SECURITIES SUBSCRIPTION AGREEMENT
THIS SECURITIES SUBSCRIPTION AGREEMENT, dated as of March
16, 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 8% Series A
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, Xxxxx 000,
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 8% Series A
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 U.S. $183,500
(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 one hundred eighty three thousand five hundred United
States Dollars (U.S. $183,500) ("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 is
attached hereto and 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 signed Escrow Agreement and (iii)
Buyer pays $25,000 towards the Purchase Price for the Debentures
("Closing Date").
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:
(i) Buyer is not, and on the closing date will not be, an
affiliate of Seller;
(ii) Buyer is purchasing the Securities for its own account and
Buyer is qualified to purchase the Securities under the laws of its
jurisdiction of residence, and the offer and sale of the Securities
will not violate the securities laws or other laws of such
jurisdiction;
(iii) All offers and sales of any of the Securities 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;
(iv) Buyer understands that the Securities are not registered
under the 1933 Act and are being offered and sold to it in reliance
on specific exclusions 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 exclusions and the
suitability of Buyer and any purchaser from Buyer to acquire the
Securities;
(v) Buyer shall comply with Rule 504 promulgated under Regulation D;
(vi) 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;
(vii) The execution and delivery of this Agreement and the
consummation of the purchase of the Securities 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;
(viii) All invitations, offers and sales of or in respect of, any of
the Securities, by Buyer and any distribution by Buyer of any
documents relating to any invitation, offer or sale by it of any of
the Securities 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 by 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;
(ix) 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;
(x) Buyer understands that no Federal or State or foreign
government agency has passed on or made any recommendation or
endorsement of the Securities;
(xi) Buyer has had an opportunity 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.
(xii) Buyer acknowledges that the purchase of the Securities
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 Securities. Buyer
understands that the Securities are not being registered under the
1933 Act, and therefore, Buyer must bear the economic risk of this
investment for an indefinite period of time; and
(xiii) Buyer is not a "10-percent Shareholder" (as defined in
Section 871(h)(3)(B) of the U.S. Internal Revenue Code) of Seller.
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 20,000,000 as of March 15, 1999 outstanding. The
Common Stock trades on National Associates of Securities Dealers OTC
Bulletin Board. All issued and outstanding shares of Common Stock
have been authorized and validly issued and are fully paid and
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.
(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.
(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.
(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 ("Material Adverse
Change"). 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. Seller will be
filing suit against Optima Investments, Houston, Texas, on the
grounds of breach of contract. Seller does not believe that the
filing of the suit or any potential counterclaim will result in a
Material Adverse Change.
(h) There are no other material outstanding debt or
equity securities presently convertible into Common Stock other than
the Debentures except for a unit offering of Series A and B
restricted common stock and warrants, which has been described in a
letter from Seller's counsel dated March 16, 1999 which has been
delivered to and reviewed by Buyer ("Units").
(i) The Seller has not sold any 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 or in
violation of Section 5(a) of the 1933 Act except for the Units and
limited offerings of some securities which, aggregated with the
Debentures, meet the requirements under Rule 504 of Regulation D for
an exemption from registration..
(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.
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.
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.
(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 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 ("Opinion").
Seller's attorney has executed this Agreement to acknowledge and
accept his obligations to issue the Opinion when and as required by
the Seller and Seller's transfer agent.
6. Delivery Instructions. The Debentures being
purchased hereunder, and the Purchase Price, shall be delivered to
the Escrow Agent pursuant to the Escrow Agreement.
7. 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
Payment Date with the same force and effect as if made on and as of
the Payment 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 Payment 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) The funding by the Buyer of the Escrow Fund.
8. 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 to the Escrow Agent.
9. No Shareholder Approval. 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 Securities hereunder.
10. 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 New York applicable to contracts made and wholly to be
performed within the State of New York 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 New York.
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 New York City 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.
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
Xxx Xxxxxxxx
Title: President
Accepted this 16th day of March, 1999
Official Signatory of Buyer:
Y.L. XXXXXX
By: /s/Y.L. Xxxxxx
Address of Buyer:
000 Xxxxx Xxxxxxx,
X. Xxxxxxxxx, Xxxxxx
Fax No.: 000-0-000-0000
Tel. No.: 000-0-000-0000
AS TO SECTION 5(b):
ACCEPTED AND AGREED TO:
By:/s/Xxxxx X. Xxxxxxxx
Attorney for Lakota Resources Inc.
