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EXHIBIT 4.4
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED EXCEPT IN ACCORDANCE
THEREWITH.
THIS SECURITY IS SUBJECT TO RESTRICTIONS ON TRANSFER CONTAINED IN
THE NOTE PURCHASE AGREEMENT DATED AS OF JUNE 22, 1999, AMONG THE
ISSUER OF THIS SECURITY AND EOS PARTNERS, L.P., A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE MERIDIAN RESOURCE
CORPORATION, AS REGISTRAR, AND WHICH RESTRICTIONS REQUIRE, AS A
CONDITION TO ANY TRANSFER, APPROPRIATE DOCUMENTATION TO EVIDENCE
COMPLIANCE WITH APPLICABLE SECURITIES LAWS, INCLUDING AN OPINION OF
COUNSEL WITH RESPECT THERETO.
NO REGISTRATION OF TRANSFER OF THIS SECURITY WILL BE EFFECTED ON
THE BOOKS OF THE REGISTRAR UNLESS AND UNTIL SUCH RESTRICTIONS
ARE COMPLIED WITH.
THE MERIDIAN RESOURCE CORPORATION
9 1/2% SUBORDINATED NOTE DUE JUNE 18, 2005
NO. 1 $5,000,000 JUNE 22, 1999
1. GENERAL TERMS.
(a) Principal and Interest. FOR VALUE RECEIVED, the
undersigned, THE MERIDIAN RESOURCE CORPORATION, a Delaware corporation, (the
"ISSUER" or the "COMPANY"), hereby promises to pay to Eos Partners, L.P., a
Delaware limited partnership, or registered assigns (the "Holders", and each a
"Holder"), the principal sum of five million dollars (the "Principal Amount")
on June 18, 2005, with interest (computed on the basis of a 360-day of twelve
30-day months) on the unpaid balance thereof at the rate of 9 1/2% per annum
from the date hereof, payable quarterly, on the 15th day of March, June,
September and December of each year, commencing with September 15, 1999, until
the principal hereof shall have become due and payable.
(b) Payments. Payments of principal of and interest on
with respect to this Note are to be made in lawful money of the United States
of America by the method and to the address or account specified with respect
to the holder hereof pursuant to Section 9.1 of the Note Purchase Agreement
referred to below.
(c) Note Purchase Agreement. This Note is one of a series
of Subordinated Notes (herein called the "NOTES") issued pursuant to the Note
Purchase Agreement dated as of June 22, 1999 (as the same may be amended,
supplemented or otherwise modified from time to time, the "NOTE PURCHASE
AGREEMENT"; capitalized terms used herein and not otherwise defined herein have
the meanings set forth in the Note Purchase Agreement), among the Issuer and
Eos Partners, L.P. Each holder of this Note (a "Holder") will be deemed,
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by its acceptance hereof, to have made the representation set forth in Sections
3.1, 3.2 and 3.5 of the Note Purchase Agreement on the date of transfer of this
Note to such Holder.
(d) Registrar. The Issuer hereby acknowledges and makes
this Note a registered obligation for United States withholding tax purposes.
The Issuer shall be the registrar for this Note (the "Registrar") with full
power of substitution. In the event the Registrar becomes unable or unwilling
to act as registrar under this Agreement, the Company shall reasonably
designate a successor Registrar. Each Holder who is a foreign person, by its
acceptance of this Note, hereby agrees to provide the Issuer with a completed
Internal Service Form W-8 (Certificate of Foreign Status) or a substantially
similar form for such Holder, participants or other affiliates who are holders
of beneficial interests in this Note. Notwithstanding any contrary provision
contained in this Note or the Note Purchase Agreement, neither this Note nor
any interests therein may be sold, transferred, hypothecated, participated or
assigned to any Person except upon satisfaction of the conditions specified in
this paragraph. Each Holder, by acceptance of this Note, agrees to be bound by
the provisions of this paragraph and to indemnify and hold harmless the
Registrar against any and all loss or liability arising from the disposition by
such Holder of this Note or any interest therein in violation of this
paragraph. The Registrar shall keep at its principal executive office (or an
office or agency designated by it by notice to the last registered Holder) a
ledger, in which, subject to such reasonable regulations as it may prescribe,
but at its expense (except as specified below), it shall provide for the
registration and transfer of this Note. No sale, transfer, hypothecation,
participation or assignment of this Note or any interest herein shall be
effective for any purpose until it shall be registered on the books of the
Registrar to be maintained for such purpose. The Registrar shall record the
transfer of this Note on the books maintained for this purpose upon receipt by
the Registrar at the office or agency designated by the Registrar of (a) a
written assignment of this Note (or the applicable interest therein), (b) funds
sufficient to pay any transfer taxes payable upon the making of such transfer
as well as the cost of reviewing the documents presented to the Registrar, and
(c) such evidence of due execution as the Registrar shall reasonably require.
The Registrar shall record the transfer of this Note on the books maintained
for such purpose at the cost and expense of the assignee.
(e) Optional Redemption. The Company, at its option at
any time following the date of issuance, may redeem this Note, in whole or in
part, from time to time at a redemption price equal to the principal amount of
this Note then outstanding, plus accrued and unpaid interest to and including
the date fixed for the redemption. In addition, if such redemption occurs on or
before June 18, 2001, the Company also shall issue to the record holder of this
Note a warrant to purchase at the Conversion Price (as defined in Section 4(c))
a number of shares of Common Stock equal to the number of shares of Common
Stock into which this Note would be convertible on the date of redemption
pursuant to Section 4, which warrant shall have terms and conditions
substantially similar to the form of warrant attached hereto as Annex A (the
"Warrant"). The redemption price as determined in this paragraph, including the
Warrant, shall be hereinafter referred to as the "Redemption Price".
Notwithstanding anything herein to the contrary, the Company may not redeem
less than one-half of the outstanding principal amount of this Note at any one
time.
Not more than 60 nor less than 10 days before the
redemption date, notice by first class mail, postage prepaid, shall be given to
the Holders of record of this Note to be redeemed, addressed to such Holders at
their last addresses as shown on the books of the Registrar. Each such notice
of redemption shall specify the date fixed for redemption, the Redemption
Price, the place or places of payment, that payment will be made upon
presentation and surrender of this Note, that on and after the redemption date
interest will cease to accumulate on this Note, the then-effective Conversion
Price pursuant to Section 4 and that the right of Holders to convert pursuant
to Section 4 shall terminate at the close of business on the fifth business day
prior to the redemption date.
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Any notice that is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder of
this Note receives such notice; and failure properly to give such notice by
mail, or any defect in such notice, to the Holders of this Note designated for
redemption shall not affect the validity of the proceedings for the redemption
of this Note. On or after the date fixed for redemption as stated in such
notice, each Holder of this Note shall surrender the certificate evidencing
this Note to the Company at the place designated in such notice and shall
thereupon be entitled to receive payment of the Redemption Price. If less than
all outstanding principal of this Note is redeemed, a new certificate shall be
issued representing the unredeemed portion of this Note. If, on the date fixed
for redemption, funds necessary for the redemption shall be available therefor
and shall have been irrevocably deposited or set aside, then, notwithstanding
that the certificates evidencing this Note shall not have been surrendered, the
interest with respect to this Note so called shall cease to accrue after the
date fixed for redemption, the Note (or portion thereof so redeemed) shall no
longer be deemed outstanding, and all rights whatsoever with respect to the
Note (or portion thereof) so called for redemption (except the right of the
holders to receive the Redemption Price without interest upon surrender of
their certificates therefor) shall terminate.
2. SUBORDINATION. (a) The Holder of this Note hereby subordinates
all liabilities and obligations of any nature, whether primary, secondary,
absolute, contingent, sole, joint, several or joint and several and all
interest thereon (including, without limitation, interest accruing after the
filing of any petition in bankruptcy or the commencement of any insolvency,
reorganization or like proceeding, relating to the Company) and all fees, costs
and expenses (including attorney's fees and other legal expenses) related
thereto, now or at any time or times hereafter existing, contracted or
incurred, under this Note (collectively, "Subordinated Debt") principal of and
interest on borrowed money of the Company and all other obligations and
liabilities of the Company (including, without limitation, interest accruing
after the filing of any petition in bankruptcy or the commencement of any
insolvency, reorganization or like proceeding relating to the Company, whether
or not a claim for post-filing or post-petition interest is allowed in such
proceeding), whether primary, secondary, absolute, contingent, sole, joint,
several or joint and several, now or at any time or times hereafter existing,
contracted or incurred, which may arise under, on, or in connection with, such
borrowed money of the Company whether on account of principal, interest, fees,
indemnitees, costs, expenses or otherwise (including, without limitation all
fees and disbursements of legal counsel) (collectively, "Senior Debt"),
including under the Credit Agreement (as defined in the Note Purchase
Agreement); provided, however, Senior Debt shall not include principal of and
interest on the 9 1/2% Subordinated Note of the Company dated June 18, 1999 in
the principal amount of $15,000,000 that is payable to Kayne Anderson Energy
Fund, L.P. (the "Kayne Note"), and all other obligations and liabilities of the
Company (including, without limitation, interest accruing after the filing of
any petition in bankruptcy or the commencement of any insolvency,
reorganization or like proceeding relating to the Company, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding),
whether primary, secondary, absolute, contingent, sole, joint, several or joint
and several, now or at any time or times hereafter existing, contracted or
incurred, which may arise under, on, or in connection with, the Kayne Note,
whether on account of principal, interest, fees, indemnitees, costs, expenses
or otherwise (including, without limitation all fees and disbursements of legal
counsel) (collectively, "Kayne Debt"), it being understood and agreed that the
Subordinated Debt shall rank pari passu with the Kayne Debt in all respects .
Until the Senior Debt is satisfied (or a written waiver from the holders of the
Senior Debt is received in accordance with the terms of the Senior Debt), (i)
the Company will not make and the Holders of this Note will not accept, either
directly or indirectly, payment (of any kind or character) of all or any part
of the principal of, premium, if any, on or any claim or amount with respect to
any of the Subordinated Debt, except that, so long as there is no Default or
Event of Default (as such terms are defined in the Chase Facility) under the
Chase Facility or default in any payment obligations under any other Senior
Debt, the Company may make, and the Holder of the Note may receive, interest on
this Note as
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provided for herein; and (ii) the Holders of this Note will not demand or
accelerate any of the Subordinated Debt, institute any court proceedings
against the Company to collect any Subordinated Debt, or exercise any rights or
remedies against the Company or its assets; provided however the Holders of
this Note may declare it due and payable upon the occurrence of any of the
events described in Section 3(a)(iii)(B) or Section 3(a)(iv). In addition, no
part of the Subordinated Debt shall have any claim to the assets of the Company
on a parity with or prior to the claim of the Senior Debt.
(b) The expression "satisfied", "prior payment in full," "payment in
full," "paid in full" and any other similar terms or phrases when used herein
with respect to the Senior Debt shall mean the payment, in immediately
available funds, of all of the Senior Debt.
(c) The Holders of the Subordinated Debt and the Company agree that
upon the occurrence of any event described in Section 3(a)(iii) or (iv):
(i) all Senior Debt shall be paid in full before any
payment or distribution is made with respect to the Subordinated
Debt; and
(ii) any payment or distribution of assets of the Company,
whether in cash, property or securities, to which any Holder of
Subordinated Debt would be entitled except for the provisions
hereof, shall be paid or delivered by the Company, or any receiver,
trustee in bankruptcy, liquidating trustee, disbursing agent or
other Person making such payment or distribution, directly to the
holders of the Senior Debt, to the extent necessary to pay in full
all Senior Debt, before any payment or distribution shall be made to
any Holder of Subordinated Debt.
(d) If any payment or distribution, whether consisting of money,
property or securities, be collected or received by any Holder of Subordinated
Debt in respect of the Subordinated Debt, except payments permitted to be made
at the time of payment as provided in paragraph (a) above, such Holder of
Subordinated Debt forthwith shall deliver the same to the holders of the Senior
Debt, in the form received, duly endorsed, if required, to be applied to the
payment or prepayment of the Senior Debt until the Senior Debt is paid in full.
Until so delivered, such payment or distribution shall be held in trust by such
Holder of Subordinated Debt as the property of the holders of Senior Debt,
segregated from other funds and property held by such Holder of Subordinated
Debt. In the event the Holder of Subordinated Debt is required to remit funds
received by it from the Company to the holders of Senior Debt pursuant to the
provisions of this Section 2, then such amounts remitted to the Senior Debt
shall be considered not having been paid to the holders of the Subordinated
Debt by the Company and such amounts shall be considered due and payable by the
Company to the holders of the Subordinated Debt and shall thereafter constitute
Subordinated Debt of the Company to the Holder.
(e) The Senior Debt shall be deemed to have been created, contracted
or incurred in reliance upon these subordination provisions and these
subordination provisions may not be modified or terminated without the consent
of the holders of Senior Debt.
3. EVENT OF DEFAULT. (a) Definition. An "Event of Default" shall
exist if any of the following conditions or events shall occur and be
continuing:
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(i) the Company defaults in the payment of any principal
on any Note when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or
otherwise; or
(ii) the Company defaults in the payment of any interest
on any Note for more than five Business Days after the same becomes
due and payable; or
(iii) the Company (A) is generally not paying, or admits
in writing its inability to pay, its debts as they become due, (B)
files, or consents by answer or otherwise to the filing against it
of, a petition for relief or reorganization or arrangement or any
other petition in bankruptcy, for liquidation or to take advantage
of any bankruptcy, insolvency, reorganization, moratorium or other
similar law of any jurisdiction, (C) makes a general assignment for
the benefit of its creditors, (D) consents to the appointment of a
custodian, receiver, trustee or other officer with similar powers
with respect to it or with respect to any substantial part of its
property, (E) is adjudicated as insolvent or to be liquidated, or
(F) takes corporate action for the purpose of any of the foregoing;
or
(iv) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by the
Company, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property, or constituting an order for relief or
approving a petition for relief or reorganization or any other
petition in bankruptcy or for liquidation or to take advantage of
any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of the Company, or any
such petition shall be filed against the Company and such petition
shall not be dismissed within 60 days; or
(b) Remedies on Event of Default, Etc.
(i) Acceleration. If an Event of Default has
occurred, this Note shall automatically become immediately
due and payable.
Upon this Note becoming due and payable under
this Section 3, the Note will forthwith mature and the
entire unpaid principal amount of this Note, plus all
accrued and unpaid interest thereon (to the full extent
permitted by applicable law), shall all be immediate ly
due and payable, in each and every case without
presentment, demand, protest or further notice, all of
which are hereby waived.
(ii) Other Remedies. If any Event of Default has
occurred and is continuing, and the Holders of this Note
at the time outstanding may proceed to protect and enforce
the rights of such Holder by an action at law, suit in
equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or
in any Note, or for an injunction against a violation of
any of the terms hereof or thereof, or in aid of the
exercise of any power granted hereby or thereby or by law
or otherwise.
(iii) Rescission. At any time after any Notes
have been declared due and payable the Holders of this
Note, by written notice to the Company, may rescind and
annul any such declaration and its consequences if (a) the
Company has paid all overdue interest on this Note, (b)
all Events of Default, other than non-payment of amounts
that have become due solely by reason of such declaration,
have been cured or have been waived, and (c) no judgment
or de-
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cree has been entered for the payment of any monies
due pursuant hereto or to the Notes. No rescission and
annulment under this Section 3 will extend to or affect
any subsequent Event of Default or impair any right
consequent thereon.
4. CONVERSION PRIVILEGE.
(a) Right of Conversion. This Note shall be convertible at
the option of the Holder, at any time prior to the close of business on the
fifth business day prior to date fixed for repayment of the Note as herein
provided, into the number of fully paid and nonassessable shares of Common
Stock equal to the Principal Amount divided by the Conversion Price (as defined
in Section 4(c)) in effect from time to time.
For the purpose of this Section 4, the term "Common Stock"
shall initially mean the class designated as Common Stock, par value $.01 per
share, of the Company, as of June 18, 1999, subject to adjustment as
hereinafter provided.
(b) Conversion Procedures. Any Holder desiring to convert
this Note shall surrender this Note at the office of the Registrar, which
certificate or certificates, if the Company shall so require, shall be duly
endorsed to the Company or in blank, or accompanied by proper instruments of
transfer to the Company or in blank, accompanied by irrevocable written notice
to the Company that the holder elects so to convert this Note and specifying
the name or names (with address) in which a certificate or certificates for
Common Stock are to be issued.
Upon the conversion of this Note, the Company shall pay
the holder surrendering such shares cash in an amount equal to any accrued but
unpaid interest to the date of conversion of this Note.
The Company will, as soon as practicable (but in no event
later than ten (10) business days) after such deposit of this Note accompanied
by the written notice and compliance with any other conditions herein
contained, deliver at such office of such transfer agent to the person for
whose account this Note were so surrendered, or to his nominee or nominees,
certificates for the number of full shares of Common Stock to which he shall be
entitled as aforesaid, together with a cash adjustment of any fraction of a
share as hereinafter provided. Subject to the following provisions of this
paragraph, such conversion shall be deemed to have been made as of the date of
such surrender of this Note to be converted, and the person or persons entitled
to receive the Common Stock deliverable upon conversion of this Note shall be
treated for all purposes as the record holder or holders of such Common Stock
on such date; provided, however, that the Company shall not be required to
convert this Note while the stock transfer books of the Company are closed for
any purpose, but the surrender of this Note for conversion during any period
while such books are so closed shall become effective for conversion
immediately upon the reopening of such books as if the surrender had been made
on the date of such reopening, and the conversion shall be at the Conversion
Price in effect on such date.
(c) Conversion Price. The conversion price for determining
the number of shares of Common Stock deliverable upon conversion of this Note
(the "Conversion Price") shall initially be $7.00 per share of Common Stock.
The Conversion Price shall be subject to adjustment from time to time as
follows:
(i) In case the Company shall (A) pay a dividend
to all holders of its Common Stock or make a distribution
on the Common Stock to all holders of the Common Stock,
which is paid or made (I) in other shares of stock of the
Company or (II) in rights to purchase stock or other
securities if such rights are not separable from the
Common Stock except upon the
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occurrence of a contingency, (B) subdivide its outstanding
shares of Common Stock into a greater number of shares or
(C) combine its outstanding shares of Common Stock into a
smaller number of shares, then in each such case the
Conversion Price in effect immediately prior thereto and
the securities issuable shall be adjusted retroactively as
provided below so that the holder of this Note thereafter
surrendered for conversion shall be entitled to receive
the number of shares of Common Stock and other shares and
rights to purchase stock or other securities that such
holder would have owned or have been entitled to receive
after the happening of any of the events described above
had this Note been converted immediately prior to the
happening of such event. In the event of the redemption of
any shares or rights referred to clause (A), such holder
shall have the right to receive, in lieu of any such
shares or rights, any cash, property or securities paid in
respect of such redemption; provided, however, that if the
value of such cash, property or securities is less than
$.10 per share of Common Stock, such holder shall not be
entitled to such cash, property or securities. An
adjustment made pursuant to this subparagraph (i) shall
become effective immediately after the record date in the
case of a dividend or distribution and shall become
effective immediately after the effective date in the case
of a subdivision or combination.
(ii) In case the Company shall issue rights or
warrants to all holders of the Common Stock entitling them
(for a period expiring within 45 days after the date fixed
for determination mentioned below) to subscribe for or
purchase shares of Common Stock at a price per share less
than the current market price per share (determined as
provided below) of the Common Stock on the date fixed for
the determination of shareholders entitled to receive such
rights or warrants, then the Conversion Price in effect at
the opening of business on the day following the date
fixed for such determination shall be reduced by
multiplying such conversion price by a fraction of which
the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the date
fixed for such determination plus the number of shares of
Common Stock so offered for subscription or purchase and
the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the date
fixed for such determination plus the number of shares of
Common Stock that the aggregate of the offering price of
the total number of shares of Common Stock so offered for
subscription or purchase would purchase at such current
market price, such reduction to become effective
immediately after the opening of business on the day
following the date fixed for such determination; provided,
however, in the event that all the shares of Common Stock
offered for subscription or purchase are not delivered
upon the exercise of such rights or warrants, upon the
expiration of such rights or warrants the conversion price
shall be readjusted to the conversion price that would
have been in effect had the denominator and the numerator
of the foregoing fraction and the resulting adjustment
been made based upon the number of shares of Common Stock
actually delivered upon the exercise of such rights or
warrants rather than upon the number of shares of Common
Stock offered for sub scription or purchase. For the
purposes of this subparagraph (ii), the number of shares
of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company.
(iii) If the Company shall, by dividend or
otherwise, distribute to all holders of its Common Stock
evidences of its indebtedness, cash (excluding regular
quarterly cash dividends in a per share amount
(appropriately adjusted for stock splits and stock
dividends) not in excess of 200% of the amount most
recently paid ("Regular Cash Dividends")), other
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assets or rights or warrants to subscribe for or purchase
any security (excluding those referred to in subparagraphs
(i) and (ii) above), then in each such case the conversion
price shall be adjusted retroactively so that the same
shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the close
of business on the date fixed for the determination of
shareholders entitled to receive such distribution by a
fraction of which the denominator shall be the current
market price per share (determined as provided below) of
the Common Stock on the date fixed for such determination
and the numerator shall be such current market price per
share of the Common Stock less the amount of cash and the
then fair market value (as determined by the Board of
Directors in good faith, whose determination shall be
conclusive and described in a resolution of the Board of
Directors) of the portion of the assets, rights or
evidences of indebtedness so distributed applicable to one
share of Common Stock, such adjustment to become effective
immediately prior to the opening of business on the day
following the date fixed for the determination of holders
entitled to receive such distribution.
(iv) If (i) the Company shall ever, in
connection with a merger, consolidation, share exchange,
or acquisition of a business or properties or similar
transaction, or in a private placement of securities, sell
or issue or commit to sell or issue 1,000,000 (as adjusted
for stock splits, reverse splits, reclassifications, and
similar actions) or more shares of Common Stock or
options, warrants or other securities exchangeable or
convertible into Common Stock (other than securities
issued pursuant to employee benefit plans and similar
arrangements or pursuant to contractual and other
arrangements existing on the date of this Statement of
Designation) that, at the time of issuance, sale or
commitment and assuming full conversion, exchange or
exercise thereof, represent 1,000,000 (as adjusted for
stock splits, reverse splits, reclassifications, and
similar actions) or more shares of Common Stock and (ii)
at or prior to the meeting of the Company's Board of
Directors approving any such transaction, the Company's
Board of Directors shall not have received an opinion
letter from an investment banking firm of national
recognition or "Big 5" accounting firm to the effect that
the contemplated transaction is fair, from a financial
point of view, to the Company, then, and in each such
case, the Conversion Price then in effect shall be
adjusted by dividing the Conversion Price in effect on the
day immediately prior to the date (the "Date") of approval
by the Board of Directors of the issuance or sale by a
fraction (x) the numerator of which shall be the sum of
all of the outstanding shares of Common Stock on such date
plus the number of additional shares of Common Stock to be
issued or issued (or the maximum number into which such
convertible or exchangeable securities initially may
convert or exchange or for which such options, warrants or
other rights initially may be exercised) and (y) the
denominator of which shall be the sum of the number of
shares of Common Stock outstanding on the date plus the
number of shares of Common Stock plus the number of shares
of Common Stock that an investment banking firm of
national recognition or "Big 5" public accounting firm
determines in good faith would need to be issued (or into
which such convertible or exchangeable securities
initially should convert or be exchange for or for which
such options, warrants or other rights initially should be
exercised) in order for the transaction in question to be
fair to the Company from a financial point of view. If any
shares of Common Stock or convertible or exchangeable
securities, options, warrants or other rights (or any
portions thereof) that shall have given rise to an
adjustment pursuant to this Section (iv) shall have never
been issued or shall have expired or terminated without
the exercise thereof and/or if by reason of the terms of
such shares of Common Stock or convertible or
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exchangeable securities, options, warrants or other rights
there shall have been an increase or increases, with the
passage of time or otherwise, in the price payable upon
the purchase, exercise or conversion thereof, then the
Conversion Price hereunder shall be readjusted (but to no
greater extent than originally adjusted) on the basis of
(x) eliminating from the computation any additional shares
of Common Stock corresponding to such shares of Common
Stock or convertible or exchangeable securities, options,
warrants or other rights as having been issued for the
consideration actually received and receivable therefor
and (z) treating any of such shares of Common Stock,
convertible or exchangeable securities, options, warrants
or other rights that remain outstanding as being subject
to exercise or conversion on the basis of such exercise or
conversion price as shall be in effect at this time.
(v) For the purpose of any computation under
subparagraphs (ii) and (iii), the current market price per
share of Common Stock on any date shall be deemed to be
the average of the daily closing prices for the 30
consecutive trading days commencing with the 45th trading
day before the day in question. The closing price for each
day shall be the reported last sales price regular way or,
in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices
regular way, in either case on the New York Stock Exchange
or, if the Common Stock is not listed or admitted to
trading on such Exchange, on the principal national
securities exchange on which the Common Stock is listed or
admitted to trading (based on the aggregate dollar value
of all securities listed or admitted to trading) or, if
not listed or admitted to trading on any national
securities exchange, on the NASDAQ National Market System
or, if the Common Stock is not listed or admitted to
trading on any national securities exchange or quoted on
the NASDAQ National Market System, the average of the
closing bid and asked prices in the over-the-counter
market as furnished by any New York Stock Exchange member
firm selected from time to time by the Company for that
purpose, or, if such prices are not available, the fair
market value set by, or in a manner established by, the
Board of Directors of the Company in good faith. "Trading
day" shall mean a day on which the national securities
exchange or the NASDAQ National Market System used to
determine the closing price is open for the transaction of
business or the reporting of trades or, if the closing
price is not so determined, a day on which the New York
Stock Exchange is open for the transaction of business.
(vi) No adjustment in the Conversion Price shall
be required unless such adjustment would require an
increase or decrease of at least 1% in such price;
provided, however, that the Company may make any such
adjustment at its election; and provided, further, that
any adjustments that by reason of this subparagraph (vi)
are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All
calculations under this Section 5 shall be made to the
nearest cent or to the nearest one-hundredth of a share,
as the case may be.
(vii) Whenever the Conversion Price is adjusted
as provided in any provision of this Section 5:
(1) the Company shall compute the
adjusted Conversion Price in accordance with
this Section 5 and shall prepare a certificate
signed by the principal financial officer of the
Company setting forth the adjusted Conversion
Price and
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showing in reasonable detail the facts upon that
such adjustment is based, and such certificate
shall forthwith be filed with the Registrar of
this Note; and
(2) a notice stating that the
Conversion Price has been adjusted and setting
forth the adjusted conversion price shall
forthwith be required, and as soon as
practicable after it is required, such notice
shall be mailed by the Company to all record
holders of this Note at their last addresses as
they shall appear in the stock transfer books of
the Company.
(viii) If at any time, as a result of any
adjustment made pursuant to this Section 5, the holder of
this Note thereafter surrendered for conversion shall
become entitled to receive any shares of the Company other
than shares of Common Stock or to receive any other
securities, the number of such other shares or securities
so receivable upon conversion of this Note shall be
subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the
provisions contained in this Section 5 with respect to the
Common Stock.
(d) No Fractional Shares. No fractional shares or scrip
representing fractional shares of Common Stock shall be issued upon conversion
of this Note. If more than one certificate representing Notes shall be
surrendered for conversion at one time by the same holder, the number of full
shares issuable upon conversion thereof shall be computed on the basis of the
aggregate principal amount of Notes so surrendered. Instead of any fractional
share of Common Stock that would otherwise be issuable upon conversion of
Notes, the Company will pay a cash adjustment in respect of such fractional
interest in an amount equal to the same fraction of the closing price per share
of Common Stock (determined in accordance with subparagraph (c)(v)) at the
close of business on the day of conversion.
(e) Reclassification, Consolidation, Merger or Sale of
Assets. In case of any reclassification of the Common Stock, any consolidation
of the Company with, or merger of the Company into, any other person, any
merger of another person into the Company (other than a merger that does not
result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Company), any sale or transfer of all
or substantially all of the assets of the Company or any compulsory share
exchange pursuant to which share exchange the Common Stock is converted into
other securities, cash or other property, the lawful provision shall be made as
part of the terms of such transaction whereby the holder of this Note shall
have the right thereafter, during the period such share shall be convertible
hereunder, to convert this Note only into the kind and amount of securities,
cash and other property receivable upon such reclassification, consolidation,
merger, sale, transfer or share exchange by a holder of the number of shares of
Common Stock of the Company into which this Note might have been converted
immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange assuming such holder of Common Stock of the Company
(i) is not a person with which the Company consolidated or into which the
Company merged or that merged into the Company, to which such sale or transfer
was made or a party to such share exchange, as the case may be ("constituent
person"), or an affiliate of a constituent person and (ii) failed to exercise
his rights of election, if any, as to the kind or amount of securities, cash
and other property receivable upon such reclassi fication, consolidation,
merger, sale, transfer or share exchange (provided that if the kind or amount
of securities, cash and other property receivable upon such reclassification,
consolidation, merger, sale, transfer or share exchange is not the same for
each share of Common Stock of the Company held immediately prior to such
consolidation, merger, sale or transfer by other than a constituent person or
an affiliate thereof and in respect of which such rights of election shall not
have been exercised ("non-electing share"), then the kind and
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amount of securities, cash and other property receivable upon such
reclassification, consolidation, merger, sale, transfer or share exchange by
each non-electing share shall be deemed to be the kind and amount so receivable
per share by a plurality of the non-electing shares). The Company, the person
formed by such consolidation or resulting from such merger or that acquires
such assets or that acquires the Company's shares, as the case may be, shall
make provisions in its certificate or articles of incorporation or other
constituent document to establish such right. Such certificate or articles of
incorporation or other constituent document shall provide for adjustments that,
for events subsequent to the effective date of such certificate or articles of
incorporation or other constituent document, shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 5. The above
provisions shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
(f) Reservation of Shares; Transfer Taxes; Etc. The
Company shall at all times reserve and keep available, out of its authorized
and unissued stock, solely for the purpose of effecting the conversion of this
Note, such number of shares of its Common Stock free of preemptive rights as
shall from time to time be sufficient to effect the conversion of this Note
from time to time outstanding. The Company shall from time to time, in
accordance with the laws of the State of Texas, increase the authorized number
of shares of Common Stock if at any time the number of shares of Common Stock
not outstanding shall not be sufficient to permit the conversion of this Note.
If any shares of Common Stock required to be reserved for
purposes of conversion of this Note hereunder require registration with or
approval of any governmental authority under any Federal or State law before
such shares may be issued upon conversion, the Company will in good faith and
as expeditiously as possible endeavor to cause such shares to be duly
registered or approved, as the case may be. If the Common Stock is listed on
the New York Stock Exchange or any other national securities exchange, the
Company will, if permitted by the rules of such exchange, as soon as
practicable following issuance of this Note, list and keep listed on such
exchange, upon official notice of issuance, all shares of Common Stock issuable
upon conversion of this Note.
The Company will pay any and all issue or other taxes that
may be payable in respect of any issue or delivery of shares of Common Stock on
conversion of this Note. The Company shall not, however, be required to pay any
tax that may be payable in respect of any transfer involved in the issue or
delivery of Common Stock (or other securities or assets) in a name other than
that in which this Note so converted were registered, and no such issue or
delivery shall be made unless and until the person requesting such issue has
paid to the Company the amount of such tax or has established, to the
satisfaction of the Company, that such tax has been paid.
Before taking any action that would cause an adjustment
reducing the Conversion Price to less than the then par value of the Common
Stock, the Company will take any corporate action that may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and non assessable shares of Common Stock at the conversion
price as so adjusted.
(g) Prior Notice of Certain Events. In case:
(i) the Company shall (1) declare any dividend
(or any other distribution) on its Common Stock, other
than (A) a dividend payable in shares of Common Stock or
(B) Regular Cash Dividends or (2) declare or authorize a
redemption or repurchase of in excess of 20% of the
then-outstanding shares of Common Stock; or
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(ii) the Company shall authorize the granting to
the holders of Common Stock of rights or warrants to
subscribe for or purchase any shares of stock of any class
or of any other rights or warrants (other than any rights
specified in paragraph (c)(i)(1)(B) of this Section 5); or
(iii) of any reclassification of Common Stock
(other than a subdivision or combination of the
outstanding Common Stock, or a change in par value, or
from par value to no par value, or from no par value to
par value), or of any consolidation or merger to which the
Company is a party and for which approval of any
stockholders of the Company shall be required, or of the
sale or transfer of all or substantially all of the assets
of the Company or of any compulsory share exchange whereby
the Common Stock is converted into other securities, cash
or other property; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be mailed to the holder of this Note, at its
last address as they shall appear upon the Registrar's books, at least 15 days
prior to the applicable record date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption or granting of rights or warrants or, if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distribution, redemption, rights or warrants are
to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up (but no failure to mail such notice or
any defect therein or in the mailing thereof shall affect the validity of the
corporate action required to be specified in such notice).
(h) Other Changes in Conversion Price. The Company may
make reductions in the Conversion Price, in addition to those required or
allowed by this Section 4, as shall be determined by it, as evidenced by a
resolution of the Board of Directors, to be advisable in order to avoid or
diminish any income tax to holders of Common Stock resulting from any dividend
or distribution of stock or issuance of rights or warrants to purchase or
subscribe for stock or from any event treated as such for income tax purposes.
Whenever the Conversion Price is so reduced, the Company shall mail to holders
of record of this Note a notice of the reduction at least 10 days before the
date the reduced Conversion Price takes effect, and such notice shall state the
reduced Conversion Price and the period it will be in effect.
5. GOVERNING LAW. This Note shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the State of Texas excluding choice-of-law principles of the law of such State
that would require the application of the laws of a jurisdiction other than
such State.
6. USURY SAVINGS CLAUSE Notwithstanding anything to the contrary
contained elsewhere in this Note or in the Note Purchase Agreement, the Issuer
and the Holder of this Note hereby agree that all agreements among them under
this Note and the Note Purchase Agreement, whether now existing or hereafter
arising and whether written or oral, are expressly limited so that in no
contingency or event whatsoever shall the amount paid, or agreed to be paid, to
such Holder for the use, forbearance, or detention of the money loaned to the
Issuer and evidenced hereby or thereby or for the performance or payment of any
covenant or obligation
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contained herein or therein, exceed the Highest Lawful Rate. If due to any
circumstance whatsoever, fulfillment of any provisions of this Note or the Note
Purchase Agreement at the time performance of such provision shall be due shall
exceed the Highest Lawful Rate, then, automatically, the obligation to be
fulfilled shall be modified or reduced to the extent necessary to limit such
interest to the Highest Lawful Rate, and if from any such circumstance the
Holder should ever receive anything of value deemed interest by applicable law
which would exceed the Highest Lawful Rate, such excessive interest shall be
applied to the reduction of the principal amount then outstanding hereunder and
not to the payment of interest, or if such excessive interest exceeds the
principal unpaid balance then outstanding hereunder and such excess shall be
refunded to the Issuer. All sums paid or agreed to be paid to such Holder for
the use, forbearance, or detention of indebtedness of the Issuer to the
Holders, to the extent permitted by applicable law, shall be amortized,
prorated, allocated or spread throughout the entire term of such indebtedness.
For purpose of this paragraph, "HIGHEST LAWFUL RATE" means, at any given time
during which principal shall be outstanding hereunder, the maximum nonusurious
interest rate that at any time or from time to time may be contracted for,
taken, reserved, charged or received on the obligations hereunder, under the
laws of the State of Texas (or the law of any other jurisdiction whose laws may
be mandatorily applicable notwithstanding other provisions of this Note), or
under applicable federal laws which may presently or hereafter be in effect and
which allow a higher maximum nonusurious interest rate than under the laws of
the State of Texas (or such other jurisdiction's law), in any case after taking
into account, to the extent permitted by applicable law, any and all relevant
payments or charges under this Note, and any available exemptions, exceptions
and exclusions. The terms and provisions of this paragraph shall control every
other provision of this Note.
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IN WITNESS WHEREOF, the Issuer has executed this Note on the date
first written above.
THE MERIDIAN RESOURCE CORPORATION
By: /s/ P. Richard Gessinger
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Name: P. Richard Gessinger
Title: Executive Vice President
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