SECURITIES SUBSCRIPTION AGREEMENT
THIS SECURITIES SUBSCRIPTION AGREEMENT, dated as of July 23,
1999 ("Agreement"), is executed in reliance upon the exemption from
registration afforded by Rule 504 promulgated under Regulation D by
the Securities and Exchange Commission ("SEC"), under the Securities
Act of 1933, as amended. Capitalized terms used herein and not
defined shall have the meanings given to them in Rule 504 and
Regulation D.
This Agreement has been executed by the undersigned buyer
("Buyer") in connection with the private placement of 1% Series B
Senior Subordinated Convertible Debentures of Lakota Energy, Inc., a
corporation organized under the laws of Colorado, with its principal
executive offices located at 0000 Xxxxx Xxxxx Xxxx, Xxxxxxx, Xxxxxxx
00000 ("Seller"). Buyer hereby represents and warrants to, and
agrees with Seller:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL
NOT BE REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE PURSUANT TO AN EXEMPTION FROM
REGISTRATION PROVIDED BY SECTION 3(B) OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT"),
AND RULE 504 OF REGULATION D PROMULGATED THEREUNDER.
1. Agreement to Subscribe; Purchase Price.
(a) Subscription. The undersigned Buyer hereby
subscribes for and agrees to purchase the Seller's 1% Series B
Senior Subordinated Convertible Redeemable Debenture substantially
in the form of the Debenture attached as Exhibit A hereto and having
an aggregate original principal face amount of Seventy Four Thousand
United States dollars $74,000 (singly, a "Debenture," and
collectively, the "Debentures"), at an aggregate purchase price of
100% of the face amount of such Debentures as set forth in
subsection (b) herein.
(b) Payment. The Purchase Price for the Debenture
shall be Seventy Four United States Dollars (U.S. $74,000)
("Purchase Price"), which shall be payable at closing, pursuant to
paragraph c herein, in accordance with the terms and conditions of
an Escrow Agreement which shall be executed simultaneously with this
Agreement ("Escrow Agreement").
(c) Closing. Subject to the satisfaction of the
conditions set forth in Sections 7 and 8 hereof, the Closing of the
transactions contemplated by this Agreement shall take place when
(i) Seller delivers the Debentures to the Escrow Agent, as defined
in an Escrow Agreement among
Buyer, Seller and the Escrow Agent of even date, (ii) Seller delivers
the signed Escrow Agreement and accompanying documents, (iii) Buyer pays
the Purchase Price for the Debentures ("Closing Date"), and (iv) Buyer
delivers signed Escrow Agreement.
2. Buyer Representations and Covenants;
Access to Information
In connection with the purchase and sale of the Debenture,
Buyer represents and warrants to, and covenants and agrees with
Seller as follows:
(a) Buyer is not, and on the closing date will not be, an affiliate
of Seller;
(b) Buyer is an "accredited investor" as defined in Rule 501 of Regulation
D promulgated under the 1933 Act, and is purchasing the Shares for
its own account and Buyer is qualified to purchase the Shares under
the laws of the State of Colorado;
(c) All offers and sales of any of the Debentures by Buyer shall be made
in compliance with any applicable securities laws of any applicable
jurisdiction and in accordance with Rule 504, as applicable, of
Regulation D or pursuant to registration of securities under the
1933 Act or pursuant to an exemption from registration;
(d) Buyer understands that the Debentures are not registered under
the 1933 Act and are being offered and sold to it in reliance on specific
exemptions from the registration requirements of Federal and State
securities laws, and that Seller is relying upon the truth and
accuracy of the representations, warranties, agreements,
acknowledgments and understandings of Buyer set forth herein in
order to determine the applicability of such exemptions and the
suitability of Buyer and any purchaser from Buyer to acquire the
Debentures;
(e) Buyer shall comply with Rule 504 promulgated under Regulation D;
(f) Buyer has the full right, power and authority to enter into this
Agreement and to consummate the transaction contemplated herein. This
Agreement has been duly authorized, validly executed and delivered on behalf
of Buyer and is a valid and binding agreement in accordance with its
terms, subject to general principles of equity and to bankruptcy or
other laws affecting the enforcement of creditors' rights generally;
(g) The execution and delivery of this Agreement and the
consummation of the purchase of the Debentures and the transactions
contemplated by this Agreement do not and will not conflict with or result
in a breach by Buyer of any of the terms or provisions of, or constitute a
default under, the articles of incorporation or by-laws (or similar
constitutive documents) of Buyer or any indenture, mortgage, deed of
trust, or other material agreement or instrument to which Buyer is a
party or by which it or any of its properties or assets are bound,
or any existing applicable law,
rule or regulation of the United States or any State thereof or any
applicable decree, judgment or order of any Federal or State court, Federal
or State regulatory body, administrative agency or other United States
governmental body having jurisdiction over buyer or any of its properties
or assets;
(h) All invitations, offers and sales of or in respect of, any of the
Debentures, by Buyer and any distribution by Buyer of any documents
relating to any invitation, offer or sale by it of any of the Debentures
will be in compliance with applicable laws and regulations, will be made
in such a manner that no prospectus need be filed and no other filing
need be made by Seller with any regulatory authority or stock
exchange in any country or any political sub-division of any
country, and Buyer will make no misrepresentations nor omissions of
material fact in the invitation, offer or resale of the Debentures;
(i) The Buyer (or others for whom it is contracting hereunder) has been
advised to consult its own legal and tax advisors with respect to applicable
resale restrictions and applicable tax considerations and it (or
others for whom it is contracting hereunder) is solely responsible
(and the Seller is not in any way responsible) for compliance with
applicable resale restrictions and applicable tax legislation;
(j) Buyer understands that no Federal or State or foreign government
agency has passed on or made any recommendation or endorsement of the
Debentures;
(k) Buyer has had an opportunity to receive and review
all material information and financial data and to discuss with the
officers of Seller, all matters relating to the securities,
financial condition, operations and prospects of Seller and any
questions raised by Buyer have been answered to Buyer's satisfaction.
(l) Buyer acknowledges that the purchase of the Debentures involve a high
degree of risk. Buyer has such knowledge and experience in
financial and business matters that it is capable of evaluating the
merits and risks of purchasing the Debentures. Buyer understands
that the Debentures are not being registered under the 1933 Act, or
under any state securities laws, and therefore, Buyer must bear the
economic risk of this investment for an indefinite period of time;
(m) Buyer is not a "10-percent Shareholder" (as defined in Section
871(h)(3)(B) of the U.S. Internal Revenue Code) of Seller; and
(n) Buyer acknowledges and agrees that the transactions contemplated
by this Agreement have taken place solely and exclusively within the
State of Colorado.
3. Seller Representations and Covenants.
(a) Seller is a corporation duly organized and validly
existing under the laws of the State of Colorado, and is in good
standing under such laws. The Seller has all requisite corporate
power and authority to own, lease and operate its properties and
assets, and to carry on its business as presently conducted. The
Seller is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of
its business requires such qualification, except where failure to so
qualify would not have a material adverse effect on the Seller.
(b) There are 50,000,000 shares of Seller's common stock,
$0.001 par value per share ("Common Stock"), authorized and
approximately 35,932,581 as of July 23, 1999 outstanding. The
Common Stock is quoted on National Association of Securities Dealers
OTC Electronic Bulletin Board under the symbol"XXXX" All issued and
outstanding shares of Common Stock have been authorized and validly
issued and are fully paid and non-assessable.
(c) The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby will
not, conflict with, or result in any violation of, or default (with
or without notice or lapse of time, or both), or give rise to a
right of termination, cancellation or acceleration of any obligation
or to a loss of a material benefit, under, any provision of the
Articles of Incorporation, and any amendments thereto, By-Laws,
Stockholders Agreements and any amendments thereto of the Seller or
any material mortgage, indenture, lease or other agreement or
instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law ordinance, rule or regulation applicable to the
Seller, its properties or assets. There is no action, suit or
proceeding pending, or to the knowledge of the Seller, threatened
against the Seller, before any court or arbitrator or any government
body, agency or official, which would have a material adverse affect
on Seller's operations or financial condition.
(d) The Seller is not subject to the reporting requirements of Sections
13 or 15(d) of the Securities and Exchange Act, is not an investment company
or a developmental stage company that either has no specific business plan or
purpose. The Debentures and Common Stock when issued, will be issued in
compliance with all applicable U.S. federal and state securities laws.
The Seller understands and acknowledges that, in certain, circumstances, the
issuance of the Shares could dilute the ownership interests of other
stockholders of the Seller. The execution and delivery by the
Seller of this Agreement and the issuance of the Debentures and
Common Stock will not contravene or constitute a default under any
provision of applicable law or regulation. The Seller is in
compliance with and conforms to all statutes, laws, ordinances,
rules, regulations, orders, restrictions and all other legal
requirements of any domestic or foreign government or any
instrumentality thereof having jurisdiction over the conduct of its
businesses or the ownership of its properties
(e) There is no fact known to the Seller that has not been publicly
disclosed by the Seller or disclosed in writing to the
Buyer which could reasonably be expected to have a material adverse
effect on the condition (financial or otherwise) or in the earnings,
business affairs, properties or assets of the Seller, or could
reasonably be expected to materially and adversely affect the
ability of the Seller to perform its obligations pursuant to this
Agreement. The information furnished by
the Seller to Buyer for purposes of or in connection with this Agreement
or any transaction contemplated hereby, does not contain any untrue
statement of material fact or omit to state a material fact necessary in
order to make the statements contained therein, in light of the circumstances
under which they are made, not misleading.
(f) No consent, approval or authorization of or designation, declaration
or filing with any governmental authority on the part of the Seller is
required in connection with the valid execution and delivery of this
Agreement, or the offer, sale or issuance of the debentures or Common Stock,
or the consummation of any other transaction contemplated hereby, except the
filing with the SEC of Form D.
(g) There is no action, proceeding or investigation
pending, or to the Seller's knowledge, threatened, against the
Seller which might result, either individually or in the aggregate,
in any material adverse change in the business, prospects,
conditions, affairs or operations of the Seller. The Seller is not
a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit proceeding or
investigation by the Seller currently pending or which the Seller
intends to initiate. The SEC has not issued any order suspending
trading in the Seller's Common Stock and the Seller is not under
investigation by the SEC or the National Association of Securities
Dealers, and there are no proceedings pending or threatened before
either regulatory body.
(h) There are no other material outstanding debt or
equity securities presently convertible into Common Stock other than
the Debentures and warrants or commitments to acquire approximately
18,000,000 shares.
(i) The Seller has not sold more than $926,000 worth of
securities within the 12 month period prior to the date the Common
Stock was first offered in reliance on any exemption under Section
3(b) of the 1933 Act, Regulation D or its rules or in violation of
Section 5(a) of the 1933 Act.
(j) The issuance, sale and delivery of the Debentures
have been duly authorized by all required corporate action on the
part of the Seller, and when issued, sold and delivered in
accordance with the terms hereof and thereof for the consideration
expressed herein and therein, will be duly and validly issued, fully
paid and non-assessable. The Common Stock issuable upon conversion
of the Debenture has been duly and validly reserved for issuance and
upon issuance in accordance with the terms of the Debentures, shall
be duly and validly issued, fully paid, and non-assessable There
are no pre-emptive rights of any shareholder of Seller.
(k) This Agreement has been duly authorized, validly
executed and delivered on behalf of Seller and is a valid and
binding agreement in accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally. The Seller has all
requisite right, power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
All corporate action on the part of the Seller, its directors and
shareholders necessary for the authorization, execution, delivery
and performance of this Agreement and the Debentures has been taken.
Upon their issuance to the Buyer and delivery to the Escrow Agent,
as defined in and pursuant to the Escrow Agreement, the Debentures
will be validly issued and nonassessable, and will be free of any
liens or encumbrances.
(l) Seller acknowledges and agrees that the transactions contemplated
by this the Agreement have taken place solely and exclusively within
the State of Colorado.
4. Exemption; Reliance on Representations. Buyer understands that the
offer and sale of the Securities are not being registered under the 1933
Act. Seller and Buyer are relying on the rules governing offers and sales
made pursuant to Rule 504 promulgated under Regulation D. The offer and
sale of the Shares are made solely within the State and jurisdiction of
Colorado and without general solicitation.
5. Transfer Agent Instructions.
(a) Debentures. Upon the conversion of the Debentures,
the Buyer or holder shall give a notice of conversion to the Seller
and the Seller shall instruct its transfer agent to issue one or
more Certificates representing that number of shares of Common Stock
into which the Debenture or Debentures are convertible in accordance
with the provisions regarding conversion set forth in Exhibit A.
The Seller shall act as Debenture Registrar and shall maintain an
appropriate ledger containing the necessary information with respect
to each Debenture. There shall be no need for the Purchaser to
surrender the original Debentures to the Seller until the Debentures
have been paid by the Seller or converted into Common Stock, as the
case may be.
(b) Common Stock to be Issued Without Restrictive Legend.
Upon the conversion of any Debenture, Seller shall instruct
Seller's transfer agent to issue Stock Certificates up to the total
of the "Conversion Amount" (as defined in the Debenture) and any
"Interest Shares" (as defined in the Debenture) without restrictive
legend of any nature in the name of the Buyer (or its nominee) and
in such denominations to be specified at conversion representing the
number of shares of Common Stock issuable upon such conversion, as
applicable. The Common Stock shall be immediately freely
transferable on the books and records of Seller. Seller shall also
instruct its attorney to issue and render any legal opinion which is
required at any time by Seller's transfer agent to permit Seller's
transfer agent to issue any and all Stock Certificates without a
restrictive legend as required by this Agreement.
6. Registration. If upon conversion of the Debentures
effected by the Buyer pursuant to the terms of this Agreement or
payment of interest pursuant to the Debenture the Seller fails to
issue certificates for shares of Common Stock issuable upon such
conversion ("Underlying Shares") or the Interest Shares to the Buyer
bearing no restrictive legend for any reason, then the Seller shall
be required, at the request of the Buyer and at the Seller's
expense, to effect the
registration of the Underlying Shares and/or Interest Shares issuable
upon conversion of the Debentures and payment of interest under the Act
and relevant Blue Sky laws as promptly as is practicable. The Seller
and the Buyer shall cooperate in good faith in connection with the
furnishings of information required for such registration and the taking
of such other actions as may be legally or commercially necessary in order
to effect such registration. The Seller shall file such a
registration statement within 30 days of Buyer's demand and shall
use its good faith diligent efforts to cause such registration
statement to become effective as soon as practicable thereafter.
Such good faith diligent efforts shall include, but not be limited
to, promptly responding to all comments received from the staff of
the SEC, providing Buyer's counsel with a contemporaneous copy of
all written communications from and to the staff of the SEC with
respect to such registration statement and promptly preparing and
filing amendments to such registration statement which are
responsive to the comments received from the staff of the SEC. Once
declared effective by the SEC, the Seller shall cause such
registration statement to remain effective until the earlier of (i)
the sale by the Buyer of all Underlying Shares registered or (ii)
120 days after the effective date of such registration statement.
In the event the Seller undertakes to file a Registration Statement
in connection with the Common Stock, upon the effectiveness of such
Registration, Buyer shall have the option to sell the Common Stock
pursuant thereto.
7. Delivery Instructions. The Debentures being
purchased hereunder, and the Purchase Price, shall be delivered to
the Escrow Agent pursuant to the Escrow Agreement.
8. Conditions To Seller's Obligation To Sell. Seller's
obligation to sell the Debentures is conditioned upon:
(a) The receipt and acceptance by Seller of this
Agreement as executed by Buyer.
(b) All of the representations and warranties of the
Buyer contained in this Agreement shall be true and correct on the
Closing Date with the same force and effect as if made on and as of
the Closing Date. The Buyer shall have performed or complied with
all agreements and satisfied all conditions on its part to be
performed, complied with or satisfied at or prior to the Closing Date.
(c) No order asserting that the transactions contemplated
by this Agreement are subject to the registration requirements of
the Act shall have been issued, and no proceedings for that purpose
shall have been commenced or shall be pending or, to the knowledge
of the Seller, be contemplated. No stop order suspending the sale of
the Debentures or Common Stock shall have been issued, and no
proceedings for that purpose shall have been commenced or shall be
pending or, to the knowledge of the Seller, be contemplated.
(d) Delivery of Escrow Agreement by Buyer.
9. Conditions To Buyer's Obligation To Purchase.
Buyer's obligation to purchase the Debentures is conditioned upon:
(a) The confirmation of receipt and acceptance by Seller
of this Agreement as evidenced by execution of this Agreement of the
duly authorized officer of Seller.
(b) Delivery of the Debentures and the Escrow Agreement
to the Escrow Agent.
10. No Shareholder Approval and No Dilution.
(a) Seller hereby agrees that from the Closing Date until the issuance of
Common Stock upon the conversion of the Debentures, Seller will not
take any action which would require Seller to seek shareholder
approval of such issuance unless such shareholder approval is
required by law or regulatory body (including but not limited to the
NASDAQ Stock Market, Inc.) as a result of the issuance of the
Debentures or Common Stock hereunder.
(b) Provided the Debentures, or any Seller Debentures from a series which
predate the Debentures remain outstanding and unpaid, or if there is
any portion of any such Debentures which have not been converted
into the Seller's Common Stock, then the Seller shall not split nor
reverse split the Common Stock, nor consolidate the outstanding
number of shares of Common Stock into a small number of shares.
11. Miscellaneous.
(a) This Agreement together with the Debentures and
Escrow Agreement, constitutes the entire agreement between the
parties, and neither party shall be liable or bound to the other in
any manner by any warranties, representations or covenants except as
specifically set forth herein. Any previous agreement among the
parties related to the transactions described herein is superseded
hereby. The terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the restrictive successors and
assigns of the parties hereto. Nothing in this Agreement, express
or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
(b) Buyer is an independent contractor and is not the
agent of Seller. Buyer is not authorized to bind Seller or to make
any representation or warranties on behalf of Seller.
(c) All representations and warranties contained in this
Agreement by Seller and Buyer shall survive the closing of the
transactions contemplated by this Agreement.
(d) This Agreement shall be construed in accordance with
the laws of Colorado applicable to contracts made and wholly to be
performed within the State of Colorado and shall be
binding upon the successors and assigns of each party hereto.
Buyer and Seller hereby mutually waive trial by jury and consent to
exclusive jurisdiction and venue in the courts of the State of Colorado.
At Buyer's election, any dispute between the parties may be arbitrated
rather than litigated in the courts, before the arbitration board of
the American Arbitration Association in Denver and pursuant to its
rules. Upon demand made by the Buyer to the Seller, Seller agrees
to submit to and participate in such arbitration. This Agreement
may be executed in counterparts, and the facsimile transmission of
an executed counterpart to this Agreement shall be effective as an
original.
(e) Seller agrees to indemnify and hold Buyer harmless
from any and all claims, damages and liabilities arising from
Seller's breach of its representations and/or covenants set forth
herein.
(f) Buyer agrees to indemnify and hold Seller harmless
from any and all claims, damages and liabilities arising from
Buyer's breach of its representations and warranties set forth in
this Agreement.
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IN WITNESS WHEREOF, the undersigned has executed this
Agreement as of the date first set forth above.
Official Signatory of Seller:
LAKOTA ENERGY, INC.
By:/s/Xxx Xxxxxxxx
Title: President
Accepted this day 23rd day of July, 1999
Official Signatory of Buyer:
HLKT HOLDINGS, L.L.C.
By:/s/Unknown
