock Split shall be rounded up to 100.
WHEREAS, the original description of the Stock Split set forth above and in the Merger Agreement failed to fully describe the procedure for effectuating the Stock Split in a manner consistent with the original intent of the Parties.
WHEREAS, the Parties wish to amend the Merger Agreement to clearly state the procedure for effectuating the Stock Split as it was originally envisioned by the Parties.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the Parties hereby agree to amend the Merger Agreement as follows, as permitted by Section 11.5 of the Merger Agreement:
Defined Terms. All capitalized terms used herein and not otherwise defined herein shall have the meanings given to them in the Merger Agreement.
Amendment to Section 8.3(b)(i). Section 8.3(b)(i) of the Merger Agreement is hereby amended and restated in its entirety to read as follows:
“(i) Effect a reverse stock split on a 1-for-800 basis (the “Stock Split”) of Parent’s Common Stock on the following terms and conditions:
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| a) | The Stock Split shall only affect issued and outstanding shares of Parent Common Stock and shall have no effect on the total number of authorized shares of Parent Common Stock; |
| b) | Each of Parent’s common stockholders that hold less than 2,000 shares of Parent Common Stock immediately prior to the Stock Split (each a “Distribution Stockholder”) shall receive, in lieu of shares of common stock in the Stock Split, a cash distribution from Parent (the “Cash Distribution”) equal to the number of pre-Stock Split shares of Parent Common Stock held by each such Distribution Stockholder multiplied by a per-share amount determined to be fair to both the Parent and Parent’s stockholders by Parent’s Board of Directors. The aggregate amount of Cash Distribution to be received by each such Distribution Stockholder shall be rounded up to the nearest whole cent. Simultaneously with the effectuation of the Stock Split, all of the shares of Parent Common Stock held by Distribution Stockholders will be automatically cancelled and returned to the status of authorized but unissued shares of Parent; |
| c) | Upon the effectuation of the Stock Split, each of Parent’s common stockholders that hold 2,000 or more shares of Parent Common Stock immediately prior to the Stock Split (each a “Stock Split Stockholder”) shall receive one share of Parent Common Stock for every 800 shares of Parent Common Stock held by such Stock Split Stockholder immediately prior to the Stock Split. However, any fractional shares that would otherwise be issued to Stock Split Stockholders as a result of the Stock Split shall be rounded up to the nearest whole share. Furthermore, any Stock Split Stockholders who would, as a result of the Stock Split, receive in the aggregate less than 100 shares of Parent Common Stock on a post-Stock Split basis shall instead receive 100 shares of Parent Common Stock; and |
| d) | For the avoidance of doubt, the effect of this Stock Split on derivative and convertible securities shall be governed by the individual terms of each such derivative and/or convertible security. |
Entire Agreement. The Merger Agreement, as amended by this First Amendment, embodies the entire understanding among the Parties with respect to the subject matter thereof and hereof and can be changed only by an instrument in writing executed by all of the Parties.
Conflict of Terms. In the event of a conflict or inconsistency between the terms of the Merger Agreement and those of this First Amendment, the terms of this First Amendment shall control and govern the rights and obligations of the Parties.
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Ratification. Except to the extent amended hereby or inconsistent herewith, all of the terms, covenants, conditions, and provisions of the Merger Agreement shall remain in full force and effect, and the Parties hereby acknowledge and confirm that the same are in full force and effect.
Execution. This First Amendment may be executed in two or more counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. Facsimile or other electronic signatures shall be accepted by the Parties as originals.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the Parties have caused this First Amendment to be executed by their respective officers thereunto duly authorized as of the date first above written.
| CELLTECK, INC. | ||
| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |
| EOS PETRO, INC. | ||
| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |
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