ESCROW AGREEMENT
ESCROW AGREEMENT ("Escrow Agreement") dated as of July 23,
1999 by and among LAKOTA ENERGY, INC., a Colorado corporation, with
a principal executive office at 0000 Xxxxx Xxxxx Xxxx, Xxxxxxx,
Xxxxxxx 00000 ("Lakota"), and HLKT HOLDINGS, L.L.C. ("Purchaser"),
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
Subscription Agreement dated as of July 14, 1999 ("Agreement"), in
which, inter alia, the Purchaser agreed to purchase Lakota's 1%
Series B Senior Subordinated Convertible Redeemable Debentures
("Debentures");
B. Pursuant to the Agreement, the Debentures 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 transfer to Lakota the sum of USD$74,000 by wire transfer,
less any fees which Lakota has agreed to pay by virtue of a separate
agreement.
3. Issuance and Delivery of the Debentures 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 Debentures in
the face amount of $74,000 as provided in the Agreement. If Lakota
is not paid the full Purchase Price for the Debentures, as provided
in this Escrow Agreement, then the Debenture, or any portion of the
Debentures which is not paid for at the time when payment is due to
be made, shall be canceled by Lakota, and the Escrow Agent, upon
written notice of such cancellation from Lakota, shall promptly
return the Debentures to Lakota. Upon such cancellation and return
of the Debentures, the parties shall have no further obligations or
liabilities each to the other under this Escrow Agreement, the
Agreement or the Debentures.
(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 as provided in Section 5(b) of the Agreement, in an amount
equal up to $74,000, 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 50% of the closing bid price of Lakota's common stock
as reported on the National Association of Securities Dealers
Electronic Bulletin Board for the day immediately preceding the
date of receipt of the Resolution by transfer agent, 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
Debentures and this Escrow Agreement, or Lakota commits a material
breach of the Agreement, the Debentures, 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 Debentures, 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 Debentures. The
Escrow Agent shall hold and dispose of the Debentures only in
accordance with the terms of this Escrow Agreement.
5. Conversion of Debentures and Payment of Escrow Fund.
(a) As provided in paragraph 4 of the Debentures,
Purchaser may give Notice of Conversion of the Debentures to Lakota
by facsimile to the number set forth in Section 10 below.
Conversion of Debentures may take place at any time until the
Maturity Date of the Debentures, as defined in the Debentures. As
provided in paragraph 4 of the Debentures, within 5 business days of
receipt of the Notice of Conversion, Lakota shall deliver to the
Purchaser, or to an account designated by Purchaser in the Notice of
Conversion, certificates representing the shares of common stock to
which the Purchaser shall be entitled by reason of the conversion
("Certificates").
(b) If Lakota fails to timely deliver Certificates, as
provided in Section 5(a) above, then Lakota shall pay Purchaser $150
per day for each day late in delivering Certificates up to and
including the 10th late day, and $500 per day for each day late in
delivering the Certificates after the 10th late day ("Liquidated
Damages"). Any Liquidated Damages incurred by Lakota shall be
payable immediately and in cash upon demand in writing by Purchaser,
or its agent, to Lakota. However, such Liquidated Damages may be
deducted from any amounts owed to Lakota by Purchaser pursuant to
this Section 5. Notwithstanding anything contained in the Agreement
to the contrary, including but not limited to the provisions of
Section 6 regarding the registration of restricted Conversion
Shares, Purchaser shall be required to pay the Liquidated Damages
set forth in this Section 5(c).
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
Purchaser shall not be precluded from making any conversions of the
Debenture.
7. Indemnification. Purchaser 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
Debentures, Conversion Shares, Escrow Fund 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 Debentures 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 Debentures 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 Debentures, or in the event that the Escrow
Agent otherwise determines that the Debentures should be retained,
then the Escrow Agent may retain the Debentures until the Escrow
Agent shall have received (i) a final nonappealable order of a court
of competent jurisdiction directing delivery of the Debentures, or
(ii) a written agreement executed by the other parties hereto
directing delivery of the Debentures, in which case the Escrow Agent
shall promptly deliver the Debentures 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, Debentures 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
Colorado. The parties agree to submit to the jurisdiction and venue
of any state or federal court in Denver 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 Energy, Inc. Corporation
0000 Xxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Att'n: Xxx Xxxxxxxx
Fax: 000-000-0000
with a copy to:
Xxxxx Xxxxxxxx, Esq.
c/o M. Xxxxxxx Xxxxxx, Esq.
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Fax: 000-000-0000
If to Purchaser:
HLKT Holdings, LLC
0000 Xxxxx Xxxxxxx Xxxxxx- Xxxx 000X
Xxxxxx, Xxxxxxxx 00000
Fax: 000-000-0000
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 ENERGY, INC.
By:/s/Xxx Xxxxxxxx
President
HLKT HOLDINGS, LLC
By:/s/Unknown
As to Escrow Only:
ESCROW AGENT:
XXXXXX X. XXXXXXXX, ESQ.
By:/s/Xxxxxx X. Xxxxxxxx
