On October 16, 2008, Foothills Resources, Inc. (the “Company”) entered into that certain Third Amendment to Credit Agreement and Amended and Restated Forbearance Agreement, dated as of September 15, 2008, by and among the Company and each of its subsidiaries as borrowers, certain lenders and Wells Fargo Foothill, LLC, as administrative agent (the “Agreement”).

The Agreement provides for certain amendments to that certain Forbearance Agreement, dated as of August 13, 2008, among the Company and each of its subsidiaries as borrowers, various lenders and Wells Fargo Foothill, LLC as agent (the “Forbearance Agreement”) and that certain Credit Agreement, dated as of December 13, 2007, by and among the Company and each of its subsidiaries as borrowers, certain lenders and Wells Fargo Foothill, LLC, as agent, as amended (the “Credit Agreement”). Pursuant to the Agreement, the lenders and administrative agent have agreed to extend the term of the Forbearance Agreement until 5:00 p.m. (Eastern Standard Time) on December 31, 2008 and forbear until then from exercising their rights and remedies under the Credit Agreement, arising as a result of the occurrence of the Company’s failure to maintain a minimum asset coverage ratio of at least 1.60:1.00 for the quarter ending June 30, 2008 and the Company’s failure to have a leverage ratio of less than or equal to 6.25:1.00 for the quarter ending June 30, 2008.

Pursuant to the Agreement the applicable interest rate for borrowings under the Credit Agreement have been amended as follows: (i) the base interest rate for base rate loans that are term loans will be the greater of 5.25% or the prime rate; (ii) the margin interest rate applicable to base rate loans that are advances prior to September 20, 2008 will be 0.75% and on or after September 20, 2008 it will be 2.75%, and for base rate loans that are term loans the applicable margin interest rate prior to September 20, 2008 will be 5.25%, on or after September 20, 2008 and prior to November 1, 2008 it will be 7.25%, on or after November 1, 2008 and prior to December 1, 2008 it will be 8.25%, and on or after December 1, 2008 it will be 9.25%; and (iv) the margin interest rate applicable to LIBOR rate loans that are advances prior to September 20, 2008 will be 2.00% and on or after September 20, 2008 it will be 4.00%, and for LIBOR rate loans that are term loans the applicable margin interest rate prior to September 20, 2008 will be 6.50%, on and after September 20, 2008 and prior to November 1, 2008 it will be 8.50%, on and after November 1, 2008 and prior to December 1, 2008 it will be 9.50%, and on and after December 1, 2008 it will be 10.50%.

The Agreement further provides that, during the Forbearance Period, the Company’s obligation to comply with certain financial covenants set forth in the Credit Agreement shall be suspended, and instead, the Company is obligated to: (i) maintain a leverage ratio less than 9.95:1.00 for the calendar month ending October 31, 2008, 10.25:1.00 for the calendar month ending November 30, 2008, and 10.46:1.00 for the calendar month ending December 31, 2008; (ii) maintain minimum levels of earnings before interest, taxes, depreciation and amortization of not less than $439,600 for the calendar month ending October 31, 2008, $540,700 for the calendar month ending November 30, 2008, and $577,800 for the calendar month ending December 31, 2008; and (iii) have oil and natural gas production of not less than 9,108 barrels of oil and natural gas equivalent (“BOE”) for the calendar month ending September 30, 2008, 13,260 BOE for the calendar month ending October 31, 2008, 15,470