HOUSTON AMERICAN ENERGY CORP.
8% SUBORDINATED CONVERTIBLE NOTES DUE 2010
PURCHASE AGREEMENT
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THIS PURCHASE AGREEMENT (the "Agreement") is made the date set forth on the
signature page by and among HOUSTON AMERICAN ENERGY CORP. (the "Company"), a
Delaware corporation, and the purchaser whose name appears on the signature page
hereof (the "Purchaser"). The Company proposes, subject to the terms and
conditions stated herein, to issue and sell and the Purchaser desires to
purchase 8% Subordinated Convertible Notes due 2010, in the form attached hereto
as Exhibit A (the "Notes"), in the principal amount set forth on the signature
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page hereof.
The Notes will be convertible into duly and validly issued, fully paid and
non-assessable shares of common stock, par value $0.001 per share (the "Common
Stock"), of the Company (such shares, the "Shares" and, together with the Notes,
the "Securities") on the terms, and subject to the conditions, set forth herein.
The Notes will be offered and sold to the Purchaser without being
registered under the Securities Act of 1933, as amended, and the rules and
regulations of the Securities and Exchange Commission (the "Commission")
thereunder (collectively, the "Securities Act"), in reliance upon Section 4(2)
("Section 4(2)") thereof and/or Regulation D ("Regulation D") thereunder.
The Purchaser will be entitled to the benefits of a Registration Rights
Agreement (the "Registration Rights Agreement") to be entered into among the
Company and the Purchaser pursuant to which the Company will agree, among other
things, with respect to the Notes and the Shares, to file with the Commission a
shelf registration statement pursuant to Rule 415 under the Securities Act (the
"Resale Registration Statement") covering the resale of the Notes and the
Shares, and to use its reasonable best efforts to cause the Registration
Statement to be declared effective within the time periods specified therein.
This Agreement, the Registration Rights Agreement, and the form of Note
between the Company and the Purchaser, are referred to herein collectively as
the "Transaction Documents," and the transactions contemplated hereby and
thereby are referred to herein collectively as the "Transactions."
1. PURCHASE AND SALE OF NOTES.
(a) On the basis of the representations, warranties and
covenants contained in this Agreement, and subject to its terms and
conditions, the Company agrees to issue and sell to the Purchaser and the
Purchaser agrees to purchase from the Company an aggregate principal amount
of Notes shown on the signature page hereof.
(b) The purchase price for the Notes will be equal to 100% of
the principal amount thereof.
(c) Delivery of, and payment for, the Notes (the "Closing")
shall be made at 10:00 a.m., New York City time, on May 2, 2005, at the
offices of Northeast Securities, Inc. ("NES"), or such other time or place
as the Company and NES shall designate.
(d) The Purchaser (including subsequent transferees) of the
Notes will have the registration rights set forth in the Registration
Rights Agreement, in substantially the form of Exhibit B hereto.
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2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. In
addition to the other representations, warranties and agreements contained in
this Agreement, the Company represents and warrants to, and agrees with, the
Purchaser as follows:
(a) The Company has prepared a private placement memorandum
dated April 20, 2005 (the "Private Placement Memorandum") and setting forth
information concerning the Company, the Securities, the Transaction
Documents, the Transactions and certain other matters. A copy of the
Private Placement Memorandum has been delivered by the Company to the
Purchaser. As used in this Agreement, "Private Placement Memorandum" means
the Private Placement Memorandum including the documents incorporated by
reference therein, as amended or supplemented. The Private Placement
Memorandum did not as of its date, and will not as of the Closing Date,
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
The documents incorporated by reference in the Preliminary
Private Placement Memorandum (the "Incorporated Documents"), when they
became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Exchange Act"); and none of such
documents contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; and any further documents so filed and
incorporated by reference in the Private Placement Memorandum will conform
in all material respects to the requirements of the Exchange Act and will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances in which they were
made, not misleading.
(b) The Company has been duly incorporated or formed and is
validly existing and in good standing as a corporation or a limited
liability company under the laws of its respective jurisdiction of
incorporation or formation, is duly qualified to do business and is in good
standing as a foreign corporation or limited liability company in each
jurisdiction in which its ownership or lease of property or the conduct of
its businesses requires such qualification, and has all power and authority
necessary to own, lease or hold its properties and to conduct the
businesses in which it is engaged. Except as set forth in the Private
Placement Memorandum, the Company does not own, directly or indirectly, any
shares of common stock or any other equity or long-term debt securities
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or have any equity interest in any firm, partnership, joint venture or
other entity. The Company does not have any subsidiaries.
(c) The Company has an authorized capitalization as set forth
in the Private Placement Memorandum, and all of the issued shares of common
stock of the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and conform to the description thereof
contained in the Private Placement Memorandum; and, except for directors'
qualifying shares, are owned directly or indirectly by the Company, free
and clear of all liens, encumbrances, equities, claims or adverse interests
(collectively, "Liens") of any nature. Except as disclosed in the Private
Placement Memorandum, (i) there are no outstanding securities convertible
into or exchangeable for, or warrants, options or rights issued by the
Company to purchase, any shares of the Common Stock, (ii) there are no
statutory, contractual, preemptive or other rights to subscribe for or to
purchase any Common Stock and (iii) there are no restrictions upon transfer
of the Common Stock pursuant to the Company's charter or bylaws.
(d) Except as set forth in the Private Placement Memorandum
and except with respect to the rights contained in the Registration Rights
Agreement, there are no contracts, agreements or other documents between
the Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with
respect to any securities of the Company owned or to be owned, directly or
indirectly, by such person.
(e) There has been no change in the authorized capitalization
of the Company since the date indicated in the Private Placement Memorandum
except with respect to (i) changes occurring in the ordinary course of
business and (ii) changes in outstanding common stock resulting from
transactions relating to an employee benefit plan, qualified stock option
plans or other employee compensation plans existing on the date hereof.
(f) Since the date as of which information is given in the
Private Placement Memorandum through the date hereof, the Company has not
(i) issued or granted any securities, (ii) incurred any liability or
obligation, direct or contingent, other than liabilities and obligations
which were incurred in the ordinary course of business, (iii) entered into
any transaction not in the ordinary course of business or (iv) declared or
paid any dividend on any of its common stock.
(g) Except as set forth in the Private Placement Memorandum,
there are no legal or governmental proceedings pending to which the Company
is a party or of which any property or assets of any of the Company is
subject which, if determined adversely to such companies, individually or
in the aggregate, might have a material adverse effect on the business,
condition (financial or other) or prospects of such companies taken as a
whole (a "Material Adverse Effect"), and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others. There is no pending or,
to the best of the Company's knowledge, threatened legal or governmental
proceeding that seeks to restrain, enjoin, prevent the consummation of, or
otherwise challenge the issuance of the Securities to be sold pursuant to
this Agreement or the consummation of the other
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Transactions. The aggregate of all pending legal or governmental
proceedings to which the Company is a party or of which any of their
respective property or assets is the subject which are not described in the
Private Placement Memorandum, including ordinary routine litigation
incidental to the business, could not reasonably be expected to result in a
Material Adverse Effect.
(h) The Company is not (i) in violation of its charter, by
laws or formation documents or (ii) in default in any material respect, and
no event has occurred which, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of any
term, covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, note, lease, license, franchise agreement, permit,
certificate, contract or other agreement or instrument to which it is a
party or by which it is bound or to which any of its properties or assets
is subject.
(i) The Company has not sustained, since the date of the
latest audited financial statements included or incorporated by reference
in the Private Placement Memorandum, any material loss or interference with
its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any strike, job action, slowdown, work
stoppage, labor dispute or court or governmental action, order or decree (a
"Material Loss"); and, since such date, there has not been any change in
the common stock, equity interests, short-term debt or long-term debt of
the Company or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the business, general
affairs, management, position (financial or otherwise), stockholders'
equity, results of operations, cash flow or earnings of the Company taken
as a whole, otherwise than as set forth or contemplated in the Private
Placement Memorandum (a "Material Adverse Change").
(j) The financial statements, including the related notes and
supporting schedules, included or incorporated by reference in the
Preliminary Private Placement Memorandum and the Private Placement
Memorandum present fairly the financial condition, results of operations
and changes in financial position of the Company on the basis stated
therein at the respective dates or for the respective periods to which they
apply; such statements and related schedules and notes have been prepared
in accordance with generally accepted accounting principles in the United
States ("GAAP") consistently applied throughout the periods involved; the
supporting schedules, if any, included or incorporated by reference in the
Private Placement Memorandum present fairly, in accordance with GAAP, the
information required to be stated therein; and the other financial and
statistical information and data set forth in the Private Placement
Memorandum are or will be, in all material respects, accurately presented
and prepared on a basis consistent with such financial statements
(including the related notes and supporting schedules) and the books and
records of the Company.
(k) The statistical, industry and market-related data
included in the Private Placement Memorandum are based on or derived from
sources that the Company believes to be reliable and accurate.
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(l) ▇▇▇▇▇▇ ▇▇▇▇▇ & Co., L.L.P. (the "Accountants"), who have
certified the financial statements of the Company and whose report is
contained or incorporated by reference in the Private Placement Memorandum
is a registered public accounting firm, and the Accountants were
independent accountants as required by the Exchange Act during the periods
covered by the financial statements on which they reported.
(m) The Company employ disclosure controls and procedures
that are designed to ensure that information required to be disclosed by
the Company in the reports that they file or submit under the Exchange Act
is recorded, processed, summarized and reported, within the time periods
specified in the Commission's rules and forms, and is accumulated and
communicated to the management of the Company, including its principal
executive officer or officers and principal financial officer or officers,
as appropriate to allow timely decisions regarding disclosure.
(n) The Company has established and maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15 and 15d-15
under the Exchange Act) as required by and in material compliance with the
Exchange Act; the principal executive officers (or their equivalents) and
principal financial officers (or their equivalents) of the Company have
made all certifications required by the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the
"▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act") and any related rules and regulations of the
Commission, and the statements contained in any such certification are
complete and correct in all material respects; and the Company is otherwise
in compliance in all material respects with all applicable, effective
provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
(o) The Company has all necessary power and authority to
execute and deliver this Agreement and each of the other Transaction
Documents to which it is a party, and to perform its obligations hereunder
and thereunder to issue the Securities and to consummate the other
Transactions; each of the Transaction Documents and the Transactions have
been duly authorized by the Company; this Agreement has been duly executed
and delivered by the Company and each of the other Transaction Documents,
when executed and delivered by the Company assuming that such Transaction
Documents are or will be the valid and binding agreements of the other
parties thereto, will constitute a valid and binding obligation of the
Company, enforceable against the Company in accordance with its respective
terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally and (ii) general equitable
principles (whether considered in a proceeding in equity or at law).
(p) The Company has all necessary power and authority to
execute, issue and deliver the Shares; the Shares have been duly and
validly authorized, and, when duly issued and delivered to holders of the
Notes upon conversion of the Notes from time to time, the Shares will be
duly and validly authorized and issued, fully paid and nonassessable and
will be free and clear of any preemptive rights and Liens.
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(q) The Company has all necessary power and authority to
execute, issue and deliver the Notes and perform its obligations
thereunder; the Notes have been duly authorized by the Company, will be in
the form attached hereto as Exhibit A and, when executed, authenticated,
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delivered to and paid for by the Purchaser pursuant to this Agreement, will
constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, subject to (i) the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally and (ii) general equitable principles (whether considered
in a proceeding in equity or at law).
(r) The execution, delivery and performance by the Company of
this Agreement and the other Transaction Documents, the performance of the
obligations of the Company hereunder and thereunder, the issuance of the
Securities and the consummation of the other Transactions will not, as of
the Closing Date, (i) conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract or other agreement or
instrument to which the Company is a party or by which the Company is bound
or to which any of the property or assets of the Company is subject, (ii)
result in any violation of the provisions of the charter, by laws or
formation documents of the Company or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company or any of their properties or assets, (iii) result in the
imposition or creation of (or the obligation to create or impose) any Lien
under any agreement or instrument to which the Company is a party or by
which any of the Company or its properties or assets is bound or (iv)
result in the suspension, termination or revocation of any permit, license,
consent, exemption, franchise, authorization or other approval (each, an
"Authorization") the Company or any other impairment of the rights of the
holder of any such Authorization.
(s) No consent, approval, authorization or order of, or
filing or registration with, any court or governmental agency or body is
required for the execution, delivery and performance of the Transaction
Documents by the Company, the issuance of the Securities, the performance
of the obligations of the Company hereunder and thereunder and the
consummation of the other Transactions contemplated hereby and thereby,
except (i) with respect to the transactions contemplated by the
Registration Rights Agreement as may be required under the Securities Act
and the Exchange Act, (ii) as required by the state securities or "blue
sky" laws and (ii) for such consents, approvals, authorizations, orders,
filings or registrations which have been obtained or made.
(t) Each of the Company has such authorizations and has made
all filings with and notices to, all governmental or regulatory authorities
and self-regulatory organizations and all courts and other tribunals, as
are necessary to own, lease, license and operate its properties and to
conduct its business in the manner described in the Private Placement
Memorandum, except where the failure to have any such Authorization or to
make any such filing or notice would not have a Material Adverse Effect.
Each such Authorization is valid and in full force and effect and the
Company is in material compliance with all the terms and conditions thereof
and with the rules and regulations of the authorities and governing bodies
having jurisdiction with respect
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thereto, except where the failure to be valid, in full force and effect or
in compliance would not have a Material Adverse Effect. No event has
occurred (including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of time
or both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would
result in any other material impairment of the rights of the holder of any
such Authorization except to the extent that such revocation, suspension or
other impairment would not have a Material Adverse Effect. To the knowledge
of the Company, no governmental body or agency has threatened to limit,
suspend or revoke any such Authorization, except where such limitation,
suspension or revocation would not have a Material Adverse Effect.
(u) Neither the Company nor any agent thereof acting on their
behalf has taken, and none of them will take, any action that might cause
this Agreement or the issuance or sale of the Notes to violate Regulation T
(12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12
C.F.R. Part 224) of the Board of Governors of the Federal Reserve System.
(v) The Company has good and marketable title in fee simple
to, or valid and enforceable leasehold estates in, all items of real and
personal property owned or leased by it, in each case free and clear of all
liens, charges, claims, encumbrances, pledges, security interests, defects
or other restrictions or equities of any kind whatsoever, except such as
are described in the Private Placement Memorandum.
(w) The Company carries, or is covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of its
respective businesses and the value of its respective properties and as is
customary for companies engaged in similar businesses in similar
industries.
(x) The Company owns or possesses adequate rights to use all
patents, patent applications, trademarks, service marks, trade names,
trademark registrations, service mark registrations, copyrights and
licenses necessary for the conduct of its business (the "Intellectual
Property") and has no reason to believe that the conduct of its business
will conflict with, and has not received any notice of any claim of
conflict with, any such rights of others, in each case except as could not
reasonably be expected to have a Material Adverse Effect. The Company has
taken reasonable security measures to protect the secrecy, confidentiality
and value of its Intellectual Property and other proprietary information in
all respects.
(y) No relationship, direct or indirect, exists between or
among the Company on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand,
which is required to be described in the Private Placement Memorandum which
is not so described.
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(z) The Company is in compliance with all presently
applicable provisions of the Employee Retirement Income Security Act of
1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has
occurred with respect to any "pension plan" (as defined in ERISA) for which
the Company would have any material liability; the Company has not incurred
and does not expect to incur liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "pension plan" or (ii)
Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code
is so qualified and nothing has occurred, whether by action or by failure
to act, which would cause the loss of such qualification.
(aa) The Company has filed all federal, state and local
income and franchise tax returns required to be filed through the date
hereof, has paid all taxes due thereon and has established adequate
reserves for such taxes which are not yet due and payable, and does not
have any tax deficiency or claims outstanding, proposed or assessed against
it.
(bb) Neither the Company nor any director, officer, agent,
employee or other person associated with or acting on behalf of the
Company, has used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity;
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977; or
made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment.
(cc) The Company is not, nor, as of the Closing Date, after
giving effect to the issuance of the Securities and the application of the
net proceeds therefrom as set forth in the Private Placement Memorandum
(including completion of the Transactions), will be an "investment company"
as defined, and subject to regulation, under the Investment Company Act of
1940, as amended, and the rules and regulations of the Commission
thereunder (collectively, the "Investment Company Act").
(dd) All indebtedness of the Company that will be repaid with
the proceeds of the issuance and sale of the Notes was incurred, and the
indebtedness represented by the Notes is being incurred, for proper
purposes and in good faith and the Company was, at the time of the
incurrence of such indebtedness that will be repaid with the proceeds of
the issuance and sale of the Securities, and will be on the Closing Date
(after giving effect to the application of the proceeds from the issuance
of the Notes) solvent, and had at the time of the incurrence of such
indebtedness that will be repaid with the proceeds of the issuance and sale
of the Notes and will have on the Closing Date (after giving effect to the
application of the proceeds from the issuance of the Notes) sufficient
capital for carrying on its business and was, at the time of the incurrence
of such indebtedness that will be repaid with the proceeds of the issuance
and sale of the Notes, and will be on the Closing Date (after giving effect
to the application of the proceeds from the issuance of the Notes) able to
pay its debts as they mature.
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(ee) No event has occurred nor has any circumstance arisen
which, had the Securities been issued on such Closing Date, would
constitute a default or an event of default under the Note as summarized in
the Private Placement Memorandum.
(ff) Assuming the accuracy of the representations and
warranties of the Purchaser contained in Section 3 and the compliance of
the Purchaser with the agreements set forth herein, it is not necessary, in
connection with the issuance and sale of the Securities, in the manner
contemplated by Transaction Documents and the Private Placement Memorandum,
to register the Securities under the Securities Act.
(gg) None of the Company or any of its Affiliates (as defined
in Rule 501(b) of Regulation D) has engaged, and will not engage, directly
or indirectly in any form of general solicitation or general advertising in
connection with the offering of the Securities (as those terms are used in
Regulation D) under the Securities Act or in any manner involving a public
offering within the meaning of Section 4(2); and the Company has not
entered, and will not enter, into any arrangement or agreement with respect
to the distribution of the Securities, except for this Agreement and the
Registration Rights Agreement, and the Company agrees not to enter into any
such arrangement or agreement.
(hh) Neither the Company nor any of its Affiliates has
directly or indirectly sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of any "security" (as defined in the
Securities Act) which is, or would be, integrated with the sale of any of
the Securities in a manner that would require the registration under the
Securities Act of any of the Securities.
(ii) Neither the Company nor, to the Company's knowledge, any
of the Affiliates of the Company, have taken, directly or indirectly, any
action designed to cause or result in, or which has constituted or which
might reasonably be expected to constitute, the stabilization or
manipulation of the price of the Securities to facilitate the sale or
resale of such securities.
(jj) The Company has not sold or issued any security of the
same or similar class or series as any of the Securities or any security
convertible into any of the Securities during the six-month period
preceding the Closing Date, including any sales pursuant to Rule 144A, or
Regulation D (other than shares issued pursuant to employee benefit plans,
qualified stock options plans or other employee compensation plans or
pursuant to outstanding options, rights or warrants), and has no intention
of making, and will not make, an offer or sale of such securities, for a
period of six months after the Closing Date, except for the offering of
Securities as contemplated by this Agreement and the Registration Rights
Agreement. As used in this paragraph, the terms "offer" and "sale" have the
meanings specified in Section 2(a)(3) of the Securities Act.
(kk) The Company will not offer or sell any of the Securities
to any person who is not whom it reasonably believes to be a Qualified
Institutional Buyer ("QIB") or accredited investor ("Accredited Investor"),
as those terms are defined under the Securities Act.
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(ll) Each certificate signed by any officer of the Company
and delivered to the Purchaser or counsel to the Purchaser shall be deemed
to be a representation and warranty by the Company to the Purchaser as to
the matters covered thereby.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE PURCHASER.
The Purchaser represents and warrants to, and agrees with, the Company that it:
(a) is not acquiring the Notes with a view to any
distribution thereof or with any present intention of offering or selling
any of the Notes in a transaction that would violate the Securities Act or
the securities laws of any State of the United States or any other
applicable jurisdiction.
(b) is a QIB or Accredited Investor, as reflected in the
Investor Questionnaire delivered simultaneous herewith, and the information
contained in said Investor Questionnaire is true and correct.
(c) is aware that the Notes are speculative and that it may
lose its entire investment and it can afford to bear the risks of an
investment in the Company, including the risk of losing its entire
investment.
(d) has (i) been provided an opportunity to obtain
information concerning the Company and any other relevant matters as
Purchaser has requested, and (ii) been given the opportunity to ask
questions of and receive answers from the Company concerning the terms and
conditions of the offering of the Notes.
(e) is aware that its must bear the economic risk of its
investment in the Company for an indefinite period of time because: (1) the
Notes have not been registered under the Securities Act, or qualified under
the state securities laws of any state, and therefore cannot be sold,
assigned or otherwise disposed of unless appropriate exemptions from such
registration or qualification requirements are available; (2) the Company
will place a legend on the certificates evidencing the Notes stating that
the Notes have not been registered under the Act or any state securities
laws and setting forth the limitations on resale contained above and the
Company will also require that its registrar and transfer agent make a
notation of such restrictions in its appropriate records; and (3) there is
no public market for such Notes. The Purchaser further understands and
agrees that the Company will not honor any attempt by Purchaser to sell,
transfer of otherwise dispose of the Notes in the absence of either an
effective registration statement and qualification under applicable Blue
Sky laws or exemptions therefrom.
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4. FURTHER AGREEMENTS OF THE COMPANY. In addition to the other
agreements of the Company in this Agreement, the Company further agrees as
follows:
(a) the Company will promptly notify the Purchaser, and
confirm such notice in writing, of the happening of any event prior to the
Closing Date that makes any statement of a material fact made or
incorporated by reference in the Private Placement Memorandum untrue or
that requires any additions to, or changes in, the Private Placement
Memorandum or any Exchange Act Document in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(b) to advise the Purchaser promptly of any proposal to amend
or supplement the Private Placement Memorandum or any Exchange Act
Document; and if any event shall occur or any condition shall exist as a
result of which it is necessary, in the reasonable opinion of counsel to
the Company, to amend or supplement the Private Placement Memorandum in
order that the Private Placement Memorandum and the Exchange Act Documents
will not, as of their respective dates, as of the date of this Agreement
and as of the Closing Date, include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, to promptly notify the Purchaser and promptly prepare or, with
respect to any Exchange Act Documents, file with the Commission such
amendment or supplement as may be necessary to correct such untrue
statement or omission;
(c) to use reasonable best efforts to qualify the Notes and
the Shares for offering and sale under the securities laws of such
jurisdictions as the Purchaser may reasonably request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the Private
Placement; provided that, in connection therewith, the Company shall not be
required to qualify as a foreign corporation or to file a general consent
to service of process in any jurisdiction;
(d) to advise the Purchaser promptly of the issuance by any
state securities commission of any stop order suspending the qualification
or exemption from qualification of any Notes for offering or sale in any
jurisdiction designated by the Purchaser pursuant to Section 4(c) hereof,
or the initiation of any proceeding by any state securities commission or
other federal or state regulatory authority for such purpose. The Company
shall use all commercially reasonable efforts to prevent the issuance of
any stop order or order suspending the qualification or exemption of any of
the Notes under any state securities or Blue Sky laws, and if at any time
any state securities commission or other federal or state regulatory
authority shall issue an order suspending the qualification or exemption of
any Notes under any state securities or Blue Sky laws, the Company shall
use all commercially reasonable efforts to obtain the withdrawal or lifting
of such order at the earliest possible time.
(e) to apply the proceeds therefrom as set forth under the
caption "Use of Proceeds" in the Private Placement Memorandum.
11
(f) so long as the Notes are outstanding, (i) to furnish to
the Purchaser as soon as reasonably practicable after the end of each
fiscal year, a copy of its annual report to stockholders for such year, if
one is prepared, and (ii) to make available to the Purchaser as soon as
reasonably practicable after such materials become available, copies of all
other reports or other communications furnished by the Company to its
security holders or furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed and such other publicly available information concerning
the Company as the Purchaser may reasonably request; provided, however,
that any such report filed on the Commission's ▇▇▇▇▇ system need not be
furnished pursuant to this Section 4(d).
(g) so long as any of the Notes remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, to make available to any holder of Notes in connection with
any sale thereof and any prospective purchaser of such Notes from such
holder, upon the request of such holder or prospective purchaser, the
information ("Rule 144A Information") required by Rule 144A(d)(4) under the
Securities Act if, at the time of such request, the Company is not subject
to Section 13 or 15(d) of the Exchange Act.
(h) not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the
Securities Act) that would be integrated with the sale of the Notes to the
Purchaser in a manner that would require the registration of any such sale
of the Notes under the Securities Act.
(i) to use all commercially reasonable efforts to do and
perform all things required or necessary to be done and performed under
this Agreement prior to the Closing Date and to satisfy all conditions
precedent to the delivery of the Notes.
(j) for a period of 90 days from the date hereof, not to,
directly or indirectly, (1) announce an offering of, or file a registration
statement with the Commission relating to, equity securities of the Company
(other than the offering contemplated by this Agreement) or offer for sale,
sell, pledge or otherwise dispose of (or enter into any transaction or
device which is designed to, or could be expected to, result in the
disposition or purchase by any person at any time in the future of) any
shares of Common Stock or securities convertible into or exchangeable for
Common Stock other than the Notes and shares of Common Stock to be issued
in the ordinary course pursuant to currently outstanding options, warrants
or rights), or (2) enter into any swap or other derivatives transaction
that transfers to another, in whole or in part, any of the economic
benefits or risks of ownership of such shares of Common Stock, whether any
such transaction described in clause (1) or (2) above is to be settled by
delivery of Common Stock or other securities, in cash or otherwise, without
the prior written consent of the Purchaser.
12
5. CONDITIONS OF THE PURCHASER'S OBLIGATIONS. The obligations of
the Purchaser hereunder are subject to the accuracy, in all material respects,
when made and on the Closing Date, of the representations, warranties and
agreements of the Company contained herein, to the performance by the Company of
its obligations hereunder, and to each of the following additional conditions:
(a) The representations and warranties made by the Company in
Section 2 hereof shall have been true and correct when made, and shall be
true and correct on the Closing Date as if made on the Closing Date.
(b) Except for any notices required or permitted to be filed
after the Closing Date with certain federal and state securities
commissions, the Company shall have obtained all governmental approvals
required in connection with the lawful sale and issuance of the Notes.
(c) At the Closing Date, the sale and issuance by the
Company, and the purchase by the Purchaser, of the Notes shall be legally
permitted by all laws and regulations to which the Purchaser or the Company
are subject.
(d) All corporate and other proceedings in connection with
the transactions contemplated at the Closing Date and all documents and
instruments incident to such transactions shall be reasonably satisfactory
in substance and form to the Purchaser.
(e) No default or Event of Default shall have occurred under
any of the Transaction Documents.
(f) The Company shall have delivered to the Purchaser each of
the following:
(i) Certificate of Good Standing or comparable
certificate as to the Company, certified as of a recent date prior to
the Closing Date by the Secretary of State of each such company's
state of incorporation;
(ii) An opinion of counsel to the Company, in form and
substance reasonably satisfactory to the Purchaser;
(iii) A certificate of the Secretary of the Company,
dated the Closing Date, certifying that (1) attached thereto are true
and correct copies of the organizational documents of the Company, and
that such organizational documents are in full force and effect and
have not been amended, supplemented, revoked or repealed since the
date of such certification; (2) attached thereto is a true and correct
copy of resolutions duly adopted by the Board of Directors of the
Company authorizing the execution, delivery, and performance by the
Company of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby; and
(3) there are no proceedings for the dissolution or liquidation of the
Company that have commenced or, to the knowledge of the Company, been
threatened;
13
(iv) A certificate of the Secretary of the Company,
dated the Closing Date, certifying the incumbency, signatures and
authority of the officers of the Company authorized to execute and
deliver this Agreement and the Notes on behalf of the Company and
perform the Company's obligations thereunder on behalf of the Company;
(v) A certificate of an officer of the Company, dated
the Closing Date, certifying that (A) the representations and
warranties of the Company set forth in this Agreement were true and
correct as of the date hereof and are true and correct as of the
Closing Date; (B) that the Company has performed and complied with all
agreements, obligations and covenants to be performed or complied by
the Company under this Agreement; (C) since the respective dates as of
which information is given in the Private Placement Memorandum, other
than as set forth in the Private Placement Memorandum (exclusive of
any amendments or supplements thereto subsequent to the date of this
Agreement), (1) there has not occurred any change or any development
that might have a Material Adverse Effect, (2) there has not been any
change in the common stock, equity interests, the short-term debt or
the long-term debt of the Company that might have a Material Adverse
Effect, (3) the Company has not incurred any material liability or
obligation, direct or contingent, (4) a Material Loss has not occurred
and (5) the Company has not declared or paid any dividend on its
common stock, except for dividends declared in the ordinary course of
business and consistent with past practice; and (D) he has reviewed
the Private Placement Memorandum and, in his opinion (A) the Private
Placement Memorandum, as of its date and the Closing Date, did not and
does not include any untrue statement of a material fact and did not
and does not omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, and (B) since the date of the Private
Placement Memorandum, no event has occurred which should have been set
forth in a supplement or amendment to the Private Placement
Memorandum; and
(vi) a letter from the Accountants, in form and
substance reasonably satisfactory to the Purchaser and dated not more
than five days prior to the Closing Date (i) confirming that they are
independent public accountants within the meaning of the Securities
Act and are in compliance with the applicable requirements relating to
the qualification of accountants under Rule 2-01 of Regulation S-X of
the Commission and (ii) stating, as of the date thereof (or, with
respect to matters involving changes or developments since the
respective dates as of which specified financial information is given
in the Private Placement Memorandum, as of a date not more than five
days prior to the date thereof), the conclusions and findings of such
firm with respect to the financial information and other matters
ordinarily covered by accountants' "comfort letters" to underwriters
in connection with registered public offerings.
14
(g) Each of the Transaction Documents, other than this
Agreement, shall be in form and substance reasonably satisfactory to the
Purchaser and shall have been duly executed and delivered by the Company
and the other parties thereto, and the Notes shall have been duly executed
and delivered by the Company.
(h) The sale of the Notes shall not be enjoined (temporarily
or permanently) on the Closing Date.
(i) The Company shall not have sustained since the date of
the latest audited financial statements incorporated by reference in the
Private Placement Memorandum (A) any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as described or contemplated in the
Private Placement Memorandum, or (B) since such date there shall not have
been any change in the capital stock, short-term debt or long-term debt of
the Company or any change, or any development involving a prospective
change, in or affecting the general affairs, management, financial
position, prospects, stockholders' equity or results of operations of the
Company, otherwise than as described or contemplated in the Private
Placement Memorandum, the effect of which, in any such case described in
clause (A) or (B), is, in the judgment of the Purchaser, so material and
adverse as to make it impracticable or inadvisable to proceed with the
delivery of the Securities being delivered on the Closing Date on the terms
and in the manner contemplated in the Private Placement Memorandum and this
Agreement.
In addition, the Company shall have furnished to the Purchaser such further
information, certificates and documents as the Purchaser may reasonably request
to evidence compliance with the conditions set forth in this Section.
6. MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
(b) Consent to Jurisdiction; Forum Selection; Appointment of
Agent for Service of Process
(i) Each of the Purchaser and the Company hereby submits
to the jurisdiction of the courts of the State of New York and the
courts of the United States of America located in the State of New
York over any suit, action or proceeding with respect to this
Agreement or the transactions contemplated hereby.
15
(ii) Any suit, action or proceeding with respect to this
Agreement or the transactions contemplated hereby may be brought only
in the courts of the State of New York or the courts of the United
States of America located in the State of New York, located in the
Borough of Manhattan, City of New York, State of New York. Each of the
parties hereto waives any objection that it may have to the venue of
such suit, action or proceeding in any such court or that such suit,
action or proceeding in such court was brought in an inconvenient
court and agrees not to plead or claim the same.
(c) Waiver of Jury Trial. Any right to trial by jury with
respect to any lawsuit, claim, action or other proceeding arising out of or
relating to this Agreement or the services to be rendered by you hereunder
is expressly and irrevocably waived.
(d) Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and undertakings, both written
and oral, among the parties, or any of them, with respect to the subject
matter hereof. No provision of this Agreement may be waived or amended
other than by an instrument in writing signed by the party to be charged
with enforcement.
(e) Amendments and Waiver. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, except by the
parties to this Agreement. The failure by any party to exercise any right
or remedy under this Agreement or otherwise, or delay by a party in
exercising such right or remedy, shall not operate as a waiver thereof.
(f) Persons Entitled to Benefit of Agreement. This Agreement
will inure to the benefit of and be binding upon the Purchaser, the
Company, and their respective successors and assigns. This Agreement and
the terms and provisions hereof are for the sole benefit of only those
persons, except that (i) the representations, warranties, indemnities and
agreements of the Company contained in this Agreement will also be deemed
to be for the benefit of the officers, agents, representatives and
employees of the Purchaser and the person or persons, if any, who control
the Purchaser within the meaning of Section 15 of the Securities Act.
(g) Severability. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction.
(h) Counterparts. This Agreement may be executed in one or
more counterparts and, if executed in more than one counterpart, the
executed counterparts shall each be deemed to be an original but all such
counterparts shall together constitute one and the same instrument.
16
(i) Headings. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to
affect the meaning or interpretation of, this Agreement.
(j) Notices. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(i) if to the Purchaser, shall be delivered or sent by
mail, telex or facsimile transmission to the address set forth on the
signature page hereof;
(ii) if to any of the Company, shall be delivered or
sent by mail, telex or facsimile transmission to it at: Houston
American Energy Corp., ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ (fax: ▇▇▇-▇▇▇-▇▇▇▇, telephone:
▇▇▇-▇▇▇-▇▇▇▇)
Any such statements, requests or notices will take effect at the
time of receipt thereof. Each party shall provide notice to the other party
of any changes in address.
[Signature page follows]
17
If the foregoing correctly sets forth the agreement between the Company and
the Purchaser, please indicate your acceptance in the space provided for that
purpose below.
Purchaser Name: ______________________
Purchaser Address: ______________________
______________________
Telephone No.: ______________________
Facsimile No.: ______________________
Tax ID No.: ______________________
Notes Subscribed: $_____________________
PURCHASER:
Date: ___________, 2005
By:_____________________________
Name:
Title:
Accepted and agreed, this ___ day
of _____________, 2005, by:
Houston American Energy Corp.
By: ____________________________
Name:
Title:
