UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant
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Filed by a Party other than the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2)
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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The Meridian Resource Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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THE
MERIDIAN RESOURCE CORPORATION
1401 Enclave Parkway,
Suite 300
Houston, Texas 77077
PROPOSED
CASH MERGER YOUR VOTE IS VERY IMPORTANT
To our Shareholders:
After careful consideration, the board of directors of The
Meridian Resource Corporation, a Texas corporation, which we
refer to as Meridian, we,
our, or us, has unanimously approved a
merger agreement providing for Meridians acquisition by
Alta Mesa Holdings, LP, or Alta Mesa.
If the merger is completed, each share of our common stock
issued and outstanding immediately prior to the effective time
of the merger (other than shares owned by Alta Mesa, Alta Mesa
Acquisition Sub, LLC or any other subsidiary of Alta Mesa or
held in treasury by us and other than shares held by
shareholders, if any, who have properly exercised and perfected
statutory appraisal rights) will be converted into the right to
receive $0.29 in cash, without interest and less any applicable
withholding tax. Each outstanding option or warrant for Meridian
common stock will be canceled in exchange for (A) the
excess, if any, of $0.29 over the per share exercise price of
the option or warrant, as applicable, multiplied by (B) the
number of shares of common stock subject to the option or
warrant, as applicable, net of any applicable withholding taxes.
If the merger is completed, Meridian will no longer be a
publicly traded company, our stock will not be traded on the New
York Stock Exchange and you will not participate in our future
earnings or growth.
At a special meeting of our shareholders, you will be asked to
vote on a proposal to adopt the merger agreement. The special
meeting will be held on Tuesday, March 30, 2010, at
10:00 a.m. Houston time, at the offices of Fulbright
& Jaworski L.L.P., 1301 McKinney, Houston,
Texas 77010. Notice of the special meeting and the related
proxy statement are enclosed.
The accompanying proxy statement provides you with detailed
information about the special meeting, the merger agreement and
the merger. A copy of the merger agreement is attached as
Annex A
to the accompanying proxy statement. We
encourage you to read the entire proxy statement and the merger
agreement carefully. You may also obtain more information about
us from documents we have filed with the Securities and Exchange
Commission.
Our board of directors has unanimously determined that the
merger agreement is advisable and in the best interests of
Meridian and its shareholders and unanimously recommends that
you vote FOR the proposal to adopt the merger
agreement. The board of directors also recommends that you vote
FOR the approval of any proposal to adjourn or
postpone the special meeting to a later date to solicit
additional proxies in favor of the adoption of the merger
agreement if there are not sufficient votes for approval and
adoption of the merger agreement at the special meeting.
Your vote is very important.
We cannot complete the
merger without the affirmative vote in favor of the adoption of
the merger agreement of the holders of at least two-thirds of
the outstanding shares of Meridian common stock entitled to
vote. The failure of any shareholder to vote on the proposal to
adopt the merger agreement will have the same effect as a vote
against the adoption of the merger agreement.
Whether or not you plan to attend the special meeting, please
complete, date, sign and return, as promptly as possible, the
enclosed proxy in the accompanying reply envelope, or submit
your proxy by telephone or the Internet. If you attend the
special meeting and vote in person, your vote by ballot will
revoke any proxy previously submitted.
On behalf of your board of directors, thank you for your
continued support.
Sincerely,
Paul D. Ching
Chairman and Chief Executive Officer
February 8, 2010
Neither the Securities and Exchange Commission nor any state
securities regulatory agency has approved or disapproved the
merger, passed upon the merits or fairness of the merger or
passed upon the adequacy or accuracy of the disclosure in this
document. Any representation to the contrary is a criminal
offense.
This proxy statement is dated February 8, 2010 and is first
being mailed to shareholders of Meridian on or about
February 12, 2010.
THE
MERIDIAN RESOURCE CORPORATION
1401 Enclave Parkway,
Suite 300
Houston, Texas 77077
NOTICE
OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On March 30, 2010
To the Shareholders of The Meridian Resource Corporation:
We will hold a special meeting of shareholders of The Meridian
Resource Corporation, which we refer to as Meridian,
we, our, or us, at the
offices of Fulbright & Jaworski L.L.P., 1301 McKinney,
Houston, Texas 77010 on Tuesday, March 30, 2010
at 10:00 a.m. local time, for the following purposes:
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To consider and vote on a proposal to adopt the Agreement and
Plan of Merger, or the merger agreement, dated as of
December 22, 2009, by and among Meridian, Alta Mesa
Holdings, LP, a Texas limited partnership, or Alta
Mesa, and Alta Mesa Acquisition Sub, LLC, a Texas limited
liability company and a wholly owned subsidiary of Alta Mesa, or
Merger Sub. A copy of the merger agreement is
attached as
Annex A
to the accompanying proxy
statement. Pursuant to the terms of the merger agreement,
Meridian will merge with and into Merger Sub and Merger Sub will
continue as the surviving company, which we refer to as the
merger. Upon completion of the merger, each share of
our common stock, par value $.01 per share, or the
common stock, issued and outstanding immediately
prior to the effective time of the merger (other than shares
owned by Alta Mesa, Merger Sub or any other subsidiary of Alta
Mesa or held in treasury by us and other than shares held by
shareholders, if any, who have properly exercised and perfected
statutory appraisal rights) will be converted into the right to
receive $0.29 in cash, without interest and less any applicable
withholding tax.
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To grant to the proxyholders the authority to vote in their
discretion with respect to the approval of any proposal to
postpone or adjourn the special meeting to a later date to
solicit additional proxies in favor of the adoption of the
merger agreement if there are not sufficient votes for adoption
of the merger agreement at the special meeting.
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These items of business are described in the attached proxy
statement. Only our shareholders of record at the close of
business on February 8, 2010, the record date for the
special meeting, are entitled to notice of and to vote at the
special meeting and any adjournments or postponements of the
special meeting.
The adoption of the merger agreement requires the affirmative
vote of the holders of at least two-thirds of the outstanding
shares of common stock entitled to vote.
Your vote is very important. If you do not vote on the
proposal to adopt the merger agreement, it will have the same
effect as a vote against it.
It is important that your shares be represented and voted
whether or not you plan to attend the special meeting in person.
Even if you plan to attend the special meeting in person, we
request that you complete, sign, date and return the enclosed
proxy or submit your proxy by telephone or the Internet prior to
the special meeting. If you are a shareholder of record, voting
in person at the meeting will revoke any proxy previously
submitted. If your shares are held in street name,
which means shares held of record by a broker, bank or other
nominee, you should check the voting form used by that firm to
be sure such firm votes those shares in accordance with your
instructions. Submitting a proxy over the Internet, by telephone
or by mailing the enclosed proxy card in a timely manner will
ensure your shares are represented at the special meeting.
Please review the instructions in the accompanying proxy
statement and the enclosed proxy card or the information
forwarded by your broker, bank or other nominee regarding the
voting of your shares.
Shareholders who vote against the adoption of the merger
agreement will have the right to seek appraisal of the fair
value of their shares of common stock if the merger is
completed, but only if they deliver a written demand for
appraisal before the vote is taken on the merger agreement and
comply with all applicable requirements of Texas law, which are
summarized in the accompanying proxy statement.
By Order of the Board of Directors,
Paul D. Ching
Chairman and Chief Executive Officer
Houston, Texas
February 8, 2010
TABLE OF
CONTENTS
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i
SUMMARY
TERM SHEET
The following summary highlights selected information in this
proxy statement and may not contain all the information that may
be important to you. Accordingly, we encourage you to read
carefully this entire proxy statement, its annexes and the
documents referred to or incorporated by reference in this proxy
statement. Each item in this summary includes a page reference
directing you to a more complete description of that topic. See
Where You Can Find More Information.
References to Meridian, we,
our or us in this proxy statement refer
to The Meridian Resource Corporation and its subsidiaries unless
the context indicates otherwise.
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The
Parties to the Merger (page 15)
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The Meridian Resource Corporation, a Texas corporation, is an
independent oil and natural gas company that explores for,
acquires and develops oil and natural gas properties. Through
our wholly owned subsidiaries, we hold interests primarily in
the onshore oil and natural gas regions of south Louisiana and
Texas and offshore in the Gulf of Mexico. Meridian is
headquartered in Houston, Texas.
Alta Mesa Holdings, LP, which we refer to as Alta
Mesa, is a privately held Texas limited partnership that
explores for, acquires and develops oil and natural gas
properties.
Alta Mesa Acquisition Sub, LLC, which we refer to as
Merger Sub, is a wholly owned subsidiary of Alta
Mesa and is a Texas limited liability company. It was formed
solely for the purpose of effecting the merger, has no assets,
and has conducted no business operations.
You are being asked to consider and vote upon the adoption of
the merger agreement. If the merger agreement is adopted by our
shareholders, the other conditions to closing are satisfied or
waived and the merger agreement is not terminated prior to the
effective time of the merger, Meridian will merge with and into
Merger Sub, Merger Sub will continue as the surviving company,
we will no longer be a publicly traded company, we will not be
required to file reports with the Securities and Exchange
Commission, or the SEC, our stock will not be traded
on the New York Stock Exchange, or the NYSE, and you
will not participate in our future earnings or growth. Upon
completion of the merger, each share of our common stock issued
and outstanding immediately prior to the effective time of the
merger (other than shares owned by Alta Mesa, Merger Sub or any
other subsidiary of Alta Mesa or held in treasury by us and
other than shares held by shareholders, if any, who have
properly exercised and perfected statutory appraisal rights)
will be converted into the right to receive $0.29 in cash,
without interest and less any applicable withholding tax. In
this proxy statement, we refer to the consideration to be paid
per share of common stock in the merger as the Merger
Consideration. The surviving company will be a wholly
owned subsidiary of Alta Mesa.
The merger agreement provides that the parties will close the
merger no later than the business day after the satisfaction or
waiver of the conditions described under The Merger
Agreement Conditions to the Completion of the
Merger.
We currently anticipate that the merger will be completed in the
first half of 2010. However, there can be no assurances that the
merger will be completed at all, or if completed, that it will
be completed in the first half of 2010. We are currently in
default under our credit facility and other lending
arrangements, including a payment default under our credit
facility resulting from a borrowing base redetermination that
became effective on April 30, 2009 (causing a borrowing
base deficiency of $35.0 million at the time of such
redetermination and $26.4 million as of January 4,
2010), and are subject to forbearance agreements with our
lenders that they may terminate on or after February 28,
2010 if the merger is not completed by that date. If the merger
is not completed, you will remain subject to all of the risks
you are currently subject to as a holder of our common stock,
including the risk that the forbearance agreements with our
lenders and certain others would terminate, that our lenders and
other parties would then take action to enforce their rights
with respect to the outstanding obligations owed to them and
that we may be forced to liquidate or to otherwise seek
protection under federal bankruptcy laws. We can give you no
assurance that in a bankruptcy proceeding you
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would receive any value for your shares. See The
Merger Effects on Meridian if the Merger is Not
Completed.
Alta Mesa or Meridian may terminate the merger agreement under
certain circumstances. In addition, Alta Mesa may terminate the
merger agreement for any reason at any time prior to the
effective time of the merger in its sole and absolute
discretion. See The Merger Termination of the
Merger Agreement.
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The
Special Meeting (page 15)
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Time,
Place and Date (page 15)
The special meeting of our shareholders will be held on Tuesday,
March 30, 2010 at the offices of Fulbright & Jaworski
L.L.P., 1301 McKinney, Houston, Texas 77010, at
10:00 a.m. local time.
Purpose
(page 15)
You will be asked
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to consider and vote upon the adoption of the merger agreement,
pursuant to which Meridian will merge with and into Merger Sub,
and Merger Sub will survive and will remain a wholly owned
subsidiary of Alta Mesa, and
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to grant to the proxyholders the authority to vote in their
discretion with respect to the approval of any proposal to
postpone or adjourn the special meeting to a later date to
solicit additional proxies in favor of the adoption of the
merger agreement if there are not sufficient votes for adoption
of the merger agreement at the special meeting.
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Record
Date and Quorum (page 15)
You are entitled to vote at the special meeting if you owned
shares of common stock at the close of business on
February 8, 2010, the record date for the special meeting.
You will have one vote for each share of common stock that you
owned on the record date. As of February 8, 2010, there
were 92,475,527 shares of common stock entitled to be voted.
A majority of the outstanding shares of our common stock
entitled to vote, represented in person or by proxy, will
constitute a quorum for purposes of the special meeting.
Vote
Required to Approve the Merger Agreement
(page 16)
The adoption of the merger agreement requires the affirmative
vote of the holders of at least two-thirds of the outstanding
shares of common stock entitled to vote. A failure to vote your
shares of common stock, an abstention or a broker non-vote will
have the same effect as voting AGAINST the adoption
of the merger agreement.
Common
Stock Ownership of Directors and Executive Officers; Voting
Agreements (page 68)
Exclusive of options and warrants, our directors and executive
officers beneficially owned, and had the right to vote an
aggregate of 3,997,363 shares of common stock, or
approximately 4.32% of our outstanding shares of common stock on
the record date. Each of our directors and executive officers
has entered into an agreement with Alta Mesa and Merger Sub to
vote all shares of our common stock owned or controlled by them
in favor of the approval of the merger agreement.
Voting
and Proxies (page 16)
Any shareholder of record entitled to vote at the special
meeting may submit a proxy by returning the enclosed proxy card
by mail, by telephone, by the Internet or by voting in person by
appearing at the special meeting. If your shares of common stock
are held in street name by your broker, bank or
other nominee, you should instruct your broker, bank or other
nominee on how to vote your shares of common stock using the
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instructions provided by your broker, bank or other nominee. If
you do not provide your broker, bank or other nominee with
instructions, your shares of common stock will not be voted and
that will have the same effect as a vote AGAINST the
adoption of the merger agreement.
Revocability
of Proxy (page 16)
You have the right to change or revoke your proxy at any time
before the vote taken at the special meeting:
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by delivering to our Corporate Secretary, Lloyd V. DeLano, at
The Meridian Resource Corporation, 1401 Enclave Parkway,
Suite 300, Houston, Texas 77077 a signed written notice of
revocation, bearing a date later than the date of the proxy,
stating that the proxy is revoked;
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by attending the special meeting and voting in person (your
attendance at the meeting will not, by itself, revoke your
proxy you must vote in person at the meeting to
revoke a prior proxy);
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by submitting a later-dated proxy card;
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if you voted by telephone or the Internet, by voting at a later
time by telephone or the Internet; or
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if you have instructed a broker, bank or other nominee to vote
your shares, by following the directions received from your
broker, bank or other nominee to change those instructions.
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Treatment
of Stock Options and Warrants (page 51)
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The merger agreement provides that at the effective time of the
merger, each outstanding option to purchase our common stock
will become fully vested pursuant to our long-term incentive
plans and, pursuant to the merger agreement, will be converted
into the right to receive, at the effective time of the merger,
an amount in cash equal to the product of (A) the excess,
if any, of the Merger Consideration over the per share exercise
price of common stock subject to such option multiplied by
(B) the number of shares of common stock covered by such
option, the payment of which will be without interest and
subject to applicable withholding tax. The per share exercise
price for all of our outstanding options exceeds the Merger
Consideration. Therefore, the holders of outstanding options
will not receive any consideration for the cancellation of their
outstanding options held by them, except that certain holders of
options will receive $10 consideration in exchange for the
execution of an option waiver, cancellation and release
agreement.
Joseph A. Reeves, Jr. and Michael J. Mayell, who are
directors of Meridian, each own warrants to purchase
936,499 shares of our common stock. The exercise price of
the warrants is $0.10 per share. At the effective time of
the merger, each such outstanding warrant will be converted into
the right to receive, at the effective time of the merger, an
amount in cash equal to the product of (A) the excess of
the Merger Consideration over the exercise price per share of
common stock subject to such warrant multiplied by (B) the
number of shares of common stock covered by such warrant, the
payment of which will be without interest and subject to
applicable withholding tax. Mr. Reeves and Mr. Mayell
will receive $355,870 in the aggregate for their warrants.
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Interests
of Meridians Directors and Executive Officers in the
Merger (page 46)
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In considering the recommendation of our board of directors with
respect to the merger agreement, you should be aware that our
directors and executive officers have interests in the merger
that are different from, or in addition to, your interests as a
shareholder. These interests include:
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existing change of control arrangements between us and our
executive officers providing for, among other things, severance
benefits if the executives employment is terminated under
certain circumstances following a change in control of Meridian,
such as the merger, which change in control arrangements include:
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an employment agreement between us and our Chairman and Chief
Executive Officer, Paul D. Ching, providing for the payment to
Mr. Ching of all accrued and unpaid salary through the date
of
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termination and his monthly salary for the remainder of the term
of his employment agreement if his employment is terminated
following a change in control; and
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employment agreements and participation of Messrs. Lloyd V.
DeLano, Allen D. Breaux, Steven G. Ives and Alan S. Pennington,
who are officers of Meridian, in The Meridian
Resource & Exploration LLC Change in Control and
Severance Plan, which could result in potential change in
control benefits to such officers of an aggregate of
$2.8 million.
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conversion of outstanding warrants held by two of our directors,
Messrs. Reeves and Mayell, into the right to receive the
Merger Consideration, less the exercise price of the warrants,
which, assuming a closing on March 30, 2010, and based on
the number of warrants held as of February 8, 2010, would
result in an aggregate cash payment to them of $355,870;
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indemnification provisions in the merger agreement in favor of
our directors and officers;
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maintenance of a six-year tail directors and
officers liability insurance policy to cover directors and
officers currently covered by our directors and
officers liability insurance policy; and
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potential employment arrangements between Alta Mesa or any of
its affiliates, on the one hand, and one or more executive
officers of Meridian, on the other hand, although there are no
such arrangements as of the date of this proxy statement.
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Opinion
of Our Financial Advisor (page 34)
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Morgan Keegan & Company, Inc., which we refer to as
Morgan Keegan, delivered its opinion to our board of
directors that, as of December 22, 2009 and based upon and
subject to the factors and assumptions set forth therein, the
$0.29 per share in cash to be received by the holders of
the outstanding shares of our common stock pursuant to the
merger agreement was fair from a financial point of view to the
holders.
The full text of the written opinion of Morgan Keegan, dated
December 22, 2009, which sets forth assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as
Annex B.
Morgan Keegan provided its opinion for the
information and assistance of our board of directors in
connection with its consideration of the transaction. The Morgan
Keegan opinion is not a recommendation as to how any holder of
our common stock should vote with respect to the transaction.
Pursuant to an engagement letter between us and Morgan Keegan,
we have agreed to pay Morgan Keegan a fee of $300,000, plus
reasonable
out-of-pocket
expenses.
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Recommendation
of Our Board of Directors (page 32)
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Our board of directors unanimously approved the merger
agreement, including the merger and the other transactions
contemplated by the merger agreement, and declared the merger
agreement advisable and in the best interests of Meridian and
its shareholders and recommended that the shareholders adopt the
merger agreement and directed that the matter be submitted for
consideration of our shareholders at the special meeting. For a
discussion of the material factors considered by our board of
directors in reaching its conclusions, see The
Merger Reasons for the Merger; Recommendation of Our
Board of Directors.
Our board of directors unanimously recommends that you vote
FOR the proposal to adopt the merger agreement and
FOR the approval of any proposal to adjourn or
postpone the special meeting to a later date to solicit
additional proxies in favor of the adoption of the merger
agreement if there are not sufficient votes for adoption of the
merger agreement at the special meeting.
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Financing
of the Merger (page 44)
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The amount of funds necessary to pay the aggregate merger
consideration to our shareholders and holders of options and
warrants is anticipated to be approximately $27.2 million,
assuming:
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a purchase price of $0.29 per share (net of the exercise
price for warrants); and
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none of our shareholders validly exercises and perfects its
appraisal rights.
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In addition, Alta Mesa will assume our outstanding indebtedness,
which was approximately $92.4 million as of January 4,
2010. Alta Mesa has informed us that it will pay for the
acquisition through a combination of cash on hand and financing
obtained under its credit facility or contributions from its
partners. Alta Mesas obligation to complete the merger is
not contingent on its obtaining financing.
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Material
United States Federal Income Tax Consequences
(page 44)
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The exchange of shares of common stock for cash in the merger
will be a taxable transaction for United States federal
income tax purposes, and possibly for state, local and foreign
tax purposes as well. See The Merger Material
U.S. Federal Income Tax Consequences of the Merger to Our
Shareholders. You should consult your tax advisor for a
complete analysis of the effect of the merger on your federal,
state, local
and/or
foreign taxes.
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Conditions
to the Completion of the Merger (page 61)
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Conditions to the Obligations of Each
Party.
The merger agreement contains important
conditions to each partys obligation to consummate the
merger, including the following:
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the adoption of the merger agreement by the affirmative vote of
the holders of at least two-thirds of the outstanding shares of
our common stock entitled to vote;
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the absence of any action, suit or proceeding instituted by any
governmental authority and no statute, rule, order, decree or
regulation and no injunction, order, decree or judgment of any
court or governmental authority of competent jurisdiction may be
in effect, in each case which would prohibit, restrain, enjoin
or restrict the consummation of the transactions contemplated by
the merger agreement; and
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each of the parties to the merger agreement shall have obtained
all material permits, licenses, certificates, consents,
approvals, entitlements, plans, surveys, relocation plans,
environmental impact reports and other authorizations of
governmental authorities required to consummate the transactions
contemplated by the merger agreement.
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Conditions to Alta Mesas and Merger Subs
Obligations.
The merger agreement contains
important conditions to Alta Mesas and Merger Subs
obligations to consummate the merger, including the following:
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the representations and warranties that Meridian made in the
merger agreement are true and correct as of the date of the
merger agreement and as of closing date of the merger as though
made on such dates (except to the extent such representations
and warranties are expressly made only as of a specific date, in
which case as of such specific date), except where the failures
to be so true and correct (for this purpose disregarding any
qualification or limitation as to materiality or a material
adverse effect) do not have, and would not reasonably be
expected to have, individually or in the aggregate, a material
adverse effect;
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Meridians performance in all material respects of our
obligations under the merger agreement;
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since the date of the merger agreement, there shall not have
occurred a material adverse effect;
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certain consents, waivers and approvals necessary to consummate
the merger shall have been obtained;
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Meridians execution of a settlement agreement with Shell
Oil Company and SWEPI LP (together, Shell) on terms
that are materially similar to the terms previously disclosed to
Alta Mesa relating to the pending arbitration proceeding in
which Shell has demanded contractual indemnity and defense from
us arising from certain environmental claims (we entered into a
settlement agreement on such terms with Shell on
January 11, 2010);
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no more than five percent of the holders of our common stock
shall have notified us of their intent to exercise rights of
dissent and appraisal;
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Morgan Keegans fairness opinion shall not have been
withdrawn;
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except for our well bonus plans and any other employee incentive
plans being assumed by the surviving company, all employee
incentive plans shall terminate on or prior to the effective
time of the merger;
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all of Meridians payment and other obligations under our
engagement letters with our financial advisors shall have
terminated, except for the indemnity and confidentiality
provisions thereunder; and
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waivers from certain of Meridians option holders for the
cancellation of options held by them shall have been obtained.
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Conditions to Meridians Obligations.
The
merger agreement contains important conditions to our
obligations to consummate the merger, including the following:
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the representations and warranties that Alta Mesa and Merger Sub
made in the merger agreement are true and correct as of the date
of the merger agreement and as of closing date of the merger as
though made on such dates (except to the extent such
representations and warranties are expressly made only as of a
specific date, in which case as of such specific date), except
where the failures to be so true and correct (for this purpose
disregarding any qualification or limitation as to materiality
or any material adverse effect on the ability of Alta Mesa or
Merger Sub to timely consummate the merger and the transactions
contemplated by the merger agreement) do not have, and would not
reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the ability of Alta Mesa
or Merger Sub to timely consummate the merger and the
transactions contemplated by the merger agreement; and
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Alta Mesa and Merger Sub shall have performed in all material
respects their respective obligations under the merger agreement.
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Restrictions
on Solicitations of Other Offers (page 57)
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The merger agreement provides that Meridian will not, nor will
we authorize or permit any of our subsidiaries or authorize any
of our directors, officers, employees, representatives or agents
to, directly or indirectly:
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solicit, initiate, encourage or knowingly facilitate, any
inquiries or the making of any proposal or offer that
constitutes, or could reasonably be expected to lead to, an
acquisition proposal for Meridian;
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enter into or engage in any discussions or negotiations
regarding, or that could reasonably be expected to lead to, any
acquisition proposal for Meridian, furnish to any third party
any information in connection with, or in furtherance of, any
acquisition proposal for Meridian, or afford access to the
business, properties, assets, books or records of Meridian or
any of our subsidiaries, otherwise cooperate in any way with, or
knowingly assist, participate in, facilitate or encourage any
effort by, any third party that has made, is seeking to make or
has informed us of any intention to make, or has publicly
announced an intention to make, an acquisition proposal for
Meridian;
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subject to certain limited exceptions, fail to make, withdraw,
qualify, amend or modify or publicly propose to withdraw,
qualify, amend or modify our boards recommendation that
the merger agreement be approved by our shareholders, or
recommend, adopt or approve, or publicly propose to recommend,
adopt or approve, an acquisition proposal for us, or take any
action or make any statement inconsistent with such
recommendation;
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take any action to make the provisions of any fair
price, moratorium, control share
acquisition, business combination or other
similar anti-takeover statute or regulation (including approving
any transaction under, or a third party becoming an
affiliated shareholder under, Section 21.606 of
the Texas Business Organizations Code, referred to in this proxy
statement as the TBOC), or any restrictive provision of any
applicable anti- takeover provision in our articles of
incorporation or bylaws, inapplicable to any transactions
contemplated by an acquisition proposal;
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enter into any agreement in principle, letter of intent, term
sheet, merger agreement, acquisition agreement, option
agreement, joint venture agreement, partnership agreement or
other contract or
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instrument constituting or relating to an acquisition proposal
for Meridian, or any contract or agreement in principle
compelling us to abandon, terminate or breach any of our
obligations under the merger agreement;
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enter into any confidentiality or similar agreement with any
third party which prohibits us from providing or making
available to Alta Mesa any of the information to be provided to
such third party in accordance with the no solicitation
provisions of the merger agreement; or
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grant or permit any third party any waiver or release under, or
fail to enforce any provision of, any confidentiality,
standstill or similar agreement with respect to any
class of securities of Meridian or any of our subsidiaries.
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Notwithstanding these restrictions, under certain circumstances,
our board of directors may respond to a third party acquisition
proposal or terminate the merger agreement and enter into an
acquisition agreement with respect to a superior proposal, so
long as we comply with certain terms of the merger agreement
described under The Merger Agreement
Covenants No Solicitation.
See The Merger Agreement Covenants
No Solicitation for the definitions of the terms
acquisition proposal and superior
proposal as used above.
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Termination
of the Merger Agreement (page 62)
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Alta Mesa has the option to terminate the merger agreement for
any reason in its sole and absolute discretion at any time prior
to the effective time of the merger, whether before or after
approval by our shareholders, provided that, if Alta Mesa elects
to exercise this option to terminate, Alta Mesa must pay a
$3.0 million termination fee to Meridian concurrently with
such termination. Under the terms of our forbearance agreement
with our credit facility lenders, if we receive a termination
fee from Alta Mesa, we would be required to use the termination
fee to reduce our indebtedness under our credit facility, and we
would not otherwise have the use of such fee for working capital
or capital expenditures.
In addition, the merger agreement may be terminated at any time
prior to the effective time of the merger, whether before or
after approval by our shareholders under several other
circumstances including, without limitation:
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by either Meridian or Alta Mesa if the effective time of the
merger has not occurred by 11:59 p.m. central time on
May 31, 2010, which we sometimes call the termination
date, except the right to terminate the merger agreement
shall not be available to a party whose breach of its
obligations under the merger agreement in any material respect
shall have proximately contributed to the failure to consummate
the merger on or before the termination date;
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by Meridian, at any time prior to the time at which we receive
the approval of our shareholders, if our board of directors
determines to enter into a definitive agreement with respect to
a superior proposal in accordance with the no solicitation
provisions of the merger agreement, provided that we pay to Alta
Mesa $3.0 million, as a termination fee, concurrently with
such termination and up to $1.0 million of Alta Mesas
expenses incurred by it in connection with the transactions
contemplated by the merger agreement; and
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by Alta Mesa if
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a change in our boards recommendation that the merger
agreement be approved by our shareholders shall have occurred;
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following the date of any bona fide acquisition proposal by a
third party for Meridian or any material modification thereto is
first publicly announced, disclosed or otherwise made known
prior to the time at which we receive the approval of our
shareholders, we fail to issue a press release that expressly
reaffirms our boards recommendation that the merger
agreement be approved by our shareholders within ten business
days following Alta Mesas written request to do so;
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any tender offer or exchange offer constituting an acquisition
proposal for Meridian is commenced or materially modified by any
third party with respect to our outstanding common stock prior
to the time at which we receive the approval of our
shareholders, and our board of directors shall not have
recommended that our shareholders reject such tender offer or
exchange offer and not tender their common stock into such
tender offer or exchange offer within ten business days after
commencement or material modification of such tender offer or
exchange offer, unless we have issued a press release that
expressly reaffirms our boards recommendation that the
merger agreement be approved by our shareholders within such ten
business day period;
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Meridian or our board of directors approves, endorses,
recommends, adopts or enters into any acquisition proposal by a
third party for Meridian or any agreement relating to an
acquisition proposal for Meridian (other than a confidentiality
agreement permitted by the no solicitation provisions of the
merger agreement); or
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Meridian shall have materially breached our obligations under
the nonsolicitation provisions of the merger agreement; or
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Meridians lenders shall have exercised their right, upon
unanimous written consent of all of the lenders party to our
credit facility, to terminate the forbearance period under our
credit facility forbearance agreement without cause on or after
February 28, 2010.
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Termination
Fee and Expenses (page 63)
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If the merger agreement is terminated under specified
circumstances, we may be required to pay to Alta Mesa a
$3.0 million termination fee and up to $1.0 million of
Alta Mesas expenses incurred by it in connection with the
transactions contemplated by the merger agreement.
If the merger agreement is terminated under other specified
circumstances, Alta Mesa may be required to pay to Meridian a
$3.0 million termination fee. Under the terms of our
forbearance agreement with our credit facility lenders, if we
receive a termination fee from Alta Mesa, we would be required
to use the termination fee to reduce our indebtedness under our
credit facility, and we would not otherwise have the use of such
fee for working capital or capital expenditures.
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Rights of
Dissent and Appraisal (page 65)
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If you vote against adopting the merger agreement, and you
otherwise comply with the applicable statutory procedures and
requirements of the TBOC, summarized elsewhere in this proxy
statement, you will be entitled to seek appraisal of the fair
value of your shares as set forth in Chapter 10, Subchapter
H of the TBOC. You must precisely follow these specific
procedures to exercise and perfect your rights of dissent and
appraisal, or you may lose your appraisal rights.
8
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING
The following questions and answers are intended to address
briefly some commonly asked questions regarding the merger, the
merger agreement and the special meeting. These questions and
answers may not address all questions that may be important to
you as a Meridian shareholder. Please refer to the Summary
Term Sheet and the more detailed information contained
elsewhere in this proxy statement, the annexes to this proxy
statement and the documents referred to or incorporated by
reference in this proxy statement, which you should read
carefully. See Where You Can Find More
Information.
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Q.
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What is the proposed transaction?
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A.
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The proposed transaction is Meridians acquisition by Alta
Mesa Holdings, LP, a Texas limited partnership, or Alta
Mesa. If the Agreement and Plan of Merger, which we refer
to as the merger agreement, dated as of
December 22, 2009, by and among Meridian, Alta Mesa and
Alta Mesa Acquisition Sub, LLC, a Texas limited liability
company and a wholly owned subsidiary of Alta Mesa that we refer
to as Merger Sub, is adopted by our shareholders,
the other closing conditions in the merger agreement are
satisfied or waived and the merger agreement is not terminated
prior to the effective time of the merger, Meridian will merge
with and into Merger Sub, which we refer to as the
merger. Merger Sub will be the surviving company and
will continue to be wholly owned after the merger by Alta Mesa.
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Q.
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Why am I receiving this proxy statement and proxy card?
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A.
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We are sending you these materials to help you decide how to
vote your shares of Meridian common stock with respect to the
merger. The merger cannot be completed unless the Meridian
shareholders adopt the merger agreement. Meridian is holding a
special meeting of shareholders to vote on the proposal to adopt
the merger agreement. Information about the special meeting, the
merger and the other business to be considered by Meridian
shareholders is contained in this proxy statement.
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Q.
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What matters will be voted on at the special meeting?
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A.
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At the special meeting you will be asked
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to consider and vote upon the adoption of the merger
agreement, pursuant to which Meridian will merge with and into
Merger Sub, and Merger Sub will continue as the surviving
company and remain a wholly owned subsidiary of Alta
Mesa, and
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to grant to the proxyholders the authority to vote
in their discretion with respect to the approval of any proposal
to postpone or adjourn the special meeting to a later date to
solicit additional proxies in favor of the adoption of the
merger agreement if there are not sufficient votes for adoption
of the merger agreement at the special meeting.
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Q.
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What happens if the merger is not consummated?
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A.
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If the merger agreement is not adopted by our shareholders or if
the merger is not completed for any other reason, shareholders
will not receive any payment for their shares in connection with
the merger. Instead, we will remain an independent public
company and the value of shares of our common stock will
continue to be subject to the risks and uncertainties identified
in our Annual Report on
Form 10-K
for the year ended December 31, 2008, as amended, and any
updates to those risks and uncertainties set forth in our
subsequent Quarterly Reports on
Form 10-Q,
including risks and uncertainties associated with our default
under our credit facility and other lending arrangements. If we
remain an independent public company, we cannot assure you that
our shares would continue to be traded on the NYSE. See
The Merger Effects on Meridian if the Merger
is Not Completed. Under specified circumstances, we may be
required to pay Alta Mesa a termination fee and expenses as
described under the caption The Merger
Agreement Termination Fee and Expenses.
Additionally, if the merger is not completed, forbearance
agreements with our lenders and certain others would terminate
and our lenders and other parties would then take action to
enforce their rights with respect to the outstanding obligations
owed to them. Because substantially all of our assets are
pledged as collateral under our credit facility, if our lenders
declare an event of default, they would be entitled to foreclose
on and take possession of our assets. If the merger is not
completed, we may be forced to liquidate or to otherwise seek
protection under federal bankruptcy
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laws, and we can give you no assurance that in a bankruptcy
proceeding you would receive any value for your shares.
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Q.
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Why is my vote important?
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A.
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If you fail to vote or fail to instruct your broker or other
nominee how to vote on the merger, your failure to vote will
have the same effect as voting AGAINST the proposal
to adopt the merger agreement. If you respond with an
abstain vote, your proxy will have the same effect
as voting AGAINST such proposal.
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Q.
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What will I receive in the merger?
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A.
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If the merger is completed, each share of our common stock
issued and outstanding immediately prior to the effective time
of the merger (other than shares owned by Alta Mesa, Merger Sub
or any other subsidiary of Alta Mesa or held in treasury by us
and other than shares held by shareholders, if any, who have
properly exercised and perfected statutory appraisal rights)
will be converted into the right to receive $0.29 in cash,
without interest and less any applicable withholding tax. The
closing sale price of our common stock on the NYSE on
December 22, 2009, the last trading day prior to
announcement of the execution of the merger agreement, was
$0.26 per share. The $0.29 per share to be paid for
each share of common stock in the merger represents a premium of
approximately 12% to the closing sale price on December 22,
2009.
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The exercise price of our outstanding stock options exceeds the
Merger Consideration, so holders of our options will not receive
any consideration, except that certain holders of options will
receive $10 consideration in exchange for the execution of an
option waiver, cancellation and release agreement. All
outstanding warrants will be converted into the right to receive
a cash payment at the effective time of the merger of an amount
equal to the Merger Consideration for the underlying shares,
reduced by the exercise price, and subject in all cases to
applicable withholding tax. Two of our directors,
Messrs. Reeves and Mayell, will receive $355,870 in the
aggregate for their warrants.
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Q.
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Will the proceeds I receive for my shares in the merger be
taxable to me?
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A.
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The exchange of shares of common stock for cash in the merger
will be a taxable transaction for United States federal
income tax purposes, and possibly for state, local and foreign
tax purposes as well. See The Merger Material
U.S. Federal Income Tax Consequences of the Merger to Our
Shareholders. You should consult your tax advisor for a
complete analysis of the effect of the merger on your federal,
state, local
and/or
foreign taxes.
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Q.
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When and where is the special meeting?
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A.
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The special meeting of our shareholders will be held on Tuesday,
March 30, 2010 at the offices of Fulbright & Jaworski
L.L.P., 1301 McKinney, Houston, Texas 77010, at
10:00 a.m. local time.
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Q.
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Who is entitled to vote at the special meeting?
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A.
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Holders of our common stock at the close of business on
February 8, 2010, the record date for the special meeting,
are entitled to vote.
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Q.
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What constitutes a quorum?
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A.
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Shareholders who hold a majority of the outstanding shares of
our common stock as of the close of business on the record date
and who are entitled to vote must be present or represented by
proxy in order to constitute a quorum to conduct business at the
special meeting.
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Q.
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What vote is required for Meridian shareholders to adopt the
merger agreement?
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A.
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The adoption of the merger agreement requires the affirmative
vote of the holders of at least two-thirds of the outstanding
shares of common stock entitled to vote.
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Q.
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How many votes do I have?
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A.
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You have one vote for each share of common stock that you owned
at the close of business on February 8, 2010, the record
date for the special meeting.
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Q.
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How does Meridians board of directors recommend that I
vote?
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A.
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Our board of directors unanimously recommends that you vote
FOR the proposal to adopt the merger agreement and
FOR the approval of any proposal to adjourn or
postpone the special meeting to a later date to solicit
additional proxies in favor of the adoption of the merger
agreement if there are not sufficient votes for adoption of the
merger agreement at the special meeting. You should read
The Merger Reasons for the Merger;
Recommendation of Our Board of Directors for a discussion
of the factors that our board of directors considered in
deciding to recommend the adoption of the merger agreement.
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Q.
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How do Meridians executive officers and directors
intend to vote?
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A.
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Each of our directors and executive officers has entered into an
agreement with Alta Mesa and Merger Sub to vote all shares of
our common stock owned or controlled by them in favor of the
approval of the merger agreement.
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Exclusive of options and warrants, our directors and executive
officers beneficially owned, and had the right to vote an
aggregate of 3,997,363 shares of common stock, or
approximately 4.32% of our outstanding shares of common stock on
the record date.
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Q.
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What effects will the merger have on Meridian?
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A.
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As a result of the merger, if completed, we will be wholly owned
by Alta Mesa and our common stock will cease to be publicly
traded. You will no longer have any interest in our future
earnings or growth.
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Following consummation of the merger, the registration of our
common stock under the Securities Exchange Act of 1934, or the
Exchange Act, will be terminated upon application to
the SEC, we will no longer be required to file reports with the
SEC, we will no longer be a publicly traded company and you will
not participate in our earnings or growth. In addition, upon
completion of the merger, shares of our common stock will no
longer be listed on the NYSE.
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Q.
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What do I need to do now?
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A.
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After carefully reading and considering the information
contained in this proxy statement, including the annexes hereto
and the other documents referred to or incorporated by reference
in this proxy statement, please vote your shares by completing,
signing, dating and returning the enclosed proxy card or by
submitting your proxy by telephone or the Internet. If you hold
your shares in street name, please follow the
instructions on the voting form provided by your broker, bank or
other nominee. You can also attend the special meeting and vote.
Do NOT send your stock certificate(s) with your proxy.
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Q.
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How do I vote?
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A.
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You may vote:
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by completing, signing and dating each proxy card
you receive and returning it in the enclosed prepaid envelope;
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by using the telephone number printed on your proxy
card;
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by using the Internet voting instructions printed on
your proxy card;
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in person by appearing at the special
meeting; or
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if you hold your shares in street name,
by following the procedures provided by your broker, bank or
other nominee.
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If you are voting by telephone or via the Internet, your voting
instructions must by received by 11:59 p.m., Eastern time,
on March 29, 2010.
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If you return your signed proxy card, but do not mark the boxes
showing how you wish to vote, your shares will be voted
FOR the proposal to adopt the merger agreement and
FOR the approval of any proposal to adjourn or
postpone the special meeting to a later date to solicit
additional proxies in favor of the adoption of the merger
agreement if there are not sufficient votes for adoption of the
merger
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agreement at the special meeting, and in accordance with the
recommendations of our board of directors on any other matters
properly brought before the special meeting for a vote.
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Q.
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If my shares are held in street name by my
broker, bank or other nominee, will my broker, bank or other
nominee vote my shares for me?
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A.
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Your broker, bank or other nominee will only be permitted to
vote your shares if you instruct your broker, bank or other
nominee how to vote. You should follow the procedures provided
by your broker, bank or other nominee regarding the voting of
your shares. If you do not instruct your broker, bank or other
nominee to vote your shares, your shares will not be voted and
the effect will be the same as a vote AGAINST the
adoption of the merger agreement.
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Q.
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What do I do if I receive more than one proxy or set of
voting instructions?
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A.
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If you hold shares in street name, directly as a
record holder or in multiple accounts, you may receive more than
one proxy
and/or
set
of voting instructions relating to the special meeting. These
should each be voted and returned separately as described
elsewhere in this proxy statement in order to ensure that all of
your shares are voted.
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Q.
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How can I change or revoke my vote?
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A.
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You have the right to change or revoke your proxy at any time
before the vote taken at the special meeting by taking any of
the following actions:
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by delivering to our Corporate Secretary, Lloyd V.
DeLano, at The Meridian Resource Corporation, 1401 Enclave
Parkway, Suite 300, Houston, Texas 77077 a signed written
notice of revocation, bearing a date later than the date of the
proxy, stating that the proxy is revoked;
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by attending the special meeting and voting in
person (your attendance at the meeting will not, by itself,
revoke your proxy you must vote in person at the
meeting to revoke a prior proxy);
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by submitting a later-dated proxy card;
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if you voted by telephone or the Internet, by voting
a later time by telephone or Internet; or
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if you have instructed a broker, bank or other
nominee to vote your shares, by following the directions
received from your broker, bank or other nominee to change those
instructions.
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Q.
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Will any other business be conducted at the meeting?
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A.
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Our board of directors does not know of any other business that
will be presented at the meeting. If any other proposal properly
comes up for a vote at the meeting in which a proxy has provided
discretionary authority, the proxy holders will vote your shares
in accordance with their best judgment.
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Q.
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What happens if I sell my shares before the special
meeting?
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A.
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The record date of the special meeting is earlier than the
special meeting and the date that the merger, if approved, is
expected to be completed. If you transfer your shares of common
stock after the record date but before the special meeting, you
will retain your right to vote at the special meeting, but will
transfer the right to receive the Merger Consideration. In order
to receive the Merger Consideration, you must hold shares upon
completion of the merger.
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Q.
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Am I entitled to exercise appraisal rights instead of
receiving the Merger Consideration for my shares?
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A.
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Yes. As a holder of our common stock, you are entitled to
appraisal rights under Texas law in connection with the merger
if you meet certain conditions and follow certain required
procedures. See Rights of Dissent and Appraisal.
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Q.
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When is the merger expected to be completed if approved by
Meridian shareholders?
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A.
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We are working toward completing the merger as quickly as
possible, and we anticipate that it will be completed during the
first half of 2010. However, the exact timing of the completion
of the merger cannot be predicted. To complete the merger, we
must obtain shareholder approval and the other closing
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conditions under the merger agreement must be satisfied or
waived. See The Merger Agreement The Merger
and Effective Time and The Merger
Agreement Conditions to Completion of the
Merger.
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Q:
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How long after the effective date of the merger will I
receive the Merger Consideration?
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A:
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We expect the paying agent to distribute letters of transmittal
within five business days after the effective date of the
merger. You should expect payment for your shares
approximately days after the paying agent receives
your properly completed letter of transmittal and stock
certificates.
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Q.
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Will a proxy solicitor be used?
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A.
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Yes. We have engaged The Altman Group, Inc. to assist in the
solicitation of proxies for the special meeting. We will pay
that firm approximately $185,000 plus reasonable
out-of-pocket
expenses for their assistance.
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Q.
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Should I send in my stock certificates now?
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A.
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No. Please do not send your certificates in now.
After the merger is completed, you will be sent a letter of
transmittal with detailed written instructions for exchanging
your common stock certificates for the Merger Consideration. If
your shares are held in street name by your broker,
bank or other nominee you will receive instructions from your
broker, bank or other nominee as to how to effect the surrender
of your street name shares after completion of the
merger in exchange for the Merger Consideration.
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Q.
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What if I have lost a stock certificate?
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A.
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If any certificate is lost, stolen or destroyed, upon making an
affidavit of that fact posting a bond in the form required by
Merger Sub, as the surviving company, as indemnity against any
claim that may be made against Merger Sub against any claim that
may be made against it with respect to such certificate, the
exchange agent will pay you the Merger Consideration in exchange
for such lost, stolen or destroyed certificate.
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Q.
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Who is soliciting my vote?
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A.
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Meridian is soliciting your vote.
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Q.
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Who can help answer my other questions?
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A.
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If you have additional questions about the merger, need
assistance in submitting your proxy or voting your shares of
common stock, or need additional copies of the proxy statement
or the enclosed proxy card, please contact The Altman Group,
Inc., our proxy solicitor, toll-free at (877) 864-5052 or call
(201) 806-7300 or e-mail questions to
TMRinfo@altmangroup.com.
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13
FORWARD-LOOKING
STATEMENTS
This proxy statement contains statements that are not historical
facts and that are considered forward-looking within
the meaning of the safe harbor provisions of Section 27A of
the Securities Act of 1933 and Section 21E of the Exchange
Act. You can identify these statements by the fact that they do
not relate strictly to historical or current facts. We have
based these forward-looking statements on our current
expectations about future events. Further, statements that
include words such as may, will,
project, might, expect,
believe, anticipate, intend,
could, would, estimate,
continue or pursue, or the negative or
other words or expressions of similar meaning, may identify
forward-looking statements. These forward-looking statements are
found at various places throughout this proxy statement. These
forward-looking statements, including without limitation, those
relating to future actions, effects of the merger on us if the
merger is not completed, strategies, future performance, the
outcome of contingencies such as legal proceedings and future
financial results, wherever they occur in this proxy statement,
are necessarily estimates reflecting the best judgment of our
management and involve a number of risks and uncertainties that
could cause actual results to differ materially from those
suggested by the forward-looking statements. These
forward-looking statements should, therefore, be considered in
light of various important factors set forth from time to time
in our filings with the SEC. In addition to other factors and
matters contained in this document, these statements are subject
to risks, uncertainties and other factors, including, among
others:
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we may be unable to obtain the required shareholder approval for
the merger at the special meeting;
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the conditions to the closing of the merger may not be
satisfied, or the merger agreement may be terminated prior to
closing, which would, in some cases, require payment of a
$3.0 million termination fee;
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Alta Mesa may exercise its option to terminate the merger
agreement for any reason in its sole and absolute discretion at
any time prior to the effective time of the merger, whether
before or after approval by our shareholders, provided that, if
Alta Mesa elects to exercise this option to terminate, Alta Mesa
must pay a $3.0 million termination fee to Meridian
concurrently with such termination, which Meridian would be
required to use to reduce our indebtedness under our credit
facility;
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disruptions and uncertainty resulting from our proposed merger
may make it more difficult for us to maintain relationships with
other customers, employees or suppliers, and as a result our
business may suffer;
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the effects of litigation filed in connection with the proposed
merger;
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the restrictions on our conduct prior to closing contained in
the merger agreement may have a negative effect on our
flexibility and our business operations;
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the right of Meridians lenders, upon unanimous written
consent of all of the lenders party to our credit facility, to
terminate the forbearance period under our credit facility
forbearance agreement without cause on or after
February 28, 2010;
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the merger may involve unexpected costs or unexpected
liabilities;
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we may not have sufficient cash to continue our operations and
to conduct our business until the conditions to the merger can
be satisfied and the merger can be completed; and
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additional factors discussed in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008, under the
headings Risk Factors and Quantitative and
Qualitative Disclosures About Market Risk, and as such
factors were updated in our subsequent Quarterly Reports on
Form 10-Q.
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See Where You Can Find More Information. You are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this proxy
statement.
THE FORWARD-LOOKING STATEMENTS IN THIS PROXY STATEMENT SPEAK
ONLY AS OF THE DATE HEREOF. WE UNDERTAKE NO OBLIGATION TO
PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS,
WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS, OR
OTHERWISE.
14
THE
PARTIES TO THE MERGER
Meridian
The Meridian Resource Corporation
1401 Enclave Parkway, Suite 300
Houston, Texas 77077
(281) 597-7000
The Meridian Resource Corporation, a Texas corporation, is an
independent oil and natural gas company that explores for,
acquires and develops oil and natural gas properties. Through
our wholly owned subsidiaries, we hold interests primarily in
the onshore oil and natural gas regions of south Louisiana and
Texas and offshore in the Gulf of Mexico.
For more information about us, please visit our website at
www.tmrx.com. The information provided on our website is not
part of this proxy statement, and therefore is not incorporated
by reference. See also Where You Can Find More
Information. Our common stock is publicly traded on the
NYSE under the symbol TMR.
Alta Mesa
Alta Mesa Holdings, LP
15415 Katy Freeway, Suite 800
Houston, Texas 77094
Telephone:
(281) 530-0991
Alta Mesa Holdings, LP is a privately held Texas limited
partnership that explores for, acquires and develops oil and
natural gas properties.
Merger Sub
Alta Mesa Acquisition Sub, LLC
15415 Katy Freeway, Suite 800
Houston, Texas 77094
Telephone:
(281) 530-0991
Alta Mesa Acquisition Sub, LLC is a wholly owned subsidiary of
Alta Mesa and is a Texas limited liability company. It was
formed solely for the purpose of effecting the merger, has no
assets, and has conducted no business operations.
THE
SPECIAL MEETING
Time,
Place and Purpose of the Special Meeting
This proxy statement is being furnished to our shareholders as
part of the solicitation of proxies by our board of directors
for use at the special meeting to be held on Tuesday,
March 30, 2010, starting at 10:00 a.m. local time, at
the offices of Fulbright & Jaworski L.L.P., 1301
McKinney, Houston, Texas 77010, or at any postponement or
adjournment thereof. The purpose of the special meeting is for
our shareholders to consider and vote upon the adoption of the
merger agreement (and to approve any proposal to adjourn or
postpone the special meeting to a later date to solicit
additional proxies in favor of the adoption of the merger
agreement if there are not sufficient votes for adoption of the
merger agreement at the special meeting). A copy of the merger
agreement is attached as
Annex A
to this proxy
statement. This proxy statement and the enclosed form of proxy
are first being mailed to our shareholders on or about
February 12, 2010.
Record
Date and Quorum
We have fixed the close of business on February 8, 2010 as
the record date for the special meeting, and only holders of
record of common stock on the record date are entitled to vote
at the special meeting. On
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February 8, 2010, there were 92,475,527 shares of
common stock entitled to be voted. Each share of common stock
entitles its holder to one vote on all matters properly coming
before the special meeting.
A majority of the outstanding shares of our common stock
entitled to vote, represented in person or by proxy, will
constitute a quorum for purposes of the special meeting. Shares
of common stock represented at the special meeting but not
voted, including broker non-votes and shares of
common stock for which we have received proxies indicating that
the submitting shareholders have abstained, will be treated as
present at the special meeting for purposes of determining the
presence or absence of a quorum for the transaction of all
business. In the event that a quorum is not present at the
special meeting, it is expected that the meeting will be
adjourned or postponed to solicit additional proxies.
Vote
Required for Approval of the Merger Agreement
The adoption of the merger agreement requires the affirmative
vote of the holders of at least two-thirds of the outstanding
shares of common stock entitled to vote. For the proposal to
adopt the merger agreement, you may vote FOR,
AGAINST or ABSTAIN.
If you abstain,
it will have the same effect as a vote AGAINST the
adoption of the merger agreement.
Under the rules of the NYSE, brokers who hold shares in street
name for customers have the authority to vote on
routine proposals when they have not received
instructions from beneficial owners. However, brokers are
precluded from exercising their voting discretion with respect
to approving non-routine matters such as the adoption of the
merger agreement and, as a result, absent specific instructions
from the beneficial owner of the shares, brokers are not
empowered to vote those shares, referred to generally as
broker non-votes.
These broker
non-votes will have the same effect as a vote
AGAINST the adoption of the merger agreement.
Exclusive of options and warrants, our directors and executive
officers beneficially owned, and had the right to vote an
aggregate of 3,997,363 shares of common stock, or
approximately 4.32% of our outstanding shares of common stock on
the record date. Each of our directors and executive officers
has entered into an agreement with Alta Mesa and Merger Sub to
vote all shares of our common stock owned or controlled by them
in favor of the approval of the merger agreement.
Proxies
and Revocation
If you submit a proxy by telephone or the Internet or by
returning a signed proxy card by mail, your shares will be voted
at the special meeting as you indicate on your proxy card or by
such other method. If you sign your proxy card without
indicating your vote, your shares will be voted FOR
the adoption of the merger agreement and FOR the
approval of any adjournment or postponement of the special
meeting referred to above, and in accordance with the
recommendations of our board of directors on any other matters
properly brought before the special meeting for a vote.
If you abstain, your shares of common stock will be treated as
present at the special meeting for purposes of determining the
presence or absence of a quorum for the transaction of business;
however, your shares will not be counted as votes cast or shares
voting on the proposal to adopt the merger agreement. If you
abstain, it will have the same effect as a vote
AGAINST the adoption of the merger agreement.
If your shares of common stock are held in street name, you will
receive instructions from your broker, bank or other nominee
that you must follow in order to have your shares voted. If you
do not instruct your broker, bank or other nominee to vote your
shares, it has the same effect as a vote AGAINST
adoption of the merger agreement.
16
Proxies received at any time before the special meeting, and not
revoked or superseded before being voted, will be voted at the
special meeting. You have the right to change or revoke your
proxy at any time before the vote taken at the special meeting:
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by delivering to our Corporate Secretary, Lloyd V. DeLano, at
The Meridian Resource Corporation, 1401 Enclave Parkway,
Suite 300, Houston, Texas 77077 a signed written notice of
revocation, bearing a date later than the date of the proxy,
stating that the proxy is revoked;
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by attending the special meeting and voting in person (your
attendance at the meeting will not, by itself, revoke your
proxy you must vote in person at the meeting to
revoke a prior proxy);
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by submitting a later-dated proxy card;
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if you voted by telephone or the Internet, by voting at a later
time by telephone or the Internet; or
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if you have instructed a broker, bank or other nominee to vote
your shares, by following the directions received from your
broker, bank or other nominee to change those instructions.
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Please do not send in your stock certificates with your proxy
card. If the merger is completed, a separate letter of
transmittal will be mailed to you that will enable you to
receive the Merger Consideration in exchange for your Meridian
stock certificates.
Adjournments
and Postponements
If the requisite shareholder vote approving the merger proposal
has not been received at the time of the special meeting,
holders of our common stock may be asked to vote on a proposal
to adjourn or postpone the special meeting, if necessary, to
solicit additional proxies in favor of the merger proposal. The
affirmative vote of the holders of the majority of the shares
entitled to vote on, and who voted for, against, or expressly
abstained with respect to, the adjournment proposal at the
special meeting is required to approve the adjournment proposal.
Our board of directors recommends that you vote FOR
the approval of any such adjournment or postponement of the
meeting, if necessary.
Rights of
Dissent and Appraisal
The Texas Business Organizations Code, or TBOC, provides you
with rights of dissent and appraisal in connection with the
merger. This means that if you are not satisfied with the amount
you are receiving in the merger, you are entitled to have the
fair value of your shares of common stock determined by a Texas
court and to receive payment based on that valuation. The
ultimate amount you receive as a dissenting shareholder in an
appraisal proceeding may be more or less than, or the same as,
the amount you would have received in the merger. To exercise
your rights of dissent and appraisal, you must deliver a written
objection to the merger before the merger agreement is voted on
at the special meeting and you must vote against the approval of
the merger agreement. Your failure to follow exactly the
procedures specified under Texas law will result in the loss of
your rights of dissent and appraisal.
See Rights of Dissent and Appraisal and the text of
Subchapter H of Chapter 10 of the Texas Business
Organizations Code reproduced in its entirety as
Annex C
to this proxy statement, which relates to your rights of
dissent and appraisal. We encourage you to read these provisions
carefully and in their entirety.
Solicitation
of Proxies
This proxy solicitation is being made and paid for by us on
behalf of our board of directors. In addition, we have retained
The Altman Group, Inc. to assist in the solicitation. We will
pay The Altman Group, Inc. approximately $185,000 plus
reasonable
out-of-pocket
expenses for their assistance. Our directors, officers and
employees may also solicit proxies by personal interview, mail,
e-mail,
telephone, facsimile or other means of communication. These
persons will not be paid additional remuneration for their
efforts. We will also request brokers, banks and other nominees
to forward proxy solicitation material to the beneficial owners
of shares of common stock that the brokers, banks and nominees
hold of record. Upon request, we will reimburse them for their
reasonable
out-of-pocket
expenses related to forwarding the material.
17
Other
Matters
Our board of directors does not know of any other business that
will be presented at the meeting. If any other proposal properly
comes up for a vote at the meeting in which your proxy has
provided discretionary authority, the proxy holders will vote
your shares in accordance with their best judgment.
Questions
and Additional Information
If you have additional questions about the merger, need
assistance in submitting your proxy or voting your shares of
common stock, or need additional copies of the proxy statement
or the enclosed proxy card, please contact The Altman Group,
Inc., our proxy solicitor, toll-free at (877) 864-5052 or call
(201) 806-7300 or e-mail questions to
TMRinfo@altmangroup.com.
THE
MERGER
At the special meeting we will ask our shareholders to vote on a
proposal to adopt the merger agreement that provides for the
merger of us with and into Merger Sub, with Merger Sub being the
surviving corporation. A copy of the merger agreement is
attached as
Annex A
to this proxy statement and is
incorporated into this proxy statement by reference. We urge you
to read the merger agreement in its entirety because it is the
legal document governing the merger.
Background
of the Merger
Historically, our board of directors and management have
periodically reviewed our long-term strategies and objectives.
In mid-2008, our board again concluded that it would be in our
best interests and the best interests of our shareholders to
re-evaluate our business strategy and long-term prospects. The
board recognized that there were many dynamic factors and
uncertainties to consider, many beyond our control, that would
impact any given specific strategy to attain value for our
shareholders. In the past, our board and management had, from
time to time, sought advice from financial advisors to help
evaluate our assets, business plans and strategic alternatives
relative to the economic and market conditions that affect us
and the oil and gas industry. In keeping with this policy and in
recognition of the uncertainties that existed in the market,
including the volatility of commodities prices, at its
July 22, 2008 meeting, our board agreed to engage
J.P.Morgan Securities, Inc. (JPMorgan) to advise and
assist in evaluating strategic alternatives given our financial,
technical and operational aspects relative to the prevailing
economic and market conditions and outlook. Our board also
appointed a special committee of independent and non-independent
directors comprised of Paul D. Ching, Michael J. Mayell, C. Mark
Pearson and John B. Simmons to monitor, review and help the
board understand the ongoing work of JPMorgan and the management
team and to screen any resulting offers from third parties.
Mr. Ching served as chair of the special committee.
We were also undergoing transitions in management during the
same period. In April 2008, Joseph A. Reeves, Jr. stepped
down as our Chairman of the Board, but remained as our Chief
Executive Officer. Our board appointed Mr. Ching to serve
as the new Chairman of the Board. Both Mr. Reeves and
Mr. Mayell, then President of Meridian, had also agreed to
relinquish their respective officer positions at the end of 2008
when their employment agreements ended, but would remain on the
board.
JPMorgan advised our board that our Gulf Coast portfolio carried
exploitation and exploration risks that were difficult to
predict. Our acreage portfolio included mostly gas, with a low
reserves-to-production
ratio, while the market seemed to be giving more credit to those
companies that had diversified their portfolios to include
longer-lived properties, such as tight gas sands and shale gas.
Our board and management believed that we might be able to take
advantage of the high commodity price environment at the time
and enhance shareholder value by creating a more diversified
portfolio of properties with a strategic partner. JPMorgan
identified a preliminary list of potential strategic partners
(public, private, financial sponsors and small cap resource
players) to contact and seek to engage in initial discussions
regarding a strategic transaction. By late August 2008, we had
entered into confidentiality agreements with several companies
and we began providing them with information.
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Over the next few months, there was an unprecedented and
widespread deterioration in financial markets and commodities
prices. By late October 2008, oil and gas prices also continued
to deteriorate. Our market value had fallen more than 60% since
late June 2008. Our board and JPMorgan believed that achieving a
strategic transaction had become much more difficult, as many
potential strategic partners were looking to preserve liquidity
in order to carry out their own near term plans. The market for
exploration and production properties quickly changed from a
sellers to a buyers market.
At a board meeting held on November 5, 2008,
Mr. Reeves reported that, as a result of the recent price
declines in commodities prices and resulting reductions in cash
flow, Meridian would seek to reduce its general and
administrative expenses in 2009 by approximately one-third, sell
its interests in certain non-developed prospects and schedule
the development of other properties in a manner intended to
achieve maximum cash flow with the capital available. He also
reported that about ten companies had signed confidentiality
agreements with Meridian and were reviewing the data we had
provided to them. Our board considered the advantages and
disadvantages of asset sales, raising additional capital or a
stock-for-stock
transaction and indicated a preference for a
stock-for-stock
strategic transaction.
In late November 2008, we received from Company A a
cash offer for our Turtle Bayou and Weeks Island fields. The
special committee of the board and management reviewed the offer
and determined that the offer price significantly undervalued
the assets. Given the continued interest from other parties, we
made a decision not to pursue the sale of those assets to
Company A, and we informed Company A of our decision.
Our board met again in early December 2008 and reviewed the
status of ongoing discussions with potential transaction
parties. The special committee reported to the board that,
although several companies were conducting due diligence
reviews, management considered about six or seven of them to be
seriously considering making some sort of firm offer.
Over the previous several years, various landowners
and/or
regulators had asserted claims against Meridian (along with
numerous other oil companies) concerning several fields in which
Meridian had operations. In those claims, the landowners or
regulators sought, through litigation, injunctive and other
relief, including unspecified amounts in both actual and
punitive damages, for alleged breaches of mineral leases and
alleged failure to restore the plaintiffs lands from
alleged contamination and otherwise from Meridians oil and
natural gas operations. In some of the lawsuits, Shell Oil
Company and SWEPI LP (together, Shell) had demanded
contractual indemnity and defense from Meridian based upon the
terms of the two acquisition agreements related to the fields,
under which Meridian had originally acquired those fields from
Shell in the late 1990s. On December 9, 2008, Shell sent
Meridian a letter reiterating its demand for indemnity. Shell
did not at that time produce supporting documentation for its
claim and Meridian denied that it owed any indemnity under the
acquisition agreements; however, the amounts claimed by Shell
were substantial in nature and, if adversely determined, would
have had a material adverse effect on Meridian. Our board and
management believed that Shells claim could be a
substantial barrier to any successful strategic transaction with
another party. Management arranged for a meeting with Shell
representatives in the first week of January 2009 for Meridian
to understand Shells position in this matter. On many
occasions throughout the first half of 2009, management
continued to meet with Shell representatives to try to reach a
resolution satisfactory to both parties.
On December 19, 2008, Meridian and its lenders amended our
credit facility. Among other things, the amendment redetermined
our borrowing base from $110.0 million to
$95.0 million, which was the amount of borrowings
outstanding under the credit facility at that time, and
increased the interest rates accruing on the borrowings. The
borrowing base was governed by a number of factors including,
but not limited to, the reserve volumes associated with our
proved oil and gas properties (particularly proved developed
producing reserves) and the future net cash flows associated
with the reserves, determined utilizing the lenders
assumptions regarding commodity prices. Our resulting lack of
liquidity put further pressure on our ability to create cash
flow by drilling oil and gas wells and turning non-producing
properties into producing properties.
On December 22, 2008, our board met again to get updates
from JPMorgan on the status of ongoing discussions with
potential transaction parties. JPMorgan indicated that they
expected that any further indications of interest would be
forthcoming by the end of January 2009. In light of pending
management
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changes, our board appointed Mr. Ching to serve as interim
Chief Executive Officer and President, effective
December 30, 2008.
As of December 29, 2008, Mr. Reeves stepped down as
our Chief Executive Officer and Mr. Mayell stepped down as
our President. Both continued to serve on our board.
In early 2009, with the approval of our board, Mr. Ching
and management implemented a strategy to:
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achieve a strategic transaction by a merger, sale of assets or
an infusion of capital;
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work with our lenders to gain time to achieve a strategic
transaction;
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reduce both general and administrative costs and field
operations costs;
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focus on production optimization;
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preserve cash;
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attempt to reduce obligations in order to strengthen our balance
sheet and improve Meridians attractiveness to a potential
strategic partner, including settlement of the Shell claim and
restructuring of our drilling rig contract obligations;
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re-prioritize existing exploration opportunities; and
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sell certain South Texas and East Texas acreage positions to
improve our cash position.
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Our board met again on February 3, 2009 and reviewed the
status of ongoing discussions. Management reported to the board
that six parties still indicated an interest in doing a
transaction, but we had received no offers.
On February 6, 2009, Company B submitted a
letter of intent outlining a proposal to acquire Meridian in a
stock transaction. The offer was, however, subject to the
agreement by our credit facility lenders to accept payment for
substantially less than the full amount of our outstanding
loans. Our lenders declined anything less than full repayment of
our outstanding debt and we were forced to reject the offer.
Later in February 2009, Company C made an oral offer
to Meridian for a
stock-for-stock
merger. Our board and management, with the assistance of
JPMorgan, analyzed the offer and concluded that Meridian at that
time was a stronger company on a stand-alone basis when compared
with the combination of Company C and Meridian. Management, with
agreement of the special committee, decided to terminate further
discussions with Company C.
At the March 10, 2009 board meeting, management reported
that some additional potentially interested parties had entered
into confidentiality agreements with Meridian and we had
provided evaluation information to them. Our board reviewed our
final 2008 financial statements, 2009 strategy and projected
2009 budget and expenditures, which included reductions in both
general and administrative costs and field operating costs.
Management updated the board on the status of negotiations with
potential acquirors and discussions with our lenders related to
the April 2009 borrowing base redetermination under our credit
facility. One key aspect of the discussion was that we did not
have sufficient cash to continue drilling any of our oil and gas
prospects and develop our reserve base, nor did we expect to
have sufficient cash to repay any borrowing base deficiency that
could occur if our lenders further reduced our borrowing base.
Based on our December 31, 2008 balance sheet, we had
financial covenant defaults under our credit facility,
specifically, the requirement that the ratio of current assets
to current liabilities, as adjusted in accordance with the
credit facility, be one to one or higher. Management reported
that our independent auditors were most likely going to issue
their audit report on our 2008 financial statements with a going
concern modification, which would constitute an additional
covenant default under our credit facility. The going concern
modification was expected to provide that the financial covenant
defaults under our credit facility and other debt agreements
raised substantial doubt about our ability to continue as a
going concern. In addition, we had two long-term dayrate
contracts with Orion Drilling Company LLC (Orion) to
utilize two drilling rigs. Although our capital expenditure
plans could no longer accommodate use of these rigs, we remained
obligated for the dayrate regardless of whether the rigs were
working or idle. Consequently, our obligations under the rig
contracts were becoming increasingly
20
significant. Our board approved managements proposed 2009
budget, subject to resolution of the borrowing base
redetermination issues with our credit facility lenders and
subject to resolution of issues under our drilling rig contracts.
In February and March 2009, Company D had indicated
an interest in a transaction with Meridian. The companies
exchanged due diligence information and the management for the
companies met. Mr. Ching sent a proposal to Company D in
late March 2009. Mr. Ching held further discussions with
them, but Company D decided not go forward.
In the first part of 2009, Company E had indicated
an interest in a merger transaction with Meridian. Company
Es chief executive officer and Mr. Ching had several
conversations during that time and each exchanged due diligence
materials. In early March 2009, Company E made an indicative
offer to Meridian for a
stock-for-stock
merger between the two companies. The offer, however, was
subject to Company E being able to restructure its existing
credit facility and senior notes. In mid-April 2009, Company E
withdrew its offer, citing prohibitive financing issues and
higher potential plugging and abandonment liabilities than they
had expected on the Meridian properties.
On April 15, 2008, our credit facility lenders notified
Meridian that, effective April 30, 2009, our borrowing base
would be reduced from $95.0 million to $60.0 million.
The credit facility provided that the $35.0 million of
outstanding borrowings in excess of the borrowing base must be
repaid within 90 days after the redetermination. We did not
have sufficient cash available to repay the shortfall. The value
of proved reserves had been significantly reduced during the
previous several months due primarily to continuing decreases in
the prices of oil and natural gas. Management continued
discussions with the lenders regarding alternative repayment
terms, including consideration of amortization payments from
cash flow, obtaining waivers for non-compliance with covenants
creating events of default, providing additional security and
the potential for a forbearance agreement. Management and our
board also considered other options for repayment, including the
sale of strategic and nonstrategic assets and attempting to
obtain capital from other lenders or investors. We asked our
lenders to forbear from exercising remedies under the credit
facility in order to give Meridian more time to pursue a
strategic transaction. Over the next four months, Meridian and
its lenders negotiated a forbearance agreement. A forbearance
agreement was finally agreed to between the parties on
September 3, 2009.
On May 8, 2009, Mr. Ching provided an update to the
special committee of the board on strategic alternatives.
Meridian continued to discuss options with several companies who
indicated an interest in our company or its assets, but had not
been successful in achieving a transaction due to many factors,
including the collapse of the financial markets and precipitous
declines in oil and gas commodity prices. Most discussions of
the significant issues with completing the transactions that had
been proposed related to the interested parties ability to
obtain appropriate financing. Mr. Ching advised the special
committee that we had been forced to stop all drilling, minimize
capital spending and continue to cut costs. We had been able to
keep production essentially flat, had made progress in
renegotiating the drilling rig contracts, but had not been able
to negotiate a settlement on the Shell claim. We also believed
that the Shell claim continued to have a negative impact on any
potential transaction. As a precaution, Mr. Ching, another
member of the board and members of management met with
bankruptcy counsel to understand the bankruptcy process and the
ramifications if we were eventually forced to seek protection
under federal bankruptcy laws.
On May 11, 2009, Shell initiated formal arbitration
proceedings regarding its environmental claims against us. In
early June 2009, we and Shell reached an agreement in principle
for a settlement. We would convey to Shell approximately
4,300 acres of fee land near Houma, Louisiana and pay
$5.0 million over five years to Shell in return for Shell
releasing us from all claims. The fee land had no hydrocarbon
exploration or development opportunities, but it had the
potential to be classified as a mitigation bank for
environmental mitigation matters. By the end of August 2009, the
final form of agreement was ready for execution, but
restrictions under our credit facility precluded us from
conveying the fee land or making any payments to Shell until we
had a definitive strategic transaction, such as the merger, in
place. We executed the final agreement with Shell, which is
subject to the closing of the merger, on January 11, 2010.
21
In mid-April 2009, we held an introductory meeting with
Rivington Securities LLC, a subsidiary of Rivington Capital
Advisors, LLC (Rivington), to discuss the
possibility of Rivington assisting Meridian in raising debt or
equity capital. Initially, Rivington analyzed the feasibility of
raising junior capital in the form of second lien debt. Proceeds
would be used to repay Meridians borrowing base deficiency
under its existing credit facility. After consultation with our
management, Rivington ultimately concluded that it would be
difficult for us to raise second lien debt due mainly to the
continued instability of global capital markets, lower commodity
prices and our other substantial long-term liabilities,
including the existing credit facility, drilling rig loan and
dayrate contract obligations and the Shell claim. We asked
Rivington to seek other strategic alternatives.
On April 23, 2009, Rivington met with Company F
about the possibility of investing capital in Meridian in the
form of convertible preferred stock. On May 13, 2009,
Company F delivered a letter to Meridian indicating
an interest in making a convertible preferred equity investment
in Meridian. On May 14, 2009, Meridian and Rivington
executed an engagement letter. Discussions with Company F and
analysis of the proposal continued for the next several weeks.
On July 17, 2009, Company F held an investment committee
meeting with its equity capital providers to discuss the
proposed transaction. Following that review, Company F decided
to not proceed further with the possible transaction.
On May 21, 2009, Company G submitted an offer
to purchase all of our interest in the Weeks Island field for
cash. Discussions continued for several weeks, but our board
ultimately concluded that the sale of the Weeks Island field,
which was one of Meridians most valuable assets, would
help in the short run as a means to eliminate part of the
borrowing base deficiency, but would be detrimental to us in the
long run. Cash flow would be significantly reduced, and we would
still have no liquidity for drilling additional wells. Our board
decided to pursue other options.
On June 11, 2009, we received a proposal from Company
H, which had conducted a preliminary review of
Meridians data. The proposal indicated that Company H
would issue 25.0 million Company H shares in exchange for
all of Meridians common stock. Based on share prices at
that time, the preliminary proposal indicated a value of
approximately $0.44 per share for Meridian stock. Company H
would assume all of our debt outstanding. The proposal was
subject to due diligence of Meridians data, which Company
H conducted over the following two weeks. On June 26, 2009,
Company H notified Mr. Ching that the proposal would be
revised such that Company H would issue only 7.5 million
Company H shares in exchange for all of Meridians common
stock, indicating a value of about $0.10 per share for Meridian
stock. Company H would assume our debt and immediately pay
$10.0 million to $15.0 million to reduce the borrowing
base deficiency, but would expect our credit facility lenders to
accept further payments only when natural gas prices increased.
At the June 26, 2009 board meeting, Mr. Ching reported
that Meridian and its credit facility lenders had reached a
tentative agreement on the terms of a forbearance agreement. The
lenders would forbear from exercising remedies under the credit
facility in exchange for:
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certain milestone dates being met, including execution by
July 31, 2009 of a merger agreement, capital infusion
agreement or asset sale agreement sufficient to cover the
borrowing base deficiency, which dates could be extended at the
discretion of the lenders;
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assurances that we were making progress on a settlement with
Shell, with the lenders agreeing to allow conveyance of the
Louisiana acreage and payment of the cash settlement amount upon
consummation of a strategic transaction;
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our payment of a forbearance fee based on the outstanding loan
value;
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additional mortgages for up to 95% of our oil and gas
properties; and
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certain amortization payments, cash flow sweeps and cash account
control agreements.
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Mr. Ching also reported that we were still engaged in
discussions with Companies F and H and had resumed discussions
with Company A. Our board supported managements
recommendations to move quickly to document the Shell agreement,
finalize the forbearance agreement, sell non-core acreage and
pursue
22
multiple avenues to a strategic transaction so as to maintain
competitive tension among the potential transaction parties.
On June 26, 2009, JPMorgan received an
e-mail
with
another proposal from Company B to acquire our shares and assume
our debt, but the proposal was vague. Company B followed up with
an
e-mail
to
Mr. Ching on June 30, but the proposal was not
significantly clarified. Mr. Ching asked Company B for a
more specific proposal in writing, but did not receive one.
On July 7, 2009, the chief executive officer of Company H
came to Meridians office and presented a letter proposing
a merger between Company H and Meridian. The key proposed terms
were:
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an exclusivity period to negotiate only with Company H until
August 15;
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acquisition of all of our outstanding shares in consideration
for 7.5 million shares of Company H common stock;
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Company H would provide cash to reduce our current bank debt by
a minimum of $15.0 million and enter into a restructured
agreement with our credit facility lenders;
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as a condition to closing, our outstanding indebtedness under
our credit facility would be restructured on terms reasonably
acceptable to Company H;
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a representation by Company H that it had sufficient sources of
additional capital to effect the transaction, as well as to
finance the operations of the combined entity following
completion of the transaction;
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confirmatory due diligence; and
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approvals from Company Hs board, Company Hs
preferred shareholders, our board and our lenders.
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We began work to develop a response to the Company H proposal.
On July 8, 2009, we received from Company I an
indication of interest with respect to the purchase of
substantially all of our assets through a proposed
pre-packaged bankruptcy proceeding. The asset
purchase agreement would be negotiated prior to any filing by
Meridian under Chapter 11 of the federal bankruptcy code,
and a motion requesting approval of the agreement would be filed
concurrently with Meridians bankruptcy petition. The
aggregate purchase price for our assets would be between
$50.0 million and $80.0 million, subject to additional
due diligence and discussions with our principal creditors. The
purchase price would be paid from Company Is cash on hand
and available financing commitments. The ability of Company I to
obtain such financing commitments would be a condition to
consummation of the sale.
On July 14, 2009, we received from Company J an
offer to purchase certain of our oil and gas properties in Texas
for $14.6 million. Management analyzed the offer and
determined that it undervalued the assets. Mr. Ching
discussed the offer with the special committee on July
21. The committee recommended that Mr. Ching go back
to Company J with the request that they improve the offer price
as we would not accept the current offer. Mr. Ching also
discussed the offer with the full board on July 28, who
supported the committees recommendation. Mr. Ching
called the Company J chief executive officer and requested an
improved offer price. Company J indicated they would review the
request with their investors, but Company J offered no further
proposals.
On July 16, 2009, Company I notified us that, if the Shell
claim and claims under the drilling rig contracts could be
resolved, Company I would be interested in a transaction
resulting in a substantial direct equity investment in Meridian
rather than the asset purchase proposed on July 8.
Restructuring of our credit facility would be a condition to
such investment.
On July 17, 2009, we met with representatives of our credit
facility lenders for a status update and to seek additional
support for a forbearance period until such time as we were able
to consummate a strategic transaction.
23
The special committee of our board met on July 21, 2009 to
discuss our current situation. Among other things,
Mr. Ching reported that it was increasingly clear, based on
continuing analysis and advice from JPMorgan and Rivington, that
a go it alone strategy continued to be very
difficult due to cash flow and debt repayment requirements.
Selling key assets would not remedy our debt problems, since the
remaining assets, with a higher percentage of non-producing
properties, would not generate the cash flows required to
service the debt and fund a program to convert non-producing
assets to producing assets.
On July 23, 2009, Company K contacted
Mr. Ching and outlined the general terms of a proposal
under which Company K would merge into Meridian. The proposal
involved an extensive capital restructuring of the combined
company, including a capital injection of between
$50.0 million and $60.0 million. On July 24, the
chief executive officer of Company K called Mr. Ching to
withdraw the offer, citing Company Ks inability to obtain
the proposed financing.
Our board met again on July 28, 2009. Mr. Ching had
invited the chief executive officer of Company H to attend the
first part of the meeting and provide to our board additional
background information on Company H and the status of their due
diligence review of Meridian. The Company H chief executive
officer outlined for our board Company Hs proposal to
acquire us. He indicated that they placed a total value on
Meridian of $105.0 million and was prepared to offer
7.5 million shares of Company H stock for all of our shares
(which translated to a value of about $0.10 per Meridian share)
and assume Meridians $95.0 million of bank loans. The
Company H chief executive officer said he was prepared to pay
$35.0 million to our credit facility lenders, but he
preferred to use that money to drill wells. He pointed out that
Company H had a substantial amount of cash on its books and no
debt obligations due for some years. Members of our board asked
the Company H chief executive officer a number of questions
regarding cash, cash flow, net asset value and other financial
and operational matters. Our board also inquired further about
Company Hs proposed exclusivity period with Meridian.
Going forward, Company Hs chief executive officer stated
that he wished to have further discussions with our credit
facility lenders.
The Company H chief executive officer left the meeting and
Mr. Ching updated the board regarding the status of our
operations, production levels, cost reductions, forbearance
negotiations with lenders, other potential strategic
transactions, settlement negotiations with Orion on the drilling
rig contracts and Shell settlement negotiations. Mr. Ching
also noted that, by the end of June 2009, our efforts to reduce
costs had resulted in significant reductions in general and
administrative costs and field operating costs.
Mr. Ching summarized that to date we had executed
confidentiality agreements for the exchange of data with more
than 20 entities. Eleven companies had made indicative offers
and nine companies had elected not to proceed beyond preliminary
discussions. Three (Companies A, G and J) of the eleven
were offers for specific assets. Selling the two specific assets
wanted by those companies would remove greater than 30% of our
reserve base, about 44% of our production and between 50% and
60% of our net operating cash flow. Mr. Ching reiterated
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. Being left with a smaller asset
base, which had mostly non-producing gas reserves, would not
allow us to borrow any additional capital and the remaining cash
flow would not support the servicing of the debt plus the
funding of a drilling or recompletion program that would enable
Meridian to sustain itself. Therefore, we would not pursue the
sale of specific assets.
Mr. Ching further summarized that, for reasons stated
earlier, we had decided not to pursue any further discussions
with Company C. Five companies (Companies B, D, E, F and
K) either made a decision for various reasons not to pursue
Meridian any further or had not come back to Meridian with any
explicit decision. We continued to consider two proposals
(Companies H and I). At the conclusion of the meeting, our board
took the following actions:
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approved entering into an exclusivity period until August 15
with Company H (proposed stock for stock merger) and continuing
due diligence;
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supported managements position to continue to consider
Company Is proposal (pre-packaged bankruptcy offer or, if
major liabilities are resolved, a capital infusion of preferred
stock and restructured bank debt) as a viable option depending
on negotiations with Company H;
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supported managements position to reject offers for
specific assets;
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approved entering into the forbearance agreement with our credit
facility lenders on substantially the terms presented earlier to
the board;
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approved entering into the Shell settlement agreement on
substantially the terms presented earlier to the board;
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supported the position that the go-it-alone strategy
was not a viable option, given the reasons previously
discussed; and
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supported maintaining awareness of the advantages and
disadvantages of a bankruptcy proceeding.
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On July 29, 2009, we and Company H entered into an
exclusivity agreement for the period commencing July 29 and
ending August 15, and Company H and Meridian initiated a
detailed due diligence process. Several days later, Company H
asked to extend the exclusivity period to August 31.
Mr. Ching had ongoing discussions with individual members
of the special committee and the board regarding Company
Hs request. The board was not comfortable with the
extension, as the offer from Company H valued Meridian at about
$0.10 per share, the market price at that time was about $0.30
per share and Company H had not indicated any interest in
improving their offer. Mr. Ching related this concern to
the Company H chief executive officer on September 8 and
requested that they re-evaluate their offer. The Company H chief
executive officer agreed to re-evaluate their offer.
On August 17, 2009, our management and Rivington met to
re-evaluate various strategic alternatives, including raising
capital and potential business combinations. Due to some
improvement in the credit and capital markets, management and
Rivington developed a plan to approach a select group of private
equity firms and private equity-backed companies who might have
an interest in either merging with or investing in Meridian.
Rivington contacted several private equity firms and oil and gas
exploration and development companies that were backed by
private equity firms. In late August, Rivington received
indications of interest from two of the exploration and
development companies and both signed confidentiality agreements
with us and began to review our data. Representatives from one
of the exploration and development companies visited
Meridians offices on August 27, where our management
presented an overview of Meridian and provided additional
information to them. On September 1, representatives from
the second exploration and development company, which was Alta
Mesa, visited Meridians offices, where our management
presented an overview of Meridian and provided additional
information to them.
On September 2, 2009, the first exploration and development
company notified us that it had decided not to proceed further
with a transaction with us. No other private equity firm decided
to explore further any possible transaction with us.
During August 2009, negotiations had continued with our
creditors on the forbearance agreements. On September 3,
2009, we entered into forbearance agreements with certain of our
creditors who agreed to forbear from exercising any right or
remedy arising as a result of existing events of default for
specified periods of time. Specifically, we entered into
forbearance agreements with:
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our credit facility lenders, provided that the forbearance
period would end on September 30, 2009 if, by that date, we
had not entered into (i) a merger agreement pursuant to
which we would merge with or into or be acquired by or transfer
all or substantially all of our assets to another person;
(ii) a capital infusion agreement in an amount sufficient
to enable us to pay to the credit facility lenders an amount
equal to the borrowing base deficiency; or (iii) a purchase
and sale agreement pursuant to which we would agree to sell one
or more oil and gas properties for net proceeds sufficient to
enable us to pay to the credit facility lenders an amount equal
to the borrowing base deficiency, plus any incremental borrowing
base deficiency resulting from such sales. In each case, the
transaction needed to be
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consummated by October 30, 2009, unless such date was
extended with the consent of the credit facility lenders, but in
no event later than December 31, 2009;
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our hedging agreement counterparties;
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CIT Group/Equipment Financing, Inc. (CIT), the
lenders who financed the purchase of our drilling rig in
2008; and
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Orion, who leased another drilling rig to us and with whom we
have rig usage contracts on two drilling rigs.
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On September 3, 2009, we received another offer from
Company A to acquire our Weeks Island field for cash. In light
of our boards decision not to pursue sales of individual
assets, and managements view that the offer did not
reflect the value of that property, we rejected the offer.
Also on September 3, 2009, Mr. Ching received a letter
from Mr. Reeves asserting claims relating to various
amounts allegedly owed to Mr. Reeves and his affiliates
under Mr. Reeves existing net profits interest
agreements and master participation agreements with Meridian.
On September 11, 2009, Mr. Harlan Chappelle, chief
executive officer of Alta Mesa, sent us a draft letter of intent
proposing a no shop period while the parties
negotiated a $50 million investment in Meridian by Alta
Mesa in exchange for voting convertible preferred stock. The
preferred stock would receive mandatory dividends equal to 7%
per annum payable quarterly either in cash or in kind with
additional preferred stock. The preferred stock would
participate in any dividends paid on Meridians common
stock on an as converted basis. At any time after
closing, the preferred stock would be convertible into
Meridians common stock at a conversion price of $0.35 per
share. Each share of preferred stock would have the right to a
number of votes equal to the number of shares of common stock
issuable upon conversion of each such share of preferred stock.
The proceeds from the sale of the preferred stock would be used
for continued drilling, work-over and recompletion activities of
Meridian, to pay transaction fees and expenses, and reduce
outstanding borrowings under our credit facility. After closing,
Meridian would be managed by Alta Mesa under a management
services agreement. Over the following week, Mr. Ching and
representatives of Rivington met with Mr. Chappelle and
Alta Mesas chief financial officer to discuss the proposal
and exchanged drafts of a revised letter of intent.
On September 21, 2009, our board met and Mr. Ching
outlined the status of discussions with Company H, Company I and
Alta Mesa. He provided the current draft of the Alta Mesa letter
of intent to the board and informed the board that Company H was
meeting with our credit facility lenders the next day. The board
supported moving forward with each of the companies.
On September 22, 2009, Company Hs chief financial
officer and other representatives, along with our management,
had a teleconference call with the agent bank for our credit
facility lenders, Fortis Capital Corp. The Company H chief
financial officer provided some background information about
Company H and outlined their proposal for restructuring our
debt. They proposed reducing our debt by paying our lenders
$15.0 million at the closing of the merger, requested that
the lenders forgive an additional $15.0 million of debt and
then standstill for one year, at which time Company H would
restructure the entire debt of the combined company. Company H
expressed the desire to put money into drilling Meridians
properties to increase reserves and production. Fortis agreed to
take the proposal under advisement and discuss it later that day
with all the members of our bank group.
On September 23, 2009, Fortis advised us that the bank
group was not willing to discount or forgive any of our
outstanding debt. Mr. Ching informed Company H of the bank
groups decision and asked Company H if they would consider
increasing their offer. Company H indicated that they would not.
Later on September 23, Mr. Ching met with the board to
inform them of the status of discussions with Company H and Alta
Mesa. The board engaged in a discussion of Alta Mesas
proposal, including the no shop provision and what
effect that provision would have; the effect that the letter of
intent would have on Meridians forbearance agreements with
its lenders; and the proposed conversion price of the preferred
stock and the resulting dilution to Meridians current
shareholders. Some members of the Board expressed concern
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over how Meridian would be run post-closing and how conflicts of
interest would be managed. Mr. Ching also reported on
Company Hs discussions with the agent bank. The
banks decision not to discount any debt also negatively
affected Company Is position, who also wanted to approach
our lenders for a discount in restructuring our debt. Our board
supported continuing to move forward with Alta Mesa.
On September 29, Alta Mesa informed us that they were
withdrawing their preferred stock investment proposal, but would
consider making an offer for Meridians stock.
Since July 2009, when the period to repay our borrowing base
deficiency under our credit facility had expired, our credit
facility lenders had continued to put increasing pressure on us
to enter into a strategic transaction. On September 30,
2009, the date on which the forbearance period would have
otherwise terminated without a strategic transaction in place,
our credit facility lenders agreed to extend to October 2,
and on October 2 agreed to extend to October 7, the date by
which the forbearance period would end if we had not entered
into an agreement for a strategic transaction.
On October 1, 2009, Meridian received a proposal from
Company L for a capital infusion, although the exact
nature of the proposal was not entirely clear. Mr. Ching
contacted the president of Company L to obtain clarity on the
offer but after discussions the proposal was still vague. A
second proposal letter was received within a few days and again
it was vague as to terms and conditions. Mr. Ching called
the president of Company L and was told that Meridian should
disregard Company Ls written proposals, as they only
wanted to use those proposals to demonstrate their interest in
Meridian. After several discussions, no clear proposal was
forthcoming and Mr. Ching recommended to the board that
Company L not be considered as a serious possibility for a
transaction. The board supported that position.
On October 7, 2009, our credit facility lenders agreed to
extend to October 14 the date by which the forbearance period
would end if we had not entered into an agreement for a
strategic transaction.
Also on October 7, 2009, the board met again to receive an
update from Mr. Ching. He reported that:
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Alta Mesa was still working on submitting another offer to
Meridian;
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we were receiving a substantial amount of pressure from the
credit facility lenders to show concrete progress towards a
strategic transaction;
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the NYSE had expressed concern that Meridians lenders
would not continue to extend the forbearance period, and the
NYSE was considering suspending trading in Meridian stock for
the reasons described in The Merger Effects on
Meridian if the Merger is Not Completed;
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Mr. Ching had urged Company H to enhance its offer, but
Company H had not done so and was still concerned about
Meridians position with its lenders; and
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management and bankruptcy counsel were continuing with
contingency plans for a bankruptcy filing as a last resort.
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Mr. Ching recommended that the board accept the Company H
offer, as it was the best offer available. It provided for
positive equity value, as opposed to bankruptcy, which
Meridians analyses had indicated would likely wipe out any
remaining equity, and a transaction with Company H would most
likely convince the credit facility lenders to extend the
forbearance period.
The board then discussed our options and our bargaining position
with our lenders. At the end of the discussion, the board voted
to accept the Company H offer if Alta Mesa had not made an
alternative offer by 9:00 a.m. the following day.
Mr. Ching called the board together again on
October 8. Mr. Ching reported that there was no change
in the terms proposed by Company H and that Company Hs
proposal would expire at the end of the day. The Company H chief
executive officer had indicated that the expiration date of the
offer would not be extended. Mr. Ching also reported that
he had received a draft letter of intent from Alta Mesa
proposing a merger transaction with Meridian, under which each
share of Meridian common stock would be converted into the right
to receive $0.40 in cash. The proposal included a no
shop provision until November 15, except that
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Alta Mesa would, on or before October 17, provide Meridian
sufficient information to demonstrate to Meridians
satisfaction Alta Mesas ability to consummate the
transaction. If Alta Mesa failed to provide such information on
or before October 17, or if such information was not
satisfactory to Meridian, then the no shop period
would terminate. If Meridian received any unsolicited proposals
during the no shop period and subsequently entered
into a transaction with that third party, then Meridian would
pay $500,000 to Alta Mesa as liquidated damages. After
discussion, the board voted unanimously in favor of accepting
Alta Mesas letter of intent, and Mr. Ching executed
the letter of intent on behalf of Meridian later that day.
On October 12, 2009, representatives from Meridian and its
counsel, Fulbright & Jaworski L.L.P.
(Fulbright), and representatives from Alta Mesa and
its counsel, Haynes and Boone, LLP (Haynes and
Boone) met to discuss Alta Mesas continuing due
diligence review and assignment of responsibilities toward
reaching a definitive merger agreement.
On October 17, 2009, Mr. Ching and Mr. Chappelle
agreed to extend to October 19 the expiration of the no
shop provision of the letter of intent, so Alta Mesa could
complete the information required to demonstrate to
Meridians satisfaction Alta Mesas ability to
consummate the transaction. Upon satisfaction of the information
requirement on October 19, the no shop
provision was automatically extended.
On November 1, 2009, Haynes and Boone submitted the first
draft of the definitive agreement.
On November 2, 2009, we engaged Morgan Keegan &
Company, Inc. (Morgan Keegan) to render an opinion
to our board as to the fairness, from a financial point of view,
to our shareholders of the consideration to be received in
connection with the merger, since Rivington had a policy of not
rendering fairness opinions in capital raising engagements, and
JPMorgan believed that rendering a fairness opinion in this
transaction might limit their ability to participate in
financings for other transactions.
From November 2, 2009 through November 8, 2009, our
senior management and representatives of Rivington and Fulbright
held several discussions regarding the terms proposed by Alta
Mesa in its initial draft of the merger agreement. Meridian and
its representatives drafted comments and proposed changes to the
initial draft of the merger agreement to address terms and
conditions contained in the initial draft of the merger
agreement that were not acceptable to us. The comments and
proposed changes were intended to:
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narrow the type of events that would constitute a Target
Material Adverse Effect;
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make certain changes to the representations and warranties of
Meridian, including adding exceptions to certain representations
and warranties for matters disclosed in reports filed by
Meridian with the SEC and appropriate materiality qualifiers;
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add representations and warranties to be made by Alta Mesa and
Merger Sub;
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provide us with greater flexibility to operate our business
prior to the closing of the merger;
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provide our board with more flexibility in responding to
competing and superior proposals;
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remove and revise certain closing conditions to increase the
likelihood of closing (assuming our shareholders voted in favor
of adopting the merger agreement);
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narrow Alta Mesas termination rights and remove Alta
Mesas right to terminate the merger agreement for any
reason in its sole and absolute discretion at any time prior to
the effective time of the merger, whether before or after
approval by our shareholders; and
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reduce the proposed termination fee of $5.0 million and
minimize the circumstances in which we would pay a termination
fee and reimburse expenses to Alta Mesa.
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On November 8, 2009, Mr. Chappelle informed
Mr. Ching of his belief that one of the critical elements
in negotiating a definitive merger agreement was whether our
lenders would be willing to extend a commitment to allow for the
hedging of our natural gas and oil production during a period of
time following the signing of the merger agreement. Later that
day, Fulbright sent a revised draft of the merger agreement to
Haynes and Boone.
28
During this period, Mr. Ching and Mr. Reeves had been
in discussions to settle certain claims that Mr. Reeves had
asserted against Meridian relating to various amounts allegedly
owed to Mr. Reeves and his affiliates under
Mr. Reeves existing net profits interest agreements
and master participation agreements with Meridian.
On November 11, 2009, Mr. Ching and other
representatives from Meridian, Mr. Chappelle and other
representatives from Alta Mesa, and representatives from
Rivington, Haynes and Boone and Fulbright met to further
negotiate the terms of the merger agreement. The material
negotiated changes included the following:
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the parties narrowed the type of events that would constitute a
Target Material Adverse Effect and agreed to exclude
certain events customarily excluded from such a definition, such
as general business or economic conditions;
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Alta Mesa accepted Meridians proposed definition of
superior proposal;
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the parties structured the merger as a forward merger in which
Meridian would merge with and into Merger Sub, resulting in
Merger Sub as the surviving entity;
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the parties agreed to certain changes proposed by us to the
representations and warranties and certain changes to the
provisions relating to our conduct of our business prior to the
closing of the merger; and
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the parties agreed to certain additional representations and
warranties to be made by Alta Mesa and Merger Sub.
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During the meeting, the parties discussed the non-solicitation
provisions, the provisions regarding fiduciary responsibilities
to consider other offers, and the termination and remedies
provisions of the merger agreement, including the size of the
termination fee payable in the event that certain termination
events occurred and Alta Mesas right to terminate the
merger agreement for any reason in its sole and absolute
discretion at any time prior to the effective time of the
merger. Alta Mesa accepted certain proposed changes to these
provisions, but did not agree to remove its option to terminate
until our lenders agreed to extend a commitment to allow for the
hedging of our natural gas and oil production during a period of
time following the signing of the merger agreement.
In addition, Alta Mesa emphasized that, in order to complete the
merger, the agreements to clarify and confirm certain historical
records with respect to Mr. Reeves and
Mr. Mayells interests under their net profits
interest agreements and master participation agreements with
Meridian would need to be finalized, and the claims asserted by
Mr. Reeves under his net profits interest agreement and
master participation agreement would need to be settled. Alta
Mesa also emphasized that, in order for it to be willing to
enter into a binding merger agreement, Meridians lenders
would need to extend a commitment to allow for the hedging of
Meridians natural gas and oil production during a period
of time following the signing of the merger agreement.
Shortly after the November 11, 2009 meeting, Meridian
engaged Gordon, Arata, McCollam, Duplantis & Eagan,
L.L.P. (Gordon Arata) to begin preparing the
documents relating to Mr. Reeves and
Mr. Mayells confirmatory agreements regarding their
respective net profits interest agreements and master
participation agreements and to begin preparing the settlement
agreement with Mr. Reeves. From November 11, 2009
until just prior to the signing of the merger agreement,
representatives from Meridian and Gordon Arata continued to
negotiate the terms of a settlement agreement with
Mr. Reeves and his counsel. Meridian, Mr. Reeves and
Mr. Mayell, and their respective counsel, also negotiated
and finalized the confirmatory agreements.
From November 12, 2009 through November 20, 2009, the
parties and their representatives had several in-person and
telephonic discussions regarding the terms and provisions of the
merger agreement. During that time, the parties made progress in
negotiating limits on the scope of our representations and
warranties and covenants in the merger agreement, including
provisions relating to the conduct of our business prior to
closing. In addition, a number of the closing conditions
initially proposed by Alta Mesa were narrowed in scope or
removed. The non-solicitation, fiduciary responsibility,
termination and remedies provisions of the merger agreement were
negotiated, but the parties had agreed to only limited changes.
On November 13, 2009, we sent a written request to its
lenders requesting the additional hedge commitment support. On
that same date, we and certain of our subsidiaries entered into
the fourth amendment
29
to the credit facility forbearance agreement, which extended to
November 23, 2009, the date by which the credit facility
forbearance agreement would have terminated if, by such date, we
had not entered into a strategic transaction, such as the merger.
On November 15, 2009, Mr. Ching called a telephonic
meeting of our board. At the meeting Mr. Ching updated the
board on the status of the proposed transaction, including the
status of negotiations with Alta Mesa and remaining deal points,
discussions with the lenders regarding hedging arrangements and
the status of Alta Mesas due diligence on Meridian. The
board instructed Mr. Ching to continue to negotiate with
Alta Mesa. Mr. Ching and Mr. Chappelle also agreed to
amend the letter of intent to extend to November 23 the
expiration of the no shop provision.
On November 19, 2009, Mr. Ching and Mr. Chappelle
and other members of senior management of Meridian and Alta Mesa
met to discuss certain aspects of the merger agreement and Alta
Mesas conclusions from the due diligence it conducted on
Meridian. Alta Mesa informed us that Alta Mesa was reducing its
original offer of $0.40 per Meridian share to $0.30 per share.
Alta Mesa stated that the reduction in offer price was due to
changing market conditions and additional due diligence
conducted since the original offer. Our management negotiated
with Alta Mesa for a revised offer price per share.
On November 20, 2009, Mr. Ching called a special
meeting of our board with representatives from Morgan Keegan and
Fulbright present at the meeting. At the special meeting
Mr. Ching updated the board on the status of the proposed
transaction, including the fact that our management was
successful in increasing Alta Mesas latest offer of $0.30
per Meridian share to $0.33 per share and Mr. Chings
belief that Alta Mesa would not be willing to further increase
the merger consideration. Representatives from Morgan Keegan
presented telephonically to the board its preliminary
conclusions with respect to its fairness opinion. A
representative from Fulbright advised our board of its fiduciary
duties in connection with the potential transaction, reviewed
the proposed terms of the merger agreement and presented a
summary of the remaining open issues that had not yet been
resolved with Alta Mesa. During the course of these discussions
and presentations, our board engaged in a discussion of the
terms of the transaction and the fact that the proposed
transaction was probably Meridians only viable alternative
to seeking the protection under federal bankruptcy laws. After
discussion, the board instructed Mr. Ching to continue to
negotiate the remaining terms of the merger agreement with Alta
Mesa.
On November 20, 2009, we and certain of our subsidiaries
entered into the fifth amendment to the credit facility
forbearance agreement, which extended to November 30, 2009,
the date by which the credit facility forbearance agreement
would have terminated if, by such date, we had not entered into
a strategic transaction, such as the merger.
Based on the continuing progress that was being made with
respect to pursuing the proposed transaction with Alta Mesa,
Meridian agreed to amend the letter of intent to extend the
exclusivity agreement with Alta Mesa to the earlier of
December 11, 2009 or expiration of our forbearance
agreement with our credit facility lenders.
On November 23, 2009, Mr. Ching and Mr. DeLano,
Mr. Chappelle and other representatives from Alta Mesa, and
representatives from Rivington, Haynes and Boone and Fulbright
agreed to meet to resolve the remaining open items in the merger
agreement. During the meeting, the parties were able to resolve
many of the outstanding negotiating points in the
representations and warranties and the closing conditions. After
negotiations and discussions, the parties agreed to make certain
changes to the non-solicitation, fiduciary responsibility,
termination and remedies provisions of the merger agreement.
Such changes included:
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the removal of Alta Mesas right to terminate the merger
agreement for any reason in its sole and absolute discretion at
any time prior to the effective time of the merger, based upon
positive feedback from the lenders on the request to permit
Meridian to hedge a portion of its production; and
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the inclusion of provisions permitting each party to seek from
the other party remedies in addition to the other partys
payment of the termination fee (including specific performance
and injunctive relief) in the event of the other partys
breach of the merger agreement.
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However, the parties were not able to come to final agreement on
the final amount of the termination fee. Alta Mesa and its
representatives made clear at the end of the meeting that they
were unwilling to negotiate further the remaining terms of the
non-solicitation, fiduciary responsibility, termination and
remedies provisions.
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At a meeting with Alta Mesa representatives held on
November 23, 2009, Mr. Ching reported that he was
still in discussions with Mr. Reeves regarding his claims
against Meridian for amounts purportedly owed to Mr. Reeves
and his affiliates under existing net profits interest
agreements and master participation agreements with Meridian.
Meridian and Alta Mesa agreed that the settlement agreement with
Mr. Reeves for such claims and the agreements to clarify
and confirm certain historical records with respect to
Mr. Reeves and Mr. Mayells interests under
net profits interest agreements and master participation
agreements would need to be executed prior to signing the merger
agreement. Alta Mesa indicated that in addition to the
previously requested extension of hedging commitments, it would
expect that the forbearance agreements with the credit facility
lenders and other creditors would be extended until at least
30 days after the closing of the merger. The following day
we requested from our credit facility lenders the extension of
hedging commitments and forbearance extension.
On November 30, 2009, we and certain of our subsidiaries
entered into the sixth amendment to the credit facility
forbearance agreement, which extended to December 4, 2009,
the date by which the credit facility forbearance agreement
would have terminated if, by such date, we had not entered into
a strategic transaction, such as the merger.
On December 1, 2009, the bank group responded to our
November
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request and informed us that they were unwilling to provide any
additional hedging commitments. The bank group also indicated
that it would be unwilling to agree to the requested extension
of the forbearance period without a demonstration by Alta Mesa
of its ability to assume or pay in full the amounts outstanding
under our credit facility. Over the following two weeks,
representatives from Alta Mesa provided the information to the
bank group that it requested.
On December 2, 2009, we and certain of our subsidiaries
entered into the seventh amendment to the credit facility
forbearance agreement, which extended to December 4, 2009,
the date by which the credit facility forbearance agreement
would have terminated if, by such date, we had not entered into
a strategic transaction, such as the merger.
On December 4, 2009, Mr. Ching and Mr. Chappelle
discussed the remaining material terms of the merger agreement.
Mr. Chappelle made clear that, given the banks
unwillingness to provide hedging commitments, the parties needed
to restore the provisions in the merger agreement that permit
Alta Mesa to terminate the merger agreement for any reason in
its sole and absolute discretion at any time prior to the
effective time of the merger, and that this provision was not
subject to negotiation. The parties agreed to a
$3.0 million termination fee to be paid by us to Alta Mesa
under certain circumstances specified in the merger agreement
and a $3.0 million reverse termination fee to be paid by
Alta Mesa to us under certain specified circumstances, including
if Alta Mesa exercises its option to terminate the merger
agreement at any time including after shareholder approval. In
addition, Alta Mesa agreed to cap our expense reimbursement
obligations at $1.0 million.
On December 3, 2009 and December 4, 2009,
Mr. Ching updated the board on the status of the proposed
transaction, including Alta Mesas final terms relating to
its option to terminate and the final proposed amount of the
termination fee, and the banks response to our November
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request.
On December 4, 2009 and December 14, 2009, we and
certain of our subsidiaries entered into further amendments to
the credit facility forbearance agreement, which extended
through December 21, 2009, the date by which the credit
facility forbearance agreement would have terminated if, by such
date, we had not entered into a transaction agreement, such as
the merger. Also on these dates, we obtained forbearance
extensions through December 21 for the forbearance agreements
relating to hedging agreements with affiliates of Fortis Capital
Corp. and Scotia Bank (each a lender under our credit facility)
and the drilling rig financing with CIT Group/Equipment Finance,
Inc.
Early in the afternoon of December 16, 2009,
Mr. Chappelle contacted Mr. Ching to tell him that
Alta Mesa has reduced its offer of $0.33 per share to $0.28 per
share. Mr. Chappelle indicated that Alta Mesa would be able
to increase its offer one or two cents per share if we could
negotiate a decrease in the advisory fees payable to JPMorgan
and Rivington.
On December 16, our board met telephonically to consider
the proposed transaction. Fulbright and Morgan Keegan
participated by telephone. Our senior management reviewed the
proposed transaction with the board. Mr. Ching also updated
the board regarding Alta Mesas further reduction to the
merger consideration, our business and recent results of
operations, and the fact that our creditors had verbally agreed
to consent to the transaction and provide forbearance extensions
through the completion of the merger. The board also reviewed
with Fulbright the material terms of the merger agreement,
including Alta Mesas final proposals regarding the
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deal protection provisions. During the meeting, Morgan Keegan
reviewed its analysis of the proposed transaction, and delivered
its oral opinion that, as of the date of the meeting and based
upon and subject to the factors, assumptions, matters,
procedures, limitations and qualifications it summarized and as
would be set forth in its written opinion, the merger
consideration of $0.28 per share to be received by the holders
of Meridians common stock in the transaction was fair,
from a financial point of view, to such holders.
Our board had a discussion as to the alternatives available to
us and concluded that, due to our lack of liquidity and
indications from our lenders that they would be unwilling to
continue to forbear, our only alternative to accepting Alta
Mesas $0.28 per share offer was to seek the protection
under federal bankruptcy laws. Our board then considered the
proposed merger and the transactions contemplated thereby,
including the positive and negative factors described below in
the section entitled Reasons for the Merger;
Recommendation of Our Board of Directors. Following
further discussion and based on the totality of the information
presented and the fairness opinion presentation by Morgan
Keegan, our board, among other things, unanimously approved the
terms of the proposed merger agreement, authorized
Mr. Ching to execute the proposed merger agreement with
merger consideration of $0.28 per share or higher, and declared
the transaction to be in the best interests of Meridians
shareholders, and instructed management to undertake to finalize
and execute the definitive merger agreement and related
documentation.
During the course of the next several business days,
Mr. Ching spoke to representatives from JPMorgan and
Rivington regarding a potential reduction in their advisory
fees. Rivington was amenable to a lower fee in exchange for
amending its engagement letter with Meridian to include a
provision that Rivington would be paid on any transaction that
closed. Absent this amendment, Rivington felt that the terms of
its engagement entitled them to the full amount of advisory
fees. JPMorgan also would not agree to any reduction in advisory
fees based on its existing engagement. Mr. Ching and
Mr. Chappelle engaged in further discussions regarding the
merger consideration and ultimately agreed on the final Merger
Consideration of $0.29 per share.
From December 16 through the evening of December 22,
management of Meridian and Alta Mesa together with Haynes and
Boone and Fulbright continued to work to finalize the merger
agreement. The parties also continued to work with our creditors
to extend the forbearance agreements through the earlier of
(x) May 31, 2010, (y) the effective time of the
merger, or (z) the termination of the merger agreement.
During this time, we also finalized the settlement agreement
with Mr. Reeves and the agreements to clarify and confirm
certain historical records with respect to Mr. Reeves
and Mr. Mayells interests under net profits interest
agreements and master participation agreements. By the evening
of December 22, the merger agreement and such other
documents were finalized and executed and Morgan Keegan
delivered its final written opinion to our board stating that,
as of December 22, 2009 and based upon and subject to the
factors and assumptions set forth therein, the $0.29 per share
in cash to be received by the holders of the outstanding shares
of our common stock pursuant to the merger agreement was fair
from a financial point of view to the holders.
On December 23, 2009, we issued a press release announcing
the merger.
On February 4, 2010, our board received an unsolicited,
non-binding preliminary indication of interest from a third
party. The preliminary indication of interest contemplated the
acquisition of all of our common stock at a purchase price of
not less than $.30 per share, subject to, among other things,
confirmatory due diligence. Our board is evaluating this
preliminary indication of interest and plans to engage in
discussions with this potentially interested party and will
consider all of our alternatives with respect to this
preliminary indication of interest consistent with our
boards fiduciary duties under applicable law and subject
to the terms and conditions of the merger agreement. At this
time, however, our board continues to recommend that our
shareholders vote to adopt the merger agreement with Alta Mesa.
Reasons
for the Merger; Recommendation of Our Board of
Directors
Our board of directors unanimously determined to approve the
merger agreement and recommended that our shareholders vote to
adopt the merger agreement. In reaching the foregoing
determination, our board of directors consulted with our senior
management, financial advisors and legal counsel, reviewed a
significant
32
amount of information and considered the following material
factors in support of its decision to enter into the merger
agreement:
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The fact that Meridian had explored a variety of strategic
alternatives over an extended period of time and the
thoroughness of the process for exploring and reviewing these
alternatives, including consideration of alternative
transactions with other third parties.
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The current and historical prices of our common stock and the
fact that the Merger Consideration of $0.29 in cash per share of
our common stock represented a premium over the recent market
price of our common stock immediately prior to the execution of
the merger agreement.
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The financial analysis and opinion of Morgan Keegan dated
December 22, 2009 delivered to our board of directors as to
the fairness, from a financial point of view as of the date of
the opinion, of the $0.29 per share cash Merger
Consideration to be received by holders of our common stock
pursuant to the merger. See
Annex B
to this proxy
statement and Opinion of Our Financial
Advisor on page 34 of this proxy statement for more
information on the analyses and opinion, including the
assumptions made, matters considered and limits of review.
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The belief of our board of directors that we would be unable to
continue operations as an independent, stand-alone company
because of our lack of liquidity and our inability to obtain
additional financing from other sources. We have experienced
recent decreases in cash flow due in part to volatility of oil
and natural gas prices and declining oil and gas production
volumes. Such volatility has also resulted in significant
reductions in our borrowing base under our credit facility and
we currently have a borrowing base deficiency of approximately
$26.4 million. We do not have sufficient cash available to
repay the borrowing base deficiency and, as a result, in the
absence of a transaction, such as the merger, we would likely
have to seek protection under the federal bankruptcy laws.
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The risk that we may not be able to comply with the conditions
and covenants set forth in the forbearance agreements relating
to defaults under our credit facility, hedging agreements with
affiliates of Fortis Capital Corp. and Scotia Bank (each a
lender under our credit facility), our loan secured in 2008 for
the purchase of a drilling rig and two drilling contracts, and
that the parties to these forbearance agreements would not grant
further extensions. If we were unable to comply with the terms
of the forbearance agreements or if the parties to the
forbearance agreements were unwilling to grant further
extensions, we would be subject to the exercise of remedies by
the parties to those agreements. The exercise of such remedies
would likely result in us seeking protection under federal
bankruptcy laws.
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The efforts made by our senior management and its advisors to
obtain greater value than the $0.29 per share provided for
in the merger, and the recognition that the $0.29 per share
in value for shareholders was likely a greater amount for the
shareholders than could be expected from a bankruptcy filing,
which was the most likely alternative available to us.
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Subject to certain conditions, including the payment of a
termination fee under certain circumstances, the terms of the
merger agreement allow our board of directors to exercise its
fiduciary duties to consider potential alternative transactions
and to withdraw its recommendation to our shareholders to adopt
the merger agreement and to terminate the merger agreement to
accept a superior proposal.
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The proposed merger is for all cash, which provides more
certainty of value to our shareholders compared to a transaction
pursuant to which shareholders receive stock or other non-cash
consideration that could fluctuate in value.
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Under Texas law, our shareholders have the right to demand
appraisal of their shares, which rights are described below
under Rights of Dissent and Appraisal on
page 65 and
Annex C.
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Our board of directors also considered a number of
countervailing risks and factors concerning the proposed
transaction. These countervailing risks and factors included the
following:
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The fact that we will no longer exist as an independent company
and our shareholders will be unable to participate in any future
earnings or receive any benefit from any future increase in
value of Meridian.
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Alta Mesa has the option to terminate the merger agreement for
any reason in its sole and absolute discretion at any time prior
to the effective time of the merger, whether before or after
approval by our shareholders.
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The fact that our officers and employees will have to focus
extensively on actions required to complete the merger, as well
as the substantial transaction costs that we will incur for the
proposed transaction even if it is not consummated.
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The fact that, pursuant to the merger agreement, we must
generally conduct our business in the ordinary course and are
subject to many restrictions on the conduct of our business
prior to the closing of the merger or termination of the merger
agreement, which may delay or prevent us from pursuing business
opportunities that may arise or preclude actions that would be
advisable if we were to remain an independent company.
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The $3.0 million termination fee and up to
$1.0 million in expenses payable to Alta Mesa upon the
occurrence of certain events, and the possible deterrent effect
that paying such fee might have on the desire of other potential
acquirors to propose an alternative transaction that may be more
advantageous to our shareholders.
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The potential effects of our limitations on soliciting
alternative proposals for the acquisition of Meridian or our
assets, including prohibitions on soliciting alternative
transactions and a requirement to hold a shareholder meeting on
the merger whether or not the board of directors continues to
believe at the time of the shareholder meeting that the merger
is fair to, and in the best interests of, Meridians
shareholders.
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The discussion of the information, risks and factors that our
board of directors considered in arriving at its decision to
approve the merger agreement and recommend that our shareholders
vote to adopt the merger agreement is not intended to be
exhaustive, but includes all material factors considered by our
board of directors. In view of the wide variety of factors and
risks considered in connection with its evaluation of the
proposed transaction, our board of directors did not believe it
necessary to, and did not attempt to, rank or quantify the risks
and factors although individual members of our board of
directors may have assigned different weights to the factors and
risks in their individual assessments of the proposed
transaction. The overall analysis of the factors described above
by our board of directors included multiple discussions with and
questioning of our management, financial advisors and legal
counsel. Our board of directors carefully considered the risks
and uncertainties associated with our remaining an independent
publicly traded company. Many of those risks and uncertainties
are described in our Annual Report on
Form 10-K,
as amended, any updates to those risks and uncertainties set
forth in our subsequent Quarterly Reports on
Form 10-Q
and the factors described below in Effects on
Meridian if the Merger is Not Completed.
Our board of directors unanimously approved the merger
agreement. Our board of directors unanimously believes that the
merger is advisable and recommends that our shareholders vote
FOR adoption of the merger agreement.
Opinion
of Our Financial Advisor
Morgan Keegan rendered its opinion to our board of directors
that, as of December 22, 2009 and based upon and subject to
the factors and assumptions set forth therein, the
$0.29 per share in cash to be received by holders of the
outstanding shares of our common stock pursuant to the merger
agreement was fair from a financial point of view to such
holders.
The full text of Morgan Keegans written opinion, which
sets forth the assumptions made, matters considered and
qualifications and limitations on the scope of review undertaken
by Morgan Keegan, is attached as
Annex B
and is
incorporated into this proxy statement by reference. This
description of Morgan Keegans opinion should be reviewed
together with, the full text of the opinion. You are urged to
read the opinion and consider it carefully. Morgan Keegan
provided its opinion for the information and assistance of
Meridians board of directors in connection with its
consideration of the merger. Morgan Keegans opinion was
addressed to the our board of directors and assessed only the
fairness,
34
from a financial point of view, of the merger consideration
to holders of our common stock. Morgan Keegans opinion was
only one of many factors considered by our board of directors in
its evaluation of the merger and should not be viewed as
determinative of the views of our board of directors or senior
management with respect to the merger or the Merger
Consideration. The terms of the merger, including the Merger
Consideration, were determined through negotiations between
Meridian and Alta Mesa and were not determined or recommended by
Morgan Keegan. Morgan Keegans opinion did not address the
merits of the underlying decision of Meridian to engage in the
transaction and did not constitute, nor should it be construed
as, a recommendation to any Meridian shareholder as to how to
vote on any matter related to the merger. Additionally, Morgan
Keegan expressed no opinion as to the prices at which the shares
of our common stock will trade following the announcement of the
merger.
In rendering its opinion, Morgan Keegan:
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reviewed the merger agreement;
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reviewed certain publicly available financial statements and
other business and financial information of Meridian;
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reviewed certain non-public internal financial statements and
other financial and operating data concerning Meridian,
including our engineering and reserve report;
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reviewed certain non-public financial forecasts relating to us
prepared by our management (the Company Forecasts);
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discussed the past and current operations, financial condition
and prospects of Meridian with our senior executives, including
our questionable ability to continue as a going concern;
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reviewed historical reported prices and trading activity for our
common stock;
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compared our financial performance and the prices of our common
stock with those of certain other publicly traded companies
Morgan Keegan deemed relevant;
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compared certain financial terms of the merger to financial
terms, to the extent publicly available, of certain other
business combination transactions Morgan Keegan deemed relevant;
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considered the results of our efforts to solicit indications of
interest from selected third parties with respect to a possible
acquisition of Meridian; and
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performed such other analyses and considered such other factors
as Morgan Keegan deemed appropriate.
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In rendering its opinion, Morgan Keegan has assumed and relied
upon, without independent verification, the accuracy and
completeness of the financial and other information reviewed by
Morgan Keegan. At the direction of Meridian, Morgan Keegan has
assumed, without independent verification, that the Company
Forecasts have been reasonably prepared on bases reflecting the
best currently available estimates and good faith judgments of
Meridians management as to Meridians future
financial performance. Morgan Keegan has not made any
independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of Meridian, nor has Morgan Keegan
been furnished with any such evaluations or appraisals. Morgan
Keegan has assumed that the merger will be consummated as
provided in the merger agreement with full satisfaction of all
covenants and conditions set forth in the merger agreement and
without any waivers thereof.
Morgan Keegan expresses no view or opinion as to any terms or
aspects of the merger (other than the Merger Consideration to
the extent expressly specified in this proxy statement),
including, without limitation, the form or structure of the
merger or the Merger Consideration and the tax treatment of the
merger to various constituencies. Morgan Keegan expresses no
view or opinion as to the fairness of the amount or nature of
the compensation, if any, to any of Meridians officers,
directors or employees, or class of such persons, relative to
the compensation to Meridians shareholders. In addition,
Morgan Keegan expresses no view or opinion as to the relative
merits of the merger in comparison to other transactions
available to Meridian or in which Meridian might engage or as to
whether any transaction might be more favorable to Meridian as
an alternative to the merger, nor is Morgan
35
Keegan expressing any opinion as to the underlying business
decision of Meridians board of directors to recommend the
merger to Meridians shareholders or its decision to
proceed with or effect the merger. This opinion is not a
recommendation to any shareholder as to how such shareholder
should vote with respect to the merger.
The following is a summary of the material financial analyses
used by Morgan Keegan in connection with its presentation to
Meridians board of directors, and the preparation of its
opinion delivered to our board of directors. The following
summary, however, does not purport to be a complete description
of the financial analyses performed by Morgan Keegan, nor does
the order of presentation of the analyses described represent
relative importance or weight given to those analyses by Morgan
Keegan. Some of the summaries of the financial analyses include
information presented in tabular format. The tables must be read
together with the full text of each summary and are alone not a
complete description of Morgan Keegans financial analyses.
Considering the data set forth in the tables below without
considering the full narrative description of the financial
analyses, including the methodologies and assumptions underlying
the analyses, could create a misleading or incomplete view of
the financial analyses performed by Morgan Keegan. Except as
otherwise noted, the following quantitative information, to the
extent that it is based on market data, is based on market data
as it existed on or before December 21, 2009, and is not
necessarily indicative of current market conditions. The
preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods
of financial analysis and the application of these methods to
the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. Each of the
analyses conducted by Morgan Keegan was carried out in order to
provide a different perspective on the merger and add to the
total mix of information supporting the opinion. Morgan Keegan
did not form a conclusion as to whether any individual analysis,
considered in isolation, supported or failed to support its
opinion. Rather, in reaching its conclusions and delivering its
opinion, Morgan Keegan considered the results of the analyses in
light of each other and did not place particular reliance or
weight on any individual analysis, but instead concluded that
its analyses, taken as a whole, supported its determination.
Accordingly, notwithstanding the separate factors summarized
above, Morgan Keegan believes that its analyses must be
considered as a whole and that selecting portions of its
analyses and the factors considered by it, without considering
all analyses and factors, could create an incomplete or
misleading view of the evaluation process underlying its
opinion. In performing its analyses, Morgan Keegan made numerous
assumptions with respect to industry performance, business and
economic conditions and other matters. The analyses performed by
Morgan Keegan are not necessarily indicative of actual values or
future results, which may be significantly more or less
favorable than suggested by such analyses.
Historical Stock Price Analysis.
Using
publicly available trading data, Morgan Keegan reviewed
historical trading prices and volumes for Meridian common stock
and compared such trading prices to the proposed Merger
Consideration of $0.29 per share. Morgan Keegan analyzed
the volume-weighted average price, or VWAP, as well
36
as the average price for various periods prior to, and
including, December 21, 2009. The following table
summarizes the premium of the Merger Consideration relative to
prices for various measurement periods or dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger Consideration per Share
|
|
|
|
|
Premium/(Discount) to
|
Measurement Period
|
|
Price
|
|
Measurement Period
|
|
5-Day
VWAP
|
|
$
|
0.245
|
|
|
|
18.6
|
%
|
10-Day
VWAP
|
|
$
|
0.244
|
|
|
|
19.0
|
%
|
20-Day
VWAP
|
|
$
|
0.258
|
|
|
|
12.5
|
%
|
30-Day
VWAP
|
|
$
|
0.273
|
|
|
|
6.4
|
%
|
60-Day
VWAP
|
|
$
|
0.326
|
|
|
|
(11.0
|
)%
|
YTD VWAP
|
|
$
|
0.368
|
|
|
|
(21.3
|
)%
|
1-Year
VWAP
|
|
$
|
0.373
|
|
|
|
(22.3
|
)%
|
5-Day
Average
|
|
$
|
0.244
|
|
|
|
18.9
|
%
|
10-Day
Average
|
|
$
|
0.243
|
|
|
|
19.5
|
%
|
20-Day
Average
|
|
$
|
0.266
|
|
|
|
9.1
|
%
|
30-Day
Average
|
|
$
|
0.278
|
|
|
|
4.2
|
%
|
60-Day
Average
|
|
$
|
0.315
|
|
|
|
(8.0
|
)%
|
YTD Average
|
|
$
|
0.344
|
|
|
|
(15.6
|
)%
|
1-Year
Average
|
|
$
|
0.351
|
|
|
|
(17.4
|
)%
|
Premium Analysis.
Morgan Keegan analyzed the
premiums paid for selected mergers and acquisitions of publicly
traded companies since January 1, 2008. Morgan Keegan
analyzed the premiums paid for non-technology and non-financial
institution mergers and acquisitions of publicly traded
companies with equity values between $0 and $300 million
since January 1, 2008, irrespective of the type of
consideration paid to the target. Morgan Keegan also analyzed
the premiums paid for mergers and acquisitions of publicly
traded oil and gas exploration and production companies with the
same equity value and time horizon parameters, irrespective of
the type of consideration paid to the target. Morgan Keegan
analyzed the premiums paid over the targets stock price
one day prior and average closing prices five days,
30 days, 60 days and 180 days prior to the date
of the letter of intent and compared these premiums offered in
the proposed transaction. The following tables summarize the
median premiums paid for the aforementioned mergers and
acquisitions and the implied equity value per share of Meridian
common stock.
|
|
|
|
|
|
|
|
|
Implied Equity Value
|
Measurement Period
|
|
Median Premium Range
|
|
per Share
|
|
Premium to
1-day
|
|
(16.4)% - 2.9%
|
|
$0.20 - $0.25
|
Premium to
5-day
average
|
|
(9.3)% - 3.5%
|
|
$0.22 - $0.25
|
Premium to
30-day
average
|
|
(1.4)% - 46.0%
|
|
$0.27 - $0.41
|
Premium to
60-day
average
|
|
0.5% - 44.9%
|
|
$0.32 - $0.46
|
Premium to
180-day
average
|
|
2.7% - 47.5%
|
|
$0.37 - $0.53
|
Transaction premiums vary for many reasons including:
(i) differences in pre-transaction operating performance;
(ii) other hidden or intangible assets not apparent in
historical operating performance; (iii) non-disclosed pro
forma adjustments and other deal-specific factors; and
(iv) differences in asset and geographical mix. Transaction
premiums of the selected transactions as a whole were deemed
more meaningful than the premiums of any particular transaction.
No selected transaction analyzed in the premium analysis was
identical to the proposed transaction. Mathematical analysis,
such as determining the mean and median, is not in itself a
meaningful method of using comparable transaction data.
Peer Group Analysis.
Morgan Keegan analyzed
certain publicly traded companies that were deemed comparable to
Meridian in scope of business operation, market capitalization
and/or
geographic location of reserves (the Peer Group).
Morgan Keegan compared our financial performance with the
performance of our Peer Group for the latest twelve months of
publicly available data and certain consensus projections.
Morgan Keegan derived
37
base valuation multiples by analyzing the specific Peer
Groups financial information. Morgan Keegan then applied
these valuation multiples to our results of operations for the
latest twelve months ended September 30, 2009 and for the
projected calendar years 2009 and 2010. Morgan Keegan used
estimates provided by our management as well as publicly
available analyst estimates in conducting the Peer Group
analysis. The Peer Group consisted of:
|
|
|
|
|
Abraxas Petroleum Corp.
|
|
|
|
Clayton Williams Energy, Inc.
|
|
|
|
Crimson Exploration, Inc.
|
|
|
|
Energy XXI (Bermuda) Limited
|
|
|
|
GeoResources, Inc.
|
|
|
|
Gulfport Energy Corp.
|
|
|
|
McMoRan Exploration Co.
|
|
|
|
PetroQuest Energy, Inc.
|
|
|
|
Stone Energy Corp
|
|
|
|
Swift Energy Co.
|
For each of the companies identified above, Morgan Keegan
calculated various valuation multiples after excluding any
non-recurring, extraordinary gains or expenses and non-cash,
stock-based compensation, including:
|
|
|
|
|
the ratio of enterprise value (herein referred to in all tables
as EV) to proved reserves, average daily production
and SEC
PV-10; and
|
|
|
|
the ratio of enterprise value to historical and estimated
earnings before interest, taxes, depreciation and amortization
(herein referred to in all tables as EBITDA) for the
last twelve months (herein referred to in all tables as
LTM) and calendar years 2009 (herein referred to in
all tables as CY 2009P) and 2010 (herein referred to
in all tables as CY 2010P).
|
The following table summarizes the derived relevant ranges of
multiples for the companies identified above and the ranges of
prices per Meridian share implied by such multiples:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Prices of
|
|
|
|
Multiples
|
|
|
Meridian Common Stock
|
|
Financial Metric
|
|
Min
|
|
|
Median
|
|
|
Max
|
|
|
Min
|
|
|
Median
|
|
|
Max
|
|
|
EV/Proved Reserves
|
|
$
|
1.87
|
|
|
$
|
3.19
|
|
|
$
|
3.96
|
|
|
$
|
0.63
|
|
|
$
|
1.79
|
|
|
$
|
2.47
|
|
EV/Average Daily Production
|
|
$
|
4.84
|
|
|
$
|
10.17
|
|
|
$
|
18.46
|
|
|
$
|
0.67
|
|
|
$
|
2.51
|
|
|
$
|
5.39
|
|
EV/SEC
PV-10
|
|
|
0.99
|
x
|
|
|
1.66
|
x
|
|
|
4.05
|
x
|
|
$
|
1.32
|
|
|
$
|
2.91
|
|
|
$
|
8.56
|
|
EV/LTM EBITDA
|
|
|
3.30
|
x
|
|
|
6.32
|
x
|
|
|
18.44
|
x
|
|
$
|
0.36
|
|
|
$
|
1.62
|
|
|
$
|
6.66
|
|
EV/CY 2009P
|
|
|
3.16
|
x
|
|
|
6.31
|
x
|
|
|
9.47
|
x
|
|
|
NM
|
|
|
|
NM
|
|
|
$
|
0.37
|
|
EV/CY 2010P
|
|
|
2.69
|
x
|
|
|
4.37
|
x
|
|
|
7.40
|
x
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NM
|
|
No company analyzed in the Peer Group has operations or reserves
that are identical to those of Meridian. Trading multiples of
the Peer Group as a whole were deemed more meaningful than
multiples of any particular company. Mathematical analysis, such
as determining the mean and median, is not in itself a
meaningful method of using comparable company data. A complete
analysis involves complex considerations and judgments
concerning differences in financial and operating
characteristics of the comparable companies and other factors
that could affect the public trading values of the companies to
which Meridian was compared. In conducting the Peer Group
analysis, Morgan Keegan examined both historical and projected
valuation multiples in order to determine the relevant range of
multiples. In some cases, these relevant ranges were narrower
than the full range of such multiples.
Precedent Transactions Analysis.
Using
publicly available information, including SEC filings and press
releases, Morgan Keegan compared various valuation metrics from
(i) corporate transactions and (ii) asset and
38
property sales announced on or after January 1, 2009 with
available reserve and production information that Morgan Keegan
deemed to be relevant (herein referred to in the aggregate as
Precedent Transactions). The comparable corporate
transactions that Morgan Keegan deemed to be relevant were:
|
|
|
|
|
Announcement
|
|
Buyer
|
|
Seller
|
|
11/9/2009
|
|
Rise Energy Ltd
|
|
Teton Energy Corporation
|
9/30/2009
|
|
Resaca Exploitation LP
|
|
Cano Petroleum Inc
|
9/10/2009
|
|
Magnum Hunter Resources Corp
|
|
Sharon Resources Inc
|
6/19/2009
|
|
Abraxas Petroleum Corp
|
|
Abraxas Energy Partners LP
|
5/25/2009
|
|
NiMin Energy Corp
|
|
Legacy Energy Inc
|
3/31/2009
|
|
Double Eagle Petroleum Company
|
|
Petrosearch Energy Corporation
|
2/16/2009
|
|
Dana Petroleum plc
|
|
Bow Valley Energy Ltd
|
2/9/2009
|
|
Delta Oil & Gas Inc
|
|
Stallion Group
|
The comparable asset and property sale transactions that Morgan
Keegan deemed to be relevant were:
|
|
|
|
|
Announcement
|
|
Buyer
|
|
Seller
|
|
11/5/2009
|
|
Whiting Petroleum Corp
|
|
Undisclosed/private seller(s)
|
10/29/2009
|
|
Endeavour International Corp
|
|
J-W Operating Company
|
10/29/2009
|
|
Magnum Hunter Resources Corp
|
|
Triad Energy Corporation (Ohio)
|
10/20/2009
|
|
Undisclosed
|
|
Sterling Energy
|
10/16/2009
|
|
Magellan Petroleum Corporation
|
|
Privateco
|
10/2/2009
|
|
Public Gas Partners
|
|
Edge Petroleum
|
9/30/2009
|
|
EV Energy Partners LP; EnerVest Ltd
|
|
EXCO Resources Incorporated
|
9/21/2009
|
|
Merit Management Partners I LP
|
|
Petrohawk Energy Corporation
|
9/15/2009
|
|
Magnum Hunter Resources Corp
|
|
Undisclosed private company
|
9/10/2009
|
|
Callon Petroleum Company
|
|
EXL Petroleum LP
|
9/1/2009
|
|
Pioneer Southwest Energy Partners LP
|
|
Pioneer Natural Resources Company
|
8/10/2009
|
|
Williams Companies Inc
|
|
Undisclosed private company
|
8/6/2009
|
|
Linn Energy LLC
|
|
Forest Oil Corporation
|
7/22/2009
|
|
EV Energy Partners LP
|
|
Undisclosed
|
7/21/2009
|
|
Vanguard Natural Resources LLC
|
|
Lewis Energy Group
|
7/17/2009
|
|
Undisclosed private company
|
|
BreitBurn Energy Partners LP
|
6/30/2009
|
|
EnerVest Ltd
|
|
Chesapeake Energy Corporation
|
6/29/2009
|
|
Encore Acquisition Company
|
|
EXCO Resources Incorporated
|
6/29/2009
|
|
Encore Energy Partners LP
|
|
Encore Acquisition Company
|
6/10/2009
|
|
EV Energy Partners LP
|
|
Undisclosed
|
5/29/2009
|
|
GeoResources Inc.
|
|
GE Energy Financial Services
|
5/29/2009
|
|
Northern Oil & Gas Inc
|
|
Windsor Bakken LLC
|
5/28/2009
|
|
FieldPoint Petroleum Corporation
|
|
Undisclosed
|
5/20/2009
|
|
Slawson Exploration Company Inc;
GeoResources Incorporated
|
|
Undisclosed
|
5/19/2009
|
|
Encore Energy Partners LP
|
|
Encore Acquisition Company
|
5/19/2009
|
|
Encore Energy Partners LP
|
|
Undisclosed independent oil/gas company
|
5/18/2009
|
|
Eni SpA
|
|
Quicksilver Resources Incorporated
|
5/14/2009
|
|
Talon Oil & Gas LLC
|
|
Denbury Resources Incorporated
|
5/5/2009
|
|
Admiral Bay Resources Inc
|
|
Undisclosed
|
39
|
|
|
|
|
Announcement
|
|
Buyer
|
|
Seller
|
|
5/5/2009
|
|
Energen Resources Corporation;
Energen Corporation
|
|
Range Resources Corporation
|
4/30/2009
|
|
Apache Corporation
|
|
Marathon Oil Corporation
|
4/1/2009
|
|
Rabb Contracting Company LLC;
Claude Rabb (individual)
|
|
HyperDynamics Corp
|
3/4/2009
|
|
Crescent Point Energy Corp
|
|
Talisman Energy Incorporated
|
3/4/2009
|
|
TriStar Oil and Gas Ltd
|
|
Talisman Energy Incorporated
|
3/3/2009
|
|
Undisclosed
|
|
Berry Petroleum Company
|
2/23/2009
|
|
Longview Fund LP
|
|
South Texas Oil Company
|
2/17/2009
|
|
INNEX California Inc
|
|
Exoma Energy Limited
|
2/2/2009
|
|
Black Stone Minerals Company LP
|
|
Undisclosed private company
|
Morgan Keegan focused on multiples of total enterprise value to
proved reserves and total enterprise value to average daily
production.
Morgan Keegan applied certain median multiples of these
Precedent Transactions to Meridians most recent reserve
and production data to derive an implied range of enterprise and
equity values for Meridian. The following table summarizes the
median multiples paid for the Precedent Transactions and the
implied equity value per share of Meridian common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Prices of
|
|
|
Multiples
|
|
Meridian Common Stock
|
Financial Metric
|
|
Min
|
|
Median
|
|
Max
|
|
Min
|
|
Median
|
|
Max
|
|
EV/Proved Reserves
|
|
|
0.9
|
x
|
|
|
1.9
|
x
|
|
|
4.0
|
x
|
|
$
|
2.25
|
|
|
$
|
3.74
|
|
|
$
|
6.76
|
|
EV/Average Daily Production
|
|
|
7.3
|
x
|
|
|
9.8
|
x
|
|
|
25.8
|
x
|
|
$
|
4.19
|
|
|
$
|
5.32
|
|
|
$
|
12.54
|
|
Precedent Transactions metrics vary for many reasons, including,
but not limited to: (i) differences in pre-transaction
operating performance; (ii) other hidden or intangible
assets not apparent in historical operating performance;
(iii) non-disclosed pro forma adjustments and other
deal-specific factors; and (iv) differences in asset and
geographical mix. Multiples of the selected Precedent
Transactions as a whole were deemed more meaningful than the
multiples of any particular transaction. No selected transaction
analyzed in the Precedent Transactions analysis was identical to
the proposed transaction. Mathematical analysis, such as
determining the median, is not by itself a meaningful method of
using the Precedent Transactions data. A complete analysis
involves complex considerations and judgments concerning
differences in financial and operating characteristics of the
companies, as well as differences in geographies and development
and production costs, involved in the Precedent Transactions and
other factors that could affect the valuation multiples in the
Precedent Transactions to which the proposed transaction was
compared.
Net Asset Value Analysis.
Morgan Keegan
performed a Net Asset Value analysis, including calculating the
present value of the field-level before-tax future cash flows
that Meridian could expect to generate from its existing base of
proved reserves as detailed in our third quarter 2009
engineering report. Three cases have been included in the
analysis:
PV-10,
future net revenue (herein referred to in all tables as
FNR) divided by 1.5, and future net revenue divided
by 2.
Key assumptions used in the Net Asset Value analysis include:
|
|
|
|
|
Price deck:
NYMEX strip at December 1,
2009 $75.707/bbl, $4.457/mcf (held constant);
|
|
|
|
Risk weighting:
100% for proven developed and
producing reserves, 65% to 75% for proven developed and
non-producing reserves, 40% to 50% for proven undeveloped
reserves; and
|
|
|
|
Discount rate
(PV-10
case
only): 10%
|
Gross asset value was adjusted in each case for working capital,
cash, debt and selected other commitments and liabilities in
order to calculate a net asset value for each case, which was
then used to imply
40
a net asset value per share of Meridian common stock. The
following table summarizes the gross asset value as well as the
risked gross asset value for each case.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risked
|
Case
|
|
Gross Asset Value
|
|
Low
|
|
High
|
|
PV-10
|
|
$
|
216,018
|
|
|
$
|
150,960
|
|
|
$
|
164,047
|
|
FNR/1.5
|
|
$
|
209,480
|
|
|
$
|
137,758
|
|
|
$
|
150,528
|
|
FNR/2
|
|
$
|
157,111
|
|
|
$
|
105,651
|
|
|
$
|
115,811
|
|
Assuming a sale of its oil and natural gas properties, Meridian
would have certain liabilities, commitments and other
obligations to satisfy prior to distributing any proceeds to
shareholders. It should be noted that these liabilities,
commitments and other obligations significantly impair the
equity value available to shareholders. The following table
summarizes the implied net asset value per share of Meridian
common stock based assuming the range of gross asset values
previously detailed.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Net Asset Value
|
|
|
Gross Asset
|
|
|
|
per Share of
|
Reference Range
|
|
Value
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|
Net Asset Value
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|
Meridian Common Stock
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|
Low
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|
$
|
105,651
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|
|
$
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(34,882
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)
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|
|
NM
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|
Mid-point
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|
$
|
134,849
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|
|
$
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(5,684
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)
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|
|
NM
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|
High
|
|
$
|
164,047
|
|
|
$
|
23,707
|
|
|
$
|
0.25
|
|
The Net Asset Value analysis is dependent upon a number of
factors, including but not limited to:
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The validity of the third party engineering and reserve report;
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Discount rate/multiple; and
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Commodity price deck assumptions.
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Conclusion.
In arriving at its opinion, Morgan
Keegan did not attribute any particular weight to any analysis
or factor considered, but rather made qualitative judgments as
to the significance and relevance of each analysis and factor.
However, due to factors specific to Meridian, Morgan Keegan
considered the results of certain analyses, namely the Peer
Group Analysis and the Precedent Transaction Analysis, to be
less relevant to its overall analysis than those of other
valuation methodologies employed. These factors include, but are
not limited to:
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Meridians small market capitalization relative to that of
the selected publicly traded peers;
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Meridians lack of available capital and liquidity to fund
development activities;
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The fact that Meridian has been and remains in technical and
payment default with its lenders; and
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The expressed doubt from Meridians independent auditors as
to our ability to continue as a going concern for a period
longer than the next twelve months.
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Accordingly, Morgan Keegan believes that its analyses must be
considered as a whole and that selecting portions of its
analyses, without considering all analyses and factors, would
create an incomplete view of the process underlying Morgan
Keegans opinion. Based upon and subject to the foregoing
analysis, Morgan Keegans experience as investment bankers,
Morgan Keegans work as described above and other factors
Morgan Keegan deemed relevant, Morgan Keegan is of the opinion,
as of the date hereof, that the merger of Meridian is fair, from
a financial point of view, to Meridians shareholders.
Meridians board of directors selected Morgan Keegan to
deliver its opinion because of Morgan Keegans reputation
as a nationally recognized investment banking and advisory firm
with substantial experience in transactions similar to the
merger.
Pursuant to a letter agreement, dated November 2, 2009,
Meridian engaged Morgan Keegan to act as our financial advisor
in connection with the merger. Pursuant to the terms of this
engagement letter, we have agreed to pay Morgan Keegan a fee of
$300,000. In addition, we have agreed to reimburse Morgan Keegan
for
41
its reasonable
out-of-pocket
expenses, such expenses not to exceed $10,000 without our prior
consent, and to indemnify Morgan Keegan and related persons
against various liabilities, including certain liabilities under
the federal securities laws.
Other
Financial Advisory Fees
At the closing of the merger, Rivington will be paid a fee of
$2.4 million and JPMorgan will be paid a fee of
$1.8 million for their financial advisory services to us in
connection with the merger.
Effects
of the Merger
If the merger is approved by our shareholders, the other
conditions to the closing of the merger are either satisfied or
waived and Alta Mesa does not exercise its option to terminate
the merger agreement, Meridian will be merged with and into
Merger Sub, and Merger Sub will be the surviving company. After
the merger, the surviving company will be a wholly owned
subsidiary of Alta Mesa.
If the merger is completed, each share of our common stock
issued and outstanding immediately prior to the effective time
of the merger (other than shares owned by Alta Mesa, Merger Sub
or any other subsidiary of Alta Mesa or held in treasury by us
and other than shares held by shareholders, if any, who have
properly exercised and perfected statutory appraisal rights)
will be converted into the right to receive $0.29 in cash,
without interest and less any applicable withholding tax. Each
outstanding option or warrant for Meridian common stock will be
canceled in exchange for (A) the excess, if any, of $0.29
over the per share exercise price of the option or warrant, as
applicable, multiplied by (B) the number of shares of
common stock subject to the option or warrant, as applicable,
net of any applicable withholding taxes.
At the effective time of the merger, our shareholders will cease
to have ownership interests in us or rights as our shareholders.
Therefore, you will not participate in any of our future
earnings and will not benefit from any appreciation in
Meridians value.
Our common stock is currently registered under the Exchange Act
and is quoted on the NYSE under the symbol TMR. As a
result of the merger, we will be a privately held corporation,
and there will be no public market for our common stock. After
the merger, our common stock will cease to be listed on the
NYSE. In addition, registration of our common stock under the
Exchange Act will be terminated.
If any condition to the merger is not satisfied or waived or if
Alta Mesa exercises its right to terminate the merger agreement,
the merger will not be consummated. In that event, you will not
receive any cash or other consideration as a result of these
transactions. Alta Mesa has the option to terminate the merger
agreement for any reason in its sole and absolute discretion at
any time prior to the effective time of the merger, whether
before or after approval by our shareholders, provided that, if
Alta Mesa elects to exercise this option to terminate, Alta Mesa
must pay a $3.0 million termination fee to Meridian
concurrently with such termination. See The Merger
Agreement- Termination of the Merger Agreement. Under the
terms of our forbearance agreement with our credit facility
lenders, if we receive a termination fee from Alta Mesa, we
would be required to use the termination fee to reduce our
indebtedness under our credit facility, and we would not
otherwise have the use of such fee for working capital or
capital expenditures.
Effects
on Meridian if the Merger is Not Completed
If the merger is not consummated for any reason, our
shareholders will not receive the Merger Consideration and our
current management under the direction of our board of
directors, will continue to manage us as a stand-alone,
independent business and the value of shares of our common stock
will continue to be subject to the risks and uncertainties
identified in our Annual Report on
Form 10-K
for the year ended December 31, 2008, as amended, and any
updates to those risks and uncertainties set forth in our
subsequent Quarterly Reports on
Form 10-Q.
In addition, for the reasons described below, if the merger is
not completed, the forbearance agreements with our lenders and
certain others would terminate, allowing them to take action to
enforce their rights with respect to the outstanding
obligations. Because substantially all of our assets are pledged
as collateral under our credit facility, if our lenders declare
an event of default, they would be entitled
42
to foreclose on and take possession of our assets, including our
cash balances. In such an event, we may be forced to liquidate
or to otherwise seek protection under federal bankruptcy laws,
and we can give you no assurance that in a bankruptcy proceeding
you would receive any value for your shares.
Credit Facility Forbearance Agreement.
On
September 3, 2009, Meridian entered into a Forbearance and
Amendment Agreement (Credit Facility Forbearance
Agreement) with the lenders party to its credit facility.
The Credit Facility Forbearance Agreement provided that the
lenders would forbear from exercising any right or remedy
arising as a result of certain existing events of default under
the credit facility. Currently, the defaults under our credit
facility include payment default as a result of the borrowing
base redetermination, which became effective on April 30,
2009, and a financial covenant default associated with one of
the financial ratios prescribed in the credit facility. Default
remedies available to the lenders under the credit facility
include acceleration of all principal and interest amounts due
under the credit facility. Meridian and its lenders have amended
the Credit Facility Forbearance Agreement a number of times to,
among other things, extend the termination date of the
forbearance period, which is currently until the earlier of
(i) 5:00 p.m. (Central Time) on the earlier of
(x) May 31, 2010, (y) the effective time of the
merger, or (z) the termination of the merger agreement
(ii) or the date that any default occurs under the Credit
Facility Forbearance Agreement. In addition, our credit facility
lenders have the right, upon unanimous written consent of all of
the lenders party to our credit facility, to terminate the
forbearance period under our credit facility forbearance
agreement without cause on or after February 28, 2010.
The borrowing base under Meridians credit facility is
subject to semi-annual redetermination. The borrowing base is
governed by a number of factors including, but not limited to,
the reserve volumes associated with Meridians proved oil
and gas properties (particularly proved developed producing
reserves) and the future net cash flows associated with the
reserves, determined utilizing the lenders assumptions
regarding commodity prices. Effective April 30, 2009, the
lenders notified Meridian that the new borrowing base under the
facility would be $60.0 million, down from
$95.0 million, resulting in a borrowing base deficiency of
$35.0 million. As of January 4, 2010, Meridian has
outstanding indebtedness under the credit facility of
$86.4 million and a borrowing base deficiency of
$26.4 million. Meridian has made all principal reduction
and interest payments required under the Credit Facility
Forbearance Agreement. Meridian does not, however, currently
have sufficient cash available to repay the borrowing base
deficiency. As part of the Credit Facility Forbearance
Agreement, and the subsequent amendments thereto, the lenders
have agreed to waive the scheduled redetermination of the
borrowing base until such date that the Credit Facility
Forbearance Agreement terminates. Due to the limited nature of
Meridians drilling activities during 2009 and the runoff
of Meridians proved developed producing reserves as a
result of its ongoing production operations, Meridian can give
no assurance as to what its redetermined borrowing base would be
should the lenders undertake a borrowing base redetermination.
CIT Forbearance Agreement.
On
September 3, 2009, Meridian also entered into a forbearance
agreement with CIT Group/Equipment Finance, Inc. (CIT
Forbearance Agreement) related to defaults under an
agreement with CIT Group/Equipment Finance, Inc. due to
cross-default provisions contained therein. The CIT Forbearance
Agreement, as amended, runs in tandem with the Credit Facility
Forbearance Agreement and will terminate if there is any default
under either forbearance agreement. Default remedies available
to CIT Group/Equipment Finance, Inc. include acceleration of all
principal and interest amounts due under the financing
agreement. As of January 4, 2010, Meridian owes
approximately $6.0 million to CIT under this drilling rig
financing.
Hedge Party Forbearance Agreement.
On
September 3, 2009, Meridian also entered into a forbearance
agreement (Hedge Party Forbearance Agreement) with
certain affiliates of Fortis Capital Corp. and Scotia Bank,
lenders under the credit facility, related to defaults under
hedging agreements due to cross-default provisions contained
therein. The Hedge Party Forbearance Agreement, as amended, runs
in tandem with the Credit Facility Forbearance Agreement and
will terminate if there is any default under the Credit Facility
Forbearance Agreement. We do not currently have any hedge
contracts outstanding under the hedge agreements.
43
Orion Forbearance Agreement.
Meridian has a
long-term dayrate contract to utilize a drilling rig from an
unaffiliated service company, Orion Drilling Company LLC
(Orion). Although Meridians capital
expenditure plans no longer accommodate use of this rig,
Meridian is obligated for the dayrate regardless of whether the
rig is working or idle. When the contracted rig is not in use on
Meridian-operated wells, Orion may contract it to third parties,
or the rig may be idled. Meridian is obligated for the
difference between the contracted dayrate and the lesser dayrate
if the rig is utilized by a third party. The contracted rig was
utilized drilling a Meridian-operated well through the end of
the first quarter of 2009, and contracted to a third party
during the second and third quarters at a lower dayrate than
Meridians contracted dayrate.
In addition, we own a rig that was also intended primarily to
drill wells operated by us. In April 2008, Orion began leasing
the rig from us, and operating it under a dayrate contract with
Meridian. Meridian is obligated for the difference between the
contracted dayrate and the lesser dayrate if the rig is utilized
by a third party. Beginning January 2009, the rig has been
contracted to a third party operator at a rate which is less
than the dayrate contract for which Meridian is obligated.
On September 3, 2009, Meridian also entered into a
forbearance agreement with Orion (Orion Forbearance
Agreement) related to Meridians payment obligations
under the dayrate contracts. The Orion Forbearance Agreement, as
amended, runs in tandem with the CIT Forbearance Agreement and
will terminate if there is any default under the CIT Forbearance
Agreement. Obligations under the dayrate contracts accrue over
the life of the dayrate contracts. The dayrate contracts related
to the two rigs terminate in March 2010 and February 2011.
Although Meridian has obtained short-term forbearance agreements
for each of the aforementioned agreements in default, we may not
be able to comply with the conditions and covenants set forth in
those forbearance agreements. There can be no assurance that
these forbearance agreements provide us the time to resolve the
deficiencies and forestall further default. If we are unable to
comply with the terms of the forbearance agreements, we will be
subject to the exercise of remedies by such parties on account
of such defaults. The exercise of such remedies would likely
result in us seeking protection under federal bankruptcy laws.
New York Stock Exchange.
On December 4,
2008, we received notification from the NYSE that we had fallen
below certain continued listing criteria that require a minimum
average closing price of $1.00 per share over 30 consecutive
trading days. The NYSE temporarily suspended the minimum average
closing price requirement during part of the first half of 2009.
We received notification from the NYSE that our common stock
would potentially be delisted if we were not in compliance with
that requirement by November 9, 2009. To date we have not
been delisted from the NYSE.
In addition, we are currently monitoring our compliance with
another listing criterion. This criterion requires that average
market capital over 30 consecutive trading days must be at least
$15 million. Based on shares outstanding at January 1,
2010, our average market capital decreases below this level when
the stock price drops below approximately $0.16 per share. Some
closing prices in the first half of 2009 have been below this
price. If we become non-compliant with this criterion, our
common stock would be subject to the NYSEs delisting
procedures.
In our communications with the NYSE they noted that we have not
held a shareholders meeting in more than twelve months,
since August 6, 2008, and are not in compliance with NYSE
rules in that respect.
Finally, the NYSE also noted that it can take accelerated
listing action in the event that our common stock trades at
levels viewed to be abnormally low over a sustained
period of time, and that it is continuing to evaluate the
trading levels of our stock, including the price per share.
There can be no assurance that our common stock will continue to
be listed on the NYSE. Also, there can be no assurance that we
will obtain listing on an alternate stock exchange or automated
quotation service in the event we are delisted from the NYSE. A
delisting of our common stock could materially and adversely
affect, among other things, the liquidity and market price of
our common stock; the number of investors willing to hold or
acquire our common stock; and our access to capital markets to
raise capital in the future.
44
Financing
of the Merger
The amount of funds necessary to pay the aggregate merger
consideration to our shareholders and holders of options and
warrants is anticipated to be approximately $27.2 million,
assuming:
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a purchase price of $0.29 per share (net of the exercise price
for warrants); and
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none of our shareholders validly exercises and perfects its
appraisal rights.
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In addition, Alta Mesa will assume our outstanding indebtedness,
which was approximately $92.4 million as of January 4,
2010. Alta Mesa has informed us that it will pay for the
acquisition through a combination of cash on hand and financing
obtained under its credit facility or contributions from its
partners. Alta Mesas obligation to complete the merger is
not contingent on its obtaining financing.
Material
United States Federal Income Tax Consequences
General
The following discussion summarizes the material
U.S. federal income tax consequences of the merger that may
be relevant to our shareholders who hold shares of our common
stock as a capital asset for U.S. federal income tax
purposes (generally, assets held for investment) and who, or
that, are for U.S. federal income tax purposes:
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an individual who is a citizen or resident of the United States
(including certain former citizens and former long-term
residents);
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a corporation, or other entity taxable as a corporation for
U.S. federal tax purposes, created or organized in or under
the laws of the United States or any state thereof or the
District of Columbia;
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an estate the income of which is subject to U.S. federal
income taxation regardless of its source; or
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a trust (i) that is subject to the primary supervision of a
court within the United States and the control of one or more
United States persons as defined in section 7701(a)(30) of
the Internal Revenue Code of 1986, as amended, or the Code, or
(ii) that has a valid election in effect under applicable
Treasury regulations to be treated as a United States person.
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This discussion is based on the Code, Treasury regulations
promulgated thereunder, court decisions, published rulings of
the Internal Revenue Service, or the IRS, and other applicable
authorities, all as in effect on the date of this proxy
statement and all of which are subject to change or differing
interpretations, possibly with retroactive effect.
This discussion does not address all of the U.S. federal
income tax consequences that may be relevant to our shareholders
in light of their particular circumstances or to our
shareholders who may be subject to special treatment under
U.S. federal income tax laws, such as tax-exempt
organizations, foreign persons or entities, S corporations
or other pass-through entities, financial institutions,
insurance companies, broker-dealers, persons who hold Meridian
shares as part of a hedge, straddle, wash sale, synthetic
security, conversion transaction, or other integrated investment
comprised of Meridian shares and one or more investments,
persons whose functional currency (as defined in the
Code) is not the U.S. dollar, persons who exercise
appraisal rights, and persons who acquired Meridian shares in
compensatory transactions. Further, this discussion does not
address any aspect of state, local, or foreign taxation.
If a partnership (or other entity classified as a partnership
for U.S. federal tax purposes) is a beneficial owner of
Meridian shares, the tax treatment of a partner in that
partnership will generally depend on the status of the partner
and the activities of the partnership. Meridian shareholders
that are partnerships and partners in these partnerships are
urged to consult their tax advisors regarding the
U.S. federal income tax consequences of the merger to them.
THIS SUMMARY IS NOT A SUBSTITUTE FOR AN INDIVIDUAL ANALYSIS
OF THE TAX CONSEQUENCES OF THE MERGER TO YOU. WE URGE YOU TO
CONSULT YOUR TAX
45
ADVISOR REGARDING THE PARTICULAR FEDERAL, STATE, LOCAL, AND
FOREIGN TAX CONSEQUENCES OF THE MERGER IN LIGHT OF YOUR OWN
SITUATION.
Tax
Consequences of the Merger to Meridian
Shareholders
The Merger.
The exchange of Meridian shares
for cash in the merger will be a taxable transaction for United
States federal income tax purposes, and possibly for state,
local and foreign tax purposes as well.
A holder of our stock generally will recognize capital gain or
capital loss equal to the difference, if any, between the amount
of cash received by the shareholder pursuant to the merger and
the shareholders adjusted tax basis in the shares of our
stock surrendered. Gain or loss will be calculated separately
for each block of shares (that is, shares acquired at the same
cost in a single transaction) exchanged in the merger. Holders
of separate blocks of our stock should consult their tax
advisors with respect to these rules.
If at the time of the merger a non-corporate shareholders
holding period for the shares of our stock is more than one
year, any gain recognized will be long term capital gain. If the
non-corporate shareholders holding period for the shares
of our stock is one year or less at the time of the merger, any
gain will be subject to United States federal income tax at the
same graduated rates as ordinary income. The use of capital
losses is generally subject to limitations.
For corporations, capital gain is taxed at the same rates as
ordinary income, and the use of capital losses is subject to
limitations.
Appraisal Rights.
Holders of our common shares
are entitled to appraisal rights under Texas law in connection
with the merger. If a United States holder receives cash
pursuant to the exercise of appraisal rights, that United States
holder generally will recognize gain or loss equal to the
difference between the amount of cash received and the adjusted
tax basis in their shares of our common stock. This gain should
be long-term capital gain or loss if the United States holder
held our common stock for more than one year. Any holder of our
common stock that plans to exercise appraisal rights in
connection with the merger is urged to consult a tax advisor to
determine the related tax consequences.
Information Reporting and Backup
Withholding.
Under U.S. federal income tax
laws, the exchange agent will generally be required to report to
a Meridian shareholder and to the IRS any reportable payments
made to such Meridian shareholder in the merger. Additionally, a
Meridian shareholder may be subject to a backup withholding tax
with respect to the cash received in the merger, unless the
Meridian shareholder provides the exchange agent with his
correct taxpayer identification number, which in the case of an
individual is his social security number, or, in the
alternative, establishes a basis for exemption from backup
withholding. If the correct taxpayer identification number or an
adequate basis for exemption is not provided, a Meridian
shareholder will be subject to backup withholding on any
reportable payment.
To prevent backup withholding, each Meridian shareholder must
complete the IRS
Form W-9
or a substitute
Form W-9
that will be provided by the exchange agent with the transmittal
letter. Any amounts withheld under the backup withholding rules
from a payment to a Meridian shareholder will be allowed as a
credit against his U.S. federal income tax liability and
may entitle him to a refund, if the required information is
furnished to the IRS.
The foregoing discussion is for general information only and
not intended to be legal or tax advice to any particular
Meridian shareholder. Tax matters regarding the merger are very
complicated, and the tax consequences of the merger to any
particular Meridian shareholder will depend on that
shareholders particular situation. Meridian shareholders
should consult their own tax advisor to determine the specific
tax consequences of the merger, including tax return reporting
requirements, the applicability of U.S. federal, state,
local, and foreign tax laws, and the effect of any proposed
change in the tax laws to them.
46
Interests
of Meridians Directors and Executive Officers in the
Merger
In considering the recommendation of our board of directors with
respect to the merger agreement, you should be aware that our
directors and executive officers have interests in the merger
that are different from, or in addition to, your interests as a
shareholder. These interests include:
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existing change of control arrangements between us and our
executive officers providing for, among other things, severance
benefits if the executives employment is terminated under
certain circumstances following a change in control of Meridian,
such as the merger, which change in control arrangements include:
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an employment agreement between us and our Chairman and Chief
Executive Officer, Paul D. Ching, providing for the payment to
Mr. Ching of all accrued and unpaid salary through the date
of termination and his monthly salary for the remainder of the
term of his employment agreement if his employment is terminated
following a change in control; and
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employment agreements and participation of Messrs. Lloyd V.
DeLano, Allen D. Breaux, Steven G. Ives and Alan S. Pennington,
who are officers of Meridian, in The Meridian
Resource & Exploration LLC Change in Control and
Severance Plan, which could result in potential change in
control benefits to such officers of an aggregate of $2.8
million.
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conversion of outstanding warrants held by two of our directors,
Messrs. Reeves and Mayell, into the right to receive the
Merger Consideration, less the exercise price of the warrants,
which, assuming a closing on March 30, 2010, and based on
the number of warrants held as of February 8, 2010, would
result in an aggregate cash payment to them of $355,870;
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indemnification provisions in the merger agreement in favor of
our directors and officers;
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maintenance of a six-year tail directors and
officers liability insurance policy to cover directors and
officers currently covered by our directors and
officers liability insurance policy; and
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potential employment arrangements between Alta Mesa or any of
its affiliates, on the one hand, and one or more executive
officers of Meridian, on the other hand, although there are no
such arrangements as of the date of this proxy statement.
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Our board of directors was aware of, and considered, the
interests of our directors and executive officers in approving
the merger agreement and the merger. For the reasons, among
others, described below, these additional interests did not
affect the ability of our board of directors to exercise its
judgment solely for the benefit of us and our shareholders:
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our board of directors was aware of these additional interests
and the boards decision to approve the merger agreement
and the merger was made with full knowledge of the existence of
these additional interests and their terms;
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the change of control arrangements in Mr. Chings
employment agreement were recommended by non-employee directors
more than 11 months prior to the execution of the merger
agreement and was recommended for the purpose of ensuring that
Mr. Ching would devote his services for the best interests
of us and our shareholders and not be distracted by any
potential change in control;
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the other executive officers participation in The Meridian
Resource & Exploration LLC Change in Control and
Severance Plan was recommended by non-employee directors more
than 10 months prior to the execution of the merger
agreement and all were recommended for the purpose of ensuring
that our executive officers would continue to devote their
services for the best interests of us and our shareholders and
not be distracted by any potential change in control;
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our directors believed the executive officers severance
agreements to be prudent and in the best interests of us and our
shareholders;
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these additional interests were not implemented for the purpose
of creating a deterrent to any takeover proposal;
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47
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since the exercise price for all of the options held by our
executive officers and directors exceeds the Merger
Consideration, such options will be cancelled at the time of the
merger in exchange for no payment being made to such officers
and directors or, in some circumstances, only $10 payments being
made to such directors and officers for their execution of a
waiver, cancellation and release agreement; and
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the warrants issued to Messrs. Reeves and Mayell were
issued in conjunction with certain transactions with
Messrs. Reeves and Mayell that took place in anticipation
of our consolidation in December 1990 and were a component of
the total consideration issued for various interests that
Messrs. Reeves and Mayell had as general partners in TMR,
Ltd., a predecessor entity of us, and were not issued in
contemplation of the proposed transaction with Alta Mesa or any
other party.
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Directors and Officers.
There may be potential
employment arrangements between Alta Mesa or any of its
affiliates, on the one hand, and one or more executive officers
of Meridian, on the other hand, although there are no such
arrangements as of the date of this proxy statement.
Employment Agreement with Paul D. Ching.
We
have an employment agreement, effective as of December 30,
2008 with Paul D. Ching, our interim Chairman of the Board and
Chief Executive Officer. The employment agreement was for an
initial term of six months and was subsequently extended through
March 31, 2010. The employment agreement is renewable only
by mutual agreement and in writing. The employment agreement
provides for a base salary of $41,667 per month, which equates
to an annual rate of $500,000. The agreement specifies that
Mr. Ching will not be entitled to participate in any of our
employee benefit plans.
If we or the surviving company terminate Mr. Chings
employment after the merger, we will pay him (a) all
accrued but unpaid salary through the date of termination and
(b) his monthly salary for the remainder of the term of his
employment agreement. If we had terminated Mr. Chings
employment on January 1, 2010 after a change of control, we
estimate the value of the payments he would have been eligible
to receive was $125,000.
Change in Control and Severance Plan.
In
February 2009, Messrs. DeLano, Breaux, Ives and Pennington,
who are officers of Meridian, became participants in The
Meridian Resource & Exploration LLC Change in Control
and Severance Plan. If the employment of any of
Messrs. DeLano, Breaux, Ives and Pennington is terminated
under specified circumstances in connection with a change of
control, such as the proposed merger, then such person will be
entitled to (a) all accrued but unpaid salary, vacation and
sick leave benefits through the date of termination;
(b) his monthly salary for 36 months after the date of
termination (including termination payments under their
respective employment agreements); (c) his medical
insurance benefits for a period of 18 months after his
termination of employment at no cost to him; and (d) a
single lump sum amount representing 18 months
premiums for the basic life insurance provided by us on his date
of termination.
If Mr. DeLanos employment had been terminated on
January 1, 2010 after a change of control, we estimate the
value of the payments and benefits described in clauses (a),
(b), (c), and (d) above he would have been eligible to
receive is (a) $20,058; (b) $782,250,
(c) $25,197, and (d) $2,584, with an aggregate value
of $830,089.
If Mr. Breauxs employment had been terminated on
January 1, 2010 after a change of control, we estimate the
value of the payments and benefits described in clauses (a),
(b), (c), and (d) above he would have been eligible to
receive is (a) $10,154; (b) $704,025, (c) $1,689,
and (d) $2,490, with an aggregate value of $718,358.
If Mr. Ives employment had been terminated on
January 1, 2010 after a change of control, we estimate the
value of the payments and benefits described in clauses (a),
(b), (c), and (d) above he would have been eligible to
receive is (a) $13,378; (b) $521,760,
(c) $11,666, and (d) $2,134, with an aggregate value
of $548,938.
If Mr. Penningtons employment had been terminated on
January 1, 2010 after a change of control, we estimate the
value of the payments and benefits described in clauses (a),
(b), (c), and (d) above he would have
48
been eligible to receive is (a) $-0-; (b) $735,336,
(c) $25,197, and (d) $2,530, with an aggregate value
of $763,063.
We entered into these change in control and severance plan
arrangements as a result of the determination of our board of
directors and compensation committee that it was imperative for
us to be able to rely upon these individuals to continue in
their respective positions with us without concern that such
employees might be distracted by the personal uncertainties and
risks created by any proposed change of control of Meridian.
Total Consideration for Our Common Stock.
Our
directors and executive officers will receive the same per share
consideration for their shares of our common stock in the merger
as all of our other shareholders. The table below sets forth the
estimated aggregate amount of consideration that will be
received in the merger by our directors and executive officers
on account of their ownership of our common stock as of
January 1, 2010:
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Number of
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Amount of Cash to
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Shares of
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be Received for Our
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Our Common
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Common Stock in
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Executive Officers and Directors
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Stock Owned
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the Merger
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Paul D. Ching
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15,873
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$
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4,603
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Lloyd V. DeLano
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79,096
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$
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22,938
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Allen D. Breaux
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56,104
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$
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16,270
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Steven G. Ives
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33,935
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$
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9,841
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Alan S. Pennington
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57,334
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$
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16,627
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E. L. Henry
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13,000
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$
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3,770
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Michael J. Mayell
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1,744,261
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$
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505,836
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C. Mark Pearson
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-0-
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$
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-0-
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Joseph A. Reeves, Jr.
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1,964,010
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$
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569,563
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John B. Simmons
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-0-
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$
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-0-
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Fenner R. Weller, Jr.
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33,750
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$
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9,788
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Total
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3,997,363
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$
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1,159,236
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Stock Options and Warrants.
The merger
agreement provides that at the effective time of the merger,
each outstanding option to purchase our common stock will become
fully vested pursuant to our long-term incentive plans and,
pursuant to the merger agreement, will be converted into the
right to receive, at the effective time of the merger, an amount
in cash equal to the product of (A) the excess, if any, of
the Merger Consideration over the per share exercise price of
common stock subject to such option multiplied by (B) the
number of shares of common stock covered by such option, the
payment of which will be without interest and subject to
applicable withholding tax. The per share exercise price for all
of our outstanding options, including options held by our
executive officers and directors, exceeds the Merger
Consideration. Therefore, our executive officers and directors
will not receive any consideration for the cancellation of their
outstanding options, except that Mr. Ching will receive $10
consideration in exchange for his execution of an option waiver,
cancellation and release agreement for 250,000 options that he
holds.
Joseph A. Reeves, Jr. and Michael J. Mayell, who are
directors of Meridian, each own warrants to purchase
936,499 shares of our common stock. The exercise price of
the warrants is $0.10 per share. At the effective time of the
merger, each such outstanding warrant will be converted into the
right to receive, at the effective time of the merger, an amount
in cash equal to the product of (A) the excess of the
Merger Consideration over the exercise price per share of common
stock subject to such warrant multiplied by (B) the number
of shares of common stock covered by such warrant, the payment
of which will be without interest and subject to applicable
withholding tax. Mr. Reeves and Mr. Mayell will
receive $355,870 in the aggregate for their warrants.
Directors and Officers Indemnification and
Insurance.
The merger agreements contains
indemnification provisions in favor of our directors and
officers and provides for the maintenance of a six-year
tail directors and officers liability
insurance policy to cover directors and officers currently
covered by our
49
directors and officers liability insurance policy,
see The Merger Agreement Covenants
Directors and Officers Indemnification and
Insurance.
Litigation
Related to the Merger
Following announcement of the merger transaction with Alta Mesa
on December 23, 2009, putative derivative and class action
lawsuits were filed in state district court in Harris County,
Texas challenging the proposed transaction. The plaintiffs in
these stockholder actions allege that the members of
Meridians board of directors breached their fiduciary duty
by: (i) permitting Alta Mesa to purchase Meridian for an
unfair price; (ii) utilizing a purportedly defective sales
process; and (iii) agreeing to certain provisions in the
merger agreement that plaintiffs deem overly restrictive. The
stockholder actions also allege that Alta Mesa and, in some
cases, Meridian, aided and abetted the alleged breaches of
fiduciary duty. The plaintiffs seek various remedies, including
an injunction preventing the transaction from being consummated
in accordance with the
agreed-upon
terms.
THE
MERGER AGREEMENT
The following summary of the terms of the merger agreement is
qualified in its entirety by reference to the merger agreement,
a copy of which is attached to this proxy statement as
Annex A
. This summary may not contain all of the
information about the merger that is important to you. We
encourage you to read carefully the merger agreement in its
entirety.
The descriptions of the merger agreement in this proxy statement
have been included to provide you with information regarding its
terms. Except for its status as the contractual document between
the parties with respect to the merger, it is not intended to
provide factual information about Alta Mesa, Merger Sub or us.
The merger agreement contains representations and warranties
made by and to Alta Mesa, Merger Sub and us as of specific
dates. The representations and warranties were made for purposes
of the merger agreement and are subject to qualifications and
limitations agreed to by the parties in connection with
negotiating the terms of the merger agreement, including
qualifications in disclosures exchanged between the parties. In
addition, some representations and warranties were made as of a
specified date, may be subject to contractual standards of
materiality different from those generally applicable to
shareholders, and have been made solely for purposes of risk
allocation and to provide contractual rights and other remedies
to Alta Mesa, Merger Sub and us. You should not rely upon the
representations and warranties set forth in the merger agreement
as statements of factual information.
The
Merger and Effective Time
The merger agreement provides that Meridian will merge with and
into Merger Sub, a wholly owned subsidiary of Alta Mesa. Merger
Sub will be the surviving company in the merger, which we
sometimes refer to as the surviving company, and will continue
to exist after the merger as a wholly owned subsidiary of Alta
Mesa.
The closing date for the merger will be no later than the first
business day following the day on which all conditions to
closing in the merger agreement have been satisfied or waived or
on another date as agreed between Alta Mesa, Merger Sub and us.
We currently expect to complete the merger during the first half
of 2010. However, we cannot assure you when, or if, all the
conditions to completion of the merger will be satisfied or
waived or whether the merger agreement will terminate prior to
closing. See Conditions to the Merger
and Termination of the Merger Agreement
below.
The merger will be effective on the date of filing of a properly
executed certificate of merger with the Secretary of State of
Texas (or at such later time as agreed to by the parties and
specified in such certificate of merger).
50
Merger
Consideration
The merger agreement provides that each share of our common
stock outstanding immediately prior to the effective time of the
merger (other than shares owned by Alta Mesa, Merger Sub or any
other subsidiary of Alta Mesa or held in treasury by us and
other than shares held by shareholders, if any, who have
properly exercised and perfected statutory appraisal rights)
will be converted at the effective time of the merger into the
right to receive $0.29 in cash, without interest and less any
applicable withholding of taxes. In this proxy statement, we
refer to the consideration to be paid per share of common stock
in the merger as the Merger Consideration.
If any of our shareholders properly exercises and perfects
appraisal rights with respect to any of their shares of our
common stock, then we will treat those shares as described below
in Rights of Dissent and Appraisal.
Payment
Procedures
Prior to the effective time of the merger, Alta Mesa or Merger
Sub will deposit with an exchange agent agreed upon between Alta
Mesa and us an amount in cash sufficient to pay the aggregate
Merger Consideration payable to all holders of our common stock.
The exchange agent will deliver the Merger Consideration in
exchange for surrendered stock certificates or book entry shares.
Promptly after the effective time of the merger, and in any
event within five business days after the closing date, Merger
Sub will cause the exchange agent to send to each holder of
record of our shares a letter of transmittal and instructions
disclosing the procedure for exchanging shares of our common
stock for the Merger Consideration. After the effective time of
the merger, each holder of shares of our common stock which have
been converted into the right to receive the Merger
Consideration shall, upon either surrender to the paying agent
of a certificate together with a properly completed letter of
transmittal or receipt of an agents message by the paying
agent, be entitled to receive the Merger Consideration for each
share of common stock held (less any applicable withholding of
taxes). No interest will be paid or accrued on the Merger
Consideration.
Any cash remaining in the possession of the exchange agent one
year after the effective time of the merger will be returned to
Merger Sub, upon demand, and any holder who has not exchanged
such holders common stock prior to that time may look only
to the surviving company to exchange such shares of common stock
or to pay the Merger Consideration. If outstanding shares of our
common stock are not surrendered prior to six years after the
effective time of the merger (or, in any particular case, prior
to such earlier date on which any Merger Consideration issuable
or payable upon the surrender of shares of our common stock
would otherwise escheat to or become the property of any
governmental authority), the Merger Consideration issuable or
payable upon the surrender of our common stock shall, to the
extent permitted by applicable law, become the property of
Merger Sub, free and clear of all claims or interest of our
shareholders.
You should not return your stock certificates representing
shares of our common stock with the enclosed proxy card, and you
should not forward your stock certificates to the disbursing
agent without a transmittal letter.
In all cases, the Merger
Consideration will be paid only in accordance with the
procedures set forth in the merger agreement and the transmittal
letter.
If payment of the Merger Consideration is to be made to a person
other than the registered holder of our common stock, it will be
a condition of payment that the person requesting such payment
either pay any applicable taxes required or establish, to the
reasonable satisfaction of the exchange agent, that the tax has
been paid or is not applicable.
If any share certificate is lost, stolen or destroyed, the
exchange agent will pay the Merger Consideration for the number
of shares represented by such certificate upon delivery by the
person seeking payment of an affidavit in lieu of the
certificate, and if required by the surviving company, an
indemnity bond in form and substance and with surety reasonably
satisfactory to the surviving company.
51
Treatment
of Stock Options and Stock-Based Awards
The merger agreement provides that at the effective time of the
merger, each outstanding option to purchase our common stock
will become fully vested pursuant to our long-term incentive
plans and, pursuant to the merger agreement, will be converted
into the right to receive, at the effective time of the merger,
an amount in cash equal to the product of (A) the excess,
if any, of the Merger Consideration over the per share exercise
price of common stock subject to such option multiplied by
(B) the number of shares of common stock covered by such
option, the payment of which will be without interest and
subject to applicable withholding tax. The per share exercise
price for all of our outstanding options exceeds the Merger
Consideration. Therefore, the holders of outstanding options
will not receive any consideration for the cancellation of their
outstanding options held by them, except that certain holders of
options will receive $10 consideration in exchange for the
execution of an option waiver, cancellation and release
agreement.
Joseph A. Reeves, Jr. and Michael J. Mayell, who are
directors of Meridian, each own warrants to purchase
936,499 shares of our common stock. The exercise price of
the warrants is $0.10 per share. At the effective time of the
merger, each such outstanding warrant will be converted into the
right to receive, at the effective time of the merger, an amount
in cash equal to the product of (A) the excess of the
Merger Consideration over the exercise price per share of common
stock subject to such warrant multiplied by (B) the number
of shares of common stock covered by such warrant, the payment
of which will be without interest and subject to applicable
withholding tax. Mr. Reeves and Mr. Mayell will
receive $355,870 in the aggregate for their warrants.
Certificate
of Formation; Company Agreement and Directors and Officers of
the Surviving Company
When the merger becomes effective, the certificate of formation
of Merger Sub, as in effect immediately before the effective
time of the merger, will be the certificate of formation of the
surviving company. The company agreement of Merger Sub, as in
effect immediately prior to the effective time of the merger,
will be the company agreement of the surviving company.
The directors and officers of Merger Sub immediately prior to
the effective time of the merger will be the directors and
officers of the surviving company following the merger until
their respective successors are duly elected or appointed and
qualified.
Representations
and Warranties
Meridian made various representations and warranties in the
merger agreement with respect to us and our subsidiaries that
are subject, in some cases, to disclosures and specified
exceptions and qualifications. Our representations and
warranties relate to, among other things:
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our due organization, valid existence and good standing;
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the due organization, valid existence and good standing of our
subsidiaries;
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the corporate power of Meridian and each of our subsidiaries to
own, use or lease our respective properties and carry on our
respective businesses;
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our capital structure;
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our ownership of each of our subsidiaries;
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our corporate power and authority to enter into, execute and
deliver the merger agreement and consummate the transactions
contemplated thereby;
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our due authorization, execution and delivery of the merger
agreement;
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the consents, approvals and filings required to enter into the
merger agreement or to complete the transactions contemplated by
the merger agreement;
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the accuracy of our filings with the SEC and compliance with
applicable rules and regulations for a specified period of time;
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52
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our compliance with the Sarbanes-Oxley Act;
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our financial statements filed with the SEC for each of the
three fiscal years ended December 31, 2006, 2007 and 2008
and the fiscal quarters ended March 31, June 30 and
September 30, 2009;
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the absence of undisclosed liabilities;
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the conduct of our business, and the absence of certain changes
in our business, since December 31, 2008, including the
absence of a material adverse effect relating to us;
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tax matters affecting us and our subsidiaries;
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litigation matters affecting us and our subsidiaries;
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labor and employment, employee welfare and benefit plan matters
affecting us and our subsidiaries;
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environmental matters affecting us and our subsidiaries;
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the adequacy of the governmental authorizations and permits
needed to conduct our business and our compliance with
applicable laws and governmental orders;
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compliance with applicable laws affecting us and our
subsidiaries;
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insurance;
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the accuracy of our reserve reports;
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material contracts;
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the required vote of our shareholders to approve the merger
agreement;
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matters relating to this proxy statement;
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intellectual property;
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our and our subsidiaries hedging obligations;
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our absence of liability for undisclosed brokers fees;
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opinion of Morgan Keegan, our financial advisor;
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the inapplicability to the merger of state anti-takeover
statutes or regulations;
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net profit interest agreements, including net profit interest
agreements with Joseph A. Reeves, Jr. and Michael J.
Mayell, two of our directors, and other arrangements we have
with Messrs. Reeves and Mayell;
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our credit facility forbearance agreement and other forbearance
agreements with third parties;
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gas balancing and
take-or-pay
contracts;
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production requirements;
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our Well Bonus Plans; and
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interested party transactions.
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You should be aware that these representations and warranties
made by Meridian to Alta Mesa and Merger Sub may be subject to
important limitations, disclosures and qualifications set forth
in the merger agreement and the disclosure schedules thereto,
and do not purport to be accurate as of the date of this proxy
statement or provide factual information about us to our
shareholders. Certain of our representations and warranties are
qualified by a material adverse effect standard, which is
defined in the section labeled Material
Adverse Effect Definition below.
53
In addition, Alta Mesa and Merger Sub made certain
representations and warranties to us, including representations
and warranties relating to:
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due organization and good standing with respect to Alta Mesa and
Merger Sub;
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power and authority of Alta Mesa and Merger Sub to enter into,
execute and deliver the merger agreement and consummate the
transactions contemplated thereby;
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due authorization, execution and delivery of the merger
agreement;
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Alta Mesas ownership of Merger Sub and absence of business
activities of Merger Sub;
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the absence of conflicts with organizational documents of Alta
Mesa and Merger Sub or violations under contracts of Alta Mesa
and Merger Sub;
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the absence of liability for undisclosed brokers fees;
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the accuracy of information furnished to us by Alta Mesa or
Merger Sub for inclusion in this proxy statement;
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Alta Mesa and Merger Sub not being affiliated
shareholders of Meridian for purposes of certain
anti-takeover statutes;
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Alta Mesas availability of sufficient cash, available
lines of credit or other sources of immediately available funds
to enable it to cause Merger Sub to make payment of the
aggregate Merger Consideration by Merger Sub under the merger
and all related fees and expenses and to otherwise consummate
the transactions contemplated by the merger agreement; and
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Alta Mesas acknowledgement that obtaining of any financing
is not a condition to closing.
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All of the representations and warranties contained in the
merger agreement will expire at the effective time of the merger.
Material
Adverse Effect Definition
A material adverse effect means any event, circumstance,
condition, development or occurrence causing, resulting in or
having (or with the passage of time likely to cause, result in
or have) a material adverse effect on the financial condition,
business, assets, properties or results of operations of
Meridian and our subsidiaries, taken as a whole, including but
not limited to any of the following:
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a decline of ten percent or more in the monthly aggregate
average daily production rate of our oil and gas interests, as
compared to those monthly aggregate reserves classified as
Proved Developed Producing reserves in the reserve
report of T. J. Smith & Co. Inc. relating to such
firms estimates of proved oil and gas reserves
attributable to our oil and gas interests as of January 1,
2009;
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the bankruptcy of Meridian or any of our subsidiaries;
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uninsured casualty losses of Meridian and our subsidiaries in
excess of $1,000,000 in the aggregate;
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the initiation of litigation or an arbitration proceeding
against Meridian or any of our subsidiaries that could
reasonably result in damages in excess of $1,000,000;
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the initiation of an investigation by the SEC; and
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the initiation of foreclosure proceedings against any of our or
our subsidiaries assets or the delivery of a notice of
cross default by any of our or our subsidiaries lenders.
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The following events, circumstances, conditions, developments
and occurrences are not deemed to constitute and are not to be
taken into account in determining whether there is a material
adverse effect to Meridians business, assets, properties
or results of operations:
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general business or economic conditions or the capital,
financial, banking or currency markets, or changes therein;
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54
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conditions generally affecting the industry in which we or any
of our subsidiaries operate or changes therein, including the
market price of oil or natural gas or changes thereof;
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the negotiation, execution, announcement, or pendency or
performance of the merger agreement or any of the transactions
contemplated by the merger agreement, including any change in
our relationship or any of our subsidiaries relationships
with employees, customers, suppliers, investors and contractual
counterparties, and any litigation resulting therefrom;
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any action or omission required or permitted by the merger
agreement or any action taken at the request of Alta Mesa;
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any action taken by Alta Mesa or Merger Sub;
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any change in the market price for or trading volume of our
stock;
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any changes in laws or applicable accounting regulations or
principles, or interpretations thereof; and
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the commencement, continuation or escalation of war, terrorism
or hostilities, or natural disasters or political events.
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Covenants
Conduct of Business Pending the Merger.
From
the date of the merger agreement to the effective time of the
merger, and unless otherwise contemplated or permitted in the
merger agreement, as required by applicable law or consented to
in writing by Alta Mesa, Meridian has agreed to conduct our
business in the ordinary course, and to use our commercially
reasonable efforts to preserve intact our business organizations
and relationships with third parties and to keep available the
services of our present officers and key employees.
From the date of the merger agreement to the effective time of
the merger, Meridian has agreed, with limited exceptions, that
we will not (and we will not permit any of our subsidiaries to)
do any of the following, except as expressly contemplated or
permitted by the merger agreement, as required by applicable law
or consented to in writing by Alta Mesa:
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cause or permit any change to our or our subsidiaries
organizational documents;
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declare, set aside or pay any dividend or other distribution
with respect to any shares of our capital stock; repurchase,
redeem or otherwise acquire any outstanding shares of our
capital stock or other securities of, or other ownership
interests in, us;
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merge with any other person or acquire capital assets other than
oil and gas interests of any other person for aggregate
consideration in excess of $100,000 in any single transaction
(or series of transactions), or enter a new line of business or
commence business operations in any country in which we or our
subsidiaries are not operating as of the date of the merger
agreement;
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sell, lease, license or otherwise surrender, relinquish or
dispose of or grant any liens with respect to, any assets or
properties with an aggregate fair market value exceeding
$100,000 in any single transaction (or series of transactions)
(other than sales of hydrocarbons in the ordinary course of
business), except pursuant to certain material contracts in
force on the date of the merger agreement;
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settle any audit that would require us to make any material
payment to a governmental authority, make or change any material
tax election or file any material amended tax return, except in
the ordinary course of business;
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issue any securities, enter into any amendment of any term of
any outstanding security of us or of any of our subsidiaries,
fail to make any required contribution to any benefit plan,
increase compensation, bonus or other benefits payable to
(except for payments pursuant to 401(k) plans), or modify or
amend any employment agreements or severance agreements with,
any executive officer or former employee or enter into any
settlement or consent with respect to any pending litigation in
excess of $100,000 other than settlements in the ordinary course
of business;
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55
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change any method of accounting or accounting practice, except
for any such change required by generally accepted accounting
principles in the United States or the rules and regulations
promulgated by the SEC;
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take any action that would give rise to a claim under the Worker
Adjustment and Retraining Notification Act of 1988, the
WARN Act, or any similar state law or regulation
because of a plant closing or mass
layoff (each as defined in the WARN Act) without in good
faith attempting to comply with the WARN Act;
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amend or otherwise change the terms of any arrangements with
brokers that will be entitled to a fee payable by us in
connection with the consummation of the transactions
contemplated by the merger agreement, except to the extent that
any such amendment or change would result in terms more
favorable to us;
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become bound or obligated to make any expenditure, capital
expenditure, participate in any operation, or consent to
participate in any operation, with respect to any oil and gas
interests that will, in the aggregate, cost in excess of
$250,000 over a predetermined budget;
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fail to timely meet royalty payment obligations in connection
with oil and gas leases;
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enter into any futures, hedge, swap, collar, put, call, floor,
cap, option or other contracts that are intended to benefit from
or reduce or eliminate the risk of fluctuations in the price of
commodities, including hydrocarbons or securities, other than in
the ordinary course of business in accordance with our current
policies and as contemplated by the merger agreement, or enter
into any fixed price commodity sales agreements with a duration
of more than three months, other than in the ordinary course of
business in accordance with our current policies;
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adopt, amend or assume any obligation to contribute to any
employee benefit plan or arrangement of any type or collective
bargaining agreement or enter into any employment, severance or
similar contract with any person or amend any such existing
contracts to increase any amounts payable thereunder or benefits
provided thereunder;
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engage in any transaction in connection with which we or any of
our subsidiaries would reasonably be expected to be subject to
either a civil penalty assessed pursuant to subsections (c),
(i) or (l) of Section 502 of the Employee
Retirement Income Security Act of 1974, as amended (ERISA), or a
tax imposed pursuant to Chapter 43 of Subtitle D of the
Internal Revenue Code of 1986, as amended;
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terminate any benefit plan in a manner, or take any other action
with respect to any benefit plan, that could result in liability
of Meridian or any of our subsidiaries to any person;
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take any action that could adversely affect the qualification of
any benefit plan or its compliance with the applicable
requirements of ERISA;
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fail to make full payment when due of all amounts which, under
the provisions of any benefit plan, any agreement relating
thereto or applicable law, Meridian or any of its subsidiaries
is required to pay as contributions thereto;
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fail to file, on a timely basis, all reports and forms required
by federal regulations with respect to any benefit plan;
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approve an increase in salary for any of our employees,
terminate any of our employees entitled to any severance payment
upon such termination, or enter into, renew, permit to extend or
amend any employment, severance, termination or similar
agreement or arrangement with any director, officer, employee or
consultant;
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permit any of our subsidiaries to organize or acquire any person
that could become a subsidiary of Meridian;
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permit any of our subsidiaries to enter into any commitment or
agreement to license or purchase seismic data, other than
pursuant to agreements or commitments existing on the date of
the merger agreement;
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enter into any exclusivity arrangements that would be applicable
after the effective time of the merger to Alta Mesa and its
subsidiaries, amend or modify in any material respect or
terminate any material contract, or waive, release or assign any
material rights, claims or benefits of Meridian and our
subsidiaries under any material contract;
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settle, pay, compromise or discharge any claim that requires any
payment by Meridian and our subsidiaries in excess of $100,000
in the aggregate or involves any restrictions on the conduct of
Meridian or our subsidiaries or any of our affiliates
business or other equitable remedies that materially adversely
affect the business of Meridian and our subsidiaries, and we and
our subsidiaries will not settle, pay, compromise or discharge
any claim against us and our subsidiaries with respect to or
arising out of the transactions contemplated by the merger
agreement;
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incur, create, assume, modify, guarantee or otherwise become
liable for any obligation for borrowed money, purchase money
indebtedness or any obligation of any other person;
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sublet, sublease, assign, extend, terminate or otherwise modify
the material terms of the commercial real estate lease for the
property located at 1401 Enclave Parkway, Houston, Texas 77077
used for our principal place of business;
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pay, discharge, settle or satisfy any claims, liabilities or
obligations prior to the same being due in excess of $100,000 in
the aggregate;
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fail to continuously maintain in full force and effect our
current insurance or a commercially reasonable substitute for a
company engaged in business similar to ours and our
subsidiaries; and
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adopt a plan of complete or partial liquidation, dissolution, or
reorganization.
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No Solicitation.
Meridian has agreed that we
will not, nor will we authorize or permit any of our
subsidiaries or authorize any of our directors, officers,
employees representatives or agents to, directly or indirectly:
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solicit, initiate, encourage or knowingly facilitate, any
inquiries or the making of any proposal or offer that
constitutes, or could reasonably be expected to lead to, an
acquisition proposal for Meridian;
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enter into or engage in any discussions or negotiations
regarding, or that could reasonably be expected to lead to, any
acquisition proposal for Meridian, furnish to any third party
any information in connection with, or in furtherance of, any
acquisition proposal for Meridian, or afford access to the
business, properties, assets, books or records of Meridian or
any of our subsidiaries, otherwise cooperate in any way with, or
knowingly assist, participate in, facilitate or encourage any
effort by, any third party that has made, is seeking to make or
has informed us of any intention to make, or has publicly
announced an intention to make, an acquisition proposal for
Meridian;
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subject to certain limited exceptions, fail to make, withdraw,
qualify, amend or modify or publicly propose to withdraw,
qualify, amend or modify our boards recommendation that
the merger agreement be approved by our shareholders, or
recommend, adopt or approve, or publicly propose to recommend,
adopt or approve, an acquisition proposal for Meridian, or take
any action or make any statement inconsistent with such
recommendation;
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take any action to make the provisions of any fair
price, moratorium, control share
acquisition, business combination or other
similar anti-takeover statute or regulation (including approving
any transaction under, or a third party becoming an
affiliated shareholder under, Section 21.606 of
the TBOC), or any restrictive provision of any applicable
anti-takeover provision in our articles of incorporation or
bylaws, inapplicable to any transactions contemplated by an
acquisition proposal;
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enter into any agreement in principle, letter of intent, term
sheet, merger agreement, acquisition agreement, option
agreement, joint venture agreement, partnership agreement or
other contract or instrument constituting or relating to an
acquisition proposal for Meridian, or any contract or agreement
in principle compelling us to abandon, terminate or breach any
of our obligations under the merger agreement;
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enter into any confidentiality or similar agreement with any
third party which prohibits us from providing or making
available to Alta Mesa any of the information to be provided to
such third party in accordance with the no solicitation
provisions of the merger agreement; or
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grant or permit any third party any waiver or release under, or
fail to enforce any provision of, any confidentiality,
standstill or similar agreement with respect to any
class of securities of Meridian or any of our subsidiaries.
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The merger agreement defines acquisition proposal to
mean any offer or proposal by any third party concerning any
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merger, consolidation, share exchange, tender offer,
recapitalization, other business combination or similar
transaction directly or indirectly involving Meridian, or any of
its subsidiaries, pursuant to which such third party would own
fifty percent or more of the consolidated assets, revenues or
net income of Meridian, and our subsidiaries, taken as a whole;
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sale, lease, license or other disposition directly or indirectly
by merger, consolidation, business combination, share exchange,
joint venture or otherwise, of our assets, (including equity
interests of any of our subsidiaries) or any of our
subsidiaries, representing fifty percent or more of the
consolidated assets, revenues or net income of Meridian and our
subsidiaries, taken as a whole, in each case in a single
transaction or series of transactions;
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issuance or sale or other disposition (including by way of
merger, consolidation, business combination, share exchange,
joint venture or similar transaction) of equity interests
representing fifty percent or more of the voting power of
Meridian;
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transaction or series of transactions in which any third party
would acquire beneficial ownership or the right to acquire
beneficial ownership of equity interests representing fifty
percent or more of the voting power of Meridian; or
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any combination of the foregoing.
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The merger agreement defines superior proposal to
mean a bona fide written acquisition proposal that our board of
directors determines in good faith (after consultation with our
financial advisor and outside legal counsel) to be more
favorable to the our shareholders than the merger, and
reasonably expected to be consummated, taking into consideration
the timing, conditionality, legal, regulatory and other aspects
of such acquisition proposal.
Notwithstanding the restrictions described above, at any time
prior to the adoption of the merger agreement by our
shareholders, our board of directors, directly or indirectly
through representatives, may take the following actions if our
board of directors determines in good faith, after consultation
with outside legal counsel, that its failure to take such action
would likely be inconsistent with its fiduciary duties to our
shareholders:
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contact a third party or its representatives for the purpose of
clarifying any inquiry or acquisition proposal and the material
terms and conditions thereof so as to determine whether such
inquiry or acquisition proposal is a superior proposal or is
reasonably likely to lead to a superior proposal;
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engage in negotiations or discussions with any third party that
our board of directors determines in good faith is credible and
reasonably capable of consummating a superior proposal for
Meridian, and that has made after the date of the merger
agreement a superior proposal for Meridian or a bona fide
written acquisition proposal for Meridian that our board of
directors determines in good faith (after
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consultation with our financial advisor and outside legal
counsel) is reasonably likely to lead to a superior proposal;
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thereafter, furnish to such third party nonpublic information
relating to Meridian or any of our subsidiaries pursuant to a
confidentiality agreement with terms in the aggregate at least
as restrictive to such third party as those contained in the
confidentiality agreement between us and Alta Mesa and which
contains a standstill or similar provision on terms
no more materially favorable to such third party than the terms
of any standstill or similar agreement, or provision
in any agreement, applicable to Alta Mesa with respect to
Meridian; and
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make a change to our boards recommendation that the merger
agreement be approved by our shareholders.
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In the merger agreement Meridian agreed that we will not take
any of the actions referred to in the preceding paragraph unless
we deliver to Alta Mesa one business days prior written
notice advising Alta Mesa that we intend to take such action,
and we have agreed to continue to advise Alta Mesa after taking
such action, on a current basis, of the status and terms of any
discussions and negotiations with the third party. In addition,
we have agreed to notify Alta Mesa promptly (but in no event
later than one business day) after receipt by us of any
acquisition proposal, or any amendment or modification to any
acquisition proposal, for us or of any request for information
relating to us or any of our subsidiaries or for access to
business, properties, assets, books or records of Meridian or
any of our subsidiaries by any third party that, to the our
knowledge, is considering making, or has made, an acquisition
proposal for Meridian. We have agreed to keep Alta Mesa
informed, on a current basis, of the status and details of any
such acquisition proposal for Meridian, indication or request
and have agreed to promptly (but in no event later than one
business day after receipt) provide to Alta Mesa copies of all
drafts of the definitive documents relating to any acquisition
proposal.
We have agreed that our board of directors will not make any
change to its recommendation that the merger agreement be
approved by our shareholders or terminate the merger agreement
prior to approval of the merger agreement by our shareholders if
our board of directors determines to enter into a definitive
agreement with respect to a superior proposal unless and until
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we promptly notify Alta Mesa, in writing, at least three
business days before taking that action, of our intention to do
so;
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if requested by Alta Mesa, during the three-business-day period,
we negotiate in good faith with Alta Mesa with respect to any
revised proposal from Alta Mesa in respect of the terms of the
transactions contemplated by the merger agreement; and
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if in response to a superior proposal for Meridian, Alta Mesa
does not make, within such three-business-day period, an offer
that is at least as favorable to our shareholders, as determined
by our board of directors in good faith (after considering the
advice of our financial advisor), as such superior proposal.
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Directors and Officers Indemnification and
Insurance.
The merger agreement provides that the
organizational documents of Merger Sub and the surviving company
shall, with respect to indemnification of directors, officers,
employees and agents, not be amended, repealed or otherwise
modified after the date of the merger agreement in any manner
that would adversely affect the rights of the directors,
officers, employees and agents who at any time prior to the
effective time of the merger were identified as prospective
indemnitees under our articles of incorporation or the bylaws in
respect of actions or omissions occurring at or prior to the
effective time of the merger.
The merger agreement provides that the surviving company shall
indemnify, defend and hold harmless our and our
subsidiaries current and former directors and officers
against all liability arising out of actions or omissions before
or at the effective time of the merger to the fullest extent
permitted by law. The merger agreement also provides that the
surviving company will advance all reasonable
out-of-pocket
expenses of each indemnified party under certain circumstances.
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Under the merger agreement, the surviving company will maintain
our existing officers and directors liability
insurance policy for a period of six years after the effective
time of the merger, but only to the extent related to actions or
omissions prior to the effective time of the merger. The
surviving company may substitute for our existing policy a
policy of substantially similar coverage and amounts containing
terms no less advantageous to our directors or officers,
provided that the surviving company is not required to pay, in
the aggregate, an amount of annual premiums with respect to the
maintenance of such insurance for such six-year period in excess
of 175% of the aggregate amount of annual premiums currently
paid by Meridian for such insurance.
Employee Matters.
The merger agreement
provides that after the effective time of the merger the
surviving company will perform Meridians obligations under
our well bonus plans and severance agreements and severance
plans. To the extent that service is relevant for purposes of
eligibility, participation or vesting under any employee benefit
plan, program or arrangement established or maintained by the
surviving company or its affiliates in which our employees may
participate, our employees will be credited for service accrued
as of the effective time of the merger with Meridian and our
subsidiaries to the extent such service was credited under a
similar plan, program or arrangement of ours or of our
subsidiaries.
To the extent our employees and their dependents enroll in any
health plan sponsored by the surviving company or its
affiliates, the surviving company will waive any preexisting
condition limitation applicable to our employees to the extent
that the employees or dependents condition would not
have operated as a preexisting condition under the group health
plan maintained by Meridian.
With respect to the 401(k) accounts of our employees who become
eligible to participate in the surviving companys 401(k)
Plan after the effective time of the merger, Merger Sub agrees
to take one or more of the following actions:
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to establish an arrangement under which such employees are
provided with payroll withholding for purposes of repaying any
loan that is outstanding under our 401(k) Plan as of the
effective time of the merger;
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to permit such employees to voluntarily transfer or rollover
their accounts (including loans) from our 401(k) Plan to the
surviving companys 401(k) Plan; or
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to cause the surviving companys 401(k) Plan to accept a
direct
trustee-to-trustee
transfer of assets from our 401(k) Plan into the surviving
companys 401(k) Plan, including any outstanding loans, on
behalf of such employees.
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Financing.
Prior to the effective time of the
merger, we agreed to cooperate with Alta Mesa and Merger Sub,
their financing sources, auditors and attorneys in connection
with the Alta Mesas and Merger Subs financing
efforts with respect to the transactions contemplated by the
merger agreement, including without limitation any refinancing
of existing credit facilities of Alta Mesa, Merger Sub or us. We
also agreed not to take any actions that would terminate or
otherwise invalidate the agreement to extend the forbearance
agreement relating to our credit facility.
Shell Settlement.
Meridian agreed that we
would use reasonable best efforts to enter into a settlement
agreement to be effective at the effective time of the merger,
on terms that are materially similar to the terms previously
disclosed to Alta Mesa, with Shell Oil Company and SWEPI LP
(together, Shell) relating to the pending
arbitration proceeding in which Shell has demanded contractual
indemnity and defense from Meridian arising from environmental
claims. Meridian entered into a settlement agreement on such
terms with Shell on January 11, 2010.
Other Covenants.
The merger agreement contains
additional agreements between Meridian and Alta Mesa relating
to, among other things:
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the filing of this proxy statement with the SEC and the mailing
of the proxy statement to our shareholders;
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the special meeting of the shareholders, and the recommendation
of our board of directors;
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Alta Mesas access to our offices, employees, customers,
suppliers, properties, books and records;
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each partys use of commercially reasonable efforts to
obtain all consents and approvals and to do all other things
necessary for the consummation of the transactions contemplated
by the merger agreement;
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our obligation to confer on a regular and frequent basis with
Alta Mesa to report and consult on operational matters of
materiality and the general status of ongoing operations,
including matters relating to drilling of wells, and to promptly
provide Alta Mesa with copies of all filings made by us with any
governmental authority in connection with the merger agreement;
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coordination of press releases and other public announcements;
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making of all filings required to be made in connection with the
merger agreement or desirable to achieve the purposes
contemplated by the merger agreement, and cooperation with
respect to any such filing;
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use of commercially reasonable efforts to obtain all consents
necessary or advisable in connection with the merger agreement;
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notification of certain events; and
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Alta Mesas reasonable opportunity to participate in the
defense of any litigation against us and our directors relating
to the transactions contemplated by the merger agreement.
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Conditions
to the Completion of the Merger
Conditions to the Obligations of Each
Party.
The merger agreement contains important
conditions to each partys obligation to consummate the
merger, including the following:
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the adoption of the merger agreement by the affirmative vote of
the holders of at least two-thirds of the outstanding shares of
our common stock entitled to vote;
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the absence of any action, suit or proceeding instituted by any
governmental authority and no statute, rule, order, decree or
regulation and no injunction, order, decree or judgment of any
court or governmental authority of competent jurisdiction may be
in effect, in each case which would prohibit, restrain, enjoin
or restrict the consummation of the transactions contemplated by
the merger agreement; and
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each of the parties to the merger agreement shall have obtained
all material permits, licenses, certificates, consents,
approvals, entitlements, plans, surveys, relocation plans,
environmental impact reports and other authorizations of
governmental authorities required to consummate the transactions
contemplated by the merger agreement.
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Conditions to the Obligations of Alta Mesa and Merger
Sub.
The merger agreement contains important
conditions to Alta Mesas and Merger Subs obligations
to consummate the merger, including the following:
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the representations and warranties that Meridian made in the
merger agreement are true and correct as of the date of the
merger agreement and as of closing date of the merger as though
made on such dates (except to the extent such representations
and warranties are expressly made only as of a specific date, in
which case as of such specific date), except where the failures
to be so true and correct (for this purpose disregarding any
qualification or limitation as to materiality or a material
adverse effect) do not have, and would not reasonably be
expected to have, individually or in the aggregate, a material
adverse effect;
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Meridians performance in all material respects of our
obligations under the merger agreement;
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since the date of the merger agreement, there shall not have
occurred a material adverse effect;
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certain consents, waivers and approvals necessary to consummate
the merger shall have been obtained;
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Meridians execution of a settlement agreement with Shell
on terms that are materially similar to the terms previously
disclosed to Alta Mesa relating to the pending arbitration
proceeding in which Shell has demanded contractual indemnity and
defense from Meridian arising from environmental claims;
Meridian entered into a settlement agreement on such terms with
Shell on January 11, 2010;
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no more than five percent of the holders of our common stock
shall have notified us of their intent to exercise rights of
dissent and appraisal;
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Morgan Keegans fairness opinion shall not have been
withdrawn;
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except for our well bonus plans and any other employee incentive
plans being assumed by the surviving company, all employee
incentive plans shall terminate on or prior to the effective
time of the merger;
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all of Meridians payment and other obligations under our
engagement letters with our financial advisors shall have
terminated, except for the indemnity and confidentiality
provisions thereunder; and
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obtaining waivers from certain option holders for the
cancellation of options held by them.
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Conditions to Meridians Obligations.
The
merger agreement contains important conditions to
Meridians obligations to consummate the merger, including
the following:
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the representations and warranties that Alta Mesa and Merger Sub
made in the merger agreement are true and correct as of the date
of the merger agreement and as of closing date of the merger as
though made on such dates (except to the extent such
representations and warranties are expressly made only as of a
specific date, in which case as of such specific date), except
where the failures to be so true and correct (for this purpose
disregarding any qualification or limitation as to materiality
or any material adverse effect on the ability of Alta Mesa or
Merger Sub to timely consummate the merger and the transactions
contemplated by the merger agreement) do not have, and would not
reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the ability of Alta Mesa
or Merger Sub to timely consummate the merger and the
transactions contemplated by the merger agreement; and
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Alta Mesa and Merger Sub shall have performed in all material
respects their respective obligations under the merger agreement.
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Termination
of the Merger Agreement
Alta Mesa has the option to terminate the merger agreement for
any reason in its sole and absolute discretion at any time prior
to the effective time of the merger, whether before or after
approval by our shareholders, provided that, if Alta Mesa elects
to exercise this option to terminate, Alta Mesa must pay a
$3.0 million termination fee to Meridian concurrently with
such termination. Under the terms of our forbearance agreement
with our credit facility lenders, if we receive a termination
fee from Alta Mesa, we would be required to use the termination
fee to reduce our indebtedness under our credit facility, and we
would not otherwise have the use of such fee for working capital
or capital expenditures.
In addition, the merger agreement may be terminated at any time
prior to the effective time of the merger, whether before or
after approval by our shareholders:
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by mutual consent of Meridian and Alta Mesa;
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by either Meridian or Alta Mesa if the effective time of the
merger has not occurred by 11:59 p.m. central time on
May 31, 2010, which we sometimes call the termination
date, except the right to terminate the merger agreement
shall not be available to a party whose breach of its
obligations under the merger agreement in any material respect
shall have proximately contributed to the failure to consummate
the merger on or before the termination date;
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by either Meridian or Alta Mesa if any governmental authority
issues an order, decree or ruling or takes any other action
permanently enjoining, restraining or otherwise prohibiting the
merger and, such order, decree, ruling or other action shall
have become final and non-appealable;
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by Meridian if there has been a breach by Alta Mesa or Merger
Sub of any representation, warranty, covenant or agreement set
forth in the merger agreement which breach would cause the
conditions described above under Conditions to
the Completion of the Merger Conditions to
Meridians Obligations not to be satisfied and such
breach (if susceptible to cure) has not been cured in all
material respects within twenty business days following receipt
by Alta Mesa of notice of such breach;
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by Alta Mesa if (i) there has been a breach by us of any
representation, warranty, covenant or agreement set forth in the
merger agreement (other than as described in clause (ii) of
this bullet point) which breach would cause the conditions
described above in the first two bullet points under
Conditions to the Completion of the
Merger Conditions to the Obligations of Alta Mesa
and Merger Sub not to be satisfied and such breach (if
susceptible to cure) has not been cured in all respects within
twenty business days following receipt by us of notice of such
breach or (ii) the lenders to our credit facility exercise
their right to terminate the forbearance period under our credit
facility forbearance agreement on or after February 28,
2010, upon unanimous written consent of all of the lenders party
to our credit facility, or if we take any actions that would
terminate or otherwise invalidate the credit facility
forbearance agreement;
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by Meridian or Alta Mesa if Meridians shareholders
meeting to adopt the merger agreement (or any postponement or
adjournment thereof) shall have concluded and the merger
agreement shall not have been adopted by the affirmative vote of
the holders of at least two-thirds of the outstanding shares of
our common stock entitled to vote;
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by Alta Mesa if
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(i) a change in our boards recommendation that the
merger agreement be approved by our shareholders shall have
occurred;
(ii) following the date of any bona fide acquisition
proposal by a third party for Meridian or any material
modification thereto is first publicly announced, disclosed or
otherwise made known prior to the time at which we receive the
approval of our shareholders, we fail to issue a press release
that expressly reaffirms our boards recommendation that
the merger agreement be approved by our shareholders within ten
business days following Alta Mesas written request to do
so;
(iii) any tender offer or exchange offer constituting an
acquisition proposal for Meridian is commenced or materially
modified by any third party with respect to our outstanding
common stock prior to the time at which we receive the approval
of our shareholders, and our board of directors shall not have
recommended that our shareholders reject such tender offer or
exchange offer and not tender their common stock into such
tender offer or exchange offer within ten business days after
commencement or material modification of such tender offer or
exchange offer, unless we have issued a press release that
expressly reaffirms our boards recommendation that the
merger agreement be approved by our shareholders within such ten
business day period;
(iv) Meridian or our board of directors approves, endorses,
recommends, adopts or enters into any acquisition proposal by a
third party for Meridian or any agreement relating to an
acquisition proposal for Meridian (other than a confidentiality
agreement permitted by the no solicitation provisions described
above); or
(v) Meridian shall have materially breached our obligations
under the no solicitation provisions described under
Covenants No Solicitation;
provided, however, that Alta Mesas right to terminate the
merger agreement shall only be available for a ten business day
period following the applicable triggering event set forth in
(i) through (iv); and
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by Meridian, at any time prior to the time at which we receive
the approval of our shareholders, if our board of directors
determines to enter into a definitive agreement with respect to
a superior proposal in accordance with the no solicitation
provisions described above, provided that we pay to Alta Mesa
$3.0 million, as a termination fee, concurrently with such
termination and up to $1.0 million of Alta Mesas
expenses incurred by it in connection with the transactions
contemplated by the merger agreement.
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Termination
Fee and Expenses
If the merger agreement is terminated pursuant to the
circumstances described in the second, sixth, seventh or eighth
bullet point above under the heading
Termination of the Merger Agreement,
then we have agreed to reimburse Alta Mesa in cash for Alta
Mesas expenses incurred in connection with the
transactions contemplated by the merger agreement (such
reimbursement amount not to exceed $1.0 million) no later
than two business days after receipt by us of an invoice from
Alta Mesa of such expenses.
In addition to payment of expenses, we have agreed to pay Alta
Mesa a termination fee of $3.0 million if the termination
agreement is terminated in the following circumstances:
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if Alta Mesa terminates the merger agreement pursuant to the
circumstances described in the seventh bullet point above under
the heading Termination of the Merger
Agreement relating to our boards recommendation with
respect to the merger, then we will pay Alta Mesa the
termination fee in cash no later than two business days after
such termination;
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if Meridian terminates the merger agreement pursuant to the
circumstances described in the eighth bullet point above under
the heading Termination of the Merger
Agreement relating to our entering into a definitive
agreement with respect to a superior proposal, then we will pay
Alta Mesa the termination fee in cash concurrently with such
termination;
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if
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Meridian or Alta Mesa terminate the merger agreement pursuant to
the circumstances described in the second bullet point above
under the heading Termination of the Merger
Agreement relating to the merger not occurring by the
termination date;
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prior to the termination date, any person (other than Alta Mesa
or its affiliates) makes an acquisition proposal for
Meridian; and
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within nine months of the date of such termination we enter into
a definitive agreement or consummate a transaction contemplated
by an acquisition proposal,
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then we will pay to Alta Mesa the termination fee no later than
two business days after we consummate a transaction contemplated
by an acquisition proposal;
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Meridian terminates the merger agreement pursuant to the
circumstances described in the sixth bullet point above under
the heading Termination of the Merger
Agreement relating to the merger agreement not being
adopted by our shareholders;
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prior to the date of the special meeting to which this proxy
relates, any person (other than Alta Mesa or its affiliates)
makes an acquisition proposal for Meridian; and
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within nine months of the date of such termination we enter into
a definitive agreement or consummate a transaction contemplated
by an acquisition proposal;
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then we will pay to Alta Mesa the termination fee no later than
two business days after we consummate a transaction contemplated
by an acquisition proposal; and
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if Alta Mesa terminates the merger agreement pursuant to the
circumstances described in the fifth bullet point above under
the heading Termination of the Merger
Agreement relating to a breach of a representation,
warranty or covenant by us and the termination of the credit
facility forbearance period, then we will pay Alta Mesa the
termination fee in cash no later than two business days after
such termination.
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Alta Mesa has agreed to pay us a termination fee of
$3.0 million if the termination agreement is terminated in
the following circumstances:
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if Meridian terminates the merger agreement pursuant to the
circumstances described in the fourth bullet point above under
the heading Termination of the Merger
Agreement relating to a breach of
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64
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a representation, warranty or covenant by Alta Mesa or Merger
Sub, then Alta Mesa will pay us the termination fee in cash no
later than two business days after such termination; and
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if Alta Mesa exercises its option to terminate the merger
agreement for any reason in its sole and absolute discretion and
Alta Mesa has not terminated for any of the other reasons
specified in the merger agreement, Alta Mesa will pay to us the
termination fee in cash concurrently with such termination.
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Under the terms of our forbearance agreement with our credit
facility lenders, if we receive a termination fee from Alta
Mesa, we would be required to use the termination fee to reduce
our indebtedness under our credit facility, and we would not
otherwise have the use of such fee for working capital or
capital expenditures.
Amendment
At any time before or after approval of the matters presented in
connection with the merger by our shareholders and prior to the
effective time of the merger, the merger agreement may be
amended or supplemented in writing by Meridian, Alta Mesa and
Merger Sub with respect to any of the terms contained in the
merger agreement, except as otherwise provided by law; provided,
however, that following approval of the merger agreement by our
shareholders, there shall be no amendment or change to the
provisions hereof unless permitted by the applicable Texas
statutes, without further approval by our shareholders.
RIGHTS OF
DISSENT AND APPRAISAL
Under the TBOC, you have the right to demand appraisal of your
shares of common stock in connection with the merger and to
receive, in lieu of the Merger Consideration, payment in cash,
for the fair value of your shares of common stock as determined
by an appraiser selected in a Texas state court proceeding. Our
shareholders electing to exercise appraisal rights must comply
with the provisions of Section 10.356 of the TBOC in order
to perfect their rights of dissent and appraisal. We will
require strict compliance with the statutory procedures.
The following is intended as a brief summary of the material
provisions of the Texas statutory procedures required to be
followed by a shareholder in order to demand and perfect
appraisal rights. This summary, however, is not a complete
statement of all applicable requirements and is qualified in its
entirety by reference to Subchapter H of Chapter 10, and
specifically Sections 10.354 to 10.361 of the TBOC. The
full text of Subchapter H of Chapter 10 appears in
Annex C
to this proxy statement.
This proxy statement constitutes our notice to our shareholders
of the availability of appraisal rights in connection with the
merger in compliance with the requirements of
Section 10.355 of the TBOC. If you wish to consider
exercising your appraisal rights, you should carefully review
the text of Section 10.356 of the TBOC contained in
Annex C
since failure to timely and properly comply
with the requirements of Section 10.356 of the TBOC will
result in the loss of your appraisal rights under Texas law.
If you elect to demand appraisal of your shares of common stock,
you must satisfy each of the following conditions:
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Prior to the special meeting you must deliver to Meridian a
written objection to the merger stating your intention to
exercise your right to dissent in the event that the merger is
completed, and setting forth the address at which notice shall
be provided to you in that event.
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This written objection must be in addition to and separate from
any proxy or vote against the approval of the merger agreement.
Voting against the approval of the merger agreement by itself
does not constitute a demand for appraisal within the meaning of
Section 10.356 of the TBOC.
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You must vote against the approval of the merger agreement.
Failing to vote against approval of the merger agreement will
constitute a waiver of your appraisal rights. An abstention from
or a vote in favor of the approval of the merger agreement, by
proxy or in person, will constitute a waiver of your
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65
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appraisal rights in respect of the shares of common stock so
voted and will nullify any previously filed written demands for
appraisal.
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You must continuously hold your shares of common stock through
the effective time of the merger.
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If you fail to comply with any of these conditions and the
merger is completed, you will be entitled to receive the Merger
Consideration for your shares of common stock as provided for in
the merger agreement, but you will have no appraisal rights with
respect to your shares of common stock. A proxy card which is
signed and does not contain voting instructions will, unless
revoked, be voted FOR the approval of the merger
agreement, will constitute a waiver of your right of appraisal,
and will nullify any previous written demand for appraisal.
All written objections should be addressed to The Meridian
Resource Corporation, 1401 Enclave Parkway, Suite 300,
Houston, Texas 77077, Attention President and Corporate
Secretary, and should be executed by, or on behalf of, the
record holder of the shares of common stock in respect of which
appraisal is being demanded. The written objection must
reasonably inform Meridian of the identity of the shareholder
and the intention of the shareholder to demand appraisal of such
shareholders shares of common stock.
To be effective, a written objection must be made by or on
behalf of, the shareholder of record. The written objection
should set forth, fully and correctly, the shareholder of
records name as it appears on his or her common stock
certificate(s) and should specify the holders mailing
address and the number of shares of common stock registered in
the holders name and the fair value of the common stock as
estimated by the shareholder. The written objection must state
that the person intends to exercise their right to dissent under
Texas law in connection with the merger. Beneficial owners who
do not also hold the shares of common stock of record may not
directly make appraisal demands to Meridian. The beneficial
holder must, in such cases, have the record owner submit the
required demand in respect of those shares of common stock. If
shares of common stock are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution
of a written objection must be made in that capacity; and if the
shares of common stock are owned of record by more than one
person, as in a joint tenancy or tenancy in common, the written
objection must be executed by or for all joint owners. An
authorized agent, including an authorized agent for two or more
joint owners, may execute the written objection for appraisal
for a shareholder of record; however, the agent must identify
the record owner or owners and expressly disclose the fact that,
in executing the written objection, he or she is acting as agent
for the record owner. A record owner, such as a broker, who
holds shares of common stock as a nominee for others, may
exercise his or her right of appraisal with respect to the
shares of common stock held for one or more beneficial owners,
while not exercising this right for other beneficial owners. In
that case, the written objection should state the number of
shares of common stock as to which appraisal is sought. Where no
number of shares of common stock is expressly mentioned, the
written objection will be presumed to cover all shares of common
stock held in the name of the record owner.
If you hold your shares of common stock in a brokerage account
or in other nominee form and you wish to exercise appraisal
rights, you should consult with your broker or the other nominee
to determine the appropriate procedures for making a demand for
appraisal by the nominee.
Within 10 days after the effective time of the merger, the
surviving company must give written notice that the merger has
become effective to each shareholder of Meridian who has
properly filed a written objection and who voted against the
approval of the merger agreement. Any shareholder making a
written demand for payment must submit to the surviving company
for notation any certificated shares held by that shareholder
which are subject to the demand within 20 days after making
the written demand. The failure by any shareholder making a
written demand to submit its certificates may result in the
termination of the shareholders appraisal rights.
The surviving company has 20 days after its receipt of a
demand for payment to provide notice that the surviving company
(i) accepts the amount claimed in the written demand and
agrees to pay the amount claimed within 90 days from
effective time of the merger, or (ii) offer to pay its
estimated fair value of the shares of common stock not later
than 60 days after the date the offer is accepted.
66
If, within 60 days after the date the surviving company
first delivered its offer to pay its estimated fair value of the
shares of common stock to the shareholder, the offer is not
accepted, and the surviving company and a shareholder who has
delivered written demand in accordance with Section 10.356
of the TBOC do not reach agreement as to the fair value of the
shares of common stock, either the surviving company or the
shareholder may, within 60 days after the expiration of the
60-day
demand period, file a petition in a court in Harris County,
Texas, with a copy served on the surviving company in the case
of a petition filed by a shareholder, requesting a finding and a
determination of the fair value of the shares of common stock
held by the shareholder. The surviving company has no obligation
and has no present intention to file such a petition if there
are objecting shareholders. Accordingly, it is the obligation of
Meridians shareholders to initiate all necessary action to
perfect their appraisal rights in respect of shares of common
stock within the time prescribed in Sections 10.361 of the
TBOC. The failure of a shareholder to file such a petition
within the period specified could nullify the shareholders
previously written demand for appraisal.
If a petition for appraisal is duly filed by a shareholder and a
copy of the petition is delivered to the surviving company, the
surviving company will then be obligated, within 10 days
after receiving service of a copy of the petition, to provide
the office of the clerk of the court in which the petition was
filed with a list containing the names and addresses of all
shareholders who have demanded an appraisal of their shares of
common stock and with whom agreements as to the value of their
shares of common stock have not been reached.
After notice to dissenting shareholders, the court will conduct
a hearing upon the petition, and determine those shareholders
who have complied with Sections 10.354 to 10.361 and who
have become entitled to the appraisal rights provided thereby.
After determination of the shareholders entitled to appraisal of
their shares of common stock, the court will appraise the shares
of common stock, determining their fair value. When the value is
determined, the court will direct the payment of such value to
the shareholders entitled to receive the same, immediately to
the holders of uncertificated shares of common stock and upon
surrender by holders of the certificates representing shares of
common stock.
You should be aware that the fair value of your shares of common
stock as determined under Section 10.362 of the TBOC could
be more, the same, or less than the Merger Consideration. You
should also be aware that the opinions of our financial advisors
as to the fairness, from a financial point of view, of the
Merger Consideration do not purport to be appraisals.
Costs of the appraisal proceeding may be imposed upon the
surviving company and the shareholders participating in the
appraisal proceeding by the court as the court deems equitable
in the circumstances. Any shareholder who had demanded appraisal
rights will not, after the effective time of the merger, be
entitled to vote shares of common stock subject to that demand
for any purpose or to receive payments of dividends or any other
distribution with respect to those shares of common stock, other
than with respect to payment as of a record date prior to the
effective time of the merger; however, if no petition for
appraisal is filed within 120 days after the date Meridian
first delivered its offer to pay its estimated fair value of the
shares of common stock to the shareholder, or if the shareholder
delivers a written withdrawal of such shareholders demand
for appraisal and an acceptance of the terms of the merger prior
to the filing of a petition for appraisal or if the court
adjudges that the shareholder is not entitled to elect to
dissent, then the right of that shareholder to appraisal will
cease and that shareholder will be entitled to receive the
Merger Consideration. Any withdrawal of a demand for appraisal
made after the filing of a petition for appraisal may only be
made with the written approval of the surviving company.
Failure to comply with all of the procedures set forth in
Sections 10.354 to 10.361 of the TBOC will result in the
loss of a shareholders statutory appraisal rights. In view
of the complexity of Sections 10.354 to 10.361 of the TBOC,
our shareholders who may wish to dissent from the merger and
pursue appraisal rights should consult their legal advisors.
67
STOCK
OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information, as of
January 1, 2010, with respect to the number and percentage
of shares of our common stock beneficially owned by each of our
directors and executive officers, and all of our executive
officers and directors as a group.
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Number of
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Shares
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Beneficially
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Name
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Owned(1)
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Percent
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Paul D. Ching(2)
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152,123
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*
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Lloyd V. DeLano
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79,096
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*
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Allen D. Breaux(3)
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71,104
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*
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Steven G. Ives(4)
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35,435
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*
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Alan S. Pennington
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57,334
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*
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E. L. Henry(5)
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35,500
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*
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Michael J. Mayell(6)
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2,680,760
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2.87
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%
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C. Mark Pearson(7)
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22,500
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*
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Joseph A. Reeves, Jr.(8)
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2,900,509
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3.11
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%
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John B. Simmons(9)
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30,000
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*
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Fenner R. Weller, Jr.(10)
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67,500
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*
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All executive officers and directors as a group
(11 persons)(2),(3),(4),(5),(6),(7),(8),(9) and (10)
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6,131,861
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6.48
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%
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*
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Less than one percent.
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(1)
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Shares of our 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 our common stock, unless
otherwise noted.
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(2)
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Includes 136,250 shares of our common stock that
Mr. Ching has the right to acquire upon the exercise of
stock options. Excludes 143,750 shares of our common stock
underlying options owned by Mr. Ching that are not
exercisable within 60 days.
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(3)
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Includes 15,000 shares of our common stock that
Mr. Breaux has the right to acquire upon the exercise of
stock options.
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(4)
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Includes 1,500 shares of our common stock that
Mr. Ives has the right to acquire upon the exercise of
stock options.
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(5)
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Includes 22,500 shares of our common stock that
Mr. Henry has the right to acquire upon the exercise of
stock options. Excludes 7,500 shares of our common stock
underlying options that are not exercisable within 60 days.
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(6)
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Includes 936,499 shares of our common stock that
Mr. Mayell has the right to acquire upon the exercise of
warrants.
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(7)
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Includes 22,500 shares of our common stock that
Mr. Pearson has the right to acquire upon the exercise of
stock options. Excludes 7,500 shares of our common stock
underlying options that are not exercisable within 60 days.
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(8)
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Includes 936,499 shares of our common stock that
Mr. Reeves has the right to acquire upon the exercise of
warrants.
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(9)
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Includes 30,000 shares of our common stock that
Mr. Simmons has the right to acquire upon the exercise of
stock options.
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(10)
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Includes 33,750 shares of our common stock that
Mr. Weller has the right to acquire upon the exercise of
stock options. Excludes 11,250 shares of our common stock
underlying options that are not exercisable within 60 days.
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68
STOCK
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information, as of
January 31, 2010, with respect to each shareholder, other
than directors and executive officers, known by us to
beneficially own more than 5% of our common stock.
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Number of
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Shares
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Beneficially
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Name and Address of Beneficial Owner
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Owned
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Percent
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Donald Smith & Co.(1)
152 West
57
th
Street
New York, NY 10019
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7,067,939
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7.64
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%
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Dimensional Fund Advisors Inc.(2)
Pallisades West, Building One
6300 Bee Cave Road
Austin, Texas 78746
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5,351,718
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5.79
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%
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Mr. Bradley Louis Radoff(3)
1177 West Loop South, Suite 1625
Houston, Texas 77027
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5,400,000
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5.84
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%
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(1)
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As of September 30, 2009, based on information contained in
a Schedule 13F filing made by Donald Smith & Co.,
Inc. with the SEC on November 18, 2009.
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(2)
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As of September 30, 2009, based on information contained in
a Schedule 13F filing made by Dimensional
Fund Advisors Inc. with the SEC on October 29, 2009.
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(3)
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|
As of January 19, 2010, based on information contained in a
Schedule 13G filing made by Mr. Radoff with the SEC on
January 26, 2010.
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FUTURE
SHAREHOLDER PROPOSALS
If the merger is completed, we will have no public shareholders
and no public participation in any of our future shareholder
meetings. We intend to hold an annual meeting of shareholders in
2010 only if the merger is not completed. Shareholder proposals
for consideration at the 2010 Annual Meeting of Shareholders
(2010 Annual Meeting) must be received by us a
reasonable time before we begin to print and send our proxy
materials for the 2010 Annual Meeting in order to be eligible
for inclusion in our proxy statement and proxy used in
connection with the 2010 Annual Meeting. Shareholder proposals
as to which we receive notice that are proposed to be brought
before the 2010 Annual Meeting (outside the process of the
SECs rule on shareholder proposals) will be considered not
properly brought before the meeting, and will be out of order,
unless we receive the notice as to that matter not later than
the close of business on the tenth day following the day on
which notice of the date of the 2010 Annual Meeting is mailed or
public disclosure of the 2010 Annual Meeting date is made.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any
document we file at the SECs public reference room located
at 100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330
for further information on the public reference room. Our SEC
filings are also available to the public at the SECs
website at
www.sec.gov
. You also may obtain free copies
of the documents we file with the SEC by going to the SEC
Filings section of our website at www.tmrx.com. The
information provided on our website is not part of this proxy
statement, and therefore is not incorporated by reference.
Any person, including any beneficial owner, to whom this proxy
statement is delivered may request copies of proxy statements
and any of the documents incorporated by reference in this
document or other information concerning us, without charge, by
written or telephonic request directed to The Meridian Resource
Corporation, 1401 Enclave Parkway, Suite 300, Houston,
Texas 77077, Attn: Lloyd V. DeLano, Corporate Secretary,
telephone: (281) 597-7000, on our website at
www.tmrx.com
or from the SEC through the SECs
website at
http://www.sec.gov
.
Alta Mesa has supplied all information pertaining to Alta Mesa
and Merger Sub, and we have supplied all information pertaining
to us.
69
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A
PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM
WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT
JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED
OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT TO VOTE
YOUR SHARES AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM
WHAT IS CONTAINED IN THIS PROXY STATEMENT.
THIS PROXY STATEMENT IS DATED FEBRUARY 8, 2010. YOU SHOULD
NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND
THE MAILING OF THIS PROXY STATEMENT TO SHAREHOLDERS DOES NOT
CREATE ANY IMPLICATION TO THE CONTRARY.
70
Annex A
Execution
Version
AGREEMENT AND PLAN OF MERGER
By and Among
ALTA MESA HOLDINGS, LP,
ALTA MESA ACQUISITION SUB, LLC
and
THE MERIDIAN RESOURCE CORPORATION
Dated December 22, 2009
TABLE OF
CONTENTS
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Article I. CERTAIN DEFINED TERMS
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A-1
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Section 1.1
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Certain Defined Terms
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A-1
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|
Article II. THE MERGER
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A-5
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Section 2.1
|
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The Merger
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A-5
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Section 2.2
|
|
Effective Time of the Merger
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A-6
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Article III. THE SURVIVING COMPANY
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A-6
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Section 3.1
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Certificate of Formation
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A-6
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Section 3.2
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|
Charter Documents
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A-6
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Section 3.3
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|
Directors and Officers
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A-6
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Article IV. CONVERSION OF SHARES
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A-6
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Section 4.1
|
|
Conversion of Capital Stock
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|
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A-6
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|
Section 4.2
|
|
Surrender and Payment
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A-7
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Section 4.3
|
|
Stock Options; Warrants
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A-8
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Section 4.4
|
|
Dissenting Shares
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|
|
A-9
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|
Section 4.5
|
|
Closing
|
|
|
A-9
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|
Article V. REPRESENTATIONS AND WARRANTIES OF TARGET
|
|
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A-9
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|
Section 5.1
|
|
Organization and Qualification
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A-9
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|
Section 5.2
|
|
Capitalization
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A-10
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Section 5.3
|
|
Authority
|
|
|
A-10
|
|
Section 5.4
|
|
Consents and Approvals; No Violation
|
|
|
A-11
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|
Section 5.5
|
|
Target SEC Reports
|
|
|
A-11
|
|
Section 5.6
|
|
Target Financial Statements
|
|
|
A-12
|
|
Section 5.7
|
|
Absence of Undisclosed Liabilities; Liabilities as of Year End
|
|
|
A-12
|
|
Section 5.8
|
|
Absence of Certain Changes
|
|
|
A-12
|
|
Section 5.9
|
|
Taxes
|
|
|
A-12
|
|
Section 5.10
|
|
Litigation
|
|
|
A-13
|
|
Section 5.11
|
|
Employee Benefit Plans; ERISA
|
|
|
A-14
|
|
Section 5.12
|
|
Environmental Matters
|
|
|
A-15
|
|
Section 5.13
|
|
Compliance with Applicable Laws
|
|
|
A-16
|
|
Section 5.14
|
|
Insurance
|
|
|
A-16
|
|
Section 5.15
|
|
Labor Matters; Employees
|
|
|
A-16
|
|
Section 5.16
|
|
Reserve Reports
|
|
|
A-17
|
|
Section 5.17
|
|
[Reserved]
|
|
|
A-17
|
|
Section 5.18
|
|
Material Contracts
|
|
|
A-17
|
|
Section 5.19
|
|
Required Shareholder Vote; Board Action
|
|
|
A-18
|
|
Section 5.20
|
|
Proxy Statement
|
|
|
A-18
|
|
Section 5.21
|
|
Intellectual Property
|
|
|
A-18
|
|
Section 5.22
|
|
Hedging
|
|
|
A-18
|
|
Section 5.23
|
|
Brokers
|
|
|
A-19
|
|
Section 5.24
|
|
Fairness Opinion
|
|
|
A-19
|
|
Section 5.25
|
|
Takeover Laws
|
|
|
A-19
|
|
Section 5.26
|
|
Net Profits Interest Agreements; Reeves/Mayell Agreements
|
|
|
A-19
|
|
Section 5.27
|
|
Forbearances
|
|
|
A-20
|
|
Section 5.28
|
|
Gas Balancing and
Take-or-Pay
Contracts
|
|
|
A-21
|
|
Section 5.29
|
|
Production Requirements
|
|
|
A-21
|
|
Section 5.30
|
|
Well Bonus Plans
|
|
|
A-21
|
|
Section 5.31
|
|
Interested Party Transactions
|
|
|
A-22
|
|
Section 5.32
|
|
No Other Representations or Warranties
|
|
|
A-22
|
|
Article VI. REPRESENTATIONS AND WARRANTIES OF PARENT PARTIES
|
|
|
A-22
|
|
Section 6.1
|
|
Organization and Qualification
|
|
|
A-22
|
|
Section 6.2
|
|
Authority
|
|
|
A-22
|
|
Section 6.3
|
|
Merger Sub
|
|
|
A-22
|
|
Section 6.4
|
|
No Violation
|
|
|
A-23
|
|
Section 6.5
|
|
Brokers
|
|
|
A-23
|
|
Section 6.6
|
|
Parent Information
|
|
|
A-23
|
|
|
|
|
|
|
|
|
Section 6.7
|
|
Target Stock
|
|
|
A-23
|
|
Section 6.8
|
|
Financing
|
|
|
A-23
|
|
Section 6.9
|
|
No Other Representations or Warranties
|
|
|
A-23
|
|
Article VII. CONDUCT OF BUSINESS PENDING THE MERGER
|
|
|
A-24
|
|
Section 7.1
|
|
Conduct of Business by Target Pending the Merger
|
|
|
A-24
|
|
Article VIII. ADDITIONAL AGREEMENTS
|
|
|
A-26
|
|
Section 8.1
|
|
Preparation of the Proxy Statement
|
|
|
A-26
|
|
Section 8.2
|
|
Shareholders Meeting; Recommendations
|
|
|
A-27
|
|
Section 8.3
|
|
Access to Information; Confidentiality
|
|
|
A-27
|
|
Section 8.4
|
|
No Solicitation
|
|
|
A-28
|
|
Section 8.5
|
|
Directors and Officers Indemnification and Insurance
|
|
|
A-30
|
|
Section 8.6
|
|
Further Assurances
|
|
|
A-31
|
|
Section 8.7
|
|
Expenses
|
|
|
A-31
|
|
Section 8.8
|
|
Cooperation
|
|
|
A-31
|
|
Section 8.9
|
|
Publicity
|
|
|
A-32
|
|
Section 8.10
|
|
Additional Actions
|
|
|
A-32
|
|
Section 8.11
|
|
Filings
|
|
|
A-32
|
|
Section 8.12
|
|
Consents
|
|
|
A-32
|
|
Section 8.13
|
|
Employee Matters
|
|
|
A-32
|
|
Section 8.14
|
|
Notice of Certain Events
|
|
|
A-33
|
|
Section 8.15
|
|
Site Inspections
|
|
|
A-33
|
|
Section 8.16
|
|
Shareholder Litigation
|
|
|
A-33
|
|
Section 8.17
|
|
Financing
|
|
|
A-34
|
|
Section 8.18
|
|
[Reserved]
|
|
|
A-34
|
|
Section 8.19
|
|
Shell Settlement
|
|
|
A-34
|
|
Article IX. CONDITIONS TO CONSUMMATION OF THE MERGER
|
|
|
A-34
|
|
Section 9.1
|
|
Conditions to the Obligation of Each Party
|
|
|
A-34
|
|
Section 9.2
|
|
Conditions to the Obligations of the Parent Parties
|
|
|
A-34
|
|
Section 9.3
|
|
Conditions to the Obligations of the Target
|
|
|
A-35
|
|
Article X. SURVIVAL
|
|
|
A-35
|
|
Section 10.1
|
|
Survival of Representations and Warranties
|
|
|
A-35
|
|
Section 10.2
|
|
Survival of Covenants and Agreements
|
|
|
A-35
|
|
Article XI. TERMINATION, AMENDMENT AND WAIVER
|
|
|
A-36
|
|
Section 11.1
|
|
Termination
|
|
|
A-36
|
|
Section 11.2
|
|
Notice of Termination; Effect of Termination
|
|
|
A-37
|
|
Section 11.3
|
|
Expenses and Other Payments
|
|
|
A-37
|
|
Article XII. MISCELLANEOUS
|
|
|
A-38
|
|
Section 12.1
|
|
Notices
|
|
|
A-38
|
|
Section 12.2
|
|
Severability
|
|
|
A-39
|
|
Section 12.3
|
|
Assignment
|
|
|
A-39
|
|
Section 12.4
|
|
Interpretation
|
|
|
A-40
|
|
Section 12.5
|
|
Counterparts
|
|
|
A-40
|
|
Section 12.6
|
|
Entire Agreement
|
|
|
A-40
|
|
Section 12.7
|
|
Governing Law
|
|
|
A-40
|
|
Section 12.8
|
|
Submission to Jurisdiction
|
|
|
A-40
|
|
Section 12.9
|
|
Attorneys Fees
|
|
|
A-40
|
|
Section 12.10
|
|
No Third Party Beneficiaries
|
|
|
A-40
|
|
Section 12.11
|
|
Disclosure Schedules
|
|
|
A-40
|
|
Section 12.12
|
|
Amendments and Supplements
|
|
|
A-40
|
|
Section 12.13
|
|
Extensions, Waivers, etc.
|
|
|
A-40
|
|
Section 12.14
|
|
Specific Performance; Additional Remedies
|
|
|
A-41
|
|
Exhibit A Form
of Voting Agreement
|
|
|
A-43
|
|
Exhibit B Form
of Option Waiver, Cancellation and Release Agreement
|
|
|
A-53
|
|
A-ii
INDEX OF
DEFINED TERMS
|
|
|
|
|
Term
|
|
Section
|
|
Acquisition Proposal
|
|
|
1.1
|
|
Affiliate
|
|
|
1.1
|
|
Affiliate Transaction
|
|
|
5.31
|
|
Aggregate Cost Overrun
|
|
|
7.1(b)(x)
|
|
Agreement
|
|
|
Preamble
|
|
AMI
|
|
|
5.26(b)
|
|
Ancillary Agreements
|
|
|
5.3
|
|
Assessment
|
|
|
8.15
|
|
Audit
|
|
|
1.1
|
|
Book Entry Shares
|
|
|
4.1(a)
|
|
Business Day
|
|
|
1.1
|
|
Business Employee
|
|
|
1.1
|
|
Cairn
|
|
|
1.1
|
|
Cancelled Excepted Option
|
|
|
4.3(c)
|
|
Change in the Target Recommendation
|
|
|
8.4(a)
|
|
Charter Documents
|
|
|
3.2
|
|
CIT Credit Agreement
|
|
|
5.27(c)
|
|
CIT Forbearance and Amendment Agreement
|
|
|
5.27(c)
|
|
Closing
|
|
|
4.5
|
|
Closing Date
|
|
|
4.5
|
|
Code
|
|
|
1.1
|
|
Confidentiality Agreement
|
|
|
8.3
|
|
Customary Post-Closing Consents
|
|
|
1.1
|
|
D&O Insurance
|
|
|
8.5(d)
|
|
Dissenting Shares
|
|
|
4.4(a)
|
|
Effective Time
|
|
|
2.2
|
|
Enforceability Exception
|
|
|
1.1
|
|
Engagement Letters
|
|
|
1.1
|
|
Environmental Laws
|
|
|
1.1
|
|
ERISA
|
|
|
1.1
|
|
Excepted Options
|
|
|
4.3(a)
|
|
Exchange Act
|
|
|
1.1
|
|
Exchange Agent
|
|
|
4.2(a)
|
|
Exchange Fund
|
|
|
4.2(a)
|
|
Exclusivity Arrangements
|
|
|
1.1
|
|
Existing Derivative Transactions
|
|
|
5.22
|
|
Expenses
|
|
|
1.1
|
|
Fairness Opinion
|
|
|
5.24
|
|
FEMT
|
|
|
5.27(b)
|
|
Fortis
|
|
|
5.27(a)
|
|
Fortis Forbearance Agreement
|
|
|
5.27(a)
|
|
Fortis Hedging Agreement
|
|
|
5.27(b)
|
|
GAAP
|
|
|
1.1
|
|
A-iii
|
|
|
|
|
Term
|
|
Section
|
|
Governmental Authority
|
|
|
1.1
|
|
Hazardous Substances
|
|
|
1.1
|
|
Hedging Agreements
|
|
|
5.27(b)
|
|
Hedging Forbearance Agreement
|
|
|
5.27(b)
|
|
HSR Act
|
|
|
1.1
|
|
Hydrocarbons
|
|
|
1.1
|
|
Indemnified Liabilities
|
|
|
8.5(b)
|
|
Indemnified Party
|
|
|
8.5(b)
|
|
Intellectual Property
|
|
|
1.1
|
|
JAR
|
|
|
1.1
|
|
JP Morgan
|
|
|
1.1
|
|
Knowledge of Target
|
|
|
1.1
|
|
Liens
|
|
|
1.1
|
|
LOP
|
|
|
1.1
|
|
Material Production Decline
|
|
|
1.1
|
|
Mayell
|
|
|
5.26(a)
|
|
Mayell NPI Agreement
|
|
|
5.26(b)
|
|
Merger
|
|
|
Recitals
|
|
Merger Consideration
|
|
|
4.1(a)
|
|
Merger Sub
|
|
|
Preamble
|
|
Morgan Keegan
|
|
|
1.1
|
|
NPI Agreements
|
|
|
5.26(b)
|
|
Oil and Gas Interests
|
|
|
1.1
|
|
Option Waiver, Cancellation and Release Agreement
|
|
|
4.3(c)
|
|
Orion
|
|
|
5.27(d)
|
|
Orion Forbearance and Amendment Agreement
|
|
|
5.27(d)
|
|
Parent
|
|
|
Preamble
|
|
Parent Breach
|
|
|
11.1(d)
|
|
Parent Material Adverse Effect
|
|
|
1.1
|
|
Parent Parties
|
|
|
Preamble
|
|
PCBs
|
|
|
5.12(f)
|
|
Permits
|
|
|
1.1
|
|
Person
|
|
|
1.1
|
|
Proceeding
|
|
|
8.5(b)
|
|
Proved Developed Producing
|
|
|
1.1
|
|
Proxy Statement
|
|
|
8.1(a)
|
|
Reeves
|
|
|
5.26(a)
|
|
Reeves NPI Agreement
|
|
|
5.26(b)
|
|
Reeves Release
|
|
|
5.26(c)
|
|
Representatives
|
|
|
8.3
|
|
Rivington
|
|
|
1.1
|
|
Sarbanes-Oxley Act
|
|
|
1.1
|
|
SEC
|
|
|
1.1
|
|
Securities Act
|
|
|
1.1
|
|
A-iv
|
|
|
|
|
Term
|
|
Section
|
|
Subsidiary
|
|
|
1.1
|
|
Severance Package Table
|
|
|
5.11(e)
|
|
Stock Certificate
|
|
|
4.1(a)
|
|
Superior Proposal
|
|
|
1.1
|
|
Surviving Company
|
|
|
2.1
|
|
Sydson
|
|
|
1.1
|
|
Target
|
|
|
Preamble
|
|
Target Acquisition Contract
|
|
|
8.4(a)
|
|
Target Benefit Plan
|
|
|
1.1
|
|
Target Breach
|
|
|
11.1(e)
|
|
Target CIT Lenders
|
|
|
5.27(c)
|
|
Target Common Shares
|
|
|
4.1(a)
|
|
Target Credit Agreement
|
|
|
5.27(a)
|
|
Target Disclosure Schedule
|
|
|
Article V
|
|
Target Employee Agreement
|
|
|
1.1
|
|
Target Employees
|
|
|
5.11(e)
|
|
Target ERISA Affiliate
|
|
|
1.1
|
|
Target Lenders
|
|
|
5.27(a)
|
|
Target Material Adverse Effect
|
|
|
1.1
|
|
Target Material Contract
|
|
|
1.1
|
|
Target Options
|
|
|
4.3(a)
|
|
Target Preferred Shares
|
|
|
5.2(a)
|
|
Target Recommendation
|
|
|
5.19(b)
|
|
Target Reserve Report
|
|
|
5.16(a)
|
|
Target SEC Reports
|
|
|
1.1
|
|
Target Shareholders
|
|
|
1.1
|
|
Target Shareholders Approval
|
|
|
5.19(a)
|
|
Target Shareholders Meeting
|
|
|
8.2
|
|
Target Warrants
|
|
|
4.3(b)
|
|
Tax Authority
|
|
|
1.1
|
|
Tax Returns
|
|
|
1.1
|
|
Taxes
|
|
|
1.1
|
|
TBCA
|
|
|
1.1
|
|
TBOC
|
|
|
1.1
|
|
Termination Date
|
|
|
11.1(b)
|
|
Termination Fee
|
|
|
1.1
|
|
TODD
|
|
|
1.1
|
|
Transactions
|
|
|
4.5
|
|
Voting Agreement
|
|
|
Recitals
|
|
WARN Act
|
|
|
5.15(b)
|
|
Well Bonus Plans
|
|
|
5.30
|
|
A-v
AGREEMENT
AND PLAN OF MERGER
This Agreement and Plan of Merger (this
Agreement
) dated December 22,
2009, is entered into by and among ALTA MESA HOLDINGS, LP, a
Texas limited partnership
(Parent)
,
ALTA MESA ACQUISITION SUB, LLC, a Texas limited liability
company (
Merger Sub,
and, together
with Parent, the
Parent Parties
), and
THE MERIDIAN RESOURCE CORPORATION, a Texas corporation
(Target)
.
RECITALS
The respective boards of directors or other governing bodies of
Parent, Merger Sub and Target deem it advisable and in the best
interests of their respective entities, partners and members
that Target merge with and into Merger Sub (the
Merger
) upon the terms and subject to
the conditions set forth in this Agreement, and such boards of
directors and governing bodies have approved this Agreement and
the Merger.
Concurrently with the execution of this Agreement as a condition
and inducement to the Parent Parties entering into this
Agreement and agreeing to perform their respective obligations
hereunder, each director and executive officer of Target has
executed and delivered to Parent a voting agreement in the form
attached hereto as
Exhibit A
(individually, a
Voting Agreement
and, collectively,
the
Voting Agreements
) pursuant to
which they have each agreed, subject to the terms and conditions
therein, to vote their Target Common Shares in favor of the
Transactions.
In consideration of the premises and the representations,
warranties and agreements contained in this Agreement, the
parties to this Agreement agree as follows:
ARTICLE I.
CERTAIN
DEFINED TERMS
Section 1.1
Certain
Defined Terms.
The following terms which are
capitalized and used in this Agreement have the meanings set
forth below:
Acquisition Proposal
means any offer or
proposal by any third party concerning any (i) merger,
consolidation, share exchange, tender offer, recapitalization,
other business combination or similar transaction directly or
indirectly involving Target, or any of its Subsidiaries,
pursuant to which such Person would own fifty percent (50%) or
more of the consolidated assets, revenues or net income of
Target, and its Subsidiaries, taken as a whole, (ii) sale,
lease, license or other disposition directly or indirectly by
merger, consolidation, business combination, share exchange,
joint venture or otherwise, of assets of Target, (including
equity interests of any of its Subsidiaries) or any Subsidiary
of Target, representing fifty percent (50%) or more of the
consolidated assets, revenues or net income of Target and its
Subsidiaries, taken as a whole, in each case in a single
transaction or series of transactions, (iii) issuance or
sale or other disposition (including by way of merger,
consolidation, business combination, share exchange, joint
venture or similar transaction) of equity interests representing
fifty percent (50%) or more of the voting power of Target,
(iv) transaction or series of transactions in which any
Person would acquire beneficial ownership or the right to
acquire beneficial ownership of equity interests representing
fifty percent (50%) or more of the voting power of Target, or
(v) any combination of the foregoing.
Affiliate
means, when used with respect to
any Person, any other Person directly or indirectly controlling,
controlled by, or under common control with such Person. As used
in the definition of
Affiliate,
the
term control means possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the
ownership of voting securities, partnership or other ownership
interests, by contract or otherwise.
Audit
means any audit, assessment of Taxes,
other examination by any Tax Authority, proceeding or appeal of
such proceeding relating to Taxes.
A-1
Business Day
means any day other than a
Saturday or Sunday, or a day on which banking institutions in
the State of Texas are authorized or obligated by law or
executive order to close.
Business Employee
means an individual who is
employed by Target immediately prior to the Effective Time and
who thereafter remains or becomes an employee of Merger Sub or
an Affiliate of Merger Sub.
Cairn
means Cairn Energy USA, Inc., a wholly
owned Subsidiary of Target.
Code
means the Internal Revenue Code of 1986,
as amended.
Customary Post-Closing Consents
means
approvals that are ministerial in nature and are customarily
obtained from Governmental Authorities after the Effective Time
in connection with transactions of the same nature as are
contemplated hereby.
Enforceability Exception
means the effects of
bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting the rights of creditors and of
general principles of equity.
Engagement Letters
means (i) that
engagement letter, dated May 14, 2009, between Rivington
and Target, as amended, (ii) that engagement letter, dated
July 22, 2008, between JP Morgan and Target, as amended,
and (iii) that engagement letter, dated November 2,
2009, between Morgan Keegan and Target.
Environmental Laws
means all applicable
federal, state and local statutes, ordinances, restrictions,
licenses, rules, orders, regulations, permit conditions,
injunctive obligations, standards, and legal requirements
relating to the protection of the environment, the presence or
release of Hazardous Substances and human health and safety,
including the common law and the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C.
§ 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. App. § 1801 et
seq.), the Resource Conservation and Recovery Act
(42 U.S.C. § 6901 et seq.), the Clean Water Act
(33 U.S.C. § 1251 et seq.), the Clean Air Act
(42 U.S.C. § 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C. § 2601 et seq.), the
Federal Insecticide, Fungicide and Rodenticide Act
(7 U.S.C. § 136 et seq.), and the Occupational
Safety and Health Act (29 U.S.C. § 651 et seq.),
as each is currently amended, and the regulations promulgated
pursuant thereto, and all analogous state and local laws.
ERISA
means the Employee Retirement Income
Security Act of 1974, as amended.
Exchange Act
means the U.S. Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
Exclusivity Arrangements
means any agreement,
provision or covenant limiting the ability of Target or its
Subsidiaries to (i) sell products or services,
(ii) engage in a line of business, (iii) establish or
maintain contacts related to its business in a geographic area
or (iv) obtain services from any Person or limiting such
Persons ability to provide products or services to Target
or its Subsidiaries.
Expenses
shall include all reasonable
out-of-pocket
expenses (including all reasonable fees and expenses of outside
counsel, accountants, financing sources, investment bankers,
experts and consultants to a party hereto and its Affiliates)
incurred by a party or on its behalf in connection with or
related to the due diligence, authorization, preparation,
negotiation, execution and performance of this Agreement, the
preparation, printing, filing and mailing of the Proxy
Statement, the solicitation of shareholder approvals, requisite
HSR filings and all other matters related to the consummation of
the Transactions (subject to reasonable documentation).
GAAP
means generally accepted accounting
principles in the United States.
Governmental Authority
means any governmental
agency or authority (including a court) of the United States,
any other country, or any domestic or foreign state, and any
political subdivision thereof, and shall include any
multinational authority having governmental or
quasi-governmental powers.
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Hazardous Substances
means any chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous
substances, hazardous materials, petroleum, petroleum products
or any substance regulated under any Environmental Law.
HSR Act
means the
Hart-Scott-Rodino
Anti-Trust Improvements Act of 1976.
Hydrocarbons
means oil, condensate, natural
gas, casinghead gas and other liquid or gaseous hydrocarbons.
Intellectual Property
means all patents,
patent rights, trademarks, rights, trade names, trade name
rights, service marks, service mark rights, copyrights,
technology, know-how, processes and other proprietary
intellectual property rights and computer programs.
JAR
means JAR Resource Holdings, LP.
JP Morgan
means J.P. Morgan Securities
Inc.
knowledge of Target
and similar terms mean
the current knowledge of: Paul D. Ching, President, Chief
Executive Officer and Chairman of the Board of Directors; Lloyd
V. DeLano, Senior Vice President, Chief Accounting Officer and
Secretary; Alan S. Pennington, Vice President-Business
Development TMRX; A. Dale Breaux, Vice
President-Operations TMRX; Steven G. Ives, Vice
President and Ethel Porciaux, Land Coordinator.
Liens
means all liens, mortgages, pledges,
security interests, encumbrances, claims or charges of any kind.
LOP
means Louisiana Onshore Properties LLC, a
wholly owned Subsidiary of Target.
Material Production Decline
means a decline
of ten percent (10%) or more in the monthly aggregate average
daily production rate of the Oil and Gas Interests of Target, as
compared to those monthly aggregate reserves classified as
Proved Developed Producing reserves in the Target
Reserve Report; provided that, with respect to any wells
identified as producing Hydrocarbons in the Target Reserve
Report, if Target or any of its Subsidiaries takes any action
with respect to any such well that is (i) outside the
ordinary course of business (except to the extent in accordance
with the standards applicable to a prudent operator) or
(ii) inconsistent with the productive behavior thereof as
contemplated by the third party engineering firm who prepared
the Target Reserve Report, and any such action would or could be
reasonably likely to cause an increase in production from any
wells identified as producing Hydrocarbons in the Target Reserve
Report, then such increases in production shall be disregarded
for purposes of this definition.
Morgan Keegan
means Morgan Keegan &
Company, Inc.
Oil and Gas Interests
means direct and
indirect interests in and rights with respect to oil, gas,
mineral, and related properties and assets of any kind and
nature, direct or indirect, including working, leasehold and
mineral interests and operating rights and royalties, overriding
royalties, production payments, net profit interests and other
non-working interests and non-operating interests; all interests
in rights with respect to Hydrocarbons and other minerals or
revenues therefrom, all contracts in connection therewith and
claims and rights thereto (including all oil and gas leases,
operating agreements, unitization and pooling agreements and
orders, division orders, transfer orders, mineral deeds, royalty
deeds, oil and gas sales, exchange and processing contracts and
agreements, and in each case, interests thereunder), surface
interests, fee interests, reversionary interests, reservations,
and concessions; all easements, rights of way, licenses,
permits, leases, and other interests associated with,
appurtenant to, or necessary for the operation of any of the
foregoing; and all interests in equipment and machinery
(including wells, well equipment and machinery), oil and gas
production, gathering, transmission, treating, processing, and
storage facilities (including tanks, tank batteries, pipelines,
and gathering systems), pumps, water plants, electric plants,
gasoline and gas processing plants, refineries, and other
tangible personal property and fixtures associated with,
appurtenant to, or necessary for the operation of any of the
foregoing.
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Parent Material Adverse Effect
means any
material adverse effect on the ability of Parent or Merger Sub
to timely consummate the Merger and the Transactions.
Permits
means permits, licenses,
certificates, consents, approvals, entitlements, plans, surveys,
relocation plans, environmental impact reports and other
authorizations of Governmental Authorities.
Person
means an individual, a corporation, a
limited liability company, a partnership, an association, a
trust or any other entity or organization, including any
Governmental Authority.
Rivington
means Rivington Capital Advisors,
LLC.
Sarbanes-Oxley Act
means the Sarbanes-Oxley
Act of 2002, as amended.
SEC
means the U.S. Securities and
Exchange Commission.
Securities Act
means the U.S. Securities
Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
Subsidiary
means, with respect to any party,
any corporation or other organization, whether incorporated or
unincorporated, of which (i) at least a majority of the
securities or other interests having by their terms voting power
to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or
other organization is directly or indirectly beneficially owned
or controlled by such party or by any one or more of its
subsidiaries, or by such party and one or more of its
subsidiaries, or (ii) such party or any Subsidiary of such
party is a general partner of a partnership or a manager of a
limited liability company.
Superior Proposal
means, with respect to
Target, a bona fide written Acquisition Proposal that the Target
Board determines in good faith (after consultation with
Targets financial advisor and outside legal counsel) to be
(i) more favorable to the Target Shareholders than the
Merger, and (ii) reasonably expected to be consummated,
taking into consideration the timing, conditionality, legal,
regulatory and other aspects of such Acquisition Proposal.
Sydson
means Sydson Energy, Inc.
Target Benefit Plan
means any individual or
group employee benefit plans or arrangements of any type
(including plans described in Section 3(3) of ERISA),
sponsored, maintained or contributed to by Target or a Target
ERISA Affiliate within six (6) years prior to the Effective
Time.
Target Employee Agreement
means any
employment, severance or similar agreement with respect to which
Target or any Target ERISA Affiliate has any current or future
obligation or liability.
Target ERISA Affiliate
means any trade or
business, whether or not incorporated, which together with
Target would, on the date of this Agreement, be deemed a
single employer within the meaning of
Section 414(b), (c) or (m) of the Code or
Section 4001(b)(1) of ERISA.
Target Material Adverse Effect
means any
event, circumstance, condition, development or occurrence
causing, resulting in or having (or with the passage of time
likely to cause, result in or have) a material adverse effect on
the financial condition, business, assets, properties or results
of operations of Target and its Subsidiaries, taken as a whole,
including but not limited to any of the following: a Material
Production Decline, the bankruptcy of Target or any of its
Subsidiaries, uninsured casualty losses of Target and its
Subsidiaries in excess of $1,000,000 in the aggregate, the
initiation of litigation or an arbitration proceeding against
Target or any of its Subsidiaries that could reasonably result
in damages in excess of $1,000,000, the initiation of an
investigation by the SEC, and the initiation of foreclosure
proceedings against any of Targets or its
Subsidiaries assets or the delivery of a notice of cross
default by any of Targets or its Subsidiaries
lenders;
provided
that in no event shall any of the
following be deemed to constitute or be taken into account in
determining a Target Material Adverse Effect: (i) general
business or economic conditions or the capital, financial,
banking or currency markets, or changes therein;
(ii) conditions generally affecting the industry in which
any of the Target or any of its Subsidiaries operate or changes
therein, including the market price of oil or natural gas or
changes thereof; (iii) the
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negotiation, execution, announcement, or pendency or performance
of this Agreement or any of the Transactions contemplated
hereby, including any change in the relationship of the Target
or any of its Subsidiaries with their respective employees,
customers, suppliers, investors and contractual counterparties,
and any litigation resulting therefrom; (iv) (A) any action
or omission required or permitted by this Agreement or
(B) any action taken at the request of Parent; (v) any
action taken by Parent or Merger Sub; (vi) any change in
the market price for or trading volume of the Targets
stock; (vii) any changes in laws or applicable accounting
regulations or principles, or interpretations thereof; and
(viii) the commencement, continuation or escalation of war,
terrorism or hostilities, or natural disasters or political
events.
Target Material Contract
means each contract,
lease, indenture, agreement, arrangement or understanding to
which Target or any of its Subsidiaries is subject that is
currently in effect and is of a type that would be required to
be included as an exhibit to a
Form S-1
registration statement pursuant to the rules and regulations of
the SEC if such a registration statement were filed by Target.
Target SEC Reports
means each form,
registration statement, report, schedule, proxy or information
statement and other document (including exhibits and amendments
thereto) required to be filed by the Target with the SEC since
January 1, 2009 under the Securities Act or the Exchange
Act.
Target Shareholders
shall mean the holders of
Target Common Shares.
Tax Authority
means the Internal Revenue
Service and any other domestic or foreign Governmental Authority
responsible for the administration of any Taxes.
Tax Returns
means all Federal, state, local
and foreign tax returns, declarations, statements, reports,
schedules, forms and information returns and any amended Tax
Return relating to Taxes.
Taxes
means (i) any and all taxes,
customs, duties, tariffs, imposts, charges, deficiencies,
assessments, levies or other like governmental charges,
including, without limitation, income, gross receipts, excise,
real or personal property, ad valorem, value added, estimated,
alternative minimum, stamp, sales, withholding, social security,
occupation, use, service, service use, license, net worth,
payroll, franchise, transfer and recording taxes and charges,
imposed by any Tax Authority, whether computed on a separate,
consolidated, unitary, combined or any other basis; and such
term shall include any interest, fines, penalties or additional
amounts attributable to, or imposed upon, or with respect to,
any such amounts, (ii) any liability for the payment of any
amounts described in (i) as a result of being a member of
an affiliated, consolidated, combined, unitary, or similar group
or as a result of transferor or successor liability, and
(iii) any liability for the payment of any amounts as a
result of being a party to any tax sharing agreement or as a
result of any obligation to indemnify any other person with
respect to the payment of any amounts of the type described in
clauses (i) or (ii).
TBCA
means the Texas Business Corporations
Act, as amended, as applicable to the Target, Parent Parties and
the Transactions.
TBOC
means the Texas Business Organizations
Code, as amended, as applicable to Target, Parent Parties and
the Transactions.
Termination Fee
means $3,000,000.
TMRX
means The Meridian Resource &
Exploration LLC, a wholly owned Subsidiary of Target.
TODD
means Texas Oil Distribution &
Development, Inc.
ARTICLE II.
THE MERGER
Section 2.1
The
Merger.
Upon the terms and subject to the
conditions hereof, at the Effective Time, Target shall merge
with and into Merger Sub and the separate corporate existence of
Target shall thereupon cease and Merger Sub shall be the
surviving company in the Merger (sometimes referred to herein as
the
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Surviving Company
). The Merger shall
have the effects set forth in Article 5.06 of the TBCA and
Section 10.008 of the TBOC, including the Surviving
Companys succession to and assumption of all rights and
obligations of Target.
Section 2.2
Effective
Time of the Merger.
The Merger shall become
effective (the
Effective Time
) upon
the later of (i) the date of filing of a properly executed
Certificate of Merger relating to the Merger with the Secretary
of State of Texas in accordance with the TBOC, and (ii) at
such later time as the parties shall agree and set forth in such
Certificate of Merger. The filing of the Certificate of Merger
referred to above shall be made as soon as practicable on the
Closing Date set forth in
Section 4.5
.
ARTICLE III.
THE
SURVIVING COMPANY
Section 3.1
Certificate
of Formation.
The Certificate of Formation of
Merger Sub in effect immediately prior to the Effective Time
shall be the Certificate of Formation of the Surviving Company
at and after the Effective Time until thereafter amended in
accordance with the terms thereof and the TBOC.
Section 3.2
Charter
Documents.
The organizational documents,
including the company agreement, of Merger Sub (the
Charter Documents
) as in effect
immediately prior to the Effective Time shall be the Charter
Documents of the Surviving Company at and after the Effective
Time, and thereafter may be amended in accordance with their
terms and as provided by the Surviving Companys Charter
Documents and the TBOC.
Section 3.3
Directors
and Officers.
At and after the Effective Time,
the directors and officers of Merger Sub shall be the directors
and officers of the Surviving Company until their respective
successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance
with the Surviving Companys Charter Documents and the TBOC.
ARTICLE IV.
CONVERSION
OF SHARES
Section 4.1
Conversion
of Capital Stock.
At the Effective Time, by
virtue of the Merger and without any action on the part of the
holders of any capital stock described below:
(a) All shares of issued and outstanding common stock of
Target, par value $.01 per share (
Target Common
Shares
) (other than (i) Target Common Shares
held by Parent, Merger Sub or any wholly owned Subsidiary of
Parent or Merger Sub, (ii) the Dissenting Shares and
(iii) Target Common Shares held in Targets treasury),
shall be converted into the right to receive an amount in cash,
without interest, equal to $0.29 per Target Common Share (the
Merger Consideration
). At the
Effective Time, all Target Common Shares converted into Merger
Consideration pursuant to this
Section 4.1
shall
cease to be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each holder of a
certificate (
Stock Certificate
) or of
non-certificated Target Common Shares represented by a book
entry (the
Book Entry Shares
) that,
immediately prior to the Effective Time represented such Target
Common Shares shall cease to have any rights with respect
thereto, except the right to receive Merger Consideration,
without interest.
(b) Each Target Common Share issued and held in
Targets treasury shall (i) cease to be outstanding,
(ii) be canceled and retired without payment of any
consideration therefor, and (iii) cease to exist.
(c) With respect to the Dissenting Shares, subject to
Section 4.4
, such Dissenting Shares, by virtue of
the Merger and without any action on the part of the holders
thereof, shall no longer be outstanding and shall be canceled
and retired and shall cease to exist, and each Dissenting
Shareholder shall thereafter cease to have any rights with
respect to such Dissenting Shares, except the rights, if any, as
are granted by Article 5.13 of the TBCA or Subchapter H of
Chapter 10 of the TBOC, as applicable.
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(d) Each Target Common Share held by Parent, Merger Sub or
any other Subsidiary of Parent shall (i) cease to be
outstanding, (ii) be canceled and retired without payment
of any consideration therefor, and (iii) cease to exist.
(e) All of the membership interest of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be
converted into the membership interest of the Surviving Company
with the same rights, powers and privileges as the membership
interest so converted and shall constitute the only outstanding
membership interest of the Surviving Company.
Section 4.2
Surrender
and Payment
(a) Parent and Target shall authorize a transfer agent,
commercial bank or trust company reasonably acceptable to both
parties to act as exchange agent under this Agreement (the
Exchange Agent
) for payment of the
Merger Consideration upon surrender of Stock Certificates and
Book Entry Shares representing the Target Common Shares. At or
prior to the Effective Time, Parent or Merger Sub shall deposit
with the Exchange Agent for the benefit of the holders of Target
Common Shares, cash in an amount equal to the aggregate amount
of Merger Consideration to which holders of Target Common Shares
shall be entitled at the Effective Time pursuant to
Section 4.1
in exchange for outstanding Target
Common Shares (such amounts being hereinafter referred to as the
Exchange Fund
). The Exchange Agent
shall, pursuant to irrevocable instructions, deliver the Merger
Consideration in exchange for surrendered Stock Certificates or
Book Entry Shares pursuant to
Section 4.1
out of the
Exchange Fund. Except as contemplated by
Section 4.2(d)
, the Exchange Fund shall not be used
for any other purpose.
(b) Promptly but in any event within five (5) Business
Days after the Effective Time, the Surviving Company shall cause
the Exchange Agent to send to each holder of record of Stock
Certificates or Book Entry Shares a letter of transmittal for
use in such exchange (which shall specify that the delivery
shall be effected, and risk of loss and title with respect to
the Stock Certificates or Book Entry Shares shall pass, only
upon proper delivery of the Stock Certificates or Book Entry
Shares to the Exchange Agent, and which shall be in a form
reasonably acceptable to Target), and instructions for use in
effecting the surrender of Stock Certificates or Book Entry
Shares for payment therefor in accordance herewith. Upon proper
surrender of a Stock Certificate or Book Entry Shares for
exchange and cancellation to the Exchange Agent, together with
such properly completed letter of transmittal, duly executed,
the holder of such Stock Certificate or Book Entry Shares shall
be entitled to receive in exchange therefor the amount of Merger
Consideration provided in
Section 4.1(a)
, and the
Stock Certificate or Book Entry Shares so surrendered shall
forthwith be cancelled.
(c) If any portion of the Merger Consideration is to be
issued or paid to a Person other than the registered holder of
Target Common Shares represented by the Stock Certificates or
Book Entry Shares surrendered in exchange therefor, no such
issuance or payment shall be made unless (i) the Stock
Certificates or Book Entry Shares so surrendered have been
properly endorsed or otherwise be in proper form for transfer
and (ii) the Person requesting such issuance has paid to
the Exchange Agent any transfer or other Taxes required as a
result of such issuance to a Person other than the registered
holder or establish to the Exchange Agents satisfaction
that such tax has been paid or is not applicable.
(d) Any portion of the Exchange Fund that remains unclaimed
by the holders of Target Common Shares one (1) year after
the Effective Time shall be returned to Merger Sub, upon demand,
and any such holder who has not exchanged such holders
Target Common Shares in accordance with this section prior to
that time shall thereafter look only to the Surviving Company,
as a general creditor thereof, to exchange such Target Common
Shares or to pay amounts to which such holder is entitled
pursuant to
Section 4.1
. If outstanding Target
Common Shares are not surrendered prior to six (6) years
after the Effective Time (or, in any particular case, prior to
such earlier date on which any Merger Consideration issuable or
payable upon the surrender of such Target Common Shares would
otherwise escheat to or become the property of any Governmental
Authority), the Merger Consideration issuable or payable upon
the surrender of such Target Common Shares shall, to the extent
permitted by applicable law, become the property of the
Surviving Company, free and clear of all claims or interest of
any Person previously entitled thereto. Notwithstanding the
foregoing, none of Parent, Merger Sub, Target or the Surviving
Company shall be liable to any holder of Target Common Shares
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for any amount paid, or Merger Consideration delivered, to a
public official pursuant to applicable abandoned property,
escheat or similar laws.
(e) If any Stock Certificate is lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person
claiming such Stock Certificate is lost, stolen or destroyed
and, if required by the Surviving Company, the posting by such
Person of a bond in such reasonable amount as the Surviving
Company may direct as indemnity against any claim that may be
made against it with respect to such Stock Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or
destroyed Stock Certificate the Merger Consideration in respect
thereof pursuant to this Agreement.
Section 4.3
Stock
Options; Warrants
(a) Except with respect to the stock options set forth on
Section 4.3(a) of the Target Disclosure Schedule (the
Excepted Options
), Target represents
and warrants that each stock option of Target (the
Target Options
) that is not fully
exercisable as of the date of this Agreement will automatically
become fully vested and exercisable immediately prior to the
Effective Time pursuant to the terms of the applicable employee
benefit plan and other agreements. The consideration for the
cancellation of each Target Option shall be (x) the amount
by which the Merger Consideration exceeds the per share exercise
price of such Target Option multiplied by (y) the number of
Target Common Shares covered by the outstanding portion of the
cancelled Target Option; provided that if the exercise price of
such Target Option is equal to or greater than the Merger
Consideration, such Target Option shall be cancelled without any
cash payment being made in respect thereof. Any payment made
pursuant to this
Section 4.3(a)
shall be reduced by
any income or employment Tax withholding required under
(i) any applicable state or local Tax laws or (ii) any
other applicable laws. Each Target Option shall be cancelled and
no longer be outstanding at or immediately prior to the
Effective Time. The Surviving Company shall pay such
consideration to the holders of Target Options promptly after
the Effective Time, but in no event more than two
(2) Business Days after the Effective Time. Target will
take any and all actions necessary on or before the Effective
Time to terminate all Excepted Options as provided in
Section 4.3(c)
.
(b) Target shall cause each warrant of Target (the
Target Warrants
) to become fully
exercisable immediately prior to the Effective Time. The
consideration for the cancellation of each Target Warrant shall
be (x) the amount by which the Merger Consideration exceeds
the per share exercise price of such Target Warrant multiplied
by (y) the number of Target Common Shares covered by the
outstanding portion of the cancelled Target Warrant. Each Target
Warrant shall be cancelled and no longer be outstanding at or
immediately prior to the Effective Time. The Surviving Company
shall pay such consideration to the holders of Target Warrants
promptly after the Effective Time, but in no event more than two
(2) Business Days after the Effective Time.
(c) With respect to the Excepted Options, each Excepted
Option that is not fully exercisable and that is outstanding
immediately prior to the Effective Time, will automatically
become fully vested and exercisable immediately prior to the
Effective Time. Prior to the Effective Time, Target shall cause
each holder of an Excepted Option to enter into a written
agreement, substantially in the form attached hereto as
Exhibit B
, pursuant to which the aggregate number of
such Excepted Options will be canceled at the Effective Time and
converted into the right to receive a $10.00 cash payment,
without interest (the
Option Waiver, Cancellation
and Release Agreement
). Each optionholder who
holds an Excepted Option that has been canceled (a
Cancelled Excepted Option
) shall have
no rights with respect to such Cancelled Excepted Option to
receive any other consideration in connection with the Merger or
otherwise. Any payments made to a holder of an Excepted Option
will be reduced by any income or employment Tax withholding
required under (x) the Code, (y) any applicable state
or local Tax laws, or (z) any other applicable laws. To the
extent that any amounts are so withheld, those amounts shall be
treated as having been paid to the holder of a Cancelled
Excepted Option for all purposes under this Agreement. Target
shall make the payments in respect of the Cancelled Excepted
Options as promptly as practicable following the cancellation of
such Cancelled Excepted Options as contemplated by this
Section 4.3(c)
.
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Section 4.4
Dissenting
Shares
(a) Notwithstanding Section 4.1(a), Target Common
Shares that are held by any holder who has exercised such
holders right to demand appraisal for such shares in
accordance with the TBCA or TBOC (the
Dissenting
Shares
) shall not be converted into the right to
receive the Merger Consideration (unless such holder fails to
perfect or withdraws or otherwise loses the right to appraisal).
Holders of Dissenting Shares shall have those rights, but only
those rights, of holders who perfect their appraisal rights
pursuant to the TBCA or TBOC, as applicable; provided, however,
that any holder of Dissenting Shares who shall have failed to
perfect or shall have withdrawn or lost his rights to appraisal
of such Dissenting Shares, in each case under the TBCA or TBOC,
as applicable, shall forfeit the right to appraisal of such
Dissenting Shares, and such Dissenting Shares shall be treated
as if they had been converted into the right to receive, as of
the Effective Time, the Merger Consideration, without interest.
Notwithstanding anything to the contrary contained in this
section, if the Merger is terminated, rescinded or abandoned,
then the right of any Target Shareholder to be paid the fair
value of such shareholders Dissenting Shares shall cease.
The Surviving Company shall comply with all of its obligations
under the TBCA or TBOC, as applicable, with respect to holders
of Dissenting Shares.
(b) Target shall give the Parent Parties (i) prompt
written notice of any demands for appraisal, any withdrawals of
such demands received by Target and any other related
instruments served pursuant to the TBCA or TBOC, as applicable,
and received by Target, and (ii) the right to participate
in all negotiations and proceedings with respect to demands for
appraisal under the TBCA or TBOC, as applicable. Target shall
not, except with the prior written consent of the Parent,
voluntarily make any payment with respect to any demands for
appraisal or offer to settle or settle any such demands.
Section 4.5
Closing.
The
closing (the
Closing
) of the
transactions contemplated by this Agreement (the
Transactions
) shall take place as soon
as practicable, and in any event not later than one
(1) Business Day following the date on which the conditions
to the Closing set forth in
Article IX
(excluding
conditions that, by their terms, cannot be satisfied until the
Closing, but subject to the satisfaction or waiver of such
conditions at the Closing) have been satisfied or waived or at
such other place, time and date as the parties hereto may agree
in writing (the
Closing Date
). The
Closing shall take place at the offices of Haynes and Boone,
LLP, 1221 McKinney Street, Suite 2100, Houston, Texas,
77010 on the Closing Date.
ARTICLE V.
REPRESENTATIONS
AND WARRANTIES OF TARGET
Except as disclosed in the disclosure letter, dated as of the
date of this Agreement and delivered to Parent in connection
with the execution and delivery of this Agreement (the
Target Disclosure Schedule
), which
disclosure shall be subject to
Section 12.11
hereof,
the Target represents and warrants to the Parent Parties as
follows:
Section 5.1
Organization
and Qualification
(a) Target is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Texas, has the corporate power to own, use or lease its
properties and to carry on its business as it is now being
conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the failure to be so duly
qualified and in good standing would reasonably be expected to
have a Target Material Adverse Effect. Target has made available
to the Parent Parties a complete and correct copy of its
articles of incorporation and bylaws (or similar organizational
documents), each as amended to the date hereof. Target is not in
violation of any provision of its articles of incorporation or
bylaws (or similar organizational documents), except for any
such violation as would not reasonably be expected to have a
Target Material Adverse Effect.
(b) Section 5.1(b) of the Target Disclosure Schedule
lists, as of the date hereof, the name and jurisdiction of
organization of each Subsidiary of Target and the jurisdictions
in which each such Subsidiary is qualified or holds licenses to
do business as a foreign corporation or other organization. Each
such Subsidiary is a corporation or other organization duly
organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, has the requisite
corporate power to own, use or lease its properties and to carry
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on its business as it is now being conducted and is duly
qualified and in good standing to do business in each
jurisdiction in which the failure to be so duly qualified and in
good standing would reasonably be expected to have a Target
Material Adverse Effect. Target has made available to the Parent
Parties a complete and correct copy of the articles of
incorporation and bylaws (or similar organizational documents)
of each of Targets Subsidiaries, each as amended to the
date hereof. No Subsidiary of Target is in violation of any
provision of its articles of incorporation or bylaws (or similar
organizational documents) except for any such violation as would
not reasonably be expected to have a Target Material Adverse
Effect. Other than Targets Subsidiaries, Target does not
beneficially own or control, directly or indirectly, five
percent (5%) or more of any class of equity or similar
securities of any corporation or other organization, whether
incorporated or unincorporated.
Section 5.2
Capitalization
(a) The authorized capital stock of Target consists of
200,000,000 Target Common Shares and 25,000,000 shares of
preferred stock, par value $1.00 per share (
Target
Preferred Shares
). As of December 17, 2009,
(i) 92,475,527 Target Common Shares were issued and
outstanding, (ii) no Target Preferred Shares were issued
and outstanding, (iii) stock options to acquire 449,000
Target Common Shares were outstanding under all stock option
plans and agreements of Target and all such options have an
exercise price in excess of the Merger Consideration, and
(iv) 3,300,998 warrants of Target were outstanding, of
which 1,428,000 of such warrants have an exercise price of $5.85
and, if unexercised, will expire on December 29, 2009.
There are no bonds, debentures, notes or other indebtedness
issued or outstanding having the right to vote with the Target
Shareholders, whether together or as a separate class, on any
matters on which the Target Shareholders may vote. All of the
outstanding Target Common Shares are validly issued, fully paid
and nonassessable, and free of preemptive rights. Except as set
forth above or in Section 5.2(a) of the Target Disclosure
Schedule, and other than this Agreement, as of the date hereof,
there are no outstanding subscriptions, options, rights,
warrants, convertible securities, stock appreciation rights,
phantom equity, or other agreements or commitments (including
rights plans or poison pills) obligating
Target to issue, transfer, sell, redeem, repurchase or otherwise
acquire any shares of its capital stock of any class. Except for
the Voting Agreements, there are no agreements, arrangements or
other understandings to which Target is a party with respect to
the right to vote any shares of capital stock of Target.
(b) Except as set forth in Section 5.2(b) of the
Target Disclosure Schedule, Target is, directly or indirectly,
the record and beneficial owner of all of the outstanding shares
of capital stock of each Subsidiary of Target, there are no
irrevocable proxies with respect to any such shares, and no
equity securities of any Subsidiary of Target are or may become
required to be issued because of any options, warrants, rights
to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into
or exchangeable or exercisable for, any shares of capital stock
of any Subsidiary of Target. As of the date hereof, there are no
contracts, commitments, understandings or arrangements by which
Target or any Subsidiary of Target is or may be bound to issue
additional shares of capital stock of any Subsidiary of Target
or securities convertible into or exchangeable or exercisable
for any such shares. Except as set forth in Section 5.2(b) of
the Target Disclosure Schedule, all of such shares Target owns
are validly issued, fully paid and nonassessable and are owned
by it free and clear of all Liens, other than Liens imposed by
applicable securities laws.
Section 5.3
Authority.
Target
has all necessary corporate power and authority to execute and
deliver this Agreement and any ancillary agreements relating to
the Transactions to which Target is or will be a party (the
Ancillary Agreements
) and, subject to
obtaining the Target Shareholders Approval, to consummate
the Transactions. The execution, delivery and performance of
this Agreement and the Ancillary Agreements to which Target is
or will be a party and the consummation of the Transactions have
been duly and validly authorized by Targets Board of
Directors, and no other corporate proceedings on the part of
Target are necessary to authorize this Agreement and the
Ancillary Agreements to which Target is or will be a party or to
consummate the Transactions, other than the Target
Shareholders Approval and the filing of the Certificate of
Merger, in each case, pursuant to the requirements of the TBOC
and TBCA, as applicable. This Agreement has been, and the
Ancillary Agreements to which Target is or will be a party are,
or upon execution will be, duly and validly executed and
delivered by Target and, assuming the due authorization,
execution and delivery hereof and thereof by the other parties
hereto and thereto, constitutes, or upon execution will
constitute, valid
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and binding obligations of Target enforceable against Target in
accordance with their respective terms, except as such
enforceability may be subject to the effects of the
Enforceability Exception.
Section 5.4
Consents
and Approvals; No Violation.
The execution and
delivery of this Agreement by Target, the consummation of the
Transactions by Target and the performance by Target of its
obligations hereunder will not:
(a) subject to receipt of the Target Shareholders
Approval, conflict with any provision of Targets articles
of incorporation or bylaws, as amended, or other similar
organizational documents of any of its Subsidiaries;
(b) subject to obtaining the Target Shareholders
Approval and the filing of the Certificate of Merger with the
Secretary of State of Texas, require any consent, waiver,
approval, order, authorization or permit of, or registration,
filing with or notification to, (i) any Governmental
Authority, except for applicable requirements of the HSR Act,
the Securities Act, the Securities Exchange Act, state laws
relating to takeovers, if applicable, state securities or blue
sky laws, except as set forth in Section 5.4(b) of the Target
Disclosure Schedule and except for Customary Post-Closing
Consents or (ii) except as set forth in Section 5.4(b)
of the Target Disclosure Schedule, any third party other than a
Governmental Authority, other than such non-Governmental
Authority third party consents, waivers, approvals, orders,
authorizations and Permits that would not (i) impair in any
material respect the ability of Target or any of its
Subsidiaries, as the case may be, to perform its obligations
under this Agreement or any Ancillary Agreement or
(ii) prevent the consummation of any of the Transactions;
(c) except as set forth in Section 5.4(c) of the
Target Disclosure Schedule, result in any violation of or the
breach of or constitute a default (with notice or lapse of time
or both) under, or give rise to any right of termination,
cancellation or acceleration or guaranteed payments or a loss of
a material benefit under, any of the terms, conditions or
provisions of any note, lease, mortgage, license, agreement or
other instrument or obligation to which Target, or any of its
Subsidiaries, is a party or by which Target or any of its
Subsidiaries or any of their respective properties or assets may
be bound, except for such violations, breaches, defaults, or
rights of termination, cancellation or acceleration, or losses
as to which requisite waivers or consents have been obtained or
which, individually or in the aggregate, would not
(i) materially impair the ability of Target or any of its
Subsidiaries to perform their obligations under this Agreement
or any Ancillary Agreement or (ii) prevent the consummation
of any of the Transactions;
(d) except as set forth in Section 5.4(d) of the
Target Disclosure Schedule, violate the provisions of any order,
writ, injunction, judgment, decree, statute, rule or regulation
applicable to Target or any of its Subsidiaries; or
(e) except as set forth in Section 5.4(e) of the
Target Disclosure Schedule, result in the creation of any Liens
upon any shares of capital stock or properties or assets of
Target or any of its Subsidiaries under any agreement or
instrument to which Target or any of its Subsidiaries is a party
or by which Target or any of its Subsidiaries or any of their
properties or assets is bound.
Section 5.5
Target
SEC Reports
(a) Target has filed with the SEC true and complete copies
of the Target SEC Reports. As of the respective dates the Target
SEC Reports were filed or, if any Target SEC Reports were
amended, as of the date such amendment was filed, each Target
SEC Report: (i) included all financial statements,
schedules and exhibits required to be included therein,
(ii) complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act, as the
case may be, and (iii) did not contain any untrue statement
of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. No event since the date of the last Target
SEC Report has occurred that would require Target to file a
current report on
Form 8-K
other than the execution of this Agreement and the agreements
referred to in
Section 5.26
and
Section 5.27
and executed concurrently with this Agreement.
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(b) The chief executive officer and principal financial
officer of Target have made all certifications (without
qualification or exceptions to the matters certified) required
by, and would be able to make such certifications (without
qualification or exception to the matters certified) as of the
date hereof as if required to be made as of the date hereof
pursuant to, the Sarbanes-Oxley Act and any related rules and
regulations promulgated by the SEC, and the statements contained
in any such certifications are complete and correct; neither
Target nor its officers have received notice from any
Governmental Authority questioning or challenging the accuracy,
completeness, form or manner of filing or submission of such
certification. Target maintains disclosure controls and
procedures (as defined in
Rule 13a-14(c)
under the Exchange Act); such disclosure controls and procedures
are effective to ensure that all material information concerning
Target and its Subsidiaries is made known on a timely basis to
the individuals responsible for preparing Target SEC Reports and
other public disclosures and Target is otherwise in compliance
with all applicable effective provisions of the Sarbanes-Oxley
Act and any related rules and regulations promulgated by the SEC.
Section 5.6
Target
Financial Statements.
Each of the audited
consolidated financial statements and unaudited consolidated
interim financial statements of Target (including any related
notes and schedules) included (or incorporated by reference) in
its annual reports on
Form 10-K
for each of the three fiscal years ended December 31, 2006,
2007 and 2008 and its quarterly reports on
Form 10-Q
for its fiscal quarters ended March 31, June 30 and
September 30, 2009 have been prepared from, and are in
accordance with, the books and records of Target and its
consolidated Subsidiaries, comply in all material respects with
GAAP and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP
applied on a consistent basis (except as may be indicated in the
notes thereto and subject, in the case of quarterly financial
statements, to normal and recurring year-end adjustments) and
fairly present, in conformity with GAAP applied on a consistent
basis (except as may be indicated in the notes thereto), the
consolidated financial position of Target and its Subsidiaries
as of the date thereof and the consolidated results of
operations and cash flows (and changes in financial position, if
any) of Target and its Subsidiaries for the periods presented
therein (subject to normal year-end adjustments and the absence
of financial footnotes in the case of any unaudited interim
financial statements).
Section 5.7
Absence
of Undisclosed Liabilities; Liabilities as of Year
End.
Except (a) as set forth in
Section 5.7 of the Target Disclosure Schedule, (b) as
reflected, reserved for or disclosed in the Target SEC Reports
filed and publicly available prior to the date hereof,
(c) for liabilities and obligations incurred in the
ordinary course of business and consistent with past practice
since September 30, 2009, and (d) liabilities and
obligations incurred in connection with this Agreement and the
Transactions, neither Target nor any of its Subsidiaries have
incurred any material liabilities or obligations of any nature
(contingent or otherwise) that would be required by GAAP to be
reflected on a consolidated balance sheet of Target and its
Subsidiaries or the notes thereto which are not reflected.
Section 5.8
Absence
of Certain Changes.
Except (a) as disclosed
in the Target SEC Reports filed and publicly available prior to
the date hereof, (b) as set forth in Section 5.8 of
the Target Disclosure Schedule or (c) as contemplated by
this Agreement, from December 31, 2008 to the date hereof
(i) Target and its Subsidiaries have conducted their
respective businesses only in the ordinary course of business,
(ii) there has not been a Target Material Adverse Effect,
(iii) there has not been any declaration, setting aside or
payment of any dividend or other distribution with respect to
any shares of capital stock of Target, or any repurchase,
redemption or other acquisition by Target or any of its
Subsidiaries of any outstanding shares of capital stock or other
securities of, or other ownership interests in, Target or any of
its Subsidiaries, (iv) there has not been any amendment of
any term of any outstanding security of Target or any of its
Subsidiaries, and (v) there has not been any change in any
method of accounting or accounting practice by Target or any of
its Subsidiaries, except for any such change required because of
a concurrent change in GAAP or to conform a Subsidiarys
accounting policies and practices to those of Target.
Section 5.9
Taxes.
Except
as otherwise disclosed in Section 5.9 of the Target
Disclosure Schedule:
(a) Target and each of its Subsidiaries have timely filed
(or have had timely filed on their behalf) or will file or cause
to be timely filed, all material Tax Returns required by
applicable law to be filed by any of them prior to or as of the
Closing Date taking into account all extensions of time to file.
As of the
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time of filing, the foregoing Tax Returns correctly reflected
the material facts regarding the income, business, assets,
operations, activities, status, or other matters of Target and
its Subsidiaries. Such material Tax Returns are true, correct
and complete.
(b) Target and each of its Subsidiaries have paid (or have
had paid on their behalf), or will pay or cause to be paid on or
before the Closing Date, or where payment is not yet due, have
established (or have had established on their behalf), or will
establish or cause to be established on or before the Closing
Date, an adequate accrual for, all Taxes due with respect to any
period ending prior to or as of the Closing Date; provided,
however, no amount shall be included in such accrual for any
Taxes which may arise as a result of the consummation of the
Merger. Target and each of its Subsidiaries have withheld and
paid all Taxes required to have been withheld and paid in
connection with any amounts paid or owing to any employee,
independent contractor, creditor, shareholder, or other third
party.
(c) No Audit by a Tax Authority is pending or to the
knowledge of Target, threatened, with respect to any material
Tax Returns filed by, or material Taxes due from, Target or any
of its Subsidiaries. No issue has been raised by any Tax
Authority in any Audit of Target or any of its Subsidiaries that
if raised with respect to any other period not so audited could
be expected to result in a material proposed deficiency for any
period not so audited. No material deficiency or adjustment for
any Taxes has been, proposed, asserted, assessed or to the
knowledge of Target, threatened, against Target or any of its
Subsidiaries. There are no Liens for Taxes upon the assets of
Target or any of its Subsidiaries, except Liens for current
Taxes not yet delinquent.
(d) Neither Target nor any of its Subsidiaries has given or
been requested to give any waiver of statutes of limitations
relating to the payment of Taxes or have executed powers of
attorney with respect to Tax matters, which will be outstanding
as of the Closing Date.
(e) Neither Target nor any of its Subsidiaries is a party
to any agreement or understanding providing for the allocation
or sharing of Taxes, other than with respect to each other.
(f) Except for the group of which it is currently a member,
during the last six (6) years neither Target nor any
Subsidiary thereof has been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the
Code.
(g) Neither Target nor any of its Subsidiaries has agreed
or, to the knowledge of Target, will be required to make any
adjustment under Section 481(a) of the Code by reason of
change in accounting method or otherwise.
(h) During the last two (2) years, neither Target nor
any of its Subsidiaries has distributed stock of another Person,
or has had its stock distributed by another Person in a
transaction that was purported or intended to be governed in
whole or in part by Code Section 355 or 361.
(i) Neither Target nor any of its Subsidiaries has assets
subject to a lease to a tax exempt entity within the
meaning of Section 168(h)(2) of the Code.
(j) Each of Target and each of its Subsidiaries has made
available to the Parent Parties correct and complete copies of
(i) all of their Tax Returns filed within the past five
(5) years, (ii) all Audit reports, letter rulings,
technical advice memoranda and similar documents issued by a
Governmental Authority within the past five (5) years
relating to the federal, state, local or foreign Taxes due from
or with respect to any of them and (iii) any closing
letters or agreements with respect to Taxes entered into by any
of them with any Tax Authorities within the past five
(5) years.
Section 5.10
Litigation.
Except
as disclosed in the Target SEC Reports filed and publicly
available prior to the date hereof or Section 5.10 of the
Target Disclosure Schedule, there is no material suit, claim,
action, proceeding or investigation pending or, to the knowledge
of Target, threatened against or directly affecting Target, any
Subsidiaries of Target or any of the directors or officers of
Target or any of its Subsidiaries in their capacity as such, nor
is there any reasonable basis therefore. Except as disclosed on
the Target SEC Reports filed and publicly available prior to the
date hereof or Section 5.10 of the Target Disclosure
Schedule, neither Target nor any of its Subsidiaries, nor any
officer, director or employee of Target
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or any of its Subsidiaries has been permanently or temporarily
enjoined by any order, judgment or decree of any court or any
other Governmental Authority from engaging in or continuing any
conduct or practice in connection with the business, assets or
properties of Target or such Subsidiary nor, to the knowledge of
Target, is Target, any of its Subsidiaries or any officer,
director or employee of Target or any of its Subsidiaries under
investigation by any Governmental Authority. Except as disclosed
in the Target SEC Reports filed and publicly available prior to
the date hereof or Section 5.10 of the Target Disclosure
Schedule, there is no order, judgment or decree of any court or
other tribunal or other agency extant enjoining or requiring
Target or any of its Subsidiaries to take any action of any kind
with respect to its business, assets or properties.
Section 5.11
Employee
Benefit Plans; ERISA
(a) Section 5.11(a)(1) of the Target Disclosure
Schedule contains a true and complete list of the Target Benefit
Plans (other than the Target Employee Agreements) and Section
5.11(a)(2) of the Target Disclosure Schedule lists each Target
Employee Agreement.
(b) Except as set forth in Section 5.11(b) of the
Target Disclosure Schedule, with respect to each Target Benefit
Plan: (i) if intended to qualify under Section 401(a)
or 401(k) of the Code, such plan satisfies in all material
respects the requirements of such Section, Target or a Target
ERISA Affiliate has received a favorable determination letter
from the Internal Revenue Service with respect to such
plans qualification under Section 401(a) of the Code, and
such plans related trust has been determined to be exempt
from tax under Section 501(a) of the Code and, to the
knowledge of Target, nothing has occurred since the date of such
letter which would reasonably be expected to adversely affect
such qualification or exemption; (ii) each such plan has
been administered in all material respects in substantial
compliance with its terms and applicable law; (iii) neither
Target nor any Target ERISA Affiliate has engaged in, and to the
knowledge of Target no other Person has engaged in, any
transaction or acted or failed to act in any manner that would
subject Target or any Target ERISA Affiliate to any liability
for a breach of fiduciary duty under ERISA that would result in
a Target Material Adverse Effect; (iv) no disputes are
pending or, to the knowledge of Target, threatened;
(v) neither Target nor any Target ERISA Affiliate has
engaged in, and to the knowledge of Target no other Person has
engaged in, any transaction in violation of Section 406(a)
or (b) of ERISA or Section 4975 of the Code for which
no exemption exists under Section 408 of ERISA or
Section 4975(c) of the Code or Section 4975(d) of the
Code; (vi) contributions due under a plan subject to
Section 401(a) of the Code have been made on a timely
basis, and (vii) such plan may be terminated on a
prospective basis without any continuing liability for benefits
other than benefits accrued to the date of such termination.
Contributions made under any Target Benefit Plan that is subject
to Section 401(a) of the Code that are deductible under
Section 404 of the Code have satisfied the requirements for
deduction under Section 404 of the Code, and all
contributions which are required and which have not been made
have been properly recorded on the books of Target or a Target
ERISA Affiliate.
(c) Neither Target nor any Target ERISA Affiliate has ever
adopted, established, maintained or contributed to, or has any
liability with respect to, a plan that is subject to
Title IV of ERISA, Part 3 of Title I of ERISA or
Section 412 of the Code. No Target Benefit Plan is a
multiemployer plan (as defined in
Section 4001(a)(3) of ERISA) or a multiple employer
plan (within the meaning of Section 413(c) of the
Code). No event has occurred with respect to Target or a Target
ERISA Affiliate in connection with which Target could be subject
to any liability, lien or encumbrance that would result in a
Target Material Adverse Effect with respect to any Target
Benefit Plan or any employee benefit plan described in
Section 3(3) of ERISA maintained, sponsored or contributed
to by a Target ERISA Affiliate under ERISA or the Code, except
for regular contributions and benefit payments in the ordinary
course of plan business.
(d) Except as set forth in Section 5.11(d) of the
Target Disclosure Schedule, no present or former employees of
Target or any of its Subsidiaries are covered by any Target
Employee Agreements or other plans for which Target has any
liability that provide or will provide severance pay,
post-termination health or life insurance benefits (except as
required pursuant to Section 4980(B) of the Code) or any
similar benefits, and the consummation of the Transactions shall
not cause any payments or benefits to any employee of Target or
any of its Subsidiaries to be either subject to an excise tax or
non-deductible to Target under Sections 4999 and 280G of
the Code, respectively.
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(e) Attached as Section 5.11(e) of the Target
Disclosure Schedule is a current list of Targets employees
(the
Target Employees
), and a
severance package table (the
Severance Package
Table
) which lists the maximum amount of all cash
amounts as of the date of this Agreement that Target is
obligated to pay to Target Employees pursuant to severance
arrangements.
Section 5.12
Environmental
Matters.
Except (i) as set forth in
Section 5.12 of the Target Disclosure Schedule and
(ii) with respect to any matters that would not reasonably
be expected to result in a Target Material Adverse Effect:
(a) The businesses of Target and its Subsidiaries have been
and are operated in compliance with all Environmental Laws.
(b) Neither Target nor any of its Subsidiaries has caused
or allowed the generation, treatment, manufacture, processing,
distribution, use, storage, discharge, release, disposal,
transport or handling of any Hazardous Substances, except in
compliance with all Environmental Laws, and no generation,
treatment, manufacture, processing, distribution, use, storage,
discharge, release, disposal, transport or handling of any
Hazardous Substances has occurred at any property or facility
owned, leased or operated by Target for any of its Subsidiaries
except in compliance with all Environmental Laws.
(c) Neither Target nor any of its Subsidiaries has received
any written notice from any Governmental Authority or third
party or, to the knowledge of Target, any other communication
alleging or concerning any violation by Target or any of its
Subsidiaries of, or responsibility, obligation or liability of
Target or any of its Subsidiaries under, any Environmental Law.
There are no pending, or to the knowledge of Target, threatened,
claims, suits, actions, proceedings or investigations with
respect to any violation of, or responsibility, obligation or
liability under, any Environmental Law or the release of any
Hazardous Substances on, at or under any property or facility
owned, leased, or operated by Target or any of its Subsidiaries,
nor does Target have any knowledge of any fact or condition that
could give rise to such a claim, suit, action, proceeding or
investigation.
(d) Neither Target nor any of its Subsidiaries has received
any notice that it has been identified by the
U.S. Environmental Protection Agency, or any similar state
authority, as a potentially responsible party under the
Comprehensive Environmental Response Compensation and Liability
Act (CERCLA) or any similar or analogous state law and neither
Target nor any of its Subsidiaries has received any request for
information issued under CERCLA.
(e) Target and its Subsidiaries have obtained and are in
compliance with Permits under all Environmental Laws required
for the operation of the businesses of Target and its
Subsidiaries as currently conducted; there are no pending or, to
the knowledge of Target, threatened, actions, proceedings or
investigations alleging violations of or seeking to modify,
revoke or deny renewal of any of such Permits; and Target does
not have knowledge of any fact or condition that is reasonably
likely to give rise to any action, proceeding or investigation
regarding the violation of or seeking to modify, revoke or deny
renewal of any of such Permits. All such Permits are listed on
Section 5.12(e) of the Target Disclosure Schedule.
(f) Except as described in
Section 5.12(e)
,
without in any way limiting the generality of the foregoing,
(i) to Targets knowledge, all offsite locations where
Target or any of its Subsidiaries has transported, released,
discharged, stored, disposed or arranged for the disposal of
Hazardous Substances are licensed and operating as required by
law and (ii) no polychlorinated biphenyls
(
PCBs
), PCB-containing items,
underground storage tanks, asbestos-containing materials, or
radioactive materials are used or stored at any property owned,
leased or operated by Target or any of its Subsidiaries except
in compliance with Environmental Laws.
(g) The Target has provided to Parent copies of all audits,
studies, reports, analyses and results of investigations which
relate to environmental issues or compliance by Target and its
Subsidiaries with applicable Environmental Laws that are in the
possession of the Target or its Subsidiaries and created within
the past two (2) years.
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(h) No claims have been asserted or, to Targets
knowledge, threatened to be asserted against Target or its
Subsidiaries for any personal injury (including wrongful death)
or property damage (real or personal) arising out of alleged
exposure or otherwise related to Hazardous Substances used,
handled, generated, transported or disposed by Target or its
Subsidiaries.
Section 5.13
Compliance
with Applicable Laws
(a) Except for Customary Post-Closing Consents, Target and
each of its Subsidiaries hold all material Permits necessary for
the lawful conduct of their respective businesses, as now
conducted, and such businesses are not being, and neither Target
nor any of its Subsidiaries have received any notice from any
Person that any such business has been or is being, conducted in
violation of any applicable law, ordinance or regulation
(including any applicable law, ordinance or regulation relating
to occupational health and safety) that is material to the
operation of the business as now conducted, provided, however,
no representation or warranty in this section is made with
respect to Environmental Laws, which are covered exclusively in
Section 5.12
.
(b) Neither Target, any Subsidiary of Target, nor, to the
knowledge of Target, any director, officer, agent, employee or
other Person acting on behalf of Target or any of its
Subsidiaries, has used any corporate or other funds for unlawful
contributions, payments, gifts, or entertainment, or made any
unlawful expenditures relating to political activity to
government officials or others, or established or maintained any
unlawful or unrecorded funds in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any other domestic or
foreign law.
Section 5.14
Insurance.
Section 5.14
of the Target Disclosure Schedule lists each insurance policy of
Target and its Subsidiaries currently in effect. Target has made
available to the Parent Parties a true, complete and correct
copy of each such policy or the binder therefor. With respect to
each such insurance policy or binder none of Target, any of its
Subsidiaries or, to Targets knowledge, any other party to
the policy is in material breach or default thereunder
(including with respect to the payment of premiums or the giving
of notices), and Target does not know of any occurrence or any
event which (with notice or the lapse of time or both) would
constitute such a material breach or default or permit
termination, modification or acceleration under the policy.
Section 5.14 of the Target Disclosure Schedule describes
any self-insurance arrangements affecting Target or its
Subsidiaries. To Targets knowledge, the insurance policies
listed in Section 5.14 of the Target Disclosure Schedule
include all material policies which are required in connection
with the operation of the businesses of Target and its
Subsidiaries as currently conducted by applicable laws and all
agreements relating to Target and its Subsidiaries.
Section 5.15
Labor
Matters; Employees
(a) Except as set forth in Section 5.15 of the Target
Disclosure Schedule, (i) there is no labor strike, dispute,
slowdown, work stoppage or lockout actually pending or, to the
knowledge of Target, threatened against or affecting Target or
any of its Subsidiaries and, during the past five
(5) years, there has not been any such action,
(ii) none of Target or any of its Subsidiaries is a party
to or bound by any collective bargaining or similar agreement
with any labor organization, or work rules or practices agreed
to with any labor organization or employee association
applicable to employees of Target or any of its Subsidiaries,
(iii) none of the employees of Target or any of its
Subsidiaries are represented by any labor organization and none
of Target or any of its Subsidiaries have any knowledge of any
current union organizing activities among the employees of
Target or any of its Subsidiaries nor does any question
concerning representation exist concerning such employees,
(iv) Target and its Subsidiaries have each at all times
been in material compliance with all applicable laws respecting
employment and employment practices, terms and conditions of
employment, wages, hours of work and occupational safety and
health, and are not engaged in any unfair labor practices as
defined in the National Labor Relations Act or other applicable
law, ordinance or regulation, (v) there is no unfair labor
practice charge or complaint against Target or any of its
Subsidiaries pending or, to the knowledge of Target, threatened
before the National Labor Relations Board or any similar state
or foreign agency, (vi) there is no grievance or
arbitration proceeding arising out of any collective bargaining
agreement or other grievance procedure relating to Target or any
of its Subsidiaries, (vii) neither the Occupational Safety
and Health Administration nor any other federal or state agency
has threatened to file any citation, and there are no pending
citations, relating to Target or any of its Subsidiaries, and
(viii) to Targets knowledge, there is no
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employee or governmental claim or investigation, including any
charges to the Equal Employment Opportunity Commission or state
employment practice agency, investigations regarding Fair Labor
Standards Act compliance, audits by the Office of Federal
Contractor Compliance Programs, Workers Compensation
claims, sexual harassment complaints or demand letters or
threatened claims.
(b) Since the enactment of the Worker Adjustment and
Retraining Notification Act of 1988 (
WARN
Act
), none of Target or any of its Subsidiaries
have effectuated (i) a plant closing (as
defined in the WARN Act) affecting any site of employment or one
or more facilities or operating units within any site of
employment or facility of Target or any of its Subsidiaries, or
(ii) a mass layoff (as defined in the WARN Act)
affecting any site of employment or facility of Target or any of
its Subsidiaries, nor has Target or any of its Subsidiaries been
affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any
similar state or local law.
Section 5.16
Reserve
Reports
(a) All information (including the statement of the
percentage of reserves from the oil and gas wells and other
interests evaluated therein to which Target or its Subsidiaries
are entitled and the percentage of the costs and expenses
related to such wells or interests to be borne by Target or its
Subsidiaries) supplied to T. J. Smith & Co., Inc. by
or on behalf of Target and its Subsidiaries that was material to
such firms estimates of proved oil and gas reserves
attributable to the Oil and Gas Interests of Target in
connection with the preparation of the proved oil and gas
reserve reports concerning the Oil and Gas Interests of Target
and its Subsidiaries as of January 1, 2009 and prepared by
such engineering firm (the
Target Reserve
Report
) was (at the time supplied or as modified
or amended prior to the issuance of the Target Reserve Report)
true and correct in all material respects and Target has no
knowledge of any material errors in such information that
existed at the time of such issuance. Except for
(i) changes generally affecting the oil and gas industry
(including changes in commodity prices), (ii) changes
reflected in the interim reserve report prepared by Target,
dated October 1, 2009, a copy of which has been provided to
Parent, and (iii) other normal adjustments since that date,
including, but not limited to, production, there has been no
material change in respect of the matters addressed in the
Target Reserve Report.
(b) Set forth in Section 5.16(b) of the Target
Disclosure Schedule is a list of all material Oil and Gas
Interests that were included in the Target Reserve Report that
have been disposed of prior to the date hereof.
Section 5.17
[Reserved]
Section 5.18
Material
Contracts
(a) Set forth in Section 5.18(a) of the Target
Disclosure Schedule is a list of each Target Material Contract
that has not been filed and made publicly available in a Target
SEC Report at least two (2) days prior to the date hereof,
except for agreements referred to in
Section 5.26
and
Section 5.27
and executed concurrently with this
Agreement.
(b) Except as set forth in Section 5.18(b) of the
Target Disclosure Schedule or the Target SEC Reports filed and
publicly available prior to the date hereof, the Oil and Gas
Interests of Target and its Subsidiaries are not subject to
(i) any instrument or agreement evidencing or related to
indebtedness for borrowed money, whether directly or indirectly,
or (ii) any agreement not entered into in the ordinary
course of business in which the amount involved is in excess of
$500,000. In addition, (A) all Target Material Contracts
are the valid and legally binding obligations of Target and, to
the knowledge of Target, each of the other parties thereto, and
are enforceable in accordance with their respective terms,
except as such enforceability may be subject to the
Enforceability Exception; (B) except as set forth in the
Target SEC Reports filed and publicly available prior to the
date hereof, Target is not in material breach or default with
respect to, and to the knowledge of Target, no other party to
any Target Material Contract is in material breach or default
with respect to, its obligations thereunder, including with
respect to payments or otherwise; (C) no party to any
Target Material Contract has given notice of any action to
terminate, cancel, rescind or procure a judicial reformation
thereof; and (D) except as set forth in the Target SEC
Reports filed and publicly available prior to the date hereof no
Target Material Contract contains any provision that prevents
Target or any of its
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Subsidiaries from owning, managing and operating the Oil and Gas
Interests of Target and its Subsidiaries in accordance with
historical practices.
(c) As of the date hereof, except as set forth in
Section 5.18(c) of the Target Disclosure Schedule, with
respect to authorizations for expenditure executed after
December 31, 2008, (i) there are no outstanding calls
for payments in excess of $250,000 that are due or that Target
or its Subsidiaries are committed to make that have not been
made; (ii) there are no operations with respect to which
Target or its Subsidiaries have become a non-consenting party;
and (iii) there are no commitments for the material
expenditure of funds for drilling or other capital projects
other than projects with respect to which a third party operator
is not required under the applicable operating agreement to seek
consent.
(d) Except as set forth in Section 5.18(d) of the
Target Disclosure Schedule, (i) there are no provisions
applicable to the Oil and Gas Interests of Target and its
Subsidiaries which increase the royalty percentage of the lessor
thereunder; and (ii) none of the Oil and Gas Interests of
Target and its Subsidiaries are limited by terms fixed by a
certain number of years (other than primary terms under oil and
gas leases).
Section 5.19
Required
Shareholder Vote; Board Action
.
(a) The affirmative vote of holders of at least two-thirds
of the Target Common Shares (the
Target
Shareholders Approval
) is the only vote
necessary by the Target Shareholders for the approval of this
Agreement and the Merger.
(b) On or prior to the date of this Agreement, the Board of
Directors of Target has unanimously (i) determined that
this Agreement, the Merger, the Ancillary Agreements, the Voting
Agreements and the other Transactions are advisable and in the
best interests of Target and the Target Shareholders,
(ii) approved and declared advisable this Agreement, the
Merger, the Ancillary Agreements, the Voting Agreements and the
other Transactions and (iii) resolved to recommend that the
Agreement and the Merger be approved by the Target Shareholders
(the
Target Recommendation
).
Section 5.20
Proxy
Statement.
None of the information to be supplied
by Target for inclusion in the Proxy Statement relating to the
Target Shareholder Meeting, to be filed by Target with the SEC,
and any amendments or supplements thereto, will, at the time of
filing, at the time the Proxy Statement or any amendment or
supplement thereto is first mailed to the Target shareholders,
and at the time of the Target Shareholder Meeting and at the
Effective Time (taking into account all additional definitive
proxy materials filed by the Target subsequent to the mailing of
the Proxy Statement), contain any untrue statement of a material
fact or omit to state any material fact required to be made
therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were
made, not misleading, except that no representation or warranty
is made by the Target with respect to statements made or
incorporated by reference therein based on information supplied
by or on behalf of Parent or any of its Subsidiaries for
inclusion or incorporation by reference in the Proxy Statement.
Section 5.21
Intellectual
Property.
Target or its Subsidiaries own, or are
licensed or otherwise have the right to use, all Intellectual
Property currently used in the conduct of the business of Target
and its Subsidiaries. No Person has notified either Target or
any of its Subsidiaries in writing and Target does not have any
knowledge that their use of the Intellectual Property infringes
on the rights of any Person, and, to Targets knowledge, no
Person is infringing on any right of Target or any of its
Subsidiaries with respect to any such Intellectual Property. No
claims are pending or, to Targets knowledge, threatened
that Target or any of its Subsidiaries is infringing or
otherwise adversely affecting the rights of any Person with
regard to any Intellectual Property. No material software
license will terminate by its terms due to the Merger, and all
software licenses material to the business of Target will
transfer to the Surviving Company pursuant to the Merger.
Section 5.22
Hedging.
Section 5.22
of the Target Disclosure Schedule sets forth for the periods
shown obligations of Target and each of its Subsidiaries for the
delivery of Hydrocarbons attributable to any of the properties
of Target or any of its Subsidiaries in the future on account of
prepayment, advance payment,
take-or-pay
or similar obligations without then or thereafter being entitled
to receive full value therefor. Except as set forth in
Section 5.22 of the Target Disclosure Schedule, as of the
date hereof, neither Target nor any of
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its Subsidiaries is bound by futures, hedge, swap, collar, put,
call, floor, cap, option or other contracts that are intended to
benefit from, relate to or reduce or eliminate the risk of
fluctuations in the price of commodities, including
Hydrocarbons, or securities (
Existing Derivative
Transactions
).
Section 5.23
Brokers.
No
broker, finder or investment banker (other than Rivington, JP
Morgan and Morgan Keegan, the fees and expenses of which will be
paid by Target) is entitled to any brokerage, finders fee
or other fee or commission payable by Target or any of its
Subsidiaries in connection with the Transactions based upon
arrangements made by and on behalf of Target or any of its
Subsidiaries.
Section 5.24
Fairness
Opinion.
Targets Board of Directors has
received a written opinion (or oral opinion to be confirmed in
writing) from Morgan Keegan to the effect that, as of the date
of such opinion, the Merger Consideration is fair, from a
financial point of view, to the Target Shareholders (the
Fairness Opinion
). True and complete
copies of the Fairness Opinion have been given to the Parent
Parties for informational purposes only, and Morgan Keegan has
agreed to the inclusion of the Fairness Opinion in the Proxy
Statement for the Target Shareholder Meeting.
Section 5.25
Takeover
Laws.
Assuming the representation and warranty
set forth in
Section 6.7
is true, no fair
price, moratorium, control share
acquisition or other similar antitakeover statute or
regulation enacted under state or federal laws in the United
States applicable to Target is applicable to the Merger or the
Transactions.
Section 5.26
Net
Profits Interest Agreements; Reeves/Mayell Agreements
(a) Except as set forth in this
Section 5.26
and as set forth in Section 5.26(a) of the Target Disclosure
Schedule:
(i) there are no net profits interest agreements between
Target or any of its Subsidiaries and any other Person,
(ii) by the Termination Agreement dated April 29,
2008, between Target and Joseph A. Reeves, Jr.
(
Reeves
), Target has terminated,
except to the extent that such net profit interests were
modified and recognized as vested therein, the agreement between
Target and Reeves, dated June 27, 1995 (effective
January 1, 1994), as amended by that certain
AMENDMENT TO AGREEMENT DATED JUNE 27, 1995, said
amendment having been filed of record under document number
20090356605 in the public records of Harris County, Texas,
(iii) by the Termination Agreement dated April 29,
2008, between Target and Michael J. Mayell
(
Mayell
), Target has terminated,
except to the extent that such net profit interests were
modified and recognized as vested therein, the agreement between
Target and Mayell, dated June 27, 1995 (effective
January 1, 1994), as amended by that certain
AMENDMENT TO AGREEMENT DATED JUNE 27, 1995, said
amendment having been filed of record under document number
20090356606 in the public records of Harris County, Texas,
(iv) any and all net profits interests owned or controlled
by Reeves and Mayell, or assigns of Reeves and Mayell, have
specifically been excluded from the Target Reserve Report,
(v) there are no other net profit interests owned or
controlled by Reeves or Mayell, or which Reeves and Mayell or
assigns of Reeves and Mayell have the right to acquire, pursuant
to agreements that are or were in effect with Target or any of
its Subsidiaries, and
(vi) Target has no contractual duty to obtain the approval
of Reeves or Mayell, or assigns of Reeves and Mayell, for any
sales transactions of all or part of Targets interests,
including without limitation, third party sales, farmouts, joint
venture agreements or any other conveyance transaction.
(b) Each of the (i) Omnibus Agreement Relating to
Assigned Interests, dated as of December 22, 2009, among
Reeves, Target, TMRX, TODD, JAR, LOP and Cairn (the
Reeves NPI Agreement
) and
(ii) Agreement With Cross-Release, dated as of
December 17, 2009, among Mayell, Target, TMRX, Sydson, LOP
and Cairn (the
Mayell NPI Agreement,
and, together with the Reeves NPI Agreement, the
NPI
Agreements
) is the valid and legally binding
obligation of Target and, to the knowledge of Target, each of
the other parties
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thereto and is enforceable in accordance with its terms, except
as such enforceability may be subject to the Enforceability
Exception. Target is not in material breach or default with
respect to, and to the knowledge of Target, no other party to
any NPI Agreement is in material breach or default with respect
to, its obligations thereunder. Target has made available to the
Parent Parties true, complete and correct copies of the NPI
Agreements.
(c) The Settlement and Release Agreement, dated as of
December 22, 2009, among Target, TODD, JAR and Reeves (the
Reeves Release
) is the valid and
legally binding obligations of Target and, to the knowledge of
Target, each of the other parties thereto, and is enforceable in
accordance with its terms, except as such enforceability may be
subject to the Enforceability Exception. Target is not in
material breach or default with respect to, and to the knowledge
of Target, no other party to the Reeves Release is in material
breach or default with respect to, its obligations thereunder.
Target has made available to the Parent Parties a true, complete
and correct copy of the Reeves Release.
Section 5.27
Forbearances
(a)
Credit Facility Forbearance.
The
Forbearance and Amendment Agreement, dated as of
September 3, 2009, the First Amendment to Forbearance and
Amendment Agreement, dated as of September 30, 2009, the
Second Amendment to Forbearance and Amendment Agreement, dated
October 2, 2009, the Third Amendment to Forbearance and
Amendment Agreement, dated as of October 20, 2009, the
Fourth Amendment to Forbearance and Amendment Agreement, dated
as of November 13, 2009, the Fifth Amendment to Forbearance
and Amendment Agreement, dated as of November 20, 2009, the
Sixth Amendment to Forbearance and Amendment Agreement, dated as
of November 30, 2009, the Seventh Amendment to Forbearance
and Amendment Agreement, dated as of December 2, 2009, the
Eighth Amendment to Forbearance and Amendment Agreement, dated
as of December 4, 2009, the Ninth Amendment to Forbearance
and Amendment Agreement, dated as of December 14, 2009, the
Tenth Amendment to Forbearance and Amendment Agreement, dated as
of December 21, 2009, and the Eleventh Amendment to
Forbearance and Amendment Agreement, dated as of the date of
this Agreement (collectively, and as may be subsequently amended
from time to time, the
Fortis Forbearance
Agreement
), among Target, certain of its
Subsidiaries, Fortis Capital Corp., as administrative agent, and
the several banks, financial institutions and other entities
from time to time parties thereto (collectively, the
Target Lenders
), amending that certain
Amended and Restated Credit Agreement, dated as of
December 23, 2004, as amended, among Target, Fortis Capital
Corp.
(Fortis)
, as administrative
agent, and the lenders party thereto
(Target Credit
Agreement)
are in effect. Except as set forth in
Section 5.27(a) of the Target Disclosure Schedule, no
default or event of default under the Target Credit Agreement
has occurred, other than as set forth in the Fortis Forbearance
Agreement, and no Target Lender has sent a default or
cross-default notice to Target. Target is in compliance with all
of its covenants under the Fortis Forbearance Agreement, and has
obtained the consent of the Target Lenders to the Transactions.
(b)
Hedging Agreements Forbearance.
The
(i) ISDA Master Agreement, dated as of August 9, 2007,
between The Bank of Nova Scotia and Target, and the ISDA
Schedule thereto, and (ii) ISDA 2002 Master Agreement,
dated October 28, 2004, between Fortis Energy LLC and
Target, the Schedule thereto and the ISDA Credit Support Annex
to such Schedule (
Fortis Hedging
Agreement
, and collectively, the
Hedging Agreements
) are in effect.
Target and certain of its Subsidiaries on the one hand, and
Fortis and Fortis Energy Marketing & Trading GP on the
other hand, have entered into a forbearance agreement with
respect to the Fortis Hedging Agreement, and the First Amendment
to Forbearance Agreement, dated as of December 4, 2009, the
Second Amendment to Forbearance Agreement, dated as of
December 14, 2009, and the Third Amendment to Forbearance
Agreement, dated as of December 16, 2009 (collectively, and
as may be subsequently amended from time to time, the
Hedging Forbearance Agreement
). Except
as set forth in Section 5.27(b) of the Target Disclosure
Schedule, no default or event of default under the Hedging
Agreements has occurred, other than as set forth in the Hedging
Forbearance Agreement, and Target has not received a default or
cross-default notice with respect to any of the Hedging
Agreements. Target is in compliance with all of its covenants
under the Hedging Forbearance Agreement.
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(c)
CIT Forbearance.
The Forbearance and
Amendment Agreement, dated as of September 3, 2009, and the
First Amendment to Forbearance and Amendment Agreement, dated as
of December 4, 2009, the Second Amendment to Forbearance
and Amendment Agreement, dated as of December 14, 2009, the
Third Amendment to Forbearance and Amendment Agreement, dated as
of December 21, 2009, and the Fourth Amendment to
Forbearance and Amendment Agreement, dated as of the date of
this Agreement (collectively, and as may be subsequently amended
from time to time, the
CIT Forbearance and Amendment
Agreement
), among Target, certain of its
Subsidiaries, and The CIT Group/Equipment Financing, Inc., as
administrative agent and lender
(Target CIT
Lenders)
, amending that certain Credit Agreement,
dated as of May 2, 2008, as amended, among TMR Drilling
Corporation, The CIT Group/Equipment Financing, Inc., as
administrative agent, and the lenders party thereto
(CIT Credit Agreement)
are in effect.
Except as set forth in Section 5.27(c) of the Target
Disclosure Schedule, no default or event of default under the
CIT Credit Agreement has occurred, other than as set forth in
the CIT Forbearance and Amendment Agreement, and no Target CIT
Lender has sent a default or cross-default notice to Target.
Target is in compliance with all of its covenants under the CIT
Forbearance and Amendment Agreement and has obtained from the
Target CIT Lenders their consent to the Transactions and their
agreement that the Surviving Company shall succeed to the CIT
Forbearance and Amendment Agreement and the CIT Credit Agreement
pursuant to their terms.
(d)
Orion Forbearance.
The Forbearance
and Amendment Agreement, dated as of September 3, 2009
(Orion Forbearance and Amendment
Agreement)
, among Target, certain of its
Subsidiaries, and Orion Drilling Company LLC, successor to Orion
Drilling Company, LP (collectively,
Orion
) is in effect. Except as set
forth in Section 5.27(d) of the Target Disclosure Schedule,
no default or event of default under the Orion Forbearance and
Amendment Agreement and the other agreements referenced therein
has occurred, other than as set forth in the Orion Forbearance
and Amendment Agreement, and Orion has not sent a default or
cross-default notice to Target. Target is in compliance with all
of its covenants under the Orion Forbearance and Amendment
Agreement and has obtained from Orion its consent (if required)
to the Transactions, and the Surviving Company has the right to
succeed to the Orion Forbearance and Amendment Agreement and
related agreements pursuant to their terms.
(e)
Extension.
Target has entered into an
agreement with the Target Lenders to extend the Fortis
Forbearance Agreement until the Effective Time.
Section 5.28
Gas
Balancing and
Take-or-Pay
Contracts.
Except as set forth in
Section 5.28 of the Target Disclosure Schedule, neither
Target nor any of its Subsidiaries, or any Oil and Gas Interests
of any of them, is subject to or encumbered by a balancing,
take-or-pay/make-up,
deferred production, Hydrocarbon banking or other arrangement
under which one or more third parties may take a portion of the
Hydrocarbons produced without full payment therefor, in cash or
immediately available funds at the market price or value
thereof, as a result of Hydrocarbons having been taken from, or
as a result of other actions or inactions with respect to, such
Oil and Gas Interests.
Section 5.29
Production
Requirements.
None of the production of
Hydrocarbons which have heretofore been produced from the Oil
and Gas Interests of Target or its Subsidiaries has been in
excess of allowable production quotas allowed or permitted to
such Oil and Gas Interests by any applicable regulatory
authority so as to subject, after the Effective Time, any well
located thereon to restrictions or penalties on allowables for
overproduction.
Section 5.30
Well
Bonus Plans.
Section 5.30 of the Target
Disclosure Schedule sets forth, with respect to each of the TMRC
Geoscientist Well Bonus Plan, TMRC Management Well Bonus Plan
and the TMRC TMR Employees Trust Well Bonus Plan
(collectively, the
Well Bonus Plans
)
(a) all Oil and Gas Interests subject to each such Well
Bonus Plan as of the date hereof, (b) each current or
former Target Employee that has been granted an award under each
such Well Bonus Plan, which award is currently accruing payments
of net profits interests (as defined in each of the respective
Well Bonus Plans) thereunder and (c) the percentage of such
net profits interest awarded to each such Target Employee.
Subject to
Section 8.13(a)
, such net profits
interests will continue to accrue in accordance with the Well
Bonus Plans until the Effective Time, and will continue to
accrue after the Effective Time if the Surviving Company adopts
the Well Bonus Plans.
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Section 5.31
Interested
Party Transactions.
Except as set forth in the
Target SEC Reports filed prior to the date hereof, Target
Benefit Plans or Target Employee Agreements, Section 5.31
of the Target Disclosure Schedule sets forth a correct and
complete list of the contracts or arrangements that are in
existence as of the date of this Agreement under which any of
Target or its Subsidiaries has any existing or future
liabilities between any of Target or its Subsidiaries, on the
one hand, and, on the other hand, any (a) present or former
officer or director of any of Target or its Subsidiaries or any
Person that has served as such an officer or director within the
past two (2) years or any of such officers or
directors immediate family members, (b) record or
beneficial owner of more than five percent (5%) of Targets
Common Shares as of the date hereof, or (c) to the
knowledge of Target, any Affiliate of any such officer, director
or owner (other than Target or its Subsidiaries) (each an
Affiliate Transaction
). Target has
provided or made available to Parent correct and complete copies
of each such contract or other relevant documentation (including
any amendments or modifications thereto) providing for each
Affiliate Transaction.
Section 5.32
No
Other Representations or Warranties.
Except for
the representations and warranties contained in this
Article V
, neither the Target nor any other Person
makes any other express or implied representation or warranty on
behalf of the Target or any of its Affiliates in connection with
this Agreement or the Transactions.
ARTICLE VI.
REPRESENTATIONS
AND WARRANTIES OF PARENT PARTIES
The Parent Parties hereby represent and warrant to Target as
follows:
Section 6.1
Organization
and Qualification.
Parent is a limited
partnership duly organized, validly existing and in good
standing under the laws of the State of Texas. Merger Sub is a
limited liability company duly organized, validly existing and
in good standing under the laws of the State of Texas.
Section 6.2
Authority.
Each
of Parent and Merger Sub has all necessary power and authority
to execute and deliver this Agreement and any Ancillary
Agreements to which it is or will be a party and to consummate
the Transactions. The execution, delivery and performance of
this Agreement and the Ancillary Agreements to which Parent or
Merger Sub are or will be a party and the consummation of the
Transactions have been duly and validly authorized by the
governing bodies of Parent and Merger Sub and no other
proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement and the Ancillary Agreement to which
Parent or Merger Sub are or will be a party or to consummate the
Transactions, other than the filing of the Certificate of Merger
pursuant to the requirements of the TBOC or the TBCA. Parent, as
the sole member of Merger Sub has adopted and approved this
Agreement, including the Merger. This Agreement has been, and
the Ancillary Agreements to which Parent or Merger Sub are or
will be a party are, or upon execution will be, duly and validly
executed and delivered by each of the Parent Parties and,
assuming the due authorization, execution and delivery hereof
and thereof by the other parties hereto and thereto, constitutes
or upon execution will constitute, the valid and binding
obligations of each of the Parent Parties enforceable against
such Persons in accordance with their respective terms, except
for the Enforceability Exception.
Section 6.3
Merger
Sub.
Merger Sub was formed solely for the purpose
of engaging in the Transactions. All of the outstanding
membership interests of Merger Sub are owned directly by Parent.
As of the date of this Agreement and the Effective Time, except
for obligations or liabilities incurred in connection with its
formation or organization and the Transactions, Merger Sub has
not and will not have incurred, directly or indirectly, through
any Subsidiary or Affiliate, any obligations or liabilities or
engaged in any business activities of any type whatsoever or
entered into any agreements or arrangements with any Person,
except as would not reasonably be expected to have a material
adverse effect on the ability of Merger Sub to timely consummate
the Transactions. The organizational documents of Merger Sub
provided to Target by Parent are true and correct copies of the
organizational documents in effect for Merger Sub on the date of
this Agreement.
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Section 6.4
No
Violation.
The execution and delivery of this
Agreement, the consummation of the Transactions and the
performance by the Parent Parties of their respective
obligations hereunder will not:
(a) conflict with any provision of Parent or Merger
Subs organizational documents, as amended;
(b) result in any violation of or the breach of or
constitute a default (with notice or lapse of time or both)
under, or give rise to any right of termination, cancellation or
acceleration or guaranteed payments or a loss of a material
benefit under, any of the terms, conditions or provisions of any
note, lease, mortgage, license, agreement or other instrument or
obligation to which Parent, Merger Sub, or any of their
respective Subsidiaries, is a party or by which Parent, Merger
Sub or any of their respective Subsidiaries or any of their
respective properties or assets may be bound, except for such
violations, breaches, defaults, or rights of termination,
cancellation or acceleration, or losses as to which requisite
waivers or consents have been obtained or which, individually or
in the aggregate, would not (i) materially impair the
ability of Parent, Merger Sub, or any of their respective
Subsidiaries to perform their obligations under this Agreement
or any Ancillary Agreement or (ii) prevent the consummation
of any of the Transactions.
Section 6.5
Brokers.
No
broker, finder or investment banker is entitled to any
brokerage, finders fee or other fee or commission payable
by Parent or any of its Affiliates in connection with the
Transactions based upon arrangements made by and on behalf of
Parent or any of its Affiliates.
Section 6.6
Parent
Information.
None of the information to be
supplied by or on behalf of Parent or Merger Sub for inclusion
in the Proxy Statement relating to the Target Shareholder
Meeting, to be filed by Target with the SEC, and any amendments
or supplements thereto, will, at the time of the filing, at the
time the Proxy Statement or any amendment or supplement thereto
is first mailed to the Target Shareholders, and at the time of
the Target Shareholder Meeting and at the Effective Time (taking
into account all additional definitive proxy materials filed by
Target subsequent to such mailing of the Proxy Statement),
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except
that no representation or warranty is made by Parent or Merger
Sub with respect to statements made or incorporated by reference
therein based on information supplied by or on behalf of Target
for inclusion or incorporation by reference in the Proxy
Statement.
Section 6.7
Target
Stock.
None of Parent, Merger Sub, or their
respective Affiliates (i) owns (directly or indirectly,
beneficially or of record) any securities of the Target or
(ii) holds any right to acquire, hold, vote or dispose of
any securities in the Target, except as contemplated by the
Voting Agreements. Neither Parent nor Merger Sub is an
affiliated shareholder of the Target as defined in
Section 13.02A.(2) of the TBCA and Section 21.602 of
the TBOC. Parent and Merger Sub represent and warrant that as of
the date hereof, more than three (3) years has lapsed since
any Affiliate of Parent or Merger Sub first became an
affiliated shareholder in the Target as defined in
Section 13.02A.(2) of the TBCA and Section 21.602 of
the TBOC.
Section 6.8
Financing.
Parent
has sufficient cash, available lines of credit or other sources
of immediately available funds to enable it to cause Merger Sub
to make payment of the aggregate Merger Consideration by Merger
Sub under the Merger and all related fees and expenses and to
otherwise consummate the Transactions. Parent acknowledges that
obtaining of any financing is not a condition to closing.
Section 6.9
No
Other Representations or Warranties.
Except for
the representations and warranties contained in this
Article VI
, neither Parent, Merger Sub nor any other
Person makes any other express or implied representation or
warranty on behalf of Parent or Merger Sub or any of their
respective Affiliates in connection with this Agreement or the
Transactions.
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ARTICLE VII.
CONDUCT OF
BUSINESS PENDING THE MERGER
Section 7.1
Conduct
of Business by Target Pending the Merger
.
(a) From the date hereof until the earlier of the
termination of this Agreement or the Effective Time, except
(i) as set forth in Section 7.1(a) of the Target
Disclosure Schedule, (ii) as required, expressly
contemplated or permitted by this Agreement, (iii) as
required by applicable law, or (iv) with the prior written
consent of Parent (which consent shall not be unreasonably
withheld, conditioned or delayed), Target (A) shall conduct
its business in the ordinary course and (B) shall use all
commercially reasonable efforts to preserve intact its business
organizations and relationships with third parties and to keep
available the services of its present officers and key
employees, subject to the terms of this Agreement.
(b) During the period from the date of this Agreement and
continuing until the earlier of the termination of this
Agreement or the Effective Time, except (i) as set forth in
Section 7.1(b) of the Target Disclosure Schedule,
(ii) as required, expressly contemplated or permitted by
this Agreement, (iii) as required by applicable law, or
(iv) with the prior written consent of Parent (which
consent shall not be unreasonably withheld, conditioned or
delayed), the Target shall not, and shall not permit any of its
Subsidiaries to:
(i) cause or permit any change to its articles of
incorporation or bylaws (or similar organizational documents);
(ii) (A) declare, set aside or pay any dividend or
other distribution with respect to any shares of capital stock
of Target, or (B) repurchase, redeem or otherwise acquire
any outstanding shares of capital stock or other securities of,
or other ownership interests in, Target, except (1) from
former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection
with any termination of service to it or any of its
Subsidiaries, and (2) the acceptance of Target Common
Shares in payment of the exercise price or withholding Taxes
incurred by any holder in connection with the exercise of
options or the lapse of restrictions on restricted shares;
(iii) merge or consolidate with any other Person or acquire
capital assets other than Oil and Gas Interests of any other
Person for aggregate consideration in excess of $100,000 in any
single transaction (or series of transactions), or enter a new
line of business or commence business operations in any country
in which Target or any of its Subsidiaries is not operating as
of the date hereof;
(iv) sell, lease, license or otherwise surrender,
relinquish or dispose of or grant any Liens with respect to, any
assets or properties (other than to Merger Sub and its direct
and indirect wholly owned Subsidiaries) with an aggregate fair
market value exceeding $100,000 in any single transaction (or
series of transactions) (other than sales of Hydrocarbons in the
ordinary course of business), except pursuant to Target Material
Contracts in force on the date of this Agreement;
(v) settle any Audit that would require Target to make any
material payment to a Governmental Authority, make or change any
material Tax election or file any material amended Tax Return,
except in the ordinary course of business;
(vi) Except as otherwise permitted by this Agreement or as
set forth in Section 7.1(b) of the Target Disclosure
Schedule, Target shall not, and shall not permit any of its
Subsidiaries to, issue any securities (whether through the
issuance or granting of options, warrants, rights or otherwise
and except pursuant to existing obligations disclosed in the
Target SEC Reports filed and publicly available prior to the
date hereof or the Target Disclosure Schedule), enter into any
amendment of any term of any outstanding security of Target or
of any of its Subsidiaries, fail to make any required
contribution to any Target Benefit Plan, increase compensation,
bonus (except for compensation or bonuses as set forth in
Section 7.1(b) of the Target Disclosure Schedule) or other
benefits payable to (except for payments pursuant to 401(k)
plans), or modify or amend any employment agreements or
severance agreements with, any executive officer or former
employee or enter into any settlement or consent with respect to
any pending litigation in excess of $100,000 other than
settlements in the ordinary course of business;
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(vii) change any method of accounting or accounting
practice by Target or any of its Subsidiaries except for any
such change required by GAAP or the rules and regulations
promulgated by the SEC;
(viii) take any action that would give rise to a claim
under the WARN Act or any similar state law or regulation
because of a plant closing or mass
layoff (each as defined in the WARN Act) without in good
faith attempting to comply with the WARN Act;
(ix) amend or otherwise change the terms of any
arrangements of the type described in
Section 5.23
,
except to the extent that any such amendment or change would
result in terms more favorable to Target;
(x) become bound or obligated to make any expenditure,
capital expenditure, participate in any operation, or consent to
participate in any operation, with respect to any Oil and Gas
Interests that will, in the aggregate, cost in excess of
$250,000 over the total amount budgeted in the budget set forth
in Section 7.1(b) of the Target Disclosure Schedule (the
Aggregate Cost Overrun
), and except
for utilization of the Aggregate Cost Overrun, neither Target
nor any of its Subsidiaries shall, with respect to any of the
individual projects set forth in Section 7.1(b) of the
Target Disclosure Schedule, become bound to or expend funds in
excess of the amount budgeted for such project as set forth in
Section 7.1(b) of the Target Disclosure Schedule;
(xi) fail to timely meet their royalty payment obligations
in connection with their respective oil and gas leases;
(xii) (A) enter into any futures, hedge, swap, collar,
put, call, floor, cap, option or other contracts that are
intended to benefit from or reduce or eliminate the risk of
fluctuations in the price of commodities, including Hydrocarbons
or securities, other than in the ordinary course of business in
accordance with Targets current policies and as
contemplated by this Agreement, or (B) enter into any fixed
price commodity sales agreements with a duration of more than
three (3) months, other than in the ordinary course of
business in accordance with Targets current policies;
(xiii) (i) adopt, amend (other than amendments that
reduce the amounts payable by Target or any Subsidiary, or
amendments required by law to preserve the qualified status of a
Target Benefit Plan or otherwise comply with ERISA, the Code or
other applicable law) or assume any obligation to contribute to
any employee benefit plan or arrangement of any type or
collective bargaining agreement or enter into any employment,
severance or similar contract with any Person (including
contracts with management of Target or any Subsidiary that might
require that payments be made upon consummation of the
Transactions) or amend any such existing contracts to increase
any amounts payable thereunder or benefits provided thereunder,
(ii) engage in any transaction (either acting alone or in
conjunction with any Target Benefit Plan or trust created
thereunder) in connection with which Target or any Subsidiary
would reasonably be expected to be subject (directly or
indirectly) to either a civil penalty assessed pursuant to
subsections (c), (i) or (l) of Section 502 of
ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of
the Code, (iii) terminate any Target Benefit Plan in a
manner, or take any other action with respect to any Target
Benefit Plan, that could result in the liability of Target or
any Subsidiary to any person, (iv) take any action that
could adversely affect the qualification of any Target Benefit
Plan or its compliance with the applicable requirements of
ERISA, (v) fail to make full payment when due of all
amounts which, under the provisions of any Target Benefit Plan,
any agreement relating thereto or applicable law, Target or any
Subsidiary is required to pay as contributions thereto or
(vi) fail to file, on a timely basis, all reports and forms
required by federal regulations with respect to any Target
Benefit Plan;
(xiv) (A) approve an increase in salary for any Target
Employees, or (B) terminate any Target Employee entitled to
any severance payment upon such termination, (C) or enter
into, renew, permit to extend or amend any employment,
severance, termination or similar agreement or arrangement with
any director, officer, employee or consultant;
(xv) permit any of its Subsidiaries to organize or acquire
any Person that could become a Subsidiary;
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(xvi) permit any of its Subsidiaries to enter into any
commitment or agreement to license or purchase seismic data,
other than pursuant to agreements or commitments existing on the
date hereof;
(xvii) (A) enter into any Exclusivity Arrangements
that would be applicable after the Closing Date to Parent and
its Subsidiaries or (B) other than in the ordinary course
of business, (1) amend or modify in any material respect or
terminate any Target Material Contract or (2) waive,
release or assign any material rights, claims or benefits of
Target and its Subsidiaries under any Target Material Contract;
(xviii) except for the payment of any deductible under an
existing insurance policy (or a commercially reasonable
substitute for a company engaged in businesses similar to those
of Target and its Subsidiaries) with respect to a claim that is
being settled by such insurance company, settle, pay, compromise
or discharge any claim that (A) requires any payment by
Target and its Subsidiaries in excess of $100,000 in the
aggregate or (B) involves any restrictions on the conduct
of Target or its Subsidiaries or any of its Affiliates
business or other equitable remedies that materially adversely
affect the business of Target and its Subsidiaries, and Target
and its Subsidiaries shall not settle, pay, compromise or
discharge any claim against Target and its Subsidiaries with
respect to or arising out of the Transactions;
(xix) incur, create, assume, modify, guarantee or otherwise
become liable for any obligation for borrowed money, purchase
money indebtedness or any obligation of any other Person,
whether or not evidenced by a note, bond, debenture, guarantee,
indemnity or similar instrument, except for (A) borrowings
and renewals, amendments, extensions or increases thereof under
credit lines existing at the date of this Agreement,
(B) trade payables incurred in the ordinary course of
business consistent with past practice, (C) indebtedness
with any Subsidiary, (D) obligations under Existing
Derivative Transactions, and (E) other obligations not
exceeding $100,000 in the aggregate outstanding at any one time;
(xx) sublet, sublease, assign, extend, terminate or
otherwise modify the material terms of the commercial real
estate lease for the property located at 1401 Enclave Parkway,
Houston, Texas 77077 used for the offices of Target and its
Subsidiaries;
(xxi) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise) prior to the same being due
in excess of $100,000 in the aggregate, other than pursuant to
mandatory terms of any agreement, understanding or arrangement
as in effect on the date hereof;
(xxii) fail to continuously maintain in full force and
effect its current insurance or a commercially reasonable
substitute for a company engaged in business similar to those of
Target and its Subsidiaries.
(xxiii) adopt a plan of complete or partial liquidation,
dissolution, or reorganization; and
(xxiv) agree or commit to do any of the foregoing.
ARTICLE VIII.
ADDITIONAL
AGREEMENTS
Section 8.1
Preparation
of the Proxy Statement
(a) As promptly as is practicable following the date of
this Agreement, Target shall prepare a proxy statement (together
with any amendments thereof or supplements thereto, the
Proxy Statement
) in order to seek the
Target Shareholders Approval. The Proxy Statement shall
comply as to form in all material respects with the applicable
provisions of the Exchange Act and other applicable law. Each of
Parent and Target also agrees to use reasonable best efforts to
obtain all necessary state securities law or Blue
Sky permits and approvals required to carry out the
Transactions. Target shall respond to any comments from the SEC
as promptly as practicable following the receipt of such
comments. Target will use its reasonable best efforts to cause
the SEC to complete its review of the Proxy Statement as
promptly as is practicable after such filing, and Target shall
use its reasonable best efforts to cause the Proxy Statement to
be mailed to the holders of Target Common Shares as promptly as
is practicable after the SEC shall have notified Target that it
has no further comments regarding the Proxy Statement.
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(b) No filing of or amendment or supplement to the Proxy
Statement and all responses to requests for additional
information and replies to comments prior to these being filed
with or sent to the SEC will be made by Target, without
providing Parent and its counsel a reasonable opportunity to
review and comment thereon prior to its being filed with the
SEC. Target agrees, as to itself and its Subsidiaries, that none
of the information supplied or to be supplied by it for
inclusion or incorporation by reference in the Proxy Statement
and any amendment or supplement thereto will, at the date of
mailing to shareholders and at the time of the Target
Shareholder Meeting contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the
light of the circumstances under which such statement was made,
not misleading. If at any time prior to the Effective Time, any
information relating to Target, or any of its Affiliates,
directors or officers, should be determined by Target to have
rendered the Proxy Statement misleading in any material way
(whether as a result of the misstatement of a material fact or
the omission of a material fact), Target shall promptly prepare
and file with the SEC an amendment or supplement to the Proxy
Statement, so that the Proxy Statement would not include any
misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Target
shall promptly notify the Parent of such material misstatement
or omission and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC
and, to the extent required by law, disseminated to the
shareholders of Target. Target shall notify Parent promptly of
the receipt of any comments from the SEC and of any request by
the SEC or the staff of the SEC for amendments or supplements to
the Proxy Statement or for additional information and shall
supply Parent with (i) copies of all correspondence and a
description of all material oral discussions between it or any
of its respective Representatives, on the one hand, and the SEC
or the staff of the SEC, on the other hand, with respect to the
Proxy Statement or the Merger and (ii) copies of all orders
of the SEC relating to the Proxy Statement.
Section 8.2
Shareholders
Meeting; Recommendations.
Subject to
Section 8.4
, Target shall take all actions necessary
under applicable law to call, give notice of, convene and hold a
meeting of the Target Shareholders (the
Target
Shareholders Meeting
) as soon as reasonably
practicable following the date of this Agreement for the purpose
of securing the Target Shareholders Approval. Target shall
consult with Parent regarding the date of the meeting and use
its reasonable best efforts to have the Target Shareholder
Meeting be a date not more than forty-five (45) days
following the mailing of the Proxy Statement. The Proxy
Statement shall (i) state that the Target Board has
unanimously (x) approved this Agreement and the
Transactions, (y) determined that this Agreement and the
Transactions are advisable and in the best interests of Target
and its shareholders, and (z) include the Target
Recommendation (except to the extent that Target effects a
Change in the Target Recommendation in accordance with
Section 8.4
of this Agreement) and (ii) include
the written opinion of Morgan Keegan, a Target financial
advisor, as of the date of this Agreement, as to the fairness
from a financial perspective of the Merger Consideration to be
received by the holders of Target Common Shares pursuant to this
Agreement. Target shall use its reasonable best efforts to
solicit from shareholders of Target votes in favor of the Target
Shareholders Approval. The Target Board shall not effect a
Change in the Target Recommendation except pursuant to and
solely as permitted by
Section 8.4
. Notwithstanding
any Change in the Target Recommendation, unless this Agreement
has been terminated pursuant to the terms hereof, this Agreement
shall be submitted to the shareholders of Target at the Target
Shareholder Meeting and nothing contained herein shall be deemed
to relieve Target of such obligation. In addition to the
foregoing, during the term of this Agreement, Target shall not
submit to the vote of its shareholders any Acquisition Proposal
other than the Merger.
Section 8.3
Access
to Information; Confidentiality.
To the extent
permitted by applicable law and subject to restrictions imposed
upon the Target and any Target Subsidiary by any agreement of
confidentiality with any Person, Target will provide and will
cause Targets Subsidiaries and its and their respective
directors, officers, employees, accountants, consultants, legal
counsel, investment bankers, advisors, and agents and other
representatives (collectively, the
Representatives
) to provide Parent and
its authorized Representatives, during normal business hours and
upon reasonable advance notice access to the offices, employees,
customers, suppliers, properties, books and records of Target
(so long as such access does not unreasonably interfere with the
operations of Target) as Parent may reasonably request. With
respect to any information disclosed pursuant to this section,
Parent shall comply with, and shall cause each of its
Representatives to comply with, all of its
A-27
obligations under the confidentiality agreement, dated
September 1, 2009, previously executed by Parent and Target
(the
Confidentiality Agreement
).
Target shall not be required to provide access to or disclose
any information where such access or disclosure would jeopardize
any attorney-client privilege of such party or any Subsidiary of
such party or contravene any contract, law or order (it being
agreed that the parties shall use their respective reasonable
best efforts to cause such information to be provided in a
manner that would not result in such jeopardy or contravention).
Parent will use its reasonable efforts to minimize any
disruption to the businesses of the Target and the Target
Subsidiaries which may result from the requests for access, data
and information hereunder.
Section 8.4
No
Solicitation
(a)
General Prohibitions.
Subject to
Section 8.4(b)
, Target shall not, nor shall it
authorize or permit any of its Subsidiaries or authorize any of
its or their respective Representatives to, directly or
indirectly, (A) solicit, initiate, encourage or knowingly
facilitate, any inquiries or the making of any proposal or offer
that constitutes, or could reasonably be expected to lead to, an
Acquisition Proposal for Target, (B) enter into or engage
in any discussions or negotiations regarding, or that could
reasonably be expected to lead to, any Acquisition Proposal for
Target, furnish to any third party (or any Representative of any
third party) any information (whether orally or in writing) in
connection with, or in furtherance of, any Acquisition Proposal
for Target, or afford access to the business, properties,
assets, books or records of Target or any of its Subsidiaries,
otherwise cooperate in any way with, or knowingly assist,
participate in, facilitate or encourage any effort by, any third
party (or any Representative of any third party) that has made,
is seeking to make or has informed Target of any intention to
make, or has publicly announced an intention to make, an
Acquisition Proposal for Target, (C) fail to make,
withdraw, qualify, amend or modify or publicly propose to
withdraw, qualify, amend or modify the Target Recommendation (it
being understood that, subject to and without limitation of
Section 8.4(f)
, taking a neutral position or no
position with respect to any Acquisition Proposal for Target
shall be considered an amendment or modification), or recommend,
adopt or approve, or publicly propose to recommend, adopt or
approve, an Acquisition Proposal for Target, or take any action
or make any statement inconsistent with the Target
Recommendation (any of the foregoing in this clause (C), a
Change in the Target Recommendation
),
(D) take any action to make the provisions of any
fair price, moratorium, control
share acquisition, business combination or
other similar anti-takeover statute or regulation (including
approving any transaction under, or a third party becoming an
affiliated shareholder under, Section 21.606 of the
TBOC), or any restrictive provision of any applicable
anti-takeover provision in Targets articles of
incorporation or bylaws, inapplicable to any transactions
contemplated by an Acquisition Proposal, (E) enter into any
agreement in principle, letter of intent, term sheet, merger
agreement, acquisition agreement, option agreement, joint
venture agreement, partnership agreement or other contract or
instrument constituting or relating to an Acquisition Proposal
for Target (other than a confidentiality agreement of the type
referred to in
Section 8.4(b)
), or any contract or
agreement in principle compelling Target to abandon, terminate
or breach any of its obligations hereunder, or fail to
consummate the Transactions (any of the foregoing agreements in
this clause (E), a
Target Acquisition
Contract
), (F) enter into any confidentiality
or similar agreement with any third party which prohibits Target
from providing or making available to Parent pursuant to
Section 8.4(b)
any of the information to be provided
to such third party in the time periods provided in
Section 8.4(b)
, (G) grant or permit any third
party any waiver or release under, or fail to enforce any
provision of, any confidentiality, standstill or
similar agreement with respect to any class of securities of
Target or any of its Subsidiaries or (H) resolve, propose
or agree to do any of the foregoing. Without limiting the
foregoing, it is agreed that any violation of the restrictions
on Target set forth in the preceding sentence by any
Representative of Target or any of its Subsidiaries shall be a
breach of this section by Target.
(b)
Exceptions after Receipt of Certain
Proposals.
Notwithstanding anything to the
contrary in this Agreement, at any time prior to obtaining the
Target Shareholders Approval (and in no event after
obtaining the Target Shareholders Approval), the Target
Board, directly or indirectly through its Representatives, may,
subject to compliance with
Section 8.4(c)
, (A)
(i) contact a third party or its Representatives for the
purpose of clarifying any inquiry or Acquisition Proposal and
the material terms and conditions thereof so as to determine
whether such inquiry or Acquisition Proposal is a Superior
Proposal or is reasonably likely to lead to a Superior Proposal
or (ii) engage in negotiations or discussions with any
third party that the Target Board
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determines in good faith is credible and reasonably capable of
consummating a Superior Proposal for Target, and that has made
after the date of this Agreement a Superior Proposal for Target
or a bona fide written Acquisition Proposal for Target that the
Target Board determines in good faith (after consultation with
its financial advisor and outside legal counsel) is reasonably
likely to lead to a Superior Proposal, (B) thereafter,
furnish to such third party nonpublic information relating to
Target or any of its Subsidiaries pursuant to a confidentiality
agreement with terms in the aggregate at least as restrictive to
such third party as those contained in the Confidentiality
Agreement and which contains a standstill or similar
provision on terms no more materially favorable to such third
party than the terms of any standstill or similar
agreement, or provision in any agreement, applicable to Parent
with respect to Target; provided, that the terms of such
standstill or similar provision may allow such third
party to make Acquisition Proposals to Target in connection with
the negotiations or discussions permitted by this section (a
copy of such confidentiality agreement shall, subject to
Section 8.4(c)
, be provided promptly after its
execution, and which copy and the terms and existence thereof
shall be subject to the confidentiality obligations imposed on
the Parent Parties pursuant to the Confidentiality Agreement),
provided, that, subject to
Section 8.4(c)
, all such
nonpublic information (to the extent that such nonpublic
information has not been previously provided or made available
to Parent) is provided or made available to Parent, as the case
may be, prior to or substantially concurrently with the time it
is provided or made available to such third party), and
provided, further, that, if such Superior Proposal for Target or
Acquisition Proposal for Target is made by a third party who or
which, on the date hereof, is party to a confidentiality
agreement with Target which would prohibit Target from complying
with any of the terms of this section or
Section 8.4(c)
requiring the provision by Target of
information, agreements or the documents to Parent, then Target
may take the actions described in clauses (A) and
(B) of this section only if such confidentiality agreement
with such third party has been amended to (x) allow Target
to fully comply with such terms of this section and
Section 8.4(c)
without violating such
confidentiality agreement and (y) include, if not already
included, a standstill or similar provision on terms
no more materially favorable to such third party than the terms
of any standstill or similar agreement, or provision
in any agreement applicable to Parent with respect to Target;
provided, that the terms of such standstill or
similar provision may allow such third party to make Acquisition
Proposals to Target in connection with the negotiations or
discussions permitted by this section and (C) subject to
compliance with
Section 8.4(d)
, make a Change in the
Target Recommendation; but in each case referred to in the
foregoing clauses (A), (B) and (C) only if the Target
Board determines in good faith, after consultation with outside
legal counsel to Target, that its failure to take such action
would likely be inconsistent with the Target Boards
fiduciary duties to the Target Shareholders.
(c)
Required Notices.
Target shall not
take any of the actions referred to in
Section 8.4(b)
unless Target shall have delivered to
Parent one (1) Business Days prior written notice
advising Parent that it intends to take such action, and Target
shall continue to advise Parent after taking such action, on a
current basis, of the status and terms of any discussions and
negotiations with the third party. In addition, Target shall
notify Parent promptly (but in no event later than one
(1) Business Day) after receipt by Target (or any of its
Representatives) of any Acquisition Proposal, or any amendment
or modification to any Acquisition Proposal, for Target or of
any request for information relating to Target or any of its
Subsidiaries or for access to the business, properties, assets,
books or records of Target or any of its Subsidiaries by any
third party that, to the knowledge of Target, is considering
making, or has made, an Acquisition Proposal for Target, which
notice shall be provided orally and in writing and shall
identify the third party making, and the material terms and
conditions of, any such Acquisition Proposal for Target,
indication or request (including, in each case, any changes
thereto). Target shall keep Parent informed, on a current basis,
of the status and details of any such Acquisition Proposal for
Target, indication or request (including, in each case, any
changes thereto) and shall promptly (but in no event later than
one (1) Business Day after receipt) provide to Parent
copies of (i) all drafts of the definitive documents
relating to any Acquisition Proposal sent or provided to Target
or any of its Subsidiaries and (ii) from to time
thereafter, all documents containing material changes to such
definitive documents.
(d)
Limitations on Ability to Change Recommendation or
Terminate the Agreement.
Notwithstanding
Section 8.4(b)
, the Target Board shall not make any
Change in the Target Recommendation or terminate this Agreement
pursuant to
Section 11.1(h)
unless and until
(A) Target promptly notifies Parent, in writing, at least
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three (3) Business Days before taking that action, of its
intention to do so, (B) if requested by Parent, during the
three-Business-Day period, Target shall negotiate in good faith
with Parent with respect to any revised proposal from Parent in
respect of the terms of the Transactions and (C) if in
response to an Acquisition Proposal for Target that constitutes
a Superior Proposal for Target, Parent does not make, within
such three-Business-Day period, an offer that is at least as
favorable to the shareholders of Target, as determined by the
Target Board in good faith (after considering the advice of
Targets financial advisor), as such Superior Proposal (it
being understood that, with respect to the termination of this
Agreement pursuant to
Section 11.1(h)
, Target shall
not terminate this Agreement pursuant to
Section 11.1(h)
during such three-Business-Day
period, and that any amendment to the financial terms or other
material terms of such Superior Proposal shall require a new
written notification from Target and an additional
three-Business-Day period that satisfies this section).
(e)
Obligation to Terminate Existing
Discussions.
Target shall, and shall cause its
Subsidiaries and its and their respective Representatives to,
cease immediately and cause to be terminated any and all
existing soliciting activities, discussions or negotiations and
access to nonpublic information, if any, with, to or by any
third party conducted prior to the date hereof with respect to
any Acquisition Proposal for Target. Target shall promptly
request that each third party, if any, in possession of
Confidential Information (as such term is defined in the
Confidentiality Agreement) about Target or any of its
Subsidiaries that was furnished by or on behalf of Target or any
of its Subsidiaries in connection with its consideration of any
potential Acquisition Proposal to return or destroy all
Confidential Information heretofore furnished to such third
party in compliance with the applicable confidentiality
agreement entered into with such third party.
(f)
Certain Exceptions.
Nothing in this
section shall prohibit the Target Board from (A) taking and
disclosing to the Target Shareholders a position contemplated by
Rule
14e-2(a),
Rule 14d-9
or Item 1012(a) of
Regulation M-A
promulgated under the Exchange Act, or other applicable law, or
(B) making any disclosure to the Target Shareholders if the
Target Board determines, after consultation with outside
counsel, that failure to so disclose such position would be
reasonably likely to give rise to a violation of applicable
laws; provided, however, that any such disclosure of a position
contemplated by Rule
14e-2(a)
or
Rule 14d-9
promulgated under the Exchange Act, other than (x) a
stop, look and listen or similar communication of
the type contemplated by
Rule 14d-9(f)
promulgated under the Exchange Act, (y) an express
rejection of an applicable Acquisition Proposal or (z) an
express reaffirmation of its Target Recommendation, shall be
deemed a Change in the Target Recommendation. In addition, it is
understood and agreed that, for purposes of this Agreement
(including this
Article VI
), a factually and materially
accurate public statement by Target that describes Targets
receipt of an Acquisition Proposal for Target and the operation
of this Agreement with respect thereto shall not be deemed a
Change in the Target Recommendation if Target affirmatively
reaffirms in such disclosure the Target Recommendation.
Section 8.5
Directors
and Officers Indemnification and Insurance
(a) The organizational documents of the Merger Sub and of
the Surviving Company shall, with respect to indemnification of
directors, officers, employees and agents, not be amended,
repealed or otherwise modified after the date of this Agreement
in any manner that would adversely affect the rights thereunder
of the Persons who at any time prior to the Effective Time were
identified as prospective indemnitees under Targets
articles of incorporation or the bylaws in respect of actions or
omissions occurring at or prior to the Effective Time (including
the Transactions).
(b) From and after the Effective Time, the Surviving
Company shall indemnify, defend and hold harmless each person
who is now, or has been at any time prior to the date hereof or
who becomes prior to the Effective Time, an officer or director
of Target or any of its Subsidiaries (each an
Indemnified Party
), who was or is made
or is threatened to be made a party or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, or
investigative (a
proceeding
) against
all losses, claims, damages, costs, liabilities, fees and
expenses (including reasonable fees and disbursements of counsel
and experts and judgments, fines, losses, claims, liabilities
and amounts paid in settlement (provided that any such
settlement is effected with the prior written consent of Parent,
which will not be unreasonably withheld, conditioned or delayed)
actually and reasonably incurred by the Indemnified Party based
in whole or in part out of the fact the Indemnified Party is
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or was an officer or director of Target or any Subsidiary of
Target or of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in which such
Indemnified Party was serving at the request of the Target, and
pertaining to any matter existing or occurring, or any acts or
omissions occurring, at or prior to the Effective Time including
any act or omission relating to this Agreement or the
Transactions (the
Indemnified
Liabilities
), to the full extent permitted under
Texas law. If an Indemnified Party makes or asserts any claim
for Indemnified Liabilities, any determination required to be
made with respect to whether an Indemnified Partys conduct
complies with the standards set forth under the TBCA or TBOC, as
applicable, shall be made by independent counsel mutually
acceptable to the Surviving Company and the Indemnified Party;
provided, further, that nothing herein shall impair any rights
or obligations of any Indemnified Party. If any claim or claims
are brought against any Indemnified Party (whether arising
before or after the Effective Time), counsel selected for the
defense of such claim shall be reasonably acceptable to Target
(if selected before the Effective Time) and the Surviving
Company (if selected after the Effective Time).
(c) The Surviving Company shall promptly advance all
reasonable
out-of-pocket
expenses of each Indemnified Party in connection with any such
action or proceeding described above, as such expenses are
incurred, to the fullest extent permitted by the TBOC, subject
to the receipt by the Surviving Company of an undertaking by or
on behalf of such Indemnified Party to repay such amount if it
shall ultimately be determined that such Indemnified Party is
not entitled to be indemnified by the Surviving Company.
(d) The Surviving Company shall maintain Targets
existing officers and directors liability insurance
policy (
D&O Insurance
) for a
period of at least six (6) years after the Effective Time,
but only to the extent related to actions or omissions prior to
the Effective Time; provided, that the Surviving Company may
substitute therefor policies of substantially similar coverage
and amounts containing terms no less advantageous to such former
directors or officers; provided further, that the aggregate
amount of annual premiums to be paid with respect to the
maintenance of such D&O Insurance for such six-year period
shall not exceed one hundred seventy-five percent (175%) of the
aggregate amount of annual premiums currently paid by Target for
such D&O Insurance.
(e) In the event Parent or any of its successors or assigns
or the Surviving Company or any of its successors or assigns
(i) consolidates with or merges into any of its Affiliates
and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers or
conveys all or substantially all of its properties and assets to
any of its Affiliates, then, and in each such case, proper
provision shall be made so that the successors and assigns of
Parent or the Surviving Company, as applicable, assume the
obligations set forth in this section.
(f) The provisions of this
Section 8.5
shall
survive the Effective Time and are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party
and his or her heirs and representatives.
Section 8.6
Further
Assurances.
Each party shall use commercially
reasonable efforts to obtain all consents and approvals and to
do all other things necessary for the consummation of the
Transactions. The parties shall take such further action to
deliver or cause to be delivered to each other at the Closing
and at such other times thereafter as shall be reasonably agreed
by such parties such additional agreements or instruments as any
of them may reasonably request for the purpose of carrying out
this Agreement and the Transactions. The parties shall afford
each other access to all information, documents, records and
personnel who may be necessary for any party to comply with laws
or regulations (including the filing and payment of Taxes and
handling Audits), to fulfill its obligations with respect to
indemnification hereunder or to defend itself against suits or
claims of others. Parent and Target shall duly preserve all
files, records or any similar items of Parent or Target received
or obtained as a result of the Transactions with the same care
and for the same period of time as it would preserve its own
similar assets.
Section 8.7
Expenses.
Except
as provided in
Section 11.3
, each party shall bear
solely and entirely, all Expenses that they incur.
Section 8.8
Cooperation.
Subject
to compliance with applicable law, from the date hereof until
the Effective Time, Target shall confer on a regular and
frequent basis with one or more Representatives of Parent
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to report and consult on operational matters of materiality and
the general status of ongoing operations, including, without
limitation, matters relating to drilling of wells, whether or
not within the ordinary course of business, and shall promptly
provide Parent or its counsel with copies of all filings made by
Target with any Governmental Authority in connection with this
Agreement and the Transactions.
Section 8.9
Publicity.
Neither
Target, Parent, Merger Sub nor any of their respective
Affiliates shall issue or cause the publication of any press
release or other announcement with respect to the Transactions
without the prior consultation with and consent of the other
party (such consent not to be unreasonably withheld, conditioned
or delayed), except as may be reasonably determined to be
required by applicable law or by obligations pursuant to any
listing agreement with any national securities exchange, and
each party shall use reasonable efforts to provide copies of
such release or other announcement to the other party hereto,
and give due consideration to such comments as each such other
party may have, prior to such release or other announcement.
Section 8.10
Additional
Actions.
Subject to the terms and conditions of
this Agreement, each party agrees to use commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable
under applicable laws and regulations, or to remove any
injunctions or other impediments or delays, to consummate and
make effective the Transactions, subject, however, to the Target
Shareholders Approval.
Section 8.11
Filings.
Each
party shall make all filings such party is required to make in
connection herewith or desirable to achieve the purposes
contemplated hereby, and shall cooperate as needed with respect
to any such filing by any other party.
Section 8.12
Consents.
Each
of Parent, Merger Sub and Target shall use commercially
reasonable efforts to obtain all consents necessary or advisable
in connection with its obligations hereunder.
Section 8.13
Employee
Matters
(a) Subsequent to the Effective Time, the Surviving Company
shall perform or cause Target to perform the obligations of
Target under the Well Bonus Plans and the severance agreements
and severance plans to which Target is a party or subject and
which are set forth in Sections 5.11(e) and 5.30 of the
Target Disclosure Schedule. From the date of this Agreement
until the Effective Time, Target agrees not to add any
additional wells or make any additional grants to new or current
participants under any of the Well Bonus Plans.
(b) To the extent service is relevant for purposes of
eligibility, participation or vesting (but not the accrual of
benefits) under any employee benefit plan, program or
arrangement established or maintained by the Surviving Company
or its Affiliates in which Business Employees may participate,
such Business Employees shall be credited for service accrued as
of the Effective Time with Target and its Subsidiaries to the
extent such service was credited under a similar plan, program
or arrangement of Target.
(c) To the extent Business Employees and their dependents
enroll in any health plan sponsored by the Surviving Company or
its Affiliates, the Surviving Company shall waive any
preexisting condition limitation applicable to such Business
Employees to the extent that the employees or
dependents condition would not have operated as a
preexisting condition under the group health plan maintained by
Target. In addition, the Surviving Company shall cause such
health plans (i) to waive all preexisting condition
exclusions and waiting periods otherwise applicable to Business
Employees and their dependents, other than exclusions or waiting
periods that are in effect with respect to such individuals as
of the Effective Time to the extent not satisfied, under the
corresponding benefit plans of Target, and (ii) to provide
each Business Employee and his or her dependents with
corresponding credit for any co-payments and deductibles paid by
them under the corresponding benefit plans of Target during the
portion of the respective plan year prior to the Effective Time.
(d) With respect to the 401(k) accounts of those Business
Employees who become eligible to participate in the Surviving
Companys 401(k) Plan after the Effective Time, Merger Sub
agrees to take one or more of the following actions: (i) to
establish an arrangement under which such Business Employees are
provided with payroll withholding for purposes of repaying any
loan that is outstanding under Targets 401(k) Plan as of
the Effective Time; (ii) to permit such Business Employees
to voluntarily transfer or rollover their accounts
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(including loans) from Targets 401(k) Plan to the
Surviving Companys 401(k) Plan; or (iii) to cause the
Surviving Companys 401(k) Plan to accept a direct
trustee-to-trustee
transfer of assets from Targets 401(k) Plan into the
Surviving Companys 401(k) Plan, including any outstanding
loans, on behalf of such Business Employees. Merger Sub and
Target agree that they shall take all actions necessary,
including the amendment of their respective plans, to effect the
actions selected by Merger Sub under the preceding sentence.
(e) With respect to any Business Employees who become
employed by Merger Sub or its Affiliates after the Effective
Time, Merger Sub or such Affiliate shall give service credit for
purposes of determining post Effective Time vacation, sick leave
and any other paid time off entitlements that Merger Sub or such
Affiliate provides to its employees generally.
(f) Target and Merger Sub shall cooperate with each other
in all reasonable respects relating to any actions to be taken
pursuant to this section.
Section 8.14
Notice
of Certain Events.
Each party to this Agreement
shall promptly as reasonably practicable notify the other
parties of:
(a) any notice or other communication from any Person
alleging that the consent of such Person (or other Person) is or
may be required in connection with the Transactions;
(b) any notice or other communication from any Governmental
Authority in connection with the Transactions;
(c) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge,
threatened against, relating to or involving or otherwise
affecting it or any of its Subsidiaries which, if pending on the
date hereof, would have been required to have been disclosed
pursuant to
Section 5.10
or
Section 5.12
, or which relate to the consummation of
the Transactions;
(d) any notice of, or other communication relating to, a
breach, default or event under this Agreement or otherwise that,
with notice or lapse of time or both, would become a breach or
default, received by it or any of its Subsidiaries subsequent to
the date hereof, under any material agreement and could
reasonably be expected to cause the conditions set forth in
Article IX
not to be satisfied; and
(e) any Target Material Adverse Effect or the occurrence of
any event which is reasonably likely to result in a Target
Material Adverse Effect.
Section 8.15
Site
Inspections.
Subject to compliance with
applicable law, from the date hereof until the Effective Time,
the Parent Parties may undertake (at the Parent Parties
sole cost and expense) a reasonable environmental and
operational assessment or assessments (an
Assessment
) of the Targets
operations, business
and/or
properties that are the subject of this Agreement. An Assessment
may include a review of permits, files and records including,
but not limited to, environmental investigations, audits,
assessments, studies, testing and management plans and systems,
as well as visual and physical inspections and testing. An
Assessment will include any soil borings, groundwater or any
other Phase II testing if required in the reasonable
discretion of the Parent Parties without the consent of the
Target, the Parent Parties shall confer with the Target
regarding the nature, scope and scheduling of such Assessment,
and shall comply with such conditions as the Target may
reasonably impose to (a) avoid interference with the
Targets operations or business; (b) require the
Parent Parties representatives responsible for performing
the Assessment to maintain insurance coverage as required by the
Target; and (c) keep the Targets property free and
clear of any Liens arising out of any entry onto or inspection
of the subject property. The Target shall cooperate in good
faith with the Parent Parties effort to conduct an
Assessment. The Parent Parties shall jointly and severally
indemnify Target and its Subsidiaries from any claims made
against Target or any of its Subsidiaries in respect of personal
or bodily injury to, sickness, disease, death or loss of
services or wages of or respecting, any employee, agent or
contractor of any Parent Party, arising from any investigations,
audits, assessments, studies, testing and inspections conducted
by a Parent Party pursuant to this
Section 8.15
.
Section 8.16
Shareholder
Litigation.
Target shall give the Parent Parties
the reasonable opportunity to participate in the defense of any
litigation against Target and its directors relating to the
Transactions.
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Section 8.17
Financing
(a) Prior to the Effective Time, Target shall cooperate
with the Parent Parties, the Parent Parties financing
sources, and the Parent Parties auditors and attorneys in
connection with the Parent Parties financing efforts with
respect to the Transactions, including without limitation any
refinancing of existing credit facilities of the Parent Parties
or Target. Without limiting the generality of the foregoing,
Target shall provide, and Target shall instruct its auditors to
provide, to the Parent Parties such financial and other
information that Parent or its Representatives reasonably
requests for inclusion in any materials to be used by the Parent
Parties or provided to any financing sources in connection with
such financing.
(b) Target shall not take any actions that would terminate
or otherwise invalidate the agreement to extend the Fortis
Forbearance Agreement until the Effective Time.
Section 8.18
[Reserved]
Section 8.19
Shell
Settlement.
Target agrees that, prior to the
Effective Time, it shall use reasonable best efforts to enter
into a settlement agreement with Shell, to be effective as of
the Effective Time, relating to the pending arbitration
proceeding on terms that are materially similar to the terms of
the proposed Compromise and Settlement Agreement previously
disclosed to Parent. Target shall keep Parent informed, on a
current basis, of the status and details of such agreement and
shall provide to Parent copies of all correspondence and a
description of all material oral discussions between Target and
Shell (or between Targets Representatives and Shells
Representatives) with respect to the terms of the proposed
settlement.
ARTICLE IX.
CONDITIONS
TO CONSUMMATION OF THE MERGER
Section 9.1
Conditions
to the Obligation of Each Party.
The respective
obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the
following conditions:
(a) The Target Shareholders Approval shall have been
obtained.
(b) No action, suit or proceeding instituted by any
Governmental Authority may be pending and no statute, rule,
order, decree or regulation and no injunction, order, decree or
judgment of any court or Governmental Authority of competent
jurisdiction may be in effect, in each case which would
prohibit, restrain, enjoin or restrict the consummation of the
Transactions; provided, however, that if Target seeks to
terminate this Agreement pursuant to this subsection (b), Target
must have used all reasonable best efforts to prevent the entry
of such injunction or other order.
(c) Each of Target, Parent and Merger Sub shall have
obtained all material Permits required to consummate the
Transactions.
Section 9.2
Conditions
to the Obligations of the Parent Parties.
The
obligation of the Parent Parties to effect the Merger is subject
to the satisfaction at or prior to the Closing Date of the
following conditions, any or all which may be waived by them, in
whole or in part, to the extent permitted by applicable law:
(a) The representations and warranties of Target set forth
in this Agreement shall be true and correct as of the date of
this Agreement and as of the Closing Date as though made on such
date (except to the extent such representations and warranties
are expressly made only as of a specific date, in which case as
of such specific date), except where the failures to be so true
and correct (for this purpose disregarding any qualification or
limitation as to materiality or a Target Material Adverse
Effect) do not have, and would not reasonably be expected to
have, individually or in the aggregate, a Target Material
Adverse Effect. Parent shall have received a certificate signed
on behalf of Target by an executive officer of Target to such
effect.
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(b) Target shall have performed in all material respects
its obligations required to be performed by it under this
Agreement. Parent shall have received a certificate signed on
behalf of Target by an executive officer of Target to such
effect.
(c) Since the date of this Agreement, there shall not have
occurred a Target Material Adverse Effect.
(d) Each consent, waiver and approval set forth in
Section 5.4(b)
and
Section 5.4(c)
of the
Target Disclosure Schedule must have been obtained, and Target
must have provided Merger Sub with copies thereof.
(e) Target shall have provided to Parent the executed
Compromise and Settlement Agreement with Shell relating to the
arbitration proceeding between the parties, and the terms of
such agreement shall be materially similar to the terms
previously disclosed to Parent.
(f) No more than five percent (5%) of the holders of Target
Common Shares shall have notified Target or the Parent Parties
of their intent to exercise dissenters rights.
(g) The Fairness Opinion, as described in
Section 5.24
, shall not have been withdrawn.
(h) Except for the Well Bonus Plans and any other employee
incentive plans being assumed by the Surviving Company, all
employee incentive plans shall terminate on or prior to the
Effective Time.
(i) All of Targets payment and other obligations
under the Engagement Letters shall have terminated, except for
the indemnity and confidentiality provisions thereunder.
(j) Each holder of an Excepted Option shall have delivered
to Parent an executed Option Waiver, Cancellation and Release
Agreement cancelling such Excepted Options.
Section 9.3
Conditions
to the Obligations of the Target.
The obligations
of the Target to effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of the following
conditions, any or all of which may be waived by the Target, in
whole or in part, to the extent permitted by applicable law:
(a) The representations and warranties of Parent and Merger
Sub set forth in this Agreement shall be true and correct, in
each case as of the date of this Agreement and as of the Closing
Date as though made on such date (except to the extent such
representations and warranties are expressly made only as of a
specific date, in which case as of such specific date), except
where the failures to be so true and correct (for this purpose
disregarding any qualification or limitation as to materiality
or a Parent Material Adverse Effect) do not have, and would not
reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect. The Target shall
have received a certificate signed on behalf of Parent and
Merger Sub by an executive officer of Parent and Merger Sub to
such effect.
(b) Parent and Merger Sub shall have performed in all
material respects the respective obligations required to be
performed by them under this Agreement, and the Target shall
have received a certificate signed on behalf of Parent and
Merger Sub by an executive officer of Parent and Merger Sub to
such effect.
ARTICLE X.
SURVIVAL
Section
10.1
Survival
of Representations and Warranties.
The
representations and warranties of the parties contained in this
Agreement shall not survive the Effective Time.
Section
10.2
Survival
of Covenants and Agreements.
The covenants and
agreements of the parties to be performed after the Effective
Time contained in this Agreement shall survive the Effective
Time.
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ARTICLE XI.
TERMINATION,
AMENDMENT AND WAIVER
Section
11.1
Termination.
This
Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the shareholders of
Target:
(a) by the mutual written consent of Parent and Target by
action of their respective boards of directors or governing
bodies, at any time prior to the Effective Time;
(b) by either Parent or Target if the Effective Time has
not occurred on or before 11:59 p.m. Central time on
May 31, 2010 (the
Termination
Date
), provided that the party seeking to
terminate this Agreement pursuant to this section shall not have
breached in any material respect its obligations under this
Agreement in any manner that shall have proximately contributed
to the failure to consummate the Merger on or before the
Termination Date;
(c) by either Target or Parent, if any Governmental
Authority issues an order, decree or ruling or takes any other
action permanently enjoining, restraining or otherwise
prohibiting the Merger and, such order, decree, ruling or other
action shall have become final and non-appealable;
(d) by Target if there has been a breach by Parent or
Merger Sub of any representation, warranty, covenant or
agreement set forth in this Agreement which breach would cause
the conditions set forth in
Section 9.3(a)
and
Section 9.3(b)
not to be satisfied and such breach
(if susceptible to cure) has not been cured in all material
respects within twenty (20) Business Days following receipt
by Parent of notice of such breach (a
Parent
Breach
);
(e) by Parent, if (i) there has been a breach by
Target of any representation, warranty, covenant or agreement
set forth in this Agreement (other than as described in
clause (ii) of this
Section 11.1(e)
) which
breach would cause the conditions set forth in
Section 9.2(a)
and
Section 9.2(b)
not to
be satisfied and such breach (if susceptible to cure) has not
been cured in all respects within twenty (20) Business Days
following receipt by Target of notice of such breach, or
(ii) the Target Lenders terminate the Forbearance Period
(as defined in the Fortis Forbearance Agreement) pursuant to
Section 11(e) of the Fortis Forbearance Agreement, or
Target breaches the covenant set forth in
Section 8.17(b)
(in the case of (i) and (ii), a
Target Breach
);
(f) by Parent or Target if the Target Shareholder Meeting
(or any postponement or adjournment thereof) shall have
concluded and the Target Shareholders Approval shall not
have been obtained;
(g) by Parent if (i) a Change in the Target
Recommendation shall have occurred, whether or not permitted by
Section 8.4
, (ii) following the date of any
bona fide Acquisition Proposal by a third party for Target or
any material modification thereto is first publicly announced,
disclosed or otherwise made known prior to the time at which
Target receives the Target Shareholders Approval, Target
fails to issue a press release that expressly reaffirms the
Target Recommendation within ten (10) Business Days
following Parents written request to do so (which request
may be made by Parent one time following any such Acquisition
Proposal or any material modifications thereto), (iii) any
tender offer or exchange offer constituting an Acquisition
Proposal for Target is commenced or materially modified by any
third party with respect to the outstanding Target Common Shares
prior to the time at which Target receives the Target
Shareholders Approval, and the Target Board shall not have
recommended that the Target Shareholders reject such tender
offer or exchange offer and not tender their Target Common
Shares into such tender offer or exchange offer within ten
(10) Business Days after commencement or material
modification of such tender offer or exchange offer, unless
Target has issued a press release that expressly reaffirms the
Target Recommendation within such ten (10) Business Day
period, (iv) Target or the Target Board approves, endorses,
recommends, adopts or enters into any Acquisition Proposal by a
third party for Target or any Target Acquisition Contract,
whether or not permitted by
Section 8.4
,
(v) Target shall have materially breached its obligations
under
Section 8.4
, or (vi) Target or the Target
Board announces, resolves or proposes to do any of the
foregoing, whether or not permitted by
Section 8.4
;
provided, however, that Parents right to terminate this
Agreement pursuant to this
Section 11.1(g)
shall
only be
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available for a ten (10) Business Day period following the
applicable triggering event set forth in clauses (i), (ii),
(iii), (iv) and (vi) of this
Section 11.1(g)
;
(h) by Target, at any time prior to the time at which
Target receives the Target Shareholders Approval, if the
Target Board determines to enter into a definitive agreement
with respect to a Superior Proposal in accordance with
Section 8.4(b)
, provided that it pays to Parent the
Termination Fee concurrently with such termination; and
(i) by Parent, at any time, provided that it pays to Target
the Termination Fee concurrently with such termination.
Section
11.2
Notice
of Termination; Effect of Termination.
(a) Other than pursuant to
Section 11.1(a)
, a
terminating party shall provide written notice of termination to
the other party specifying with particularity the reason for
such termination, and any such termination in accordance with
Section 11.1
shall be effective immediately upon
delivery of such written notice to the other party or, if such
termination is due to a Target Breach or a Parent Breach,
immediately upon the expiration of the applicable cure period.
(b) In the event of termination of this Agreement by any
party as provided in
Section 11.1
, this Agreement
shall forthwith become void and there shall be no liability or
obligation on the part of any party except with respect to this
Article XI
,
Section 8.3
,
Section 8.9
and
Section 12.14.
(c) Upon termination of this Agreement, each of the Voting
Agreements and the Option Waiver, Cancellation and Release
Agreements will terminate according to its terms.
Section
11.3
Expenses
and Other Payments.
(a) If this Agreement is terminated pursuant to
Section 11.1(b)
,
Section 11.1(f)
,
Section 11.1(g)
or
Section 11.1(h)
, then
Target shall reimburse Parent, in cash, for Parents
Expenses by wire transfer of immediately available funds to an
account designated by Parent, no later than two
(2) Business Days after receipt by Target of an invoice
from Parent for Parents Expenses; provided, however, that
in no event shall the amount reimbursed to Parent for its
Expenses exceed $1,000,000. In all other cases, each party shall
pay its own expenses incident to preparing for, entering into
and carrying out this Agreement and the consummation of the
Transactions, whether or not the Merger shall be consummated.
(b) If Parent terminates this Agreement pursuant to
Section 11.1(g)
, then Target shall pay Parent the
Termination Fee, in cash, by wire transfer of immediately
available funds to an account designated by Parent, no later
than two (2) Business Days after such termination.
(c) If Target terminates this Agreement pursuant to
Section 11.1(h)
, then Target shall pay Parent the
Termination Fee, in cash, by wire transfer of immediately
available funds to an account designated by Parent, concurrently
with such termination.
(d) If (i) Parent or Target terminate this Agreement
pursuant to
Section 11.1(b)
, (ii) prior to the
Termination Date, any Person (other than Parent or its
Affiliates) makes an Acquisition Proposal for Target, whether or
not publicly announced, and (iii) within nine
(9) months of the date of such termination Target enters
into a definitive agreement or consummates a transaction
contemplated by an Acquisition Proposal, then Target shall pay
Parent the Termination Fee, in cash, by wire transfer of
immediately available funds to an account designated by Parent,
no later than two (2) Business Days after Target
consummates a transaction contemplated by an Acquisition
Proposal irrespective of the date upon which such transaction is
consummated.
(e) If (i) Target terminates this Agreement pursuant
to
Section 11.1(f)
, (ii) prior to the date of
the Target Shareholders Meeting any Person (other than Parent or
its Affiliates) makes an Acquisition Proposal for Target,
whether or not publicly announced, and (iii) within nine
(9) months of the date of such termination Target enters
into a definitive agreement or consummates a transaction
contemplated by an Acquisition Proposal, then Target shall pay
Parent the Termination Fee, in cash, by wire transfer of
immediately available funds to an account designated by Parent,
no later than two (2) Business Days after Target
consummates a
A-37
transaction contemplated by an Acquisition Proposal irrespective
of the date upon which such transaction is consummated.
(f) If Target terminates this Agreement pursuant to
Section 11.1(d)
, then Parent shall pay Target the
Termination Fee, in cash, by wire transfer of immediately
available funds to an account designated by Target, no later
than two (2) Business Days after such termination.
(g) If Parent terminates this Agreement pursuant to
Section 11.1(e)
, then Target shall pay Parent the
Termination Fee, in cash, by wire transfer of immediately
available funds to an account designated by Parent, no later
than two (2) Business Days after such termination.
(h) If Parent terminates this Agreement pursuant to
Section 11.1(i)
only and for none of the other
reasons specified in
Section 11.1
, then Parent shall
pay Target the Termination Fee, in cash, by wire transfer of
immediately available funds to an account designated by Target,
concurrently with such termination. Target agrees (for itself
and on behalf of its Subsidiaries, Affiliates, stockholders or
Representatives) that if Parent pays the Termination Fee
pursuant to this
Section 11.3(h)
, the payment of
such Termination Fee shall be the sole and exclusive remedy of
Target, its Subsidiaries, Affiliates, stockholders or
Representatives against Parent, Merger Sub or any of their
respective Subsidiaries, Affiliates, partners or Representatives
for Parents termination of this Agreement pursuant to
Section 11.1(i)
, and in no event will Target seek to
recover any other money damages or seek any other remedy based
on a claim in law or equity (including specific performance).
Upon payment to Target of the Termination Fee, neither Parent,
Merger Sub nor any of their Subsidiaries, Affiliates,
stockholders or Representatives shall have any further liability
or obligation to Target or its Subsidiaries, Affiliates,
stockholders or Representatives relating to or arising out of
this Agreement or the Transactions.
(i) The parties acknowledge and agree that the agreements
contained in this section are an integral part of the
Transactions, and that, without these agreements, the parties
would not enter into this Agreement. If a party fails to
promptly pay the amount due by it pursuant to this section,
interest shall accrue on such amount from the date such payment
was required to be paid pursuant to the terms of this Agreement
until the date of payment at the rate of six percent (6%) per
annum. If, in order to obtain such payment, the other party
commences a suit that results in judgment for such party for
such amount, the defaulting party shall pay the other party its
reasonable costs and expenses (including reasonable
attorneys fees and expenses) incurred in connection with
such suit. Each of the parties further acknowledges that the
payment of the amounts by Parent and Target specified in this
section is not a penalty, but in each case (except in the case
of a Parent Breach or a Target Breach) are liquidated damages in
a reasonable amount that will compensate Target or Parent, as
the case may be, in the circumstances in which such fees are
payable for the efforts and resources expended and the
opportunities foregone while negotiating this Agreement and in
reliance on this Agreement and on the expectation of the
consummation of the Transactions, which amount would otherwise
be impossible to calculate with precision. In no event shall
Parent or Target, as applicable, be required to pay the
Termination Fee more than once.
ARTICLE XII.
MISCELLANEOUS
Section
12.1
Notices.
All
notices or communications hereunder shall be in writing
(including facsimile or similar writing) addressed as follows:
To Parent:
ALTA MESA HOLDINGS, LP
15415 Katy Fwy, Suite 800
Houston, Texas 77094
Attention: Harlan H. Chappelle, President
Telephone:
(281) 530-0991
Facsimile:
(281) 530-5278
A-38
To Merger Sub:
ALTA MESA ACQUISITION SUB, LLC
c/o Alta
Mesa Holdings, LP
15415 Katy Fwy, Suite 800
Houston, Texas 77094
Attention: Harlan H. Chappelle, President
Telephone:
(281) 530-0991
Facsimile:
(281) 530-5278
With copies (which shall not constitute notice) to:
Haynes and Boone, LLP
1221 McKinney Street, Suite 2100
Houston, Texas 77010
Attention: Buddy Clark
Telephone:
(713) 547-2077
Facsimile:
(713) 236-5577
Haynes and Boone, LLP
1221 McKinney Street, Suite 2100
Houston, Texas 77010
Attention: Bill Nelson
Telephone:
(713) 547-2084
Facsimile:
(713) 236-5557
To Target:
THE MERIDIAN RESOURCE CORPORATION
1401 Enclave Parkway, Suite 300
Houston, Texas 77077
Attention: Paul Ching, Chairman & CEO
Telephone:
(281) 597-7000
Facsimile:
(281) 597-8880
With a copy (which shall not constitute notice) to:
Fulbright & Jaworski L.L.P.
1301 McKinney Street, Suite 5100
Houston, Texas 77010
Attention: Roger K. Harris
Telephone:
(713) 651-5151
Facsimile:
(713) 651-5246
Any such notice or communication shall be deemed given
(i) when made, if made by hand delivery, and upon
confirmation of receipt, if made by facsimile, (ii) one
Business Day after being deposited with a
next-day
courier, postage prepaid, or (iii) three (3) Business
Days after being sent certified or registered mail, return
receipt requested, postage prepaid, in each case addressed as
above (or to such other address as such party may designate in
writing from time to time).
Section
12.2
Severability.
If
any provision of this Agreement shall be declared to be invalid
or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions
hereof which shall remain in full force and effect.
Section
12.3
Assignment.
This
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal
representatives, successors, and assigns; provided, however,
that neither this Agreement nor any rights hereunder shall be
assignable or otherwise subject to hypothecation and any
assignment in violation hereof shall be null and void.
A-39
Section
12.4
Interpretation.
The
headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section
12.5
Counterparts.
This
Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same Agreement, and shall
become effective when one or more such counterparts have been
signed by each of the parties and delivered to each party.
Section
12.6
Entire
Agreement.
This Agreement, all documents
contemplated herein or required hereby, the Confidentiality
Agreement and the Voting Agreements represent the entire
Agreement of the parties with respect to the subject matter
hereof and shall supersede any and all previous contracts,
arrangements or understandings between the parties with respect
to the subject matter hereof.
Section
12.7
Governing
Law.
This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the
state of Texas, without reference to rules relating to conflicts
of law.
Section
12.8
Submission
to Jurisdiction.
Each party to this Agreement
submits to the exclusive jurisdiction of the federal and state
courts in Harris County, in the State of Texas, in any dispute
or action arising out of or relating to this Agreement and
agrees that all claims in respect of such dispute or action may
be heard and determined in any such court. Each party also
agrees not to bring any dispute or action arising out of or
relating to this Agreement in any other court. Each party agrees
that a final judgment in any dispute or action so brought will
be conclusive and may be enforced by dispute or action on the
judgment or in any other manner provided at law (common,
statutory or other) or in equity. Each party waives any defense
of inconvenient forum to the maintenance of any dispute or
action so brought and waives any bond, surety, or other security
that might be required of any other party with respect thereto.
Section
12.9
Attorneys
Fees.
If any action at law or equity, including
an action for declaratory relief, is brought to enforce or
interpret any provision of this Agreement, the prevailing party
shall be entitled to recover reasonable attorneys fees and
expenses from the other party, which fees and expenses shall be
in addition to any other relief which may be awarded.
Section
12.10
No
Third Party Beneficiaries.
Except as provided in
Section 8.5
, no Person other than a party to this
Agreement is an intended beneficiary of this Agreement or any
portion hereof.
Section
12.11
Disclosure
Schedules.
The disclosures made on the Target
Disclosure Schedule, with respect to any representation or
warranty shall be deemed to be made with respect to any other
representation or warranty requiring the same or similar
disclosure to the extent that the relevance of such disclosure
to other representations and warranties is reasonably evident
from the face of the disclosure schedule. The inclusion of any
matter on the Target Disclosure Schedule will not be deemed an
admission by Target that such listed matter is material or that
such listed matter has or would have a Target Material Adverse
Effect.
Section
12.12
Amendments
and Supplements.
At any time before or after
approval of the matters presented in connection with the Merger
by the shareholders of Target and prior to the Effective Time,
this Agreement may be amended or supplemented in writing by the
Parent Parties and Target with respect to any of the terms
contained in this Agreement, except as otherwise provided by
law; provided, however, that following approval of this
Agreement by the shareholders of Target, there shall be no
amendment or change to the provisions hereof unless permitted by
the TBCA
and/or
the
TBOC, as applicable, without further approval by the
shareholders of Target.
Section
12.13
Extensions,
Waivers, etc.
At any time prior to the Effective
Time, either party may:
(a) extend the time for the performance of any of the
obligations or acts of the other party;
(b) waive any inaccuracies in the representations and
warranties of the other party, or breaches thereof, contained
herein or in any document delivered pursuant hereto; or
(c) subject to the proviso of
Section 12.12
waive compliance with any of the agreements or conditions of the
other party contained herein.
A-40
Notwithstanding the foregoing, no failure or delay by Merger Sub
or Target in exercising any right hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise
of any other right hereunder. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of
such party.
Section
12.14
Specific
Performance; Additional Remedies.
Parent, Merger
Sub and Target agree that money damages would not be a
sufficient remedy for any Parent Breach or any Target Breach and
that, in addition to the remedies set forth in
Section 11.3
, the non-breaching party shall be
entitled to all remedies available to it at law or equity as a
remedy for such breach, including specific performance and
injunctive relief. In connection with any request for specific
performance or other equitable relief by the non-breaching party
under this
Section 12.14
, the breaching party waives
any requirement for the security or posting of any bond in
connection with such remedy. The parties further agree that
(a) by seeking any particular remedy, the non-breaching
party shall not in any respect waive its right to seek any other
form of relief that may be available to it, and (b) nothing
contained in this
Section 12.14
shall require the
non-breaching party to institute any proceeding for (or limit
the right of the non-breaching party to institute any proceeding
for) specific performance or injunctive relief under this
Section 12.14
before exercising any termination
right arising from a Parent Breach or a Target Breach, as
applicable (and pursuing damages after such termination), nor
shall the commencement of any action pursuant to this
Section 12.14
or anything contained in this
Section 12.14
restrict or limit the right of the
non-breaching party to terminate this Agreement as a result of a
Parent Breach or a Target Breach, as applicable, or pursue any
other remedies under this Agreement that may be available then
or thereafter.
A-41
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ALTA MESA HOLDINGS, LP
By: Alta Mesa GP, LLC
Its: General Partner
|
|
|
|
By:
|
/s/ Harlan
H. Chappelle
|
Name: Harlan H. Chappelle
|
|
|
|
Title:
|
President and Chief Executive Officer
|
ALTA MESA ACQUISITION SUB, LLC
|
|
|
|
By:
|
/s/ Harlan
H. Chappelle
|
Name: Harlan H. Chappelle
THE MERIDIAN RESOURCE CORPORATION
Name: Paul D. Ching
|
|
|
|
Title:
|
Chairman, Chief Executive Officer and
|
President
[Signature
Page Agreement and Plan of Merger]
A-42
Exhibit A
Form of
Voting Agreement
VOTING
AGREEMENT
This Voting Agreement (this
Agreement
)
is made and entered into as of December , 2009,
by and among ALTA MESA HOLDINGS, LP, a Texas limited partnership
(Parent)
, ALTA MESA ACQUISITION SUB,
LLC, a Texas limited liability company (
Merger
Sub,
and, together with Parent, the
Parent Parties
), THE MERIDIAN RESOURCE
CORPORATION, a Texas corporation
(Target)
, and the undersigned
shareholder
(Shareholder)
of Target.
RECITALS
A. Concurrently with the execution of this Agreement, the
Parent Parties and Target have entered into an Agreement and
Plan of Merger (as may be amended from time to time, the
Merger Agreement
), which provides that
upon the terms and subject to the conditions thereof, at the
Effective Time, Target shall merge with and into Merger Sub and
the separate corporate existence of Target shall thereupon cease
and Merger Sub shall be the Surviving Company.
B. In connection with the Merger, Target has agreed to
solicit the votes of the shareholders of Target on certain
actions, the approval of which by such shareholders is a
condition precedent to the consummation of the Merger, and, in
connection therewith, to deliver to the shareholders of Target a
proxy statement soliciting their vote on such actions (the
Proxy Statement
).
C. As of the date hereof, Shareholder Beneficially Owns (as
defined below) the number of Shares (as defined below) of
capital stock of Target as set forth on the signature page of
this Agreement.
D. In order to induce the Parent Parties to execute the
Merger Agreement, Shareholder desires to restrict the transfer
or disposition of, and desires to vote, his Shares as provided
in this Agreement, and the execution and delivery of this
Agreement is a material condition to the Parent Parties
willingness to enter into the Merger Agreement.
E. As a shareholder of Target, Shareholder will benefit
from the execution and delivery of the Merger Agreement and the
consummation of the transactions contemplated thereby.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1.
Certain Definitions.
Capitalized
terms used but not defined herein and defined in the Merger
Agreement shall have the meanings ascribed to them in the Merger
Agreement. For purposes of this Agreement:
(a) A Person shall be deemed to
Beneficially
Own
a security if such Person has beneficial
ownership of such security as determined pursuant to
Rule 13d-3
under the Securities Exchange Act of 1934, as amended.
(b)
Constructive Sale
means, with
respect to any security, a short sale or entering into or
acquiring an offsetting derivative contract with respect to such
security, entering into or acquiring a futures or forward
contract to deliver such security or entering into any other
hedging or other derivative transaction that has the effect of
materially changing the economic benefits and risks of ownership
of such security.
(c)
Expiration Date
means the earlier to
occur of (i) the Effective Time of the Merger and
(ii) such date and time as the Merger Agreement shall have
been terminated pursuant to Article XI thereof.
(d)
Options
means: (i) all
securities Beneficially Owned by such Shareholder as of the date
of this Agreement that are convertible into, or exercisable or
exchangeable for, shares of capital stock of Target, including,
without limitation, options, warrants and other rights to
acquire Target Common Shares
A-43
or other shares of capital stock of Target; and (ii) all
securities of which such Shareholder acquires Beneficial
Ownership during the period from the date of this Agreement
through and including the Expiration Date that are convertible
into, or exercisable or exchangeable for, shares of capital
stock of Target, including, without limitation, in each case,
Target Options, Target Warrants and other rights to acquire
Target Common Shares or other shares of capital stock of Target.
(e)
Person
means any
(i) individual, (ii) corporation, limited liability
company, partnership, limited partnership or other entity, or
(iii) Governmental Authority.
(f)
Shares
means: (i) all shares of
capital stock of Target Beneficially Owned by such Shareholder
as of the date of this Agreement; and (ii) all shares of
capital stock of Target of which Shareholder acquires Beneficial
Ownership during the period from the date of this Agreement
through and including the Expiration Date, including, without
limitation, in each case, shares issued upon the conversion,
exercise or exchange of Options.
(g)
Transfer
means, with respect to any
security, the direct or indirect (i) assignment, sale,
transfer, tender, pledge, hypothecation, placement in voting
trust, Constructive Sale or other disposition of such security
(excluding transfers by testamentary or intestate succession),
of any right, title or interest in such security (including,
without limitation, any right or power to vote to which the
holder thereof may be entitled, whether such right or power is
granted by proxy or otherwise) or of the record or beneficial
ownership of such security, or (ii) offer to make any such
sale, transfer, tender, pledge, hypothecation, placement in
voting trust, Constructive Sale or other disposition, and each
agreement, arrangement or understanding, whether or not in
writing, to effect any of the foregoing, in each case, excluding
any (1) Transfer pursuant to a court order and
(2) such actions pursuant to which such Shareholder
maintains all voting rights with respect to such security.
2.
No Transfer of Shares or
Options.
Shareholder agrees that, at all times
during the period beginning on the date hereof and ending on the
Expiration Date, Shareholder shall not Transfer (or cause or
permit any Transfer of) any Shares or Options or make any
agreement relating thereto, in each case, without the prior
written consent of Parent. Shareholder agrees that any Transfer
in violation of this Agreement shall be void
ab initio
and of no force or effect. Shareholder hereby agrees with,
and covenants to, each other party hereto, that Shareholder
shall not request that Target register the Transfer (book entry
or otherwise) of any certificate or uncertificated interest
representing any of its Shares, unless such Transfer is made in
compliance with this Agreement. Shareholder shall notify the
Parent Parties promptly, but in no event later than two Business
Days, of the number of any Shares or Options acquired by such
Shareholder after the date hereof or any other change in the
number of Shares and Options Beneficially Owned by such
Shareholder after the date hereof.
3.
No Transfer of Voting
Rights.
Shareholder agrees that, during the
period from the date of this Agreement through and including the
Expiration Date, Shareholder shall not deposit (or cause or
permit the deposit of) any Shares or Options in a voting trust
or grant (or cause or permit the grant of) any proxy or enter
into (or cause or permit the entry into) any voting agreement or
similar agreement with respect to any of the Shares or Options
other than as contemplated by this Agreement and the Merger
Agreement.
4.
Agreement to Vote Shares
.
(a) Until the Expiration Date, at every meeting of
shareholders of Target, however called, at every adjournment or
postponement thereof, and on every action or approval by written
consent of shareholders of Target with respect to any of the
following, Shareholder shall vote all of the Shares or cause all
of the Shares to be voted:
(i) in favor of (1) the Merger and the other
Transactions, including all actions and transactions
contemplated by the Proxy Statement, and (2) any other
actions properly presented to holders of shares of capital stock
of Target in furtherance of the Merger Agreement, the Merger and
the other actions and transactions contemplated by the Merger
Agreement or the Proxy Statement;
A-44
(ii) against approval of any proposal made in opposition
to, or in competition with, the Merger Agreement or consummation
of the Merger and the other transactions contemplated by the
Merger Agreement or the Proxy Statement; and
(iii) except as otherwise agreed in writing in advance by
Parent, against the following actions (other than in furtherance
of the consummation of the Merger and the actions contemplated
by the Merger Agreement or the Proxy Statement): (A) any
extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving Target or
its Subsidiaries; (B) a sale, lease or transfer of a
material amount of assets of Target or its Subsidiaries;
(C) the issuance of shares of capital stock of Target in
connection with any such transaction described in the foregoing
clause (A) or clause (B), or (D) (1) any change in a
majority of the persons who constitute the board of directors of
Target; (2) any change in the present capitalization of
Target or any amendment of Targets articles of
incorporation or bylaws; (3) any other material change in
Targets corporate structure or business; or (4) any
action that is intended, or could reasonably be expected, in any
manner to impede, frustrate, prevent, nullify, interfere with,
delay, postpone, discourage or otherwise adversely affect the
consummation of the Merger or any of the other Transactions, in
accordance with the terms thereof, or the Proxy Statement,
including, without limitation, any action which could result in
a breach in any respect of any covenant, representation, or
warranty or other obligation or agreement of Target under the
Merger Agreement or this Agreement.
(b) Shareholder shall not enter into any agreement or
understanding with any person to vote or give instructions in
any manner inconsistent with or violative of this
Section 4
.
5.
Representations, Warranties and Covenants of
Shareholder.
Shareholder hereby represents,
warrants and covenants to the Parent Parties as follows:
(a) Shareholder is the Beneficial Owner of the Shares and
Options indicated on the signature page of this Agreement. If
any such Shares are held other than of record in the name of
Shareholder,
Exhibit A
lists each name, address and,
if applicable, account number (each such name and, if
applicable, corresponding account number, a
Nominee
Account
) in which such Shares are so held and the
number of Shares so held in each such Nominee Account. Except as
set forth on
Exhibit A
, Shareholder is the record
holder of the Shares and Options indicated on the signature page
of this Agreement.
(b) As of the date hereof, Shareholder does not
Beneficially Own any shares of capital stock of Target or any
securities convertible into, or exchangeable or exercisable for,
shares of capital stock of Target, other than the Shares and
Options set forth on the signature page hereto.
(c) Shareholder has the sole, full right, power and
authority to dispose, vote or direct the voting of the Shares
for and on behalf of all Beneficial Owners of the Shares with no
limitations, qualifications or restrictions on such rights,
subject to applicable securities laws and the terms of this
Agreement. Without limiting the foregoing, none of the Shares
are subject to any shared voting power or power of disposition
by any other Beneficial Owner of the Shares.
(d) The Shares are Beneficially Owned by Shareholder, free
and clear of any rights of first refusal, co-sale rights,
security interests, liens, preemptive rights, pledges, claims,
options, charges, proxies, voting trusts or agreements,
understandings or arrangement, or any other encumbrances of any
kind or nature
(Encumbrances)
, except
as permitted by the terms of this Agreement.
(e) The execution and delivery of this Agreement by
Shareholder does not, and Shareholders performance of its
obligations under this Agreement will not, conflict with or
violate or require any consent, approval or notice under, any
order, decree, judgment, statute, law, rule, regulation or
agreement applicable to Shareholder or by which Shareholder or
any of Shareholders properties or assets, including,
without limitation, the Shares and Options, is bound.
(f) Shareholder has the sole, full right, power and
authority to make, enter into and carry out the terms of this
Agreement with respect to all of the Shares without limitation,
qualification or restriction on such power and authority. This
Agreement has been duly executed and delivered by Shareholder
and
A-45
constitutes a legal, valid and binding agreement of Shareholder,
enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization,
moratorium and other laws of general applicability relating to
or affecting creditors rights and to general principles of
equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
(g) Except as expressly contemplated herein, Shareholder is
not a party to, and the Shares are not subject to or bound in
any manner by, any contract or agreement relating to the Shares
that would prohibit or restrict Shareholder from voting the
Shares as described in this Agreement or require Shareholder to
Transfer the Shares in violation of this Agreement, including
without limitation, any voting agreement, option agreement,
purchase agreement, shareholders agreement, partnership
agreement or voting trust.
6.
Additional Documents.
Each of
Shareholder and Target hereby covenants and agrees to execute
and deliver any additional documents and take such further
actions as may be reasonably necessary or desirable, in the
reasonable opinion of Parent, to carry out the purposes and
intent of this Agreement.
7.
Consents and
Waivers.
Shareholder hereby gives all consents
and waivers that may be required from it for the execution and
delivery of this Agreement under the terms of any agreement or
instrument to which Shareholder is a party or subject or in
respect of any rights Shareholder may have now or at any time
prior to the Expiration Date with respect to the voting of the
Shares. Shareholder further consents to Target placing a stop
transfer order on the Shares with its transfer agent(s), which
stop transfer order shall, until otherwise requested by Parent,
remain in effect until the Expiration Date. Shareholder further
consents and authorizes the Parent Parties and Target to publish
and disclose in the Proxy Statement (including all documents
filed with the SEC in connection therewith) Shareholders
identity and ownership of the Shares and the nature of
Shareholders commitments, arrangements and understandings
under this Agreement.
8.
Waiver of Claims.
Subject to
Section 11 of this Agreement, Shareholder agrees that it
will not bring, commence, institute, maintain, prosecute,
participate in or voluntarily aid any action, claim, suit or
cause of action, in law or in equity, in any court or before any
governmental entity, which (i) challenges the validity of
or seeks to enjoin the operation of any provision of this
Agreement or (ii) alleges that the execution and delivery
of this Agreement by the Shareholder, either alone or together
with the other Target voting agreements to be delivered in
connection with the execution of the Merger Agreement, or the
approval of the actions contemplated by the Merger Agreement or
the Proxy Statement by the Board of Directors of Target,
breaches any fiduciary duty of the Board of Directors of Target
or any member thereof;
provided,
that the Shareholder may
defend against, contest or settle any such action, claim suit or
cause of action brought against Shareholder that relates solely
to the Shareholders capacity as a director or officer of
Target.
9.
Termination.
This Agreement
shall terminate and shall have no further force or effect as of
the Expiration Date.
10.
Covenants.
Target agrees to
make a notation on its records and give instructions to its
transfer agent(s) to not permit, during the term of this
Agreement, the Transfer of any Shares, except in accordance with
the terms of this Agreement.
11.
Shareholder
Capacity.
Shareholder does not make any agreement
or representation or warranty herein as a director or officer of
Target. Nothing in this Agreement shall be construed as
prohibiting, preventing, precluding or otherwise affecting any
actions taken, or not taken, by Shareholder in his capacity as
an officer or director of Target or any of its Subsidiaries or
from fulfilling the obligations of such office.
12.
Board Approval.
Target
represents and warrants that prior to the execution of this
Agreement, the Board of Directors of Target has determined that
this Agreement and the transactions contemplated hereby are
advisable and in the best interests of Target and the holders of
Targets capital stock and has approved the execution and
delivery of this Agreement by Target.
13.
Miscellaneous
.
(a)
Waiver.
No failure on the part of any
party to exercise any power, right, privilege or remedy under
this Agreement, and no delay on the part of any party in
exercising any power, right, privilege or remedy
A-46
under this Agreement, shall operate as a waiver of such power,
right, privilege or remedy; and no single or partial exercise of
any such power, right, privilege or remedy shall preclude any
other or further exercise thereof or of any other power, right,
privilege or remedy. A party hereto shall not be deemed to have
waived any claim arising out of this Agreement, or any power,
right, privilege or remedy under this Agreement, unless the
waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and
delivered on behalf of such party; and any such waiver shall not
be applicable or have any effect except in the specific instance
in which it is given.
(b)
Notices.
All notices and other
communications hereunder shall be in writing and shall be deemed
duly given (i) on the date of delivery if delivered
personally or by courier service, (ii) on the date of
confirmation of receipt (or the first Business Day following
such receipt if the date is not a Business Day) if sent via
facsimile (receipt confirmed), or (iii) on the date of
confirmation of receipt (or the first Business Day following
such receipt if the date is not a Business Day) if delivered by
a nationally recognized courier service. All notices hereunder
shall be delivered to the parties at the following addresses or
facsimile numbers (or pursuant to such other instructions as may
be designated in writing by the party to receive such notice):
To Parent:
ALTA MESA HOLDINGS, LP
15415 Katy Fwy, Suite 800
Houston, Texas 77094
Attention: Harlan H. Chappelle, President
Telephone:
(281) 530-0991
Facsimile:
(281) 530-5278
To Merger Sub:
ALTA MESA ACQUISITION SUB, LLC
c/o Alta
Mesa Holdings, LP
15415 Katy Fwy, Suite 800
Houston, Texas 77094
Attention: Harlan H. Chappelle, President
Telephone:
(281) 530-0991
Facsimile:
(281) 530-5278
With copies (which shall not constitute notice) to:
Haynes and Boone, LLP
1221 McKinney Street, Suite 2100
Houston, Texas 77010
Attention: Buddy Clark
Telephone:
(713) 547-2077
Facsimile:
(713) 236-5577
Haynes and Boone, LLP
1221 McKinney Street, Suite 2100
Houston, Texas 77010
Attention: Bill Nelson
Telephone:
(713) 547-2084
Facsimile:
(713) 236-5557
A-47
To Target:
THE MERIDIAN RESOURCE CORPORATION
1401 Enclave Parkway, Suite 300
Houston, Texas 77077
Attention: Paul Ching, Chairman & CEO
Telephone:
(281) 597-7000
Facsimile:
(281) 597-8880
With a copy (which shall not constitute notice) to:
Fulbright & Jaworski, L.L.P.
1301 McKinney Street, Suite 5100
Houston, Texas 77010
Attention: Roger K. Harris
Telephone:
(713) 651-5151
Facsimile:
(713) 651-5517
To Shareholder:
To the address for notice set forth opposite Shareholders
name on the signature page hereof.
(c)
Headings.
All captions and section
headings used in this Agreement are for convenience only and do
not form a part of this Agreement.
(d)
Counterparts.
This Agreement may be
executed in two or more counterparts, and via facsimile, all of
which shall be considered one and the same agreement and shall
become effective when one or more counterparts have been signed
by each of the parties and delivered to the other parties or to
a person designated in writing by the parties to accept and
confirm the execution and delivery of this Agreement, it being
understood that all parties need not sign the same counterpart.
(e)
Entire Agreement; Amendment.
This
Agreement constitutes the entire agreement among the parties
with respect to the subject matter hereof and supersedes all
prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
This Agreement may not be changed or modified, except by an
agreement in writing specifically referencing this Agreement and
executed by the Parent Parties and Shareholder;
provided,
however,
that Targets obligations hereunder may not
be changed or modified without the written consent of Target.
(f)
Severability.
In the event that any
provision of this Agreement shall be determined to be invalid,
unlawful, void or unenforceable to any extent, the remainder of
this Agreement shall not be impaired or otherwise affected and
shall continue to be valid and enforceable to the fullest extent
permitted by law.
(g)
Governing Law, Jurisdiction and
Venue.
This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas,
regardless of the laws that might otherwise govern under
applicable principles of conflicts of law thereof. Each of the
parties hereto irrevocably consents to the exclusive
jurisdiction and venue of the courts of Harris County in the
State of Texas in connection with any matter based upon or
arising out of this Agreement or the matters contemplated
herein, agrees that process may be served upon them in any
manner authorized by the laws of the State of Texas for such
persons and waives and covenants not to assert or plead any
objection which they might otherwise have to such jurisdiction,
venue and such process.
(h)
Rules of Construction.
The parties
hereto agree to waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party
drafting such agreement or document.
(i)
Remedies.
The parties acknowledge
that the Parent Parties will be irreparably harmed and that
there will be no adequate remedy at law in the event of a
violation or breach of any of the terms of this Agreement.
Therefore, it is agreed that, in addition to any other remedies
that may be available to the Parent Parties upon any such
violation or breach, the Parent Parties shall have the right to
enforce the terms hereof by specific
A-48
performance, injunctive relief or by any other means available
to the Parent Parties at law or in equity, and that Shareholder
waives the posting of any bond or security in connection with
any proceedings related thereto. All rights, powers and remedies
provided under this Agreement or otherwise available in respect
hereof at law or in equity shall be cumulative and not
alternative, and the exercise or beginning of the exercise of
any right, power or remedy by the Parent Parties shall not
preclude the simultaneous or later exercise of any other such
right, power or remedy by the Parent Parties.
(j)
Binding Effect; No Assignment.
This
Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement
nor any of the rights, interests or obligations of the parties
hereto may be assigned by any of the parties without the prior
written consent of the other parties. Any purported assignment
in violation of this
Section 13(j)
shall be void.
[SIGNATURE
PAGE FOLLOWS]
A-49
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ALTA MESA HOLDINGS, LP
By: Alta Mesa GP, LLC
Its: General Partner
Name:
Title:
ALTA MESA ACQUISITION SUB, LLC
Name:
Title:
THE MERIDIAN RESOURCE CORPORATION
Name:
Title:
[Signature
Page Voting Agreement]
A-50
IN WITNESS WHEREOF, the undersigned has executed this Agreement
as of the day and year first above written.
Address
Shares and Options
Target Common Shares:
Target Options:
Target Warrants:
[Signature
Page Voting Agreement]
A-51
EXHIBIT A
[Nominee
Accounts]
A-52
Exhibit B
Form of
Option Waiver, Cancellation and Release Agreement
OPTION
WAIVER, CANCELLATION AND RELEASE AGREEMENT
This Option Waiver, Cancellation and Release Agreement (this
Agreement
) is entered into by and
between THE MERIDIAN RESOURCE CORPORATION, a Texas corporation
(
Target
),
and (the
Optionholder
). Terms used in this
Agreement with initial capital letters that are not otherwise
defined herein shall have the meanings ascribed to such terms in
the Agreement and Plan of Merger, dated as of
December , 2009 (the
Merger
Agreement
), by and among ALTA MESA HOLDINGS, LP, a
Texas limited partnership
(Parent)
,
ALTA MESA ACQUISITION SUB, LLC, a Texas limited liability
company (
Merger Sub,
and, together
with Parent, the
Parent Parties
), and
Target. This Agreement shall be effective as of the Effective
Time.
RECITALS
A. Under the option agreement,
dated ,
by and between the Optionholder and Target (the
Option Agreement
), Target granted to
the Optionholder a stock option (the
Option
) to
purchase
full shares of Target Common Shares at an exercise price equal
to $ per share pursuant to the
[1997 Long-Term Incentive Plan/2007 Long-Term Incentive
Plan]
(the
Plan
).
B. In connection with the Merger, Target and the
Optionholder desire to cancel the entire Option Agreement as it
relates
to shares
of Target Common Shares immediately prior to the Effective Time
so that on and after the Effective Time, the Option Agreement
shall be cancelled and of no further effect.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties to this
Agreement agree as follows:
ARTICLE I
CANCELLATION
OF OPTIONS
1.1
Waiver of Substitution.
In
exchange for the payment of the amount described in
Section 1.3
below, as of the Effective Time, the
Optionholder hereby irrevocably and unconditionally waives and
relinquishes his rights of substitution with respect to the
Option under the Plan and Option Agreement. In waiving the right
to substitution, the Optionholder understands and acknowledges
that he shall not be entitled to acquire under the Option
Agreement any cash, stock, securities or other property that the
Optionholder may be entitled to pursuant to any
[Change of
Control (as defined in the Plan)/Corporate Change (as defined in
the Plan)]
, except as set forth in
Section 1.3
of this Agreement.
1.2
Cancellation of Option
Agreement.
In exchange for the payment of the
amount described in
Section 1.3
below, the
Optionholder hereby agrees that the Option Agreement and the
Option granted thereunder shall be cancelled, terminated, and of
no further force or effect, effective as of the Effective Time,
and neither Target nor the Optionholder shall have any further
rights or obligations with respect to the Option Agreement, or
with respect to any Target Common Shares that could have been
purchased upon exercise of the Option under the Option
Agreement. The Optionholder hereby agrees not to exercise the
Option under the Option Agreement, in whole or in part, or
transfer the Option under the Option Agreement or any portion
thereof.
1.3
Payment.
In exchange for the
Optionholders agreement to cancel the Option Agreement and
the rights, obligations and liabilities of Target thereunder
granting Optionholder the right to purchase Target Common Shares
or other ownership interests of Target and the release of claims
set forth in
Section 1.4
, Target hereby agrees to
pay Optionholder, as promptly as practicable after the Effective
Time, $10.00 in cash, without interest (less any income or
employment Tax withholding required under (x) the Code,
(y) any applicable state or local Tax laws, or (z) any
other applicable laws).
A-53
1.4
Release
.
(a) Effective as of the Effective Time, the Optionholder,
for the Optionholder and the Optionholders successors and
assigns forever, does hereby unconditionally and irrevocably
compromise, settle, remise, acquit and fully and forever release
and discharge Target, the Parent Parties and their respective
Affiliates (including, but not limited to, the Surviving
Company) and each of their respective successors and assigns,
and their present and former officers, directors, employees and
agents (collectively, the
Released
Parties
) from any and all claims, counterclaims,
set-offs, debts, demands, choses in action, obligations,
remedies, suits, damages and liabilities in connection with any
rights to acquire securities of Target pursuant to the Option
Agreement and the Target Common Shares issuable thereunder
(collectively, the
Releasers
Claims
), whether now known or unknown or suspected
or claimed, whether arising under common law, in equity or under
statute, which the Optionholder or the Optionholders
successors or assigns ever had, now have, or in the future may
claim to have against the Released Parties and which may have
arisen at any time on or prior to the Effective Time; provided
that this
Section 1.4(a)
shall not apply to any of
the obligations or liabilities of the Released Parties arising
under or in connection with this Agreement.
(b) The Optionholder covenants and agrees never to
commence, voluntarily aid in any way, prosecute or cause to be
commenced or prosecuted against the Released Parties any action
or other proceeding based on any of the released Releasers
Claims which may have arisen at any time on or prior to the
Effective Time.
1.5
Further Assurances.
Each party
to this Agreement agrees that it will perform all such further
acts and execute and deliver all such further documents as may
be reasonably required in connection with the consummation of
the transactions contemplated hereby in accordance with the
terms of this Agreement.
ARTICLE II
MISCELLANEOUS
2.1
Headings.
The headings that are
used in this Agreement are used for reference and convenience
purposes only and do not constitute substantive matters to be
considered in construing the terms and provisions of this
Agreement.
2.2
Parties Bound.
The terms,
provisions, representations, warranties, covenants, and
agreements that are contained in this Agreement shall apply to,
be binding upon, and inure to the benefit of the parties and
their respective heirs, executors, administrators, legal
representatives, and permitted successors and assigns.
2.3
Counterparts.
This Agreement
may be executed in two or more counterparts, and via facsimile,
all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties
or to a person designated in writing by the parties to accept
and confirm the execution and delivery of this Agreement, it
being understood that all parties need not sign the same
counterpart.
2.4
Entire Agreement.
This
Agreement supersedes any and all other prior understandings and
agreements, either oral or in writing, between the parties with
respect to the subject matter hereof and constitutes the sole
and only agreement between the parties with respect to the said
subject matter. All prior negotiations and agreements between
the parties with respect to the subject matter hereof are merged
into this Agreement. Each party to this Agreement acknowledges
that no representations, inducements, promises, or agreements,
orally or otherwise, have been made by any party or by anyone
acting on behalf of any party, which are not embodied in this
Agreement and that any agreement, statement or promise that is
not contained in this Agreement shall not be valid or binding or
of any force or effect.
2.5
Governing Law, Jurisdiction and
Venue.
This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas,
regardless of the laws that might otherwise govern under
applicable principles of conflicts of law thereof. Each of the
parties hereto irrevocably consents to the exclusive
jurisdiction and venue of the courts of Harris County in the
State of Texas in connection with any matter based upon or
arising out of this Agreement or the matters contemplated
herein, agrees that process may be served upon them in any
manner authorized by the laws of the State of Texas for such
persons and
A-54
waives and covenants not to assert or plead any objection which
they might otherwise have to such jurisdiction, venue and such
process.
2.6
Notices.
Any notice required or
permitted to be delivered hereunder shall be deemed to be
delivered only when actually received by Target or by the
Optionholder, as the case may be, at the addresses set forth
below, or at such other addresses as they have theretofore
specified by written notice delivered in accordance herewith.
Notice to Target shall be addressed and delivered as follows:
THE MERIDIAN RESOURCE CORPORATION
1401 Enclave Parkway, Suite 300
Houston, Texas 77077
Attention: Paul Ching, Chairman & CEO
Telephone:
Facsimile:
Notice to the Optionholder shall be addressed and delivered to
the address set forth opposite the Optionholders name on
the signature page hereof.
2.7
Effectiveness.
If the Merger
Agreement is terminated pursuant to Article XI thereof,
this Agreement shall be void and cease to be of further force or
effect, with no liability on the part of any party to the other
party hereto and the agreements and obligations of the parties
contained the Option Agreement shall continue to apply in
accordance with the terms of the Option Agreement, without
giving effect to the terms of this Agreement.
[SIGNATURE
PAGE FOLLOWS]
A-55
IN WITNESS WHEREOF, Target has caused this Agreement to be
executed by its duly authorized officer, and the Optionholder,
to evidence his consent and approval of all the terms hereof,
has duly executed this Agreement as of the day
of ,
2010.
THE MERIDIAN RESOURCE CORPORATION
Name:
Title:
OPTIONHOLDER
Name:
Address:
A-56
Annex B
711
Louisiana Street
Suite 1650
Houston, TX 77002
713.546.5800 Telex
69-74324
WATS 800.366.7426
December 22, 2009
Personal and Confidential
Board of Directors
The Meridian Resource Corporation
1401 Enclave Parkway
Suite 300
Houston, Texas 77077
Gentlemen:
You have requested our opinion as to the fairness, from a
financial point of view, to holders of the common stock of the
Meridian Resource Corporation (the Company) of the
Merger Consideration (as defined below) to be received by such
holders pursuant to the Agreement and Plan of Merger dated as of
December 22, 2009 (the Merger Agreement), among
Alta Mesa Holdings, L.P. (Parent), and Alta Mesa
Acquisition Sub, L.L.C., a Texas limited liability company and a
wholly-owned subsidiary of Parent (Purchaser), and
the Company. Capitalized terms used in this opinion letter
without definition shall have the meaning ascribed to such terms
in the Merger Agreement.
Pursuant to the Merger Agreement, at the Effective Time, each
share of the Companys common stock, $.01 par value
(the Company Common Stock) issued and outstanding
immediately prior to the Effective Time, except as otherwise
provided for in the Merger Agreement, shall be converted into
the right to receive an amount in cash, without interest, equal
to the $0.29 (the Merger Consideration). The terms
and conditions of the Merger are more fully set forth in the
Merger Agreement.
In rendering our opinion, we have:
i) reviewed certain publicly available financial statements
and other business and financial information of the Company;
ii) reviewed certain non-public internal financial
statements and other financial and operating data concerning the
Company, including the Companys engineering and reserve
report;
iii) reviewed certain non-public financial forecasts
relating to the Company prepared by the management of the
Company (the Company Forecasts);
iv) discussed the past and current operations, financial
condition and prospects of the Company with senior executives of
the Company, including the Companys questionable ability
to continue as a going concern;
v) reviewed historical reported prices and trading activity
for the Company Common Stock;
A Regions
Company
Not FDIC Insured May Lose
Value No Bank Guarantee
Not a Deposit Not Insured by Any Government
Agency
B-1
The Meridian
Resource Corporation
December 22, 2009
Page 2 of 3
vi) compared the financial performance of the Company and
the prices of the Company Common Stock with those of certain
other publicly traded companies we deemed relevant;
vii) compared certain financial terms of the Merger to
financial terms, to the extent publicly available, of certain
other business combination transactions we deemed relevant;
viii) reviewed the Merger Agreement;
ix) considered the results of the Companys efforts to
solicit indications of interest from selected third parties with
respect to a possible acquisition of the Company; and
x) performed such other analyses and considered such other
factors as we have deemed appropriate.
In rendering our opinion, we have assumed and relied upon,
without independent verification, the accuracy and completeness
of the financial and other information reviewed by us. At the
direction of the Company we have assumed, without independent
verification, that the Company Forecasts have been reasonably
prepared on bases reflecting the best currently available
estimates and good faith judgments of the management of the
Company as to the future financial performance of the Company.
We have not made any independent evaluation or appraisal of the
assets or liabilities (contingent or otherwise) of the Company,
nor have we been furnished with any such evaluations or
appraisals. We have assumed that the Merger will be consummated
as provided in the Merger Agreement with full satisfaction of
all covenants and conditions set forth in the Merger Agreement
and without any waivers thereof.
We express no view or opinion as to any terms or aspects of the
Merger (other than the Merger Consideration to the extent
expressly specified herein), including, without limitation, the
form or structure of the Merger or the Merger Consideration and
the tax treatment of the Merger to various constituencies. We
express no view or opinion as to the fairness of the amount or
nature of the compensation, if any, to any of the Companys
officers, directors or employees, or class of such persons,
relative to the compensation to the shareholders of the Company.
In addition, we express no view or opinion as to the relative
merits of the Merger in comparison to other transactions
available to the Company or in which the Company might engage or
as to whether any transaction might be more favorable to the
Company as an alternative to the Merger, nor are we expressing
any opinion as to the underlying business decision of the Board
of Directors of the Company to recommend the Merger to the
Companys stockholders or the Companys decision to
proceed with or effect the Merger. This opinion is not a
recommendation to any stockholder as to how such stockholder
should vote with respect to the proposed Merger.
The Company has agreed to indemnify us against certain
liabilities arising out of our engagement by the Company.
Moreover, we and our affiliates are actively engaged in the
securities business as a broker, dealer, investment advisor and
investment banking organization. Accordingly, we
and/or
our
affiliates may actively trade or hold securities or loans of the
Company for our own accounts or for the accounts of customers
and, accordingly, we or our affiliates may at any time hold long
or short positions in such securities or loans.
It is understood that this letter is for the benefit and use of
the Board of Directors of the Company in connection with and for
purposes of its evaluation of the Merger. This opinion may not
be republished or disclosed to any other party without our
written consent, provided that this opinion may be published in
a proxy statement delivered to stockholders of the Company in
connection with the solicitation of proxies to approve the
Merger. Under its engagement with the Company, Morgan Keegan
will receive a fee in connection with rendering this opinion,
which fee is not contingent upon the successful completion of
the Merger. Morgan Keegans opinion was approved by Morgan
Keegans fairness opinion committee.
Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available
to us as of, the date hereof. It should be understood that
subsequent developments may affect this opinion, and we do not
have any obligation to update, revise or reaffirm this opinion.
B-2
The Meridian
Resource Corporation
December 22, 2009
Page 3 of 3
Based upon and subject to the foregoing, including the various
assumptions and limitations set forth herein, we are of the
opinion on the date hereof that the Merger Consideration to be
received in the Merger by holders of the Company Common Stock is
fair, from a financial point of view, to such holders.
Sincerely,
/s/ Morgan
Keegan & Company, Inc.
MORGAN KEEGAN & COMPANY, INC.
B-3
Annex C
TEXAS
BUSINESS ORGANIZATIONS CODE
TITLE 1. GENERAL PROVISIONS
CHAPTER 10. MERGERS, INTEREST EXCHANGES, CONVERSIONS, AND
SALES OF ASSETS
SUBCHAPTER H. RIGHTS OF DISSENTING OWNERS
§
10.351. Applicability of Subchapter
(a) This subchapter does not apply to a fundamental
business transaction of a domestic entity if, immediately before
the effective date of the fundamental business transaction, all
of the ownership interests of the entity otherwise entitled to
rights to dissent and appraisal under this code are held by one
owner or only by the owners who approved the fundamental
business transaction.
(b) This subchapter applies only to a domestic entity
subject to dissenters rights, as defined in
Section 1.002. That term includes a domestic for-profit
corporation, professional corporation, professional association,
and real estate investment trust. Except as provided in
Subsection (c), that term does not include a partnership or
limited liability company.
(c) The governing documents of a partnership or a limited
liability company may provide that its owners are entitled to
the rights of dissent and appraisal provided by this subchapter,
subject to any modification to those rights as provided by the
entitys governing documents.
§
10.352. Definitions
In this subchapter:
(1)
Dissenting owner
means an owner of
an ownership interest in a domestic entity subject to
dissenters rights who:
(A) provides notice under Section 10.356; and
(B) complies with the requirements for perfecting that
owners right to dissent under this subchapter.
(2)
Responsible organization
means:
(A) the organization responsible for:
(i) the provision of notices under this subchapter; and
(ii) the primary obligation of paying the fair value for an
ownership interest held by a dissenting owner;
(B) with respect to a merger or conversion:
(i) for matters occurring before the merger or conversion,
the organization that is merging or converting; and
(ii) for matters occurring after the merger or conversion,
the surviving or new organization that is primarily obligated
for the payment of the fair value of the dissenting owners
ownership interest in the merger or conversion;
(C) with respect to an interest exchange, the organization
the ownership interests of which are being acquired in the
interest exchange; and
(D) with respect to the sale of all or substantially all of
the assets of an organization, the organization the assets of
which are to be transferred by sale or in another manner.
C-1
§
10.353. Form and Validity of Notice
(a) Notice required under this subchapter:
(1) must be in writing; and
(2) may be mailed, hand-delivered, or delivered by courier
or electronic transmission.
(b) Failure to provide notice as required by this
subchapter does not invalidate any action taken.
§
10.354. Rights of Dissent and Appraisal
(a) Subject to Subsection (b), an owner of an ownership
interest in a domestic entity subject to dissenters rights
is entitled to:
(1) dissent from:
(A) a plan of merger to which the domestic entity is a
party if owner approval is required by this code and the owner
owns in the domestic entity an ownership interest that was
entitled to vote on the plan of merger;
(B) a sale of all or substantially all of the assets of the
domestic entity if owner approval is required by this code and
the owner owns in the domestic entity an ownership interest that
was entitled to vote on the sale;
(C) a plan of exchange in which the ownership interest of
the owner is to be acquired;
(D) a plan of conversion in which the domestic entity is
the converting entity if owner approval is required by this code
and the owner owns in the domestic entity an ownership interest
that was entitled to vote on the plan of conversion; or
(E) a merger effected under Section 10.006 in which:
(i) the owner is entitled to vote on the merger; or
(ii) the ownership interest of the owner is converted or
exchanged; and
(2) subject to compliance with the procedures set forth in
this subchapter, obtain the fair value of that ownership
interest through an appraisal.
(b) Notwithstanding Subsection (a), subject to Subsection
(c), an owner may not dissent from a plan of merger or
conversion in which there is a single surviving or new domestic
entity or non-code organization, or from a plan of exchange, if:
(1) the ownership interest, or a depository receipt in
respect of the ownership interest, held by the owner is part of
a class or series of ownership interests, or depository receipts
in respect of ownership interests, that are, on the record date
set for purposes of determining which owners are entitled to
vote on the plan of merger, conversion, or exchange, as
appropriate:
(A) listed on a national securities exchange or a similar
system;
(B) listed on the Nasdaq Stock Market or a successor
quotation system;
(C) designated as a national market security on an
interdealer quotation system by the National Association of
Securities Dealers, Inc., or a successor system; or
(D) held of record by at least 2,000 owners;
(2) the owner is not required by the terms of the plan of
merger, conversion, or exchange, as appropriate, to accept for
the owners ownership interest any consideration that is
different from the consideration to be provided to any other
holder of an ownership interest of the same class or series as
the ownership interest held by the owner, other than cash
instead of fractional shares or interests the owner would
otherwise be entitled to receive; and
C-2
(3) the owner is not required by the terms of the plan of
merger, conversion, or exchange, as appropriate, to accept for
the owners ownership interest any consideration other than:
(A) ownership interests, or depository receipts in respect
of ownership interests, of a domestic entity or non-code
organization of the same general organizational type that,
immediately after the effective date of the merger, conversion,
or exchange, as appropriate, will be part of a class or series
of ownership interests, or depository receipts in respect of
ownership interests, that are:
(i) listed on a national securities exchange or authorized
for listing on the exchange on official notice of issuance;
(ii) approved for quotation as a national market security
on an interdealer quotation system by the National Association
of Securities Dealers, Inc., or a successor entity; or
(iii) held of record by at least 2,000 owners;
(B) cash instead of fractional ownership interests the
owner would otherwise be entitled to receive; or
(C) any combination of the ownership interests and cash
described by Paragraphs (A) and (B).
(c) Subsection (b) shall not apply to a domestic
entity that is a subsidiary with respect to a merger under
Section 10.006.
§
10.355. Notice of Right of Dissent and Appraisal
(a) A domestic entity subject to dissenters rights
that takes or proposes to take an action regarding which an
owner has a right to dissent and obtain an appraisal under
Section 10.354 shall notify each affected owner of the
owners rights under that section if:
(1) the action or proposed action is submitted to a vote of
the owners at a meeting; or
(2) approval of the action or proposed action is obtained
by written consent of the owners instead of being submitted to a
vote of the owners.
(b) If a parent organization effects a merger under
Section 10.006 and a subsidiary organization that is a
party to the merger is a domestic entity subject to
dissenters rights, the responsible organization shall
notify the owners of that subsidiary organization who have a
right to dissent to the merger under Section 10.354 of
their rights under this subchapter not later than the
10th day after the effective date of the merger. The notice
must also include a copy of the certificate of merger and a
statement that the merger has become effective.
(c) A notice required to be provided under
Subsection (a) or (b) must:
(1) be accompanied by a copy of this subchapter; and
(2) advise the owner of the location of the responsible
organizations principal executive offices to which a
notice required under Section 10.356(b)(2) may be provided.
(d) In addition to the requirements prescribed by
Subsection (c), a notice required to be provided under
Subsection (a)(1) must accompany the notice of the meeting to
consider the action, and a notice required under Subsection
(a)(2) must be provided to:
(1) each owner who consents in writing to the action before
the owner delivers the written consent; and
(2) each owner who is entitled to vote on the action and
does not consent in writing to the action before the
11th day after the date the action takes effect.
(e) Not later than the 10th day after the date an
action described by Subsection (a)(1) takes effect, the
responsible organization shall give notice that the action has
been effected to each owner who voted against the action and
sent notice under Section 10.356(b)(2).
C-3
§
10.356. Procedure for Dissent by Owners as to Actions;
Perfection of Right of Dissent and Appraisal
(a) An owner of an ownership interest of a domestic entity
subject to dissenters rights who has the right to dissent
and appraisal from any of the actions referred to in
Section 10.354 may exercise that right to dissent and
appraisal only by complying with the procedures specified in
this subchapter. An owners right of dissent and appraisal
under Section 10.354 may be exercised by an owner only with
respect to an ownership interest that is not voted in favor of
the action.
(b) To perfect the owners rights of dissent and
appraisal under Section 10.354, an owner:
(1) with respect to the ownership interest for which the
rights of dissent and appraisal are sought:
(A) must vote against the action if the owner is entitled
to vote on the action and the action is approved at a meeting of
the owners; and
(B) may not consent to the action if the action is approved
by written consent; and
(2) must give to the responsible organization a notice
dissenting to the action that:
(A) is addressed to the president and secretary of the
responsible organization;
(B) demands payment of the fair value of the ownership
interests for which the rights of dissent and appraisal are
sought;
(C) provides to the responsible organization an address to
which a notice relating to the dissent and appraisal procedures
under this subchapter may be sent;
(D) states the number and class of the ownership interests
of the domestic entity owned by the owner and the fair value of
the ownership interests as estimated by the owner; and
(E) is delivered to the responsible organization at its
principal executive offices at the following time:
(i) before the action is considered for approval, if the
action is to be submitted to a vote of the owners at a meeting;
(ii) not later than the 20th day after the date the
responsible organization sends to the owner a notice that the
action was approved by the requisite vote of the owners, if the
action is to be undertaken on the written consent of the
owners; or
(iii) not later than the 20th day after the date the
responsible organization sends to the owner a notice that the
merger was effected, if the action is a merger effected under
Section 10.006.
(c) An owner who does not make a demand within the period
required by Subsection (b)(2)(E) is bound by the action and is
not entitled to exercise the rights of dissent and appraisal
under Section 10.354.
(d) Not later than the 20th day after the date an
owner makes a demand under this section, the owner must submit
to the responsible organization any certificates representing
the ownership interest to which the demand relates for purposes
of making a notation on the certificates that a demand for the
payment of the fair value of an ownership interest has been made
under this section. An owners failure to submit the
certificates within the required period has the effect of
terminating, at the option of the responsible organization, the
owners rights to dissent and appraisal under
Section 10.354 unless a court, for good cause shown,
directs otherwise.
(e) If a domestic entity and responsible organization
satisfy the requirements of this subchapter relating to the
rights of owners of ownership interests in the entity to dissent
to an action and seek appraisal of those ownership interests, an
owner of an ownership interest who fails to perfect that
owners right of dissent in accordance with this subchapter
may not bring suit to recover the value of the ownership
interest or money damages relating to the action.
C-4
§
10.357. Withdrawal of Demand for Fair Value of Ownership
Interest
(a) An owner may withdraw a demand for the payment of the
fair value of an ownership interest made under
Section 10.356 before:
(1) payment for the ownership interest has been made under
Sections 10.358 and 10.361; or
(2) a petition has been filed under Section 10.361.
(b) Unless the responsible organization consents to the
withdrawal of the demand, an owner may not withdraw a demand for
payment under Subsection (a) after either of the events
specified in Subsections (a)(1) and (2).
§
10.358. Response by Organization to Notice of Dissent and Demand
for Fair Value by Dissenting Owner
(a) Not later than the 20th day after the date a
responsible organization receives a demand for payment made by a
dissenting owner in accordance with Section 10.356, the
responsible organization shall respond to the dissenting owner
in writing by:
(1) accepting the amount claimed in the demand as the fair
value of the ownership interests specified in the notice; or
(2) rejecting the demand and including in the response the
requirements prescribed by Subsection (c).
(b) If the responsible organization accepts the amount
claimed in the demand, the responsible organization shall pay
the amount not later than the 90th day after the date the
action that is the subject of the demand was effected if the
owner delivers to the responsible organization:
(1) endorsed certificates representing the ownership
interests if the ownership interests are certificated; or
(2) signed assignments of the ownership interests if the
ownership interests are uncertificated.
(c) If the responsible organization rejects the amount
claimed in the demand, the responsible organization shall
provide to the owner:
(1) an estimate by the responsible organization of the fair
value of the ownership interests; and
(2) an offer to pay the amount of the estimate provided
under Subdivision (1).
(d) An offer made under Subsection (c)(2) must remain open
for a period of at least 60 days from the date the offer is
first delivered to the dissenting owner.
(e) If a dissenting owner accepts an offer made by a
responsible organization under Subsection (c)(2) or if a
dissenting owner and a responsible organization reach an
agreement on the fair value of the ownership interests, the
responsible organization shall pay the agreed amount not later
than the 60th day after the date the offer is accepted or
the agreement is reached, as appropriate, if the dissenting
owner delivers to the responsible organization:
(1) endorsed certificates representing the ownership
interests if the ownership interests are certificated; or
(2) signed assignments of the ownership interests if the
ownership interests are uncertificated.
§
10.359. Record of Demand for Fair Value of Ownership
Interest
(a) A responsible organization shall note in the
organizations ownership interest records maintained under
Section 3.151 the receipt of a demand for payment from any
dissenting owner made under Section 10.356.
C-5
(b) If an ownership interest that is the subject of a
demand for payment made under Section 10.356 is
transferred, a new certificate representing that ownership
interest must contain:
(1) a reference to the demand; and
(2) the name of the original dissenting owner of the
ownership interest.
§
10.360. Rights of Transferee of Certain Ownership
Interest
A transferee of an ownership interest that is the subject of a
demand for payment made under Section 10.356 does not
acquire additional rights with respect to the responsible
organization following the transfer. The transferee has only the
rights the original dissenting owner had with respect to the
responsible organization after making the demand.
§
10.361. Proceeding to Determine Fair Value of Ownership Interest
and Owners Entitled to Payment; Appointment of
Appraisers
(a) If a responsible organization rejects the amount
demanded by a dissenting owner under Section 10.358 and the
dissenting owner and responsible organization are unable to
reach an agreement relating to the fair value of the ownership
interests within the period prescribed by
Section 10.358(d), the dissenting owner or responsible
organization may file a petition requesting a finding and
determination of the fair value of the owners ownership
interests in a court in:
(1) the county in which the organizations principal
office is located in this state; or
(2) the county in which the organizations registered
office is located in this state, if the organization does not
have a business office in this state.
(b) A petition described by Subsection (a) must be
filed not later than the 60th day after the expiration of
the period required by Section 10.358(d).
(c) On the filing of a petition by an owner under
Subsection (a), service of a copy of the petition shall be made
to the responsible organization. Not later than the
10th day after the date a responsible organization receives
service under this subsection, the responsible organization
shall file with the clerk of the court in which the petition was
filed a list containing the names and addresses of each owner of
the organization who has demanded payment for ownership
interests under Section 10.356 and with whom agreement as
to the value of the ownership interests has not been reached
with the responsible organization. If the responsible
organization files a petition under Subsection (a), the petition
must be accompanied by this list.
(d) The clerk of the court in which a petition is filed
under this section shall provide by registered mail notice of
the time and place set for the hearing to:
(1) the responsible organization; and
(2) each owner named on the list described by
Subsection (c) at the address shown for the owner on the
list.
(e) The court shall:
(1) determine which owners have:
(A) perfected their rights by complying with this
subchapter; and
(B) become subsequently entitled to receive payment for the
fair value of their ownership interests; and
(2) appoint one or more qualified appraisers to determine
the fair value of the ownership interests of the owners
described by Subdivision (1).
(f) The court shall approve the form of a notice required
to be provided under this section. The judgment of the court is
final and binding on the responsible organization, any other
organization obligated to make
C-6
payment under this subchapter for an ownership interest, and
each owner who is notified as required by this section.
(g) The beneficial owner of an ownership interest subject
to dissenters rights held in a voting trust or by a
nominee on the beneficial owners behalf may file a
petition described by Subsection (a) if no agreement
between the dissenting owner of the ownership interest and the
responsible organization has been reached within the period
prescribed by Section 10.358(d). When the beneficial owner
files a petition described by Subsection (a):
(1) the beneficial owner shall at that time be considered,
for purposes of this subchapter, the owner, the dissenting
owner, and the holder of the ownership interest subject to the
petition; and
(2) the dissenting owner who demanded payment under
Section 10.356 has no further rights regarding the
ownership interest subject to the petition.
§
10.362. Computation and Determination of Fair Value of Ownership
Interest
(a) For purposes of this subchapter, the fair value of an
ownership interest of a domestic entity subject to
dissenters rights is the value of the ownership interest
on the date preceding the date of the action that is the subject
of the appraisal. Any appreciation or depreciation in the value
of the ownership interest occurring in anticipation of the
proposed action or as a result of the action must be
specifically excluded from the computation of the fair value of
the ownership interest.
(b) In computing the fair value of an ownership interest
under this subchapter, consideration must be given to the value
of the domestic entity as a going concern without including in
the computation of value any control premium, any minority
ownership discount, or any discount for lack of marketability.
If the domestic entity has different classes or series of
ownership interests, the relative rights and preferences of and
limitations placed on the class or series of ownership
interests, other than relative voting rights, held by the
dissenting owner must be taken into account in the computation
of value.
(c) The determination of the fair value of an ownership
interest made for purposes of this subchapter may not be used
for purposes of making a determination of the fair value of that
ownership interest for another purpose or of the fair value of
another ownership interest, including for purposes of
determining any minority or liquidity discount that might apply
to a sale of an ownership interest.
§
10.363. Powers and Duties of Appraiser; Appraisal
Procedures
(a) An appraiser appointed under Section 10.361 has
the power and authority that:
(1) is granted by the court in the order appointing the
appraiser; and
(2) may be conferred by a court to a master in chancery as
provided by
Rule 171, Texas Rules of Civil Procedure.
(b) The appraiser shall:
(1) determine the fair value of an ownership interest of an
owner adjudged by the court to be entitled to payment for the
ownership interest; and
(2) file with the court a report of that determination.
(c) The appraiser is entitled to examine the books and
records of a responsible organization and may conduct
investigations as the appraiser considers appropriate. A
dissenting owner or responsible organization may submit to an
appraiser evidence or other information relevant to the
determination of the fair value of the ownership interest
required by Subsection (b)(1).
(d) The clerk of the court appointing the appraiser shall
provide notice of the filing of the report under
Subsection (b) to each dissenting owner named in the list
filed under Section 10.361 and the responsible organization.
C-7
§
10.364. Objection to Appraisal; Hearing
(a) A dissenting owner or responsible organization may
object, based on the law or the facts, to all or part of an
appraisal report containing the fair value of an ownership
interest determined under Section 10.363(b).
(b) If an objection to a report is raised under Subsection
(a), the court shall hold a hearing to determine the fair value
of the ownership interest that is the subject of the report.
After the hearing, the court shall require the responsible
organization to pay to the holders of the ownership interest the
amount of the determined value with interest, accruing from the
91st day after the date the applicable action for which the
owner elected to dissent was effected until the date of the
judgment.
(c) Interest under Subsection (b) accrues at the same
rate as is provided for the accrual of prejudgment interest in
civil cases.
(d) The responsible organization shall:
(1) immediately pay the amount of the judgment to a holder
of an uncertificated ownership interest; and
(2) pay the amount of the judgment to a holder of a
certificated ownership interest immediately after the
certificate holder surrenders to the responsible organization an
endorsed certificate representing the ownership interest.
(e) On payment of the judgment, the dissenting owner does
not have an interest in the:
(1) ownership interest for which the payment is
made; or
(2) responsible organization with respect to that ownership
interest.
§
10.365. Court Costs; Compensation for Appraiser
(a) An appraiser appointed under Section 10.361 is
entitled to a reasonable fee payable from court costs.
(b) All court costs shall be allocated between the
responsible organization and the dissenting owners in the manner
that the court determines to be fair and equitable.
§
10.366. Status of Ownership Interest Held or Formerly Held by
Dissenting Owner
(a) An ownership interest of an organization acquired by a
responsible organization under this subchapter:
(1) in the case of a merger, conversion, or interest
exchange, shall be held or disposed of as provided in the plan
of merger, conversion, or interest exchange; and
(2) in any other case, may be held or disposed of by the
responsible organization in the same manner as other ownership
interests acquired by the organization or held in its treasury.
(b) An owner who has demanded payment for the owners
ownership interest under Section 10.356 is not entitled to
vote or exercise any other rights of an owner with respect to
the ownership interest except the right to:
(1) receive payment for the ownership interest under this
subchapter; and
(2) bring an appropriate action to obtain relief on the
ground that the action to which the demand relates would be or
was fraudulent.
(c) An ownership interest for which payment has been
demanded under Section 10.356 may not be considered
outstanding for purposes of any subsequent vote or action.
C-8
§
10.367. Rights of Owners Following Termination of Right of
Dissent
(a) The rights of a dissenting owner terminate if:
(1) the owner withdraws the demand under
Section 10.356;
(2) the owners right of dissent is terminated under
Section 10.356;
(3) a petition is not filed within the period required by
Section 10.361; or
(4) after a hearing held under Section 10.361, the
court adjudges that the owner is not entitled to elect to
dissent from an action under this subchapter.
(b) On termination of the right of dissent under this
section:
(1) the dissenting owner and all persons claiming a right
under the owner are conclusively presumed to have approved and
ratified the action to which the owner dissented and are bound
by that action;
(2) the owners right to be paid the fair value of the
owners ownership interests ceases;
(3) the owners status as an owner of those ownership
interests is restored, as if the owners demand for payment
of the fair value of the ownership interests had not been made
under Section 10.356, if the owners ownership
interests were not canceled, converted, or exchanged as a result
of the action or a subsequent action;
(4) the dissenting owner is entitled to receive the same
cash, property, rights, and other consideration received by
owners of the same class and series of ownership interests held
by the owner, as if the owners demand for payment of the
fair value of the ownership interests had not been made under
Section 10.356, if the owners ownership interests
were canceled, converted, or exchanged as a result of the action
or a subsequent action;
(5) any action of the domestic entity taken after the date
of the demand for payment by the owner under Section 10.356
will not be considered ineffective or invalid because of the
restoration of the owners ownership interests or the other
rights or entitlements of the owner under this
subsection; and
(6) the dissenting owner is entitled to receive dividends
or other distributions made after the date of the owners
payment demand under Section 10.356, to owners of the same
class and series of ownership interests held by the owner as if
the demand had not been made, subject to any change in or
adjustment to the ownership interests because of an action taken
by the domestic entity after the date of the demand.
§
10.368. Exclusivity of Remedy of Dissent and Appraisal
In the absence of fraud in the transaction, any right of an
owner of an ownership interest to dissent from an action and
obtain the fair value of the ownership interest under this
subchapter is the exclusive remedy for recovery of:
(1) the value of the ownership interest; or
(2) money damages to the owner with respect to the action.
C-9
THE
MERIDIAN RESOURCE CORPORATION
SPECIAL MEETING OF SHAREHOLDERS
March 30, 2010
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 Paul D. Ching, Lloyd V. DeLano
and Steven G. Ives, 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 that the
undersigned would be entitled to vote at the special meeting of
shareholders of the Company to be held March 30, 2010, and
at any adjournment or postponement thereof, on the following
matters more particularly described in the accompanying Proxy
Statement dated February 8, 2010.
This proxy revokes all prior proxies with respect to the special
meeting. This proxy will be voted in the manner directed herein
and in accordance with the accompanying Proxy Statement. Receipt
of the Notice of Special Meeting and the related Proxy Statement
is hereby acknowledged.
If no direction is made, the
undersigned grants the proxies named above discretionary
authority with respect to, and this proxy will be voted FOR,
proposals 1 and 2 which are being proposed by the board of
directors of the Company.
In their discretion, the proxies
named above are authorized to consider and vote upon such other
matters as may properly come before the special meeting or any
adjournment or postponement thereof.
The board of directors
of the Company recommends that you vote FOR the approval of
proposals 1 and 2.
THERE ARE
THREE WAYS TO DELIVER YOUR PROXY
MAIL
Simply complete, sign and date your
proxy card and return it in the envelope provided as soon as
possible. If you are delivering your proxy by telephone or
Internet, please do not mail your proxy card.
-OR-
TELEPHONE
On a touch tone telephone, call
toll-free (800) 454-8683, 24 hours a day, 7 days a
week. You will be prompted to provide your unique control number
shown below. Have your proxy card ready, then follow the
prerecorded instructions. Available until 11:59 p.m. Eastern
Time on Monday, March 29, 2010.
-OR-
INTERNET
Visit the Internet website at
www.proxyvote.com. Enter your unique control number shown below
and follow the instructions on your screen. You will incur only
your usual internet charges. Available until 11:59 p.m. Eastern
Time on Monday, March 29, 2010.
CONTROL
NUMBER
[ ]
(Continued
and to be signed on the reverse side)
1
THE
MERIDIAN RESOURCE CORPORATION
SPECIAL MEETING OF SHAREHOLDERS
March 30, 2010
Please
date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach along perforated line and mail in the envelope
provided.
Please mark
your vote in blue or black ink as shown
here.
x
1. Proposal to adopt the Agreement and Plan of Merger dated
as of December 22, 2009, among The Meridian Resource
Corporation, Alta Mesa Holdings, LP and Alta Mesa Acquisition
Sub, LLC.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
2. Proposal to approve the postponement or adjournment of
the special meeting to a later date to solicit additional
proxies in favor of the adoption of the merger agreement if
there are not sufficient votes for adoption of the merger
agreement at the special meeting.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
3. In accordance with their discretion, to consider and
vote upon such other matters as may properly come before the
special meeting or any adjournment or postponement of the
special meeting.
To change the address on your account, please check the box at
right and indicate your new address in the address space above.
Please note that changes to the registered name(s) on the
account may not be submitted via this
method. [ ]
|
|
|
Signature of Shareholder
|
|
Date:
|
Signature of Shareholder
|
|
Date:
|
Note: Please sign exactly as your name or names appear on this
proxy. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.
2
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