SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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Rule 14a-6(e)(2))
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or Section 240.14a-12
THE MERIDIAN RESOURCE CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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THE MERIDIAN RESOURCE CORPORATION
1401 ENCLAVE PARKWAY, SUITE 300
HOUSTON, TEXAS 77077
NOTICE OF 2002 ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF THE MERIDIAN RESOURCE CORPORATION:
The 2002 Annual Meeting of Shareholders of The Meridian Resource Corporation
(the "Company") will be held on June 26, 2002, 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 2005
Annual Meeting of Shareholders or until such person's
successor shall be duly elected and qualified.
2. To transact such other business as may properly come before
the meeting.
The Board of Directors has fixed the close of business on May 23, 2002, as the
record date ("Record Date") for determination of shareholders who are entitled
to notice of and to vote either in person or by proxy at the 2002 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
2001 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 James H. Shonsey at
the Company at (281) 597-7000 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
April 30, 2002
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THE MERIDIAN RESOURCE CORPORATION
1401 ENCLAVE PARKWAY, SUITE 300
HOUSTON, TEXAS 77077
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 2002 Annual
Meeting of Shareholders (the "Meeting"), to 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
27, 2002.
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 and
(ii) in the discretion of such persons, in connection with any other business
that may properly come before the Meeting. A Shareholder who has executed and
returned a proxy may revoke it 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 25, 2002, the Company had outstanding and
entitled to vote 49,883,866 shares of Common Stock, $.01 par value ("Common
Stock"). The outstanding shares of Common Stock are the only shares of capital
stock of the Company entitled to vote. Each share of Common Stock is entitled to
one vote with respect to each matter to be acted on at the Meeting.
The holders of a majority of the outstanding shares of Common 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 all of
the Common Stock is entitled to vote. Under Texas law, any unvoted position in a
brokerage account with respect to any matter will be considered as not voted and
will not be counted toward fulfillment of quorum requirements as to that matter.
As of April 25, 2002, Shell Louisiana Onshore Properties Inc. ("SLOPI"), a
subsidiary of Shell Oil Company, owned 7,082,030 shares of Common Stock which
represented 14.2% of the
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outstanding Common Stock as of the Record Date. See "Certain Relationships and
Related Transactions - Shell Transactions" beginning on page 21 of this Proxy
Statement.
PROPOSAL ONE -
ELECTION OF CLASS III DIRECTORS
Two directors will be elected by the holders of the Common Stock at the Meeting
to serve as the Class III Directors of the Company's Board of Directors until
the 2005 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 each person executing a proxy
will vote all shares represented by such proxy for the election as director of
both Mr. Reeves and Mr. Mayell. Should either of Messrs. Reeves or 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 election, 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.
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DIRECTORS
The Company's Bylaws provide that the Board of Directors shall be classified
into three classes: Class I, Class II and Class III Directors. Each class serves
for a term of three years or until a director's successor is duly elected and
qualified.
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.
PRESENT POSITIONS DIRECTOR EXPIRATION OF
NAME AGE WITH THE COMPANY SINCE PRESENT TERM
---- --- ---------------- ----- ------------
Michael J. Mayell 55 Class III Director and 1990 2002
President
Joseph A. Reeves, Jr. 55 Class III Director, 1990 2002
Chairman of the
Board and Chief
Executive Officer
James T. Bond 77 Class I Director 1997 2003
Jack A. Prizzi 66 Class I Director 1993 2003
E. L. Henry 66 Class II Director 1998 2004
Joe E. Kares 58 Class II Director 1990 2004
Gary A. Messersmith 53 Class II Director 1997 2004
Michael J. Mayell is President of the Company. Prior to assuming such position
with the Company, Mr. Mayell held a similar position with TMR from 1988 to 1990.
Joseph A. Reeves, Jr. is Chairman of the Board and Chief Executive Officer of
the Company. Prior to 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.
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
over fifty years.
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.
E. L. Henry has been a partner with the law firm of Adams and Reese L.L.P. in
Baton Rouge, Louisiana since 1987. Mr. Henry was formerly Commissioner of the
Division of Administration for the State of Louisiana from 1980 through 1984, a
member of the Louisiana House of Representatives from 1968 through 1980 and
Speaker of the Louisiana House of Representatives from 1972 through 1980.
Joe E. Kares has been a partner with the public accounting firm of Kares &
Cihlar in Houston, Texas since 1980.
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Gary A. Messersmith has been a partner with the law firm of Looper, Reed &
McGraw, a Professional Corporation, in Houston, Texas since 2001, and from 1982
to 2001 was a partner with the law firm of Fouts & Moore, L.L.P. in Houston,
Texas.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held four meetings during the year ended December 31,
2001. In 2001, each director attended at least 80% 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. Twelve meetings of the Executive Committee were held in 2001.
The Audit Committee is currently comprised of Messrs. Kares, Henry and Prizzi
and is charged with the duties of recommending the appointment of the
independent certified public accountants, reviewing their fees, ensuring 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. The Board of Directors has determined that each member of the Audit
Committee is "independent", as such term is defined in sections 303.01(B)(2)(a)
and (3) of the New York Stock Exchange listing standards. Three Audit Committee
meetings were held in 2001. The Audit Committee is governed by a written charter
approved by the Board of Directors. A copy of this charter is included in
Appendix A to the Company's 2001 proxy statement.
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 2001, compensation decisions with respect to Messrs. Reeves and Mayell
were made by the full Board of Directors, with Messrs. Reeves and Mayell
abstaining. One Executive Compensation Committee meeting was held in 2001.
The Directors' Stock Plan Administration Committee is currently comprised of
Messrs. Reeves and Mayell and is responsible for administering the Company's
Non-Employee Director Stock Option Plan. Two Directors' Stock Plan
Administration Committee meetings were held in 2001.
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The Employee Compensation Committee is currently 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. Six Employee Compensation Committee meetings were held in
2001.
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.
The Company has a Non-Employee Director Stock Option Plan (the "Director Stock
Option Plan") pursuant to which options to purchase up to 570,000 shares of
Common Stock may be granted. Under the Director Stock Option Plan, each
non-employee director (other than a Preferred 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") to purchase 15,000 shares of
Common Stock at an exercise price per share 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 the remaining shares of Common Stock three years after the
date of grant. There are currently outstanding options to acquire 268,000 shares
under the Director Stock Option Plan with a weighted average exercise price of
$6.81 per share. There are currently 220,000 additional shares available for
grant under the Director Stock Option Plan.
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 benefited the long-term interests of the Company. Decisions with
respect to compensation for any particular executive officer or
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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 2001. 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 approved 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 them.
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.
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
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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. A Christmas bonus of up to one
month's base salary was awarded and paid during 1999 and 2000 to the
Company's employees.
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.
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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 exploration and
development activities and other endeavors, including the Company's 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 17 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.
No increases were made to Messrs. Reeves' or Mayell's annual salaries during
1999, 2000 and 2001, except for cost of living increases. The bonus payments
were paid on January 1 of 2000 and 2001, and will be paid in 2002 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 and rewards them for their efforts that were instrumental to the future
prospects of the Company.
TAX MATTERS
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);
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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.
Joseph A. Reeves, Jr. Michael J. Mayell
James T. Bond E. L. Henry
Joe E. Kares Gary A. Messersmith
Jack A. Prizzi
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 20 of
this Proxy Statement. In addition, cash compensation decisions during 2001 with
respect to Messrs. Reeves and Mayell were made by the full Board of Directors,
with each of Messrs. Reeves and Mayell abstaining.
AUDIT COMMITTEE REPORT
We have reviewed and discussed with management the Company's audited financial
statements as of and for the year ended December 31, 2001.
We have discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, Communications with Audit
Committees, as amended, by the Auditing Standards Board of the American
Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter from the
independent auditors required by Independence Standard No. 1, Independence
Discussions with Audit Committees, as amended, by the Independence Standards
Board, and have discussed with the auditors the auditors' independence.
Based on the reviews and discussions referred to above, we recommended to the
Board of Directors that the financial statements referred to above be included
in the Company's Annual Report on Form 10-K for the year ended December 31,
2001.
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We also have considered whether the provision by the independent auditors of
non-audit services is compatible with maintaining the auditors' independence.
Joe E. Kares, Chairman E. L. Henry Jack A. Prizzi
COMPENSATION
EXECUTIVE COMPENSATION
The following tables contain compensation data for the five highest paid
executive officers serving at the end of 2001 whose 2001 salary and annual bonus
compensation exceeded $100,000, and other individuals who would otherwise have
been included in this table but for the fact that such individuals were not
serving as executive officers of the Company at the end of 2001 (collectively,
the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
-------------------------------------------------- --------------------------------------------
Restricted Securities
Name and Other Annual Stock Underlying All Other
Principal Position Year Salary($)(1) Bonus($)(1)(2) Compensation($) Award($)(1) Options(#) Compensation($)(3)
------------------ ----- ----------- -------------- --------------- ----------- ----------- ------------------
Joseph A. Reeves, Jr. 2001 $ 40,613 $760,000 $---------- $834,160 $---------- $10,500
CEO 2000 41,557 800,987 ---------- 800,000 ---------- 10,500
1999 33,994 927,468 ---------- 800,000 ---------- 10,000
Michael J. Mayell 2001 $ 40,613 $760,000 $---------- $834,160 $---------- $10,500
President 2000 41,557 800,987 ---------- 800,000 ---------- 10,500
1999 33,994 927,468 ---------- 800,000 ---------- 10,000
P. Richard Gessinger 2001 $ 84,365 $656,806 $---------- $------- $---------- $ 3,938
Executive Vice 2000 217,041 820,234 ---------- ------- ---------- 10,500
President and Chief 1999 208,693 220,205 ---------- ------- ---------- 10,000
and Chief Financial
Officer (5)
James H. Shonsey 2001 $ 78,333 $------- $---------- $------- $---------- $ 2,844
Vice President of 2000 ------- ------- ---------- ------- ---------- ------
Finance and 2000 ------- ------- ---------- ------- ---------- ------
Capital Markets (4)
Lloyd V. DeLano 2001 $167,999 $437,395 $---------- $------- $---------- $10,500
Vice President and 2000 162,076 421,750 ---------- ------- ---------- 10,500
Chief Accounting 1999 155,842 128,863 ---------- ------- ---------- 10,000
Officer
James W. Carrington, Jr. 2001 $166,812 $419,014 $---------- $------- $---------- $10,500
VP Land--TMRX 2000 160,931 454,406 ---------- ------- ---------- 10,500
1999 154,742 118,094 ---------- ------- ---------- 10,000
(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
the Company's 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 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 December 31, 1997 ($9 9/16 per
share), for the deferrals during the first half of 1998; at June 30,
1998 ($7 1/16 per share), for the deferrals during the second half of
1998; at December 31, 1998 ($3 3/16 per share), for the deferrals
during the first half of 1999; June 30, 1999 ($3 7/8 per share), for
the deferrals during the second half of 1999; at December 31, 1999
($3.0625 per share) for the
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deferrals during the first half of 2000; at June 30, 2000 ($5.703125
per share) for the deferrals during the second half of 2000; at
December 31, 2000 ($8.625 per share) for the deferrals during the first
half of 2001; and at June 30, 2001 ($7.17 per share) for the deferrals
during the second half of 2001. Pursuant to the DCP, Messrs. Reeves and
Mayell each elected to defer $400,000, $400,000 and $417,080 of their
compensation for 1999, 2000 and 2001 respectively. As of December 31,
2001, each of Messrs. Reeves and Mayell had rights to 713,902 shares
(including matching deferrals) with a total value (including matching
deferrals) as of December 31, 2001 of $2,848,469. An amount equal to
the dividends, if any, that would have 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 2001 include $656,806, $437,395 and $419,014 paid
to each of Gessinger, DeLano and Carrington pursuant to the Company's
Well Bonus Plans. See page 15 for a discussion of the Well Bonus Plans.
(3) Includes Company contributions to its 401(k) plan.
(4) Mr. Shonsey began employment with the Company in September 2001.
(5) Mr. Gessinger resigned his position on May 15, 2001.
12
The following table summarizes the number and value of options exercised by the
Named Executive Officers during 2001, as well as the number and value of
unexercised options owned by the Named Executive Officers as of December 31,
2001.
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 2001
AND DECEMBER 31, 2001 OPTION VALUE
Number of Value of Unexercised
Unexercised In-the-Money
Options at Options at
December 31, December 31,
2001(#) 2001($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized($) Unexercisable(1) Unexercisable
--------------------------- --------------- ------------ ---------------- ----------------------
Joseph A. Reeves, Jr. (1) -- -- 1,781,000/0 $922,500/$0
Michael J. Mayell (1) -- -- 1,781,000/0 $922,500/$0
James H. Shonsey -- -- 2,500/7,500 $0/$0
Lloyd V. DeLano -- -- 80,000/0 $5,375/$0
James W. Carrington, Jr. -- -- 17,500/0 $4,613/$0
(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, 2001, based on the
difference between the market price of the Common Stock at December 31,
2001 and the exercise price of the respective warrants, was $1,844,183
for each of Messrs. Reeves and Mayell.
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. 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 annual 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
13
Section 4999 of the Internal Revenue 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 and such
adjudication 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 and such finding is no longer subject to direct appeal.
In connection with the execution of their Employment Agreements, both Messrs.
Reeves and Mayell were granted a 2% net profits 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 profits interests represent real property
rights that are not subject to vesting or continued employment with the Company.
Messrs. Reeves and Mayell did not participate in the Well Bonus Plans (as such
term is defined under "-Well Bonus Plans and NPI Rights" below) for any
particular property to the extent the original net profits interest grant covers
such property. See also note 3 under "-Summary Compensation Table" above and
"-Well Bonus Plans and NPI Rights" below.
Mr. Lloyd V. DeLano entered into an employment agreement with the Company under
which he is given the title Vice President of the Company. Mr. DeLano's
employment agreement provides that he will receive a monthly salary of $14,000
and an annual bonus in the amount determined in the discretion of the Company's
Board of Directors. If Mr. DeLano is terminated, depending on the circumstances,
he may 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.
Mr. James W. Carrington, Jr. entered into an employment agreement with the
Company under which he is given the title Vice President - Land. Mr.
Carrington's employment agreement provides that he will receive a monthly salary
of $13,901 and an annual bonus in the amount determined in the discretion of the
Company's Board of Directors. If Mr. Carrington is terminated, depending on the
circumstances, he may 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.
14
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 6,953,406, which represents
approximately 14.5% of the total number of shares of Common Stock outstanding.
This number may change in order to maintain that number at 10% of the total
number of shares of Common Stock outstanding. There are currently 5,993,850
shares allocated to outstanding options or existing or future stock rights under
deferred compensation arrangements under the Incentive Plans. Therefore,
approximately 959,556 shares are available for grant of additional options or
stock-based compensation. As of December 31, 2001, 3,786,745 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 net profits program that was adopted
effective as of November 1997. All employees participated 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 Trust 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,
administered each of the Well Bonus Plans. The participants in each of the Well
Bonus Plans were designated by the Executive Committee in its sole discretion.
Participants in the Management Plan were limited to executive officers of the
Company and other key management personnel designated by the Executive
Committee. Neither Messrs. Reeves nor Mayell participated in the Management
Plan, except with respect to a small number of wells and prospects not covered
by their original net profits grants described under "-Employment Agreements"
above. The participants in the Trust Plan generally were all employees of the
Company that did not participate in one of the other Well Bonus Plans. Pursuant
to the Well Bonus Plans, the Executive Committee designated, in its sole
discretion, the individuals and wells that participated in each of the Well
Bonus Plans. The Executive Committee also determined the percentage bonus that
was paid under each well and the individuals that participated thereunder. The
Well Bonus Plans covered all properties on which the Company expended funds
during each participant's employment with the Company, with the percentage bonus
generally ranging from less than .1% to .5% of the net profits derived from each
well included in the well bonus plan, depending on the level of the employee.
In February 2001, the Company discontinued making additional grants under the
Geoscientist Plan and the Management Plan and offered participants in those
plans shares of common stock and registration rights in exchange for
relinquishment of the right to receive future net profits from the designated
wells. In January 2002, the Company issued an aggregate of 1,940,991 shares of
common stock to certain participants and terminated their interests in the
Geoscientist Plan and the Management Plan.
15
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.
YEAR FIRST
ELECTED
NAME OF OFFICER POSITION WITH THE COMPANY AGE AS OFFICER
--------------- ------------------------- --- ----------
Joseph A. Reeves, Jr. Chairman of the Board 55 1990
and Chief Executive Officer
Michael J. Mayell Director and President 55 1990
P. Richard Gessinger (1) Executive Vice President and Chief Financial Officer 53 1997
James H. Shonsey Vice President - Finance and Capital Markets 50 2001
Lloyd V. DeLano Vice President and Chief Accounting Officer 51 1993
James W. Carrington, Jr. Vice President - Land - TMRX 51 1998
(1) Mr. Gessinger resigned from the Company on May 15, 2001.
For additional information regarding Messrs. Reeves and Mayell, see "Directors",
above.
James H. Shonsey joined the Company as Vice President of Corporate Finance and
Capital Markets in September 2001. Mr. Shonsey has over 28 years of experience
in corporate finance. Most recently, he was the Chief Financial Officer of
Westport Resources Corporation in Denver, Colorado. At Westport, Mr. Shonsey was
responsible for all the financial activities including Treasury, Financial
Reporting, Tax, and Financial Accounting. While Vice President at Snyder Oil
Corporation, he performed various financial duties from 1991 to 1997, and he was
the Director of Operations Accounting at Apache Corporation from 1987 to 1991.
Lloyd V. DeLano joined the Company in January 1992 performing contract work and
became an employee of the Company in October 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 1993 and in June
1996 was named Vice President and Chief Accounting Officer of the Company. Mr.
DeLano is a Certified Public Accountant with 27 years of oil and natural gas
experience.
James W. Carrington, Jr. joined the Company in March 1998 as Vice President of
Land of The Meridian Resource & Exploration Company (a wholly owned subsidiary
of the Company). Prior to assuming his position with the Company, Mr. Carrington
was employed by CNG Producing Company.
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.
16
STOCK PERFORMANCE GRAPH
The following performance graph compares the performance of the Common Stock to
the New York Stock Exchange Market Index and Peer Group Index from December 31,
1996 through December 31, 2001. The graph assumes that the value of the
investment in the Common Stock and each index was $100 at December 31, 1996, and
that all dividends were reinvested.
DECEMBER 31, 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
The Company 100 55.84 18.61 17.88 50.37 23.30
NYSE Market Index 100 131.56 156.55 171.42 175.51 159.87
Peer Group Index 100 104.38 92.25 94.63 154.50 115.56
Assumes: $100 invested on December 31, 1996 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, EEX Corporation, Noble Affiliates, Inc., Ocean Energy, Inc.,
Pogo Producing Company, Questar Corporation and The Williams Company Inc.
17
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of April 25, 2002, 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 executive
officers and directors of the Company as a group.
NUMBER OF
SHARES
BENEFICIALLY
NAME OWNED (1) PERCENT
------------------------------------------------------ --------------- -----------
Joseph A. Reeves, Jr. (2) 3,906,477 7.3
Michael J. Mayell (3) 3,816,510 7.1
P. Richard Gessinger (4) 298,122 *
James H. Shonsey (5) 2,500 *
Lloyd V. DeLano (6) 117,899 *
James W. Carrington, Jr. (7) 56,009 *
James T. Bond (8) 57,500 *
E. L. Henry (9) 28,000 *
Joe E. Kares (10) 50,000 *
Gary A. Messersmith (11) 78,472 *
Jack A. Prizzi (12) 45,000 *
All executive officers and directors as a group (10
persons) (2), (3), (4), (5), (6), (7), (8), (9),
(10), (11), (12) 8,456,489 14.8
Shell Oil Company (13) 7,082,030 14.2
KAIM Non-Traditional LP (14) 5,142,857 10.3
Mellon Financial Corporation (15) 3,855,771 7.7
*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 505,492 shares, 714,000 shares, and 1,781,000 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
538,547 vested shares underlying deferred compensation arrangements.
Excludes 25,339 unvested shares under deferred compensation
arrangements. Mr. Reeves' business address is 1401 Enclave Parkway,
Suite 300, Houston, Texas 77077.
18
(3) Includes 505,492 shares, 714,000 shares, and 1,781,000 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
538,547 vested shares underlying deferred compensation arrangements.
Excludes 25,339 unvested shares under deferred compensation
arrangements. Mr. Mayell's business address is 1401 Enclave Parkway,
Suite 300, Houston, Texas 77077.
(4) Based upon information provided the Company as of February 11,
2002.
(5) Includes 2,500 shares of Common Stock that Mr. Shonsey has the
right to acquire upon the exercise of stock options.
(6) Includes 80,000 shares of Common Stock that Mr. DeLano has the
right to acquire upon the exercise of stock options.
(7) Includes 17,500 shares of Common Stock that Mr. Carrington has the
right to acquire upon the exercise of stock options.
(8) Includes 37,500 shares of Common Stock that Mr. Bond has the right
to acquire upon the exercise of stock options. Excludes 7,500 shares
underlying options not exercisable within 60 days.
(9) Includes 28,000 shares of Common Stock that Mr. Henry has the right
to acquire upon the exercise of stock options. Excludes 15,000 shares
underlying options that are not exercisable within 60 days.
(10) Includes 50,000 shares of Common Stock that Mr. Kares has the
right to acquire upon the exercise of stock options. Excludes 15,000
shares underlying options not exercisable within 60 days.
(11) Includes 65,000 shares of Common Stock that Mr. Messersmith has
the right to acquire upon the exercise of stock options. Excludes
15,000 shares underlying options not exercisable within 60 days.
(12) Includes 42,500 shares of Common Stock that Mr. Prizzi has the
right to acquire upon the exercise of stock options. Excludes 7,500
shares underlying options not exercisable within 60 days.
(13) Based solely upon a Schedule 13D filed with the Securities and
Exchange Commission. Shell Oil Company controls Shell Louisiana Onshore
Properties Inc. ("SLOPI"). Shell Oil Company's business address is One
Shell Plaza, Houston, Texas 77002. SLOPI's business address is P.O. Box
7986, Newark, Delaware.
(14) Based upon a Schedule 13G filed with the Securities and Exchange
Commission and 2,142,857 shares of common stock that KAIM
Non-Traditional, L.P. has the right to acquire upon conversion of their
9 1/2% Convertible Subordinated Notes. The business address of KAIM
Non-Traditional, L.P., is 1800 Avenue of the Stars, 2nd Floor, Los
Angeles, California 90067.
(15) Based solely upon a Schedule 13G filed with the Securities and
Exchange Commission by Mellon Financial Corporation and certain of its
affiliates. Mellon Financial Corporation's business address is 500
Grant Street, Pittsburgh, Pennsylvania 15258.
19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SHELL TRANSACTIONS
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"). Pursuant to the terms of one of the
transactions, the Company issued to SLOPI 12,082,030 shares of Common Stock and
3,982,906 shares of Preferred Stock that were convertible into a total of
12,837,428 shares of Common Stock.
On July 18, 2000, the Company and SLOPI announced a definitive agreement (the
"Option and Standstill Agreement") granting the Company an option to repurchase
all of the outstanding shares of the Preferred Stock, plus six million shares of
Common Stock held by Shell, for an aggregate cash price of $114 million.
Further, the agreement provided that Shell would not dispose of any of its stock
position until the latter part of April 2001 and any subsequent stock sales
would be subject to Rule 144 of the Securities Act of 1933. As consideration for
the option, the Company issued Shell one million shares of Common Stock. The
option under the Option and Standstill Agreement was exercised in a single
transaction on January 29, 2001. After the Company exercised the option, Shell
remains the Company's largest shareholder, with 7,082,030 shares of Common
Stock, representing approximately 14.2% of the shares of Common Stock
outstanding. Upon exercise of the option under the Option and Standstill
Agreement, the Company and SLOPI entered into a Registration Rights Agreement
(the "2001 Registration Rights Agreement"), which replaced a registration rights
agreement entered into between such parties in 1998.
The Option and Standstill Agreement also provides that, for a period of ten
years following the exercise of the option, Shell will not (i) acquire any
additional debt or equity securities of the Company without the consent of the
Company's Board of Directors, and (ii) propose any candidate for election to the
Company's Board of Directors.
The shares of Common Stock issued in one of the transaction are restricted stock
and are not freely transferable and tradable. Therefore, the Company and SLOPI
entered into the 2001 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 two 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 500,000 shares 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
20
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 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 4% 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 2001, 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 2001, 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 $4,846,000 for the year
ended December 31, 2001, in oil and natural gas drilling activities for which
the Company was the operator. Collective amounts owed from such entities for
such activities were approximately $844,000 as of December 31, 2001, which have
been netted by amounts owed to them from the Company.
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, 2001, 2000
and 1999 and received fees of approximately $269,000, $304,000 and $283,000,
respectively. These fees exceeded 5% of the gross revenues of Kares & Cihlar for
2001. The Company believes that these fees were
21
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 Looper, Reed & McGraw, a
Professional Corporation, and from 1982 to 2001 was a partner with the law firm
of Fouts & Moore, L.L.P., in Houston, Texas, which periodically provided 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. Messersmith. Mr. Messersmith also participated in the
Well Bonus Plans pursuant to which he was paid approximately $401,000 during
2001.
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, 2001, through December 31, 2001, all filing requirements applicable
to officers, directors and greater than ten-percent shareholders were in
compliance, except for Mr. Henry, a director of the Company, who failed to file
a Form 5 on a timely basis with regard to two transactions involving the
purchase and gift of 2,000 shares of Common Stock.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Ernst & Young LLP served as the Company's principal independent accountants for
the fiscal year ended December 31, 2001, and has been recommended by the Audit
Committee to so serve for the current year. Fees for the last fiscal year ended
December 31, 2001, were annual audit $345,000, audit related services $55,900
and all other nonaudit services $137,283. 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.
22
SHAREHOLDER PROPOSALS
Any proposal by a shareholder to be presented at the Company's 2003 Annual
Meeting of Shareholders (the "2003 Annual Meeting") must be received by the
Company no later than December 27, 2002, in order to be eligible for inclusion
in the Company's Proxy Statement and proxy used in connection with the 2003
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 2003 Annual Meeting (or any supplement thereto)
given by or at the direction of the Board of Directors, (ii) otherwise properly
brought before the 2003 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 2003 Annual Meeting and (B) gives timely
notice of such business in writing to the Secretary of the Company. A
shareholder's notice to the Secretary of the Company shall set forth (i) a brief
description of each matter desired to be brought before the 2003 Annual Meeting
and the reasons for conducting such business at the 2003 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 2003 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
April 30, 2002
23
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 26, 2002, and at any
adjournment(s) thereof, on the following matters more particularly described in
the Proxy Statement dated April 30, 2002.
(To Be Signed on REVERSE SIDE)
[X} Please mark your
votes as in this
example
1. Election of Class III Directors Receipt is hereby acknowledged of
the Notice of Annual Meeting of
Nominees: Shareholders and Proxy Statement,
Joseph A. Reeves, Jr. each dated April __, 2002, and the
Michael J. Mayell Annual Report to Shareholders of the
Company for the year ended
December 31, 2001.
[ ] FOR all nominees
(except as marked to the contrary)
[ ] WITHHOLD authority to vote for both nominees
INSTRUCTION: IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR EITHER
INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE
LIST ABOVE.)
2. In their discretion the proxies are authorized to vote upon such Please mark, sign, date and return
other business as may properly come before the meeting or any this proxy card promptly using the
adjournment thereof. enclosed envelope.
SIGNATURE(S) DATE , 2002
---- ------
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.