BRIDGE LOAN AGREEMENT

 

THIS BRIDGE LOAN AGREEMENT (hereinafter the “Agreement”), is entered into on the
date set forth below by and between Houston American Energy Corp., a Delaware
corporation (the “Borrower”), and the lenders whose signatures appear hereon
(the “Lender(s)”).

 

WHEREAS, the Borrower is engaged in oil and gas exploration and is party to an
agreement to acquire an interest in mineral acreage in Hockley County, Texas
(the “Hockley County Acreage”);

 

WHEREAS, the Borrower is presently engaged in efforts to secure additional
equity capital or debt financing (all sales, for cash, of equity or debt
securities – excluding the Bridge Loan Notes issued pursuant to this Agreement –
of the Borrower from and after the date hereof until the Bridge Loans made
hereunder are paid in full, being referred to as the “Funding Program”) to
support the acquisition of the Hockley County Acreage;

 

WHEREAS, pending the receipt of funding from the Funding Program, the Borrower
desires to borrow, and the Lenders are willing to lend, up to $600,000 (the
“Bridge Loan”) to support the acquisition of the Hockley County Acreage; and

 

WHEREAS, as consideration for making the Bridge Loan, the Borrower has agreed to
issue to the Lenders senior unsecured promissory notes (the “Bridge Loan Note”),
in the form attached hereto as Exhibit A, and warrants (the “Warrant”), in the
form attached hereto as Exhibit B.

 

NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Borrower and Lenders agree as
follows:

 

1.       Bridge Loan Notes and Warrants. The Borrower agrees to issue to the
Lenders (a) Bridge Loan Notes in the amount set forth on the signature page
hereof, for aggregate consideration not to exceed $600,000, the terms of which
Bridge Loan Notes are set forth herein and in the Bridge Loan Note, and (b)
Warrants to purchase one share of common stock of the Borrower for each dollar
of Bridge Loan Notes issued, the terms of which Warrants are set forth in
Exhibit B.

 

2.       Consideration. As consideration for the issuance of the Bridge Loan
Notes and Warrants, the Lenders shall pay to the Borrower an amount equal to 95%
of the face amounts of the Bridge Loan Notes issued to said Lenders.

 

3.       Interest. The unpaid principal amount of the Bridge Loan shall bear
interest until paid at an interest rate per annum (the “Applicable Rate”) of
twelve percent (12%); provided, however, that so long as an Event of Default has
occurred and is continuing, the Applicable Rate shall be the lesser of eighteen
percent (18%) per annum or the maximum rate permissible under applicable law.
Interest on the unpaid principal amount of the Bridge Loan shall accrue from and
including the date funds are advanced but not including the date such Bridge
Loan is paid. Interest shall be calculated on the basis of a year consisting of
365 days and paid for actual days elapsed.

 

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4.       Payments. Subject to the provisions of Sections 5 and 6 below, the
Bridge Loans, including interest accrued thereon, shall be repayable by the
Borrower:

 

(a)       in monthly installments of interest only payable on the last day of
each calendar month so long as the Bridge Loan remains outstanding; and

 

(b)       any unpaid principal and accrued interest on the Bridge Loan shall be
payable in full one hundred twenty (120) calendar days following the date of the
applicable Bridge Loan Note (the “Maturity Date”).

 

All payments shall be applied first to expenses, if any, of collection, then to
accrued and unpaid interest and then to principal. All payments by the Borrower
hereunder shall be made without set-off or counterclaim and shall be made to the
Lender at its address set forth on the signature page, or at such other place as
may be designated in writing by the Lender to the Borrower.

 

5.       Prepayment. The Borrower shall, (i) on the last business day of each
month so long as amounts remain owing hereunder, prepay the Bridge Loans,
including accrued interest, from and to the extent of one hundred percent (100%)
of the net proceeds received by the Borrower from the Funding Program, and (ii)
not later than five (5) business days following the sale (an “Asset Sale”) by
the Borrower of any assets, other than assets sold in the ordinary course of
business, prepay the Bridge Loans, including accrued interest, from and to the
extent of one hundred percent (100%) of the net proceeds received by the
Borrower from the sale of assets, and (iii) not later than five (5) business
days following the receipt of proceeds (“Oil and Gas Proceeds”) from sale of oil
and gas production arising from the Hockley County Acreage, prepay the Bridge
Loans, including accrued interest, from and to the extent of seventy-five
percent (75%) of the net Oil and Gas Proceeds received. In addition, the
Borrower may, at its election, repay the Bridge Loan in whole or in part at any
time prior to the Maturity Date without premium or penalty.

 

6.       Default. The occurrence of any of the following shall constitute an
“Event of Default” under this Agreement and under the Bridge Loan Notes:

 

(a)       The Borrower shall fail to pay (i) any principal payment owed
hereunder on the due date required hereunder, (ii) any interest payment owed
hereunder on the due date required hereunder, or (iii) any other payment
required under the terms of this Agreement or the Bridge Loan Notes on the due
date for such payment, and such payment shall not have been made within five (5)
days after the Borrower’s receipt of the Lender’s written notice to the Borrower
of such failure to pay (any such event being referred to as a “Payment
Default”); or

 

(b)       The Borrower shall fail to observe or perform any other covenant,
obligation, condition or agreement contained in this Agreement or the Bridge
Loan Notes (other than those specified in Section 6(a) of this Agreement) and
such failure shall continue for ten (10) days after written notice thereof is
delivered to the Borrower by a holder of the Bridge Loan Note; or

 

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(c)       The Borrower shall:

 

(i)       apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property;

 

(ii)       be unable, or admit in writing its inability, to pay its debts
generally as they mature;

 

(iii)       make a general assignment for the benefit of any of its creditors;

 

(iv)       commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
consent to any such relief or to the appointment of or taking possession of its
property by any official in an involuntary case or other proceeding commenced
against it; or

 

(v)       take any action for the purpose of effecting any of the foregoing; or

 

(d)       Proceedings for the appointment of a receiver, trustee, liquidator or
custodian of the Borrower or of all or a substantial part of the property
thereof, or an involuntary case or other proceedings seeking liquidation,
reorganization or other relief with respect to the Borrower or the debts thereof
under any bankruptcy, insolvency or other similar law now or hereafter in
effect, shall be commenced and an order for relief entered or such proceeding
shall not be dismissed or discharged within sixty (60) days after commencement.

 

7.       Rights of Holder Upon Default. Upon the occurrence or existence of any
Event of Default (other than an Event of Default under Sections 6(c) or 6(d))
and at any time thereafter during the continuance of such Event of Default, the
Lender may, by written notice to the Borrower, declare all outstanding amounts
payable by the Borrower under this Agreement to be immediately due and payable
without presentment, demand, protest, notice of intent to accelerate, or any
other notice of any kind, all of which are hereby expressly waived. Upon the
occurrence or existence of any Event of Default described in Sections 6(c) or
6(d) hereof, immediately and without notice, all outstanding amounts payable by
the Borrower under this Agreement and the Bridge Loan Notes shall automatically
become immediately due and payable, without presentment, demand, protest, notice
of intent to accelerate, or any other notice of any kind, all of which are
hereby expressly waived, anything contained herein to the contrary
notwithstanding. In addition to the foregoing remedies, upon the occurrence or
existence of any Event of Default, the Lender may exercise any other right,
power or remedy permitted to it by the UCC, or otherwise available at law or in
equity or both.

 

8.       Representations, Warranties and Covenants of the Borrower. The Borrower
hereby represents, warrants and covenants to the Lender that:

 

(a)       Authorization. The Borrower has full power and authority to enter into
this Agreement and such Agreement constitutes a valid and legally binding
obligation of the Borrower enforceable in accordance with its terms.

 

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(b)       Use of Proceeds. The proceeds of the Bridge Loan shall be used to
support the acquisition of the Hockley County Acreage and general working
capital needs of the Borrower and no payments will be made to repay indebtedness
owed to affiliates of the Borrower unless and until the Bridge Loan Notes have
been repaid in full.

 

(c)       Prepayment Notices. Within two (2) business days following receipt by
the Borrower, on or after the date hereof, of net funds from (i) the Funding
Program, (ii) an Asset Sale, or (iii) Oil and Gas Proceeds; the Borrower shall
provide written notice to the holders of the Bridge Loan Notes with respect to
the receipt of such funds.

 

(d)       No Senior or Parity Debt. So long as any amounts remain outstanding
and owing under the Bridge Loan Notes, without the prior written consent of
holders of a majority in total principal amount then owing under the Bridge Loan
Notes (the “Majority Holders”), the Borrower will not create, incur, assume or
permit to exist any indebtedness which is not expressly and fully subordinated
to the Bridge Loan Notes and does not contain subordination terms that are
reasonably satisfactory to the Majority Holders.

 

(e)       Negative Pledge. So long as any amounts remain outstanding and owing
under the Bridge Loan Notes, without the prior written consent of the Majority
Holders, the Borrower will not create, incur, assume or suffer to exist any
liens upon or with respect to any assets now owned or hereafter acquired by it
or on any of its rights in respect thereof, except for:

 

(i)       liens existing as of the date hereof;

 

(ii)       liens incurred in the ordinary conduct of the business of the
Borrower and its subsidiaries or the ownership of their respective assets; and

 

(iii)       liens for taxes, assessments or governmental charges or levies, or
otherwise arising by operation of law, which taxes, assessments or governmental
charges or levies are not yet due and payable or which are being contested in
good faith by appropriate proceedings.

 

9.       Representations, Warranties and Covenants of the Lender. The Lender
hereby represents, warrants and covenants to the Borrower that:

 

(a)       Authorization. The Lender has full power and authority to enter into
this Agreement and such Agreement constitutes a valid and legally binding
obligation of the Lender enforceable in accordance with its terms.

 

(b)       Purchase Entirely for Own Account. This Agreement is made with the
Lender in reliance upon the Lender’s representation to the Borrower, which by
the Lender’s execution of this Agreement the Lender hereby confirms, that the
Bridge Loan Note and Warrant will be acquired for investment for the Lender’s
own account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that the Lender has no present intention
of selling, granting any participation in, or otherwise distributing the same.
By executing this Agreement, the Lender further represents that the Lender does
not have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to the Bridge Loan Note or Warrant.

 

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(c)       Disclosure of Information. The Lender has received such information
regarding the Borrower and the Bridge Loan Notes and Warrant as the Lender shall
have requested and believes it has received all the information considered by
the Lender as being necessary or appropriate for deciding whether to enter into
the transaction contemplated hereby. The Lender further represents that it has
had an opportunity to ask questions and receive answers from the Borrower
regarding the terms and conditions of the transactions contemplated hereby and
the business, properties and financial condition of the Borrower.

 

(d)       Investment Experience. The Lender acknowledges that it is able to fend
for itself, can bear the economic risk of the transactions contemplated herein,
and has such knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of the transaction contemplated
herein.

 

(e)       Accredited Investor. The Lender is an “accredited investor” within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act of 1933
(the “Securities Act”), as presently in effect.

 

(f)       Restricted Securities. The Lender understands that the Bridge Loan
Notes and Warrants, and shares underlying the Warrants, are characterized as
“restricted securities” under the federal securities laws inasmuch as they are
being acquired from the Borrower in a transaction not involving a public
offering and that under such laws and applicable regulations such securities may
be resold without registration under the Securities Act only in certain limited
circumstances. In this connection, the Lender represents that it is familiar
with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.

 

10.       Successors and Assigns. This Agreement shall be binding upon the
executors, administrators, heirs, legal representatives, legatees, successors
and assigns of the parties hereto and shall inure to the benefit of the parties
and their successors and assigns. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.

 

11.       Notices. Any notice required to be given under this Agreement shall be
in writing and shall be deemed effective upon personal delivery or upon deposit
in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party’s signature line on this Agreement or at such other address as such
party may designate by ten days’ advance written notice under this paragraph to
all other parties to this Agreement.

 

12.       No Waiver. The failure of any party hereto in any instance to exercise
any rights provided hereby shall not constitute a waiver of any other rights
that may subsequently arise under the provisions of this Agreement or any other
agreement between the parties. No waiver of any breach or condition of this
Agreement shall be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.

 

13.       Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same instrument.

 

[Lender Signature Pages Follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Bridge Loan Agreement to
be duly executed by their respective authorized signatories as of the date
indicated below.

 

  HOUSTON AMERICAN ENERGY CORP.       Dated: September 18, 2019       By:    
Name: James Schoonover   Title: President     801 Travis, Suite 1425    
Houston, Texas 77002         LENDER:               Name:     Title:          
Address:        

 

  Face Amount of   Bridge Loan Notes: $___________________    
                            x 95%         Consideration $___________________

 

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