ESCROW AGREEMENT
ESCROW AGREEMENT ("Escrow Agreement") dated as of August 24,
1999 by and among LAKOTA TECHNOLOGIES, INC., a Colorado
corporation, with a principal executive office at 0000 Xxxxx Xxxxx
Xxxx, Xxxxxxx, Xxxxxxx 00000 ("Lakota"), and Y.L. Xxxxxx, Xxxxxx
Xxxxxxxx, Xxxxxx Xxxxxxxxxx, Xxxxx Xxxxxxx and Xxx X. Xxxxxxxxxx
("Purchasers"), and Xxxxxx X. Xxxxxxxx, Esq., having a principal
place of business at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
("Escrow Agent").
WHEREAS:
A. The Purchaser and Lakota entered into a Securities
Purchase Agreement dated as of August 24, 1999 ("Agreement"), in
which, inter alia, the Purchaser agreed to purchase Lakota's 8%
Convertible Notes Due August 24, 2001 ("Notes") and provide certain
warrants to the Purchaser ("Warrants");
B. Pursuant to the Agreement, the Notes, the Warrants
and other accompanying transaction documents and the Purchase Price
are to be delivered to the Escrow Agent to hold and administer in
accordance with the terms and conditions of this Escrow Agreement.
NOW THEREFORE, in consideration of the respective premises,
mutual covenants and agreements of the parties hereto, and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Escrow Agent. Escrow Agent is hereby
appointed as escrow agent and the Escrow Agent hereby accepts such
appointment. The Escrow Agent shall act in accordance with the
instructions set forth in this Escrow Agreement and any further
instructions given to it by written instrument signed by Lakota and
Purchaser.
2. Initial Funding. On the date hereof, the Purchaser
shall deliver the Purchase Price to the Escrow Agent which in turn
shall transfer to Lakota the sum of USD$500,000 by wire transfer,
less any fees which Lakota has agreed to pay by virtue of a separate
agreement upon receipt of the fully executed Agreement, Notes,
Warrants and other accompanying transaction documents The Balance of
the Purchase Price, i.e., $250,000 less any fees agreed to by
Lakota, shall be held in escrow by the Escrow Agent ("Escrow Fund").
3. Issuance and Delivery of the Notes and
Resolution to the Escrow Agent
(a) On the date hereof, Lakota shall issue in the name of
the Purchaser and deposit with the Escrow Agent the Notes in the
face amount of $750,000 as provided in the Agreement.
(b) On the date hereof, Lakota shall deliver to the
Escrow Agent a resolution in the form annexed hereto as Exhibit A
("Resolution"), instructing Lakota's transfer agent, American Stock
Transfer, 0000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000
("Transfer Agent") to
issue to Purchaser shares of Lakota's common stock registered in the name
of the Purchaser, without restrictive legend, if at the time the
Resolution is presented Lakota's registration statement has become
effective, or with restrictive legend, if the registration statement
has not been filed or has not become effective, as provided in the
Agreement, in an amount equal up to $750,000, or at some lesser amount
as the Escrow Agent, in his sole discretion may direct the Transfer
Agent, at a price per share which is in accordance with the terms and
conditions of the Notes, and providing that Lakota shall not change its
transfer agent from the Transfer Agent, without the express written
consent and directive of the Escrow Agent. The Resolution may be
delivered by the Escrow Agent to the Transfer Agent in the event that,
for any reason whatsoever, Lakota fails to honor any Notice of Conversion
as provided in the Notes and this Escrow Agreement, or Lakota commits a
material breach of the Agreement, the Notes, or this Escrow
Agreement, or in the event that Lakota changes or attempts to change
its transfer agent from the Transfer Agent without the express
written consent of the Purchaser. Upon written demand from the
Purchaser, Escrow Agent shall deliver the resolution to the Transfer
Agent as provided in this Section 3(b). Delivery of the Resolution
to the Transfer Agent and the issuance of shares by the Transfer
Agent in accordance with the Resolution shall not preclude the
Purchaser from exercising any and all other remedies available to
the Purchaser against Lakota for a breach of the Agreement, the
Notes, or this Escrow Agreement. Escrow Agent shall be entitled to
honor any such written demand from the Purchaser and shall ignore
any demand or instructions to the contrary from Lakota.
4. Custody and Disposition of the Notes. The Escrow Agent shall
hold and dispose of the Notes only in accordance with the terms of this
Escrow Agreement.
5. Release of Escrow Fund.
(a) When the Registration Statement is declared effective, as provided
in Section 10.2 of the Agreement and as mandated by the Registration
Rights Agreement between Lakota and the Purchasers executed and delivered
simultaneously with the Agreement, then Lakota shall give written notice
to the Purchasers advising of such effectiveness and shall demand, in
writing, that the Escrow Agent release the Escrow Fund to Lakota.
Provided Lakota is not otherwise in default under the Agreement, the
Notes and the other transaction documents issued, executed and delivered
in connection with the Agreement and the transactions contemplated thereunder,
the Escrow Agent shall release the Escrow Fund to Lakota into an account
or accounts designated by Lakota in writing.
(b) If Lakota fails to timely deliver conversion shares
to Purchasers, as required in the Agreement, then Lakota shall pay
Purchaser $150 per day for each day late in delivering such
conversion shares up to and including the 10th late day, and $500
per day for each day late in delivering the conversion shares after
the 10th late day which amounts shall be added to the outstanding
principal balances due under the Notes ("Liquidated Damages"). Any
Liquidated Damages incurred by Lakota shall be payable immediately
and in cash upon demand in writing by Purchasers, or its agent, to
Lakota.
(c) In the event that the Registration Statement is not declared effective
no later than January 1, 2000, and as required by the Agreement and the
Registration Rights Agreement
executed in connection with the Agreement, then the Default Conversion
Price shall apply to all conversions done under the Notes pursuant to
said Section 4.1 and the Escrow Fund shall not be released to Lakota
until the registration statement has become effective. If the registration
statement has not become effective by March 1, 2000, then the Escrow
Fund shall be paid and transferred to the Purchasers at their
direction and neither the Purchasers not the Escrow Agent shall have
any further obligations under this Escrow Agreement and shall be
fully and completely released from any and all claims, demands, and
causes of action of any nature whatsoever thereafter.
6. Bankruptcy. In the event any proceeding under the
Bankruptcy Laws of the United States or any proceedings under any
state laws for the protection of debtors or creditors, are filed,
voluntarily or involuntarily, by or on behalf of Lakota, then the
Escrow Agent shall not pay the Escrow Fund to Lakota and shall
immediately pay and transfer the Escrow Fund to the Purchasers
without any further notice from the Purchasers or Lakota required.
7. Indemnification. Purchasers and Lakota agree,
jointly and severally to indemnify, defend and hold harmless the
Escrow Agent from and against any and all costs (including, without
limitation, legal fees and expenses), liabilities, claims and losses
arising out of or in connection with this Escrow Agreement or any
action or failure to act by the Escrow Agent under this Escrow
Agreement, except as provided in paragraph 8 below.
8. Concerning the Escrow Agent. To induce the Escrow
Agent to act hereunder, it is further agreed by the undersigned that:
(a) This Escrow Agreement expressly sets forth all the
duties of the Escrow Agent with respect to any and all matters
pertinent hereto. No implied duties or obligations on the part of
the Escrow Agent shall be read into this Escrow Agreement. The
Escrow Agent shall not be bound by the provisions of any agreement
among the other parties hereto except this Escrow Agreement.
(b) The Escrow Agent shall not be liable for any action
or failure to act in its capacity as Escrow Agent hereunder unless
such action or failure to act shall constitute willful misconduct on
the part of the Escrow Agent, in which case there shall be no
indemnification obligations.
(c) The Escrow Agent shall be entitled to rely upon any
order, judgment, certification, demand, notice, instrument or other
writing delivered to it hereunder without being required to
determine the authenticity or the correctness of any fact stated
therein or the propriety or validity of the service thereof. The
Escrow Agent may act in reliance upon any instrument or signature
believed by it to be genuine and may assume, unless he has actual
knowledge to the contrary, that any person purporting to give notice
or receipt or advice or make any statement or execute any document
in connection with the provisions hereof has been duly authorized to
do so.
(d) The Escrow Agent may act pursuant to the advice of
counsel with respect to any matter relating to this Escrow Agreement
and shall not be liable for any action taken or omitted in
accordance with such advice, except as provided in paragraph 8(b)
above.
(e) The Escrow Agent does not have any interest in the
Notes, Conversion Shares, or any other property deposited hereunder
but is serving as escrow holder only and having only possession
thereof, and is not charged with any duty or responsibility to
determine the validity or enforceability of any such documents.
(f) The Escrow Agent (and any successor Escrow Agent) may
at any time resign as such by delivering the Notes to any successor
Escrow Agent, jointly designated by the other parties hereto in
writing, or to any court of competent jurisdiction, whereupon the
Escrow Agent shall be discharged of and from any and all further
obligations arising in connection with this Escrow Agreement
thereafter. The resignation of the Escrow Agent will take effect on
the earlier of (a) the appointment of a successor (including a court
of competent jurisdiction) or (b) the day which is 30 days after the
date of delivery of its written notice of resignation to the other
parties hereto. If at that time the Escrow Agent has not received a
designation of a successor Escrow Agent, the Escrow Agent's sole
responsibility after that time shall be to safekeep the Notes and
not make delivery or disposition thereof until receipt of a
designation of successor Escrow Agent or a joint written disposition
instruction by the other parties hereto or a final order of a court
of competent jurisdiction.
(g) In the event of any disagreement among the parties
hereto resulting in adverse claims or demands being made in
connection with the Notes, or in the event that the Escrow Agent
otherwise determines that the Notes should be retained, then the
Escrow Agent may retain the Notes until the Escrow Agent shall have
received (i) a final nonappealable order of a court of competent
jurisdiction directing delivery of the Notes, or (ii) a written
agreement executed by the other parties hereto directing delivery of
the Notes, in which case the Escrow Agent shall promptly deliver the
Notes in accordance with such order or agreement. Any court order
referred to in (i) above shall be accompanied by a legal opinion by
counsel for the presenting party reasonably satisfactory to the
Escrow Agent to the effect that said court order is final and
nonappealable. The Escrow Agent shall act on such court order and
legal opinion without further question.
(h) This Escrow Agreement shall be binding upon and inure
solely to the benefit of the parties hereto and their respective
successors (including successors by way of merger) and assigns,
heirs, administrators and representatives and shall not be
enforceable by or inure to the benefit of any third party except as
provided in paragraph (g) with respect to a resignation by the
Escrow Agent.
(i) This Escrow Agreement may be modified by a writing
signed by all the parties hereto, and no waiver hereunder shall be
effective unless in a writing signed by the party to be charged.
(j) Lakota acknowledges and agrees that in any dispute
involving the Agreement,
Notes or this Escrow Agreement, that Escrow Agent may represent
Purchaser's interests and shall not have a conflict of interest due
to the fact that Escrow Agent is also acting as an escrow agent
pursuant to this Escrow Agreement and Lakota hereby waives any right
which it may have had to assert a conflict of interest in the
absence of this Section 8(j).
9. Governing Law. This Escrow Agreement shall be
governed in all respects by the internal laws of the State of New
York. The parties agree to submit to the jurisdiction and venue of
any state or federal court in New York City having subject matter
jurisdiction over the matter. Service may be made by certified
mail, return receipt requested, to the parties at the addresses set
forth in paragraph 10 below, but the parties shall not be precluded
from making service in any other manner permitted by law.
10. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be delivered by
hand or sent by U.S. Express Mail, Fedex or some other reliable
overnight courier service for next day delivery. Each such notice
or other communication shall for all purposes of this Escrow
Agreement be treated as effective or having been given when
delivered if delivered personally, or, if sent by overnight express
mail service, 1 day after the same has been deposited with the U.S.
Postal Service, Fedex or the overnight courier. All such notices
must also be sent by facsimile on the same day to the parties as
follows:
If to Lakota :
Lakota Technologies, Inc.
0000 Xxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Att'n: Xxx Xxxxxxxx
Fax: 000-000-0000
with a copy to:
Xxxxx Xxxxxxxx, Esq.
Law Offices of M. Xxxxxxx Xxxxxx, Esq.
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Fax: 000-000-0000
If to Purchasers:
x/x Xxxxxx Xxxxxxxxxx
Xxxxxxx Xxxxxxxxxx Xxxxxx
X. Xxxxxxxxx, Xxxxxx
Fax No.: 000-000-0-000-0000
If to Escrow Agent:
Xxxxxx X. Xxxxxxxx, Esq.
Xxxxx Xxxxx Xxxxxx Xxxxxxxx & Xxxxxxx, P.C.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: 000-000-0000
11. Counterparts. This Escrow Agreement may be executed
in one or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the
same instrument.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this
Escrow Agreement to be duly executed and delivered, as of the day
and year first above written.
LAKOTA TECHNOLOGIES, INC.
By:
/s/Xxx Xxxxxxxx
President
/s/Y.L. XXXXXX
/s/XXXXXX XXXXXXXX
/s/XXXXXX XXXXXXXXXX
/s/XXXXX XXXXXXX
/s/XXX X. XXXXXXXXXX
As to Escrow Only:
ESCROW AGENT:
XXXXXX X. XXXXXXXX, ESQ.
By:/s/Xxxxxx X. Xxxxxxxx
