UNITED STATES
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: SEPTEMBER 30, 1998
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: 1-10671
THE MERIDIAN RESOURCE CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 76-0319553
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
15995 N. BARKERS LANDING, SUITE 300, HOUSTON, TEXAS 77079
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 281-558-8080
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 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Number of shares of common stock outstanding at November 13, 1998 45,819,513
Page 1 of 26
<PAGE>
THE MERIDIAN RESOURCE CORPORATION
QUARTERLY REPORT ON FORM 10-Q
INDEX
PAGE
NUMBER
------
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations (unaudited) for the
Three Months and Nine Months Ended September 30, 1998 and 1997.. 3
Consolidated Balance Sheets as of September 30, 1998 (unaudited)
and December 31, 1997 .......................................... 4
Consolidated Statements of Cash Flows (unaudited) for the
Nine Months Ended September 30, 1998 and 1997 .................. 6
Notes to Consolidated Financial Statements (unaudited) ............ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................ 13
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders ............... 24
Item 6. Exhibits and Reports on Form 8-K .................................. 24
SIGNATURE ................................................................... 26
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS NINE MONTHS
ENDED SEPT. 30, ENDED SEPT. 30,
-------------------- --------------------
1998 1997 1998 1997
-------- -------- --------- -------
(in thousands, except for
per share information)
REVENUES:
Oil and natural gas ............ $ 23,076 $ 12,265 $ 46,349 $41,793
Interest and other ............. 162 98 527 469
-------- -------- --------- -------
23,238 12,363 46,876 42,262
-------- -------- --------- -------
COSTS AND EXPENSES:
Oil and natural gas operating .. 5,540 1,461 8,866 3,953
Severance and ad valorem taxes . 1,371 564 2,206 1,697
Depletion and depreciation ..... 15,285 6,628 27,824 19,723
General and administrative ..... 2,511 1,484 6,626 5,120
Interest ....................... 3,702 1,343 8,725 3,226
Impairment of long-lived assets -- -- 196,126 --
-------- -------- --------- -------
28,409 11,480 250,373 33,719
-------- -------- --------- -------
INCOME (LOSS) BEFORE
INCOME TAXES ................... (5,171) 883 (203,497) 8,543
INCOME TAX EXPENSE (BENEFIT) ..... -- 7 (22,000) 7
-------- -------- --------- -------
NET INCOME (LOSS) ................ $ (5,171) $ 876 ($181,497) $ 8,536
-------- -------- --------- -------
DIVIDEND REQUIREMENT ON
PREFERRED STOCK ................ (1,350) -- (1,350) --
-------- -------- --------- -------
NET INCOME (LOSS) APPLICABLE
TO COMMON SHAREHOLDERS ......... $ (6,521) $ 876 $(182,847) $ 8,536
======== ======== ========= =======
NET INCOME (LOSS) PER SHARE:
Basic .......................... $ (0.14) $ 0.03 $ (4.85) $ 0.26
======== ======== ========= =======
Diluted ........................ $ (0.14) $ 0.02 $ (4.85) $ 0.24
======== ======== ========= =======
See notes to consolidated financial statements
3
<PAGE>
THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1998 1997
--------- ---------
(unaudited)
(in thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ....................... $ 3,714 $ 8,083
Accounts receivable ............................. 25,106 10,920
Due from affiliates ............................. 3,504 3,038
Prepaid expenses and other ...................... 1,389 1,130
--------- ---------
Total current assets ................... 33,713 23,171
--------- ---------
PROPERTY AND EQUIPMENT:
Oil and natural gas properties, full cost method
(including $100,015,000 [1998] and
$51,883,000 [1997] not subject to depletion) . 794,156 409,310
Land ............................................ 478 478
Equipment ....................................... 6,081 4,618
--------- ---------
800,715 414,406
Less accumulated depletion and depreciation ..... (369,670) (145,719)
--------- ---------
431,045 268,687
--------- ---------
OTHER ASSETS, NET ................................. 2,135 700
--------- ---------
$ 466,893 $ 292,558
========= =========
See notes to consolidated financial statements.
4
<PAGE>
THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
SEPTEMBER 30, DECEMBER 31,
1998 1997
--------- ---------
(unaudited)
(in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .................................. $ 32,898 $ 7,735
Revenues and royalties payable .................... 4,133 5,991
Accrued liabilities ............................... 22,504 20,330
Current maturities of long-term debt .............. 5,078 110
--------- ---------
Total current liabilities ...................... 64,613 34,166
--------- ---------
LONG-TERM DEBT ...................................... 193,896 107,085
--------- ---------
DEFERRED TAX LIABILITY .............................. 6,052 --
--------- ---------
LITIGATION LIABILITIES .............................. 6,205 6,205
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value (25,000,000
shares authorized, 3,982,906 [1998] and none
[1997] shares of Series A Cumulative Convertible
Preferred Stock issued at stated value) ........ 135,000 --
Common stock, $0.01 par value (200,000,000 shares
authorized, 45,803,417 [1998] and
33,481,261 [1997] issued) ...................... 461 336
Additional paid-in capital ........................ 269,968 172,023
Accumulated deficit ............................... (208,953) (26,106)
Unamortized deferred compensation ................. (326) (309)
--------- ---------
196,150 145,944
Treasury stock, at cost (1,275 [1998] and
46,792 [1997] shares) ............................. (23) (842)
--------- ---------
Total stockholders' equity .......................... 196,127 145,102
--------- ---------
$ 466,893 $ 292,558
========= =========
See notes to consolidated financial statements.
5
<PAGE>
THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
NINE MONTHS ENDED SEPT. 30,
---------------------------
1998 1997
--------- --------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .................................. ($182,847) $ 8,536
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depletion and depreciation ..................... 27,824 19,723
Amortization of other assets ................... 138 449
Non-cash compensation .......................... 1,407 1,406
Impairment of long-lived assets ................ 196,126 --
Deferred income taxes .......................... (22,000) --
Changes in assets and liabilities excluding
effects of acquisition of oil and
gas properties:
Accounts receivable ............................ (14,186) (831)
Due from affiliates ............................ (466) (1,489)
Accounts payable ............................... 25,163 (618)
Revenues and royalties payable ................. (2,528) (1,196)
Accrued liabilities and other .................. (1,784) (1,044)
--------- --------
Net cash provided by operating activities .......... 26,847 24,936
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties and other .. (87,794) (85,671)
Acquisition of oil and gas properties .......... (37,078) --
Sales of oil and gas properties ................ 2,100 --
--------- --------
Net cash used in investing activities .............. (122,772) (85,671)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ................... 91,895 43,234
Reductions in long-term debt ................... (116) --
Exercise of stock options ...................... 1,293 147
Deferred loan costs ............................ (1,516) (770)
--------- --------
Net cash provided by financing activities .......... 91,556 42,611
--------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS ............ (4,369) (18,124)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD ......................... 8,083 23,705
--------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD ............................... $ 3,714 $ 5,581
========= ========
See notes to consolidated financial statements.
6
<PAGE>
THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements reflect the accounts of The Meridian
Resource Corporation and its subsidiaries (the "Company") after elimination of
all significant intercompany transactions and balances. On November 5, 1997,
Cairn Energy USA, Inc. ("Cairn") merged with a subsidiary of the Company. The
merger was accounted for as a pooling of interests, and, accordingly, the
accompanying September 30, 1997 financial statements have been restated to
include the financial position and results of operations of Cairn. The financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997, as filed with the Securities and
Exchange Commission.
Certain items in the prior year statements have been reclassified to conform
with the current year
presentation.
The Shell Transactions (defined below) were accounted for utilizing the purchase
method of accounting for financial accounting purposes. Therefore, excluding the
write-down disclosed in Note 3, operations relating to the oil and gas
properties acquired in the Shell Transactions (the "Shell Properties") are
included in the Company's results of operations beginning with the third quarter
of 1998.
The financial statements included herein as of September 30, 1998, and for the
three and nine month periods ended September 30, 1998 and 1997, are unaudited,
and, in the opinion of management, the information furnished reflects all
material adjustments, consisting of normal recurring adjustments, necessary for
a fair statement of the results for the interim periods presented.
2. SHELL TRANSACTIONS
On June 30, 1998, the Company acquired (the "LOPI Transaction") Louisiana
Onshore Properties Inc. ("LOPI"), an indirect subsidiary of Shell Oil Company
("Shell"), pursuant to a merger of a wholly-owned subsidiary of the Company with
LOPI. The consideration paid in the LOPI Transaction consisted of 12,082,030
shares of the Company's common stock, $.01 par value ("Common Stock"), and a new
issue of convertible preferred stock of the Company (the "Preferred Stock") that
is convertible into 12,837,428 shares of Common Stock, which together provided
Shell Louisiana Onshore Properties Inc., an indirect subsidiary of Shell
("SLOPI"), with beneficial ownership of 39.9% of the outstanding shares of
Common Stock as of the closing of the LOPI Transaction, assuming exercise of all
outstanding options and warrants and the conversion of the Preferred Stock. In a
transaction separate from the LOPI Transaction, the Company also acquired on
June 30, 1998 from Shell Western E&P, Inc., an indirect subsidiary of Shell,
various other oil and gas property interests located onshore in south Louisiana
for a total cash consideration of $38.6 million (together with the LOPI
Transaction, the "Shell Transactions").
7
<PAGE>
The purchase price of $303.5 million in connection with the Shell Transactions
was allocated as follows ($ in thousands, except per share data):
Net cash paid ............................................... $ 37,078
Issuance of 3,982,906 shares of Preferred
Stock (stated value) ...................................... 135,000
Issuance of 12,082,030 shares of Common
Stock valued at $7.96 per share ........................... 96,173
Assumption of certain liabilities ........................... 3,441
Deferred income taxes related to the
acquired properties ....................................... 28,052
Acquisition costs ........................................... 3,771
--------
Total purchase price ........................................ $303,515
========
The following summarized unaudited proforma financial information assumes the
Shell Transactions occurred on January 1 of each year:
PROFORMA INFORMATION NINE MONTHS ENDED SEPT. 30,
-----------------------------
1998 1997
--------- ---------
(in thousands, except per share data)
Revenues .......................... $ 78,553 $ 115,128
Net income (loss) ................. $(163,823) $ 6,425
Earnings (Loss) per share ......... $ (3.58) $ 0.14
The pro forma results do not necessarily represent results that would have
occurred if the transaction had taken place on the basis assumed above, nor are
they indicative of the results of future combined
operations.
3. IMPAIRMENT OF LONG-LIVED ASSETS
A significant decline in oil and natural gas prices caused the Company to
recognize a $196.1 million non-cash write-down of its oil and natural gas
properties under the full cost method of accounting during the first half of
1998, including $88 million relating to the Shell Properties, to reflect the
impairment on the Company's oil and natural gas properties (including the Shell
Properties) thru June 30, 1998.
No ceiling write-down was taken during the third quarter of 1998 due to the fact
that oil and natural gas equivalent prices for the Company's production
increased subsequent to September 30, 1998. Otherwise, utilizing index prices on
September 30, 1998, of $1.59 per Mcf and $13.66 per Bbl, without giving effect
to the subsequent price increases, the Company would have recognized an
additional impairment charge during the third quarter of 1998 of $59 million
($53 million after tax).
8
<PAGE>
Due to the substantial recent volatility in oil and gas prices and their effect
on the carrying value of the Company's proved oil and gas reserves, there can be
no assurance that future write-downs will not be required as a result of factors
that may negatively affect the present value of proved oil and natural gas
reserves and the carrying value of oil and natural gas properties, including
volatile oil and natural gas prices, downward revisions in estimated proved oil
and natural gas reserve quantities and unsuccessful drilling activities.
4. SHORT-TERM DEBT
On September 1, 1998, the Company entered into a $10 million line of credit with
NationsBank, N.A. (the "NationsBank Facility"). Pursuant to the NationsBank
Facility, the Company may obtain either (i) an alternative base rate loan equal
to the greater of (a) the federal funds rate plus .5% and (b) the bank's prime
rate or (ii) a Eurodollar base rate loan that bears interest, generally, at a
rate equal to the London interbank offered rate plus 2%, adjusted upward based
upon the reserve requirement for such Eurodollar loan. Borrowings under the
NationsBank Facility mature on December 31, 1998. The NationsBank Facility
contains restrictive covenants consistent with the Credit Facility (as defined
below). Each of the Company's principal operating subsidiaries has guaranteed
the Company's obligations under the NationsBank Facility. As of November 13,
1998, $10 million was outstanding under the NationsBank Facility.
5. LONG-TERM DEBT
In May 1998, the Company amended and restated its credit facility with The Chase
Manhattan Bank as Administrative Agent (the "Credit Facility") to provide for
maximum borrowings, subject to borrowing base limitations, of up to $250
million. In November 1998, the Company amended the Credit Facility to increase
the then-existing borrowing base from $200 million to $250 million. The
borrowing base is scheduled to be redetermined on March 31, 1999. The borrowing
base is set at $250 million until the March 1999 redetermination. The lenders
under the Credit Facility have the right, after the March 1999 redetermination,
in addition to the regularly scheduled annual borrowing base redeterminations,
to redetermine the borrowing base at any time once during each calendar year and
the Company has the right to obtain a redetermination by the banks of the
borrowing base once during each calendar year. Borrowings under the Credit
Facility are secured by pledges of the outstanding capital stock of the
Company's material subsidiaries and a mortgage of all of the Company's offshore
oil and gas properties. In the event of a default, the Company is obligated to
pledge additional properties representing, in the aggregate, at least 75% of the
Company's present value of proved properties. The Credit Facility contains
various restrictive covenants, including, among other things, maintenance of
certain financial ratios and restrictions on cash dividends on the Common Stock.
Borrowings under the Credit Facility mature on May 22, 2003. The Credit
Facility, as amended, also requires the Company to have average daily production
from the Company's proved reserves for the fourth quarter of 1998 of at least
140 million cubic feet equivalent per day of natural gas, aggregate proved
reserves as of December 31, 1998 of at least 281 billion cubic feet equivalent
of natural gas and working capital of not less than negative $10 million as of
December 31, 1998. Under the Credit Facility, as amended, the Company may secure
either (i) an alternative base rate loan that bears interest at a rate per annum
equal to the greatest of the administrative agent's prime rate, a certificate of
deposit based rate or federal funds based rate plus 0% to 1.5% or (ii) a
Eurodollar base rate loan that bears interest, generally, at a rate per annum
equal
9
<PAGE>
to the London interbank offered rate plus 1.0% to 2.5%, depending on the
Company's ratio of the aggregate outstanding loans and letters of credit to the
borrowing base. The Credit Facility also provides for commitment fees ranging
from .3% to .5% per annum, a 2.5% one time drawdown fee on first time borrowings
in excess of $200 million, and certain closing fees aggregating $0.5 million
paid in November 1998 in connection with the increase in the borrowing base. At
November 13, 1998, the Company had outstanding borrowings of $195 million under
the Credit Facility.
6. PREFERRED STOCK
The Company has issued 3,982,906 shares of Preferred Stock as part of the
consideration in the LOPI Transaction (see Note 2). The following is a summary
of the material terms and conditions
of the Preferred Stock.
DESIGNATION AND RANK. The Preferred Stock has an aggregate stated value of $135
million and ranks prior to the Common Stock as to distribution of assets and
payment of dividends.
DIVIDENDS. Holders of the Preferred Stock are entitled to receive, when and as
declared by the Board of Directors, a cash dividend at the rate of 4% per annum
on the stated value per share; provided, however, dividends shall cease to
accrue on an incremental one-third of the shares of Preferred Stock on June 30,
2001, June 30, 2002 and June 30, 2003, so that no dividends will accrue on any
shares of Preferred Stock after June 30, 2003. Until paid in full, any dividend
arrearages also shall accrue dividends at the rate of 4% per annum. No dividends
may be declared or paid on the Common Stock until full cumulative dividends on
the Preferred Stock have been contemporaneously declared and paid or a sum
sufficient for such payment is set apart for payment to holders of the Preferred
Stock.
VOTING. Each share of Preferred Stock is entitled to one vote per share on all
matters submitted to the shareholders of the Company for their approval. In
addition, the affirmative vote or consent of the holders of a majority of the
shares of Preferred Stock is required in order for the Company to effect any of
the following: (i) the authorization, creation or issuance, or any increase in
the authorized or issued amount, of any class of senior stock or parity stock or
(ii) the amendment, restatement, modification, alteration or repeal of any of
the provisions of the Certificate of Designation for Preferred Stock.
ELECTION OF DIRECTORS. Until the earlier of (i) the termination of the Stock
Rights and Restrictions Agreement dated June 30, 1998, between the Company and
SLOPI, and (ii) SLOPI and its affiliates beneficially own less than 21% of the
outstanding Common Stock, the holders of the Preferred Stock shall be entitled
to elect a number of directors, such that after giving effect to election of
such persons, the number of directors elected by the holders of Preferred Stock
shall equal the product (rounded downward in the event of a fractional number,
but in no event less than one) of (x) the total number of directors constituting
the entire Board of Directors multiplied by (y) 20%. So long as there is a
director elected by the holders of Preferred Stock on the Company's Board of
Directors, at least one director elected by the holders of Preferred Stock is
required to be a member of the Company's audit committee.
10
<PAGE>
CONVERSION. The Preferred Stock may be converted into Common Stock at any time
by the holder thereof. In addition, on or after June 30, 2001, the Preferred
Stock will automatically convert into Common Stock if the mean per share market
value of the Common Stock exceeds 150% of the conversion price for 75
consecutive trading days; provided that SLOPI has the right to withhold
conversion on one share of Preferred Stock. The number of shares of Common Stock
into which the Preferred Stock is convertible is 12,837,428. The conversion
price currently is $10.52 per share of Common Stock.
7. NET INCOME PER SHARE
The following tables set forth the computation of basic and diluted net income
(loss) per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPT. 30,
--------------------------------
1998 1997
-------- -------
(in thousands, except per share)
<S> <C> <C>
Numerator:
Net income (loss) ................................ $ (5,171) $ 876
Less: Preferred Dividend Requirements ............ (1,350) --
-------- -------
Net income (loss) used in Per Share Calculation .. $ (6,521) $ 876
Denominator:
Denominator for basic net income (loss) per
share - weighted average shares outstanding .. 45,818 33,376
Effect of potentially dilutive common shares:
Employee and director stock options .............. N/A 648
Warrants ......................................... N/A 1,359
-------- -------
Denominator for diluted net income (loss) per
share - weighted average shares outstanding
and assumed conversions ...................... 45,818 35,383
======== =======
Basic net income (loss) per share .................... $ (0.14) $ 0.03
======== =======
Diluted net income (loss) per share .................. $ (0.14) $ 0.02
======== =======
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPT. 30,
----------------------------------
1998 1997
--------- -------
(in thousands, except per share)
<S> <C> <C>
Numerator:
Net income (loss) ........................................................... $(181,497) $ 8,536
Less: Preferred Dividend Requirements ....................................... (1,350) --
--------- -------
Net Earnings used in Per Share Calculation .................................. $(182,847) $ 8,536
Denominator:
Denominator for basic net income (loss) per
share - weighted average shares outstanding ............................. 37,736 33,376
Effect of potentially dilutive common shares:
Employee and director stock options ......................................... N/A 648
Warrants .................................................................... N/A 1,359
--------- -------
Denominator for diluted net income (loss) per
share - weighted average shares outstanding
and assumed conversions ................................................. 37,736 35,383
========= =======
Basic net income (loss) per share ............................................... $ (4.85) $ 0.26
========= =======
Diluted net income (loss) per share ............................................. $ (4.85) $ 0.24
========= =======
</TABLE>
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following is a discussion of the Company's financial operations for the
three and nine month periods ended September 30, 1998 and 1997. The notes to the
Company's consolidated financial statements included in this report, as well as
the Company's Annual Report on Form 10-K for the year ended December 31, 1997
(and the notes attached thereto), should be read in conjunction with this
discussion.
OVERVIEW
SHELL TRANSACTIONS. On June 30, 1998, the Company acquired (the "LOPI
Transaction") Louisiana Onshore Properties Inc. ("LOPI"), an indirect subsidiary
of Shell Oil Company ("Shell"), pursuant to a merger of a wholly-owned
subsidiary of the Company with LOPI. The consideration paid in the LOPI
Transaction consisted of 12,082,030 shares of the Company's common stock, $.01
par value ("Common Stock"), and a new issue of convertible preferred stock of
the Company (the "Preferred Stock") that is convertible into 12,837,428 shares
of Common Stock, which together provided Shell Louisiana Onshore Properties
Inc., an indirect subsidiary of Shell ("SLOPI"), with beneficial ownership of
39.9% of the outstanding shares of Common Stock as of the closing of the LOPI
Transaction, assuming exercise of all outstanding options and warrants and the
conversion of the Preferred Stock. In a transaction separate from the LOPI
Transaction, the Company also acquired on June 30, 1998 from Shell Western E&P
Inc., an indirect subsidiary of Shell ("SWEPI"), various other oil and gas
property interests located onshore in south Louisiana for a total cash
consideration of $38.6 million (the "SWEPI Acquisition").
The LOPI Transaction and the SWEPI Acquisition (together, the "Shell
Transactions") were effected to increase the Company's reserves, lease acreage
positions and exploration prospects in Louisiana and are expected to
substantially increase the Company's production and cash flow. The property
interests held by LOPI and the property interests acquired from SWEPI
(collectively, the "Shell Properties") represented substantially all of Shell's
and its direct and indirect subsidiaries' onshore oil and gas property interests
in south Louisiana, excluding offshore interests and certain interests in
Louisiana state waters and the onshore areas adjacent to such waters owned by
Shell Offshore Inc., a subsidiary of Shell, and its direct and indirect
subsidiaries. The Shell Properties include interests in approximately 210,000
gross (98,000 net) acres either held by production or under lease or option for
exploration, access to approximately 1,400 square miles of 3-D seismic data
covering onshore south Louisiana either currently held or now being acquired by
Shell and its direct and indirect subsidiaries, and access to substantially all
of Shell's and its direct and indirect subsidiaries' existing geological data
and field studies and geophysical 2-D seismic grid covering onshore south
Louisiana.
13
<PAGE>
The Shell Transactions were accounted for utilizing the purchase method of
accounting for financial accounting purposes. Therefore, excluding the
write-down disclosed in Note 3 to the financial statements included in this Form
10-Q taken during the second quarter of 1998, operations relating to the Shell
Properties are included in the Company's results of operations beginning with
the third quarter of 1998. Revenues and production from the Shell Properties
accounted for approximately 63% of the Company's total revenues and production,
during the third quarter of 1998. The Company currently expects revenues and
production from the Shell Properties as a percentage of the Company's total
revenues and production to increase as the Company continues to emphasize the
Shell Properties in its exploration and development activities.
CAIRN MERGER. On November 5, 1997, the Company consummated a merger (the "Cairn
Merger") with Cairn Energy USA, Inc. ("Cairn"). In connection with the Cairn
Merger, the Company issued approximately 19.0 million shares of Common Stock.
The Cairn Merger more than doubled the Company's then-existing proved reserves
and substantially increased the production and cash flow of the Company. The
Cairn Merger was accounted for as a pooling of interests and the Company's
historical financial statements and operating results and the discussion of such
results in this Management's Discussion and Analysis of Financial Condition and
Results of Operations have been restated to reflect the combined operations of
the Company and Cairn for the periods presented. The Company recorded a one-time
charge in the fourth quarter of 1997 of approximately $10 million for costs
associated with the Cairn Merger.
INDUSTRY CONDITIONS. The Company's revenues, profitability and future rate of
growth are substantially dependent upon prevailing prices for natural gas and,
to a lesser extent, oil. Oil and natural gas prices have been extremely volatile
in recent years and are affected by many factors outside the control of the
Company. In this regard, average worldwide oil and natural gas prices have
decreased substantially from levels existing during 1997. As a result of these
declines, the price received by the Company during the nine months ended
September 30, 1998 was $2.17 per Mcfe compared to $2.78 per Mcfe during the nine
months ended September 30, 1997, which has negatively impacted the Company's
revenues and cash flow during 1998. These industry conditions, and any
continuation thereof, will have several important consequences to the Company,
including decreasing the level of cash flow received from the Company's
producing properties, delaying the timing of exploration of certain prospects
and reducing the Company's access to capital markets, which could adversely
affect the Company's revenues, profitability and ability to maintain or increase
its exploration and development program.
14
<PAGE>
CEILING WRITE-DOWN. A significant decline in oil and natural gas prices caused
the Company to recognize a $196.1 million non-cash write-down of its oil and
natural gas properties under the full cost method of accounting during the first
half of 1998, including $88 million relating to the Shell Properties, to reflect
the impairment on the Company's oil and natural gas properties (including the
Shell Properties) thru June 30, 1998.
No ceiling write-down was taken during the third quarter of 1998 due to the fact
that oil and natural gas equivalent prices for the Company's production
increased subsequent to September 30, 1998. Otherwise, utilizing index prices on
September 30, 1998, of $1.59 per Mcf and $13.66 per Bbl, without giving effect
to the subsequent price increases, the Company would have recognized an
additional impairment charge during the third quarter of 1998 of $59 million
($53 million after tax).
Due to the substantial recent volatility in oil and gas prices and their effect
on the carrying value of the Company's proved oil and gas reserves, there can be
no assurance that future write-downs will not be required as a result of factors
that may negatively affect the present value of proved oil and natural gas
reserves and the carrying value of oil and natural gas properties, including
volatile oil and natural gas prices, downward revisions in estimated proved oil
and natural gas reserve quantities and unsuccessful drilling activities.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998, COMPARED
TO THE THREE MONTHS ENDED SEPTEMBER 30, 1997
OPERATING REVENUES. Third quarter 1998 oil and natural gas revenues were $23.1
million reflecting an increase of $10.8 million compared to third quarter 1997
revenues primarily due to the inclusion of production from the Shell Properties
for the first time in the Company's results of operations during the third
quarter of 1998 as well as offshore platforms and wells brought online during
the first half of 1998. Production from the Shell Properties, during the third
quarter of 1998 comprised 63% of the total production for the current quarter.
Production increases during the quarter were partially offset by loss of
production from the Company's offshore properties caused by adverse weather
conditions in the Gulf of Mexico and normal production declines. The Company
currently expects production during the fourth quarter of 1998 to increase over
third quarter 1998 levels due to successful wells drilled and completed during
the third and fourth quarters of 1998.
Revenue increases during the third quarter of 1998 due to production increases
were partially offset by significant decreases in the oil and natural gas prices
received during the third quarter of 1998
compared to the third quarter of 1997.
15
<PAGE>
The following table summarizes production volumes, average sales prices and
gross revenues for the Company for the three months ended September 30, 1998 and
1997.
<TABLE>
<CAPTION>
1998
THREE MONTHS ENDED 1998 PERCENTAGE
SEPTEMBER 30, INCREASE INCREASE
1998 1997 (DECREASE) (DECREASE)
------- ------- -------- ----
<S> <C> <C> <C> <C>
Production Volumes:
Oil (Mbbl) ................................ 771 205 566 276%
Natural gas (Mmcf) ........................ 6,620 3,472 3,148 91%
MMCFE ..................................... 11,246 4,702 6,544 139%
Average Sales Prices:
Oil (Bbl) ................................. $ 12.84 $ 18.59 $ (5.75) (31%)
Natural gas (Mcf) ......................... $ 1.99 $ 2.42 $ (0.43) (18%)
MMCFE ..................................... $ 2.05 $ 2.60 $ (0.55) (21%)
Gross Revenues (000's):
Oil ....................................... $ 9,897 $ 3,810 $ 6,087 160%
Natural gas ............................... 13,179 8,399 4,780 57%
Pipeline .................................. -- 56 (56) (100%)
------- ------- -------- --
Total ................................. $23,076 $12,265 $ 10,811 88%
======= ======= ======== ==
</TABLE>
INTEREST AND OTHER INCOME. Interest and other income during the third quarter
1998 increased $0.6 million from the same quarter of 1997.
OPERATING EXPENSES. Oil and natural gas operating expenses increased $4.1
million to $5.5 million for the three months ended September 30, 1998, compared
to $1.4 million for the three months ended September 30, 1997. The increase was
primarily due to the inclusion of costs and expenses from the Shell Properties
for the first time in the Company's results of operations during the third
quarter of 1998 as well as new wells brought on production during the previous
twelve months.
As
a percentage of revenues, oil and natural gas operating expenses increased to
24% for the third quarter 1998 compared to 11.9% for third quarter 1997. This
significant increase was due to decreased prices as well as the fact that
operating costs for the Shell Properties are higher than those of the Company's
properties not acquired in the Shell Transactions.
SEVERANCE AND AD VALOREM TAXES. Third quarter 1998 severance and ad valorem
taxes of $1.4 million increased $0.8 million from the same period in 1997. As a
percentage of revenues, severance and ad valorem taxes increased from 4.6% to
5.9%. This increase as a percentage of revenues was the result of the addition
of results of operations from the Shell Properties, which are located entirely
in South Louisiana, as opposed to the Company's other properties, which include
offshore properties in the Gulf of Mexico that are not subject to state
severance taxes.
16
<PAGE>
DEPLETION AND DEPRECIATION. Depreciation and depletion increased to $15.3
million from $6.6 million on a unit of production basis, such costs decreased
4%; primarily due to the significant reduction in the Company's amortizable full
cost pool caused by full cost ceiling write-downs in the first and second
quarters of 1998.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense increased
$1.0 million during the third quarter of 1998 compared to the third quarter of
1997. The increase is primarily a result of increases in salaries and wages and
related employee costs associated with the Company's expanded exploration and
overall growth activities.
INTEREST EXPENSE. Interest expense increased to $3.7 million for the third
quarter of 1998 compared to $1.4 million during the same period in 1997 as a
direct result of the borrowings under the Company's credit facility including
approximately $37 million for the Shell Properties made during the past twelve
months. The Company's interest expense will continue to increase as a result of
the Company's intent to utilize debt to at least partially fund its exploration
program during the fourth quarter of 1998.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED
TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997
OPERATING REVENUES. Oil and natural gas revenues during the nine months ended
September 30, 1998, increased $4.5 million, to a total of $46,349 or 11%,
compared to the nine months ended September 30, 1997. The increase in revenues
is a direct result of production increases caused by the inclusion of production
from the Shell Properties for the first time in the Company's results of
operations during the third quarter of 1998 as well as offshore platforms and
wells brought online during the first half of 1998. Production from the Shell
Properties, during the first nine months comprised 33% of the total production
for the period. Production increases during the nine months ended September 30,
1998 were partially offset by loss of production from the Company's Southwest
Holmwood properties, which were the subject of litigation with Amoco previously
disclosed in the Company's annual report on Form 10-K and quarterly report on
Form 10-Q for the quarter ended June 30, 1998, loss of production due to adverse
weather conditions in the Gulf of Mexico and normal production declines.
Revenue increases during the first nine months of 1998 due to production
increases were partially offset by significant decreases in the oil and gas
prices received during the nine months ended September 30, 1998, compared to the
corresponding period in 1997.
17
<PAGE>
The following table summarizes production volumes, average sales prices and
gross revenues for the Company for the nine months ended September 30, 1998 and
1997.
<TABLE>
<CAPTION>
1998
NINE MONTHS ENDED 1998 PERCENTAGE
SEPTEMBER 30, INCREASE INCREASE
1998 1997 (DECREASE) (DECREASE)
------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Production Volumes:
Oil (Mbbl) .................. 1,225 659 566 86%
Natural gas (Mmcf) .......... 14,051 11,031 3,020 27%
MMCFE ....................... 21,401 14,985 6,416 43%
Average Sales Prices:
Oil (Bbl) ................... $ 12.95 $ 20.08 $ (7.13) (36)%
Natural gas (Mcf) ........... $ 2.16 $ 2.57 $ (0.41) (16)%
MMCFE ....................... $ 2.17 $ 2.78 $ (0.61) (22)%
Gross Revenues (000's):
Oil ......................... $15,867 $13,231 $ 2,636 20%
Natural gas ................. 30,398 28,399 1,999 7%
Pipeline .................... 84 163 (79) (48)%
------- ------- -------
Total ................... $46,349 $41,793 $ 4,556 11%
======= ======= =======
</TABLE>
INTEREST AND OTHER INCOME. Interest and other income increased $0.1 million
during the first nine months of 1998 compared to the first nine months of 1997.
OPERATING EXPENSES. Oil and natural gas operating expenses increased $4.9
million to $8.9 million for the nine months ended September 30, 1998, compared
to $4.0 million for the nine months ended September 30, 1997. This increase was
primarily related to new wells brought on production during the previous twelve
months and the inclusion of costs and expenses from the Shell Properties for the
first time in the Company's results of operations during the third quarter of
1998. As a percentage of revenues, oil and natural gas operating expenses
increased to 19% for the first nine months of 1998 compared to 9% for the
corresponding period of 1997. This significant increase was due to decreased
prices as well as the fact that operating costs for the Shell Properties are
higher than those of the Company's properties not acquired in the Shell
Transactions.
SEVERANCE AND AD VALOREM TAXES. Severance and ad valorem taxes of $2.2 million
increased $0.5 million for the first three quarters of 1998 compared to the same
period of 1997. As a percentage of revenues, severance and ad valorem taxes
increased from 4% to 4.8%. This increase was the result of the addition of
results of operations from the Shell Properties during the third quarter of 1998
which are located entirely in South Louisiana, as opposed to the Company's other
properties, which includes offshore properties in the Gulf of Mexico that are
not subject to state severance taxes.
18
<PAGE>
DEPLETION AND DEPRECIATION. Depletion and depreciation increased during the nine
months ended September 30, 1998 to $27.8 million from $19.7 million for the
comparable period of 1997. On a unit of production basis, such costs remained
relatively stable.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense increased
$1.5 million to $6.6 million for the first nine months of 1998 when compared to
$5.1 million for the first nine months of 1997. The increase is primarily a
result of increases in salaries and wages and related employee costs associated
with the Company's expanded exploration and overall growth activities.
INTEREST EXPENSE. Interest expense increased to $8.7 million for the nine months
ended September 30, 1998 compared to $3.2 million during the same period in 1997
as a direct result of the borrowings under the Company's credit facility made
during this period.
INCOME TAX EXPENSE. The income tax benefit of $22 million relates almost
entirely to the full cost ceiling write-down attributable to the Shell
Properties in the second quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL. During the third quarter of 1998, the Company's liquidity needs
were met from cash from operations and borrowings under the Company's credit
facilities. As of September 30, 1998, the Company had a cash balance of $3.7
million and negative working capital of $29.6 million. The decrease in both the
cash balance and working capital from levels existing at June 30, 1998, reflects
capital expenditures related to the Company's increasing exploration and
development activities and reduced operating cash flows resulting from lower oil
and natural gas prices and lower production levels coupled with the recognition
of $1.3 million preferred stock dividend to Shell.
AMENDED CREDIT FACILITY. In May 1998, the Company amended and restated its
credit facility with The Chase Manhattan Bank as Administrative Agent (the
"Credit Facility") to provide for maximum borrowings, subject to borrowing base
limitations, of up to $250 million. In November 1998, the Company amended the
Credit Facility to increase the then-existing borrowing base from $200 million
to $250 million. The borrowing base is scheduled to be redetermined on March 31,
1999. The borrowing base is set at $250 million until the March 1999
redetermination. The lenders under the Credit Facility have the right, after the
March 1999 redetermination, in addition to the regularly scheduled annual
borrowing base redeterminations, to redetermine the borrowing base at any time
once during each calendar year and the Company has the right to obtain a
redetermination by the banks of the borrowing base once during each calendar
year. Borrowings under the Credit Facility are secured by pledges of the
outstanding capital stock of the Company's material subsidiaries and a mortgage
of all of the Company's offshore oil and gas properties. In the event of a
default, the Company is obligated to pledge additional properties representing,
in the aggregate, at least 75% of the Company's present value of proved
properties. The Credit Facility contains various restrictive covenants,
including, among other things, maintenance of certain financial ratios and
restrictions on cash dividends on the Common Stock. Borrowings under the Credit
Facility mature on May 22, 2003. The Credit Facility, as amended, also requires
the Company to have average daily production from the Company's proved reserves
for the fourth quarter of 1998 of at least 140 million cubic feet equivalent per
day of natural gas, aggregate proved reserves as of December 31, 1998 of at
least 281 billion cubic feet equivalent of natural gas and working capital of
not less than negative $10 million
19
<PAGE>
as of December 31, 1998. Under the Credit Facility, as amended, the Company may
secure either (i) an alternative base rate loan that bears interest at a rate
per annum equal to the greatest of the administrative agent's prime rate, a
certificate of deposit based rate or federal funds based rate plus 0% to 1.5% or
(ii) a Eurodollar base rate loan that bears interest, generally, at a rate per
annum equal to the London interbank offered rate plus 1.0% to 2.5%, depending on
the Company's ratio of the aggregate outstanding loans and letters of credit to
the borrowing base. The Credit Facility also provides for commitment fees
ranging from .3% to .5% per annum, a 2.5% one time drawdown fee on first time
borrowings in excess of $200 million, and certain closing fees aggregating $0.5
million paid in November 1998 in connection with the increase in the borrowing
base. At November 13, 1998, the Company had outstanding borrowings of $195
million under the Credit Facility.
NATIONSBANK FACILITY. On September 1, 1998, the Company entered into a $10
million line of credit with NationsBank, N.A. (the "NationsBank Facility").
Pursuant to the NationsBank Facility, the Company may obtain either (i) an
alternative base rate loan equal to the greater of (a) the federal funds rate
plus .5% and (b) the bank's prime rate or (ii) a Eurodollar base rate loan that
bears interest, generally, at a rate equal to the London interbank offered rate
plus 2%, adjusted upward based upon the reserve requirement for such Eurodollar
loan. Borrowings under the NationsBank Facility mature on December 31, 1998. The
NationsBank Facility contains restrictive covenants consistent with Credit
Facility. Each of the Company's principal operating subsidiaries has guaranteed
the Company's obligations under the NationsBank Facility. As of November 13,
1998, $10 million was outstanding under the NationsBank Facility.
CAPITAL EXPENDITURES. Capital expenditures (excluding the Shell Transactions)
during the nine months ended September 30, 1998 consisted of $81.3 million for
property and equipment additions related to exploration and development of
various prospects (including leases), seismic data acquisitions, and drilling
and completion costs. The Company currently expects capital expenditures for the
remainder of 1998 to be approximately $29 million and anticipates that such
capital expenditures will be funded from cash flows from its producing
properties and borrowings under its credit facilities. The Company currently
expects to expend $74 million on capital expenditures during 1999 to fund its
1999 exploration and development program. Availability of capital to fund the
Company's 1999 exploration and development program will depend upon the success
of the Company's drilling program and the nature and extent of capital
expenditures required for development of discoveries. In this regard, the
Company anticipates that based on its current product price and production
forecast, internal cash flow and borrowings permitted under the Credit Facility
should fully fund its 1999 capital expenditure program as currently anticipated.
DIVIDENDS. It is the policy of the Company to retain its existing cash for
reinvestment in the businesses of the Company, and therefore, the Company does
not anticipate that it will pay dividends with respect to the Common Stock in
the foreseeable future. The Preferred Stock issued upon closing of the LOPI
Transaction accrues a quarterly cash dividend of 4% of its stated value with the
dividend ceasing to accrue incrementally on one-third of the shares of Preferred
Stock on June 30, 2001, 2002 and 2003 so that no dividends will accrue on any
shares of Preferred Stock after June 30, 2003. Dividends on the Preferred Stock
aggregating $1.35 million accrued as of October 1, 1998.
20
<PAGE>
STOCK RIGHTS AND RESTRICTIONS AGREEMENT. In light of the large ownership
position issued to SLOPI in the LOPI Transaction and in recognition of both the
Company's and SLOPI's desire that the Company function as an independent oil and
gas company, SLOPI and the Company entered into a Stock Rights and Restrictions
Agreement that defines and limits SLOPI's and the Company's respective rights
and obligations. These agreements limit SLOPI's and its affiliates' control of
the Company while protecting their interests in the context of certain
extraordinary transactions by (i) allowing SLOPI to maintain representation on
the Company's Board of Directors, (ii) restricting SLOPI's and its affiliates'
ability to effect certain business combinations with the Company or to propose
certain business combinations with the Company, (iii) restricting the ability of
SLOPI and its affiliates to sell certain portions of their shares of Common
Stock and Preferred Stock, subject to certain exceptions designed to permit them
to sell such shares over time and to sell such shares in the event of certain
business combinations involving the Company, (iv) limiting SLOPI's and its
affiliates' discretionary voting rights to 23% of the total voting shares,
except with respect to certain extraordinary events and in situations in which
the price of the Common Stock for a period of time has been less than $5.50 per
share or the Company is in material breach of its obligations under the
agreements governing the LOPI Transaction, (v) permitting SLOPI and its
affiliates to purchase additional securities of the Company (or pay cash in lieu
thereof at the option of the Company) in order to maintain a 21% beneficial
ownership interest of the Common Stock if the Company proposes to issue
additional shares of Common Stock or securities convertible into Common Stock,
(vi) extending certain statutory and corporate restrictions on business
combinations applicable to SLOPI and its affiliates and (vii) obligating the
Company to issue a currently indeterminable number of additional shares of
Common Stock in the future by the Company in satisfaction of a make-whole
provision contained in the Stock Rights and Restrictions Agreement in the event
SLOPI receives less than approximately $10.52 per share on the sale of any
Common Stock that is issuable upon conversion of the Preferred Stock.
YEAR 2000
The Company is currently conducting a company-wide Year 2000 readiness program
("Y2K Program"). The Y2K Program is addressing the issue of computer programs
and embedded computer chips being unable to distinguish between the year 1900
and the year 2000. Therefore, some computer hardware and software will need to
be modified prior to the year 2000 to remain functional. The Company anticipates
that its Year 2000 compliance will be substantially complete by March 1999.
The Company's Y2K Program is divided into three major categories: (i) internal
information and accounting ("IT") systems, (ii) non-"IT" equipment and systems
and (iii) third-party suppliers and customers. The general stages of review with
respect to each of the categories are (a) identifying and assessing items or
systems that are not Year 2000 compliant, (b) assessing costs and expenses
associated with the various alternatives for remedying items and systems that
are not Year 2000 compliant and (c) repairing or replacing items that are
determined not to be Year 2000 compliant.
21
<PAGE>
The Company is in varying stages of review with respect to each category within
its Y2K Program. The Company has completed its review of its IT equipment and
systems and currently believes that its internal information and accounting
systems are Year 2000 compliant, except for certain field software that the
Company currently does not believe is material to its operations. The Company
currently is reviewing its various alternatives for making such field software
Year 2000 compliant, and believes the costs associated therewith will not be
material.
The Company currently is in the process of reviewing its non-IT equipment and
systems. The Company does not believe such equipment and systems will present
any material Year 2000 issues. At present, the Company has not identified any
non-IT equipment and systems that are not Year 2000 compliant that cannot be
remedied or replaced at minimal cost to the Company.
The Company has not yet begun its assessment of third party Year 2000 issues.
The Company intends to begin this assessment during the fourth quarter of 1998.
The Company's third party review initially will consist of written inquiries to
third party suppliers, subcontractors and customers requesting information and
representations from such third parties as to their readiness for the Year 2000.
The Company will review these responses and, based upon such responses, will
determine the necessity for requesting additional information as appropriate.
The Company expects its initial review of third parties to be substantially
complete during the first quarter of 1999.
Management believes that it has taken reasonable steps in developing its Year
2000 Program. Notwithstanding these actions, there can be no assurance that all
of the Company's Year 2000 issues or those of its key suppliers, subcontractors
or customers will be resolved or addressed satisfactorily before the Year 2000
commences. If the Company's key suppliers, subcontractors, customers and other
third parties fail to address their Year 2000 issues, and there are no
alternatives available to the Company, then the Company's usual channels of
supply and distribution could be disrupted, in which event the Company could
experience a material adverse impact on its business, results of operations or
financial position. In addition, although the Company believes its internal
planning efforts are adequate to address its internal Year 2000 concerns, there
can be no assurances that the Company will not experience unanticipated negative
consequences and material costs caused by undetected errors or defects in the
technology used in its internal systems, which could have material adverse
effect on the Company's business, results of operations or financial condition.
The Company currently is unable to estimate the most reasonably likely
worst-case effects of the arrival of the year 2000 and currently does not have a
contingency plan in place for any such unanticipated negative effects. The
Company intends to analyze reasonably likely worst-case scenarios and the need
for such contingency planning once its review of third-party preparedness
described above has been completed, and the Company expects to complete this
analysis by June 30, 1999.
It is anticipated that the total costs related to the Year 2000 issue will not
exceed $150,000. The majority of which has already been incurred by the Company.
To date, there have been no material deferments of other IT projects resulting
from the work taking place on the Company's Y2K
Program.
22
<PAGE>
FORWARD-LOOKING INFORMATION
From time to time, the Company may make certain statements that contain
"forward-looking" information as defined in the Private Securities Litigation
Reform Act of 1995 and that involves risk and uncertainty. These forward-looking
statements may include, but are not limited to, exploration and seismic
acquisition plans, anticipated results from current and future exploration
prospects, the anticipated results of wells based on logging data and production
tests, future sales of production, earnings, margins, production levels and
costs, market trends in the oil and natural gas industry and the exploration and
development sector thereof, environmental and other expenditures and various
business trends. Forward-looking statements may be made by management orally or
in writing including, but not limited to, the Management's Discussion and
Analysis of Financial Condition and Results of Operations section and other
sections of the Company's filings with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended.
Actual results and trends in the future may differ materially depending on a
variety of factors including, but not limited to, the success of the Company's
exploration and development program; changes in the price of oil and natural
gas, which could cause the Company to delay or suspend planned drilling
operations or reduce production levels; risks relating to the availability of
capital to fund drilling operations and the Company's current estimates of its
need for additional capital, which can be adversely affected by adverse drilling
results, production declines, declines in oil and gas prices and declines in the
overall economy; world-wide political stability and economic growth; the
Company's successful execution of internal exploration, development and
operating plans; risks inherent in the drilling of oil and natural gas wells,
including risks of fire, explosion, blowout, pipe failure, casing collapse,
unusual or unexpected formation pressures, unusual or unexpected weather
conditions; litigation and disputes in the ordinary course of business;
environmental hazards and other operating and production risks, which may
temporarily or permanently reduce production or cause initial production or test
results to not be indicative of future well performance or delay in timing of
sales or completion of drilling operations; environmental regulation and costs;
regulatory uncertainties and legal proceedings. The risks related to the year
2000, and the dates on which the Company believes its Y2K Program will be
completed, are based on management's best estimates, which were derived
utilizing numerous assumptions of future events, including the continued
availability of certain resources, third-party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved, or that there will not be a delay in, or increased costs associated
with, the implementation of the Company's Y2K Program. Specific factors that
might cause differences between the estimates and actual results include, but
are not limited to, the availability and cost of personnel trained in these
areas, the ability to locate and correct all relevant computer codes, timely
responses to and corrections by third parties and suppliers, the ability to
implement interfaces between the new systems and the systems not being replaced,
and similar uncertainties. Due to the general uncertainty inherent in the Year
2000 problem, resulting in part from the uncertainty of the Year 2000 readiness
of third parties and the interconnection of global businesses, the Company
cannot ensure its ability to timely and cost effectively resolve problems
associated with the Year 2000 issue that may affect its operations and business
or expose it to third-party liability.
23
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the reconvened special meeting of shareholders held on July 20, 1998, the
Company's shareholders voted in favor of an amendment to the Company's restated
articles of incorporation that increased the number of authorized shares of
Common Stock from 100,000,000 to 200,000,000. The number of shares voted for and
against and the number of abstentions and broker non-votes with respect to such
matter is as follows:
<TABLE>
<CAPTION>
BROKER
MATTER FOR AGAINST ABSTAIN NON-VOTE
------ --- ------- ------- --------
<S> <C> <C> <C> <C>
Articles Amendment 22,765,409 1,095,592 42,958 50
</TABLE>
At the annual meeting of shareholders held on August 28, 1998, the Company's
shareholders (including preferred stockholders) elected Class II Directors. The
following summarizes the number of votes for and against each nominee and the
number of votes withheld and the number of broker non-votes.
<TABLE>
<CAPTION>
BROKER
NOMINEE FOR AGAINST ABSTAIN NON-VOTE
------- --- ------- ------- --------
E. L. Henry 39,976,969 487,347
<S> <C> <C>
Joe E. Kares 39,976,969 487,347
Gary A. Messersmith 39,976,969 487,347
</TABLE>
In addition, in conjunction with such annual meeting, SLOPI, the holder of all
of the Company's issued and outstanding Preferred Stock, elected Jim Funk as a
director of the Company pursuant to SLOPI's rights under the certificate of
designation governing the Preferred Stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
3.1 Third Amended and Restated Articles of Incorporation
3.2 Amended and Restated Bylaws
10.1 Credit Agreement dated as of September 1, 1998, between NationsBank,
N.A. and the Company.
10.2 Employment Agreement with Lloyd V. DeLano effective November 5, 1997.
24
<PAGE>
10.3 Employment Agreement with P. Richard Gessinger effective December 1,
1997.
10.4 Amendment No. 2 dated November 13, 1998 to Amended and Restated Credit
Agreement dated May 22, 1998, by and among the Company, The Chase
Manhattan Bank as administrative agent, and the various lenders party
thereto.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
On July 10, 1998, the Company filed a Current Report on Form 8-K dated June 30,
1998, reporting the Shell Transactions and filing pro forma financial statements
of the Company and historical financial statements for the Shell Properties.
25
<PAGE>
SIGNATURE
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.
THE MERIDIAN RESOURCE CORPORATION
(Registrant)
Date: November 16, 1998 By: P. RICHARD GESSINGER
P. Richard Gessinger
Executive Vice President and
Chief Financial Officer
By: LLOYD V. DELANO
Lloyd V. DeLano
Vice President and
Chief Accounting Officer
26
EXHIBIT 3.1
THIRD AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
THE MERIDIAN RESOURCE CORPORATION
ARTICLE ONE
The Meridian Resource Corporation, a Texas corporation (the
"Corporation"), pursuant to the provisions of Article 4.07 of the Texas Business
Corporation Act, as amended ("TBCA"), hereby adopts these Third Amended and
Restated Articles of Incorporation (the "Third Amended and Restated Articles"),
which accurately copy the entire text of the Second Amended and Restated
Articles of Incorporation of the Corporation, as amended and supplemented by all
certificates of amendment and correction previously issued by the Secretary of
State of the State of Texas (the "Second Amended and Restated Articles of
Incorporation"), and as further amended by these Third Amended and Restated
Articles as hereinafter set forth and which contain no other change in any
provision thereof.
ARTICLE TWO
The Second Amended and Restated Articles of Incorporation of the
Corporation are hereby amended by these Third Amended and Restated Articles of
Incorporation as follows:
Paragraph 1 of Article Four be and hereby is amended to read as follows:
"ARTICLE FOUR
The Corporation shall have authority to issue two (2) classes of stock,
and the total number authorized shall be Two Hundred Million (200,000,000)
shares of Common Stock, par value of One Cent ($0.01) per share ("Common
Stock"), and Twenty-five Million (25,000,000) shares of Preferred Stock, par
value of One Dollar ($1.00) per share ("Preferred Stock"). A description of the
different classes of stock of the Corporation and a statement of the
designations and the powers, preferences
<PAGE>
and rights, and the qualifications, limitations or restrictions thereof, in
respect of each class of such stock are as follows:
1. ISSUANCE IN CLASS OR SERIES. The Common or Preferred Stock may be
issued from time to time in one (1) or more series, or either or both of the
Common or Preferred Stock may be divided into additional classes and such
classes into one (1) or more series which classes or series shall have such
designations, preferences, limitations, and relative rights, including voting
rights as shall be stated and expressed in the resolution or resolutions adopted
by the Board of Directors designating such class or series, which resolution or
resolutions the Board of Directors is hereby expressly authorized to adopt. Such
resolution or resolutions with respect to a class or series shall specify all or
such of the rights or preferences of such class or series as the Board of
Directors shall determine. Without limiting the generality of the foregoing
grant of authority, the Board of Directors is authorized to determine any or all
of the following, and the shares of each series may vary from the shares of any
other series, in any or all of the following aspects:
(a) The number of shares of such series (which may subsequently be
increased, except as otherwise provided by the resolutions of the Board of
Directors providing for the issue of such series, or decreased to a number
not less than the number of shares then outstanding) and the distinctive
designation thereof;
(b) The dividend rights, if any, of such series, the dividend
preferences, if any, as between such series and any other class or series
of stock, whether and the extent to which shares of such series shall be
entitled to participate in dividends with shares of any other series or
class of stock, whether and the extent to which dividends on such series
shall be cumulative, and any limitations, restrictions or conditions on
the payment of such dividends;
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(c) The time or times during which, the price or prices at which,
and any other terms or conditions on which the shares of such series may
be redeemed, if redeemable;
(d) The rights of such series, and the preferences, if any, as
between such series and any other class or series of stock, in the event
of any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation and whether and the extent to which shares of any such
series shall be entitled to participate in such event with any other class
or series of stock;
(e) The voting powers, if any, in addition to the voting powers
prescribed by law on shares of such series, and the terms of exercise of
such voting powers;
(f) Whether shares of such series shall be convertible into or
exchangeable for shares of any other series or class of stock, or any
other securities, and the terms and conditions, if any, applicable to such
right; or
(g) The terms and conditions, if any, of any purchase, retirement or
sinking fund which may be provided for the shares of such series.
All shares of the Common Stock shall rank equally and all shares of
the Preferred Stock shall rank equally, and be identical within their classes in
all respects regardless of series, except as to terms which may be specified by
the Board of Directors pursuant to the above provisions. All shares of any one
(l) series of a class of Common or Preferred Stock shall be of equal rank and
identical in all respects, except that shares of any one (1) series issued at
different times may differ as to the dates which dividends thereon shall accrue
and be cumulative."
ARTICLE THREE
The amendment made by these Third Amended and Restated Articles of
Incorporation has been effected in conformity with the provisions of the TBCA
and such Third Amended and
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Restated Articles of Incorporation and such amendment made by the Third Amended
and Restated Articles of Incorporation was duly adopted by the shareholders of
the Corporation on the 20th day of July, 1998.
ARTICLE FOUR
The number of shares outstanding was 33,721,315 and the number of
shares entitled to vote on the amendment made by these Third Amended and
Restated Articles of Incorporation was 23,904,009, the number of shares voted
for such Third Amended and Restated Articles of Incorporation was 23,765,459;
and the number of shares voted against such Third Amended and Restated Articles
was 1,095,592.
ARTICLE FIVE
The Articles of Incorporation as amended and supplemented by all
certificates of amendment and correction previously issued by the Secretary of
State of the State of Texas are hereby superseded by the following Third Amended
and Restated Articles which accurately copy the entire text thereof and as
amended as set forth above:
(TEXT RESUMES ON THE FOLLOWING PAGE)
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"THIRD AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
THE MERIDIAN RESOURCE CORPORATION
ARTICLE ONE
The name of the corporation is The Meridian Resource Corporation
(the "Corporation"). These Third Amended and Restated Articles of Incorporation
are herein referred to as the "Articles of Incorporation."
ARTICLE TWO
The address of the Corporation 's registered office in the State of
Texas is 15995 N. Barkers Landing, Suite 300, Houston, Texas 77079, and the name
of its registered agent at such address is Joseph A. Reeves, Jr.
ARTICLE THREE
The purpose for which the Corporation is organized is to conduct or
engage in any lawful act or activity for which corporations may be incorporated
under the Texas Business Corporation Act (the "TBCA").
ARTICLE FOUR
The Corporation shall have authority to issue two (2) classes of
stock, and the total number authorized shall be Two Hundred Million
(200,000,000) shares of Common Stock, par value of One Cent ($0.01) per share
("Common Stock"), and Twenty-five Million (25,000,000) shares of Preferred
Stock, par value of One Dollar ($1.00) per share ("Preferred Stock"). A
description of the different classes of stock of the Corporation and a statement
of the designations and the powers,
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preferences and rights, and the qualifications, limitations or restrictions
thereof, in respect of each class of such stock are as follows:
1. ISSUANCE IN CLASS OR SERIES. The Common or Preferred Stock may be
issued from time to time in one (1) or more series, or either or both of the
Common or Preferred Stock may be divided into additional classes and such
classes into one (1) or more series which classes or series shall have such
designations, preferences, limitations, and relative rights, including voting
rights as shall be stated and expressed in the resolution or resolutions adopted
by the Board of Directors designating such class or series, which resolution or
resolutions the Board of Directors is hereby expressly authorized to adopt. Such
resolution or resolutions with respect to a class or series shall specify all or
such of the rights or preferences of such class or series as the Board of
Directors shall determine. Without limiting the generality of the foregoing
grant of authority, the Board of Directors is authorized to determine any or all
of the following, and the shares of each series may vary from the shares of any
other series, in any or all of the following aspects:
(a) The number of shares of such series (which may subsequently be
increased, except as otherwise provided by the resolutions of the Board of
Directors providing for the issue of such series, or decreased to a number
not less than the number of shares then outstanding) and the distinctive
designation thereof;
(b) The dividend rights, if any, of such series, the dividend
preferences, if any, as between such series and any other class or series
of stock, whether and the extent to which shares of such series shall be
entitled to participate in dividends with shares of any other series or
class of stock, whether and the extent to which dividends on such series
shall be cumulative, and any limitations, restrictions or conditions on
the payment of such dividends;
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(c) The time or times during which, the price or prices at which,
and any other terms or conditions on which the shares of such series may
be redeemed, if redeemable;
(d) The rights of such series, and the preferences, if any, as
between such series and any other class or series of stock, in the event
of any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation and whether and the extent to which shares of any such
series shall be entitled to participate in such event with any other class
or series of stock;
(e) The voting powers, if any, in addition to the voting powers
prescribed by law on shares of such series, and the terms of exercise of
such voting powers;
(f) Whether shares of such series shall be convertible into or
exchangeable for shares of any other series or class of stock, or any
other securities, and the terms and conditions, if any, applicable to such
right; or
(g) The terms and conditions, if any, of any purchase, retirement or
sinking fund which may be provided for the shares of such series.
All shares of the Common Stock shall rank equally and all shares of
the Preferred Stock shall rank equally, and be identical within their classes in
all respects regardless of series, except as to terms which may be specified by
the Board of Directors pursuant to the above provisions. All shares of any one
(l) series of a class of Common or Preferred Stock shall be of equal rank and
identical in all respects, except that shares of any one (1) series issued at
different times may differ as to the dates which dividends thereon shall accrue
and be cumulative.
2. OTHER PROVISIONS. Shares of Common or Preferred Stock of any class or
series may be issued with such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative participating, option or
special rights, and qualifications, limitations or
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restrictions thereof, as shall be stated and expressed in the resolution or
resolutions providing for the issuance of such stock adopted by the Board of
Directors. Any of the designations, preferences, limitations, or relative
rights, including the voting rights of any series of shares, may be made
dependent upon facts ascertainable outside the resolution or resolutions of the
Board of Directors providing for the issue of such stock by the Board of
Directors, provided the manner in which such facts shall operate upon the voting
powers, designations, preferences, rights and qualifications, limitations or
restrictions of such class or series is clearly set forth in the resolution or
resolutions providing for the issue of such stock adopted by the Board of
Directors.
3. COMMON STOCK. Except as otherwise provided in any resolution or
resolutions adopted by the Board of Directors providing for the issuance of a
class or series of Preferred Stock, the Common Stock shall (a) have the
exclusive voting power of the Corporation; (b) entitle the holders thereof to
one (1) vote per share at all meetings of the shareholders of the Corporation;
(c) entitle the holders to share ratably, without preference over any other
shares of the Corporation in all assets of the Corporation in the event of any
dissolution, liquidation or winding up of the Corporation; and (d) entitle the
record holders thereof on such record dates as are determined, from time to
time, by the Board of Directors to receive such dividends, if any, if, as and
when declared by the Board of Directors.
4. PREEMPTIVE RIGHTS DENIED. No shareholder shall have any preemptive
right to acquire any additional unissued or treasury shares of the Corporation
of any class now or hereafter authorized or held.
5. CUMULATIVE VOTING DENIED. Shareholders of the Corporation shall not
have the right to cumulate their votes at any election of directors. At each
such election of directors, each shareholder
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shall be entitled to vote in person or by proxy the number of shares owned by
him in the election of each director for whose election he has a right to vote.
ARTICLE FIVE
The period of duration of the Corporation is perpetual.
ARTICLE SIX
1. NUMBER, ELECTION AND TERMS OF DIRECTORS. The business and affairs of
the Corporation shall be managed by a Board of Directors, which, subject to the
rights of holders of shares of any class of series of Preferred Stock then
outstanding to elect additional directors under specified circumstances, shall
consist of the number of the members of the initial Board of Directors as set
forth herein or such other number, not less than three (3), as may be specified
from time to time by action of the Board of Directors pursuant to the Bylaws.
The directors shall be classified into three (3) classes: Class I, Class II and
Class III. Such classes shall be as nearly equal in number of directors as
possible. Each director shall serve for a term ending on the expiration of the
term for directors of the class to which such director belongs; provided,
however, that any director elected to fill a vacancy or to a newly-created
directorship shall serve until the next annual meeting of shareholders, at which
time the shareholders shall confirm the election of such director for the
balance of the term in office of directors of that class or elect another to
such directorship. The directors originally elected to Class I shall serve for a
term expiring at the annual meeting of shareholders to be held in 1991 and the
term in office of directors of such class shall expire at the annual meeting of
shareholders in every third year thereafter. The directors originally elected to
Class II shall serve for a term expiring at the annual meeting of shareholders
to be held in 1992 and the term in office of directors of such class shall
expire at the annual meeting of shareholders in every third year thereafter. The
directors originally elected to Class III shall serve for a term expiring at the
annual meeting of shareholders to
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be held in 1993 and the term in office of directors of such class shall expire
at the annual meeting of shareholders in every third year thereafter. The
foregoing notwithstanding, each director shall serve until his successor shall
have been duly elected and qualified, unless he shall resign, become
disqualified or disabled, or shall otherwise be removed.
At each annual election, the directors chosen to succeed those whose
terms then expire shall be of the same class as the directors they succeed,
unless, by reason of any intervening changes in the authorized number of
directors, the Board of Directors shall designate one (1) or more directorships
whose term then expires as directorships of another class in order more nearly
to achieve equality of number of directors among the classes.
Notwithstanding the rule that the three (3) classes shall be as nearly
equal in number of directors as possible, in the event of any change in the
authorized number of directors, each director then continuing to serve as such
shall nevertheless continue as a director of the class of which he is a member
until the expiration of his current term, or his prior death, resignation or
removal. If any newly-created directorship may, consistent with the rule that
the three (3) classes shall be as nearly equal in number of directors as
possible, be allocated to one (1) or two (2) or more classes, the Board of
Directors shall allocate it to that of the available classes whose terms of
office are due to expire at the earliest date following such allocation. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
2. NEWLY-CREATED DIRECTORSHIPS AND VACANCIES. Subject to the rights of
the holders of any series of any Preferred Stock then outstanding, newly-created
directorships resulting from any increase in the authorized number of directors
and any vacancies in the Board of Directors resulting from the death,
resignation, retirement, disqualification, removal from office or other cause
may be
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filled by a majority vote of the directors then in office even though less than
a quorum, or by a sole remaining director.
3. REMOVAL. Subject to the rights of the holders of any series of any
Preferred Stock then outstanding, any director or the entire Board of Directors,
may be removed from office at any annual or special meeting called for such
purpose, and then only for cause and only by the affirmative vote of the holders
of eighty percent (80%) or more of the voting power of all of the shares of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class. As used herein, cause shall mean only the following:
proof, beyond the existence of a reasonable doubt that a director has (a) been
convicted of a felony, (b) committed grossly negligent or willful misconduct
resulting in a material detriment to the Corporation, or (c) committed a
material breach of his fiduciary duty to the Corporation resulting in a material
detriment to the Corporation.
4. AMENDMENT, REPEAL, ETC. Notwithstanding anything contained in these
Articles of Incorporation to the contrary, the affirmative vote of the holders
of eighty percent (80%) or more of the voting power of all of the shares of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to alter, amend or adopt any
provision inconsistent with or repeal this Article Six, or to alter, amend or
adopt any provision inconsistent with or repeal comparable sections of the
Bylaws of the Corporation.
ARTICLE SEVEN
Subject to the rights of the holders of any series of Preferred Shares
then outstanding, any action required or permitted to be taken by the
shareholders of the Corporation must be effected at a duly called annual or
special meeting of shareholders of the Corporation and may not be effected by
any consent in writing by such shareholders unless all of the shareholders
entitled to vote thereon consent thereto in writing. Notwithstanding anything
contained in these Articles of Incorporation to
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the contrary, the affirmative vote of the holders of fifty percent (50%) or more
of the voting power of all the shares of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to call a special meeting of shareholders, or to alter, amend, or
adopt any provision inconsistent with or repeal this Article Seven, or to alter,
amend, or adopt any provision inconsistent with comparable sections of the
Bylaws.
ARTICLE EIGHT
1. VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS. In addition to any
affirmative vote required by law or these Articles of Incorporation or the
Bylaws of the Corporation, and except as otherwise expressly provided in Section
2 of this Article Eight, a Business Combination (as hereinafter defined) with,
or proposed by or on behalf of, any Related Person (as hereinafter defined) or
any Affiliate or Associate (as hereinafter defined) of any Related Person or any
person who thereafter would be an Affiliate or Associate of such Related Person,
shall require the affirmative vote of not less than eighty percent (80%) of the
votes entitled to be cast by the holders of all of the then outstanding shares
of Voting Stock (as hereinafter defined), voting together as a single class, and
the affirmative vote of not less than a majority of the votes entitled to be
cast by the Voting Stock beneficially owned by persons other than such Related
Person. Each share of Voting Stock shall have the number of votes granted to it
in, or duly fixed by the Board of Directors pursuant to, Article Four of these
Articles of Incorporation. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage or separate class vote may be specified, by law, or in any agreement
with any national securities exchange or otherwise.
2. EXCEPTIONS TO HIGHER VOTE REQUIREMENT. The provisions of Section 1 of
this Article Eight shall not be applicable to any particular Business
Combination, and such Business Combination shall require only such affirmative
vote, if any, as is required by law or by any other provision of these
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Articles of Incorporation or the Bylaws of the Corporation, or any agreement
with any national securities exchange, if all of the conditions specified in
either of the following Paragraphs (a) or (b) are met or, in the case of a
Business Combination not involving the payment of consideration to the holders
of the Corporation's outstanding Capital Stock (as hereinafter defined), if the
condition specified in the following Paragraph (a) is met:
(a) The Business Combination shall have been approved either specifically
or as a transaction which is within an approved category of transactions, by a
majority (whether such approval is made prior to or subsequent to the
acquisition of or announcement or public disclosure of the intention to acquire,
beneficial ownership of the Voting Stock that caused the Related Person to
become a Related Person) of the Continuing Directors (as hereinafter defined).
(b) All of the following conditions shall have been met:
(i) The aggregate amount of cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation of the Business
Combination, of consideration other than cash to be received per share by
holders of Common Stock of the Corporation in such Business Combination shall be
at least equal to the higher amount determined under clauses (A) and (B) below:
(A) (If applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or
on behalf of the Related Person for any share of Common Stock of the Corporation
in connection with the acquisition by the Related Person of beneficial ownership
of shares of Common Stock,
(x) within the two-year period immediately prior to the
first public announcement of the proposed Business Combination (the
"Announcement Date"), or
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(y) in the transaction in which it became a Related
Person, whichever is higher, in either case as adjusted for any subsequent stock
split, stock dividend, subdivision or reclassification with respect to the
Common Stock of the Corporation; and
(B) The Fair Market Value per share of the Common Stock of the
Corporation on the Announcement Date or on the date (the "Determination Date")
on which the Related Person became a Related Person, whichever is higher, as
adjusted for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to the Common Stock of the Corporation.
(ii) The aggregate amount of cash and the Fair Market Value, as of
the date of the consummation of the Business Combination, of consideration
other than cash to be received per share by holders of shares of any class
or series of outstanding Capital Stock, other than Common Stock of the
Corporation, shall be at least equal to the highest amount determined
under clauses (A), (B) and (C) below:
(A) (If applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid
by or on behalf of the Related Person for any share of such class or
series of Capital Stock in connection with the acquisition by the Related
Person of beneficial ownership of shares of such class or series of
Capital Stock,
(x) within the two-year period immediately prior to
the Announcement Date, or
(y) in the transaction in which it became a Related
Person, whichever is higher, in either case as adjusted for any subsequent stock
split, stock dividend, subdivision or reclassification with respect to such
class or series of Capital Stock;
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(B) The Fair Market Value per share of such class or series of
Capital Stock on the Announcement Date or on the Determination Date, whichever
is higher, as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to such class or series of Capital
Stock; and
(C) (If applicable) the highest preferential amount per share
to which the holders of shares of such class or series of Capital Stock would be
entitled, as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to such class or series of Capital
Stock, in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation regardless of whether the Business
Combination to be consummated constitutes such an event.
The provisions of this Paragraph (b) shall be required to be met with
respect to every class or series of outstanding Capital Stock, whether or not
the Related Person has previously acquired beneficial ownership of any shares of
a particular class or series of Capital Stock.
(iii) The consideration to be received by holders of a particular
class or series of outstanding Capital Stock shall be in cash or in the same
form as previously has been paid by or on behalf of the Related Person in
connection with its direct or indirect acquisition of beneficial ownership of
shares of such class or series of Capital Stock. If the consideration so paid
for shares of any class or series of Capital Stock varies as to form, the form
of consideration for such class or series of Capital Stock shall be either cash
or the form used to acquire beneficial ownership of the largest number of shares
of such class or series of Capital Stock previously acquired by the Related
Person.
(iv) After the Determination Date and prior to the consummation of
such Business Combination:
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(A) Except as approved by a majority of the Continuing
Directors, there shall have been no failure to declare and pay at the regular
date therefor any full quarterly dividends (whether or not cumulative) payable
in accordance with the terms of any outstanding Capital Stock;
(B) There shall have been no reduction in the annual rate of
dividends paid on the Common Stock of the Corporation (except as necessary
to reflect any stock split, stock dividend or subdivision of the Common
Stock of the Corporation), except as approved by a majority of the
Continuing Directors;
(C) There shall have been an increase in the annual rate of
dividends paid on the Common Stock of the (corporation as necessary to
reflect any reclassification (including any reverse stock split,
recapitalization, reorganization or any similar transaction that has the
effect of reducing the number of outstanding shares of Common Stock of the
Corporation, unless the failure to increase such annual rate is approved
by a majority of the Continuing Directors; and
(D) Such Related Person shall not have become the beneficial
owner of any additional shares of Capital Stock except as part of the
transaction that results in such Related Person becoming a Related Person
and except in a transaction that, after giving effect thereto, would not
result in any increase in the Related Person 's percentage beneficial
ownership of any class or series of Capital Stock.
(v) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"Act") (or any subsequent provisions replacing such Act, rules or regulations)
shall be mailed to all shareholders of the Corporation at least thirty (30) days
prior to the consummation of such Business Combination (whether or not such
proxy
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or information statement is required to be mailed pursuant to such Act or
subsequent provisions). The proxy or information statement shall contain on the
first page thereof, in a prominent place, any statement as to the advisability
(or inadvisability) of the Business Combination that the Continuing Directors,
or any of them, may choose to make and, if deemed advisable by a majority of the
Continuing Directors, the opinion of an investment banking firm selected by a
majority of the Continuing Directors as to the fairness (or lack of fairness) of
the terms of the Business Combination from the financial point of view of the
holders of the outstanding shares of Capital Stock other than the Related Person
and its Affiliates or Associates, such investment banking firm to be furnished
with all information it reasonably requests and to be paid a reasonable fee for
its services' by the Corporation.
(vi) Such Related Person shall not have made any major change in the
Corporation's business or equity capital structure without the approval of a
majority of the Continuing Directors.
(vii) After the Determination Date, the Related Person shall not
have received the benefit, directly or indirectly (except proportionately as a
shareholder), of any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by the
Corporation, whether in anticipation of or in connection with such Business
Combination or otherwise.
3. CERTAIN DEFINITIONS. The following definitions shall apply with respect
to this Article Eight: (a) The term "Business Combination" shall mean:
(i) Any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (A) any Related Person or (B) any other company
(whether or not itself a Related Person) which is, or after such merger or
consolidation would be, an Affiliate or Associate of a Related Person; or
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(ii) Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition or security arrangement, investment, loan, advance, guarantee,
agreement to purchase, agreement to pay, extension of credit, joint venture
participation or other arrangement (in one transaction or a series of
transactions) to, with or for the benefit of any Related Person or any Affiliate
or Associate of any Related Person involving any assets, securities or
commitments of the Corporation, any Subsidiary or any Related Person or any
Affiliate or Associate of any Related Person which (except for any arrangement,
whether as an employee, consultant or otherwise, other than as a director,
pursuant to which any Related Person or any Affiliate or Associate thereof
shall, directly or indirectly, have any control over or responsibility for the
management of any aspect of the business or affairs of the Corporation, with
respect to which arrangements the value tests set forth below shall not apply),
together with all other such arrangements (including all contemplated future
events), has an aggregate Fair Market Value and/or involves aggregate
commitments of $2,500,000 or more or constitutes more than five percent (5%) of
the book value of the total assets (in the case of transactions involving assets
or commitments other than capital stock) or five percent (5%) of the
shareholders' equity (in the case of transactions in capital stock) of the
equity in question (the "Substantial Part"), as reflected in the most recent
fiscal year-end consolidated balance sheet of such entity existing at the time
the shareholders of the Corporation would be required to approve or authorize
the Business Combination involving the assets, securities and/or commitments
constituting any Substantial Part; or
(iii) The adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any Related Person or
any Affiliate or Associate of any Related Person; or
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(iv) Any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or consolidation
of the Corporation with any of its Subsidiaries or any other transaction
(whether or not with, into or otherwise involving a Related Person) that has the
effect, directly or indirectly, of increasing the proportionate share of the
outstanding shares of any class of Equity Security (as hereinafter defined) of
the Corporation or any Subsidiary, that is beneficially owned by any Related
Person or any Affiliate or Associate of any Related Person; or
(v) Any agreement, contract or other arrangement providing for any
one or more of the actions specified in the foregoing clauses (i) to (iv).
(b) The term "Capital Stock" shall mean all capital stock of the
Corporation authorized to be issued from time to time under Article Four of
these Articles of Incorporation, and the term "Voting Stock" shall mean all
Capital Stock which by its terms may be voted on all matters submitted to the
shareholders of the Corporation generally.
(c) The term "person" shall mean any individual, firm, company or other
entity and shall include any group comprised of any person and any other person
with whom such person or any Affiliate or Associate of such person has any
agreement, arrangement or understanding, directly or indirectly, for the purpose
of acquiring, holding, voting or disposing of Capital Stock.
(d) The term "Related Person" shall mean any person (other than the
Corporation or any Subsidiary and other than any profit-sharing, employee stock
ownership or other employee benefit plan of the Corporation or any Subsidiary or
any trustee of or fiduciary with respect to any such plan when acting in such
capacity and other than any person who on September 30, 1990 was the holder of
five percent (5%) or more of the outstanding shares of the Common Stock of the
Corporation) who or which (i) is or has announced or publicly disclosed a plan
or intention to become the beneficial
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owner of Voting Stock representing ten percent (10%) or more of the votes
entitled to be cast by the holders of all the then outstanding shares of Voting
Stock; or (ii) is an Affiliate or Associate of the Corporation and at any time
within the two-year period immediately prior to the date in question was the
beneficial owner of Voting Stock representing ten percent (10%) of more of the
votes entitled to be cast by the holders of all the then outstanding shares of
Voting Stock; or (iii) is an assignee of or has otherwise succeeded to any
shares of Voting Stock that were at any time within the two-year period
immediately prior to the date in question beneficially owned by any Related
Person, if such assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering within the
meaning of the Securities Act of 1933, as amended.
(e) A person shall be a "beneficial owner" of any Capital Stock (i) which
such person or any of its Affiliates or Associates beneficially owns, directly
or indirectly; (ii) which such person or any of its Affiliates or Associates
has, directly or indirectly, (A) the right to Acquire (whether such right is
exercisable immediately or only after the passage of time and notwithstanding
that Rule 13d-3 under the Act deems such shares to be beneficially owned only if
such right may be exercised within sixty (60) days), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (B) the right to vote pursuant to
any agreement, arrangement or understanding; or (iii) which are beneficially
owned, directly or indirectly, by any other person with which such person or any
of its Affiliates or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares of
Capital Stock. For the purposes of determining whether a person is a Related
Person pursuant to Paragraph (d) of this Section 3, the number of shares of
Capital Stock deemed to be outstanding shall include shares deemed beneficially
owned by such person through application of this Paragraph (e) of Section 3, but
shall not include any other shares of Capital Stock
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that may be issuable pursuant to any arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
(f) The term "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Act as in effect on
September 30, 1990 (the term "registrant" in said Rule 12b-2 meaning, in this
case, the Corporation).
(g) The term "Subsidiary" means any company of which a majority of any
class of Equity Security is beneficially owned by the Corporation; provided,
however, that for the purposes of the definition of Related Person set forth in
Paragraph (d) of this Section 3, the term "Subsidiary" shall mean only a company
of which a majority of each class of Equity Security is beneficially owned by
the Corporation.
(h) The term "Continuing Director" means any member of the Board of
Directors of the Corporation, while such person is a member of the Board of
Directors, who is not an Affiliate or Associate or representative of the Related
Person and was a member of the Board of Directors prior to the Determination
Date, and any successor of a Continuing Director, while such successor is a
member of the Board of Directors, who is not an Affiliate or Associate or
representative of the Related Person and is recommended or elected to succeed
the Continuing Director by a majority of Continuing Directors.
(i) The term "Fair Market Value" means (i) in the case of stock, the
highest closing sales price during the 30-day period immediately preceding the
date in question of a share of such stock registered under the Act on the
principal United States securities exchange on which such stock is listed, or,
if such stock is not listed on any such exchange, the highest closing bid
quotation with respect to a share of such stock during the 30-day period
preceding the date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any similar system
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then in use, or if no such quotations are available, the fair market value on
the date in question of a share of such stock as determined by a majority of the
Continuing Directors in good faith and (ii) in the case of property other than
stock, the fair market value of such property on the date in question as
determined by a majority of the Continuing Directors in good faith.
(j) In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used in
Paragraphs (b)(i) and (b)(ii) of Section 2 of this Article Eight shall include
the shares of Common Stock of the Corporation and/or the shares of any other
class or series of Capital Stock retained by the holders of such shares.
(k) The term "Equity Security" shall have the meaning ascribed to such
term in Section 3(a)(11) of the Act, as in effect on September 30, 1990.
4. POWERS OF CONTINUING DIRECTORS. A majority of the Continuing Directors
shall have the power and duty to determine for the purposes of this Article
Eight, on the basis of information known to them after reasonable inquiry, any
and all questions, interpretations and determinations arising under, or with
regard to the application of, this Article Eight, including, without limitation,
(a) whether a person is a Related Person, (b) the number of shares of Capital
Stock or other securities beneficially owned by any person, (c) whether a person
is an Affiliate or Associate of another, (d) whether a Business Combination is
with, or proposed by, or on behalf of a Related Person or an Affiliate or
Associate of a Related Person, (e) whether the assets that are the subject of
any Business Combination have, or the consideration to be received for the
issuance or transfer of securities by the Corporation or any Subsidiary in any
Business Combination has, an aggregate Fair Market Value of $2,500,000 or more,
and (f) whether the assets or securities that are the subject of any Business
Combination constitute a Substantial Part. Any such determination made in good
faith shall be binding and conclusive on all parties.
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5. NO EFFECT ON FIDUCIARY OBLIGATIONS OF RELATED PERSONS. Nothing
contained in this Article Eight shall be construed to relieve any Related Person
from any fiduciary obligation imposed by law.
6. COMPLIANCE WITH THIS ARTICLE EIGHT. The fact that any Business
Combination complies with the provisions of Section 2 of this Article Eight
shall not be construed to impose any fiduciary duty, obligation or
responsibility on the Board of Directors, or any member thereof, to approve such
Business Combination or recommend its adoption or approval to the shareholders
of the Corporation, nor shall such compliance limit, prohibit or otherwise
restrict in any manner the Board of Directors, or any member thereof, with
respect to evaluations of or actions and responses taken with respect to such
Business Combination.
7. BUSINESS COMBINATIONS PROPOSED BY RELATED PERSON. For the purpose of
this Article Eight, a Business Combination is presumed to have been proposed by,
or on behalf of, a Related Person or an Affiliate or Associate of a Related
Person or a person who thereafter would become such if (a) after the Related
Person became such, the Business Combination is proposed following the election
of any director of the Corporation who with respect to such Related Person,
would not qualify to serve as a Continuing Director or (b) such Related Person,
Affiliate, Associate or person votes for or consents to the adoption of any such
Business Combination, unless as to such Related Person, Affiliate, Associate or
person a majority of the Continuing Directors makes a good faith determination
that such Business Combination is not proposed by or on behalf of such Related
Person, Affiliate, Associate or person, based on information known to them after
reasonable inquiry.
8. PROVISION, REPEAL, ETC. Notwithstanding anything contained in these
Articles of Incorporation to the contrary, the affirmative vote of the holders
of at least eighty percent (80%) of the voting power of all outstanding shares
of Voting Stock voting together as a single class, and the
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affirmative vote of the holders of at least a majority of the voting power of
all outstanding shares of Voting Stock, voting together as a single class,
excluding the Voting Stock beneficially owned by a Related Person, shall be
required to alter, amend or repeal, or adopt any provision inconsistent with,
this Article Eight.
ARTICLE NINE
The Corporation shall indemnify its current or former directors, officers,
employees and agents or any person who served or is serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise from and
against any and all expenses, liabilities or other matters to the fullest extent
permitted by the TBCA. Such indemnification shall not be deemed exclusive of any
other rights to which such person may be entitled, under any bylaws, agreements,
vote of shareholders or disinterested directors, or otherwise, both as to
actions taken in their official capacity and as to action in another capacity
while holding such office, and shall inure to the benefit of the heirs,
executors and administrators of such persons. The Corporation shall have the
power to enter into agreements providing for indemnification by the Corporation
of current or former officers, directors, general partners, employees and agents
or any other person of or who served any predecessor corporation, partnership,
joint venture, trust or other enterprise from and against any and all expenses,
liabilities or other matters.
ARTICLE TEN
A director of the Corporation shall not be liable to the Corporation or
its shareholders for monetary damages for an act or omission in the director's
capacity as a director, except that this Article does not authorize the
elimination or limitation of the liability of a director to the extent the
director is found liable for: (a) a breach of the director's duty of loyalty to
the Corporation or its
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shareholders or members, (b) an act or omission not in good faith that
constitutes a breach of duty of the director to the Corporation, or an act or
omission that involves intentional misconduct or a knowing violation of the law,
(c) a transaction from which the director received an improper benefit, whether
or not the benefit resulted from an action taken within the scope of the
director's office, or (d) an act or omission for which the liability of a
director is expressly provided by an applicable statute.
ARTICLE ELEVEN
The classes, names and addresses of the persons who are the current
directors of the Corporation are as follows:
CLASS NAME ADDRESS
Class I Jack Prizzi 15995 N. Barkers Landing,
James T. Bond Suite 300, Houston, Texas
77079
Class II Gary Messersmith 15995 N. Barkers Landing,
E.L. Henry Suite 300, Houston, Texas
Joe E. Kares 77079
Class III Michael J. Mayell 15995 N. Barkers Landing,
Joseph A. Reeves, Jr. Suite 300, Houston, Texas
77079
15995 N. Barkers Landing,
Suite 300, Houston, Texas
Preferred Director Jim Funk 77079
ARTICLE TWELVE
The Corporation will not commence business until it has received for the
issuance of its shares consideration of a value of at least One Thousand Dollars
($1,000.00), consisting of money, labor done or property actually received."
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Dated this 28th day of August, 1998.
THE MERIDIAN RESOURCE CORPORATION
By: /s/ JOSEPH A. REEVES, JR.,
Joseph A. Reeves, Jr.,
Chairman of the Board
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AMENDED AND RESTATED
BYLAWS
OF
THE MERIDIAN RESOURCE CORPORATION
ADOPTED EFFECTIVE JUNE 1, 1998
ARTICLE I.
OFFICES
The principal office of the corporation in the State of Texas shall be
located in the City of Houston, County of Harris. The corporation may have such
other offices, either within or without the State of Texas, as the board of
directors may designate or as the business of the corporation may require from
time to time.
The registered office of the corporation required by the Texas Business
Corporation Act to be maintained in the State of Texas may be, but need not be,
identical with the principal office in the State of Texas, and the address of
the registered office may be changed from time to time by the board of
directors.
ARTICLE II.
SHAREHOLDERS
Section l. ANNUAL MEETING. An annual meeting of shareholders shall be held
for the purpose of electing directors and for the transaction of such other
business as may come before the meeting on such date and at such time as the
Board of Directors shall fix and set forth in the notice of the meeting.
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Section 2. SPECIAL MEETINGS. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the chairman of the board of directors, and shall be called by the president at
the request of the holders of not less than one-tenth of all the outstanding
shares of the corporation entitled to vote at the meeting.
Section 3. PLACE OF MEETING. The board of directors may designate any
place, either within or without the State of Texas, as the place of meeting for
any annual meeting or for any special meeting called by the board of directors.
If no designation is made, or if a special meeting be otherwise called, the
place of meeting shall be the registered office of the corporation in the State
of Texas.
Section 4. NOTICE OF MEETING. Written or printed notice stating the place,
day, and hour of each shareholders' meeting and, in case of a special meeting,
the purpose or purposes for which the shareholders' meeting is called, shall be
delivered not less than ten (10) days nor more than sixty (60) before the date
of the meeting, either personally or by mail, by or at the direction of the
Chairman of the Board of Directors, President, the Secretary, or the officer or
person calling the meeting, to each shareholder of record entitled to vote at
such meeting. If mailed, such notice shall be deemed to be delivered when
deposited into the United States mail, addressed to the shareholder at his or
her address as it appears on the stock transfer books of the corporation, with
postage thereon prepaid.
Section 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purposes of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the board of directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, 60 days. If the stock transfer
books shall be closed for the purpose of
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determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten days immediately
preceding such meeting. In lieu of closing the stock transfer books, the board
of directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than 60 days
and, in case of a meeting of shareholders, not less than ten days prior to the
date on which the particular action, requiring such determination of
shareholders, is to be taken. If the stock transfer books are not closed and no
record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the board of directors declaring such dividend
is adopted, as the case may be shall be the record date for such determination
of shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof except where the
determination has been made through the closing of the stock transfer books and
the stated period of closing has expired.
Section 6. VOTING LISTS. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make, at least ten days
before each meeting of shareholders, a complete list of shareholders entitled to
vote at such meeting, or any adjournment thereof, arranged in alphabetical
order, with the address of and the number of shares held by each, which list for
a period of ten days prior to such meeting shall be kept on file at the
registered office of the corporation and shall be subject to inspection by any
shareholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder during the whole time of the meeting. The
original
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stock transfer book shall be prima facie evidence as to who are the shareholders
entitled to examine such list or transfer books or to vote at any meeting of
shareholders.
Section 7. QUORUM. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Section 8. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly authorized
attorney in fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
11 months from the date of its execution, unless otherwise provided in the
proxy.
Section 9. VOTING OF SHARES. Unless otherwise required by law, each
outstanding share entitled to vote or except as otherwise provided by the
Articles of Incorporation, shall be entitled to one vote upon each matter
submitted to a vote at a meeting of shareholders. In the election of directors
of the corporation, votes may not be cumulative.
Section 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine.
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Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer into his name if authority to do so be contained
in an appropriate order of the court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation or held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
Section 11. ORDER OF BUSINESS AND RULES OF PROCEDURE. All meetings of the
shareholders shall be presided over by the Chairman of the meeting, who shall be
the Chairman of the Board of Directors, or if he is not present, the President,
or if neither the Chairman of the Board nor the President is present, any person
who shall be designated by the Board of Directors as Chairman for the purpose of
presiding over such meeting. The Secretary of the corporation, if present, shall
act as Secretary of the meeting; or if the Secretary is not present, a Secretary
of the meeting shall be designated by the Chairman of the meeting. Unless the
Chairman of the meeting shall otherwise determine, the order of business at all
annual and special meetings of shareholders shall, to the extent practicable, be
as follows:
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(l) Call to order.
(2) Presentation of proof of due calling and notice of the meeting.
(3) Presentation and examination of proxies.
(4) Ascertainment and announcement of quorum.
(5) Reading (or waiver of reading) and approval of minutes of prior
meeting.
(6) Report of officers.
(7) Reports of officers and committees.
(8) Receiving motions and resolutions, discussion and vote thereon.
(9) Nomination for directors if an annual meeting or special meeting
called for that purpose.
(10) Vote on directors.
(11) Receipt of report of inspectors on results of election and vote on
motions and resolutions.
(12) Any other unfinished business. (13) Any other new business.
(14) Adjournment.
The Chairman of the meeting shall resolve all questions pertaining to conduct of
the shareholders' meetings, including each orderly adjournment thereof. Legal
counsel to the company, or such other person as is specified in notice of the
meeting, shall act as parliamentarian.
Section 12. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the board of directors shall appoint not less than one nor more
than three inspectors of election. If there is no such appointment made in
advance, or if any appointed person refuses or fails to serve, the Chairman of
the meeting shall appoint a replacement. Inspectors of election shall determine
the number of
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shares outstanding, voting power of each share, shares represented at the
meeting, existence of a quorum, and authenticity, validity and effect of
proxies; shall receive votes, ballots, assents and consents, and hear and
determine all challenges and questions in any way arising in connection with a
vote; shall count and tabulate all votes, assents and consents, and determine
and announce results; and do all other acts as may be proper to conduct
elections or votes with fairness to all stockholders.
ARTICLE III.
BOARD OF DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed by its Board of Directors.
Section 2. NUMBER AND CLASSIFICATION OF COMPANY'S BOARD OF DIRECTORS. The
number of directors which shall constitute the whole Board of Directors of the
Corporation shall be not less than three (3), as may be specified from time to
time by action of the Board of Directors. The directors for whom holders of the
Company's Common Stock are entitled to vote shall be classified into three
classes: Class I, Class II and Class III; however, directors for whom holders of
the Common Stock are not entitled to vote shall not be classified unless
required by the Company's Articles of Incorporation or certificate of
designation or other instrument creating the class of capital stock entitled to
elect such director. Such classes shall be as nearly equal in number of
directors as possible. One-third of the classified Directors shall be elected
each year for staggered three-year terms and Directors that are not classified
shall be elected for one-year terms. Class I Directors shall serve for a term
expiring at the 1991 Annual Meeting and the term in office of directors of such
class shall expire at the annual meeting of shareholders every third year
thereafter. Class II Directors shall serve for a term expiring at the 1992
Annual Meeting and the term in office of directors of such class
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shall expire at the annual meeting of shareholders every third year thereafter.
Class III Directors shall serve for a term expiring at the 1993 Annual Meeting
and the term in office of directors of such class shall expire at the annual
meeting of the shareholders every third year thereafter. Each director shall
serve until his successor shall have been duly elected and qualified, unless he
shall resign, become disqualified or disabled, or shall otherwise be removed.
At each annual election, the directors chosen to succeed those whose terms
then expire shall be of the same class as the directors they succeed, unless, by
reason of any intervening changes in the authorized number of directors, the
Board of Directors shall designate one or more directorships whose term then
expires as directorships of another class in order more nearly to achieve
equality of number of directors among the classes.
Notwithstanding the rule that the three classes shall be as nearly equal
in number of directors as possible, in the event of any change in the authorized
number of directors, each director then continuing to serve as such shall
nevertheless continue as a director of the class of which he is a member until
the expiration of his current term, or his prior death, resignation or removal.
If any newly created directorship may, consistent with the rule that the three
classes shall be as nearly equal in number of directors as possible, be
allocated to one or two or more classes, the Board of Directors shall allocate
it to that of the available classes whose terms of office are due to expire at
the earliest date following such allocation. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director.
Section 3. REMOVAL. No director of the Corporation shall be removed from
his office as a director by vote or other action of the shareholders or
otherwise except for cause.
Section 4. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created
directorships resulting from an increase in the number of directors may be
filled by the affirmative vote of a
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majority of the directors for a term of office continuing only until the next
election of one or more directors by the shareholders entitled to vote thereon;
provided, however, that the Board of Directors shall not fill more than two such
directorships during the period between two successive annual meetings of
shareholders. Any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other cause shall be filled by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board of Directors. Any director elected to
fill any such vacancy shall hold office for the remainder of the full term of
the director whose departure from the Board of Directors created the vacancy and
until such newly elected director's successor shall have been elected and
qualified.
Section 5. PROVISION, REPEAL, ETC. Notwithstanding any other provision of
these Bylaws, Sections 2 through 5, inclusive, of this Article III cannot be
amended except in strict compliance with the Corporation's Articles of
Incorporation.
Section 6. REGULAR MEETINGS. The annual meeting of the Board of Directors
shall be held without notice other than this Bylaw immediately after, and at the
same place as, the annual meeting of shareholders. The Board of Directors may at
any Board meeting, either within or without the State of Texas, call and
schedule such additional meetings.
Section 7. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the President or any Director. The person
or persons authorized to call special meetings of the Board of Directors may fix
any place, either within or without the State of Texas, as the place for holding
any special meeting of the Board of Directors called by them.
Section 8. NOTICE. Notice of any special meeting, effective upon delivery
in accordance herewith, shall be given at least one (l) day prior thereto by
oral or written notice delivered personally, or by written notice mailed to each
Director at his business address or by telegram or by
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telephonic facsimile transmission. If mailed, the notice shall be deemed to be
delivered three (3) days following its deposit in the United States mail so
addressed, with postage thereon prepaid. If notice is given by telegram, it
shall be deemed to be delivered when delivered to the telegraph company. The
attendance of a Director at a meeting shall constitute a waiver of notice of
such meeting, except where a Director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice of such meeting.
Section 9. QUORUM. A majority of the number of Directors fixed in the
manner provided by Section 2 of this Article III shall constitute a quorum for
the transaction of business at any meeting of the Board of Directors, but if
less than such majority is present at a meeting, a majority of the Directors
present may adjourn the meeting from time to time without further notice.
Section 10. MANNER OF ACTING. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
Section 11. COMPENSATION. By resolution of the Board of Directors, the
Directors may be paid a fixed sum and/or their expenses of attendance, if any,
at each meeting of the Board of Directors, and/or may be paid a stated salary
for acting as a Director. No such payment shall preclude any Director from
serving the Corporation in any other capacity and receiving compensation
therefor.
Section 12. PRESUMPTION OF ASSENT. A Director who is present at a meeting
of the Board of Directors shall be presumed to have assented to any action taken
thereat unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the secretary of
the meeting before adjournment thereof or shall forward his dissent by
registered
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mail to the Secretary of the Corporation immediately after adjournment of the
meeting. Such right to dissent shall not apply to a Director who voted in favor
of such action.
Section 13. COMMITTEES. By resolution adopted by a majority of the full
Board of Directors, the Directors may designate an Executive Committee and one
(1) or more other committees from its members, each of which shall exercise such
authority and responsibility as may be set forth in the resolution establishing
the same, subject to the provisions of Article 2.36 of the Texas Business
Corporation Act. Each such committee shall serve at the pleasure of the Board of
Directors, and shall establish its own administrative and operational rules and
procedures, but shall be required to keep accurate records of all actions taken
by it.
ARTICLE IV.
OFFICERS
Section 1. NUMBER. The officers of the corporation shall be a chairman of
the board of directors, a president, one or more vice-presidents (the number
thereof to be determined by the board of directors), a secretary, and a
treasurer, each of whom shall be elected by the board of directors. Such other
officers and assistant officers as may be deemed to be necessary may be elected
or appointed by the board of directors. Any two or more offices may be held by
the same person, except the office of president.
Section 2. ELECTION AND TERM OF OFFICE. The officers of the corporation to
be elected by the board of directors shall be elected annually by the board of
directors at the first meeting of the board of directors held after each annual
meeting of the shareholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as conveniently may
be. Each
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officer shall hold office until his successor shall have been duly elected and
shall have qualified or until his death or until he shall resign or shall have
been removed in the manner hereinafter provided.
Section 3. REMOVAL. Any officer or agent elected or appointed by the board
of directors may be removed by the board of directors whenever in its judgment
the best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
Section 5. CHAIRMAN OF THE BOARD. The chairman of the board of directors
shall be the chief executive officer of the company and, subject to the board of
directors, shall be in general charge of the affairs of the company. He shall
preside at all meetings of the shareholders and of the board of directors;
provided, however, that in the event of the absence of the Chairman from
meetings of the shareholders and directors, the board of directors shall
designate another officer of the corporation to preside at such meetings.
Section 6. PRESIDENT. Subject to the chairman of the board of directors
and the board itself, the president shall in general supervise and control all
of the business and affairs of the corporation. He may sign, with the secretary
or any other proper officer of the corporation thereunto authorized by the board
of directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the board of directors or by these
bylaws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the
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office of president and such other duties as may be prescribed by the board of
directors from time to time.
Section 7. THE VICE-PRESIDENTS. In the absence of the president or in the
event of his death, inability or refusal to act, the vice-president (or in the
event there be more than one vice-president, the vice-presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of their election) shall perform the duties of the president,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the president. A vice president shall perform such duties as
may from time to time be assigned to him by the president or the board of
directors, and if authorized by the board of directors, may sign, together with
another appropriate officer authorized by these bylaws and the board of
directors, certificates for shares of stock of the corporation.
Section 8. THE SECRETARY. The Secretary shall: (a) keep the minutes of the
shareholders' and of the board of directors' meetings in one or more books
provided for that purpose; (b) see that all notices are given in accordance with
the provisions of these bylaws or as required by law; (c) be custodian of the
corporate records and of the seal of the corporation and see that the seal of
the corporation is affixed to all documents the execution of which on behalf of
the corporation under its seal is duly authorized; (d) keep a register of the
post office address of each shareholder which shall be furnished to the
secretary by such shareholder; (e) if authorized by the board of directors, sign
along with another appropriate officer authorized by these bylaws and the board
of directors, certificates for shares of stock of the corporation; (f) have
general charge of the stock transfer books of the corporation; and (g) in
general perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned to him by the president or by the
board of directors.
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Section 9. THE TREASURER. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the board of directors shall determine. He
shall: (a) have charge and custody of and be responsible for all funds and
securities of the corporation; receive and give receipts for moneys due and
payable to the corporation from any source whatsoever, and deposit all such
moneys in the name of the corporation in such banks, trust companies or other
depositories as shall be selected in accordance with the provisions of Article V
of these bylaws; and (b) in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the board of directors.
Section 10. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant
treasurers shall respectively, if required by the board of directors, give bonds
for the faithful discharge of their duties in such sums and with such sureties
as the board of directors shall determine. The assistant secretaries and
assistant treasurers, in general, shall perform such duties as shall be assigned
to them by the secretary or the treasurer, respectively, or by the president or
by the board of directors.
Section 11. SALARIES. The salaries of the officers shall be fixed from
time to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V.
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section l. CONTRACTS. The board of directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
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Section 2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors.
Such authority may be general or confined to specific instances.
Section 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation, shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from time to time be determined by
resolution of the board of directors.
Section 4. DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the board of directors may
select.
ARTICLE VI.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section l. CERTIFICATES FOR SHARES. Certificates representing shares of
the corporation shall be in such form as shall be determined by the board of
directors. The stock certificates shall be signed by (a) the chairman of the
board plus the president, or a vice president, or the secretary; or (b) the
president plus a vice president or the secretary; as shall be determined by the
board of directors. All certificates for shares shall be consecutively numbered
or otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the corporation. All
certificates surrendered to the corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and
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canceled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and indemnity to the corporation
as the board of directors may prescribe.
Section 2. TRANSFER OF SHARES. Transfer of shares of the corporation shall
be made only on the stock transfer books of the corporation by the holder of
record thereof or by his legal representative, who shall furnish proper evidence
of authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the secretary of the corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
ARTICLE VII.
FISCAL YEAR
The fiscal year of the corporation shall be determined by the Board of
Directors.
ARTICLE VIII.
DIVIDENDS
The board of directors may from time to time declare, and the corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its articles of incorporation.
ARTICLE IX.
SEAL
The board of directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation.
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ARTICLE X.
AMENDMENTS
The authority to alter, amend, or repeal these bylaws, and adopt new
bylaws, is delegated to the board of directors, but any bylaws so adopted,
altered, amended or repealed by the board of directors may be altered or
repealed by the stockholders by a majority vote of the outstanding shares.
ARTICLE XI.
NOTICE AND WAIVER OF NOTICE
Whenever any notice whatever is required to be given under the provisions
of these bylaws, said notice shall be deemed to be sufficient if given by
depositing the same in a post office box in a sealed postpaid wrapper addressed
to the persons entitled thereto at his post office address, as it appears on the
books of the corporation, and such notice shall be deemed to have been given on
the date of such mailing. A waiver of notice, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto. Neither the business to be transacted at, nor the
purposes of, any regular or special meeting of the board of directors or
shareholders need be specified in the waiver of notice of such meeting.
ARTICLE XII
INDEMNITY
Section 1. GENERAL INDEMNITY. The corporation shall indemnify any person
who was or is a party or a witness or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, any appeal in such an
action, suit or proceeding, and any inquiry or investigation that could lead to
such
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an action, suit or proceeding by reason of the fact that such person is or was a
Director, "advisory director" or officer of the corporation, or is or was
serving at the request of the corporation as a Director, "advisory director" or
officer of another corporation, partnership, joint venture, trust, employee
benefit plan, or other enterprise; and may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
contemplated action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, any appeal in such an action, suit
or proceeding, and any inquiry or investigation that could lead to such an
action, suit or proceeding, by reason of the fact that such person is or was an
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise; against reasonable expenses actually
incurred (including attorneys' fees), penalties (including excise and similar
taxes), judgments, fines and amounts paid in settlement in connection with such
action, suit or proceeding if such person conducted himself in good faith and,
with respect to conduct undertaken in his "Official Capacity" (defined below),
in a manner he reasonably believed to be in the best interests of the
corporation, and, with respect to conduct outside of such person's Official
Capacity, in a manner, at least, not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceedings by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, be
determinative that the person did not act in good faith and in a manner which he
reasonably believed to be in or, if applicable, not opposed to the best interest
of the Corporation, or, with respect to any criminal action or proceedings, that
he had reasonable cause to believe that his conduct was unlawful. In the event a
determination is made that a person is entitled to indemnification pursuant to
the foregoing
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provisions of this Section l in connection with a proceeding in which the person
is found liable to the corporation or is found liable on the basis that improper
personal benefit was received, such indemnification shall be limited to the
reasonable expenses (including court costs and attorneys' fees) actually
incurred by such person in connection with the applicable proceeding, provided,
no indemnification shall be made under this Section 1 in respect of any
proceeding in which such person shall have been found liable for willful or
intentional misconduct in the performance of his duty to the corporation. For
purposes hereof a person shall be deemed to have been "found liable" in respect
of any matter, claim or issue only if so adjudged by a court of competent
jurisdiction after exhaustion of all appeals therefrom.
Section 2. "OFFICIAL CAPACITY". The term "Official Capacity" herein means
(i) when used with respect to a director, the office of director of the
corporation, and (ii) when used with respect to a person other than a director,
the elective or appointive office of the corporation held by such person or the
employment or agency relationship undertaken by such person on behalf of the
corporation, but in each case does not include service for any other foreign or
domestic corporation or any partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise.
Section 3. SUCCESSFUL DEFENSE. The extent that a director, officer,
employee or agent of the corporation has been wholly successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section 1
of this Article XII in which he is a named defendant or respondent, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) and costs actually and reasonably incurred
by him in connection therewith.
Section 4. DETERMINATION OF CONDUCT. Any indemnification under Section 1
of this Article XII (unless ordered by a court) shall be made by the corporation
only as authorized in the specific
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case upon a determination that the indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1 of this Article XII. Such
determination shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who at the time of the vote were not named
defendants or respondents to such action, suit or proceeding, or (ii) if such
quorum is not obtainable or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion; or
(iii) by the shareholders, in a vote that excludes the shares held by persons
named as defendants or respondents in the proceeding.
Section 5. PAYMENT OF EXPENSES IN ADVANCE. Expenses incurred by a director
or officer of the corporation in defending a civil or criminal action, suit or
proceeding shall be paid by the corporation in advance of the final disposition
of such action, suit or proceeding and expenses incurred by an employee or agent
in defending a civil or criminal action, suit or proceedings may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the Director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the corporation as
authorized in this Article XII, and an affirmation by such person of his good
faith belief that he has met the applicable standard of conduct. Such written
undertaking shall be an unlimited obligation but need not be secured and it may
be accepted without reference to financial ability to make repayment.
The corporation shall advance such expenses, if requested, by payment
directly to any third party billing for such expenses upon delivery of an
invoice for such expenses.
In the event the corporation shall be obligated to advance or pay the
expenses of any proceeding against an officer, director or other person seeking
indemnity hereunder, the corporation,
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if appropriate, shall be entitled to assume the defense of such proceeding, with
counsel approved by the person to be indemnified, upon the delivery to such
person of written notice of its election to do so. After delivery of such
notice, approval of such counsel by the person to be indemnified, and the
retention of such counsel by the corporation, the corporation will not be liable
to the person to be indemnified, for any fees of counsel subsequently incurred
by such person with respect to the same proceeding, provided that (i) such
person shall have the right to employ his own counsel in any such proceeding at
his own expense; and (ii) if (a) the employment of counsel by such person has
been previously authorized by the corporation, (b) such person shall have
reasonably concluded that there may be a conflict of interest between the
corporation and such person in the conduct of any such defense, or (c) the
corporation shall not, in fact, have employed counsel to assume the defense of
such proceeding, then the fees and expenses of any counsel retained by such
person shall be at the expense of the corporation.
Section 6. OTHER INDEMNITY. The indemnification and advancement of
expenses provided or granted pursuant to the other sections of this Article XII
shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any Bylaw,
agreement, vote of Stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office.
Section 7. INSURANCE INDEMNIFICATION. The corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation, as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status
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as such, whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this Article XII.
Section 8. THE CORPORATION. For purposes of this Article XII, references
to "the Corporation" shall include, in addition to the resulting corporation,
any foreign or domestic constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under and subject to
the provisions of this Article XII with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
Section 9. EMPLOYEE BENEFIT PLANS. For purposes of this Article XII,
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the corporation" shall include any service as a director, officer, employee
or agent of the corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article XII.
Section 10. CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article XII
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shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person, and further, the provisions of this Article XII shall continue to be
applicable for matters occurring prior to the revocation or amendment of this
Article XII if it is revoked or amended to eliminate or reduce the effect of
this Article XII.
Section 11. CONSTRUCTION. Nothing herein is intended to require or shall
be construed as requiring the corporation to do or fail to do any act in
violation of applicable law. The provisions hereto shall be severable such that
if any portion hereof shall be invalidated on any ground by any court of
competent jurisdiction, then the corporation shall nevertheless indemnify the
applicable officer, director, employee or other person to the full extent
permitted by any applicable portion hereof that shall not have been invalidated,
and the balance of this Article XII not so invalidated shall be enforceable in
accordance with its terms.
Section 12. REPORTING. Any indemnification or advancement of expenses in
accordance with this Article XII shall be reported to the shareholders of the
corporation with the notice of the next annual shareholders meeting.
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CREDIT AGREEMENT
CREDIT AGREEMENT (this "AGREEMENT") dated as of September 1, 1998, between
THE MERIDIAN RESOURCE CORPORATION, a Texas corporation (the "BORROWER"), and
NATIONSBANK, N.A., a national banking association (the "BANK").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. BASIC DEFINITIONS. As used in this Agreement, the following
terms have the following meanings:
"APPLICABLE MARGIN" means 2.00%.
"COMMITMENT" means the obligation of the Bank to make Loans to the
Borrower in an aggregate principal amount at any time outstanding up to
but not exceeding $10,000,000, as the same may be reduced or terminated
pursuant to this Agreement.
"FEE" means a commitment fee in the amount of $25,000.
"GUARANTY" means the guaranty of Cairn Energy USA, Inc., The
Meridian Resource & Exploration Company, The Meridian Production
Corporation, The Meridian Resource Corporation, a Delaware corporation,
and Louisiana Onshore Properties, Inc., in substantially the form of
Exhibit B.
"PRINCIPAL OFFICE" means the office of the Bank located at 901 Main
Street, Dallas, Texas 75202.
"TERMINATION DATE" means December 31, 1998.
SECTION 1.02. ADDITIONAL DEFINITIONS. As used in this Agreement, the
following terms have the following meanings.
"ADJUSTED EURODOLLAR RATE" means, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined by the Bank to be equal
to the quotient obtained by dividing (a) the Eurodollar Rate for such
Eurodollar Loan for such Interest Period by (b) 1 minus the Reserve
Requirement for such Eurodollar Loan for such Interest Period.
"BASE RATE" means, for any day, the rate per annum equal to the
higher of (a) the Federal Funds Rate for such day plus one-half of one
percent (.5%) and (b) the Prime Rate for such day. Any change in the Base
Rate due to a change in the Prime Rate or the Federal
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Funds Rate shall be effective on the effective date of such change in the
Prime Rate or Federal Funds Rate.
"BASE RATE LOANS" means Loans that bear interest at rates based upon
the Base Rate.
"Business Day" means any day except a Saturday, Sunday, or other day
on which banks in the State where the Principal Office is located are
authorized by law to close and, if the applicable Business Day relates to
Eurodollar Loans, on which commercial banks in London are open for
international business (including dealings in Dollar deposits in the
London interbank market).
"COMMITTED LOANS" has the meaning specified in Section 2.01.
"CONTINUE", "CONTINUATION" and "CONTINUED" shall refer to a
continuation pursuant to Section 2.07 of a Eurodollar Loan or Money Market
Loan as a Loan of the same Type from one Interest Period to the next
Interest Period.
"CONVERT", "CONVERSION", and "CONVERTED" shall refer to the
conversion pursuant to Section 2.07 or Article III of one Type of Loan
into another Type of Loan.
"DEBTOR RELIEF LAWS" means the Bankruptcy Code of the United States
of America and all other applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, receivership, insolvency,
reorganization, suspension of payments, or similar debtor relief laws from
time to time in effect affecting the rights of creditors generally.
"DEFAULT" means an Event of Default or the occurrence of an event or
condition that with notice or lapse of time or both would become an Event
of Default.
"DEFAULT RATE" means, with respect to any principal of any Loan or
any other amount payable by the Borrower under this Agreement or any other
Loan Document that is not paid when due (whether at stated maturity, by
acceleration, or otherwise), a rate per annum during the period from and
including the due date to but excluding the date on which such amount is
paid in full equal to two percent (2%) plus the Base Rate as in effect
from time to time plus the Applicable Margin for Base Rate Loans (provided
that, if the amount in default is principal of a Eurodollar Loan and the
due date thereof is a day other than the last of the Interest Period
therefor, two percent (2%) plus the interest rate for such Loan as
provided in Section 2.05(b) and, thereafter, the rate provided for above
in this definition).
"DOLLARS" and "$" mean lawful money of the United States of America.
"EURODOLLAR LOANS" means Loans that bear interest at rates based
upon the Adjusted Eurodollar Rate.
"EURODOLLAR RATE" means, for any Eurodollar Loan for any Interest
Period therefor, the rate per annum appearing on Telerate Page 3750 (or
any successor page) as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two
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Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period. If for any reason such rate is not
available, the term "Eurodollar Rate" shall mean, for any Eurodollar Loan
for any Interest Period therefor, the rate per annum appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two Business Days prior
to the first day of such Interest Period for a term comparable to such
Interest Period; PROVIDED, HOWEVER, if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean
of all such rates.
"EVENT OF DEFAULT" has the meaning specified in Section 7.01.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business
day next succeeding such day; PROVIDED that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day as so published on
the next succeeding Business Day, and (b) if no such rate is so published
on such next succeeding Business Day, the Federal Funds Rate for such day
shall be the average rate charged to the Bank on such day on such
transactions as determined by the Bank.
"FINANCIAL STATEMENTS" means the unaudited June 30, 1998 financial
statements of the Borrower and the Subsidiaries most recently furnished to
the Bank prior to the date of this Agreement.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state
or political subdivision thereof, any central bank (or similar monetary or
regulatory authority), and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government.
"INTEREST PERIOD" means: (i) with respect to any Eurodollar Loan,
each period commencing on the date such Eurodollar Loan is made or
Converted from a Loan of another Type or the last day of the next
preceding Interest Period with respect to such Eurodollar Loan, and ending
on the numerically corresponding day in the first, second, third, or sixth
calendar money thereafter, as the Borrower may select as provided in
Section 2.09, except, that each such Interest Period which commences on
the last Business Day of a calendar month (or on any day for which there
is no numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Business Day of the appropriate subsequent
calendar month, and (ii) with respect to any Money Market Loan, each
period commencing on the date such Loan is made or converted from a Loan
of another Type or on the last day of the preceding Interest Period with
respect to such Loan, and ending on the number of days thereafter (but not
less than 7 or more than 180 days) as may be agreed to by the Borrower and
the Bank pursuant to Section 2.02.
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Notwithstanding the foregoing: (a) each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, in the case of Eurodollar Loans, if such
succeeding Business Day falls in the next succeeding calendar month, on
the next preceding Business Day); (b) any Interest Period which would
otherwise extend beyond the Termination Date shall end on the Termination
Date; (c) no more than 3 Interest Periods for Eurodollar Loans or Money
Market Loans shall be in effect at the same time; and (d) no Interest
Period shall have a duration of less than 1 month (in the case of
Eurodollar Loans) or 7 days (in the case of Money Market Loans) and, if
the Interest Period for any Eurodollar Loan or Money Market Loan would
otherwise be a shorter period, such Eurodollar Loan or Money Market Loan
shall not be available hereunder.
"LOAN DOCUMENTS" means this Agreement, the Note, the Guaranty and
all other documents, instruments, and agreements executed or delivered
pursuant to or in connection with this Agreement, ad the same may be
amended, modified, renewed, extended or supplemented.
"LOANS" means Committed Loans and Money Market Loans.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
financial condition or business operations of the Borrower and the
Subsidiaries taken as a whole, (b) the ability of the Borrower to pay and
perform its obligations under any Loan Document, or (c) the validity or
enforceability of any Loan Document or the rights and remedies of the Bank
thereunder.
"MONEY MARKET LOAN" has the meaning specified in Section 2.02.
"MONEY MARKET RATE" has the meaning specified in Section 2.02.
"NOTE" has the meaning specified in Section 2.03.
"PERSON" means any individual, corporation, company, joint venture,
association, partnership, trust, unincorporated organization, Governmental
Authority, or other entity.
"PRIME RATE" means the per annum rate of interest established from
time to time by the Bank as its prime rate, which rate may not be the
lowest rate of interest charged by the Bank to its customers.
"QUARTERLY DATE" means the last day of each March, June, September
and December of each year, the first of which shall be the first such day
after the date of this Agreement.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"RESERVE REQUIREMENT" means, at any time, the maximum rate at which
reserves (including any marginal, special, supplemental or emergency
reserves) are required to be maintained under regulations issued from time
to time by the Board of Governors of the
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Federal Reserve System (or any successor) by member banks of the Federal
Reserve System in New York City with deposits exceeding one billion
dollars against "Eurocurrency liabilities" (as such term is used in
Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by
such member banks with respect to (i) any category of liabilities which
includes deposits by reference to which the Adjusted Eurodollar Rate is to
be determined, or (ii) any category of extensions of credit or other
assets which include Eurodollar Loans. The Adjusted Eurodollar Rate shall
be adjusted automatically on and as of the effective date of any change in
the Reserve Requirement.
"SUBSIDIARY" means, any corporation or other entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing
similar functions are at the time directly or indirectly owned by the
Borrower.
"TYPE" means any type of Loan (i.e., Base Rate Loan, Eurodollar Loan
or Money Market Loan).
ARTICLE II
LOANS
SECTION 2.01. LOANS. Subject to the terms and conditions of this
Agreement, the Bank agrees to make one or more loans ("COMMITTED LOANS") to the
Borrower from time to time from and including the date hereof to but excluding
the Termination Date, provided that the aggregate principal amount of the Loans
at any time outstanding to the Borrower shall not exceed the amount of the
Commitment. Subject to the foregoing limitations, and the other terms and
provisions of this Agreement, the Borrower may borrow, repay, and reborrow
hereunder the amount of the Commitment by means of Base Rate Loans and
Eurodollar Loans.
SECTION 2.02. MONEY MARKET LOANS. In addition to Committed Loans pursuant
to Section 2.01, the Borrower in accordance with the terms hereof may from time
to time to but excluding the Termination Date request offers from the Bank for
loans (each a "MONEY MARKET LOAN") on a specific date, at a fixed rate of
interest (the "MONEY MARKET RATE"), and for an Interest Period quoted by the
Bank. Upon receipt of each such request for a Money Market Loan offer, the Bank
may, but shall have no obligation to, offer to make such Money Market Loan on
such terms and conditions as the Bank may determine at such time. The Borrower
may accept each such offer for a Money Market Loan by submitting to the Bank a
notice of borrowing pursuant to Section 2.09.
SECTION 2.03. NOTE. The Loans made by the Bank to the Borrower shall be
evidenced by a single promissory note of the Borrower in substantially the form
of Exhibit A, dated the date hereof, payable to the order of the Bank in a
principal amount equal to the Commitment as originally in effect and otherwise
duly completed (as from time to time amended, modified, renewed, or extended,
the "NOTE").
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SECTION 2.04. REPAYMENT OF LOANS. The Borrower shall pay to the Bank the
outstanding principal amount of the Loans borrowed by it on the Termination Date
and, in the case of Money Market Loans, on the last day of the applicable
Interest Period quoted by the Bank pursuant to Section 2.02.
SECTION 2.05. INTEREST. The Borrower shall pay to the Bank interest on the
unpaid principal amount of each Loan borrowed by it for the period commencing on
the date of such Loan to but excluding the date such Loan shall be paid in full,
at the following rates per annum:
(a) during the periods such Loan is a Base Rate Loan, the Base Rate;
(b) during the period such Loan is a Eurodollar Loan, the Adjusted
Eurodollar Rate PLUS the Applicable Margin; and
(c) during such periods such Loan is a Money Market Loan, the Money
Market Rate for such Loan.
Notwithstanding the foregoing, the Borrower shall pay to the Bank interest at
the Default Rate on any principal of any Loan borrowed by it and (to the fullest
extent permitted by law) on any other amount payable by the Borrower under this
Agreement or any other Loan Document which is not paid in full when due (whether
at stated maturity, by acceleration, or otherwise), for the period from and
including the due date thereof to but excluding the date the same in paid in
full. Accrued interest on the Loans shall be due and payable as follows: (i) in
the case of the Base Rate Loans, on each Quarterly Date; (ii) in the case of
each Eurodollar Loan, on the last day of the Interest Period with respect
thereto and, in the case of an Interest Period greater than three months, at
three-month intervals after the first day of such Interest Period; (iii) in the
case of each Money Market Loan on the last day of the Interest Period in respect
thereto, and in the case of an Interest Period greater than 90 days, at 90-day
intervals after the first day of such Interest Period; (iv) upon the payment or
prepayment of any Loan or the Conversion of any Loan to a Loan of another Type
(but only on the principal amount so paid, prepaid or Converted); and (v) on the
Termination Date; provided that interest payable at the Default Rate shall be
payable from time to time on demand.
SECTION 2.06. BORROWING PROCEDURE. The Borrower shall give the Bank notice
of each borrowing by it hereunder in accordance with Section 2.09. Not later
than 2:00 p.m. (at the Principal Office) on the date specified for each
borrowing hereunder, the Bank will make available the amount of the Loan to be
made by it on such date to the Borrower by depositing the same, in immediately
available funds, in an account of the Borrower (designated by the Borrower)
maintained with the Bank at the Principal Office or as otherwise directed by the
Borrower.
SECTION 2.07. PREPAYMENTS, CONVERSIONS AND CONTINUATIONS OF LOANS. Subject
to Section 2.08, the Borrower shall have the right from time to time to prepay
the Loans borrowed by it, or to Convert all or part of a Loan borrowed by it of
one Type into a Loan of another Type or to Continue Eurodollar Loans or Money
Market Loans borrowed by it, provided that: (a) the Borrower shall give the Bank
notice of each such prepayment, Conversion or Continuation as provided in
Section 2.09, (b) Eurodollar Loans and Money Market Loans may only be Converted
on the last day of the Interest Period, (c) the Borrower may not Continue a
Money Market Loan or Convert a Loan borrowed by
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it into a Money Market Loan unless the Borrower and the Bank shall have agreed
upon the rate of interest and the Interest Period for such Loan in accordance
with Section 2.02, and (d) except for Conversions into Base Rate Loans, no
Conversions or Continuations shall be made while a Default has occurred and is
continuing.
SECTION 2.08. MINIMUM AMOUNTS. Except for Conversions and prepayments
pursuant to Article III, each borrowing, each Conversion and each prepayment of
principal of the Loans shall be in an amount at least equal to $1,000,000.
Anything in this Agreement to the contrary notwithstanding, the aggregate
principal amount of Eurodollar Loans having the same Interest Period shall be at
least equal to $1,000,000.
SECTION 2.09. CERTAIN NOTES. Notices by the Borrower to the Bank of a
termination or reduction of the Commitment, of borrowing, Conversions,
Continuations and optional prepayments of Loans and of the duration of Interest
Periods shall be irrevocable and shall be effective only if received by the Bank
not later than 11:00 a.m. (local time at the Principal Office) on the number of
business Days prior to the date of the relevant termination, reduction,
borrowing, Conversion, Continuation or prepayment or the first day of such
Interest Period specified below:
NUMBER OF BUSINESS
NOTICE DAYS PRIOR
- - ------------------------------------ ------------------------
Termination or reduction of Commitment 2
Borrowing or prepayment of, or
Conversion into, Base Rate Loans same day
Borrowing or prepayment of,
Conversions into, Continuations as, or
duration of Interest Periods for,
Eurodollar Loans
Borrowing or prepayment of, 2
Conversions into, Continuations as
duration of Interest Periods for,
Money Market Loans , or same day
Each such notice of termination or reduction shall specify the amount of the
Commitment to be terminated or reduced. Each such notice of borrowing,
Conversion, Continuation or optional prepayment shall specify (a) the amount and
Type of the Loan to be borrowed, Converted, Continued or prepaid (and, in the
case of a Conversion, the Type of Loan to result from such Conversion), (b) the
date of borrowing, Conversion, Continuation or prepayment (which shall be a
Business Day), and (c) in the case of a Eurodollar Loan or Money Market Loan, or
Conversion to or Continuation of a Eurodollar Loan or Money Market Loan, the
duration of the Interest Period. In the event the Borrower fails to select the
Type of Loan, or the duration of any Interest Period for any Eurodollar Loan or
Money Market Loan, within the time period and otherwise as provided in this
Section 2.08, such Loan (if outstanding as a Eurodollar Loan or Money Market
Loan) will be automatically
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Converted into a Base Rate Loan on the last day of the preceding Interest Period
for such Loan or (if outstanding as a Base Rate Loan) will remain as, or (if not
then outstanding) will be made as, a Base Rate Loan.
SECTION 2.10. USE OF PROCEEDS. The proceeds of the Loans shall be used by
the Borrower for working capital and other lawful corporate purposes in the
ordinary course of business. The Borrower will not, directly or indirectly, use
any part of such proceeds for the purpose of purchasing or carrying any margin
stock within the meaning of Regulations G, U, T or X of the Board of Governors
of the Federal Reserve System.
SECTION 2.11. FEE. In consideration of the commitment of the Bank
hereunder, the Borrower agrees to pay to the Bank the Fee on the date hereof.
SECTION 2.12. COMPUTATIONS. Interest payable by the Borrower hereunder and
under the other Loan Documents shall be computed on the basis of a year of 360
days and the actual number of days elapsed (including the first day but
excluding the last day) occurring in the period for which payable.
SECTION 2.13. REDUCTION OR TERMINATION OF COMMITMENT. The Borrower shall
have the right to irrevocably terminate or reduce in part the unused portion of
the Commitment at any time and from time to time, provided that: (a) the
Borrower shall give notice of each such termination or reduction s provided in
Section 2.09; and (b) each partial reduction shall be in an aggregate amount at
least equal to $1,000,000.
SECTION 2.14. PAYMENTS. All payments of principal, interest and other
amounts to be made by the Borrower under this Agreement and other Loan Documents
shall be made to the Bank at the Principal Office in Dollars and in immediately
available funds, without setoff, deduction or counterclaim. Whenever any payment
under this Agreement or any other Loan Document shall be stated to be due on a
day that is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time in such case shall be included in the
computation of interest, as applicable.
ARTICLE III
CHANGE IN CIRCUMSTANCES
SECTION 3.01. INCREASED COST AND REDUCED RETURN.
(a) If, after the date hereof, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any Governmental
Authority charged with the interpretation or administration thereof, or
compliance by the Bank with any request or directive (whether or not having the
force of law) of any such Governmental Authority:
(i) shall subject the Bank to any tax, duty or other charge with
respect to any Eurodollar Loans or Money Market Loans, the Note execute by
the Borrower, or its
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obligation to make Eurodollar Loans or Money Market Loans, or change the
basis of taxation of any amounts payable to the Bank under this Agreement
or the Note in respect of any Eurodollar Loans or Money Market Loans
(other than taxes imposed on the overall net income of the Bank by the
jurisdiction in which the Bank has its Principal Office);
(ii) shall impose or modify any reserve, special deposit, or similar
requirement (other than the Reserve Requirement utilized in the
determination of the Adjusted Eurodollar Rate) relating to any extensions
of credit or other assets of, or any deposits with or other liabilities or
commitments of, the Bank (including the Commitment); or
(iii) shall impose on the Bank or on the London interbank market any
other condition affecting this Agreement or the Note or any of such
extensions of credit or liabilities or commitments:
and the result of any of the foregoing is to increase the cost to the Bank of
making, Converting into, Continuing, or maintaining any Eurodollar Loans or
Money Market Loans or to reduce any sum received or receivable by the Bank under
this Agreement or the Note executed by the Borrower with respect to any
Eurodollar Loans or Money Market Loans, then the Borrower shall pay to the Bank
on demand such amount or amounts as will compensate the Bank for such increased
cost or reduction.
(b) If the Bank shall have determined that the adoption of any applicable
law, rule, or regulation regarding capital adequacy or any change therein or in
the interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such Governmental Authority, has or would have the effect of reducing the
rate of return on the capital of the Bank or any corporation controlling the
Bank as a consequence of the Bank's obligations hereunder to a level below that
which the Bank or such corporation could have achieved but for such adoption,
change, request, or directive (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by the Bank to be material,
then from time to time upon demand the Borrower shall pay to the Bank such
additional amount or amounts as will compensate the Bank for such reduction.
(c) A certificate of the Bank claiming compensation under this Section and
setting forth the additional amount or amounts to be paid to it hereunder shall
be conclusive in the absence of clearly demonstrable error. In determining such
amount, the Bank may use any reasonable averaging and attribution methods.
SECTION 3.02. LIMITATION ON EURODOLLAR LOANS. If on or prior to the first
day of any Interest Period for any Eurodollar Loan:
(a) the Bank determines (which determination shall be conclusive) that by
reason of circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate, for such Interest
Period; or
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(b) the Bank determines (which determination shall be conclusive) that the
Adjusted Eurodollar Rate will not adequately and fairly reflect the cost to the
Bank of funding Eurodollar Loans, for such Interest Period; than the Bank shall
give the Borrower prompt notice thereof, and so long as such condition remains
in effect, the Bank shall be under no obligation to make additional Eurodollar
Loans, Continue Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar
Loans and the Borrower shall, on the last day(s) of the then current Interest
Period(s) for the outstanding Eurodollar Loans, either prepay such Loans or
Convert such Loans into Base Rate Loans in accordance with the terms of this
Agreement.
SECTION 3.03. ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for the Bank to make, maintain,
or fund Eurodollar Loans hereunder, then the Bank shall promptly notify the
Borrower thereof and the Bank's obligation to make or Continue Eurodollar Loans
and to Convert Base Rate Loans into Eurodollar Loans shall be suspended until
such time as the Bank may again make, maintain, and fund Eurodollar Loans and
the Borrower shall, on the last day of the Interest Period for each outstanding
Eurodollar Loan (or earlier, if required by law), either prepay such Loans or
Convert such Loans into Base Rate Loans in accordance with the terms of this
Agreement.
SECTION 3.04. COMPENSATION. Upon the request of the Bank, the Borrower
shall pay to the Bank such amount or amounts as shall be sufficient (in the
reasonable opinion of the Bank) to compensate it for any loss, cost, or expense
incurred by it as a result of:
(a) any payment, prepayment or Conversion of a Eurodollar Loan or Money
Market Loan for any reason (including, without limitation, the acceleration of
the Loans pursuant to Section 7.02) on a date other than the last day or an
Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including, without
limitation, the failure of any conditions precedent specified in Article IV to
be satisfied) to borrow, Convert, Continue, or prepay a Eurodollar Loan or Money
Market Loan on the date for such borrowing, Conversion, Continuation, or
Conversion or prepayment specified in the relevant notice of borrowing,
prepayment, Continuation, or Conversion under this Agreement.
Without limiting the effect of the preceding sentence, such compensation shall
include any loss, cost, or expense incurred in obtaining, liquidating, or
employing deposits from third parties (including loss of margin).
SECTION 3.05. TAXES.
(a) Any and all payments by the Borrower to or for the account of the Bank
hereunder or under any other Loan document shall be made free and clear of and
without deduction for any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, EXCLUDING, in the case of the Bank, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which the
Bank is organized or any political subdivision thereof (all such non-excluded
taxes, duties, levies, imposts, deductions,
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charges, withholdings, and liabilities being hereinafter referred to as
"TAXES"). If the Borrower shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder or under any Loan Document to the Bank,
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 3.05) the Bank receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower shall make
such deductions, (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law, and (iv) the Borrower shall furnish to the Bank, at its address referred to
in Section 8.07 the original or a certified copy of a receipt evidencing payment
thereof.
(b) In addition, the Borrower agrees to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes or charges or
similar levies which arise from any payment made hereunder or under any Loan
Document or from the execution or delivery of, or otherwise with respect to,
this Agreement or any other Loan Document (hereinafter referred to as "OTHER
TAXES").
(c) The Borrower agrees to indemnify the bank for the full amount of Taxes
and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed
or asserted by any jurisdiction on amounts payable under this Section 3.05) paid
by the Bank and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto.
ARTICLE IV
CONDITIONS
SECTION 4.01. INITIAL LOAN. The obligation of the Bank to make the initial
Loan to the Borrower hereunder is subject to the satisfaction of the following
conditions:
(a) receipt by the Bank of the duly executed Note and Guaranty; and
(b) receipt by the Bank of all documents that the Bank may request
relating to the existence of the Borrower, the authorization for and the
validity of the Loan Documents, and any other matters relevant thereto, all in
form and substance satisfactory to the bank.
SECTION 4.02. EACH LOAN. The obligation of the Bank to make any Loan
(including the initial Loan) to the Borrower is subject to the satisfaction of
the following conditions precedent:
(a) receipt by the Bank of a notice of borrowing in accordance with
Section 2.06;
(b) the fact that immediately after the making of such Loan, the aggregate
outstanding principal amount of the Loans made to the Borrower will not exceed
the amount of the Commitment;
(c) the fact that immediately before and after such Loan, no Default shall
have occurred and be continuing; and
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(d) the fact that the representations and warranties of the Borrower
contained in this Agreement and the other Loan Documents shall be true and
correct on and as of the date of such Loan.
Each borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such borrowing that the conditions precedent
specified in clauses (b), (c), and (d) of this Section have been satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. EXISTENCE. Each of the Borrower and the Subsidiaries (a) is
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its organization; and (b) has the requisite power and authority
and legal right to own its assets and carry on its business as now being or as
proposed to be conducted. Each of the Borrower and the Subsidiaries has the
power, authority, and legal right to execute, deliver, and perform its
obligations under the Loan Documents to which it is a party.
SECTION 5.02. FINANCIAL STATEMENTS. The Financial Statements are complete
and correct, have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis, and fairly and accurately present the
financial condition of the Borrower and the Subsidiaries as of the respective
dates indicated therein and the results of operations for the respective periods
indicated therein. Since the effective date of the Financial Statements, no
event or condition has occurred that could have a Material Adverse Effect.
SECTION 5.03. AUTHORIZATION: NO BREACH. The execution, delivery, and
performance by each of the Borrower and the Subsidiaries of the Loan Documents
to which it is a party and compliance with the terms and provisions thereof have
been duly authorized by all requisite action on the part of the Borrower and
each such Subsidiary and do not and will not (a) violate or conflict with, or
result in a breach of, or require any consent under (i) the articles of
incorporation, bylaws, rule, or regulation or any order, writ, injunction, or
decree of any Governmental Authority or arbitrator, or (iii) any agreement or
instrument to which the Borrower or any such Subsidiary is a party or by which
any of them or any of their property is bound or subject, or (b) constitute a
default under any such agreement or instrument.
SECTION 5.04. LITIGATION. Except as disclosed in the Borrower's Form 10-Q
for the fiscal quarter ended June 30, 1998 filed with the Securities and
Exchange Commission, there is no action, suit, investigation, or proceeding
before or by any Governmental Authority or arbitrator pending, or to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
Subsidiary, that could, if adversely determined, have a Material Adverse Effect.
SECTION 5.05. ENFORCEABILITY. This Agreement constitutes, and the other
Loan Documents when executed and delivered by the Borrower and each Subsidiary
party thereto shall constitute, the legal, valid, and binding obligations of the
Borrower and such Subsidiary, enforceable against the
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Borrower and such Subsidiary in accordance with their respective terms, except
as limited by applicable Debtor Relief Laws and general principles of equity.
SECTION 5.06. APPROVALS. No authorization, approval, or consent of, and no
filing or registration with, any Governmental Authority or third party is or
will be necessary for the execution, delivery, or performance by the Borrower or
any Subsidiary of any of the Loan Documents to which it is a party or for the
validity or enforceability thereof.
SECTION 5.07. DISCLOSURE. No statement, information, report,
representation, or warranty made by the Borrower in any Loan Document or
furnished to the Bank in connection with any Loan Document contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements herein or therein not misleading.
ARTICLE VI
COVENANTS
The Borrower agrees that, so long as the Bank has any Commitment hereunder
or any amount payable under either Note remains unpaid:
SECTION 6.01. INFORMATION. The Borrower shall deliver to the Bank:
(a) as soon as available and in any event within 105 days after the end of
each fiscal year of the Borrower a consolidated balance sheet of the Borrower
and the Subsidiaries as of the end of such fiscal year and the related
consolidated statements of income and cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous fiscal year,
all prepared in accordance with generally accepted accounting principles applied
on a consistent basis and certified by independent public accountants of
nationally recognized standing;
(b) as soon as available and in any event within 50 days after the end of
each of the first three quarters of each fiscal year of the Borrower a
consolidated balance sheet of the Borrower and the Subsidiaries as of the end of
such quarter and the related consolidated statements of income and cash flows
for such quarter, setting forth in each case in comparative form the figures for
the corresponding quarter and the corresponding portion of the Borrower's
previous fiscal year, all in reasonable detail and duly certified (subject to
normal year-end adjustments) by the chief financial officer of the Borrower as
having been prepared in accordance with generally accepted accounting principles
applied on a consistent basis;
(c) within three (3) days after any officer of the Borrower obtains
knowledge of any Default, a certificate of the chief financial officer of the
Borrower setting forth the details thereof and any action that the Borrower is
taking or proposes to take with respect thereto; and
(d) from time to time such additional information regarding the financial
condition or business of the Borrower and the Subsidiaries as the Bank may
reasonably request.
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SECTION 6.02. OBLIGATIONS. The Borrower shall, and shall cause each of the
Subsidiaries to:
(a) preserve and maintain all of its right, privileges, and franchises
necessary or desirable in the normal conduct of its business;
(b) except as, individually or in the aggregate, would not have a Material
Adverse Effect, comply with the requirements of all applicable laws, rules,
regulations, and orders of Governmental Authorities:
(c) pay and discharge when due all taxes, assessments, and governmental
charges or levies imposed on it or on its income or profits or any of its
property, except for any such tax, assessment, charge, or levy the payment of
which is being contested in good faith and by proper proceedings and against
which adequate reserves are being maintained;
(d) maintain all of its properties useful and necessary in its business in
accordance with past practices and customary industry norms, (x) ordinary wear
and tear and (y) casualty events which could not reasonably be expected to have
a Material Adverse Effect, excepted;
(e) permit representatives of the Bank, during normal business hours, to
examine, copy, and make abstracts from its books and records, to inspect its
properties, and to discuss its business and affairs with its officers,
directors, and accountants; and
(f) maintain insurance in such amounts, with such deductibles, and against
such risks as is customary for similarly situated businesses.
ARTICLE VII
DEFAULT
SECTION 7.01. EVENTS OF DEFAULT. Each of the following shall constitute an
"EVENT OF DEFAULT":
(a) the Borrower shall fail to pay when due any principal of any Loan, or
the Borrower shall fail to pay when due any interest or other amount payable by
it under any Loan Document and such failure continues for a period of three
Business Days.
(b) any representation, warranty, certification, or statement made or
deemed made by the Borrower in any Loan document or in any certificate,
financial statement, or other document delivered pursuant thereto shall be
false, misleading, or incorrect in any material respect when made or deemed
made.
(c) the Borrower shall fail to perform, observe, or comply with any
covenant, agreement, or term contained in Section 6.01 of this Agreement.
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(d) the Borrower shall fail to perform, observe, or comply with any other
covenant, agreement, or term contained in any Loan Document (other than a
failure covered elsewhere in this Section 7.01 and such failure shall continue
for a period of thirty (30) days after notice thereof to the Borrower by the
Bank.
(e) an "Event of Default" shall occur under and as defined in that certain
$250,000,000 Amended and Restated Credit Agreement dated as of May 22, 1998,
among the Borrower, the several lenders party thereto including the Lender, and
certain agents, as such Amended and Restated Credit Agreement has been or is
hereafter amended so long as the Lender is a party thereto.
SECTION 7.02. REMEDIES. If any Event of Default shall occur and be
continuing, the Bank may do any one or more of the following:
(a) ACCELERATION. Declare all outstanding principal of and accrued and
unpaid interest on the Note and all other amounts payable by the Borrower under
the Loan Documents immediately due and payable, and the same shall thereupon
become immediately due and payable, without presentment, demand, protest, notice
of acceleration, notice of intent to accelerate, or other notices or formalities
of any kind, all of which are hereby expressly waived by the Borrower.
(b) TERMINATION OF COMMITMENT. Terminate the Commitment without notice to
the Borrower.
(c) RIGHTS. Exercise any and all rights and remedies afforded by
applicable law or otherwise including making demand under the Guaranty.
Notwithstanding the foregoing, upon the occurrence of an "Event of Default"
under Section 9.01(f) of the above-described Amended and Restated Credit
Agreement, the Commitment shall automatically terminate, and the outstanding
principal of and accrued and unpaid interest on the Note and all other amounts
payable by the Borrower under the Loan Documents shall thereupon become
immediately due and payable without presentment, demand, protest, notice of
acceleration, notice of intent to accelerate, or other notices or formalities of
any kind, all of which are hereby expressly waived by the Borrower.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. EXPENSES. The Borrower shall on demand pay or reimburse the
Bank for paying (a) all reasonable costs and expenses of the Bank, including the
fees and disbursements of counsel for the Bank in connection with the
administration of the Loan documents, the preparation of any waiver or consent
thereunder or any amendment thereof or any Default or alleged Default and (b) if
an Event of Default occurs, all costs and expenses incurred by the Bank,
including the fees and disbursements of counsel (including the allocated cost of
internal counsel), in connection with such Event of Default and any collection,
bankruptcy, insolvency, and other enforcement proceedings resulting therefrom.
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SECTION 8.02. INDEMNIFICATION. THE BORROWER AGREES TO INDEMNIFY THE BANK
AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, AND AGENTS (EACH AN INDEMNIFIED PERSON") FROM, AND HOLD EACH OF THEM
HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES,
JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES, INCLUDING ALL FEES AND
DISBURSEMENTS OF COUNSEL (INCLUDING THE ALLOCATED COST OF INTERNAL COUNSEL)
(COLLECTIVELY THE "INDEMNIFIED LIABILITIES"), WHICH DIRECTLY OR INDIRECTLY ARISE
FROM OR RELATE TO ANY LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREBY, BUT EXCLUDING ANY OF THE FOREGOING TO THE EXTENT CAUSED BY THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PERSON. WITHOUT LIMITING ANY
PROVISION OF ANY LOAN DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES
HERETO THAT EACH INDEMNIFIED PERSON SHALL BE INDEMNIFIED FROM AND HELD HARMLESS
AGAINST ANY AND ALL INDEMNIFIED LIABILITIES ARISING OUT OF OR RESULTING FROM THE
SOLE OR CONTRIBUTORY NEGLIGENCE OF THE INDEMNIFIED PERSON.
SECTION 8.03. RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default, the Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Bank (or
any of its affiliates) to or for the credit or the account of the Borrower
against any and all of the obligations of the borrower now or hereafter existing
under the Loan Documents, irrespective of whether the Bank shall have made any
demand under the Loan Documents and although such obligations may be unmatured.
The Bank agrees promptly to notify the Borrower after any such set-off and
application made by the Bank; PROVIDED, HOWEVER, that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Bank under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) that the Bank may have.
SECTION 8.04. NO WAIVER: CUMULATIVE REMEDIES. No failure on the part of
the Bank to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under any Loan document shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power, or privilege under any Loan document preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege. The
rights and remedies provided for in the Loan Documents are cumulative and not
exclusive of any rights and remedies provided by law.
SECTION 8.05. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns, except that the Borrower may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of the Bank.
The Bank may at any time and from time to time (a) grant participating interests
in the commitment and the Loans to any Person(s), and (b) assign all or any
portion of its rights and/or obligations under the Loan Documents to any
Person(s); PROVIDED, that the Bank may not assign its Commitment to any Person
(other than an affiliate of the Bank) without the prior written consent of the
Borrower. All information provided by the Borrower to the Bank may be furnished
by the Bank to its affiliates and to any actual or proposed assignee or
participant.
SECTION 8.06. AMENDMENTS. No amendment or waiver of any provision of any
Loan Document to which the Borrower is a party, nor any consent to any departure
by the Borrower
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<PAGE>
therefrom, shall be effective unless the same shall be agreed or consented to in
writing by the Bank and the Borrower, and each such waiver or consent shall be
effectively only in the specific instance and for the specific purpose for which
given.
SECTION 8.07. NOTICES. All notices, requests, and other communications to
either party hereunder shall be in writing (including facsimile transmission)
and shall be given to such party at its address or facsimile number set forth on
the signature pages hereof. Each such notice, request, or other communication
shall be effective (i) if given by facsimile transmission, when transmitted to
the facsimile number referred to in this Section and confirmation of receipt is
received, (ii) if given by mail, three (3) Business Days after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid, or (iii) if given by any other means, when delivered at
the address referred to in this Section; PROVIDED that notices to the Bank shall
not be effective until received.
SECTION 8.08. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 8.09. SEVERABILITY. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
SECTION 8.10. CONTROLLING AGREEMENT. Notwithstanding anything to the
contrary contained in any Loan Document, the interest paid or agreed to be paid
under the Loan documents shall not exceed the maximum rate of non-usurious
interest permitted by applicable law (the "MAXIMUM RATE"). If the Bank shall
receive interest in an amount that exceeds the Maximum Rate, the excessive
interest shall be applied to the principal of the Loans or, if it exceeds the
unpaid principal, refunded to the Borrower. In determining whether the interest
contracted for, charged, or received by the Bank exceeds the Maximum Rate, the
Bank may, to the extent permitted by applicable law, (a) characterize any
payment that is not principal as an expense, fee, or premium rather than
interest, (b) exclude voluntary prepayments and the effects thereof, and (c)
amortize, prorate, allocate, and spread in equal or unequal parts the total
amount of interest throughout the contemplated term of the Loans.
SECTION 8.11. SURVIVAL. All representations and warranties made or deemed
made by the Borrower in the Loan Documents shall survive the execution and
delivery thereof and the making of the Loans, and no investigation by the Bank
or any closing shall affect the representations and warranties by the Borrower
or the right of the Bank to rely upon them. Without prejudice to the survival of
any other obligation of the Borrower hereunder, the obligations of the Borrower
under Article III and Sections 8.01 and 8.02 shall survive repayment of the Note
and termination of the Commitment.
SECTION 8.12. GOVERNING LAW. This Agreement and the Note shall be governed
by and construed in accordance with, the law of the State where the Principal
Office is located and the applicable laws of the United States of America. The
Borrower hereby submits to the nonexclusive jurisdiction of the United States
District Court and each state court in the city where the Principal Office is
located for the purposes of all legal proceedings arising out of or relating to
any of the Loan
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<PAGE>
Documents or the transactions contemplated thereby. The Borrower irrevocably
consents to the service of any and all process in any such action or proceeding
by the mailing of copies of such process to the Borrower at its address set
forth underneath its signature hereto. The Borrower irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in an
inconvenient forum.
SECTION 8.13. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND EXPRESSLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO
ANY LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS
OF THE BANK IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
SECTION 8.14. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
<SIGNATURES ON NEXT PAGE>
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
BORROWER: THE MERIDIAN RESOURCE CORPORATION
By: /s/ P. RICHARD GESSINGER
Title: Executive Vice President
Address for Notices:
15995 N. Barkers Landing, Suite 300
Houston, Texas 77079
Facsimile No.:(713) 558-5595
Attention: Joseph A. Reeves, Jr.
BANK: NATIONSBANK, N.A.
By: /s/ AUTHORIZED SIGNATORY
Title:______________________________
Address for Notices:
700 Louisiana, 8th Floor
Houston, Texas 77002
Facsimile No.:(713) 247-6568
Attention: Jim Allred
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<PAGE>
EXHIBIT A
PROMISSORY NOTE
$10,000,000 September 1, 1998
FOR VALUE RECEIVED, the undersigned, THE MERIDIAN RESOURCE
CORPORATION, a Texas corporation (the "BORROWER"), hereby promises to pay to the
order of NATIONSBANK, N.A., a national banking association (the "BANK"), at the
Principal Office, in lawful money of the United States of America and in
immediately available funds, the principal amount of Ten Million Dollars
($10,000,000) or such lesser amount as shall equal the aggregate unpaid
principal amount of the Loans made by the Bank to the Borrower under the Credit
Agreement referred to below, on the dates and in the principal amounts provided
in the Credit Agreement, and to pay interest on the unpaid principal amount of
each such Loan, at such office, in like money and funds, for the period
commencing on the date of such Loan until such Loan shall be paid in full, at
the rates per annum and on the dates provided in the Credit Agreement.
The books and records of the Bank shall be prima facie evidence of all
amounts outstanding hereunder.
This Note is the Note referred to in the Credit Agreement of even date
herewith, between the Borrower and the Bank (such Credit Agreement, as the same
may be amended, modified, or supplemented from time to time, being referred to
herein as the "CREDIT AGREEMENT"), and evidences Loans made by the Bank
thereunder. The Credit Agreement, among other things, contains provisions for
acceleration of the maturity of this Note upon the happening of certain stated
events and for prepayments of Loans prior to the maturity of this Note upon the
terms and conditions specified in the Credit Agreement. Capitalized terms used
in this Note have the respective meanings assigned to them in the Credit
Agreement.
This Note shall be governed by and construed in accordance with the laws
of the State where the Principal Office is located and the applicable laws of
the United States of America.
THE MERIDIAN RESOURCE CORPORATION
By:_________________________________
Title:______________________________
A-1
<PAGE>
EXHIBIT B
GUARANTY
For value received, the sufficiency of which is hereby acknowledged, and,
in consideration of any credit and/or financial accommodation heretofore or
hereafter from time to time made or granted to The Meridian Resource
Corporation, a Texas corporation ("BORROWER"), by NationsBank, N.A. ("BANK"),
the undersigned (singly and collectively, "GUARANTOR") hereby jointly and
severally absolutely and unconditionally guarantee, as a guarantee of payment
and not merely as a guarantee of collection, prompt payment when due, whether at
stated maturity, upon acceleration or otherwise, and at all times thereafter, of
any and all existing and future indebtedness and liability of every kind, nature
and character, direct or indirect, absolute or contingent of Borrower to Bank
arising under that certain Credit Agreement dated September 1, 1998 between
Borrower and Bank (the "Credit Agreement") and all instruments, agreements and
other documents of every kind and nature now or hereafter executed in connection
with the Credit Agreement (including all renewals, extensions and modifications
thereof and all costs, attorneys' fees and expenses incurred by Bank in
connection with the collection or enforcement thereof) (collectively the
"GUARANTEED DEBT"). All payments by Guarantor hereunder shall be paid in full,
without setoff or counterclaim or and deduction or withholding whatsoever, or,
in the event that Guarantor or Bank is required by law to make any such
deduction or withholding, Guarantor shall pay to Bank such additional amounts as
will result in the receipt by Bank of the full amount payable hereunder. If and
to the extent any payment is not made when due hereunder, Bank may setoff and
charge from time to time any amount so due against any or all of Guarantor's
accounts or deposits with Bank or its affiliates.
The obligations of Guarantor hereunder shall be limited to an aggregate
amount equal to the largest amount that would not render its obligations
hereunder subject to avoidance under Section 548 of the United States Bankruptcy
Code or any comparable provisions of any applicable state law.
This Guaranty shall not be affected by the genuineness, validity,
regularity or enforceability of the Guaranteed Debt or any instrument or
agreement evidencing any Guaranteed Debt, or by the existence, validity,
enforceability, perfection, or extent of any collateral therefor, or by any fact
or circumstance relating to the Guaranteed Debt which might otherwise constitute
a defense to the Guaranty. Guarantor waives notice of the acceptance of this
Guaranty and of the extension or continuation of the Guaranteed Debt or any part
thereof. Guarantor further waives presentment, protest, notices of any kind,
demand, and diligence by Bank and action on delinquency in respect of the
Guaranteed Debt or any part thereof, including, without limitation any
provisions of law requiring Bank to exhaust any right or remedy or to take any
action against Borrower, any other guarantor or any other person, entity or
property before enforcing this Guaranty against Guarantor, including but not
limited to the benefits of Chapter 34 of the Texas Business and Commerce Code,
ss.17.001 of the Texas Civil Practice and Remedies Code, and Rule 31 of the
Texas Rules of Civil Procedure.
This Guaranty is a continuing and irrevocable guaranty of all Guaranteed
Debt now or hereafter existing and shall remain in full force and effect until
all Guaranteed Debt and any other amounts payable under this Guaranty are
indefeasibly paid and performed in full and any commitments of Bank or
facilities provided by Bank with respect to the Guaranteed Debt are
B-1
<PAGE>
terminated. Notwithstanding the preceding sentence, this Guaranty shall continue
to be effective or be reinstated, as the case may be, if at any time any payment
of any portion of Guaranteed Debt is rescinded or must otherwise be restored or
returned upon the insolvency, bankruptcy or reorganization of Borrower or
otherwise, as if such payment had not been made and whether or not Bank is in
possession of or has released this Guaranty. Guarantor shall exercise no right
of subrogation, contribution or similar rights with respect to any payments it
makes under this Guaranty until all of the Guaranteed Debt and any amounts
payable under this Guaranty are indefeasibly paid and performed in full and any
commitments of Bank or facilities provided by Bank with respect to the
Guaranteed Debt are terminated. If any amounts are paid to Guarantor in
violation of the foregoing limitation, then such amounts shall be held in trust
for the benefit of Bank and shall forthwith be paid to Bank to reduce the amount
of the Guaranteed Debt, whether matured or unmatured.
Guarantor agrees that Bank may, at any time and from time to time, and
without notice to Guarantor, make any agreement with Borrower or with any other
person or entity liable on any of the Guaranteed Debt or providing collateral as
security for the Guaranteed Debt, for the extension, renewal, payment,
compromise, discharge or release of the Guaranteed Debt or any collateral (in
whole or in part), or for any modification or amendment of the terms thereof or
of any instrument or agreement evidencing the Guaranteed Debt or the provision
of collateral, all without in any way impairing, releasing, discharging or
otherwise affecting the obligations of Guarantor under this Guaranty. Further,
Guarantor consents to the taking of, or failure to take, any action which might
in any manner or to any extent vary the risks of Guarantor under this Guaranty
or which, but for this provision, might operate as a discharge of Guarantor.
Guarantor hereby subordinates the payment of all obligations and
indebtedness of Borrower owing to Guarantor, whether now existing or hereafter
arising, to the indefeasible payment in full of all Guaranteed Debt.
Guarantor agrees to furnish promptly to Bank any and all financial or
other information regarding Guarantor or its property as Bank may reasonably
request in writing.
In the event that acceleration of the time for payment of any of the
Guaranteed Debt is stayed, upon the insolvency, bankruptcy or reorganization of
Borrower, or otherwise, all such amounts shall nonetheless by payable by
Guarantor immediately upon demand by Bank.
Guarantor shall pay on demand all out-of-pocket expenses (including
reasonable attorneys' fees and expenses) in any way relating to the enforcement
or protection of Bank's rights under this Guaranty. The obligations of Guarantor
under the preceding sentence shall survive termination of this Guaranty.
No provision of this Guaranty may be waived, amended, supplemented or
modified, except by a written instrument executed by Bank and Guarantor. No
failure by Bank to exercise, and no delay in exercising, any right, remedy or
power hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy or power hereunder preclude any other or
further exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and
B-2
<PAGE>
not exclusive of any remedies provided by law. The unenforceability or
invalidity of any provision of this Guaranty shall not affect the enforceability
or validity of any other provision herein.
This Guaranty shall (i) bind Guarantor and its successors and assigns,
PROVIDED that Guarantor may not assign its rights or obligations under this
Guaranty without the prior written consent of Bank, (ii) inure to the benefit of
Bank and its successors and assigns and (iii) be governed by the internal laws
of the State of Texas. Guarantor hereby irrevocably (a) submits to the
non-exclusive jurisdiction of any United States Federal or State court sitting
in Houston, Texas in any action or proceeding arising out of or relating to this
Guaranty and (b) waives to the fullest extent permitted by law any defense
asserting an inconvenient forum in connection therewith. Service of process by
Bank in connection with such action or proceeding shall be binding on Guarantor
if sent to Guarantor by registered or certified mail at its address specified
below.
Unless otherwise agreed by Bank and Guarantor in writing, this Guaranty is
not intended to supersede or otherwise affect any other guaranty now or
hereafter given by Guarantor for the benefit of Bank or any term or provision
thereof.
TO THE EXTENT ALLOWED BY APPLICABLE LAW, GUARANTOR AND BANK EACH WAIVE
TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM , SUIT OR PROCEEDING ON OR
ARISING OUT OF THIS GUARANTY. THIS GUARANTY REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Executed this day of September 1, 1998.
CAIRN ENERGY USA, INC.
By:_________________________________
Title:______________________________
Address: 15995 N. Barkers Landing, Suite 300
Houston, Texas 77079
THE MERIDIAN RESOURCE & EXPLORATION COMPANY
By:_________________________________
Title:______________________________
Address: 15995 N. Barkers Landing, Suite 300
Houston, Texas 77079
B-3
<PAGE>
THE MERIDIAN PRODUCTION CORPORATION
By:_________________________________
Title:______________________________
Address: 15995 N. Barkers Landing, Suite 300
Houston, Texas 77079
THE MERIDIAN RESOURCE CORPORATION,
a Delaware corporation
By:_________________________________
Title:______________________________
Address: 15995 N. Barkers Landing, Suite 300
Houston, Texas 77079
LOUISIANA ONSHORE PROPERTIES, INC.
By:_________________________________
Title:______________________________
Address: 15995 N. Barkers Landing, Suite 300
Houston, Texas 77079
B-4
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement) by and between TEXAS MERIDIAN
RESOURCES EXPLORATION, INC., a Texas corporation (the "Company"), and LLOYD V.
DELANO (the "Executive") is made and entered into as of the Effective Date set
forth in Section 1.3 below:
RECITALS
A. The Company desires to employ Executive in the capacity set forth on
EXHIBIT "A", pursuant to the provisions of this Agreement; and
B. The Executive desires employment as an employee of the Company
pursuant to the provisions of this Agreement.
ARTICLE I.
TERMS OF EMPLOYMENT
The terms of employment are as follows:
1.1 EMPLOYMENT. The Company hereby employs the Executive for and during
the term hereof in the position set forth on EXHIBIT "A", but Company may
subsequently assign Executive to a different position or modify Executive's
duties and responsibilities. The Executive hereby accepts employment under the
terms and conditions set forth in this Agreement.
1.2 DUTIES OF EXECUTIVE. The Executive shall perform in the capacity
described in Section 1.1 hereof and shall have such duties, responsibilities,
and authorities as may be designated for such office. The Executive agrees to
devote the Executive's best efforts, abilities, knowledge, experience and full
business time to the faithful performance of the duties, responsibilities, and
authorities which may be assigned to the Executive. Executive may not engage,
directly or indirectly, in any other business, investment, or activity that
interferes with Executive's performance of Executive's duties hereunder, is
contrary to the interests of the Company. Executive shall at all times comply
with and be subject to such policies and procedures as the Company may establish
from time to time, which will be customary within Company's industry. Executive
acknowledges and agrees that Executive owes a fiduciary duty of loyalty,
fidelity and allegiance to act at all times in the best interests of the Company
and to do no act which would injure Company's business, its interests, or its
reputation. The foregoing shall not be construed to prevent the Executive from
making passive investments in other businesses or enterprises, provided such
investments do not require services on the part of the Executive.
1.3 TERM. This Agreement shall become effective as of the 5th day of
November, 1997 (the "Effective Date") and shall continue in force and effect for
one (1) year unless sooner terminated as provided in Section 2.1 hereof. Unless
this Agreement is terminated before the end of its initial term, the term hereof
shall be automatically extended for successive six (6) month terms, unless
Page 1 of 12 Pages
<PAGE>
terminated prior to the expiration of any six (6) month term. Except as set out
herein, this Agreement may only be renewed or extended by written agreement
executed by the Company and the Executive pursuant to mutually acceptable terms
and conditions.
1.4 COMPENSATION. The Company shall pay the Executive, as "Compensation"
for services rendered by the Executive under this Agreement the following Salary
plus Bonus.
(a) SALARY: A base salary per month as set forth on EXHIBIT "A", prorated
for any partial period of employment ("Salary"). Such Salary shall be paid
in installments in accordance with the Company's regular payroll
practices. Each calendar year the Company, in its sole discretion, will
determine if a cost of living increase will be added to the Salary.
(b) BONUS: A bonus as set forth in EXHIBIT "A" ("Bonus").
(c) PARTICIPATION: A participation interest as set forth in EXHIBIT "A",
in the Company's executive well participation program.
1.5 EMPLOYMENT BENEFITS. In addition to the Salary payable to the
Executive hereunder, the Executive shall be entitled to the following benefits:
(a) EMPLOYMENT BENEFITS. As an employee of the Company, the
Executive shall participate in and receive all general employee benefit
plans and programs, as may be in effect from time to time, upon
satisfaction by the Executive of the eligibility requirements therefor.
Nothing in this Agreement is to be construed or interpreted to provide
greater rights, participation, coverage, or benefits under such benefit
plans or programs than provided to similarly situated employees pursuant
to the terms and conditions of such benefit plans and programs.
(b) WORKING FACILITIES. During the term of this Agreement, the
Company shall provide, at its expense, office space, furniture, equipment,
supplies and personnel as shall be adequate for the Executive's use in
performing Executive's duties and responsibilities under this Agreement.
(c) CLUB. Company shall reimburse Executive for all general club
dues and business related expenses incurred at the club set forth in
EXHIBIT "A".
(d) PROFESSIONAL DUES. The Company shall pay for all professional
dues, seminars, continuing education and related activities approved in
advance by the Chief Executive Officer.
(e) VACATION. Executive shall be entitled to the vacation as set out
in EXHIBIT "A".
(f) LIMITATIONS. Company shall not by reason of this Article 1.5 be
obligated to institute, maintain, or refrain from changing, amending, or
discontinuing, any such incentive
Page 2 of 12 Pages
<PAGE>
compensation or employee benefit program or plan, so long as such actions
are similarly applicable to covered employees similarly situated.
ARTICLE II.
TERMINATION
2.1 TERMINATION. Notwithstanding anything herein to the contrary, this
Agreement and the Executive's employment hereunder may be terminated without any
breach of this Agreement at any time during the term hereof by reason of and in
accordance with the following provisions:
(a) DEATH. If the Executive dies during the term of this Agreement
and while in the employ of the Company, this Agreement shall automatically
terminate as of the date of the Executive's death, and the Company shall
have no further liability hereunder to the Executive or Executive's
estate, except to the extent set forth in Section 2.2(a) hereof.
(b) DISABILITY. If, during the term of this Agreement, the Executive
shall be prevented from performing the Executive's duties hereunder, for a
period of not less than sixty (60) consecutive days or an aggregate of
ninety (90) days during any period of twelve (12) consecutive calendar
months, by reason of becoming disabled as hereinafter defined, the Company
may terminate this Agreement immediately upon written notice to the
Executive without any further liability hereunder to the Executive, except
as set forth in Section 2.2(b) hereof. For purposes of this Agreement, the
Executive shall be deemed to have a "Disability" when the Board of
Directors of the Company, upon the written report of a qualified physician
designated by the Board of Directors of the Company, shall have determined
that the Executive has become mentally, physically and/or emotionally
incapable of performing Executive's duties and services under this
Agreement.
(c) TERMINATION BY THE COMPANY FOR CAUSE. Prior to the expiration of
the term of this Agreement, the Company may discharge the Executive for
cause and terminate this Agreement immediately upon written notice to the
Executive without any further liability hereunder to the Executive, except
to the extent set forth in Section 2.1(c) hereof. For purposes of this
Agreement, a "discharge for cause" shall mean termination of the Executive
upon written notice to the Executive limited, however, to one or more of
the following reasons:
(1) Conviction of the Executive by a court of competent
jurisdiction of a felony or a crime involving moral turpitude;
(2) The Executive's failure or refusal to comply with the
Company's policies, standards, and regulations of the Company, which
from time to time may be established;
Page 3 of 12 Pages
<PAGE>
(3) The Executive's engaging in conduct amounting to fraud,
dishonesty, gross negligence, willful misconduct or conduct that is
unprofessional, unethical, or detrimental to the reputation,
character or standing of the Company; or
(4) The Executive's failure to faithfully and diligently
perform the duties required hereunder or to comply with the
provisions of this Agreement.
Prior to terminating this Agreement pursuant to Section
2.1(c), (2), or (4), the Company shall furnish the Executive written
notice of the Executive's alleged failure to abide by or alleged
breach of this Agreement. The Executive shall have thirty (30) days
after the Executive's receipt of such notice to cure such failure to
abide or breach and the Company's Board of Directors, in its sole
discretion, shall determine if the failure to abide or breach is
cured.
(d) TERMINATION BY THE COMPANY WITH NOTICE. The Company may
terminate this Agreement at any time, for any reason, other than as set
forth in Subparagraphs (a), (b) or (c) of this Section 2.1, with or
without cause, in the Company's sole discretion, immediately upon written
notice to the Executive without any further liability hereunder to the
Executive, except to the extent set forth in Section 2.2(d) hereof.
(e) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The Executive may
terminate this Agreement at any time for Good Reason (as hereinafter
defined) in which event the Company shall have no further liability
hereunder to the Executive, except to the extent set forth in Section
2.2(e) hereof. For purposes of this Agreement, the term "Good Reason"
shall mean, without the Executive's express written consent, the
occurrence of any of the following circumstances:
(1) The Company's failure to pay the Executive the
Compensation pursuant to the terms of this Agreement that has not
been cured within thirty (30) days after notice of such
noncompliance has been given by the Executive to the Company; or
(2) Any failure by the Company to comply with any material
provision of this Agreement that has not been cured within thirty
(30) days after notice of such noncompliance has been given by the
Executive to the Company. The Executive shall use Executive's best
efforts to make a good faith determination if the failure has been
cured and shall so notify the Company within five (5) days after the
expiration of said thirty (30) day period; or
(3) The Company's cancellation or termination of the executive
well participation plan or the Executive's participation in such
plan.
(f) TERMINATION BY THE EXECUTIVE WITH NOTICE. The Executive may
terminate this Agreement fifteen (15) days in advance for any reason, in
the Executive's sole discretion other than Good Reason, by giving the
Company fifteen (15) days prior written notice, in which event the Company
shall have no further liability hereunder to the Executive, except to the
extent set forth in Section 2.2(f) hereof.
2.2 COMPENSATION UPON TERMINATION.
Page 4 of 12 Pages
<PAGE>
(a) DEATH. In the event the Executive's employment hereunder is
terminated pursuant to the provisions of Section 2.1(a) hereof due to the
death of the Executive, the Company shall have no further obligation to
the Executive or Executive's estate, except to pay to the Executive's
spouse, or if none, to the estate of the Executive any accrued, but
unpaid, Salary and any vacation or sick leave benefits, which have accrued
as of the date of death, but were then unpaid or unused. Any amount due
the Executive hereunder shall be paid in a lump sum in cash within thirty
(30) days after the death of the Executive.
(b) DISABILITY. In the event the Executive's employment hereunder is
terminated pursuant to the provisions of Section 2.1(b) hereof due to
Disability of the Executive, the Company shall be relieved of all of its
obligations under this Agreement, except to pay the Executive any accrued,
but unpaid Salary, and vacation or sick leave benefits, which have accrued
as of the date on which such Disability is determined, but then remains
unpaid. The provisions of the preceding sentence shall not affect the
Executive's rights to receive payments under the Company's disability
insurance plan, if any. Any amount due the Executive hereunder shall be
paid in a lump sum in cash within thirty (30) days after the termination
of the Executive's employment hereunder.
(c) TERMINATION BY THE COMPANY FOR CAUSE. In the event the
Executive's employment hereunder is terminated by the Company for Cause
pursuant to the provisions of Section 2.1(c) hereof, the Company shall
have no further obligation to the Executive under this Agreement except to
pay the Executive any accrued, but unpaid, Salary and any vacation or sick
leave benefits, which have accrued as of the date of termination of this
Agreement, but were then unpaid or unused. Any amount due the Executive
hereunder shall be paid in a lump sum in cash within sixty (60) days after
the termination of the Executive's employment hereunder.
(d) TERMINATION BY THE COMPANY WITH NOTICE. In the event the
Executive's employment hereunder is terminated by the Company pursuant to
the provisions of Section 2.1(d) hereof, the Executive shall be entitled
to receive (i) any accrued, but unpaid, Salary and any vacation or sick
leave benefits, which have accrued as of the date of termination of this
Agreement, but were then unpaid or unused and (ii) an amount payable in
monthly installments equal to the Executive's full monthly Salary payable
for the remainder of the then existing term of this Agreement. Any amount
due the Executive under (i) of this Section shall be paid in a lump sum in
cash within thirty (30) days after the termination of the Executive's
employment hereunder.
(e) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. In the event this
Agreement is terminated by the Executive pursuant to the provisions of
Section 2.1(e) hereof, the Executive shall be entitled to receive (i) any
accrued, but unpaid, Salary and any vacation or sick leave benefits which
have accrued as of the date of termination of the Agreement, but were then
unpaid or unused and (ii) the full monthly Salary payable hereunder for
the six (6) months in accordance with the Company's regular payroll
periods or over such lesser period as the Company may determine. Any
amount due the Executive under (i) of this Section shall
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be paid in a lump sum in cash within thirty (30) days after the
termination of the Executive's employment hereunder.
(f) TERMINATION BY THE EXECUTIVE WITH NOTICE. In the event the
Executive's employment hereunder is terminated by the Executive pursuant
to the provisions of Section 2.1(f) hereof, all future compensation to
which Executive is entitled and all future benefits for which Executive is
eligible shall cease and terminate as of the date of termination.
Executive shall be entitled to any accrued, but unpaid or unused, Salary,
vacation or sick leave benefits through the date of termination. Any
amount due the Executive hereunder shall be paid in a lump sum in cash
within thirty (30) days after the termination of Executive's Employment
hereunder.
(g) TERMINATION OF OBLIGATIONS OF THE COMPANY UPON PAYMENT OF
COMPENSATION. Upon payment of the amount, if any, due the Executive
pursuant to the preceding provisions of this Section II, the Company shall
have no further obligation to the Executive under this Agreement.
2.3 CHANGE OF CONTROL. For this Agreement, a CHANGE IN CONTROL shall be
deemed to occur if:
(a) any person (other than the Company, an employee benefit plan of the
Company or any holder of the Company's voting securities on the date
hereof), acquires directly or indirectly the Beneficial Ownership
(as defined in Section 13(d) of the Exchange Act) of any voting
security of the Company and immediately after such acquisition such
Person is, directly or indirectly, the Beneficial Owner of voting
securities representing more than 50 percent of the total voting
power of all of the then outstanding voting securities of the
Company;
(b) the following individuals no longer constitute a majority of the
members of the Board: (A) the individuals who, as of the date
hereof, constitute the Board (the"Original Directors); (B) the
individuals who thereafter are elected to the Board and whose
election, or nomination for election, to the Board was approved by a
vote of at least two-thirds of the Original Directors then still in
office (such directors becoming "Additional Original Directors"
immediately following their election); or (C) the individuals who
are elected to the Board and whose election, or nomination for
election, to the Board was approved by a vote of at least two-
thirds of the Original Directors and Additional Original Directors
then still in office (such directors also becoming "Additional
Original Directors" immediately following their election);
(c) the stockholders of the Company approve a merger, consolidation,
recapitalization or reorganization of the Company, or a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 50 percent of
the total voting power represented by the voting securities of the
surviving entity outstanding immediately after such transaction
being Beneficially Owned by at least
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50 percent of the holders of outstanding voting securities of the
Company immediately prior to the transaction, with the voting power
of each such continuing holder relative to other such continuing
holder not substantially altered in the transaction; or
(d) the stockholders of the Company shall approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or a substantial portion more than
50 percent of the value of the total assets of the Company.
In the event of a Change of Control, the Company will require any and all
successors to the Company to expressly assume and agree pursuant to an
appropriate written assumption agreement to 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. Failure of the Company to obtain such
agreement prior to or contemporaneously with the effectiveness of any such
successor shall be a breach of the Agreement and shall entitle the Executive, as
his or her sole remedy, to terminate Executive's employment contemporaneously
with the effectiveness of any such successor and receive Executive's Monthly
Base Salary for the next eighteen (18) months in accordance with the Company's
regular payroll practices and immediately receive any accrued, but unpaid,
salary, vacation or sick leave. In the event the successor assumes and agrees,
pursuant to a written assumption agreement, to perform this Agreement, but
terminates this Agreement pursuant to Section 2.1(d) prior to the expiration of
six (6) months from the effectiveness of such successor, then the successor
shall pay such Executive, his Monthly Base Salary in accordance with the
Company's regular payroll practices for the next eighteen (18) months after such
termination and immediately pay any accrued, but unpaid, salary, vacation or
sick leave.
2.4 OFFSET. The Company shall have the right to deduct from any amounts
due the Executive pursuant to Article II, any obligations owed by the Executive
to the Company.
2.5 WELL PARTICIPATION PROGRAM. Notwithstanding anything contained in
Section 2.2 hereof, Executive's right to receive a bonus pursuant to the
Company's well participation shall be determined in accordance with the terms
and conditions of said program.
ARTICLE III.
PROTECTION OF INFORMATION AND NON-COMPETITION
PROTECTIVE COVENANTS. The Executive recognizes that his employment by the
Company is one of the highest trust and confidence because (i) the Executive
will become fully familiar with all aspects of the Company's business during the
term of this Agreement, (ii) certain information of which the Executive will
gain knowledge during his employment is proprietary and confidential information
which is special and peculiar value to the Company, and (iii) if any such
proprietary and confidential information were imparted to or became known by any
person, including the Executive, engaging in a business in competition with that
of the Company, hardship, loss or irreparable injury and damage could result to
the Company, the measurement of which would be difficult if not impossible to
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ascertain. The Executive acknowledges that the Company has developed unique
skills, concepts, designs, marketing programs, marketing strategy, business
practices, methods of operation, trademarks, licenses, hiring and training
methods, financial and other confidential and proprietary information concerning
its operations and expansion plans ("Trade Secrets"). Trade Secrets shall not
include the geologic or geophysical information, rather such information shall
be subject to the terms and provisions of Subparagraph (c) below. Therefore, the
Executive agrees that it is necessary for the Company to protect its business
from such damage, and the Executive further agrees that the following covenants
constitute a reasonable and appropriate means, consistent with the best interest
of both the Executive and the Company, to protect the Company against such
damage and shall apply to and be binding upon the Executive as provided herein:
(a) TRADE SECRETS. The Executive recognizes that his position with
the Company is one of the highest trust and confidence by reason by of the
Executive's access to and contact with certain Trade Secrets of the
Company. The Executive agrees and covenants to use his best efforts and
exercise utmost diligence to protect and safeguard the Trade Secrets of
the Company. The Executive further agrees and covenants that, except as
may be required by the Company in connection with this Agreement, or with
the prior written consent of the Company, the Executive shall not, either
during the term of this Agreement or thereafter, directly or indirectly,
use for the Executive's own benefit or for the benefit of another, or
disclose, disseminate, or distribute to another, any Trade Secret (whether
or not acquired, learned, obtained, or developed by the Executive alone or
in conjunction with others) of the Company or of others with whom the
Company has a business relationship. All memoranda, notes, records,
drawings, documents, or other writings whatsoever made, compiled,
acquired, or received by the Executive during the term of this Agreement,
arising out of, in connection with, or related to any activity or business
of the Company, including, but not limited to, Trade Secrets, are, and
shall continue to be, the sole and exclusive property of the Company, and
shall, together with all copies thereof and all advertising literature, be
returned and delivered to the Company by the Executive immediately,
without demand, upon the termination of this Agreement, or at any time
upon the Company's demand.
(b) RESTRICTION ON SOLICITING EMPLOYEES OF THE COMPANY. The
Executive covenants that during the term of this Agreement and for the
period set forth on EXHIBIT "A" ("Non-Solicitation Period") following the
termination of this Agreement, he will not, either directly or indirectly,
call on, solicit, or take away, or attempt to call on, solicit, induce or
take away any employee of the Company, either for himself or for any other
person, firm, corporation or other entity. Further, Executive shall not
induce any employee of the Company to terminate his or her employment with
the Company.
(c) COVENANT NOT TO COMPETE. The Executive hereby covenants and
agrees that during the term of this Agreement and for the later of one (1)
year after the date of his termination or until the Company no longer has
a well operating in such designated prospects ("the Non-Compete Period"),
he will not, directly or indirectly, either as an employee, employer,
consultant, agent, principal, partner, shareholder (other than through
ownership of publicly-traded capital stock of a corporation which
represents less than five percent (5%) of the outstanding capital stock of
such corporation), corporate officer, director, investor,
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financier or in any other individual or representative capacity, engage or
participate in any business competitive with the business conducted by the
Company within the prospect areas on which Executive has worked up to the
date of the termination of this Agreement ("Designated Prospect(s)"). The
Company shall provide to the Executive a list and an outline of each such
Designated Prospect within fifteen (15) business days after the date of
termination. Further, Executive agrees and covenants not to use for his
benefit or for the benefit of another or disclose, disseminate or
distribute to another any geologic or geophysical information regarding
the Designated Prospects during the Non-Compete Period.
(d) SURVIVAL OF COVENANTS. Each covenant of the Executive set forth
in this Article III shall survive the termination of this Agreement and
shall be construed as an agreement independent of any other provision of
this Agreement, and the existence of any claim or cause of action of the
Executive against the Company whether predicated on this Agreement or
otherwise shall not constitute a defense to the enforcement by the Company
of said covenant.
(e) REMEDIES. In the event of breach or threatened breach by the
Executive of any provision of this Article III, the Company shall be
entitled to relief by temporary restraining order, temporary injunction,
or permanent injunction or otherwise, in addition to other legal and
equitable relief to which it may be entitled, including any and all
monetary damages which the Company may incur as a result of said breach,
violation or threatened breach or violation. The Company may pursue any
remedy available to it concurrently or consecutively in any order as to
any breach, violation, or threatened breach or violation, and the pursuit
of one of such remedies at any time will not be deemed an election of
remedies or waiver of the right to pursue any other of such remedies as to
such breach, violation, or threatened breach or violation, or as to any
other breach, violation, or threatened breach or violation.
(f) LIMITATIONS. The obligations of confidentiality regarding Trade
Secrets and geologic or geophysical information regarding Designated
Prospects set forth in this Section 3.1 shall not apply if (i) it can be
demonstrated by the Executive to have been within his legitimate
possession prior to the time of disclosure by the disclosing party, (ii)
it was in the public domain prior to such disclosure, or (iii) if such
disclosure comes into the public domain through no fault of the Executive.
The Executive hereby acknowledges that the Executive's agreement to be
bound by the protective covenants set forth in this Article III was a material
inducement for the Company entering into this Agreement and agreeing to pay the
Executive the compensation and benefits set forth herein. Further, Executive
understands the foregoing restrictions may limit his or her ability to engage in
certain businesses during the period of time provided for, but acknowledges that
Executive will receive sufficiently high remuneration and other benefits under
this Agreement to justify such restriction.
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ARTICLE IV.
GENERAL PROVISIONS
4.1 NOTICES. all notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be deemed to have been
delivered on the date personally delivered or on the date deposited in a
receptacle maintained by the United States Postal Service for such purpose,
postage prepaid, by certified mail, return receipt requested, addressed to the
respective parties as follows:
IF TO THE EXECUTIVE As set forth in EXHIBIT "A"
IF TO THE COMPANY: Texas Meridian Resources Exploration, Inc.
15995 N. Barkers Landing, Suite 300
Houston, Texas 77079
ATTN: General Counsel
Either party hereto may designate a different address by providing written
notice of such new address to the other party hereto.
4.2 SEVERABILITY. If any provision contained in this Agreement is
determined by a court of competent jurisdiction or an arbitrator pursuant to
Section 5 below to be void, illegal or unenforceable, in whole or in part, then
the other provisions contained herein shall remain in full force and effect as
if the provision which was determined to be void, illegal, or unenforceable had
not been contained herein. If the restrictions contained in Article III are
found by a court to be unreasonable or overly broad as to geographic area or
time, or otherwise unenforceable, the parties intend for said restrictions to be
modified by said court so as to be reasonable and enforceable and, as so
modified, to be fully enforced.
4.3 WAIVER MODIFICATION, AND INTEGRATION. The waiver by any party hereto
of a breach of any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach by any party. This instrument contains the
entire agreement of the parties concerning employment and supersedes all prior
and contemporaneous representations, understandings and agreements (including
but not limited to any initial employment or independent contractor agreement)
either oral or in writing, between the parties hereto with respect to the
employment of the Executive by the Company and all such prior or contemporaneous
representations, understandings and agreements, both oral and written, are
hereby terminated, unless otherwise specifically designated on EXHIBIT "A". This
Agreement may not be modified, altered or amended except by written agreement of
all the parties hereto.
4.4 BINDING EFFECT. This Agreement shall be binding and effective upon the
parties and their respective heirs, executors and successors. Neither party
shall assign this Agreement without the prior written consent of the other
party, except that the Company shall have the right to assign this Agreement to
an entity.
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4.5 GOVERNING LAW. The parties intend that the laws of the State of Texas
should govern the validity of this Agreement, the construction of its terms, and
the interpretation of the rights and duties of the parties hereto.
4.6 REPRESENTATION OF EXECUTIVE. The Executive hereby represents and
warrants to the Company that the Executive has not previously assumed any
obligations inconsistent with those contained in this Agreement, unless
specifically set out in EXHIBIT "A". The Executive further represents and
warrants to the Company that the Executive has entered into this Agreement
pursuant to Executive's own initiative and that this Agreement is not in
contravention of any existing commitments. The Executive acknowledges that the
Company has entered into this Agreement in reliance upon the foregoing
representations of the Executive.
4.7 COUNTERPART EXECUTION. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
4.8 COMPANY. For the purposes of this Agreement, Company shall include any
parent, subsidiary division of the Company, or any entity, who directly or
indirectly, controls, is controlled by, or is under common control with the
Company.
4.9 EXECUTIVE. Executive represents to the Company and agrees that he: (i)
was specifically advised to and fully understands his rights to discuss all
aspects of this Agreement with an attorney, (ii) has, to the extent he desires,
availed himself of these rights,and (iii) has carefully read and fully
understands the provisions of this Agreement.
ARTICLE V.
ARBITRATION
5.1 RESOLUTION OF DISPUTES. In the event any dispute(s) arises between the
parties, the parties shall cooperate in good faith to resolve the dispute(s). If
the parties cannot resolve the dispute(s) between themselves within ten (10)
days after written notice of activation of the terms of this Article V, each
party shall, within seven (7) days after the expiration of said 10 day period,
select a mediator and shall notify the other party of such selection. The
mediators shall have thirty (30) days from the expiration of said 7 day period
to resolve the dispute(s). If a resolution of the dispute(s) does not occur
through said mediation within said 30 days, the dispute(s) shall be resolved by
binding arbitration.
5.2 ARBITRATION. In the event any dispute cannot be resolved through
mediation the parties agree to submit such dispute(s) to binding non-appealable
arbitration within ten (10) days from the expiration of the 30 day period set
out in Section 5.1. Any such arbitration arising hereunder shall be conducted in
Houston, Texas in accordance with the rules of the American Arbitration
Association then in effect. Each party hereby submits itself to personal
jurisdiction in Houston, Texas, for the purpose of such arbitration proceedings.
Within fifteen (15) days from submitting the dispute(s) to arbitration each
party shall select its arbitrator. Then within twenty (20) days after said 15
days the two arbitrators shall select a third arbitrator. The three arbitrators
shall have their first meeting within twenty (20) days after the selection of
the third arbitrator. The arbitrators shall reach a final decision within
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one hundred eighty (180) days of their first meeting. The costs of arbitration
shall be borne equally by the parties, except each party shall be responsible
for such party's own arbitrator's and attorneys' fees.
ARTICLE VI.
CONFIDENTIALITY
6.1 CONFIDENTIALITY. This Agreement is confidential, and the substance may
be disclosed only as mutually agreed by the parties or as may be required by
law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written effective as of the Effective Date.
THE COMPANY:
TEXAS MERIDIAN RESOURCES
EXPLORATION, INC.
By: /s/ JOSEPH A. REEVES, JR.
Printed Name: Joseph A. Reeves, Jr.
Title: Chief Executive Officer
EXECUTIVE:
/s/ LLOYD V. DELANO
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EXHIBIT "A" TO
EMPLOYMENT AGREEMENT
Executive Name: Lloyd V. DeLano
Position: Vice-President
Monthly Base Salary: Twelve thousand four hundred forty-five and 84/100
Dollars ($12,445.84).
Bonus: An annual bonus at the discretion of the
Company's Board of Directors.
Participation: The participation interest of 0.25% pursuant
to the Company's management well bonus plan.
Vacation: You shall be deemed to have 5 years service
with the Company as of the date hereof for
the purpose of calculating the vacaation you
are entitled to pursuant Company policy. The
vacation shall be earned each year based
upon each full month of employment during
that year. Vacation days will be
coordinated in advance, subject to the
reasonable discretion of the Chief Executive
Officer.
Clubs: One health or luncheon club
Non-Solicitation Period: Six (6) months
Home Address: 11709 Monica Lane
Houston, Texas 77024
Section 4.3 Agreement(s): Only as to net profits interests in
prospects granted in writing prior to the
date hereof, pursuant to that certain
agreement dated December 30, 1993 and that
certain agreement dated June 27, 1995.
Section 4.6 restrictions. None
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement) by and between TEXAS MERIDIAN
RESOURCES EXPLORATION, INC., a Texas corporation (the "Company"), and P. RICHARD
GESSINGER (the "Executive") is made and entered into as of the Effective Date
set forth in Section 1.3 below:
RECITALS
A. The Company desires to employ Executive in the capacity set forth on
EXHIBIT "A", pursuant to the provisions of this Agreement; and
B. The Executive desires employment as an employee of the Company
pursuant to the provisions of this Agreement.
ARTICLE I.
TERMS OF EMPLOYMENT
The terms of employment are as follows:
1.1 EMPLOYMENT. The Company hereby employs the Executive for and during
the term hereof in the position set forth on EXHIBIT "A", but Company may
subsequently assign Executive to a different position or modify Executive's
duties and responsibilities. The Executive hereby accepts employment under the
terms and conditions set forth in this Agreement. Provided, however, Executive's
primary office shall be within fifty (50) miles of the current principal office
of the Company.
1.2 DUTIES OF EXECUTIVE. The Executive shall perform in the capacity
described in Section 1.1 hereof and shall have such duties, responsibilities,
and authorities as may be designated for such office. The Executive agrees to
devote the Executive's best efforts, abilities, knowledge, experience and full
business time to the faithful performance of the duties, responsibilities, and
authorities which may be assigned to the Executive. Executive may not engage,
directly or indirectly, in any other business, investment, or activity that
interferes with Executive's performance of Executive's duties hereunder, or is
contrary to the interests of the Company. Executive shall at all times comply
with and be subject to such policies and procedures as the Company may establish
from time to time, which will be customary within Company's industry. Executive
acknowledges and agrees that Executive owes a fiduciary duty of loyalty,
fidelity and allegiance to act at all times in the best interests of the Company
and to do no act which would injure Company's business, its interests, or its
reputation. The foregoing shall not be construed to prevent the Executive from
making passive investments in other businesses or enterprises, provided such
investments do not require services on the part of the Executive.
1.3 TERM. This Agreement shall become effective as of the 1st day of
December, 1997 (the "Effective Date") and shall continue in force and effect for
one (1) year unless sooner terminated
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as provided in Section 2.1 hereof. Unless this Agreement is terminated before
the end of its initial term, the term hereof shall be automatically extended for
successive one (1) year terms, unless terminated prior to the expiration of any
one (1) year term. Except as set out herein, this Agreement may only be renewed
or extended by written agreement executed by the Company and the Executive
pursuant to mutually acceptable terms and conditions.
1.4 COMPENSATION. The Company shall pay the Executive, as "Compensation"
for services rendered by the Executive under this Agreement the following Salary
plus Bonus.
(a) SALARY: A base salary per month as set forth on EXHIBIT "A", prorated
for any partial period of employment ("Salary"). Such Salary shall be paid
in installments in accordance with the Company's regular payroll
practices. Each calendar year the Company, will determine the cost of
living increase to be added to the Salary.
(b) BONUS: A bonus as set forth in EXHIBIT "A" ("Bonus").
(c) PARTICIPATION: A participation interest as set forth in EXHIBIT "A",
in the Company's executive well participation program.
1.5 EMPLOYMENT BENEFITS. In addition to the Salary payable to the
Executive hereunder, the Executive shall be entitled to the following benefits:
(a) EMPLOYMENT BENEFITS. As an employee of the Company, the
Executive shall participate in and receive all general employee benefit
plans and programs, as may be in effect from time to time, upon
satisfaction by the Executive of the eligibility requirements therefor.
Nothing in this Agreement is to be construed or interpreted to provide
greater rights, participation, coverage, or benefits under such benefit
plans or programs than provided to similarly situated employees pursuant
to the terms and conditions of such benefit plans and programs.
(b) WORKING FACILITIES. During the term of this Agreement, the
Company shall provide, at its expense, office space, furniture, equipment,
supplies and personnel as shall be adequate for the Executive's use in
performing Executive's duties and responsibilities under this Agreement.
(c) CLUB. Company shall reimburse Executive for all general club
dues and business related expenses incurred at the clubs set forth in
EXHIBIT "A".
(d) PROFESSIONAL DUES. The Company shall pay for all professional
dues, seminars, continuing education and related activities approved in
advance by the Chief Executive Officer.
(e) VACATION. Executive shall be entitled to the vacation as set out
in EXHIBIT "A".
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(f) GENERAL. The other benefits set out in EXHIBIT "A".
(g) LIMITATIONS. Company shall not by reason of this Article 1.5 be
obligated to institute, maintain, or refrain from changing, amending, or
discontinuing, any such incentive compensation or employee benefit program
or plan, so long as such actions are similarly applicable to covered
employees similarly situated.
ARTICLE II.
TERMINATION
2.1 TERMINATION. Notwithstanding anything herein to the contrary, this
Agreement and the Executive's employment hereunder may be terminated without any
breach of this Agreement at any time during the term hereof by reason of and in
accordance with the following provisions:
(a) DEATH. If the Executive dies during the term of this Agreement
and while in the employ of the Company, this Agreement shall automatically
terminate as of the date of the Executive's death, and the Company shall
have no further liability hereunder to the Executive or Executive's
estate, except to the extent set forth in Section 2.2(a) hereof.
(b) DISABILITY. If, during the term of this Agreement, the Executive
shall be prevented from performing the Executive's duties hereunder, for a
period of not less than sixty (60) consecutive days or an aggregate of
ninety (90) days during any period of twelve (12) consecutive calendar
months, by reason of becoming disabled as hereinafter defined, the Company
may terminate this Agreement immediately upon written notice to the
Executive without any further liability hereunder to the Executive, except
as set forth in Section 2.2(b) hereof. For purposes of this Agreement, the
Executive shall be deemed to have a "Disability" when the Board of
Directors of the Company, upon the written report of a qualified physician
designated by the Board of Directors of the Company, shall have determined
that the Executive has become mentally, physically and/or emotionally
incapable of performing Executive's duties and services under this
Agreement.
(c) TERMINATION BY THE COMPANY FOR CAUSE. Prior to the expiration of
the term of this Agreement, the Company may discharge the Executive for
cause and terminate this Agreement immediately upon written notice to the
Executive without any further liability hereunder to the Executive, except
to the extent set forth in Section 2.1(c) hereof. For purposes of this
Agreement, a "discharge for cause" shall mean termination of the Executive
upon written notice to the Executive limited, however, to one or more of
the following reasons:
(1) Conviction of the Executive by a court of competent
jurisdiction of a felony or a crime involving moral turpitude;
(2) The Executive's failure or refusal to comply with the
Company's policies, standards, and regulations of the Company, which
from time to time may be established;
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(3) The Executive's engaging in conduct amounting to fraud,
dishonesty, gross negligence, willful misconduct or conduct that is
unprofessional, unethical, or detrimental to the reputation,
character or standing of the Company; or
(4) The Executive's failure to faithfully and diligently
perform the duties required hereunder or to comply with the
provisions of this Agreement.
Prior to terminating this Agreement pursuant to Section
2.1(c), (2), or (4), the Company shall furnish the Executive written
notice of the Executive's alleged failure to abide by or alleged
breach of this Agreement. The Executive shall have thirty (30) days
after the Executive's receipt of such notice to cure such failure to
abide or breach and the Company's Board of Directors, in its sole
discretion, shall determine if the failure to abide or breach is
cured.
(d) TERMINATION BY THE COMPANY WITH NOTICE. The Company may
terminate this Agreement at any time, for any reason, other than as set
forth in Subparagraphs (a), (b) or (c) of this Section 2.1, with or
without cause, in the Company's sole discretion, immediately upon written
notice to the Executive without any further liability hereunder to the
Executive, except to the extent set forth in Section 2.2(d) hereof.
(e) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The Executive may
terminate this Agreement at any time for Good Reason (as hereinafter
defined) in which event the Company shall have no further liability
hereunder to the Executive, except to the extent set forth in Section
2.2(e) hereof. For purposes of this Agreement, the term "Good Reason"
shall mean, without the Executive's express written consent, the
occurrence of any of the following circumstances:
(1) The Company's failure to pay the Executive the
Compensation pursuant to the terms of this Agreement that has not
been cured within thirty (30) days after notice of such
noncompliance has been given by the Executive to the Company; or
(2) Any failure by the Company to comply with any material
provision of this Agreement that has not been cured within thirty
(30) days after notice of such noncompliance has been given by the
Executive to the Company. The Executive shall use Executive's best
efforts to make a good faith determination if the failure has been
cured and shall so notify the Company within five (5) days after the
expiration of said thirty (30) day period; or
(3) The Company's cancellation or termination of the executive
well bonus plan or the Executive's participation in such Plan.
(f) TERMINATION BY THE EXECUTIVE WITH NOTICE. The Executive may
terminate this Agreement fifteen (15) days in advance for any reason, in
the Executive's sole discretion other than Good Reason, by giving the
Company fifteen (15) days prior written notice, in which
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event the Company shall have no further liability hereunder to the
Executive, except to the extent set forth in Section 2.2(f) hereof.
2.2 COMPENSATION UPON TERMINATION.
(a) DEATH. In the event the Executive's employment hereunder is
terminated pursuant to the provisions of Section 2.1(a) hereof due to the
death of the Executive, the Company shall have no further obligation to
the Executive or Executive's estate, except to pay to the Executive's
spouse, or if none, to the estate of the Executive any accrued, but
unpaid, Salary and any vacation or sick leave benefits, which have accrued
as of the date of death, but were then unpaid or unused. Any amount due
the Executive hereunder shall be paid in a lump sum in cash within thirty
(30) days after the death of the Executive.
(b) DISABILITY. In the event the Executive's employment hereunder is
terminated pursuant to the provisions of Section 2.1(b) hereof due to
Disability of the Executive, the Company shall be relieved of all of its
obligations under this Agreement, except to pay the Executive any accrued,
but unpaid Salary, and vacation or sick leave benefits, which have accrued
as of the date on which such Disability is determined, but then remains
unpaid. The provisions of the preceding sentence shall not affect the
Executive's rights to receive payments under the Company's disability
insurance plan, if any. Any amount due the Executive hereunder shall be
paid in a lump sum in cash within thirty (30) days after the termination
of the Executive's employment hereunder.
(c) TERMINATION BY THE COMPANY FOR CAUSE. In the event the
Executive's employment hereunder is terminated by the Company for Cause
pursuant to the provisions of Section 2.1(c) hereof, the Company shall
have no further obligation to the Executive under this Agreement except to
pay the Executive any accrued, but unpaid, Salary and any vacation or sick
leave benefits, which have accrued as of the date of termination of this
Agreement, but were then unpaid or unused. Any amount due the Executive
hereunder shall be paid in a lump sum in cash within sixty (60) days after
the termination of the Executive's employment hereunder.
(d) TERMINATION BY THE COMPANY WITH NOTICE. In the event the
Executive's employment hereunder is terminated by the Company pursuant to
the provisions of Section 2.1(d) hereof, the Executive shall be entitled
to receive (i) any accrued, but unpaid, Salary and any vacation or sick
leave benefits, which have accrued as of the date of termination of this
Agreement, but were then unpaid or unused and (ii) an amount payable in
monthly installments equal to the Executive's full monthly Salary payable
for the greater of twelve (12) months or the remainder of the then
existing term of this Agreement. Any amount due the Executive under (i) of
this Section shall be paid in a lump sum in cash within thirty (30) days
after the termination of the Executive's employment hereunder.
(e) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. In the event this
Agreement is terminated by the Executive pursuant to the provisions of
Section 2.1(e) hereof, the Executive shall be entitled to receive (i) any
accrued, but unpaid, Salary and any vacation or
Page 5 of 12 Pages
<PAGE>
sick leave benefits which have accrued as of the date of termination of
the Agreement, but were then unpaid or unused and (ii) the full monthly
Salary payable hereunder for the twelve (12) months in accordance with the
Company's regular payroll periods or over such lesser period as the
Company may determine. Any amount due the Executive under (i) of this
Section shall be paid in a lump sum in cash within thirty (30) days after
the termination of the Executive's employment hereunder.
(f) TERMINATION BY THE EXECUTIVE WITH NOTICE. In the event the
Executive's employment hereunder is terminated by the Executive pursuant
to the provisions of Section 2.1(f) hereof, all future compensation to
which Executive is entitled and all future benefits for which Executive is
eligible shall cease and terminate as of the date of termination.
Executive shall be entitled to any accrued, but unpaid or unused, Salary,
vacation or sick leave benefits through the date of termination. Any
amount due the Executive hereunder shall be paid in a lump sum in cash
within thirty (30) days after the termination of Executive's Employment
hereunder.
(g) TERMINATION OF OBLIGATIONS OF THE COMPANY UPON PAYMENT OF
COMPENSATION. Upon payment of the amount, if any, due the Executive
pursuant to the preceding provisions of this Section II, the Company shall
have no further obligation to the Executive under this Agreement.
2.3 CHANGE OF CONTROL. For this Agreement, a CHANGE IN CONTROL shall be
deemed to occur if:
(a) any person (other than the Company, an employee benefit plan of the
Company or any holder of the Company's voting securities on the date
hereof), acquires directly or indirectly the Beneficial Ownership
(as defined in Section 13(d) of the Exchange Act) of any voting
security of the Company and immediately after such acquisition such
Person is, directly or indirectly, the Beneficial Owner of voting
securities representing more than 50 percent of the total voting
power of all of the then outstanding voting securities of the
Company;
(b) the following individuals no longer constitute a majority of the
members of the Board: (A) the individuals who, as of the date
hereof, constitute the Board (the"Original Directors); (B) the
individuals who thereafter are elected to the Board and whose
election, or nomination for election, to the Board was approved by a
vote of at least two-thirds of the Original Directors then still in
office (such directors becoming "Additional Original Directors"
immediately following their election); or (C) the individuals who
are elected to the Board and whose election, or nomination for
election, to the Board was approved by a vote of at least two-thirds
of the Original Directors and Additional Original Directors then
still in office (such directors also becoming "Additional Original
Directors" immediately following their election);
(c) the stockholders of the Company approve a merger, consolidation,
recapitalization or reorganization of the Company, or a reverse
stock split of outstanding voting
Page 6 of 12 Pages
<PAGE>
securities, or consummation of any such transaction if stockholder
approval is not obtained, other than any such transaction which
would result in at least 50 percent of the total voting power
represented by the voting securities of the surviving entity
outstanding immediately after such transaction being Beneficially
Owned by at least 50 percent of the holders of outstanding voting
securities of the Company immediately prior to the transaction, with
the voting power of each such continuing holder relative to other
such continuing holder not substantially altered in the transaction;
or
(d) the stockholders of the Company shall approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or a substantial portion more than
50 percent of the value of the total assets of the Company.
In the event of a Change of Control, the Company will require any and all
successors to the Company to expressly assume and agree pursuant to an
appropriate written assumption agreement to 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. Failure of the Company to obtain such
agreement prior to or contemporaneously with the effectiveness of any such
successor shall be a breach of the Agreement and shall entitle the Executive, as
his or her sole remedy, to terminate Executive's employment contemporaneously
with the effectiveness of any such successor and receive Executive's Monthly
Base Salary for the next twelve (12) months in accordance with the Company's
regular payroll practices and immediately receive any accrued, but unpaid,
salary, vacation or sick leave. In the event the successor assumes and agrees,
pursuant to a written assumption agreement, to perform this Agreement, but
terminates this Agreement pursuant to Section 2.1(d) prior to the expiration of
six (6) months from the effectiveness of such successor, then the successor
shall pay such Executive, his Monthly Base Salary in accordance with the
Company's regular payroll practices for the next twelve (12) months after such
termination and immediately pay any accrued, but unpaid, salary, vacation or
sick leave.
2.4 OFFSET. The Company shall have the right to deduct from any amounts
due the Executive pursuant to Article II, any obligations owed by the Executive
to the Company.
2.5 WELL BONUS PLAN. Notwithstanding anything contained in Section 2.2
hereof, Executive's right to receive a bonus pursuant to the Company's
management well bonus plan shall be determined in accordance with the terms and
conditions of said plan.
ARTICLE III.
PROTECTION OF INFORMATION AND NON-COMPETITION
PROTECTIVE COVENANTS. The Executive recognizes that his employment by the
Company is one of the highest trust and confidence because (i) the Executive
will become fully familiar with all aspects of the Company's business during the
term of this Agreement, (ii) certain information of which the Executive will
gain knowledge during his employment is proprietary and confidential information
Page 7 of 12 Pages
<PAGE>
which is special and peculiar value to the Company, and (iii) if any such
proprietary and confidential information were imparted to or became known by any
person, including the Executive, engaging in a business in competition with that
of the Company, hardship, loss or irreparable injury and damage could result to
the Company, the measurement of which would be difficult if not impossible to
ascertain. The Executive acknowledges that the Company has developed unique
skills, concepts, designs, marketing programs, marketing strategy, business
practices, methods of operation, trademarks, licenses, hiring and training
methods, financial and other confidential and proprietary information concerning
its operations and expansion plans ("Trade Secrets"). Trade Secrets shall not
include the geologic or geophysical information, rather such information shall
be subject to the terms and provisions of Subparagraph (c) below. Therefore, the
Executive agrees that it is necessary for the Company to protect its business
from such damage, and the Executive further agrees that the following covenants
constitute a reasonable and appropriate means, consistent with the best interest
of both the Executive and the Company, to protect the Company against such
damage and shall apply to and be binding upon the Executive as provided herein:
(a) TRADE SECRETS. The Executive recognizes that his position with
the Company is one of the highest trust and confidence by reason by of the
Executive's access to and contact with certain Trade Secrets of the
Company. The Executive agrees and covenants to use his best efforts and
exercise utmost diligence to protect and safeguard the Trade Secrets of
the Company. The Executive further agrees and covenants that, except as
may be required by the Company in connection with this Agreement, or with
the prior written consent of the Company, the Executive shall not, either
during the term of this Agreement or thereafter, directly or indirectly,
use for the Executive's own benefit or for the benefit of another, or
disclose, disseminate, or distribute to another, any Trade Secret (whether
or not acquired, learned, obtained, or developed by the Executive alone or
in conjunction with others) of the Company or of others with whom the
Company has a business relationship. All memoranda, notes, records,
drawings, documents, or other writings whatsoever made, compiled,
acquired, or received by the Executive during the term of this Agreement,
arising out of, in connection with, or related to any activity or business
of the Company, including, but not limited to, Trade Secrets, are, and
shall continue to be, the sole and exclusive property of the Company, and
shall, together with all copies thereof and all advertising literature, be
returned and delivered to the Company by the Executive immediately,
without demand, upon the termination of this Agreement, or at any time
upon the Company's demand.
(b) RESTRICTION ON SOLICITING EMPLOYEES OF THE COMPANY. The
Executive covenants that during the term of this Agreement and for the
period set forth on EXHIBIT "A" ("Non-Solicitation Period") following the
termination of this Agreement, he will not, either directly or indirectly,
call on, solicit, or take away, or attempt to call on, solicit, induce or
take away any employee of the Company, either for himself or for any other
person, firm, corporation or other entity. Further, Executive shall not
induce any employee of the Company to terminate his or her employment with
the Company.
(c) COVENANT NOT TO COMPETE. The Executive hereby covenants and
agrees that during the term of this Agreement and for the later of one (1)
year after the date of his termination or until the Company no longer has
a well operating in such designated prospects
Page 8 of 12 Pages
<PAGE>
("the Non-Compete Period"), he will not without the prior written consent
of the Company, directly or indirectly, either as an employee, employer,
consultant, agent, principal, partner, shareholder (other than through
ownership of publicly-traded capital stock of a corporation which
represents less than five percent (5%) of the outstanding capital stock of
such corporation), corporate officer, director, investor, financier or in
any other individual or representative capacity, engage or participate in
any business competitive with the business conducted by the Company within
the prospect areas on which Executive has worked up to the date of the
termination of this Agreement ("Designated Prospect(s)"). The Company
shall provide to the Executive a list and an outline of each such
Designated Prospect within fifteen (15) business days after the date of
termination. Further, Executive agrees and covenants not to use for his
benefit or for the benefit of another or disclose, disseminate or
distribute to another any geologic or geophysical information regarding
the Designated Prospects during the Non-Compete Period.
(d) SURVIVAL OF COVENANTS. Each covenant of the Executive set forth
in this Article III shall survive the termination of this Agreement and
shall be construed as an agreement independent of any other provision of
this Agreement, and the existence of any claim or cause of action of the
Executive against the Company whether predicated on this Agreement or
otherwise shall not constitute a defense to the enforcement by the Company
of said covenant.
(e) REMEDIES. In the event of breach or threatened breach by the
Executive of any provision of this Article III, the Company shall be
entitled to relief by temporary restraining order, temporary injunction,
or permanent injunction or otherwise, in addition to other legal and
equitable relief to which it may be entitled, including any and all
monetary damages which the Company may incur as a result of said breach,
violation or threatened breach or violation. The Company may pursue any
remedy available to it concurrently or consecutively in any order as to
any breach, violation, or threatened breach or violation, and the pursuit
of one of such remedies at any time will not be deemed an election of
remedies or waiver of the right to pursue any other of such remedies as to
such breach, violation, or threatened breach or violation, or as to any
other breach, violation, or threatened breach or violation.
(f) LIMITATIONS. The obligations of confidentiality regarding Trade
Secrets and geologic or geophysical information regarding the Designated
Prospects set forth in this Section 3.1 shall not apply if (i) it can be
demonstrated by the Executive to have been within his legitimate possession
prior to the time of disclosure by the disclosing party, (ii) it was in the
public domain prior to disclosure, or (iii) if such disclosure comes into the
public domain through no fault of the Executive.
The Executive hereby acknowledges that the Executive's agreement to be
bound by the protective covenants set forth in this Article III was a material
inducement for the Company entering into this Agreement and agreeing to pay the
Executive the compensation and benefits set forth herein. Further, Executive
understands the foregoing restrictions may limit his or her ability to engage in
certain businesses during the period of time provided for, but acknowledges that
Executive will receive sufficiently high remuneration and other benefits under
this Agreement to justify such restriction.
Page 9 of 12 Pages
<PAGE>
ARTICLE IV.
GENERAL PROVISIONS
4.1 NOTICES. all notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be deemed to have been
delivered on the date personally delivered or on the date deposited in a
receptacle maintained by the United States Postal Service for such purpose,
postage prepaid, by certified mail, return receipt requested, addressed to the
respective parties as follows:
IF TO THE EXECUTIVE As set forth in EXHIBIT "A"
IF TO THE COMPANY:Texas Meridian Resources Exploration, Inc.
15995 N. Barkers Landing, Suite 300
Houston, Texas 77079
ATTN: General Counsel
Either party hereto may designate a different address by providing written
notice of such new address to the other party hereto.
4.2 SEVERABILITY. If any provision contained in this Agreement is
determined by a court of competent jurisdiction or an arbitrator pursuant to
Section 5 below to be void, illegal or unenforceable, in whole or in part, then
the other provisions contained herein shall remain in full force and effect as
if the provision which was determined to be void, illegal, or unenforceable had
not been contained herein. If the restrictions contained in Article III are
found by a court to be unreasonable or overly broad as to geographic area or
time, or otherwise unenforceable, the parties intend for said restrictions to be
modified by said court so as to be reasonable and enforceable and, as so
modified, to be fully enforced.
4.3 WAIVER MODIFICATION, AND INTEGRATION. The waiver by any party hereto
of a breach of any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach by any party. This instrument contains the
entire agreement of the parties concerning employment and supersedes all prior
and contemporaneous representations, understandings and agreements (including
but not limited to any initial employment or independent contractor agreement)
either oral or in writing, between the parties hereto with respect to the
employment of the Executive by the Company and all such prior or contemporaneous
representations, understandings and agreements, both oral and written, are
hereby terminated, unless otherwise specifically designated on EXHIBIT "A". This
Agreement may not be modified, altered or amended except by written agreement of
all the parties hereto.
4.4 BINDING EFFECT. This Agreement shall be binding and effective upon the
parties and their respective heirs, executors and successors. Neither party
shall assign this Agreement without the prior written consent of the other
party, except that the Company shall have the right to assign this Agreement to
an entity.
Page 10 of 12 Pages
<PAGE>
4.5 GOVERNING LAW. The parties intend that the laws of the State of Texas
should govern the validity of this Agreement, the construction of its terms, and
the interpretation of the rights and duties of the parties hereto.
4.6 REPRESENTATION OF EXECUTIVE. The Executive hereby represents and
warrants to the Company that the Executive has not previously assumed any
obligations inconsistent with those contained in this Agreement, unless
specifically set out in EXHIBIT "A". The Executive further represents and
warrants to the Company that the Executive has entered into this Agreement
pursuant to Executive's own initiative and that this Agreement is not in
contravention of any existing commitments. The Executive acknowledges that the
Company has entered into this Agreement in reliance upon the foregoing
representations of the Executive.
4.7 COUNTERPART EXECUTION. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
4.8 COMPANY. For the purposes of this Agreement, Company shall include any
parent, subsidiary division of the Company, or any entity, who directly or
indirectly, controls, is controlled by, or is under common control with the
Company.
4.9 EXECUTIVE. Executive represents to the Company and agrees that he: (i)
was specifically advised to and fully understands his rights to discuss all
aspects of this Agreement with an attorney, (ii) has, to the extent he desires,
availed himself of these rights,and (iii) has carefully read and fully
understands the provisions of this Agreement.
ARTICLE V.
ARBITRATION
5.1 RESOLUTION OF DISPUTES. In the event any dispute(s) arises between the
parties, the parties shall cooperate in good faith to resolve the dispute(s). If
the parties cannot resolve the dispute(s) between themselves within ten (10)
days after written notice of activation of the terms of this Article V, each
party shall, within seven (7) days after the expiration of said 10 day period,
select a mediator and shall notify the other party of such selection. The
mediators shall have thirty (30) days from the expiration of said 7 day period
to resolve the dispute(s). If a resolution of the dispute(s) does not occur
through said mediation within said 30 days, the dispute(s) shall be resolved by
binding arbitration.
5.2 ARBITRATION. In the event any dispute cannot be resolved through
mediation the parties agree to submit such dispute(s) to binding non-appealable
arbitration within ten (10) days from the expiration of the 30 day period set
out in Section 5.1. Any such arbitration arising hereunder shall be conducted in
Houston, Texas in accordance with the rules of the American Arbitration
Association then in effect. Each party hereby submits itself to personal
jurisdiction in Houston, Texas, for the purpose of such arbitration proceedings.
Within fifteen (15) days from submitting the dispute(s) to arbitration each
party shall select its arbitrator. Then within twenty (20) days after said 15
days the two arbitrators shall select a third arbitrator. The three arbitrators
shall have their first meeting within
Page 11 of 12 Pages
<PAGE>
twenty (20) days after the selection of the third arbitrator. The arbitrators
shall reach a final decision within one hundred eighty (180) days of their first
meeting. The costs of arbitration shall be borne equally by the parties, except
each party shall be responsible for such party's own arbitrator's and attorneys'
fees.
ARTICLE VI.
CONFIDENTIALITY
6.1 CONFIDENTIALITY. This Agreement is confidential, and the substance may
be disclosed only as mutually agreed by the parties or as may be required by
law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written effective as of the Effective Date.
THE COMPANY:
TEXAS MERIDIAN RESOURCES
EXPLORATION, INC.
By:__________________________________
Printed Name:_____________________
Title:____________________________
EXECUTIVE:
Printed Name: P. RICHARD GESSINGER
Page 12 of 12 Pages
<PAGE>
EXHIBIT "A" TO
EMPLOYMENT AGREEMENT
Executive Name: P. Richard Gessinger
Position: Chief Financial Officer and Executive Vice President of
the Meridian Resource Corporation
Monthly Base Salary: Sixteen Thousand Six Hundred Sixty-Six and 67/100
Dollars ($16,666.67)
Bonus: An annual bonus at the discretion of the Company's Board
of Directors.
Well Bonus Plan: An interest of one-half of one percent (0.50%) in the
Company's management well bonus plan will be granted to
you. In conjunction with said management well bonus plan
you will be granted the right to receive up to 20,000
shares of Company common stock subject to the
calculation set out below and to an initial 4 year
vesting program. The only requirement for the annual
vesting is you must be employed by the Company on each
annual vesting date. The purpose of said stock grant is
to create a floor amount of consideration you will
receive in 1998 from the management well bonus plan. If
the amount you receive from the management well bonus
plan in 1998 exceeds $200,000, then no shares will vest
other than the initial 5,000 shares. If the amount
received from the management well bonus plan in 1998 is
less than $200,000, then you will receive the number of
shares, valued for the purposes hereof at $10.00 per
share, necessary to equal the difference between the
amount you received and $200,000. Five thousand (5,000)
shares of said 20,000 shares will vest on January 1,
1998 and one third of the shares issued pursuant to the
above calculation shall vest on January 1, 1999, 2000
and 2001.
Stock Options: You will be granted 25,000 stock options (ISO and NQSO).
The grant price of these options is $10.00. The options
will vest over a four year period in accordance with the
stock option plans.
Salary Deferral Program:You may choose to defer all or part of your salary
under an existing salary deferral program and receive a
partial match up to 50% of your salary by purchasing
common stock with the deferred salary.
Page 1 of 2 Pages
<PAGE>
Annual Medical Exam: The Company will pay for an annual physical exam with an
approved medical facility or with an approved physician.
Business expenses: All reasonable expenses for travel or otherwise related
to business on behalf of the Company will be reimbursed.
Parking: The Company will provide a reserved parking space.
Vacation: Four (4) weeks, on a calendar basis, effective from the
first day of employment. The vacation shall be earned at
the rate of 1.67 days for each full month of employment.
Vacation days will be coordinated in advance, subject to
the reasonable discretion of the Chief Executive Officer
and/or President of The Meridian Resource Corporation.
Clubs: The Company will pay your monthly dues and business use
of your Coronado Club and Lochinvar Country Club
membership. The Company will acquire a corporate
membership at Lochinvar Country Club for your use, if
you pay one-half of the cost of the membership. Upon
your termination from the Company, you may elect to
either pay the Company the other one-half of the cost of
the membership and the membership will be transferred to
you or the Company will pay you the one-half of the cost
of the membership originally paid by you and retain the
corporate membership. Personal usage will be for your
own account.
Non-Solicitation Period:Six (6) months
Non-Compete Period: Six (6) months
Home Address: 705 Pifer Road
Houston, Texas 77024
Page 2 of 2 Pages
EXHIBIT 10.4
EXECUTION COPY
SECOND AMENDMENT
SECOND AMENDMENT, dated as of November 13, 1998 (this "SECOND AMENDMENT"),
to the Amended and Restated Credit Agreement (as amended, supplemented or
otherwise modified from time to time), dated as of May 22, 1998 (the "CREDIT
AGREEMENT"), among The Meridian Resource Corporation, a Texas corporation (the
"Borrower"), the several lenders from time to time parties thereto (the
"LENDERS"), The Chase Manhattan Bank, as the Administrative Agent for the
Lenders (in such capacity, the "ADMINISTRATIVE AGENT"), Bankers Trust Company,
as syndication agent (in such capacity, the "SYNDICATION Agent"), Chase
Securities Inc., as advisor to the Borrower (in such capacity, the "Advisor"),
Chase Securities Inc., BT Alex. Brown Incorporated, Toronto Dominion (Texas),
Inc. and Credit Lyonnais New York Branch, as co-arrangers (each in such
capacity, a "CO-ARRANGER"), and Toronto Dominion (Texas), Inc. and Credit
Lyonnais New York Branch, as co-documentation agents (each in such capacity, a
"CO-DOCUMENTATION AGENT").
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders and the Administrative Agent are
parties to the
Credit Agreement;
WHEREAS, the Borrower has requested, and the Administrative Agent and the
Lenders have agreed, to increase the Borrowing Base to $250,000,000 and to
certain other modifications all as provided for herein set forth herein; and
WHEREAS, the Commitments of certain Lenders are changing, the Commitments
of certain Lenders are being reduced to zero (the "EXITING LENDERS") and a
certain financial institution is being added as a party hereto (the "NEW
LENDER");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Terms defined in the Credit Agreement and used herein
shall, unless otherwise indicated, have the meanings given to them in the Credit
Agreement.
2. AMENDMENTS TO SUBSECTION 1.1 OF THE CREDIT AGREEMENT. (a) Subsection
1.1 of the Credit Agreement is hereby amended by deleting therefrom the
definitions of "Applicable Margin", "Borrowing Base", "Commitment Fee Rate" and
"Mortgage" contained therein in their entirety and substituting in lieu thereof
the following definitions:
<PAGE>
2
"APPLICABLE MARGIN": for any day with respect to Eurodollar Loans
and ABR Loans, the applicable per annum rate set forth below opposite the
Borrowing Base Usage in effect on such day:
BORROWING EURODOLLAR ABR
BASE USAGE MARGIN MARGIN
---------- -------- ------
Less than or 1.00% 0%
equal to 33%
Greater than 1.25% .25%
33% and less
than or equal
to 66%
Greater than 1.50% .50%
66% and less
than or equal
to 80%
Greater than 0%
80% 2.50% 1.5
PROVIDED if there is no Borrowing Base Deficiency on the effective date of
the March '99 Redetermination (after giving effect thereto), then
commencing on such effective date the Applicable Margin thereafter, for
any day with respect to Eurodollar Loans and ABR Loans shall be the
applicable per annum rate set forth below opposite the Borrowing Base
Usage in effect on any such day:
BORROWING EURODOLLAR ABR
BASE USAGE MARGIN MARGIN
---------- -------- ------
Less than or 1.00% 0%
equal to 33%
Greater than 1.25% .25%
33% and less
than or equal
to 66%
Greater than 0%
66% 1.50% .5
As used herein, "BORROWING BASE USAGE" on any day means the percentage
equivalent to the ratio of (i) the sum of the aggregate principal amount
of the
<PAGE>
3
Loans then outstanding and Letter of Credit Outstandings on such day to
(ii) the Borrowing Base in effect on such day.
"BORROWING BASE": at any time of determination, the amount then in
effect as determined in accordance with subsection 4.9; PROVIDED, HOWEVER,
that until the March '99 Redetermination, the Borrowing Base shall be
$250,000,000.
"COMMITMENT FEE RATE": for any day, a rate per annum equal to (a)
.30% if the Borrowing Base Usage in effect on such day is less than or
equal to 33%, (b) .375% if the Borrowing Base Usage in effect on such day
is greater than 33% and less than or equal to 80% and (c) .50% if the
Borrowing Base Usage in effect on such day is greater than 80%; PROVIDED
that if there is no Borrowing Base Deficiency on the effective date of the
March '99 Redetermination (after giving effect thereto), then commencing
on such effective date the Commitment Fee Rate thereafter for any day
shall be a rate per annum equal to (a) .30% if the Borrowing Base Usage in
effect on such day is less than or equal to 33% and (b) .375% if the
Borrowing Base Usage in effect on such day is greater than 33%.
"MORTGAGE": collectively, (i) the Existing Mortgage, as amended by
the Mortgage Amendment, as further amended by the Second Mortgage
Amendment, and (ii) each other mortgage (including without limitation, the
Additional Mortgage), deed of trust, assignment, security agreement or
mortgage executed by the Borrower or any other Loan Party and in form and
substance reasonably satisfactory to the Administrative Agent which
purports to create a Lien in favor of the Administrative Agent, in each
case as amended, supplemented or otherwise modified from time to time.
(b) Subsection 1.1 of the Credit Agreement is hereby amended by
adding thereto the following new definitions in alphabetical order:
"ADDITIONAL MORTGAGE": additional mortgages and deeds of trust on
Oil and Gas Properties consisting of additional properties made by any
Loan Party in favor of, or for the benefit of, the Administrative Agent
for the benefit of the Lenders, substantially in the form of Exhibit J
attached hereto, as the same may be amended, supplemented or otherwise
modified from time to time.
"BBL": one stock tank barrel, or 42 U.S. gallons liquid volume, used
herein in reference to crude oil or other liquid hydrocarbons.
"BCFE": billion cubic feet equivalent, determined using the ratio of
six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas
liquids.
"MCF": one thousand cubic feet.
<PAGE>
4
"MMCFE/D": one million cubic feet equivalent per day, determined
using the ratio of six Mcf of natural gas to one Bbl of crude oil,
condensate or natural gas liquids.
"CONSOLIDATED WORKING CAPITAL": at any date, the excess of current
assets on such date OVER current liabilities on such date, excluding the
current portion of long term debt, all as determined in accordance with
GAAP.
"MARCH '99 REDETERMINATION": the redetermination of the Borrowing
Base scheduled for March 31, 1999, pursuant to subsection 4.9(c),
utilizing the Reserve Report dated as of December 31, 1998 and required to
be delivered prior to March 1, 1999.
"SECOND MORTGAGE AMENDMENT": the Second Mortgage Amendment,
substantially in the form of Exhibit K, to amend the Existing Mortgage as
amended by the Mortgage Amendment.
3. AMENDMENTS TO SUBSECTION 4.6. Subsection 4.6 of the Credit Agreement is
hereby amended by adding after clause (b) and before subsection 4.7 the
following new clause (c):
"(c) Each time the Borrower requests Revolving Credit Loans be made
on a Borrowing Date, the effect of which would be to cause the aggregate
outstanding principal amount of the Revolving Credit Loans to exceed the
greater of (i) $200 million and (ii) the previous highest aggregate
outstanding principal amount of Revolving Credit Loans (the greater of (i)
and (ii) being herein called the "BASE Amount"), the Borrower shall pay to
the Administrative Agent for the ratable benefit of the Lenders (based on
each Lender's Commitment Percentage) a fee equal to the product obtained
by multiplying 2.5% by the amount by which the aggregate outstanding
principal amount of the Revolving Credit Loans on such Borrowing Date
(after giving effect to the Revolving Credit Loans being made on such
Borrowing Date) exceeds the Base Amount."
4. AMENDMENTS TO SUBSECTION 4.9. Subsection 4.9 of the Credit Agreement is
hereby amended by deleting such subsection in its entirety and substituting in
lieu thereof the following:
"4.9 COMPUTATION OF BORROWING BASE. (a) BORROWING BASE. (i) The
Borrowing Base in effect from time to time shall represent the maximum
principal amount (subject to the aggregate amount of the Revolving Credit
Commitments) of Loans and Letter of Credit Outstandings that the Lenders
will allow to remain outstanding during the Commitment Period. Until the
March '99 Redetermination, the Borrowing Base will be based upon the value
of certain Proved Reserves attributable to the Oil and Gas Properties of
the Borrower and its Subsidiaries and other assets of the Borrower and its
Subsidiaries acceptable to the Administrative Agent in its sole
discretion, and will be determined by the
<PAGE>
5
Administrative Agent in accordance with paragraph (d) of this subsection
4.9, subject to approval by the Supermajority Lenders (or, with respect to
the March '99 Redetermination, all of the Lenders). Until the Commitments
are no longer in effect, all Letters of Credit have terminated and all of
the Loans and all other obligations under this Agreement are paid in full,
this Agreement shall be subject to the then effective Borrowing Base.
(b) RESERVE REPORTS. Prior to March 1 and September 1 of each year,
the Borrower shall, at its own expense, furnish to the Administrative
Agent and to each Lender Reserve Reports, which Reserve Reports shall be
dated as of the immediately preceding December 31 (in the case of Reserve
Reports due on March 1) and June 30 (in the case of Reserve Reports due on
September 1), and shall set forth, among other things, (i) the Oil and Gas
Properties, then owned by the Borrower and its Subsidiaries, (ii) the
Proved Reserves attributable to such Oil and Gas Properties and (iii) a
projection of the rate of production and net income of the Proved Reserves
as of the date of such Reserve Report, all in accordance with the
guidelines published by the Securities and Exchange Commission and such
assumptions as the Administrative Agent shall provide. Concurrently with
the delivery of the Reserve Reports, the Borrower shall furnish to the
Administrative Agent and to each Lender a certificate of a Responsible
Officer showing any additions to or deletions from the Oil and Gas
Properties listed in the Reserve Report, which additions or deletions were
made by the Borrower and its Subsidiaries since the date of the previous
Reserve Report.
(c) REDETERMINATIONS OF THE BORROWING BASE. The Borrowing Base shall
be redetermined (i) after receipt by the Administrative Agent of each
scheduled Reserve Report, commencing with the Reserve Report prepared as
of December 31, 1998, (ii) upon the delivery of a Lender Redetermination
Notice to the Borrower and (iii) upon the delivery of a Borrower
Redetermination Notice to the Administrative Agent, all as provided in
this subsection 4.9. Within 15 days after the delivery of a Borrower
Redetermination Notice or a Lender Redetermination Notice, the Borrower
shall furnish to the Administrative Agent and to each Lender a Reserve
Report as of the most recent practicable date. If the Borrower fails to
deliver a Reserve Report within the time period provided for in the
preceding sentence, then the Administrative Agent shall have the right to
rely on the last Reserve Report previously delivered by the Borrower with
any such adjustments and taking into account any additional information as
the Administrative Agent may deem appropriate, in its sole discretion. On
or before the date which is 30 days after receipt (i) of a scheduled
semi-annual Reserve Report or (ii) of a Reserve Report in connection with
a Lender Redetermination Notice or a Borrower Redetermination Notice, the
Administrative Agent shall redetermine the Borrowing Base in its sole
discretion, and the Administrative Agent shall notify the Borrower and the
Lenders of its redetermination of the Borrowing Base. Within 10 days after
receipt from the Administrative Agent of the amount of the its
redetermination of the Borrowing Base, each Lender shall notify the
Administrative Agent stating whether or not such Lender agrees with that
redetermination. Failure of any Lender to give such notice within such
<PAGE>
6
period of time shall be deemed to constitute an acceptance of such
redetermination. If the Supermajority Lenders (or, with respect to the
March '99 Redetermination, all of the Lenders) agree with that
redetermination, then the Administrative Agent promptly shall notify the
Borrower of the Borrowing Base as so redetermined, whereupon that
redetermined value shall automatically become effective (and shall remain
effective until the Borrowing Base is again redetermined as provided in
this subsection 4.9(c)). If the Supermajority Lenders (or, with respect to
the March '99 Redetermination, all of the Lenders) have not approved or
are not deemed to have approved the Borrowing Base within the 10 day
period following their receipt of the proposed amount from the
Administrative Agent, the Borrowing Base shall be set at the amount of the
then current Borrowing Base and the Borrowing Base shall remain at such
level until the Supermajority Lenders (or, with respect to the March '99
Redetermination, all of the Lenders), utilizing the procedure outlined
herein, agree on a new Borrowing Base. Each redetermination provided for
by this subsection 4.9(c) shall be made in accordance with the provisions
of subsection 4.9(d). It is the intention of the Borrower and the Lenders
that the Borrowing Base be redetermined within 45 days after the
furnishing of each Reserve Report, subject to the provisions of this
paragraph (c).
(d) CRITERIA. (i) All determinations and redeterminations by the
Administrative Agent provided for in this subsection 4.9 (and any
determinations and decisions by either or both of the Administrative Agent
and the Supermajority Lenders (or, with respect to the March '99
Redetermination, all of the Lenders) in connection therewith, including
effecting any redetermination of the value of any component contained in a
Reserve Report) shall be made by the Administrative Agent and the Lenders
in their sole discretion and shall be made on a reasonable basis and in
good faith based upon the application by the Administrative Agent and the
Lenders of their respective normal oil and gas lending criteria as they
exist at the time of determination.
(ii) All redeterminations of the Borrowing Base referred to in this
subsection 4.9 shall become effective immediately upon the delivery of
notice by the Administrative
Agent to the Borrower of the redetermination.
(iii) Upon the issuance of any Subordinated Indebtedness, the
Borrowing Base shall be redetermined in accordance with the procedures set
forth in subsection 4.9 which would have applied had a Borrower
Redetermination Notice or a Lender Redetermination Notice been delivered.
(e) TITLE. Concurrently with the delivery to the Administrative
Agent of each Reserve Report, the Administrative Agent may request that
the Borrower furnish to the Administrative Agent reasonable evidence of
the Borrower's title to the Oil and Gas Properties which have been
developed or acquired by the Borrower subsequent to the Reserve Report
immediately preceding such Reserve Report."
<PAGE>
7
5. AMENDMENTS TO SECTION 4.10. Subsection 4.10 of the Credit Agreement is
hereby amended by deleting such subsection in its entirety and substituting in
lieu
thereof the following:
"4.10 BORROWING BASE COMPLIANCE. If, upon any redetermination of the
Borrowing Base pursuant to subsection 4.9(c) other than in connection with
the issuance of Subordinated Indebtedness provided for in subsection
8.2(f), the Aggregate Revolving Credit Exposure of the Lenders exceeds the
Borrowing Base then in effect (any such excess, the "BORROWING BASE
DEFICIENCY"), the Borrower shall prepay the Revolving Credit Loans and
then to the extent necessary, cash collateralize the Letter of Credit
Outstandings in an amount equal to at least 50% of the Borrowing Base
Deficiency within 90 days after the effective date of the redetermination
resulting in such Borrowing Base Deficiency, and within the next 90 days
prepay the Revolving Credit Loans and then cash collateralize the Letter
of Credit Outstandings in an amount equal to the balance of such Borrowing
Base Deficiency in each case together with interest accrued to the date of
such payment or prepayment and any amounts payable under subsection 4.14;
PROVIDED that, if there exists a Borrowing Base Deficiency upon the March
'99 Redetermination the Borrower shall within 30 days of the effectiveness
of the March '99 Redetermination prepay the Revolving Credit Loans and
then cash collateralize the Letter of Credit Outstandings (together with
interest accrued to the date of such payment or prepayment and any amounts
payable under subsection 4.14) in an amount equal to such Borrowing Base
Deficiency. If at any other time there exists a Borrowing Base Deficiency
(including as a result of a redetermination in connection with the
incurrence of Subordinated Indebtedness provided for in subsection
8.2(f)), the Borrower shall immediately prepay the Revolving Credit Loans
and then to the extent necessary, cash collateralize the Letter of Credit
Outstandings in an amount equal to 100% of such Borrowing Base Deficiency
together with (i) interest accrued to the date of such payment or
prepayment and (ii) any amounts payable under subsection 4.14.
Notwithstanding the foregoing, the Borrower shall immediately apply 100%
of the Net Proceeds of any Redetermination Event described in clauses (a),
(b), (c) or (d) of the definition thereof to prepay outstanding Loans and
then cash collateralize the Letter of Credit Outstandings. Prepayments and
collateralization pursuant to this subsection 4.10 shall be made as set
forth in subsection 4.5(c)."
6. AMENDMENT TO SUBSECTION 7.2. Subsection 7.2 of the Credit Agreement is
hereby amended by (a) deleting the "and" and the end of clauses "(e)", (b)
relettering clause "(f)" as clause "(g)" and adding the following new clause
"(f)":
"(f) no later than January 15, 1999, a certificate of the Borrower
certifying to the best of the Borrower's knowledge, the Borrower's
compliance with paragraphs (d), (e) and (f) of subsection 8.1 together
with computations showing such compliance including the respective
percentages of Proved Reserves consisting of proved developed producing
reserves, proved developed non-producing reserves and proved undeveloped
reserves; and"
<PAGE>
8
7. AMENDMENTS TO SECTION 7.11. Subsection 7.11 of the Credit Agreement is
hereby amended by deleting such subsection in its entirety and substituting in
lieu thereof the following:
"7.11 FURTHER ASSURANCES. Upon the request of the Administrative
Agent, promptly perform or cause to be performed any and all acts and
execute or cause to be executed any and all documents (including, without
limitation, financing statements and continuation statements) for filing
under the provisions of the Uniform Commercial Code or any other
Requirement of Law which are necessary or advisable to maintain in favor
of the Administrative Agent, for the benefit of the Lenders, Liens on the
Pledged Securities and on the Oil and Gas Properties subject to the
Mortgages that are duly perfected in accordance with all applicable
Requirements of Law; PROVIDED that the Liens created by such Mortgages
shall be released after the effectiveness of the March '99 Redetermination
(pursuant to documentation reasonably satisfactory to the Administrative
Agent) and PROVIDED that, if upon redetermination of the Borrowing Base in
connection with the March '99 Redetermination it is determined that there
is no Borrowing Base Deficiency or if there is, such deficiency is cured
within 30 days, the Liens created by such Mortgages shall be released if,
at such time, (x) no Default or Event of Default has occurred and is
continuing and (y) the December 31, 1998 Reserve Report is delivered by
the Borrower to the Administrative Agent by March 1, 1999."
8. AMENDMENT TO SECTION 7. Section 7 of the Credit Agreement is hereby
amended by adding after subsection 7.11 and before Section 8, the following:
"7.12 ADDITIONAL COLLATERAL. (a) The Borrower shall take all action
so that no later than December 11, 1998, the schedules of description of
properties to be included with the Additional Mortgage are delivered in
proper recordable form to the Administrative Agent, such that the
Additional Mortgage (when recorded) together with the Existing Mortgage
shall give the Lenders a first lien on Proved Reserves of the Borrower
constituting at least 75% of the net present value of all the Proved
Reserves of the Borrower and its Subsidiaries as reflected in the Reserve
Report dated September 3, 1998, prepared by the Borrower and delivered to
the Lenders. In addition, the Adminstrative Agent shall receive no later
than December 11, 1998, a certificate from the Borrower satisfactory to
the Administrative Agent as to the fact that the Additional Mortgage
together with the Existing Mortgage shall give the Lenders when the
Additional Mortgage is properly filed, a first lien on Proved Reserves of
the Borrower constituting at least 75% of the net present value of all the
Proved Reserves of the Borrower and its Subsidiaries as reflected in the
foregoing Reserve Report.
(b) The Borrower hereby directs the Administrative Agent to file and
record the Additional Mortgage in all filing offices as the Administrative
Agent deems appropriate upon the occurrence of any of the following events
(and the Administrative Agent and the Lenders agree not to file or record
the Additional Mortgage until the occurrence of any of the following
events):
<PAGE>
9
(i) the Borrower fails to deliver the certificate required by
subsection 7.2(f) by January 15, 1999 or if the Borrower delivers such
certificate, subsequent information is received by the Borrower or the
Administrative Agent which demonstrates to the reasonable satisfaction of
the Administrative Agent that the Borrower is not in compliance with
subsection 8.1(d), (e), or (f); or
(ii) if the Borrower fails to deliver the Reserve Report for
December 31, 1998 to the Administrative Agent by March 1, 1999 or if upon
redetermination of the Borrowing Base in connection with the March '99
Redetermination it is determined that a Borrowing Base Deficiency exists
and the Borrower fails to cure such deficiency within 30 days of the
effective date of the March '99 Redetermination by prepaying the Revolving
Credit Loans and/or cash collateralizing Letter of Credit Outstandings.
(c) Upon the filing of the Additional Mortgage to the extent
required under paragraph (b) above, the Borrower shall take all other
action so that on such date the Administrative Agent on behalf of the
Lender shall have a valid perfected first mortgage lien on Proved Reserves
of the Borrower constituting at least 75% of the net present value of all
the Proved Reserves of the Borrower and its Subsidiaries as reflected in
the most recent Reserve Report and thereafter the Borrower shall take such
action as is necessary so that the Administrative Agent on behalf of the
Lenders continues to have a first mortgage lien on Proved Reserves of the
Borrower constituting at least 75% of the net present value of the Proved
Reserves of the Borrower and its Subsidiaries as reflected in the most
recent Reserve Report."
9. AMENDMENT TO SUBSECTION 8.1. Subsection 8.1 of the Credit Agreement is
hereby amended by adding thereto the following paragraphs (d), (e) and (f):
"(d) AVERAGE DAILY PRODUCTION. Permit the average daily production
of the Proved Reserves of the Borrower and its Subsidiaries for the
calendar quarter ending December 31, 1998 to be less than 140 MMCFE/D.
(e) PROVED RESERVES. Permit the aggregate Proved Reserves of the
Borrower and its Subsidiaries as of December 31, 1998 to be less than 281
BCFE.
(f) WORKING CAPITAL. Permit the Consolidated Working Capital as at
December 31, 1998 to be less than negative $10,000,000."
10. AMENDMENT TO SUBSECTION 9(C). Section 9 of the Credit Agreement is
hereby amended by deleting paragraph (c) in its entirety and substituting in
lieu thereof the following:
"(c) The Borrower or any of its Subsidiaries shall default in the
observance or performance of any agreement applicable to it contained in
subsections 4.10, 7.7(a), 7.9 or 7.12 of this Agreement, Section 8 of this
Agreement or Section 5(b) of the Pledge Agreement; or"
<PAGE>
10
11. SCHEDULE 1.1(A), EXHIBIT J AND EXHIBIT K. The Credit Agreement is
hereby amended and supplemented by (a) deleting Schedule 1.1(a) therefrom in its
entirety and substituting a new Schedule 1.1(a) attached hereto as Annex A, (b)
adding thereto a new Exhibit J (the Form of Additional Mortgage) attached hereto
as Annex B and (c) adding thereto a new Exhibit K (the Second Mortgage
Amendment) attached hereto as Annex C.
12. CONDITIONS TO EFFECTIVENESS. The amendments and changes provided for
in this Second Amendment shall become effective on the date (the "SECOND
AMENDMENT EFFECTIVE DATE") upon which the following conditions precedent are
satisfied and the Administrative Agent notifies the Borrower and the Lenders of
the occurrence of the Second Amendment Effective Date:
(a) the Administrative Agent shall have received counterparts of
this Second Amendment, duly executed by the Borrower, the Lenders (including the
Exiting Lenders) and the
New Lender, listed in the signature pages hereof;
(b) the Administrative Agent shall have received counterparts of the
Acknowledgement and Consent, confirming and agreeing that the Second Amended and
Restated Guarantee, dated as of June 30, 1998, is and shall continue to be, in
full force and effect, duly executed by the Guarantors attached hereto;
(c) the Administrative Agent shall have received the Second Mortgage
Amendment, executed and delivered by a duly authorized officer of each Loan
Party thereto;
(d) the Administrative Agent shall have received an Additional
Mortgage, effective to create when properly filed in favor of the Administrative
Agent, for the ratable benefit of the Lenders, a first priority lien on the
properties to be covered by the Additional Mortgage;
(e) the Administrative Agent shall have received all fees and
expenses required to be paid on or before the Second Amendment Effective Date;
(f) the Administrative Agent shall have received a legal opinion of
counsel to the Borrower and special Louisiana counsel to the Administrative
Agent in form and substance satisfactory to the Administrative Agent;
(g) the Administrative Agent shall have received a copy of the
resolutions, in form and substance satisfactory to the Administrative Agent, of
the Board of Directors of each applicable Loan Party authorizing (i) the
execution, delivery and performance of this Second Amendment, the Second
Mortgage Amendment and the Additional Mortgage, certified by its Secretary or
Assistant Secretary as of the Second Amendment Effective Date, which certificate
shall state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded as of the date of such certificate; and
<PAGE>
11
(h) concurrently with the occurrence of the Second Amendment
Effective Date, all actions required by Section 13(a) below of this Second
Amendment shall have been taken with respect to the New Lender and each Exiting
Lender.
13. EXITING AND NEW LENDERS; AMENDMENT TO SCHEDULE 1.1(A). (a) Each of (i)
Bankers Trust Company, (ii) Credit Lyonnais New York Branch, (iii) CIBC, Inc.,
(iv) The Sanwa Bank, Limited, and (v) The Fuji Bank, Limited is an Exiting
Lender and Morgan Guaranty Trust Company of New York is a New Lender.
Concurrently with the Second Amendment Effective Date, Commitments will be
adjusted as provided in Annex A and the Administrative Agent shall inform the
Lenders of adjustments to be made on the Second Amendment Effective Date
including that certain Lenders will make additional Revolving Loans and the
Exiting Lenders will be repaid their Revolving Loans together with all interest
and fees accrued to the Second Amendment Effective Date so that upon conclusion
of such adjustments, each Lender's Aggregate Revolving Credit Exposure will be
pro rata in accordance with Annex A and the Exiting Lenders will have no
outstanding Revolving Credit Exposure.
(b) In connection with the foregoing, effective on the Second
Amendment Effective Date, (i) the New Lender shall be a party to the Credit
Agreement and have the rights and obligations of a Lender thereunder and under
the other Loan Documents and shall be bound by the provisions thereof, (ii) each
Exiting Lender shall no longer be a Lender thereunder and shall be released from
its obligations under the Credit Agreement (including without limitation,
Section 3.4), (iii) Bankers Trust Company shall no longer be Syndication Agent
thereunder and shall be released from its obligations under the Credit Agreement
in its capacity as Syndication Agent, (iv) Credit Lyonnais New York Branch shall
no longer be a Co-Arranger or a CoDocumentation Agent thereunder and shall be
released from its obligations under the Credit Agreement in its capacity as
Co-Arranger and as Co-Documentation Agent, and (v) Mees Pierson N.V. shall be a
Co-Arranger thereunder and shall have the rights and obligations of a
Co-Arranger thereunder and under the Loan Documents and shall be bound by the
provisions thereof.
(c) Each Exiting Lender is executing this Second Amendment solely
for the purposes of acknowledging and agreeing that upon occurrence of the
Second Amendment Effective Date and repayment of the Revolving Loan and all
accrued and unpaid interest and fees, such Exiting Lender is no longer a Lender
under the Credit Agreement.
14. REPRESENTATIONS AND WARRANTIES. The Borrower as of the date hereof and
after giving effect to the amendments contained herein, hereby (a) represents
and warrants to the Administrative Agent and each Lender that the list of
additional properties described in the Additional Mortgage on the date hereof is
true and complete and (b) confirms, reaffirms and restates that (i)
representations and warranties made by it in Section 5 of the Credit Agreement
are true and correct on and as of the date hereof (except to the extent such
representations and warranties are stated to relate to a specific earlier date)
and (ii) no Default or Event of Default has occurred and is continuing on the
date hereof; PROVIDED, that each reference to the Credit Agreement therein shall
be deemed to be a reference to the Credit Agreement after giving effect to this
Second Amendment.
<PAGE>
12
15. PAYMENT OF EXPENSES. The Borrower agrees to pay or reimburse the
Administrative Agent for all of its out-of-pocket costs and reasonable expenses
incurred in connection with this Second Amendment, any other documents prepared
in connection herewith and the transactions contemplated hereby, including,
without limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent.
16. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS; LIMITED EFFECT. On and
after the date hereof and the satisfaction of the conditions contained in
Section 7 of this Second Amendment, each reference in the Credit Agreement to
"this Agreement", "hereunder", "hereof" or words of like import referring to the
Credit Agreement, and each reference in the other Loan Documents to "the Credit
Agreement", "thereunder", "thereof" or words of like import referring to the
Credit Agreement, shall mean and be a reference to the Credit Agreement as
amended hereby. The execution, delivery and effectiveness of this Second
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of any Lender or the Agent under any of the Loan
Documents, nor constitute a waiver of any provisions of any of the Loan
Documents. Except as expressly amended herein, all of the provisions and
covenants of the Credit Agreement and the other Loan Documents are and shall
continue to remain in full force and effect in accordance with the terms thereof
and are hereby in all respects ratified and confirmed.
17. COUNTERPARTS. This Second Amendment may be executed by one or more of
the parties hereto in any number of separate counterparts (which may include
counterparts delivered by facsimile transmission) and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. Any
executed counterpart delivered by facsimile transmission shall be effective as
for all purposes hereof.
18. SEVERABILITY. Any provision of this Second Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
19. INTEGRATION. This Second Amendment and the other Loan Documents
represent the agreement of the Loan Parties, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to the subject matter hereof not expressly set forth or referred
to herein or in the other Loan Documents.
20. GOVERNING LAW. THIS SECOND AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS SECOND AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
[Remainder of Page Intentionally Left Blank]
<PAGE>
13
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed and delivered by their respective proper and duly
authorized officers as of the day and year first above written.
THE MERIDIAN RESOURCE CORPORATION
By: /s/ P. Richard Gessinger
Title: Executive Vice President
THE CHASE MANHATTAN BANK, as
Administrative Agent, Issuing Lender
and as a Lender
By: /s/ AUTHORIZED SIGNATORY
Title:
TORONTO DOMINION (TEXAS), INC., as
Arranger, Documentation Agent and as a
Lender
By: /S/ AUTHORIZED SIGNATORY
Title:
SOCIETE GENERALE, SOUTHWEST AGENCY,
as a Lender
By: /s/ AUTHORIZED SIGNATORY
Title:
<PAGE>
14
NATIONSBANK, N.A., as a Lender
By: /s/ AUTHORIZED SIGNATORY
Title:
MEES PIERSON, N.V., as a Lender
By: /s/ AUTHORIZED SIGNATORY
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as a New Lender
By: /s/ AUTHORIZED SIGNATORY
Title:
THE SANWA BANK, LIMITED, as an Exiting
Lender
By: /s/ AUTHORIZED SIGNATORY
Title:
THE FUJI BANK, LIMITED, as an Exiting
Lender
By: /s/ AUTHORIZED SIGNATORY
Title:
CREDIT LYONNAIS NEW YORK BRANCH, as
an Exiting Lender
By: /s/ AUTHORIZED SIGNATORY
Title:
<PAGE>
15
CIBC INC., as an Exiting Lender
By: /s/ AUTHORIZED SIGNATORY
Title:
BANKERS TRUST COMPANY, as Exiting Lender
By: /s/ AUTHORIZED SIGNATORY
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE MERIDIAN RESOURCE CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,714
<SECURITIES> 0
<RECEIVABLES> 25,106
<ALLOWANCES> 121
<INVENTORY> 0
<CURRENT-ASSETS> 33,713
<PP&E> 800,715
<DEPRECIATION> 369,670
<TOTAL-ASSETS> 466,893
<CURRENT-LIABILITIES> 64,613
<BONDS> 0
0
135,000
<COMMON> 461
<OTHER-SE> 60,689
<TOTAL-LIABILITY-AND-EQUITY> 466,893
<SALES> 46,349
<TOTAL-REVENUES> 46,876
<CGS> 234,281
<TOTAL-COSTS> 234,281
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,725
<INCOME-PRETAX> (203,497)
<INCOME-TAX> (22,000)
<INCOME-CONTINUING> (181,497)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (181,497)
<EPS-PRIMARY> (4.85)
<EPS-DILUTED> (4.85)
</TABLE>
