Exhibit 2.1
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this "Agreement"), is entered into as of the 19th
day of July, 2002 (the "Effective Date"), by and between Millennium Seismic,
Inc., a Texas corporation ("Millennium"), and Houston American Energy Corp., a
Delaware corporation ("HAEC").
W I T N E S S E T H:
WHEREAS, Millennium desires to acquire 1,000,000 shares (the "Purchased
Shares") of HAEC's common stock, par value $0.001 per share (the "Common
Stock"), in exchange for Millennium's issuance to HAEC of a no fee license
agreement relating to HAEC's utilization of Millennium's seismic data, all as
set forth in the following terms and conditions;
NOW THEREFORE, for and in consideration of the premises, and the mutual
promises and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
HAEC and Millennium hereby agree as follows:
1. Exchange. On the terms and subject to the conditions of this Agreement,
at the Closing (as that term is defined in Section 6): (i) HAEC agrees to sell
and deliver to Millennium, and Millennium agrees to acquire from HAEC, the
Purchased Shares and the Warrant (as that term is defined in Section 6.3); and
(ii) in consideration for the Purchased Shares and the Warrant and in reliance
upon the representations and warranties of HAEC contained herein, Millennium
agrees to deliver to HAEC a no fee License Agreement For Use of Proprietary
Data, substantially in the form attached hereto as Exhibit "A" (the "License
Agreement").
2. Representations and Warranties of HAEC. HAEC represents and warrants to
Millennium, as of the Closing Date, as follows:
2.1 The Purchased Shares. Upon delivery of the Purchased Shares to
Millennium in accordance herewith, the Purchased Shares shall be fully paid
and non-assessable shares of the Common Stock, free of any preemptive
rights and claims of any kind.
2.2 Organization and Existence. HAEC is a corporation duly organized
and validly existing and in good standing under the laws of the State of
Delaware, having all requisite corporate power to own, lease and otherwise
operate its properties and assets and to carry on its business as now being
conducted. HAEC is duly qualified as a foreign corporation and is in good
standing in each jurisdiction in which the nature of its business or the
location of its properties requires such qualification, and is duly
authorized and licensed and has all licenses, franchises, permits and other
governmental authorizations required under all applicable laws,
regulations, ordinances and orders of public authorities to carry on its
business in the places and in the manner as now conducted. On or before the
Closing Date, HAEC has delivered complete and correct copies of its
Certificate of Incorporation and Bylaws to Millennium, each as in effect on
the Closing Date.
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2.3 Authority. The execution, delivery and performance by HAEC of this
Agreement, the Warrant, the License Agreement, the Registration Rights
Agreement (as this term is defined in Section 6.4), and the other
documents, instruments and transactions contemplated hereby and thereby to
which HAEC is a party or is to be a party (collectively, the "Transaction
Documents"), have been duly authorized by all necessary corporate action of
HAEC, and the Transaction Documents have been, or will be prior to Closing,
duly executed and delivered by HAEC. The Transaction Documents constitute
(or will constitute when executed and delivered at Closing) valid and
binding obligations of HAEC, enforceable against it in accordance with
their respective terms, except as that enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, moratorium, or similar laws of general application
affecting enforcement of creditors' rights generally.
2.4 No Conflict With Other Instruments. HAEC's execution, delivery and
performance of this Agreement will not result in a violation or breach of
any term or provision of, or constitute a default or accelerate the
performance required under, any indenture, mortgage, deed of trust or other
contract or agreement to which HAEC is a party or by which HAEC or its
assets are bound, or violate any order, writ, injunction or decree of any
court, administrative agency or governmental body.
2.5 Capitalization. The authorized capital stock of HAEC consists of:
(i) 100,000,000 shares of the Common Stock, of which 11,999,883 shares were
issued and outstanding immediately prior to the Closing Date; and (ii)
10,000,000 shares of preferred stock, par value $0.001 per share, none of
which are issued and outstanding as of the Closing Date. HAEC has no
treasury shares. All of the outstanding shares of the Common Stock are
validly issued, fully paid and nonassessable, and such shares were not
issued in violation of the preemptive rights of any of HAEC's stockholders.
Except as set forth on Schedule 2.4, there are no existing subscriptions,
options, warrants, conversion rights, calls, obligations or agreements
(voting or otherwise, including without limitation, registration rights)
relating to any of HAEC's authorized or outstanding capital stock.
2.6 Subsidiaries. Except as set forth on Schedule 2.6, HAEC has no
subsidiaries and does not, directly or indirectly, own or control any
capital stock, bonds or other securities of, or have any proprietary
interest in, any corporation, association, partnership, firm, joint venture
or other business organization or enterprise, and HAEC does not, directly
or indirectly, control the management of any such entities.
2.7 Litigation. Except as set forth on Schedule 2.7, there are no (and
HAEC has not received actual notice of any) claims, actions, suits,
investigations or proceedings, pending or threatened against HAEC or any of
its assets or properties, or which otherwise question the validity or
legality of the transactions contemplated hereby, whether at law or in
equity or before or by any court or federal, state, municipal or other
governmental department, commission, board, agency or instrumentality.
Except as set forth on Schedule 2.7, neither HAEC nor its assets are
subject to any court or administrative order, writ, injunction or decree,
nor does there exist any violation of or default with respect to any order,
writ, injunction or decree of any court or federal, state, municipal or
other governmental department, commission, board, agency, instrumentality
or arbitrator to which HAEC is a party.
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2.8 Financial Statements. On or before the Closing Date, HAEC has
furnished Millennium with complete copies of HAEC's currently available
audited financial statements relating to: (i) the year ended December 31,
2001; and (ii) interim unaudited financial statements for the three-month
period ending March 31, 2002, including income statements through such
dates and balance sheets as of such dates (collectively, the "Financial
Statements"). The Financial Statements are true and complete in all
material respects, having been prepared from the books and records of HAEC
in accordance with generally accepted accounting principles, consistently
applied throughout the entire period presented (except as disclosed
therein) for the periods reflected therein. The balance sheets contained
within the Financial Statements fairly present the financial condition of
HAEC as of the respective dates thereof; and the income statements
contained within the Financial Statements fairly present the results of
operations of HAEC for the respective periods reflected therein. None of
the Financial Statements, as of the dates and the periods thereof,
misstates or omits to state any liability, absolute or contingent, the
omission of which renders the Financial Statements misleading.
2.9 Compliance with Laws. HAEC has complied in all material respects
with all applicable foreign, federal, state, municipal and other political
subdivision or governmental agency statutes, ordinances and regulations,
including, without limitation, those imposing taxes, in every applicable
jurisdiction, in respect of the ownership of its property and the conduct
of its business, and HAEC is not a party to any investigation or inquiry by
any foreign, federal, state or local governmental body or agency pending
or, to HAEC's knowledge, threatened with respect to its business,
operations, affairs or properties.
2.10 ERISA. HAEC is not a party to any defined benefit pension plan or
any defined contribution profit sharing plan. To the best of HAEC's
knowledge, HAEC is in compliance in all material respects with all
applicable provisions of ERISA. Neither a Reportable Event nor a Prohibited
Transaction has occurred and is continuing with respect to any Plan (as
such terms are defined herein). No notice of intent to terminate a Title IV
Plan has been filed, nor has any Title IV Plan been terminated. No
circumstances exist which constitute grounds entitling the PBGC to
institute proceedings to terminate, or appoint a trustee to administer, a
Title IV Plan, nor has the PBGC instituted any such proceedings. Neither
HAEC nor any of its ERISA Affiliates is a party to, or has completely or
partially withdrawn from, a Multiemployer Plan. Neither HAEC nor any ERISA
Affiliates has incurred any liability to the PBGC under ERISA. For purposes
of this Section 2.10, the following definitions apply:
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereunder.
"ERISA Affiliate" means any corporation or trade or business that is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as HAEC or is under common control (within the
meaning of Section 414(c) of the Code) with HAEC.
"Multiemployer Plan" means a multiemployer plan defined as such in Section
3(37) of ERISA to which contributions have been made by HAEC or any of its ERISA
Affiliates and which is covered by Title IV of ERISA.
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"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Plans" means all employee benefit plans as defined in Section 3(3) of
ERISA maintained by HAEC or any of its ERISA Affiliate or to which HAEC or any
of its ERISA Affiliate contributes or is required to contribute.
"Prohibited Transaction" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Code.
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA.
2.11 Guaranties; Suretyships. HAEC is not a party to any guaranties or
matters of suretyship.
2.12 Absence of Undisclosed Liabilities. Except as set forth in the
Financial Statements or on Schedule 2.12, HAEC does not have any material
liabilities, debts or obligations of any nature incurred by HAEC, whether
accrued, absolute, contingent or otherwise, whether due or to become due,
including, without limitation, liabilities, debts or obligations on account
of taxes or other governmental charges, or penalties, interest or fines
thereon or in respect thereof, and whether such liabilities are normally
shown or reflected on a balance sheet prepared in a manner consistent with
generally accepted accounting principles. The term "material" contained in
the preceding sentence shall refer to liabilities, debts or obligations
aggregating in excess of $5,000. HAEC is not in default in respect of any
material term or condition of any indebtedness or liability. To HAEC's
knowledge, no facts exist which could serve as the basis for any assertion
against HAEC or any of its properties of any liability, debt or obligation
not otherwise disclosed in this Agreement or in the Financial Statements.
2.13 Tax Matters. HAEC has provided Millennium with copies of all tax
returns and related documents, and HAEC has filed or timely filed requests
for extensions of, all federal, foreign, state, county, and local tax
returns required to be filed by it for periods ending on or before the
Closing Date. HAEC has paid all Taxes shown to be due on such returns. For
purposes of this paragraph, the term "Taxes" shall mean, without
limitation, income taxes, corporate franchise taxes, payroll taxes, sales
taxes, and ad valorem taxes. The liabilities for such Taxes are properly
reflected in the Financial Statements of HAEC, and represent, as of the
Closing Date, reasonable provision for the payment of all accrued and
unpaid Taxes of HAEC accrued through that date, whether or not disputed, as
well as deferred Taxes required under generally accepted accounting
principles. The income tax returns of HAEC are not currently under audit by
any federal, state or foreign taxing authorities and have never been so
audited by federal authorities. There are no agreements, waivers or other
arrangements providing for an extension of time with respect to the payment
of any Tax or the assessment of any Tax or deficiency of any nature against
HAEC, nor are any suits or any other actions, proceedings, investigations
or claims now pending or threatened against HAEC with respect to any Tax or
assessment, nor are any matters under discussion with any federal, state,
foreign or local authority relating to any such Taxes or assessments, or to
any claims for additional Taxes or assessments asserted by any such
authority. HAEC will not cause, or voluntarily permit, a change in any
federal income tax method of accounting by HAEC or in the method of
allocation
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of the federal income tax liability of HAEC during or applicable to its
current tax year which would render inaccurate, misleading or incomplete
the information concerning Taxes set forth or referred to herein, or which
would have a material adverse effect on HAEC for any period prior to the
Closing Date.
2.14 Insurance. HAEC has, or within 30 days after the Closing Date
will obtain, and will maintain in full force and effect fire and casualty
insurance policies, with extended coverage, sufficient in amount (subject
to reasonable deductibles) to allow HAEC to replace, as of the Closing
Date, any of its properties that might be damaged or destroyed. To the
extent HAEC has obtained any such policies prior to the Closing Date, HAEC
is not in default with respect to any provision contained therein and all
such policies are in full force and effect.
2.15 Licenses and Permits. HAEC has all material licenses, permits and
certificates necessary to conduct its business, all of which are valid and
in full force and effect. HAEC has not received any notice of violation
with respect to any such licenses or permits and, to HAEC's knowledge, no
proceeding is pending or threatened seeking the revocation or limitation of
any such license or permit.
2.16 Title to Assets, Etc. HAEC has good and indefeasible title to all
of its assets, including those reflected in the Financial Statements (other
than those that have since been sold or otherwise disposed of in the
ordinary course of business, consistent with past practice, and not
involving any misrepresentation or breach of warranty or covenant in this
Agreement), free and clear of all liens, mortgages, pledges, title
retention agreements, restrictions, security interests and encumbrances,
except as set forth in the Financial Statements.
2.17 Leased Property. All leases of real or personal property to which
HAEC is a party, including those which are necessary for the conduct of its
business as currently conducted, are in full force and effect. There is no
default as to HAEC under any such lease, and to HAEC's knowledge, no act
has occurred which following the passage of time will constitute a default
under any such lease. Millennium's purchase of the Purchased Shares will
not constitute a prohibited assignment or transfer under any such lease.
2.18 Machinery and Equipment. All of HAEC's personal property has been
well maintained and repaired and are in good operating condition, ordinary
wear and tear excepted, and are free from any known defects, except such as
require routine maintenance and except such minor defects as do not
substantially interfere with the continued use thereof in the conduct of
HAEC's operations. Additionally, HAEC has the legal right to use all
personal property utilized by HAEC in conducting its business as currently
conducted.
2.19 Patents and Trademarks. Schedule 2.19 contains a complete list of
the patents, patent applications, registered trademarks, trademark
applications, registered copyrights, and other intellectual property, which
HAEC owns or licenses from third parties, designated as such. As currently
conducted, HAEC's business does not infringe any third party's logo,
patent, trademark, trade name, copyright or other intellectual property. No
stockholder, director, officer, employee or consultant of HAEC (i) owns,
directly or indirectly, in whole or in part, any inventions or logos,
patents, trademarks, trade names, brand names, copyrights or third party
test results or applications therefor which HAEC is presently using and
which is necessary for its
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business as currently conducted or (ii) has made any invention which has
not been assigned to HAEC and which is necessary for its business as
currently conducted.
2.20 Environmental and Safety Laws. HAEC is not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, and, to the best of its knowledge, no
material expenditures are or will be required in order to comply with any
such existing statute, law or regulation.
2.21 Accuracy of Periodic Reports. The information contained in each
of the periodic reports HAEC has filed with the United States Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934
(the "1934 Act") was true and correct as of the date each such periodic
report was filed, and HAEC has amended or updated all such information as
required by the 1934 Act.
2.22 Completeness. The representations, warranties and statements made
by HAEC herein do not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
made herein not misleading in light of the circumstances under which such
statements were made.
2.23 Miscellaneous. All agreements, reports and other documents HAEC
has heretofore furnished to Millennium are true, accurate and complete
copies of the agreements, reports and other documents they purport to be.
3. Representations and Warranties of Millennium. Millennium represents and
warrants to with HAEC, as of the Closing Date, as follows:
3.1 Securities Representations and Warranties.
(a) The Purchased Shares are being acquired for Millennium's own
account, for investment purposes only, and not for the account of any other
person, and not with a view to distribution, assignment, or resale to
others or to fractionalization in whole or in part and that the issuance of
the Purchased Shares to Millennium is intended to be exempt from
registration under the Securities Act of 1933 (the "Act") by virtue of the
exemption under Section 4(2) of the Act. Millennium understands that the
Purchased Shares constitute "restricted securities," as said term is
defined in Rule 144 of the Rules and Regulations promulgated under the Act,
that the certificates representing the Purchased Shares will bear a legend
stating that the transfer of the securities represented thereby is subject
to the provisions hereof. Millennium represents, warrants, and agrees that:
(i) no other person has or will have a direct or indirect beneficial
interest in the Purchased Shares; (ii) Millennium is not acquiring the
Purchased Shares with a view toward resale, assignment, fractionalization
or distribution thereof; and (iii) Millennium will not sell, hypothecate,
or otherwise transfer any of the Purchased Shares except, (A) pursuant to
an effective registration statement filed in accordance with the Act and
applicable state securities laws or (B) in the opinion of HAEC's corporate
counsel, an exemption from the registration requirements of the Act and
such laws is available.
(b) Millennium is an accredited investor as that term is defined in
Rule 501 of Regulation D promulgated under the Act.
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3.2 Authority. The execution, delivery and performance by Millennium
of this Agreement, the License Agreement, and the other documents,
instruments and transactions contemplated hereby and thereby to which
Millennium is a party or is to be a party, have been duly authorized by all
necessary corporate action of Millennium, and have been, or will be prior
to Closing, duly executed and delivered by Millennium. Such documents
constitute (or will constitute when executed and delivered at Closing)
valid and binding obligations of Millennium enforceable against it in
accordance with their respective terms, except as that enforceability may
be limited by applicable bankruptcy, insolvency, fraudulent conveyance or
transfer, reorganization, moratorium, or similar laws of general
application affecting enforcement of creditors' rights generally.
3.3 No Conflict with Other Agreement. Millennium's execution, delivery
and performance of this Agreement will not result in or constitute a
default or breach of, or accelerate the performance required under, or
require the consent of any person or entity under any indenture, mortgage,
deed of trust or other contract or agreement to which Millennium is a party
or by which it or any of its assets are bound, or violate any order, writ,
injunction or decree of any court, administrative agency or governmental
body.
4. Nature and Survival of Representations and Warranties. Regardless of any
investigation at any time made by or on behalf of any party hereto or of any
information any party may have in respect thereof, all representations and
warranties made hereunder or pursuant hereto shall survive the Closing.
5. Conditions to Closing. The obligation of Millennium to purchase, and the
obligation of HAEC to sell, the Purchased Shares are subject to the fulfillment,
or the waiver by Millennium or HAEC, as the case may be, of the following
conditions on or before the Closing Date:
5.1 Due Diligence Review. Millennium shall have completed to its
satisfaction a review of HAEC's books and records, and HAEC shall have
completed to its satisfaction a review of Millennium's seismic data.
5.2 Corporate Consents. The respective Boards of Directors of each of
HAEC and Millennium shall have approved the transactions contemplated
herein.
6. The Closing. HAEC and Millennium hereby agree to consummate the closing
of the sale and purchase of the Purchased Shares (the "Closing") at the offices
of Millennium's legal counsel, Boyar & Miller, located at 4265 San Felipe, Suite
1200, Houston, Texas 77027 (or such other place as Millennium and HAEC mutually
agree) immediately following the execution of this Agreement by all parties (the
"Closing Date"). At the Closing, each of the following shall occur:
6.1 Certificates Representing Purchased Shares. HAEC shall deliver to
Millennium certificates representing the Purchased Shares, issued in the
names as directed by Millennium.
6.2 License Agreement. Millennium shall execute and deliver to HAEC
the License Agreement.
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6.3 Warrant. HAEC shall execute and deliver to Millennium the Warrant
(the "Warrant") attached hereto as Exhibit "B", whereby Millennium is
granted the right to purchase 750,000 shares of the Common Stock at a
purchase price of $1.00 per share, as more particularly described therein.
6.4 Registration Rights Agreement. Each of HAEC and Millennium shall
execute and deliver the Registration Rights Agreement ("Registration Rights
Agreement") attached to the Warrant as Appendix A.
7. Further Acts. HAEC covenants and agrees that, from time to time on and
after the Closing Date, at the request of Millennium, it will execute and
deliver all documents that may be reasonably required to confirm and assure
Millennium of its title and interest in the Purchased Shares.
8. Expenses and Commissions. Each of HAEC and Millennium shall pay their
respective expenses incident to the transactions contemplated by this Agreement.
Millennium and HAEC each represent to the other that there are no agents or
brokers entitled to a commission in connection with the transaction contemplated
by this Agreement. HAEC hereby agrees to indemnify and hold harmless Millennium
against any and all claims of any agent, broker, finder or similar party
claiming through HAEC, and Millennium hereby agrees to indemnify and hold
harmless HAEC against any and all claims of any agent, broker, finder, or other
similar party claiming through Millennium.
9. Miscellaneous.
9.1 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been given if
personally delivered or mailed, first class, registered or certified mail,
postage prepaid to the following:
If to Millennium, to:
Millennium Seismic, Inc.
7751 San Felipe, Suite 100
Houston, Texas 77063
Attn: Jesse R. Marion, President
Telecopy No.: 713-789-2304
If to HAEC, to:
Houston American Energy Corp.
801 Travis, Suite 2020
Houston, Texas 77002
Attention: John F. Terwilliger, President
Telecopy No. (713) 222-6440
or to such other address as shall be given in writing by any party to the
others. If sent by U.S. mail in accordance with this Section 9.1, such
notices shall be deemed given and received on the earlier to occur of (a)
the recipient's actual receipt thereof, or (b) the third business day after
deposit thereof, with the United States Postal Service in the manner herein
provided. Notices may also be transmitted by facsimile, provided that such
facsimile transmission is evidenced by
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electronic confirmation of delivery. Notices delivered by any other means
shall be deemed given and received upon the recipient's actual receipt
thereof.
9.2 Assignment. This Agreement may not be assigned by any party hereto
without the prior written consent of the other party. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and permitted assigns.
9.3 Entire Agreement. This Agreement, together with the Exhibits and
Schedules attached hereto, each of which are incorporated herein by this
reference, shall comprise the entire agreement among the parties hereto
regarding the subject matter hereof and thereof, and this Agreement
supersedes all prior agreements and understandings whether written or oral.
9.4 GOVERNING LAW; VENUE. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF TEXAS. VENUE FOR ANY DISPUTE ARISING OUT OF THIS AGREEMENT
SHALL BE PROPER IN ANY COURT OF COMPETENT JURISDICTION IN HOUSTON, HARRIS
COUNTY, TEXAS.
9.5 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Signatures delivered
by telecopy shall be considered for all purposes to be the same as original
signatures.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties as
of the Effective Date.
HOUSTON AMERICAN ENERGY CORP.
By: /s/ John F. Terwilliger
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John F. Terwilliger, President
MILLENNIUM SEISMIC, INC.
By: /s/ Jesse R. Marion
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Jesse R. Marion, President
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EXHIBIT A
LICENSE AGREEMENT
EXHIBIT B
WARRANT