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EXHIBIT 10.3
TOREADOR ROYALTY CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, made as of this 8th day of September, 1994, by and
between Toreador Royalty Corporation, a Delaware corporation (the "Company"),
and Peter R. Vig ("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.
(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 50,000 shares of Common Stock at the price of $3.25 per share (the
"Purchase Price"), at any time or (with respect to partial
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exercises) from time to time during a period commencing on the first
anniversary of the Grant Date and ending on September 8, 2004 (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 September 8, 1995, 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 September 8, 1996,
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 September
8, 1997, 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 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
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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.
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.
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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 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.
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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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TOREADOR ROYALTY CORPORATION
By: /s/ James S. Blair
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James S. Blair, Vice President -
Land and Acquisitions
/s/ Peter R. Vig
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Peter R. Vig, Optionee
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TOREADOR ROYALTY CORPORATION
530 PRESTON COMMONS WEST
8117 PRESTON ROAD
DALLAS, TEXAS 75225
May 15, 1995
Mr. Peter R. Vig
Chairman and Chief Executive Officer
Toreador Royalty Corporation
530 Preston Commons
8117 Preston Road
Dallas, Texas 75225
Re: Amendment to Stock Option Agreements under the 1990
Stock Option Plan
Dear Peter:
Reference is made to that certain Incentive Stock Option Agreement
dated as of September 8, 1994 (the "Incentive Agreement"), between you and
Toreador Royalty Corporation (the "Company") under the Company's 1990 Stock
Option Plan. The Stock Option Committee of the Board of Directors has
authorized an amendment to the Incentive Agreement to allow for accelerated
vesting of options granted under the Plan upon the occurrence of a change in
control of the Company.
Accordingly, Section 9 of the Incentive Agreement is hereby amended
effective as of April 25, 1995 by deleting such section in its entirety and
inserting in its place a new Section 9, which shall be and read as follows:
9. Adjustments Upon Changes in Capitalization, Merger, Etc. In
the event that, before delivery by the Company of all of the shares of
Common Stock in respect of which this Incentive Option has been
granted, the Company shall have effected a split of the Common Stock,
a dividend payable in Common Stock, or combination of Common Stock
into a smaller number of shares, the shares still subject to the
Incentive Option shall be increased or decreased proportionately and
the purchase price per share shall be decreased or increased
proportionately so that the aggregate purchase price for all of the
shares then subject to the Incentive Option 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 or reorganization
(including a merger, consolidation or sale of assets) of the Company,
the Board shall make such adjustments, if any, as it may deem
appropriate in the number, purchase
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Mr. Peter R. Vig
May 15, 1995
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price and kind of shares covered by the unexercised portions of the
Incentive Option. The provisions of this Section 9 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.
Notwithstanding any indication to the contrary in the preceding
paragraphs of this Section 9, upon the occurrence of a "Change in
Control" (as hereinafter defined) of the Company, the maturity of the
Incentive Option shall be accelerated automatically, so that the
Incentive Option shall become exercisable in full with respect to all
shares as to which the Incentive Option shall not have previously been
exercised or become exercisable; provided, however, that no such
acceleration shall occur with respect to this Incentive Option if
Optionee's employment with the Company or an Affiliate shall have
terminated prior to the occurrence of such Change in Control.
For purposes of the Plan, a "Change in Control" of
the Company shall be deemed to have occurred if:
(a) the stockholders of the Company shall approve:
(i) any merger, consolidation or
reorganization of the Company (a "Transaction") in
which the stockholders of the Company immediately
prior to the Transaction would not, immediately after
the Transaction, beneficially own, directly or
indirectly, shares representing in the aggregate more
than 50% of all votes to which all stockholders of the
corporation issuing cash or securities in the
Transaction (or of its ultimate parent corporation, if
any) would be entitled under ordinary circumstances in
the election of directors, or in which the members of
the Company's Board immediately prior to the
Transaction would not, immediately after the
Transaction, constitute a majority of the board of
directors of the corporation issuing cash or
securities in the Transaction (or of its ultimate
parent corporation, if any),
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Mr. Peter R. Vig
May 15, 1995
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(ii) any sale, lease, exchange or
other transfer (in one transaction or a series
of related transactions contemplated or
arranged by any party as a single plan) of
all or substantially all of the Company's
assets, or
(iii) any plan or proposal for the
liquidation or dissolution of the Company;
(b) individuals who constitute the Company's
Board as of the date of adoption of the Plan by the Board (the
"Incumbent Directors") cease for any reason to constitute at
least a majority of the Board; provided, however, that for
purposes of this subparagraph (b), any individual who becomes
a Director of the Company subsequent to the date of adoption
of the Plan by the Board, and whose election, or nomination
for election by the Company's stockholders, is approved by a
vote of at least a majority of the Incumbent Directors who are
Directors at the time of such vote, shall be considered an
Incumbent Director; or
(c) any "person," as that term is defined in
Section 3(a)(9) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than the Company, any of
its subsidiaries, any employee benefit plan of the Company or
any of its subsidiaries, or any entity organized, appointed or
established by the Company for or pursuant to the terms of
such plan), together with all "affiliates" and "associates"
(as such terms are defined in Rule 12b-2 under the Exchange
Act) of such person (as well as any "Person" or "group" as
those terms are used in Sections 13(d) and 14(d) of the
Exchange Act), shall become the "beneficial owner" or
"beneficial owners" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act), directly or indirectly, of securities of
the Company representing in the aggregate 20% or more of
either (i) the then outstanding shares of Common Stock or (ii)
the combined voting power of all then outstanding securities
of the Company having the right under ordinary circumstances
to vote in an election of the Company's Board ("Voting
Securities"), in either such case other than as a
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Mr. Peter R. Vig
May 15, 1995
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result of acquisitions of such securities directly
from the Company.
Notwithstanding the foregoing, a "Change in Control" of the
Company shall not be deemed to have occurred for purposes of
subparagraph (c) of this Section 9 solely as the result of an
acquisition of securities by the Company which, by reducing the number
of shares of Common Stock or other Voting Securities outstanding,
increases (i) the proportionate number of shares of Common Stock
beneficially owned by any person to 20% or more of the shares of
Common Stock then outstanding or (ii) the proportionate voting power
represented by the Voting Securities beneficially owned by any person
to 20% or more of the combined voting power of all then outstanding
Voting Securities; provided, however, that if any person referred to
in clause (i) or (ii) of this sentence shall thereafter become the
beneficial owner of any additional shares of Common Stock or other
Voting Securities (other than a result of a stock split, stock
dividend or similar transaction), then a "Change in Control" of the
Company shall be deemed to have occurred for purposes of subparagraph
(c) of this Section 9.
Except as expressly modified by this amendment, all terms and
conditions of the Incentive Agreement shall remain in full force and effect.
Sincerely,
TOREADOR ROYALTY CORPORATION
By: /s/ James S. Blair
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James S. Blair,
Vice President-Land and Acquisition