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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
AMENDMENT NO. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number: 1-10671
THE MERIDIAN RESOURCE CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 76-0319553
(State of incorporation) (I.R.S. Employer Identification No.)
1401 ENCLAVE PARKWAY, SUITE 300, HOUSTON, TEXAS 77077
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 281-597-7000
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class) (Name of each exchange on which registered)
Common Stock, $0.01 par value New York Stock Exchange
Rights to Purchase Preferred Shares New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
--------------------
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one)
Large Accelerated Filer [ ] Accelerated Filer [X] Non-Accelerated Filer [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Aggregate market value of shares of common stock held by non-affiliates
of the Registrant at June 30, 2005 $410,169,664
Number of shares of common stock outstanding at April 21, 2006: 86,926,502
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EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A (the "Amendment") is being filed to
amend the annual report on Form 10-K of The Meridian Resource Corporation (the
"Company") filed with the Securities and Exchange Commission on March 16, 2006
(the "Original Report on Form 10-K"). The sole purpose of this Amendment is to
include Items 10, 11, 12, 13 and 14 of Part III previously intended to be
incorporated by reference through the Company's proxy statement for its 2006
annual meeting of shareholders. The Company will not be filing its proxy
statement for its 2006 annual meeting within 120 days following the end of its
fiscal year 2005, and, therefore, is filing this Amendment. Accordingly, Items
10-14 of Part III are amended and restated in their entirety. The reference on
the cover page of the Original Report on Form 10-K to the incorporation by
reference of the registrant's proxy statement relating to its 2006 Annual
Meeting is also deleted. In addition, in connection with the filing of this
Amendment and pursuant to the rules of the Securities and Exchange Commission,
the Company is including with this Amendment certain currently dated
certifications. Accordingly, Item 15 of Part IV has also been amended to reflect
the filing of these currently dated certifications. Except as otherwise stated
herein, the Amendment does not amend any other disclosure in the Original Report
on Form 10-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICES OF THE REGISTRANT.
DIRECTORS
The Company's Bylaws provide that the Board of Directors shall be
classified into three classes: Class I Directors, Class II Directors 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, with each person's business experience for at least the past five
years.
EXPIRATION
PRESENT POSITIONS DIRECTOR OF PRESENT
NAME AGE WITH THE COMPANY SINCE TERM
- ------------------------------- -------- ---------------------------------------------- ------------ ----------------
David W. Tauber 56 Class I Director (1) 2004 2006
John B. Simmons 53 Class I Director (2) 2004 2006
E. L. Henry 70 Class II Director (3) 1998 2007
Joe E. Kares 62 Class II Director 1990 2007
Gary A. Messersmith 57 Class II Director 1997 2007
Joseph A. Reeves, Jr. 59 Class III Director, Chairman of the Board 1990 2008
and Chief Executive Officer (4)
Michael J. Mayell 58 Class III Director and President (4) 1990 2008
Fenner R. Weller, Jr. 54 Class III Director (5) 2004 2008
- --------------
(1) Member of the Audit Committee and the Board Affairs Committee.
- 1 -
(2) Member of the Audit Committee.
(3) Member of the Board Affairs Committee and the Compensation
Committee.
(4) Member of the Executive Committee and Directors' Stock Option Plan
Administration Committee.
(5) Member of the Audit Committee and the Compensation Committee.
David W. Tauber has served as owner/principal of Tauber Oil Company, a
marketer of fuel oil and carbon black located in Houston, Texas, since 1984.
In 2006, John B. Simmons was named Vice Chairman and Chief Executive
Officer of Stewart & Stevenson, LLC, a new entity comprised of the former
Engineering Products and Power Products divisions of Stewart & Stevenson
Services, Inc., a manufacturer, service provider and distributor of industrial
and energy related equipment. He served as Senior Vice President, Treasurer and
Chief Financial Officer of Stewart & Stevenson Services, Inc. from 2002 until
2006, and as their Controller and Chief Accounting Officer from 2001 to 2002.
From 1997 to 2000, Mr. Simmons was Vice President and Chief Financial Officer of
Cooper Energy Services, a provider of power and compression equipment.
E. L. Henry was a partner with the law firm of Adams and Reese L.L.P. in
Baton Rouge, Louisiana from 1987 until his retirement in 2001. 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.
Gary A. Messersmith has been a Member of 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.
Joseph A. Reeves, Jr. is Chairman of the Board and Chief Executive Officer
of the Company. Mr. Reeves, along with Mr. Mayell, founded the Company's
predecessor company, Texas Meridian Resources, Ltd. ("TMR"), during 1988 and
from that time to the present has held these positions with The Meridian
Resource Corporation.
Michael J. Mayell is President and Chief Operating Officer and was, along
with Mr. Reeves, a co-founder of Meridian. Prior to assuming such positions with
the Company, Mr. Mayell held similar positions with TMR from 1988 until 1990.
Fenner R. Weller, Jr. has been a general partner of Weller, Anderson, &
Co., Ltd., a securities firm, since 1995.
AUDIT COMMITTEE; AUDIT COMMITTEE FINANCIAL EXPERT
The Company has a standing Audit Committee established in accordance with
Section 3(a)(58)(A) of the Exchange Act. The current members of the Audit
Committee are identified
- 2 -
above. The Board of Directors has determined that Mr. Simmons is an audit
committee financial expert as defined in applicable SEC and NYSE rules.
EXECUTIVE AND CERTAIN OTHER OFFICERS
The following table provides information with respect to the executive
officers and certain other officers of the Company. Each 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 and Chief Executive Officer 59 1990
Michael J. Mayell Director and President 58 1990
Lloyd V. DeLano Senior Vice President and Chief Accounting Officer 55 1993
Alan S. Pennington Vice President--Business Development--TMRX 52 1999
Thomas J. Tourek* Senior Vice President--Exploration--TMRX 63 1999
A. Dale Breaux* Vice President--Operations--TMRX 57 2002
Kendall A. Trahan Vice President--Land and Business Development--TMRX 55 2005
- -----------
* Non-executive officer.
For additional information regarding Messrs. Reeves and Mayell, see "Directors",
above.
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
LLC, a wholly owned subsidiary of the Company ("TMRX"), 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 30 years of oil and natural gas
experience.
Alan S. Pennington joined the Company in August 1989 as Vice President -
Geology of TMRX and has held several positions with the Company. He is presently
Vice President - Business Development of TMRX.
Thomas J. Tourek joined Meridian in June 1999, after nearly 30 years of
experience at Shell in the discovery and development exploration and production
projects. His successes in managing and performing geological and geophysical
(including 3-D) evaluations span the greater Gulf of Mexico Basin, Europe,
Africa, Latin America, and the Middle and Far East. Mr. Tourek holds a Bachelor
of Science Degree in Geology from Wittenberg University, and a Masters Degree
and Ph.D in Geology from Johns Hopkins University.
A. Dale Breaux joined the Company in 2002 and is currently the Vice
President--Operations of TMRX. Mr. Breaux has nearly 30 years of field and
management experience in onshore and offshore drilling operations at Sun Oil
Company, Campbell Energy Corporation, and Petrofina. Mr. Breaux holds a Bachelor
of Science in Petroleum Engineering from the University of Louisiana in
Lafayette.
- 3 -
Kendall A. Trahan joined Meridian in August 2005. Since June 1997, he
served as Vice President of Land with Carrizo Oil & Gas, Inc. From 1994 to 1997,
he served as Director of Joint Ventures Onshore Gulf Coast for Vastar Resources,
Inc. And from 1982 to 1994, he served as Area Landman and a Division Landman and
Director of Business Development for Arco Oil & Gas Company. Prior to that, Mr.
Trahan served as Staff Landman for Amerada Hess Corporation. He holds a Bachelor
of Science degree from the University of Louisiana.
There are no family relationships among the current officers and directors
of the Company.
CODE OF ETHICS
The Board of Directors has adopted a Code of Ethics and Business Conduct
for its directors, officers and employees, a copy of which are posted on the
Company's web site at www.tmrx.com. To obtain a printed copy of the Company's
Code of Ethics and Business Conduct send a written request to 1401 Enclave
Parkway, Suite 300, Houston, Texas 77077.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act 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 SEC. 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, 2005, through December 31, 2005, all officers, directors and greater
than ten-percent shareholders of the Company were in compliance with applicable
filing requirements.
ITEM 11. EXECUTIVE COMPENSATION.
The following tables contain compensation data for the five highest paid
executive officers serving at the end of 2005 whose 2005 salary and annual bonus
compensation exceeded $100,000, and other individuals who would otherwise have
been included in this table but for the fact that such individuals were not
serving as executive officers of the Company at the end of 2005 (collectively,
the "Named Executive Officers").
- 4 -
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
----------------------------------------------------- -----------------------------
Restricted Securities
Name and Other Annual Stock Underlying All Other
Principal Position Year Salary($)(1) Bonus($)(1)(2) Compensation($)(3) Award($)(1) Options(#) Compensation($)(4)
- ------------------- ---- ------------ -------------- ------------------ ----------- ------------- ------------------
Joseph A. Reeves, Jr. 2005 $121,587 $803,466 $ 120,161 $ 800,000 ------------ $14,000
CEO 2004 104,973 780,978 37,673 800,000 ------------ 13,000
2003 40,527 760,000 32,710 631,620 ------------ 12,000
Michael J. Mayell 2005 $121,587 $803,466 $ 120,161 $ 800,000 ------------ $14,000
President 2004 104,973 780,978 37,673 800,000 ------------ 13,000
2003 40,427 760,000 32,710 631,620 ------------ 12,000
Lloyd V. DeLano 2005 $191,451 $752,861 $--------- $---------- $------------ $14,000
Senior Vice President and 2004 185,353 688,271 --------- ---------- ------------ 13,000
Chief Accounting Officer 2003 169,399 368,026 --------- ---------- ------------ 12,000
James W. Carrington, Jr.(5) 2005 $ 80,122 $490,771 $--------- $---------- $------------ $11,881
Executive Vice President, 2004 184,044 691,495 1,416 ---------- ------------ 13,000
Land and Legal - TMRX 2003 168,203 352,879 1,636 ---------- ------------ 12,000
Alan S. Pennington 2005 $217,233 $720,010 $--------- $---------- $------------ $14,000
Vice President, Business 2004 210,313 688,271 --------- ---------- ------------ 13,000
Development- TMRX 2003 192,210 369,063 --------- ---------- ------------ 12,000
Kendal Trahan (6) 2005 $ 69,664 $ 10,833 $--------- $---------- $------------ $ 2,844
Vice President, Land and
Business Development
- --------------
(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 and the shareholders of the
Company 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; at 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 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; at June 30, 2001 ($7.17 per
share), for the deferrals during the second half of 2001; at December 31,
2001 ($3.99 per share), for deferrals during the first half of 2002; at
June 30, 2002 ($3.72 per share), for deferrals during the second half of
2002; at December 31, 2002 ($0.90 per share), for deferrals during the
first half of 2003; at June 30, 2003 ($4.73 per share), for deferrals
during the second half of 2003; at December 31, 2003 ($5.94 per share),
for deferrals during the first half of 2004; at June 30, 2004 ($6.94 per
share), for deferrals during the second half of 2004; at December 31, 2004
($6.05 per share), for deferrals during the first half of 2005; and at
June 30, 2005 ($4.78 per share), for deferrals during the second half of
2005. Pursuant to the DCP, Messrs. Reeves and Mayell each elected to defer
$315,810, $400,000 and $400,000 of their compensation for 2003, 2004 and
2005, respectively. As of December 31, 2005, each of Messrs. Reeves and
Mayell had rights (including matching deferrals) to 1,707,704 shares and
1,518,284 shares, respectively, with a total value (including matching
deferrals) as of December 31, 2005, of $7,172,357 and $6,376,793,
respectively. 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) Under the Company's Well Bonus Plan, Mr. DeLano received bonus
amounts in 2005, 2004 and 2003 as follows: $701,907, $688,271, and
$360,326, respectively. Under the same plan Mr. Carrington was paid in
2005, 2004 and 2003 the following amounts: $490,771, $691,495, and
$345,233, respectively. Under the same plan, Mr. Pennington was paid in
2005, 2004 and 2003 the following amounts: $701,907, $688,291, and
$360,326, respectively.
(3) Includes the value conveyed during the applicable year
attributable to net profits interests assigned to the Named Executive
Officer during the applicable year in connection with their employment
agreements. In connection with such employment agreements, the Company
adopted in 1994 a program under which net profits interests are granted to
certain key
- 5 -
employees of the Company in prospects and wells that the Company is
pursuing and drilling. In general, the net profits interest is 2.00% of
any well and is subject to proportional reduction to the Company's
interests. Pursuant to these arrangements, during 2003, 2004 and 2005, net
profits interests of 2% were granted to each of Messrs. Reeves and Mayell
in various prospects acquired by the Company in 2003, 2004 and 2005.
Although such grants were intended to provide long-term incentive for the
executive officer or employee by aligning his or her interests with those
of the Company in its drilling efforts, such grants are not subject to
vesting, the continued employment of the individual with the Company or
other conditions. Accordingly, such grants are considered part of the
Company's annual compensation package and not compensation under a
long-term incentive plan. Each grant of a net profits interest is
reflected in this table at a value based on a third party appraisal of the
interest granted or the Company's current estimate of value for those
prospects for which a third party appraisal has not yet been completed.
Such values are appraisals or estimates only and the actual realized value
of such interests may prove to be higher or lower than the amounts
reflected in this table. See also "-Employment Agreements" and "-Well
Bonus Plans and NPI Rights" below.
(4) Includes Company contributions to its 401(k) plan.
(5) Mr. Carrington resigned from the Company effective May 27, 2005.
(6) Mr. Trahan joined the Company effective August 8, 2005.
OPTION GRANTS IN FISCAL 2005
The following table sets forth those options granted to Named Executive
Officers during 2005. Mr. Trahan was the only Named Executive Officer to receive
option grants in fiscal 2005.
Number of % of Total
Shares Options Potential Realizable Value at
Underlying Granted to Exercise Assumed Annual Rates of Stock
Options Employees in Price Expiration Price Appreciation for Option Term
Name Granted Fiscal Year ($/share) Date 5%($) 10%($)
- ----------------------- ------------- ------------- ----------- ---------- --------------- -----------------
Kendall A. Trahan 10,000 33.3% $4.92 7/15/2015 30,942 78,412
- 6 -
The following table summarizes the number and value of options exercised
by the Named Executive Officers during 2005, as well as the number and value of
unexercised options owned by the Named Executive Officers as of December 31,
2005.
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 2005
AND DECEMBER 31, 2005 OPTION VALUE
Number of Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options at Options at
December 31, December 31,
2005(#) 2005($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized($) Unexercisable(1) Unexercisable
- ----------------------------- ----------------- --------------- ------------------------ ----------------------
Joseph A. Reeves, Jr. (1) --------- --------- 1,600,000 / ----- $1,237,500 / -----
Michael J. Mayell (1) --------- --------- 1,600,000 / ----- $1,237,500 / -----
Lloyd V. DeLano --------- --------- 42,500 / ----- $ 20,625 / -----
James W. Carrington, Jr. --------- --------- ----- / ----- ----- / -----
Alan S. Pennington --------- --------- 11,000 / ----- $ 4,125 / -----
Kendall Trahan --------- --------- 2,500 / 7,500 ----- / -----
- -------------
(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, 2005, based on the
difference between the market price of the Common Stock at December 31,
2005 and the exercise price of the respective warrants, was $3,595,936 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 along with annual bonuses in cash
substantially consistent with previous annual bonuses, to be reviewed at least
annually for possible increases, and additional 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 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
- 7 -
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.
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 their original 2% net
profits interest grant covered 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 Senior Vice President and Chief Accounting
Officer of the Company. Mr. DeLano's employment agreement provides that he will
receive a monthly salary of $15,954 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. Alan S. Pennington entered into an employment agreement with the
Company under which he is given the title Vice President - Business Development
of TMRX. Mr. Pennington's employment agreement provides that he will receive a
monthly salary of $18,103 and an annual bonus in the amount determined in the
discretion of the Company's Board of Directors. If Mr. Pennington 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.
THE INCENTIVE PLANS
The Company's existing stock option 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
- 8 -
Stock that currently may be issued under the Incentive Plans is 9,607,528, which
represents approximately 11% of the total number of shares of Common Stock
outstanding. There are currently 7,448,791 shares allocated to outstanding
options or existing or future stock rights under deferred compensation
arrangements under the Incentive Plans. Therefore, approximately 2,148,737
shares are available for grant of additional options or stock-based
compensation. As of December 31, 2005, 3,069,150 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
during 2005. 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.
Effective March 2001, the participants in the Geoscientist Plan were
notified that no additional future wells would be placed into the plan. During
2002, the Executive Committee decided to modify this position and for certain
key geoscientists the plan will include future new wells through July, 2002.
Effective December 2001, an agreement was executed to repurchase and
terminate certain interests in the Well Bonus Plans from current and former
employees in exchange for the issuance of Common Stock. The offering was for a
total of 1,940,991 shares of the Common Stock. The Common Stock was issued on
February 4, 2002, at the then current price of $3.48 per share.
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives an annual retainer,
payable in quarterly installments, of $25,000. In addition, each of the chairmen
of the Audit Committee,
- 9 -
Board Affairs Committee and the Compensation Committee receives annual payments
of $10,000, $2,500 and $2,500, respectively. The other members of the Audit
Committee receive annual payments of $6,500. Each non-employee director receives
$2,500 for each Board of Directors meeting attended in person or $1,000 for each
Board of Directors meeting attended telephonically, and $1,000 for each Board of
Directors committee meeting attended in person or $500 for each Board of
Directors committee meeting attended telephonically. 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's prior Director Stock Option Plan (the "Prior Director Plan")
expired by its terms on December 31, 2005 and no additional stock options may be
granted under the plan. Stock options granted prior to the termination of the
Prior Director Plan will remain outstanding until such options have been
settled, terminated or forfeited. Under the Prior Director Plan, each
non-employee director was granted, on the date of his appointment, election,
reappointment or re-election as a member of the Board of Directors, an option
("Prior Director Plan 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 Prior Director Plan 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 Prior Director Plan 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
255,000 shares under the Prior Director Plan with a weighted average exercise
price of $7.30 per share.
REPORT ON EXECUTIVE COMPENSATION
GENERAL POLICY AND PHILOSOPHY
The Compensation Committee's objective is to compensate executive officers
in a manner that promotes recruiting, motivating, and retaining exceptional
employees who will help the Company achieve its earnings and growth objectives
which are consistent with building stockholder value. Fixed 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.
The Compensation Committee consists exclusively of non-employee,
independent directors, and is responsible for overseeing the compensation and
benefit programs of the Company's senior executives. It maintains oversight on
the incentive and equity-based programs for the management team and other
employees. Consistent with the Company's Governance guidelines (located at:
www.tmrc.com) the Compensation Committee has established policies
- 10 -
governing its role and responsibilities in administering the compensation and
benefits of all of our executives including the named executive officers and
Company's Chief Executive Officer.
ACTIONS DURING 2005
For 2005 the newly organized Compensation Committee reviewed existing
market data, interviewed consultants and, upon engagement of an independent
outside compensation consultant, began a detailed review of the current programs
in place for the named executive officers and other key positions. This process
is underway at the time of the proxy and the outcome will allow the Committee to
more precisely describe the linkage between the current programs and the stated
philosophy and associated industry practices.
The 2005 compensation, as reflected in the Summary Compensation Tables,
was derived from contractual terms covering the annual bonus, the net profit
interest plans and the matching Company contributions under the Company's
deferred compensation plans.
In 2005, decisions with respect to the cash compensation of the Company's
executive officers were made in the following manner. 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
officers and other senior executives, and granted cash bonuses to such
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 either one of them.
The Compensation Committee continues to review the Company's compensation
policies and procedures in light of evolving corporate governance standards and
changes in legislation and regulation.
SPECIFIC STRATEGY FOR PAY COMPONENTS
Base Salary
The base salaries of the Company's employees are determined based on their
functional role with the Company, their talents and experience and competitive
market factors, including the deliberate strategy by the Company to attract and
retain executives with expertise and proven success in 3-D seismic exploration.
Generally, and for most employees, 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 and annual incentives of the Company's
executive officers, the Company considers data from published surveys and
reports regarding compensation of executive officers from a cross section of
other energy companies, which may or may not include
- 11 -
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 solely 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 their employment agreements, if any,
the financial results of the Company and various subjective factors, including
the executive's or employee's contribution to the Company's success in finding
reserves and acquiring prospects, identifying and obtaining sources of capital
for the Company and increasing shareholder value. In addition to the annual
incentive the Company has paid a Christmas bonus of up to one month's base
salary to all of its employees during 2003, 2004 and 2005.
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 Equity-Based Compensation
The Board of Directors and the Compensation Committee believe 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 and restricted stock grants under the
Company's stock option plans. It is the intention of the Board of Directors and
the Compensation Committee to continue to rely on the importance of each
executive having a significant portion of his or her financial well-being tied
to the long-term success of the Company and its shareholders. We believe further
that stock-based compensation in which the executives have a sizeable portion of
their contingent compensation at risk will be an important element of pay into
the future.
DISCUSSION OF COMPENSATION OF THE CHIEF EXECUTIVE OFFICER AND PRESIDENT
During 2005, Messrs. Reeves' and Mayell's salaries and bonuses were paid
in accordance with their employment agreements. The Board of Directors and the
Compensation Committee believe that granting stock options and the approval of
bonus payments further align Messrs. Reeves and Mayell's interests with those of
the Company, rewarding them for their efforts that were instrumental to the
successful production efforts and the corresponding reserve replacements and,
therefore, the future success of the Company.
- 12 -
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). 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.
E.L. Henry
Fenner R. Weller, Jr.
- 13 -
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, 2000 through December 31, 2005. The graph assumes that the value of
the investment in the Common Stock and each index was $100 at December 31, 2000,
and that all dividends were reinvested.
DECEMBER 31, 2000 2001 2002 2003 2004 2005
- ----------------- ---- ----- ----- ----- ------ ------
The Company 100 46.26 10.43 68.87 70.14 48.70
NYSE Market Index 100 91.09 74.41 96.39 108.85 117.84
Peer Group Index 100 71.24 69.55 91.08 129.58 184.78
The Company's Peer Group is comprised of Cabot Oil & Gas Corp., Chesapeake
Energy Corporation, Comstock Resources, Inc., Denbury Resources, Inc., Energy
Partners Ltd., Petroquest Energy, Inc., Remington Oil & Gas Corporation, St.
Mary Land & Exploration, Stone Energy Corporation and Swift Energy Company.
- 14 -
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 either one of them.
For a discussion of certain transactions between the Company and members of the
Board of Directors, see "Certain Relationships and Related Transactions" below.
In addition, cash compensation decisions during 2005 with respect to Messrs.
Reeves and Mayell were made by the full Board of Directors, with each of Messrs.
Reeves and Mayell abstaining.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The following table sets forth information, as of April 14, 2006, with
respect to the beneficial ownership of Common Stock by (a) each current
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) 5,342,648 5.8%
Michael J. Mayell (3) 5,040,779 5.5%
Lloyd V. DeLano (4) 94,766 *
Alan S. Pennington (5) 41,229 *
Kendall A. Trahan (6) 7,500 *
E. L. Henry (7) 24,750 *
Joe E. Kares (8) 18,750 *
Gary A. Messersmith (9) 42,222 *
David W. Tauber (10) 11,090 *
John B. Simmons (11) 7,500 *
Fenner R. Weller, Jr. (12) 50,000 *
All executive officers and directors as a group (11
persons) (2), (3), (4), (5), (6), (7), (8), (9), (10),
(11) and (12) 10,681,234 11.0%
Dimensional Fund Advisors Inc. (13) 4,433,169 5.1%
- 15 -
Barclays (14) 5,511,930 6.3%
- -----------
*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. Each such person has
sole voting and dispositive power for its shares of Common Stock, unless
otherwise noted.
(2) Includes 880,063 shares, 714,000 shares and 1,600,000 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 1,728,079
vested shares underlying deferred compensation arrangements. Excludes
23,297 unvested shares under deferred compensation arrangements. Mr.
Reeves' business address is 1401 Enclave Parkway, Suite 300, Houston,
Texas 77077.
(3) Includes 880,063 shares, 714,000 shares and 1,600,000 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 1,538,659
vested shares underlying deferred compensation arrangements. Excludes
23,297 unvested shares under deferred compensation arrangements. Mr.
Mayell's business address is 1401 Enclave Parkway, Suite 300, Houston,
Texas 77077.
(4) Includes 42,500 shares of Common Stock that Mr. DeLano has the
right to acquire upon the exercise of stock options.
(5) Includes 11,000 shares of Common Stock that Mr. Pennington has
the right to acquire upon the exercise of stock options.
(6) Includes 2,500 shares of Common Stock that Mr. Trahan has the
right to acquire upon the exercise of stock options. Excludes 7,500 shares
underlying options that are not exercisable within 60 days.
(7) Includes 18,750 shares of Common Stock that Mr. Henry has the
right to acquire upon the exercise of stock options. Excludes 11,250
shares underlying options that are not exercisable within 60 days.
(8) Includes 18,750 shares of Common Stock that Mr. Kares has the
right to acquire upon the exercise of stock options. Excludes 11,250
shares of Common Stock that are not exercisable within 60 days.
(9) Includes 18.750 shares of Common Stock that Mr. Messersmith has
the right to acquire upon the exercise of stock options. Excludes 11,250
shares of Common Stock that are not exercisable within 60 days.
(10) Includes 3,750 shares of Common Stock that Mr. Tauber has the
right to acquire upon the exercise of stock options. Excludes 26,250
shares underlying options that are not exercisable within 60 days.
(11) Includes 7,500 shares of Common Stock that Mr. Simmons has the
right to acquire upon the exercise of stock options. Excludes 22,500
shares underlying options that are not exercisable within 60 days.
(12) Includes 7,500 shares of Common Stock that Mr. Weller has the
right to acquire upon the exercise of stock options. Excludes 37,500
shares underlying options that are not exercisable within 60 days.
(13) This information is based on information contained in a
Schedule 13G filing made by Dimensional Fund Advisors Inc. ("Dimensional")
with the Securities and Exchange Commission on February 6, 2006. The
principal business address of Dimensional is 1299 Ocean Avenue, 11th
Floor, Santa Monica, CA 90401. Dimensional, an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other commingled group trusts and separate accounts. These
investment companies, trusts and accounts are the "Funds." In its role as
investment advisor or manager, Dimensional possesses investment and/or
voting power over Common Stock held by the Funds. However, all securities
reported by Dimensional are owned by the Funds.
(14) This information is based on information contained in a
Schedule 13G filing made by Barclays Global Investors, NA, Barclays Global
Funds Advisors, Barclays Global Investors, LTD and Barclays Global
Investors Japan Trust and Banking Company Limited ("Barclays") with the
Securities and Exchange Commission on January 26, 2006. The principal
business address of Barclays Global Investors, NA and Barclays Global
Funds Advisors is 45 Freemont Street, San Francisco, CA 94105. The
principal business address of Barclays Global Investors, LTD is Murray
House, 1 Royal Mint Court, London, England EC3N 4HH. The principal
business address of Barclays Global Investors Japan Trust and Banking
Company Limited is Ebisu Prime Square Tower, 8th Floor, 1-1-39 Hiroo
Shibuya-Ku, Tokyo 150-0012 Japan.
- 16 -
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 or Mayell may elect to participate in any prospect is a 4% working
interest. Beginning with 2002, each of Messrs. Reeves and Mayell have
participated in every prospect that the Company has drilled on a 3.5% working
interest basis. Prior to 2002, through 1994, Messrs. Reeves and Mayell each
participated with the Company for a 1.5% working interest basis on all drilled
prospects.
During 2005, 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 2005, each of Texas Oil
Distribution and Development, Inc. ("TODD") and JAR Resources LLC ("JAR")
(companies owned by Mr. Reeves) and Sydson Energy, Inc. ("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, JAR and Sydson collectively invested approximately $9,997,000 for
the year ended December 31, 2005, in oil and natural gas drilling activities for
which the Company was the operator. Net amounts due to TODD, JAR and Mr. Reeves
were approximately $2,308,000 as of December 31, 2005. Net amounts due to Sydson
and Mr. Mayell were approximately $2,330,000.
Mr. Joseph A. Reeves, Jr., an officer and Director of Meridian, has two
relatives currently employed by the Company. J. Drew Reeves, his son, is a staff
member in the Land Department. He has a Masters degree in Business
Administration from Louisiana State University and was employed as a Landman for
the firm of Land Management LLC in Metairie, Louisiana, prior to joining
Meridian in 2003. Mr. Drew Reeves was paid $100,000, $80,000 and $40,000 for the
years 2005, 2004 and 2003, respectively. Jeff Robinson is the son-in-law of
Joseph A. Reeves, Jr. and is employed as the Manager of the Company's
Information Technology Department and has been paid $111,000, $101,000 and
$42,000 for the years 2005, 2004 and 2003, respectively. Mr. Robinson earned his
undergraduate degree in MIS from Auburn University and was employed by BSI
Consulting for 5 years prior to joining Meridian in 2003. J. Todd Reeves, a
- 17 -
previous partner in the law firm of Creighton, Richards, Higdon and Reeves in
Covington, Louisiana, is the son of Joseph A. Reeves, Jr. This law firm provided
legal services for the Company for the years ended December 31, 2005 and 2004,
and received fees of approximately $32,000 and $67,000, respectively. Currently
he is a partner in the law firm of J. Todd Reeves and Associates, and is
providing legal services to the Company and received fees of approximately
$100,000 in 2005. Such fees exceeded 5% of the gross revenues for these firms
for those respective years. Management believes that such fees were equivalent
to fees that would have been paid to similar firms providing such services in
arm's length transactions.
Michael W. Mayell, the son of Michael J. Mayell, an officer and Director
of Meridian, is a staff member in the Production Department, and was paid
$79,000, $60,000, and $30,000, for the years 2005, 2004 and 2003, respectively.
James T. Bond, former Director of Meridian, is the father-in-law of Michael J.
Mayell, and has provided consultant services to the Company and received fees in
the amount of $175,000, $124,000, and $115,000, for the years 2005, 2004 and
2003, respectively.
OTHER
Joe E. Kares, a member of the Board of Directors, 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, 2005, 2004
and 2003 and received fees of approximately $320,000, $255,000, and $210,000,
respectively. These fees exceeded 5% of the gross revenues of Kares & Cihlar for
2005. The Company believes that these fees were equivalent to the fees that
would have been paid to similar firms providing its services in arm's length
transactions. Mr. Kares also participated in the Well Bonus Plans pursuant to
which he was paid approximately $464,000 during 2005, $298,000 during 2004 and
$61,000 during 2003.
Mr. Gary A. Messersmith, a Director of Meridian, is currently a Member of
the law firm of Looper, Reed and McGraw in Houston, Texas, which provided legal
services for the Company for the years ended December 31, 2005, 2004 and 2003,
and received fees of approximately $19,000, $12,000, and $49,000, respectively.
Management believes that such fees were equivalent to fees that would have been
paid to similar firms providing such services in arm's length transactions. In
addition, the Company has Mr. Messersmith on a personal retainer of $8,333 per
month relating to his services provided to the Company and a bonus in the form
of personal property valued at $12,500 was awarded during 2002. Mr. Messersmith
also participated in the Management Plan, pursuant to which he was paid
approximately $702,000 during 2005, $688,000 during 2004, $360,000 during 2003,
and $377,000 during 2002.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
BDO Seidman, LLP served as the Company's principal independent registered
public accounting firm for the fiscal year ended December 31, 2005. BDO Seidman,
LLP's engagement to conduct the audit of the Company for the fiscal year ended
December 31, 2006 was approved by the Audit Committee.
- 18 -
AUDIT FEES
The following table presents fees for the audits of the Company's annual
consolidated financial statements for 2005 and 2004 provided by BDO Seidman, LLP
for the fiscal years ended December 31, 2005 and December 31, 2004.
2005 2004
------- ----------
Audit Fees............................................................ 628,629 $1,199,832
Either the Audit Committee or the Chairman of the Audit Committee approved
all engagements of the independent accountants in advance, except with respect
to the appointment of the independent audit firm, which is made by the Audit
Committee. In the event the Audit Committee Chairman approves any such
engagement, he discusses such approval with the Audit Committee at its next
meeting.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)
1. and 2. No financial statements or schedules are filed with this report on
Form 10-K/A.
3. Exhibits filed herewith.
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule
15d-14(a) under the Securities Exchange Act of 1934, as amended.
31.2 Certification of President pursuant to Rule 13a-14(a) or Rule 15d-14(a)
under the Securities Exchange Act of 1934, as amended.
31.3 Certification of Chief Accounting Officer pursuant to Rule 13a-14(a) or
Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.
32.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or Rule
15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C.
Section 1350.
32.2 Certification or President pursuant to Rule 13a-14(b) or Rule 15d-14(b)
under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section
1350.
32.3 Certification Chief Accounting Officer pursuant to Rule 13a-14(b) or Rule
15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C.
Section 1350.
- 19 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE MERIDIAN RESOURCE CORPORATION
BY: /s/ JOSEPH A. REEVES, JR.
-------------------------------------
Chief Executive Officer
(Principal Executive Officer)
Director and Chairman of the Board
Date: April 28, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Name Title Date
- -------------------------------------- ----------------------------- --------------
BY: /s/ JOSEPH A. REEVES, JR. Chief Executive Officer April 28, 2006
---------------------------------- (Principal Executive Officer)
Joseph A. Reeves, Jr.
Director and Chairman
of the Board
BY: /s/ MICHAEL J. MAYELL President and Director April 28, 2006
----------------------------------
Michael J. Mayell
BY: /s/ LLOYD V. DELANO Chief Accounting Officer April 28, 2006
----------------------------------
Lloyd V. DeLano
BY: /s/ E. L. HENRY Director April 28, 2006
----------------------------------
E. L. Henry
BY: /s/ JOE E. KARES Director April 28, 2006
----------------------------------
Joe E. Kares
BY: /s/ GARY A. MESSERSMITH Director April 28, 2006
----------------------------------
Gary A. Messersmith
BY: /s/ DAVID W. TAUBER Director April 28, 2006
----------------------------------
David W. Tauber
- 20 -
BY: /s/ JOHN B. SIMMONS Director April 28, 2006
----------------------------------
John B. Simmons
BY: /s/ FENNER R. WELLER, JR. Director April 28, 2006
----------------------------------
Fenner R. Weller, Jr.
- 21 -
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or
Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.
31.2 Certification of President pursuant to Rule 13a-14(a) or Rule 15d- 14(a)
under the Securities Exchange Act of 1934, as amended.
31.3 Certification of Chief Accounting Officer pursuant to Rule 13a- 14(a) or
Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.
32.1 Certification of Chief Executive Officer pursuant to Rule 13a- 14(b) or
Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and
18 U.S.C. Section 1350.
32.2 Certification or President pursuant to Rule 13a-14(b) or Rule 15d- 14(b)
under the Securities Exchange Act of 1934, as amended, and 18 U.S.C.
Section 1350.
32.3 Certification Chief Accounting Officer pursuant to Rule 13a-14(b) or Rule
15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18
U.S.C. Section 1350.