<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934*
TOREADOR ROYALTY CORPORATION
(NAME OF ISSUER)
COMMON STOCK, $.15625 PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
891041 10 5
(CUSIP NUMBER)
JOHN MARK MCLAUGHLIN
2201 SHERWOOD WAY, SUITE 213
SAN ANGELO, TEXAS 76901
(915) 942-0401
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
JUNE 26, 1998
(DATE OF EVENT WHICH REQUIRES FILING
OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 7
<PAGE> 2
CUSIP NO. 891041 10 5 SCHEDULE 13D
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(1) Names of Reporting Persons/S.S. or I.R.S. Identification Nos. of Above
Persons
JOHN MARK MCLAUGHLIN
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group (See Instructions) (a)[ ]
(b)[X]
- --------------------------------------------------------------------------------
(3) SEC Use Only
- --------------------------------------------------------------------------------
(4) Source of Funds (See Instructions) PF (See Item 3)
- --------------------------------------------------------------------------------
(5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
(6) Citizenship or Place of Organization UNITED STATES OF AMERICA
- --------------------------------------------------------------------------------
(7) Sole Voting Power 290,536
---------------------------------------------
Number of Shares
Beneficially (8) Shared Voting Power 0
Owned By ---------------------------------------------
Each
Reporting (9) Sole Dispositive Power 290,536
Person With ---------------------------------------------
(10) Shared Dispositive Power 0
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person 290,536
- --------------------------------------------------------------------------------
(12) Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [ ]
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11) 5.60%(1)
- --------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions) IN
- --------------------------------------------------------------------------------
- -------------------
(1) Based on 5,146,771 shares of Common Stock issued and outstanding as of
June 12, 1998 as disclosed in the Issuer's definitive proxy materials
filed with the Securities and Exchange Commission on July 1, 1998.
Page 2 of 7
<PAGE> 3
CUSIP NO. 891041 10 5 SCHEDULE 13D
- --------------------------------------------------------------------------------
ITEM 1. SECURITY AND ISSUER
The class of equity securities to which this statement relates is
common stock, $.15625 par value per share (the "Common Stock") of Toreador
Royalty Corporation, a Delaware corporation (the "Issuer"). The address of the
principal executive offices of the Issuer is 530 Preston Commons West, 8117
Preston Road, Dallas, Texas 75225.
ITEM 2. IDENTITY AND BACKGROUND
Item 2(a)-(c)
John Mark McLaughlin is an individual whose business address is 2201
Sherwood Way, Suite 213, San Angelo, Texas 76901. Mr. McLaughlin's principal
occupation is Chairman of the Board and President of the Issuer. In addition,
Mr. McLaughlin is an attorney in private practice in San Angelo, Texas.
Item 2(d)
During the past five years, the individual identified in this Item 2
has not been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors).
Item 2(e)
During the last five years, the individual identified in this Item 2
was not a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Mr. McLaughlin purchased the 290,536 shares, which are owned in his
individual capacity, for cash using personal funds.
ITEM 4. PURPOSE OF TRANSACTION
Mr. McLaughlin acquired the securities for investment purposes. Mr.
McLaughlin reserves the right from time to time to purchase additional shares of
Common Stock on the open market or in privately negotiated transactions. Mr.
McLaughlin has no present intention of selling any shares of Common Stock, but
reserves the right to do so, in whole and in part at any time, in open market
transactions, privately negotiated transactions, or otherwise.
On June 25, 1998, certain stockholders of the Issuer affiliated with
Lee Global Energy Fund, L.P. (the "Gralee Persons"), certain stockholders of the
Issuer affiliated with Dane, Falb, Stone & Co., Inc. (the "Dane Falb Persons")
and the members of the current Board of Directors of the Issuer acting in their
capacity as stockholders of the Issuer (collectively, the "Stockholders"),
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 1998
Annual Meeting of Stockholders of the Issuer. The Stockholder Agreement provides
that the seven nominees are to be: J.W. Bullion,
Page 3 of 7
<PAGE> 4
currently a director of the Issuer, Thomas P. Kellogg, Jr., currently a director
of the Issuer; John Mark McLaughlin, currently a director of the Issuer
(collectively referred to as the "Company Designees"); G. Thomas Graves III and
William I. Lee (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 Issuer (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
during the Effective Period 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 of the Issuer then in office, (i) (A) seek election to, or seek to
place a representative on, the Board of Directors of the Issuer, (B) engage in
any solicitation of proxies with respect to any securities of the Issuer, or (C)
become a participant in any election contest relating to the election of
directors of the Issuer; (ii) initiate, propose or otherwise solicit
stockholders of the Issuer for the approval of any stockholder proposal; (iii)
vote in favor of any matter or proposal submitted to stockholders of the Issuer
unless such matter or proposal is first recommended to stockholders by a vote of
five of the seven members of the Board of Directors of the Issuer 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 Issuer, (B) any sale of
assets of the Issuer, (C) any issuance or sale of equity securities of the
Issuer or (D) any restructuring, recapitalizing or similar transaction with the
Issuer; (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 Issuer 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.
Page 4 of 7
<PAGE> 5
The Issuer, 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 Issuer.
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 Issuer will, subject to certain limitations, cause to be
maintained in effect the Issuer'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.
Except as set forth in this Item 4, Mr. McLaughlin has no present plans
or proposals that relate to or would result in any of the actions specified in
clauses (a) through (j) of Item 4 of Schedule 13D.
The summary set forth in this Item 4 of Schedule 13D of certain aspects
of the transactions reported in this Schedule 13D does not purport to be a
complete description of, and is qualified in its entirety by reference to, the
various provisions of the various agreements and documents described herein
and/or attached as exhibits to this Schedule 13D and incorporated herein by
reference for all purposes.
Page 5 of 7
<PAGE> 6
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Item 5(a)
Mr. McLaughlin beneficially owns 290,536 shares of Common Stock (which
is approximately 5.60% of the outstanding shares of Common Stock as of June 12,
1998 based on information disclosed in the Issuer's definitive proxy materials
filed with the Securities and Exchange Commission on July 1, 1998). If the
relationships described in Item 4 hereof constitute a group for purposes of Rule
13d-5 of the Act, then the group may collectively own an aggregate of 2,207,660
shares of Common Stock of the Issuer (which is approximately 42% of the
outstanding shares of Common Stock of the Issuer as of June 12, 1998 based on
information disclosed in the Issuer's definitive proxy materials filed with the
Securities and Exchange Commission on July 1, 1998). Mr. McLaughlin disclaims
any beneficial ownership of the other Stockholders' shares and only claims
beneficial ownership of 290,536 shares of Common Stock of the Issuer.
Item 5(b)
Mr. McLaughlin has the sole power (and no shared power) to vote or
direct the vote or to dispose of direct the disposition of 290,536 shares of
Common Stock. As stated above, Mr. McLaughlin disclaims any beneficial ownership
or shared voting or dispositive power of the other Stockholders' shares.
Item 5(c)
Except as otherwise described herein, Mr. McLaughlin has not effected
any transaction in the Common Stock of the Issuer during this time period
commencing 60 days preceding the date of the event that required the filing of
this Schedule 13D through the date hereof.
Item 5(d)
No person other than Mr. McLaughlin has the right to receive or the
power to direct the receipt of dividends from, or the proceeds from the sale of,
Common Stock of the Issuer with respect to which this filing is made.
Item 5(e)
Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
Except as set forth in Item 4 or in the Exhibits filed herewith, there
are no contracts, arrangements, understandings or relationships (legal or
otherwise) between Mr. McLaughlin and any other person with respect to the
shares of Common Stock of the Issuer.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The information required by this Item 7 is set forth in the Index to
Exhibits accompanying this Schedule 13D filing.
Page 6 of 7
<PAGE> 7
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
July 8, 1998
/s/ John Mark McLaughlin
------------------------------------
John Mark McLaughlin
Page 7 of 7
<PAGE> 8
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
1 Stockholder Voting Agreement dated as of June 25, 1998 by
and among the Gralee Persons, the Dane Falb Persons and
certain other stockholders of the Issuer.
</TABLE>
<PAGE> 1
EXHIBIT 1
FINAL EXECUTION COPY
TOREADOR ROYALTY CORPORATION
STOCKHOLDER VOTING AGREEMENT
This STOCKHOLDER VOTING AGREEMENT, dated June 25, 1998 (the
"Agreement") is made and entered into by and among Mr. G. Thomas Graves, III and
Mr. William I. Lee, individuals whose business address is 4809 Cole Avenue,
Suite 107, Dallas, Texas 75205, Lee Global Energy Fund, L.P., a Texas limited
partnership ("Lee Global"), Gralee Capital Corp., a Texas corporation ("Gralee
Capital"), and Gralee Partners, L.P., a Texas limited partnership ("Gralee
Partners" and together with Mr. Graves, Mr. Lee, Lee Global and Gralee Capital,
collectively referred to as the "Gralee Persons"); Mr. Peter Lawrence Falb and
Mr. Edward Nathan Dane, individuals whose business address is 33 Broad Street,
Boston, Massachusetts 02109, Firethorn I Limited Partnership, a Massachusetts
limited partnership ("Firethorn"), the Hilary Bell Falb 1983 Trust (the "HBF
Trust"), the Alison Forslund Falb 1985 Trust (the "AFF Trust"), the Forslund
Irrevocable Trust (the "Forslund Trust"), and Dane, Falb, Stone & Co., Inc., a
Massachusetts corporation ("Dane Falb" and, together with Mr. Falb, Mr. Dane,
the HBF Trust, the AFF Trust, the Forslund Trust and Firethorn, collectively
referred to as the "Dane Falb Persons"); and Mr. John V. Ballard, an individual
whose address is 161-A Heritage Hills, Somers, New York 10589, Mr. J. W.
Bullion, an individual whose business address is 1700 Pacific Avenue, Suite
3300, Dallas, Texas 75201, Mr. Thomas P. Kellogg, an individual whose business
address is 50 Horseshoe Road, Darien, Connecticut 06820, Mr. John Mark
McLaughlin, an individual whose business address is 2201 Sherwood Way, Suite
213, San Angelo, Texas 76901, Mr. Peter R. Vig, an individual whose business
address is 101 Park Avenue, 48th Floor, New York, New York 10178, and Mr. Jack
L. Woods, an individual whose business address is 294 North Bay Drive, Bullard,
Texas 75757 (collectively referred to as "Current Management") (each of the
persons constituting the Gralee Persons, the Dane Falb Persons and Current
Management are sometimes collectively referred to as the "Stockholders").
W I T N E S S E T H:
WHEREAS, each of the Stockholders is a holder of shares of Common Stock
(as defined) of Toreador Royalty Corporation, a Delaware corporation (the
"Company");
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements set forth herein the parties to this Agreement hereby agree as
follows:
1. Definitions of Certain Agreement Terms. For purposes of this
Agreement, the terms hereinafter set forth shall have the following definitions
unless otherwise specifically stated:
"1998 Annual Meeting" means the 1998 annual meeting of stockholders of
the Company at which the election of directors shall be considered.
<PAGE> 2
"1999 Annual Meeting" means the 1999 annual meeting of stockholders of
the Company at which the election of directors shall be considered.
"2000 Annual Meeting" means the 2000 annual meeting of stockholders of
the Company at which the election of directors shall be considered.
"Board" means the Board of Directors of the Company.
"Bylaws" means the Amended and Restated Bylaws of the Company as
hereinafter amended or supplemented.
"Common Stock" means the common stock, par value $.15625 per share, of
the Company.
"Company Nominating Committee" shall mean the continuing director
nominating committee of the Board as established pursuant to the Bylaws.
"Company Securities" means any securities issued by the Company,
including the Common Stock and any other debt or equity securities of the
Company that are outstanding as of the date hereof or may hereafter be issued.
"Dane Falb Schedule 13D" means the Statement on Schedule 13D filed with
the SEC on April 7, 1995 by Mr. Falb, Mr. Dane, Firethorn and Dane Falb, as
amended through Amendment No. 5 thereto dated May 5, 1998.
"Effective Period" shall mean the period commencing immediately
subsequent to the 1998 Annual Meeting and ending on 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.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Falb Nominating Committee" shall mean the Falb nominating committee of
the Board as established pursuant to the Bylaws.
"Gralee Nominating Committee" shall mean the Gralee nominating
committee of the Board as established pursuant to the Bylaws.
"Lee Global Schedule 13D" means the Statement on Schedule 13D filed
with the SEC on June 2, 1997 by Lee Global, as amended through Amendment No. 3
thereto dated April 28, 1998.
"Person" means any individual, corporation, association, general or
limited partnership, limited liability company, limited liability partnership,
joint venture, trust, estate, other entity or organization or group.
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<PAGE> 3
"Rights Agreement" means the rights agreement dated as of April 3, 1995
between the Company and Continental Stock Transfer & Trust Company, as rights
agent, as amended or supplemented.
"SEC" means the United States Securities and Exchange Commission.
The terms "participant," "proxy" and "solicitation" shall be used as
defined in Regulation 14A under the Exchange Act. The terms "beneficial
ownership" and "group" shall be used as defined in Regulation 13D-G under the
Exchange Act. The terms "affiliate" and "associate" shall be used as defined in
Rule 12b-2 under the Exchange Act.
2. Nominations to the Company's Board of Directors at the 1998 Annual
Meeting.
(a) The Stockholders agree that they will support the
nomination and the election of the following seven (7) nominees standing for
election at the 1998 Annual Meeting to serve on the Board until the 1999 Annual
Meeting and until their respective successors shall be duly elected and
qualified: J. W. Bullion, current director of the Company; Thomas P. Kellogg,
Jr., current director of the Company; and John Mark McLaughlin, current director
of the Company (collectively referred to as the "Company Designees"); G. Thomas
Graves, III and William I. Lee (collectively referred to as the "Gralee
Designees"); and Peter Lawrence Falb and Edward Nathan Dane (collectively
referred to as the "Dane Falb Designees"). The Gralee Persons and the Dane Falb
Persons shall cause the Gralee Designees and the Dane Falb Designees,
respectively, to consent to serving as members of the Board, and provide the
biographical, beneficial ownership of Common Stock and other information
required to be disclosed in the Company's proxy materials used for the
solicitation of proxies at the 1998 Annual Meeting.
(b) Each Stockholder shall vote (including the taking of any
action by written consent, as necessary or appropriate), and shall cause its
affiliates to vote (including the taking of any action by written consent, as
necessary or appropriate), all shares of Common Stock which they are entitled to
vote (or control the voting of, directly or indirectly) at the 1998 Annual
Meeting in favor of the election of the nominees set forth in subsection (a) of
this Section 2.
3. Nominations to the Company's Board of Directors at the 1999 Annual
Meeting and 2000 Annual Meeting. During the Effective Period, the Stockholders
agree as follows:
(a) If the slate of nominees set forth in subsection (a) of
Section 2 are willing and able to act as such at the 1999 Annual Meeting and the
2000 Annual Meeting, the Stockholders shall support the nomination and election
of such seven nominees for election to the Board at the 1999 Annual Meeting and
the 2000 Annual Meeting.
(b) 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 Annual Meeting or the 2000 Annual Meeting, then the Stockholders agree the
replacement nominee(s) shall be nominated by the Company Nominating Committee.
If one or more of the Gralee Designees declines or is
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<PAGE> 4
otherwise unable to stand as nominee(s) for the election of directors at the
1999 Annual Meeting or the 2000 Annual Meeting, then the Stockholders agree the
replacement nominee(s) shall be nominated by the Gralee Nominating Committee. 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 Annual Meeting or the
2000 Annual Meeting, then the Stockholders agree the replacement nominee(s)
shall be nominated by the Falb Nominating Committee. The Stockholders shall
support the nomination and the election of the slate of nominees as selected in
accordance with this subsection (b) for election to the Board at the 1999 Annual
Meeting and the 2000 Annual Meeting.
(c) Each Stockholder shall vote (including the taking of any
action by written consent, as necessary or appropriate), and shall cause its
affiliates to vote (including the taking of any action by written consent, as
necessary or appropriate), all shares of Common Stock which they are entitled to
vote (or control the voting of, directly or indirectly) at the 1999 Annual
Meeting and the 2000 Annual Meeting in favor of the election of the nominees
selected in accordance with subsection (a) or (b) of this Section 3.
4. Board Vacancies. During the Effective Period and notwithstanding any
provision of the Bylaws with respect to the filling of vacancies on the Board to
the contrary, the Stockholders agree to vote (including the taking of any action
by written consent, as necessary or appropriate), and shall cause its affiliates
to vote (including the taking of any action by written consent, as necessary or
appropriate), all shares of Common Stock which they are entitled to vote (or
control the voting of, directly or indirectly), and otherwise take commercially
reasonable actions to cause vacancies on the Board to be filled as follows:
(a) in the event that one or more of the Company Designees
ceases to serve as a member of the Board during his term of office but prior to
December 31, 2000, the resulting vacancy on the Board shall be filled by a
person nominated by the Company Nominating Committee.
(b) in the event that one or more of the Gralee Designees
ceases to serve as a member of the Board during his term of office but prior to
December 31, 2000, the resulting vacancy on the Board shall be filled by a
person nominated by the Gralee Nominating Committee.
(c) in the event that one or more of the Dane Falb Designees
ceases to serve as a member of the Board during his term of office but prior to
December 31, 2000, the resulting vacancy on the Board shall be filled by a
person nominated by the Falb Nominating Committee.
5. Covenants.
(a) The Gralee Persons and the Dane Falb Persons agree to
withdraw their demand for a stockholder list and related information dated April
9, 1998 and April 27, 1998, respectively.
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<PAGE> 5
(b) Except as otherwise provided in this Agreement or as
agreed to by five (5) of the seven (7) members of the Board then in office, no
Stockholder or its affiliates will prior to December 31, 2000:
(i) (A) seek election to, or seek to place a
representative on, the Board, (B) engage in any solicitation of proxies with
respect to any Company Securities 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 one or more stockholder
proposals, as described in Rule 14a-8 under the Exchange Act, or otherwise;
(iii) vote in favor of or execute a consent with
respect to any matter or proposal submitted to the Company's stockholders by
vote or otherwise unless such matter or proposal has first been recommended to
stockholders by five (5) of the seven (7) members of the Board then in office,
and such recommendation has not been withdrawn; it being understood that the
Stockholders shall have no obligation to vote on any matter submitted to
stockholders other than as provided in Sections 2 and 3 hereof;
(iv) propose or seek to effect or seek permission of
the Board or stockholders of the Company to propose or effect on behalf of or
for the benefit of any Stockholder other than as a stockholder on an equal basis
(A) any form of business combination transaction involving the Company,
including without limitation a merger, consolidation, tender offer, share
exchange or exchange offer, (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 respect to the Company;
(v) initiate, propose or otherwise solicit
stockholders to amend or terminate the Rights Agreement, or to redeem the rights
issued thereunder; or
(vi) aid, encourage or act in concert with any person,
firm, corporation, group or other entity to take any of the actions prohibited
by Section 5(b) hereof.
(c) With respect to Dane Falb discretionary accounts, the
covenants in Section 5(b) shall apply only insofar as Dane Falb exercises
discretionary authority with respect to Company Securities held in such
accounts.
6. Representations and Warranties of the Gralee Persons. The Gralee
Persons jointly and severally represent and warrant to Current Management as
follows:
(a) Each Gralee Person has the power and authority to execute,
deliver and carry out the terms and provisions of this Agreement and to
consummate the transactions contemplated hereby, and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement.
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<PAGE> 6
(b) This Agreement has been duly and validly authorized,
executed and delivered by each Gralee Person, and constitutes a valid and
binding obligation of each Gralee Person, enforceable in accordance with its
terms, subject to applicable bankruptcy, reorganization, insolvency or other
laws affecting the enforcement of creditors' rights generally.
(c) None of the Gralee Persons or any of its affiliates
beneficially owns, or has any direct, indirect or contingent pecuniary interest
in, any Company Securities other than as disclosed in the Lee Global Schedule
13D.
(d) None of the Gralee Persons or any of its respective
affiliates is a member of any group with respect to any Company Securities, and
there are no other persons who are part of such a group with it or any of its
affiliates, except as disclosed in the Lee Global Schedule 13D.
7. Representations and Warranties of the Dane Falb Persons. The Dane
Falb Persons jointly and severally represent and warrant to Current Management
as follows:
(a) Each Dane Falb Person has the power and authority to
execute, deliver and carry out the terms and provisions of this Agreement and to
consummate the transactions contemplated hereby, and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement.
(b) This Agreement has been duly and validly authorized,
executed and delivered by each Dane Falb Person, and constitutes a valid and
binding obligation of each Dane Falb Person, enforceable in accordance with its
terms, subject to applicable bankruptcy, reorganization, insolvency or other
laws affecting the enforcement of creditors' rights generally.
(c) Except for an aggregate of 14,500 shares of Common Stock
held by the HBF Trust, the AFF Trust and the Forslund Trust, none of the members
of the Dane Falb Persons or any of its affiliates beneficially owns, or has any
direct, indirect or contingent pecuniary interest in, any Company Securities
other than as disclosed in the Dane Falb Schedule 13D.
(d) None of the Dane Falb Persons or any of its respective
affiliates is a member of any group with respect to any Company Securities, and
there are no other persons who are part of such a group with it or any of its
affiliates, except as disclosed in the Dane Falb Schedule 13D.
8. Representations and Warranties of Current Management Current
Management jointly and severally represents and warrants to the Gralee Persons
and the Dane Falb Persons as follows:
(a) Each member of Current Management has the power and
authority to execute, deliver and carry out the terms and provisions of this
Agreement and to consummate the transactions contemplated hereby, and has taken
all necessary action to authorize the execution, delivery and performance of
this Agreement.
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<PAGE> 7
(b) This Agreement has been duly and validly executed and
delivered by each member of Current Management, and constitutes a valid and
binding obligation of each member of Current Management, enforceable in
accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency or other laws affecting the enforcement of creditors' rights
generally.
9. Successors, Assigns and Transferees. Subject to applicable laws
regarding the sale or transfer of Common Stock by the Stockholders, the terms
and provisions of this Agreement shall not be deemed to restrict or limit future
sales of Common Stock by the Stockholders. The terms and provisions of this
Agreement shall not bind, inure to the benefit of or be enforceable by or
against the successors, assigns or transferees of each of the Stockholders. No
Stockholder may assign its rights under this Agreement.
10. Survival of Representations. All representations, warranties and
agreements made by the Stockholders in this Agreement or pursuant hereto shall
survive the date hereof.
11. Entire Agreement; Amendments. This Agreement, including that
certain Agreement of even date herewith among the Gralee Persons, the Dane Falb
Persons, the Company, among other parties thereto, and such additional
instruments as may be concurrently executed and delivered pursuant to this
Agreement, constitutes the entire understanding of the parties with respect to
its subject matter. There are no restrictions, agreements, promises,
representations, warranties, covenants or undertakings other than those
expressly set forth herein or in the documents delivered concurrently herewith.
This Agreement may be amended only by a written instrument duly executed by all
the parties hereto.
12. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not effect in any way the meaning or
interpretation of this Agreement.
13. Notices, All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given if so given) by hand delivery, facsimile or by
mail (registered or certified, postage prepaid, return receipt requested) to the
respective parties as follows:
If to the Gralee Persons:
Gralee Capital Corp.
4809 Cole Avenue
Suite 107
Dallas, Texas 75205
Attention: Mr. G. Thomas Graves, III
Fax No: (214) 521-8834
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<PAGE> 8
with a copy to:
Haynes & Boone, LLP
901 Main Street
Suite 3100
Dallas, Texas 75202
Attention: Ms. Janice V. Sharry
Fax No: (214) 651-5940
If to the Dane Falb Persons:
Dane, Falb, Stone & Co., Inc.
33 Broad Street
Boston, Massachusetts 02109
Attention: Mr. Peter Falb
Fax No: (617) 742-2304
with a copy to:
Richards, Layton & Finger
920 King Street
Wilmington, Delaware 19801
Attn: Mr. Jesse Finkelstein
Fax No.: (302) 658-6548
and:
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
Attn: Ms. Carla Herwitz
Fax No.: (617) 248-4000
If to Current Management:
2201 Sherwood Way
Suite 213
San Angelo, Texas 76901
Attention: Mr. John Mark McLaughlin
Fax: (915) 949-0480
-8-
<PAGE> 9
with a copy to:
Thompson & Knight, P.C.
1700 Pacific Avenue
Suite 3300
Dallas, Texas 75201
Attention: Mr. Joe Dannenmaier
Fax: (214) 969-1751
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
14. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware, without
reference to the conflict of laws principles thereof.
15. Waiver. Any waiver by any party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
16. Challenges to Agreement. Each party hereto shall not, and shall use
its best efforts to cause its affiliates, associates and representatives not to,
challenge the validity of any provisions of this Agreement. In the event that
any part of this Agreement or any transaction contemplated hereby is
temporarily, preliminarily or permanently enjoined or restrained by court of
competent jurisdiction, the parties hereto shall use their reasonable best
efforts to cause any such injunction or restraining order to be vacated or
dissolved or otherwise declared or determined to be of no further force or
effect.
17. Specific Performance. Each of the Stockholders acknowledges and
agrees that irreparable harm would occur if any provision of this Agreement were
not performed in accordance with the terms thereof, or were otherwise breached,
and that such harm could not be remedied by an award of damages. Accordingly,
the Stockholders agree that any non-breaching Stockholder shall be entitled to
an injunction to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof.
18. Counterparts. This Agreement may be executed in counterparts, each
of which shall be an original, but each of which together shall constitute one
and the same Agreement.
* * * * *
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<PAGE> 10
IN WITNESS WHEREOF, and intending to be legally bound hereby, each of
the undersigned parties has executed or caused this Agreement to be executed on
the date first above written.
LEE GLOBAL ENERGY FUND, L.P.
By: Gralee Partners, L.P., its general partner
By: Gralee Capital Corp., its general
partner
By: /s/ G. T. Graves, III
----------------------------------
Name: G. T. Graves, III
--------------------------------
Title: President
-------------------------------
GRALEE CAPITAL CORPORATION
By: /s/ G. T. Graves, III
------------------------------------------
Name: G. T. Graves, III
-------------------------------------
Title: President
------------------------------------
GRALEE PARTNERS, L.P.
By: Gralee Partners, L.P., its general partner
By: /s/ G. T. Graves, III
--------------------------------------
Name: G. T. Graves, III
---------------------------------
Title: President
--------------------------------
/s/ G. Thomas Graves, III
----------------------------------
G. Thomas Graves, III
/s/ Peter Lawrence Falb
----------------------------------
Peter Lawrence Falb
/s/ Edward Nathan Dane
----------------------------------
Edward Nathan Dane
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<PAGE> 11
FIRETHORN I LIMITED PARTNERSHIP
By: Firethorn II Limited Partnership, its
general partner
By: Eaglerock Corporation, its general
partner
By: /s/ PETER L. FALB
-------------------------------------
Name: Peter L. Falb
--------------------------------
Title: Treasurer
-------------------------------
THE HILARY BELL FALB 1983 TRUST
By: /s/ Karen F. Falb, Trustee
-----------------------------------------
Karen F. Falb, Trustee
THE ALISON FORSLUND FALB 1985 TRUST
By: /s/ Karen F. Falb, Trustee
-----------------------------------------
Karen F. Falb, Trustee
DANE, FALB, STONE & CO., INC.
By: /s/ PETER L. FALB
-----------------------------------------
Name: Peter L. Falb
------------------------------------
Title: Principal
-----------------------------------
/s/ John V. Ballard
----------------------------------------
John V. Ballard
/s/ J.W. Bullion
---------------------------------------
J.W. Bullion
/s/ Thomas P. Kellogg, Jr.
---------------------------------------
Thomas P. Kellogg, Jr.
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<PAGE> 12
/s/ John Mark McLaughlin
--------------------------------
John Mark McLaughlin
/s/ Peter R. Vig
--------------------------------
Peter R. Vig
/s/ Jack L. Woods
--------------------------------
Jack L. Woods
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<PAGE> 13
THE FORSLUND IRREVOCABLE TRUST
By: /s/ Karen F. Falb, Trustee
----------------------------------
Karen F. Falb, Trustee
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