<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
TOREADOR ROYALTY CORPORATION
(Name of Registrant as Specified In Its Charter)
TOREADOR ROYALTY CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
TOREADOR ROYALTY CORPORATION
530 PRESTON COMMONS WEST
8117 PRESTON ROAD
DALLAS, TEXAS 75225
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 23, 1998
To the Stockholders of Toreador Royalty Corporation:
The Annual Meeting of Stockholders of Toreador Royalty Corporation, a
Delaware corporation (the "Company"), will be held on July 23, 1998, at 10:00
a.m., Dallas, Texas time, in the 36th floor conference center of Thompson &
Knight, P.C., at 1700 Pacific Avenue, Dallas, Texas, for the following purposes:
(1) To elect seven directors, each to serve until the next annual
meeting of stockholders and until his successor shall be elected
and qualified; and
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on June 12, 1998,
are entitled to notice of and to vote at the meeting or any adjournment thereof.
A record of the Company's activities and consolidated financial
statements for the year ended December 31, 1997, are contained in the enclosed
1997 Annual Report.
Dated: June 30, 1998
By Order of the Board of Directors,
John Mark McLaughlin
Chairman of the Board
------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE MARK,
SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING
ENVELOPE. IF YOU DO ATTEND THE MEETING IN PERSON, YOU MAY WITHDRAW YOUR PROXY
AND VOTE IN PERSON. THE PROMPT RETURN OF PROXIES WILL INSURE A QUORUM AND SAVE
THE COMPANY THE EXPENSE OF FURTHER SOLICITATION.
<PAGE> 3
TOREADOR ROYALTY CORPORATION
530 PRESTON COMMONS WEST
8117 PRESTON ROAD
DALLAS, TEXAS 75225
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 23, 1998
GENERAL
The accompanying proxy is solicited by the Board of Directors of
Toreador Royalty Corporation (the "Company") for use at the Annual Meeting of
Stockholders of the Company (the "Annual Meeting") to be held on July 23, 1998,
at 10:00 a.m., Dallas, Texas time in the 36th floor conference center of
Thompson & Knight, P.C., at 1700 Pacific Avenue, Dallas, Texas. The approximate
date on which the proxy statement and form of proxy are being sent to
stockholders is July 1, 1998.
This proxy statement contains important information relating to an
agreement dated June 25, 1998 among the Company, the members of the current
Board of Directors of the Company, certain stockholders of the Company
affiliated with Lee Global Energy Fund, L.P. (the "Gralee Persons"), and certain
stockholders of the Company affiliated with Dane, Falb, Stone & Co., Inc. (the
"Dane Falb Persons"); and a stockholder voting agreement dated June 25, 1998
among the Gralee Persons, the Dane Falb Persons and certain other stockholders
of the Company. As more fully described below, these agreements provide, among
other things, that (i) the Gralee Persons and the Dane Falb Persons will not
engage in a proxy contest with the Company at the Annual Meeting and (ii) two
nominees designated by the Gralee Persons and two nominees designated by the
Dane Falb Persons are proposed for election to the Company's Board of Directors
at the Annual Meeting. The Board of Directors believes that the agreements
entered into with the Gralee Persons and the Dane Falb Persons will benefit the
Company and its stockholders, and permit the Company to avoid the expense and
uncertainties of a proxy contest initiated by one or more of such persons and to
devote its full attention to the business of the Company and the enhancement of
stockholder value. See "Background; Agreements with the Gralee Persons and the
Dane Falb Persons" for more information regarding these agreements.
The cost of soliciting proxies will be borne by the Company. The
Company has retained Corporate Investor Communications, Inc., a proxy
solicitation firm in Carlstadt, New Jersey, to solicit proxies from brokers,
banks, nominees, institutional holders and individual holders for use at the
meeting at a fee of approximately $3,000 plus certain expenses. In addition, the
Company may use its officers and employees (who will receive no special
compensation therefor) to solicit proxies in person or by telephone, facsimile
or similar means. The Company will reimburse brokers or other persons holding
stock in their names or in the names of their nominees for their charges and
expenses in forwarding proxies and proxy materials to the beneficial owners of
such stock.
PROXIES
Shares represented by a proxy in the accompanying form, duly signed,
dated and returned to the Company and not revoked, will be voted at the meeting
in accordance with the directions given. If no direction is given, shares will
be voted for the election of the nominees for directors named in the
accompanying form of proxy and for the other proposals set forth in the notice.
Any stockholder returning a proxy may revoke it at any time before it has been
exercised by giving written notice of such revocation to the Secretary of the
Company, by filing with the Company a proxy bearing a subsequent date or by
voting in person at the meeting. The Board knows of no other business to come
before the meeting, but if other matters properly come before the meeting, the
persons named in the proxy intend to vote thereon in accordance with their best
judgment.
<PAGE> 4
VOTING PROCEDURES AND TABULATION
The Company will appoint one or more inspectors of election to act at
the meeting and to make a written report thereof. Prior to the meeting, the
inspectors will sign an oath to perform their duties in an impartial manner and
to the best of their abilities. The inspectors will ascertain the number of
shares outstanding and the voting power of each of the shares, determine the
shares represented at the meeting and the validity of proxies and ballots, count
all votes and ballots and perform certain other duties as required by law.
The inspectors will tabulate the number of votes cast for or withheld
as to the vote on each nominee for director. Under Delaware law and the
Company's Certificate of Incorporation, as amended (the "Charter"), and Amended
and Restated Bylaws (the "Bylaws"), abstentions and broker non-votes will have
no effect on the voting on the election of directors, provided a quorum is
present, because directors are elected by a plurality of the shares of common
stock, par value $.15625 per share, of the Company ("Common Stock") present in
person or by proxy at the meeting and entitled to vote. Under the rules of the
Nasdaq National Market, brokers who hold stock in street name have the authority
to vote on certain routine matters when they have not received instructions from
beneficial owners. Brokers that do not receive instructions are entitled to vote
on the election of directors.
BACKGROUND; AGREEMENTS WITH THE GRALEE PERSONS AND THE DANE FALB PERSONS
On July 31, 1997, Lee Global Energy Fund, L.P. ("Lee Global") sent a
letter to the Board of Directors of the Company requesting to meet with the
Board to discuss various strategic alternatives for the Company, including a
sale of the Company or business combination with Lee Global or another operating
entity, and offering assistance in structuring such a transaction. In September
1997, the Company engaged Dain Rauscher Wessels as its financial advisor in
evaluating strategic alternatives available to the Company, including a sale of
the Company, a merger with another company and other forms of business
combinations. On March 25, 1998, Dane, Falb, Stone & Co., Inc. sent a letter to
the Company's Chairman proposing additional or replacement members to the
Company's Board of Directors. On April 9, 1998, Lee Global sent another letter
to the Board of Directors requesting that the Board consider appointing Lee
Global's designated representatives to the Board of Directors as soon as
possible. On that same date, Lee Global sent a letter to the Company's Corporate
Secretary demanding the right to inspect the Company's stockholder list and its
other books and records, and to make copies or extracts therefrom. At an April
16, 1998 meeting, the Company met with certain of Lee Global's representatives
to discuss the matters raised in Lee Global's previous letters.
In an April 27, 1998 news release, the Company announced that it was
actively seeking acquisition and merger partners through Dain Rauscher Wessels.
Lee Global sent a letter to the Company dated April 28 stating that Lee Global
did not believe that it is in the best interest of the Company and its
stockholders to sell the Company or dispose of any of its assets at this time
and requesting further review of the Company's books and records. Dane, Falb,
Stone & Co., Inc. also sent a letter dated April 27, 1998 requesting to review
certain books and records of the Company.
Following negotiations among the members of the Board of Directors of
the Company, certain Gralee Persons and certain Dane Falb Persons, the Board of
Directors determined that it is in the best interest of the Company and its
stockholders to avoid the expense and uncertainties of a proxy contest initiated
by one of more of the Gralee Persons or the Dane Falb Persons, and that it is in
the best interest of the Company and its stockholders that certain persons
chosen by the Gralee Persons and the Dane Falb Persons be nominated for election
as directors.
On June 25, 1998, the Gralee Persons, the Dane Falb Persons and the
members of the Board of Directors acting in their capacity as stockholders of
the Company (collectively, the "Stockholders"), all of whom in the aggregate own
approximately 40 percent of the outstanding shares of Common Stock, entered into
a Stockholder Voting Agreement (the "Stockholder Agreement"), pursuant to which
the Stockholders agreed to support the nomination and election of a slate of
seven nominees standing for election as directors at the Annual Meeting. The
Stockholder Agreement provides that the seven nominees are to be: J.W. Bullion,
currently a director of the Company, Thomas P. Kellogg, Jr., currently a
director of the Company; John Mark McLaughlin, currently a director of the
Company (collectively referred to as the "Company Designees"); G. Thomas Graves
III and William I. Lee
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<PAGE> 5
(collectively referred to as the "Gralee Designees"); and Peter L. Falb and
Edward Nathan Dane (collectively referred to as the "Dane Falb Designees"). The
Stockholders also agreed that until the earlier to occur of (i) such time as (x)
the Gralee Persons are no longer the beneficial owners in the aggregate of at
least 514,677 shares of Common Stock, and (y) the Dane Falb Persons are no
longer the beneficial owners in the aggregate of at least 514,677 shares of
Common Stock, and (ii) the day immediately subsequent to the 2000 Annual Meeting
of Stockholders of the Corporation (the "Effective Period"), the Stockholders
would support these seven nominees for election at the 1999 and 2000 Annual
Meetings of Stockholders if such nominees are willing to act as such. During the
Effective Period, if one or more of the Company Designees declines or is
otherwise unable to stand as nominee(s) for the election of directors at the
1999 or 2000 Annual Meetings, the Stockholders agreed that replacement
nominee(s) shall be nominated by a committee of the Board of Directors
consisting of the Company Designees as established pursuant to the Bylaws (the
"Company Nominating Committee"). During the Effective Period, if one or more of
the Gralee Designees declines or is otherwise unable to stand as nominee(s) for
the election of directors at the 1999 or 2000 Annual Meetings, the Stockholders
agreed that replacement nominee(s) shall be nominated by the Gralee nominating
committee of the Board of Directors as established pursuant to the Bylaws (the
"Gralee Nominating Committee"). During the Effective Period, if one or more of
the Dane Falb Designees declines or is otherwise unable to stand as nominee(s)
for the election of directors at the 1999 or 2000 Annual Meetings, the
Stockholders agreed that replacement nominee(s) shall be nominated by the Falb
nominating committee of the Board of Directors as established pursuant to the
Bylaws (the "Falb Nominating Committee"). The Stockholders also agreed that they
will vote all shares of Common Stock which they are entitled to vote at the
Annual Meeting and the 1999 and 2000 Annual Meetings in favor of each such
nominee, and that they will vote to cause any vacancy among any of the Company
Designees, the Gralee Designees or the Dane Falb Designees, respectively, to be
filled by a person nominated by the Company Nominating Committee, the Gralee
Nominating Committee or the Falb Nominating Committee, respectively.
The Stockholder Agreement also provides, among other things, that no
Stockholder will prior to December 31, 2000, except as otherwise provided by the
Stockholder Agreement or as agreed to by five of the seven members of the Board
of Directors then in office, (i) (A) seek election to, or seek to place a
representative on, the Board of Directors of the Company, (B) engage in any
solicitation of proxies with respect to any securities of the Company, or (C)
become a participant in any election contest relating to the election of
directors of the Company; (ii) initiate, propose or otherwise solicit
stockholders of the Company for the approval of any stockholder proposal; (iii)
vote in favor of any matter or proposal submitted to stockholders of the Company
unless such matter or proposal is first recommended to stockholders by a vote of
five of the seven members of the Board of Directors then in office; (iv) propose
or seek to effect or seek permission to propose or effect other than as a
stockholder on an equal basis (A) any form of business combination transaction
or similar transaction with the Company, (B) any sale of assets of the Company,
(C) any issuance or sale of equity securities of the Company or (D) any
restructuring, recapitalizing or similar transaction with the Company; (v)
initiate, propose or otherwise solicit stockholders to amend or terminate that
certain Rights Agreement dated as of April 3, 1995, as amended or supplemented
(the "Rights Agreement"), between the Company and Continental Stock Transfer &
Trust Company, as rights agent, or to redeem the rights issued under the Rights
Agreement; or (vi) aid, encourage or act in concert with any person, firm,
corporation, group or other entity to take any of the foregoing actions.
The Company, the members of the current Board of Directors, the Gralee
Persons and the Dane Falb Persons entered into an Agreement dated June 25, 1998
(the "Settlement Agreement") which provides for mutual releases by the parties
and certain related entities (the "Released Parties") of all existing and future
claims arising out of each Released Party's activities up to the date of the
Settlement Agreement with respect to, or in any way connected with, the Company.
The Settlement Agreement provides that until December 31, 2000, each party will
refrain making any statement or taking any action (other than a sale of Common
Stock) that is critical or disparaging of the other parties. The Settlement
Agreement also provides that, for a period of six years after the date of such
agreement, the Company will, subject to certain limitations, cause to be
maintained in effect the Company's current directors' and officers' liability
insurance policies for the benefit of those persons who are currently covered by
such policies on terms no less favorable than the terms of such current
insurance coverage.
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<PAGE> 6
In connection with the Stockholder Agreement and the Settlement
Agreement, the Board of Directors approved an amendment to the Bylaws to become
effective immediately following the Annual Meeting and expiring at the end of
the Effective Period (the "Bylaw Amendment"). The Bylaw Amendment (i)
establishes the Company Nominating Committee, the Gralee Nominating Committee
and the Falb Nominating Committee of the Board of Directors, (ii) sets the
number of persons constituting the Board of Directors at seven (7), and (iii)
provides that three (3) persons shall be nominated as directors on behalf of the
Company by the Company Nominating Committee, two (2) persons shall be nominated
as directors on behalf of the Company by the Gralee Nominating Committee and two
(2) persons shall be nominated as directors on behalf of the Company by the Falb
Nominating Committee. The provisions of the Bylaws implemented by the Bylaw
Amendment may be amended or repealed only by the affirmative vote of five of the
members of the entire Board of Directors or the holders of 75 percent of the
outstanding Common Stock. See "Election of Directors" below for further
information regarding the Company Nominating Committee, the Gralee Nominating
Committee and the Falb Nominating Committee established pursuant to the Bylaw
Amendment.
AMENDMENT TO RIGHTS AGREEMENT
The Board of Directors of the Company approved an amendment to the
Rights Agreement to increase the ownership percentage at which an acquiring
person triggers the rights issued under the Rights Agreement from 20 percent to
22 percent, and to incorporate an exemption for certain "Qualifying Offers."
Under the "Qualifying Offer" exemption, a person that acquires beneficial
ownership of 22 percent or more of the shares of Common Stock then outstanding
pursuant to a "Qualifying Offer" will not trigger the rights issued under the
Rights Agreement. Triggering of the rights as a result of a person acquiring a
22 percent or greater position normally results in dilution of the acquiring
person's ownership (unless the Board has taken action to redeem the rights or
otherwise make them inapplicable). The amendment specifically exempts any group
formed among all of the parties to the Stockholder Agreement from triggering the
rights issued under the Rights Agreement. Under the amendment, a "Qualifying
Offer" is an all-cash tender offer for all outstanding shares of Common Stock
which meets all of the following requirements:
(i) Fully Financed. The offeror must, prior to or upon
commencing the offer, (A) have reasonably demonstrated to the Board of
Directors that the offeror has then available and has irrevocably
committed in writing to the Company to utilize for purposes of the
offer if consummated, and to set apart and maintain available for such
purposes until the offer is consummated or withdrawn, cash or cash
equivalents in an amount which will be sufficient to pay for all shares
outstanding on a fully diluted basis and all related expenses, or (B)
have provided the Company firm written commitments from responsible
financial institutions, accepted by the offeror, to provide funds for
the offer which, when added to other funds of the offeror available and
committed to be used for purposes of the offer if consummated, will be
sufficient to pay for all shares outstanding on a fully diluted basis
and all related expenses. The terms of the financing commitments must
be subject only to customary terms and conditions, which may not
include (x) conditions requiring access by the financial institutions
to non-public information to be provided by the Company, (y) conditions
based on the accuracy of any information concerning the Company other
than such as would be the subject of representations in a public
financing by the Company, or (z) conditions requiring the Company to
make any representations, warranties or covenants in connection with
the financing.
(ii) Two-Thirds Requirement. The offeror must own, immediately
after consummating the offer, at least two-thirds of the then
outstanding shares of Common Stock not beneficially owned by the
offeror prior to making the offer.
(iii) 30 Percent Premium. The price per share offered in the
offer must be at least 30 percent above the average closing price of
the Common Stock for the 20 consecutive trading days ending on the
fourth trading day preceding the commencement of the offer. If another
tender offer is commenced during the pendency of a Qualifying Offer,
the second, competing offer will constitute a Qualifying Offer if the
per share price offered is at least 10 percent higher than the price
offered in the first offer and the other requirements for a Qualifying
Offer are satisfied. In no event may the price per share offered in the
initial or competing Qualifying Offer be less than $5.00.
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(iv) Duration and Conditions. The offer must remain open for
at least 60 business days and must be extended for at least 20 business
days after the last increase in the price offered and after any bona
fide higher alternative offer is made. The offer must be subject only
to customary terms and conditions, which may in no event include any
satisfaction of any conditions relating to the business, financial
condition, results of operations or prospects of the Company other than
such as are based on information publicly disclosed by the Company.
(v) Second Step Commitment. The offeror must irrevocably
commit, prior to or upon commencement of the offer, (A) to consummate
promptly upon completion of the offer an all-cash transaction whereby
all shares not tendered in the offer will be acquired at the same price
per share paid pursuant to the offer, and otherwise not to purchase any
shares of Common Stock following completion of the offer, (B) that the
offeror will not materially amend the terms of the offer (other than an
increase in the price offered) and (C) that the offeror will not make
an offer for any equity securities of the Company for six months after
the commencement of the offer if the original offer does not result in
the tender of the required minimum of two-thirds of the outstanding
shares, except in certain circumstances involving the making by an
unrelated party of a competing offer which constitutes a Qualifying
Offer under the provisions described in paragraph (iii) above.
The Rights Agreement has also been amended to require the approval of
at least 70 percent of the members of the entire Board of Directors to redeem
the rights or amend the Rights Agreement.
VOTING SECURITIES
The only voting security of the Company outstanding is its Common
Stock, par value $.15625 per share. Only the holders of record of Common Stock
at the close of business on June 12, 1998, the record date for the meeting, are
entitled to notice of and to vote at the meeting. As of June 12, 1998, there
were 5,146,771 shares of Common Stock outstanding and entitled to be voted at
the meeting. A majority of such shares, present in person or by proxy, is
necessary to constitute a quorum. Each share of Common Stock is entitled to one
vote.
ELECTION OF DIRECTORS
The business and affairs of the Company are managed by the Board of
Directors, which exercises all corporate powers of the Company and establishes
broad corporate policies. The Bylaws currently provide that the Board will
consist of not less than six nor more than 15 directors, with the actual number
determined from time to time by resolution of the Board. The Board has fixed the
number at seven. At the meeting seven directors will be elected.
Directors are elected by plurality vote, and cumulative voting is not
permitted. All duly submitted and unrevoked proxies will be voted for the
nominees for director selected by the Board, except where authorization so to
vote is withheld. If any nominee should become unavailable for election for any
presently unforeseen reason, the persons designated as proxies will have full
discretion to vote for another person designated by the Board. Proxies cannot be
voted for a greater number of persons than the number of nominees for the office
of director named herein. Directors are elected to serve until the next annual
meeting of stockholders and until their successors have been elected and
qualified.
The seven nominees of the Board of Directors are named below. Each has
consented to serve as a director, if elected. The table below sets forth
information with respect to the nominees. Of the seven nominees, Messrs.
Bullion, Kellogg and McLaughlin are presently directors of the Company, were
elected as directors at the 1997 annual meeting, and have served continuously as
a director since the date of his first election to the Board in 1986, 1992 and
1976, respectively. Messrs. Ballard, Vig and Woods who are presently directors
of the Company are not standing as nominees for election at the 1998 annual
meeting.
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<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NOMINEE AGE DURING PAST FIVE YEARS
- -------------------------------- -------- --------------------------------------------------------------------------
<S> <C> <C>
J. W. Bullion 84 Of Counsel, Thompson & Knight, P.C., Dallas, Texas since 1983; prior to
(1) 1983, a partner in the firm; Secretary of the Company
Edward Nathan Dane 62 Principal of Dane, Falb, Stone & Co., Inc., a Boston-based registered
investment adviser since 1977
Peter L. Falb 61 Principal of Dane, Falb, Stone & Co., Inc., a Boston-based registered
investment adviser since 1977; Professor of Applied Mathematics, Brown
University
G. Thomas Graves III 49 President and Director of Wilco Properties, Inc., a privately held oil
and gas exploration company. He also serves as Managing Partner of
Gralee Partners, LP, an asset management company; director of
Input/Output, Inc., a NYSE listed company engaged in the design and
manufacture of seismic technology and equipment; served as an officer of
Triton Energy Corporation from 1986 to 1993 and also served as Chairman
and Chief Executive of Triton Europe Plc, a London Stock Exchange listed
company engaged in the oil and gas exploration industry from October
1991 to September 1993
Thomas P. Kellogg, Jr. 62 Director of Triton Energy Limited, an international exploration and
(1)(3)(4)(5) production company; Director of Reef Chemical Company, an oil field
chemical company; consultant and private investor since 1992; 1990 and
1991, consultant for Ensign Oil & Gas, Inc.; 1960 to 1990, Vice
President of J. P. Morgan & Co., a commercial and investment bank
William I. Lee 71 Independent energy explorer and producer since 1952. In December 1993,
he retired as President and Chief Executive Officer of Triton Energy
Corporation. In May 1995, he retired as Chairman and Director of Triton
Energy Corporation. He is presently Chairman and Chief Executive of
Wilco Properties, Inc.
John Mark McLaughlin 67 Chairman of the Board and President of the Company; an attorney in
(2)(4) private practice in San Angelo, Texas
</TABLE>
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(1) Member of audit committee
(2) Member of compensation committee
(3) Member of stock option committee
(4) Member of finance committee
(5) Member of exploration committee
There is no family relationship between any of the nominees or between
any nominee and any executive officer of the Company.
The executive officers of the Company consist of Mr. John Mark
McLaughlin, Chairman of the Board and President; Mr. Edward C. Marhanka, Vice
President and Treasurer; and Mr. J. W. Bullion, Secretary. Mr. Marhanka, 42, was
appointed as Vice President and Treasurer in May 1997, having been a petroleum
consultant to the Company since June 1989. Prior to his consulting practice in
November 1987 he was employed as Senior Petroleum Engineer for Penn Resources,
Inc., Dallas, Texas, where he managed their oil and gas properties. Mr. Bullion
has served as Secretary since 1987.
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<PAGE> 9
On June 24, 1998, the Board elected Mr. G. Thomas Graves III, one of
the nominees to election to the Company's Board of Directors, to the offices of
President and Chief Executive Officer, effective immediately after the Annual
Meeting. The terms of Mr. Graves' employment with and compensation by the
Company will be determined by the newly constituted Board of Directors
immediately following the Annual Meeting.
As permitted by the Bylaws of the Company, the Board has designated
from its members, an audit committee, a compensation committee and a stock
option committee. The audit committee reviews the scope, plan and results of the
annual audit with the independent auditors; reviews each professional service
provided by the independent auditors; considers the independence of the
auditors; and reviews all non-audit fees paid to the independent auditors. The
compensation committee reviews and approves the compensation and benefit plans
for all employees of the Company. The stock option committee administers the
Company's 1990 Stock Option Plan and reviews and approves grants of stock
options to the Company's officers and directors exempt from the short-swing
profit recovery provisions of Section 16 of the Securities Exchange Act of 1934,
as amended.
The audit committee met once and the compensation committee met twice
in 1997. In May 1997, the stock option committee by unanimous written consent
approved grants of stock options to employees of the Company under the 1990
Stock Option Plan. In addition, there were five regularly scheduled meetings of
the Board of Directors of the Company in 1997. All directors attended at least
75 percent of such meetings.
The Bylaw Amendment, which becomes effective immediately following the
Annual Meeting, establishes the Company Nominating Committee, the Gralee
Nominating Committee and the Falb Nominating Committee of the Board of
Directors. The Company Nominating Committee will consist of J. W. Bullion,
Thomas P. Kellogg, Jr., John Mark McLaughlin, and any successors thereto
selected by the Company Nominating Committee so long as each is a director of
the Company. The Gralee Nominating Committee will consist of G. Thomas Graves
III, William I. Lee, and any successors thereto selected by the Gralee
Nominating Committee so long as each is a director of the Company. The Falb
Nominating Committee will consist of Peter L. Falb, Edward Nathan Dane, and any
successors thereto selected by the Falb Nominating Committee for so long as each
is a director of the Company. The Company Nominating Committee has the exclusive
power on behalf of the Board of Directors to nominate persons for election as
directors of the Company as Company Designees and to fill positions on the Board
vacated by Company Designees. The Gralee Nominating Committee has the exclusive
power on behalf of the Board of Directors to nominate persons for election as
directors of the Company as Gralee Designees and to fill positions on the Board
vacated by the Gralee Designees. The Falb Nominating Committee has the exclusive
power on behalf of the Board of Directors of the Company to nominate persons for
election as directors of the Company as Dane Falb Designees and to fill
positions on the Board of Directors vacated by the Dane Falb Designees. See
"Background; Agreements with the Gralee Persons and the Dane Falb Persons."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 12, 1998 the beneficial
ownership of Common Stock of the Company (the only equity securities of the
Company presently outstanding) by (i) each director and nominee for director of
the Company, (ii) each person who was known to the Company to be the beneficial
owner of more than five percent of the outstanding shares of Common Stock and
(iii) directors and executive officers of the Company as a group. John Mark
McLaughlin, Chairman of the Board, President and a Director of the Company, and
Peter R. Vig, the former Chairman of the Board and Chief Executive Officer who
resigned from these positions in April 1997 and a Director of the Company, are
the only "named executive officers" listed in the Summary Compensation Table
appearing in this Proxy Statement.
-7-
<PAGE> 10
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned
--------------------------------------------------------------
Number Percent of
of Shares Class
---------------------- --------------------------
Name
- ----
<S> <C> <C>
Directors
John V. Ballard . . . . . . . . . . . . . . . . . 85,000 (1) 1.65% (1)
J. W. Bullion . . . . . . . . . . . . . . . . . . 34,924 (1) *
Thomas P. Kellogg, Jr. . . . . . . . . . . . . . 21,000 (1) *
John Mark McLaughlin . . . . . . . . . . . . . . . 290,536 (2) 5.60% (2)
Peter R. Vig . . . . . . . . . . . . . . . . . . . 297,500 (3) 5.78% (3)
Jack L. Woods . . . . . . . . . . . . . . . . . . 57,000 (2) 1.10% (2)
Nominees
Edward Nathan Dane . . . . . . . . . . . . . . . . 732,300 (4) 14.23% (4)
Peter L. Falb . . . . . . . . . . . . . . . . . . 843,300 (4) 16.39% (4)
G. Thomas Graves III . . . . . . . . . . . . . . . 532,500 (5) 10.35% (5)
William I. Lee . . . . . . . . . . . . . . . . . . 532,500 (5) 10.35% (5)
Beneficial owner of 5% or more (excluding persons
named above)
Peter L. Falb, Edward Nathan Dane, 843,300 (4) 16.39% (4)
Firethorn I Limited Partnership and
Dane, Falb, Stone & Co., Inc.
c/o Peter L. Falb
33 Broad Street
Boston, Massachusetts 02109
Lee Global Energy Fund, L.P. 532,500 (5) 10.35% (5)
6688 North Central Expressway
Suite 1150
Dallas, Texas 75206
All directors and officers (excluding nominees) as 805,293 (6) 15.17% (6)
a group of 7
</TABLE>
- ----------
*Less than one percent
(1) Includes 20,000 shares of Common Stock with respect to which such
person has the right to acquire beneficial ownership upon exercise of
currently exercisable options (the percentage is calculated on the
basis that such shares are deemed outstanding).
(2) Includes 50,000 shares of Common Stock with respect to which such
person has the right to acquire beneficial ownership upon exercise of
currently exercise options (the percentage is calculated on the basis
that such shares are deemed outstanding).
-8-
<PAGE> 11
(3) Includes 6,600 shares of Common Stock held by Mr. Vig's children, of
which Mr. Vig disclaims beneficial ownership.
(4) Messrs. Dane and Falb may be deemed to have beneficial ownership of
732,000 shares of Common Stock, consisting of (i)170,000 shares held by
Firethorn I Limited Partnership, a Massachusetts limited partnership,
and (ii) 562,300 shares held by advisory clients of Dane, Falb, Stone &
Co., Inc., a Massachusetts corporation. In addition, Mr. Falb has sole
voting and dispositive power with respect to 111,000 shares. The
information regarding Mr. Dane's and Mr. Falb's beneficial ownership of
the Company's Common Stock is disclosed on a Schedule 13D filed with
the Securities and Exchange Commission ("SEC") on April 7, 1995 by the
Dane Falb Persons, as amended through Amendment No. 5 thereto dated May
5, 1998.
(5) Mr. Lee and Mr. Graves may be deemed to have beneficial ownership of
532,500 shares of Common Stock in their capacities of controlling
stockholder and President, respectively, of Gralee Capital Corp., the
corporate general partner of Lee Global. Based on a Schedule 13D filed
with the SEC on June 2, 1997 by Lee Global, as amended through
Amendment No. 3 thereto dated April 28, 1998, Lee Global has sole
voting and dispositive power with respect to 532,500 shares of Common
Stock.
(6) Includes 160,000 shares of Common Stock which are subject to stock
options currently exercisable by the six directors, 18,333 shares of
Common Stock which are subject to a stock option currently exercisable
by Mr. Edward C. Marhanka, Vice President and Treasurer of the Company
and 1,000 shares of Common Stock which are otherwise owned directly by
Mr. Marhanka.
Except as otherwise indicated, all shares shown in the above table are
owned directly and the holder thereof has sole voting and investment powers with
respect to such shares.
-9-
<PAGE> 12
EXECUTIVE COMPENSATION AND OTHER TRANSACTIONS
SUMMARY COMPENSATION TABLE
The following table sets forth summary information regarding the
compensation awarded to, covered by or paid to John Mark McLaughlin, the
Chairman of the Board and President of the Company, and Peter R. Vig, the former
Chairman of the Board, Chief Executive Officer, President and Treasurer of the
Company who resigned from such capacities in April 1997. None of the other
executive officers of the Company serving as such at the end of or during fiscal
1997 earned total annual salary and bonus that exceeded $100,000. Mr. Vig is the
only executive officer of the Company whose total compensation earned during
fiscal 1995 and 1996 exceeded $100,000.
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
----------------------------------- -------------------------- ----------
Other
Annual Restricted Securities All Other
Name and Compen- Stock Underlying LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary ($) Bonus ($) ($) ($) SARs (#) ($) ($)
- --------- ---- ---------- --------- ------- ----------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John Mark 1997 -- -- -- -- 30,000 -- 8,500
McLaughlin,
Chairman of the
Board and
President(1)
Peter R. Vig, 1997 66,667 -- -- -- -- -- 482,620(2)
Chairman of the 1996 200,000 -- -- -- -- -- 30,709(3)
Board, Chief 1995 200,000 -- -- -- -- -- 3,500(4)
Executive
Officer and
President
</TABLE>
- ----------
(1) Mr. McLaughlin was elected Chairman of the Board and President of the
Company in April 1997, serving with no salary but with an option to
purchase 30,000 shares of Common Stock at an exercise price of $2.50.
During 1997 Mr. McLaughlin was paid $8,500 in compensation for services
provided as a director of the Company.
(2) In 1997 this amount consisted of (a) $7,500 in compensation for
services provided as a director, (b) a $388,803 distribution of Mr.
Vig's accrued benefits under the Company's noncontributory defined
benefit pension plan, and (c) a $86,317 distribution under Mr. Vig's
supplemental executive retirement plan.
(3) In 1996 this amount consisted of (a) $26,709 of life insurance premiums
and (b) $4,000 in compensation for services provided as a director.
(4) In 1995 this amount consisted of $3,500 in compensation for services
provided as a director.
-10-
<PAGE> 13
The following table provides information on grants of stock options in
1997 to Mr. McLaughlin pursuant to the Company's 1990 Stock Option Plan.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION
GRANTED (#) IN 1997 ($/SH) DATE
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John Mark McLaughlin 30,000 (1) 48.39% $2.50 05/15/07
</TABLE>
- ----------
(1) These options are immediately exercisable.
The following table summarizes the number and value of options
exercised during 1997, if any, as well as the number and value of unexercised
options, as of December 31, 1997, held by Messrs. McLaughlin and Vig.
AGGREGATED OPTION EXERCISES IN 1997 AND DECEMBER 31, 1997 OPTION VALUE
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($) (1)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ---------------------- ---------------- ------------------ ------------- --------------
<S> <C> <C> <C> <C>
John Mark McLaughlin -- -- 50,000 shares/ 78,750/--
0 shares
Peter R. Vig -- -- 200,000 shares/ 300,000/--
0 shares
</TABLE>
- ----------
(1) The high sales price per share on December 31, 1997 was $4.50 as
reported by the Nasdaq National Market.
-11-
<PAGE> 14
PENSION BENEFITS
The following table shows the annual pension benefits which would be
payable under the Company's noncontributory defined benefit pension plan for
retirement at age 65 for various levels of final average annual pay and years of
service.
<TABLE>
<CAPTION>
ANNUAL BENEFITS FOR YEARS OF SERVICE (1)
--------------------------------------------------------------------------------------
FINAL AVERAGE PAY (2) 5 10 15 20 25
- --------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000 . . . . . . . . . . $ 23,550 $ 47,100 $ 70,650 $ 80,070 $ 80,070
150,000 . . . . . . . . . . 32,250 70,650 105,975 120,105 120,105
200,000 . . . . . . . . . . 47,100 94,200 141,300 160,140 160,140
</TABLE>
- ----------
(1) Benefits are based on the average of the last five consecutive years of
service of the participant. After two years of service, a participant
has a 20 percent vested interest in accrued benefits, and an additional
20 percent vests each subsequent year. Accrued benefits are the product
of a participant's benefit at age 65 multiplied by the number of years
of completed service divided by the total number of years of service at
age 65. Benefits are computed on the basis of straight life annuity
amounts and are not subject to deduction for Social Security or other
offset amounts.
(2) The pension benefits accruing to the participant are based on total
compensation, even if it exceeds the limitation imposed by the Internal
Revenue Code of 1986, as amended (the "Code"). Under Section 401 of the
Code, the highest annual salary on which benefits can be calculated is
$150,000 for 1996 and $160,000 for 1997.
Upon his resignation in April 1997, Mr. Vig had 8 credited years of
service under the retirement plan, and accordingly was distributed $388,803 in
accrued benefits under the plan. In 1996, the Company established a supplemental
executive retirement plan which provides for incremental pension payments by the
Company so that retirement benefit payments are equal to amounts that would have
been payable from the Company's principal retirement plan if it were not for
limitations on these payments imposed by income tax regulations. Pursuant to his
supplemental executive retirement plan, the Company distributed to Mr. Vig
$86,317 upon his resignation. Mr. McLaughlin, the Company's Chairman and
President, is not covered under the Company's principal retirement plan and
supplemental executive retirement plan.
EMPLOYMENT AGREEMENT AND OTHER CHANGE OF CONTROL ARRANGEMENTS
In 1988, the Company entered into an employment agreement with Mr. Vig
pursuant to which he was employed to serve as the Chairman of the Board and the
Chief Executive Officer of the Company. The agreement, which has been amended
since 1988, expired upon Mr. Vig's resignation on April 21, 1997. The agreement
provided Mr. Vig with an annual salary of $200,000 a year and a lump sum
severance payment equal to the total salary which is payable over the remaining
term of the agreement or $200,000, whichever is larger, if Mr. Vig is discharged
by the Company without cause. If Mr. Vig resigned for cause, the agreement
further provided for a lump sum severance payment of $400,000. Resignation
following a change in control of the Company constitutes a resignation for
cause. Mr. Vig's resignation in April 1997 was not for cause and, therefore, he
did not receive severance payments under the terms of the employment agreement.
The Company's 1990 Stock Option Plan contains certain "changes in
control" provisions which are applicable to options issued under this plan,
including the options held by John Mark McLaughlin. Such provisions include the
following: In the event of: (i) a dissolution or liquidation of the Company,
(ii) a sale of all or substantially all of the Company's assets, (iii) a merger
or consolidation in which the Company is not the surviving corporation or (iv) a
-12-
<PAGE> 15
transaction in which another corporation becomes the owner of 50 percent or more
of the outstanding Common Stock, then every outstanding option granted under the
plan shall terminate; provided, however, the holders of each such outstanding
option shall have the right immediately prior to such dissolution, liquidation,
sale of assets, merger, consolidation or transaction to exercise any unexercised
options that have not at that time expired or have been terminated without
regard to any vesting periods under the holder's option agreement. Further, the
Stock Option Committee may, in its sole and absolute discretion, accelerate the
time of exercisability of any option that has been granted.
The Company's Bylaws, as amended, provide for mandatory indemnification
of and advancement of expenses to directors and officers, including former
directors and officers, of the Company in circumstances involving a "change in
control." The Company has entered into separate agreements with its directors
embodying and expanding upon these indemnification provisions in accordance with
the Delaware General Corporation Law.
COMPENSATION OF DIRECTORS
Directors of the Company are each paid an annual retainer of $6,000,
plus $500 for each regularly scheduled Board of Directors meeting they attend
and are reimbursed for reasonable travel expenses. The compensation for
directors elected at the Annual Meeting will be determined by the newly
constituted Board of Directors or a committee thereof following the Annual
Meeting.
On May 24, 1991, the Board of Directors authorized the Company to enter
into a stock option agreement with each non-employee director of the Company,
subject to stockholder approval within one year of the date of grant of the
option. The agreements were approved by the Company's stockholders at the Annual
Meeting of Stockholders held on May 22, 1992. Identical agreements were entered
into with John V. Ballard, J. W. Bullion, John Mark McLaughlin and Jack L.
Woods. At the time, Mr. Kellogg was not a director. Each agreement granted an
option to purchase 10,000 shares of Common Stock at a price of $3.625 per share,
exercisable during the period commencing May 22, 1992 and ending May 24, 2001,
subject to certain conditions. On February 17, 1994, the Company granted Mr.
Kellogg an option to purchase 10,000 shares of Common Stock at a price of $3.625
per share, exercisable until February 17, 2004, subject to certain conditions.
On September 8, 1994, the Board adopted the 1994 Non-Employee Director
Stock Option Plan (the "1994 Plan"), pursuant to which each non-employee
director was and each newly elected non-employee director is granted an option
to purchase 10,000 shares of Common Stock subject to shareholder approval. The
1994 Plan was approved by the Company's stockholders at the Annual Meeting of
Stockholders held on May 18, 1995. As a result, the Company's non-employee
directors at the time - including Messrs. Ballard, Bullion, Kellogg, McLaughlin
and Woods - each received options to purchase 10,000 shares of Common Stock at
$3.50 per share. The options under the 1994 Plan are granted at fair market
value on the grant date and become exercisable, subject to certain conditions,
in three equal annual installments on the first three anniversaries of the grant
date and terminate ten years from the grant date unless terminated sooner as a
result of the death or termination of directorship of the holder thereof.
The 1994 Plan provides for accelerated vesting of options granted in
certain instances constituting a "change in control." Upon the occurrence of a
"change in control" of the Company, the maturity of the option shall be
accelerated automatically so that the option shall become exercisable in full
with respect to all shares as to which the option shall not have previously been
exercised or become exercisable; provided that no such acceleration shall occur
with respect to the option if a director ceases to be a member of the Board of
Directors prior to the occurrence of such "change in control." A "change in
control" includes mergers, consolidations, reorganizations, sales of assets or a
dissolution of the Company; a change in the majority of the Board of Directors;
or the acquisition by a stockholder of 20 percent or more of the Common Stock of
the Company.
The Company entered into a consulting agreement dated May 1, 1997 with
Jack L. Woods, a director of the Company. The Company agreed to pay Mr. Woods a
consulting fee of $4,500 during the term of this Agreement. As additional
compensation for Mr. Wood's services, the Company granted him an option to
purchase 30,000 shares of Common Stock, which option was immediately exercisable
upon the date of grant.
-13-
<PAGE> 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Bullion, a director and executive officer of the Company, is of
counsel to Thompson & Knight, a Professional Corporation, a Dallas, Texas law
firm that has been retained by the Company as its corporate counsel.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors and officers of
the Company, and persons who own more than 10 percent of the Common Stock, to
file with the SEC initial reports of ownership and reports of changes in
ownership of the Common Stock. Directors, officers and more than 10 percent
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the year ended December 31, 1997, all Section
16(a) filing requirements applicable to its directors and officers were complied
with.
AUDITORS
Price Waterhouse LLP, which has served as the Company's independent
public accountants since 1988, has been selected to audit the financial
statements of the Company for the year ended December 31, 1998. This selection
will not be submitted to stockholders for ratification or approval. The
representatives of Price Waterhouse LLP are expected to be present at the
meeting to respond to appropriate questions from the stockholders and will be
given the opportunity to make a statement should they desire to do so.
STOCKHOLDERS' PROPOSALS
It is contemplated that the 1999 Annual Meeting of Stockholders of the
Company is scheduled to take place on May 20, 1999. Stockholder proposals for
inclusion in the Company's proxy materials for the 1999 Annual Meeting of
Stockholders must be received by the Company at its offices in Dallas, Texas,
addressed to the Secretary of the Company, not less than 60 days, and not more
than 120 days, in advance of such meeting.
ANNUAL REPORT AND FINANCIAL STATEMENTS
The Annual Report of the Company for its fiscal year ended December 31,
1997 accompanies this Proxy Statement. The audited financial statements of the
Company are included in the Annual Report.
By Order of the Board of Directors,
John Mark McLaughlin
Chairman of the Board
-14-
<PAGE> 17
TOREADOR ROYALTY CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John Mark McLaughlin and Edward C.
Marhanka, and either of them, proxies with power of substitution, and hereby
authorizes them to represent and to vote, as designated below, all shares of
Common Stock of Toreador Royalty Corporation standing in the name of the
undersigned on June 12, 1998, at the annual meeting of stockholders to be held
on July 23, 1998 at 10:00 a.m. at Dallas, Texas, and at any adjournment thereof
and especially to vote on the items of business specified below, as more fully
described in the notice of the meeting dated June 30, 1998, and the proxy
statement accompanying the same, receipt of which is hereby acknowledged.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary below) [ ] to vote for all nominees listed below [ ]
J. W. BULLION EDWARD NATHAN DANE PETER L. FALB G. THOMAS GRAVES III
THOMAS P. KELLOGG, JR. WILLIAM I. LEE JOHN MARK MCLAUGHLIN
(INSTRUCTION: To withhold authority to vote for any individual nominee, write the nominee's name in the space provided below.)
- ------------------------------------------------------------------------------------------------------------
2. In his discretion, the proxies are authorized to vote upon such other business or matters as may properly come before the
meeting or any adjournment thereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
</TABLE>
<PAGE> 18
THIS PROXY, WHEN DULY EXECUTED AND RETURNED, WILL BE VOTED IN THE MANNER
DESIGNATED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF THIS PROXY IS DULY EXECUTED
AND RETURNED, BUT WITHOUT A CLEAR VOTING DESIGNATION, IT WILL BE VOTED FOR THE
ELECTION TO THE BOARD OF DIRECTORS OF THE NOMINEES LISTED ON THIS PROXY AND, IN
THE DISCRETION OF THE PROXY, ANY OTHER BUSINESS.
The undersigned hereby revokes any proxy or proxies heretofore given to
represent or vote such Common Stock and hereby ratifies and confirms all actions
that said proxy, his substitutes, or any of them, may lawfully take in
accordance with the terms hereof.
DATED: , 1998
--------------------------------
---------------------------------------------
---------------------------------------------
Signature(s) of Stockholder(s)
This proxy should be signed exactly as your
name appears hereon. Joint owners should both
sign. If signed as attorney, executor,
guardian or in some other representative
capacity, or as officer of a corporation,
please indicate your capacity or title.
Please complete, date and sign this proxy and return it in the enclosed
envelope, which requires no postage if mailed in the United States.
