SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of March 4, 2019,
by and between FOOTHILLS EXPLORATION, INC., a Delaware corporation, with
headquarters located at 10940 Wilshire Boulevard, 23rd Floor, Los Angeles, CA
90024 (the “Company”), and FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC, a Delaware
limited liability company, with its address at 1040 First Avenue, Suite 190, New
York, NY 10022 (the “Buyer”).

 

WHEREAS:

 

A. The Company and the Buyer are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”) and Rule
506(b) promulgated by the United States Securities and Exchange Commission (the
“SEC”) under the 1933 Act;

 

B. Buyer desires to purchase from the Company, and the Company desires to issue
and sell to the Buyer, upon the terms and conditions set forth in this
Agreement, a Senior Secured Convertible Promissory Note of the Company, in the
aggregate principal amount of $705,882.35 (as the principal amount thereof may
be increased pursuant to the terms thereof, and together with any note(s) issued
in replacement thereof or as a dividend thereon or otherwise with respect
thereto in accordance with the terms thereof, in the form attached hereto as
Exhibit A, the “Note”), convertible into shares of common stock, $0.0001 par
value per share, of the Company (the “Common Stock”), upon the terms and subject
to the limitations and conditions set forth in such Note;

 

C. The Buyer wishes to purchase, upon the terms and conditions stated in this
Agreement, such principal amount of the Note as is set forth immediately below
its name on the signature pages hereto;

 

D. The Company wishes to issue a warrant to purchase 1,125,000 shares of Common
Stock (the “Warrant”) to the Buyer as additional consideration for the purchase
of the Note, as further provided herein.

 

NOW THEREFORE, in consideration of the foregoing and of the agreements and
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and the
Buyer hereby agree as follows:

 

1. Purchase and Sale of Note.

 

a. Purchase of Note. On the Closing Date (as defined below), the Company shall
issue and sell to the Buyer, and the Buyer agrees to purchase from the Company,
the Note and Warrant, as further provided herein.

 

b. Form of Payment. On the Closing Date: (i) the Buyer shall pay the purchase
price of $600,000.00 (the “Purchase Price”) for the Note, to be issued and sold
to it at the Closing (as defined below), by wire transfer of immediately
available funds to the Company, in accordance with the Company’s written wiring
instructions, against delivery of the Note, and (ii) the Company shall deliver
such duly executed Note on behalf of the Company, to the Buyer, against delivery
of such Purchase Price.

 

c. Closing Date. Subject to the satisfaction (or written waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Note pursuant to this Agreement (the “Closing
Date”) shall be 4:00 PM, Eastern Time on the date first written above, or such
other mutually agreed upon time.

 

d. Closing. The closing of the transactions contemplated by this Agreement (the
“Closing”) shall occur on the Closing Date at such location as may be agreed to
by the parties (including via exchange of electronic signatures).

 

1A. Warrant. Not more than five (5) business days following the Closing Date,
the Company shall issue the Warrant to the Buyer.

 

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2. Buyer’s Representations and Warranties. The Buyer represents and warrants to
the Company as of the Closing Date that:

 

a. Investment Purpose. As of the Closing Date, the Buyer is purchasing the Note,
the Warrant, and the shares of Common Stock issuable upon conversion of or
otherwise pursuant to the Note and such additional shares of Common Stock, if
any, as are issuable on account of interest on the Note pursuant to this
Agreement and/or upon exercise of the Warrant, such shares of Common Stock being
collectively referred to herein as the “Conversion Shares” and, collectively
with the Note and the Warrant, the “Securities”) for its own account and not
with a present view towards the public sale or distribution thereof, except
pursuant to sales registered or exempted from registration under the 1933 Act;
provided, however, that by making the representations herein, the Buyer does not
agree to hold any of the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in accordance with
or pursuant to a registration statement or an exemption under the 1933 Act.

 

b. Accredited Investor Status. The Buyer is an “accredited investor” as that
term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).

 

c. Reliance on Exemptions. The Buyer understands that the Securities are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Securities.

 

d. Information. The Buyer and its advisors, if any, have been, and for so long
as the Note remains outstanding will continue to be, furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities which have been
requested by the Buyer or its advisors. The Buyer and its advisors, if any, have
been, and for so long as the Note remains outstanding will continue to be,
afforded the opportunity to ask questions of the Company regarding its business
and affairs. Notwithstanding the foregoing, the Company has not disclosed to the
Buyer any material nonpublic information regarding the Company or otherwise and
will not disclose such information unless such information is disclosed to the
public prior to or promptly following such disclosure to the Buyer. Neither such
inquiries nor any other due diligence investigation conducted by Buyer or any of
its advisors or representatives shall modify, amend or affect Buyer’s right to
rely on the Company’s representations and warranties contained in Section 3
below.

 

e. Governmental Review. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed upon or
made any recommendation or endorsement of the Securities.

 

f. Transfer or Re-sale. The Buyer understands that (i) the sale or resale of the
Securities has not been and is not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Buyer shall have delivered to the Company,
at the cost of the Company, an opinion of counsel (which may be the Legal
Counsel Opinion (as defined below)) that shall be in form, substance and scope
customary for opinions of counsel in comparable transactions to the effect that
the Securities to be sold or transferred may be sold or transferred pursuant to
an exemption from such registration, which opinion shall be accepted by the
Company, (c) the Securities are sold or transferred to an “affiliate” (as
defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule
144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only
in accordance with this Section 2(f) and who is an Accredited Investor, (d) the
Securities are sold pursuant to Rule 144, or (e) the Securities are sold
pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation
S”), and the Buyer shall have delivered to the Company, at the cost of the
Company, an opinion of counsel that shall be in form, substance and scope
customary for opinions of counsel in corporate transactions, which opinion shall
be accepted by the Company; (ii) any sale of such Securities made in reliance on
Rule 144 may be made only in accordance with the terms of said Rule and further,
if said Rule is not applicable, any re-sale 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 1933 Act) may
require compliance with some other exemption under the 1933 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 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder (in each case). Notwithstanding the foregoing or anything
else contained herein to the contrary, the Securities may be pledged in
connection with a bona fide margin account or other lending arrangement secured
by the Securities, and such pledge of Securities shall not be deemed to be a
transfer, sale or assignment of the Securities hereunder, and the Buyer in
effecting such pledge of Securities shall be not required to provide the Company
with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or otherwise.

 

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g. Legends. The Buyer understands that until such time as the Note, Warrant,
and, upon conversion of the Note and/or exercise of the Warrant in accordance
with its respective terms, the Conversion Shares, have been registered under the
1933 Act or may be sold pursuant to Rule 144, Rule 144A under the 1933 Act or
Regulation S without any restriction as to the number of securities as of a
particular date that can then be immediately sold, the Securities may bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE/EXERCISABLE]
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A OR REGULATION S UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.”

 

The legend set forth above shall be removed and the Company shall issue or cause
to be issued a certificate for the applicable shares of Common Stock without
such legend to the holder of any Security upon which it is stamped or (as
requested by such holder) issue the applicable shares of Common Stock to such
holder by electronic delivery by crediting the account of such holder’s broker
with The Depository Trust Company (“DTC”), if, unless otherwise required by
applicable state securities laws, (a) such Security is registered for sale under
an effective registration statement filed under the 1933 Act or otherwise may be
sold pursuant to Rule 144, Rule 144A or Regulation S without any restriction as
to the number of securities as of a particular date that can then be immediately
sold, or (b) the Company or the Buyer provides the Legal Counsel Opinion (as
contemplated by and in accordance with Section 4(m) hereof) to the effect that a
public sale or transfer of such Security may be made without registration under
the 1933 Act, which opinion shall be accepted by the Company so that the sale or
transfer is effected. The Company shall be responsible for the fees of its
transfer agent and all DTC fees associated with any such issuance. The Buyer
agrees to sell all Securities, including those represented by a certificate(s)
from which the legend has been removed, in compliance with applicable prospectus
delivery requirements, if any. In the event that the Company does not accept the
opinion of counsel provided by the Buyer with respect to the transfer of
Securities pursuant to an exemption from registration, such as Rule 144, Rule
144A or Regulation S, at the Deadline (as defined in the Note), it will be
considered an Event of Default pursuant to Section 3.2 of the Note.

 

h. Authorization; Enforcement. This Agreement has been duly and validly
authorized by the Buyer and has been duly executed and delivered on behalf of
the Buyer, and this Agreement constitutes a valid and binding agreement of the
Buyer enforceable in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors’ rights generally and except as may be limited by the
exercise of judicial discretion in applying principles of equity.

 

i. Residency. The Buyer is a resident of the jurisdiction set forth immediately
below the Buyer’s name on the signature pages hereto.

 

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3. Representations and Warranties of the Company. The Company represents and
warrants to the Buyer as of the Closing Date that:

 

a. Organization and Qualification. The Company and each of its Subsidiaries (as
defined below), if any, is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated,
with full power and authority (corporate and other) to own, lease, use and
operate its properties and to carry on its business as and where now owned,
leased, used, operated and conducted. Schedule 3(a), if attached hereto, sets
forth a list of all of the Subsidiaries of the Company and the jurisdiction in
which each is incorporated. The Company and each of its Subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership or use of property or the nature of
the business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect. “Material Adverse Effect” means any material adverse effect on the
business, operations, assets, financial condition or prospects of the Company or
its Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection
herewith. “Subsidiaries” means any corporation or other organization, whether
incorporated or unincorporated, in which the Company owns, directly or
indirectly, any equity or other ownership interest.

 

b. Authorization; Enforcement. (i) The Company has all requisite corporate power
and authority to enter into and perform this Agreement, the Note, and to
consummate the transactions contemplated hereby and thereby and to issue the
Securities, in accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement, the Warrant, the Note, and the Conversion Shares
by the Company and the consummation by it of the transactions contemplated
hereby and thereby (including without limitation, the issuance of the Note,
Warrant, as well as the issuance and reservation for issuance of the Conversion
Shares issuable upon conversion of the Note and/or exercise of the Warrant) have
been duly authorized by the Company’s Board of Directors and no further consent
or authorization of the Company, its Board of Directors, its shareholders, or
its debt holders is required, (iii) this Agreement and the Note (together with
any other instruments executed in connection herewith or therewith) have been
duly executed and delivered by the Company by its authorized representative, and
such authorized representative is the true and official representative with
authority to sign this Agreement, the Note and the other instruments documents
executed in connection herewith or therewith and bind the Company accordingly,
and (iv) this Agreement constitutes, and upon execution and delivery by the
Company of the Note, each of such instruments will constitute, a legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with their terms.

 

c. Capitalization; Governing Documents. As of March 4, 2019, the authorized
capital stock of the Company consists of: 100,000,000 authorized shares of
Common Stock, of which 14,620,627 shares were issued and outstanding, and
25,000,000 authorized shares of preferred stock, of which none were issued and
outstanding. All of such outstanding shares of capital stock of the Company and
the Conversion Shares, are, or upon issuance will be, duly authorized, validly
issued, fully paid and non-assessable. No shares of capital stock of the Company
are subject to preemptive rights or any other similar rights of the shareholders
of the Company or any liens or encumbrances imposed through the actions or
failure to act of the Company. As of the effective date of this Agreement, other
than as publicly announced prior to such date and reflected in the SEC Documents
of the Company (i) there are no outstanding options, warrants, scrip, rights to
subscribe for, puts, calls, rights of first refusal, agreements, understandings,
claims or other commitments or rights of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for any shares of
capital stock of the Company or any of its Subsidiaries, 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,
(ii) there are no agreements or arrangements under which the Company or any of
its Subsidiaries is obligated to register the sale of any of its or their
securities under the 1933 Act and (iii) there are no anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) that will be triggered by the
issuance of any of the Securities. The Company has furnished to the Buyer true
and correct copies of the Company’s Certificate of Incorporation as in effect on
the date hereof (“Certificate of Incorporation”), 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 of the Company and the material
rights of the holders thereof in respect thereto.

 

d. Issuance of Conversion Shares. The Conversion Shares are duly authorized and
reserved for issuance and, upon conversion of the Note in accordance with its
terms, will be validly issued, fully paid and non-assessable, and free from all
taxes, liens, claims and encumbrances with respect to the issue thereof and
shall not be subject to preemptive rights or other similar rights of
shareholders of the Company and will not impose personal liability upon the
holder thereof.

 

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e. Issuance of Warrant. The issuance of the Warrant is duly authorized and will
be validly issued and free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Company and will not impose personal
liability upon the holder thereof.

 

f. Acknowledgment of Dilution. The Company understands and acknowledges the
potentially dilutive effect of the Conversion Shares to the Common Stock upon
the conversion of the Note. The Company further acknowledges that its obligation
to issue, upon conversion of the Note, the Conversion Shares, in accordance with
this Agreement, and the Note are absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
shareholders of the Company.

 

g. Ranking; No Conflicts. The Note shall be a senior debt obligation of the
Company, with priority in payment and performance over all existing and future
indebtedness of the Company, except for the Company’s preexisting obligations as
described in Schedule 3(g) attached hereto or as such described in the Company’s
SEC Documents. The execution, delivery and performance of this Agreement and the
Note by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance and
reservation for issuance of the Conversion Shares) will not (i) conflict with or
result in a violation of any provision of the Certificate of Incorporation or
By-laws, or (ii) violate or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which with notice or lapse of
time or both could become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement, note,
evidence of indebtedness, indenture, patent, patent license or instrument to
which the Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and regulations of any
self-regulatory organizations to which the Company or its securities is subject)
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
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect), or (iv) trigger any anti-dilution and/or ratchet provision
contained in any other contract in which the Company is a party thereto or any
security issued by the Company, except for the Company’s preexisting obligations
as described in Schedule 3(g) attached hereto or as such described in the
Company’s SEC Documents. Neither the Company nor any of its Subsidiaries is in
violation of its Certificate of Incorporation, By-laws or other organizational
documents and neither the Company nor any of its Subsidiaries is in default (and
no event has occurred which with notice or lapse of time or both could put the
Company or any of its Subsidiaries in default) under, and neither the Company
nor any of its Subsidiaries has taken any action or failed to take any action
that would 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 by which any property or assets of the
Company or any of its Subsidiaries is bound or affected, except for possible
defaults as would not, individually or in the aggregate, have a Material Adverse
Effect. The businesses of the Company and its Subsidiaries, if any, are not
being conducted, and shall not be conducted so long as the Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any governmental
entity. Except as specifically contemplated by this Agreement and as required
under the 1933 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, governmental agency, regulatory agency,
self-regulatory organization or stock market or any third party in order for it
to execute, deliver or perform any of its obligations under this Agreement and
the Note in accordance with the terms hereof or thereof or to issue and sell the
Note in accordance with the terms hereof and, upon conversion of the Note and/or
exercise of the Warrant, issue Conversion Shares. 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. If the Company is listed on the Over-the-Counter Bulletin
Board, the OTCQB Market, any principal market operated by OTC Markets Group,
Inc. or any successor to such markets (collectively, the “OTCBB”), the Company
is not in violation of the listing requirements of the OTCBB and does not
reasonably anticipate that the Common Stock will be delisted by the OTCBB in the
foreseeable future. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.

 

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h. SEC Documents; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents (other than exhibits to such documents) incorporated by
reference therein, being hereinafter referred to herein as the “SEC Documents”).
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. None of the
statements made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements as have been
amended or updated in subsequent filings prior the date hereof). As of their
respective dates, the financial statements of the Company included in the SEC
Documents 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
United States generally accepted accounting principles, consistently applied,
during the periods involved and fairly present in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth in the
financial statements of the Company included in the SEC Documents, the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to September 30, 2018, and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in such financial statements, which, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.
The Company is subject to the reporting requirements of the 1934 Act.

 

i. Absence of Certain Changes. Since September 30, 2018, there has been no
material adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition, results of
operations, prospects or 1934 Act reporting status of the Company or any of its
Subsidiaries.

 

j. Absence of Litigation. There is no action, suit, claim, proceeding, inquiry
or investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its Subsidiaries, threatened against or affecting the Company or any
of its Subsidiaries, or their officers or directors in their capacity as such
(collectively “Claims”), except as such described in Schedule 3(j), if attached
hereto, or such that are described in the Company’s SEC Documents. The SEC
Documents contain a complete list and summary description of any pending or, to
the knowledge of the Company, threatened proceeding against or affecting the
Company or any of its Subsidiaries, without regard to whether it would have a
Material Adverse Effect. Except as may be described in Schedule 3(j) or in its
SEC Documents, the Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to Claims.

 

k. Intellectual Property. The Company and each of its Subsidiaries owns or
possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and copyrights
(“Intellectual Property”) necessary to enable it to conduct its business as now
operated (and, as presently contemplated to be operated in the future); there is
no claim or action by any person pertaining to, or proceeding pending, or to the
Company’s knowledge threatened, which challenges the right of the Company or of
a Subsidiary with respect to any Intellectual Property necessary to enable it to
conduct its business as now operated (and, as presently contemplated to be
operated in the future); to the best of the Company’s knowledge, the Company’s
or its Subsidiaries’ current and intended products, services and processes do
not infringe on any Intellectual Property or other rights held by any person;
and the Company is unaware of any facts or circumstances which might give rise
to any of the foregoing. The Company and each of its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of their Intellectual Property.

 

l. No Materially Adverse Contracts, Etc. 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 previously disclosed in SEC Documents of the Company or as
described in Schedule 3(l) attached hereto. Neither the Company nor any of its
Subsidiaries is a party to any contract or agreement which in the judgment of
the Company’s officers has or is expected to have a Material Adverse Effect,
except as previously disclosed in SEC Documents of the Company or as described
in Schedule 3(l) attached hereto.

 

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m. Tax Status. The Company and each of its Subsidiaries has made or filed all
federal, state and foreign income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (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) and 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 provisions 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. The Company has not executed a
waiver with respect to the statute of limitations relating to the assessment or
collection of any foreign, federal, state or local tax. None of the Company’s
tax returns is presently being audited by any taxing authority.

 

n. Transactions with Affiliates. Except for arm’s length transactions pursuant
to which the Company or any of its Subsidiaries makes payments in the ordinary
course of business upon terms no less favorable than the Company or any of its
Subsidiaries could obtain from third parties and other than the grant of stock
options described in the SEC Documents or other transactions which are described
within the SEC Documents, none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company or any of its
Subsidiaries (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.

 

o. Disclosure. All information relating to or concerning the Company or any of
its Subsidiaries set forth in this Agreement and provided to the Buyer pursuant
to Section 2(d) hereof and otherwise in connection with the transactions
contemplated hereby is true and correct in all material respects and the Company
has not omitted to state any material fact necessary in order to make the
statements made herein or therein, in light of the circumstances under which
they were made, not misleading. No event or circumstance has occurred or exists
with respect to the Company or any of its Subsidiaries or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed
(assuming for this purpose that the Company’s reports filed under the 1934 Act
are being incorporated into an effective registration statement filed by the
Company under the 1933 Act).

 

p. Acknowledgment Regarding Buyer’s Purchase of Securities. The Company
acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s
length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that the 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 statement made by the Buyer or any of its respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to the Buyer’s purchase of the Securities. The Company further represents to the
Buyer that the Company’s decision to enter into this Agreement has been based
solely on the independent evaluation of the Company and its representatives.

 

q. 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 in any security or solicited any offers to buy any security
under circumstances that would require registration under the 1933 Act of the
issuance of the Securities to the Buyer. The issuance of the Securities to the
Buyer will not be integrated with any other issuance of the Company’s securities
(past, current or future) for purposes of any shareholder approval provisions
applicable to the Company or its securities.

 

7

 

 

r. No Brokers. The Company has taken no action which would give rise to any
claim by any person for brokerage commissions, transaction fees or similar
payments relating to this Agreement or the transactions contemplated hereby.

 

s. Permits; Compliance. The Company and each of its Subsidiaries are in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the “Company Permits”), and there is
no action pending or, to the knowledge of the Company, threatened regarding
suspension or cancellation of any of the Company Permits, except to the extent
that they relate, if at all, to a Company Permit not material to the business or
operations of the Company. Neither the Company nor any of its Subsidiaries is in
conflict with, or in default or violation of, any of the Company Permits, except
for any such conflicts, defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
Since September 30, 2018, neither the Company nor any of its Subsidiaries has
received any notification with respect to possible conflicts, defaults or
violations of applicable laws, except for notices relating to possible
conflicts, defaults or violations, which conflicts, defaults or violations would
not have a Material Adverse Effect.

 

t. Environmental Matters.

 

(i) There are, to the Company’s knowledge, with respect to the Company or any of
its Subsidiaries or any predecessor of the Company, no past or present material
violations of Environmental Laws (as defined below), releases of any material
into the environment, actions, activities, circumstances, conditions, events,
incidents, or contractual obligations which may give rise to any material common
law environmental liability or any material liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or similar
federal, state, local or foreign laws and neither the Company nor any of its
Subsidiaries has received any notice with respect to any of the foregoing, nor
is any action pending or, to the Company’s knowledge, in connection with any of
the foregoing. The term “Environmental Laws” means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.

 

(ii) Other than those that are or were stored, used or disposed of in compliance
with applicable law, no Hazardous Materials are contained on or about any real
property currently owned, leased or used by the Company or any of its
Subsidiaries, and no Hazardous Materials were released on or about any real
property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of the Company’s
or any of its Subsidiaries’ business.

 

(iii) There are no underground storage tanks on or under any real property
owned, leased or used by the Company or any of its Subsidiaries that are not in
material compliance with applicable law.

 

u. Title to Property. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 3(u), if attached hereto, or
such as would not have a Material Adverse Effect. Any real property and
facilities held under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as would not
have a Material Adverse Effect.

 

v. Insurance. The Company and each of its Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse Effect.
Upon written request the Company will provide to the Buyer true and correct
copies of all policies relating to commercial general liability coverage,
umbrella, commercial property and employee benefits liability, control of well
insurance and pollution liability insurance.

 

8

 

 

w. Internal Accounting Controls. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient, in the judgment of
the Company’s board of directors, 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, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

 

x. Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries,
nor any director, officer, agent, employee or other person acting on behalf of
the Company or any Subsidiary has, in the course of his actions for, or on
behalf of, the Company, used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity;
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended, or made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.

 

y. Solvency. The Company (after giving effect to the transactions contemplated
by this Agreement) is solvent (i.e., its assets have a fair market value in
excess of the amount required to pay its probable liabilities on its existing
debts as they become absolute and matured) and currently the Company has no
information that would lead it to reasonably conclude that the Company would
not, after giving effect to the transaction contemplated by this Agreement, have
the ability to, nor does it intend to take any action that would impair its
ability to, pay its debts from time to time incurred in connection therewith as
such debts mature. The Company’s financial statements for its most recent fiscal
year end and interim financial statements have been prepared assuming the
Company will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.

 

z. No Investment Company. The Company is not, and upon the issuance and sale of
the Securities as contemplated by this Agreement will not be an “investment
company” required to be registered under the Investment Company Act of 1940 (an
“Investment Company”). The Company is not controlled by an Investment Company.

 

aa. No Off Balance Sheet Arrangements. There is no transaction, arrangement, or
other relationship between the Company or any of its Subsidiaries and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its 1934 Act filings and is not so disclosed or that
otherwise could be reasonably likely to have a Material Adverse Effect.

 

bb. No Disqualification Events. None of the Company, nor, to its knowledge, any
of its predecessors, any affiliated issuer, any director, executive officer,
other officer of the Company participating in the offering hereunder, any
beneficial owner of 20% or more of the Company’s outstanding voting equity
securities, calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the 1933 Act) connected with the Company in
any capacity at the time of sale (each, an “Issuer Covered Person”) is subject
to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to
(viii) under the 1933 Act (a “Disqualification Event”), except for a
Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has
exercised reasonable care to determine whether any Issuer Covered Person is
subject to a Disqualification Event.

 

cc. Manipulation of Price. The Company has not, and to its knowledge no one
acting on its behalf has: (i) taken, directly or indirectly, any action designed
to cause or to result, or that could reasonably be expected to cause or result,
in the stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.

 

9

 

 

dd. Breach of Representations and Warranties by the Company. The Company agrees
that if the Company breaches any of the representations or warranties set forth
in this Section 3 and in addition to any other remedies available to the Buyer
pursuant to this Agreement, it will be considered an Event of Default under
Section 3.4 of the Note.

 

4. ADDITIONAL COVENANTS, AGREEMENTS AND ACKNOWLEDGEMENTS.

 

a. Best Efforts. The parties shall use their reasonable best efforts to satisfy
timely each of the conditions described in Section 6 and 7 of this Agreement.

 

b. Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof to
the Buyer promptly after such filing.

 

c. Use of Proceeds. The Company shall use the proceeds for business development
and operations, and not for the repayment of any indebtedness owed to officers,
directors or employees of the Company or their affiliates or in violation or
contravention of any applicable law, rule or regulation.

 

d. Right of Participation in Subsequent Offerings. On or before the closing of
any subsequent offering, Company shall notify Buyer of such offering and Buyer
shall be delivered such further information as they may request. Buyer shall
have a period of up to ten (10) days following the closing to participate in
said offering upon the same terms and conditions as provided to investors in
that offering in any amount up to $705,882.35.

 

Notwithstanding anything set forth above, the foregoing shall not apply to any
shares, options or other rights provided to employees, directors, consultants or
shares issued or issuable in connection with any acquisition of property,
leaseholds or companies directly or indirectly. As used in this Agreement, the
term “business day” shall mean any day other than a Saturday, Sunday or a day on
which commercial banks in the city of New York, New York are authorized or
required by law or executive order to remain closed.

 

e. Usury. To the extent it may lawfully do so, the Company hereby agrees not to
insist upon or plead or in any manner whatsoever claim, and will resist any and
all efforts to be compelled to take the benefit or advantage of, usury laws
wherever enacted, now or at any time hereafter in force, in connection with any
action or proceeding that may be brought by the Buyer in order to enforce any
right or remedy under this Agreement, the Note and any document, agreement or
instrument contemplated thereby. Notwithstanding any provision to the contrary
contained in this Agreement, the Note and any document, agreement or instrument
contemplated thereby, it is expressly agreed and provided that the total
liability of the Company under this Agreement, the Note or any document,
agreement or instrument contemplated thereby for payments which under applicable
law are in the nature of interest shall not exceed the maximum lawful rate
authorized under applicable law (the “Maximum Rate”), and, without limiting the
foregoing, in no event shall any rate of interest or default interest, or both
of them, when aggregated with any other sums which under applicable law in the
nature of interest that the Company may be obligated to pay under this
Agreement, the Note and any document, agreement or instrument contemplated
thereby exceed such Maximum Rate. It is agreed that if the maximum contract rate
of interest allowed by law applicable to this Agreement, the Note and any
document, agreement or instrument contemplated thereby is increased or decreased
by statute or any official governmental action subsequent to the date hereof,
the new maximum contract rate of interest allowed by law will be the Maximum
Rate applicable to this Agreement, the Note and any document, agreement or
instrument contemplated thereby from the effective date thereof forward, unless
such application is precluded by applicable law. If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to the
Buyer with respect to indebtedness evidenced by this Agreement, the Note and any
document, agreement or instrument contemplated thereby, such excess shall be
applied by the Buyer to the unpaid principal balance of any such indebtedness or
be refunded to the Company, the manner of handling such excess to be at the
Buyer’s election.

 

10

 

 

f. Restriction on Activities. Commencing as of the date first above written, and
until the earlier of (a) ninety (90) days following Issue Date (except with
respect to Section 4(f)(i) and 4(f)(ii) below), (b) payment of the Note in full
or (c) full conversion of the Note, the Company shall not, directly or
indirectly, without the Buyer’s prior written consent, which consent shall not
be unreasonably withheld: (i) change the nature of its business; or (ii) sell,
divest, acquire, change the structure of any material assets other than in the
ordinary course of business; or (iii) solicit any offers for, respond to any
unsolicited offers for, or conduct any negotiations with any other person or
entity in respect of any Variable Rate Transaction (as defined herein), whether
a transaction similar to the one contemplated hereby or any other investment.

 

g. Listing. The Company will, so long as the Buyer owns any of the Securities,
maintain the listing and trading of its Common Stock on the OTCBB or any
equivalent replacement exchange or electronic quotation system (including but
not limited to the Pink Sheets electronic quotation system) and will comply in
all respects with the Company’s reporting, filing and other obligations under
the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and
such exchanges, as applicable. The Company shall promptly provide to the Buyer
copies of any notices it receives from the OTCBB and any other exchanges or
electronic quotation systems on which the Common Stock is then traded regarding
the continued eligibility of the Common Stock for listing on such exchanges and
quotation systems.

 

h. Corporate Existence. The Company will, so long as the Buyer beneficially owns
any of the Securities, maintain its corporate existence and shall not sell all
or substantially all of the Company’s assets, except in the event of a merger or
consolidation or sale of all or substantially all of the Company’s assets, where
the surviving or successor entity in such transaction (i) assumes the Company’s
obligations hereunder and under the agreements and instruments entered into in
connection herewith and (ii) is a publicly traded corporation whose Common Stock
is listed for trading or quotation on the OTCBB, any tier of the NASDAQ Stock
Market, the New York Stock Exchange or the NYSE MKT.

 

i. No Integration. The Company shall not make any offers or sales of any
security (other than the Securities) under circumstances that would require
registration of the Securities being offered or sold hereunder under the 1933
Act or cause the offering of the Securities to be integrated with any other
offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.

 

j. Breach of Covenants. The Company acknowledges and agrees that if the Company
breaches any of the covenants set forth in this Section 4, in addition to any
other remedies available to the Buyer pursuant to this Agreement, it will be
considered an Event of Default under Section 3.4 of the Note.

 

k. Compliance with 1934 Act; Public Information Failures. Not more than four (4)
business days following the date this Agreement has been fully executed and for
so long as the Buyer beneficially owns the Note, Warrant, or any Conversion
Shares, the Company shall comply with the reporting requirements of the 1934
Act; and the Company shall continue to be subject to the reporting requirements
of the 1934 Act. During the period that the Buyer beneficially owns the Note, if
the Company shall (i) fail for any reason to satisfy the requirements of Rule
144(c)(1), including, without limitation, the failure to satisfy the current
public information requirements under Rule 144(c) or (ii) if the Company has
ever been an issuer described in Rule 144(i)(1)(i) or becomes such an issuer in
the future, and the Company shall fail to satisfy any condition set forth in
Rule 144(i)(2) (each, a “Public Information Failure”) and such failure remains
uncured by the Company for a period of 20 days or longer (“Cure Period”) then,
as partial relief for the damages to the Buyer by reason of any such delay in or
reduction of its ability to sell the Securities (which remedy shall not be
exclusive of any other remedies available pursuant to this Agreement, the Note,
or at law or in equity), the Company shall pay to the Buyer an amount in cash
equal to one-half percent (0.5%) of the Purchase Price on each of the day of a
Public Information Failure, which remains uncured by the Company for a period of
20 days or longer and on every thirtieth day (pro-rated for periods totaling
less than thirty days) thereafter until the date such Public Information Failure
is cured. The payments to which a holder shall be entitled pursuant to this
Section 4(k) are referred to herein as “Public Information Failure Payments.”
Public Information Failure Payments shall be paid on the earlier of (i) the last
day of the calendar month following the Cure Period during which such Public
Information Failure Payments are incurred and (iii) the third business day after
the event or failure giving rise to the Public Information Failure Payments is
cured. In the event the Company fails to make Public Information Failure
Payments in a timely manner, such Public Information Failure Payments shall bear
interest at the rate of 1% per month (prorated for partial months) until paid in
full.

 

11

 

 

l. Acknowledgement Regarding Buyer’s Trading Activity. The Company acknowledges
and agrees that (i) the Buyer has not been asked to agree, nor has the Buyer
agreed, to desist from purchasing long securities of the Company, or
“derivative” securities based on securities issued by the Company or to hold the
Securities for any specified term, and (ii) the Buyer shall not be deemed to
have any affiliation with or control over any arm’s length counter-party in any
“derivative” transaction. The Company acknowledges that such aforementioned
trading activities do not constitute a breach of this Agreement or any of the
documents executed in connection herewith.

 

m. Disclosure of Transactions and Other Material Information. By 9:00 a.m., New
York time, not more than four (4) business days following the date this
Agreement has been fully executed, the Company shall file a Current Report on
Form 8-K describing the terms of the transactions contemplated by this Agreement
in the form required by the 1934 Act and attaching this Agreement, the form of
Note (the “8-K Filing”). From and after the filing of the 8-K Filing with the
SEC, the Buyer shall not be in possession of any material, nonpublic information
received from the Company, any of its Subsidiaries or any of their respective
officers, directors, employees or agents that is not disclosed in the 8-K
Filing. In addition, effective upon the filing of the 8-K Filing, the Company
acknowledges and agrees that any and all confidentiality or similar obligations
under any agreement, whether written or oral, between the Company, any of its
Subsidiaries or any of their respective officers, directors, affiliates,
employees or agents, on the one hand, and the Buyer or any of its affiliates, on
the other hand, shall terminate.

 

n. Legal Counsel Opinions. Upon the request of the Buyer from to time to time,
the Company shall be responsible (at its cost) for promptly supplying to the
Company’s transfer agent and the Buyer a customary legal opinion letter of its
counsel (the “Legal Counsel Opinion”) to the effect that the resale of the
Conversion Shares by the Buyer or its affiliates, successors and assigns is
exempt from the registration requirements of the 1933 Act pursuant to Rule 144
(provided the requirements of Rule 144 are satisfied and provided the Conversion
Shares are not then registered under the 1933 Act for resale pursuant to an
effective registration statement). Should the Company’s legal counsel fail for
any reason to issue the Legal Counsel Opinion, the Buyer may (at the Company’s
cost) secure another legal counsel to issue the Legal Counsel Opinion, and the
Company will instruct its transfer agent to accept such opinion.

 

o. Piggyback Registration Rights. The Company hereby grants to the Buyer the
registration rights set forth on Exhibit B hereto.

 

p. Most Favored Nation. While the Note or any principal amount, interest or fees
or expenses due thereunder remain outstanding and unpaid, the Company shall not
enter into any public or private offering of its securities (including
securities convertible into shares of Common Stock) with any individual or
entity (an “Other Investor”) that has the effect of establishing rights or
otherwise benefiting such Other Investor in a manner more favorable in any
material respect to such Other Investor than the rights and benefits established
in favor of the Buyer by this Agreement or the Note unless, in any such case,
the Buyer has been provided with such rights and benefits pursuant to a
definitive written agreement or agreements between the Company and the Buyer.
From the date hereof and for so long as a Buyer holds any Securities, in the
event that the Company issues or sells any Common Stock or Common Stock
Equivalents or issues, any other securities convertible into, exercisable for,
or otherwise entitle any person or entity the right to acquire, shares of Common
Stock, if the Buyer then holding outstanding Securities, reasonably believes
that any of the terms and conditions appurtenant to such issuance or sale are
more favorable to such investors than are the terms and conditions granted to
the Buyer hereunder, then such additional or more favorable term, at Buyer’s
option, shall become a part of the transaction documents with the Buyer. The
Company shall provide the Buyer with notice of any such issuance or sale not
later than ten (10) Trading Days before such issuance or sale.

 

q. Subsequent Variable Rate Transactions. From the date hereof until ninety (90)
days following, the Company shall be prohibited from effecting or entering into
an agreement involving a Variable Rate Transaction. “Variable Rate Transaction”
means a transaction in which the Company (i) issues or sells any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive, additional shares of Common Stock either (A) at a
conversion price, exercise price or exchange rate or other price that is based
upon, and/or varies with, the trading prices of or quotations for the shares of
Common Stock at any time after the initial issuance of such debt or equity
securities or (B) with a conversion, exercise or exchange price that is subject
to being reset at some future date after the initial issuance of such debt or
equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock or (ii) enters into any agreement, including, but not limited
to, an equity line of credit, whereby the Company may issue securities at a
future determined price. Any Purchaser shall be entitled to obtain injunctive
relief against the Company to preclude any such issuance, which remedy shall be
in addition to any right to collect damages. If the Company effectuates or
enters into any Variable Rate Transaction after the ninety (90) calendar day
moratorium as described herein, then such Variable Rate Transaction must be for
an investment amount of $250,000.00 or more to the Company.

 

12

 

 

5. Transfer Agent Instructions. The Company shall issue irrevocable instructions
to the Company’s transfer agent to issue certificates, registered in the name of
the Buyer or its nominee, upon conversion of the Note and/or exercise of the
Warrant, the Conversion Shares, in such amounts as specified from time to time
by the Buyer to the Company in accordance with the terms thereof (the
“Irrevocable Transfer Agent Instructions”). In the event that the Company
proposes to replace its transfer agent, the Company shall provide, prior to the
effective date of such replacement, a fully executed Irrevocable Transfer Agent
Instructions in a form as initially delivered pursuant to this Agreement
(including but not limited to the provision to irrevocably reserved shares of
Common Stock in the Reserved Amount (as defined in the Note)) signed by the
successor transfer agent to the Company and the Company. Prior to registration
of the Conversion Shares under the 1933 Act or the date on which the Conversion
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of Securities as of a particular date that can then be immediately sold, all
such certificates shall bear the restrictive legend specified in Section 2(g) of
this Agreement. The Company warrants that: (i) no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5 will be
given by the Company to its transfer agent and that the Securities, subject to
applicable securities laws shall otherwise be freely transferable on the books
and records of the Company as and to the extent provided in this Agreement and
the Note; (ii) it will not direct its transfer agent not to transfer or delay,
impair, and/or hinder its transfer agent in transferring (or
issuing)(electronically or in certificated form) any certificate for Securities
to be issued to the Buyer upon conversion of or otherwise pursuant to the Note
as and when required by the Note and this Agreement; (iii) it will not fail to
remove (or directs its transfer agent not to remove or impairs, delays, and/or
hinders its transfer agent from removing) any restrictive legend (or to withdraw
any stop transfer instructions in respect thereof) on any certificate for any
Securities issued to the Buyer upon conversion of or otherwise pursuant to the
Note as and when required by the Note and this Agreement and (iv) it will
provide any required corporate resolutions and issuance approvals to its
transfer agent within three (3) business days of each conversion of the Note.
Nothing in this Section shall affect in any way the Buyer’s obligations and
agreement set forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon re-sale of the Securities. If the
Buyer provides the Company, at the cost of the Company, with (i) an opinion of
counsel in form, substance and scope customary for opinions in comparable
transactions, to the effect that a public sale or transfer of such Securities
may be made without registration under the 1933 Act and such sale or transfer is
effected or (ii) the Buyer provides reasonable assurances that the Securities
can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in
the case of the Securities, promptly instruct its transfer agent to issue one or
more certificates, free from restrictive legend, in such name and in such
denominations as specified by the Buyer. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Buyer, by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 may be inadequate and agrees, in the event of a
breach or threatened breach by the Company of the provisions of this Section,
that the Buyer shall be entitled, in addition to all other available remedies,
to an injunction restraining any breach and requiring immediate transfer,
without the necessity of showing economic loss and without any bond or other
security being required.

 

6. Conditions to the Company’s Obligation to Sell. The obligation of the Company
hereunder to issue and sell the Note to the Buyer at the Closing is subject to
the satisfaction, at or before the Closing Date, of each of the following
conditions thereto, 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. The Buyer shall have executed this Agreement and delivered the same to the
Company.

 

13

 

 

b. The Buyer shall have delivered the Purchase Price in accordance with Section
1(b) above.

 

c. The representations and warranties of the Buyer 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 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 at or prior to the Closing Date.

 

d. No litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.

 

7. Conditions to The Buyer’s Obligation to Purchase. The obligation of the Buyer
hereunder to purchase the Note, on the Closing Date, is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Buyer’s sole benefit and
may be waived by the Buyer at any time in its sole discretion:

 

a. The Company shall have executed this Agreement and delivered the same to the
Buyer.

 

b. The Company shall have delivered to the Buyer the duly executed Note in such
denominations as the Buyer shall request and in accordance with Section 1(b)
above.

 

c. The Company shall have delivered to the Buyer the Warrant.

 

d. The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to the Buyer, shall have been delivered to and acknowledged in
writing by the Company’s Transfer Agent.

 

e. The representations and warranties of the Company shall be true and correct
in all material respects as of the date when made and as of Closing Date, as
though made at such 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.

 

f. No litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.

 

g. No event shall have occurred which could reasonably be expected to have a
Material Adverse Effect on the Company including but not limited to a change in
the 1934 Act reporting status of the Company or the failure of the Company to be
timely in its 1934 Act reporting obligations.

 

h. Trading in the Common Stock on the OTCBB shall not have been suspended by the
SEC, FINRA or the OTCBB.

 

i. The Company shall have delivered to the Buyer not more than three (3)
business days following receipt of the Purchase Price funds (i) a certificate
evidencing the formation and good standing of the Company and each of its
Subsidiaries in such entity’s jurisdiction of formation issued by the Secretary
of State (or comparable office) of such jurisdiction, as of a date within ten
(10) days of the Closing Date and (ii) resolutions adopted by the Company’s
Board of Directors at a duly called meeting or by unanimous written consent
authorizing this Agreement and all other documents, instruments and transactions
contemplated hereby.

 

14

 

 

8. Governing Law; Miscellaneous.

 

a. Governing Law; Venue. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada without regard to principles of
conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement, the Note, or any
other agreement, certificate, instrument or document contemplated hereby shall
be brought only in the state courts of New York or in the federal courts located
in the state and county of New York. The parties to this Agreement hereby
irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTIONS CONTEMPLATED HEREBY. The
prevailing party shall be entitled to recover from the other party its
reasonable attorney’s fees and costs. Each party hereby irrevocably waives
personal service of process and consents to process being served in any suit,
action or proceeding in connection with this Agreement, the Note, or any other
agreement, certificate, instrument or document contemplated hereby or thereby by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law.

 

b. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. A facsimile or .pdf
signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an
original, not a facsimile or .pdf signature. Delivery of a counterpart signature
hereto by facsimile or email/.pdf transmission shall be deemed validly delivery
thereof.

 

c. Construction; Headings. This Agreement shall be deemed to be jointly drafted
by the Company and the Buyer and shall not be construed against any person as
the drafter hereof. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.

 

d. Severability. In the event that any provision of this Agreement, the Note, or
any other agreement or instrument delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Agreement,
the Note, or any other agreement, certificate, instrument or document
contemplated hereby or thereby.

 

e. Entire Agreement; Amendments. This Agreement, the Note, 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 the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement or any agreement or instrument contemplated hereby may be waived
or amended other than by an instrument in writing signed by the Buyer.

 

f. Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, e-mail or facsimile, addressed as set
forth below or to such other address as such party shall have specified most
recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by e-mail or facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:

 

15

 

 

If to the Company, to:

 

FOOTHILLS EXPLORATION, INC.

10940 Wilshire Blvd., 23rd Floor

Los Angeles, CA 90024

Attention: B. P. Allaire

e-mail: bpallaire@foothillspetro.com

 

With a copy by e-mail only to (which copy shall not constitute notice):

 

CHARLES ROBERT COX

Attorney at Law

1432 S. Carson Avenue

Tulsa, Oklahoma 74119

charlesrobertcox@gmail.com

 

If to the Buyer:

 

FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC

1040 First Avenue, Suite 190

New York, NY 10022

Attn: Eli Fireman

e-mail: eli@firstfirecapital.com

 

With a copy by e-mail only to (which copy shall not constitute notice):

 

LEGAL & COMPLIANCE, LLC

330 Clematis Street, Suite 217

West Palm Beach, FL 33401

Attn: Chad Friend, Esq., LL.M.

e-mail: CFriend@LegalandCompliance.com

 

g. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns. Neither the Company nor
the Buyer shall assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other. Notwithstanding the foregoing,
subject to Section 2(f), the Buyer may assign its rights hereunder to any person
that purchases Securities in a private transaction from the Buyer or to any of
its “affiliates,” as that term is defined under the 1934 Act, without the
consent of the Company.

 

h. 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. The representations and warranties of the Company and the
agreements and covenants set forth in this Agreement shall survive the closing
hereunder notwithstanding any due diligence investigation conducted by or on
behalf of the Buyer. The Company agrees to indemnify and hold harmless the Buyer
and all their officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach by the Company
of any of its representations, warranties and covenants set forth in this
Agreement or any of its covenants and obligations under this Agreement,
including advancement of expenses as they are incurred.

 

j. Publicity. The Company, and the Buyer shall have the right to review a
reasonable period of time before issuance of any press releases, SEC, OTCBB or
FINRA filings, or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of the Buyer, to make any press release or SEC, OTCBB
(or other applicable trading market) or FINRA filings with respect to such
transactions as is required by applicable law and regulations (although the
Buyer shall be consulted by the Company in connection with any such press
release prior to its release and shall be provided with a copy thereof and be
given an opportunity to comment thereon).

 

16

 

 

k. Expense Reimbursement; Further Assurances. At the Closing to occur as of the
Closing Date, the Company shall pay on behalf of the Buyer or reimburse the
Buyer for its legal fees and expenses incurred in connection with this Agreement
up to the sum of $5,000.00, pursuant to the disbursement authorization signed by
the Company of even date. 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. 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.

 

m. Indemnification. In consideration of the Buyer’s execution and delivery of
this Agreement and acquiring the Securities hereunder, and in addition to all of
the Company’s other obligations under this Agreement or the Note, the Company
shall defend, protect, indemnify and hold harmless the Buyer and its
stockholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing persons’ agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
“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 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 any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, the Note or any other agreement, certificate,
instrument or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in this Agreement,
the Note or any other agreement, certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought
or made against such Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company) and arising out of or
resulting from (i) the execution, delivery, performance or enforcement of this
Agreement, the Note or any other agreement, certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Securities, or (iii) the status of the Buyer or holder of the Securities
as an investor in the Company pursuant to the transactions contemplated by this
Agreement. 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 that is
permissible under applicable law.

 

n. Remedies. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Agreement or the Note will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement or the
Note, that the Buyer shall be entitled, in addition to all other available
remedies at law or in equity, and in addition to the penalties assessable
herein, to an injunction or injunctions restraining, preventing or curing any
breach of this Agreement or the Note and to enforce specifically the terms and
provisions hereof, without the necessity of showing economic loss and without
any bond or other security being required.

 

o. Payment Set Aside. To the extent that the Company makes a payment or payments
to the Buyer hereunder or pursuant to the Note, or the Buyer enforces or
exercises its rights hereunder or thereunder, and such payment or payments or
the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person or entity under
any law (including, without limitation, any bankruptcy law, foreign, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.

 

p. Failure or Indulgence Not Waiver. No failure or delay on the part of the
Buyer in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privileges. All rights and remedies of the Buyer existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

 

[Signature Page Follows]

 

17

 

 

IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this
Agreement to be duly executed as of the date first above written.

 

FOOTHILLS EXPLORATION, INC.

 

By:     Name:  B. P. ALLAIRE   Title: CHIEF EXECUTIVE OFFICER  

 

FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC

 

By: FirstFire Capital Management LLC, its Manager

 

By:       ELI FIREMAN  

 

SUBSCRIPTION AMOUNT:

 

Principal Amount of Note: $705,882.35.00

Actual Amount of Purchase Price of Note: $600,000.00*

 

*The purchase price of $600,000.00 shall be paid within one (1) business day
after the full execution of the Note and all related transaction documents.

 

18

 

 

EXHIBIT A

 

FORM OF NOTE

 

[attached hereto]

 

19

 

 

EXHIBIT B

 

REGISTRATION RIGHTS

 

All of the Conversion Shares and shares into which the Warrant is exercisable
into will be deemed “Registrable Securities” subject to the provisions of this
Exhibit B. All capitalized terms used but not defined in this Exhibit B shall
have the meanings ascribed to such terms in the Securities Purchase Agreement to
which this Exhibit is attached.

 

1. Piggy-Back Registration.

 

1.1 Piggy-Back Rights. If at any time on or after the date of the Closing the
Company proposes to file any Registration Statement under the 1933 Act (a
“Registration Statement”) with respect to any offering of equity securities, or
securities or other obligations exercisable or exchangeable for, or convertible
into, equity securities, by the Company for its own account or for shareholders
of the Company for their account (or by the Company and by shareholders of the
Company), other than a Registration Statement (i) filed in connection with any
employee stock option or other benefit plan on Form S-8, (ii) for a dividend
reinvestment plan or (iii) in connection with a merger or acquisition, then the
Company shall (x) give written notice of such proposed filing to the holders of
Registrable Securities appearing on the books and records of the Company as such
a holder as soon as practicable but in no event less than ten (10) days before
the anticipated filing date of the Registration Statement, which notice shall
describe the amount and type of securities to be included in such Registration
Statement, the intended method(s) of distribution, and the name of the proposed
managing underwriter or underwriters, if any, of the offering, and (y) offer to
the holders of Registrable Securities in such notice the opportunity to register
the sale of such number of Registrable Securities as such holders may request in
writing within five (5) days following receipt of such notice (a “Piggy-Back
Registration”). The Company shall cause such Registrable Securities to be
included in such registration and shall cause the managing underwriter or
underwriters of a proposed underwritten offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration on the same
terms and conditions as any similar securities of the Company and to permit the
sale or other disposition of such Registrable Securities in accordance with the
intended method(s) of distribution thereof. All holders of Registrable
Securities proposing to distribute their securities through a Piggy-Back
Registration that involves an underwriter or underwriters shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such Piggy-Back Registration.

 

1.2 Withdrawal. Any holder of Registrable Securities may elect to withdraw such
holder’s request for inclusion of Registrable Securities in any Piggy-Back
Registration by giving written notice to the Company of such request to withdraw
prior to the effectiveness of the Registration Statement. The Company (whether
on its own determination or as the result of a withdrawal by persons making a
demand pursuant to written contractual obligations) may withdraw a Registration
Statement at any time prior to the effectiveness of such Registration Statement.
Notwithstanding any such withdrawal, the Company shall pay all expenses incurred
by the holders of Registrable Securities in connection with such Piggy-Back
Registration as provided in Section 1.5 below.

 

1.3 The Company shall notify the holders of Registrable Securities at any time
when a prospectus relating to such holder’s Registrable Securities is required
to be delivered under the 1933 Act, upon discovery that, or upon the happening
of any event as a result of which, the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing. At the request of such holder, the Company shall also prepare, file
and furnish to such holder a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of the Registrable Securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing. The holders of
Registrable Securities shall not to offer or sell any Registrable Securities
covered by the Registration Statement after receipt of such notification until
the receipt of such supplement or amendment.

 

1.4 The Company may request a holder of Registrable Securities to furnish the
Company such information with respect to such holder and such holder’s proposed
distribution of the Registrable Securities pursuant to the Registration
Statement as the Company may from time to time reasonably request in writing or
as shall be required by law or by the SEC in connection therewith, and such
holders shall furnish the Company with such information.

 

20

 

 

1.5 All fees and expenses incident to the performance of or compliance with this
Exhibit B by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses of the Company’s counsel and independent registered public
accountants) (A) with respect to filings made with the SEC, (B) with respect to
filings required to be made with any trading market on which the Common Stock is
then listed for trading, (C) in compliance with applicable state securities or
Blue Sky laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities) and (D)
with respect to any filing that may be required to be made by any broker through
which a holder of Registrable Securities intends to make sales of Registrable
Securities with the FINRA, (ii) printing expenses, (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company,
(v) 1933 Act liability insurance, if the Company so desires such insurance, (vi)
fees and expenses of all other persons or entities retained by the Company in
connection with the consummation of the transactions contemplated by this
Exhibit B and (vii) reasonable fees and disbursements of a single special
counsel for the holders of Registrable Securities (selected by holders of the
majority of the Registrable Securities requesting such registration). In
addition, the Company shall be responsible for all of its internal expenses
incurred in connection with the consummation of the transactions contemplated by
this Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder. In no event shall the Company be responsible for any broker or
similar commissions of any holder of Registrable Securities.

 

1.6 The Company and its successors and assigns shall indemnify and hold harmless
the Buyer, each holder of Registrable Securities, the officers, directors,
members, partners, agents and employees (and any other individuals or entities
with a functionally equivalent role of a person holding such titles,
notwithstanding a lack of such title or any other title) of each of them, each
individual or entity who controls the Buyer or any such holder of Registrable
Securities (within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act) and the officers, directors, members, stockholders, partners,
agents and employees (and any other individuals or entities with a functionally
equivalent role of a person holding such titles, notwithstanding a lack of such
title or any other title) of each such controlling individual or entity (each,
an “Indemnified Party”), to the fullest extent permitted by applicable law, from
and against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys’ fees) and expenses (collectively,
“Losses”), as incurred, arising out of or relating to (1) any untrue or alleged
untrue statement of a material fact contained in a Registration Statement, any
related prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any such prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading or (2) any violation or alleged violation by the Company of the
1933 Act, the 1934 Act or any state securities law, or any rule or regulation
thereunder, in connection with the performance of its obligations under this
Exhibit B, except to the extent, but only to the extent, that (i) such untrue
statements or omissions are based upon information regarding the Buyer or such
holder of Registrable Securities furnished to the Company by such party for use
therein. The Company shall notify the Buyer and each holder of Registrable
Securities promptly of the institution, threat or assertion of any proceeding
arising from or in connection with the transactions contemplated by this Exhibit
B of which the Company is aware.

 

1.7 If the indemnification under Section 1.6 is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless for any Losses, then
the Company shall contribute to the amount paid or payable by such Indemnified
Party, in such proportion as is appropriate to reflect the relative fault of the
Company and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of the Company and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, the Company or the Indemnified Party, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include any reasonable
attorneys’ or other fees or expenses incurred by such party in connection with
any proceeding to the extent such party would have been indemnified for such
fees or expenses if the indemnification provided for in Section 1.6 was
available to such party in accordance with its terms. It is agreed that it would
not be just and equitable if contribution pursuant to this Section 1.7 were
determined by pro rata allocation or by any other method of allocation that does
not take into account the equitable considerations referred to in the
immediately preceding sentence. Notwithstanding the provisions of this Section
1.7, neither the Buyer nor any holder of Registrable Securities shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds actually received by such party from the sale of all of
their Registrable Securities pursuant to such Registration Statement or related
prospectus exceeds the amount of any damages that such party has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.

 

[End of Exhibit B]

 

21

 

 

Schedule 3(a)

 

SUBSIDIARIES OF FOOTHILLS EXPLORATION, INC.

 

Foothills Petroleum, Inc., a Nevada corporation*

 

SUBSIDIARIES OF FOOTHILLS PETROLEUM, INC.

 

Foothills Petroleum Operating, Inc., a Nevada corporation

Foothills Exploration Operating, Inc., a Nevada corporation*

Foothills Exploration LLC, a Wyoming limited liability company

 

SUBSIDIARIES OF FOOTHILLS EXPLORATION OPERATING, INC.

 

Clear Elite Holdings Limited, a British Virgin Islands limited liability
company*

Prominent Sino Holdings Limited, a British Virgin Islands limited liability
company

Value Train Investments Limited, a British Virgin Islands limited liability
company

Tiger Energy Partners International, LLC, a Nevada limited liability company –
25% total equity ownership

 

SUBSIDIARIES OF CLEAR ELITE HOLDINGS LIMITED

 

Golden Giants Limited, a British Virgin Islands limited liability company*

 

SUBSIDIARIES OF GOLDEN GIANTS LIMITED

 

NTE-Utah, LLC, a Delaware limited liability company*

Tiger Energy Partners International, LLC, a Nevada limited liability company –
75% total equity ownership

 

SUBSIDIARIES OF NTE-UTAH, LLC

 

Tiger Energy Operating, LLC, a Nevada limited liability company*

 

SUBSIDIARIES OF TIGER ENERGY OPERATING, LLC

 

Tiger Energy Mineral Leasing, LLC, a Nevada limited liability company

 

* Indicates that it is a parent of one or more entities.

 

22

 

 

Schedule 3(g)

 

On September 29, 2017, Foothills Exploration, Inc. (the “Company”), issued to an
unaffiliated investor a promissory note (“Note”) and three tranches of warrants
for an aggregate consideration of $250,000. The Note accrues no interest if paid
when due, and is due and payable on January 2, 2018 (“Maturity”). If principal
is not paid on or before Maturity, interest will accrue at the rate of 15% per
year until paid. For a more complete disclosure, please see 8-K Report filed
with the SEC on October 5, 2017.

 

On November 1, 2018, Foothills Exploration, Inc. (the “Company”), entered into a
loan transaction with Labrys Fund, LP (“Labrys”), which funded and closed on
November 5, 2018. The Company issued the lender a convertible promissory Labrys
Note (“Labrys Note”) dated November 1, 2018, in the principal amount of $380,000
with an original issue discount of 10% and received proceeds of $342,000, before
giving effect to certain transactional costs including legal fees on November 5,
2018. As part of this transaction the Company also issued (i) 650,000 shares of
the Company’s restricted common stock and two tranches of warrants : (ii)
tranche 1 are warrants having a 5-year term to purchase 687,500 shares of the
Company’s restricted common stock at an exercise price of $0.20 per share with
cashless exercise option and (ii) tranche 2 are warrants having a 5-year term to
purchase 2,062,500 shares of the Company’s restricted common stock at an
exercise price of $0.20 per share with cashless exercise option. Tranche 2
warrants may be redeemed by the Company for $20,000 (“Call Payment”) beginning
on the date of issuance, November 1, 2018, and ending on the date which is 180
calendar days following the issuance date (the “Call”). If Company exercises the
Call, then the Company shall make the Call Payment to the Labrys within five
business days of the date that the Company exercises the Call. If the Call
Payment is not made within the required time frame, then the Company will lose
its right to exercise the Call for the tranche 2 warrants. The Labrys Note
accrues interest at 12% per year, and is due and payable on May 1, 2019
(“Maturity Date”). The Company may prepay the Labrys Note without prepayment
penalty if prepaid during the first 180 days following issuance date. No
prepayment is permitted after the initial 180 days from issuance. The warrants
are subject to adjustment in certain events such as forward or reverse stock
splits or if subsequent financings are at terms that are more favorable to
persons in subsequent issuances of securities. The Labrys Note agreements give
the lender the right to convert the loan amounts due into common stock at a
conversion price equal to the lesser of (i) 50% multiplied by the lowest trading
price during the previous twenty (20) trading day period ending on the latest
complete trading day prior to the date of this Labrys Note and (ii) the
alternate conversion price (subject to equitable adjustments for stock splits,
stock dividends or rights offerings by the Company relating to the Company’s
securities or the securities of any subsidiary of the Company, combinations,
recapitalization, reclassifications, extraordinary distributions and similar
events). The “Alternate Conversion Price” means 50% multiplied by the Market
Price. “Market Price” means the lowest trading price for the common stock during
the twenty (20) trading day period ending on the latest complete trading day
prior to the conversion date. Should Labrys exercise its conversion rights upon
terms provided within the Labrys Note, the interests of our share, Labrys may be
materially diluted and a change in control could occur. Net proceeds obtained in
this transaction will be used to retire certain outstanding loan obligation
currently due and payable, and for general corporate and working capital
purposes. No broker-dealer or placement agent was retained or involved in this
transaction. The transaction documents contain additional terms and provisions,
representations and warranties, including further provisions covering
conversions of debt, remedies on default, venue, and governing law. For a more
complete disclosure of the Labrys Note, please see 8-K Report filed with the SEC
on November 9, 2018.

 

On December 6, 2018, Foothills Exploration, Inc. (the “Company”), entered into a
convertible loan transaction with Crown Bridge Partners, LLC (“CBP”) in the
principal amount of $136,500 (the “CBP Note”). The CBP Note is divided into
three tranches, the first tranche of which, in the face amount of $45,500,
funded and closed on December 7, 2018, before giving effect to certain
transactional costs including legal fees yielding a net of $41,500. The CBP Note
carries an original issue discount of $12,000.00 (the “OID”) prorated to each
tranche, to cover the CBP’s accounting fees, due diligence fees, monitoring,
and/or other transactional costs incurred in connection with the negotiation,
purchase and sale of the CBP Note, which is included in the principal balance of
this CBP Note. For each tranche funded under the CBP Note, the Company agreed to
issue warrants having a 5-year term to purchase up to 227,500 shares of the
Company’s restricted common stock at an exercise price of $0.20 per share with a
cashless exercise option. The warrants are subject to adjustment in certain
events such as forward or reverse stock splits or if subsequent financings are
at terms that are more favorable to persons in subsequent issuances of
securities. The CBP Note agreements give the CBP, after the 180th calendar day
after the issue date, the right to convert all or any part of the outstanding
and unpaid principal amount and accrued and unpaid interest of this CBP Note due
into fully paid and non-assessable shares of Common Stock at the Conversion
Price. The “Conversion Price” shall be the Variable Conversion Price (subject to
equitable adjustments for stock splits, stock dividends or rights offerings by
the Company relating to the Company’s securities or the securities of any
subsidiary of the Company, combinations, recapitalization, reclassifications,
extraordinary distributions and similar events). The “Variable Conversion Price”
shall mean 50% multiplied by the Market Price. “Market Price” means the lowest
one (1) Trading Price (as defined below) for the Common Stock during the twenty
(20) Trading Day period ending on the last complete Trading Day prior to the
Conversion Date. “Trading Price” means, for any security as of any date, the
lesser of the (i) lowest traded price and (ii) lowest closing bid price on the
OTCQB, or applicable trading market (the “OTCQB”) as reported by a reliable
reporting service (“Reporting Service”) designated by the CBP (i.e. Bloomberg)
or, if the OTCQB is not the principal trading market for such security, on the
principal securities exchange or trading market where such security is listed or
traded or, if the lowest intraday trading price of such security is not
available in any of the foregoing manners, the lowest intraday price of any
market makers for such security that are quoted on the OTC Markets. If the
Trading Price cannot be calculated for such security on such date in the manner
provided above, the Trading Price shall be the fair market value as mutually
determined by the Company and the CBPs of a majority in interest of the CBP
Notes being converted for which the calculation of the Trading Price is required
in order to determine the Conversion Price of such CBP Notes. “Trading Day”
shall mean any day on which the Common Stock is tradable for any period on the
OTCQB, or on the principal securities exchange or other securities market on
which the Common Stock is then being traded.

 

23

 

 

Each tranche of the CBP Note funded accrues interest at 12% per year. The
maturity date for each tranche funded shall be twelve (12) months from the
effective date of each payment (each a “Maturity Date”), and is the date upon
which the principal sum of each respective tranche, as well as any accrued and
unpaid interest and other fees relating to that respective tranche, shall be due
and payable. This Company may prepay any amount outstanding under each tranche
of this CBP Note, during the initial 60 calendar day period after the issuance
of the respective tranche of this CBP Note, by making a payment to the CBP of an
amount in cash equal to 125% multiplied the amount that the Company is prepaying
Notwithstanding anything to the contrary contained in this CBP Note, the Company
may prepay any amount outstanding under each tranche of this CBP Note, during
the 61st through 120 calendar day period after the issuance of the respective
tranche of this CBP Note, by making a payment to the CBP of an amount in cash
equal to 135% multiplied the amount that the Company is prepaying.
Notwithstanding anything to the contrary contained in this CBP Note, the Company
may prepay any amount outstanding under each tranche of this CBP Note, during
the 121st through 180 calendar day period after the issuance of the respective
tranche of this CBP Note, by making a payment to the CBP of an amount in cash
equal to 145% multiplied the amount that the Company is prepaying.

 

The Company may not prepay any amount outstanding under each tranche of this CBP
Note after the 180th calendar day after the issuance of the respective tranche
of this CBP Note. Any amount of principal or interest due pursuant to this CBP
Note, which is not paid by the Maturity Date, shall bear interest at the rate of
the lesser of (i) fifteen percent (15%) per annum or (ii) the maximum amount
permitted by law from the due date thereof until the same is paid (“Default
Interest”). Interest shall commence accruing on the date that each tranche of
the CBP Note is fully paid and shall be computed on the basis of a 365-day year
and the actual number of days elapsed. Net proceeds obtained in this transaction
will be used for general corporate and working capital purposes. No assurance
can be given that any other tranche of the CBP Note will be funded or that any
amount due there under will be prepaid. No broker-dealer or placement agent was
retained or involved in this transaction. For a more complete disclosure of the
CBP Note, please see 8-K Report filed with the SEC on December 11, 2018.

 

On December 19, 2018, Foothills Exploration, Inc. (the “Company”), entered into
a convertible loan transaction with Jefferson Street Capital, LLC (“JSC”) in the
principal amount of $58,300 (the “JSC Note”), which funded and closed on
December 21, 2018, before giving effect to certain transactional costs including
legal fees yielding a net of $53,000. The JSC Note carries an original issue
discount of $5,300.00 (the “OID”), to cover the JSC’s accounting fees, due
diligence fees, monitoring, and/or other transactional costs incurred in
connection with the negotiation, purchase and sale of the JSC Note, which is
included in the principal balance of this JSC Note. The JSC Note agreements give
the JSC, after the 180th calendar day after the issue date, the right to convert
all or any part of the outstanding and unpaid principal amount and accrued and
unpaid interest of this JSC Note due into fully paid and non-assessable shares
of Common Stock at the Conversion Price. Provided that no Event of Default has
occurred, the conversion price (the “Conversion Price”) shall equal the Variable
Conversion Price (as defined herein) (subject to equitable adjustments for stock
splits, stock dividends or rights offerings by the Company relating to the
Company’s securities or the securities of any subsidiary of the Company,
combinations, recapitalization, reclassifications, extraordinary distributions
and similar events). The “Variable Conversion Price” shall equal the lesser of
(i) 60% multiplied by the lowest Trading Price (as defined below) during the
previous twenty-five (25) Trading Days (as defined below) before the Issue Date
of this JSC Note (representing a discount rate of 40%) or (ii) 60% multiplied by
the Market Price (as defined herein) (representing a discount rate of 40%).
“Market Price” means the lowest Trading Price for the Common Stock during the
twenty-five (25) Trading Day period ending on the latest complete Trading Day
prior to the Conversion Date. “Trading Price” means, for any security as of any
date, the lesser of: (a) the lowest trade price on the Over-the-Counter Bulletin
Board (the “OTCBB”), OTCQB or applicable trading market as reported by a
reliable reporting service (“Reporting Service”) designated by the JSC or, if
the OTCBB is not the principal trading market for such security, the trading
price of such security on the principal securities exchange or trading market
where such security is listed or traded or, if no trading price of such security
is available in any of the foregoing manners, the average of the trading prices
of any market makers for such security that are listed in the “pink sheets” by
the National Quotation Bureau, Inc., or (b) the closing bid price on the OTCBB,
OTCQB or applicable trading market as reported by a Reporting Service designated
by the JSC or, if the OTCBB is not the principal trading market for such
security, the closing bid price of such security on the principal securities
exchange or trading market where such security is listed or traded or, if no
closing bid price of such security is available in any of the foregoing manners,
the average of the closing bid prices of any market makers for such security
that are listed in the “pink sheets” by the National Quotation Bureau, Inc. To
the extent the Conversion Price of the Company’s Common Stock closes below the
par value per share, the Company will take all steps necessary to solicit the
consent of the stockholders to reduce the par value to the lowest value possible
under law. The Company agrees to honor all conversions submitted pending this
adjustment.

 

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The JSC Note accrues interest at 10% per year. The maturity date for the JSC
Note is September 19, 2019 (“Maturity Date”), and is the date upon which the
principal sum, as well as any accrued and unpaid interest, shall be due and
payable. This Company may prepay any amount outstanding under this JSC Note,
during the initial 60 calendar day period after the issuance of this JSC Note,
by making a payment to the JSC of an amount in cash equal to 125% multiplied the
amount that the Company is prepaying Notwithstanding anything to the contrary
contained in this JSC Note, the Company may prepay any amount outstanding under
each tranche of this JSC Note, during the 61st through 120 calendar day period
after the issuance of the respective tranche of this JSC Note, by making a
payment to the JSC of an amount in cash equal to 135% multiplied the amount that
the Company is prepaying. Notwithstanding anything to the contrary contained in
this JSC Note, the Company may prepay any amount outstanding under each tranche
of this JSC Note, during the 121st through 180 calendar day period after the
issuance of the respective tranche of this JSC Note, by making a payment to the
JSC of an amount in cash equal to 140% multiplied the amount that the Company is
prepaying. The Company may not prepay any amount outstanding under each tranche
of this JSC Note after the 180th calendar day after the issuance of the
respective tranche of this JSC Note. Any amount of principal or interest due
pursuant to this JSC Note, which is not paid by the Maturity Date, shall bear
interest at the rate of the lesser of (i) eighteen percent (18%) per annum or
(ii) the maximum amount permitted by law from the due date thereof until the
same is paid (“Default Interest”). Interest shall commence accruing on the date
that each tranche of the JSC Note is fully paid and shall be computed on the
basis of a 360-day year and the actual number of days elapsed. Net proceeds
obtained in this transaction will be used for general corporate and working
capital purposes. No broker-dealer or placement agent was retained or involved
in this transaction. For a more complete disclosure of the JSC Note, please see
8-K Report filed with the SEC on December 31, 2018.

 

25

 

 

Schedule 3(j)

 

Litigation

 

Utah Wells

 

Graco Fishing & Rental Tools, Inc. vs. Tiger Energy Operating LLC (Case No.
160800005 8th Judicial District Court, Duchesne County, State of Utah)

 

Plaintiff in this case sought collection of unpaid debt incurred by TEO for
services rendered in connection with its workover of wells in Duchesne County,
Utah. On June 1, 2016, a default judgment of $159,965 was obtained against TEO
by Plaintiff. Graco filed a writ of execution against the A Rust 2, Dye-Hall
2-21 A1, Wilkins 1-24 A5 and Rust 3-22A-4 wells located in Duchesne County
executing on properties not owned by us. A Motion to Set Aside the sheriff’s
sale of these properties was filed with the court based on the fact that TEO was
not the owner of these properties. A hearing for this matter was held on May 1,
2017, in Duchesne County, Utah, at which time a Company representative was
present to comply with the court’s order to produce documents. Prior to the
hearing, TEO made an initial settlement offer, which was eventually rejected by
Graco. A writ of execution was issued to seize the property subject of
litigation on March 8, 2018. Graco had scheduled certain foreclosure sales of
TEO’s interests in various oil and gas wells to take place on May 3, 2018 (the
“Sales”). On April 27, 2018, the parties reached a settlement and release
agreement whereby TEO agreed to make five (5) payments totaling $163,964.59 to
Graco. The first payment due on May 9, 2018, has already been made to the
judgment holder. The second payment of $32,792.92 is due on July 9, 2018; the
third payment of $32,792.92 is due on September 9, 2018; the fourth payment of
$32,792.92 is due on November 9, 2018; and fifth and final payment of $32,792.92
is due on January 9, 2019. If any of the above payments are not made when due,
Grace will have the right to immediately execute the Sales. Graco will maintain
and apply liens and notices of its judgment until the total payment has been
paid in full by TEO. TEO shall be provided with a 10-day period within which to
cure any default under the settlement agreement, other than making the first
payment described above. TEO made its second payment of $32,793 on July 19,
2018, within the 10-day cure period provided in the settlement agreement. TEO
made its third payment of $32,793 on September 11, 2018, within the 10-day cure
period provided in the settlement agreement. TEO also made its fourth payment of
$32,793 on November 15, 2018.

 

Conquest Well Servicing, LLC vs. Foothills Exploration Operating, Inc. (Case No.
179800421 8th Judicial District Court in and for Uintah County, State of Utah)

 

Plaintiff filed this action on September 11, 2017, for collection of unpaid
services and materials in the amount of $49,689 in connection with a workover of
wells in Uintah County, Utah. A Settlement Agreement and Stipulation to Entry of
Judgment was agreed to by the parties and filed with the court on October 10,
2017. Judgment in the amount of $54,937.10 including $5,248.10 in pre-judgement
interest was filed on December 18, 2017. An order requesting company asset
inquiry was issued on February 20, 2018. As of September 30, 2018, we recorded
$9,368.45 of prejudgment interest expense. A hearing on contempt by FEOI for
failure to appear and an answer as to assets was set for September 13, 2018. A
stipulation was filed with the court to continue the hearing to October 22,
2018. FEOI inadvertently failed to appear at this hearing, resulting in a
contempt of court citation being issued. Currently, FEOI is seeking to
reschedule this hearing and intends to purge any contempt by compliance with the
court’s order.

 

Peak Well Service, LLC v. Tiger Energy Operating, LLC (Case No.
2:16-CV-00957-EJF United States District Court for the District of Utah Court)

 

Peak Well Service, LLC (“Peak”), filed mechanics and materialman’s liens against
the Wilkins, Rust 2 Well, Dye Hall 2, Rust 3, and Josie 1 wells operated by TEO
for unpaid accounts in connection with work on these wells. A settlement was
reached between TEO and Peak pursuant to a confidential settlement agreement.
Pursuant to the settlement agreement, lien releases on each of these well liens
were filed on February 8, 2017. This settlement is a final resolution of this
creditor claim.

 

BIA Administrative Appeal – Tiger Energy Partners International, LLC

 

  Notice of Appeal: Dated May 8, 2013   Appellant: Tiger Energy Partners
International, LLC   Appellee: Superintendent Uintah and Ouray Agency   Decision
April 12, 2013   Concerning: Notice of Expiration of Oil and Gas Leases

 

26

 

 

This Administrative appeal concerns the ownership and validity of Northern Ute
(the “Tribe”) Tribal leases acquired by Tiger Energy Partners International, LLC
(TEPI) in a transaction with Mountain Oil and Gas and its affiliated companies.
Pursuant to the Global Settlement Agreement (GSA) negotiated between the Tribe
and TEPI, the Company proposes to resolve any issues regarding the ownership of
the subject leases and other lands thus acquired. The status of the appeal by
TEPI remained unchanged at December 31, 2017, awaiting decision by the Regional
Director of the BIA on the merits of the appeal. The decision of the Regional
Director is stayed by the parties having entered into the GSA. The Tribe and
Tiger remain in discussion regarding approval of the Global Settlement Agreement
by the Regional Director.

 

Labokay Well – Parish of Calcasieu, State of Louisiana

 

R.W. Delaney Construction Company vs. Foothills Petroleum Operating, Inc. (Cause
No. 2017-CV-0330 – County Court of Adams County, Mississippi)

 

This case was filed on September 18, 2017 and concerns the collection of amounts
incurred by FPOI for services performed by plaintiff in the amount of $72,495 in
connection with drilling the Labokay test well in Calcasieu Parish, Louisiana. A
judgment was entered on January 22, 2018, in the County Court of Adams County,
Mississippi in the principal amount of $72,495, plus pre-judgement interest in
the amount of $12,763, plus attorney’s fees in the amount of $18,124, plus costs
in the amount of $196, for a total amount of $103,578, plus post-judgment
interest at the rate of 8% per annum. On May 9, 2018, District Court for the
City and County of Denver, Colorado, granted plaintiff with an order granting
their petition to domesticate this foreign judgment with the Denver District
Court, which now has the same effect and is subject to the same procedures,
defenses, and proceedings for reopening, vacating, or staying as a judgment from
the Denver District Court, and may be enforced or satisfied in like manner. No
further action filed in this matter as of the date of this current quarterly
report.

 

Performance Drilling Company, LLC vs. Foothills Petroleum Operating, Inc. (Case
No. 2017-3916 DIV G 14th Judicial District Court in Parish of Calcasieu, State
of Louisiana)

 

This case was filed on September 25, 2017, for payment of services performed by
plaintiff in the amount of $205,251 for unpaid accounts in connection with its
drilling of the Labokay test well. On January 16, 2018, a default judgment was
entered against FPOI, in the amount of $205,251.24; together with accrued
interest of $29,861 from March 18, 2017, through December 31, 2017; plus,
additional interest from January 1, 2018, at the rate of one and one-half
percent (1.5%) per month until paid (a per diem rate of $103.69); plus, an
additional sum for reasonable attorney’s fees of $2,500, and all costs of the
court proceedings. As of September 30, 2018, we recorded $57,570.33 of
prejudgment interest expense. On July 27, 2018, FPOI was cited to appear through
its authorized representative, B.P. Allaire, in Open Court, on 27th of July at
9:00 a.m. to be examined as a Judgment Debtor. FPOI was ordered to produce at
the above time and place all the books, papers and other documents so requested
in the petition. FPOI inadvertently failed to appear at this hearing and is
currently seeking to reschedule this hearing.

 

Monster Rentals, LLC dba Deepwell Equipment Rentals vs. Foothills Petroleum
Operating, Inc. (Case No. 2017-11013 DIV E – 15th Judicial District Court in
Parish of Acadia, State of Louisiana)

 

This case was filed on October 24, 2017 and concerns the collection of amounts
incurred by FPOI for services performed by plaintiff in the amount of $53,943.53
in connection with the Labokay test well in Calcasieu Parish, Louisiana. On
December 5, 2017, a default judgement was entered against FPOI in favor of
Plaintiff in the amount of $53,943.53, plus attorneys’ fees of $3,483 and court
costs and expenses in the amount of $476.84, plus judicial interest from the
date of the judicial demand, until paid, and for all costs of these proceedings.
No further action filed in this matter as of the date of this current quarterly
report.

 

27

 

 

Canal Petroleum Products, Inc. vs. Foothills Petroleum Operating, Inc. (Case No.
2017-6574; DIV. C – 15th Judicial District Court, Lafayette Parish, Louisiana)

 

This case was filed on November 14, 2017 and concerns the collection of amounts
incurred by FPOI for services performed by plaintiff in the amount of $35,981
for unpaid accounts in connection with its drilling of the Labokay test well. On
January 25, 2018, a default judgment was entered against FPOI in the amount of
$35,981 inclusive of interest as of September 6, 2017; plus, finance charges to
accrue after September 6, 2017, of one and one-half percent per month (18% per
annum) until paid on the unpaid principal amount of $32,956; plus, legal fees of
$8,239 together with related court costs.

 

Smith International, Inc. vs. Foothills Petroleum Operating, Inc. (Case No.
2017-004617; DIV. E – 14th Judicial District Court, Calcasieu Parish, Louisiana)

 

This case was filed on November 7, 2017 and concerns the collection of amounts
incurred by FPOI for services performed by plaintiff in the amount of $30,244 in
connection with its drilling of the Labokay test well. On March 23, 2018, the
court issued a preliminary judgement in favor of plaintiff in the amount of
$30,244, plus interest in the contractual amount of 18% per annum from the date
the payment was originally due until the judgment date, plus legal interest from
the judgment date until amounts are paid, plus reasonable attorneys’ fees. On
April 3, 2018, a final judgment was entered in favor of plaintiff. No further
action filed in this matter as of the date of this current quarterly report.

 

M-I, L.L.C. d/b/a MI-SWACO vs. Foothills Petroleum Operating, Inc. (Case No.
2017-004616; DIV. G – 14th Judicial District Court, Calcasieu Parish, Louisiana)

 

This case was filed on November 7, 2017 and concerns the collection of amounts
incurred by FPOI for services performed by plaintiff in the amount of $51,275 in
connection with the Labokay test well. On March 23, 2018, the court issued a
preliminary judgment in favor of plaintiff in the amount of $51,275, plus
interest in the contractual amount of 1.5% per month from the date the payment
was originally due until the judgement date, plus legal interest from the
judgment date until amounts are paid, plus reasonable attorney’s fees expended
in the prosecution and collection of debt. On April 3, 2018, a final judgment
was entered in favor of plaintiff. No further action filed in this matter as of
the date of this current quarterly report.

 

Schlumberger Technology Corporation vs. Foothills Petroleum Operating, Inc.
(Case No. 2017-004618; DIV. E – 14th Judicial District Court, Calcasieu Parish,
Louisiana)

 

This case was filed on November 7, 2017 and concerns the collection of amounts
incurred by FPOI for services performed by plaintiff in the amount of $28,904
for unpaid accounts in connection with its drilling of the Labokay test well in
Calcasieu Parish, Louisiana. On March 23, 2018, the court issued a preliminary
judgment in favor of plaintiff in the amount of $28,904, plus interest in the
contractual amount of 1.5% per month from the date the payment was originally
due until the judgment date, plus legal interest from the judgment date until
amounts are paid, plus reasonable attorney’s fees expended in the prosecution
and collection of debt. On April 3, 2018, a final judgment was entered in favor
of plaintiff. No further action filed in this matter as of the date of this
current quarterly report.

 

Zealous Energy Services, LLC vs. Foothills Petroleum Operating, Inc. (Docket No.
086708 Div. C 16th Judicial District Court, Parish of St. Martin, Louisiana)

 

On September 28, 2018, the Court after reviewing the record of these
proceedings, found the law and evidence supported Plaintiff’s demands and,
without holding a hearing, ruled as follows: the Court ordered, adjudged and
decreed that a money judgement be rendered in favor of Zealous Energy Services,
LLC and against Foothills Petroleum Operating, Inc. in the full and true amount
of $53,026.58, plus interest at the judicial interest rate of 5% per annum from
January 24, 2018, the date of judicial demand, until finally paid, plus
attorney’s fees of $1,260.00 and all cost.

 

28

 

 

Schedule 3(l)

 

As disclosed in the Company’s 2016 10-K Report filed with the SEC on April 14,
2017.

 

One of the Company’s indirect wholly-owned subsidiaries, Tiger Energy Partners
International, LLC (“TEPI”), owns all rights and interests pertaining to the
Global Settlement Agreement (“GSA”) for the Uintah and Ouray Reservation between
Mountain Oil & Gas, Inc. and the MOG Entities (Craig Phillips) and the Ute
Indian Tribe of the Uintah and Ouray Reservation, dated December 22, 2014. This
GSA is currently the subject of an administrative approval request made to the
BIA that is expected to be received in 2018. TEPI and the Ute Indian Tribe are
currently working to amend the GSA to the mutual satisfaction of all parties.

 

29

 

 

Schedule 3(u)

 

Liens Placed Against Property

 

Baker Hughes Oilfield Operations, LLC

 

On October 3, 2017, Baker Hughes Oilfield Operations, LLC, filed for record a
Statement of Lien among the records of the County Clerk of Big Horn County,
Wyoming, against the referenced property, the PawPaw Federal #1 well (API
49-003-216530000) in the amount of $2,758.00 for products furnished and services
provided to the subject property and leasehold.

 

Elliot G. Freier Revocable Trust U/A 9/6/06

 

On July 18, 2018, a Mortgage, Assignment of Production, Security Agreement,
Fixture Filing and Financing Statement was filed in Uintah County, Utah, with
the Company’s indirect subsidiary, Tiger Energy Operating, LLC, as Mortgagor to
Elliot G. Freier Revocable Trust U/A 9/6/06 as Mortgagee securing the initial
principal amount of $300,000, including any additional loans made by Mortgagee
to Mortgagor, the total of which has since been increased to $532,000. Proceeds
of loans made have been used to cover field operating expenses and workover
operations on the Company’s Duck Creek wells located in Uintah County, Utah.

 

30