ESCROW AGREEMENT
ESCROW AGREEMENT ("Escrow Agreement") dated as of March 16,
1999 by and among LAKOTA ENERGY, INC., a Colorado corporation, with
a principal place of business at 0000 Xxxxx Xxxxx Xxxx, Xxxxxxx,
Xxxxxxx 00000 ("Lakota"), and Y.L. XXXXXX, XXXXX XXXXXXX and XXXXXX
XXXXXXXX (collectively "Purchaser" or "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. Each of the Purchasers and Lakota entered into
Securities Subscription Agreements dated as of March 16, 1999
("Agreement" or "Agreements"), in which, inter alia, the Purchasers
agreed to purchase Lakota's 8% Series A 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$75,000, less any fees which Lakota
has agreed to pay by virtue of a separate agreement.
3. Issuance and Delivery of the Debentures and Confession of Judgment
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 Debenture in the
face amount of $550,000 as provided in the Agreement. If Lakota is
not paid the full Purchase Price for the Debenture, as provided in
this Escrow Agreement, then the Debenture, or any portion of the
Debenture 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 Debenture to Lakota. Upon such cancellation and return
of the Debenture, the parties shall have no further obligations or
liabilities each to the other under this Escrow Agreement, the
Agreement or the Debenture.
(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,1825 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 $550.000, 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 75% of the closing bid price of Lakota's common stock
as reported on the National Association of Securities Dealers
Electronic Bulletin Board on 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 Jersey Transfer and Trust Company without the
express written consent of the Purchasers ("Default"). Upon written
demand from the Purchasers, 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 Purchasers from exercising any and all other
remedies available to the Purchasers 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
Purchasers and shall ignore any demand or instructions to the
contrary from Lakota.
(c) On the date hereof, Lakota shall deliver to the
Escrow Agent a confession of judgment, in the form annexed hereto as
Exhibit B, in the amount of $687,500 ("Confession of Judgment"),
which shall be filed by the Escrow Agent against Lakota in the event
of a Default for all sums which Purchasers would have been entitled
to under the Agreement, the Debentures, and this Escrow Agreement,
including liquidated damages as provided in Section 5(b) below.
Upon written demand from the Purchasers, Escrow Agent shall deliver
the Confession of Judgment to the Purchasers who may thereafter file
the Confession of Judgment and seek enforcement of the judgment
against Lakota wherever Lakota maintains assets. Filing and
enforcing the Confession of Judgment shall not preclude the
Purchasers from exercising any and all other remedies available to
the Purchasers 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 Purchasers 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"). Notwithstanding anything to the contrary contained
in paragraph 4 of the Debenture, Lakota may demand, in writing, that
the Purchaser pay outstanding principal amounts of the Debenture
("Demand") even though Purchaser has not converted all or any amount
of the Debenture into shares of common stock, as provided in
subsections (A) and (B) below. The Demand is a provision for
payment of the Debenture only. Conversions of the Debenture into
shares of common stock shall be done in accordance with paragraph 4
of the Debenture, and may be in an amount which is no less than
$10,000 but not necessarily as much as the Demand. However, (A) a
Demand may only be made in increments of $25,000 no less than 10
business days from last Demand, provided that the closing bid price
for Lakota's publicly traded common stock for the day preceding the
Demand is equal to or greater than $.03, or (B) no Demand may be
made if the average closing bid price of Lakota's publicly traded
common stock falls below $.03.
(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 required to make any payment under the
Debenture or to honor any Demand.
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 shall 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 an 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) The Escrow Agent has the right to rely on any notice received from
Y. L. Xxxxxx on behalf of all Purchasers without the necessity of
receiving notices to act separately from each Purchaser, and each
Purchaser and Lakota agree that Escrow Agent may act upon the
instructions or written notice or demand received from Y. L. Xxxxxx
alone.
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 Energy, Inc.
0000 Xxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Att'n: Xxx Xxxxxxxx
Fax: 000-000-0000
with a copy to:
Xxxxx X. Xxxxxxxx, Esq.
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Fax: 000-000-0000
If to Purchaser:
Y.L. Xxxxxx
259 Batai Ugarian
Jerusalem, Israel
Fax: 000-000-0-000-0000
with a copy to:
Portfolio investment Strategies Corp.
0 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxx Xxxx 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.
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
Xxx Xxxxxxxx
President
PURCHASERS:
/s/Y.L.XXXXXX
/s/XXXXX XXXXXXX
/s/XXXXXX XXXXXXX
ESCROW AGENT:
XXXXXX X. XXXXXXXX, ESQ.
By: /s/Xxxxxx X. Xxxxxxxx
