Document:

Unassociated Document

    EXHIBIT
      10.8

     

    FORM
      OF SUBSCRIPTION AGREEMENT

     

    THIS
      SUBSCRIPTION AGREEMENT (the “Agreement”) is made as of this 8th day of
      September, 2006, by and between Foothills Resources, Inc., a Nevada corporation
      (the “Company”) and the investor identified on the signature page to this
      Agreement (the
      “Investor”).

     

    RECITALS:

     

    WHEREAS,
      the Company is offering pursuant to Rule 506 of Regulation D of the Securities
      Act of 1933, as amended (the “Securities Act”), to accredited investors in a
      private placement transaction (the “Offering”), up to 8,888,888 units (“Units”)
      consisting of one share of the Company’s common stock, par value $0.001 per
      share (“Common Stock”) and a warrant (the “Investor Warrants”) to purchase 0.5
      shares of Common Stock for 5 years at the exercise price of $2.75 per whole
      share of Common Stock;

     

    WHEREAS,
      to the extent that all 8,888,888 Units are sold, the Company will have the
      option to sell up to an additional 6,666,667 Units in the Offering;

    

    WHEREAS,
      the Investor desires to subscribe for, purchase and acquire from the Company
      and
      the Company desires to sell and issue to the Investor the number of Units,
      set
      forth on the signature page of this Agreement (the “Investor’s Units”) upon the
      terms and conditions and subject to the provisions hereinafter set
      forth;

     

    WHEREAS,
      in connection with the purchase of the Investor’s Units, the Company and the
      Investor will execute a Securities Purchase Agreement, signed by either the
      Investor or on behalf of the Investor by Sanders Morris Harris Inc., as set
      forth in Section 4 hereof, dated as of the date of this Agreement, whereby
      the
      Company will issue and sell to the Investor shares of Common Stock and Investor
      Warrants to purchase shares of Common Stock, at a per share price and upon
      the
      terms and conditions set forth in the Securities Purchase Agreement and this
      Agreement; 

     

    WHEREAS,
      in connection with the purchase of the Investor’s Units, the Company and the
      Investor will execute a Registration Rights Agreement, signed by either the
      Investor or on behalf of the Investor by Sanders Morris Harris Inc., as set
      forth in Section 4 hereof, dated as of the date of this Agreement, pursuant
      to
      which the Company will provide certain registration rights to the Investor
      (the
“Registration Rights Agreement”); and

     

    WHEREAS,
      The Company and Signature Bank (the “Escrow Agent”) have entered into an Escrow
      Agreement (the “Escrow Agreement”) to provide for the safekeeping of funds
      received and documents executed in connection with the Offering.

     

    NOW,
      THEREFORE, for and in consideration of the mutual covenants and agreements
      contained herein and for other good and valuable consideration, the receipt
      and
      sufficiency of which are hereby acknowledged, the parties hereto agree as
      follows:

     

    1. Purchase
      and Sale of the Units.
      Subject
      to the terms and conditions of this Agreement and the satisfaction of the
      Closing Conditions, the Investor subscribes for and agrees to purchase and
      acquire from the Company and the Company agrees to sell and issue, to the
      Investor, the Investor’s Units at the purchase price of $2.25 per Unit (the
“Purchase Price”). 

     

    2. The
      Closing.
      The
      Offering will close upon receipt of acceptable subscriptions representing at
      least 8,888,888 Units (the “Closing Date”) at either the offices of the Escrow
      Agent or to the Company. On the Closing Date, the Escrow Agent shall deliver
      the
      funds held in escrow and the Placement Agent shall deliver the Transaction
      Documents (as defined herein) as of the Closing Date pursuant to the terms
      of
      the Escrow Agreement. As soon as practicable after the Closing Date, the Company
      shall issue and deliver, or shall cause the issuance and delivery of, a stock
      certificate, registered in the name of the Investor and representing the shares
      of Common Stock underlying the Investor’s Units and an Investor Warrant
      registered in the name of the Investor representing the Investor’s right to
      purchase the number of shares of Common Stock underlying the Investor’s Warrant.
      To the extent that more than 8,888,888 Units are sold in the Offering, the
      Company may conduct multiple closings of the Offering. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3. Subscription
      Procedure.
      To
      complete a subscription for Units, the Investor must fully comply with the
      subscription procedure provided in this Section on or before 5:00 p.m. Eastern
      time on the Closing Date. 

     

    (a) Transaction
      Documents.
      Prior
      to 5:00 p.m. Eastern time on the Closing Date, the Investor shall review,
      complete and execute this Agreement, the Investor Questionnaire attached hereto
      as Appendix
      A
      and the
      Registration Rights Agreement, and deliver such agreements and questionnaire
      to
      the PlacementAgent at the address provided below. Executed agreements and
      questionnaires may be delivered to the Placement Agent by facsimile using the
      facsimile number provided below if the Investor immediately thereafter confirms
      receipt of such transmission with the Placement Agent and delivers the original
      copies of the agreements and questionnaire to the Placement Agent as soon as
      practicable thereafter.

     

    Escrow
      Agent - Mailing Address and Facsimile Number:

    

    Signature
      Bank

    950
      Third
      Avenue

    New
      York,
      NY 10022

    Facsimile
      Number: 646-822-1520

    Attention:
      [John Gonzalez]

    Telephone
      Number: 646-822-1502

    

    Placement
      Agent - Mailing Address and Facsimile Number:

    

    Sanders
      Morris Harris Inc.

    527
      Madison Ave., 6th
      Floor

    New
      York,
      NY 10022

    Facsimile
      Number: (212) 593-6150

    Attention:
      John Ilog

    Telephone
      Number: (212) 419-3930

    

    

    (b) Purchase
      Price.
      Simultaneously with the delivery of the Transaction Documents to the Escrow
      Agent as provided herein, and in any event on or prior to 5:00 p.m. Eastern
      time
      on the Closing Date, the Investor shall deliver to the Escrow Agent the full
      Purchase Price for the Investor’s Units by wire transfer of immediately
      available funds pursuant to wire transfer instructions provided
      below:

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    

    
      	 	Escrow
              Agent -
              Wire Transfer Instructions:	 
	 	 	 
	
               

            	
              Bank:

            	
              Signature
                Bank

            
	 	 	
              950
                Third Avenue

            
	 	 	
              New
                York, NY 10022

            
	 	
              ABA
                #:

            	
              026013576

            
	 	
              Account
                Name:

            	
              Signature
                Bank as escrow agent for SMH/Foothills Res

            
	 	
              Account:

            	
              1500654534

            
	 	
              SWIFT#:

            	
              SIGNUS33

            
	 	
              Ref:

            	
              Signature
                Bank as escrow agent for SMH/Foothills Res

            
	 	
              FBO:

            	
              ____________________________________

            
	 	 	
              (Investor
                Name)

            
	 	 	 
	 	
              Signature
                Bank Contact: John Gonzalez (646) 822-1502

              Bank
                Contact: John Ilog (212) 419-3930

            

    

    

    (c)
      Purchaser
      Representative.
      If the
      Investor has retained the services of a purchaser representative to assist
      in
      evaluating the merits and risks associated with investing in the Units, the
      Investor must deliver along with the Transaction Documents a purchaser
      representative certificate in substantially the form attached hereto as
Appendix
      B.
      

     

    4. Securities
      Purchase Agreement; Registration Rights Agreement; Power of
      Attorney.
      The
      Investor agrees to be bound by the terms of the Securities Purchase Agreement
      and Registration Rights Agreement among the Company and the purchasers of the
      Units being offered pursuant to the Offering. The Investor hereby irrevocably
      constitutes and appoints Sanders Morris Harris Inc., a Texas corporation
      (“SMH”), as the Investor’s lawful agent and attorney-in-fact with full power of
      substitution and full power and authority in the Investor’s name, place, and
      stead to execute and deliver the Securities Purchase Agreement and Registration
      Rights Agreement and to take such actions as may be necessary or appropriate
      to
      carry out the terms of the Securities Purchase Agreement and Registration Rights
      Agreement. The power of attorney hereby granted will be deemed coupled with
      an
      interest, will be irrevocable, and will survive and not be affected by the
      Investor’s subsequent death, incapacity, dissolution, insolvency, or termination
      or any delivery by the Investor of an assignment in whole or in part of the
      Investor’s shares of Common Stock. The foregoing power of attorney may be
      exercised by SMH by signing jointly as attorney-in-fact for the Investor and
      for
      other subscribers for the Units in the Offering acting as attorney-in-fact
      for
      all of them. The Company may rely and act upon any writing believed in good
      faith to be signed by SMH or any authorized representative of SMH, and may
      assume that all actions of SMH and any authorized representative of SMH have
      been duly authorized by the Investor. 

     

    5. Representations
      and Warranties of the Investor.
      The
      Investor represents, warrants and covenants to the Company that: 

     

    (a)
      Authorization.
      All
      action on the part of the Investor and, if applicable, its officers, directors,
      managers, members, shareholders and/or partners necessary for the authorization,
      execution, delivery and performance of the Securities Purchase Agreement and
      the
      Registration Rights Agreement, and the consummation of the transactions
      contemplated herein and therein, has been taken. When executed and delivered,
      each of the Transaction Documents will constitute the legal, valid and binding
      obligation of the Investor, enforceable against the Investor in accordance
      with
      its terms, except as such may be limited by bankruptcy, insolvency,
      reorganization or other laws affecting creditors’ rights generally and by
      general equitable principles. The Investor has all requisite corporate or
      limited partnership, as the case may be, power and authority to enter into
      each
      of the Transaction Documents, and to carry out and perform its obligations
      under
      the terms of hereof and thereof. 

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (b) Purchase
      Entirely for Own Account.
      The
      Investor certifies and represents to the Company that the Securities to be
      received by the Investor hereunder will be acquired for the Investor’s own
      account, not as nominee or agent, and not with a view to the resale or
      distribution of any part thereof in violation of the Securities Act, and the
      Investor has no present intention of selling, granting any participation in
      or
      otherwise distributing the same, in violation of the Securities Act. The
      Investor is not a registered broker dealer or an entity engaged in the business
      of being a broker dealer. The Investor and the Company acknowledge that nothing
      contained in this Section 4.2 shall be construed as a restriction or other
      limitation on the Investor’s ability to sell or hedge the Securities purchased
      hereunder at any time following the Closing Date other than for restrictions
      or
      limitations imposed by the Securities Act or applicable state securities laws.
      

    

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

    

    (d) Investor
      Status; Etc.
      The
      Investor certifies and represents to the Company that it is an “accredited
      investor” as defined in Rule 501 of Regulation D promulgated under the
      Securities Act and was not organized for the purpose of acquiring any of the
      Shares. The Investor’s financial condition is such that it is able to bear the
      risk of holding the Shares for an indefinite period of time and the risk of
      loss
      of its entire investment. The Investor has sufficient knowledge, sophistication
      and experience in business and financial matters so as to be able to evaluate
      the risks and merits of its investment in the Securities, and has so evaluated
      the merits and risks of such investment. 

    

    (e) Independent
      Investment Decision.
      The
      Investor has independently evaluated the merits of its decision to purchase
      Securities pursuant to this Agreement, such decision has been independently
      made
      by the Investor and the Investor confirms that it has only relied on the advice
      of its own business and/or legal counsel and not on the advice of any other
      Investor’s business and/or legal counsel in making such decision. 

    

    (f) Disclosure
      of Information.
      The
      Investor acknowledges that it has reviewed all disclosure materials provided
      by
      the Company in connection with this Agreement and has been afforded (a) the
      opportunity to ask such questions as it has deemed necessary of, and to receive
      answers from, representatives of the Company concerning the terms and conditions
      of the offering of the Securities and the merits and risks of investing therein;
      (b) access to publicly available information about the Company and the
      Subsidiaries and their respective financial conditions, results of operations,
      businesses, properties, management and prospects sufficient to enable it to
      evaluate its investment; (c) the opportunity to obtain such additional public
      information that the Company possesses or can acquire without unreasonable
      effort or expense that is necessary to make an informed investment decision
      with
      respect to the investment. Neither such inquiries nor any other investigation
      conducted by or on behalf of the Investor or its representatives or counsel
      shall modify, amend or affect the Investor’s right to rely on the truth,
      accuracy and completeness of the Company’s disclosures and the Company’s
      representations and warranties contained herein. 

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (g) Securities
      Not Registered.
      The
      Investor understands that the Securities have not been registered under the
      Securities Act, by reason of their issuance by the Company in a transaction
      exempt from the registration requirements of the Securities Act, and that the
      Securities must continue to be held by the Investor unless a subsequent
      disposition thereof is registered under the Securities Act or is exempt from
      such registration. The Investor understands that the exemptions from
      registration afforded by Rule 144 (the provisions of which are known to it)
      promulgated under the Securities Act depend on the satisfaction of various
      conditions, and that, if applicable, Rule 144 may afford the basis for sales
      only in limited amounts. 

    

    (h) Acknowledgement
      of Risk.
      The
      Investor acknowledges and understands that its investment in the Securities
      involves a significant degree of risk and in the event of a disposition of
      the
      Securities, the Investor could sustain the loss of its entire investment.

    

    (i) No
      Conflict.
      The
      execution and delivery of the Transaction Documents by the Investor, and the
      consummation of the transactions contemplated hereby and thereby, will not
      conflict with or result in any violation of or default by the Investor (with
      or
      without notice or lapse of time, or both) under, or give rise to a right of
      termination, cancellation or acceleration of any obligation or to a loss of
      a
      material benefit under (i) any provision of the organizational documents of
      the
      Investor or (ii) any agreement or instrument, permit, franchise, license,
      judgment, order, statute, law, ordinance, rule or regulations, applicable to
      the
      Investor. 

    

    (j) Brokers.
      The
      Investor has not retained, utilized or been represented by any broker or finder
      in connection with the transactions contemplated by this Agreement.

    

    (k) Consents.
      All
      consents, approvals, orders and authorizations required on the part of the
      Investor in connection with the execution, delivery or performance of this
      Agreement and the consummation of the transactions contemplated herein by the
      Investor have been obtained and are effective as of the date hereof.

    

    (l) Short
      Sale.
      The
      Investor represents that after the date that the Investor learned of the terms
      of this transaction and prior to the date hereof, neither it nor any Person
      over
      which the Investor has direct control, have made any net short sales of, or
      granted any option for the purchase of or entered into any hedging or similar
      transaction with the same economic effect as a net short sale, in the Common
      Stock.

    

    (m) Employee
      Benefit Plans.
      If the
      Investor is an employee benefit plan within the meaning of the Employee
      Retirement Income Security Act of 1974, as amended (“ERISA”): (i) the
      Investor and its plan fiduciaries are not affiliated with, and are independent
      of the Company, and are informed of and understand the Company’s investment
      objectives, policies, and strategies; (ii) the Investor represents that the
      purchase of the Units will not involve any transaction that is subject to the
      prohibition of Section 406 of ERISA or in connection with which a penalty could
      be imposed under Section 502(i) of ERISA or a tax could be imposed pursuant
      to
      Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”);
      (iii) the trustee or other plan fiduciary directing the investment, in
      making the proposed investment, is aware of and has taken into consideration
      the
      diversification requirements of Section 404(a)(1)(C) of ERISA and has concluded
      that the proposed investment in the Units is prudent and is consistent with
      the
      other applicable fiduciary responsibilities under ERISA; (iv) this
      Agreement has been duly executed on the Investor’s behalf by a duly designated
      Named Fiduciary (within the meaning of Section 402(a)(2) of ERISA); and
      (v) if the Investor is an individual retirement account or employee benefit
      plan not subject to Title I of ERISA, such as a governmental or church plan,
      the
      owner of the individual retirement account or other fiduciary directing the
      investment of the plan has concluded that the proposed investment in the Units
      is prudent and consistent with its fiduciary responsibilities, if
      any.

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    6. Independent
      Nature of Investor’s Obligations and Rights.
      The
      obligations of the Investor under this Agreement, the Securities Purchase
      Agreement, the Registration Rights Agreement and the Investor Questionnaire
      (collectively, the “Transaction Documents”) are several and not joint with the
      obligations of any other purchaser of Units in the Offering, and the Investor
      shall not be responsible in any way for the performance of the obligations
      of
      any other purchaser of Units in the Offering under any Transaction Document.
      The
      decision of the Investor to purchase the Investor’s Units pursuant to the
      Transaction Documents has been made by the Investor independently of any other
      purchaser of Units in the Offering. Nothing contained herein or in any
      Transaction Document, and no action taken by any purchaser of Units pursuant
      thereto, shall be deemed to constitute such purchasers as a partnership, an
      association, a joint venture, or any other kind of entity, or create a
      presumption that the purchasers of Units are in any way acting in concert or
      as
      a group with respect to such obligations or the transactions contemplated by
      the
      Transaction Documents. The Investor acknowledges that no other purchaser of
      Units has acted as agent for the Investor in connection with making its
      investment hereunder and that no other purchaser of Units will be acting as
      agent of the Investor in connection with monitoring its investment in the Units
      or enforcing its rights under the Transaction Documents. The Investor shall
      be
      entitled to independently protect and enforce its rights, including without
      limitation the rights arising out of this Agreement or out of the other
      Transaction Documents, and it shall not be necessary for any other purchaser
      of
      Units to be joined as an additional party in any proceeding for such
      purpose.

     

    7. Prospectus
      Delivery Requirement.
      The
      Investor hereby covenants with the Company not to make any sale of the
      Investor’s Units or the shares of Common Stock underlying the Investor’s Units
      or the Investor Warrants or the shares of Common Stock underlying the Investor
      Warrants without complying with the provisions hereof and of the Registration
      Rights Agreement, and without effectively causing the prospectus delivery
      requirement under the Securities Act to be satisfied (unless the Investor is
      selling in a transaction not subject to the prospectus delivery requirement).
      

     

    8. Stockholder
      Approval.
      The
      Company represents and warrants to the Investor that a vote of the stockholders
      of the Company will not be required to approve the issuance of the Investor’s
      Units.

     

    9. Non-Public
      Information.
      Subsequent to the Closing, the Company covenants and agrees that neither it
      nor
      any other person acting on its behalf will provide the Investor or its agents
      or
      counsel with any information that the Company believes constitutes material
      non-public information, unless prior thereto the Investor shall have executed
      a
      written agreement regarding the confidentiality and use of such information.
      The
      Company understands and confirms that the Investor shall be relying on the
      foregoing representations in effecting transactions in securities of the
      Company.

     

    10. Further
      Assurances.
      The
      parties to this Agreement will, upon reasonable request, execute and deliver
      all
      such further assignments, endorsements and other documents as may be necessary
      in order to perfect the purchase by the Investor of the Investor’s
      Units.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    11. Entire
      Agreement; No Oral Modification.
      This
      Agreement and the other Transaction Documents contain the entire agreement
      among
      the parties hereto with respect to the subject matter hereof and supersede
      all
      prior agreements and understandings with respect thereto and this Agreement
      may
      not be amended or modified except in a writing signed by both of the parties
      hereto.

     

    12. Binding
      Effect; Benefits.
      This
      Agreement shall inure to the benefit of and be binding upon the parties hereto
      and their respective heirs, successors and assigns; however, nothing in this
      Agreement, expressed or implied, is intended to confer on any other person
      other
      than the parties hereto, or their respective heirs, successors or assigns,
      any
      rights, remedies, obligations or liabilities under or by reason of this
      Agreement.

     

    13. Counterparts.
      This
      Agreement may be executed in any number of counterparts, for each of which
      shall
      be deemed to be an original and all of which together shall be deemed to be
      one
      and the same instrument. In the event that any signature is delivered by
      facsimile transmission, such signature shall create a valid and binding
      obligation of the party executing (or on whose behalf such signature is
      executed) with the same force and effect as if such facsimile signature page
      were an original thereof.

     

    14. Governing
      Law.
      This
      Agreement shall be governed by, and construed and enforced in accordance with,
      the laws of the United States of America and the State of New York, both
      substantive and remedial, without regard to New York conflicts of law
      principles. Any
      judicial proceeding brought against either of the parties to this agreement
      or
      any dispute arising out of this Agreement or any matter related hereto shall
      be
      brought in the courts of the State of New York, New York County, or in the
      United States District Court for the Southern District of New York and, by
      its
      execution and delivery of this agreement, each party to this Agreement accepts
      the jurisdiction of such courts. 

     

    15. Prevailing
      Parties.
      In any
      action or proceeding brought to enforce any provision of this Agreement, or
      where any provision hereof is validly asserted as a defense, the prevailing
      party shall be entitled to receive and the non-prevailing party shall pay upon
      demand reasonable attorneys’ fees in addition to any other remedy.

     

    16. Notices.
      All
      communication hereunder shall be in writing and shall be mailed, delivered,
      telegraphed or sent by facsimile or electronic mail, and such delivery shall
      be
      confirmed to the addresses as provided below: 

     

    if
      to the
      Company:

    

    Foothills
      Resources, Inc.

    4540
      California Avenue, Suite 550

    Bakersfield,
      California 93309

    Attention:
      W. Kirk Bosché, Chief Financial Officer

    Facsimile:
      (661) 716-1340

    kbosche@foothills-resources.com

     

    with
      copy
      to: 

    

    McGuireWoods
      LLP

    77
      West
      Wacker Drive, Suite 4100

    Chicago,
      Illinois 60601

    Attention:
      Thomas Horenkamp

    Facsimile:
      (312) 920-7236

    thorenkamp@mcguirewoods.com

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    

    with
      further copy to:

    

    Sanders
      Morris Harris Inc. 

    527
      Madison Ave., 6th
      Floor

    New
      York,
      NY

    Attention:
      John Ilog

    Facsimile:
      (212) 593-6150

    John.ilog@smhgroup.com

    

    if
      to the
      Investor:

    

    to
      the
      address set forth on the signature page of this Agreement

    

    17. Headings.
      The
      section headings herein are included for convenience only and are not to be
      deemed a part of this Agreement.

     

    

     

    

     

    [SIGNATURE
      PAGES FOLLOW]

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have executed this Subscription Agreement
      as
      of the date first written above.

    

     

    
      	 	
              COMPANY

            
	 	
              Foothills
                Resources, Inc.

            
	 	 
	 	 
	 	
              By:     
                __________________________

            
	 	
              Name:
                Dennis B. Tower

            
	 	
              Its:     
                Chief Executive Officer

            

    

    

    

    

    

    

    

    

    

    [SIGNATURE
      PAGE OF INVESTOR FOLLOWS]

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have executed this Subscription Agreement
      as
      of the date first written above.

     

    

    
      	
              INVESTOR
                (individual)

            	
              INVESTOR
                (entity)

            
	 	 
	
              ______________________________________

            	
              ____________________________________

            
	
              Signature

            	
              Name
                of Entity

            
	 	 
	
              ______________________________________

            	
              ____________________________________

            
	
              Print
                Name

            	
              Signature

            
	 	 
	
              Address
                of Principal Residence:

            	 
	
              _____________________________________

            	
              Print
                Name: __________________________

            
	
              _____________________________________

            	 
	
              _____________________________________

            	
              Title:
                ________________________________

            
	 	 
	
              Social
                Security Number:

            	
              Address
                of Executive Offices:

            
	
              _____________________________________

            	 
	
               

            	
              _____________________________________

            
	
              Telephone
                Number:

            	
              _____________________________________

            
	
              _____________________________________

            	
              _____________________________________

            
	 	 
	
              Facsimile
                Number:

            	
              IRS
                Tax Identification Number:

            
	
              _____________________________________

            	
              __________________________________

            
	 	 
	 	
              Telephone
                Number:

            
	 	
              __________________________________

            
	 	 
	 	
              Facsimile
                Number:

            
	 	
              ____________________________________

            
	 	 

    

    

    
      	
              
                 

              

            	
              X

            	 	
               $2.25

            	 	
              =

            	 	$	
               

            
	
              Number
                of Units 

            	 	 	
              Price
                per Unit

            	 	 	 	 	
              Purchase
                Price 

            

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    REMITTANCE
      INSTRUCTIONS

     

    

    For
      Investor: ___________________________________________

                              
      Please Print Name of Investor

    

    Amount
      of
      Investment: $______________

    

    Please
      check one of the options below to indicate your method of payment, sign and
      date
      the form, and return it to Sanders Morris Harris, with remittance if
      appropriate. Your
      remittance must be received no later than August 8,
      2006,
      unless the date for payment is extended.

    
      
        

      

    

     

    
      	
              _____

            	
              I
                have an account with Sanders Morris Harris and wish to pay the amount
                of
                my investment from such account:

            

    

    

    
      To
        Sanders Morris Harris Inc.: Please accept this letter as your authorization
        to
        pay $_________ to “Signature Bank as escrow agent for SMH/Foothills Res” from my
        account number __________. 

      
        

      

    

    

    
      	
              _____

            	
              Attached
                is my check payable to “Signature Bank as escrow agent for SMH/Foothills
                Res” in the amount of my
                investment.

            

    

    

    
      
        

      

    

    

    
      	
              _____

            	
              I
                will wire the amount of my investment on (date not later than August
                8,
                2006), using the following wiring
                instructions:

            

    

     

    

    
      	 	
              Bank:

            	
              Signature
                Bank

            
	 	 	
              950
                Third Avenue

            
	 	 	
              New
                York, NY 10022

            
	 	
              ABA
                #:

            	
              026013576

            
	 	
              Account
                Name:

            	
              Signature
                Bank as escrow agent for SMH/Foothills Res

            
	 	
              Account:

            	
              1500654534

            
	 	
              SWIFT#:

            	
              SIGNUS33

            
	 	
              Ref:

            	
              Signature
                Bank as escrow agent for SMH/Foothills Res

            
	 	
              FBO:

            	
              ____________________________________

            
	 	 	
              (Investor
                Name)

            

    

     

    

    Signed:
      ___________________________________________________________ Dated:
      ____________

                 
      Please return this form to Sanders Morris Harris with your executed subscription
      documents.

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    APPENDIX
      A

    

    Investor
      Questionnaire

    

    

    

    

    (See
      Attached)

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    CONFIDENTIAL

    INVESTOR
      QUESTIONNAIRE

    

    

    Foothills
      Resources, Inc.

    

    Foothills
      Resources, Inc.

    4540
      California Avenue, Suite 550

    Bakersfield,
      California 93309

    Attention:
      W. Kirk Bosché, Chief Financial Officer

    

    

    The
      information contained herein is being furnished to Foothills Resources, Inc.
      (the “Company”) to determine whether the undersigned’s subscription to purchase
      units (the “Units”) consisting of shares of the Company’s common stock, $0.001
      par value per share (the “Common Stock”) and warrants to acquire Common Stock
      (together with the Units referred to as the “Securities”) may be accepted by the
      Company in compliance with the requirements of Sections 3(b), 4(2) and 4(6)
      of
      the Securities Act of 1933, as amended (the “Securities Act”), and Regulation D
      promulgated thereunder (“Regulation D”). The undersigned acknowledges and
      understands that (i) the Company will rely on the information provided by the
      undersigned contained herein for purposes of determining compliance with and
      the
      availability of exemptions, provided under Regulation D, from the registration
      requirements of the Securities Act and (ii) the issuance of the Securities
      will
      not be registered under the Securities Act in reliance upon such
      exemptions.

    

    All
      information provided by the undersigned is furnished for the sole use of the
      Company for the purposes described above and will be held in confidence by
      the
      Company, except that this Investor Questionnaire and/or the information may
      be
      furnished to such other parties as the Company, or their counsel or other
      authorized representatives, deem necessary or desirable to establish compliance
      with federal or state securities laws. For further information, or if you have
      questions concerning the Company or the sale of Securities, please contact:
      Louis W. Zehil, McGuireWoods, LLP, (212) 548-2138.

    

    In
      accordance with the foregoing, the undersigned makes the following
      representations and warranties:

    

    

    

    PART
      ONE

    INVESTMENT
      EXPERIENCE AND PURPOSE 

    TO
      BE COMPLETED BY EVERY PROSPECTIVE INVESTOR

    

    
      	
              1.

            	
              Investment
                Experience.
                This item is presented in alternative form. Please initial, in the
                space
                provided below, the alternative that applies to
                you.

            

    

    

      
        	 	_____	
                ALTERNATIVE
                  ONE:
                  The undersigned has such knowledge and experience in financial
                  and
                  business matters so as to be capable of evaluating the relative
                  merits and
                  risks of an investment in the Securities; the undersigned is not
                  using an
                  Investor Representative (as defined below) in connection with such
                  evaluation. The undersigned offers as evidence of knowledge and
                  experience
                  in these matters the information requested in this Investor
                  Questionnaire.

              

      
 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      
        	 	_____	
                ALTERNATIVE TWO*:
                  The undersigned will use an investor representative (“Investor
                  Representative”) acceptable to the Company in connection with evaluating a
                  potential investment in the Securities. The undersigned acknowledges
                  that
                  the following person will be acting as Investor Representative
                  in
                  connection with evaluating the merits and risks of an investment
                  in the
                  Securities.

                 

                Name
                  of Investor Representative:
                  __________________________________

                 

                The
                  undersigned represents and warrants that the
                  above-named Investor Representative has furnished the undersigned
                  with an
                  investor representative questionnaire and that the undersigned
                  and the
                  above-named Investor Representative together have such knowledge
                  and
                  experience in financial and business matters that they are capable
                  of
                  evaluating the merits and risks of an investment in the
                  Securities. 

              

      

    (*IF
      YOU
      HAVE INITIALED ALTERNATIVE TWO, THE INVESTOR QUESTIONNAIRE MUST BE ACCOMPANIED
      BY A COMPLETED AND SIGNED INVESTOR REPRESENTATIVE QUESTIONNAIRE.)

     

    
      	
              2.

            	
              Purpose
                of Investment.
                Except as indicated below, any purchase of the Securities will be
                solely
                for the account of the undersigned, and not for the account of any
                other
                person or with a view to any resale, division or distribution thereof.
                

            

    

     

    EXCEPTIONS
      (If
      exceptions provide details and attach additional pages if necessary)
      

    

    
      	 	 

    

     

    
      
        	 	 

      

    

    

    

    PART
      TWO

    GENERAL
      INFORMATION

    TO
      BE COMPLETED BY EVERY PROSPECTIVE INVESTOR

    

    

      
        	
                1.

              	
                Name:

              	 
	 	 	
                (exact
                  name as it should appear in the records of the
                  Company
                  and any registration statement in which you are a named “selling
                  stockholder”)

              
	 	 	 
	
                2.

              	
                Address
                  of record:

              	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

      

      
        	
                3.

              	
                Telephone
                  number:

              	
                 

              	
                FAX:  
                  

              	  

      

      
        	 	 	 
	
                4.

              	
                Social
                  Security or Taxpayer ID number:

              	 

      

    

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    
      	
              5.

            	
              Describe
                any preexisting business or personal relationship between the prospective
                investor and any director or officer of the Company:

            

    

    
      

      
        	 	 

      

      
        
          	 	 

        

      

    

    PART
      THREE

    INDIVIDUAL
      INVESTOR

    TO
      BE COMPLETED ONLY BY PROSPECTIVE INVESTORS WHO ARE
      INDIVIDUALS

    

    
      	1.	
              Select
                the representation provided below that applies:

            

    

    

    
      	 	
              ___

            	
              (a)
                

            	
              My
                individual net worth, or joint net worth with my spouse, exceeds
                $1,000,000.

            
	 	 	 	 
	 	
              ___

            	
              (b)

            	
              My
                individual income (without my spouse) was in excess of $200,000 in
                each of
                the two most recent years or joint income with my spouse was in excess
                of
                $300,000 in each of those years, and I reasonably expect an income
                reaching the same income level in the current year. For purposes
                of this
                Investor Questionnaire, individual income means adjusted gross income,
                as
                reported for federal income tax purposes, less any income attributable
                to
                a spouse or to property owned by a spouse, increased by the following
                amounts (but not including any amounts attributable to a spouse or
                to
                property owned by a spouse): (i) the amount of any tax exempt interest
                income received, (ii) the amount of losses claimed as a limited partner
                in
                a limited partnership, (iii) any deduction claimed for depletion,
                (iv)
                deductions for alimony paid, (v) amounts contributed to an IRA or
                Keogh
                retirement plan, and (vi) any amount by which income from long-term
                capital gains has been reduced in arriving at adjusted gross income
                pursuant to the provisions of Section 1202 of the Internal Revenue
                Code.

            

    

    

    
      	
              2.

            	
              Educational
                background of prospective investor:

            

    

    
      

      
        	 	 

      

      
        

      

    

    
      	
              3.

            	
              Professional
                licenses or registrations, including bar admissions, accounting
                certification, real estate brokerage licenses, and SEC or state
                broker-dealer registrations:

            

    

    
      

      
        	 	 

      

      
        

      

    

    
      	
              4.

            	
              Employment,
                during the past five years (and the inclusive dates of
                each):

            

    

    

    
      	 	
              Employment/
                Occupation:

            	 
	 	 	 
	 	
              Nature
                of Responsibility:

            	 
	 	 	 
	 	
              From
                - To:

            	 

    

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    
      	 	
              Employment/
                Occupation:

            	 
	 	 	 
	 	
              Nature
                of Responsibility:

            	 
	 	 	 
	 	
              From
                - To:

            	 

    

    

    
      	 	
              Employment/
                Occupation:

            	 
	 	 	 
	 	
              Nature
                of Responsibility:

            	 
	 	 	 
	 	
              From
                - To:

            	 

    

    

    
      	 	
              Employment/
                Occupation:

            	 
	 	 	 
	 	
              Nature
                of Responsibility:

            	 
	 	 	 
	 	
              From
                - To:

            	 

    

    

    
      	
              5.

            	
              The
                prospective investor has previously purchased securities sold in
                reliance
                on the exemption from registration under the Securities Act provided
                by
                Regulation D: 

            

    

    

    
      	 	
              Yes

            	 	 	
              No

            	 	 

    

    

    
      	
              6.

            	
              Investor’s
                investment objectives:

            

    

    

    
      	 	 	
               
                Income

            	 	
              Other,
                please state:

            	 	 
	 	 	
               
                Appreciation

            	 	 	 	 

    

    

    
      	
              7.

            	
              Prior
                investments made by prospective investor which evidence prospective
                investors investing experience in transactions similar to this offering:
                

            

    

    

    
      	 	
              Nature
                of Investment:

            	 
	 	 	 
	 	
              Amount
                Invested:

            	 

    

    
      

      
        	 	
                Nature
                  of Investment:

              	 
	 	 	 
	 	
                Amount
                  Invested:

              	 

      

      

      
        	 	
                Nature
                  of Investment:

              	 
	 	 	 
	 	
                Amount
                  Invested:

              	 

      

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    PART
      FOUR

    CORPORATE
      INVESTOR

    TO
      BE COMPLETED BY PROSPECTIVE INVESTORS 

    WHO
      ARE CORPORATIONS (AND OTHER ENTITIES)

    

    

    
      	
              1.   Type
                of organization (partnership, corporation, etc.):

            	 	 
	 	 	 
	
              2.   Date
                and State of organization:

            	 	 
	 	 	 
	
              3.   Select
                the representation provided below that applies:

            	 	 

    

    

    
      	 	
              (a)

            	
              (___)
                a bank as defined in Section 3(a)(2) of the Securities Act, or any
                savings
                and loan association or other institution as defined in Section 3(a)(5)(A)
                of the Securities Act acting in either an individual or fiduciary
                capacity; 

            

    

    (___)
      a
      broker or dealer registered pursuant to Section 15 of the Securities and
      Exchange Act of 1934; 

    (___)
      a
      Small Business Investment Company licensed by the U. S. Small Business
      Administration under Section 301(c) or (d) of the Small Business Investment
      Act
      of 1958; 

    (___)
      an
      investment company registered under the Investment Company Act of 1940 or a
      business development company as defined in Section 2(a)(48) of that Act;
      or

    (___)
      an
      insurance company as defined in Section 2(13) of the Securities
      Act;

     

    
      	 	
              (b)

            	
              (___)
                a private business development company as defined in Section 202(a)(22)
                of
                the Investment Advisers Act of
                1940;

            

    

     

    
      	 	
              (c)

            	
              (___)
                a corporation, partnership, limited liability company, Massachusetts
                or
                similar business trust, or an organization described in Section 501(c)(3)
                of the Internal Revenue Code, not formed for the specific purpose
                of
                acquiring the securities offered with total assets in excess of
                $5,000,000;

            

    

     

    
      	 	
              (d)

            	
              (___)
                any trust, with total assets in excess of $5,000,000, not formed
                for the
                specific purpose of acquiring the securities offered, whose purchase
                is
                directed by a "sophisticated person" as such term is described in
                Rule
                506(b)(2)(ii) of Regulation D;

            

    

     

    
      	 	
              (e)
                

            	
              (___)
                an employee benefit plan within the meaning of the Employee Retirement
                Income Security Act of 1974 with investment decisions made by a plan
                fiduciary, as defined in Section 3(21) of such act, which is a bank,
                an
                insurance company, a savings and loan association, or a registered
                investment advisor; 

            

    

    (___)
      an
      employee benefit plan with total assets in excess of $5,000,000; or

    (___)
      an
      employee benefit plan that is a self-directed plan (such as a self-directed
      individual retirement account, Keogh or SEP plan) with investment decisions
      made
      solely by persons that are “accredited investors”
      as such
      term is defined in Rule 501(a) of Regulation D;
      or

     

    
      	 	
              (f)

            	
              (___)
                an entity in which all of the equity owners are “accredited investors” as
                such term is defined in Rule 501(a) of Regulation D. Note: prospective
                investor must submit an individual Investor Questionnaire for each
                equity
                owner.

            

    

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    
      	 	
              List
                all equity owners of the entity:

            
	 	 	 	 
	 	 	 	 
	 	 	 	 

    

    

    
      	
              4.

            	
              Attach
                a copy of the following documents of the prospective investor’s: (a)
                Articles of Incorporation, Certificate of Incorporation, or other
                applicable formation document and (b) consent or resolutions of the
                prospective investor’s Board of Directors, or other applicable document,
                authorizing the investment by the organization in the Securities
                and
                providing the signatory hereto authority to execute on behalf of
                the
                prospective investor. 

            

    

    

    

    PART
      FIVE

    REPRESENTATIONS
      AND WARRANTIES

    TO
      BE COMPLETED BY EVERY PROSPECTIVE INVESTOR

     

    
      	
              1.

            	
              The
                undersigned understands and acknowledges that the Company will be
                relying
                on the accuracy and completeness of the information provided by the
                prospective investor in this Investor Questionnaire and the undersigned
                represents and warrants to the Company as
                follows:

            

    

    

    
      	 	
              (a)

            	
              The
                information is complete and correct and may be relied upon by the
                Company
                in determining whether the offer and sale of Securities in this offering
                in which the undersigned proposes to participate is exempt from the
                registration requirements of the Securities
                Act;

            

    

     

    
      	 	
              (b)

            	
              The
                undersigned will notify the Company immediately of any material change
                in
                any information provided by the prospective investor in this Investor
                Questionnaire occurring prior to the completion of the Offering;
                and

            

    

     

    
      	 	
              (c)

            	
              The
                undersigned has adequate means of providing for the undersigned’s current
                needs and personal contingencies, has no need for liquidity in its
                investment in the Securities, and is able to bear the economic risk
                of an
                investment the undersigned in the Securities of the size contemplated
                by
                the prospective investor. In making this statement, the undersigned
                represents that at the present time has sufficient means to provide
                for
                its needs in the event of a complete loss of such
                investment.

            

    

     

    

    PART
      SIX

    REGISTRATION
      STATEMENT INFORMATION

    TO
      BE COMPLETED BY EVERY PROSPECTIVE INVESTOR

     

    
      	
              1.

            	
              Are
                you, or is your organization, a broker-dealer registered under Section
                15
                of the Securities Exchange Act of
                1934?

            

    

    

    
      	 	
              _______________
                YES

            	
              _______________
                NO

            	 

    

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    
      	2.	
              Are
                you, or is your organization, an affiliate of a
                broker-dealer?

            

    

    
      

      
        	 	
                _______________
                  YES

              	
                _______________
                  NO

              	 

      

    If
      the
      answer is yes, please explain the nature of any such relationship: 

    
      

      
        	 	 

      

      	 	 

      	 	 

    

    

    
      	
              3.

            	
              Have
                you had any position, office or other material relationship, or has
                your
                organization has any material relationship, within the past three
                years
                with the Company or its affiliates?

            

    

    
      

      
        	 	
                _______________
                  YES

              	
                _______________
                  NO

              	 

      

    If
      the
      answer is yes, please explain the nature of any such relationship: 

    
      
        

        
          	 	 

        

        	 	 

        	 	 

      

    

    

    
      	
              4.

            	
              Please
                describe all other securities of the Company that you beneficially
                own or
                that your organization beneficially
                owns.

            

    

    
      
        

        
          	 	 

        

        	 	 

        	 	 

      

    

    

    
      	
              5.

            	
              Have
                you made or are you aware of any arrangements relating to the distribution
                of the shares of the Company’s Common Stock under any registration
                statement?

            

    

    
      

      
        	 	
                _______________
                  YES

              	
                _______________
                  NO

              	 

      

    If
      the
      answer is yes, please describe the nature and amount of such arrangements:
      

    
      
        

        
          	 	 

        

        	 	 

        	 	 

      

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the undersigned prospective investor has executed this Investor
      Questionnaire this ___ day of __________, 2006.

     

    
      	
              INDIVIDUALS:

            	 	
              ENTITIES:

            
	 	 	 
	 	 	 
	
              Print
                Name

            	 	
              Print
                Name of Entity 

            
	 	 	 
	 	 	 
	 	 	 
	
              Signature

            	 	
              Print
                Name of Authorized Signatory

            
	 	 	 
	 	 	 
	 	 	
              Signature
                of Authorized Signatory 

            
	 	 	 
	 	 	 
	
              Signature
                (if Joint Tenants or
                Tenants in Common)

            	 	
              Capacity
                in which Authorized Signatory has Signed on Behalf of
                Entity

            

    

    

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    APPENDIX
      B

    

    Purchaser
      Representative Questionnaire

    

    

    

    

    (See
      Attached)

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    FOOTHILLS
      RESOURCES, INC.

    

    PURCHASER
      REPRESENTATIVE QUESTIONNAIRE

    

    Foothills
      Resources, Inc.

    4540
      California Avenue, Suite 550

    Bakersfield,
      California 93309

    Attention:
      W. Kirk Bosché, Chief Financial Officer

    Facsimile:
      (661) 716-1340

    

    Re:
       Purchase
      of Shares of Common Stock of Foothills Resources, Inc.

    

    Ladies
      and Gentlemen:

    

    The
      following information is furnished to you so that you may determine whether
      the
      undersigned client ______________________________________, (the “Purchaser”),
      together with the undersigned and other purchaser representatives, if any,
      has
      such knowledge and experience in financial and business matters that he is
      capable of evaluating the merits and risks of an investment in the common stock,
      par value $0.001 per share (the “Common Stock”), of Foothills Resources, Inc.
      (“Foothills”) as required under Regulation D, promulgated by the Securities and
      Exchange Commission (“Regulation D”). I understand that you will rely upon the
      information contained herein for purposes of such determination, and that the
      Common Stock will not be registered under the Securities Act of 1933, as amended
      (the “Securities Act”), and the applicable securities laws of any state or
      foreign jurisdiction, in reliance upon the exemption from registration provided
      by Section 4(2) of the Securities Act and/or Rule 506 of Regulation
      D.

    

    All
      information contained herein will be treated confidentially. However, I agree
      that you may present this Questionnaire to such persons as you deem appropriate
      if called upon to establish that the proposed offer and sale of the Common
      Stock
      is exempt from registration under the Securities Act and the applicable
      securities laws of any state or foreign jurisdiction.

    

    I
      am
      acting as Purchaser Representative for the Purchaser in connection with the
      Purchaser's prospective investment in Foothills, and, in that connection, I
      furnish you with the following representations and information:

    

      
        	 	
                1.

              	
                Name
                  (please
                  print):_______________________________________________________

              
	 	 	 	 
	 	
                2.

              	
                Age:_________

              
	 	 	 	 
	 	
                3.

              	
                Profession
                  (or Business and Title, if applicable):

              
	 	 	 	 
	 	 	______________________________________________________________
	 	 	 	 
	 	 	______________________________________________________________ 
	 	 	 	 
	 	
                4.

              	
                (a)

              	
                Business
                  Address:_________________________________________________

              
	 	 	 	 
	 	 	
                (b)

              	
                Telephone
                  Number:
                  ________________________________________________

              

      

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    5. Details
      of any training or experience in financial, business, or tax matters that
      qualify me to act in the capacity of Purchaser Representative (include current
      and prior employment, business or professional education, professional licenses
      now held, and, if applicable, participating in evaluation of similar investments
      in the past):

    ______________________________________________________________________________

    

    ______________________________________________________________________________

    

    ______________________________________________________________________________

    

    6. I
      have
      not, during the past 10 years, (i) been convicted, indicted, or investigated
      in
      connection with any past or present criminal proceeding (excluding traffic
      violations and other minor offenses); or (ii) been the subject of any order,
      judgment, or decree of any court of competent jurisdiction permanently or
      temporarily enjoining the undersigned from acting as an investment adviser,
      underwriter, broker, or dealer in securities or as an affiliated person,
      director, or employee of an investment company, bank, savings and loan
      association or insurance company, or from engaging in or continuing any conduct
      or practice in connection with any such activity or in connection with the
      purchase or sale of any security, or been the subject of any order of a federal
      or state authority barring or suspending for more than 60 days the undersigned's
      right to be engaged in any such activity, or to be associated with persons
      engaged in any such activity, which order has not been reversed or
      suspended.

    

    7. I
      am not
      an Affiliate (as defined in Regulation D), director, officer or other employee
      of Foothills, or a beneficial owner of 10 percent or more of the equity interest
      in Foothills, except as follows: (if none, so state)
      ______________________________________________________.

    

    8. I
      have
      such knowledge and experience in financial, business, and tax matters so as
      to
      be capable, together with the Purchaser, of evaluating the relative merits
      and
      risks of an investment in Foothills.

    

    9. There
      is
      no material relationship (as defined in Regulation D) between me or my
      affiliates and Foothills or its affiliates which now exists or is mutually
      understood to be contemplated or which has existed at any time during the
      previous two years, nor has any compensation been received or will any
      compensation be received as a result of any such relationship except as follows:
      (if none, so state) _____________________________________________.

    

    10. I
      agree
      to advise you promptly of any material changes in the foregoing information
      that
      may occur prior to termination of the offering relating to the purchase of
      the
      Common Stock of FTRS.

    

      
        	 	
                Very
                  truly yours,

              
	 	 
	 	 
	 	
                 

              
	 	
                (Purchaser
                  Representative)

              
	 	 
	 	
                 

              
	 	
                Print
                  Name

              

      

    

     

    
      Dated:_______________________,
        2006Unassociated Document

    EXHIBIT
      10.9

    

    FOOTHILLS
      RESOURCES, INC.

    

    FORM
      OF SECURITIES PURCHASE AGREEMENT

    

    This
      Securities Purchase Agreement (this “Agreement”) is dated as of September 8,
      2006, by and among Foothills Resources, Inc., a Nevada corporation (the
“Company”), each institutional investor listed on Schedule
      1
      hereto
      and Sanders Morris Harris Inc., a Texas corporation (the “Placement Agent”),
      individually and as agent and attorney-in-fact for each retail investor listed
      on Schedule
      2
      hereto
      (each such institutional investor, retail investor and the Placement Agent
      referred to herein as a “Purchaser,” and collectively, the
“Purchasers”).

    

    WHEREAS,
      the Company desires to issue and sell to the Purchasers, and the Purchasers
      desire to purchase from the Company, such number of units of its securities
      (the
“Units”) as is listed next to each Purchaser’s name on Schedule
      1
      and
Schedule
      2
      hereto,
      at a purchase price of $2.25 per Unit, each Unit comprising one share of its
      authorized but unissued shares of common stock, $0.001 par value per share,
      of
      the Company (including any securities into which or for which such shares may
      be
      exchanged for, or converted into, pursuant to any stock dividend, stock split,
      stock combination, recapitalization, reclassification, reorganization or other
      similar event the “Common Stock”), and a warrant (“Warrant”) to purchase one
      half (1⁄2) of
      a
      share of Common Stock at an exercise price equal to $2.75 per whole share,
      in
      substantially the form attached to the Confidential Private Placement Memorandum
      distributed to each such Purchaser (the “PPM”), for an aggregate purchase price
      of up to $30,000,000 (the “Aggregate Proceeds”) on the terms and subject to the
      conditions set forth in this Agreement and, for the retail Purchasers listed
      on
Schedule
      2,
      the
      Subscription Agreement, dated as of even date herewith, in substantially the
      form attached to the PPM (the “Subscription Agreement”); 

    

    WHEREAS,
      prior to entering into this Agreement, the Company, Sanders Morris Harris Inc.
      and Signature Bank, as Escrow Agent (the “Escrow Agent”), have entered into an
      Escrow Agreement dated as of July 24, 2006 and attached hereto as Exhibit
      A
      (the
“Escrow Agreement”), pursuant to which the Company has deposited any Aggregate
      Proceeds received by the Company into an escrow account (the “Escrow Account”)
      for release to the Company subject to the conditions
      therein contained; 

    

    WHEREAS,
      simultaneously with entering into this Agreement, the Company and the Purchasers
      are entering into that certain Registration Rights Agreement, dated as of the
      date hereof and attached as an exhibit to the PPM (the “Registration Rights
      Agreement”), pursuant to which the Company shall register for resale the
      Securities (as defined below) on the terms set forth therein; and

    

    WHEREAS,
      simultaneously with the Closing (as defined herein), the Company and TARH
      E&P Holdings L.P. (“TARH”) shall close on the Company’s acquisition of
      TARH’s interests in four oil fields, including the Goose Creek Field and the
      East Goose Creek Field, both located in Harris County, Texas, the Cleveland
      Field located in Liberty County, Texas, and the Saratoga Field located in Hardin
      County, Texas pursuant to two Purchase and Sale Agreements dated as of June
      21,
      2006, by and between Foothills Texas, Inc. and TARH.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    NOW
      THEREFORE, in consideration of the mutual agreements, representations,
      warranties and covenants herein contained, the parties hereto agree as follows:
      

    

    1. Definitions.
      As used
      in this Agreement, the following terms shall have the following respective
      meanings: 

    

    (a)  “Affiliate”
means
      any Person that, directly or indirectly, through one or more intermediaries,
      controls, is controlled by, or is under common control with, a Person, as such
      terms are used and construed under Rule 144. With respect to any Purchaser,
      any
      investment fund or managed account that is managed on a discretionary basis
      by
      the same investment manager as such Purchaser will be deemed an Affiliate of
      such Purchaser. 

    

    (b)  “Board”
means
      the board of directors of the Company. 

    

    (c)  “Business
      Day”
means
      any day except Saturday, Sunday and any day which shall be a federal legal
      holiday or a day on which banking institutions in the State of New York are
      authorized or required by law or other governmental action to close.

    

    (d)  “Closing”
means
      the purchase and sale of the Securities hereunder.

    

    (e)  “Closing
      Date”
means
      the date of this Agreement, or such other time as the Closing shall occur in
      accordance with the agreement of the parties. 

    

    (f)  “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended, and all of the rules and
      regulations promulgated thereunder. 

    

    (g)  “GAAP” means
      generally accepted accounting principles as in effect from time to time in
      the
      United States of America. 

    

    (h)  “Mandatory
      Effective Date”
means
      the earlier of (i) the date that is one hundred twenty (120) days after the
      Closing Date or (ii) the date that the registration statement required to be
      filed by the Company under the Securities Act pursuant to the terms of the
      Registration Rights Agreement becomes effective.

    

    (i)  “Material
      Adverse Effect”
means
      any event, occurrence or development that has had, or that could reasonably
      be
      expected to have, individually or in the aggregate with other events,
      occurrences or developments, a material adverse effect on the assets,
      liabilities (contingent or otherwise), business, affairs, operations, prospects
      or condition (financial or otherwise) of the Company.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    (j)  “Person”
      (whether or not capitalized) means an individual, entity, partnership, limited
      liability company, corporation, association, trust, joint venture,
      unincorporated organization, and any government, governmental department or
      agency or political subdivision thereof. 

    

    (k)  “Placement
      Agent”
means
      Sanders Morris Harris Inc.

    

    (l)  “Rule
      144”
means
      Rule 144 as promulgated under the Securities Act and any successor or substitute
      rule, law or provision. 

    

    (m)  “SEC”
means
      the Securities and Exchange Commission.

    

    (n)  “Securities”
means
      the Shares, the Warrants and Warrant Shares.

    

    (o)  “Securities
      Act”
means
      the Securities Act of 1933, as amended, and all of the rules and regulations
      promulgated thereunder. 

    

    (p)  “Shares”
means
      the shares of Common Stock issued and sold by the Company to the Purchasers
      hereunder.

    

    (q)  “TARH
      Acquisition”
means
      the acquisition, from TARH, of TARH’s interests in four oil fields, including
      the Goose Creek Field and the East Goose Creek Field, both located in Harris
      County, Texas, the Cleveland Field located in Liberty County, Texas, and the
      Saratoga Field located in Hardin County, Texas (collectively the “TARH
      Interests”) pursuant to two Purchase and Sale Agreements dated as of June 21,
      2006, by and between Foothills Texas, Inc. and TARH.

    

    (r)  “Trading
      Market”
means
      any of the New York Stock Exchange, the American Stock Exchange, the NASDAQ
      SmallCap Market or the NASD Over-The-Counter Bulletin Board (the “OTC Bulletin
      Board”) on which the Common Stock is or will be listed or quoted for trading on
      the date in question.

    

    (s)  “Transaction
      Documents”
means,
      collectively, this Agreement, the Registration Rights Agreement, the
      Subscription Agreement, the Warrant and the PPM, delivered to the Purchasers
      in
      connection with this Agreement. 

    

    (t)  “Transfer
      Agent Instructions”
means
      the Irrevocable Transfer Agent Instructions, in substantially the form of
Exhibit
      C,
      executed by the Company and delivered to and acknowledged in writing by the
      Company’s transfer agent. 

    

    (u)  “Unit
      Price”
means
      $2.25 per Unit.

    

    (v)  “Warrant
      Shares”
means
      the shares of Common Stock issuable upon exercise of or otherwise pursuant
      to
      the Warrants.

     

    2. Purchase
      and Sale of Shares and Warrants.
      

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    2.1 Purchase
      and Sale of Shares and Warrants.
      Subject
      to and upon the terms and conditions set forth in this Agreement, the Company
      agrees to issue and sell to each Purchaser, and each Purchaser hereby agrees,
      severally and not jointly, (i) to purchase from the Company, at the Closing,
      the
      number of Units representing the number of Shares and Warrants to acquire
      Warrant Shares set forth opposite such Purchaser’s name on Schedule
      1
      and
Schedule 2
      hereto,
      at the Unit Price and (ii) to pay the purchase price set forth opposite such
      Purchaser’s name on Schedule 1
      and
Schedule
      2
      hereto.
      The Purchasers and the Company agree that the Company may sell to other
      investors capital stock or other securities of the Company in offerings (the
      “Other Offerings”) concurrent with the sale by the Company to the Purchasers
      hereunder.

    

    2.2 Closing.
      Subject
      to and upon the terms and conditions set forth in this Agreement, the Closing
      shall take place at the offices of McGuireWoods LLP, 1345 Avenue of the
      Americas, Seventh Floor, New York, NY 10105, on the Closing Date, or on such
      other date and at such time as may be agreed upon between the Purchasers, on
      the
      one hand, and the Company, on the other hand. At the Closing, the Company shall
      deliver to the Escrow Agent, on behalf of each Purchaser or at the direction
      of
      any Purchaser, or to such Purchaser directly, a single stock certificate and
      a
      Warrant (or more, if reasonably requested by the Purchaser), registered in
      the
      name of such Purchaser or such Purchaser’s designee, representing the number of
      Shares and Warrants, respectively, purchased by such Purchaser against payment
      of the purchase price by wire transfer of immediately available funds to the
      Escrow Account designated by the Escrow Agent.

    

    2.3 Placement
      Agent’s Fee.
      Upon
      the release of funds from the Escrow Account in accordance with the Escrow
      Agreement, the Company shall pay to the Placement Agent a placement agent fee
      in
      connection with the transactions contemplated hereunder in the amount of seven
      percent (7%) of the Aggregate Proceeds attributable to any Purchaser other
      than
Goldman,
      Sachs & Co. or any affiliate thereof,
      by wire
      transfer in accordance with the engagement letter by and between the Company
      and
      the Placement Agent. 

    

    3. Representations
      and Warranties of the Company.
      The
      Company hereby represents and warrants to each Purchaser, as of the date hereof
      and as of the Closing Date as follows: 

    

    3.1 Incorporation.
      Each of
      the Company and the Subsidiaries (as defined in Section 3.19 below) is a
      corporation or other entity duly organized, validly existing and in good
      standing under the laws of the State of Nevada (or such other applicable
      jurisdiction of incorporation or formation as is indicated on Schedule
      3.19),
      and is
      in good standing as a foreign corporation or other entity in each jurisdiction
      in which the nature of the business conducted or the character of the property
      owned by it makes such qualification necessary, except where the failure to
      be
      so qualified or in good standing, as the case may be, would not result in a
      Material Adverse Effect. Each of the Company and the Subsidiaries has all
      requisite corporate power and authority to own its properties, to carry on
      its
      business as now conducted, to enter into the Transaction Documents to which
      it
      is a party and to carry out the transactions contemplated hereby and thereby.
      Neither the Company nor any of the Subsidiaries is in violation of any of the
      provisions of its Certificate or Articles of Incorporation, as the case may
      be
      (or other charter document) or By-laws. 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

    3.2 Capitalization.
      Immediately prior to the consummation of the transactions to be effected at
      the
      Closing, the authorized capital stock of the Company consists of (a) 100,000,000
      shares of Common Stock, of which 48,582,104 shares
      are issued and outstanding as of the date hereof, and (b) 10,000,000 shares
      of
      Preferred Stock, of which no shares are issued and outstanding as of the date
      hereof. Immediately after the consummation of the sale of the Units to the
      Purchasers hereunder, and the issuance of 1,605,345 shares of Common Stock
      in
      the TARH Acquisition, assuming all 13,333,333 Units
      being offered for sale are purchased by the Purchasers, and assuming no
      outstanding warrants or options to acquire Common Stock are exercised before
      the
      Closing Date, there will be 63,520,782 shares of Common Stock issued and
      outstanding. After giving effect to the transactions contemplated hereby, all
      shares of the Company’s issued and outstanding capital stock have been duly
      authorized, are validly issued and outstanding, are fully paid and
      nonassessable, have been issued in compliance with all applicable securities
      laws, were not issued in violation of or subject to any preemptive rights or
      other rights to subscribe for or purchase securities, and conform in all
      material respects to the description thereof contained in the SEC Documents
      (as
      defined in Section 3.7). Except as set forth in Schedule
      3.2
      to the
      Disclosure Schedule attached hereto as Schedule 3
      (the
“Disclosure Schedule”), there are no existing options, warrants, calls, puts,
      preemptive (or similar) rights, subscriptions or other rights, agreements,
      arrangements or commitments of any character obligating the Company to issue,
      transfer or sell, or cause to be issued, transferred or sold, any shares of
      the
      capital stock of the Company or other equity interests in the Company or any
      securities convertible into or exchangeable for such shares of capital stock
      or
      other equity interests, including the Securities, and there are no outstanding
      contractual obligations of the Company to repurchase, redeem or otherwise
      acquire any shares of its capital stock or other equity interests. The issue
      and
      sale of the Securities will not obligate the Company to issue or sell, pursuant
      to any pre-emptive right or otherwise, shares of Common Stock or other
      securities to any Person (other than the Purchasers) and will not result in
      a
      right of any holder of Company securities to adjust the exercise, conversion,
      exchange or reset price under such securities. With respect to each Subsidiary,
      (i) all of the issued and outstanding shares of the Subsidiary’s capital stock
      have been duly authorized, are validly issued and outstanding, are fully paid
      and nonassessable, have been issued in compliance with applicable securities
      laws, were not issued in violation of or subject to any preemptive rights or
      other rights to subscribe for or purchase securities, and (ii) there are no
      outstanding options to purchase, or any preemptive rights or other rights to
      subscribe for or to purchase, any securities or obligations convertible into,
      or
      any contracts or commitments to issue or sell, shares of the Subsidiary’s
      capital stock or any such options, rights, convertible securities or
      obligations. There are no agreements of which the Company is aware, other than
      the Transaction Documents and other than as set forth in Schedule
      3.2
      to the
      Disclosure Schedule, relating to the voting of the Company’s voting securities
      or restrictions on the transfer of the Company’s capital stock. The Company has
      reserved and set aside from its duly authorized capital stock a sufficient
      number of shares to satisfy in full the Company’s obligations under these
      options, warrants and other rights to acquire shares of capital stock described
      on Schedule
      3.2
      of the
      Disclosure Schedule.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    3.3 Registration
      Rights.
      Except
      as set forth on Schedule
      3.3
      to the
      Disclosure Schedule, the Company has not granted or agreed to grant to any
      Person any right (including “piggy-back” and demand registration rights) to have
      any capital stock or other securities of the Company registered with the SEC
      or
      any other government authority. 

    

    3.4 Authorization.
      All
      corporate action on the part of the Company, its officers and directors and
      its
      stockholders necessary for the authorization, execution, delivery and
      performance of the Transaction Documents and the consummation of the
      transactions (including, without limitation, the sale and delivery of the Shares
      and Warrants and upon exercise of the Warrants, the issuance of the Warrant
      Shares) contemplated herein and therein has been taken. When executed and
      delivered by the Company, each of the Transaction Documents shall constitute
      a
      legal, valid and binding obligation of the Company, enforceable against the
      Company in accordance with its terms, except as such may be limited by
      bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights
      generally and by general equitable principles. The Company has all requisite
      corporate power and authority to enter into the Transaction Documents and to
      carry out and perform its obligations under their respective terms.

    

    3.5 Valid
      Issuance of the Shares, the Warrants and the Warrant Shares.
      The
      Shares and Warrants have been duly authorized and will be validly issued, fully
      paid and nonassessable and not subject to any encumbrances, preemptive rights
      or
      any other similar contractual rights of the stockholders of the Company or
      any
      other Person. The Warrant Shares have been duly authorized and when issued
      and
      paid for in accordance with its terms will be validly issued, fully-paid and
      non-assessable and not subject to any encumbrances, preemptive rights or any
      other similar contractual rights of the stockholders of the Company or any
      other
      Person. The Company has reserved from its duly authorized capital stock the
      number of shares of Common Stock issuable upon execution of this Agreement
      and
      upon proper exercise of the Warrants.

    

    3.6 Financial
      Statements.
      The
      Company has made available to the Purchasers true and complete copies of the
      unaudited consolidated balance sheet of the Company and the Subsidiaries as
      of
      June 30, 2006 (the “Balance Sheet”) and the related consolidated income
      statement, consolidated statement of cash flows and consolidated statement
      of
      stockholders’ equity of the Company for the six (6) months then ended. The
      Company has made available to the Purchasers true and complete copies of the
      audited consolidated balance sheet of the Company and the Subsidiaries as of
      December 31, 2005 and the related financial statements of the Company for the
      twelve (12) months then ended. All of the financial statements described above
      are hereinafter referred to, collectively, as the “Financial Statements.” The
      Financial Statements have been prepared in accordance with GAAP applied on
      a
      consistent basis during the periods covered thereby, subject, to normal year-end
      adjustments (which individually and in the aggregate are not material) and
      to
      the absence of footnotes thereto, and present fairly, in all material respects,
      the financial position of the Company and the Subsidiaries and the results
      of
      operations and cash flows as of the date and for the periods indicated therein.
      The firm of Amisano Hanson, Chartered Accountants, which has expressed its
      opinion with respect to the consolidated financial statements included in the
      Company’s Annual Report on Form 10-KSB/A for the fiscal year ended December 31,
      2005, is an independent accountant as required by the Exchange Act and the
      rules
      and regulations promulgated thereunder. 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    

    3.7 SEC
      Documents.
      

    

    (a) The
      Company has filed all reports (the “SEC Documents”) required to be filed by it
      under the Securities Act and the Exchange Act on a timely basis or has timely
      filed for a valid extension of such time of filing and has filed any such SEC
      Documents prior to the expiration of any such extension. As of their respective
      dates, the SEC Documents complied in all material respects with the requirements
      of the Securities Act and the Exchange Act and the rules and regulations of
      the
      SEC promulgated thereunder, and none of the SEC Documents, when filed, 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. The financial statements of the Company included in the SEC
      Documents comply in all material respects with applicable accounting
      requirements and the rules and regulations of the SEC with thereto as in effect
      at the time of filing. Such financial statements have been prepared in
      accordance with GAAP applied on a consistent basis during the periods involved,
      except as may be otherwise specified in such financial statements or the notes
      thereto, and fairly present in all material respects the financial position
      of
      the Company and its Subsidiaries as of and for the dates thereof and the results
      of operations and cash flows for the periods then ended, subject, in the case
      of
      unaudited statements, to normal, immaterial, year-end audit adjustments. All
      material agreements to which the Company is a party or to which the property
      or
      assets of the Company are subject are included as part of or specifically
      identified in the SEC Documents to the extent required by the rules and
      regulations of the SEC as in effect at the time of filing. The Company has
      prepared and filed with the SEC all filings and reports required by the
      Securities Act and the Exchange Act to make the Company’s filings and reports
      current in all respects. 

    

    3.8 Consents.
      Except
      for (a) the filing and effectiveness of any registration statement required
      to
      be filed by the Company under the Securities Act pursuant to the terms of the
      Registration Rights Agreement and (b) any required state “blue sky” law filings
      in connection with the transactions contemplated under the Transaction
      Documents, all consents, approvals, orders and authorizations required on the
      part of the Company in connection with the execution or delivery of, or the
      performance of the obligations under the Transaction Documents, and the
      consummation of the transactions contemplated herein and therein, have been
      obtained and will be effective as of the date hereof. The execution and delivery
      by the Company of the Transaction Documents, the consummation of the
      transactions contemplated herein and therein, and the issuance of the
      Securities, do not require the consent or approval of the stockholders of,
      or
      any lender to, the Company. 

    

    3.9 No
      Conflict; Compliance With Laws.
      

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    

    (a) The
      execution, delivery and performance by the Company of the Transaction Documents,
      and the consummation of the transactions contemplated hereby and thereby,
      including the issuance of the Securities, do not and will not (i) conflict
      with
      or violate any provision of the Articles of Incorporation (or other charter
      documents) or By-laws of the Company or any of the Subsidiaries, (ii) breach,
      conflict with or result in any violation of or default (or an event that with
      notice or lapse of time or both would become a default) or cause the creation
      of
      any lien or encumbrance upon any assets of the Company under, or give rise
      to a
      right of termination, amendment, acceleration or cancellation (with or without
      notice or lapse of time, or both) of any obligation, contract, commitment,
      lease, agreement, mortgage, note, bond, indenture or other instrument or
      obligation to which the Company or any of the Subsidiaries is a party or by
      which they or any of their properties or assets are bound, except in each case
      to the extent such breach, conflict, violation, default, termination, amendment,
      acceleration or cancellation does not, and could not reasonably be expected
      to
      have, individually or in the aggregate, a Material Adverse Effect, (iii) breach,
      conflict with or result in any violation of or default (or an event that with
      notice or lapse of time or both could become a default) of any statute, law,
      rule, regulation, order, ordinance or restriction applicable to the Company,
      the
      Subsidiaries or any of their properties or assets, or any judgment, writ,
      injunction or decree of any court, judicial or quasi-judicial tribunal
      applicable to the Company, the Subsidiaries or any of their properties or
      assets, or (iv) require from the Company any notice to, declaration or filing
      with, or consent or approval of any governmental authority or other third party
      other than pursuant to federal or state securities or blue sky
      laws.

    

    (b) Neither
      the Company nor any of the Subsidiaries (i) is in default under or in violation
      of (and no event has occurred that has not been waived that, with notice or
      lapse of time or both, would result in a default by the Company or any of the
      Subsidiaries), nor has the Company or any of the Subsidiaries received written
      notice of a claim that it is in default under or that it is in violation of,
      any
      indenture, loan or credit agreement or any other agreement or instrument to
      which it is a party or by which it or any of its properties or assets is bound
      (whether or not such default or violation has been waived), or (ii) is in
      violation of any statute, rule or regulation of any governmental authority,
      including without limitation all foreign, federal, state and local laws relating
      to taxes, environmental protection, occupational health and safety, product
      quality and safety and employment and labor matters, except in each case as
      does
      not, and could not, reasonably be expected to have, individually or in the
      aggregate, a Material Adverse Effect.

    

    (c) Neither
      the Company nor its Subsidiaries is conducting its business in violation of
      any
      applicable law, rule or regulation of the jurisdictions in which it is
      conducting its business, including, without limitation, any applicable
      Environmental Laws (as defined below) or regulations, except any violations
      which would not have a Material Adverse Effect. 

    

    3.10 Brokers
      or Finders.
      Except
      as provided in Section 2.3, neither the Company nor any of the Subsidiaries
      owes
      any fee to any broker or finder in connection with the sale of Securities to
      the
      Purchasers hereunder, and neither the Company nor any of the Subsidiaries has
      incurred, or shall incur, directly or indirectly, any liability for any
      brokerage or finders’ fees or agents’ commissions or any similar charges in
      connection with the sale of Securities to Purchasers hereunder. 

    

    3.11 OTC
      Bulletin Board.
      The
      Company’s Common Stock is currently quoted on the OTC Bulletin Board.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    

    3.12 No
      Actions.
      Except
      as described in the SEC Documents, there are no legal or governmental actions,
      suits or proceedings pending and, to the Company’s knowledge, there are no
      governmental or regulatory inquiries or investigations, nor are there any legal
      or governmental threatened actions, suits, claims, proceedings or investigations
      against or involving the Company or any of the Subsidiaries. 

    

    3.13 No
      Undisclosed Liabilities; Indebtedness.
      Since
      the date of the Balance Sheet, the Company and the Subsidiaries have incurred
      no
      liabilities or obligations, whether known or unknown, asserted or unasserted,
      fixed or contingent, accrued or unaccrued, matured or unmatured, liquidated
      or
      unliquidated, or otherwise, except for liabilities or obligations that,
      individually or in the aggregate, do not or would not reasonably be expected
      to
      have a Material Adverse Effect and other than liabilities and obligations
      arising in the ordinary course of business. Except for indebtedness reflected
      in
      the Balance Sheet, the Company has no indebtedness outstanding as of the date
      hereof. The Company is not in default with respect to any outstanding
      indebtedness or any instrument relating thereto. 

    

    3.14 Environmental.
      Except
      as disclosed in Schedule
      3.14
      of the
      Disclosure Schedule, neither the Company nor any of its Subsidiaries is in
      violation of any statute, rule, regulation, decision or order of any
      governmental agency or body or any court, domestic or foreign, relating to
      the
      use, disposal or release of hazardous or toxic substances or relating to the
      protection or restoration of the environment or human exposure to hazardous
      or
      toxic substances (collectively, “Environmental Laws”), owns or operates any real
      property contaminated with any substance that is subject to any Environmental
      Laws, is liable for any off-site disposal or contamination pursuant to any
      Environmental Laws, or is subject to any claim relating to any Environmental
      Laws, which violation, contamination, liability or claim would individually
      or
      in the aggregate have a Material Adverse Effect; and the Company is not aware
      of
      any pending investigation which might lead to such a claim.

    

    3.15 Contracts.
      There
      is no material contract or agreement required by the Exchange Act and the rules
      or regulations promulgated thereunder to be described in or filed as an exhibit
      to the SEC Documents that the Company was required to file with the SEC pursuant
      to the reporting requirements which is not described or filed therein as
      required. All contracts, agreements, instruments and other documents filed
      as an
      exhibit to the SEC Documents are legal, valid, and binding obligations and
      in
      full force and effect and are enforceable by the Company in accordance with
      their respective terms as of the date hereof, except as such may be limited
      by
      bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights
      generally and by general equitable principles. As of the date hereof, neither
      the Company nor, to the Company’s knowledge, any other party is in breach of or
      default under any of such contracts, agreements, instruments or documents,
      except for such failures to be in full force and effect and such breaches or
      defaults that would not reasonably be expected to have a Material Adverse
      Effect.

    

    3.16 Title
      to Assets.
      The
      Company and its Subsidiaries have (1) good and indefeasible title to all of
      their owned interests in the oil and gas properties described in the SEC
      Documents, (2) good and indefeasible title in fee simple to all other real
      property owned by the Company or any of its Subsidiaries and (3) good title
      to
      all personal property owned by the Company or any of its Subsidiaries, in each
      case, free and clear of all liens, encumbrances and defects, except (i) as
      described in Schedule
      3.16
      to the
      Disclosure Schedule, (ii) liens securing taxes and other governmental charges
      not at the time delinquent or thereafter payable without penalty or being
      diligently contested in good faith by appropriate proceedings and for which
      adequate reserves in accordance with GAAP shall have been set aside on its
      books, or inchoate and unperfected liens securing claims of materialmen,
      mechanics and similar persons, arising in the ordinary course of business for
      amounts not overdue or being diligently contested in good faith by appropriate
      proceedings, (iii) liens and encumbrances under oil and gas leases, options
      to
      lease, operating agreements, utilization and pooling agreements, participation
      and drilling concessions agreements and gas sales contracts, securing payment
      of
      amounts not yet due and payable and of a scope and nature customary in the
      oil
      and gas industry and (iv) liens, encumbrances and defects that do not,
      individually or in the aggregate, materially affect the value of such
      properties, taken as a whole, or materially interfere with the use made or
      proposed to be made of such properties, taken as a whole, by the Company or
      its
      Subsidiaries; except as described in Schedule
      3.16
      in the
      Disclosure Schedule, the leases, options to lease, drilling concessions or
      other
      arrangements held by the Company and its Subsidiaries reflect in all material
      respects the right of the Company and its Subsidiaries to explore the unexplored
      and undeveloped acreage described in the SEC Documents, and the care taken
      by
      the Company and its Subsidiaries with respect to acquiring or otherwise
      procuring such leases, options to lease, drilling concessions and other
      arrangements was generally consistent with standard industry practices for
      acquiring or procuring leases to explore acreage for hydrocarbons; and any
      real
      property and buildings held under lease by the Company and its Subsidiaries
      are
      held by them under valid, subsisting and enforceable leases with such exceptions
      as are not material and do not interfere with the use made or proposed to be
      made of such real property and buildings by the Company or its Subsidiaries
      with
      which the Company and the Subsidiaries are in compliance in all material
      respects.

     

    
      
        
        

      

      
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    3.17 Labor
      Relations.
      No
      labor or employment dispute exists or, to the knowledge of the Company, is
      imminent or threatened, with respect to any of the employees or consultants
      of
      the Company that has, or could reasonably be expected to have, individually
      or
      in the aggregate, a Material Adverse Effect. 

    

    3.18 Intellectual
      Property.
      The
      Company is the sole and exclusive owner of, or has the exclusive right to use,
      all right, title and interest in and to all material foreign and domestic
      patents, patent rights, trademarks, service marks, trade names, brands,
      copyrights (whether or not registered and, if applicable, including pending
      applications for registration) and other proprietary rights or information,
      owned or used by the Company (collectively, the “Rights”), and in and to each
      material invention, software, trade secret, and technology used by the Company
      or any of the Subsidiaries (the Rights and such other items, the
“Intellectual Property”),
      and the Company owns and has the right to use the same, free and clear of any
      claim or conflict with the rights of others (subject to the provisions of any
      applicable license agreement). Except as set forth on Schedule
      3.18
      to the
      Disclosure Schedule, there have been no written claims made against the Company
      or any of the Subsidiaries asserting the invalidity, abuse, misuse, or
      unenforceability of any of the Intellectual Property, and, to the Company’s
      knowledge, there are no reasonable grounds for any such claims. 

    

    
      
        
        

      

      
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    3.19 Subsidiaries;
      Joint Ventures.
      Except
      for the subsidiaries listed on Schedule
      3.19
      to the
      Disclosure Schedule (the “Subsidiaries”), the Company has no subsidiaries and
      (i) does not otherwise own or control, directly or indirectly, any other Person
      and (ii) does not hold equity interests, directly or indirectly, in any other
      Person. Except as described in the SEC Documents or on Schedule
      3.19,
      the
      Company is not a participant in any joint venture, partnership, or similar
      arrangement material to its business. 

    

    3.20 Taxes.
      The
      Company and each of the Subsidiaries has filed (or has had filed on its behalf),
      will timely file or will cause to be timely filed, or has timely filed for
      an
      extension of the time to file, all material Tax Returns (as defined below)
      required by applicable law to be filed by it or them prior to or as of the
      date
      hereof, and such Tax Returns are, or will be at the time of filing, true,
      correct and complete in all material respects. Each of the Company and the
      Subsidiaries has paid (or has had paid on its behalf) or, where payment is
      not
      yet due, has established (or has had established on its behalf and for its
      sole
      benefit and recourse) or will establish or cause to be established in accordance
      with GAAP on or before the date hereof an adequate accrual for the payment
      of,
      all material Taxes (as defined below) due with respect to any period ending
      prior to or as of the date hereof. “Taxes” shall mean any and all taxes,
      charges, fees, levies or other assessments, including income, gross receipts,
      excise, real or personal property, sales, withholding, social security,
      retirement, unemployment, occupation, use, goods and services, license, value
      added, capital, net worth, payroll, profits, franchise, transfer and recording
      taxes, fees and charges, and any other taxes, assessment or similar charges
      imposed by the Internal Revenue Service or any taxing authority (whether state,
      county, local or foreign) (each, a “Taxing Authority”), including any interest,
      fines, penalties or additional amounts attributable to or imposed upon any
      such
      taxes or other assessments. “Tax Return” shall mean any report, return,
      document, declaration or other information or filing required to be supplied
      to
      any Taxing Authority, including information returns, any documents with respect
      to accompanying payments of estimated Taxes, or with respect to or accompanying
      requests for extensions of time in which to file any such return, report,
      document, declaration or other information. There are no claims or assessments
      pending against the Company or any of the Subsidiaries for any material alleged
      deficiency in any Tax, and neither the Company nor any of the Subsidiaries
      has
      been notified of any material proposed Tax claims or assessments against the
      Company or any of the Subsidiaries. No Tax Return of the Company or any of
      the
      Subsidiaries is or has been the subject of an examination by a Taxing Authority.
      Each of the Company and the Subsidiaries has withheld from each payment made
      to
      any of its past or present employees, officers and directors, and any other
      person, the amount of all material Taxes and other deductions required to be
      withheld therefrom and paid the same to the proper Taxing Authority within
      the
      time required by law. 

    

    3.21 Transfer
      Taxes.
      On the
      Closing Date, all stock transfer or other Taxes (other than income taxes) which
      are required to be paid in connection with the sale and transfer of the Shares
      to the Purchasers hereunder, will be, or will have been, fully paid or provided
      for by the Company and all laws imposing such taxes will be or will have been
      complied with.

    

    3.22 Pensions
      and Benefits.
      

     

    
      
        
        

      

      
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    (a) Schedule
      3.22(a)
      to the
      Disclosure Schedule contains a true and complete list of each “employee benefit
      plan” within the meaning of Section 3(3) of the United States Employee
      Retirement Income Security Act of 1974, as amended (“ERISA”), including, without
      limitation, multiemployer plans within the meaning of Section 3(37) of ERISA,
      and all retirement, profit sharing, stock option, stock bonus, stock purchase,
      severance, fringe benefit, deferred compensation, and other employee benefit
      programs, plans, or arrangements, whether or not subject to ERISA, under which
      (i) any current or former directors, officers, employees or consultants of
      the
      Company has any present or future right to benefits and which are contributed
      to, sponsored by or maintained by the Company or any of the Subsidiaries, or
      (ii) the Company or any of the Subsidiaries has any present or future liability.
      All such programs, plans, or arrangements shall be collectively referred to
      as
      the “Company Plans.” Each Company Plan is included as part of or specifically
      identified in the SEC Documents to the extent required by the rules and
      regulations of the SEC as in effect at the time of filing. 

    

    (b) (i)
      Each
      Company Plan has been established and administered in all material respects
      in
      accordance with its terms and in compliance with the applicable provisions
      of
      ERISA, the Internal Revenue Code of 1986, as amended (the “Code”), and other
      applicable laws, rules and regulations; (ii) each Company Plan which is intended
      to be qualified within the meaning of Section 401(a) of the Code is so qualified
      and has received a favorable determination letter as to its qualification (or
      if
      maintained pursuant to a prototype form of instrument the sponsor thereof has
      received a favorable opinion letter as to its qualification), and to the
      Company’s knowledge nothing has occurred, whether by action or failure to act,
      that could reasonably be expected to cause the loss of such qualification;
      and
      (iii) no Company Plan provides retiree health or life insurance benefits
      (whether or not insured), and neither the Company nor the Subsidiaries have
      any
      obligations to provide any such retiree benefits other than as required pursuant
      to Section 4980B of the Code or other applicable law. 

    

    (c) No
      Company Plan is a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA
      or a plan subject to the minimum funding requirements of Section 302 or ERISA
      or
      Section 412 of the Code or Title IV of ERISA, and neither the Company, the
      Subsidiaries, nor any member of their Controlled Group has any liability or
      obligation in respect of, any such multiemployer plan or plan. With respect
      to
      any Company Plan and to the Company’s knowledge, (i) no actions, suits or claims
      (other than routine claims for benefits in the ordinary course) are pending
      or
      threatened, and (ii) no administrative investigation, audit or other
      administrative proceeding by the Department of Labor, the Pension Benefit
      Guaranty Corporation, the Internal Revenue Service or other governmental
      agencies are pending, threatened or in progress. 

    

    3.23 Private
      Placement; Communications with Purchasers; Press Releases.
      

    

    (a) Assuming
      the correctness of the representations and warranties of the Purchasers set
      forth in Section 4 hereof, the offer, issuance, sale and delivery of the
      Securities to the Purchasers as contemplated hereby is exempt from the
      registration requirements of the Securities Act and the qualification or
      registration provisions of applicable state securities laws.

     

    
      
        
        

      

      
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    (b) Neither
      the Company nor any person acting on the Company’s behalf has sold or offered to
      sell or solicited any offer to buy the Securities by means of any form of
      general solicitation or advertising. None of the Company, any of its Affiliates
      or any person acting on the Company’s behalf has taken, directly or indirectly,
      at any time within the past six (6) months, and will not hereafter take, any
      action independent of the Placement Agent, to sell, offer for sale or solicit
      any offers to buy any security under circumstances that would (i) eliminate
      the availability of the exemption from registration under Regulation D under
      the
      Securities Act in connection with the sale or issuance of the Securities, as
      contemplated hereby or (ii) cause the offering or issuance of the Securities
      pursuant to any of the Transaction Documents to be integrated with prior
      offerings by the Company for purposes of any applicable law, regulation or
      stockholder approval provisions. None of the Company or any of the Subsidiaries
      is a United States real property holding corporation within the meaning of
      the
      Foreign Investment in Real Property Tax Act of 1980. No consent, license,
      permit, waiver, approval or authorization of, or designation, declaration,
      registration or filing with, the SEC or any state securities regulatory
      authority is required in connection with the offer, sale, issuance or delivery
      of the Securities other than the filing of Form D, and a Current Report on
      Form
      8-K, with the SEC. The Company does not have any agreement or understanding
      with
      any Purchaser with respect to the transactions contemplated by this Agreement,
      the Registration Rights Agreement and the Escrow Agreement, other than as
      specified in this Agreement, the Registration Rights Agreement or the Escrow
      Agreement.

    

    (c) The
      press
      releases disseminated by the Company during the twelve months preceding the
      date
      of this Agreement taken as a whole do not contain any untrue statement of
      material fact or omit 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 and when made, not misleading. 

    

    3.24 Material
      Changes.
      Except
      as set forth on Schedule
      3.24
      to the
      Disclosure Schedule, since the date of the Balance Sheet, the Company has
      conducted its business only in the ordinary course, consistent with past
      practice, and since such date there has not occurred: (i) any event that
      has had or is expected to have a Material Adverse Effect on the Company;
      (ii) any amendments or changes in the charter documents or by-laws of the
      Company or the Subsidiaries; (iii) any: (A) incurrence, assumption or guarantee
      by the Company or the Subsidiaries of any debt for borrowed money other than
      (1)
      equipment leases made in the ordinary course of business, consistent with past
      practice and (2) any such incurrence, assumption or guarantee with respect
      to an
      amount of $50,000 or more that has been disclosed in the SEC Documents; (B)
      issuance or sale of any securities convertible into or exchangeable for
      securities of the Company other than to directors, employees and consultants
      pursuant to existing equity compensation or stock purchase plans of the Company;
      (C) issuance or sale of options or other rights to acquire from the Company
      or
      the Subsidiaries, directly or indirectly, securities of the Company or any
      securities convertible into or exchangeable for any such securities, other
      than
      options issued to directors, employees and consultants in the ordinary course
      of
      business, consistent with past practice; (D) issuance or sale of any stock,
      bond
      or other corporate security other than to directors, employees and consultants
      pursuant to existing equity compensation or stock purchase plans of the Company;
      (E) acquisition of any assets, or sale, assignment or transfer of any of its
      intangible assets, except in the ordinary course of business, consistent with
      past practice, or cancellation of any debt or claim except in the ordinary
      course of business, consistent with past practice; (F) waiver of any right
      of
      substantial value whether or not in the ordinary course of business; (G)
      material change in officer compensation, except in the ordinary course of
      business and consistent with past practice; or (H) other commitment (contingent
      or otherwise) to do any of the foregoing; (iv) loss, destruction or damage
      to
      any property of the Company, whether or not insured; (v) any creation,
      sufferance or assumption by the Company or any of the Subsidiaries of any lien
      on any asset or any making of any loan, advance or capital contribution to
      or
      investment in any Person, in an aggregate amount which exceeds $50,000
      outstanding at any time; (vi) any entry into, amendment of, relinquishment,
      termination or non-renewal by the Company or the Subsidiaries of any material
      contract, license, lease, transaction, commitment or other right or obligation,
      other than in the ordinary course of business, consistent with past practice;
      (vii) any transfer or grant of a right with respect to the intellectual property
      rights owned or licensed by the Company or the Subsidiaries, except as among
      the
      Company and the Subsidiaries; or (viii) any commitment (contingent or otherwise)
      to do any of the foregoing. 

     

    
      
        
        

      

      
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    3.25 Regulatory
      Permits.
      The
      Company and the Subsidiaries possess all certificates, approvals, authorizations
      and permits issued by the appropriate federal, state, local or foreign
      governmental or regulatory authorities necessary to conduct their businesses
      as
      described in the SEC Documents, except where the failure to possess such permits
      does not, and could not have, individually or in the aggregate, a Material
      Adverse Effect (the “Material Permits”), and all such permits, licenses, orders,
      franchises and other rights and privileges are in full force and effect and,
      to
      the knowledge of the Company, no suspension or cancellation of any of them
      is
      threatened, and none of such permits, licenses, orders, franchises or other
      rights and privileges will be affected by the consummation of the transactions
      contemplated by the Transaction Documents, and the Company has not received
      any
      written notice of proceedings relating to the revocation or modification of
      any
      Material Permits except as described in the SEC Documents. 

    

    3.26 Transactions
      with Affiliates and Employees.
      Except
      as set forth in the SEC Documents or on Schedule
      3.26
      to the
      Disclosure Schedule, none of the officers or directors of the Company and,
      to
      the knowledge of the Company, none of the employees of the Company, is presently
      a party to any transaction or agreement with the Company (other than for
      services as employees, officers and directors) exceeding $60,000, 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 entity in which any officer,
      director, or any such employee has a substantial interest or is an officer,
      director, trustee or partner. There is no transaction, arrangement, or other
      relationship between the Company and an unconsolidated or other off balance
      sheet entity that is required to be disclosed by the Company in the SEC
      Documents and is not so disclosed. 

    

    3.27 Insurance.
      The
      Company and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are prudent
      and customary for the business in which the Company and the Subsidiaries are
      engaged. The Company has no reason to believe that it will not be able to renew
      existing insurance coverage for itself and the Subsidiaries as and when such
      coverage expires or to obtain similar coverage from similar insurers as may
      be
      necessary or appropriate to continue business. 

     

    
      
        
        

      

      
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    3.28 Solvency.
      Based
      on the consolidated financial condition of the Company and the Subsidiaries
      as
      of the date hereof, (i) the fair saleable value of the Company’s assets exceeds
      the amount that will be required to be paid on or in respect of the Company’s
      existing debts and other liabilities (including known and contingent
      liabilities) as they mature; (ii) the Company’s assets do not constitute
      unreasonably small capital to carry on its business for the current fiscal
      year
      as now conducted and as proposed to be conducted, including its capital needs
      taking into account the particular capital requirements of the business
      conducted by the Company, projected capital requirements and capital
      availability thereof; and (iii) the current cash flow of the Company, together
      with the proceeds the Company would receive were it to liquidate all of its
      assets, after taking into account all anticipated uses of the cash, would be
      sufficient to pay all amounts on or in respect of its debts when such amounts
      are required to be paid. The Company has no present intention to incur debts
      beyond its ability to pay such debts as they mature (taking into account the
      timing and amounts of cash to be payable on or in respect of its debt).

    

    3.29 Internal
      Accounting Controls.
      Except
      as disclosed in the SEC Documents, the Company maintains a system of internal
      accounting controls sufficient to provide reasonable assurance that (i)
      transactions are executed in accordance with management’s general or specific
      authorizations, (ii) transactions are recorded as necessary to permit
      preparation of financial statements in conformity with United States generally
      accepted accounting principles and to maintain asset accountability, (iii)
      access to assets is permitted only in accordance with management’s general or
      specific authorizations, (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, and (v) the Company is otherwise in compliance
      with the Securities Act, the Exchange Act and all other rules and regulations
      promulgated by the SEC and applicable to the Company, including such rules
      and
      regulations to implement the Sarbanes-Oxley Act of 2002, as amended.

    

    3.30 Investment
      Company.
      The
      Company is not an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for an investment company, within the
      meaning of the Investment Company Act of 1940, as amended. 

    

    3.31 Questionable
      Payments.
      Neither
      the Company nor, to the Company’s knowledge, any of its Subsidiaries or current
      or former stockholders, directors, officers, employees, agents or other persons
      acting on behalf of the Company, has on behalf of the Company or in connection
      with its businesses (a) used any corporate funds for unlawful contributions,
      gifts, entertainment or other unlawful expenses relating to political activity;
      (b) made any direct or indirect unlawful payments to any governmental officials
      or employees from corporate funds; (c) established or maintained any unlawful
      or
      unrecorded fund of corporate monies or other assets; (d) made any false or
      fictitious entries on the books and records of the Company; or (e) made any
      unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
      payment of any nature. 

     

    
      
        
        

      

      
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    3.32 Changes
      in Governmental or Political Climates.
      To the
      Company’s knowledge, there have not been any changes
      in laws and regulations, including those related to taxes, royalty rates,
      permitted production rates, import, export and use of products, and
      environmental protection, expropriation or reduction of entitlements to produce
      oil and natural gas, or refusal to extend exploration, production or development
      contracts, or any proposals for the foregoing, which would have a Material
      Adverse Effect on the Company in any of the locations where the Company conducts
      its business or in which the assets relating to the TARH Acquisition are located
      or the business of the TARH Acquisition is conducted. 

    

    3.33 Price
      of Common Stock.
      The
      Company has not taken, and will not take any action designed to cause or result
      in, or which has constituted or which might reasonably be expected to
      constitute, the stabilization or manipulation of the price of the shares of
      Common Stock to facilitate the sale or resale of the Securities.

    

    3.34 Acquisitions.
      The
      purchase agreements or other relevant transaction documents for the TARH
      Acquisition have
      been
      duly executed and are in full force and effect. No default has occurred or
      is
      continuing thereunder, and, to the best of the Company’s knowledge, all of the
      conditions precedent to the closing of the TARH Acquisition for each of the
      parties thereto can be satisfied promptly after the Closing Date with no
      material waiver granted. 

    

    3.35 Certain
      Registration Matters.
      Assuming the accuracy of the Purchasers’ representations and warranties set
      forth in Section 4 of this Agreement, no registration under the Securities
      Act
      is required for the offer and sale of the Securities by the Company to the
      Purchasers under the Transaction Documents. The Company is eligible to register
      its Common Stock for resale by the Purchasers on Form SB-2 promulgated under
      the
      Securities Act. Except as set forth in Schedule
      3.3
      of the
      Disclosure Schedule and except with respect to the Purchasers and
      the
      investors in Other Offerings contemplated by Section 2.1,
      the
      Company has not granted or agreed to grant to any Person any rights (including
      “piggy-back” registration rights) to have any securities of the Company
      registered with the SEC or any other governmental authority that have not been
      satisfied. 

    

    3.36 Listing
      Requirements.
      The
      Company is, and has no reason to believe that it will not in the foreseeable
      future continue to be, eligible for quotation of the Common Stock on a Trading
      Market. The issuance and sale of the Securities under the Transaction Documents
      does not contravene the rules and regulations of the Trading Market.

     

    
      
        
        

      

      
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    3.37 Disclosure.
      Neither
      the Company nor, to the Company’s knowledge, any other Person acting on its
      behalf and at the direction of the Company, has provided to any Purchaser or
      its
      agents or counsel any information that in the Company’s reasonable judgment, at
      the time such information was furnished, constitutes material, non-public
      information, except such information as may have been disclosed to certain
      Board
      members, who are affiliated with certain Purchasers in their capacity as
      directors of the Company and except such information set forth in a management
      presentation of the Company which will be disclosed publicly on the Company’s
      web site prior to the Closing Date. On or before 9:00 a.m., Eastern time, on
      the
      first Business Day after the Closing Date, the Company shall issue a press
      release announcing the execution of the Transaction Documents, and on or before
      5:30 p.m., Eastern time, on the first Business Day after the Closing Date,
      the
      Company shall file a Current Report on Form 8-K describing the material terms
      of
      the transactions contemplated by the Transaction Documents, and attaching as
      an
      exhibit to such Form 8-K a form of this Agreement. Other than with respect
      to
      certain Board members who are affiliated with certain Purchasers in their
      capacity as directors of the Company, or to any Purchaser who has executed
      a
      confidentiality agreement between such Purchaser and the Company, no Purchaser
      will to the Company’s knowledge be in possession of material, non-public
      information concerning the Company after the issuance of the press release
      and
      filing of the Current Report on Form 8-K. The Company understands and confirms
      that each Purchaser will rely on the representations and covenants contained
      herein in effecting the transactions contemplated by the Transaction Documents,
      and in the securities of the Company after the Closing Date. All disclosures
      provided to the Purchasers regarding the Company, its business and the
      transactions contemplated hereby, including the Transaction Documents and the
      Schedules to this Agreement furnished by or on behalf of the Company, are true
      and correct and do not contain any untrue statements of material fact or omit
      to
      state any material facts necessary in order to make the statements made therein,
      in the light of the circumstances under which they were made, not misleading.
      No
      event or circumstance has occurred or information exists with respect to the
      Company or the 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. The Company acknowledges and
      agrees that no Purchaser makes or has made any representations or warranties
      with respect to the transactions contemplated hereby other than those
      specifically set forth in Section 4. 

    

    4. Representations
      and Warranties of the Purchasers.
      Each
      Purchaser represents and warrants, severally (as to itself) and not jointly,
      to
      the Company as follows: 

    

    4.1 Authorization.
      All
      action on the part of such Purchaser and, if applicable, its officers,
      directors, managers, members, shareholders and/or partners necessary for the
      authorization, execution, delivery and performance of this Agreement and the
      Registration Rights Agreement, and the consummation of the transactions
      contemplated herein and therein, has been taken. When executed and delivered,
      each of the Transaction Documents will constitute the legal, valid and binding
      obligation of such Purchaser, enforceable against such Purchaser in accordance
      with its terms, except as such may be limited by bankruptcy, insolvency,
      reorganization or other laws affecting creditors’ rights generally and by
      general equitable principles. Such Purchaser has all requisite corporate or
      limited partnership, as the case may be, power and authority to enter into
      each
      of the Transaction Documents, and to carry out and perform its obligations
      under
      the terms of hereof and thereof. 

    

    4.2 Purchase
      Entirely for Own Account.
      Such
      Purchaser certifies and represents to the Company that the Securities to be
      received by the Purchaser hereunder will be acquired for the Purchaser’s own
      account, not as nominee or agent, and not with a view to the resale or
      distribution of any part thereof in violation of the Securities Act, and the
      Purchaser has no present intention of selling, granting any participation in
      or
      otherwise distributing the same, in violation of the Securities Act. Such
      Purchaser is not a registered broker dealer or an entity engaged in the business
      of being a broker dealer. Such Purchaser and the Company acknowledge that
      nothing contained in this Section 4.2 shall be construed as a restriction or
      other limitation on such Purchaser’s ability to sell or hedge the Securities
      purchased hereunder at any time following the Closing Date other than for
      restrictions or limitations imposed by the Securities Act or applicable state
      securities laws. 

     

    
      
        
        

      

      
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    4.3 Reliance
      on Exemptions.
      Such
      Purchaser understands that the Securities are being offered and sold to it
      in
      reliance upon specific exemptions from the registration requirements of federal
      and state securities laws and that the Company is relying upon the truth and
      accuracy of, and the Purchaser’s compliance with, the representations,
      warranties, agreements, acknowledgements and understandings of the Purchaser
      set
      forth in this Agreement in order to determine the availability of such exemption
      and the eligibility of the Purchaser to acquire the Securities. 

    

    4.4 Investor
      Status; Etc.
      Such
      Purchaser certifies and represents to the Company that it is an “accredited
      investor” as defined in Rule 501 of Regulation D promulgated under the
      Securities Act and was not organized for the purpose of acquiring any of the
      Shares. Such Purchaser’s financial condition is such that it is able to bear the
      risk of holding the Shares for an indefinite period of time and the risk of
      loss
      of its entire investment. Such Purchaser has sufficient knowledge,
      sophistication and experience in business and financial matters so as to be
      able
      to evaluate the risks and merits of its investment in the Securities, and has
      so
      evaluated the merits and risks of such investment. 

    

    4.5 Independent
      Investment Decision.
      Such
      Purchaser has independently evaluated the merits of its decision to purchase
      Securities pursuant to this Agreement, such decision has been independently
      made
      by such Purchaser and such Purchaser confirms that it has only relied on the
      advice of its own business and/or legal counsel and not on the advice of any
      other Purchaser’s business and/or legal counsel in making such decision.

    

    4.6 Disclosure
      of Information.
      Such
      Purchaser acknowledges that it has reviewed all disclosure materials provided
      by
      the Company in connection with this Agreement and has been afforded (a) the
      opportunity to ask such questions as it has deemed necessary of, and to receive
      answers from, representatives of the Company concerning the terms and conditions
      of the offering of the Securities and the merits and risks of investing therein;
      (b) access to publicly available information about the Company and the
      Subsidiaries and their respective financial conditions, results of operations,
      businesses, properties, management and prospects sufficient to enable it to
      evaluate its investment; (c) the opportunity to obtain such additional public
      information that the Company possesses or can acquire without unreasonable
      effort or expense that is necessary to make an informed investment decision
      with
      respect to the investment. Neither such inquiries nor any other investigation
      conducted by or on behalf of such Purchaser or its representatives or counsel
      shall modify, amend or affect such Purchaser’s right to rely on the truth,
      accuracy and completeness of the Company’s disclosures and the Company’s
      representations and warranties contained herein. 

    

    4.7 Securities
      Not Registered.
      Such
      Purchaser understands that the Securities have not been registered under the
      Securities Act, by reason of their issuance by the Company in a transaction
      exempt from the registration requirements of the Securities Act, and that the
      Securities must continue to be held by such Purchaser unless a subsequent
      disposition thereof is registered under the Securities Act or is exempt from
      such registration. Such Purchaser understands that the exemptions from
      registration afforded by Rule 144 (the provisions of which are known to it)
      promulgated under the Securities Act depend on the satisfaction of various
      conditions, and that, if applicable, Rule 144 may afford the basis for sales
      only in limited amounts. 

     

    
      
        
        

      

      
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    4.8 Acknowledgement
      of Risk.
      Such
      Purchaser acknowledges and understands that its investment in the Securities
      involves a significant degree of risk and in the event of a disposition of
      the
      Securities, the Purchaser could sustain the loss of its entire investment.
      

    

    4.9 No
      Conflict.
      The
      execution and delivery of the Transaction Documents by such Purchaser, and
      the
      consummation of the transactions contemplated hereby and thereby, will not
      conflict with or result in any violation of or default by such Purchaser (with
      or without notice or lapse of time, or both) under, or give rise to a right
      of
      termination, cancellation or acceleration of any obligation or to a loss of
      a
      material benefit under (i) any provision of the organizational documents of
      such
      Purchaser or (ii) any agreement or instrument, permit, franchise, license,
      judgment, order, statute, law, ordinance, rule or regulations, applicable to
      such Purchaser. 

    

    4.10 Brokers.
      Such
      Purchaser has not retained, utilized or been represented by any broker or finder
      in connection with the transactions contemplated by this Agreement.

    

    4.11 Consents.
      All
      consents, approvals, orders and authorizations required on the part of such
      Purchaser in connection with the execution, delivery or performance of this
      Agreement and the consummation of the transactions contemplated herein by such
      Purchaser have been obtained and are effective as of the date hereof.

    

    4.12 Short
      Sale.
      Such
      Purchaser represents that after the date that such Purchaser learned of the
      terms of this transaction and prior to the date hereof, neither it nor any
      Person over which the Purchaser has direct control, have made any net short
      sales of, or granted any option for the purchase of or entered into any hedging
      or similar transaction with the same economic effect as a net short sale, in
      the
      Common Stock.

    

    4.13 Employee
      Benefit Plans.
      If the
      Purchaser is an employee benefit plan within the meaning of the Employee
      Retirement Income Security Act of 1974, as amended (“ERISA”): (i) the
      Purchaser and its plan fiduciaries are not affiliated with, and are independent
      of the Company, and are informed of and understand the Company’s investment
      objectives, policies, and strategies; (ii) the Purchaser represents that
      the purchase of the Units will not involve any transaction that is subject
      to
      the prohibition of Section 406 of ERISA or in connection with which a penalty
      could be imposed under Section 502(i) of ERISA or a tax could be imposed
      pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended (the
      “Code”); (iii) the trustee or other plan fiduciary directing the
      investment, in making the proposed investment, is aware of and has taken into
      consideration the diversification requirements of Section 404(a)(1)(C) of ERISA
      and has concluded that the proposed investment in the Units is prudent and
      is
      consistent with the other applicable fiduciary responsibilities under ERISA;
      (iv) this Agreement has been duly executed on the Purchaser’s behalf by a
      duly designated Named Fiduciary (within the meaning of Section 402(a)(2) of
      ERISA); and (v) if the Purchaser is an individual retirement account or
      employee benefit plan not subject to Title I of ERISA, such as a governmental
      or
      church plan, the owner of the individual retirement account or other fiduciary
      directing the investment of the plan has concluded that the proposed investment
      in the Units is prudent and consistent with its fiduciary responsibilities,
      if
      any.

     

    
      
        
        

      

      
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    5. Conditions
      Precedent.

    

    5.1. Conditions
      to the Obligation of the Purchasers to Consummate the Closing.
      The
      obligation of each Purchaser to consummate the Closing and to purchase and
      pay
      for the Shares and Warrants to be purchased by it is subject to the satisfaction
      (or waiver by such Purchaser) of the following conditions precedent:

    

    (a) The
      representations and warranties of the Company contained herein shall be true
      and
      correct on and as of the date hereof and as of the Closing Date. The Company
      shall have performed or complied with all obligations and conditions herein
      required to be performed or complied with by the Company on or prior to the
      Closing Date.

    

    (b) There
      shall have been no material adverse change (actual or threatened) in the assets,
      liabilities (contingent or otherwise), affairs, business, operations, prospects,
      or condition (financial or otherwise) of the Company prior to the Closing
      Date.

    

    (c) There
      shall have been sold to Purchasers Units for an aggregate purchase price of
      at
      least $19,999,998 and no more than $30,000,001. 

    

    (d)
       No
      proceeding challenging the Transaction Documents, or the transactions
      contemplated hereby or thereby, or seeking to prohibit, alter, prevent or
      materially delay the Closing Date, shall have been instituted before any court,
      arbitrator or governmental body, agency or official or shall be pending against
      or involving the Company. 

    

    (e) The
      sale
      of the Securities to the Purchasers shall not be prohibited by any law, rule,
      governmental order or regulation. All necessary consents, approvals, licenses,
      permits, orders and authorizations of, or registrations, declarations and
      filings with, any governmental or administrative agency or of or with any other
      Person with respect to any of the transactions contemplated hereby or under
      any
      Transaction Document (including, without limitation, all filings and approvals,
      if any, required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
      as
      amended) shall have been duly obtained or made and shall be in full force and
      effect. 

    

    (f) All
      instruments and corporate proceedings of the Company in connection with the
      transactions contemplated by the Transaction Documents shall be satisfactory
      in
      form and substance to such Purchaser, and such Purchaser shall have received
      copies (executed or certified, as may be appropriate) of all documents which
      any
      Purchaser may have reasonably requested in connection with such transactions.
      

     

    
      
        
        

      

      
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    (g) Such
      Purchaser shall have received from McGuireWoods LLP and Kummer Kaempfer Bonner
      Renshaw & Ferrario, outside counsel to the Company, opinions addressed to
      the Purchasers, dated the Closing Date and substantially in the form of
Exhibits
      B1 and B2
      hereto.

    

    (h) The
      Registration Rights Agreement shall have been duly executed and delivered to
      such Purchaser by the Company. Unless otherwise waived by the Company and such
      Purchaser, the Escrow Agreement shall have been duly executed and delivered
      to
      such Purchaser by the Company and the Escrow Agent.

    

    (i) The
      Company shall have delivered the Transfer Agent Instructions acknowledged by
      its
      transfer agent, to issue to the Purchaser a stock certificate evidencing the
      number of Shares of Common Stock set forth opposite such Purchaser’s name on
Schedule
      1
      and
Schedule
      2
      hereto.

    

    (j) The
      Company shall have delivered, in form and substance satisfactory to such
      Purchaser, a certificate dated the Closing Date and signed by the secretary
      or
      another appropriate executive officer of the Company, certifying (i) that
      attached copies of the Certificate of Incorporation, the By-laws and resolutions
      of the Board approving the Transaction Documents and the transactions
      contemplated thereby, are all true, complete and correct and remain in full
      force and effect as of the date hereof and as of the Closing Date, and (ii)
      as
      to the incumbency and specimen signature of each officer of the Company
      executing the Transaction Documents and any other document delivered in
      connection herewith on behalf of the Company. 

    

    (k) The
      Company shall deliver to such Purchaser a certificate, in form and substance
      satisfactory to such Purchaser, dated the Closing Date and signed by the
      Company’s chief executive officer, certifying that (i) the representations and
      warranties of the Company contained in Section 3 hereof are true and correct
      in
      all respects on the Closing Date and (ii) the Company has performed and complied
      with all of the agreements and conditions set forth or contemplated herein
      that
      are required to be performed or complied with by the Company on or before the
      Closing Date. 

    

    (l) The
      Company shall have undertaken to deliver to each Purchaser, no later than 5
      business days following the Closing Date, an original Warrant evidencing the
      number of Warrant Shares set forth opposite such Purchaser’s name on
Schedule
      1
      and
Schedule 2
      hereto.

    

    (m) The
      TARH
      Acquisition shall
      close simultaneously with the Closing on the Closing
      Date,
      and all
      of the conditions precedent to the TARH Acquisition for each of the parties
      to
      the purchase agreements for the TARH Acquisition shall have been satisfied
      with
      no material waiver granted as
      of the
      Closing Date.

    

    (n) All
      Financial Statements of the Company and each of its Subsidiaries shall have
      been
      provided or made available to such Purchaser on or before the Closing
      Date.

     

    
      
        
        

      

      
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    5.2. Conditions
      to the Obligation of the Company to Consummate the Closing.
      The
      obligation of the Company to consummate the Closing and to issue and sell the
      Shares and Warrants to each Purchaser at the Closing is subject to the
      satisfaction of the following conditions precedent: 

    

    (a)
       Delivery
      of the purchase price of the Units to the Escrow Agent. 

    

    (b) The
      representations and warranties of such Purchaser contained herein shall be
      true
      and correct in all respects on and as of the Closing Date. 

    

    (c) The
      Registration Rights Agreement shall have been executed and delivered by the
      Purchasers. 

    

    (d) Each
      Purchaser shall have performed all obligations and conditions herein required
      to
      be performed or complied with by such Purchaser on or prior to the Closing
      Date.

    

    (e) No
      proceeding challenging the Transaction Documents, or the transactions
      contemplated hereby or thereby, or seeking to prohibit, alter, prevent or
      materially delay the Closing, shall have been instituted before any court,
      arbitrator or governmental body, agency or official or shall be pending against
      or involving such Purchaser. 

    

    (f) The
      sale
      of the Securities by the Company shall not be prohibited by any law, rule,
      governmental order or regulation. All necessary consents, approvals, licenses,
      permits, orders and authorizations of, or registrations, declarations and
      filings with, any governmental or administrative agency or of any other Person
      with respect to any of the transactions contemplated hereby by such Purchaser
      shall have been duly obtained or made and shall be in full force and effect.
      

    

    (g) All
      instruments and corporate proceedings in connection with the transactions
      contemplated by this Agreement to be consummated by such Purchaser at the
      Closing shall be satisfactory in form and substance to the Company, and the
      Company shall have received counterpart originals, or certified or other copies
      of all documents, including without limitation records of corporate or other
      proceedings, with respect to such Purchaser, which it may have reasonably
      requested in connection therewith. 

    

    6.
       Certain
      Covenants and Agreements.
      

    

    6.1. Transfer
      of Securities.

    

    (a) Other
      than as set forth in Section 6.1(b) below, each Purchaser agrees severally
      (as
      to itself only) and not jointly that it shall not sell, assign, pledge, transfer
      or otherwise dispose of or encumber any of the Securities, except (i) pursuant
      to an effective registration statement under the Securities Act, (ii) to an
      Affiliate (so long as such Affiliate agrees to be bound by the terms and
      provisions of this Agreement as if, and to the fullest extent as, such
      Purchaser), or (iii) pursuant to an available exemption from registration under
      the Securities Act (including sales permitted pursuant to Rule 144) and
      applicable state securities laws and, if requested by the Company, upon delivery
      by such Purchaser of either an opinion of counsel of such Purchaser reasonably
      satisfactory to the Company to the effect that the proposed transfer is exempt
      from or does not require registration under the Securities Act and applicable
      state securities laws or a representation letter of such Purchaser reasonably
      satisfactory to the Company setting forth a factual basis for concluding that
      such proposed transfer is exempt from or does not require registration under
      the
      Securities Act and applicable state securities laws. Any transfer or purported
      transfer of the Securities in violation of this Section 6.1 shall be void.
      The
      Company shall not register any transfer of the Securities in violation of this
      Section 6.1. The Company may, and may instruct any transfer agent for the
      Company, to place such stop transfer orders as may be required on the transfer
      books of the Company in order to ensure compliance with the provisions of this
      Section 6.1.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    

    (b) The
      Company acknowledges and agrees that a Purchaser may from time to time pledge
      pursuant to a bona fide margin agreement with a registered broker-dealer or
      grant a security interest in some or all of the Securities to a financial
      institution that is an “accredited investor” as defined in Rule 501(a) under the
      Securities Act and who agrees to be bound by the provisions of this Agreement
      and the Registration Rights Agreement and, if required under the terms of such
      arrangement, such Purchaser may transfer pledged or secured Securities to the
      pledgees or secured parties. Such a pledge or transfer would not be subject
      to
      approval of the Company and no legal opinion of legal counsel of the pledgee,
      secured party or pledgor shall be required in connection therewith. Further,
      no
      notice shall be required of such pledge. At the appropriate Purchaser’s expense,
      the Company will execute and deliver such reasonable documentation as a pledgee
      or secured party of Securities may reasonably request in connection with a
      pledge or transfer of the Securities, including, if the Securities are subject
      to registration pursuant to the Registration Rights Agreement, the preparation
      and filing of any required prospectus supplement under Rule 424(b)(3) under
      the
      Securities Act or other applicable provision of the Securities Act to
      appropriately amend the list of selling stockholders thereunder.

    

    6.2. Legends.
      

    

    (a) To
      the
      extent applicable, each certificate or other document evidencing the Shares
      and
      the Warrant Shares shall be endorsed with a legend substantially in the form
      set
      forth below, and each Purchaser covenants that, except to the extent such
      restrictions are waived by the Company, it shall not transfer the shares
      represented by any such certificate without complying with the restrictions
      on
      transfer described in this Agreement and the legends endorsed on such
      certificate (and a stop-transfer order may be placed against the Warrants):
      

    

    “THE
      SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THE ISSUANCE TO THE HOLDER OF
      SHARES REPRESENTED BY THIS CERTIFICATE IS NOT COVERED BY A REGISTRATION
      STATEMENT UNDER THE ACT. THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
      ACQUIRED, AND SUCH SHARES MUST BE ACQUIRED, FOR INVESTMENT AND MAY NOT BE SOLD,
      TRANSFERRED OR ASSIGNED UNLESS (1) THEIR RESALE IS REGISTERED UNDER THE ACT,
      OR
      (2) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY
      IN
      FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
      REQUIRED.” 

    

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    The
      Purchaser further acknowledges and agrees that the Warrants shall bear a
      restrictive legend in substantially the following form (and a stop-transfer
      order may be placed against the Warrants):

    

    “THIS
      WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE “ACT”), AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS (1) THE RESALE
      HEREOF IS REGISTERED UNDER THE ACT, OR (2) THE COMPANY HAS RECEIVED AN OPINION
      OF COUNSEL REASONABLY SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY
      THAT SUCH REGISTRATION IS NOT REQUIRED.”

    

    (b) The
      legends set forth in Section 6.2(a) shall be removed from the certificates
      evidencing the Securities, (i) while a registration statement covering the
      resale of such Securities is effective under the Securities Act, (ii) following
      any sale of such Securities pursuant to Rule 144, (iii) if such Securities
      are
      eligible for sale under Rule 144(k) (and the holder of such Securities has
      submitted a written request for removal of the legend indicating that the holder
      has complied with the applicable provisions of Rule 144 or such judicial
      interpretation or pronouncement), or (iv) if such legend is not required under
      applicable requirements of the Securities Act (including judicial
      interpretations and pronouncements issued by the staff of the Commission) and
      the holder of such Securities has submitted a written request for removal of
      the
      legend indicating that such legend is not required under applicable requirements
      of the Securities Act (including such judicial interpretations and
      pronouncements). The Company shall cause its counsel to issue a legal opinion
      to
      the Company’s transfer agent promptly upon the occurrence of any of the events
      in clauses (i), (ii), (iii) or (iv) above to effect the removal of the legend
      on
      certificates evidencing the Securities and shall also cause its counsel to
      issue
      a “blanket” legal opinion to the Company’s transfer agent promptly after the
      effective date of any registration statement covering the resale of the
      Securities, if required by the Company’s transfer agent, to allow sales without
      restriction pursuant to an effective registration statement. The Company agrees
      that at such time as such legend is no longer required under this Section
      6.2(b), it will, no later than three (3) Business Days following the delivery
      by
      a Purchaser to the Company or the Company’s transfer agent of a certificate
      representing the Securities issued with a restrictive legend, deliver or cause
      to be delivered to such Purchaser a certificate representing such Securities
      that is free from all restrictive and other legends; provided that in the case
      of removal of the legend for reasons set forth in clause (iii) above, the
      holder of such Securities has submitted a written request for removal of the
      legend indicating that the holder has complied with the applicable provisions
      of
      Rule 144. The Company may not make any notation on its records or give
      instructions to any transfer agent of the Company that enlarge the restrictions
      on transfer set forth in this Section.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    

    (c) If
      the
      Company shall fail for any reason or for no reason to remove the legends set
      forth in this Section 6.2 within three (3) Business Days following the delivery
      by a holder to the Company or the Company’s transfer agent of a certificate
      representing the Securities issued with a restrictive legend, and if on or
      after
      such Business Day the holder purchases (in an open market transaction or
      otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
      holder of shares of Common Stock issuable upon such exercise that the holder
      anticipated receiving from the Company (a “Buy-In”), then the Company shall,
      within three (3) Business Days after the holder’s request and in the holder’s
      discretion, either (i) pay cash to the holder in an amount equal to the holder’s
      total purchase price (including brokerage commissions, if any) for the shares
      of
      Common Stock so purchased (the “Buy-In Price”), at which point the Company’s
      obligation to deliver such certificate (and to issue such shares of Common
      Stock) shall terminate, or (ii) promptly honor its obligation to deliver to
      the
      holder a certificate or certificates representing such shares of Common Stock
      and pay cash to the holder in an amount equal to the excess (if any) of the
      Buy-In Price over the product of (A) such number of shares of Common Stock,
      multiplied by (B) the Closing bid price of the Common Stock on the date of
      exercise.

    

    6.3 Publicity.
      Except
      to the extent required by applicable laws, rules, regulations or stock exchange
      requirements or this Agreement, neither (i) the Company, the Subsidiaries or
      any
      of their Affiliates nor (ii) any Purchaser or any of its Affiliates shall,
      without the written consent of the other, make any public announcement or issue
      any press release with respect to the transactions contemplated by this
      Agreement. Other than as provided in this Agreement, in no event will either
      (A)
      the Company, the Subsidiaries or any of their Affiliates or (B) any Purchaser
      or
      any of its Affiliates make any public announcement or issue any press release
      with respect to the transactions contemplated by this Agreement without
      consulting with the other party, to the extent feasible, as to the content
      of
      such public announcement or press release. 

    

    6.4 Material,
      Nonpublic Information.
      Except
      as required by law or pursuant to an effective confidentiality agreement between
      the Company and a Purchaser, the Company and its directors, officers, employees
      and agents shall not provide any such Purchaser with any material nonpublic
      information regarding the Company or any of the Subsidiaries at any time after
      the Closing, except such information as may be required to be disclosed to
      certain Board members who are affiliated with certain Purchasers in their
      capacity as directors of the Company. In the event of a breach of the foregoing
      covenant following the Mandatory Effective Date, or in the event that the
      Company is legally required to make certain disclosures to any Purchaser (and
      does so) following the Mandatory Effective Date, then in addition to any other
      remedy provided in the Transaction Documents or in equity or at law, each
      Purchaser to whom information has been disclosed (whether as a result of breach
      or as required by law) may request, in writing, that the Company promptly (but
      in no event more than five (5) Business Days after the date of such writing)
      publicly disclose, by press release, SEC filing, or otherwise, an appropriate
      summary of the information that, in such Purchaser’s reasonable judgment,
      constitutes the then material non-public information. After such five (5)
      business-day period, the Purchaser(s) who was or were in receipt of such
      material non-public information shall be automatically authorized to make all
      of
      the information, or any portion thereof, available to the public generally,
      without incurring any liability to the Company for such disclosure.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    

    6.5 Filing
      of Information.
      The
      Company covenants to timely file (or obtain extensions in respect thereof and
      file within the applicable grace period) all reports required to be filed by
      the
      Company pursuant to all applicable securities laws, including the Exchange
      Act
      for the two (2) year period following the Closing Date. At any time if the
      Company is not required to file reports pursuant to such laws, it will prepare
      and furnish to the Purchasers and make publicly available in accordance with
      paragraph (c) of Rule 144 such information as is required for the Purchasers
      to
      sell the Securities under Rule 144. The Company further covenants that it will
      take such further action as any holder of Shares may reasonably request to
      satisfy the provisions of Rule 144 applicable to the issuer of securities
      relating to transactions for the sale of securities pursuant to Rule 144.

    

    6.6 Use
      of
      Proceeds.
      The
      Company covenants and agrees that all of the proceeds from the sale of the
      Units, which shall initially be delivered into the Escrow Account in accordance
      with the Escrow Agreement, shall be used by the Company to (i) fund the TARH
      Acquisition, (ii) consummate other potential acquisitions and (iii) provide
      for
      general working capital purposes. 

    

    6.7 Integration.
      Except
      as contemplated elsewhere in this Agreement, the Company shall not sell, offer
      for sale or solicit offers to buy or otherwise negotiate in respect of any
      security (as defined in Section 2 of the Securities Act) that would be
      integrated with the offer or sale of the Securities in a manner that would
      require the registration under the Securities Act of the sale of the Securities
      to the Purchasers.

    

    6.8 Reservation
      of Common Stock for Issuance; Listing of Shares.
      The
      Company agrees to reserve from its duly authorized capital stock the total
      number of shares of Common Stock issuable upon execution of this Agreement
      and
      upon the exercise of the Warrants. The Company agrees that at any time, if
      and
      when its shares of Common Stock are listed on a national securities exchange,
      that it will use reasonable efforts to promptly list and qualify the Shares
      and
      the Warrant Shares for trading on such exchange.

    

    6.9 Required
      Approvals.
      As
      promptly as practicable after the date of this Agreement, the Company shall
      make, or cause to be made, all filings with any governmental or administrative
      agency or any other Person necessary to consummate the transactions contemplated
      hereby.

    

    7. Indemnification.
      

    

    7.1 By
      the
      Company.
      The
      Company agrees to indemnify, defend and hold harmless each Purchaser and its
      Affiliates and their respective officers, directors, agents, employees,
      subsidiaries, partners, members and controlling persons (collectively, the
      “Purchaser Indemnitees”)
      to the fullest extent permitted by law from and against any and all claims,
      losses, liabilities, damages, deficiencies, judgments, assessments, fines,
      settlements, costs or expenses (including interest, penalties and reasonable
      fees, disbursements and other charges of counsel) (collectively, “Losses”) based
      upon, arising out of or otherwise in respect of any breach by the Company of
      any
      representation, warranty, covenant or agreement of the Company contained in
      the
      Transaction Documents, or for any Losses claimed by the Company’s stockholders,
      the Placement Agent or any other broker or placement agent. 

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    

    7.2 Claims.
      All
      claims for indemnification by a Purchaser Indemnitee pursuant to this Section
      7
      shall be made as follows: 

    

    (a) If
      a
      Purchaser Indemnitee has incurred or suffered Losses for which it is entitled
      to
      indemnification under this Section 7, then such Purchaser Indemnitee shall
      give
      prompt written notice of such claim (a “Claim Notice”) to the Company. Each
      Claim Notice shall state the amount of claimed Losses (the “Claimed Amount”), if
      known, and the basis for such claim. 

    

    (b) Within
      30
      days after delivery of a Claim Notice, the Company shall provide to each
      Purchaser Indemnitee (the “Indemnified Party”), a written response (the
“Response Notice”) in which the Company shall: (i) agree that all of the Claimed
      Amount is owed to the Indemnified Party, (ii) agree that part, but not all,
      of
      the Claimed Amount (the “Agreed Amount”) is owed to the Indemnified Party, or
      (iii) contest that any of the Claimed Amount is owed to the Indemnified Party.
      The Company may contest the payment of all or a portion of the Claimed Amount
      only based upon a good faith belief that all or such portion of the Claimed
      Amount does not constitute Losses for which the Indemnified Party is entitled
      to
      indemnification under this Section 7. If no Response Notice is delivered by
      the
      Company within such 30-day period, then the Company shall be deemed to have
      agreed that all of the Claimed Amount is owed to the Indemnified Party.

    

    (c) If
      the
      Company in the Response Notice agrees (or is deemed to have agreed) that all
      of
      the Claimed Amount is owed to the Indemnified Party, then the Company shall
      owe
      to the Indemnified Party an amount equal to the Claimed Amount to be paid in
      the
      manner set forth in this Section 7. If the Company in the Response Notice agrees
      that part, but not all, of the Claimed Amount is owed to the Indemnified Party,
      then the Company shall owe to the Indemnified Party an amount equal to the
      agreed amount set forth in such Response Notice to be paid in the manner set
      forth in this Section 7. The parties agree that the foregoing shall not be
      deemed to provide that the Company is entitled to make a binding determination
      regarding any disputed amounts owed to an Indemnified Party, unless such
      Indemnified Party accepts and agrees to such determination, and both the
      Indemnified Party and Company shall retain all rights and remedies available
      to
      such party hereunder.

    

    (d) No
      delay
      on the part of the Indemnified Party in notifying the Company shall relieve
      the
      Company of any liability or obligation hereunder except to the extent of any
      actual prejudice caused by or arising out of such delay. 

    

    7.3. Payment
      of Claims.
      The
      Company shall make payment of any portion of any Claimed Amount that the Company
      has agreed in a Response Notice that it owes to an Indemnified Party, or that
      the Company is deemed to have agreed it owes to such Indemnified Party, such
      payment to be made within thirty (30) days after such Response Notice is
      delivered by the Company or should have been delivered by the Company, as the
      case may be. 

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    

    7.4. Limitations.
      

    

    (a) Time
      for Claims.
      The
      Company will not be liable for any Losses hereunder arising out of a breach
      of
      representation or warranty unless a written claim for indemnification is given
      by the Indemnified Party to the Company on or prior to the third anniversary
      of
      the date on which the registration statement covering the resale of the Shares
      initially became effective. 

    

    (b) Maximum
      Amount.
      Notwithstanding anything contained herein to the contrary, the Company will
      not
      be liable for any Losses to any Indemnified Party hereunder in excess of the
      portion of the Aggregate Purchase Price actually paid by the related Purchaser
      related to such Indemnified Party. 

    

    7.5 Applicability;
      Exclusivity.
      Notwithstanding any term to the contrary in this Section 7, the indemnification
      and contribution provisions of the Registration Rights Agreement shall govern
      any claim made with respect to registration statements filed pursuant thereto
      or
      sales made thereunder. The parties hereby acknowledge and agree that in addition
      to remedies of the parties hereto in respect of any and all claims relating
      to
      any breach or purported breach of any representation, warranty, covenant or
      agreement that is contained in this Agreement pursuant to the indemnification
      provisions of this Section 7, all parties shall always retain the right to
      pursue and obtain injunctive relief in addition to any other rights or remedies
      hereunder. 

    

    8. Miscellaneous
      Provisions.
      

    

    8.1 Rights
      Cumulative.
      Each
      and all of the various rights, powers and remedies of the parties shall be
      considered to be cumulative with and in addition to any other rights, powers
      and
      remedies which such parties may have at law or in equity in the event of the
      breach of any of the terms of this Agreement. The exercise or partial exercise
      of any right, power or remedy shall neither constitute the exclusive election
      thereof nor the waiver of any other right, power or remedy available to such
      party. 

    

    8.2 Pronouns.
      All
      pronouns or any variation thereof shall be deemed to refer to the masculine,
      feminine or neuter, singular or plural, as the identity of the person, persons,
      entity or entities may require. 

    

    8.3 Notices.
      

    

    (a) Any
      notices, reports or other correspondence (hereinafter collectively referred
      to
      as “correspondence”) required or permitted to be given hereunder shall be given
      in writing and shall be deemed given if sent by certified or registered mail
      (return receipt requested), overnight courier or telecopy (with confirmation
      of
      receipt), or delivered by hand to the party to whom such correspondence is
      required or permitted to be given hereunder. An electronic communication
      (“Electronic Notice”) shall be deemed written notice for purposes of this
      Section 8.3 if sent with return receipt requested to the electronic mail address
      specified by the receiving party either in this Section 8.3 or on Schedule
      1
      and
Schedule
      2
      hereto.
      Electronic Notice shall be deemed received at the time the party sending
      Electronic Notice receives verification of receipt by the receiving
      party.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    (b) All
      correspondence to the Company shall be addressed as follows: 

    

    Foothills
      Resources, Inc.

    4540
      California Avenue, Suite 550

    Bakersfield,
      California 93309

    Attention:
      W. Kirk Bosché, Chief Financial Officer

    Facsimile:
      (661) 716-1340

    kbosche@foothills-resources.com

    

    with
      copies to:

    

    McGuireWoods
      LLP 

    77
      West
      Wacker Drive, Suite 4100

    Chicago,
      Illinois 60601

    Attention:
      Thomas Horenkamp

    Facsimile:
      (312) 920-7236

    thorenkamp@mcguirewoods.com

    

    (c) All
      correspondence to the Purchasers shall be addressed pursuant to the contact
      information set forth on Schedule
      1
      and
Schedule
      2
      attached
      hereto.

    

    (d) Any
      entity may change the address to which correspondence to it is to be addressed
      by notification as provided for herein. 

    

    8.4 Captions.
      The
      captions and paragraph headings of this Agreement are solely for the convenience
      of reference and shall not affect its interpretation. 

    

    8.5 Severability.
      Should
      any part or provision of this Agreement be held unenforceable or in conflict
      with the applicable laws or regulations of any jurisdiction, the invalid or
      unenforceable part or provisions shall be replaced with a provision which
      accomplishes, to the extent possible, the original business purpose of such
      part
      or provision in a valid and enforceable manner, and the remainder of this
      Agreement shall remain binding upon the parties hereto. 

    

    8.6 Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the internal
      and
      substantive laws of the State of New York and without regard to any conflicts
      of
      laws concepts which would apply the substantive law of some other jurisdiction.
      

    

    8.7 Consent
      to Jurisdiction; Venue.
      Each
      party
      hereby irrevocably and unconditionally (i) agrees that any suit, action or
      other
      legal proceeding arising out of this Agreement shall be brought in a state
      court
      located in New York, New York; (ii) consents to the jurisdiction of any such
      court in any suit, action or proceeding; and (iii) waives any objection which
      such party may have to the laying of venue of any such suit, action or
      proceeding in any such court.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    

    8.8 Waiver.
      No
      waiver of any term, provision or condition of this Agreement, whether by conduct
      or otherwise, in any one or more instances, shall be deemed to be, or be
      construed as, a further or continuing waiver of any such term, provision or
      condition or as a waiver of any other term, provision or condition of this
      Agreement. 

    

    8.9 Expenses.
      The
      Company and the Purchasers shall be responsible for their respective expenses
      (including, without limitation, their respective fees and expenses of their
      counsel) incurred by them in connection with the negotiation and execution
      of,
      and closing under, this Agreement. Notwithstanding the foregoing, the Company
      shall pay the expenses (including fees and expenses of counsel not in excess
      of
      $25,000) incurred by Goldman,
      Sachs & Co. or any affiliate thereof
      in
      connection with the negotiation and execution of, and closing under, this
      Agreement.

    

    8.10 Assignment.
      The
      rights and obligations of any party hereto shall inure to the benefit of and
      shall be binding upon the successors and permitted assigns of such party. The
      Company may not assign this Agreement or any rights or obligations hereunder
      without the prior written consent of Purchasers who hold a majority of the
      outstanding Shares issued pursuant to this Agreement (the “Majority
      Purchasers”). Each Purchaser may assign or transfer any or all of its rights
      under this Agreement to any Person provided that such assignee or transferee
      agrees in writing to be bound, with respect to the transferred Shares, Warrants
      or Warrant Shares, by the provisions hereof that apply to such assigning or
      transferring Purchaser; whereupon such assignee or transferee shall be deemed
      to
      be a “Purchaser” for all purposes of this Agreement. 

    

    8.11 Survival.
      The
      respective representations and warranties given by the parties hereto shall
      survive the Closing Date and the consummation of the transactions contemplated
      herein, without regard to any investigation made by any party. The respective
      covenants and agreements agreed to by a party hereto shall survive the Closing
      Date and the consummation of the transactions contemplated herein in accordance
      with their respective terms and conditions. 

    

    8.12 Entire
      Agreement.
      This
      Agreement and the other Transaction Documents executed by each Purchaser
      constitute the entire agreement between the parties hereto respecting the
      subject matter hereof and supersedes all prior agreements, negotiations,
      understandings, representations and statements respecting the subject matter
      hereof, whether written or oral. 

    

    8.13 Amendments.
      Any
      amendment, supplement or modification of or to any provision of this Agreement,
      any waiver of any provisions of this Agreement shall be effective only if made
      or given in writing and signed by the Company and the Majority Purchasers;
      provided that any amendment, supplement, modification or waiver that is
      materially and disproportionately adverse to any particular Purchaser (as
      compared to all Purchasers as a group) shall require the consent of such
      Purchaser. 

    

    8.14 No
      Third Party Beneficiaries.
      This
      Agreement is intended solely for the benefit of the parties hereto and is not
      intended to confer any benefits upon, or create any rights in favor of, any
      Person (including, without limitation, any stockholder or debt holder of the
      Company) other than the parties hereto; provided, that each retail Purchaser
      listed on Schedule
      2
      hereto
      is entitled to all rights and benefits of a Purchaser under this Agreement
      even
      though such Purchasers are not signatories hereto, and each Purchaser Indemnitee
      that is not also a Purchaser is entitled to all rights and benefits as third
      party beneficiaries of Article 7 of this Agreement. 

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

    

    8.15 Independent
      Nature of Purchaser’s Obligations and Rights.
      The
      obligations of the Purchasers under this Agreement are several and not joint
      with the obligations of any other Purchaser, and no Purchaser shall be
      responsible in any way for the performance of the obligations of any other
      Purchaser under the Transaction Documents. Nothing contained herein, and no
      action taken by any Purchaser pursuant hereto, shall be deemed to constitute
      the
      Purchasers as a partnership, an association, a joint venture or any other kind
      of entity, or create a presumption that the Purchasers are in any way acting
      in
      concert or as a group with respect to such obligations or the transactions
      contemplated by the Transaction Documents, including a “group” (as that term is
      used in Section 13(d) of the Exchange Act) in negotiating and entering into
      this
      Agreement or purchasing the Common Stock and the Warrants or acquiring,
      disposing of or voting any of the Common Stock or the shares of Common Stock
      issuable upon the exercise of the Warrants.  The Company hereby confirms
      that it understands and agrees that the Purchasers are not acting as part of
      any
      such group. Each Purchaser confirms that it has independently participated
      in
      the negotiation of the transaction contemplated hereby with the advice of its
      own counsel and advisors. Each Purchaser shall be entitled to independently
      protect and enforce its rights, including without limitation, the rights arising
      out of this Agreement, and it shall be necessary for any other Purchaser to
      be
      joined as an additional party to any proceeding for such purpose. 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.   

    

    8.16 Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      document. The parties hereto confirm that any facsimile copy of another party’s
      executed counterpart of this Agreement (or its signature page thereof) will
      be
      deemed to be an executed original thereof. 

    

    8.17 Waiver
      of Jury Trial.
      Each of
      the Company and the Purchasers hereby waives any right to a trial by jury in
      any
      action, lawsuit or proceeding to enforce or defend any right under this
      Agreement or any amendment, instrument, document or agreement delivered or
      to be
      delivered in connection with this Agreement and agrees that any action, lawsuit
      or proceeding will be tried before a court and not before a jury.

    

    [Signature
      Pages Follow]

    

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have executed this Securities Purchase
      Agreement as of the day and year first above written. 

    
      	 	 	 
	 	FOOTHILLS
              RESOURCES, INC.
	 
 	 
 	 
 
	 	By:  	_______________________
	 	
              Dennis
                B. Tower

            
	 	Chief
              Executive Officer

     

    

     

     

     

    [SIGNATURE
      PAGE TO SECURITIES PURCHASE
      AGREEMENT]

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
      	 	 	PURCHASERS LISTED ON SCHEDULE
              1: 
	 	 	 
	 	 	_______________________ 
	 	 	[Purchaser’s Name] 
	 	 	 
	 	 	By:
              _______________________ 
	 	 	 
	 	 	Name:_____________________ 
	 	 	 
	 	 	Title:______________________ 

    

     

    
 

     

    

    

    

    

     

     

    

     

     

    [SIGNATURE
      PAGE TO SECURITIES PURCHASE
      AGREEMENT]

    

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

     

     

    
 

    
      	 	 	PURCHASERS LISTED ON SCHEDULE
              2: 
	 	 	 
	 	 	On behalf of each of the retail Purchasers
              listed on Schedule 2 hereto:  
	 	 	 
	 	 	
              
                

              

              
                John
                  H. Malanga, Attorney-in-Fact 

              

            

    

     

    

     

    

    

     

     

    
[SIGNATURE
      PAGE TO SECURITIES PURCHASE
      AGREEMENT]

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