UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): March 23, 2010
The Meridian Resource Corporation
(Exact Name of Registrant as Specified in Charter)
Texas | 1-10671 | 76-0319553 | ||
(State or Other Jurisdiction | (Commission File Number) | (IRS Employer | ||
of Incorporation) | Identification No.) |
1401 Enclave Parkway, Suite 300
Houston, Texas 77077
Houston, Texas 77077
(Address of Principal Executive Offices) (Zip Code)
281-597-7000
(Registrants telephone number, including area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2 below):
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d- 2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e- 4(c)) |
Item 8.01 Other Events.
As previously disclosed, on December 22, 2009, The Meridian Resource Corporation (Meridian
or the Company), Alta Mesa Holdings, LP (Alta Mesa) and Alta Mesa Acquisition Sub LLC (Alta
Mesa Acquisition Sub) entered into an Agreement and Plan of Merger (the Merger Agreement)
providing for Meridians acquisition by Alta Mesa (the Merger). Also as previously disclosed,
after the announcement of the proposed Merger, putative derivative and class action lawsuits were
filed against Meridian, its directors, Alta Mesa, and Alta Mesa Acquisition Sub in state district
court in Harris County, Texas challenging the proposed transaction. In particular, two suits were
filed. The first, filed on January 8, 2010, is Cause No. 2010-01279, styled Leider, derivatively
on behalf of The Meridian Resource Corporation v. Ching, et al., in the 190th Judicial District
Court of Harris County, Texas (the Leider Action). The second, filed on January 19, 2010, is
Cause No. 2010-03129, styled Rausch, individually and derivatively on behalf of The Meridian
Resource Corporation v. Ching, et al., in the 234th Judicial District Court of Harris County, Texas
(the Rausch Action). On March 1, 2010, the court ordered the Rausch Action consolidated into the
Leider Action, and appointed the counsel for Leider as interim lead and interim liaison counsel.
On March 23, 2010, the parties agreed in principle to settle the now-consolidated Leider
Action. The settlement is conditioned on, among other things, approval of the Merger by Meridians
shareholders. Under the terms of the proposed settlement, all claims relating to the Merger
Agreement and the Merger will be dismissed on behalf of Meridians stockholders. As part of the
settlement, the defendants have agreed not to oppose plaintiffs counsels request to the court to
be paid up to $164,000 for their fees and expenses and up to $1,000 as an incentive award for
plaintiff Leider. Any payment of fees, expenses, and incentives is subject to final approval of
the settlement and such fees, expenses, and incentives by the court. The proposed settlement will
not affect the amount of merger consideration to be paid to Meridians shareholders in the Merger
or change any other terms of the Merger or Merger Agreement.
Meridian believes that no further supplemental disclosure is required under applicable laws
and defendants in the litigation deny all allegations of wrongdoing; however, to avoid the risk of
the litigation delaying or adversely affecting the Merger and to minimize the expense of defending
such action, we have agreed, pursuant to the terms of the proposed settlement, to make certain
additional disclosures, all of which are set forth below. Information concerning the Merger is
contained in our proxy statement dated February 8, 2010 (the Proxy Statement), which was mailed
on or about February 12, 2010 to Meridians shareholders of record at the close of business on
February 8, 2010. This Current Report on Form 8-K contains supplements to the disclosures made in
the Proxy Statement and should be read alongside the Proxy Statement. To the extent that
information in this Current Report on Form 8-K differs from or updates information contained in the
Proxy Statement, this Current Report on Form 8-K is more current.
Additional Disclosure Regarding the Background of the Merger
The disclosure in the section of the Proxy Statement captioned Background of the Merger
is supplemented with the disclosure set forth below.
| In the second paragraph on page 19, there is disclosure regarding the Meridian boards preference for a stock-for-stock strategic transaction expressed at a November 5, 2008 board meeting. For clarification, Meridians board preferred a stock-for-stock transaction because of its relatively low execution risk and the potential for shareholders to capture future benefits if there is hidden value in the acquirers portfolio or if a complementary fit provided for a stronger merged entity. |
| In the last paragraph on page 22, there is disclosure regarding resumed discussions with Company A. For clarification, the nature of those discussions concerned the sale of Meridians interest in the Weeks Island field for cash, which Meridian had previously determined, in connection with the offer from Company G, would be detrimental to Meridian in the long run. | ||
| In the fourth paragraph on page 23, there is disclosure regarding an offer from Company J. For clarification, the properties that Company J offered to purchase were Meridians East Texas Chalk acreage and production in Polk County, Texas. In making the determination that Company Js offer undervalued the assets, Meridian determined that the offered purchase price for these assets was significantly below the PV20 value and hence, was too low for consideration. Furthermore, as disclosed in the Proxy Statement, when the offer from Company J was discussed at the July 28, 2009 board meeting, it was noted that the management team, its advisors and the board had analyzed selling specific assets and had come to the conclusion each time that selling these key properties and then remaining independent was not viable. | ||
| In the fourth paragraph on page 24, there is disclosure regarding significant reductions in general and administrative costs and field operating costs discussed at the July 28, 2009 board meeting. For clarification, Meridians general and administrative costs for 2008 were approximately $36.4 million (which includes the capitalized component), and during early 2008 its lease operating expenses were approximately $2.4 million per month. By the third quarter of 2009, Meridians general and administrative annualized burn rate was forecasted to be approximately $14.1 million and its lease operating expenses were forecasted to be approximately $1.4 million per month. | ||
| In the fourth paragraph on page 26, there is disclosure regarding the status of discussions with . . . Company I . . . as discussed at a September 21, 2009 board meeting. For clarification, the status of discussions with Company I, which proposed to purchase substantially all of Meridians assets through a pre-packaged bankruptcy proceeding, or, if major liabilities were resolved, a capital infusion of preferred stock and restructured bank debt, was that those discussions were on hold while the Company pursued other options that did not require bankruptcy. A transaction with Company I was not pursued because resolution of Meridians major liabilities depended on the closing of a non-bankruptcy transaction, and Meridian determined that a bankruptcy proceeding would not be likely to provide value to Meridians stockholders. In addition, Company Is capital infusion proposal would have required Meridians lenders to have accepted repayment of less than the full amount outstanding, which the lenders had previously indicated they were not willing to do. | ||
| In the eighth paragraph on page 31, there is disclosure regarding the reduction in Alta Mesas offer from $0.33 per share to $0.28 per share on December 16, 2009. For clarification, Alta Mesa explained that it reduced its offer price because of changing market conditions and because Alta Mesa had completed additional due diligence that allowed it to better understand Meridians assets and liabilities. | ||
| In the fifth paragraph on page 32, there is disclosure that Meridians board received a non-binding preliminary indication of interest from a third party on February 4, 2010. For clarification, after conducting due diligence, that third party notified Meridian on March 10, 2010 that it was not prepared to make a binding offer that would provide greater value to Meridian and its shareholders than the value that would be provided under the Alta Mesa agreement. In addition, on February 19, 2010, Meridian received an additional unsolicited, non-binding preliminary indication of interest, from another third party. The Company |
entered into a confidentiality agreement with the third party and provided extensive due diligence information to them. At this time, the board has not received a binding offer from this third party. In addition, the third party has notified our Chairman that it has not to date been able to arrange for refinancing of our existing indebtedness. If a binding offer is submitted, the board will consider all of its alternatives consistent with its fiduciary duties under applicable law and subject to the terms and conditions of the merger agreement with Alta Mesa. Our board continues to recommend that our shareholders vote for the adoption of the merger agreement with Alta Mesa. |
In addition, the disclosure in the Proxy Statement captioned Opinion of Our Financial
Advisor is supplemented with the disclosure set forth below.
| In the first paragraph on page 35, there is disclosure regarding Morgan Keegans review of certain non-public financial forecasts relating to us prepared by our management. For clarification, among the forecasts reviewed by Morgan Keegan were the following year-end, annual projections: |
Projected | Projected | Projected | ||||||||||
2009 | 2010 | 2011 | ||||||||||
Production (Mmcfe) |
12,009 | 6,307 | 3,991 | |||||||||
Revenue |
$ | 83,922 | $ | 46,513 | $ | 30,475 | ||||||
Expenses |
$ | 148,941 | $ | 61,229 | $ | 47,314 | ||||||
Net income (loss) |
$ | (65,019 | ) | $ | (14,716 | ) | $ | (16,839 | ) | |||
Reconciliation of non-GAAP
financial measure: |
||||||||||||
Net income (loss) |
$ | (65,019 | ) | $ | (14,716 | ) | $ | (16,839 | ) | |||
Depletion, depreciation & amortization |
35,999 | 18,615 | 11,980 | |||||||||
Impairment of long lived assets |
59,539 | | | |||||||||
Accretion expense |
2,247 | 2,400 | 2,400 | |||||||||
Interest and other |
6,955 | 7,472 | 7,334 | |||||||||
Earning before interest, taxes,
depreciation & amortization |
$ | 39,721 | $ | 13,771 | $ | 4,875 |
Forward-Looking Statements
Statements identified by the words expects, plans, and certain of the other foregoing
statements may be deemed forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, these statements involve
risks
and uncertainties regarding the transactions described that may cause actual future activities and
results to be materially different from those suggested or described in this report. Risks and
uncertainties regarding the transactions include the possibility that the closing of the Merger
does not occur, either due to the failure of closing conditions, including the approval of the
shareholders of the Company, rights of the parties to terminate the merger agreement, or other
reasons, risks that the Merger disrupts current plans and operations and the potential difficulties
in employee retention as a result of the Merger, the outcome of legal proceedings that have been,
or may be, initiated against the Company related to the Merger and the amount of the costs, fees,
expenses and charges related to the Merger. Other risks relating to the Company are described in
the Companys documents and reports, available from the U.S. Securities and Exchange Commission,
including the report filed on Form 10-K, as amended, for the year ended December 31, 2008 and any
updates to those factors set forth in our subsequent Quarterly Reports on Form 10-Q, including
risks associated with our default under our credit facility and other lending arrangements.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
The Meridian Resource Corporation (Registrant) |
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By: | /s/ Lloyd V. DeLano | |||
Lloyd V. DeLano | ||||
Senior Vice President and Chief Accounting Officer |
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Date:
March 24, 2010