Exhibit 10.22
FORBEARANCE AGREEMENT
     This FORBEARANCE AGREEMENT (this “Agreement”), dated as of August 13, 2008,
by and among the lenders identified on the signature pages hereof (such lenders,
together with their respective successors and permitted assigns, are referred to
hereinafter each individually as a “Lender” and collectively as the “Lenders”),
WELLS FARGO FOOTHILL, LLC, a Delaware limited liability company, as
administrative agent for the Lenders (in such capacity, together with its
successors and assigns in such capacity, “Agent”), FOOTHILLS RESOURCES, INC., a
Nevada corporation (“Parent”) and each of Parent’s Subsidiaries identified on
the signature pages hereof (such Subsidiaries, together with Parent, are
referred to hereinafter each individually as a “Borrower”, and individually and
collectively, jointly and severally, as the “Borrowers”). All terms used herein
and not otherwise defined herein shall have the meanings ascribed to them in the
Credit Agreement (as hereinafter defined).
RECITALS
A.      The Agent, the Lenders and the Borrowers are parties to that certain
Credit Agreement, dated as of December 13, 2007, as amended by that First
Amendment to Credit Agreement, dated as of May 15, 2008 and as further amended
by that Limited Waiver and Second Amendment to Credit Agreement, dated as of
May 15, 2008 (as the same may be amended, extended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”);
B.      The Borrowers acknowledge that certain Events of Default have occurred
and are continuing and will continue to exist under the Credit Agreement
(referred to herein as the “Specified Defaults”) resulting from (i) the
Borrowers’ failure to maintain a minimum Asset Coverage Ratio of at least 1.60
to 1.0 for the quarter ending June 30, 2008, in violation of Section 6.14(a) of
the Credit Agreement and (ii) the Borrowers’ failure to have a Leverage Ratio of
less than or equal to 6.25:1.00 for the quarter ending June 30, 2008, in
violation of Section 6.14(c) of the Credit Agreement.
C.      The Borrowers have requested that the Agent and Lenders forbear until
the Termination Date (as defined below) from exercising their rights and
remedies arising as a result of the occurrence of the Specified Defaults. The
Agent and the Lenders are willing to grant such forbearance in accordance with
the terms and subject to the conditions of this Agreement.
     NOW, THEREFORE, in consideration of the premises and the mutual covenants,
representations, warranties and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
AGREEMENTS:
     1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the same meanings ascribed to them in the Credit Agreement. In
addition, the following terms, for the purposes of this Agreement, shall have
the following meanings:
          (a) “Effective Date” means the date the conditions set forth in
Section 5 have been satisfied.
          (b) “Forbearance Period” means the period commencing on the Effective
Date and continuing through and including the Termination Date, unless earlier
terminated pursuant to the terms and provisions of this Agreement.
          (c) “Forbearance Fee” means, (i) initially a forbearance fee (the
“Initial Forbearance Fee”) in an aggregate amount of $150,000 payable pursuant
to Section 5(e), and (ii) an additional

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forbearance fee of $225,000 (the “Additional Forbearance Fee”), payable pursuant
to Section 4(e). In connection with the Initial Forbearance Fee, $50,000 shall
be payable to the Revolving Loan Lenders and $100,000 shall be payable to Term
Loan Lenders. In connection with the Additional Forbearance Fee, $75,000 shall
be payable to the Revolving Loan Lenders and $150,000 shall be payable to the
Term Loan Lenders. The Forbearance Fee shall be fully earned as of the Effective
Date and shall be nonrefundable. The parties hereto acknowledge that the
Forbearance Fee is due and payable as of the Effective Date but that the
Required Lenders have agreed to defer payment of the Additional Forbearance Fee
so long as payment of the Additional Forbearance Fee is not required pursuant to
Section 4(e).
          (d) “Termination Date” means 5:00 p.m. (Eastern Standard Time) on
September 15, 2008.
          (e) “Termination Event” means the occurrence of any of the following:
(i) any representation or warranty made or deemed made by any Borrower in this
Agreement shall be false, misleading or erroneous in any material respect when
made or deemed to have been made (or if such representation or warranty is
qualified by materiality or a Material Adverse Change qualification, false,
misleading or erroneous in any respect), (ii) any Borrower shall fail to
perform, observe or comply timely with any covenant, agreement or term contained
in this Agreement, (iii) any Default or Event of Default, other than the
Specified Defaults, shall occur under the Credit Agreement or any of the other
Loan Documents, or (iv) any event or condition shall occur after the Effective
Date which shall constitute a Material Adverse Change.
     2. Limited Forbearance by Agent and Lenders. In accordance with the terms
and subject to the conditions of this Agreement and only so long as no
Termination Event shall have occurred, the Agent and the Lenders, for themselves
and on behalf of their permitted successors and assigns, hereby agree to forbear
until the Termination Date from (x) declaring all or any portion of the
Obligations to be immediately due and payable, (y) foreclosing upon the
Collateral and (z) exercising other similar rights as a secured creditor
pursuant to Section 8.1 of the Credit Agreement, in each case solely by reason
of, or as a result of the occurrence of, the Specified Defaults. Notwithstanding
the foregoing, (a) the Borrowers and the Lenders acknowledge and agree that
(i) the Agent has given an Activation Instruction to each Cash Management Bank
and has implemented a daily sweep of all amount in each Cash Management Account
to the Agent’s Account, and (ii) the Agent has established an additional
$2,000,000 reserve against the Borrowing Base and the Maximum Revolver Amount,
(b) at the election of the Agent or the Required Lenders, the applicable
interest rate and Letter of Credit fee may be increased in accordance with
Section 2.6(c) of the Credit Agreement, and (c) the forbearance granted by the
Agent and the Lenders pursuant hereto shall not constitute, and shall not be
deemed to constitute, a waiver of the Specified Defaults or of any other Default
or Event of Default under the Loan Documents or a waiver of any of the rights
and remedies provided thereunder, under law, at equity or otherwise. On and
after the Termination Date, or such earlier date on which a Termination Event
occurs, the Agent’s and the Lenders’ agreement hereunder to forbear shall
terminate automatically without further act or action by the Agent or the
Lenders. The Borrowers expressly acknowledge and agree that the effect of such
termination will be to permit the Agent and the Lenders to exercise any and all
rights and remedies available to them under the Loan Documents and this
Agreement, at law, in equity, or otherwise without any further lapse of time,
expiration of applicable grace periods, or requirements of notice, all of which
are hereby expressly waived by the Borrowers.
     3. Representations and Warranties. To induce the Agent and the Lenders to
enter into this Agreement, Borrowers hereby jointly and severally represent and
warrant to the Agent and the Lenders as follows:

 

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          (a) Duly Organized. Each Borrower is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, and
has the full power and authority to execute, deliver and perform this Agreement.
          (b) Authority. The execution, delivery and performance by each
Borrower of this Agreement (i) have been duly authorized by all requisite action
on the part of Borrowers, (ii) do not and will not violate the Governing
Documents of any Borrower, or any Material Contract of any of the Borrowers, or
any order, judgment or decree of any court, Governmental Authority or arbitrator
by which any Borrower or any of its properties is bound, (iii) do not and will
not conflict with, result in a breach of, or constitute (with due notice or
lapse of time or both) a default under any Material Contract of any Borrower and
(iv) do not and will not require any filing (other than any disclosure filing)
or registration with, consent, or authorization or approval of, or notice to, or
other action with or by, any Governmental Authority or other Person.
          (c) Binding Obligation. This Agreement constitutes the legal, valid
and binding obligation of such Person, enforceable against such Person in
accordance with its terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to or limiting creditors’ rights generally.
          (d) No Other Defaults. Except for the Specified Defaults, no Default
or Event of Default has occurred and is continuing or would result from this
Agreement becoming effective in accordance with its terms.
          (e) Representations and Warranties. All representations and warranties
by the Borrowers contained in the Credit Agreement and in each other Loan
Document and certificate or other writing delivered to the Agent or the Lenders
pursuant to the Credit Agreement or this Agreement that are qualified by
materiality or Material Adverse Effect are true and correct and that are not so
qualified are true and correct in all material respects as of the date hereof,
except to the extent made as of a specific date, in which case each such
representation and warranty shall be true and correct as of such date.
          (f) False or Misleading Representations or Warranties. By its
signature below, each Borrower agrees that it shall constitute an Event of
Default if any representation or warranty made herein should be false or
misleading in any material respect.
     4. Covenants. Notwithstanding any provisions to the contrary contained in
the Loan Documents, Borrowers hereby covenant and agree to observe and comply
with each of the following covenants and Borrowers agree and acknowledge that
failure to comply with any such covenant shall result in an immediate Event of
Default:
          (a) Compliance with Loan Documents and this Agreement. From and after
the Effective Date, each Borrower will perform, observe and comply with each
covenant, agreement and term contained in this Agreement and each of the Loan
Documents, other than the Specified Defaults.
          (b) Consultant. Borrowers shall deliver to the Agent, on or before
September 15, 2008, evidence in form and substance satisfactory to the Required
Lenders, that the Parent has retained at its cost and expense an independent
investment banker selected by the Parent that is not an Affiliate and which is
satisfactory to the Required Lenders, for the purpose of developing and
facilitating the plan of restructuring provided for in Section 4(c) of this
Agreement.

 

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          (c) Plan of Restructuring. Borrowers shall deliver to the Agent a
definitive, written plan of restructuring, on or before September 15, 2008. Such
plan shall be satisfactory to the Required Lenders.
          (d) Detailed Timeline for Plan of Restructuring. Borrowers shall
deliver to the Agent, on or before September 15, 2008, a detailed timeline
setting forth applicable dates for the implementation of such plan of
restructuring. Such timeline shall be satisfactory to the Required Lenders.
          (e) Additional Forbearance Fee. Borrowers shall pay to the Agent the
Additional Forbearance Fee (i) on the earlier of on demand or September 15, 2008
if at any time after the Effective Date it has failed to comply with Section
4(a) or (ii) on September 15, 2008 if it has failed to comply with Section 4
(b), (c) or (d). For the avoidance of doubt, Borrowers shall not be obligated to
pay the Additional Forbearance Fee if Borrowers comply with Section 4(a), (b),
(c) and (d) in accordance with the terms hereof.
     5. Closing Deliveries. Unless otherwise provided herein, simultaneously
with the execution and delivery hereof, and as a condition to the effectiveness
hereof, the Borrowers shall deliver (or deposit with), or cause the delivery to
(or deposit with), the Agent:
          (a) such certificates of duly authorized officers of the Borrowers,
certificates of governmental authorities, certified copies of resolutions of the
Board of Directors (or other applicable managing body) of the Borrowers (or the
general partner thereof), and such other documents, instruments and agreements
as the Agent shall require to evidence the due authorization, execution and
delivery of this Agreement;
          (b) payment of all Lender Group Expenses incurred in connection with
the preparation, negotiation and execution of this Agreement, all related
documents and the transactions contemplated hereby and thereby;
          (c) a fully executed copy of this Agreement;
          (d) such documents and instruments as the Lenders, in their sole
discretion, deem necessary or desirable to evidence and confirm perfection of
its liens and security interests in the Collateral; and
          (e) payment of the Initial Forbearance Fee.
          The failure of the Borrowers to timely comply with the terms of this
Section 5 shall constitute (i) an Event of Default under and for all purposes of
the Credit Agreement and the other Loan Documents, and (ii) a Termination Event
hereunder.
     6. Ratification of Loan Documents and Collateral. The Borrowers hereby
acknowledge that this Agreement constitutes receipt from the Agent and the
Lenders of proper notice of default, notice of intent to accelerate and
opportunity to cure, and demand for payment. The Borrowers hereby waive (a) any
further notice of default, notice of intent to accelerate, or demand for payment
and (b) any further opportunity to cure the Specified Defaults. Except as
modified by this Agreement, the Borrowers hereby acknowledge, ratify, reaffirm,
and agree that each of the Loan Documents and the perfected liens and security
interests created thereby in favor of the Agent for the benefit of the Lenders
in the Collateral, are and will remain in full force and effect and binding on
the Borrowers, and are enforceable in accordance with their respective terms and
applicable law. The Borrowers hereby acknowledge, ratify, and reaffirm all of
the terms and provisions of the Loan Documents (including, without limitation,
the Credit Agreement), except as modified herein, which are incorporated by
reference as of the Effective Date as if

 

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set forth herein including, without limitation, all promises, agreements,
warranties, representations, covenants, releases, and indemnifications contained
therein.
     7. Remedies Upon Termination Event. Upon the occurrence of a Termination
Event, (a) the Forbearance Period will terminate without further act or action
by the Agent or the Lenders and (b) the Agent and the Lenders shall be entitled
immediately to exercise any and all rights and remedies available to them under
the Loan Documents and this Agreement, at law, in equity, or otherwise, without
further opportunity to cure, demand, presentment, notice of dishonor, notice of
default, notice of intent to accelerate, notice of intent to foreclose, notice
of protest or other formalities of any kind, all of which are hereby expressly
waived by the Borrowers.
     8. Acknowledgment of Defaults. The Borrowers specifically acknowledge the
existence and continuation of the Specified Defaults.
     9. Release and Covenant Not to Sue. EACH BORROWER (IN ITS OWN RIGHT AND ON
BEHALF OF ITS DIRECTORS, OFFICERS, EMPLOYEES, INDEPENDENT CONTRACTORS, ATTORNEYS
AND AGENTS) (THE “RELEASING PARTIES”) JOINTLY AND SEVERALLY RELEASES, ACQUITS,
AND FOREVER DISCHARGES THE AGENT AND THE LENDERS AND THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, INDEPENDENT CONTRACTORS, ATTORNEYS AND AGENTS,
(COLLECTIVELY, THE “RELEASED PARTIES”), TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE STATE AND FEDERAL LAW, FROM ANY AND ALL ACTS AND OMISSIONS OF THE
RELEASED PARTIES, AND FROM ANY AND ALL CLAIMS, CAUSES OF ACTION, COUNTERCLAIMS,
DEMANDS, CONTROVERSIES, COSTS, DEBTS, SUMS OF MONEY, ACCOUNTS, RECKONINGS,
BONDS, BILLS, DAMAGES, OBLIGATIONS, LIABILITIES, OBJECTIONS, AND EXECUTIONS OF
ANY NATURE, TYPE, OR DESCRIPTION WHICH THE RELEASING PARTIES HAVE AGAINST THE
RELEASED PARTIES, INCLUDING, BUT NOT LIMITED TO, NEGLIGENCE, GROSS NEGLIGENCE,
USURY, UNCONSCIONABILITY, DURESS, ECONOMIC DURESS, DEFAMATION, CONTROL,
INTERFERENCE WITH CONTRACTUAL AND BUSINESS RELATIONSHIPS, CONFLICTS OF INTEREST,
MISUSE OF INSIDER INFORMATION, CONCEALMENT, DISCLOSURE, SECRECY, MISUSE OF
COLLATERAL, WRONGFUL RELEASE OF COLLATERAL, FAILURE TO INSPECT, ENVIRONMENTAL
DUE DILIGENCE, NEGLIGENT LOAN PROCESSING AND ADMINISTRATION, WRONGFUL SETOFF,
VIOLATIONS OF STATUTES AND REGULATIONS OF GOVERNMENTAL ENTITIES,
INSTRUMENTALITIES AND AGENCIES (CIVIL), SECURITIES AND ANTITRUST LAWS
VIOLATIONS, TYING ARRANGEMENTS, BREACH OR ABUSE OF ANY ALLEGED FIDUCIARY DUTY,
BREACH OF ANY ALLEGED SPECIAL RELATIONSHIP, COURSE OF CONDUCT OR DEALING,
ALLEGED OBLIGATION OF FAIR DEALING, ALLEGED OBLIGATION OF GOOD FAITH, AND
ALLEGED OBLIGATION OF GOOD FAITH AND FAIR DEALING, IN CONNECTION WITH OR RELATED
TO THE LOAN DOCUMENTS AND THE CREDIT AGREEMENT, AT LAW OR IN EQUITY, IN CONTRACT
IN TORT, OR OTHERWISE, KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED (COLLECTIVELY,
THE “RELEASED CLAIMS”); PROVIDED, HOWEVER, THAT THE RELEASED CLAIMS SHALL NOT
INCLUDE ANY CLAIMS ARISING OUT OF ANY FAILURE BY THE AGENT OR LENDERS TO
PERFORM, ON OR AFTER THE DATE HEREOF, ANY OF THEIR RESPECTIVE OBLIGATIONS
HEREUNDER OR UNDER ANY OF THE LOAN DOCUMENTS OR THE CREDIT AGREEMENT. THE
RELEASING PARTIES FURTHER JOINTLY AND SEVERALLY AGREE TO LIMIT ANY DAMAGES THEY
MAY SEEK IN CONNECTION WITH ANY CLAIM OR CAUSE OF ACTION, IF ANY, TO EXCLUDE ALL
PUNITIVE AND EXEMPLARY DAMAGES, DAMAGES ATTRIBUTABLE TO LOST PROFITS OR
OPPORTUNITY, DAMAGES ATTRIBUTABLE TO MENTAL ANGUISH, AND DAMAGES ATTRIBUTABLE TO
PAIN AND SUFFERING, AND THE RELEASING PARTIES DO HEREBY JOINTLY AND

 

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SEVERALLY WAIVE AND RELEASE ALL SUCH DAMAGES WITH RESPECT TO ANY AND ALL CLAIMS
OR CAUSES OF ACTION WHICH MAY ARISE AT ANY TIME AGAINST ANY OF THE RELEASED
PARTIES. THE RELEASING PARTIES REPRESENT AND WARRANT THAT NO FACTS EXIST WHICH
COULD PRESENTLY SUPPORT THE ASSERTION OF ANY OF THE RELEASED CLAIMS AGAINST THE
RELEASED PARTIES. THE RELEASING PARTIES FURTHER COVENANT NOT TO SUE THE RELEASED
PARTIES ON ACCOUNT OF ANY OF THE RELEASED CLAIMS, AND EXPRESSLY WAIVE ANY AND
ALL DEFENSES THEY MAY HAVE IN CONNECTION WITH THEIR DEBTS AND OBLIGATIONS UNDER
THE LOAN DOCUMENTS AND THE CREDIT AGREEMENT (AS AMENDED HEREBY). THIS SECTION 9
IS IN ADDITION TO AND SHALL NOT IN ANY WAY LIMIT ANY OTHER RELEASE, COVENANT NOT
TO SUE, OR WAIVER BY THE RELEASING PARTIES IN FAVOR OF THE RELEASED PARTIES.
NOTWITHSTANDING ANY PROVISION OF THE CREDIT AGREEMENT (AS AMENDED HEREBY) OR ANY
OTHER LOAN DOCUMENT, THIS SECTION 9 SHALL REMAIN IN FULL FORCE AND EFFECT AND
SHALL SURVIVE THE DELIVERY AND PAYMENT ON THE OBLIGATIONS, THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS.
     10. No Obligation of Agent and Lenders. The Borrowers hereby acknowledge
and understand that upon the expiration or termination of the Forbearance Period
and if the Specified Defaults have not been cured or waived by written agreement
in accordance with the Credit Agreement, or if there shall at such time exist a
Default or Event of Default, then the Agent and the Lenders shall have the right
to proceed to exercise any or all available rights and remedies, which may
include foreclosure on the Collateral and/or institution of legal proceedings.
The Agent and the Lenders shall have no obligation whatsoever to extend the
maturity of the Obligations, waive any events of default or defaults, defer any
payments, or further forbear from exercising its rights and remedies.
     11. No Implied Waivers. No failure or delay on the part of the Agent or the
Lenders in exercising, and no course of dealing with respect to, any right,
power or privilege under this Agreement, the Credit Agreement or any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under this Agreement, the Credit
Agreement or any other Loan Document preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
     12. INDEMNIFICATION. IN ADDITION TO, AND WITHOUT LIMITATION OF, ANY AND ALL
INDEMNITIES PROVIDED IN THE LOAN DOCUMENTS, BORROWERS SHALL AND DO HEREBY,
JOINTLY AND SEVERALLY, INDEMNIFY AND HOLD EACH OF THE RELEASED PARTIES HARMLESS
FROM AND AGAINST ANY AND ALL CLAIMS, LIABILITY, LOSSES, DAMAGES, CAUSES OF
ACTION, SUITS, JUDGMENTS, COSTS, AND EXPENSES, INCLUDING, WITHOUT LIMITATION,
ATTORNEYS’ FEES, ARISING OUT OF OR FROM OR RELATED TO ANY OF THE RELEASED
CLAIMS. IF ANY ACTION, SUIT, OR PROCEEDING IS BROUGHT AGAINST ANY OF THE
RELEASED PARTIES, BORROWERS SHALL, AT LENDERS’ REQUEST, DEFEND THE SAME AT THEIR
SOLE COST AND EXPENSE, SUCH COST AND EXPENSE TO BE A JOINT AND SEVERAL LIABILITY
OF THE BORROWERS, BY COUNSEL SELECTED BY THE LENDERS. NOTWITHSTANDING ANY
PROVISION OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, THIS SECTION 12 SHALL
REMAIN IN FULL FORCE AND EFFECT AND SHALL SURVIVE ANY DELIVERY AND PAYMENT ON
THE OBLIGATIONS, THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
     13. Survival of Representations and Warranties. All representations and
warranties made in this Agreement or any other Loan Document will survive the
execution and delivery of this Agreement, and no investigation by the Agent or
the Lenders or any closing will affect the representations and warranties or the
right of the Agent or the Lenders to rely upon them.

 

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     14. Review and Construction of Documents. The Borrowers hereby acknowledge,
and represent and warrant to the Lenders that (a) the Borrowers have had the
opportunity to consult with legal counsel of their own choice and have been
afforded an opportunity to review this Agreement with their legal counsel,
(b) the Borrowers have reviewed this Agreement and fully understand the effects
thereof and all terms and provisions contained herein, and (c) the Borrowers
have executed this Agreement of their own free will and volition. The recitals
contained in this Agreement shall be construed to be part of the operative terms
and provisions of this Agreement.
     15. ENTIRE AGREEMENT; AMENDMENT. THIS AGREEMENT AND THE LOAN DOCUMENTS AS
INCORPORATED HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT BETWEEN THE PARTIES
HERETO REGARDING THE AGENT’S AND THE LENDERS’ FORBEARANCE WITH RESPECT TO THEIR
RIGHTS AND REMEDIES ARISING AS A RESULT OF THE SPECIFIED DEFAULTS AND SUPERSEDES
ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS,
WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS
AMONG THE PARTIES HERETO. The provisions of this Agreement may be amended or
waived only by an instrument in writing signed by the Borrowers, the Agent and
the Lenders. The Loan Documents, as modified by this Agreement, continue to
evidence the agreement of the parties with respect to the subject matter
thereof.
     16. Notices. All notices, requests, demands and other communications under
this Agreement will be given in accordance with the provisions of the Credit
Agreement.
     17. Successors and Assigns. This Agreement will be binding upon, and will
inure to the benefit of, the parties hereto and their respective heirs, legal
representatives, successors and assigns, provided that the Borrowers may not
assign any rights or obligations under this Agreement without the prior written
consent of the Agent and the Lenders.
     18. Tolling of Statutes of Limitation. The parties hereto agree that all
applicable statutes of limitations with respect to the Loan Documents shall be
tolled and not begin running until the Termination Date.
     19. Arms-Length/Good Faith. This Agreement has been negotiated at
arms-length and in good faith by the parties hereto.
     20. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
     21. Interpretation. Wherever the context hereof will so require, the
singular shall include the plural, the masculine gender shall include the
feminine gender and the neuter and vice versa. The headings, captions and
arrangements used in this Agreement are for convenience only and shall not
affect the interpretation of this Agreement.
     22. Severability. In case any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal, or unenforceable provision had never been
contained herein.

 

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     23. Counterparts. This Agreement may be executed and delivered in any
number of counterparts, and by different parties hereto on separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts taken together shall constitute one
and the same instrument; provided that no party shall be bound by this Agreement
until the Borrowers, the Agent and the Lenders have executed a counterpart
hereof. Execution of this Agreement via facsimile or electronic mail shall be
effective, and signatures received via facsimile or electronic mail shall be
binding upon the parties hereto and shall be effective as originals.
     24. Further Assurances. The Borrowers agree to execute, acknowledge,
deliver, file and record such further certificates, instruments and documents,
and to do all other acts and things, as may be reasonably requested by the Agent
and the Lenders as necessary or advisable to carry out the intents and purposes
of this Agreement.
     25. Loan Document. This Agreement is a Loan Document for all purposes of
the Credit Agreement and the other Loan Documents.
     26. WAIVER OF JURY TRIAL. BORROWERS HEREBY WAIVE THEIR RESPECTIVE RIGHT TO
A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS,
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH
RIGHTS AND OBLIGATIONS. BORROWERS (a) CERTIFY THAT NO REPRESENTATIVE, THE AGENT
OR ATTORNEY OF THE AGENT OR THE LENDERS HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT THE AGENT OR THE LENDERS WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER AND (b) ACKNOWLEDGE THAT THE AGENT AND THE LENDERS
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
WAIVER AND CERTIFICATIONS CONTAINED HEREIN.
[Remainder of page is intentionally left blank; signature page follows]

 

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.

            FOOTHILLS RESOURCES, INC.,
as Borrower
      By:   /s/ W. Kirk Bosché         Name:   W. Kirk Bosché        Title:  
Chief Financial Officer          FOOTHILLS CALIFORNIA, INC.,
as Borrower
      By:   /s/ W. Kirk Bosché         Name:   W. Kirk Bosché        Title:  
Chief Financial Officer          FOOTHILLS OKLAHOMA, INC.,
as Borrower
      By:   /s/ W. Kirk Bosché         Name:   W. Kirk Bosché        Title:  
Chief Financial Officer          FOOTHILLS TEXAS, INC.,
as Borrower
      By:   /s/ W. Kirk Bosché         Name:   W. Kirk Bosché        Title:  
Chief Financial Officer     

[Signature Page to Forbearance Agreement]

 

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            WELLS FARGO FOOTHILL, LLC,
as Agent and as a Lender
      By:   /s/ William M. Plough        Name:   William M. Plough       
Title:   Vice President     

[Signature Page to Forbearance Agreement]

 

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            REGIMENT CAPITAL SPECIAL SITUATIONS
FUND III, L.P., as a Lender
      By:   Regiment Capital GP, LLC         its General Partner               
    By:   /s/ Richard T. Miller        Name:   Richard T. Miller        Title:  
Authorized Signatory     

[Signature Page to Forbearance Agreement]