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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) March 17, 2006
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FOOTHILLS RESOURCES, INC.
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(Exact name of Registrant as specified in its charter)
Nevada 001-31546 98-0339560
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(State or other jurisdiction (Commission File number) (IRS Employer
of incorporation or organization) Identification No.)
Canadiana Lodge, Wellfield Close, Coad's Green, Launceston, Cornwall, England,
PL15 7LR
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(Address of principal executive offices) (Zip Code)
011.441.566.782.199
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(Registrant's Telephone Number, Including Area Code)
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(Former Address If Changed since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation for the registrant under any of the
following provisions (see General Instruction A.2. below):
[] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Section 1 - Registrant's Business and Operations
Item 1.01. Entry into a Material Definitive Agreement.
As previously reported, as of February 15, 2006, Foothills Resources,
Inc. (the "Registrant") entered into a Term Sheet (the "Term Sheet") with
Brasada Resources, LLC (together with its corporate successor in interest,
Brasada California, Inc., "Brasada"). Brasada is engaged in oil and gas
exploration and development. As contemplated by the Term Sheet, on or before May
31, 2006 a newly-formed, wholly-owned subsidiary of the Registrant will merge
with and into the corporate successor in interest to Brasada (the "Merger"), as
a result of which Registrant will acquire all of the issued and outstanding
capital stock of Brasada and Brasada will become a wholly-owned subsidiary of
the Registrant.
As a condition to the closing of the Merger, the Registrant will have
closed a private placement offering (a "PPO"), to be conducted pursuant to the
exemption from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), provided by Rule 506 of Regulation D and Section
4(2) of the Securities Act, whereby the Registrant will offer and sell up to
10,000,000 units ("Units") of the Registrant's securities at a price of $0.70
per Unit, or an aggregate offering price of $7,000,000. Each Unit will consist
of one share of common stock, par value $0.001 per share ("Common Stock") and
Common Stock purchase warrants ("Warrant"). Each Warrant will be exercisable for
five years and will entitle its holder to purchase three shares of Common Stock
at $1.00 per share for every four Units purchased in the PPO. As of the date of
this report, the PPO has not closed.
In addition, effective March 17, 2006 the Registrant closed on the
offer and sale of $997,500 principal amount of its debentures ("Foothills
Debentures") to a limited number of accredited investors pursuant to Regulation
D. There may be additional closings on the Foothills Debentures, up to a
principal amount of $3,000,000. The Foothills Debentures are unsecured, bear
interest at the rate of 9% per annum, which interest begins to accrue commencing
120 days from issuance, and are for a term of three years. The Foothills
Debentures are payable in consecutive monthly installments of principal and
interest, commencing 120 days from the date of their issuance. The Foothills
Debentures will become convertible and will automatically convert, as to their
outstanding principal amount, into Units upon the simultaneous closing of the
Merger and the PPO (and the principal amount of the Foothills Debentures so
converted shall be a part of the $7,000,000 proceeds of the PPO). In addition,
the Foothills Debentures will become convertible, at the option of the holder,
70 days after the earlier of (i) termination of the exclusivity period provided
for in the Term Sheet, if the Merger has not closed by such date, or (ii) the
date of termination or abandonment of the Merger prior to the end of the
exclusivity period. The Foothills Debentures will convert into Units at a
conversion price of $0.70 per Unit, equal to the price per Unit in the PPO.
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If the Registrant defaults under the Foothills Debentures, the full
principal amount of the Foothills Debentures, together with interest, will, at
the holder's option, become immediately due and payable in cash. In addition,
commencing five days after the occurrence of any default that results in the
eventual acceleration of the Foothills Debenture, the interest rate will
increase to 18% per annum, or such lower maximum amount of interest permitted to
be charged under applicable law.
The Registrant used the $997,500 derived from its issuance of the
initial Foothills Debentures to provide bridge financing ("Bridge Financing") to
Brasada to enable Brasada to meet its working capital requirements. The proceeds
derived from any additional closings of Foothills Debentures will be used to
provide additional Bridge Financing. The Bridge Financing is evidenced by a
Bridge Note ("Bridge Note") and related documents (collectively, the "Bridge
Loan Documents"). The Bridge Note is for a term of 120 days from the initial
closing of the Bridge Financing (July 20, 2006) (the "Due Date"), and bears
interest at the rate of nine percent per annum. The Bridge Note is secured by a
perfected security interest and first lien on all of the assets of Brasada, as
well as by the deposit into escrow of such number of shares (the "Escrowed
Bridge Loan Shares") as shall equal 51% of the issued and outstanding capital
stock of Brasada. The security for the Bridge Loan will be released upon the
repayment in full of the Bridge Note. Closing of the Merger will be deemed to
constitute such repayment in full.
Brasada will begin making consecutive monthly interest only payments on
the Bridge Note of accrued interest commencing 30 days from the closing of the
Bridge Financing through the Due Date, at which time Brasada will be required to
repay the unpaid principal amount of the Bridge Note, together with accrued and
unpaid interest.
A default by Brasada under the Bridge Note, including but not limited
to the failure to close the Merger prior to the Due Date, will cause an increase
to the interest rate from 9% to 15% per annum, which increased interest rate
will continue until all defaults are cured. In addition, if such default is not
cured, the Registrant will be entitled to foreclose on its security interest in
the collateral provided for under the Bridge Loan Documents and to obtain
delivery of the Escrowed Bridge Loan Shares.
Section 2 - Financial Information
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant
Please see the discussion under Item 1.01 of this Report regarding the
Foothills Debentures issued by the Registrant, which discussion is incorporated
by reference into this Item 2.03.
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Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
Exhibit Number Description
10.1 Bridge Loan and Control Share Pledge and
Security Agreement, dated as of March 17,
2006, among Brasada California, Inc., certain
stockholders of Brasada California, Inc. and
the Registrant
10.2 Security Agreement, dated as of March 17,
2006, among Brasada California, Inc., certain
stockholders of Brasada California, Inc. and
the Registrant
10.3 Pledge and Escrow Agreement, dated as of March
17, 2006, among Brasada California, Inc.,
certain stockholders of Brasada California,
Inc., the Registrant and Gottbetter & Partners
LLP
10.4 Bridge Loan Promissory Note, dated March 17,
2006
10.5 Securities Purchase Agreement, dated as of
March 17, 2006, between the Registrant and the
Buyers
10.6 Escrow Agreement, dated as of February 28,
2006, between the Registrant, Gottbetter &
Partners LLP and the Buyer
10.7 Form of Debenture
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FOOTHILLS RESOURCES, INC.
Date: March 17, 2006 By: /s/ J. Earl Terris
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J. Earl Terris
Chairman of the Board of Directors,
Chief Executive Officer
and President
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