-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Az6SIXFskxVzhZ1rpFPvk0W/Lay49ZRS6Ng6tuBOjPuiWmUyXvW1d3T7EOx9qJlC w812LrP0/vX5DHvhmZjkXA== 0000950134-97-006051.txt : 19970814 0000950134-97-006051.hdr.sgml : 19970814 ACCESSION NUMBER: 0000950134-97-006051 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOREADOR ROYALTY CORP CENTRAL INDEX KEY: 0000098720 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 750991164 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02517 FILM NUMBER: 97658173 BUSINESS ADDRESS: STREET 1: 530 PRESTON COMMONS WEST STREET 2: 8117 PRESTON ROAD CITY: DALLAS STATE: TX ZIP: 75225 BUSINESS PHONE: 2143690080 MAIL ADDRESS: STREET 1: 530 PRESTON COMMONS WEST STREET 2: 8117 PRESTON ROAD CITY: DALLAS STATE: TX ZIP: 75225 10-Q 1 FORM 10-Q FOR QUARTER ENDED JUNE 30, 1997 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____ TO ____ Commission file number 0-2517 TOREADOR ROYALTY CORPORATION (Exact name of registrant as specified in its charter) Delaware 75-0991164 - --------------------------------------- ---------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 530 Preston Commons West 8117 Preston Road Dallas, Texas 75225 - ---------------------------------------- ---------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (214) 369-0080 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at June 30, 1997 - ------------------------------------- --------------------------------- Common Stock, $.15625 par value 4,948,171 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TOREADOR ROYALTY CORPORATION CONSOLIDATED BALANCE SHEET
June 30, June 30, December 31, 1997 1996 1996 ------------ ------------ ------------ (Unaudited) (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 2,916,909 $ 2,945,947 $ 3,074,111 Marketable securities, at market value -- 158,270 -- Accounts receivable 245,861 178,919 508,793 Federal income tax receivable -- 54,899 54,899 Other current assets 48,196 5,578 65,101 ------------ ------------ ------------ Total current assets 3,210,966 3,343,613 3,702,904 ------------ ------------ ------------ Properties and equipment, less accumulated depreciation, depletion and amortization 3,200,218 3,260,379 3,306,020 Other assets 116,827 117,534 -- ------------ ------------ ------------ Total assets $ 6,528,011 $ 6,721,526 $ 7,008,924 ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 109,032 $ 85,013 $ 256,298 Federal income taxes payable -- 3,984 62,938 ------------ ------------ ------------ Total current liabilities 109,032 88,997 319,236 Deferred tax liabilities 96,737 70,143 65,508 ------------ ------------ ------------ Total liabilities 205,769 159,140 384,744 ------------ ------------ ------------ Stockholders' equity: Preferred stock, $1.00 par value, 4,000,000 shares authorized; none issued -- -- -- Common stock, $.15625 par value, 10,000,000 shares authorized; 5,356,571 issued 836,964 835,792 836,964 Capital in excess of par value 3,577,385 3,560,042 3,577,385 Retained earnings 2,967,332 2,445,710 2,842,483 Net unrealized gain on marketable securities -- 84,114 -- Minimum pension liability -- -- (88,543) ------------ ------------ ------------ 7,381,681 6,925,658 7,168,289 Treasury stock at cost: 408,400 shares, 144,500 shares, and 213,900 shares (1,059,439) (363,272) (544,109) ------------ ------------ ------------ Total stockholders' equity 6,322,242 6,562,386 6,624,180 ------------ ------------ ------------ Total liabilities and stockholders' equity $ 6,528,011 $ 6,721,526 $ 7,008,924 ============ ============ ============
The Company uses the successful efforts method of accounting for its oil and gas producing activities. See accompanying notes to the consolidated financial statements. - 2 - 3 TOREADOR ROYALTY CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Three Months Ended For the Six Months Ended June 30, June 30, ---------------------------- ---------------------------- 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Revenues: Oil and gas sales $ 449,702 $ 523,642 $ 1,127,537 $ 987,155 Lease bonuses and rentals 2,800 -- 112,738 300 Interest and other income 39,963 55,577 77,340 105,876 ------------ ------------ ------------ ------------ Total revenues 492,465 579,219 1,317,615 1,093,331 Costs and expenses: Lease operating expense 141,930 127,710 280,145 218,466 Dry holes and abandonments 10,067 54,986 63,522 89,191 Depreciation, depletion and amortization 56,754 55,322 114,342 107,296 Geological and geophysical 79,475 47,522 153,489 114,720 General and administrative 289,440 216,721 519,236 443,789 ------------ ------------ ------------ ------------ Total costs and expenses 577,666 502,261 1,130,734 973,462 ------------ ------------ ------------ ------------ Income (loss) from operations (85,201) 76,958 186,881 119,869 Other income: Gain from sales of marketable securities -- 375,551 -- 375,551 Income (loss) before federal income taxes (85,201) 452,509 186,881 495,420 Provision (benefit) for federal income taxes (25,841) 150,015 62,036 165,450 ------------ ------------ ------------ ------------ Net income (loss) $ (59,360) $ 302,494 $ 124,845 $ 329,970 ============ ============ ============ ============ Income (loss) per share $ (0.01) $ 0.06 0.02 0.06 ============ ============ ============ ============ Weighted average shares outstanding 5,042,070 5,222,745 5,091,240 5,251,194 ============ ============ ============ ============
See accompanying notes to the consolidated financial statements. - 3 - 4 TOREADOR ROYALTY CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
For the Three Months Ended For the Six Months Ended June 30, June 30, ---------------------------- ---------------------------- 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Cash flows from operating activities: Net income (loss) $ (59,360) $ 302,494 $ 124,845 $ 329,970 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 56,754 54,986 114,342 107,296 Dry holes and abandonments 10,067 55,322 63,522 89,191 Gain on sale of marketable securities -- (375,551) -- (375,551) Decrease (increase) in accounts receivable (3,757) (30,518) 262,932 (10,173) Decrease in federal income tax receivable -- -- 54,899 32,551 Decrease (increase) in pension obligation (8,734) 13,750 (28,280) 791 Decrease in other current assets 40,276 34,250 16,905 16,594 Increase (decrease) in accounts payable and accrued liabilities 79,804 (20,063) (147,266) (108,226) Increase (decrease) in federal income taxes payable (71,593) 3,984 (62,938) 3,984 Deferred tax expense 8,317 146,031 31,229 161,458 ------------ ------------ ------------ ------------ Net cash provided by operating activities 51,774 184,685 430,190 247,885 ------------ ------------ ------------ ------------ Cash flows from investing activities: Expenditures for oil and gas property and equipment (53,940) (175,357) (149,697) (255,175) Proceeds from the sale of marketable securities -- 470,984 -- 470,984 Purchase of furniture & fixtures -- (400) -- (400) Proceeds from lease bonuses and rentals -- -- 77,635 -- ------------ ------------ ------------ ------------ Net cash provided (used) by investing activities (53,940) 295,227 (72,062) 215,409 ------------ ------------ ------------ ------------ Cash flows from financing activities: Purchase of treasury stock (503,504) (143,595) (515,330) (308,922) ------------ ------------ ------------ ------------ Net cash used by financing activities (503,504) (143,595) (515,330) (308,922) ------------ ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents (505,670) 336,317 (157,202) 154,372 Cash and cash equivalents, beginning of period 3,422,579 2,609,630 3,074,111 2,791,575 ------------ ------------ ------------ ------------ Cash and cash equivalents, end of period $ 2,916,909 $ 2,945,947 $ 2,916,909 $ 2,945,947 ============ ============ ============ ============ Supplemental schedule of cash flow information: Cash received during the period for Income taxes $ -- $ -- $ 58,589 $ 32,551 Cash paid during the period for Income taxes $ 40,000 $ -- $ 100,000 $ --
See accompanying notes to the consolidated financial statements. - 4 - 5 TOREADOR ROYALTY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and six months ended June 30, 1997 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These consolidated financial statements should be read in the context of the consolidated financial statements and notes thereto filed with the Securities and Exchange Commission in Toreador Royalty Corporation's (the "Company") 1996 Annual Report on Form 10-K. In the opinion of the Company, the information furnished herein reflects all adjustments consisting of only normal recurring adjustments, necessary for a fair presentation of the results of the interim periods reported herein. Operating results from the interim period may not necessarily be indicative of the results for the year ended December 31, 1997. Certain previously reported financial information has been reclassified to conform to the current period's presentation. NOTE 2 - MARKETABLE SECURITIES The Company does not own any marketable securities. The Company eliminated its position in the San Juan Basin Royalty Trust in the third quarter of 1996. NOTE 3 - NON-PRODUCING MINERAL AND ROYALTY INTERESTS Principal properties include mineral fee interests acquired by the Company during 1951 and 1958. These interests totaled approximately 530,000 net mineral acres underlying approximately 870,000 surface acres in the Texas Panhandle and West Texas. It is recognized that the ultimate realization of the investment in these properties is dependent upon future exploration and development operations which are dependent upon satisfactory leasing and drilling arrangements with others. Additionally, the Company owns working or royalty interests in Texas, New Mexico, Oklahoma, Arkansas, Louisiana and Colorado. NOTE 4 - INTEREST AND OTHER INCOME Items in interest and other income consist of:
Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Interest - Certificates of Deposit and U. S. Treasury Bills $ 39,963 $ 31,253 $ 76,196 $ 64,977 Distribution from Grantor Trust: San Juan Basin Royalty Trust -- 4,750 -- 11,975 Other Income -- 19,574 1,144 28,924 ---------- ---------- ---------- ---------- $ 39,963 $ 55,577 $ 77,340 $ 105,876 ========== ========== ========== ==========
- 5 - 6 TOREADOR ROYALTY CORPORATION For the three and six months ended June 30, 1997 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Disclosures Regarding Forward-Looking Statements This report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this Form 10-Q, including, without limitation, statements contained in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's financial position, business strategy, plans and objectives of management of the Company for future operations, and industry conditions, are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Any forward-looking statements herein are subject to certain risks and uncertainties inherent in petroleum exploration, development and production, including, but not limited to the risk that no commercially productive oil and gas reservoirs will be encountered; inconclusive results from 3-D seismic projects; delays or cancellation of drilling operations as a result of a variety of factors; volatility of oil and gas prices due to economic and other conditions; intense competition in the oil and gas industry; operational risks (e.g., fires, explosions, blowouts, cratering and loss of production); insurance coverage limitations and requirements; and potential liability imposed by intense governmental regulation of oil and gas production; all of which are beyond the control of the Company. Any one or more of these factors could cause actual results to differ materially from those expressed in any forward-looking statement. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements disclosed in this paragraph and otherwise in this report. Liquidity and Capital Resources Historically, most of the exploration activity on the Company's acreage has been funded and conducted by other oil companies and this activity is expected to continue. Exploration activity typically generates lease bonus and option income to the Company. If drilling is successful, the Company receives royalty income from the oil or gas production but bears none of the capital or operating costs. In order to accelerate the evaluation of its acreage as well as increase its ownership in any reserves discovered, the Company intends to increase its level of participation in exploring its acreage by acquiring working interests. The extent to which the Company may acquire working interests will depend on the availability of outside capital and cash flow from operations. Currently, the primary sources of capital for the financing of the Company's operations are cash flow provided from revenues generated by its proportionate share in oil and natural gas sales and existing cash, including that from a private offering completed in 1994. To the extent cash flow - 6 - 7 TOREADOR ROYALTY CORPORATION For the three and six months ended June 30, 1997 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) from operations does not significantly increase and external sources of capital are limited or unavailable, the Company's ability to make the capital investment to participate in 3-D seismic surveys and increase its interest in projects on its acreage will be limited. Future funds are expected to be provided through production from existing producing properties and new producing properties that may be discovered through exploration of the Company's acreage by third parties or by the Company itself. Funds may also be provided through external financing in the form of debt or equity. There can be no assurance as to the extent and availability of these sources of funding. The Company has no debt and maintains its excess cash funds in interest-bearing deposits and commercial paper. The Company is not aware of any demands, commitments or events which will result in its liquidity increasing or decreasing in a material way. From time to time, the Company may receive lease bonuses that cannot be anticipated and, when funds are available, the Company may elect to participate in exploratory ventures. The Company also may acquire producing oil and gas assets which could require the use of debt. Management believes that sufficient funds are available internally to meet anticipated capital requirements for fiscal 1997. The Company has used $1,042,696 of its cash reserves to purchase 402,700 shares of its Common Stock, as of June 30, 1997. These purchases were made pursuant to stock repurchase programs authorized by the Board of Directors on October 10, 1995, of up to 100,000 shares of Common Stock and a second stock repurchase program on April 22, 1996, of up to 150,000 shares of common stock. A third stock repurchase program was authorized by the Board of Directors on April 21, 1997, of up to 300,000 shares of common stock. As of August 8, 1997, the Company had purchased an aggregate of 152,700 shares at a purchase price of $411,668 under the third repurchase program. The repurchases of the Company's shares of Common Stock were made in unsolicited open-market purchases, at market (not premium) prices, without fixed terms and not contingent upon the tender of a fixed minimum number of shares or in response to a third party bid and otherwise in accordance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. - 7 - 8 TOREADOR ROYALTY CORPORATION For the three and six months ended June 30, 1997 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1997 VS THREE MONTHS ENDED JUNE 30, 1996 Revenues for the second quarter of 1997 were $492,465 versus $579,219 for the same period in 1996. Oil and gas sales were $449,702 on volumes of 19,233 BBLs of oil and 80,569 MCF of natural gas as compared to $523,642 on volumes of 16,314 BBLs and 90,606 MCF in 1996. The $73,940 decrease in oil and gas sales resulted from lower oil and gas prices. Average oil prices decreased 16.0% to $17.27/BBL for the three months ended June 30, 1997 from $20.56/BBL for three months ended June 30, 1996, while average gas prices decreased 30.3% to $1.45/MCF for the three months ended June 30, 1997 from $2.08/MCF for the three months ended June 30, 1996. Lease bonuses and rentals increased to $2,800 in 1997 versus none in 1996. Interest and other income was $39,963 in 1997 down from $55,577 in 1996. This decrease was primarily due to a one time adjustment for miscellaneous receipts in 1996. Costs and expenses were $577,666 in 1997 versus $502,261 in 1996. Lease operating expenses increased to $141,930 in 1997 from $127,710 in 1996 due to the acquisitions made in 1996. Dry holes and abandonments decreased to $10,067 in 1997 from $54,986 in 1996. Depreciation, depletion and amortization increased 2.6% to $56,754 in 1997 from $55,322 in 1996, reflecting more property owned by the Company. Geological and geophysical expenses increased 67.2% to $79,475 in 1997 from $47,522 in 1996, primarily as a result of retaining a consultant to replace a former employee and a payment for consulting services relating to the preparation of reserve reports for the year ended December 31, 1996, normally rendered in the first quarter. General and administrative expenses increased to $289,440 from $216,721 a year ago, primarily due to the payment of $86,317 to the former chief executive officer of the Company, in settlement of his supplemental executive retirement plan. The Company recognized a net loss of $59,360 or $0.01 per share, for the second quarter of 1997 versus net income of $302,494, or $0.06 per share, for the same period in 1996. Net income for the second quarter of 1996 includes a $375,551 gain from the sale of marketable securities. The Company eliminated its position in any marketable securities during the third quarter of 1996. - 8 - 9 TOREADOR ROYALTY CORPORATION For the three and six months ended June 30, 1997 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1997 VS SIX MONTHS ENDED JUNE 30, 1996 Revenues for the six months ended June 30, 1997 were $1,317,615 versus $1,093,331 for the same period in 1996. Oil and gas sales were $1,127,537 on volumes of 37,092 BBLs of oil and 159,892 MCF of natural gas as compared to $987,155 on volumes of 32,589 BBLs and 176,637 MCF in 1996. The $140,382 increase in oil and gas sales resulted from higher oil and gas prices. Average oil prices increased 2.9% to $19.93/BBL for the six months ended June 30, 1997 from $19.36/BBL for the six months ended in June 30, 1996, while average gas prices increased 19.8% to $2.42/MCF for the six months ended June 30, 1997 from $2.02/MCF for the six months ended June 30, 1996. Lease bonuses and rentals increased to $112,738 in 1997 versus $300 in 1996, primarily as a result of receiving bonuses from two exploratory agreements on the Company's minerals. Interest and other income was $77,340 in 1997 down from $105,876 in 1996. This decrease was primarily due to the Company liquidating the remainder of its marketable securities in the San Juan Basin Royalty Trust in August 1996. Costs and expenses were $1,130,734 in 1997 versus $973,462 in 1996. Lease operating expenses increased to $280,145 in 1997 from $218,466 in 1996 due to the acquisitions made in 1996. Dry holes and abandonments decreased to $63,522 in 1997 from $89,191 in 1996. Depreciation, depletion and amortization increased 6.6% to $114,342 in 1997 from $107,296 in 1996, reflecting more property owned by the Company. Geological and geophysical expenses increased 33.8% to $153,489 in 1997 from $114,720 in 1996, primarily as a result of retaining and training a consultant to replace a former employee. General and administrative expenses increased to $519,236 from $443,789 a year ago, primarily due to the payment of $86,317 to the former chief executive officer of the Company, in settlement of his supplemental executive retirement plan. The Company recognized net income of $124,845 or $0.02 per share, for the six months ended June 30, 1997 versus net income of $329,970, or $0.06 per share, for the same period in 1996. Net income for the six months ended June 30, 1996 includes a $375,551 gain from the sale of marketable securities. The Company eliminated its position in any marketable securities during the third quarter of 1996. - 9 - 10 TOREADOR ROYALTY CORPORATION For the three and six months ended June 30, 1997 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) OTHER MATTERS Recent Accounting Pronouncements In February 1997, the Financial Accounting Standards Board issued Statement No. 128 ("SFAS 128"), "Earnings Per Share". This Statement is effective for financial statements issued for periods ending after December 15, 1997. Earlier adoption is not permitted. SFAS 128 requires dual presentation of basic and diluted EPS for entities with complex capital structures. The impact of adopting this statement will not have a material effect on the Company's earnings per share calculation. - 10 - 11 TOREADOR ROYALTY CORPORATION June 30, 1997 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The annual meeting of stockholders of the Company was held at 10:00 a.m., local time, on Thursday, May 15, 1997. (b) Proxies were solicited by the Board of Directors of the Company pursuant to Regulation 14A under the Securities Exchange Act of 1934. There was no solicitation in opposition to the Board of Directors' nominees as listed in the proxy statement and all of such nominees were duly elected. (c) Out of a total of 5,138,271 shares of common stock of the Company outstanding and entitled to vote, 3,676,796 shares were present in person or by proxy, representing approximately 72 percent. The only matter voted on by the stockholders, as fully described in the definitive proxy materials for the annual meeting, was the election of directors of the Company. The results of the voting for the election of directors of the Company were as follows:
Number of Shares WITHHOLDING Number of Shares Voting AUTHORITY to Vote for Nominees FOR Election as Director Election as Director John V. Ballard 3,638,896 37,900 J. W. Bullion 3,638,596 38,200 Thomas P. Kellogg, Jr. 3,638,596 38,200 John Mark McLaughlin 3,638,896 37,900 Peter R. Vig 3,597,146 79,650 Jack L. Woods 3,638,596 38,200
There were no broker non-votes for the matter voted on by the stockholders at the annual meeting. (d) Inapplicable. - 11 - 12 TOREADOR ROYALTY CORPORATION June 30, 1997 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits The information required by this Item 6(a) is set forth in the Index to Exhibits accompanying this quarterly report and is incorporated herein by reference. (b) Reports on Form 8-K Form 8-K dated April 23, 1997 (Date of Event: April 21, 1997), which reported the resignation of Peter R. Vig as Chairman and Chief Executive Officer of the Company and Donald E. August as a director of the Company, and the authorization by the Board of Directors of the Company of a stock repurchase program of up to 300,000 shares of the Company's common stock. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TOREADOR ROYALTY CORPORATION, Registrant /s/ John Mark McLaughlin --------------------------------------- John Mark McLaughlin, Chairman and President August 8, 1997 - 12 - 13 TOREADOR ROYALTY CORPORATION June 30, 1997 INDEX TO EXHIBITS Exhibit Number Description ------- ----------- 10.1 - Non-Qualified Stock Option Agreement dated as of May 15, 1997 by and between Toreador Royalty Corporation and Jack L. Woods. 10.2 - Incentive Stock Option Agreement dated as of May 15, 1997 by and between Toreador Royalty Corporation and John Mark McLaughlin. 10.3 - Consulting Agreement dated as of May 1, 1997 by and between Toreador Royalty Corporation and Jack L. Woods. 10.4 - Incentive Stock Option Agreement dated as of May 15, 1997 by and between Toreador Royalty Corporation and Edward C. Marhanka. 10.5 - Employment Agreement dated as of May 1, 1997 by and between Toreador Royalty Corporation and Edward C. Marhanka. 27 - Financial Data Schedule EX-10.1 2 NON-QUALIFIED STOCK OPTION AGREEMENT 1 EXHIBIT 10.1 JACK L. WOODS TOREADOR ROYALTY CORPORATION NON-QUALIFIED STOCK OPTION AGREEMENT THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this "Agreement"), made and entered into as of May 15, 1997, by and between Toreador Royalty Corporation, a Delaware corporation (the "Company"), and Jack L. Woods ("Optionee"); W I T N E S S E T H: WHEREAS, Optionee provides consulting services ("Services") to the Company; and WHEREAS, the Company desires to extend to Optionee the opportunity to acquire Common Stock as an added incentive for Optionee to continue providing Services to the Company and to advance the interests of the Company; and WHEREAS, the Board of Directors of the Company has authorized and approved the grant of non-qualified stock options to Optionee subject to the terms and conditions herein provided; and NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows: 1. Grant of Option and Option Period. The Company hereby grants to Optionee as of the date of this Agreement (the "Grant Date"), subject to the provisions of Section 2 hereof and as hereinafter set forth, an option (the "Option") to purchase 30,000 shares of Common Stock, par value $.15625 per share, of the Company ("Common Stock") at the price of $2.50 per share, at any time or (with respect to partial exercises) from time to time during a period commencing on the date hereof and ending on May 15, 2007. 2. Exercise of Option. The Option may be exercised by written notice signed by Optionee and delivered to the Secretary of the Company or sent by United States registered or certified mail, postage prepaid, addressed to the Company (to the attention of its Secretary) at its corporate office in Dallas, Texas. Such notice shall state the number of shares as to which the Option is exercised and shall be accompanied by the full amount of the purchase price of such shares, in cash or by check. Any such notice shall be deemed given on the date on which the same was deposited in a regularly maintained receptacle for the deposit of United States mail, addressed and sent as above-stated, or, in the case of hand 2 delivery, on the date of receipt thereof by the Secretary of the Company. In the event of Optionee's death, the executor or administrator of Optionee's estate (or anyone who shall have acquired the Option by will or pursuant to the laws of descent and distribution) may exercise the Option in accordance with the provisions of this Agreement. 3. Delivery of Certificates Upon Exercise of the Option. Delivery of a certificate or certificates representing the purchased shares of Common Stock shall be made promptly after receipt of notice of exercise and payment of the purchase price. If the Company so elects, it obligation to deliver shares of Common Stock upon the exercise of the Option shall be conditioned upon its receipt from the person exercising the Option of an executed investment letter, in form and content satisfactory to the Company and its legal counsel, evidencing the investment intent of such person and such other matters as the Company may reasonably require. It the Company so elects, the certificate or certificates representing the shares of Common Stock issued upon exercise of the Option shall bear a legend in substantially the following form: THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SHARES ARE FIRST REGISTERED THEREUNDER OR UNLESS THE COMPANY RECEIVES A WRITTEN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE ACCEPTABLE TO THE COMPANY, TO THE EFFECT THAT REGISTRATION THEREUNDER IS NOT REQUIRED. 4. Adjustments Upon Changes in Common Stock. In the event that before delivery by the Company of all the shares in respect of which the Option is granted, the Company shall have effected a Common Stock split or dividend payable in Common Stock, or the outstanding Common Stock of the Company shall have been combined into a smaller number of shares, the shares still subject to the Option shall be increased or decreased to reflect proportionately the increase or decrease in the number of shares outstanding, and the purchase price per share shall be decreased or increased so that the aggregate purchase price for all the then optioned shares shall remain the same as immediately prior to such split, dividend or combination. In the event of a reclassification of Common Stock not covered by the foregoing, or in the event of a liquidation, separation or reorganization, including a merger, consolidation or sale of assets, the Board shall make such adjustments, if any, as it may deem appropriate in the number, purchase price and kind of shares still subject to the Option. The provisions of this Section 4 shall only be applicable if, and only to the extent that, the application thereof does not conflict with any valid governmental statute, regulation or rule. -2- 3 5. Transferability. The Option evidenced hereby is not transferable otherwise than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in the Code or in Title I of the Employee Retirement Income Security Act of 1974, as amended, and during the lifetime of Optionee is exercisable only by Optionee. 6. Applicable Law. All questions arising with respect to the provisions of this Agreement shall be determined by application of the laws of the State of Texas except to the extent preempted by Federal law. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. The "Company" TOREADOR ROYALTY CORPORATION By: /s/ JOHN MARK MCLAUGHLIN --------------------------------- John Mark McLaughlin Chairman of the Board and President "Optionee" /s/ JACK L. WOODS --------------------------------------- Jack L. Woods -3- EX-10.2 3 INCENTIVE STOCK OPTION AGREEMENT - J.M. MCLAUGHLIN 1 EXHIBIT 10.2 JOHN MARK MCLAUGHLIN TOREADOR ROYALTY CORPORATION INCENTIVE STOCK OPTION AGREEMENT THIS AGREEMENT, made as of May 15, 1997, by and between Toreador Royalty Corporation, a Delaware corporation (the "Company"), and John Mark McLaughlin ("Optionee") in connection with the grant of an Incentive Option (hereinafter defined) under the Toreador Royalty Corporation 1990 Stock Option Plan (the "Plan"). W I T N E S S E T H : WHEREAS, Optionee is an employee of the Company or an Affiliate (hereinafter defined) in a key position and the Company desires to encourage Optionee to own Common Stock (hereinafter defined) and to give Optionee added incentive to advance the interests of the Company through the Plan and desires to grant Optionee an Incentive Option (hereinafter defined) to purchase shares of Common Stock of the Company under terms and conditions established by the Board (hereinafter defined). NOW, THEREFORE, the Company and Optionee hereby agree as follows: 1. Definitions. As used in this Agreement, the following terms shall have the following meanings, respectively: (a) "Affiliate" shall have the meaning set forth in Section 1.2 of the Plan and shall include any party now or hereafter coming within that definition. (b) "Board" shall mean the Board of Directors of the Company. (c) "Code" shall mean the Internal Revenue Code of 1986, as amended. (d) "Committee" shall mean the committee appointed pursuant to Section 3 of the Plan. (e) "Common Stock" shall mean the $.15625 par value Common Stock of the Company. (f) "Fair Market Value" shall have the meaning set forth in Section 1.8 of the Plan. 2 (g) "Incentive Option" shall mean a stock option that is intended to be or is denominated as an incentive stock option (within the meaning of Section 422 of the Code). 2. Grant of Option and Option Period. The Company hereby grants to Optionee as of the date of this Agreement (the "Grant Date"), subject to the provisions of Section 3 hereof and as hereinafter set forth, the option to purchase 30,000 shares of Common Stock at the price of $2.50 per share (the "Purchase Price"), at any time or (with respect to partial exercises) from time to time during a period commencing on the date hereof and ending on May 15, 2007. 3. Termination of Service. Any provision of Section 2 hereof to the contrary notwithstanding: (a) If Optionee ceases to be employed by the Company or an Affiliate "for cause" (as defined in Section 6.4(a) of the Plan), then that portion, if any, of this Incentive Option that remains unexercised, including that portion, if any, that pursuant to this Agreement is not yet exercisable, shall automatically terminate and be of no further force or effect as of the date Optionee ceases to be employed; (b) If Optionee shall die during the Option Period while in the employ of the Company or an Affiliate, this Incentive Option may be exercised, to the extent that Optionee was entitled to exercise it at the date of Optionee's death, within one year after such death (if otherwise within the Option Period), but not thereafter, by the executor or administrator of the estate of Optionee or by the person or persons who shall have acquired this Incentive Option directly from Optionee by bequest or inheritance; (c) If Optionee ceases to be employed by the Company or an Affiliate by reason of disability (as defined in Section 22(e)(3) of the Code), this Incentive Option may be exercised, to the extent that Optionee was entitled to exercise it at the date of his termination, within one year after such termination (if otherwise within the Option Period), but not thereafter by Optionee (or Optionee's legal representative, if Optionee is legally incompetent); and (d) If Optionee ceases to be employed by the Company or an Affiliate for any reason (other than the circumstances specified in paragraphs (a), (b) and (c) of this Section 3) within the Option Period, this Incentive Option may be exercised, to the extent Optionee was able to do so at the date of termination of the directorship, within three (3) months after such termination (if otherwise within the Option Period), but not thereafter. -2- 3 4. Exercise During Employment. Except as provided in Section 3 hereof, this Incentive Option may not be exercised unless Optionee is at the time of exercise an employee of the Company or an Affiliate. 5. Manner of Exercise. This Incentive Option may be exercised by written notice signed by the person entitled to exercise same and delivered to the Secretary of the Company or sent by United States registered mail addressed to the Company (for the attention of the Secretary) at its corporate office in Dallas, Texas. Such notice shall state the number of shares of Common Stock as to which the Incentive Option is exercised and shall be accompanied by the full amount of the purchase price of such shares. Exercise of this Incentive Option shall not be effective until the Company has received written notice of exercise. 6. Payment. The Purchase Price for the Incentive Option shares may be paid in cash by certified or cashier's check or, with the consent of the Committee, with shares of Common Stock owned by Optionee which have been held at least six (6) months prior to the date of exercise or, with the consent of the Committee, by a combination of cash and such shares. 7. Delivery of Shares. Delivery of the certificates representing the shares of Common Stock purchased upon exercise of this Incentive Option shall be made promptly after receipt of notice of exercise and payment. If the Company so elects, its obligation to deliver shares of Common Stock upon the exercise of this Incentive Option shall be conditioned upon its receipt from the person exercising this Incentive Option of an executed investment letter, in form and content satisfactory to the Company and its legal counsel, evidencing the investment intent of such person and such other matters as the Company may reasonably require. If the Company so elects, the certificate or certificates representing the shares of Common Stock issued upon exercise of this Incentive Option shall bear a legend in substantially the following form: THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE HAVE BEEN ISSUED TO THE REGISTERED OWNER IN RELIANCE UPON WRITTEN REPRESENTATIONS THAT THESE SHARES HAVE BEEN PURCHASED FOR INVESTMENT. THESE SHARES MAY NOT BE SOLD, TRANSFERRED, OR ASSIGNED UNLESS, IN THE OPINION OF THE CORPORATION OR ITS LEGAL COUNSEL, SUCH SALE, TRANSFER, OR ASSIGNMENT WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION, AND ANY APPLICABLE STATE SECURITIES LAWS. -3- 4 8. Status of Optionee. Optionee shall not be deemed to be a stockholder of the Company with respect to any of the shares of Common Stock subject to this Incentive Option, except to the extent that such shares shall have been purchased and transferred to him. The Company shall not be required to issue or transfer any certificates for shares of Common Stock purchased upon exercise of this Incentive Option until all applicable requirements of law have been complied with and such shares shall have been duly listed on any securities exchange on which the Common Stock may then be listed. 9. Adjustments. Notwithstanding any other provision hereof, in the event of any change in the number of outstanding shares of Common Stock effected without receipt of consideration therefor by the Company, by reason of a stock dividend, or split, combination, exchange of shares or other recapitalization, merger, or otherwise, in which the Company is the surviving corporation, the number and class of shares subject to this Incentive Option and the exercise price of this Incentive Option shall be automatically adjusted to accurately and equitably reflect the effect thereupon of such change, provided that any fractional share resulting from such adjustment may be eliminated. In the event of a dispute concerning such adjustment, the decision of the Committee shall be conclusive. The number of shares subject to this Incentive Option shall be automatically reduced by any fraction included therein which results from any adjustment made pursuant to this Section 9. A dissolution or liquidation of the Company; a sale of all or substantially all of the assets of the Company where it is contemplated that within a reasonable period of time thereafter the Company will either be liquidated or converted into a nonoperating company or an extraordinary dividend will be declared resulting in a partial liquidation of the Company (but in all cases only with respect to those employees with the Company and its Affiliates as a result of such sale or assets); a merger or consolidation (other than a merger effecting a reincorporation of the Company in another state or any other merger or a consolidation in which the shareholders of the surviving corporation and their proportionate interests therein immediately after the merger or consolidation are substantially identical to the shareholders of the Company and their proportionate interests therein immediately prior to the merger or consolidation) in which the Company is not the surviving corporation (or survives only as a subsidiary of another corporation in a transaction in which the shareholders of the parent of the Company and their proportionate interests therein immediately after the transaction are not substantially identical to the shareholders of the Company and their proportionate interests therein immediately prior to the transaction); or a transaction in which another corporation becomes the owner of 50% or more of the total combined voting power of all classes of stock of the Company shall cause this Incentive Option to terminate, but Optionee shall, in any event, have the right, immediately prior to such dissolution, liquidation, merger, consolidation, or transaction, to exercise this Incentive Option, to the extent not theretofore exercised, without regard to the determination as to the periods and installments of exercisability made pursuant to Section 3 hereof if (and only if) this Incentive Option has not at that time expired or been terminated. Such acceleration of -4- 5 exercisability shall not apply to this Incentive Option if any surviving or acquiring corporation agrees to assume this Incentive Option in connection with the merger, consolidation, or transaction. 10. Committee Authority. Any questions concerning the interpretation of this Agreement and any controversy which may arise under this Agreement shall be determined by the Committee in its sole discretion. 11. Transferability. This Incentive Option is not transferable otherwise than by will and the laws of descent and distribution and during the lifetime of Optionee is exercisable only by Optionee or, if Optionee is legally incompetent, by Optionee's legal representative. 12. Employment. Nothing in this Agreement confers upon Optionee any right to continue in the employ of the Company or any Affiliate, nor shall this Agreement interfere in any manner with the right of the Company or any Affiliate to terminate the employment of Optionee with or without cause at any time. 13. Incentive Option Subject to Plan. By execution of this Agreement, Optionee agrees that this Incentive Option and the shares of Common Stock to be received upon exercise hereof shall be governed by and subject to all applicable provisions of the Plan. 14. Construction. This Agreement is governed by, and shall be construed and enforced in accordance with, the laws of the State of Texas. Words of any gender used in this Agreement shall be construed to include any other gender, unless the context requires otherwise. The headings of the various sections of this Agreement are intended for convenience of reference only and shall not be used in construing the terms hereof. -5- 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. TOREADOR ROYALTY CORPORATION By: /s/ J. W. BULLION ----------------------------------- J. W. Bullion Secretary /s/ JOHN MARK MCLAUGHLIN --------------------------------------- John Mark McLaughlin, Optionee -6- EX-10.3 4 CONSULTING AGREEMENT 1 EXHIBIT 10.3 JACK L. WOODS CONSULTING AGREEMENT This Consulting Agreement (this "Agreement") is made as of May 1, 1997, by and between Toreador Royalty Company, a Delaware corporation (the "Company"), and Jack L. Woods (the "Consultant"). WHEREAS, the Company desires to enter into a separate agreement to retain the services of the Consultant on a current basis, and the Consultant desires to perform such services for the Company, subject to and upon the terms and conditions contained herein; NOW, THEREFORE, in consideration of the premises and the mutual terms and conditions hereto, the Company and the Consultant agree as follows: 1. Employment and Duties. The Company agrees to retain the services of the Consultant to perform such consulting and advisory services regarding the operations of the Company as the Company shall request from time to time during the term of this Agreement. The Consultant shall make himself available to consult with the directors, officers, employees and other consultants of the Company at reasonable times, concerning geological and geophysical matters and, in general, any other issue concerning the business affairs of the Company on which the Consultant's expertise may bear. 2. Amount of Service. It is anticipated that the Consultant will spend approximately one business day per week performing his duties and functions under this Agreement during the term of this Agreement. It is understood that the Consultant's time commitment to the Company may vary over time consistent with the needs of the Company and the Consultant agrees to devote such time and attention to the performance and fulfillment of such duties, functions and responsibilities as is necessary to fulfill such duties. Notwithstanding the foregoing, it is specifically understood and agreed that the Consultant may act as a consultant or perform services for other parties other than the Company and therefore will only be required to devote a portion of his time to his services under this Agreement, which will not exceed three business days per week without his consent. The Consultant shall be deemed an independent contractor for all purposes. 3. Compensation. The Company shall pay the Consultant for his services under this Agreement a consulting fee of $4,500 during the term of this Agreement. The Board of Directors of the Company and the Consultant shall review the consulting fee on an annual basis to determine any increases that the parties shall agree upon. All federal withholding and other employment and income related taxes shall be the responsibility of the Consultant. As additional compensation for his services under this Agreement, the Consultant, upon execution of this Agreement, shall be granted by the Company an option to purchase 30,000 and conditions set forth in the form of Option Agreement attached hereto as Exhibit A which 2 is incorporated herein by reference. The Company and the Consultant shall execute and deliver counterparts of the Option Agreement in the form of Exhibit A simultaneously with the execution of this Agreement. 4. Business Expenses. The Consultant shall be reimbursed by the Company for any out of pocket expenses reasonably paid or incurred by him in connection with the performance of his duties hereunder upon presentation of expense statements or vouchers or such other supporting information reasonably evidencing such expenses. 5. Term. The term of this Agreement shall commence on the date hereof and terminate on December 31, 1997. 6. Termination. This Agreement shall terminate upon the first to occur of (i) the expiration of the term hereof, (ii) the death, disability or other incapacity of the Consultant, or (iii) the written consent of both parties to this Agreement. For purposes of this Agreement, the "disability or incapacity" of the Consultant shall occur if, as a result of the Consultant's incapacity due to physical, emotional or mental injury, illness or incapacitation, the Consultant shall have been absent from his services hereunder on a continuous basis for the entire period of six consecutive months. 7. Limited Liability. With regard to the services to be performed by the Consultant pursuant to the terms of this Agreement, the Consultant shall not be liable to the Company, or to anyone who may claim any right due to his relationship with the Company, for any acts or omissions in the performance of said services on the part of the Consultant or on the part of the agents or employees of the Consultant, except when said acts or omissions of the Consultant are due to his willful misconduct or gross negligence. The Company shall hold the Consultant free and harmless from any obligations, costs, claims, judgments, attorneys' fees and attachments arising from or growing out of the services rendered to the Company pursuant to the terms of this Agreement or in any way connected with the rendering of said services, except when the same shall arise due to the willful misconduct or gross negligence of the Consultant, and the Consultant is adjudged to be guilty of willful misconduct or gross negligence by a court of competent jurisdiction. 8. Confidentiality/Trade Secrets. The Consultant acknowledges that his position with the Company is one of the highest trust and confidence both by reason of his position and by reason of his access to and contact with the trade secrets and confidential and proprietary business data and information of the Company. Both during the term of this Agreement and thereafter, the Consultant covenants and agrees as follows: (a) that he shall use his reasonable best efforts and exercise utmost reasonable diligence to protect and safeguard the trade secrets and confidential and proprietary data and information of the Company, including but not limited to its -2- 3 technical data, records, compilations of information, processes, and specifications relating to its properties, assets, customers, suppliers, products and services; (b) that he shall not disclose any of such trade secrets and confidential and proprietary information, except as may be deemed by him to be necessary or desirable for the performance of his duties for the Company; and (c) that he shall not use, directly or indirectly, for his own benefit or for the benefit of another, any of such trade secrets and confidential and proprietary information. All files, records, documents, drawings, specifications, memoranda, notes or other documents relating to the business of the Company, whether prepared by the Consultant or otherwise coming into his possession, shall be the exclusive property of the Company and shall be delivered to the Company and not retained by the Consultant upon termination of his employment for any reason whatsoever or at any other time upon request of the Board. Notwithstanding the foregoing, the Consultant shall not be required to keep confidential or restrict use of any trade secrets or confidential and proprietary data and information of the Company (i) which he may be required to disclose at the express direction of any authorized government agency, pursuant to a subpoena or other court process, or as otherwise required by any law, rule, regulation or order of any regulatory body, (ii) which has become generally available to the public by means other than by breach of this Agreement, (iii) which was available to the Consultant prior to its disclosure by the Company to the Consultant, (iv) which has become available to the Consultant from a source other than the Company or (v) as to which disclosure or use the Company consents in writing. 9. Miscellaneous. (a) Notices. Any notice or communication required or permitted hereunder shall be given in writing and shall be (i) sent by first class registered or certified United States mail, postage prepaid, (ii) sent by overnight or express mail or expedited delivery service, (iii) delivered by hand or (iv) transmitted by wire, telex or telefax, addressed as follows: If to the Consultant: Jack L. Woods 294 North Bay Drive Bullard, TX 75757 Telephone No.: (903) 825-2356 -3- 4 If to the Company: Toreador Royalty Corporation 530 Preston Commons West 8117 Preston Road Dallas, Texas 75225 Attn: President Telephone No.: (214) 369-0080 Fax No.: (214) 369-3183 or to such other address or to the attention of such other person as hereafter shall be designated in writing by the applicable party in accordance herewith. Any such notice or communication shall be deemed to have been given as of the date of first attempted delivery at the address and in the manner provided above. 10. Successors and Assigns. This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other assign or transfer this Agreement or any rights or obligations hereunder; provided, however, that in the event of a merger, consolidation or transfer or sale of all or substantially all of the assets of the Company, this Agreement shall be binding upon the successor to the Company's business and assets. 11. Interpretation. When the context in which words are used in this Agreement indicates that such is the intent, words in the singular number shall include the plural and vice versa. 12. Severability. Every provision in this Agreement is intended to be severable. In the event that any provision of this Agreement shall be held to be invalid, the same shall not affect in any respect whatsoever the validity of the remaining provisions of this Agreement. 13. Remedies. If any action at law or equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which he may be entitled. 14. Captions. Any section or paragraph titles or captions contained in this Agreement are for convenience only and shall not be deemed a part of the context of this Agreement. 15. Entire Agreement. This Agreement contains the entire understanding and agreement between the parties and supersedes any prior written or oral agreements between them respecting the subject matter contained herein. There are no representations, agreements, arrangements or understandings, oral or written, between and among the parties -4- 5 hereto relating to the subject matter of this Agreement which are not fully expressed herein or therein. 16. No Waiver. The failure of any party to insist upon strict performance of a covenant hereunder or of any obligation hereunder, irrespective of the length of time for which such failure continues, shall not be a waiver of such party's right to demand strict compliance in the future. No consent or waiver, express or implied, to or of any breach or default in the performance of any obligation hereunder shall constitute a consent or waiver to or of any other breach or default in the performance of the same or any obligation hereunder. 17. Amendment. This Agreement may be changed, modified or amended only by an instrument in writing duly executed by all of the parties hereto. Any such amendment shall be effective as of such date as may be determined by the parties hereto. 18. Choice of Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY TEXAS LAW. IN WITNESS WHEREOF, the parties have executed this Agreement or caused the same to be executed by their duly authorized corporate officers, all as of the day and year first above written. CONSULTANT: /s/ JACK L. WOODS --------------------------------------- Jack L. Woods COMPANY: TOREADOR ROYALTY CORPORATION By: /s/ JOHN MARK MCLAUGHLIN ----------------------------------- John Mark McLaughlin Chairman of the Board and President -5- EX-10.4 5 INCENTIVE STOCK OPTION AGREEMENT - E.C. MARHANKA 1 EXHIBIT 10.4 EDWARD C. MARHANKA TOREADOR ROYALTY CORPORATION INCENTIVE STOCK OPTION AGREEMENT THIS AGREEMENT, made as of May 15, 1997, by and between Toreador Royalty Corporation, a Delaware corporation (the "Company"), and Edward C. Marhanka ("Optionee") in connection with the grant of an Incentive Option (hereinafter defined) under the Toreador Royalty Corporation 1990 Stock Option Plan (the "Plan"). W I T N E S S E T H : WHEREAS, Optionee is an employee of the Company or an Affiliate (hereinafter defined) in a key position and the Company desires to encourage Optionee to own Common Stock (hereinafter defined) and to give Optionee added incentive to advance the interests of the Company through the Plan and desires to grant Optionee an Incentive Option (hereinafter defined) to purchase shares of Common Stock of the Company under terms and conditions established by the Board (hereinafter defined). NOW, THEREFORE, the Company and Optionee hereby agree as follows: 1. Definitions. As used in this Agreement, the following terms shall have the following meanings, respectively: (a) "Affiliate" shall have the meaning set forth in Section 1.2 of the Plan and shall include any party now or hereafter coming within that definition. (b) "Board" shall mean the Board of Directors of the Company. (c) "Code" shall mean the Internal Revenue Code of 1986, as amended. (d) "Committee" shall mean the committee appointed pursuant to Section 3 of the Plan. (e) "Common Stock" shall mean the $.15625 par value Common Stock of the Company. (f) "Fair Market Value" shall have the meaning set forth in Section 1.8 of the Plan. 2 (g) "Incentive Option" shall mean a stock option that is intended to be or is denominated as an incentive stock option (within the meaning of Section 422 of the Code). 2. Grant of Option and Option Period. The Company hereby grants to Optionee as of the date of this Agreement (the "Grant Date"), subject to the provisions of Section 3 hereof and as hereinafter set forth, the option to purchase 25,000 shares of Common Stock at the price of $2.50 per share (the "Purchase Price"), at any time or (with respect to partial exercises) from time to time during a period commencing on the first anniversary of the Grant Date and ending on May 15, 2007 (the "Option Period"), provided that the number of shares purchasable hereunder in any period or periods of time during which the Option is exercised shall be limited as follows: (a) only 33 1/3% of such shares (if a fractional number, then the next lower whole number) are purchasable, in whole at any time or in part from time to time, commencing May 15, 1998, if Optionee is an employee of the Company or an Affiliate until that date; (b) an additional 33 1/3% of such shares (if a fractional number, then the next lower whole number) are purchasable, in whole at any time or in part from time to time, commencing May 15, 1999, if Optionee is an employee of the Company or an Affiliate until that date; (c) the remainder of such shares are purchasable, in whole at any time or in part from time to time, commencing May 15, 2000, if Optionee is an employee of the Company or an Affiliate until that date. 3. Termination of Service. Any provision of Section 2 hereof to the contrary notwithstanding: (a) If Optionee ceases to be employed by the Company or an Affiliate "for cause" (as defined in Section 6.4(a) of the Plan), then that portion, if any, of this Incentive Option that remains unexercised, including that portion, if any, that pursuant to this Agreement is not yet exercisable, shall automatically terminate and be of no further force or effect as of the date Optionee ceases to be employed; (b) If Optionee shall die during the Option Period while in the employ of the Company or an Affiliate, this Incentive Option may be exercised, to the extent that Optionee was entitled to exercise it at the date of Optionee's death, within one year after such death (if otherwise within the Option Period), but not thereafter, by the executor or administrator of the estate of Optionee or by the person or persons -2- 3 who shall have acquired this Incentive Option directly from Optionee by bequest or inheritance; (c) If Optionee ceases to be employed by the Company or an Affiliate by reason of disability (as defined in Section 22(e)(3) of the Code), this Incentive Option may be exercised, to the extent that Optionee was entitled to exercise it at the date of his termination, within one year after such termination (if otherwise within the Option Period), but not thereafter by Optionee (or Optionee's legal representative, if Optionee is legally incompetent); and (d) If Optionee ceases to be employed by the Company or an Affiliate for any reason (other than the circumstances specified in paragraphs (a), (b) and (c) of this Section 3) within the Option Period, this Incentive Option may be exercised, to the extent Optionee was able to do so at the date of termination of the employment, within three (3) months after such termination (if otherwise within the Option Period), but not thereafter. 4. Exercise During Employment. Except as provided in Section 3 hereof, this Incentive Option may not be exercised unless Optionee is at the time of exercise an employee of the Company or an Affiliate. 5. Manner of Exercise. This Incentive Option may be exercised by written notice signed by the person entitled to exercise same and delivered to the Secretary of the Company or sent by United States registered mail addressed to the Company (for the attention of the Secretary) at its corporate office in Dallas, Texas. Such notice shall state the number of shares of Common Stock as to which the Incentive Option is exercised and shall be accompanied by the full amount of the purchase price of such shares. Exercise of this Incentive Option shall not be effective until the Company has received written notice of exercise. 6. Payment. The Purchase Price for the Incentive Option shares may be paid in cash by certified or cashier's check or, with the consent of the Committee, with shares of Common Stock owned by Optionee which have been held at least six (6) months prior to the date of exercise or, with the consent of the Committee, by a combination of cash and such shares. 7. Delivery of Shares. Delivery of the certificates representing the shares of Common Stock purchased upon exercise of this Incentive Option shall be made promptly after receipt of notice of exercise and payment. If the Company so elects, its obligation to deliver shares of Common Stock upon the exercise of this Incentive Option shall be conditioned upon its receipt from the person exercising this Incentive Option of an executed investment letter, in form and content satisfactory to the Company and its legal counsel, -3- 4 evidencing the investment intent of such person and such other matters as the Company may reasonably require. If the Company so elects, the certificate or certificates representing the shares of Common Stock issued upon exercise of this Incentive Option shall bear a legend in substantially the following form: THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE HAVE BEEN ISSUED TO THE REGISTERED OWNER IN RELIANCE UPON WRITTEN REPRESENTATIONS THAT THESE SHARES HAVE BEEN PURCHASED FOR INVESTMENT. THESE SHARES MAY NOT BE SOLD, TRANSFERRED, OR ASSIGNED UNLESS, IN THE OPINION OF THE CORPORATION OR ITS LEGAL COUNSEL, SUCH SALE, TRANSFER, OR ASSIGNMENT WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION, AND ANY APPLICABLE STATE SECURITIES LAWS. 8. Status of Optionee. Optionee shall not be deemed to be a stockholder of the Company with respect to any of the shares of Common Stock subject to this Incentive Option, except to the extent that such shares shall have been purchased and transferred to him. The Company shall not be required to issue or transfer any certificates for shares of Common Stock purchased upon exercise of this Incentive Option until all applicable requirements of law have been complied with and such shares shall have been duly listed on any securities exchange on which the Common Stock may then be listed. 9. Adjustments. Notwithstanding any other provision hereof, in the event of any change in the number of outstanding shares of Common Stock effected without receipt of consideration therefor by the Company, by reason of a stock dividend, or split, combination, exchange of shares or other recapitalization, merger, or otherwise, in which the Company is the surviving corporation, the number and class of shares subject to this Incentive Option and the exercise price of this Incentive Option shall be automatically adjusted to accurately and equitably reflect the effect thereupon of such change, provided that any fractional share resulting from such adjustment may be eliminated. In the event of a dispute concerning such adjustment, the decision of the Committee shall be conclusive. The number of shares subject to this Incentive Option shall be automatically reduced by any fraction included therein which results from any adjustment made pursuant to this Section 9. A dissolution or liquidation of the Company; a sale of all or substantially all of the assets of the Company where it is contemplated that within a reasonable period of time thereafter the Company will either be liquidated or converted into a nonoperating company or an extraordinary dividend will be declared resulting in a partial liquidation of the Company (but in all cases only with respect to those employees with the Company and its Affiliates as a result of such sale or assets); a merger or consolidation (other than a merger -4- 5 effecting a reincorporation of the Company in another state or any other merger or a consolidation in which the shareholders of the surviving corporation and their proportionate interests therein immediately after the merger or consolidation are substantially identical to the shareholders of the Company and their proportionate interests therein immediately prior to the merger or consolidation) in which the Company is not the surviving corporation (or survives only as a subsidiary of another corporation in a transaction in which the shareholders of the parent of the Company and their proportionate interests therein immediately after the transaction are not substantially identical to the shareholders of the Company and their proportionate interests therein immediately prior to the transaction); or a transaction in which another corporation becomes the owner of 50% or more of the total combined voting power of all classes of stock of the Company shall cause this Incentive Option to terminate, but Optionee shall, in any event, have the right, immediately prior to such dissolution, liquidation, merger, consolidation, or transaction, to exercise this Incentive Option, to the extent not theretofore exercised, without regard to the determination as to the periods and installments of exercisability made pursuant to Section 3 hereof if (and only if) this Incentive Option has not at that time expired or been terminated. Such acceleration of exercisability shall not apply to this Incentive Option if any surviving or acquiring corporation agrees to assume this Incentive Option in connection with the merger, consolidation, or transaction. 10. Committee Authority. Any questions concerning the interpretation of this Agreement and any controversy which may arise under this Agreement shall be determined by the Committee in its sole discretion. 11. Transferability. This Incentive Option is not transferable otherwise than by will and the laws of descent and distribution and during the lifetime of Optionee is exercisable only by Optionee or, if Optionee is legally incompetent, by Optionee's legal representative. 12. Employment. Nothing in this Agreement confers upon Optionee any right to continue in the employ of the Company or any Affiliate, nor shall this Agreement interfere in any manner with the right of the Company or any Affiliate to terminate the employment of Optionee with or without cause at any time. 13. Incentive Option Subject to Plan. By execution of this Agreement, Optionee agrees that this Incentive Option and the shares of Common Stock to be received upon exercise hereof shall be governed by and subject to all applicable provisions of the Plan. 14. Construction. This Agreement is governed by, and shall be construed and enforced in accordance with, the laws of the State of Texas. Words of any gender used in this Agreement shall be construed to include any other gender, unless the context requires otherwise. The headings of the various sections of this Agreement are intended for convenience of reference only and shall not be used in construing the terms hereof. -5- 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. TOREADOR ROYALTY CORPORATION By: /s/ JOHN MARK MCLAUGHLIN ----------------------------------- John Mark McLaughlin Chairman of the Board and President /s/ EDWARD C. MARHANKA --------------------------------------- Edward C. Marhanka, Optionee -6- EX-10.5 6 EMPLOYMENT AGREEMENT - E.C. MARHANKA 1 EXHIBIT 10.5 EDWARD C. MARHANKA EMPLOYMENT AGREEMENT This Employment Agreement is made as of May 1, 1997, by and between Toreador Royalty Corporation, a Delaware corporation (the "Company"), and Edward C. Marhanka (the "Employee"). WHEREAS, the Company desires to continue to employ the Employee, and the Employee is willing to continue to render his services to the Company on the terms and conditions with respect to such employment hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the mutual terms and conditions hereof, the Company and the Employee hereby agree as follows: 1. Employment. The Company hereby employs the Employee and the Employee hereby accepts employment with the Company upon the terms and conditions hereinafter set forth. 2. Employment and Duties. Subject to the terms hereof, the Company agrees to employ Employee to render full-time services to the Company as Vice President and Treasurer of the Company. Employee shall have the duties specified by the Bylaws of the Company for a Vice President and the Treasurer or are customarily associated with such position, together with such other duties as may be assigned to Employee from time to time by the Board of Directors of the Company (the "Board"). Employee agrees to devote his full time and attention to the performance and fulfillment of such duties, functions and responsibilities as are necessary to discharge such duties, functions and responsibilities, except for service for civic, charitable or non-profit organizations and other non-competitive endeavors not interfering with his duties hereunder. 3. Term. This Agreement shall have a term of one (1) year commencing as of May 1, 1997, subject to earlier termination as hereinafter provided. Upon mutual agreement of the parties, this Agreement may be extended for additional one-year periods. 4. Compensation. As compensation for his services rendered under this Agreement, the Employee shall be entitled to receive the following: (a) The Employee shall be paid an annual base salary of $100,000 for the term of this Agreement. Such annual base salary shall be payable in equal semi-monthly installments payable on the 15th day and the final day (or the last business day preceding such day if it does not fall on a business day) of each month during the 2 term of this Agreement, prorated for any partial employment month. Such salary shall be subject to increase at any time by the Board in its sole discretion. (b) Upon execution of this Agreement, the Employee shall be granted by the Company an option to purchase 25,000 shares of Common Stock of the Company subject to and upon the terms and conditions set forth in the form of Option Agreement attached hereto as Exhibit A, which is incorporated herein by reference. The Company and the Employee shall execute and deliver counterparts of the Option Agreement in the form of Exhibit A simultaneously with the execution of this Agreement. 5. Other Benefits. In addition to the compensation to be paid to the Employee pursuant to Paragraph 4 hereof, the Employee shall be entitled to be included in any medical and dental benefit plans, any pension or profit sharing plan or any other fringe benefits which may be extended from time to time to employees of the Company generally by the Board in its sole discretion. The Employee shall be entitled to such vacation and sick leave as may be authorized by the Board from time to time. The time for vacation leave shall be selected by the Employee subject to the approval of the President and subject to the business needs of the Company. Vacation leave shall be taken within each employment year and shall be noncumulative. The Employee shall not be entitled to vacation pay in lieu of vacation leave and any unused vacation leave shall be deemed waived. 6. Reimbursement of Expenses. The Employee shall be reimbursed by the Company for any out of pocket expenses reasonably paid or incurred by him in connection with the performance of his duties hereunder upon presentation of expense statements or vouchers or such other supporting information reasonably evidencing such expenses. Subject to the approval of the President of the Company, the Company shall reimburse the Employee for professional dues and tuition for professional seminars. 7. Confidentiality/Trade Secrets. The Employee acknowledges that his position with the Company is one of the highest trust and confidence both by reason of his position and by reason of his access to and contact with the trade secrets and confidential and proprietary business data and information of the Company. Both during the term of this Agreement and thereafter, the Employee covenants and agrees as follows: (a) that he shall use his reasonable best efforts and exercise utmost reasonable diligence to protect and safeguard the trade secrets and confidential and proprietary data and information of the Company, including but not limited to its technical data, records, compilations of information, processes, and specifications relating to its properties, assets, customers, suppliers, products and services; -2- 3 (b) that he shall not disclose any of such trade secrets and confidential and proprietary information, except as may be deemed by him to be necessary or desirable for the performance of his duties for the Company; and (c) that he shall not use, directly or indirectly, for his own benefit or for the benefit of another, any of such trade secrets and confidential and proprietary information. All files, records, documents, drawings, specifications, memoranda, notes or other documents relating to the business of the Company, whether prepared by the Employee or otherwise coming into his possession, shall be the exclusive property of the Company and shall be delivered to the Company and not retained by the Employee upon termination of his employment for any reason whatsoever or at any other time upon request of the Board. Notwithstanding the foregoing, Employee shall not be required to keep confidential or restrict use of any trade secrets or confidential and proprietary data and information of the Company (i) which he may be required to disclose at the express direction of any authorized government agency, pursuant to a subpoena or other court process, or as otherwise required by any law, rule, regulation or order of any regulatory body, (ii) which has become generally available to the public by means other than by breach of this Agreement, (iii) which was available to Employee prior to its disclosure by the Company to Employee, (iv) which has become available to Employee from a source other than the Company or (v) as to which disclosure or use the Company consents in writing. 8. Remedies for Breach of Covenants of the Employee. The covenants set forth in paragraph 7 of this Agreement shall continue to be binding upon the Employee, notwithstanding the termination of his employment with the Company for any reason whatsoever. Such covenants shall be deemed and construed as separate agreements, independent of any other provisions of this Agreement and any other agreement between the Company and the Employee. 9. Termination. The employment of the Employee may be terminated upon the occurrence of any one of the following events: (a) Voluntary by the Employee. The Employee may resign with or without cause at any time during the term of this Agreement by giving fourteen (14) days prior written notice of termination to the Board. (b) Involuntary by the Company. The Board, with or without cause, may terminate the Employee at any time during the term of this Agreement upon fourteen (14) days prior written notice to the Employee. -3- 4 (c) Termination upon Death. The employment of the Employee shall terminate immediately upon the death of the Employee. In the event of the termination of employment of the Employee prior to the expiration of the term of this Agreement, the Employee shall be entitled to compensation earned by him prior to the date of termination as provided herein, computed on a pro rata basis to and including such date of termination. Except as hereinafter expressly set forth in Section 10 of this Agreement, the Employee shall be entitled to no further compensation as of the date of termination of this Agreement (other than salary, stock options, restricted stock and other benefits which have been earned, become payable or vested but not yet paid or exercised at the time of such termination), specifically including but not limited to any unearned cash or stock bonuses. Any termination of this Agreement shall be without prejudice to any right or remedy to which a party may be entitled either at law, in equity or under this Agreement. 10. Severance Benefits. In addition to such compensation and other benefits payable to or provided for the Employee, as authorized by the Board from time to time and earned by the Employee as of the date of resignation, termination, death or disability, the Employee shall be entitled to receive and the Company shall pay or provide to the Employee the following severance benefits in the event that the Company discharges the Employee without cause or the Employee resigns for cause, to-wit: (a) The Company shall pay to the Employee a lump sum cash payment payable on the date of termination of employment in an amount equal to the annual base salary of the Employee which would have been payable to the Employee from the date of termination to the expiration date of the term of this Agreement; but not less than $50,000. (b) All stock options granted by the Company to the Employee, all contributions made by the Company for the account of the Employee to any pension, thrift or any other benefit plan and all other benefits or bonuses which contain vesting or exercisability provisions conditioned upon or subject to the continued employment of the Employee shall become fully vested and exercisable; provided, however, that if any such amount, benefit or payment cannot become fully vested pursuant to such plan or arrangement on account of limitations imposed by law, Employee shall be entitled to receive from Company an amount in cash payable on the date of termination equal to the total amount of benefit or payment which Employee will have to forfeit pursuant to such plan or arrangement on account of such termination of employment. (c) The Company shall, to the extent permitted by applicable law, promptly reimburse the Employee for all premiums the Employee pays for continuation of the Employee's health coverage under the Company's medical plan pursuant to the -4- 5 Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") for the 12 month period following the date of termination. (d) The Employee shall not be required to mitigate the amount of any payment provided for in this Section 10 by seeking other employment or otherwise, nor shall the amount of any payment or benefit as provided for be reduced by any compensation earned by the Employee as the result of employment by another employer or by retirement benefits or otherwise. 11. Change in Control. For purposes of this Agreement, a "Change in Control" of the Company shall be deemed to have occurred upon the date any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than the Company or any "person" who on the date hereof is a director or officer of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, (a) as a passive investor without Board or other representation, of securities of the Company representing 25% or more of the combined voting power of the Company's outstanding securities, (b) or in any other capacity of securities of the Company representing 15% or more of the combined voting power of the Company's outstanding securities, in a transaction which was not approved in advance by the Board. For the purposes of this Agreement, in the event any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act), other than the Company or any "person" who on the date hereof is a director or officer of the Company, (i) commences a proxy solicitation to acquire the right to vote more than 15% of the combined voting power of the Company's outstanding securities, (ii) commences a tender or exchange offer subject to Section 14(d) (1) of the Exchange Act to acquire the beneficial ownership of securities representing 15% or more of the combined voting power of the Company's outstanding securities or (iii) acquires beneficial ownership, directly or indirectly, of securities of the Company representing 5% or more of the combined voting power of the Company's outstanding securities, which proxy solicitation or tender or exchange offer or acquisition of beneficial ownership was not approved in advance by the Board, and the Board in response to such proxy solicitation or tender or exchange offer or when such proxy solicitation or tender or exchange offer is ongoing or in response to and within one (1) year of such acquisition of beneficial ownership approves a transaction which results in any person or group (including but not limited to such person or group who initiated the proxy solicitation, tender or exchange offer or who made such acquisition of beneficial ownership but specifically excluding the Company or any "person" who is on the date hereof a director or officer of the Company) acquiring beneficial ownership of, directly or indirectly, securities of the Company representing 15% or more of the combined voting power of the Company's outstanding securities or which results in the sale, lease, transfer, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all of the assets of the Company, then such transaction shall not be considered -5- 6 approved in advance by the Board and a Change in Control shall be deemed to have occurred upon the consummation of such transaction for the purposes of this Agreement. 12. Involuntary Termination with Cause by the Company. For the purposes of this Agreement, the Company shall be deemed to have terminated the Employee with cause if any of the following conditions existed: (a) The Employee shall have become disabled for a period of more than three (3) consecutive months; (b) The Employee shall have failed to substantially perform his duties and responsibilities as a Vice President or Treasurer of the Company (other than any such failure resulting from disability or any such actual or anticipated failures resulting from the Employee's resignation with cause) after a written demand for the Employee's substantial performance has been delivered to him by the Board, which demand specifically identifies the manner in which the Board believes the Employee has not substantially performed his duties; or (c) The Employee shall have engaged in conduct demonstrably and materially injurious to the Company. The Employee shall be deemed to have been terminated with cause under the circumstances described in subparagraphs (b) or (c) above only if there has been delivered to him a copy of a resolution duly adopted by the affirmative vote of a majority of the entire membership of the Board at a meeting of the Board. "Disability" as used herein shall mean any physical, emotional or mental injury, illness or incapacitation, other than death, which renders the Employee unable to perform the duties, functions and responsibilities required of him under this Agreement. 13. Resignation with Cause. For the purposes of this Agreement, the Employee shall have resigned with cause if prior to his resignation a Change in Control of the Company has occurred and, within twelve months thereof: (a) The Company shall have removed the Employee from the office of Vice President of the Company or shall have altered his authority and responsibilities so as to be less significant than, not consistent with or not comparable to that which he held in his capacity as Vice President or shall otherwise limit or restrict his authority and responsibilities; (b) The Company shall have relocated its principal offices outside the Dallas, Texas, metropolitan area, or any requirement by the Company for the -6- 7 Employee to be based anywhere other than the Company's principal executive offices in the Dallas, Texas, metropolitan area except for required travel on the Company's business to an extent substantially consistent with his previous business travel obligations; (c) The Company shall have reduced the Employee's annual base salary as in effect from time to time; (d) The Company shall have failed to continue in effect any compensation arrangement in which the Employee participates, including but not limited to those described in this Agreement, unless an equitable arrangement has been made with respect to such plan or arrangement in connection with the Change in Control; (e) The Company shall have failed to provide the Employee with all personnel benefits which are otherwise generally provided to executive officers of the Company or reasonably necessary or appropriate for the performance by the Employee of his duties as Vice President of the Company; or (f) The Company shall have failed to obtain a satisfactory agreement from any successor to assume and perform this Agreement as contemplated by Section 16(c) hereof. Any resignation by the Employee that is not "with cause" as defined in this Section 13 shall be deemed to be resignation "without cause." 14. Remedies. If either the Company or the Employee shall file any judicial action for enforcement of this Agreement and successfully enforce any provision of this Agreement or recover compensation or damages, the prevailing party shall be entitled to recover from the other party an additional amount equal to interest at ten percent (10%) per annum on the amount recovered from the date such amount was due and payable together with all expenses and reasonable attorneys' fees incurred in obtaining legal advice and counseling respecting the respective rights of such party under this Agreement and in prosecuting and disposing of such action. The provisions of this Section shall be cumulative and without prejudice to any other right or remedy to which the Employee may be entitled either at law, in equity or under this Agreement and shall not constitute the exclusive remedy of the Company or the Employee for breach of this Agreement. 15. Notices. Any notices to be given hereunder by either party to the other shall be in writing and may be effected either by personal delivery or by mail, registered or certified, postage prepaid, with return receipt requested. Personal delivery to the Board shall be to the President. Mailed notices shall be addressed as follows: -7- 8 (a) If to the Company: Toreador Royalty Corporation 530 Preston Commons West 8117 Preston Road Dallas, Texas 75225 Attention: President (b) If to the Employee: Edward C. Marhanka 6234 Reiger Avenue Dallas, Texas 75214 Either party may change its address for notice by giving notice in accordance with the terms of this Section 15. 16. General Provisions. (a) Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term hereof, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance hereof. Furthermore, in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and still be legal, valid or enforceable. (b) Entire Agreement. This Agreement sets forth the entire understanding of the parties and supersedes all prior agreements or understandings, whether written or oral, with respect to the subject matter hereof. No terms, conditions, warranties, other than those contained herein, and no amendments or modifications hereto shall be binding unless made in writing and signed by the parties hereto. (c) Binding Effect. This Agreement shall extend to and be binding upon and inure to the benefit of the parties hereto, their respective heirs, representatives, successors and assigns. The Company will require any successor to all or substantially all of the business and/or assets of the Company to expressly assume and agree, by an agreement in form and substance satisfactory to the Employee, to -8- 9 perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. (d) Waiver. The waiver by either party hereto of a breach of any term or provision of this Agreement shall not operate or be construed as a waiver of a subsequent breach of the same provision by any party or of the breach of any other term or provision of this Agreement. (e) Titles. Titles of the paragraphs herein are used solely for convenience and shall not be used for interpretation or construing any word, clause, paragraph or provision of this Agreement. (f) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the date and year first written above. COMPANY: TOREADOR ROYALTY CORPORATION By: /s/ JOHN MARK MCLAUGHLIN ----------------------------------- John Mark McLaughlin Chairman of the Board and President EMPLOYEE: /s/ EDWARD C. MARHANKA --------------------------------------- Edward C. Marhanka -9- EX-27 7 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TOREADOR ROYALTY CORPORATION UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10Q FOR THE QUARTER ENDED JUNE 30, 1997. 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 2,916,909 0 245,861 0 0 3,210,966 4,893,424 (1,693,206) 6,528,011 109,032 0 0 0 836,964 5,485,278 6,528,011 1,127,537 1,317,615 0 1,130,734 0 0 0 186,881 62,036 124,845 0 0 0 124,845 .02 0
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