Document:

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                           Bridge Loan Promissory Note

$997,500                                                          March 17, 2006

         FOR VALUE RECEIVED,  BRASADA CALIFORNIA,  INC., a Delaware  corporation
(hereinafter  called the  "Borrower"),  hereby  promises  to pay to the order of
FOOTHILLS  RESOURCES,   INC.,  a  Nevada  corporation  (hereinafter  called  the
"Lender"),  c/o Gottbetter & Partners LLP, 488 Madison Avenue,  12th Floor,  New
York,  New York 10022,  the principal sum of Nine Hundred  Ninety Seven Thousand
Five Hundred  Dollars  ($997,500)  (the  "Loan"),  in lawful money of the United
States of America and in immediately available funds.

         1.         The  outstanding  principal  balance of this Note,  together
with accrued and unpaid interest thereon, shall be due and payable no later than
the earlier of (i) July 20, 2006 and (ii) the date of closing of the Merger,  as
contemplated  by the term sheet  between the  parties,  dated as of February 15,
2006 (the "Term Sheet"). The date such repayment is due is sometimes referred to
as the "Due Date." Upon the closing of the Merger,  all  indebtedness  evidenced
hereby shall be deemed canceled and paid in full.

         2.           This Note shall bear  interest at the rate of nine percent
(9%)  per  annum on the  unpaid  principal  balance  hereof.  Interest  shall be
calculated  on the basis of a year of three  hundred sixty (360) days applied to
the actual days on which there exists an unpaid balance under this Note.

         3.           Interest  only  shall  be  payable  monthly  in  arrears,
commencing  thirty  (30) days  from the date  hereof.  Thereafter,  on the first
business day of each month through and including the month in which the Due Date
occurs, Borrower shall pay monthly installments of interest only.

         4.           Upon an "Event of  Default," as defined in the Bridge Loan
Agreement described below, the rate of interest accruing on the unpaid principal
balance of this Note shall  increase to fifteen  percent  (15%) per annum.  Such
default interest rate shall continue until all defaults are cured.

         5.           This Note is  subject  to the  terms of a Bridge  Loan and
Control Share Pledge and Security  Agreement  (the "Bridge Loan  Agreement")  of
even date herewith by and among the Borrower,  the  Stockholders and the Lender.
This Note is secured by collateral  pledged by the Borrower and the Stockholders
to the Lender  pursuant  to a Security  Agreement  of even date  herewith by and
among the Borrower and the Lender (the "Security Agreement"),  as well as by the
deposit  into escrow of the  Borrower  Control  Shares (as defined in the Bridge
Loan Agreement)  pursuant to the terms of a Pledge and Escrow  Agreement of even
date  herewith by and among the  Borrower,  the  Lender,  the  Stockholders  and
Gottbetter  & Partners  LLP,  as escrow  agent  (the  "Escrow  Agreement").  All
capitalized  and undefined terms herein shall have the meaning given them in the
Bridge Loan Agreement, the Security Agreement or the Escrow Agreement.

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         6.         Upon the  occurrence of an Event of Default under the Bridge
Loan  Agreement  or  the  Security   Agreement,   the  entire  principal  amount
outstanding  hereunder and all accrued interest hereon,  together with all other
sums due  hereunder,  shall,  as provided in the Bridge Loan  Agreement,  become
immediately due and payable.

         Notwithstanding  the  foregoing,  if an Event of  Default  is cured (or
waived by the Lender),  the  Borrower  shall use its best efforts to ensure that
the Merger and the Transactions are consummated.

         7.           This Note is secured by and is entitled to the benefits of
the Security Agreement.  In addition to the rights and remedies given it by this
Note and the  Security  Agreement,  the Lender  shall have all those  rights and
remedies allowed by applicable laws,  including without limitation,  the Uniform
Commercial  Code as in effect in the State of New York.  The rights and remedies
of the Lender are  cumulative  and recourse to one or more right or remedy shall
not  constitute  a waiver of the others.  The  Borrower  shall be liable for all
commercially  reasonable  costs,  expenses and  attorneys'  fees incurred by the
Lender in connection  with the collection of the  indebtedness  evidenced by the
Note.

         8.          To the extent  permitted  by  applicable  law, the Borrower
waives all rights  and  benefits  of any  statute  of  limitations,  moratorium,
reinstatement, marshalling, forbearance, valuation, stay, extension, redemption,
appraisement  and  exemption  now provided or which may hereafter by provided by
law,  both as to  itself  and as to all of its  properties,  real and  personal,
against the enforcement and collection of the indebtedness evidenced hereby.

         9.         All notices,  requests,  demands,  and other  communications
with respect  hereto  shall be in writing and shall be  delivered by hand,  sent
prepaid  by a  nationally-recognized  overnight  courier  service or sent by the
United States,  certified,  postage prepaid,  return receipt  requested,  at the
addresses  designated in the Bridge Loan  Agreement or such other address as the
parties may designate to each other in writing.

         10.         This Note or any provision  hereof may be waived,  changed,
modified or discharged  only by agreement in writing  signed by the Borrower and
the Lender.  The Borrower may not assign or transfer  its  obligation  hereunder
without the prior written consent of the Lender.

         11.        The term "the Borrower" shall include each person and entity
now or hereafter  liable  hereunder,  whether as maker,  successor,  assignee or
endorsee, each of whom shall be jointly,  severally and primarily liable for all
of the obligations set forth herein.

         12.         If any  provision of this Note shall for any reason be held
invalid or unenforceable,  such invalidity or unenforceability  shall not affect
any other  provision  of this Note,  but this Note shall be construed as if this
Note had never contained the invalid or unenforceable provision.

         13.         This Note shall be governed by and  construed in accordance
with the domestic  laws of the State of New York,  without  giving effect to any
choice of law provision or rule. Any  controversy  or dispute  arising out of or

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relating to this Note shall be settled solely and exclusively in accordance with
the provisions of the Bridge Loan Agreement and the Security Agreement, dated as
of even date herewith,  which provisions are incorporated by reference herein as
though fully set forth.

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         IN  WITNESS  WHEREOF,  the  undersigned  Borrower  has  caused  the due
execution  of this  Bridge  Loan  Promissory  Note as of the day and year  first
herein above written.

                                               BRASADA CALIFORNIA, INC.

                                               By:
                                               ---------------------------------
                                               Name:    Dennis B. Tower
                                               Title:   Chief Executive Officer

                                       4================================================================================

                          SECURITIES PURCHASE AGREEMENT

         THIS  SECURITIES  PURCHASE  AGREEMENT (this  "Agreement"),  dated as of
March , 2006, is entered into by and among Foothills  Resources,  Inc., a Nevada
corporation (the "Company"), and the Buyers listed on Schedule I attached hereto
(individually, a "Buyer" or collectively "Buyers").

                                   WITNESSETH:

         WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation  D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act");

         WHEREAS,  the parties  desire  that,  upon the terms and subject to the
conditions  contained herein,  the Company shall issue and sell to the Buyer(s),
as provided  herein,  and the Buyer(s)  shall  purchase (i) up to Three  Million
Dollars   ($3,000,000)  (the  "Purchase  Price")  principal  amount  of  secured
Convertible  Debentures  (the  "Convertible  Debentures"),  which  shall  become
convertible  into units ("Units") of the Company's  securities.  Each Unit shall
consist  of one share of the  Company's  common  stock,  par value  $0.001  (the
"Common Stock") (as converted,  the "Conversion Shares") and three quarters of a
common stock purchase  warrant  ("Warrants").  The total Purchase Price shall be
allocated  among the Buyer(s) in the respective  amounts set forth opposite each
Buyers name on Schedule I (the "Subscription Amount"); and

         WHEREAS,   all  of  the  total  principal  amount  of  the  Convertible
Debentures,  subject to the deduction of any and all fees,  shall be utilized by
the Company to make a loan (the  "Bridge  Loan") to Brasada  California,  Inc. a
Delaware corporation ("Brasada"); and

         WHEREAS,  the Company is currently  (i)  preparing to conduct a private
placement  offering  (the "PPO") of its Units,  and (ii)  negotiating  a reverse
triangular merger with Brasada (as more particularly  described in the Company's
Current  Report  on Form  8-K  filed  with the SEC on  February  17,  2006,  the
"Merger"); and

         WHEREAS,  the Convertible  Debentures shall be automatically  converted
into Units simultaneously with the closing of the Merger and the PPO; and

         WHEREAS,  the  aggregate  proceeds  of  the  sale  of  the  Convertible
Debentures  shall be held in escrow pursuant to the terms of an escrow agreement
substantially  in the  form of the  Escrow  Agreement  among  the  Company,  the
Buyer(s) and the Escrow Agent (as defined  below)  attached  hereto as Exhibit A
(the "Escrow Agreement").

         NOW,  THEREFORE,  in  consideration  of the mutual  covenants and other
agreements contained in this Agreement the Company and the Buyer(s) hereby agree
as follows:

<page>

1.       PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
         -------------------------------------------

(a)        Purchase of Convertible  Debentures.  Subject to the satisfaction (or
waiver)  of the terms and  conditions  of this  Agreement,  each  Buyer  agrees,
severally and not jointly,  to purchase at Closing (as defined herein below) and
the Company  agrees to sell and issue to each Buyer,  severally and not jointly,
at Closing,  Convertible  Debentures in amounts set forth  opposite each Buyer's
name on Schedule I hereto.  Upon  execution  hereof by a Buyer,  the Buyer shall
wire transfer the Subscription  Amount set forth opposite his name on Schedule I
in same-day funds or a check payable to  "Gottbetter & Partners,  LLP, as Escrow
Agent for Foothills Resources, Inc.", which Subscription Amount shall be held in
escrow pursuant to the terms of the Escrow Agreement and disbursed in accordance
therewith.

(b)        Closing Date. The Closing of the purchase and sale of the Convertible
Debentures shall take place at 10:00 a.m. Eastern Standard Time on or before the
fifth (5th) business day following the date hereof,  subject to  notification of
satisfaction of the conditions to the Closing set forth herein and in Sections 7
and 8 below (or such later date as is mutually  agreed to by the Company and the
Buyer(s)) (the "Closing  Date").  The Closing shall occur on the Closing Date at
the offices of Gottbetter & Partners,  LLP, 488 Madison  Avenue,  New York,  New
York 10022 (or such other place as is mutually  agreed to by the Company and the
Buyer(s)).

(c)        Escrow Arrangements;  Form of Payment. Upon execution hereof by Buyer
and pending the Closing, the Purchase Price shall be deposited in a non-interest
bearing  escrow  account with  Gottbetter  & Partners,  LLP as escrow agent (the
"Escrow Agent"),  pursuant to the terms of the Escrow Agreement.  Subject to the
satisfaction of the terms and conditions of this Agreement, on the Closing Date,
(i) the Escrow Agent shall deliver to the Company in  accordance  with the terms
of the Escrow Agreement the Purchase Price for the Convertible  Debentures to be
issued  and sold to the  Buyer(s),  and (ii) the  Company  shall  deliver to the
Buyer(s), the Convertible Debenture, duly executed on behalf of the Company.

2.       BUYER'S REPRESENTATIONS AND WARRANTIES.
         --------------------------------------

         Each Buyer represents and warrants, severally and not jointly, that:

(a)          Investment  Purpose.   Each  Buyer  is  acquiring  the  Convertible
Debentures,  and, upon  conversion  of  Convertible  Debentures,  the Buyer will
acquire  the  Conversion  Shares,  the  Warrants  and/or  Warrant  Shares,  then
issuable,  for its own account for investment  only and not with a view towards,
or for resale in  connection  with,  the public  sale or  distribution  thereof,
except  pursuant to sales  registered  or  exempted  under the  Securities  Act;
provided,  however,  that by  making  the  representations  herein,  such  Buyer
reserves  the right to dispose of the  Conversion  Shares,  the Warrants and the
Warrant  Shares  at any time in  accordance  with or  pursuant  to an  effective
registration  statement  covering such Conversion  Shares,  the Warrants and the
Warrant Shares or an available  exemption under the Securities Act. The Investor
agrees not to sell,  hypothecate or otherwise transfer the Investor's securities
unless the  securities are  registered  under the Federal and  applicable  state
securities  laws or  unless,  in the  opinion  of  counsel  satisfactory  to the
Company, an exemption from such law is available.

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<page>

(b)      Accredited  Investor  Status.  Each  Buyer is an "Accredited  Investor"
as that term is  defined in Rule 501(a)(3) of Regulation D.

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

(d)         Information.  Each Buyer and its advisors (and his or, its counsel),
if any,  have  been  furnished  with all  materials  relating  to the  business,
finances and  operations of the Company and  information  he deemed  material to
making an informed investment decision regarding his purchase of the Convertible
Debentures  and the underlying  Units,  which have been requested by such Buyer.
Each Buyer and its advisors,  if any, have been afforded the  opportunity to ask
questions  of the Company and its  management.  Neither such  inquiries  nor any
other due diligence  investigations  conducted by such Buyer or its advisors, if
any, or its representatives  shall modify, amend or affect such Buyer's right to
rely on the  Company's  representations  and  warranties  contained in Section 3
below. Each Buyer understands that its investment in the Convertible Debentures,
and upon  conversion the underlying  Units involves a high degree of risk.  Each
Buyer is in a position  regarding  the Company,  which,  based upon  employment,
family relationship or economic bargaining power, enabled and enables such Buyer
to obtain information from the Company in order to evaluate the merits and risks
of this investment. Each Buyer has sought such accounting, legal and tax advice,
as it has  considered  necessary to make an informed  investment  decision  with
respect to its acquisition of the Convertible Debentures.

(e)        No Governmental  Review. Each Buyer understands that no United States
federal  or state  agency or any other  government  or  governmental  agency has
passed  on  or  made  any  recommendation  or  endorsement  of  the  Convertible
Debentures,  the Warrants,  the Warrant Shares or the Conversion  Shares, or the
fairness or  suitability of the investment in the  Convertible  Debentures,  the
Warrants, the Warrant Shares or the Conversion Shares, nor have such authorities
passed  upon  or  endorsed  the  merits  of  the  offering  of  the  Convertible
Debentures, the Warrants, the Warrant Shares or the Conversion Shares.

(f)        Transfer or Resale.  Each Buyer understands that: (i) the Convertible
Debentures have not been and are not being  registered  under the Securities Act
or any state securities laws, and may not be offered for sale, sold, assigned or
transferred  unless (A) subsequently  registered  thereunder,  or (B) such Buyer
shall have  delivered  to the  Company an opinion  of  counsel,  in a  generally
acceptable  form,  to the effect that such  securities  to be sold,  assigned or
transferred may be sold,  assigned or transferred  pursuant to an exemption from
such  registration  requirements;  (ii)  any  sale  of such  securities  made in
reliance  on Rule 144 under the  Securities  Act (or a successor  rule  thereto)
("Rule  144")  may be made  only in  accordance  with the  terms of Rule 144 and
further,  if Rule 144 is not  applicable,  any resale of such  securities  under
circumstances  in which the seller (or the person through whom the sale is made)
may be deemed to be an  underwriter  (as that term is defined in the  Securities
Act) may require  compliance  with some other exemption under the Securities Act
or the rules and  regulations  of the SEC  thereunder;  and  (iii)  neither  the
Company nor any other person is under any obligation to register such securities
under the  Securities  Act or any state  securities  laws or to comply  with the
terms and conditions of any exemption thereunder. The Company reserves the right
to place stop transfer  instructions against the shares and certificates for the
Conversion  Shares and the Warrant Shares to the extent  specifically  set forth
under this Agreement.

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<page>

(g)          Legends.  Each Buyer  understands  that the  certificates  or other
instruments  representing the Convertible Debentures,  the Warrants, the Warrant
Shares  and  or  the  Conversion  Shares  shall  bear a  restrictive  legend  in
substantially  the  following  form  (and a stop  transfer  order  may be placed
against transfer of such stock certificates):

                  THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE HAVE NOT BEEN
                  REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED,  OR
                  APPLICABLE  STATE  SECURITIES  LAWS. THE SECURITIES  HAVE BEEN
                  ACQUIRED  SOLELY FOR  INVESTMENT  PURPOSES AND NOT WITH A VIEW
                  TOWARD  RESALE  AND  MAY  NOT  BE  OFFERED  FOR  SALE,   SOLD,
                  TRANSFERRED  OR  ASSIGNED  IN  THE  ABSENCE  OF  AN  EFFECTIVE
                  REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
                  ACT OF 1933, AS AMENDED,  OR APPLICABLE STATE SECURITIES LAWS,
                  OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
                  REGISTRATION  IS NOT  REQUIRED  UNDER  SAID ACT OR  APPLICABLE
                  STATE SECURITIES LAWS.

The legend set forth above shall be removed  and the  Company  within  three (3)
business days shall issue a certificate without such legend to the holder of the
Warrants,  Warrant  Shares and Conversion  Shares upon which it is stamped,  if,
unless otherwise  required by state securities laws, (i) the Buyer or its broker
make the necessary  representations and warranties to the transfer agent for the
Common Stock that it has complied with the prospectus  delivery  requirements in
connection  with  a  sale  transaction,  provided  the  Convertible  Debentures,
Warrants,  Warrant  Shares  and  Conversion  Shares  are  registered  under  the
Securities Act or (ii) in connection with a sale transaction,  after such holder
provides  the Company  with an opinion of counsel  satisfactory  to the Company,
which  opinion shall be in form,  substance and scope  customary for opinions of
counsel in comparable transactions, to the effect that a public sale, assignment
or transfer of the Warrants,  Warrant Shares and  Conversion  Shares may be made
without registration under the Securities Act.

(h)        Authorization,  Enforcement. This Agreement has been duly and validly
authorized,  executed  and  delivered on behalf of such Buyer and is a valid and
binding agreement of such Buyer enforceable in accordance with its terms, except
as such  enforceability  may be  limited  by  general  principles  of  equity or
applicable bankruptcy, insolvency,  reorganization,  moratorium, liquidation and
other  similar laws  relating to, or affecting  generally,  the  enforcement  of
applicable creditors' rights and remedies.

                                       4

<page>

(i)        Receipt of Documents.  Each Buyer and his or its counsel has received
and read in their entirety: (i) this Agreement and each representation, warranty
and covenant set forth  herein;  (ii) all due  diligence  and other  information
necessary  to verify the  accuracy  and  completeness  of such  representations,
warranties  and  covenants;  and (iii) it has received  answers to all questions
each Buyer submitted to the Company regarding an investment in the Company;  and
each  Buyer has relied on the  information  contained  therein  and has not been
furnished any other documents, literature, memorandum or prospectus.

(j)          Due  Formation  of  Corporate  and  Other  Buyers.  If a Buyer is a
corporation,  trust,  partnership  or  other  entity  that is not an  individual
person, it has been formed and validly exists and has not been organized for the
specific purpose of purchasing the Convertible  Debentures and is not prohibited
from doing so.

(k)        Trading  Activities.  The Buyer's trading  activities with respect to
the Company's  Common Stock shall be in compliance  with all applicable  federal
and state  securities  laws, rules and regulations and the rules and regulations
of the principal market on which the Company's Common Stock is listed or traded.
Neither the Buyer nor its  affiliates  has an open short  position in the Common
Stock of the Company and,  except as set forth  below,  the Buyer shall not, and
shall not cause any of its affiliates  under common  control with the Buyer,  to
engage  in any  short  sale  as  defined  in  any  applicable  SEC  or  National
Association of Securities Dealers rules on any hedging transactions with respect
to the Common Stock until the earlier to occur of (i) the third  anniversary  of
the Closing Date and (ii) the Buyer(s) no longer own a principal  balance of the
Convertible Debentures.  Without limiting the foregoing, the Buyer agrees not to
engage in any naked short  transactions  in excess of the amount of shares owned
(or an offsetting long position) by Buyer.

(l)        No Legal Advice From the Company. Each Buyer acknowledges that it had
the  opportunity to review this Agreement and the  transactions  contemplated by
this  Agreement  with  his or its  own  legal  counsel  and  investment  and tax
advisors.  Each Buyer is relying  solely on such counsel and advisors and not on
any statements or representations  of the Company or any of its  representatives
or agents for legal,  tax or investment  advice with respect to this investment,
the  transactions  contemplated  by this Agreement or the securities laws of any
jurisdiction.

(m)        No Group Participation. Each Buyer and its affiliates is not a member
of any  group,  nor is any  Buyer  acting  in  concert  with any  other  person,
including any other Buyer,  with respect to its  acquisition of the  Convertible
Debentures, Warrants, the Warrant Shares or Conversion Shares.

(n)        Each Buyer  understands,  acknowledges and agrees that the Conversion
Shares and the Warrant Shares are "restricted  securities" within the meaning of
Rule 144 promulgated under the Act. Each Buyer further understands, acknowledges
and  agrees  that (a) such  shares  can and will  only be  resold  by the  Buyer
pursuant  to (i) an  effective  registration  statement  under the Act where the
prospectus  delivery  requirements are complied with or (ii) under an applicable
exemption from registration under the Act, and (b) it will not sell or otherwise
dispose  of or  transfer  the  Conversion  Shares or the  Warrant  Shares or any
interest  therein in a transaction that is part of a plan or scheme to avoid the
registration requirements of the Act.

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<page>

(o)        Each Buyer understands that the Company, its officers,  directors and
agents  are  relying  on the  representations  of the  Buyers  set forth in this
Article 2 in order to determine  compliance with  applicable  securities laws in
connection with the sale and issuance of the shares to the Buyer.

3.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
         ---------------------------------------------

         The Company  represents and warrants to each of the Buyers that, except
as set forth in the Disclosure Schedule attached hereto:

(a)        Organization and Qualification.  The Company and its subsidiaries are
corporations duly organized and validly existing in good standing under the laws
of the  jurisdiction  in which  they are  incorporated,  and have the  requisite
corporate  power to own their  properties  and to carry on their business as now
being conducted. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the  business  conducted  by it makes such  qualification
necessary,  except to the extent  that the failure to be so  qualified  or be in
good standing would not have a Material Adverse Effect, as defined below.

(b)        Authorization,  Enforcement,  Compliance with Other Instruments.  (i)
The Company has the  requisite  corporate  power and authority to enter into and
perform  this  Agreement  and  the  Escrow  Agreement  and all  other  documents
necessary  or  desirable  to  effect  the   transactions   contemplated   hereby
(collectively  the  "Transaction   Documents")  and  to  issue  the  Convertible
Debentures,  the  Warrants,  the  Warrant  Shares and the  Conversion  Shares in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
the  Transaction  Documents  by the  Company and the  consummation  by it of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance of the Convertible Debentures, the Warrants, the Warrant Shares and the
Conversion  Shares and the  reservation  for  issuance  and the  issuance of the
Conversion  Shares and the Warrant Shares  issuable upon  conversion or exercise
thereof,  have been duly  authorized by the Company's  Board of Directors and no
further  consent or  authorization  is  required  by the  Company,  its Board of
Directors or its  stockholders,  (iii) the Transaction  Documents have been duly
executed and delivered by the Company, (iv) the Transaction Documents constitute
the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms,  except as such enforceability may be limited by
general   principles   of   equity   or   applicable   bankruptcy,   insolvency,
reorganization,   moratorium,  liquidation  or  similar  laws  relating  to,  or
affecting generally, the enforcement of creditors' rights and remedies.

(c)        Capitalization.  The authorized capital stock of the Company consists
of 100,000,000  shares of Common Stock and 1,000,000  shares of preferred stock.
As of the Closing Date hereof, the Company has 39,356,189 shares of Common Stock
issued and outstanding and 0 shares of preferred stock outstanding.  All of such
outstanding shares have been duly authorized,  validly issued and are fully paid
and nonassessable.  Except as disclosed in the Disclosure Schedule, no shares of
Common Stock are subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by the Company.  Except as disclosed
in the Disclosure Schedule,  as of the date of this Agreement,  (i) there are no
outstanding  options,   warrants,  scrip,  rights  to  subscribe  to,  calls  or

                                       6

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commitments  of any  character  whatsoever  relating to, or securities or rights
convertible  into,  any  shares of  capital  stock of the  Company or any of its
subsidiaries, or contracts, commitments, understandings or arrangements by which
the  Company  or  any of  its  subsidiaries  is or may  become  bound  to  issue
additional  shares of capital stock of the Company or any of its subsidiaries or
options,  warrants,  scrip,  rights to subscribe to, calls or commitments of any
character  whatsoever relating to, or securities or rights convertible into, any
shares of capital  stock of the Company or any of its  subsidiaries,  (ii) there
are no  outstanding  debt  securities  and  (iii)  there  are no  agreements  or
arrangements  under which the Company or any of its subsidiaries is obligated to
register the sale of any of their securities under the Securities Act (except in
connection  with the  Merger  and the PPO),  and (iv)  there are no  outstanding
registration  statements and there are no outstanding  comment  letters from the
SEC or any other  regulatory  agency.  There are no  securities  or  instruments
containing  anti-dilution  or similar  provisions  that will be triggered by the
issuance of the  Convertible  Debentures  as  described in this  Agreement.  The
Convertible  Debentures,  Warrants,  Warrant Shares and  Conversion  Shares when
issued,  will be free and clear of all pledges,  liens,  encumbrances  and other
restrictions (other than those arising under federal or state securities laws as
a result of the issuance of the Convertible Debentures).  Except as set forth on
the  Disclosure  Schedules,  no co-sale  right,  right of first refusal or other
similar  right  exists with  respect to the  Convertible  Debentures,  Warrants,
Warrant Shares and the Conversion  Shares or the issuance and sale thereof.  The
issue and sale of the Convertible Debentures,  Warrants,  Warrant Shares and the
Conversion Shares will not result in a right of any holder of Company securities
to  adjust  the  exercise,  conversion,  exchange  or  reset  price  under  such
securities.  The Company has  furnished to the Buyer true and correct  copies of
the Company's  Certificate of Incorporation,  as amended and as in effect on the
date hereof (the "Certificate of Incorporation"),  and the Company's By-laws, as
in effect on the date hereof (the  "By-laws"),  and the terms of all  securities
convertible  into or exercisable for Common Stock and the material rights of the
holders  thereof in respect thereto other than stock options issued to employees
and consultants.

(d)          Issuance  of  Securities.   The  Convertible  Debentures  are  duly
authorized and, upon issuance in accordance with the terms hereof, shall be duly
issued, fully paid and nonassessable, are free from all taxes, liens and charges
with respect to the issue thereof.  The Conversion Shares and the Warrant Shares
have been duly  authorized  and  reserved  for  issuance,  based on the  initial
conversion price. Upon conversion or exercise in accordance with the Transaction
Documents,  the  Conversion  Shares and the Warrant  Shares will be duly issued,
fully paid and nonassessable.

(e)        No Conflicts.  Except as disclosed in the  Disclosure  Schedule,  the
execution,  delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby will
not  (i)  result  in a  violation  of  the  Certificate  of  Incorporation,  any
certificate of designations of any outstanding  series of preferred stock of the
Company or the  By-laws or (ii)  conflict  with or  constitute  a default (or an
event which with notice or lapse of time or both would become a default)  under,
or  give to  others  any  rights  of  termination,  amendment,  acceleration  or
cancellation of, any agreement,  indenture or instrument to which the Company or
any of its  subsidiaries  is a party, or result in a violation of any law, rule,
regulation,  order,  judgment or decree (including  federal and state securities
laws and regulations  and the rules and regulations of The National  Association

                                       7

<page>

of Securities  Dealers Inc.'s OTC Bulletin Board (the "OTC") on which the Common
Stock is quoted)  applicable  to the  Company or any of its  subsidiaries  or by
which any property or asset of the Company or any of its  subsidiaries  is bound
or affected  except for those which could not  reasonably  be expected to have a
material  adverse  effect  on the  assets,  business,  condition  (financial  or
otherwise),  results of  operations  or future  prospects of the Company and its
subsidiaries taken as a whole (a "Material Adverse Effect"). Except as disclosed
in the Disclosure Schedule,  and those which could not reasonably be expected to
have a material  adverse  effect on the  Company,  neither  the  Company nor its
subsidiaries  is in violation of any term of or in default under its Certificate
of  Incorporation  or  By-laws  or  their  organizational  charter  or  by-laws,
respectively,  or any  material  contract,  agreement,  mortgage,  indebtedness,
indenture,  instrument,  judgment,  decree  or  order  or any  statute,  rule or
regulation  applicable to the Company or its  subsidiaries.  The business of the
Company and its subsidiaries is not being conducted,  and shall not be conducted
in violation of any material law,  ordinance,  or regulation of any governmental
entity.  Except as  specifically  contemplated by this Agreement and as required
under the Securities Act and any applicable  state  securities laws, the Company
is not  required to obtain any consent,  authorization  or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under or contemplated by this
Agreement  or the  Escrow  Agreement  in  accordance  with the  terms  hereof or
thereof.   Except  as  disclosed  in  the  Disclosure  Schedule,  all  consents,
authorizations,  orders, filings and registrations which the Company is required
to obtain  pursuant to the preceding  sentence have been obtained or effected on
or prior to the date hereof. The Company and its subsidiaries are unaware of any
facts or circumstance, which might give rise to any of the foregoing.

(f)        Financial  Statements.  As of their  respective  dates, the financial
statements  of the Company  included in the Company's  public  filings (the "SEC
Filings") with the SEC (the  "Financial  Statements")  for the two most recently
completed fiscal years and any subsequent  interim period complied as to form in
all material respects with applicable accounting  requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting  principles,
consistently  applied,  during  the  periods  involved  (except  (i)  as  may be
otherwise  indicated in such Financial  Statements or the notes thereto, or (ii)
in the case of  unaudited  interim  statements,  to the extent  they may exclude
footnotes or may be condensed or summary  statements) and, fairly present in all
material respects the financial  position of the Company as of the dates thereof
and the  results of its  operations  and cash flows for the  periods  then ended
(subject,  in the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments).  No other  information  provided by or on behalf of the Company to
the Buyer which is not included in the Disclosure Schedule,  including,  without
limitation,  information  referred  to in this  Agreement,  contains  any untrue
statement of a material  fact or omits to state any material  fact  necessary in
order to make the statements  therein,  in the light of the circumstances  under
which they were made, not misleading.

(g)        Absence of Litigation. Except as disclosed in the Disclosure Schedule
or  the  SEC  Filings,  there  is  no  action,  suit,  proceeding,   inquiry  or
investigation  before  or  by  any  court,  public  board,   government  agency,
self-regulatory  organization  or body pending against or affecting the Company,
the Common Stock or any of the Company's  subsidiaries,  wherein an  unfavorable
decision,  ruling  or  finding  would  (i)  adversely  affect  the  validity  or
enforceability  of, or the  authority  or ability of the  Company to perform its
obligations under, this Agreement or any of the documents  contemplated  herein,
or (ii)  except  as  expressly  disclosed  in the  Disclosure  Schedule,  have a
Material Adverse Effect.

                                       8

<page>

(h)          Acknowledgment   Regarding  Buyer's  Purchase  of  the  Convertible
Debentures. The Company acknowledges and agrees that each Buyer is acting solely
in the capacity of an arm's length  purchaser with respect to this Agreement and
the transactions contemplated hereby. The Company further acknowledges that each
Buyer is not acting as a financial  advisor or  fiduciary  of the Company (or in
any  similar  capacity)  with  respect to this  Agreement  and the  transactions
contemplated  hereby  and  any  advice  given  by  such  Buyer  or any of  their
respective  representatives  or agents in connection with this Agreement and the
transactions  contemplated  hereby is merely incidental to such Buyer's purchase
of  the  Convertible  Debentures,  the  Warrants,  the  Warrant  Shares  or  the
Conversion  Shares.  The  Company  further  represents  to the  Buyers  that the
Company's  decision to enter into this  Agreement  has been based  solely on the
independent evaluation by the Company and its representatives.

(i)          No  General  Solicitation.  Neither  the  Company,  nor  any of its
affiliates,  nor any person  acting on its or their  behalf,  has engaged in any
form of general  solicitation  or general  advertising  (within  the  meaning of
Regulation  D)  in  connection  with  the  offer  or  sale  of  the  Convertible
Debentures, the Warrants, the Warrant Shares or the Conversion Shares.

(j)          No  Integrated  Offering.  Neither  the  Company,  nor  any  of its
affiliates,  nor any  person  acting on its or their  behalf  has,  directly  or
indirectly,  made any offers or sales of any security or solicited any offers to
buy any security,  under  circumstances  that would require  registration of the
Convertible  Debentures,  the  Warrants,  the Warrant  Shares or the  Conversion
Shares  under the  Securities  Act or cause  this  offering  of the  Convertible
Debentures,  the Warrants,  the Warrant  Shares or the  Conversion  Shares to be
integrated  with prior  offerings by the Company for purposes of the  Securities
Act.

(k)        Employee  Relations.  Neither the Company nor any of its subsidiaries
is involved in any labor  dispute nor, to the knowledge of the Company or any of
its subsidiaries,  is any such dispute threatened.  None of the Company's or its
subsidiaries'  employees  is a  member  of a  union  and  the  Company  and  its
subsidiaries believe that their relations with their employees are good.

(l)      Intellectual  Property   Rights.  The   Company   has   no  proprietary
intellectual property.

(m)      Environmental Laws.

(i)         Each of the  Company  and its  subsidiaries  has  complied  with all
applicable  Environmental  Laws (as defined  below),  except for  violations  of
Environmental  Laws that,  individually  or in the  aggregate,  have not had and
would not reasonably be expected to have a Material Adverse Effect.  There is no
pending  or, to the  knowledge  of the  Company,  threatened  civil or  criminal
litigation,  written notice of violation,  formal administrative  proceeding, or
investigation, inquiry or information request, relating to any Environmental Law
involving  the  Company or any  subsidiary,  except for  litigation,  notices of
violations,  formal administrative  proceedings or investigations,  inquiries or

                                       9

<page>

information  requests that,  individually or in the aggregate,  have not had and
would not reasonably be expected to have a Material Adverse Effect. For purposes
of this Agreement,  "Environmental  Law" means any federal,  state or local law,
statute,  rule or  regulation or the common law relating to the  environment  or
occupational  health and  safety,  including  without  limitation  any  statute,
regulation,  administrative  decision  or  order  pertaining  to (i)  treatment,
storage,  disposal,  generation  and  transportation  of  industrial,  toxic  or
hazardous  materials or substances or solid or hazardous waste;  (ii) air, water
and noise pollution; (iii) groundwater and soil contamination;  (iv) the release
or threatened  release into the  environment of  industrial,  toxic or hazardous
materials  or  substances,  or  solid  or  hazardous  waste,  including  without
limitation  emissions,  discharges,  injections,  spills,  escapes or dumping of
pollutants,  contaminants or chemicals;  (v) the protection of wild life, marine
life and wetlands,  including  without  limitation all endangered and threatened
species;  (vi)  storage  tanks,  vessels,  containers,  abandoned  or  discarded
barrels, and other closed receptacles;  (vii) health and safety of employees and
other  persons;  and  (viii)  manufacturing,  processing,  using,  distributing,
treating,  storing,  disposing,  transporting or handling of materials regulated
under any law as  pollutants,  contaminants,  toxic or  hazardous  materials  or
substances  or oil or petroleum  products or solid or hazardous  waste.  As used
above, the terms "release" and "environment" shall have the meaning set forth in
the  Comprehensive  Environmental  Response,  Compensation  and Liability Act of
1980, as amended ("CERCLA").

(ii)  To the  knowledge  of  the  Company  there  is no  material  environmental
liability with respect to any solid or hazardous waste transporter or treatment,
storage  or  disposal  facility  that  has  been  used  by  the  Company  or any
subsidiary.

(iii) The Company and its subsidiaries  (i) have received all permits,  licenses
or other  approvals  required  of them under  applicable  Environmental  Laws to
conduct their  respective  businesses and (ii) are in compliance  with all terms
and conditions of any such permit, license or approval.

(n)      Title. The Company does not own or lease any real or personal property.

(o)          Internal  Accounting   Controls.   The  Company  and  each  of  its
subsidiaries  maintain a system of internal  accounting  controls  sufficient to
provide  reasonable  assurance that (i)  transactions are executed in accordance
with  management's  general or specific  authorizations,  (ii)  transactions are
recorded  as  necessary  to  permit  preparation  of  financial   statements  in
conformity with generally accepted  accounting  principles and to maintain asset
accountability,  and (iii) the recorded  amounts for assets is compared with the
existing  assets at reasonable  intervals and  appropriate  action is taken with
respect to any differences.

(p)          No  Material  Adverse  Breaches,  etc.  Except  as set forth in the
Disclosure  Schedule or in the SEC  Filings,  neither the Company nor any of its
subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment,  decree,  order,  rule or regulation  which in the judgment of the
Company's  officers has or is expected in the future to have a Material  Adverse
Effect.  Except as set forth in the  Disclosure  Schedule or in the SEC Filings,
neither the Company nor any of its  subsidiaries is in breach of any contract or
agreement  which breach,  in the judgment of the Company's  officers,  has or is
expected to have a Material Adverse Effect.

                                       10

<page>

(q)         Tax  Status.  Except as set forth in the  Disclosure  Schedule,  the
Company  and each of its  subsidiaries  has made and filed all federal and state
income and all other tax  returns,  reports  and  declarations  required  by any
jurisdiction  to which it is subject and (unless and only to the extent that the
Company  and each of its  subsidiaries  has set  aside on its  books  provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has paid
all taxes and other  governmental  assessments  and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except  those  being  contested  in good  faith  and has set  aside on its books
provision  reasonably  adequate  for  the  payment  of  all  taxes  for  periods
subsequent to the periods to which such returns,  reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction,  and the officers of the Company know of no basis
for any such claim.

(r)        Certain Transactions.  Except as set forth in the Disclosure Schedule
or the SEC Filings,  and except for arm's length transactions  pursuant to which
the Company makes payments in the ordinary course of business upon terms no less
favorable  than  the  Company  could  obtain  from  third  parties,  none of the
officers,  directors,  or  employees  of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the  furnishing  of services to or by,  providing for rental of real or personal
property to or from,  or  otherwise  requiring  payments to or from any officer,
director or such employee or, to the knowledge of the Company,  any corporation,
partnership,  trust or other entity in which any officer,  director, or any such
employee  has a  substantial  interest  or is an officer,  director,  trustee or
partner.

(s)        Fees and Rights of First  Refusal.  The Company is not  obligated  to
offer the  securities  offered  hereunder on a right of first  refusal  basis or
otherwise to any third parties including,  but not limited to, current or former
stockholders  of the  Company,  underwriters,  brokers,  agents  or other  third
parties.

(t)        Reliance. The Company acknowledges that the Buyers are relying on the
representations  and  warranties  made by the  Company  hereunder  and that such
representations and warranties are a material inducement to the Buyer purchasing
the Convertible  Debentures.  The Company further acknowledges that without such
representations  and warranties of the Company made hereunder,  the Buyers would
not enter into this Agreement.

(u)        Anti-Takeover  Provision. The Company and its Board of Directors have
taken all necessary action, if any, in order to render  inapplicable any control
share acquisition, business combination, poison pill (including any distribution
under a rights  agreement) or other similar  anti-takeover  provision  under the
Company's  certificate of  incorporation  (or similar charter  documents) or the
laws of its jurisdiction of incorporation  that is or could become applicable to
the  Buyers  as a  result  of  the  Buyers  and  the  Company  fulfilling  their
obligations or exercising their rights under this Agreement,  including  without
limitation  the  Company's  issuance of the  Convertible  Debentures,  Warrants,
Warrant Shares and Conversion Shares and the Buyer's ownership thereof.

                                       11

<page>

4.       COVENANTS.
         ---------

(a)      Best  Efforts.  Each party  shall  use   its   best  efforts  timely to
satisfy  each of the  conditions  to be satisfied by it as provided in  Sections
5 and 6 of this Agreement.

(b)      Form D. The  Company  agrees to file a   Form D   with  respect  to the
Convertible  Debentures  as required  under  Regulation  D and to provide a copy
thereof to each Buyer  promptly  after such  filing.  The Company  shall,  on or
before the  Closing  Date,  take such  action as the  Company  shall  reasonably
determine is  necessary to qualify the  Convertible  Debentures,  Warrants,  the
Warrant Shares and Conversion Shares, or obtain an exemption for the Convertible
Debentures,  Warrants,  the Warrant Shares and Conversion Shares for sale to the
Buyers at the Closing pursuant to this Agreement under applicable  securities or
"Blue Sky" laws of the states of the United States,  and shall provide  evidence
of any such action so taken to the Buyers on or prior to the Closing Date.

(c)      Reporting  Status.  Until the earlier  of (i) the date as  of which the
Buyer(s) may sell all of the Warrants, the Warrant Shares, and Conversion Shares
without restriction pursuant to Rule 144(k) promulgated under the Securities Act
(or successor  thereto),  or (ii) the date on which (A) the Buyer(s)  shall have
sold all the Warrants,  the Warrant Shares and Conversion Shares and (B) none of
the Convertible  Debentures are outstanding,  the Company shall file in a timely
manner all reports  required to be filed with the SEC pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the regulations of the
SEC  thereunder,  and the Company  shall not  terminate  its status as an issuer
required to file reports  under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would otherwise permit such termination.

(d)      Use of Proceeds.  The Company shall use the proceeds from the sale of
the  Convertible  Debentures to make the Bridge Loan to Brasada.

(e)      Reservation of Shares.  The Company shall take all action reasonably
necessary  to at all times have  authorized,  and  reserved  for the  purpose of
issuance, that number of shares of Common Stock equal to equal to the sum of (i)
the number of shares of Common Stock into which the  Convertible  Debentures are
convertible  from time to time based upon a  conversion  price (the  "Conversion
Price") of $0.70 per Unit,  plus (ii) the  number of shares of Common  Stock for
which the  Warrants  are  exercisable  from time to time based upon an  exercise
price (the "Exercise Price") per whole Warrant of $1.00 per share.

(f)      Listings or  Quotation.  The Company  shall use its best  efforts to
maintain  the listing or quotation of its Common Stock upon the OTCBB.

(g)      Corporate Existence.  Except as set forth on the Disclosure Schedules
so long as any of the Convertible  Debentures  remain  outstanding,  the Company
shall  not  directly  or  indirectly  consummate  any  merger,   reorganization,
restructuring,  reverse stock split consolidation,  sale of all or substantially
all of the Company's assets or any similar  transaction or related  transactions
(each  such  transaction,  an  "Organizational  Change")  unless,  prior  to the

                                       12
<page>

consummation  of an  Organizational  Change,  the  Company  obtains  the written
consent of each  Buyer.  In any such case,  the  Company  will make  appropriate
provision with respect to such holders'  rights and interests to insure that the
provisions of this Section 4(i) will thereafter be applicable to the Convertible
Debentures.  The  provisions  of this  Section 4(g) shall be  inapplicable  with
respect to any Orginizational Change effected in connection with the Merger.

(h)        Resales Absent Effective Registration  Statement.  Each of the Buyers
understand  and   acknowledge   that  (i)  this  Agreement  and  the  agreements
contemplated  hereby may require  the  Company to issue and  deliver  Conversion
Shares  or  Warrant  Shares  to  the  Buyers  with  legend   restricting   their
transferability  under the Securities  Act, and (ii) it is aware that resales of
such Conversion  Shares or Warrant Shares may not be made unless, at the time of
resale,  there is an effective  registration  statement under the Securities Act
covering such Buyer's resale(s) or an applicable exemption from registration.

5.       CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
         ----------------------------------------------

         The  obligation  of  the  Company  hereunder  to  issue  and  sell  the
Convertible  Debentures  to  the  Buyer(s)  at the  Closing  is  subject  to the
satisfaction,  at  or  before  the  Closing  Date,  of  each  of  the  following
conditions,  provided that these  conditions  are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:

(a)      Each Buyer shall have executed the Transaction Documents and delivered
them to the Company.

(b)      The  Buyer(s)  shall have  delivered to the Escrow Agent the Purchase
Price for Convertible Debentures in respective amounts as set forth next to each
Buyer as outlined on Schedule I attached  hereto and the Escrow Agent shall have
delivered  the net  proceeds  to the  Company by wire  transfer  of  immediately
available U.S. funds pursuant to the wire instructions  provided by the Company;
it being understood that the sale of the Convertible  Debentures shall not close
unless a minimum of  $500,000  principal  amount of  Convertible  Debentures  is
subscribed for.

(c)      The  representations and warranties of the Buyer(s) contained in this
Agreement shall be true and correct in all material respects as of the date when
made  and as of the  Closing  Date  as  though  made at that  time  (except  for
representations  and  warranties  that  speak as of a  specific  date),  and the
Buyer(s) shall have performed,  satisfied and complied in all material  respects
with the covenants,  agreements and conditions  required by this Agreement to be
performed, satisfied or complied with by the Buyer(s) at or prior to the Closing
Date.

6.       CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
         ------------------------------------------------

                  The  obligation  of the  Buyer(s)  hereunder  to purchase  the
Convertible  Debentures  at the  Closing is subject to the  satisfaction,  at or
before the Closing Date, of each of the following conditions:

                                       13
<page>

(i)      The Company shall have executed the Transaction Documents and delivered
the same to the Buyer(s).

(ii)  The  representations  and  warranties  of the  Company  contained  in this
Agreement  shall be true and  correct in all  material  respects  (except to the
extent that any of such  representations  and warranties is already qualified as
to  materiality  in Section 3 above,  in which case,  such  representations  and
warranties  shall be true and correct without further  qualification)  as of the
date when made and as of the Closing  Date as though  made at that time  (except
for  representations  and  warranties  that speak as of a specific date) and the
Company shall have  performed,  satisfied and complied in all material  respects
with the covenants,  agreements and conditions  required by this Agreement to be
performed,  satisfied or complied with by the Company at or prior to the Closing
Date. If requested by the Buyer,  the Buyer shall have  received a  certificate,
executed by the  President of the Company,  dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably  requested by
the  Buyer  including,  without  limitation  an update  as of the  Closing  Date
regarding the representation contained in Section 3(c) above.

(iii) The  Company  shall  have  executed  and  delivered  to the  Buyer(s)  the
Convertible  Debentures  in the  respective  amounts  set  forth  opposite  each
Buyer(s) name on Schedule I attached  hereto and the Warrants in the  respective
numbers set forth opposite each Buyer(s) name on Schedule I attached hereto.

(iv)     The Buyer(s) shall have received an opinion  of   counsel   in a   form
reasonably satisfactory to the Buyer(s).

(v)      The Company shall have  provided to   the Buyer a  certificate  of good
standing  from the  Secretary  of State  from the state in which the  Company is
incorporated.

(vi)     The Company shall have reserved out of its  authorized   and   unissued
Common Stock,  solely for the purpose  of   effecting   the  conversion  of  the
Convertible Debentures, sufficient shares of  Common   Stock   to   effect   the
conversion of all of the Convertible Debentures'   and   the   exercise   of all
Warrants.

7.       INDEMNIFICATION.
         ---------------

(a)      In  consideration  of the  Buyer's  execution  and  delivery  of this
Agreement  and  acquiring  the  Convertible  Debentures,  the  Warrants  and the
Conversion  Shares  hereunder,  and in  addition to all of the  Company's  other
obligations under this Agreement,  the Company shall defend, protect,  indemnify
and  hold  harmless  the  Buyer(s)  and each  other  holder  of the  Convertible
Debentures,  the Warrants and the Conversion  Shares, and all of their officers,
directors,  employees and agents (including,  without limitation, those retained
in  connection   with  the   transactions   contemplated   by  this   Agreement)
(collectively,  the "Buyer  Indemnitees")  from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith  (irrespective of whether any such
Buyer Indemnitee is a party to the action for which indemnification hereunder is
sought),  and  including  reasonable  attorneys'  fees  and  disbursements  (the
"Indemnified Liabilities"),  incurred by the Buyer Indemnitees or any of them as

                                       14
<page>

a  result   of,  or  arising   out  of,  or   relating   to  (a)  any   material
misrepresentation  or material breach of any  representation or warranty made by
the  Company  in the  Transaction  Documents,  (b) any  material  breach  of any
covenant,  agreement or obligation of the Company  contained in the  Transaction
Documents,  or (c) any cause of action,  suit or claim  brought or made  against
such  Indemnitee and arising out of or resulting  from the execution,  delivery,
performance or enforcement of this Agreement or any other  Transaction  Document
executed  pursuant  hereto by any of the  Indemnities.  To the  extent  that the
foregoing  undertaking by the Company may be unenforceable  for any reason,  the
Company shall make the maximum  contribution to the payment and  satisfaction of
each of the Indemnified Liabilities, which is permissible under applicable law.

(b)        In  consideration  of the  Company's  execution  and delivery of this
Agreement,  and in addition to all of the Buyer's other  obligations  under this
Agreement,  the Buyer shall  defend,  protect,  indemnify  and hold harmless the
Company and all of its officers,  directors,  employees  and agents  (including,
without   limitation,   those  retained  in  connection  with  the  transactions
contemplated by this Agreement)  (collectively,  the "Company Indemnitees") from
and  against  any  and  all  Indemnified  Liabilities  incurred  by the  Company
Indemnitees or any of them as a result of, or arising out of, or relating to (a)
any  misrepresentation  or breach of any  representation or warranty made by the
Buyer(s) in this Agreement,  or any other  Transaction  Document executed by the
Buyer,  (b) any breach of any covenant,  agreement or obligation of the Buyer(s)
contained in this Agreement,  or any other Transaction  Document executed by the
Buyer,  or (c) any cause of action,  suit or claim  brought or made against such
Company  Indemnitee  based on material  misrepresentations  or due to a material
breach and arising out of or resulting from the execution, delivery, performance
or enforcement of the Transaction  Docuemtns by any of the Buyers. To the extent
that the  foregoing  undertaking  by each  Buyer  may be  unenforceable  for any
reason,  each Buyer  shall make the  maximum  contribution  to the  payment  and
satisfaction of each of the Indemnified Liabilities,  which is permissible under
applicable law.

8.       GOVERNING LAW: MISCELLANEOUS.
         ----------------------------

(a)      Governing Law. This Agreement shall be governed by and  interpreted  in
accordance  with  the  laws of the  State  of New  York  without  regard  to the
principles  of  conflict  of laws.  The  parties  further  agree that any action
between them shall be heard exclusively in federal or state court sitting in the
New York County,  New York, and expressly  consent to the jurisdiction and venue
of the  Supreme  Court of New York,  sitting  in New York  County and the United
States District Court for the Southern District of New York for the adjudication
of any civil action asserted pursuant to this Paragraph.

(b)      Counterparts. This Agreement may be executed in two  or  more identical
counterparts,  all of which shall be considered  one and the same  agreement and
shall  become  effective  when  counterparts  have been signed by each party and
delivered to the other party.  In the event any  signature  page is delivered by
facsimile transmission,  the party using such means of delivery shall cause four
(4) additional  original executed signature pages to be physically  delivered to
the other party within five (5) days of the execution and delivery hereof.

                                       15
<page>

(c)      Headings.  The headings of   this  Agreement  are  for  convenience  of
reference and shall not form part of, or affect  the   interpretation of,   this
Agreement.

(d)      Severability.  If any provision of this   Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction  or the  validity  or  enforceability  of  any  provision  of  this
Agreement in any other jurisdiction.

(e)      Entire  Agreement,  Amendments.  This Agreement  supersedes all other
prior oral or written  agreements  between  the  Buyer(s),  the  Company,  their
affiliates  and  persons  acting on their  behalf  with  respect to the  matters
discussed  herein,  and this  Agreement and the  instruments  referenced  herein
contain  the entire  understanding  of the parties  with  respect to the matters
covered  herein and therein  and,  except as  specifically  set forth  herein or
therein,  neither the Company nor any Buyer makes any representation,  warranty,
covenant or  undertaking  with  respect to such  matters.  No  provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.

(f)       Notices.  Any notices,  consents,  waivers,  or other  communications
required or permitted to be given under the terms of this  Agreement  must be in
writing  and will be  deemed  to have  been  delivered  (i) upon  receipt,  when
delivered personally; (ii) upon confirmation of receipt, when sent by facsimile;
(iii) upon receipt when sent by U.S.  certified mail, return receipt  requested,
or  (iv)  one (1) day  after  deposit  with a  nationally  recognized  overnight
delivery  service,  in each case properly  addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:

If to the Company, to:        Foothills Resources, Inc.
                              Candiana Lodge, Wellfield C1, Coads Green
                              Launceston, Cornwall, England
                              Attention:        J. Earl Terris
                              Telephone:        (011)441566782199
                              Facsimile:        (011)566782214

With a copy to:               Gottbetter & Partners, LLP
                              488 Madison Avenue, 12th Floor
                              New York, New York 10022
                              Adam S. Gottbetter, Esq.
                              Telephone: 212-400-6900
                              Facsimile: 212-400-6901

         If to the Buyer(s),  to its address and facsimile number on Schedule I,
with copies to the Buyer's  counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written  notice to the other party of any change in
address or facsimile number.

(g)      Successors  and Assigns.  This  Agreement  shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
Neither the Company nor any Buyer shall  assign this  Agreement or any rights or
obligations  hereunder  without  the prior  written  consent of the other  party
hereto.

                                       16
<page>

(h)      No Third  Party  Beneficiaries.  This  Agreement  is intended  for the
benefit of the parties  hereto and their respective  permitted  successors   and
assigns, and is not for the benefit of, nor    may   any   provision   hereof be
enforced by, any other person.

(i)      Survival. Unless this Agreement is terminated under Section 8(l), the
representations  and  warranties  of the Company and the  Buyer(s)  contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 8,
and the  indemnification  provisions  set forth in Section 7, shall  survive the
Closing  for a  period  of two  (2)  years  following  the  date  on  which  the
Convertible  Debentures are converted in full. The Buyer(s) shall be responsible
only  for  its  own  representations,   warranties,   agreements  and  covenants
hereunder.

(j)      Publicity.  The  Company  and the  Buyer(s)  shall have the right to
approve,  before  issuance any press release or any other public  statement with
respect to the  transactions  contemplated  hereby made by any party;  provided,
however,  that the Company shall be entitled,  without the prior approval of the
Buyer(s),  to issue any press release or other public disclosure with respect to
such  transactions  required  under  applicable  securities  or  other  laws  or
regulations  (the Company  shall use its best efforts to consult the Buyer(s) in
connection with any such press release or other public  disclosure  prior to its
release  and  Buyer(s)  shall  be  provided  with a copy  thereof  upon  release
thereof).

(k)       Further  Assurances.  Each party shall do and perform, or cause to be
done and  performed,  all such  further acts and things,  and shall  execute and
deliver all such other agreements,  certificates,  instruments and documents, as
the other  party may  reasonably  request  in order to carry out the  intent and
accomplish  the  purposes  of  this  Agreement  and  the   consummation  of  the
transactions contemplated hereby.

(l)        Termination.  In the event that the Closing  shall not have occurred
with  respect to the Buyers on or before  five (5)  business  days from the date
hereof due to the Company's or the Buyer's failure to satisfy the conditions set
forth in Sections 5 and 6 above (and the non-breaching  party's failure to waive
such unsatisfied condition(s)), the non-breaching party shall have the option to
terminate this  Agreement  with respect to such breaching  party at the close of
business on such date without liability of any party to any other party.

(m)      No Strict  Construction.  The language used in this Agreement will be
deemed to be the language  chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

(n)      Remedies.  In  addition  to  being  entitled  to  exercise  all  rights
provided herein or granted by law, including recovery of damages,  the Buyer and
the Company will be entitled to specific  performance  under the Agreement.  The
parties agree that  monetary  damages may not be adequate  compensation  for any
loss incurred by reason of any breach of obligations  described in the foregoing
sentence and hereby agree to waive in any action for specific performance of any
such obligation the defense that a remedy at law would be adequate.

                                       17
<page>

                    [REMAINDER PAGE INTENTIONALLY LEFT BLANK]

                                       18
<page>

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

                                         COMPANY:
                                         Foothills Resources, Inc.

                                         By:
                                            -----------------------------
                                         Name:    J. Earl Terris
                                         Title:   Chief Executive Officer

                                       19
<page>

                                   SCHEDULE 1

                               SCHEDULE OF BUYERS

                                        Address/Facsimile        Amount of
     Name           Signature           Number of Buyer         Subscription

                  By:_______________
                  Name:
                  Office:

                  By:_______________
                  Name:
                  Office:

                  By:_______________
                  Name:
                  Office:

                  By:_______________
                  Name:
                  Office:

<page>

                           COMPANY DISCLOSURE SCHEDULE

<page>

                                    EXHIBIT A

                            FORM OF ESCROW AGREEMENT

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