<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
The Meridian Resource Corporation
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(Name of Registrant as Specified in its Charter)
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
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<PAGE> 2
THE MERIDIAN RESOURCE CORPORATION
15995 N. BARKERS LANDING, SUITE 300
HOUSTON, TEXAS 77079
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF THE MERIDIAN RESOURCE CORPORATION:
The 1999 Annual Meeting of Shareholders of The Meridian Resource
Corporation (the "Company") will be held on June 7, 1999, at 10:00 a.m.,
Houston time, at The West Lake Club, 510 West Lake Park Boulevard, Houston,
Texas, for the following purposes:
1. To elect two persons to serve as Class III Directors on
the Company's Board of Directors, to hold office until the 2002 Annual
Meeting of Shareholders or until such person's successor shall be duly
elected and qualified;
2. To approve an amendment to the Company's 1997 Long-Term
Incentive Plan to adjust the anti-dilution provisions of such plan;
3. To approve an amendment to the Company's Director Stock
Option Plan to increase the number of shares available for grant under
such plan; and
4. To transact such other business as may properly come
before the Meeting.
The Board of Directors has fixed the close of business on April 13,
1999, as the record date to determine those shareholders who are entitled to
notice of and to vote either in person or by proxy at the 1999 Annual Meeting
of Shareholders and any adjournment thereof.
All shareholders are cordially invited to attend the meeting in
person. Even if you plan to attend the meeting, YOU ARE REQUESTED TO SIGN, DATE
AND RETURN THE ACCOMPANYING PROXY AS SOON AS POSSIBLE.
Each shareholder of the Company has previously received a copy of the
Company's 1998 Annual Report to Shareholders (the "Annual Report") or is
receiving a copy of the Annual Report with this Proxy Statement. If a
shareholder did not receive a copy of the Annual Report, such shareholder
should contact P. Richard Gessinger at the Company at (281) 558-8080 and the
Company will send a copy of the Annual Report to such shareholder free of
charge.
By Order of the Board of Directors
Joseph A. Reeves, Jr.
Chairman of the Board and
Chief Executive Officer
May 7, 1999
<PAGE> 3
THE MERIDIAN RESOURCE CORPORATION
15995 N. BARKERS LANDING, SUITE 300
HOUSTON, TEXAS 77079
(287) 558-8080
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PROXY STATEMENT
------------------
GENERAL INFORMATION
This Proxy Statement and the accompanying proxy card are furnished in
connection with the solicitation of proxies by order of the Board of Directors
of The Meridian Resource Corporation (the "Company") to be voted at the 1999
Annual Meeting of Shareholders (the "Meeting"), which will be held at the time
and place and for the purposes set forth in the accompanying notice. Such
notice, this Proxy Statement and the form of Proxy are being mailed to
shareholders on or about May 7, 1999.
The Company will bear the costs of soliciting proxies in the
accompanying form. In addition to the solicitation made hereby, proxies also
may be solicited by telephone, telegram or personal interview by officers and
regular employees of the Company. The Company will reimburse brokers or other
persons holding stock in their names or in the names of their nominees for
their reasonable expenses in forwarding proxy material to beneficial owners of
stock.
All duly executed proxies received prior to the Meeting will be voted
in accordance with the choices specified thereon, unless revoked in the manner
provided hereinafter. As to any matter for which no choice has been specified
in a proxy, the shares represented thereby will be voted by the persons named
in the proxy (i) "for" the election as director of the nominees listed herein,
(ii) "for" the approval of the amendment to the Company's 1997 Long-Term
Incentive Plan (the "1997 Plan"), (iii) "for" the approval of the amendment to
the Company's Director Stock Option Plan (the "Director Plan"), and (iv) in the
discretion of such persons, in connection with any other business that may
properly come before the Meeting. Shareholders may revoke their proxy at any
time prior to the exercise thereof by written notice to the Secretary of the
Company at the above address of the Company or by the execution and delivery of
a later dated proxy, or by attendance at the Meeting and voting their shares in
person.
As of the close of business on April 13, 1999 (the "Record Date"), the
record date for determining shareholders entitled to vote at the Meeting, the
Company had outstanding and entitled to vote 45,770,523 shares of Common Stock,
$.01 par value ("Common Stock"), entitled to one vote per share, and 3,982,906
shares of Preferred Stock, $1.00 par value ("Preferred Stock" and together with
the Common Stock, "Voting Stock"), entitled to one vote per share. The
outstanding shares of Common Stock and Preferred Stock are the only shares of
capital stock of the Company entitled to vote.
The holders of a majority of the outstanding shares of Voting Stock as
of the record date, whether represented in person or by proxy, will constitute
a quorum for the transaction of business at the Meeting as to any matter for
which the Common Stock is entitled to vote. The holders of a majority of the
shares of Preferred Stock as of the Record Date, whether represented in person
or proxy, will constitute a quorum for the transaction of business at the
Meeting on matters for which the Preferred Stock is entitled to vote as a
single class, including the election of a Preferred Director at the Meeting.
The Certificate of Designation for the Preferred Stock (the "Certificate of
Designation") provides that the Preferred Stock is entitled to vote with the
<PAGE> 4
Common Stock on all matters for which a vote of the holders of Common Stock is
taken, including the matters to be voted on at the Meeting. The Certificate of
Designation further provides that the Preferred Stock is entitled to elect that
number of directors (each a "Preferred Director") that equals the product
(rounded downward to the nearest whole number, but in no event less than one)
of the total number of directors following such election multiplied by 20%, and
also provides that the Preferred Stock is entitled to a class vote on (i) the
authorization, creation or issuance, or any increase in the authorized shares
of an class of capital stock that is senior to or on parity with the Preferred
Stock and (ii) the amendment, modification, alteration or repeal of any of the
provisions of the Certificate of Designation.
As of the record date, Shell Louisiana Onshore Properties Inc.
("SLOPI"), a subsidiary of Shell Oil Company, owned 12,082,030 shares of Common
Stock and all of the outstanding Preferred Stock (collectively, the "Shell
Shares"), which represented 35.1% of the outstanding Voting Stock as of the
record date. See "Certain Relationships and Related Transactions-Shell
Transaction-Stock Rights and Restrictions-Voting
Rights" beginning on page 25 of this Proxy Statement.
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<PAGE> 5
PROPOSAL ONE
ELECTION OF CLASS III DIRECTORS
Two directors will be elected by the holders of the Common Stock and
Preferred Stock at the Meeting to serve as the Class III Directors of the
Company's Board of Directors until the 2002 Annual Meeting of Shareholders or
until such person's successor shall be duly elected. The Board of Directors
recommends the election of Joseph A. Reeves, Jr. and Michael J. Mayell as the
Class III Directors. Messrs. Reeves and Mayell are each currently directors of
the Company. Unless contrary instructions are set forth in the proxies, it is
intended that the persons executing a proxy will vote all shares represented by
such proxy for the election as director of each of Messrs. Reeves or Mayell.
Should any of Messrs. Reeves and Mayell become unable or unwilling to accept
nomination or election, it is intended that the person acting under the proxy
will vote for the election of such other person as the Board of Directors of
the Company may recommend. Management has no reason to believe that either Mr.
Reeves or Mr. Mayell will be unable or unwilling to serve if elected.
There are currently two Class III directorships up for election. With
respect to this Proposal One, proxies cannot be voted for other than such
directorships. A nominee for director receiving a plurality of votes cast at
the Meeting and entitled to be cast for such nominee will be elected as
director. Abstentions and broker non-votes will not be treated as a vote for or
against a particular director and will not affect the outcome of the election
of directors.
DIRECTORS
The Company's Bylaws provide that the Board of Directors (other than
the Preferred Directors) shall be classified into three classes: Class I, Class
II and Class III Directors. In addition, pursuant to the terms and conditions
of the Certificate of Designation, the holders of the Preferred Stock are
entitled to elect that number of Preferred Directors that equals the product
(rounded downward to the nearest whole number, but in no event less than one)
of the total number of directors of the Company following such election
multiplied by 20%. As the holder of all of the issued and outstanding Preferred
Stock on the Record Date and pursuant to the terms of the Certificate of
Designation, SLOPI currently is entitled to elect one Preferred Director to the
Company's Board of Directors.
Set forth below is certain information concerning the current
directors of the Company, including the nominees for election as Class III
Director, with each person's business experience for at least the past five
years.
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<TABLE>
<CAPTION>
PRESENT
POSITIONS EXPIRATION
WITH THE DIRECTOR OF PRESENT
NAME AGE COMPANY SINCE TERM
---- --- ------- ----- ----
<S> <C> <C> <C> <C>
Joseph A. Reeves, Jr. 52 Class III Director, 1990 1999
Chairman of the Board
and Chief Executive
Officer
Michael J. Mayell 52 Class III Director and 1990 1999
President
James T. Bond 74 Class I Director 1997 2000
E. L. Henry 63 Class II Director 1998 2001
Joe E. Kares 55 Class II Director 1990 2001
Gary A. Messersmith 50 Class II Director 1997 2001
Jack A. Prizzi 64 Class I Director 1993 2000
Paul D. Ching 48 Preferred Director 1999 1999
</TABLE>
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Joseph A. Reeves, Jr. is Chairman of the Board and Chief Executive
Officer of the Company. Before assuming his positions with the Company, Mr.
Reeves held similar positions with the Company's predecessor, Texas Meridian
Resources, Ltd. ("TMR") from 1988 until 1990.
Michael J. Mayell is President of the Company. Before assuming such
position with the Company, Mr. Mayell held a similar position with TMR from
1988 to 1990.
James T. Bond is General Manager of H.L. Hawkins, Jr. Oil and Gas
located in Houston and New Orleans, Louisiana. He has been associated with such
company for fifty years.
E. L. "Bubba" Henry has been a partner in the law firm of Adams and
Reese L.L.P. since 1987.
Joe E. Kares has been a partner with the public accounting firm of
Kares & Cihlar in Houston, Texas since 1980.
Gary A. Messersmith has been a partner with the law firm of Fouts &
Moore, L.L.P., in Houston, Texas since 1982.
Jack A. Prizzi has served as Managing Director of Jack A. Prizzi and
Co., an investment and financial advisory firm in New York, New York since
December 1988.
Paul D. Ching is President and General Manager of Shell Continental
Companies and has been employed by Shell Oil Company or its affiliates for the
past 25 years.
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<PAGE> 7
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held five meetings during the fiscal year ended
December 31, 1998. In 1998, each director attended at least 75% of the total
combined number of meetings held by the Board and by the committees on which
each director served.
The Board of Directors has an Executive Committee, an Audit Committee, an
Executive Compensation Committee, a Directors' Stock Plan Administration
Committee and an Employee Compensation Committee.
The Company does not have a nominating or other similar committee.
The Executive Committee is currently comprised of Messrs. Reeves and
Mayell and is responsible for assisting with the general management of the
business and affairs of the Company during intervals between meetings of the
Board of Directors. No meetings of the Executive Committee were held in 1998.
The Audit Committee is currently comprised of Messrs. Kares, Bond and
Ching and is charged with the duties of recommending the appointment of the
independent certified public accountants, reviewing their fees, insuring that
proper guidelines are established for the dissemination of financial
information, meeting periodically with the independent auditors, the Board of
Directors and certain officers of the Company and its subsidiaries to ensure
the adequacy of internal controls and reporting, reviewing consolidated
financial statements and performing any other duties or functions deemed
appropriate by the Board of Directors. All members of the Audit Committee are
non-employee directors. One Audit Committee meeting was held in 1998. Pursuant
to the terms and conditions of the Certificate of Designation, at least one
Preferred Director shall be a member of the Audit Committee.
The Executive Compensation Committee (the "Executive Compensation
Committee") is currently comprised of Messrs. Kares, Messersmith and Prizzi,
all of whom are non-employee directors of the Company. The Executive
Compensation Committee is generally responsible for determining the cash
compensation to be paid to each of Messrs. Reeves and Mayell; however, during
1998, compensation decisions with respect to Messrs. Reeves and Mayell were
made by the full Board of Directors, with Messrs. Reeves and Mayell abstaining.
No Executive Compensation Committee meetings was were held in 1998.
The Directors' Stock Plan Administration Committee is currently comprised
of Messrs. Reeves and Mayell and is responsible for administering the Director
Plan. No Directors' Stock Plan Administration Committee meetings were held in
1998.
The Employee Compensation Committee is comprised of Messrs. Reeves and
Mayell. The Employee Compensation Committee sets the salaries of all employees,
including the elected officers and other senior executives, other than their
own salaries (which are set by the Executive Compensation Committee or the full
Board of Directors), and grants bonuses to such elected officers and other
senior executives. No Employee Compensation Committee meetings were held in
1998.
COMPENSATION OF DIRECTORS
Non-employee directors of the Company receive an annual retainer, payable
in quarterly installments, of $20,000. Non-employee directors also are
reimbursed for expenses incurred in attending Board of Directors and committee
meetings, including those for travel, food and lodging. Directors and members
of committees of the Board of Directors who are employees of the Company or its
affiliates are not compensated for their Board of Directors and committee
activities.
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<PAGE> 8
Pursuant to the Director Plan, options to purchase up to 270,000 shares
of Common Stock may be granted. Under the Director Plan, each non-employee
director is granted, on the date of his appointment, election, reappointment or
re-election as a member of the Board of Directors, an option ("Director
Option") for 15,000 shares of Common Stock at an exercise price equal to the
fair market value of a share of Common Stock on the date of grant. The duration
of each Director Option is five years from the date of grant, and each Director
Option may be exercised in whole or in part at any time after the date of
grant; provided, however, that the option vests with respect to 25% of the
shares of Common Stock covered by such Director Option one year after the date
of grant, with respect to an additional 25% of such shares of Common Stock two
years after the date of grant, and with respect to all remaining shares of
Common Stock three years after the date of grant. There are currently
outstanding options to acquire 225,000 shares under the Director Stock Option
Plan with a weighted average exercise price of $9.13 per share. There are
currently only 45,000 additional shares available for grant under the Director
Plan.
Mr. Messersmith also receives a retainer of $8,330 per month for legal
services he renders on behalf of the Company and also participates in the
Company's well bonus plans pursuant to which he was paid $22,600 during 1998.
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<PAGE> 9
PROPOSAL TWO
AMENDMENT TO THE 1997 PLAN
GENERAL
At the Meeting, the shareholders of the Company will be asked to vote on
a proposal to approve an amendment to the 1997 Plan that amends certain
anti-dilution provisions of the 1997 Plan. Approval of such amendment requires
the affirmative vote of the holders of a majority of the shares of Common Stock
that are present in person or by proxy and entitled to vote at the Meeting.
The 1997 Plan was originally approved by the Company's Board of Directors
and shareholders in 1997. The 1997 Plan is intended to advance the best
interests of the Company, its subsidiaries and its shareholders by attracting,
retaining and motivating key employees. The 1997 Plan provides for the grant of
stock options, stock appreciation rights issued independent of or in tandem
with such options, restricted stock awards and performance awards to certain
key employees of the Company and its subsidiaries, thereby increasing the
personal stake of such key employees in the continued success and growth of the
Company.
DESCRIPTION AND REASONS FOR THE 1997 PLAN AMENDMENT
The terms of the 1997 Plan were designed by the Board of Directors with
the intent of providing for the grant of stock-based compensation to the
Company's employees totaling 10% of the Company's outstanding capital stock.
Initially, the aggregate number of shares of Common Stock that were authorized
for issuance under the 1997 Plan was 720,000. In order to provide that the
number of shares authorized for issuance under the 1997 Plan and the Company's
1995 Long-Term Incentive Plan (the "1995 Plan") approximated 10% of the
outstanding capital stock of the Company, the 1997 Plan included the following
anti-dilution feature:
"As of January 1 of each year the [1997] Plan is in effect, if the
total number of shares of Common Stock issued and outstanding, not
including any shares issued under the [1997] Plan or the 1995 Plan,
exceeds the total number of shares of Common Stock issued and
outstanding as of January 1 of the preceding year (or, for 1998, as
of the commencement of the [1997] Plan), the number of shares that
may be issued under the [1997] Plan shall be increased by an amount
such that the total number of shares of Common Stock available for
issuance under the [1997] Plan and the 1995 Plan equals 10% of the
total number of shares of Common Stock outstanding, not including
any shares issued under the [1997] Plan and the 1995 Plan."
During 1998, in connection with the Company's acquisition of
substantially all of Shell Oil Company's and its affiliates' ("Shell") south
Louisiana oil and gas property interests, the Company issued to Shell
12,082,030 shares of Common Stock and shares of Preferred Stock that are
convertible into an aggregate of 12,837,428 shares of Common Stock. As a result
of this transaction, the number of shares available for issuance under the 1997
Plan adjusted upward by approximately 1,200,000 shares to reflect the new
issuance of Common Stock to Shell, but did not adjust for the issuance of the
Preferred Stock to Shell. Rather, in such instance, the technical terms of the
1997 Plan adjusts the number of shares authorized for issuance under the 1997
Plan only if, and when, the Preferred Stock issued to Shell actually is
converted into shares of Common Stock. Although the terms of the 1997 Plan do
not currently provide for adjustment in connection with the issuance of the
Preferred Stock, the Board of Directors believes that its intent when adopting
the 1997 Plan was for transactions, such as the issuance of the Preferred
Stock, with significant equity features to be covered by the anti-dilution
features contained in the 1997 Plan. Therefore, the following amendment and
restatement to the aforementioned provisions of the 1997 Plan has been approved
by the Board of Directors:
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<PAGE> 10
"As of January 1 of each year the [1997] Plan is in effect, if the
total number of shares of Common Stock issued and outstanding, not
including any shares issued under the [1997] Plan or the 1995 Plan,
exceeds the total number of shares of Common Stock issued and
outstanding as of January 1 of the preceding year (or, for 1998, as
of the commencement of the Plan), the number of shares that may be
issued under the [1997] Plan shall be increased (in the event there
is an increase in the number of shares of Common Stock outstanding)
by an amount such that the total number of shares of Common Stock
available for issuance under the [1997] Plan and the 1995 Plan
equals 10% of the total number of shares of Common Stock
outstanding, not including any shares issued under the [1997] Plan
and the 1995 Plan. For purposes of the preceding sentence, shares
of Common Stock that may be issued upon conversion of issued and
outstanding preferred stock, $1.00 par value, of the Company shall
be considered issued and outstanding."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT TO
THE 1997 PLAN.
Approval of the amendment to the 1997 Plan requires the affirmative vote
of the holders of a majority of the outstanding shares of Common Stock entitled
to vote on the proposal and present in person or by proxy at the Meeting. If
not otherwise provided, proxies will be voted "FOR" approval of the amendments
to the 1997 Plan. Abstentions will be counted as shares entitled to vote on the
proposal, but will not be treated as either a vote for or against the proposal.
Therefore, an abstention will have the same effect as a vote against the
proposal. A broker non-vote will not be treated as a share entitled to vote on
the proposal and will not be considered as a vote for or against the proposal.
Therefore, a broker non-vote will have no effect on the outcome of the
proposal.
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<PAGE> 11
PROPOSAL THREE
AMENDMENT TO THE DIRECTOR PLAN
GENERAL
At the Meeting, the shareholders of the Company will be asked to vote on
a proposal to approve an amendment to the Director Plan that increases the
number of shares available for grant under the Director Plan. Approval of such
amendment requires the affirmative vote of the holders of a majority of the
shares of Common Stock that are present in person or by proxy and entitled to
vote at the Meeting.
The Director Plan was originally approved by the Company's Board of
Directors and the Company's shareholders in order to further align non-employee
directors personal interest in the Company with those of the Company's
shareholders and provide performance-based incentive to such directors. The
Director Plan provides that non-employee directors of the Company are granted
options to purchase 15,000 shares of the Company's Common Stock upon their
initial appointment to the Company's Board of Directors and upon their
re-election to the Board of Directors of the Company. Options granted under the
Director Plan have exercise prices equal to the fair market value of the Common
Stock on the date of grant and vest over a three year period. Due to the
Company's Board being divided into classes, non-employee directors typically
are granted such options every three years.
DESCRIPTION AND REASONS FOR THE DIRECTOR PLAN AMENDMENT
Since the original adoption of the Director Plan, the Company has added
four directors that qualify for participation in the Director Plan. Due to the
increase in the number of non-employee directors of the Company and the ongoing
grants pursuant to the Director Plan, there are currently only 45,000 shares of
Common Stock available for grant under the Director Plan. The Board of
Directors has determined that, in order to continue to provide an adequate
level of performance-based incentive to the Company's non-employee directors
and to continue to align their interests with those of the Company's
shareholders, it is in the best interest of the Company to increase the number
of shares available for options under the Director Plan by 300,000 so that the
total number of shares of Common Stock authorized for issuance under the
Director Plan is 570,000. Therefore, the following amendment and restatement to
Section 3.1 of the Director Plan has been approved by the Board of Directors:
"The Company shall automatically grant to each Director on the date
of such Director's appointment, election, reappointment, or
reelection as a member of the Board, a Stock Option for fifteen
thousand (15,000) shares of Common Stock. The total number of
shares of Common Stock that are authorized for issuance under this
Plan is 570,000."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE DIRECTOR
PLAN.
Approval of the amendment to the Director Plan requires the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
entitled to vote on the proposal and present in person or by proxy at the
Meeting. If not otherwise provided, proxies will be voted "FOR" approval of the
amendments to the Director Plan. Abstentions will be counted as shares entitled
to vote on the proposal, but will not be treated as either a vote for or
against the proposal. Therefore, an abstention will have the same effect as a
vote against the proposal. A broker non-vote will not be treated as a share
entitled to vote on the proposal and will not be considered as a vote for or
against the proposal. Therefore, a broker non-vote will have no effect on the
outcome of the proposal.
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<PAGE> 12
REPORT ON EXECUTIVE COMPENSATION
GENERAL POLICY
The Company's executive compensation program is designed to attract,
motivate and retain talented management personnel and to reward management for
successfully performing their duties and improving shareholder value.
Compensation and incentives are provided through the combination of cash
salaries and bonuses, stock option and other stock-based awards, and grants of
net profit interests in the Company's drilling prospects. The Company's overall
compensation package is intended to provide the Company's executive officers
with above average compensation for above average results and performance, with
an emphasis on compensation that rewards the executive for actions that have
demonstrably benefitted the long-term interests of the Company. Decisions with
respect to compensation for any particular executive officer or employee are
based on a number of subjective factors, including the individual's performance
and contribution to the future growth of the Company, the financial and
operational results of the Company and industry and market conditions and the
need to insure the continued employment of individuals that the Board believes
are key to the long-term prospects of the Company.
Decisions with respect to the cash compensation of the Company's
executive officers were made in a bifurcated manner during 1988. The Employee
Compensation Committee of the Board of Directors, which is comprised of Messrs.
Reeves and Mayell set the salaries of all employees (except for themselves),
including elected officers and other senior executives, and granted cash
bonuses to such elected officers and other senior executives. Cash compensation
decisions with respect to Messrs. Reeves and Mayell were made by the Board of
Directors, with Messrs. Reeves and Mayell abstaining. Decisions with respect to
the granting of stock-based awards and the payment of other non-cash
compensation for all of the Company's executive officers, including Messrs.
Reeves and Mayell, were made by the full Board of Directors, with each of
Messrs. Reeves and Mayell abstaining with respect to matters pertaining to him.
The components of the Company's executive compensation program are more
specifically summarized below.
Base Salary.
The base salaries of the Company's employees are determined based on
their positions with the Company, their talents and experience and competitive
market factors, including the desire by the Company to attract and retain
executives with expertise and proven success in 3-D seismic exploration.
Generally, base salaries are received in cash, however, the Company adopted a
deferred compensation program in 1996 that allows the Company's Chief Executive
Officer, President and other officers to receive payment of their salaries in
deferred stock rights in lieu of cash compensation. The purpose of this
deferred compensation program is to preserve company liquidity and further
align the executive officers' interests with those of the Company's
shareholders. Stock cannot be issued under such deferred compensation
arrangements until the death, retirement or termination of the executive
officer, and until such issuance, the value of such stock rights are subject to
the general credit of the Company and changes in market value for the Company's
Common Stock.
In reviewing the base salaries of the Company's executive officers, the
Company considers data from published reports regarding compensation of
executive officers from a cross section of other energy companies, which may or
may not include companies represented in the peer group used in completing the
Company's performance graph. These reports are used as a check on the general
competitiveness of the Company's salaries and not as a means to mathematically
establish salaries within specified percentiles of salary ranges.
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<PAGE> 13
Bonus Compensation.
Bonus compensation is provided to the Company's executive officers and
other employees from time to time based on the financial results of the Company
and various subjective factors, including the executive's or employee's
contribution to the Company's success in finding reserves and acquiring
prospects, identifying and obtaining sources of capital for the Company and
increasing shareholder value. Bonuses awarded and paid during 1998 to the
Company's employees were primarily based on such employees contributions to the
completion of key elements of the Company's growth strategy, including their
roles in 1998 in successfully integrating operations acquired in the Company's
acquisition of Cairn Energy USA, Inc. and the evaluation and completion in 1998
of the Company's acquisition of substantially all of Shell's south Louisiana
oil and gas property interests.
Net Profit Interests.
The Company believes that the granting of participation interests in the
Company's prospects to its employees promotes in them a proprietary interest in
the Company's exploration efforts that benefits the Company and its
shareholders. To achieve this objective, the Company grants an interest (either
in the form of a bonus or real property right, depending on the level of the
employee) in the net profits received from all wells drilled to all of its
employees, including its executive officers. Each employee's level of
participation in these well bonus plans is based on various factors, including
the employee's tenure, salary level, job classification and contribution to the
Company's long-term prospects.
Long-Term Incentive Compensation.
The Board of Directors believes that long-term incentive compensation is
an important component of the Company's compensation program and that the value
of long-term incentive compensation should be directly related to increases in
shareholder value. Thus, as part of total compensation, the Company provides
long-term incentive compensation to its executive officers through stock
options under the Company's stock option plans.
Under the Company's existing stock option plans (collectively, the
"Incentive Plans"), the Board of Directors has the authority to grant to the
Company's executive officers and key employees options to purchase shares of
Common Stock for terms of up to ten years, with vesting conditions established
by the Board of Directors, and other forms of stock-based compensation
including restricted stock. Awards under the Incentive Plans are intended to
provide incentives to the participants to increase shareholder value by
providing benefits that are directly related to the market value of the Common
Stock. The Board of Directors believes that stock-based compensation provides a
desirable form of incentive to the Company's executive officers in that
stock-based compensation received by an executive officer generally will be of
no value to the officer unless the value of the Common Stock increases.
If a stock option or other stock-based award is granted to an executive
officer, the number of shares of Common Stock subject to the granted option or
award will be based on, among other things, the level of responsibility of the
executive officer and the anticipated contribution of the officer to the future
growth of the Company. The Board of Directors also considers the amount and
terms of the options and other stock-based benefits held by the executive
officers.
11
<PAGE> 14
DISCUSSION OF COMPENSATION OF THE CHIEF EXECUTIVE OFFICER AND PRESIDENT
During 1998, the Board of Directors (other than Messrs. Reeves and
Mayell) performed an overall review and evaluation of the compensation levels
of each of Messrs. Reeves and Mayell. The need for such review by the full
Board of Directors was based upon the significant changes in the breadth and
scope of the Company's operations that resulted from the Company's recent
exploration and development activities and other endeavors, including the
Company's recent acquisition of substantially all of Shell's south Louisiana
oil and gas property interests and the Company's efforts in developing these
properties and other properties acquired by the Company. As a part of this
process, the Board of Directors engaged Arthur Anderson & Company ("Arthur
Andersen") to review the compensation structure for each of Messrs. Reeves and
Mayell and other employees of the Company and provide to the Board of Directors
executive compensation data for other independent oil and gas companies (which
included a cross-section of energy companies plus some of the companies in the
Company's Peer Group utilized in creating the stock performance graph contained
on page 20 of this Proxy Statement) that the Board of Directors could utilize
for comparative purposes. Based in part upon the Board of Directors assessment
of the data provided by Arthur Andersen, as well as other subjective factors,
including the need to insure the continued employment of Messrs. Reeves and
Mayell and the Board of Director's assessment of Messrs. Reeves' and Mayell's
roles in strategically positioning the Company for future growth, in
particular, the fact that their efforts were instrumental in the successful
integration of the operations acquired in the Cairn acquisition and in the
identification, negotiation and successful completion of the Company's
acquisition of substantially all of Shell's south Louisiana properties, the
Board of Directors granted to each of Messrs. Reeves and Mayell options to
purchase 1,500,000 shares of Common Stock, which vest over three years, and
approved cash bonus payments of $300,000 per year that are tied to the
continued employment of the executive officer with the Company. No increases
were made to Messrs. Reeves' or Mayell's annual salaries during 1998, except
for cost of living increases. The bonus payments would be paid on January 1 of
each of 1999, 2000, and 2001 so long as the executive officer is employed by
the Company on such date. The Board of Directors believes that the granting of
these stock options and the approval of these bonus payments further aligns
Messrs. Reeves and Mayell's interests with those of the Company and further
insures their continued employment with the Company for at least the next three
years and rewards them for their efforts that were instrumental to the future
prospects of the Company.
12
<PAGE> 15
RECENT TAX LEGISLATION
Section 162(m) ("Section 162(m)") of the Internal Revenue Code of 1986,
as amended, currently imposes a $1 million limitation on the deductibility of
certain compensation paid to the Company's five highest paid executive
officers. Excluded from the limitation is compensation that is "performance
based". Excluded compensation must meet certain criteria, including being based
upon predetermined objective standards approved by the Company's shareholders.
Awards under the Incentive Plans as well as bonus and salary compensation
awarded to the Company's executive officers do not currently satisfy the
requirements of Section 162(m); however, since the Company currently does not
expect to be paying federal income taxes in the near future, the Board of
Directors and Executive Compensation Committee do not believe that such
non-deductibility will have a material effect on the Company. The Board of
Directors intend to take into account the potential application of Section
162(m) with respect to incentive compensation awards and other compensation
decisions made by them in the future.
<TABLE>
<S> <C>
Joseph A. Reeves, Jr. Michael J. Mayell
James T. Bond E. L. Henry
Joe E. Kares Gary A. Messersmith
Jack A. Prizzi Paul D. Ching*
</TABLE>
* Mr. Ching was not a member of the Board of Directors during 1998.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
As discussed above, certain components of the compensation of the
executive officers of the Company, other than Messrs. Reeves and Mayell, are
determined by the Employee Compensation Committee of the Board of Directors of
the Company, which is comprised of Messrs. Reeves and Mayell. Stock-based and
other non-cash compensation decisions with respect to the Company's executive
officers are made by the full Board of Directors, with each of Messrs. Reeves
and Mayell abstaining with respect to matters pertaining to him. For a
discussion of certain transactions between the Company and members of the Board
of Directors, see "Certain Relationships and Related Transactions" beginning on
page 23 of this Proxy Statement. In addition, cash compensation decisions
during 1998 with respect to Messrs. Reeves and Mayell were made by the full
Board of Directors, with each of Messrs. Reeves and Mayell abstaining.
COMPENSATION
EXECUTIVE COMPENSATION
The following table contains compensation data for the four highest paid
executive officers serving at the end of 1998 whose 1998 salary and annual
bonus compensation exceeded $100,000, and one other individual who would
otherwise have been included in this table but for the fact that such
individual was not serving as executive officers of the Company at the end of
1998 (collectively, the "Named Executive Officers").
13
<PAGE> 16
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------------------------
Other
Name and Annual
Principal Position Year Salary($)(1) Bonus($)(1)(2) Compensation($)(3)
------------------ ---- ------------ -------------- ------------------
<S> <C> <C> <C> <C>
Joseph A. Reeves, Jr. 1998 $32,488 $526,010 $105,423
CEO 1997 37,454 344,920 48,300
1996 202,973 373,244 --
Michael J. Mayell 1998 32,488 526,010 105,423
President 1997 37,454 344,920 48,300
1996 202,973 373,244 --
P. Richard Gessinger 1998 200,000 7,500 --
Executive Vice 1997 16,667 8,333 --
President and Chief
Financial Officer (5)
Lloyd V. DeLano 1998 149,350 25,000 22,602
Vice President and 1997 127,950 12,083 --
Chief Accounting 1996 112,794 10,000 --
Officer
Kevin McMichael 1998 186,410 -- 25,279
Former Executive 1997 28,846 8,333 --
Vice President (7)
</TABLE>
<TABLE>
<CAPTION>
Long-Term
Compensation
----------------------------
Restricted Securities
Name and Stock Underlying All Other
Principal Position Award($)(1) Options(#) Compensation($)(4)
------------------ ----------- ---------- ------------------
<S> <C> <C> <C>
Joseph A. Reeves, Jr. $748,800 1,500,000 $7,500
CEO 800,000 50,000 9,575
455,004 50,000 6,953
Michael J. Mayell 748,800 1,500,000 7,500
President 800,000 50,000 9,575
455,004 50,000 6,953
P. Richard Gessinger 4,000 7,500
Executive Vice 58,379(6) 25,000 --
President and Chief --
Financial Officer (5)
Lloyd V. DeLano -- 25,000 7,646
Vice President and -- 7,500 8,677
Chief Accounting -- 5,000 6,123
Officer
Kevin McMichael -- 6,667
Former Executive 15,938(6) -- --
Vice President (7)
</TABLE>
- --------------
(1) Salary and bonus compensation excludes amounts deferred by Messrs.
Reeves and Mayell pursuant to a deferred compensation plan (the "DCP"),
which have been reported in the Restricted Stock Award Column. The DCP
was approved by the Board of Directors in 1996 as a method to preserve
company liquidity and further align the executive officers' interests
with those of the Company's shareholders. No actual shares of Common
Stock are issued and the officer has no rights with respect to any
shares unless and until there is a distribution. Distributions cannot be
made until the death, retirement or termination of employment of the
officer. Until distribution, the value of such stock rights are subject
to the general credit of the Company and the market value of the
Company's Common Stock. Pursuant to the DCP, the Company also granted to
each officer an equal matching deferral, which is subject to a one-year
vesting and is included in the Restricted Stock Award Column. Under the
terms of the grants, the employee and matching deferrals are allocated
to a Common Stock account in which units are credited to the accounts of
the officer based on the number of shares that could be purchased at the
market price of the Common Stock at June 28, 1996 ($9.00 per share), for
the deferrals of 1996; at December 31, 1996 ($17.00 per share), for the
deferrals of 1997; at December 31, 1997 ($9 9/16 per share), for the
deferrals during the first half of 1998; and at June 30, 1998 ($7 1/16
per share), for the deferrals during the second half of 1998). Pursuant
to the DCP, Messrs. Reeves and Mayell each elected to defer $180,000,
$400,000 and $374,400 of their compensation for 1996, 1997 and 1998,
respectively. As of December 31, 1998, each of Messrs. Reeves and Mayell
had rights to 178,886 shares (including matching deferrals) with a total
value (including matching deferrals) as of December 31, 1998 of
$570,199. An amount equal to the dividends, if any, that would otherwise
been paid with respect to such shares had they actually been issued will
be credited to the respective Common Stock accounts as well.
(2) Bonus amounts in 1998 include $16,853, $22,602, and $25,279 paid to each
of Messrs. Gessinger, DeLano and McMichael pursuant to the Company's
well bonus plans. See page 18 for a discussion of the well bonus plans.
14
<PAGE> 17
(3) In connection with the execution of certain employment agreements, the
Company adopted in 1994 a program under which net profit interests are
granted to certain key employees of the Company in prospects and wells
in which the Company is pursuing and drilling. In general, the net
profit interests is 2.00% of any well and are subject to proportional
reduction to the Company's interests. Pursuant to these arrangements,
during 1997 and 1998, net profit interests of 2% were granted to each of
Messrs. Reeves and Mayell of the Company in various prospects acquired
by the Company in 1997 and 1998. Although such grants were intended to
provide long-term incentive for the executive officer or employee by
aligning his or her interests with those of the Company in its drilling
efforts, such grants are not subject to vesting, the continued
employment of the individual with the Company or other conditions.
Accordingly, such grants are considered part of the Company's annual
compensation package and not compensation under a long-term incentive
plan. Each grant of a net profits interest is reflected in this table at
a value based on a third party appraisal of the interest granted or the
Company's current estimate of value for those prospects for which a
third party appraisal has not yet been completed.
(4) Company contributions to its 401(k) plan.
(5) Mr. Gessinger began employment with the Company in November 1997.
(6) Reflects restricted stock grants pursuant to such employee's employment
agreement. All 5,000 shares granted to Mr. McMichael are fully vested.
Mr. Gessinger is fully vested in 5,000 shares, with the remaining 13,215
vesting over the following three years. At December 31, 1998, the value
of such restricted stock grants were $58,379 and $15,938 for each of
Messrs. Gessinger and McMichael, respectively.
(7) Mr. McMichael began employment with the Company in November 1997. Mr.
McMichael resigned as an officer and employee of the Company in November
1998.
The following table sets forth those options granted to the Named
Executive Officers during 1998. None of these options were "in-the-money" as of
December 31, 1998. All options are subject to vesting requirements.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------
% of Total Potential Realizable Value at
Number of Options Assumed Annual Rates of Stock
Shares Granted to Price Appreciation for Option
Underlying Employees Exercise Term
Options in Price Expiration ------------------------------
Name Granted Fiscal Year ($/share) Date 5% ($) 10% ($)
- ---------------------------- -------------- ------------ --------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph A. Reeves, Jr. 1,500,000 46% $3 3/8 8/26/08 $8,246,279 $13,130,821
Michael J. Mayell 1,500,000 46% $3 3/8 8/26/08 8,246,279 13,130,821
Richard Gessinger 4,000 * $3 3/8 8/26/08 21,990 35,016
Lloyd V. DeLano 25,000 *
Kevin J. McMichael -- -- -- -- -- --
</TABLE>
- --------------
* Less than 1%.
15
<PAGE> 18
The following table summarizes the number and value of options exercised
by the Named Executive Officers during 1998, as well as the number and value of
unexercised options owned by the Named Executive Officers as of December 31,
1998. None of the options summarized in this table were "in-the-money" as of
December 31, 1998.
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1998
AND DECEMBER 31, 1998 OPTION VALUE
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised In-the-Money
Options at Options at
Shares December 31, December 31,
Acquired Value 1998(#) 1998($)
on Realized Exercisable/ Exercisable/
Name Exercise(#) ($) Unexercisable (1) Unexercisable
- -------------------------- ----------- -------- ----------------- -------------
<S> <C> <C> <C> <C>
Joseph A. Reeves, Jr. (1) -- -- 281,000/1,500,000 0/0
Michael J. Mayell (1) -- -- 281,000/1,500,000 0/0
P. Richard Gessinger -- -- 26,000/4,000 0/0
Lloyd V. DeLano -- -- 61,250/18,750 0/0
Kevin J. McMichael -- -- -- 0/0
</TABLE>
- --------------------------------
(1) Excludes (i) the warrants (the "General Partner Warrants") granted to
each of Messrs. Reeves and Mayell in October 1990 in connection with
the Company's formation and (ii) warrants ("Executive Officer
Warrants") issued in prior years to Messrs. Reeves and Mayell in
connection with the surrender of certain "class B warrants" to the
Company. The value of these warrants at December 31, 1998, based on
the difference between the market price of the Common Stock at
December 31, 1998 and the exercise price of the respective warrants,
was $1,386,248 for each of Messrs. Reeves and Mayell.
OTHER
In August 1998, the Board of Directors, with Messrs. Reeves and Mayell
abstaining, approved a bonus program pursuant to which the Company would pay
Messrs. Reeves and Mayell each $300,000 on each of January 1, 1999, January 1,
2000 and January 1, 2001, provided such individuals remain employed by the
Company on such dates. The Board of Directors believes that these bonus
payments further insures their continued employment with the Company for at
least the next three years and rewards them for their efforts that were
instrumental to the future prospects of the Company.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement ("Employment
Agreement") with each of Messrs. Reeves and Mayell. Each Employment Agreement
is for a term of three years, renewable annually for a term to extend three
years from such renewal date. Each Employment Agreement provides for
compensation in a minimum amount of $289,800 per annum, to be reviewed at least
annually for possible increases, and annual bonuses and other perquisites in
accordance with Company policy. If either of Messrs.
16
<PAGE> 19
Reeves or Mayell terminates his employment for "Good Reason" (as defined
below), or is terminated by the Company for other than "Good Cause" (as defined
below), such individual would receive a cash lump sum payment equal to the sum
of (i) the base salary for the remainder of the employment period under the
Employment Agreement, (ii) an amount equal to the last annual bonus paid to
him, (iii) two times the sum of his annual base salary and last bonus, (iv) all
compensation previously deferred and any accrued interest thereon, (v) a
lump-sum retirement benefit equal to the actuarial equivalent of the benefits
lost by virtue of the early termination of the employee and (vi) continuation
of benefits under the Company's benefit plans. If either of Messrs. Reeves or
Mayell dies or is terminated by the Company for Good Cause, such individual or
such individual's estate, as applicable, would receive all payments then due
him under the Employment Agreement through the date of termination, including a
prorated annual bonus and any compensation previously deferred. Each of Messrs.
Reeves and Mayell also is entitled under his Employment Agreement to certain
gross-up payments if an excise tax is imposed pursuant to Section 4999 of the
Code, which imposes an excise tax on certain severance payments in excess of
three times an annualized compensation amount following certain changes in
control.
The term "Good Reason" is defined in each Employment Agreement, with
respect to each of Messrs. Reeves and Mayell, generally to mean (i) a change in
the nature or scope of the duties or responsibilities of such individual,
unless remedied by the Company; (ii) any failure by the Company to pay any form
of compensation stated in each Employment Agreement, unless remedied by the
Company; (iii) requiring such individual to be based at any office or location
30 miles or more from the current location of the Company, other than travel
reasonably required in the performance of such individual's responsibilities;
(iv) any purported termination by the Company of such individual's employment
other than due to death or for Good Cause; or (v) any failure of the Company to
require a successor of the Company to assume the terms of the Employment
Agreement. The term "Good Cause" is defined in each Employment Agreement
generally to mean (i) such individual has been convicted of a felony that is no
longer subject to direct appeal; (ii) such individual has been adjudicated to
be mentally incompetent so as to affect his ability to serve the Company that
is no longer subject to direct appeal or (iii) such individual has been found
guilty of fraud or willful misfeasance so as to materially damage the Company
that is no longer subject to direct appeal.
Mr. P. Richard Gessinger has entered into an employment agreement with
the Company under which he is given the title Chief Financial Officer and
Executive Vice President of the Company. Mr. Gessinger's employment agreement
provides that he will receive a monthly salary of $16,666.67 and an annual
bonus at the discretion of the Company's Board of Directors. If Mr. Gessinger
is terminated, depending on the circumstances, he may be entitled to a payment
equal to twelve times his monthly salary. If a change in control of the Company
occurs, he may be entitled to receive his monthly salary for twelve months
after such event.
Mr. Lloyd V. DeLano has entered into an Employment Agreement with the
Company under which he is given the title Vice President of the Company. The
Employment Agreement provides that Mr. DeLano will receive a monthly salary of
$12,445.84 and an annual bonus in the amount determined in the discretion of
the Company's Board of Directors. If Mr. DeLano is terminated, he may,
depending on the circumstances, be entitled to receive a payment equal to six
times his monthly salary. Also, if a change in control of the Company occurs,
he may be entitled to receive his monthly salary for eighteen months after such
event.
THE INCENTIVE PLANS
The Incentive Plans authorize the Board of Directors or a Committee of
the Board of Directors to issue stock options, stock appreciation rights,
restricted stock and performance awards. The aggregate number of shares of
Common Stock that currently may be issued under the Incentive Plans is
4,549,043, which represents approximately 10% of the total outstanding number
of shares of Common Stock. This number may change
17
<PAGE> 20
in order to maintain that number at 10% of the total outstanding number of
shares of Common Stock. If the proposed amendment to the 1997 Plan is approved,
approximately an additional 1.2 million shares will become available for grant
under the Incentive Plans. There are currently 4,498,300 shares allocated to
outstanding options or existing or future stock rights under deferred
compensation arrangements under the Incentive Plans. Therefore, there are only
approximately 50,743 shares available for grant of additional options or
stock-based compensation. As of December 31, 1998, none of the stock options
granted under the Incentive Plans were "in-the-money".
WELL BONUS PLANS AND NPI RIGHTS
During 1998, the Company implemented a new net profits program that
was adopted effective as of November 1997. All employees participate in this
program. Pursuant to this program, the Company adopted three separate well
bonus plans: (i) The Meridian Resource Corporation Geoscientist Well Bonus Plan
(the "Geoscientist Plan"); (ii) The Meridian Resource Corporation TMR Employees
Trust Well Bonus Plan (the "Trust Plan") and (iii) The Meridian Resource
Corporation Management Well Bonus Plan (the "Management Plan", and with the
Management Plan and the Geoscientist Plan, the "Well Bonus Plans"). The
Executive Committee of the Board of Directors, which is comprised of Messrs.
Reeves and Mayell, administers each of the Well Bonus Plans. The participants
in each of the Well Bonus Plans are designated by the Executive Committee in
its sole discretion. Participants in the Management Plan are limited to
executive offices of the Company and other key management personnel designated
by the Executive Committee. Neither Messrs. Reeves or Mayell will participate
in the Management Plan, except with respect to a small number of wells and
prospects not covered by their original net profit grants described below. The
participants in the Trust Plan generally will be all employees of the Company
that do not participate in one of the other Well Bonus Plans.
Pursuant to the Well Bonus Plans, the Executive Committee designates,
in its sole discretion, the individuals and wells that will participate in each
of the Well Bonus Plans. The Executive Committee also determines the percentage
bonus that will be paid under each well and the individuals that will
participate thereunder. The Well Bonus Plans cover all properties on which the
Company expends funds during each participant's employment with the Company,
with the percentage bonus generally ranging from less than .1% to .5%,
depending on the level of the employee. It is intended that these well bonuses
function similar to an actual net profit interests, except that the employee
will not have a real property interest and his or her rights to such bonuses
will be subject to a one-year vesting period, except for grants in 1998 for
which all employees were deemed vested, and will be subject to the general
credit of the Company. Payments under vested bonus rights will continue to be
made after an employee leaves the employment of the Company. The Company has
the option to make payments in whole, or in part, utilizing shares of Common
Stock. The determination whether to pay cash or issue Common Stock will be
based upon a variety of factors, including the Company's current liquidity
position and the fair market value of the Common Stock at the time of issuance.
In connection with the execution of their employment contracts in
1994, both Messrs. Reeves and Mayell were granted a 2% net profit interest in
the oil and natural gas production from the Company's properties to the extent
the Company acquires a mineral interest therein. The net profits interest for
Messrs. Reeves and Mayell applies to all properties on which the Company
expends funds during their employment with the Company. The net profit
interests represent real property rights that are not subject to vesting or
continued employment with the Company. Messrs. Reeves and Mayell will not
participate in the Well Bonus Plans for any particular property to the extent
the original net profit interest grants covers such property.
18
<PAGE> 21
EXECUTIVE OFFICERS
The following table provides information with respect to the executive
officers of the Company. Each executive officer has been elected to serve until
his or her successor is duly appointed or elected by the Board of Directors or
his or her earlier removal or resignation from office.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED
NAME OF OFFICER POSITION WITH THE COMPANY AGE AS OFFICER
--------------- ------------------------- --- ----------
<S> <C> <C> <C>
Joseph A. Reeves, Jr. Chairman of the Board and Chief 52 1990
Executive Officer
Michael J. Mayell Director and President 52 1990
P. Richard Gessinger Executive Vice President 51 1997
and Chief Financial Officer
Lloyd V. DeLano Vice President 48 1993
and Chief Accounting Officer
</TABLE>
- ----------------------------------
For additional information regarding Messrs. Reeves and Mayell, see
"Directors", above.
P. Richard Gessinger joined the Company as Executive Vice President
and Chief Financial Officer in 1997. Prior to assuming such position with the
Company, Mr. Gessinger gained an extensive background in energy finance over
the past 24 years as a commercial banker, investment banker and entrepreneur
for such firms as Rauscher Pierce Refsnes, Inc., Bear Sterns & Co., Inc.,
Citicorp Investment Bank and Manufacturers Hanover Trust Company.
Lloyd V. DeLano joined the Company in January 1992 performing contract
work and became an employee of the Company in October of 1992. Mr. DeLano was
named Vice President - Director of Accounting of The Meridian Resource &
Exploration Company (a wholly-owned subsidiary of the Company) in April of 1993
and in June 1996 was named Vice President and Chief Accounting Officer of the
Company. Mr. DeLano is a Certified Public Accountant with 25 years of oil and
natural gas experience.
Other than Mr. Bond, who is Mr. Mayell's father-in-law, there are no
family relationships among the officers and directors of the Company.
19
<PAGE> 22
STOCK PERFORMANCE GRAPH
The following performance graph compares the performance of the Common
Stock to the American Stock Exchange Market Index and the American Stock
Exchange Natural Resources Industry Index from December 31, 1993 through
December 31, 1998. The graph assumes that the value of the investment in the
Common Stock and each index was $100 at December 31, 1993, and that all
dividends were reinvested.
[INSERT LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
<TABLE>
<CAPTION>
December 31, 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
The Company 100 118 165 208 116 39
NYSE Market Index 100 98 127 153 202 240
Peer Group Index 100 94 122 154 156 141
</TABLE>
Assumes: $100 invested on December 31, 1993 all, dividends reinvested and
fiscal year ending December 31. The Company's Peer Group is comprised of
Anadarko Petroleum Corporation, Apache Corporation, Burlington Resources Inc.,
Chesapeake Energy Corporation, Consolidated Natural Gas Company, EEX
Corporation, Enron Corp., Noble Affiliates, Inc., Oryx Energy Company, Pogo
Producing Company, Questar Corporation, Seagull Energy Corporation, SONAT Inc.,
Union Pacific Resources Group Inc. and The Williams Company Inc.
20
<PAGE> 23
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of April 30, 1999, with
respect to the beneficial ownership of Common Stock by (a) each director, (b)
each Named Executive Officer, (c) each shareholder known by the Company to be
the beneficial owner of more than 5% of the Common Stock and (d) all officers
and directors of the Company as a group.
<TABLE>
<CAPTION>
Number of Shares
Name Beneficially Owned (1) Percent
- ----------------------------------------------------- ---------------------- -------
<S> <C> <C>
Joseph A. Reeves, Jr.(2)............................. 1,994,109 4.2%
Michael J. Mayell(3)................................. 1,897,093 4.0
P. Richard Gessinger(4).............................. 42,938 *
Kevin McMichael...................................... 5,000 *
Lloyd V. DeLano(5)................................... 67,211 *
James T. Bond(6)..................................... 26,000 *
E. L. Henry(7)....................................... --
Joe E. Kares(8)...................................... 40,000 *
Gary A. Messersmith(9)............................... 15,200 *
Jack A. Prizzi(10)................................... 50,000 *
All executive officers and directors as a group
(9 persons) (2), (3), (4), (5), (6), (7), (8), (9), 4,137,531 8.4
(10).................................................
Shell Oil Company(11)................................ 24,919,458 42.5
Phemus Corporation (12).............................. 2,785,860 6.1
KAIM Non-Traditional LP (13)......................... 3,309,527 7.2
CharlesBank Capital Partners(14) 1,785,860 8.3
</TABLE>
- -------------------------------
* Less than one percent.
1. Shares of Common Stock which are not outstanding but which can be
acquired by a person upon exercise of an option or warrant within
sixty days are deemed outstanding for the purpose of computing the
percentage of outstanding shares beneficially owned by such person.
2. Includes 464,016 shares, 714,000 shares, and 281,000 shares of Common
Stock that Mr. Reeves has the right to acquire upon the exercise of
the General Partner Warrant, Executive Warrants, and stock options
under the Company's stock option plans, respectively. Also includes
156,016 vested shares underlying deferred compensation arrangements.
Excludes 22,870 unvested shares under deferred compensation
arrangements and 1,500,000 shares underlying options not exercisable
within 60 days. Mr. Reeves' business address is 15995 N. Barkers
Landing, Suite 300, Houston, Texas 77079.
21
<PAGE> 24
3. Includes 464,016 shares, 714,000 shares, and 281,000 shares of Common
Stock that Mr. Mayell has the right to acquire upon the exercise of
the General Partner Warrant, Executive Warrants, and stock options
under the Company's stock option plans, respectively. Also includes
156,016 vested shares underlying deferred compensation arrangements.
Excludes 22,870 unvested shares under deferred compensation
arrangements and 1,500,000 shares underlying options not exercisable
within 60 days. Mr. Mayell's business address is 15995 N. Barkers
Landing, Suite 300, Houston, Texas 77079.
4. Includes 26,000 shares of Common Stock that Mr. Gessenger has the
right to acquire upon the exercise of stock options. Excludes 3,000
shares underling options not exercisable within 60 days.
5. Includes 61,250 shares of Common Stock that Mr. DeLano has the right
to acquire upon the exercise of stock options. Excludes 18,750 shares
underling options not exercisable within 60 days.
6. Includes 15,000 shares of Common Stock that Mr. Bond has the right to
acquire upon the exercise of stock options. Excludes 15,000 shares
underling options not exercisable within 60 days.
7. Excludes 30,000 shares underlying options that are not exercisable
within 60 days.
8. Includes 40,000 shares of Common Stock that Mr. Kares has the right to
acquire upon the exercise of stock options. Excludes 15,000 shares
underling options not exercisable within 60 days.
9. Includes 15,000 shares of Common Stock that Mr. Messersmith has the
right to acquire upon the exercise of stock options. Excludes 30,000
shares underling options not exercisable within 60 days.
10. Includes 47,500 shares of Common Stock that Mr. Prizzi has the right
to acquire upon the exercise of stock options. Excludes 7,500 shares
underling options not exercisable within 60 days.
11. Based solely upon a Schedule 13D filed with the Securities and
Exchange Commission. Shell Oil Company controls Shell Louisiana
Onshore Properties Inc. ("SLOPI"), which is the record holder of
12,082,030 shares of Common Stock and preferred stock that is
convertible into 12,837,428 shares of Common Stock. Shell Oil
Company's business address is One Shell Plaza, Houston, Texas 77002.
SLOPI's business address is P.O. Box 7986, Newark, Delaware. Includes
12,082,030 shares of Common Stock as well as 12,837,428 shares of
Common Stock issuable upon conversion of the Preferred Stock.
12. Based solely upon a Schedule 13G filed with the Securities and
Exchange Commission. The business address of Phemus Corporation is 600
Atlantic Avenue, Boston, Massachusetts 02210-2203. Includes 20,000
shares underlying stock options exercisable within 60 days.
13. The business address of KAIM Non-Traditional, L.P., is 1800 Avenue of
the Stars, 2nd Floor, Los Angeles, California 90067.
14. Based solely upon a Schedule 13G filed with the Securities and
Exchange Commission. The business address of CharlesBank Capital
Partners is 600 Atlantic Avenue, 26th floor, Boston, MA 02210
22
<PAGE> 25
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SHELL TRANSACTION
On June 30, 1998, the Company acquired all of Shell's onshore oil and
gas property interests located in south Louisiana pursuant to two separate
transactions (the "Shell Transactions"). The Shell Transactions were
consummated pursuant to a merger (the "LOPI Transaction") between a
wholly-owned subsidiary of the Company and Louisiana Onshore Properties Inc.
("LOPI"), an indirect wholly-owned subsidiary of Shell Oil Company, and a
separate cash purchase of oil and gas properties (the "SWEPI Acquisition" and
with the LOPI Transaction, the "Shell Transactions") from Shell Western E&P
Inc., an indirect wholly-owned subsidiary of Shell Oil Company ("SWEPI"). The
LOPI Transaction was consummated pursuant to the terms and conditions of an
Agreement and Plan of Merger dated March 27, 1998 (the "LOPI Agreement"),
between the Company, a wholly-owned subsidiary of the Company, LOPI and SLOPI.
Pursuant to the terms of the LOPI Agreement, upon consummation of the merger,
the Company issued to SLOPI 12,082,030 shares of Common Stock and 3,982,906
shares of Preferred Stock that are convertible into a total of 12,837,428
shares of Common Stock. In light of the large ownership position that was
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 certain arrangements that
define and limit SLOPI's and the Company's respective rights and obligations.
These arrangements between the parties are defined in the Stock Rights and
Restrictions Agreement, the Certificate of Designation and a Registration
Rights Agreement dated June 30, 1998 (the "Registration Rights Agreement"),
between the Company and SLOPI, which are summarized below.
The SWEPI Acquisition was consummated pursuant to the terms and
conditions of a Purchase and Sale Agreement dated effective as of October 1,
1997, between a subsidiary of the Company and SWEPI. The Company paid $42.5
million in cash for the oil and gas property interests acquired in the SWEPI
Acquisition, which is subject to adjustment based upon production and expenses
after October 1, 1997.
Stock Rights and Restrictions Agreement
The Stock Rights and Restrictions Agreement contains terms and
provisions that 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 propose or
effect 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 average per share market value of the Common Stock 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 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) restricting SLOPI's and its affiliates' ability to
purchase additional shares of Common Stock and (vii) allowing SLOPI and its
affiliates to receive additional shares of Common Stock or cash in the event
they sell shares of Common Stock received upon conversion of the Preferred
Stock for less than the conversion price in effect on the date of conversion of
such Preferred Stock.
23
<PAGE> 26
Directors. The Stock Rights and Restrictions Agreement and the
Certificate of Designation together provide that SLOPI may elect at least one
member of the Company's Board of Directors and additional members in the event
the number of Board seats is increased to ten or more so that SLOPI is able to
nominate that number of directors that equals the product (rounded downward to
the nearest whole number, but in no event less than one) of the total number of
directors following such election multiplied by 20%. So long as there is at
least one director elected by the holders of Preferred Stock serving 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.
Business Transactions. Subject to certain limited exceptions, the
Stock Rights and Restrictions Agreement prohibits SLOPI and its affiliates from
engaging or proposing to engage in any business combination transaction with
the Company unless such proposal is made after June 30, 2001, and on the date
such transaction is proposed, there is no Preferred Director or director
nominated by SLOPI and its affiliates serving on the Board of Directors.
Transfer Restrictions. The Stock Rights and Restrictions Agreement
generally prohibits SLOPI and its affiliates from selling or otherwise
transferring the shares of Common Stock and Preferred Stock owned by them;
provided, however, beginning on June 30, 2000, they may sell an incremental 25%
of the Common Stock issued in the LOPI Transaction or upon conversion of the
Preferred Stock until June 30, 2003, at which time, they may sell 100% of such
shares of Common Stock. In addition, beginning on June 30, 2001, SLOPI and its
affiliates may sell or transfer an incremental one-third of the shares of
Preferred Stock issued in the LOPI Transaction until June 30, 2003, at which
time they may sell or transfer 100% of such Preferred Stock. SLOPI and its
affiliates, however, may sell their shares of Common Stock and Preferred Stock
owned by them at any time in connection with a tender offer for the Common
Stock, subject to a right of first refusal by the Company to purchase such
shares at 105% of the tender offer price.
Limitation on Purchase of Common Stock. Subject to certain limited
exceptions, the Stock Rights and Restrictions Agreement prohibits SLOPI and its
affiliates from purchasing or acquiring any additional shares of Common Stock
(except upon conversion of the Preferred Stock or future share issuances
required by the LOPI Agreement or Stock Rights and Restrictions Agreement)
until June 30, 2001.
Voting Rights. The Stock Rights and Restriction Agreement provides
that SLOPI and its affiliates shall be entitled to vote, in their complete
discretion and on all matters, such number of its shares of Voting Stock that
constitute up to 23% of the then outstanding shares of Voting Stock eligible to
be cast for such matter. SLOPI and its affiliates will be required to vote any
shares of Voting Stock that are in excess (the "Excess Shares") of 23% of the
then outstanding shares of voting stock with the votes of all shares other than
the Excess Shares that are actually voted for, against or abstain from voting
on the matter. SLOPI's and its affiliates' voting rights will not be limited
and they will have discretionary voting rights with respect to all Voting
Shares owned by them in the event (i) the matter to be voted on involves
certain business combination transactions, (i) the matter to be voted on
involves a change of control of the Company or (iii) on the date the matter is
voting on the average per share market value for the Common Stock is less than
$5.50 per share. Currently, the average per share market value of the Common
Stock is near $5.50 per share; therefore, whether SLOPI's discretionary voting
rights at the Meeting will be limited cannot be determined at this time.
Shell Purchase Rights. The Stock Rights and Restrictions Agreement
provides that, if SLOPI and its affiliates beneficially own shares of Common
Stock that after consummation of a proposed transaction by the Company would
represent less than 21% of the outstanding shares of Common Stock, the Company
shall provide SLOPI and its affiliates the right to purchase shares of Common
Stock (or securities exchangeable into
24
<PAGE> 27
Common Stock) such that, following SLOPI's purchase and the consummation of the
contemplated transaction, SLOPI and its affiliates would beneficially own 21%
of the Common Stock.
Company Support of Certain Stock Sales. The Stock Rights and
Restrictions Agreement provides that if the proceeds received by SLOPI and its
affiliates on the sale of Common Stock issued upon conversion of the Preferred
Stock is less than approximately $10.52 per share, the Company shall pay in
cash an amount equal to, or issue additional shares of Common Stock to SLOPI
and its affiliates equal in amount to, the difference between the proceeds
received on the sale of such Common Stock and $10.52 per share.
Certificate of Designation
The terms of the Preferred Stock are set forth in the Certificate of
Designation. 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. The Preferred Stock is 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 the third, fourth
and fifth anniversaries of the LOPI Transaction so that no dividends will
accrue on any shares of Preferred Stock after June 30, 2003. Each share of
Preferred Stock is entitled to one vote on matters submitted to the Company's
shareholders for their approval. Until the earlier of (i) the termination of
the Stock Rights and Restrictions Agreement and (ii) SLOPI and its affiliates
beneficially own less than 21% of the outstanding Common Stock, the holders of
the Preferred Stock may elect at least one member of the Company's Board of
Directors and additional members in the event the number of Board seats is
increased to ten or more so that SLOPI is able to nominate that number of
directors (each a "Preferred Director") that equals the product (rounded
downward to the nearest whole number, but in no event less than one) of the
total number of directors following such election multiplied by 20%. 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 Closing Date, the
Preferred Stock will automatically convert into Common Stock in the event the
mean Per Share Market Value (as defined in the Certificate of Designation)
exceeds 150% of the conversion price (approximately $10.52 per share) for 75
consecutive trading days.
Registration Rights Agreement
The shares of Common Stock issued in the LOPI Transaction and the
shares of Common Stock that will be issued upon conversion of the Preferred
Stock are restricted stock and are not freely transferable and tradable.
Therefore, the Company and SLOPI entered into the Registration Rights Agreement
to facilitate the sale or transfer of the shares of Common Stock owned by
SLOPI. SLOPI and its affiliates will have the right to require the Company to
file a registration Statement with the Securities and Exchange Commission on
ten separate occasions for the resale of all or a portion of the eligible
Common Stock owned by SLOPI. However, the Company will not be obligated to file
a requested registration Statement in the event that the aggregate number of
shares of eligible Common Stock to be included in such requested registration
is less than 2 1/2% of the issued and outstanding Common Stock or if the
Company reasonably determines that the filing thereof at the time requested, or
the offering of the eligible Common Stock pursuant thereto, would materially
and adversely affect a pending or proposed offering of securities of the
Company or other transaction or require premature disclosure of information not
otherwise required to be disclosed to the potential detriment of the Company.
In addition, if the Company at any time proposes to file a registration
Statement relating to a public offering of Common Stock to be sold for cash
that would permit the registration of eligible Common Stock held by SLOPI and
its affiliates, SLOPI and its affiliates will be entitled to include all or a
portion of the eligible Common Stock owned by them in such registration
Statement and offering unless it is determined that the
25
<PAGE> 28
distribution of such stock would materially adversely affect the distribution
of the securities being registered for sale by the Company, in which case
SLOPI's participation in such registration will be reduced.
PARTICIPATION INTERESTS
In the ordinary course of business, the Company offers participation
in exploration prospects to industry partners. Terms of each participation vary
depending on the risk and economic conditions existing in the oil and gas
industry at the time of grant. In addition, in an effort to provide the
Company's executive officers and key employees with additional incentive to
identify and develop successful exploratory prospects for the Company, the
Company has adopted a policy of offering to its principal executive officers
and key employees responsible for the identification and development of
prospects the right to participate in each of the prospects pursued by the
Company. Such participation is required to be on the same terms and conditions
as the Company and its outside partners and is currently limited in aggregate
to an approximate 8% working interest in any prospect. The maximum percentage
that either Messrs. Reeves and Mayell may elect to participate in any prospect
is a 3.5% working interest. Since 1994, each of Messrs. Reeves and Mayell have
participated in every prospect that the Company has drilled on a 1.5% working
interest basis (other than the Chocolate Bayou Field in which they had a 3.5%
interest and certain prospects completed prior to 1994, in which Messrs. Reeves
and Mayell have working interests of up to 2.5%) and upon the same terms and
conditions as other third party working interest owners.
During 1998, both Messrs. Reeves and Mayell, either personally or
through wholly-owned or affiliated corporations, participated as working
interest owners in properties of the Company. Under the terms of the operating
and other agreements relating to the Company's wells and prospects, the
Company, as operator, incurs various expenses relating to the prospect or well
that are then billed to the working interest owner. During 1998, each of TODD
(a company owned by Mr. Reeves) and Sydson (a company owned by Mr. Mayell) were
indebted to the Company for certain expenses paid by the Company in respect of
their working interest in various prospects and wells in which the Company
acted as operator.
TODD and Sydson collectively invested approximately $2,126,000 for the
year ended December 31, 1998, in oil and natural gas drilling activities for
which the Company was the operator. Collective amounts due from such entities
for such activities were approximately $4,450,000 as of December 31, 1998,
which have been netted by amounts owed to them from the Company. The Company
executed note agreements with TODD and Sydson dated December 31, 1997, for
$1,510,699 each related to certain amounts due, which matured on December 30,
1998, and accrue interest at variable market rates. Such notes currently remain
outstanding.
OTHER
Joe E. Kares, a member of the Executive Compensation Committee, is a
partner in the public accounting firm of Kares & Cihlar, which provided the
Company and its affiliates with accounting services for the years ended
December 31, 1998, 1997 and 1996 and received fees of approximately $57,000,
$27,000 and $56,000, respectively. These fees exceeded 5% of the gross revenues
of Kares & Cihlar for 1996. The Company believes that these fees were
equivalent to the fees that would have been paid to similar firms providing its
services in arm's length transactions.
Mr. Messersmith is a partner in the law firm of Fouts & Moore, L.L.P.,
in Houston, Texas, which periodically provides legal services for the Company.
In addition, the Company has Mr. Messersmith on personal retainer of $8,333.33
per month relating to services provided to the Company personally by Mr.
26
<PAGE> 29
Messersmith. Mr. Messersmith also participates in the Well Bonus Plans pursuant
to which he was paid $22,600 during 1998.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than ten-percent shareholders are
required by the regulations promulgated under Section 16(a) to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the period from
January 1, 1998, through December 31, 1998, all filing requirements applicable
to officers, directors and greater than ten-percent shareholders were complied
with, except that Mr. Kares was late in reporting the exercise of a stock
option to purchase 15,000 shares of Common Stock and Mr. Prizzi was late in
reporting the exercise of a stock option to purchase 15,000 shares of Common
Stock and the sale of 3,160 shares of Common Stock. In addition, Mr. Henry
reported his appointment to the Board of Directors on Form 5 rather than Form
3.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Ernst & Young LLP served as the Company's principal independent
accountants for the fiscal year ended December 31, 1998, and has been
recommended by the Audit Committee to so serve for the current year. A
representative of Ernst & Young LLP will attend the Meeting with the
opportunity to make a Statement if he or she desires to do so and to respond to
appropriate questions.
OTHER BUSINESS
Management does not intend to bring any business before the Meeting
other than the matters referred to in the accompanying notice and at this date
has not been informed of any matters that may be presented to the Meeting by
others. If, however, any other matters properly come before the Meeting, it is
intended that the persons named in the accompanying proxy will vote, pursuant
to the proxy, in accordance with their best judgment on such matters.
27
<PAGE> 30
SHAREHOLDER PROPOSALS
Any proposal by a shareholder to be presented at the Company's 2000
Annual Meeting of Shareholders (the "2000 Annual Meeting") must be received by
the Company no later than February 8, 2000, in order to be eligible for
inclusion in the Company's Proxy Statement and proxy used in connection with
the 2000 Annual Meeting. In addition, the Company's bylaws provide that in
order for business to be properly brought before such meeting, such business
must be (i) specified in the notice of the 2000 Annual Meeting (or any
supplement thereto) given by or at the direction of the Board of Directors,
(ii) otherwise properly brought before the 2000 Annual Meeting by or at the
direction of the Board of Directors or (iii) otherwise properly brought before
the meeting by a shareholder who (A) is a shareholder of record on the date of
the giving of the notice provided for below and on the record date for the
determination of shareholders entitled to vote at the 2000 Annual Meeting and
(B) gives timely notice of such business in writing to the Secretary of the
Company. For purposes of the preceding sentence, to be timely, a shareholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Company no earlier than February 8, 2000 and no later than
March 9, 2000; provided, however, that in the event that the 2000 Annual Meeting
is called for date that is not within 30 days of June 7, 2000, notice by the
shareholder to be timely must be so received not later than the close of
business on the tenth day following the day on which such notice of the date of
the 2000 Annual Meeting was mailed or public disclosure of the 2000 Annual
Meeting date was made, whichever occurs first. A shareholder's notice to the
Secretary of the Company shall set forth (i) a brief description of the each
matter desired to be brought before the 2000 Annual Meeting and the reasons for
conducting such business at the 2000 Annual Meeting, (ii) the name and record
address of the shareholder proposing such business, (iii) the class and number
of shares of the Company that are beneficially owned by the shareholder, (iv)
any material interest of the shareholder in such business and (v) a
representation that such shareholder intends to appear in person or by proxy at
the 2000 Annual Meeting to bring such business before such meeting.
By order of the Company's Board of Directors
Joseph A. Reeves, Jr.
Chairman of the Board and
Chief Executive Officer
May 7, 1999
28
<PAGE> 31
THE MERIDIAN RESOURCE CORPORATION
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of The Meridian Resource Corporation, a
Texas corporation (the "Company"), hereby constitutes and appoints Joseph A.
Reeves, Jr. and Michael J. Mayell, and each of them, his true and lawful agents
and proxies, as proxies, with full power of substitution in each, to vote, as
designated on the reverse side, all shares of Common Stock, $.01 par value, of
the Company which the undersigned would be entitled to vote at the Annual
Meeting of Shareholders of the Company to be held June 7, 1999 and at any
adjournment(s) thereof, on the following matters more particularly described in
the Proxy Statement dated May 7, 1999.
(To Be Signed on REVERSE SIDE)
- -------------------------------------------------------------------------------
[X] Please mark your
votes as in this
example
<TABLE>
<CAPTION>
WITHHOLD
FOR the authority to vote
following for the nominee
nominees named herein
<S> <C> <C> <C> <C>
1. Election of Nominees: Joseph A. Reeves 4. In their discretion the proxies are authorized
Class III [ ] [ ] Michael J. Mayell to vote upon such other business as may
Directors Messersmith properly come before the meeting.
For Against Abstain
[ ] [ ] [ ]
2. Amendment to the Receipt is hereby acknowledged of the Notice
1997 Long- Term of Annual Meeting of Shareholders and Proxy
Incentive Plan Statement, each dated May 7, 1999, and the
Annual Report to Shareholders of the Company
for the year ended December 31, 1998.
For Against Abstain
[ ] [ ] [ ]
3. Amendment to the Please mark, sign, date and return this proxy
Non-Employee card promptly using the enclosed envelope.
Director Stock
Option Plan
</TABLE>
SIGNATURE(S) DATE , 1999
------------------------------- -------------------
Note: Please sign your name exactly as name appears hereon. Co-fiduciaries
and joint owners must each sign. When signing as attorney, executor,
administrator, trustee of guardian, please give full title as such. If
a corporation, please sign in the full corporate name by the president
or other authorized officer. If a partnership, please sign in the
partnership name by authorized person.
29
<PAGE> 32
THE MERIDIAN RESOURCE CORPORATION
SHELL LOUISIANA ONSHORE PROPERTIES INC.
COMMON STOCK PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of The Meridian Resource Corporation, a
Texas corporation (the "Company"), hereby constitutes and appoints Joseph A.
Reeves, Jr. and Michael J. Mayell, and each of them, its true and lawful agents
and proxies, as proxies, with full power of substitution in each, to vote, all
shares of Common Stock, $.01 par value, of the Company which the undersigned
would be entitled to vote at the Annual Meeting of Shareholders of the Company
to be held June 7, 1999 and at any adjournment(s) thereof, on the following
matters more particularly described in the Proxy Statement dated May 7, 1999,
as follows: (i) as designated below for shares of Common Stock for which the
undersigned has discretionary voting rights as provided in Section 2.5 of the
Stock Rights and Restrictions Agreement dated June 30, 1998 (the "Stock Rights
and Restrictions Agreement") between the undersigned and the Company and (ii)
as required by the terms of the Stock Rights and Restrictions Agreement for
shares of Common Stock for which the undersigned does not have discretionary
voting rights as provided in Section 2.5 of the Stock Rights and Restrictions
Agreement.
[X] Please mark your
votes as in this
example
<TABLE>
<CAPTION>
WITHHOLD
FOR the authority to vote
following for the nominee
nominees named herein
<S> <C> <C> <C> <C>
1. Election of Nominees: Joseph A. Reeves 4. In their discretion the proxies are authorized
Class III [ ] [ ] Michael J. Mayell to vote upon such other business as may
Directors Messersmith properly come before the meeting.
For Against Abstain
[ ] [ ] [ ]
2. Amendment to the Receipt is hereby acknowledged of the Notice
1997 Long- Term of Annual Meeting of Shareholders and Proxy
Incentive Plan Statement, each dated May 7, 1999, and the
Annual Report to Shareholders of the Company
for the year ended December 31, 1998.
For Against Abstain
[ ] [ ] [ ]
3. Amendment to the Please mark, sign, date and return this proxy
Non-Employee card promptly using the enclosed envelope.
Director Stock
Option Plan
</TABLE>
SHELL LOUISIANA ONSHORE PROPERTIES INC.
By
-------------------------------------
Name:
-------------------------------------
Title: DATE , 1999
------------------------------------- ----------------------
Note: Please sign your name exactly as name appears hereon. Co-fiduciaries
and joint owners must each sign. When signing as attorney, executor,
administrator, trustee of guardian, please give full title as such. If
a corporation, please sign in the full corporate name by the president
or other authorized officer. If a partnership, please sign in the
partnership name by authorized person.
30
<PAGE> 33
THE MERIDIAN RESOURCE CORPORATION
SHELL LOUISIANA ONSHORE PROPERTIES INC.
PREFERRED STOCK PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of the Series A Cumulative Preferred Stock of
The Meridian Resource Corporation, a Texas corporation (the "Company"), hereby
constitutes and appoints Joseph A. Reeves, Jr. and Michael J. Mayell, and each
of them, its true and lawful agents and proxies, as proxies, with full power of
substitution in each, to vote, as designated below, all shares of Preferred
Stock, $1.00 par value, of the Company which the undersigned would be entitled
to vote at the Annual Meeting of Shareholders of the Company to be held June 7,
1999 and at any adjournment(s) thereof, on the following matters more
particularly described in the Proxy Statement dated May 7,1999.
[X] Please mark your
votes as in this
example
<TABLE>
<CAPTION>
WITHHOLD
FOR the authority to vote
following for the nominee
nominees named herein
<S> <C> <C> <C> <C>
1. Election of Nominees: Joseph A. Reeves 5. In their discretion the proxies are authorized
Class III [ ] [ ] Michael J. Mayell to vote upon such other business as may
Directors properly come before the meeting.
Receipt is hereby acknowledged of the Notice of
WITHHOLD Annual Meeting of Shareholders and Proxy
FOR the authority to vote Statement, each dated May 7, 1999, and the Annual
following for the nominee Report to Shareholders of the Company for the year
nominees named herein ended December 31, 1998.
2. Election of Nominees: Paul D. Ching Please mark, sign, date and return this proxy card
Preferred [ ] [ ] promptly using the enclosed envelope.
Director
For Against Abstain
3. Amendment to the
1997 Long-Term [ ] [ ] [ ]
Incentive Plan
For Against Abstain
3. Amendment to the
Non-Employee [ ] [ ] [ ]
Director Stock
Option Plan
</TABLE>
SHELL LOUISIANA ONSHORE PROPERTIES INC.
By
-------------------------------------
Name:
-------------------------------------
Title: DATE , 1999
------------------------------------- ----------------------
Note: Please sign your name exactly as name appears hereon. Co-fiduciaries and
joint owners must each sign. When signing as attorney, executor,
administrator, trustee of guardian, please give full title as such. If a
corporation, please sign in the full corporate name by the president or
other authorized officer. If a partnership, please sign in the
partnership name by authorized person.
31
