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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
March , 2006, is entered into by and among Foothills Resources, Inc., a Nevada
corporation (the "Company"), and the Buyers listed on Schedule I attached hereto
(individually, a "Buyer" or collectively "Buyers").
WITNESSETH:
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase (i) up to Three Million
Dollars ($3,000,000) (the "Purchase Price") principal amount of secured
Convertible Debentures (the "Convertible Debentures"), which shall become
convertible into units ("Units") of the Company's securities. Each Unit shall
consist of one share of the Company's common stock, par value $0.001 (the
"Common Stock") (as converted, the "Conversion Shares") and three quarters of a
common stock purchase warrant ("Warrants"). The total Purchase Price shall be
allocated among the Buyer(s) in the respective amounts set forth opposite each
Buyers name on Schedule I (the "Subscription Amount"); and
WHEREAS, all of the total principal amount of the Convertible
Debentures, subject to the deduction of any and all fees, shall be utilized by
the Company to make a loan (the "Bridge Loan") to Brasada California, Inc. a
Delaware corporation ("Brasada"); and
WHEREAS, the Company is currently (i) preparing to conduct a private
placement offering (the "PPO") of its Units, and (ii) negotiating a reverse
triangular merger with Brasada (as more particularly described in the Company's
Current Report on Form 8-K filed with the SEC on February 17, 2006, the
"Merger"); and
WHEREAS, the Convertible Debentures shall be automatically converted
into Units simultaneously with the closing of the Merger and the PPO; and
WHEREAS, the aggregate proceeds of the sale of the Convertible
Debentures shall be held in escrow pursuant to the terms of an escrow agreement
substantially in the form of the Escrow Agreement among the Company, the
Buyer(s) and the Escrow Agent (as defined below) attached hereto as Exhibit A
(the "Escrow Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s) hereby agree
as follows:
1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
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(a) Purchase of Convertible Debentures. Subject to the satisfaction (or
waiver) of the terms and conditions of this Agreement, each Buyer agrees,
severally and not jointly, to purchase at Closing (as defined herein below) and
the Company agrees to sell and issue to each Buyer, severally and not jointly,
at Closing, Convertible Debentures in amounts set forth opposite each Buyer's
name on Schedule I hereto. Upon execution hereof by a Buyer, the Buyer shall
wire transfer the Subscription Amount set forth opposite his name on Schedule I
in same-day funds or a check payable to "Gottbetter & Partners, LLP, as Escrow
Agent for Foothills Resources, Inc.", which Subscription Amount shall be held in
escrow pursuant to the terms of the Escrow Agreement and disbursed in accordance
therewith.
(b) Closing Date. The Closing of the purchase and sale of the Convertible
Debentures shall take place at 10:00 a.m. Eastern Standard Time on or before the
fifth (5th) business day following the date hereof, subject to notification of
satisfaction of the conditions to the Closing set forth herein and in Sections 7
and 8 below (or such later date as is mutually agreed to by the Company and the
Buyer(s)) (the "Closing Date"). The Closing shall occur on the Closing Date at
the offices of Gottbetter & Partners, LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 (or such other place as is mutually agreed to by the Company and the
Buyer(s)).
(c) Escrow Arrangements; Form of Payment. Upon execution hereof by Buyer
and pending the Closing, the Purchase Price shall be deposited in a non-interest
bearing escrow account with Gottbetter & Partners, LLP as escrow agent (the
"Escrow Agent"), pursuant to the terms of the Escrow Agreement. Subject to the
satisfaction of the terms and conditions of this Agreement, on the Closing Date,
(i) the Escrow Agent shall deliver to the Company in accordance with the terms
of the Escrow Agreement the Purchase Price for the Convertible Debentures to be
issued and sold to the Buyer(s), and (ii) the Company shall deliver to the
Buyer(s), the Convertible Debenture, duly executed on behalf of the Company.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents and warrants, severally and not jointly, that:
(a) Investment Purpose. Each Buyer is acquiring the Convertible
Debentures, and, upon conversion of Convertible Debentures, the Buyer will
acquire the Conversion Shares, the Warrants and/or Warrant Shares, then
issuable, for its own account for investment only and not with a view towards,
or for resale in connection with, the public sale or distribution thereof,
except pursuant to sales registered or exempted under the Securities Act;
provided, however, that by making the representations herein, such Buyer
reserves the right to dispose of the Conversion Shares, the Warrants and the
Warrant Shares at any time in accordance with or pursuant to an effective
registration statement covering such Conversion Shares, the Warrants and the
Warrant Shares or an available exemption under the Securities Act. The Investor
agrees not to sell, hypothecate or otherwise transfer the Investor's securities
unless the securities are registered under the Federal and applicable state
securities laws or unless, in the opinion of counsel satisfactory to the
Company, an exemption from such law is available.
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(b) Accredited Investor Status. Each Buyer is an "Accredited Investor"
as that term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance on Exemptions. Each Buyer understands that the Convertible
Debentures are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such securities.
(d) Information. Each Buyer and its advisors (and his or, its counsel),
if any, have been furnished with all materials relating to the business,
finances and operations of the Company and information he deemed material to
making an informed investment decision regarding his purchase of the Convertible
Debentures and the underlying Units, which have been requested by such Buyer.
Each Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and its management. Neither such inquiries nor any
other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer's right to
rely on the Company's representations and warranties contained in Section 3
below. Each Buyer understands that its investment in the Convertible Debentures,
and upon conversion the underlying Units involves a high degree of risk. Each
Buyer is in a position regarding the Company, which, based upon employment,
family relationship or economic bargaining power, enabled and enables such Buyer
to obtain information from the Company in order to evaluate the merits and risks
of this investment. Each Buyer has sought such accounting, legal and tax advice,
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Convertible Debentures.
(e) No Governmental Review. Each Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Convertible
Debentures, the Warrants, the Warrant Shares or the Conversion Shares, or the
fairness or suitability of the investment in the Convertible Debentures, the
Warrants, the Warrant Shares or the Conversion Shares, nor have such authorities
passed upon or endorsed the merits of the offering of the Convertible
Debentures, the Warrants, the Warrant Shares or the Conversion Shares.
(f) Transfer or Resale. Each Buyer understands that: (i) the Convertible
Debentures have not been and are not being registered under the Securities Act
or any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, or (B) such Buyer
shall have delivered to the Company an opinion of counsel, in a generally
acceptable form, to the effect that such securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration requirements; (ii) any sale of such securities made in
reliance on Rule 144 under the Securities Act (or a successor rule thereto)
("Rule 144") may be made only in accordance with the terms of Rule 144 and
further, if Rule 144 is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such securities
under the Securities Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder. The Company reserves the right
to place stop transfer instructions against the shares and certificates for the
Conversion Shares and the Warrant Shares to the extent specifically set forth
under this Agreement.
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(g) Legends. Each Buyer understands that the certificates or other
instruments representing the Convertible Debentures, the Warrants, the Warrant
Shares and or the Conversion Shares shall bear a restrictive legend in
substantially the following form (and a stop transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company within three (3)
business days shall issue a certificate without such legend to the holder of the
Warrants, Warrant Shares and Conversion Shares upon which it is stamped, if,
unless otherwise required by state securities laws, (i) the Buyer or its broker
make the necessary representations and warranties to the transfer agent for the
Common Stock that it has complied with the prospectus delivery requirements in
connection with a sale transaction, provided the Convertible Debentures,
Warrants, Warrant Shares and Conversion Shares are registered under the
Securities Act or (ii) in connection with a sale transaction, after such holder
provides the Company with an opinion of counsel satisfactory to the Company,
which opinion shall be in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale, assignment
or transfer of the Warrants, Warrant Shares and Conversion Shares may be made
without registration under the Securities Act.
(h) Authorization, Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and is a valid and
binding agreement of such Buyer enforceable in accordance with its terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
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(i) Receipt of Documents. Each Buyer and his or its counsel has received
and read in their entirety: (i) this Agreement and each representation, warranty
and covenant set forth herein; (ii) all due diligence and other information
necessary to verify the accuracy and completeness of such representations,
warranties and covenants; and (iii) it has received answers to all questions
each Buyer submitted to the Company regarding an investment in the Company; and
each Buyer has relied on the information contained therein and has not been
furnished any other documents, literature, memorandum or prospectus.
(j) Due Formation of Corporate and Other Buyers. If a Buyer is a
corporation, trust, partnership or other entity that is not an individual
person, it has been formed and validly exists and has not been organized for the
specific purpose of purchasing the Convertible Debentures and is not prohibited
from doing so.
(k) Trading Activities. The Buyer's trading activities with respect to
the Company's Common Stock shall be in compliance with all applicable federal
and state securities laws, rules and regulations and the rules and regulations
of the principal market on which the Company's Common Stock is listed or traded.
Neither the Buyer nor its affiliates has an open short position in the Common
Stock of the Company and, except as set forth below, the Buyer shall not, and
shall not cause any of its affiliates under common control with the Buyer, to
engage in any short sale as defined in any applicable SEC or National
Association of Securities Dealers rules on any hedging transactions with respect
to the Common Stock until the earlier to occur of (i) the third anniversary of
the Closing Date and (ii) the Buyer(s) no longer own a principal balance of the
Convertible Debentures. Without limiting the foregoing, the Buyer agrees not to
engage in any naked short transactions in excess of the amount of shares owned
(or an offsetting long position) by Buyer.
(l) No Legal Advice From the Company. Each Buyer acknowledges that it had
the opportunity to review this Agreement and the transactions contemplated by
this Agreement with his or its own legal counsel and investment and tax
advisors. Each Buyer is relying solely on such counsel and advisors and not on
any statements or representations of the Company or any of its representatives
or agents for legal, tax or investment advice with respect to this investment,
the transactions contemplated by this Agreement or the securities laws of any
jurisdiction.
(m) No Group Participation. Each Buyer and its affiliates is not a member
of any group, nor is any Buyer acting in concert with any other person,
including any other Buyer, with respect to its acquisition of the Convertible
Debentures, Warrants, the Warrant Shares or Conversion Shares.
(n) Each Buyer understands, acknowledges and agrees that the Conversion
Shares and the Warrant Shares are "restricted securities" within the meaning of
Rule 144 promulgated under the Act. Each Buyer further understands, acknowledges
and agrees that (a) such shares can and will only be resold by the Buyer
pursuant to (i) an effective registration statement under the Act where the
prospectus delivery requirements are complied with or (ii) under an applicable
exemption from registration under the Act, and (b) it will not sell or otherwise
dispose of or transfer the Conversion Shares or the Warrant Shares or any
interest therein in a transaction that is part of a plan or scheme to avoid the
registration requirements of the Act.
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(o) Each Buyer understands that the Company, its officers, directors and
agents are relying on the representations of the Buyers set forth in this
Article 2 in order to determine compliance with applicable securities laws in
connection with the sale and issuance of the shares to the Buyer.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each of the Buyers that, except
as set forth in the Disclosure Schedule attached hereto:
(a) Organization and Qualification. The Company and its subsidiaries are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect, as defined below.
(b) Authorization, Enforcement, Compliance with Other Instruments. (i)
The Company has the requisite corporate power and authority to enter into and
perform this Agreement and the Escrow Agreement and all other documents
necessary or desirable to effect the transactions contemplated hereby
(collectively the "Transaction Documents") and to issue the Convertible
Debentures, the Warrants, the Warrant Shares and the Conversion Shares in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance of the Convertible Debentures, the Warrants, the Warrant Shares and the
Conversion Shares and the reservation for issuance and the issuance of the
Conversion Shares and the Warrant Shares issuable upon conversion or exercise
thereof, have been duly authorized by the Company's Board of Directors and no
further consent or authorization is required by the Company, its Board of
Directors or its stockholders, (iii) the Transaction Documents have been duly
executed and delivered by the Company, (iv) the Transaction Documents constitute
the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
(c) Capitalization. The authorized capital stock of the Company consists
of 100,000,000 shares of Common Stock and 1,000,000 shares of preferred stock.
As of the Closing Date hereof, the Company has 39,356,189 shares of Common Stock
issued and outstanding and 0 shares of preferred stock outstanding. All of such
outstanding shares have been duly authorized, validly issued and are fully paid
and nonassessable. Except as disclosed in the Disclosure Schedule, no shares of
Common Stock are subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by the Company. Except as disclosed
in the Disclosure Schedule, as of the date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
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commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, (ii) there
are no outstanding debt securities and (iii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of their securities under the Securities Act (except in
connection with the Merger and the PPO), and (iv) there are no outstanding
registration statements and there are no outstanding comment letters from the
SEC or any other regulatory agency. There are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Convertible Debentures as described in this Agreement. The
Convertible Debentures, Warrants, Warrant Shares and Conversion Shares when
issued, will be free and clear of all pledges, liens, encumbrances and other
restrictions (other than those arising under federal or state securities laws as
a result of the issuance of the Convertible Debentures). Except as set forth on
the Disclosure Schedules, no co-sale right, right of first refusal or other
similar right exists with respect to the Convertible Debentures, Warrants,
Warrant Shares and the Conversion Shares or the issuance and sale thereof. The
issue and sale of the Convertible Debentures, Warrants, Warrant Shares and the
Conversion Shares will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities. The Company has furnished to the Buyer true and correct copies of
the Company's Certificate of Incorporation, as amended and as in effect on the
date hereof (the "Certificate of Incorporation"), and the Company's By-laws, as
in effect on the date hereof (the "By-laws"), and the terms of all securities
convertible into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto other than stock options issued to employees
and consultants.
(d) Issuance of Securities. The Convertible Debentures are duly
authorized and, upon issuance in accordance with the terms hereof, shall be duly
issued, fully paid and nonassessable, are free from all taxes, liens and charges
with respect to the issue thereof. The Conversion Shares and the Warrant Shares
have been duly authorized and reserved for issuance, based on the initial
conversion price. Upon conversion or exercise in accordance with the Transaction
Documents, the Conversion Shares and the Warrant Shares will be duly issued,
fully paid and nonassessable.
(e) No Conflicts. Except as disclosed in the Disclosure Schedule, the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby will
not (i) result in a violation of the Certificate of Incorporation, any
certificate of designations of any outstanding series of preferred stock of the
Company or the By-laws or (ii) conflict with or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of The National Association
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of Securities Dealers Inc.'s OTC Bulletin Board (the "OTC") on which the Common
Stock is quoted) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries is bound
or affected except for those which could not reasonably be expected to have a
material adverse effect on the assets, business, condition (financial or
otherwise), results of operations or future prospects of the Company and its
subsidiaries taken as a whole (a "Material Adverse Effect"). Except as disclosed
in the Disclosure Schedule, and those which could not reasonably be expected to
have a material adverse effect on the Company, neither the Company nor its
subsidiaries is in violation of any term of or in default under its Certificate
of Incorporation or By-laws or their organizational charter or by-laws,
respectively, or any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its subsidiaries. The business of the
Company and its subsidiaries is not being conducted, and shall not be conducted
in violation of any material law, ordinance, or regulation of any governmental
entity. Except as specifically contemplated by this Agreement and as required
under the Securities Act and any applicable state securities laws, the Company
is not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under or contemplated by this
Agreement or the Escrow Agreement in accordance with the terms hereof or
thereof. Except as disclosed in the Disclosure Schedule, all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company and its subsidiaries are unaware of any
facts or circumstance, which might give rise to any of the foregoing.
(f) Financial Statements. As of their respective dates, the financial
statements of the Company included in the Company's public filings (the "SEC
Filings") with the SEC (the "Financial Statements") for the two most recently
completed fiscal years and any subsequent interim period complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such Financial Statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and, fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyer which is not included in the Disclosure Schedule, including, without
limitation, information referred to in this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(g) Absence of Litigation. Except as disclosed in the Disclosure Schedule
or the SEC Filings, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending against or affecting the Company,
the Common Stock or any of the Company's subsidiaries, wherein an unfavorable
decision, ruling or finding would (i) adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein,
or (ii) except as expressly disclosed in the Disclosure Schedule, have a
Material Adverse Effect.
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(h) Acknowledgment Regarding Buyer's Purchase of the Convertible
Debentures. The Company acknowledges and agrees that each Buyer is acting solely
in the capacity of an arm's length purchaser with respect to this Agreement and
the transactions contemplated hereby. The Company further acknowledges that each
Buyer is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by such Buyer or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Buyer's purchase
of the Convertible Debentures, the Warrants, the Warrant Shares or the
Conversion Shares. The Company further represents to the Buyers that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation by the Company and its representatives.
(i) No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Convertible
Debentures, the Warrants, the Warrant Shares or the Conversion Shares.
(j) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Convertible Debentures, the Warrants, the Warrant Shares or the Conversion
Shares under the Securities Act or cause this offering of the Convertible
Debentures, the Warrants, the Warrant Shares or the Conversion Shares to be
integrated with prior offerings by the Company for purposes of the Securities
Act.
(k) Employee Relations. Neither the Company nor any of its subsidiaries
is involved in any labor dispute nor, to the knowledge of the Company or any of
its subsidiaries, is any such dispute threatened. None of the Company's or its
subsidiaries' employees is a member of a union and the Company and its
subsidiaries believe that their relations with their employees are good.
(l) Intellectual Property Rights. The Company has no proprietary
intellectual property.
(m) Environmental Laws.
(i) Each of the Company and its subsidiaries has complied with all
applicable Environmental Laws (as defined below), except for violations of
Environmental Laws that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Material Adverse Effect. There is no
pending or, to the knowledge of the Company, threatened civil or criminal
litigation, written notice of violation, formal administrative proceeding, or
investigation, inquiry or information request, relating to any Environmental Law
involving the Company or any subsidiary, except for litigation, notices of
violations, formal administrative proceedings or investigations, inquiries or
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information requests that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Material Adverse Effect. For purposes
of this Agreement, "Environmental Law" means any federal, state or local law,
statute, rule or regulation or the common law relating to the environment or
occupational health and safety, including without limitation any statute,
regulation, administrative decision or order pertaining to (i) treatment,
storage, disposal, generation and transportation of industrial, toxic or
hazardous materials or substances or solid or hazardous waste; (ii) air, water
and noise pollution; (iii) groundwater and soil contamination; (iv) the release
or threatened release into the environment of industrial, toxic or hazardous
materials or substances, or solid or hazardous waste, including without
limitation emissions, discharges, injections, spills, escapes or dumping of
pollutants, contaminants or chemicals; (v) the protection of wild life, marine
life and wetlands, including without limitation all endangered and threatened
species; (vi) storage tanks, vessels, containers, abandoned or discarded
barrels, and other closed receptacles; (vii) health and safety of employees and
other persons; and (viii) manufacturing, processing, using, distributing,
treating, storing, disposing, transporting or handling of materials regulated
under any law as pollutants, contaminants, toxic or hazardous materials or
substances or oil or petroleum products or solid or hazardous waste. As used
above, the terms "release" and "environment" shall have the meaning set forth in
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA").
(ii) To the knowledge of the Company there is no material environmental
liability with respect to any solid or hazardous waste transporter or treatment,
storage or disposal facility that has been used by the Company or any
subsidiary.
(iii) The Company and its subsidiaries (i) have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (ii) are in compliance with all terms
and conditions of any such permit, license or approval.
(n) Title. The Company does not own or lease any real or personal property.
(o) Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, and (iii) the recorded amounts for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(p) No Material Adverse Breaches, etc. Except as set forth in the
Disclosure Schedule or in the SEC Filings, neither the Company nor any of its
subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the judgment of the
Company's officers has or is expected in the future to have a Material Adverse
Effect. Except as set forth in the Disclosure Schedule or in the SEC Filings,
neither the Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company's officers, has or is
expected to have a Material Adverse Effect.
10
(q) Tax Status. Except as set forth in the Disclosure Schedule, the
Company and each of its subsidiaries has made and filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject and (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
(r) Certain Transactions. Except as set forth in the Disclosure Schedule
or the SEC Filings, and except for arm's length transactions pursuant to which
the Company makes payments in the ordinary course of business upon terms no less
favorable than the Company could obtain from third parties, none of the
officers, directors, or employees of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(s) Fees and Rights of First Refusal. The Company is not obligated to
offer the securities offered hereunder on a right of first refusal basis or
otherwise to any third parties including, but not limited to, current or former
stockholders of the Company, underwriters, brokers, agents or other third
parties.
(t) Reliance. The Company acknowledges that the Buyers are relying on the
representations and warranties made by the Company hereunder and that such
representations and warranties are a material inducement to the Buyer purchasing
the Convertible Debentures. The Company further acknowledges that without such
representations and warranties of the Company made hereunder, the Buyers would
not enter into this Agreement.
(u) Anti-Takeover Provision. The Company and its Board of Directors have
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Company's certificate of incorporation (or similar charter documents) or the
laws of its jurisdiction of incorporation that is or could become applicable to
the Buyers as a result of the Buyers and the Company fulfilling their
obligations or exercising their rights under this Agreement, including without
limitation the Company's issuance of the Convertible Debentures, Warrants,
Warrant Shares and Conversion Shares and the Buyer's ownership thereof.
11
4. COVENANTS.
---------
(a) Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections
5 and 6 of this Agreement.
(b) Form D. The Company agrees to file a Form D with respect to the
Convertible Debentures as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Convertible Debentures, Warrants, the
Warrant Shares and Conversion Shares, or obtain an exemption for the Convertible
Debentures, Warrants, the Warrant Shares and Conversion Shares for sale to the
Buyers at the Closing pursuant to this Agreement under applicable securities or
"Blue Sky" laws of the states of the United States, and shall provide evidence
of any such action so taken to the Buyers on or prior to the Closing Date.
(c) Reporting Status. Until the earlier of (i) the date as of which the
Buyer(s) may sell all of the Warrants, the Warrant Shares, and Conversion Shares
without restriction pursuant to Rule 144(k) promulgated under the Securities Act
(or successor thereto), or (ii) the date on which (A) the Buyer(s) shall have
sold all the Warrants, the Warrant Shares and Conversion Shares and (B) none of
the Convertible Debentures are outstanding, the Company shall file in a timely
manner all reports required to be filed with the SEC pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the regulations of the
SEC thereunder, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would otherwise permit such termination.
(d) Use of Proceeds. The Company shall use the proceeds from the sale of
the Convertible Debentures to make the Bridge Loan to Brasada.
(e) Reservation of Shares. The Company shall take all action reasonably
necessary to at all times have authorized, and reserved for the purpose of
issuance, that number of shares of Common Stock equal to equal to the sum of (i)
the number of shares of Common Stock into which the Convertible Debentures are
convertible from time to time based upon a conversion price (the "Conversion
Price") of $0.70 per Unit, plus (ii) the number of shares of Common Stock for
which the Warrants are exercisable from time to time based upon an exercise
price (the "Exercise Price") per whole Warrant of $1.00 per share.
(f) Listings or Quotation. The Company shall use its best efforts to
maintain the listing or quotation of its Common Stock upon the OTCBB.
(g) Corporate Existence. Except as set forth on the Disclosure Schedules
so long as any of the Convertible Debentures remain outstanding, the Company
shall not directly or indirectly consummate any merger, reorganization,
restructuring, reverse stock split consolidation, sale of all or substantially
all of the Company's assets or any similar transaction or related transactions
(each such transaction, an "Organizational Change") unless, prior to the
12
consummation of an Organizational Change, the Company obtains the written
consent of each Buyer. In any such case, the Company will make appropriate
provision with respect to such holders' rights and interests to insure that the
provisions of this Section 4(i) will thereafter be applicable to the Convertible
Debentures. The provisions of this Section 4(g) shall be inapplicable with
respect to any Orginizational Change effected in connection with the Merger.
(h) Resales Absent Effective Registration Statement. Each of the Buyers
understand and acknowledge that (i) this Agreement and the agreements
contemplated hereby may require the Company to issue and deliver Conversion
Shares or Warrant Shares to the Buyers with legend restricting their
transferability under the Securities Act, and (ii) it is aware that resales of
such Conversion Shares or Warrant Shares may not be made unless, at the time of
resale, there is an effective registration statement under the Securities Act
covering such Buyer's resale(s) or an applicable exemption from registration.
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to issue and sell the
Convertible Debentures to the Buyer(s) at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:
(a) Each Buyer shall have executed the Transaction Documents and delivered
them to the Company.
(b) The Buyer(s) shall have delivered to the Escrow Agent the Purchase
Price for Convertible Debentures in respective amounts as set forth next to each
Buyer as outlined on Schedule I attached hereto and the Escrow Agent shall have
delivered the net proceeds to the Company by wire transfer of immediately
available U.S. funds pursuant to the wire instructions provided by the Company;
it being understood that the sale of the Convertible Debentures shall not close
unless a minimum of $500,000 principal amount of Convertible Debentures is
subscribed for.
(c) The representations and warranties of the Buyer(s) contained in this
Agreement shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and the
Buyer(s) shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Buyer(s) at or prior to the Closing
Date.
6. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
------------------------------------------------
The obligation of the Buyer(s) hereunder to purchase the
Convertible Debentures at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions:
13
(i) The Company shall have executed the Transaction Documents and delivered
the same to the Buyer(s).
(ii) The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects (except to the
extent that any of such representations and warranties is already qualified as
to materiality in Section 3 above, in which case, such representations and
warranties shall be true and correct without further qualification) as of the
date when made and as of the Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date) and the
Company shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date. If requested by the Buyer, the Buyer shall have received a certificate,
executed by the President of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
the Buyer including, without limitation an update as of the Closing Date
regarding the representation contained in Section 3(c) above.
(iii) The Company shall have executed and delivered to the Buyer(s) the
Convertible Debentures in the respective amounts set forth opposite each
Buyer(s) name on Schedule I attached hereto and the Warrants in the respective
numbers set forth opposite each Buyer(s) name on Schedule I attached hereto.
(iv) The Buyer(s) shall have received an opinion of counsel in a form
reasonably satisfactory to the Buyer(s).
(v) The Company shall have provided to the Buyer a certificate of good
standing from the Secretary of State from the state in which the Company is
incorporated.
(vi) The Company shall have reserved out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the
Convertible Debentures, sufficient shares of Common Stock to effect the
conversion of all of the Convertible Debentures' and the exercise of all
Warrants.
7. INDEMNIFICATION.
---------------
(a) In consideration of the Buyer's execution and delivery of this
Agreement and acquiring the Convertible Debentures, the Warrants and the
Conversion Shares hereunder, and in addition to all of the Company's other
obligations under this Agreement, the Company shall defend, protect, indemnify
and hold harmless the Buyer(s) and each other holder of the Convertible
Debentures, the Warrants and the Conversion Shares, and all of their officers,
directors, employees and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Buyer Indemnitees") from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Buyer Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Buyer Indemnitees or any of them as
14
a result of, or arising out of, or relating to (a) any material
misrepresentation or material breach of any representation or warranty made by
the Company in the Transaction Documents, (b) any material breach of any
covenant, agreement or obligation of the Company contained in the Transaction
Documents, or (c) any cause of action, suit or claim brought or made against
such Indemnitee and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement or any other Transaction Document
executed pursuant hereto by any of the Indemnities. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities, which is permissible under applicable law.
(b) In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Buyer's other obligations under this
Agreement, the Buyer shall defend, protect, indemnify and hold harmless the
Company and all of its officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Company Indemnitees") from
and against any and all Indemnified Liabilities incurred by the Company
Indemnitees or any of them as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Buyer(s) in this Agreement, or any other Transaction Document executed by the
Buyer, (b) any breach of any covenant, agreement or obligation of the Buyer(s)
contained in this Agreement, or any other Transaction Document executed by the
Buyer, or (c) any cause of action, suit or claim brought or made against such
Company Indemnitee based on material misrepresentations or due to a material
breach and arising out of or resulting from the execution, delivery, performance
or enforcement of the Transaction Docuemtns by any of the Buyers. To the extent
that the foregoing undertaking by each Buyer may be unenforceable for any
reason, each Buyer shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
8. GOVERNING LAW: MISCELLANEOUS.
----------------------------
(a) Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws. The parties further agree that any action
between them shall be heard exclusively in federal or state court sitting in the
New York County, New York, and expressly consent to the jurisdiction and venue
of the Supreme Court of New York, sitting in New York County and the United
States District Court for the Southern District of New York for the adjudication
of any civil action asserted pursuant to this Paragraph.
(b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
(4) additional original executed signature pages to be physically delivered to
the other party within five (5) days of the execution and delivery hereof.
15
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) 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 in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) Entire Agreement, Amendments. This Agreement supersedes all other
prior oral or written agreements between the Buyer(s), the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. 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.
(f) Notices. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon confirmation of receipt, when sent by facsimile;
(iii) upon receipt when sent by U.S. certified mail, return receipt requested,
or (iv) one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to the Company, to: Foothills Resources, Inc.
Candiana Lodge, Wellfield X0, Xxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx, Xxxxxxx
Attention: J. Xxxx Xxxxxx
Telephone: (000)000000000000
Facsimile: (000)000000000
With a copy to: Gottbetter & Partners, LLP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxx X. Xxxxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Buyer(s), to its address and facsimile number on Schedule I,
with copies to the Buyer's counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party
hereto.
16
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
(i) Survival. Unless this Agreement is terminated under Section 8(l), the
representations and warranties of the Company and the Buyer(s) contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 8,
and the indemnification provisions set forth in Section 7, shall survive the
Closing for a period of two (2) years following the date on which the
Convertible Debentures are converted in full. The Buyer(s) shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.
(j) Publicity. The Company and the Buyer(s) shall have the right to
approve, before issuance any press release or any other public statement with
respect to the transactions contemplated hereby made by any party; provided,
however, that the Company shall be entitled, without the prior approval of the
Buyer(s), to issue any press release or other public disclosure with respect to
such transactions required under applicable securities or other laws or
regulations (the Company shall use its best efforts to consult the Buyer(s) in
connection with any such press release or other public disclosure prior to its
release and Buyer(s) shall be provided with a copy thereof upon release
thereof).
(k) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Termination. In the event that the Closing shall not have occurred
with respect to the Buyers on or before five (5) business days from the date
hereof due to the Company's or the Buyer's failure to satisfy the conditions set
forth in Sections 5 and 6 above (and the non-breaching party's failure to waive
such unsatisfied condition(s)), the non-breaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party.
(m) No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
(n) Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Buyer and
the Company will be entitled to specific performance under the Agreement. The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agree to waive in any action for specific performance of any
such obligation the defense that a remedy at law would be adequate.
17
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18
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY:
Foothills Resources, Inc.
By:
-----------------------------
Name: J. Xxxx Xxxxxx
Title: Chief Executive Officer
19
SCHEDULE 1
SCHEDULE OF BUYERS
Address/Facsimile Amount of
Name Signature Number of Buyer Subscription
By:_______________
Name:
Office:
By:_______________
Name:
Office:
By:_______________
Name:
Office:
By:_______________
Name:
Office:
COMPANY DISCLOSURE SCHEDULE
EXHIBIT A
FORM OF ESCROW AGREEMENT
