<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____ TO ____
Commission file number 0-2517
TOREADOR ROYALTY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-0991164
- --------------------------------------- ----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
530 Preston Commons West
8117 Preston Road
Dallas, Texas 75225
- ---------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 369-0080
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 30, 1997
- ------------------------------------- ---------------------------------
Common Stock, $.15625 par value 4,948,171
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TOREADOR ROYALTY CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, June 30, December 31,
1997 1996 1996
------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,916,909 $ 2,945,947 $ 3,074,111
Marketable securities, at market value -- 158,270 --
Accounts receivable 245,861 178,919 508,793
Federal income tax receivable -- 54,899 54,899
Other current assets 48,196 5,578 65,101
------------ ------------ ------------
Total current assets 3,210,966 3,343,613 3,702,904
------------ ------------ ------------
Properties and equipment, less accumulated
depreciation, depletion and amortization 3,200,218 3,260,379 3,306,020
Other assets 116,827 117,534 --
------------ ------------ ------------
Total assets $ 6,528,011 $ 6,721,526 $ 7,008,924
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 109,032 $ 85,013 $ 256,298
Federal income taxes payable -- 3,984 62,938
------------ ------------ ------------
Total current liabilities 109,032 88,997 319,236
Deferred tax liabilities 96,737 70,143 65,508
------------ ------------ ------------
Total liabilities 205,769 159,140 384,744
------------ ------------ ------------
Stockholders' equity:
Preferred stock, $1.00 par value, 4,000,000
shares authorized; none issued -- -- --
Common stock, $.15625 par value, 10,000,000
shares authorized; 5,356,571 issued 836,964 835,792 836,964
Capital in excess of par value 3,577,385 3,560,042 3,577,385
Retained earnings 2,967,332 2,445,710 2,842,483
Net unrealized gain on marketable securities -- 84,114 --
Minimum pension liability -- -- (88,543)
------------ ------------ ------------
7,381,681 6,925,658 7,168,289
Treasury stock at cost: 408,400 shares,
144,500 shares, and 213,900 shares (1,059,439) (363,272) (544,109)
------------ ------------ ------------
Total stockholders' equity 6,322,242 6,562,386 6,624,180
------------ ------------ ------------
Total liabilities and stockholders' equity $ 6,528,011 $ 6,721,526 $ 7,008,924
============ ============ ============
</TABLE>
The Company uses the successful efforts method of
accounting for its oil and gas producing activities.
See accompanying notes to the consolidated financial statements.
- 2 -
<PAGE> 3
TOREADOR ROYALTY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $ 449,702 $ 523,642 $ 1,127,537 $ 987,155
Lease bonuses and rentals 2,800 -- 112,738 300
Interest and other income 39,963 55,577 77,340 105,876
------------ ------------ ------------ ------------
Total revenues 492,465 579,219 1,317,615 1,093,331
Costs and expenses:
Lease operating expense 141,930 127,710 280,145 218,466
Dry holes and abandonments 10,067 54,986 63,522 89,191
Depreciation, depletion and amortization 56,754 55,322 114,342 107,296
Geological and geophysical 79,475 47,522 153,489 114,720
General and administrative 289,440 216,721 519,236 443,789
------------ ------------ ------------ ------------
Total costs and expenses 577,666 502,261 1,130,734 973,462
------------ ------------ ------------ ------------
Income (loss) from operations (85,201) 76,958 186,881 119,869
Other income:
Gain from sales of marketable securities -- 375,551 -- 375,551
Income (loss) before federal income taxes (85,201) 452,509 186,881 495,420
Provision (benefit) for federal income taxes (25,841) 150,015 62,036 165,450
------------ ------------ ------------ ------------
Net income (loss) $ (59,360) $ 302,494 $ 124,845 $ 329,970
============ ============ ============ ============
Income (loss) per share $ (0.01) $ 0.06 0.02 0.06
============ ============ ============ ============
Weighted average shares outstanding 5,042,070 5,222,745 5,091,240 5,251,194
============ ============ ============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
- 3 -
<PAGE> 4
TOREADOR ROYALTY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (59,360) $ 302,494 $ 124,845 $ 329,970
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 56,754 54,986 114,342 107,296
Dry holes and abandonments 10,067 55,322 63,522 89,191
Gain on sale of marketable securities -- (375,551) -- (375,551)
Decrease (increase) in accounts receivable (3,757) (30,518) 262,932 (10,173)
Decrease in federal income tax receivable -- -- 54,899 32,551
Decrease (increase) in pension obligation (8,734) 13,750 (28,280) 791
Decrease in other current assets 40,276 34,250 16,905 16,594
Increase (decrease) in accounts payable and
accrued liabilities 79,804 (20,063) (147,266) (108,226)
Increase (decrease) in federal income taxes payable (71,593) 3,984 (62,938) 3,984
Deferred tax expense 8,317 146,031 31,229 161,458
------------ ------------ ------------ ------------
Net cash provided by operating activities 51,774 184,685 430,190 247,885
------------ ------------ ------------ ------------
Cash flows from investing activities:
Expenditures for oil and gas property and equipment (53,940) (175,357) (149,697) (255,175)
Proceeds from the sale of marketable securities -- 470,984 -- 470,984
Purchase of furniture & fixtures -- (400) -- (400)
Proceeds from lease bonuses and rentals -- -- 77,635 --
------------ ------------ ------------ ------------
Net cash provided (used) by investing activities (53,940) 295,227 (72,062) 215,409
------------ ------------ ------------ ------------
Cash flows from financing activities:
Purchase of treasury stock (503,504) (143,595) (515,330) (308,922)
------------ ------------ ------------ ------------
Net cash used by financing activities (503,504) (143,595) (515,330) (308,922)
------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (505,670) 336,317 (157,202) 154,372
Cash and cash equivalents, beginning of period 3,422,579 2,609,630 3,074,111 2,791,575
------------ ------------ ------------ ------------
Cash and cash equivalents, end of period $ 2,916,909 $ 2,945,947 $ 2,916,909 $ 2,945,947
============ ============ ============ ============
Supplemental schedule of cash flow information:
Cash received during the period for Income taxes $ -- $ -- $ 58,589 $ 32,551
Cash paid during the period for Income taxes $ 40,000 $ -- $ 100,000 $ --
</TABLE>
See accompanying notes to the consolidated financial statements.
- 4 -
<PAGE> 5
TOREADOR ROYALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended June 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements should be read in the context of
the consolidated financial statements and notes thereto filed with the
Securities and Exchange Commission in Toreador Royalty Corporation's (the
"Company") 1996 Annual Report on Form 10-K. In the opinion of the Company, the
information furnished herein reflects all adjustments consisting of only normal
recurring adjustments, necessary for a fair presentation of the results of the
interim periods reported herein. Operating results from the interim period may
not necessarily be indicative of the results for the year ended December 31,
1997. Certain previously reported financial information has been reclassified
to conform to the current period's presentation.
NOTE 2 - MARKETABLE SECURITIES
The Company does not own any marketable securities. The Company eliminated
its position in the San Juan Basin Royalty Trust in the third quarter of 1996.
NOTE 3 - NON-PRODUCING MINERAL AND ROYALTY INTERESTS
Principal properties include mineral fee interests acquired by the Company
during 1951 and 1958. These interests totaled approximately 530,000 net mineral
acres underlying approximately 870,000 surface acres in the Texas Panhandle and
West Texas. It is recognized that the ultimate realization of the investment in
these properties is dependent upon future exploration and development
operations which are dependent upon satisfactory leasing and drilling
arrangements with others. Additionally, the Company owns working or royalty
interests in Texas, New Mexico, Oklahoma, Arkansas, Louisiana and Colorado.
NOTE 4 - INTEREST AND OTHER INCOME
Items in interest and other income consist of:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest - Certificates of Deposit and
U. S. Treasury Bills $ 39,963 $ 31,253 $ 76,196 $ 64,977
Distribution from Grantor Trust:
San Juan Basin Royalty Trust -- 4,750 -- 11,975
Other Income -- 19,574 1,144 28,924
---------- ---------- ---------- ----------
$ 39,963 $ 55,577 $ 77,340 $ 105,876
========== ========== ========== ==========
</TABLE>
- 5 -
<PAGE> 6
TOREADOR ROYALTY CORPORATION
For the three and six months ended June 30, 1997
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Disclosures Regarding Forward-Looking Statements
This report on Form 10-Q includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statements of historical facts included in this Form 10-Q,
including, without limitation, statements contained in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding the Company's financial position, business strategy, plans and
objectives of management of the Company for future operations, and industry
conditions, are forward-looking statements. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable,
it can give no assurance that such expectations will prove to have been
correct. Any forward-looking statements herein are subject to certain risks and
uncertainties inherent in petroleum exploration, development and production,
including, but not limited to the risk that no commercially productive oil and
gas reservoirs will be encountered; inconclusive results from 3-D seismic
projects; delays or cancellation of drilling operations as a result of a
variety of factors; volatility of oil and gas prices due to economic and other
conditions; intense competition in the oil and gas industry; operational risks
(e.g., fires, explosions, blowouts, cratering and loss of production);
insurance coverage limitations and requirements; and potential liability
imposed by intense governmental regulation of oil and gas production; all of
which are beyond the control of the Company. Any one or more of these factors
could cause actual results to differ materially from those expressed in any
forward-looking statement. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the cautionary statements disclosed in
this paragraph and otherwise in this report.
Liquidity and Capital Resources
Historically, most of the exploration activity on the Company's
acreage has been funded and conducted by other oil companies and this activity
is expected to continue. Exploration activity typically generates lease bonus
and option income to the Company. If drilling is successful, the Company
receives royalty income from the oil or gas production but bears none of the
capital or operating costs. In order to accelerate the evaluation of its
acreage as well as increase its ownership in any reserves discovered, the
Company intends to increase its level of participation in exploring its acreage
by acquiring working interests. The extent to which the Company may acquire
working interests will depend on the availability of outside capital and cash
flow from operations. Currently, the primary sources of capital for the
financing of the Company's operations are cash flow provided from revenues
generated by its proportionate share in oil and natural gas sales and existing
cash, including that from a private offering completed in 1994. To the extent
cash flow
- 6 -
<PAGE> 7
TOREADOR ROYALTY CORPORATION
For the three and six months ended June 30, 1997
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
from operations does not significantly increase and external sources of capital
are limited or unavailable, the Company's ability to make the capital
investment to participate in 3-D seismic surveys and increase its interest in
projects on its acreage will be limited. Future funds are expected to be
provided through production from existing producing properties and new
producing properties that may be discovered through exploration of the
Company's acreage by third parties or by the Company itself. Funds may also be
provided through external financing in the form of debt or equity. There can be
no assurance as to the extent and availability of these sources of funding.
The Company has no debt and maintains its excess cash funds in
interest-bearing deposits and commercial paper. The Company is not aware of any
demands, commitments or events which will result in its liquidity increasing or
decreasing in a material way. From time to time, the Company may receive lease
bonuses that cannot be anticipated and, when funds are available, the Company
may elect to participate in exploratory ventures. The Company also may acquire
producing oil and gas assets which could require the use of debt.
Management believes that sufficient funds are available internally to
meet anticipated capital requirements for fiscal 1997.
The Company has used $1,042,696 of its cash reserves to purchase
402,700 shares of its Common Stock, as of June 30, 1997. These purchases were
made pursuant to stock repurchase programs authorized by the Board of Directors
on October 10, 1995, of up to 100,000 shares of Common Stock and a second stock
repurchase program on April 22, 1996, of up to 150,000 shares of common stock.
A third stock repurchase program was authorized by the Board of Directors on
April 21, 1997, of up to 300,000 shares of common stock. As of August 8, 1997,
the Company had purchased an aggregate of 152,700 shares at a purchase price of
$411,668 under the third repurchase program. The repurchases of the Company's
shares of Common Stock were made in unsolicited open-market purchases, at
market (not premium) prices, without fixed terms and not contingent upon the
tender of a fixed minimum number of shares or in response to a third party bid
and otherwise in accordance with Rule 10b-18 under the Securities Exchange Act
of 1934, as amended.
- 7 -
<PAGE> 8
TOREADOR ROYALTY CORPORATION
For the three and six months ended June 30, 1997
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 VS
THREE MONTHS ENDED JUNE 30, 1996
Revenues for the second quarter of 1997 were $492,465 versus $579,219
for the same period in 1996. Oil and gas sales were $449,702 on volumes of
19,233 BBLs of oil and 80,569 MCF of natural gas as compared to $523,642 on
volumes of 16,314 BBLs and 90,606 MCF in 1996. The $73,940 decrease in oil and
gas sales resulted from lower oil and gas prices. Average oil prices decreased
16.0% to $17.27/BBL for the three months ended June 30, 1997 from $20.56/BBL
for three months ended June 30, 1996, while average gas prices decreased 30.3%
to $1.45/MCF for the three months ended June 30, 1997 from $2.08/MCF for the
three months ended June 30, 1996. Lease bonuses and rentals increased to $2,800
in 1997 versus none in 1996. Interest and other income was $39,963 in 1997 down
from $55,577 in 1996. This decrease was primarily due to a one time adjustment
for miscellaneous receipts in 1996.
Costs and expenses were $577,666 in 1997 versus $502,261 in 1996.
Lease operating expenses increased to $141,930 in 1997 from $127,710 in 1996
due to the acquisitions made in 1996. Dry holes and abandonments decreased to
$10,067 in 1997 from $54,986 in 1996. Depreciation, depletion and amortization
increased 2.6% to $56,754 in 1997 from $55,322 in 1996, reflecting more
property owned by the Company. Geological and geophysical expenses increased
67.2% to $79,475 in 1997 from $47,522 in 1996, primarily as a result of
retaining a consultant to replace a former employee and a payment for
consulting services relating to the preparation of reserve reports for the year
ended December 31, 1996, normally rendered in the first quarter. General and
administrative expenses increased to $289,440 from $216,721 a year ago,
primarily due to the payment of $86,317 to the former chief executive officer
of the Company, in settlement of his supplemental executive retirement plan.
The Company recognized a net loss of $59,360 or $0.01 per share, for
the second quarter of 1997 versus net income of $302,494, or $0.06 per share,
for the same period in 1996. Net income for the second quarter of 1996 includes
a $375,551 gain from the sale of marketable securities. The Company eliminated
its position in any marketable securities during the third quarter of 1996.
- 8 -
<PAGE> 9
TOREADOR ROYALTY CORPORATION
For the three and six months ended June 30, 1997
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 VS
SIX MONTHS ENDED JUNE 30, 1996
Revenues for the six months ended June 30, 1997 were $1,317,615 versus
$1,093,331 for the same period in 1996. Oil and gas sales were $1,127,537 on
volumes of 37,092 BBLs of oil and 159,892 MCF of natural gas as compared to
$987,155 on volumes of 32,589 BBLs and 176,637 MCF in 1996. The $140,382
increase in oil and gas sales resulted from higher oil and gas prices. Average
oil prices increased 2.9% to $19.93/BBL for the six months ended June 30, 1997
from $19.36/BBL for the six months ended in June 30, 1996, while average gas
prices increased 19.8% to $2.42/MCF for the six months ended June 30, 1997 from
$2.02/MCF for the six months ended June 30, 1996. Lease bonuses and rentals
increased to $112,738 in 1997 versus $300 in 1996, primarily as a result of
receiving bonuses from two exploratory agreements on the Company's minerals.
Interest and other income was $77,340 in 1997 down from $105,876 in 1996. This
decrease was primarily due to the Company liquidating the remainder of its
marketable securities in the San Juan Basin Royalty Trust in August 1996.
Costs and expenses were $1,130,734 in 1997 versus $973,462 in 1996.
Lease operating expenses increased to $280,145 in 1997 from $218,466 in 1996
due to the acquisitions made in 1996. Dry holes and abandonments decreased to
$63,522 in 1997 from $89,191 in 1996. Depreciation, depletion and amortization
increased 6.6% to $114,342 in 1997 from $107,296 in 1996, reflecting more
property owned by the Company. Geological and geophysical expenses increased
33.8% to $153,489 in 1997 from $114,720 in 1996, primarily as a result of
retaining and training a consultant to replace a former employee. General and
administrative expenses increased to $519,236 from $443,789 a year ago,
primarily due to the payment of $86,317 to the former chief executive officer
of the Company, in settlement of his supplemental executive retirement plan.
The Company recognized net income of $124,845 or $0.02 per share, for
the six months ended June 30, 1997 versus net income of $329,970, or $0.06 per
share, for the same period in 1996. Net income for the six months ended June
30, 1996 includes a $375,551 gain from the sale of marketable securities. The
Company eliminated its position in any marketable securities during the third
quarter of 1996.
- 9 -
<PAGE> 10
TOREADOR ROYALTY CORPORATION
For the three and six months ended June 30, 1997
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OTHER MATTERS
Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128 ("SFAS 128"), "Earnings Per Share". This Statement is
effective for financial statements issued for periods ending after December 15,
1997. Earlier adoption is not permitted. SFAS 128 requires dual presentation of
basic and diluted EPS for entities with complex capital structures. The impact
of adopting this statement will not have a material effect on the Company's
earnings per share calculation.
- 10 -
<PAGE> 11
TOREADOR ROYALTY CORPORATION
June 30, 1997
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of stockholders of the Company was held at
10:00 a.m., local time, on Thursday, May 15, 1997.
(b) Proxies were solicited by the Board of Directors of the Company
pursuant to Regulation 14A under the Securities Exchange Act of 1934. There was
no solicitation in opposition to the Board of Directors' nominees as listed in
the proxy statement and all of such nominees were duly elected.
(c) Out of a total of 5,138,271 shares of common stock of the Company
outstanding and entitled to vote, 3,676,796 shares were present in person or by
proxy, representing approximately 72 percent. The only matter voted on by the
stockholders, as fully described in the definitive proxy materials for the
annual meeting, was the election of directors of the Company. The results of
the voting for the election of directors of the Company were as follows:
<TABLE>
<CAPTION>
Number of Shares
WITHHOLDING
Number of Shares Voting AUTHORITY to Vote for
Nominees FOR Election as Director Election as Director
<S> <C> <C>
John V. Ballard 3,638,896 37,900
J. W. Bullion 3,638,596 38,200
Thomas P. Kellogg, Jr. 3,638,596 38,200
John Mark McLaughlin 3,638,896 37,900
Peter R. Vig 3,597,146 79,650
Jack L. Woods 3,638,596 38,200
</TABLE>
There were no broker non-votes for the matter voted on by the stockholders at
the annual meeting.
(d) Inapplicable.
- 11 -
<PAGE> 12
TOREADOR ROYALTY CORPORATION
June 30, 1997
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
The information required by this Item 6(a) is set forth in the Index
to Exhibits accompanying this quarterly report and is incorporated herein by
reference.
(b) Reports on Form 8-K
Form 8-K dated April 23, 1997 (Date of Event: April 21, 1997), which
reported the resignation of Peter R. Vig as Chairman and Chief Executive
Officer of the Company and Donald E. August as a director of the Company, and
the authorization by the Board of Directors of the Company of a stock
repurchase program of up to 300,000 shares of the Company's common stock.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TOREADOR ROYALTY CORPORATION,
Registrant
/s/ John Mark McLaughlin
---------------------------------------
John Mark McLaughlin,
Chairman and President
August 8, 1997
- 12 -
<PAGE> 13
TOREADOR ROYALTY CORPORATION
June 30, 1997
INDEX TO EXHIBITS
Exhibit
Number Description
------- -----------
10.1 - Non-Qualified Stock Option Agreement dated as of May 15,
1997 by and between Toreador Royalty Corporation and
Jack L. Woods.
10.2 - Incentive Stock Option Agreement dated as of May 15, 1997
by and between Toreador Royalty Corporation and John
Mark McLaughlin.
10.3 - Consulting Agreement dated as of May 1, 1997 by and between
Toreador Royalty Corporation and Jack L. Woods.
10.4 - Incentive Stock Option Agreement dated as of May 15, 1997
by and between Toreador Royalty Corporation and
Edward C. Marhanka.
10.5 - Employment Agreement dated as of May 1, 1997 by and between
Toreador Royalty Corporation and Edward C. Marhanka.
27 - Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
JACK L. WOODS
TOREADOR ROYALTY CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this "Agreement"), made and
entered into as of May 15, 1997, by and between Toreador Royalty Corporation, a
Delaware corporation (the "Company"), and Jack L. Woods ("Optionee");
W I T N E S S E T H:
WHEREAS, Optionee provides consulting services ("Services") to the
Company; and
WHEREAS, the Company desires to extend to Optionee the opportunity to
acquire Common Stock as an added incentive for Optionee to continue providing
Services to the Company and to advance the interests of the Company; and
WHEREAS, the Board of Directors of the Company has authorized and
approved the grant of non-qualified stock options to Optionee subject to the
terms and conditions herein provided; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, do hereby agree as follows:
1. Grant of Option and Option Period. The Company hereby grants
to Optionee as of the date of this Agreement (the "Grant Date"), subject to the
provisions of Section 2 hereof and as hereinafter set forth, an option (the
"Option") to purchase 30,000 shares of Common Stock, par value $.15625 per
share, of the Company ("Common Stock") at the price of $2.50 per share, at any
time or (with respect to partial exercises) from time to time during a period
commencing on the date hereof and ending on May 15, 2007.
2. Exercise of Option. The Option may be exercised by written
notice signed by Optionee and delivered to the Secretary of the Company or sent
by United States registered or certified mail, postage prepaid, addressed to
the Company (to the attention of its Secretary) at its corporate office in
Dallas, Texas. Such notice shall state the number of shares as to which the
Option is exercised and shall be accompanied by the full amount of the purchase
price of such shares, in cash or by check. Any such notice shall be deemed
given on the date on which the same was deposited in a regularly maintained
receptacle for the deposit of United States mail, addressed and sent as
above-stated, or, in the case of hand
<PAGE> 2
delivery, on the date of receipt thereof by the Secretary of the Company. In
the event of Optionee's death, the executor or administrator of Optionee's
estate (or anyone who shall have acquired the Option by will or pursuant to the
laws of descent and distribution) may exercise the Option in accordance with
the provisions of this Agreement.
3. Delivery of Certificates Upon Exercise of the Option.
Delivery of a certificate or certificates representing the purchased shares of
Common Stock shall be made promptly after receipt of notice of exercise and
payment of the purchase price. If the Company so elects, it obligation to
deliver shares of Common Stock upon the exercise of the Option shall be
conditioned upon its receipt from the person exercising the Option of an
executed investment letter, in form and content satisfactory to the Company and
its legal counsel, evidencing the investment intent of such person and such
other matters as the Company may reasonably require. It the Company so elects,
the certificate or certificates representing the shares of Common Stock issued
upon exercise of the Option shall bear a legend in substantially the following
form:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS AND
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SHARES
ARE FIRST REGISTERED THEREUNDER OR UNLESS THE COMPANY RECEIVES
A WRITTEN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE
ACCEPTABLE TO THE COMPANY, TO THE EFFECT THAT REGISTRATION
THEREUNDER IS NOT REQUIRED.
4. Adjustments Upon Changes in Common Stock. In the event that
before delivery by the Company of all the shares in respect of which the Option
is granted, the Company shall have effected a Common Stock split or dividend
payable in Common Stock, or the outstanding Common Stock of the Company shall
have been combined into a smaller number of shares, the shares still subject to
the Option shall be increased or decreased to reflect proportionately the
increase or decrease in the number of shares outstanding, and the purchase
price per share shall be decreased or increased so that the aggregate purchase
price for all the then optioned shares shall remain the same as immediately
prior to such split, dividend or combination. In the event of a
reclassification of Common Stock not covered by the foregoing, or in the event
of a liquidation, separation or reorganization, including a merger,
consolidation or sale of assets, the Board shall make such adjustments, if any,
as it may deem appropriate in the number, purchase price and kind of shares
still subject to the Option. The provisions of this Section 4 shall only be
applicable if, and only to the extent that, the application thereof does not
conflict with any valid governmental statute, regulation or rule.
-2-
<PAGE> 3
5. Transferability. The Option evidenced hereby is not
transferable otherwise than by will or by the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined in the Code or
in Title I of the Employee Retirement Income Security Act of 1974, as amended,
and during the lifetime of Optionee is exercisable only by Optionee.
6. Applicable Law. All questions arising with respect to the
provisions of this Agreement shall be determined by application of the laws of
the State of Texas except to the extent preempted by Federal law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
The "Company"
TOREADOR ROYALTY CORPORATION
By: /s/ JOHN MARK MCLAUGHLIN
---------------------------------
John Mark McLaughlin
Chairman of the Board and
President
"Optionee"
/s/ JACK L. WOODS
---------------------------------------
Jack L. Woods
-3-
<PAGE> 1
EXHIBIT 10.2
JOHN MARK MCLAUGHLIN
TOREADOR ROYALTY CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, made as of May 15, 1997, by and between Toreador
Royalty Corporation, a Delaware corporation (the "Company"), and John Mark
McLaughlin ("Optionee") in connection with the grant of an Incentive Option
(hereinafter defined) under the Toreador Royalty Corporation 1990 Stock Option
Plan (the "Plan").
W I T N E S S E T H :
WHEREAS, Optionee is an employee of the Company or an Affiliate
(hereinafter defined) in a key position and the Company desires to encourage
Optionee to own Common Stock (hereinafter defined) and to give Optionee added
incentive to advance the interests of the Company through the Plan and desires
to grant Optionee an Incentive Option (hereinafter defined) to purchase shares
of Common Stock of the Company under terms and conditions established by the
Board (hereinafter defined).
NOW, THEREFORE, the Company and Optionee hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following meanings, respectively:
(a) "Affiliate" shall have the meaning set forth in
Section 1.2 of the Plan and shall include any party now or hereafter
coming within that definition.
(b) "Board" shall mean the Board of Directors of the
Company.
(c) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(d) "Committee" shall mean the committee appointed
pursuant to Section 3 of the Plan.
(e) "Common Stock" shall mean the $.15625 par value
Common Stock of the Company.
(f) "Fair Market Value" shall have the meaning set forth
in Section 1.8 of the Plan.
<PAGE> 2
(g) "Incentive Option" shall mean a stock option that is
intended to be or is denominated as an incentive stock option (within
the meaning of Section 422 of the Code).
2. Grant of Option and Option Period. The Company hereby grants
to Optionee as of the date of this Agreement (the "Grant Date"), subject to the
provisions of Section 3 hereof and as hereinafter set forth, the option to
purchase 30,000 shares of Common Stock at the price of $2.50 per share (the
"Purchase Price"), at any time or (with respect to partial exercises) from time
to time during a period commencing on the date hereof and ending on May 15,
2007.
3. Termination of Service. Any provision of Section 2 hereof to
the contrary notwithstanding:
(a) If Optionee ceases to be employed by the Company or
an Affiliate "for cause" (as defined in Section 6.4(a) of the Plan),
then that portion, if any, of this Incentive Option that remains
unexercised, including that portion, if any, that pursuant to this
Agreement is not yet exercisable, shall automatically terminate and be
of no further force or effect as of the date Optionee ceases to be
employed;
(b) If Optionee shall die during the Option Period while
in the employ of the Company or an Affiliate, this Incentive Option
may be exercised, to the extent that Optionee was entitled to exercise
it at the date of Optionee's death, within one year after such death
(if otherwise within the Option Period), but not thereafter, by the
executor or administrator of the estate of Optionee or by the person
or persons who shall have acquired this Incentive Option directly from
Optionee by bequest or inheritance;
(c) If Optionee ceases to be employed by the Company or
an Affiliate by reason of disability (as defined in Section 22(e)(3)
of the Code), this Incentive Option may be exercised, to the extent
that Optionee was entitled to exercise it at the date of his
termination, within one year after such termination (if otherwise
within the Option Period), but not thereafter by Optionee (or
Optionee's legal representative, if Optionee is legally incompetent);
and
(d) If Optionee ceases to be employed by the Company or
an Affiliate for any reason (other than the circumstances specified in
paragraphs (a), (b) and (c) of this Section 3) within the Option
Period, this Incentive Option may be exercised, to the extent Optionee
was able to do so at the date of termination of the directorship,
within three (3) months after such termination (if otherwise within
the Option Period), but not thereafter.
-2-
<PAGE> 3
4. Exercise During Employment. Except as provided in Section 3
hereof, this Incentive Option may not be exercised unless Optionee is at the
time of exercise an employee of the Company or an Affiliate.
5. Manner of Exercise. This Incentive Option may be exercised by
written notice signed by the person entitled to exercise same and delivered to
the Secretary of the Company or sent by United States registered mail addressed
to the Company (for the attention of the Secretary) at its corporate office in
Dallas, Texas. Such notice shall state the number of shares of Common Stock as
to which the Incentive Option is exercised and shall be accompanied by the full
amount of the purchase price of such shares. Exercise of this Incentive Option
shall not be effective until the Company has received written notice of
exercise.
6. Payment. The Purchase Price for the Incentive Option shares
may be paid in cash by certified or cashier's check or, with the consent of the
Committee, with shares of Common Stock owned by Optionee which have been held
at least six (6) months prior to the date of exercise or, with the consent of
the Committee, by a combination of cash and such shares.
7. Delivery of Shares. Delivery of the certificates representing
the shares of Common Stock purchased upon exercise of this Incentive Option
shall be made promptly after receipt of notice of exercise and payment. If the
Company so elects, its obligation to deliver shares of Common Stock upon the
exercise of this Incentive Option shall be conditioned upon its receipt from
the person exercising this Incentive Option of an executed investment letter,
in form and content satisfactory to the Company and its legal counsel,
evidencing the investment intent of such person and such other matters as the
Company may reasonably require. If the Company so elects, the certificate or
certificates representing the shares of Common Stock issued upon exercise of
this Incentive Option shall bear a legend in substantially the following form:
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE HAVE BEEN ISSUED TO
THE REGISTERED OWNER IN RELIANCE UPON WRITTEN REPRESENTATIONS THAT
THESE SHARES HAVE BEEN PURCHASED FOR INVESTMENT. THESE SHARES MAY NOT
BE SOLD, TRANSFERRED, OR ASSIGNED UNLESS, IN THE OPINION OF THE
CORPORATION OR ITS LEGAL COUNSEL, SUCH SALE, TRANSFER, OR ASSIGNMENT
WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED,
APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE
COMMISSION, AND ANY APPLICABLE STATE SECURITIES LAWS.
-3-
<PAGE> 4
8. Status of Optionee. Optionee shall not be deemed to be a
stockholder of the Company with respect to any of the shares of Common Stock
subject to this Incentive Option, except to the extent that such shares shall
have been purchased and transferred to him. The Company shall not be required
to issue or transfer any certificates for shares of Common Stock purchased upon
exercise of this Incentive Option until all applicable requirements of law have
been complied with and such shares shall have been duly listed on any
securities exchange on which the Common Stock may then be listed.
9. Adjustments. Notwithstanding any other provision hereof, in the
event of any change in the number of outstanding shares of Common Stock
effected without receipt of consideration therefor by the Company, by reason of
a stock dividend, or split, combination, exchange of shares or other
recapitalization, merger, or otherwise, in which the Company is the surviving
corporation, the number and class of shares subject to this Incentive Option
and the exercise price of this Incentive Option shall be automatically adjusted
to accurately and equitably reflect the effect thereupon of such change,
provided that any fractional share resulting from such adjustment may be
eliminated. In the event of a dispute concerning such adjustment, the decision
of the Committee shall be conclusive. The number of shares subject to this
Incentive Option shall be automatically reduced by any fraction included
therein which results from any adjustment made pursuant to this Section 9.
A dissolution or liquidation of the Company; a sale of all or
substantially all of the assets of the Company where it is contemplated that
within a reasonable period of time thereafter the Company will either be
liquidated or converted into a nonoperating company or an extraordinary
dividend will be declared resulting in a partial liquidation of the Company
(but in all cases only with respect to those employees with the Company and its
Affiliates as a result of such sale or assets); a merger or consolidation
(other than a merger effecting a reincorporation of the Company in another
state or any other merger or a consolidation in which the shareholders of the
surviving corporation and their proportionate interests therein immediately
after the merger or consolidation are substantially identical to the
shareholders of the Company and their proportionate interests therein
immediately prior to the merger or consolidation) in which the Company is not
the surviving corporation (or survives only as a subsidiary of another
corporation in a transaction in which the shareholders of the parent of the
Company and their proportionate interests therein immediately after the
transaction are not substantially identical to the shareholders of the Company
and their proportionate interests therein immediately prior to the
transaction); or a transaction in which another corporation becomes the owner
of 50% or more of the total combined voting power of all classes of stock of
the Company shall cause this Incentive Option to terminate, but Optionee shall,
in any event, have the right, immediately prior to such dissolution,
liquidation, merger, consolidation, or transaction, to exercise this Incentive
Option, to the extent not theretofore exercised, without regard to the
determination as to the periods and installments of exercisability made
pursuant to Section 3 hereof if (and only if) this Incentive Option has not at
that time expired or been terminated. Such acceleration of
-4-
<PAGE> 5
exercisability shall not apply to this Incentive Option if any surviving or
acquiring corporation agrees to assume this Incentive Option in connection with
the merger, consolidation, or transaction.
10. Committee Authority. Any questions concerning the
interpretation of this Agreement and any controversy which may arise under this
Agreement shall be determined by the Committee in its sole discretion.
11. Transferability. This Incentive Option is not transferable
otherwise than by will and the laws of descent and distribution and during the
lifetime of Optionee is exercisable only by Optionee or, if Optionee is legally
incompetent, by Optionee's legal representative.
12. Employment. Nothing in this Agreement confers upon Optionee any
right to continue in the employ of the Company or any Affiliate, nor shall this
Agreement interfere in any manner with the right of the Company or any
Affiliate to terminate the employment of Optionee with or without cause at any
time.
13. Incentive Option Subject to Plan. By execution of this
Agreement, Optionee agrees that this Incentive Option and the shares of Common
Stock to be received upon exercise hereof shall be governed by and subject to
all applicable provisions of the Plan.
14. Construction. This Agreement is governed by, and shall be
construed and enforced in accordance with, the laws of the State of Texas.
Words of any gender used in this Agreement shall be construed to include any
other gender, unless the context requires otherwise. The headings of the
various sections of this Agreement are intended for convenience of reference
only and shall not be used in construing the terms hereof.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TOREADOR ROYALTY CORPORATION
By: /s/ J. W. BULLION
-----------------------------------
J. W. Bullion
Secretary
/s/ JOHN MARK MCLAUGHLIN
---------------------------------------
John Mark McLaughlin, Optionee
-6-
<PAGE> 1
EXHIBIT 10.3
JACK L. WOODS
CONSULTING AGREEMENT
This Consulting Agreement (this "Agreement") is made as of May 1,
1997, by and between Toreador Royalty Company, a Delaware corporation (the
"Company"), and Jack L. Woods (the "Consultant").
WHEREAS, the Company desires to enter into a separate agreement to
retain the services of the Consultant on a current basis, and the Consultant
desires to perform such services for the Company, subject to and upon the terms
and conditions contained herein;
NOW, THEREFORE, in consideration of the premises and the mutual terms
and conditions hereto, the Company and the Consultant agree as follows:
1. Employment and Duties. The Company agrees to retain the
services of the Consultant to perform such consulting and advisory services
regarding the operations of the Company as the Company shall request from time
to time during the term of this Agreement. The Consultant shall make himself
available to consult with the directors, officers, employees and other
consultants of the Company at reasonable times, concerning geological and
geophysical matters and, in general, any other issue concerning the business
affairs of the Company on which the Consultant's expertise may bear.
2. Amount of Service. It is anticipated that the Consultant will
spend approximately one business day per week performing his duties and
functions under this Agreement during the term of this Agreement. It is
understood that the Consultant's time commitment to the Company may vary over
time consistent with the needs of the Company and the Consultant agrees to
devote such time and attention to the performance and fulfillment of such
duties, functions and responsibilities as is necessary to fulfill such duties.
Notwithstanding the foregoing, it is specifically understood and agreed that
the Consultant may act as a consultant or perform services for other parties
other than the Company and therefore will only be required to devote a portion
of his time to his services under this Agreement, which will not exceed three
business days per week without his consent. The Consultant shall be deemed an
independent contractor for all purposes.
3. Compensation. The Company shall pay the Consultant for his
services under this Agreement a consulting fee of $4,500 during the term of
this Agreement. The Board of Directors of the Company and the Consultant shall
review the consulting fee on an annual basis to determine any increases that
the parties shall agree upon. All federal withholding and other employment and
income related taxes shall be the responsibility of the Consultant. As
additional compensation for his services under this Agreement, the Consultant,
upon execution of this Agreement, shall be granted by the Company an option to
purchase 30,000 and conditions set forth in the form of Option Agreement
attached hereto as Exhibit A which
<PAGE> 2
is incorporated herein by reference. The Company and the Consultant shall
execute and deliver counterparts of the Option Agreement in the form of Exhibit
A simultaneously with the execution of this Agreement.
4. Business Expenses. The Consultant shall be reimbursed by the
Company for any out of pocket expenses reasonably paid or incurred by him in
connection with the performance of his duties hereunder upon presentation of
expense statements or vouchers or such other supporting information reasonably
evidencing such expenses.
5. Term. The term of this Agreement shall commence on the date
hereof and terminate on December 31, 1997.
6. Termination. This Agreement shall terminate upon the first to
occur of (i) the expiration of the term hereof, (ii) the death, disability or
other incapacity of the Consultant, or (iii) the written consent of both
parties to this Agreement. For purposes of this Agreement, the "disability or
incapacity" of the Consultant shall occur if, as a result of the Consultant's
incapacity due to physical, emotional or mental injury, illness or
incapacitation, the Consultant shall have been absent from his services
hereunder on a continuous basis for the entire period of six consecutive
months.
7. Limited Liability. With regard to the services to be
performed by the Consultant pursuant to the terms of this Agreement, the
Consultant shall not be liable to the Company, or to anyone who may claim any
right due to his relationship with the Company, for any acts or omissions in
the performance of said services on the part of the Consultant or on the part
of the agents or employees of the Consultant, except when said acts or
omissions of the Consultant are due to his willful misconduct or gross
negligence. The Company shall hold the Consultant free and harmless from any
obligations, costs, claims, judgments, attorneys' fees and attachments arising
from or growing out of the services rendered to the Company pursuant to the
terms of this Agreement or in any way connected with the rendering of said
services, except when the same shall arise due to the willful misconduct or
gross negligence of the Consultant, and the Consultant is adjudged to be guilty
of willful misconduct or gross negligence by a court of competent jurisdiction.
8. Confidentiality/Trade Secrets. The Consultant acknowledges
that his position with the Company is one of the highest trust and confidence
both by reason of his position and by reason of his access to and contact with
the trade secrets and confidential and proprietary business data and
information of the Company. Both during the term of this Agreement and
thereafter, the Consultant covenants and agrees as follows:
(a) that he shall use his reasonable best efforts and
exercise utmost reasonable diligence to protect and safeguard the
trade secrets and confidential and proprietary data and information of
the Company, including but not limited to its
-2-
<PAGE> 3
technical data, records, compilations of information, processes, and
specifications relating to its properties, assets, customers,
suppliers, products and services;
(b) that he shall not disclose any of such trade secrets
and confidential and proprietary information, except as may be deemed
by him to be necessary or desirable for the performance of his duties
for the Company; and
(c) that he shall not use, directly or indirectly, for
his own benefit or for the benefit of another, any of such trade
secrets and confidential and proprietary information.
All files, records, documents, drawings, specifications, memoranda,
notes or other documents relating to the business of the Company, whether
prepared by the Consultant or otherwise coming into his possession, shall be
the exclusive property of the Company and shall be delivered to the Company and
not retained by the Consultant upon termination of his employment for any
reason whatsoever or at any other time upon request of the Board.
Notwithstanding the foregoing, the Consultant shall not be required to
keep confidential or restrict use of any trade secrets or confidential and
proprietary data and information of the Company (i) which he may be required to
disclose at the express direction of any authorized government agency, pursuant
to a subpoena or other court process, or as otherwise required by any law,
rule, regulation or order of any regulatory body, (ii) which has become
generally available to the public by means other than by breach of this
Agreement, (iii) which was available to the Consultant prior to its disclosure
by the Company to the Consultant, (iv) which has become available to the
Consultant from a source other than the Company or (v) as to which disclosure
or use the Company consents in writing.
9. Miscellaneous. (a) Notices. Any notice or communication
required or permitted hereunder shall be given in writing and shall be (i) sent
by first class registered or certified United States mail, postage prepaid,
(ii) sent by overnight or express mail or expedited delivery service, (iii)
delivered by hand or (iv) transmitted by wire, telex or telefax, addressed as
follows:
If to the Consultant: Jack L. Woods
294 North Bay Drive
Bullard, TX 75757
Telephone No.: (903) 825-2356
-3-
<PAGE> 4
If to the Company: Toreador Royalty Corporation
530 Preston Commons West
8117 Preston Road
Dallas, Texas 75225
Attn: President
Telephone No.: (214) 369-0080
Fax No.: (214) 369-3183
or to such other address or to the attention of such other person as hereafter
shall be designated in writing by the applicable party in accordance herewith.
Any such notice or communication shall be deemed to have been given as of the
date of first attempted delivery at the address and in the manner provided
above.
10. Successors and Assigns. This Agreement is personal in nature
and neither of the parties hereto shall, without the consent of the other
assign or transfer this Agreement or any rights or obligations hereunder;
provided, however, that in the event of a merger, consolidation or transfer or
sale of all or substantially all of the assets of the Company, this Agreement
shall be binding upon the successor to the Company's business and assets.
11. Interpretation. When the context in which words are used in
this Agreement indicates that such is the intent, words in the singular number
shall include the plural and vice versa.
12. Severability. Every provision in this Agreement is intended
to be severable. In the event that any provision of this Agreement shall be
held to be invalid, the same shall not affect in any respect whatsoever the
validity of the remaining provisions of this Agreement.
13. Remedies. If any action at law or equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which he may be entitled.
14. Captions. Any section or paragraph titles or captions
contained in this Agreement are for convenience only and shall not be deemed a
part of the context of this Agreement.
15. Entire Agreement. This Agreement contains the entire
understanding and agreement between the parties and supersedes any prior
written or oral agreements between them respecting the subject matter contained
herein. There are no representations, agreements, arrangements or
understandings, oral or written, between and among the parties
-4-
<PAGE> 5
hereto relating to the subject matter of this Agreement which are not fully
expressed herein or therein.
16. No Waiver. The failure of any party to insist upon strict
performance of a covenant hereunder or of any obligation hereunder,
irrespective of the length of time for which such failure continues, shall not
be a waiver of such party's right to demand strict compliance in the future. No
consent or waiver, express or implied, to or of any breach or default in the
performance of any obligation hereunder shall constitute a consent or waiver to
or of any other breach or default in the performance of the same or any
obligation hereunder.
17. Amendment. This Agreement may be changed, modified or amended
only by an instrument in writing duly executed by all of the parties hereto. Any
such amendment shall be effective as of such date as may be determined by the
parties hereto.
18. Choice of Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY TEXAS LAW.
IN WITNESS WHEREOF, the parties have executed this Agreement or caused
the same to be executed by their duly authorized corporate officers, all as of
the day and year first above written.
CONSULTANT:
/s/ JACK L. WOODS
---------------------------------------
Jack L. Woods
COMPANY:
TOREADOR ROYALTY CORPORATION
By: /s/ JOHN MARK MCLAUGHLIN
-----------------------------------
John Mark McLaughlin
Chairman of the Board and President
-5-
<PAGE> 1
EXHIBIT 10.4
EDWARD C. MARHANKA
TOREADOR ROYALTY CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, made as of May 15, 1997, by and between Toreador
Royalty Corporation, a Delaware corporation (the "Company"), and Edward C.
Marhanka ("Optionee") in connection with the grant of an Incentive Option
(hereinafter defined) under the Toreador Royalty Corporation 1990 Stock Option
Plan (the "Plan").
W I T N E S S E T H :
WHEREAS, Optionee is an employee of the Company or an Affiliate
(hereinafter defined) in a key position and the Company desires to encourage
Optionee to own Common Stock (hereinafter defined) and to give Optionee added
incentive to advance the interests of the Company through the Plan and desires
to grant Optionee an Incentive Option (hereinafter defined) to purchase shares
of Common Stock of the Company under terms and conditions established by the
Board (hereinafter defined).
NOW, THEREFORE, the Company and Optionee hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following meanings, respectively:
(a) "Affiliate" shall have the meaning set forth in
Section 1.2 of the Plan and shall include any party now or hereafter
coming within that definition.
(b) "Board" shall mean the Board of Directors of the
Company.
(c) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(d) "Committee" shall mean the committee appointed
pursuant to Section 3 of the Plan.
(e) "Common Stock" shall mean the $.15625 par value
Common Stock of the Company.
(f) "Fair Market Value" shall have the meaning set forth
in Section 1.8 of the Plan.
<PAGE> 2
(g) "Incentive Option" shall mean a stock option that is
intended to be or is denominated as an incentive stock option (within
the meaning of Section 422 of the Code).
2. Grant of Option and Option Period. The Company hereby grants
to Optionee as of the date of this Agreement (the "Grant Date"), subject to the
provisions of Section 3 hereof and as hereinafter set forth, the option to
purchase 25,000 shares of Common Stock at the price of $2.50 per share (the
"Purchase Price"), at any time or (with respect to partial exercises) from time
to time during a period commencing on the first anniversary of the Grant Date
and ending on May 15, 2007 (the "Option Period"), provided that the number of
shares purchasable hereunder in any period or periods of time during which the
Option is exercised shall be limited as follows:
(a) only 33 1/3% of such shares (if a fractional number,
then the next lower whole number) are purchasable, in whole at any
time or in part from time to time, commencing May 15, 1998, if
Optionee is an employee of the Company or an Affiliate until that
date;
(b) an additional 33 1/3% of such shares (if a fractional
number, then the next lower whole number) are purchasable, in whole at
any time or in part from time to time, commencing May 15, 1999, if
Optionee is an employee of the Company or an Affiliate until that
date;
(c) the remainder of such shares are purchasable, in
whole at any time or in part from time to time, commencing May 15,
2000, if Optionee is an employee of the Company or an Affiliate until
that date.
3. Termination of Service. Any provision of Section 2 hereof to
the contrary notwithstanding:
(a) If Optionee ceases to be employed by the Company or
an Affiliate "for cause" (as defined in Section 6.4(a) of the Plan),
then that portion, if any, of this Incentive Option that remains
unexercised, including that portion, if any, that pursuant to this
Agreement is not yet exercisable, shall automatically terminate and be
of no further force or effect as of the date Optionee ceases to be
employed;
(b) If Optionee shall die during the Option Period while
in the employ of the Company or an Affiliate, this Incentive Option
may be exercised, to the extent that Optionee was entitled to exercise
it at the date of Optionee's death, within one year after such death
(if otherwise within the Option Period), but not thereafter, by the
executor or administrator of the estate of Optionee or by the person
or persons
-2-
<PAGE> 3
who shall have acquired this Incentive Option directly from Optionee
by bequest or inheritance;
(c) If Optionee ceases to be employed by the Company or
an Affiliate by reason of disability (as defined in Section 22(e)(3)
of the Code), this Incentive Option may be exercised, to the extent
that Optionee was entitled to exercise it at the date of his
termination, within one year after such termination (if otherwise
within the Option Period), but not thereafter by Optionee (or
Optionee's legal representative, if Optionee is legally incompetent);
and
(d) If Optionee ceases to be employed by the Company or
an Affiliate for any reason (other than the circumstances specified in
paragraphs (a), (b) and (c) of this Section 3) within the Option
Period, this Incentive Option may be exercised, to the extent Optionee
was able to do so at the date of termination of the employment, within
three (3) months after such termination (if otherwise within the
Option Period), but not thereafter.
4. Exercise During Employment. Except as provided in Section 3
hereof, this Incentive Option may not be exercised unless Optionee is at the
time of exercise an employee of the Company or an Affiliate.
5. Manner of Exercise. This Incentive Option may be exercised by
written notice signed by the person entitled to exercise same and delivered to
the Secretary of the Company or sent by United States registered mail addressed
to the Company (for the attention of the Secretary) at its corporate office in
Dallas, Texas. Such notice shall state the number of shares of Common Stock as
to which the Incentive Option is exercised and shall be accompanied by the full
amount of the purchase price of such shares. Exercise of this Incentive Option
shall not be effective until the Company has received written notice of
exercise.
6. Payment. The Purchase Price for the Incentive Option shares
may be paid in cash by certified or cashier's check or, with the consent of the
Committee, with shares of Common Stock owned by Optionee which have been held
at least six (6) months prior to the date of exercise or, with the consent of
the Committee, by a combination of cash and such shares.
7. Delivery of Shares. Delivery of the certificates representing
the shares of Common Stock purchased upon exercise of this Incentive Option
shall be made promptly after receipt of notice of exercise and payment. If the
Company so elects, its obligation to deliver shares of Common Stock upon the
exercise of this Incentive Option shall be conditioned upon its receipt from
the person exercising this Incentive Option of an executed investment letter,
in form and content satisfactory to the Company and its legal counsel,
-3-
<PAGE> 4
evidencing the investment intent of such person and such other matters as the
Company may reasonably require. If the Company so elects, the certificate or
certificates representing the shares of Common Stock issued upon exercise of
this Incentive Option shall bear a legend in substantially the following form:
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE HAVE BEEN ISSUED TO
THE REGISTERED OWNER IN RELIANCE UPON WRITTEN REPRESENTATIONS THAT
THESE SHARES HAVE BEEN PURCHASED FOR INVESTMENT. THESE SHARES MAY NOT
BE SOLD, TRANSFERRED, OR ASSIGNED UNLESS, IN THE OPINION OF THE
CORPORATION OR ITS LEGAL COUNSEL, SUCH SALE, TRANSFER, OR ASSIGNMENT
WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED,
APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE
COMMISSION, AND ANY APPLICABLE STATE SECURITIES LAWS.
8. Status of Optionee. Optionee shall not be deemed to be a
stockholder of the Company with respect to any of the shares of Common Stock
subject to this Incentive Option, except to the extent that such shares shall
have been purchased and transferred to him. The Company shall not be required
to issue or transfer any certificates for shares of Common Stock purchased upon
exercise of this Incentive Option until all applicable requirements of law have
been complied with and such shares shall have been duly listed on any
securities exchange on which the Common Stock may then be listed.
9. Adjustments. Notwithstanding any other provision hereof, in the
event of any change in the number of outstanding shares of Common Stock
effected without receipt of consideration therefor by the Company, by reason of
a stock dividend, or split, combination, exchange of shares or other
recapitalization, merger, or otherwise, in which the Company is the surviving
corporation, the number and class of shares subject to this Incentive Option
and the exercise price of this Incentive Option shall be automatically adjusted
to accurately and equitably reflect the effect thereupon of such change,
provided that any fractional share resulting from such adjustment may be
eliminated. In the event of a dispute concerning such adjustment, the decision
of the Committee shall be conclusive. The number of shares subject to this
Incentive Option shall be automatically reduced by any fraction included
therein which results from any adjustment made pursuant to this Section 9.
A dissolution or liquidation of the Company; a sale of all or
substantially all of the assets of the Company where it is contemplated that
within a reasonable period of time thereafter the Company will either be
liquidated or converted into a nonoperating company or an extraordinary
dividend will be declared resulting in a partial liquidation of the Company
(but in all cases only with respect to those employees with the Company and its
Affiliates as a result of such sale or assets); a merger or consolidation
(other than a merger
-4-
<PAGE> 5
effecting a reincorporation of the Company in another state or any other merger
or a consolidation in which the shareholders of the surviving corporation and
their proportionate interests therein immediately after the merger or
consolidation are substantially identical to the shareholders of the Company
and their proportionate interests therein immediately prior to the merger or
consolidation) in which the Company is not the surviving corporation (or
survives only as a subsidiary of another corporation in a transaction in which
the shareholders of the parent of the Company and their proportionate interests
therein immediately after the transaction are not substantially identical to
the shareholders of the Company and their proportionate interests therein
immediately prior to the transaction); or a transaction in which another
corporation becomes the owner of 50% or more of the total combined voting power
of all classes of stock of the Company shall cause this Incentive Option to
terminate, but Optionee shall, in any event, have the right, immediately prior
to such dissolution, liquidation, merger, consolidation, or transaction, to
exercise this Incentive Option, to the extent not theretofore exercised,
without regard to the determination as to the periods and installments of
exercisability made pursuant to Section 3 hereof if (and only if) this
Incentive Option has not at that time expired or been terminated. Such
acceleration of exercisability shall not apply to this Incentive Option if any
surviving or acquiring corporation agrees to assume this Incentive Option in
connection with the merger, consolidation, or transaction.
10. Committee Authority. Any questions concerning the
interpretation of this Agreement and any controversy which may arise under this
Agreement shall be determined by the Committee in its sole discretion.
11. Transferability. This Incentive Option is not transferable
otherwise than by will and the laws of descent and distribution and during the
lifetime of Optionee is exercisable only by Optionee or, if Optionee is legally
incompetent, by Optionee's legal representative.
12. Employment. Nothing in this Agreement confers upon Optionee any
right to continue in the employ of the Company or any Affiliate, nor shall this
Agreement interfere in any manner with the right of the Company or any
Affiliate to terminate the employment of Optionee with or without cause at any
time.
13. Incentive Option Subject to Plan. By execution of this
Agreement, Optionee agrees that this Incentive Option and the shares of Common
Stock to be received upon exercise hereof shall be governed by and subject to
all applicable provisions of the Plan.
14. Construction. This Agreement is governed by, and shall be
construed and enforced in accordance with, the laws of the State of Texas.
Words of any gender used in this Agreement shall be construed to include any
other gender, unless the context requires otherwise. The headings of the
various sections of this Agreement are intended for convenience of reference
only and shall not be used in construing the terms hereof.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TOREADOR ROYALTY CORPORATION
By: /s/ JOHN MARK MCLAUGHLIN
-----------------------------------
John Mark McLaughlin
Chairman of the Board and President
/s/ EDWARD C. MARHANKA
---------------------------------------
Edward C. Marhanka, Optionee
-6-
<PAGE> 1
EXHIBIT 10.5
EDWARD C. MARHANKA
EMPLOYMENT AGREEMENT
This Employment Agreement is made as of May 1, 1997, by and between
Toreador Royalty Corporation, a Delaware corporation (the "Company"), and
Edward C. Marhanka (the "Employee").
WHEREAS, the Company desires to continue to employ the Employee, and
the Employee is willing to continue to render his services to the Company on
the terms and conditions with respect to such employment hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual terms
and conditions hereof, the Company and the Employee hereby agree as follows:
1. Employment. The Company hereby employs the Employee and the
Employee hereby accepts employment with the Company upon the terms and
conditions hereinafter set forth.
2. Employment and Duties. Subject to the terms hereof, the
Company agrees to employ Employee to render full-time services to the Company
as Vice President and Treasurer of the Company. Employee shall have the duties
specified by the Bylaws of the Company for a Vice President and the Treasurer
or are customarily associated with such position, together with such other
duties as may be assigned to Employee from time to time by the Board of
Directors of the Company (the "Board"). Employee agrees to devote his full
time and attention to the performance and fulfillment of such duties, functions
and responsibilities as are necessary to discharge such duties, functions and
responsibilities, except for service for civic, charitable or non-profit
organizations and other non-competitive endeavors not interfering with his
duties hereunder.
3. Term. This Agreement shall have a term of one (1) year
commencing as of May 1, 1997, subject to earlier termination as hereinafter
provided. Upon mutual agreement of the parties, this Agreement may be extended
for additional one-year periods.
4. Compensation. As compensation for his services rendered under
this Agreement, the Employee shall be entitled to receive the following:
(a) The Employee shall be paid an annual base salary of
$100,000 for the term of this Agreement. Such annual base salary
shall be payable in equal semi-monthly installments payable on the
15th day and the final day (or the last business day preceding such
day if it does not fall on a business day) of each month during the
<PAGE> 2
term of this Agreement, prorated for any partial employment month.
Such salary shall be subject to increase at any time by the Board in
its sole discretion.
(b) Upon execution of this Agreement, the Employee shall
be granted by the Company an option to purchase 25,000 shares of
Common Stock of the Company subject to and upon the terms and
conditions set forth in the form of Option Agreement attached hereto
as Exhibit A, which is incorporated herein by reference. The Company
and the Employee shall execute and deliver counterparts of the Option
Agreement in the form of Exhibit A simultaneously with the execution
of this Agreement.
5. Other Benefits. In addition to the compensation to be paid to
the Employee pursuant to Paragraph 4 hereof, the Employee shall be entitled to
be included in any medical and dental benefit plans, any pension or profit
sharing plan or any other fringe benefits which may be extended from time to
time to employees of the Company generally by the Board in its sole discretion.
The Employee shall be entitled to such vacation and sick leave as may be
authorized by the Board from time to time. The time for vacation leave shall
be selected by the Employee subject to the approval of the President and
subject to the business needs of the Company. Vacation leave shall be taken
within each employment year and shall be noncumulative. The Employee shall not
be entitled to vacation pay in lieu of vacation leave and any unused vacation
leave shall be deemed waived.
6. Reimbursement of Expenses. The Employee shall be reimbursed
by the Company for any out of pocket expenses reasonably paid or incurred by
him in connection with the performance of his duties hereunder upon
presentation of expense statements or vouchers or such other supporting
information reasonably evidencing such expenses. Subject to the approval of the
President of the Company, the Company shall reimburse the Employee for
professional dues and tuition for professional seminars.
7. Confidentiality/Trade Secrets. The Employee acknowledges that
his position with the Company is one of the highest trust and confidence both
by reason of his position and by reason of his access to and contact with the
trade secrets and confidential and proprietary business data and information of
the Company. Both during the term of this Agreement and thereafter, the
Employee covenants and agrees as follows:
(a) that he shall use his reasonable best efforts and
exercise utmost reasonable diligence to protect and safeguard the
trade secrets and confidential and proprietary data and information of
the Company, including but not limited to its technical data, records,
compilations of information, processes, and specifications relating to
its properties, assets, customers, suppliers, products and services;
-2-
<PAGE> 3
(b) that he shall not disclose any of such trade secrets
and confidential and proprietary information, except as may be deemed
by him to be necessary or desirable for the performance of his duties
for the Company; and
(c) that he shall not use, directly or indirectly, for
his own benefit or for the benefit of another, any of such trade
secrets and confidential and proprietary information.
All files, records, documents, drawings, specifications, memoranda,
notes or other documents relating to the business of the Company, whether
prepared by the Employee or otherwise coming into his possession, shall be the
exclusive property of the Company and shall be delivered to the Company and not
retained by the Employee upon termination of his employment for any reason
whatsoever or at any other time upon request of the Board.
Notwithstanding the foregoing, Employee shall not be required to keep
confidential or restrict use of any trade secrets or confidential and
proprietary data and information of the Company (i) which he may be required to
disclose at the express direction of any authorized government agency, pursuant
to a subpoena or other court process, or as otherwise required by any law,
rule, regulation or order of any regulatory body, (ii) which has become
generally available to the public by means other than by breach of this
Agreement, (iii) which was available to Employee prior to its disclosure by the
Company to Employee, (iv) which has become available to Employee from a source
other than the Company or (v) as to which disclosure or use the Company
consents in writing.
8. Remedies for Breach of Covenants of the Employee. The
covenants set forth in paragraph 7 of this Agreement shall continue to be
binding upon the Employee, notwithstanding the termination of his employment
with the Company for any reason whatsoever. Such covenants shall be deemed and
construed as separate agreements, independent of any other provisions of this
Agreement and any other agreement between the Company and the Employee.
9. Termination. The employment of the Employee may be terminated
upon the occurrence of any one of the following events:
(a) Voluntary by the Employee. The Employee may resign
with or without cause at any time during the term of this Agreement by
giving fourteen (14) days prior written notice of termination to the
Board.
(b) Involuntary by the Company. The Board, with or
without cause, may terminate the Employee at any time during the term
of this Agreement upon fourteen (14) days prior written notice to the
Employee.
-3-
<PAGE> 4
(c) Termination upon Death. The employment of the
Employee shall terminate immediately upon the death of the Employee.
In the event of the termination of employment of the Employee prior to
the expiration of the term of this Agreement, the Employee shall be entitled to
compensation earned by him prior to the date of termination as provided herein,
computed on a pro rata basis to and including such date of termination. Except
as hereinafter expressly set forth in Section 10 of this Agreement, the
Employee shall be entitled to no further compensation as of the date of
termination of this Agreement (other than salary, stock options, restricted
stock and other benefits which have been earned, become payable or vested but
not yet paid or exercised at the time of such termination), specifically
including but not limited to any unearned cash or stock bonuses. Any
termination of this Agreement shall be without prejudice to any right or remedy
to which a party may be entitled either at law, in equity or under this
Agreement.
10. Severance Benefits. In addition to such compensation and
other benefits payable to or provided for the Employee, as authorized by the
Board from time to time and earned by the Employee as of the date of
resignation, termination, death or disability, the Employee shall be entitled
to receive and the Company shall pay or provide to the Employee the following
severance benefits in the event that the Company discharges the Employee
without cause or the Employee resigns for cause, to-wit:
(a) The Company shall pay to the Employee a lump sum cash
payment payable on the date of termination of employment in an amount
equal to the annual base salary of the Employee which would have been
payable to the Employee from the date of termination to the expiration
date of the term of this Agreement; but not less than $50,000.
(b) All stock options granted by the Company to the
Employee, all contributions made by the Company for the account of the
Employee to any pension, thrift or any other benefit plan and all
other benefits or bonuses which contain vesting or exercisability
provisions conditioned upon or subject to the continued employment of
the Employee shall become fully vested and exercisable; provided,
however, that if any such amount, benefit or payment cannot become
fully vested pursuant to such plan or arrangement on account of
limitations imposed by law, Employee shall be entitled to receive from
Company an amount in cash payable on the date of termination equal to
the total amount of benefit or payment which Employee will have to
forfeit pursuant to such plan or arrangement on account of such
termination of employment.
(c) The Company shall, to the extent permitted by
applicable law, promptly reimburse the Employee for all premiums the
Employee pays for continuation of the Employee's health coverage under
the Company's medical plan pursuant to the
-4-
<PAGE> 5
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA") for the 12 month period following the date of termination.
(d) The Employee shall not be required to mitigate the
amount of any payment provided for in this Section 10 by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit as provided for be reduced by any compensation earned by the
Employee as the result of employment by another employer or by
retirement benefits or otherwise.
11. Change in Control. For purposes of this Agreement, a "Change
in Control" of the Company shall be deemed to have occurred upon the date any
"person" or "group" (as such terms are used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than
the Company or any "person" who on the date hereof is a director or officer of
the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, (a) as a passive investor
without Board or other representation, of securities of the Company
representing 25% or more of the combined voting power of the Company's
outstanding securities, (b) or in any other capacity of securities of the
Company representing 15% or more of the combined voting power of the Company's
outstanding securities, in a transaction which was not approved in advance by
the Board. For the purposes of this Agreement, in the event any "person" or
"group" (as such terms are used in Section 13(d) and 14(d) of the Exchange
Act), other than the Company or any "person" who on the date hereof is a
director or officer of the Company, (i) commences a proxy solicitation to
acquire the right to vote more than 15% of the combined voting power of the
Company's outstanding securities, (ii) commences a tender or exchange offer
subject to Section 14(d) (1) of the Exchange Act to acquire the beneficial
ownership of securities representing 15% or more of the combined voting power
of the Company's outstanding securities or (iii) acquires beneficial ownership,
directly or indirectly, of securities of the Company representing 5% or more of
the combined voting power of the Company's outstanding securities, which proxy
solicitation or tender or exchange offer or acquisition of beneficial ownership
was not approved in advance by the Board, and the Board in response to such
proxy solicitation or tender or exchange offer or when such proxy solicitation
or tender or exchange offer is ongoing or in response to and within one (1)
year of such acquisition of beneficial ownership approves a transaction which
results in any person or group (including but not limited to such person or
group who initiated the proxy solicitation, tender or exchange offer or who
made such acquisition of beneficial ownership but specifically excluding the
Company or any "person" who is on the date hereof a director or officer of the
Company) acquiring beneficial ownership of, directly or indirectly, securities
of the Company representing 15% or more of the combined voting power of the
Company's outstanding securities or which results in the sale, lease, transfer,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all of the assets of the Company, then
such transaction shall not be considered
-5-
<PAGE> 6
approved in advance by the Board and a Change in Control shall be deemed to
have occurred upon the consummation of such transaction for the purposes of
this Agreement.
12. Involuntary Termination with Cause by the Company. For the
purposes of this Agreement, the Company shall be deemed to have terminated the
Employee with cause if any of the following conditions existed:
(a) The Employee shall have become disabled for a period
of more than three (3) consecutive months;
(b) The Employee shall have failed to substantially
perform his duties and responsibilities as a Vice President or
Treasurer of the Company (other than any such failure resulting from
disability or any such actual or anticipated failures resulting from
the Employee's resignation with cause) after a written demand for the
Employee's substantial performance has been delivered to him by the
Board, which demand specifically identifies the manner in which the
Board believes the Employee has not substantially performed his
duties; or
(c) The Employee shall have engaged in conduct
demonstrably and materially injurious to the Company.
The Employee shall be deemed to have been terminated with cause under
the circumstances described in subparagraphs (b) or (c) above only if there has
been delivered to him a copy of a resolution duly adopted by the affirmative
vote of a majority of the entire membership of the Board at a meeting of the
Board.
"Disability" as used herein shall mean any physical, emotional or
mental injury, illness or incapacitation, other than death, which renders the
Employee unable to perform the duties, functions and responsibilities required
of him under this Agreement.
13. Resignation with Cause. For the purposes of this Agreement,
the Employee shall have resigned with cause if prior to his resignation a
Change in Control of the Company has occurred and, within twelve months
thereof:
(a) The Company shall have removed the Employee from the
office of Vice President of the Company or shall have altered his
authority and responsibilities so as to be less significant than, not
consistent with or not comparable to that which he held in his
capacity as Vice President or shall otherwise limit or restrict his
authority and responsibilities;
(b) The Company shall have relocated its principal
offices outside the Dallas, Texas, metropolitan area, or any
requirement by the Company for the
-6-
<PAGE> 7
Employee to be based anywhere other than the Company's principal
executive offices in the Dallas, Texas, metropolitan area except for
required travel on the Company's business to an extent substantially
consistent with his previous business travel obligations;
(c) The Company shall have reduced the Employee's annual
base salary as in effect from time to time;
(d) The Company shall have failed to continue in effect
any compensation arrangement in which the Employee participates,
including but not limited to those described in this Agreement, unless
an equitable arrangement has been made with respect to such plan or
arrangement in connection with the Change in Control;
(e) The Company shall have failed to provide the Employee
with all personnel benefits which are otherwise generally provided to
executive officers of the Company or reasonably necessary or
appropriate for the performance by the Employee of his duties as Vice
President of the Company; or
(f) The Company shall have failed to obtain a
satisfactory agreement from any successor to assume and perform this
Agreement as contemplated by Section 16(c) hereof.
Any resignation by the Employee that is not "with cause" as defined in
this Section 13 shall be deemed to be resignation "without cause."
14. Remedies. If either the Company or the Employee shall file
any judicial action for enforcement of this Agreement and successfully enforce
any provision of this Agreement or recover compensation or damages, the
prevailing party shall be entitled to recover from the other party an
additional amount equal to interest at ten percent (10%) per annum on the
amount recovered from the date such amount was due and payable together with
all expenses and reasonable attorneys' fees incurred in obtaining legal advice
and counseling respecting the respective rights of such party under this
Agreement and in prosecuting and disposing of such action. The provisions of
this Section shall be cumulative and without prejudice to any other right or
remedy to which the Employee may be entitled either at law, in equity or under
this Agreement and shall not constitute the exclusive remedy of the Company or
the Employee for breach of this Agreement.
15. Notices. Any notices to be given hereunder by either party to
the other shall be in writing and may be effected either by personal delivery
or by mail, registered or certified, postage prepaid, with return receipt
requested. Personal delivery to the Board shall be to the President. Mailed
notices shall be addressed as follows:
-7-
<PAGE> 8
(a) If to the Company:
Toreador Royalty Corporation
530 Preston Commons West
8117 Preston Road
Dallas, Texas 75225
Attention: President
(b) If to the Employee:
Edward C. Marhanka
6234 Reiger Avenue
Dallas, Texas 75214
Either party may change its address for notice by giving notice in accordance
with the terms of this Section 15.
16. General Provisions.
(a) Invalid Provisions. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under
present or future laws effective during the term hereof, such
provision shall be fully severable and this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by
its severance hereof. Furthermore, in lieu of such illegal, invalid
or unenforceable provision there shall be added automatically as a
part of this Agreement a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and
still be legal, valid or enforceable.
(b) Entire Agreement. This Agreement sets forth the
entire understanding of the parties and supersedes all prior
agreements or understandings, whether written or oral, with respect to
the subject matter hereof. No terms, conditions, warranties, other
than those contained herein, and no amendments or modifications hereto
shall be binding unless made in writing and signed by the parties
hereto.
(c) Binding Effect. This Agreement shall extend to and
be binding upon and inure to the benefit of the parties hereto, their
respective heirs, representatives, successors and assigns. The
Company will require any successor to all or substantially all of the
business and/or assets of the Company to expressly assume and agree,
by an agreement in form and substance satisfactory to the Employee, to
-8-
<PAGE> 9
perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had
taken place.
(d) Waiver. The waiver by either party hereto of a
breach of any term or provision of this Agreement shall not operate or
be construed as a waiver of a subsequent breach of the same provision
by any party or of the breach of any other term or provision of this
Agreement.
(e) Titles. Titles of the paragraphs herein are used
solely for convenience and shall not be used for interpretation or
construing any word, clause, paragraph or provision of this Agreement.
(f) Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the date and year first written above.
COMPANY:
TOREADOR ROYALTY CORPORATION
By: /s/ JOHN MARK MCLAUGHLIN
-----------------------------------
John Mark McLaughlin
Chairman of the Board and President
EMPLOYEE:
/s/ EDWARD C. MARHANKA
---------------------------------------
Edward C. Marhanka
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TOREADOR
ROYALTY CORPORATION UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10Q FOR THE
QUARTER ENDED JUNE 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,916,909
<SECURITIES> 0
<RECEIVABLES> 245,861
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,210,966
<PP&E> 4,893,424
<DEPRECIATION> (1,693,206)
<TOTAL-ASSETS> 6,528,011
<CURRENT-LIABILITIES> 109,032
<BONDS> 0
0
0
<COMMON> 836,964
<OTHER-SE> 5,485,278
<TOTAL-LIABILITY-AND-EQUITY> 6,528,011
<SALES> 1,127,537
<TOTAL-REVENUES> 1,317,615
<CGS> 0
<TOTAL-COSTS> 1,130,734
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 186,881
<INCOME-TAX> 62,036
<INCOME-CONTINUING> 124,845
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 124,845
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
