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NEITHER  THIS  DEBENTURE  NOR  THE  SECURITIES  INTO  WHICH  THIS  DEBENTURE  IS
CONVERTIBLE  (COLLECTIVELY,  THE  "SECURITIES")  HAVE BEEN  REGISTERED  WITH THE
UNITED STATES  SECURITIES  AND EXCHANGE  COMMISSION  (THE  "COMMISSION")  OR THE
SECURITIES   COMMISSION  OF  ANY  STATE  IN  RELIANCE  UPON  AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES  LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE
COMPANY.  THESE SECURITIES AND THE SECURITIES  ISSUABLE UPON CONVERSION OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.



                            9% CONVERTIBLE DEBENTURE


                            FOOTHILLS RESOURCES, INC.


                                DUE MARCH , 2009


Original Issue Date_________                                         US$________

         This  Debenture  is one of a  series  of  duly  authorized  and  issued
convertible  debentures of Foothills Resources,  Inc., a Nevada corporation (the
"Company")  designated  its 9%  Convertible  Debentures  due March __, 2009 (the
"Debenture")  issued to __________  (together with its permitted  successors and
assigns,  the  "Holder")  pursuant to  exemptions  from  registration  under the
Securities Act of 1933, as amended, pursuant to a Securities Purchase Agreement,
dated March ____, 2006 (the "Securities  Purchase  Agreement") among the Company
and the Holder.

                                   ARTICLE I.


Section 1.01      Principal and Interest.  For value  received,  the Company
hereby promises to pay to the order of the Holder, in  lawful money of the
United States of America and in immediately  available  funds the principal sum
of ___________________.

(a) Interest  shall accrue on the unpaid  principal  balance of the Debenture at
the rate of nine percent (9%) per year (compounded  monthly) commencing 120 days
from the  Original  Issue Date  until  March ___ , 2009 (the  "Maturity  Date").
Interest shall be calculated on the basis of a 360-day year.

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(b)  Commencing 150 days from the Original Issue Date, the Company shall pay the
Holder equal monthly  installments of principal,  together with accrued interest
as aforesaid.  Thereafter,  on the first  business day of each month through and
including  the month in which the Maturity  Date occurs,  the Company  shall pay
such monthly  installments of principal and interest.  On the Maturity Date, the
entire unpaid principal amount and all accrued and unpaid interest shall be paid
to the Holder on the  Maturity  Date,  unless this  Debenture  is  converted  in
accordance with Section 1.02 herein.

(c) Except as otherwise set forth in this Debenture,  the Company may not prepay
any portion of the principal amount of this Debenture  without the prior written
consent of the Holder.

Section 1.02      Conversion.
                  -----------

(a) Optional  Conversion.  From and after the earlier of (i) August 24, 2006, or
(ii)  seventy  (70) days  following  the date on which the  Company  and Brasada
California,   Inc.,  a  Delaware  corporation   ("Brasada")  mutually  agree  to
terminate,   or  otherwise   abandon  (each,  a  "Merger   Termination")   their
negotiations   regarding  a  proposed   reverse   triangular   merger  (as  more
particularly  described in the Company's  Current  Report on Form 8-K filed with
the  Commission  on  February  17,  2006,  the  "Merger"),  the Holder  shall be
entitled,  at its option,  to convert,  at any time and from time to time, until
payment in full of this  Debenture,  all or any part of the principal  amount of
the Debenture, plus accrued and unpaid interest thereon, into units ("Units") of
the Company's securities, at a price (the "Conversion Price") of $0.70 per Unit.
Each Unit shall consist of one share (the "Conversion  Shares") of the Company's
common stock, par value $.001 per share (the "Common Stock"), and three quarters
(3/4) of a common stock purchase  warrant (the  "Warrants").  Each whole Warrant
shall  entitle the holder to purchase  one share of Common  Stock (the  "Warrant
Shares") at an exercise  price (the  "Exercise  Price") of $1.00 per share,  and
shall be exercisable  for a period of five years from  issuance.  No fraction of
shares or scrip  representing  fractions of shares will be issued on conversion,
but the number of shares  issuable  shall be rounded to the nearest whole share.
The number of Units issuable upon a conversion  hereunder shall be determined by
the quotient  obtained by dividing (x) the outstanding  principal amount of this
Debenture,  plus  accrued and unpaid  interest  thereon,  to be converted as set
forth in the  applicable  Conversion  Notice  by (y) the  Conversion  Price.  To
convert this Debenture,  the Holder hereof shall deliver written notice thereof,
substantially  in the form of  Exhibit  A to this  Debenture,  with  appropriate
insertions  (the  "Conversion  Notice"),  to the Escrow Agent (as defined in the
Securities  Purchase  Agreement)  and the  Company  at its  address as set forth
herein.  The date upon which the conversion  shall be effective (the "Conversion
Date") shall be deemed to be the date set forth in the Conversion Notice. Except
as otherwise  provided herein, the Company shall not have the right to object to
the conversion or the  calculation of the applicable  conversion  price,  absent
manifest  error and the Escrow  Agent shall  release the shares of Common  Stock
from escrow one business day after  providing the Company  written notice of the
conversion. Any conversion of any portion of the Debenture to Common Stock shall
be deemed to be a  pre-payment  of principal  plus accrued and unpaid  interest,
without  any  penalty,  and shall be  credited  against  any future  payments of
principal and interest in the order that such  payments  become due and payable.
The Company  undertakes  to provide the Holder  with  prompt  notification  of a
Merger Termination.

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(b) Mandatory Conversion.  Simultaneously with the closing of (i) the Merger and
------------------------
(ii) a private  placement  offering  (the "PPO") by the  Company of Units,  this
Debenture will  automatically  convert as to all unpaid principal,  plus accrued
interest,  if any, into Units at the Conversion  Price. The Company shall afford
the Holder the  opportunity to become a party to all agreements and  instruments
executed  by the  investors  in the  PPO,  including,  but  not  limited  to,  a
registration  rights  agreement  (the  "Registration  Rights  Agreement").   The
Registration Rights Agreement shall, among other things, register the Conversion
Shares and the Warrant Shares under the Securities Act.

Section 1.03  Reservation  of Common Stock.  As set forth in Section 4(e) of the
------------------------------------------
Securities Purchase Agreement,  the Company shall reserve and keep available out
of its authorized but unissued shares of Common Stock, solely for the purpose of
effecting  the  conversion  of this  Debenture and the exercise of the Warrants,
that  number of shares of  Common  Stock  equal to the sum of (i) the  number of
shares of Common Stock into which the Debenture is convertible from time to time
based upon the Conversion  Price, plus (ii) the number of shares of Common Stock
for which the Warrants are exercisable from time to time based upon the Exercise
Price.

Section 1.04 Absolute  Obligation/Ranking.  Except as expressly provided herein,
-----------------------------------------
no  provision  of this  Debenture  shall alter or impair the  obligation  of the
Company, which is absolute and unconditional,  to pay the principal of, interest
and liquidated damages (if any) on, this Debenture at the time, place, and rate,
and in the coin or currency, herein prescribed.  This Debenture is a direct debt
obligation  of the  Company.  This  Debenture  ranks  pari  passu with all other
Debentures  now  or  hereinafter  issued  pursuant  to the  Securities  Purchase
Agreement.

Section  1.05 Paying  Agent and  Registrar.  Initially,  the Company will act as
------------------------------------------
paying agent and registrar.  The Company may change any paying agent, registrar,
or  Company-registrar by giving the Holder not less than ten (10) business days'
written notice of its election to do so, specifying the name, address, telephone
number and facsimile  number of the paying agent or  registrar.  The Company may
act in any such capacity.

Section 1.06  Different  Denominations.  This Debenture is  exchangeable  for an
--------------------------------------
equal  aggregate   principal  amount  of  Debentures  of  different   authorized
denominations,  as requested  by the Holder  surrendering  the same.  No service
charge will be made for such registration of transfer or exchange.

Section 1.07 Investment Representations.  This Debenture has been issued subject
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to certain  investment  representations  of the original Holder set forth in the
Securities  Purchase  Agreement  and may be  transferred  or  exchanged  only in
compliance  with the Securities  Purchase  Agreement and applicable  federal and
state securities laws and regulations.

Section 1.08 Reliance on Debenture  Register.  Prior to due  presentment  to the
--------------------------------------------
Company for transfer or conversion of this Debenture,  the Company and any agent
of the  Company  may treat  the  Person in whose  name  this  Debenture  is duly
registered  on the  Debenture  Register  as the owner  hereof for the purpose of
receiving payment as herein provided and for all other purposes,  whether or not
this  Debenture is overdue,  and neither the Company nor any such agent shall be
affected by notice to the contrary.

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ARTICLE II.

Section 2.01 Amendments and Waiver of Default.  The Debenture may not be amended
---------------------------------------------
without  the  consent of the  Holder.  Notwithstanding  the above,  without  the
consent of the  Holder,  the  Debenture  may be  amended to cure any  ambiguity,
defect or inconsistency or to make any change that does not adversely affect the
rights of the Holder.

ARTICLE III.

Section 3.01      Events  of  Default.  Each  of the  following  events  shall
constitute  a  default  under  this Agreement (each an "Event of Default"):
                                                       -----------------

                   (a)      failure by the Company to pay  principal  amount or
interest due  hereunder  within ten (10) days of the date such payment is due;

                   (b) failure by the Company's  transfer  agent to issue Common
Stock  to the  Holder  within  five  (5) days of the  Company's  receipt  of the
attached  Conversion  Notice  from  Holder  in  accordance  with the  Securities
Purchase Agreement;

                   (c) failure  by the  Company  for  ten (10) days after notice
to it to comply  with any of its other agreements in the Debenture;

                   (d) the Company shall: (1) make a general  assignment for the
benefit  of its  creditors;  (2) apply for or consent  to the  appointment  of a
receiver,  trustee,  assignee,  custodian,  sequestrator,  liquidator or similar
official  for  itself  or any of its  assets  and  properties;  (3)  commence  a
voluntary case for relief as a debtor under the United States  Bankruptcy  Code;
(4) file with or otherwise  submit to any  governmental  authority any petition,
answer or other document seeking:  (A)  reorganization,  (B) an arrangement with
creditors or (C) to take advantage of any other present or future applicable law
respecting bankruptcy, reorganization, insolvency, readjustment of debts, relief
of debtors,  dissolution or liquidation; (5) file or otherwise submit any answer
or other document admitting or failing to contest the material  allegations of a
petition  or other  document  filed or  otherwise  submitted  against  it in any
proceeding  under any such  applicable  law, or (6) be adjudicated a bankrupt or
insolvent by a court of competent jurisdiction;

                    (e)    any  case,  proceeding  or  other  action  shall  be
commenced  against  the  Company  for  the  purpose  of  effecting, or an order,
judgment  or  decree  shall be entered by any court  of  competent  jurisdiction
approving (in whole or in part) anything specified in Section 3.01(d) hereof, or
any  receiver,  trustee,  assignee, custodian, sequestrator, liquidator or other
official  shall be appointed with respect to the Company,  or shall be appointed
to take or shall otherwise acquire possession or control of all or a substantial
part of the assets and properties of the Company, and any of the foregoing shall
continue unstayed and in effect for any period of sixty (60) days;

                      (f) any material obligation of the Company for the payment
of borrowed money is not paid when due or within any  applicable  grace  period,
or such  obligation becomes or is declared to be due and payable  before the
expressed  maturity of the  obligation,  or there shall have occurred an event
that, with the giving of notice or lapse of time, or both, would cause any such
obligation to become,  or allow any such  obligation  to be  declared  to be,
due and  payable  before the expressed maturity date of the obligation;

                                       4

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                       (g)    a breach by the Company of any material  contract
that would have a Material  Adverse Effect (as defined in the Securities
Purchase Agreement);

                       (h) the Common Stock shall not be  eligible for quotation
on or quoted for trading on the OTC  Bulletin  Board  and shall not again be
eligible  for and  quoted  for trading thereon within five (5) trading days; or

                       (i)    any  default,  whether  in whole or in part, shall
occur in the due  observance  or performance  of any  obligations or other
covenants,  terms or provisions to be performed  under the  Securities  Purchase
Agreement  which is not cured by the Company within ten (10) days after receipt
of written notice thereof.

          If any Event of  Default  occurs,  the full  principal  amount of this
Debenture, together with interest and other amounts owing in respect thereof, to
the date of acceleration shall become, at the Holder's election, immediately due
and payable in cash.  Commencing five (5) days after the occurrence of any Event
of Default that  results in the eventual  acceleration  of this  Debenture,  the
interest rate on this  Debenture  shall accrue at the rate of 18% per annum,  or
such lower maximum amount of interest  permitted to be charged under  applicable
law. All Debentures for which the full amount  hereunder shall have been paid in
accordance  herewith  shall  promptly  be  surrendered  to or as directed by the
Company.  The  Holder  need  not  provide  and the  Company  hereby  waives  any
presentment,  demand,  protest or other  notice of any kind,  and the Holder may
immediately  and without  expiration of any grace period  enforce any and all of
its rights and remedies  hereunder and all other remedies  available to it under
applicable law. Such  declaration may be rescinded and annulled by Holder at any
time  prior to  payment  hereunder  and the  Holder  shall  have all rights as a
Debenture holder until such time, if any, as the full payment under this Section
shall have been received by it. No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent thereon.

                                  ARTICLE IV.

Section 4.01 Re-issuance of Debenture.  When the Holder elects to convert a part
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of the  Debenture,  then the Company  shall  reissue a new Debenture in the same
form as this Debenture to reflect the new principal  amount and the Holder shall
return the Debenture to the Company for cancellation.

                                   ARTICLE V.

Section 5.01      Anti-dilution.  Adjustment  of  Conversion  Price.
                  -------------   ---------------------------------
The  Conversion  Price shall be adjusted from time to time as follows:

(a) Adjustment of Conversion  Price and Number of Shares upon Issuance of Common
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Stock.  If at any time after the  Original  Issue Date,  the  Company  issues or
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sells,  or is deemed to have issued or sold,  any shares of Common  Stock (other
than (i) Excluded Securities (as defined herein) and (ii) shares of Common Stock
which are issued or deemed to have been issued by the Company in connection with
an  Approved  Stock Plan (as  defined  herein)  or upon  issuance,  exercise  or

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conversion of the Other Securities (as defined herein)) for a consideration  per
share less than a price (the  "Applicable  Price") equal to the Conversion Price
in effect  immediately  prior to such issuance or sale, then  immediately  after
such issue or sale the  Conversion  Price then in effect  shall be reduced to an
amount equal to such  consideration  per share,  provided that in no event shall
the Conversion Price be reduced below $.001.

(b)      Effect on Conversion  Price of Certain Events.  For purposes of
         ---------------------------------------------
determining the adjusted  Conversion Price under Section 5.01(a) above, the
following shall be applicable:

(i)  Issuance of Options.  If after the date  hereof,  the Company in any manner
------------------------
grants any rights, warrants or options to subscribe for or purchase Common Stock
or convertible securities  ("Options"),  other than Excluded Securities or Other
Securities  issued or deemed to have been issued in connection with any Approved
Stock Plan,  and the lowest  price per share for which one share of Common Stock
is issuable upon the exercise of any such Option or upon  conversion or exchange
of any convertible  securities issuable upon exercise of any such Option is less
than the Conversion Price then in effect,  then such share of Common Stock shall
be deemed to be  outstanding  and to have been issued and sold by the Company at
the time of the  granting or sale of such  Option for such price per share.  For
purposes of this  Section  5.01(b)(i),  the lowest price per share for which one
share  of  Common  Stock is  issuable  upon  exercise  of such  Options  or upon
conversion or exchange of such convertible  securities shall be equal to the sum
of the lowest  amounts of  consideration  (if any) received or receivable by the
Company  with respect to any one share of Common Stock upon the granting or sale
of the Option, upon exercise of the Option or upon conversion or exchange of any
other convertible  security other than this Debenture  issuable upon exercise of
such Option.  No further  adjustment of the Conversion  Price shall be made upon
the actual issuance of such Common Stock or of such convertible  securities upon
the  exercise of such  Options or upon the actual  issuance of such Common Stock
upon conversion or exchange of such convertible securities.

(ii) Issuance of Convertible Securities.  If the Company in any manner issues or
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sells any  convertible  securities  after the  Original  Issue Date,  other than
Excluded  Securities or Other Securities issued or deemed to have been issued in
connection with an Approved Stock Plan, and the lowest price per share for which
one share of Common Stock is issuable upon the conversion or exchange thereof is
less than the Conversion  Price then in effect,  then such share of Common Stock
shall be  deemed  to be  outstanding  and to have  been  issued  and sold by the
Company at the time of the issuance or sale of such  convertible  securities for
such price per share. For the purposes of this Section  5.01(b)(ii),  the lowest
price per share for  which  one  share of  Common  Stock is  issuable  upon such
conversion  or  exchange  shall  be equal to the sum of the  lowest  amounts  of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the convertible  security and
upon conversion or exchange of such convertible  security. No further adjustment
of the  Conversion  Price shall be made upon the actual  issuance of such Common
Stock upon  conversion or exchange of such  convertible  securities,  and if any
such issue or sale of such  convertible  securities is made upon exercise of any
Options for which  adjustment of the Conversion Price had been or are to be made
pursuant to other provisions of this Section 5.01(b),  no further  adjustment of
the Conversion Price shall be made by reason of such issue or sale.

                                       6

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(iii)  Change in  Option  Price or Rate of  Conversion.  If the  purchase  price
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provided for in any Options, the additional consideration,  if any, payable upon
the issue, conversion or exchange of any convertible securities,  or the rate at
which any convertible securities are convertible into or exchangeable for Common
Stock changes at any time,  the  Conversion  Price in effect at the time of such
change shall be adjusted to the Conversion Price which would have been in effect
at such  time had such  Options  or  convertible  securities  provided  for such
changed purchase price, additional  consideration or changed conversion rate, as
the case may be, at the time initially granted, issued or sold and the number of
shares of Common Stock  issuable  upon  conversion  of this  Debenture  shall be
correspondingly  readjusted.  For purposes of this Section 5.01(b)(iii),  if the
terms of any  Option or  convertible  security  that was  outstanding  as of the
Original  Issue  Date are  changed in the manner  described  in the  immediately
preceding  sentence,  then such Option or  convertible  security  and the Common
Stock deemed  issuable upon  exercise,  conversion or exchange  thereof shall be
deemed to have been issued as of the date of such change. No adjustment pursuant
to this  Section  5.01(b)  shall be made if such  adjustment  would result in an
increase of the Conversion Price then in effect.

           (c)      Effect on Conversion  Price of Certain Events.  For purposes
         ---------------------------------------------
of determining the adjusted Conversion Price under Sections 5.01(a) and 5.01(b),
the following shall be applicable:

                   (i)  Calculation  of  Consideration  Received.  If any Common
                   ----------------------------------------------
Stock,  Options or convertible  securities are issued or sold  or deemed to have
been  issued  or  sold for cash,  the  consideration  received therefore will be
deemed to  be the net amount received by the Company therefore.  If  any  Common
Stock, Options or convertible securities are issued or sold for a  consideration
other than cash, the amount of such consideration received by  the  Company will
be  the  fair  value  of  such  consideration,  except where  such consideration
consists  of  marketable securities,  in  which case the amount of consideration
received by the Company will be the market  price of such securities on the date
of  receipt  of  such  securities  (measured  by  the closing sale price of such
securities  on  the Over-the-Counter  Bulletin  Board  or  its principal trading
market).    If any Common Stock, Options or convertible securities are issued to
the owners  of the non-surviving entity in  connection  with any merger in which
the Company is the surviving entity, the amount of consideration  therefore will
be deemed to be the fair value of such portion of the net assets and business of
the non-surviving entity  as is attributable  to such  Common Stock,  Options or
convertible securities, as the case may be.  The fair value of any consideration
other than cash or securities  will be determined jointly by the Company and the
holders  of  the  principal amount of  the Debentures then outstanding.  If such
parties are unable to reach agreement within ten (10)  days after the occurrence
of an event requiring valuation (the "Valuation Event"),  the fair value of such
consideration  will  be determined within five (5) Business Days after the tenth
(10th) day following the Valuation Event by an independent,  reputable appraiser
jointly selected by the  Company  and the holders of the principal amount of the
Debentures then outstanding.  The determination of such appraiser shall be final
and  binding  upon all parties and the fees and expenses of such appraiser shall
be borne by the Company.

                   (ii)  Integrated  Transactions.  In case any Option is issued
                    ------------------------------
in connection with the issue or sale of other  securities of the Company,
together  comprising  one integrated   transaction  in  which  no  specific
consideration is allocated to such Options by the parties  thereto,  the Options
will be deemed to have been issued for a consideration of $.001.

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                   (iii) Treasury Shares.  The number of  shares of Common Stock
                    -----------------------
outstanding at any given time does not  include  shares  owned or held by or for
the account of the Company,  and the  disposition of any shares so owned or held
will be considered an issue or sale of Common Stock.

                   (iv)  Record  Date.  If  the  Company  takes a  record of the
                     ------------------
holders of Common Stock for  the  purpose  of  entitling  them  (1)  to  receive
a  dividend  or  other  distribution  payable  in  Common Stock,  Options  or in
convertible securities or (2) to subscribe for or purchase Common Stock, Options
or convertible securities, then such record date will be deemed  to  be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold  upon  the  declaration  of  such  dividend  or  the  making  of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

          (d)  Adjustment of Conversion  Price upon  Subdivision  or Combination
               -----------------------------------------------------------------
of  Common  Stock.  If  at any time after the date of issuance of this Debenture
subdivides  (by  any stock split, stock dividend, recapitalization or otherwise)
one  or  more  classes  of its outstanding shares of Common Stock into a greater
number  of  shares,  the  Conversion Price or Future Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time  after  the  date  of  issuance of this Debenture combines (by combination,
reverse stock split or otherwise) one  or more classes of its outstanding shares
of Common Stock into a smaller number of shares,  the Conversion Price or Future
Price  in  effect  immediately prior to such combination will be proportionately
increased.   Any adjustment under this Section 5.01(d) shall become effective at
the close of business on the date the subdivision or combination becomes
effective.

          (e) Distribution of Assets. If the Company shall declare or  make  any
              -----------------------
dividend or  other distribution of its assets (or rights to acquire its  assets)
to  holders  of  Common  Stock,  by  way  of  return  of  capital  or  otherwise
(including,  without  limitation,  any  distribution  of  cash, stock  or  other
securities,   property  or  options  by   way  of   a    dividend,   spin   off,
reclassification,   corporate  rearrangement  or other similar  transaction)  (a
"Distribution"),  at any time  after the issuance of this  Debenture,  then,  in
each such case the  Conversion  Price in effect  immediately  prior to the close
of  business on the record date  fixed  for  the  determination  of  holders  of
Common Stock entitled to receive the Distribution  shall be  reduced,  effective
as of the close of business  on  such  record date, to  a  price  determined  by
multiplying  such  Conversion  Price by a  fraction of which (A)  the  numerator
shall  be  the  closing  bid  price  of  the  Common  Stock on  the  trading day
immediately  preceding such record date minus the value of the  Distribution (as
determined  in good faith by the  Company's  Board of Directors)  applicable  to
one share of Common  Stock,  and (B) the  denominator shall  be the closing  bid
price  of the  Common  Stock  on  the  trading  day immediately  preceding  such
record date.  Notwithstanding  the  foregoing,  the Distribution in the  form of
a  stock  dividend  (the  "Forward  Split")  to  be  effected  prior to,  and in
connection with, the Merger  shall  in  no  event  cause  an  adjustment  to the
Conversion  Price,  nor shall any similar adjustment to the capital structure of
the Company effected in connection with the Merger.

          (f)  Certain Events.  If any  event occurs of the type contemplated by
               ---------------
the provisions  of  this  Section  5.01  but  not expressly provided for by such
provisions  (including,  without limitation,  the granting of stock appreciation
rights,  phantom  stock rights or other rights with equity  features),  then the

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Company's  Board  of  Directors  will  make  an  appropriate  adjustment  in the
Conversion  Price so as to protect the rights of the  holders of the  Debenture;
provided,  except  as set  forth in  Section  5.01(d),  that no such  adjustment
pursuant to this Section 5.01(f) will increase the Conversion Price as otherwise
determined pursuant to this Section 5.01.

          (g) Notices.
              --------

                   (i) Immediately  upon any adjustment of the Conversion Price,
the Company will give written notice thereof to the holder  of  this  Debenture,
setting forth in reasonable detail, and  certifying,  the  calculation  of  such
adjustment.

                   (ii) The Company  will give  written  notice to the holder of
this  Debenture at  least ten (10) days prior to the date on  which the  Company
closes its books  or  takes  a  record (A)  with  respect  to  any  dividend  or
distribution  upon  the  Common  Stock,  (B)  with  respect  to  any   pro  rata
subscription  offer to holders of Common Stock or (C) for determining  rights to
vote with  respect  to  any  dissolution  or  liquidation,  provided  that  such
information  shall be made known to the public  prior to or in conjunction  with
such notice being provided to such holder.

          (h) Definitions.
               -----------

                   (i) "Approved  Stock  Plan"  means  any employee benefit plan
                        ---------------------
which  has  been  approved by  the  Board of  Directors of  the Company,  or any
successor  thereto, pursuant  to which the Company's  securities  may be  issued
to any  employee, officer or director for services provided to the Company.

                   (ii) "Excluded  Securities" means any of the  following:  (a)
                         --------------------
any issuance by  the  Company of  securities  in  connection  with  a  strategic
partnership  or a joint  venture (the primary purpose of  which is not  to raise
equity   capital),  (b)  any  issuance   by   the  Company   of  securities   as
consideration   for  a  merger  or  consolidation   or  the  acquisition   of  a
business,  product,  license,  or other  assets of another person or  entity and
(c) options to purchase  shares of Common  Stock, or other stock based awards or
grants under an Approved Stock Plan.

                   (iii)  "Other  Securities"   means  (i)  those   options  and
                           -----------------
warrants of the Company  issued  prior  to, and  outstanding  on,  the  Original
Issue Date,  (ii) the Units, including  the Common  Stock and Warrants  included
in the Units,  issued in the PPO,  (ii) the shares of Common  Stock  issuable on
exercise of such options and  warrants,  provided such options and warrants  are
not amended after the Original  Issue  Date,  (iii) the shares  of Common  Stock
issued in  connection with the Forward Split and (iv) the shares of Common Stock
issuable upon exercise of the Warrants or conversion of this Debenture.

                   (i) Nothing  in  this  Section  5.01  shall  be   deemed   to
authorize  the issuance of any securities by the Company in violation of Section
5.02.

                                       9

<page>

ARTICLE VI.

Section 6.01  Notice.  Notices  regarding  this  Debenture  shall be sent to the
parties at the following  addresses,  unless a party notifies the other parties,
in writing, of a change of address:

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)441566782214

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 Holder:



                                     Telephone:        (
                                     Facsimile:

With a copy to:

                                     e

                                     Telephone:
                                     Facsimile:



Section 6.02 Governing Law. All questions concerning the construction, validity,
             --------------
enforcement  and  interpretation  of this  Debenture  shall be  governed  by and
construed and enforced in accordance  with the internal laws of the State of New
York,  without regard to the principles of conflicts of law thereof.  Each party
agrees that all legal proceedings  concerning the  interpretations,  enforcement
and defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts  sitting in the City of New York,  Borough of Manhattan (the "New
York  Courts").  Each party hereto hereby  irrevocably  submits to the exclusive
jurisdiction  of the  New  York  Courts  for  the  adjudication  of any  dispute
hereunder or in connection herewith or with any transaction  contemplated hereby
or discussed  herein  (including  with respect to the  enforcement of any of the
Transaction Documents),  and hereby irrevocably waives, and agrees not to assert


                                       10

<page>

in any suit, action or proceeding,  any claim that it is not personally  subject
to the  jurisdiction  of any such court, or such New York Courts are improper or
inconvenient  venue for such proceeding.  Each party hereby  irrevocably  waives
personal  service of process and  consents to process  being  served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or  overnight  delivery  (with  evidence of  delivery) to such party at the
address in effect for  notices to it under this  Debenture  and agrees that such
service  shall  constitute  good and  sufficient  service of process  and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve  process in any manner  permitted  by law.  Each  party  hereto  hereby
irrevocably  waives,  to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Debenture or the transactions  contemplated  hereby.  If either party shall
commence an action or  proceeding to enforce any  provisions of this  Debenture,
then the  prevailing  party in such action or proceeding  shall be reimbursed by
the other party for its  attorneys  fees and other costs and  expenses  incurred
with  the   investigation,   preparation  and  prosecution  of  such  action  or
proceeding.

Section 6.03  Severability.  The  invalidity  of any of the  provisions  of this
              -------------
Debenture shall not invalidate or otherwise  affect any of the other  provisions
of this Debenture, which shall remain in full force and effect.

Section 6.04 Entire  Agreement and  Amendments.  This  Debenture  represents the
             ----------------------------------
entire  agreement  between the parties hereto with respect to the subject matter
hereof and there are no  representations,  warranties or commitments,  except as
set forth herein. This Debenture may be amended only by an instrument in writing
executed by the parties hereto.


                  [Remainder Of Page Intentionally Left Blank]


                                       11

<page>

         IN WITNESS  WHEREOF,  with the intent to be legally bound  hereby,  the
Company as executed this Debenture as of the date first written above.

                                              Foothills Resources, Inc.

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




                                       12

<page>

                                    EXHIBIT A


                              NOTICE OF CONVERSION


        (To be executed by the Holder in order to convert the Debenture)


TO:

         The undersigned hereby irrevocably elects to convert $           of the
                                                               -----------
principal  amount  of the  above  Debenture  into  Shares  of  Common  Stock  of
Foothills  Resources,  Inc.,  according  to  the  conditions stated  therein, as
of  the Conversion Date written below.
Conversion Date:
                                           -------------------------------------
Applicable Conversion Price:
                                           -------------------------------------
Signature:
                                           -------------------------------------
Name:
                                           -------------------------------------
Address:
                                           -------------------------------------
Amount to be converted:                   $
                                           -------------------------------------
Amount of Debenture unconverted:          $
                                           -------------------------------------
Conversion Price per Unit:                $
                                           -------------------------------------
Interest on the Principal being
converted shall be paid is

Number of shares of Common Stock and
Warrants to be issued including as
payment of interest, if applicable:
                                           -------------------------------------

Please issue the shares of Common Stock
and Warrants in the following name and
to the following address:
                                           -------------------------------------

Issue to the following account of the
Holder:
                                           -------------------------------------

Authorized Signature:
                                           -------------------------------------
Name:
                                           -------------------------------------
Title:
                                           -------------------------------------
Phone Number:
                                           -------------------------------------
Broker DTC Participant Code:
                                           -------------------------------------
Account Number:
                                           -------------------------------------