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.
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(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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<PAGE>
(l)
Thomas Leger & 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 Sarbanes-Oxley Act of 2002 (the
"Sarbanes-Oxley
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 Sarbanes-Oxley 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 excep
