Item
5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements
of Certain Officers.
On August 18, 2016 Foothills Exploration,
Inc., (the “Company”) issued a press release announcing appointment of Ritchie Lanclos as Executive Vice President
of the Company and as Vice President of Exploration of its wholly owned subsidiary, Foothills Petroleum, Inc. (“FPI”),
and appointment of Eleazar Ovalle as Executive Vice President of the Company and Vice President of Geology & Geophysical of
FPI.
Mr. Lanclos, age 51, will serve as Executive
Vice President of the Company and also be a part of the Exploration Division being assembled by FPI to consist of geologists and
petroleum engineers engaged in the exploration and development of hydrocarbons. Mr. Lanclos was previously self-employed as president
and principal consultant at Ritchie Rich, LLC, providing petroleum engineering consulting services to a variety of oil and gas
clients. Prior to that, from 2009 to 2014, Mr. Lanclos served as principal consultant to Noble Energy, a Texas company, and specialized
in deepwater Gulf of Mexico commercial discoveries. Before that, from 2007 to 2009, Mr. Lanclos served as principal consultant
at Nexen Production, where he also specialized in deepwater Gulf of Mexico commercial discoveries. Mr. Lanclos received a Bachelor
of Science in Petroleum Engineering from University of Southwestern Louisiana and a Master of Science in Petroleum Engineering
from Texas A&M University.
There is no family relationship between
Mr. Lanclos and the Company or FPI’s officers and directors. Other than the employment terms described below, neither Mr.
Lanclos nor the Company and FPI have entered into any transaction, and no transaction is proposed, that would require disclosure
pursuant to Item 404(a) of Regulation S-K.
FPI will pay Mr. Lanclos an annual salary
of $84,000 upon successful completion of a 90 day probationary period. Mr. Lanclos was entitled to receive a $10,000 bonus upon
commencement of employment and will also be entitled to receive bonuses that will be based on performance standards that will be
established by FPI. Mr. Lanclos will receive 100,000 restricted stock units (RSUs) of the Company of which (i) 20,000 shall vest
180 days from August 15, 2016, (ii) another 20,000 shall vest 270 days from August 15, 2016 and (iii) the remaining 60,000 shall
vest 365 days from August 15, 2016. Upon approval of the Company’s Board of Directors, Mr. Lanclos may become eligible to
participate in the Company’s equity incentive plan, should one be established.
Mr. Lanclos’s employment with
the Company and FPI is at will and may be terminated by the Company or FPI, for or without cause. If Mr. Lanclos is
terminated without cause following the 90 day probationary period, he shall be paid his salary for a period of three months
following termination and may receive a pro-rated bonus through the balance of the calendar year in which termination
occurred. A form of the Executive Employment Agreement among Mr. Lanclos, Company and FPI is attached as Exhibit 10.1 to
this Current Report on Form 8-K and incorporated herein by this reference.
Mr. Ovalle, age 61, will serve as Vice
President of the Company and be a part of the Exploration Division being assembled by FPI as described above. Mr. Ovalle joins
us from Apache Corp., where he served as Geological Advisor – Deepwater & Exploration Shelf. Previously, from 2011 to
2014, Mr. Ovalle was with ENI Petroleum where he served as Geological Advisor – Deepwater & Exploration. Prior to that,
from 2009 to 2011, Mr. Ovalle was with Maxus Energy where he served as Senior Geoscientist – Deepwater. Mr. Ovalle received
a Bachelor of Science in Geology from Trinity University.
There is no family relationship between
Mr. Ovalle and the Company or FPI’s officers and directors. Other than the employment terms described below, neither Mr.
Ovalle nor the Company and FPI have entered into any transaction, and no transaction is proposed, that would require disclosure
pursuant to Item 404(a) of Regulation S-K.
FPI will pay Mr. Ovalle an annual
salary of $84,000 upon successful completion of a 90 day probationary period. Mr. Ovalle was entitled to receive a $10,000
bonus upon commencement of employment and will also be entitled to receive bonuses that will be based on performance
standards and goals that will be established by FPI. Mr. Ovalle will receive 100,000 restricted stock units (RSUs) of the
Company of which (i) 20,000 shall vest 180 days from August 15, 2016, (ii) another 20,000 shall vest 270 days from August 15,
2016 and (iii) the remaining 60,000 shall vest 365 days from August 15, 2016. Upon approval by the Company’s Board of
Directors, Mr. Ovalle may become eligible to participate in the Company’s equity incentive plan, should one be
established.
Mr. Ovalle’s employment with
the Company and FPI is at will and may be terminated by the Company or FPI, for or without cause. If Mr. Ovalle is terminated
without cause following the 90 day probationary period, he shall be paid his salary for a period of three months following
termination and may receive pro-rated bonus through the balance of the calendar year in which termination occurred. A form
of the Executive Employment Agreement with Mr. Ovalle is attached as Exhibit 10.2 to this Current Report on Form 8-K and
incorporated herein by this reference.
In connection with the hiring of
Ritchie Lanclos and Eleazar Ovalle, FPI agreed to pay Wilshire Energy Partners LLC, one of our principal shareholders,
pursuant to a Services Agreement entered into by and between FPI and Wilshire Energy Partners and attached hereto as Exhibit
10.3 that is incorporated herein by reference, a fee of 25% of gross annual salary, including all cash and equity
compensation, but excluding any bonuses to be received by Mr. Lanclos or Mr. Ovalle. FPI has agreed to pay Wilshire Energy
Partners $50,000 for its services in recruiting Messrs Lanclos and Ovalle to the Company and FPI management teams. In the
event either of Mr. Lanclos or Mr. Ovalle leaves FPI of his own volition or is terminated for cause within 90 days from
commencement of their employment, Wilshire Energy Partners shall refund FPI 100% of fees received, minus $2,500.
The employment terms described above and the terms of
the Services Agreement with Wilshire Energy Partners are summaries which are qualified in their entirety by reference to the
forms of executive employment agreements and Services Agreement which are filed as exhibits to this Report.