-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NxG4aI0h01gSqCQZTOV3uzR45MCCC99okLuw1bl3yIoW8cFPUTrk4c6Doh0Klsqs ritH2XesgSInoM3fKecOXg== 0000950134-02-008307.txt : 20020710 0000950134-02-008307.hdr.sgml : 20020710 20020709205013 ACCESSION NUMBER: 0000950134-02-008307 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20020710 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERIDIAN RESOURCE CORP CENTRAL INDEX KEY: 0000869369 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 760319553 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-89620 FILM NUMBER: 02699223 BUSINESS ADDRESS: STREET 1: 1401 ENCLAVE PARKWAY SUITE 300 CITY: HOUSTON STATE: TX ZIP: 77077 BUSINESS PHONE: 7135588080 MAIL ADDRESS: STREET 1: 1401 ENCLAVE PARKWAY SUITE 300 CITY: HOUSTON STATE: TX ZIP: 77077 FORMER COMPANY: FORMER CONFORMED NAME: TEXAS MERIDIAN RESOURCES ACQUISITION CORPORATION DATE OF NAME CHANGE: 19600201 FORMER COMPANY: FORMER CONFORMED NAME: TEXAS MERIDIAN RESOURCES CORPORATION DATE OF NAME CHANGE: 19930328 S-3/A 1 h97443a1sv3za.txt THE MERIDIAN RESOURCE CORP - AMEND.#1 - 333-89620 As filed with the Securities and Exchange Commission on July 10, 2002 Registration Number 333-89620 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 1 to FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 THE MERIDIAN RESOURCE CORPORATION (Exact name of registrant as specified in its charter) TEXAS 76-0319553 (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1401 ENCLAVE PARKWAY, SUITE 300 HOUSTON, TEXAS 77077 (281) 597-7000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) MR. JOSEPH A. REEVES, JR. CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER THE MERIDIAN RESOURCE CORPORATION 1401 ENCLAVE PARKWAY, SUITE 300 HOUSTON, TEXAS 77077 (281) 597-7000 (Name, address, including zip code, and telephone number including area code, of agent for service) Copies to: CHARLES L. STRAUSS FULBRIGHT & JAWORSKI L.L.P. 1301 MCKINNEY, SUITE 5100 HOUSTON, TEXAS 77010-3095 (713) 651-5151 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after this registration statement becomes effective, subject to market conditions and other factors. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ____________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ____________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. SUBJECT TO COMPLETION, DATED JULY 10, 2002 PROSPECTUS [MERIDIAN LOGO] 14,073,684 SHARES COMMON STOCK, PAR VALUE $.01 PER SHARE This prospectus relates to the offering of up to 14,073,684 shares of our common stock, par value $.01 per share, by the selling security holders listed on pages 9 and 10. The common stock offered by this prospectus is issuable to the selling security holders upon the conversion of shares of our Series C Redeemable Convertible Preferred Stock, which we refer to as the Convertible Preferred Stock, issued to them in a private placement. We will not receive any of the proceeds from the sale of the shares by the selling shareholders. We have agreed to bear all expenses, including registration and filing fees and printing expenses (other than selling discounts, commissions and transfer taxes) in connection with the registration and sale of the shares being offered by the selling shareholders. We have agreed to indemnify the selling shareholders against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). Our common stock is listed on the New York Stock Exchange (the "NYSE") under the trading symbol "TMR". Any common stock sold pursuant to this prospectus or any prospectus supplement will be listed on that exchange, subject to official notice of issuance. On July 8, 2002 the last reported sales price for our common stock was $3.57 per share. YOU SHOULD CAREFULLY REVIEW AND CONSIDER THE INFORMATION UNDER THE HEADING "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS AND UNDER THE SAME HEADING IN ANY APPLICABLE PROSPECTUS SUPPLEMENT BEFORE INVESTING IN THE COMMON STOCK. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE DISTRIBUTED UNDER THIS PROSPECTUS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING SHAREHOLDERS MAY NOT SELL THE COMMON STOCK TO BE REGISTERED HEREUNDER UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THE COMMON STOCK AND IT IS NOT SOLICITING AN OFFER TO BUY THE COMMON STOCK IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. JULY __, 2002 TABLE OF CONTENTS ABOUT THIS PROSPECTUS............................................................................................1 ABOUT THE MERIDIAN RESOURCE CORPORATION..........................................................................1 FORWARD-LOOKING STATEMENTS.......................................................................................2 RISK FACTORS.....................................................................................................3 USE OF PROCEEDS..................................................................................................8 SELLING SHAREHOLDERS.............................................................................................8 PLAN OF DISTRIBUTION............................................................................................11 LEGAL MATTERS...................................................................................................12 EXPERTS.........................................................................................................12 RESERVE ENGINEERS...............................................................................................12 WHERE YOU CAN FIND MORE INFORMATION.............................................................................13 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.................................................................13
i ABOUT THIS PROSPECTUS This prospectus is part of a registration statement that we have filed with the Securities and Exchange Commission using a "shelf" registration process. Under the shelf registration process, the selling shareholders may, from time to time, offer shares of our common stock that are owned by them. Each time the selling shareholders offer common stock under this prospectus, they will provide a prospectus supplement, if required, that will contain specific information about the terms of that offering. The prospectus supplement may also add, update or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement together with additional information described in "Where You Can Find More Information" on page 13. The selling shareholders may offer the common stock in amounts, at prices, and on terms determined at the time of offering. The selling shareholders may sell the common stock directly to you or through underwriters they select. If the selling shareholders use underwriters to sell the common stock, we will name them and describe their compensation in a prospectus supplement. ABOUT THE MERIDIAN RESOURCE CORPORATION We are an independent oil and natural gas company that explores for, acquires and develops oil and natural gas properties utilizing 3-D seismic technology. Our operations are focused on the onshore oil and gas regions in south Louisiana, the Texas Gulf Coast and offshore in the Gulf of Mexico. We have achieved substantial growth in reserves, production, revenues and cash flow since our inception. From the beginning of 1992 (when the Company had no proved reserves or production of oil or natural gas) through December 31, 2001, we have achieved a compound annual growth rate in production of 40% and an average annual reserve replacement rate of 297%. Our reserves and strategic acreage position provide us with a significant presence in our area of focus, enabling us to manage a large asset base to add successful exploratory and development wells at relatively low incremental costs. As of December 31, 2001, we had proved reserves of approximately 323 Bcfe with a present value of future net cash flows before income and taxes of approximately $429 million. Approximately 55% of our proved reserves were natural gas and approximately 51% were classified as proved developed. We currently have interests in leases and options to lease acreage in approximately 383,000 gross acres in Louisiana, Texas and the Gulf of Mexico. We have a large, balanced inventory of exploration, exploitation and development drilling prospects in our producing region. In addition to a solid reserve base and acreage position in our area of focus, we believe we possess the technical knowledge and information necessary to sustain the successful growth we have experienced year after year. With licenses and rights to over 7,100 square miles of 3-D seismic data and 155,000 linear miles of 2-D seismic data, our technical and professional staff is in a unique position to continue to generate future prospects for our growth. We are a Texas corporation, and the address of our principal executive offices is 1401 Enclave Parkway, Suite 300, Houston, Texas 77077. Our telephone number is (281) 597-7000, and we maintain a web site on the Internet at http://www.tmrc.com. The information contained on our web site does not constitute a part of this prospectus and is not incorporated herein. 1 FORWARD-LOOKING STATEMENTS We believe that some statements contained in this prospectus or in the documents incorporated by reference into this prospectus relate to results or developments that we anticipate will or may occur in the future and are not statements of historical fact. Those statements are "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). Words such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "will" and similar expressions identify forward-looking statements. Examples of forward looking statements include statements about the following: o our future operating results, o our repayment of debt, o our future capital expenditures, o our expansion and growth of operations, and o our future investments in and acquisitions of oil and natural gas properties. We have based these forward-looking statements on assumptions and analyses made in light of our experience and our perception of historical trends, current conditions, and expected future developments. However, you should be aware that these forward-looking statements are only our predictions and we cannot guarantee any such outcomes. Future events and actual results may differ materially from the results set forth in or implied in the forward-looking statements. Factors that might cause such a difference include: o general economic and business conditions, o exposure to market risks in our financial instruments, o fluctuations in worldwide prices and demand for oil and natural gas, o the direct or indirect effects on our business resulting from recent terrorist incidents, o fluctuations in the levels of our oil and natural gas exploration and development activities, o risks associated with oil and natural gas exploration and development activities, o competition for raw materials and customers in the oil and natural gas industry, o technological changes and developments in the oil and natural gas industry, o regulatory uncertainties and potential environmental liabilities, o potential for and uncertainty of the outcome of pending or threatened litigation, and o additional matters discussed under "Risk Factors". 2 RISK FACTORS In addition to the information contained in this prospectus, in any prospectus supplement, and in the documents incorporated by reference into this prospectus, you should carefully consider the following information before making an investment decision. If any of the following risks actually occur, our financial condition and our results of operations could be materially and adversely affected. Additional risks and uncertainties not presently known to us may also impair our business operations. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results may differ from those anticipated in these forward-looking statements as a result of both the risks described below and factors described elsewhere in this prospectus. You should read the section above entitled "Forward-Looking Statements" for further discussion of these matters. RISKS RELATED TO OUR DEBT We have incurred a high level of debt. As of March 31, 2002, we had long-term indebtedness of approximately $235 million (including approximately $10 million of current maturities of long-term indebtedness) compared to approximately $187 million of stockholders' equity, we had a working capital deficit of approximately $8 million and we had no additional borrowing capacity available under our credit facility. If we are unable to generate sufficient cash flows from operations in the future to service our debt, we may need to refinance all or a portion of our existing debt or to obtain additional financing. We cannot assure you that any such refinancing or additional financing would be possible. Our ability to meet our debt service obligations and to reduce our total indebtedness will depend on our future performance and our ability to maintain or increase cash flows from our operations. These outcomes are subject to general economic conditions and to financial, business and other factors affecting our operations, many of which we do not control, including the prevailing market prices for oil and natural gas. We cannot assure you that our business will continue to generate cash flows at or above current levels. Borrowing limits under our credit facility are subject to redetermination. As of the date of this prospectus, we have outstanding indebtedness of $170 million under our revolving credit facility, which is the current limit to our borrowings under that facility. The borrowing base under that facility is subject to semi-annual redeterminations by our lenders, with the next such redetermination currently scheduled for September 2002. Our borrowing base is determined primarily by our oil and gas reserve amounts. Our lenders can redetermine the borrowing base to a lower level than the current borrowing base if they determine that our oil and gas reserves at the time of redetermination are inadequate to support the borrowing base then in effect. If we are required to repay debt under our credit facility as a result of a downward borrowing base redetermination, we cannot assure you that we would be able to obtain alternate borrowing sources at commercially reasonable rates. Our lenders impose restrictions on us that limit our ability to conduct business. Our credit facility contains restrictive covenants. The restrictive covenants impose significant operating and financial restraints that could impair our ability to obtain future financing, to make capital expenditures, to pay dividends, to engage in mergers or acquisitions, to withstand future downturns in our business or in the general economy or to otherwise conduct necessary corporate activities. Furthermore, we have pledged substantially all of our oil and natural gas properties and the stock of all of our principal operating subsidiaries as collateral for the indebtedness under our credit facility. If we are in material default of our obligations under that credit facility, the lenders are entitled to liens on additional oil and natural gas properties. This pledge of collateral to our credit facility lenders could impair our ability to obtain additional financing on favorable terms. A default under a restrictive covenant could result in a lender accelerating the payment of all borrowed funds, together with accrued and unpaid interest. We cannot assure you that we would be able to remit such an accelerated payment or to access sufficient funds from alternative sources to remit any such payment. Even if we could obtain additional financing, we cannot assure you that the terms of that financing would be favorable or acceptable to us. 3 RISKS OF OUR BUSINESS The oil and natural gas market is volatile and exposes us to financial risks. Our profitability and cash flow are highly dependent on the market prices of oil and natural gas. Historically, the oil and natural gas markets have proven cyclical and volatile as a result of factors that are beyond our control. These factors include changes in tax laws, the level of consumer product demand, weather conditions, the price and availability of alternative fuels, the price and level of imports and exports of oil and natural gas, worldwide economic, political and regulatory conditions, and action taken by the Organization of Petroleum Exporting Countries. Any significant decline in oil and natural gas prices or any other unfavorable market conditions could have a material adverse effect on our financial condition and on the carrying value of our proved reserves. Consequently, we may not be able to generate sufficient cash flows from operations to meet our obligations and to make planned capital expenditures. Price declines may also affect the measure of discounted future net cash flows of our reserves, a result that could adversely impact the borrowing base under our credit facility and may increase the likelihood that we will incur additional impairment charges on our oil and natural gas properties for financial accounting purposes. Our hedging transactions may not adequately prevent losses. We cannot predict future oil and natural gas prices with certainty. To manage our exposure to the risks inherent in such a volatile market, from time to time, we have entered into commodities futures, swap or option contracts to hedge a portion of our oil and natural gas production against market price changes. Hedging transactions are intended to limit the negative effect of further price declines, but may also prevent us from realizing the benefits of price increases above the levels reflected in the hedges. Our reserve estimates may prove to be inaccurate and future net cash flows are uncertain. Our estimates of the quantities of proved reserves and our projections of both future production rates and the timing of development expenditures are uncertain and may prove to be inaccurate. You should not construe these reserve estimates as the current market value of our oil and natural gas reserves. Any downward revisions of these estimates could adversely affect our financial condition and our borrowing base under the credit facility. Our reserves must be estimated by our reserve engineers, T.J. Smith & Company, Inc. The accuracy of those reserve estimates depends in large part on the quality of available data and on the engineering and geological interpretation of our engineers. Our engineers may calculate estimates that vary widely from estimates calculated by another team of independent engineers. Our engineers may even make material changes to reserve estimates based on the results of actual drilling, testing and production. Consequently, our reserve estimates often differ from the quantities of oil and natural gas we ultimately recover. We also make certain assumptions regarding future oil and natural gas prices, production levels, and operating and development costs that may prove incorrect when judged against our actual experience. Any significant variance from these assumptions could greatly affect our estimates of reserves, future net cash flows and our ability to borrow under our credit facility. We depend on key personnel to execute our business plans. The loss of any key executives or any other key personnel could have a material adverse effect on our operations. We depend on the efforts and skills of our key executives, including Joseph A. Reeves, Jr., Chairman of the Board and Chief Executive Officer, and Michael J. Mayell, President and Chief Operating Officer. Moreover, as we continue to grow our asset base and the scope of our operations, our future profitability will depend on our ability to attract and retain qualified personnel. We compete against significant players in the oil and natural gas industry. The oil and natural gas industry is highly competitive. Our ability to acquire additional properties and to discover additional reserves depends on our ability to consummate transactions in this highly competitive environment. We compete with major oil companies, other independent oil and natural gas companies, and individual producers and operators. Many of these competitors have access to greater financial and personnel 4 resources than those to which we have access. Moreover, the oil and natural gas industry competes with other industries in supplying the energy and fuel needs of industrial, commercial and other consumers. Increased competition causing oversupply or depressed prices could materially adversely affect our revenues. The oil and natural gas market is heavily regulated. We are subject to various federal, state and local laws and regulations. These laws and regulations govern safety, exploration, development, taxation and environmental matters that are related to the oil and natural gas industry. To conserve oil and natural gas supplies, regulatory agencies may impose price controls and may limit our production. Certain laws and regulations require drilling permits, govern the spacing of wells and the prevention of waste, and limit the total number of wells drilled or the total allowable production from successful wells. Other laws and regulations govern the handling, storage, transportation and disposal of oil and natural gas and any byproducts produced in oil and natural gas operations. These laws and regulations could materially adversely impact our operations and our revenues. Laws and regulations that affect us may change from time to time in response to economic or political conditions. Thus, we must also consider the impact of future laws and regulations that may be passed in the jurisdictions where we operate. We anticipate that future laws and regulations related to the oil and natural gas industry will become increasingly stringent and cause us to incur substantial compliance costs. The nature of our operations exposes us to environmental liabilities. Our operations create the risk of environmental liabilities. We may incur liability to governments or to third parties for any unlawful discharge of oil, gas or other pollutants into the air, soil or water. We could potentially discharge oil or natural gas into the environment in any of the following ways: o from a well or drilling equipment at a drill site, o from a leak in storage tanks, pipelines or other gathering and transportation facilities, o from damage to oil or natural gas wells resulting from accidents during normal operations, or o from blowouts, cratering or explosions. Environmental discharges may move through the soil to water supplies or to adjoining properties, giving rise to additional liabilities. Some laws and regulations could impose liability for failure to obtain the proper permits for, to control the use of, or to notify the proper authorities of a hazardous discharge. Such liability could have a material adverse effect on our financial condition and our results of operations and could possibly cause our operations to be suspended or terminated on such property. We may also be liable for any environmental hazards created either by the previous owners of properties that we purchase or lease or by acquired companies prior to the date we acquire them. Such liability would affect the costs of our acquisition of those properties. In connection with any of these environmental violations, we may also be charged with remedial costs. Pollution and similar environmental risks generally are not fully insurable. Although we do not believe that our environmental risks are materially different from those of comparable companies in the oil and natural gas industry, we cannot assure you that environmental laws will not result in decreased production, substantially increased costs of operations or other adverse effects to our combined operations and financial condition. We require substantial capital requirements to finance our operations. We have substantial anticipated capital requirements. Our ongoing capital requirements consist primarily of the need to fund our 2002 capital and exploration budget and the acquisition, development, exploration, production and abandonment of oil and natural gas reserves. We plan to finance anticipated ongoing expenses and capital requirements with funds generated from the following sources: o cash provided by operating activities, o available cash and cash investments, o capital raised through debt and equity offerings and o funds received under our bank line of credit. 5 Although we believe the funds provided by these sources will be sufficient to meet our 2002 cash requirements, the uncertainties and risks associated with future performance and revenues will ultimately determine our liquidity and our ability to meet anticipated capital requirements. If declining prices cause our revenues to decrease, we may be limited in our ability to replace our reserves, to maintain current production levels and to undertake or complete future drilling programs. As a result, our production and revenues would continue to decrease over time and may not be sufficient to satisfy our projected capital expenditures. We cannot assure you that we will be able to obtain additional debt or equity financing in such a circumstance. Our operations entail inherent casualty risks for which we may not have adequate insurance. We must continually acquire, explore and develop new oil and natural gas reserves to replace those produced and sold. Our hydrocarbon reserves and our revenues will decline if we are not successful in our drilling, acquisition or exploration activities. Although we have historically maintained our reserve base primarily through successful exploration and development operations, we cannot assure you that future efforts will be similarly successful. Casualty risks and other operating risks could cause reserves and revenues to decline. Our onshore and offshore operations are subject to inherent casualty risks such as fires, blowouts, cratering and explosions. Other risks include pollution, the uncontrollable flows of oil, natural gas, brine or well fluids, and the hazards of marine and helicopter operations such as capsizing, collision and adverse weather and sea conditions. These risks may result in injury or loss of life, suspension of operations, environmental damage or property and equipment damage, all of which would cause us to experience substantial financial losses. Our drilling operations involve risks from high pressures and from mechanical difficulties such as stuck pipes, collapsed casings and separated cables. Our offshore properties involve higher exploration and drilling risks such as the cost of constructing exploration and production platforms and pipeline interconnections as well as weather delays and other risks. Although we carry insurance that we believe is in accordance with customary industry practices, we are not fully insured against all casualty risks incident to our business. We do not carry business interruption insurance. Should an event occur against which we are not insured, that event could have a material adverse effect on our financial position and our results from operations. Our operations also entail significant operating risks. Our drilling activities involve risks, such as drilling non-productive wells or dry holes, which are beyond our control. The cost of drilling and operating wells and of installing production facilities and pipelines is uncertain. Cost overruns are common risks that often make a project uneconomical. The decision to purchase and to exploit a property depends on the evaluations made by our reserve engineers, the results of which are often inconclusive or subject to multiple interpretations. We may also decide to reduce or cease our drilling operations due to title problems, weather conditions, noncompliance with governmental requirements or shortages and delays in the delivery or availability of equipment or fabrication yards. We may not be able to market effectively our oil and natural gas production. We may encounter difficulties in the marketing of our oil and natural gas production. Effective marketing depends on factors such as the existing market supply and demand for oil and natural gas and the limitations imposed by governmental regulations. The proximity of our reserves to pipelines and the available capacity of such pipelines and other transportation, processing and refining facilities also affect our marketing efforts. Even if we discover hydrocarbons in commercial quantities, a substantial period of time may elapse before we begin commercial production. If pipeline facilities in an area are insufficient, we may have to wait for the construction or expansion of pipeline capacity before we can market production from that area. Another risk lies in our ability to negotiate commercially satisfactory arrangements with the owners and operators of production platforms in close proximity to our wells. Also, natural gas wells may be shut in for lack of market demand or because of the inadequate capacity or unavailability of natural gas pipelines or gathering systems. 6 We are dependent on other operators who influence our productivity. We have limited influence over the nature and timing of exploration and development on oil and natural gas properties we do not operate, including limited control over the maintenance of both safety and environmental standards. The operators of those properties may: o refuse to initiate exploration or development projects (in which case we may propose desired exploration or development activities), o initiate exploration or development projects on a slower schedule than we prefer, or o drill more wells or build more facilities on a project than we can adequately finance, which may limit our participation in those projects or limit our percentage of the revenues from those projects. The occurrence of any of the foregoing events could have a material adverse effect on our anticipated exploration and development activities. Our working interest owners face cash flow and liquidity concerns. If oil and natural gas prices decline, many of our working interest owners may experience liquidity and cash flow problems. These problems may lead to their attempting to delay the pace of drilling or project development in order to conserve cash. Any such delay may be detrimental to our projects. In most cases, we can influence the pace of development by enforcing our joint operating agreements. Some working interest owners, however, may be unwilling or unable to pay their share of the project costs as they become due. A working interest owner may declare bankruptcy and refuse or be unable to pay its share of the project costs and we would be obligated to pay that working interest owner's share of the project costs. Our inability to acquire or integrate acquired companies or to develop new exploration prospects may inhibit our growth. From time to time and under certain circumstances, our business strategy may include acquisitions of businesses that complement or expand our current business and acquisition and development of new exploration prospects that complement or expand our prospect inventory. We cannot assure you that we will be able to identify attractive acquisition or prospect opportunities. Even if we do identify attractive opportunities, we cannot assure you that we will be able to complete the acquisition of the business or prospect or to do so on commercially acceptable terms. If we do complete an acquisition, we must anticipate difficulties in integrating its operations, systems, technology, management and other personnel with our own. These difficulties may disrupt our ongoing operations, distract our management and employees and increase our expenses. Even if we are able to overcome such difficulties, we cannot assure you that we will realize the anticipated benefits of any acquisition. Furthermore, we may incur additional debt or issue additional equity securities to finance any future acquisitions. Any issuance of additional securities may dilute the value of shares currently outstanding. Terrorist attacks and threats or actual war may negatively affect our business, financial condition and results of operations. Our business is affected by general economic conditions and fluctuations in consumer confidence and spending, which can decline as a result of numerous factors outside of our control, such as terrorist attacks and acts of war. Recent terrorist attacks in the United States, as well as events occurring in response to or in connection with them, including future terrorist attacks against U.S. targets, rumors or threats of war, actual conflicts involving the United States or its allies, or military or trade disruptions impacting our suppliers or our customers, may adversely impact our operations. Strategic targets such as energy-related assets may be at greater risk of future terrorist attacks than other targets in the United States. These occurrences could have an adverse impact on energy prices, including prices for our natural gas and crude oil production. In addition, disruption or significant increases in energy prices could result in government-imposed price controls. It is possible that any or a combination of these occurrences could have a material adverse effect on our business, financial condition and results of operations. 7 ADDITIONAL RISK FACTORS Please see the prospectus supplement, if any, and our filings with the Securities and Exchange Commission incorporated herein for additional risk factors that may be applicable to our common stock or to us in the future. USE OF PROCEEDS All sales of the common stock under this prospectus will be by or for the account of the selling shareholders listed in the following section. We will not receive any proceeds from the sale of the common stock by any of the selling shareholders. SELLING SHAREHOLDERS We have filed a registration statement on Form S-3 with the SEC, of which this prospectus forms a part, pursuant to registration rights we granted to the selling shareholders upon the issuance of their respective shares of our Convertible Preferred Stock. The selling shareholders may acquire the common stock offered by this prospectus if they convert their shares of Convertible Preferred Stock into our common stock. The selling shareholders will have the right to convert each share of Convertible Preferred Stock into a number of shares of our common stock equal to $100 divided by the conversion price of $4.75. The conversion price is subject to certain adjustments in the event we make a dividend or distribution of common stock to our stockholders and in certain other circumstances more fully described in the statement of designation relating to the Convertible Preferred Stock. In addition to a selling shareholder's right to convert its shares of Convertible Preferred Stock into our common stock, we have the option to convert up to one-third of the outstanding shares of Convertible Preferred Stock into common stock at the conversion price described above if the closing price for our common stock, as reported on the New York Stock Exchange, exceeds 150% of the conversion price for 30 out of 40 consecutive trading days. We may similarly convert, no earlier than 12 months after the initial conversion, up to one-half of the remaining shares of Convertible Preferred Stock then outstanding if our common stock price similarly exceeds 150% of the conversion price. No earlier than 12 months after the second conversion, we may similarly convert all remaining shares of Convertible Preferred Stock outstanding into common stock if the common stock price similarly exceeds 150% of the conversion price. As of May 31, 2002, if the selling shareholders or we, at our option, converted all the shares of Convertible Preferred Stock into our common stock, the selling shareholders would own approximately 14,073,684 shares of our common stock, which would represent approximately 22% of our common stock outstanding, including the shares issued on conversion. We have the option to redeem the Convertible Preferred Stock at any time after March 28, 2005 at a redemption price of $100 per share plus any dividends declared but unpaid as of the date of redemption. We must redeem each outstanding share of Convertible Preferred Stock on March 31, 2009, provided that no event of default under our credit facility exists at that time or would result from the mandatory redemption. The following table sets forth the name of each selling shareholder, the number of shares of Convertible Preferred Stock beneficially owned by each selling shareholder as of May 31, 2002, and the number of shares of our common stock which may be offered by each selling shareholder pursuant to this prospectus. No offer or sale under this prospectus may be made by a holder of the shares of common stock, unless that holder is listed in the table below. We prepared the table based on the information supplied to us by the selling shareholders named in the table. Except as disclosed in the footnotes to the table, no selling shareholder has held any position, office or other material relationship with us or our affiliates during the past three years. 8
CONVERTIBLE PREFERRED SHARES OF COMMON STOCK SHARES OWNED AS OF TO BE OFFERED PURSUANT TO MAY 31, 2002(1) THIS PROSPECTUS --------------------- ------------------------- Halifax Fund, L.P. 25,000 526,316 DeAM Convertible Arbitrage Funds, Ltd. 25,000 526,316 Kayne Anderson Energy Fund, L.P.(3) 125,000 2,631,579 Kayne Anderson Capital Income 15,000 315,789 Partners (QP), L.P.(3) Arbco Associates, L.P. FBO Kayne 20,000 421,053 Living Trust(3) Arbco Associates, L.P. FBO Rudnick 10,000 210,526 Living Trust(3) Hallco, Inc. 5,000 105,263 Bedford Oak Partners, L.P. 20,000 421,053 Arbco Associates, L.P. FBO Michael 20,000 421,053 Targoff Coastal Convertibles Ltd 5,000 105,263 Newberg Family Trust UTA DTD 12-18-90 10,000 210,526 Otato Limited Partnership 5,000 105,263 JMG Triton Offshore Fund, Ltd. 26,700 562,105 JMG Capital Partners, L.P. 13,300 280,000 The Jay Goldman Master Limited 10,000 210,526 Partnership Bear Stearns Securities Corp. C/F 8,000 168,421 Robert Schnell IRA Riverview Group, LLC 50,000 1,052,632 David J. Walsh 500 10,526 Albert O. Nicholas 20,000 421,053 Omicron Partners, L.P. 25,000 526,316 Duke Capital Partners, LLC 80,000 1,684,211 Jeffrey Thorp IRA 10,000 210,526 R.L. Essakow 2001 Revocable Trust DTD 2,500 52,632 5/23/01 Midsummer Investment Ltd. 10,000 210,526 White River Securities L.L.C. 10,000 210,526 AIG DKR SoundShore Private Investors 5,000 105,263 Holding Fund Ltd.
9
CONVERTIBLE PREFERRED SHARES OF COMMON STOCK SHARES OWNED AS OF TO BE OFFERED PURSUANT TO MAY 31, 2002(1) THIS PROSPECTUS --------------------- ------------------------- AIG DKR SoundShore Strategic Holding 2,500 52,632 Fund Ltd. AIG DKR SoundShore Holdings Fund Ltd. 2,500 52,632 Keane Securities Co., Inc. 1,000 21,053 The Tail Wind Fund Ltd. 4,000 84,211 Solomon Strategic Holdings, Inc. 2,000 42,105 David Shladovsky(3) 500 10,526 Charlie Norris 5,000 105,263 White Box Convertible Arbitrage 5,000 105,263 Partners, L.P. Whitebox Convertible Artibrage 10,000 210,526 Partners, L.P. Feshbach Family Trust 2,500 52,632 JMB Capital Partners, L.P. 15,000 315,789 John Collins(2) 2,000 42,105 Gryphon MasterFund, LP 40,000 842,105 Quantico Partners, L.P. 10,000 210,526 LibertyView Funds, L.P. 4,250 89,474 LibertyView Fund, LLC 750 15,789 GATA Fund, L.P. 5,000 105,263 Mark and Michelle Majeske 500 10,526 -------- ----------- Total 668,500 14,073,684
- ---------- (1) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Unless otherwise indicated below, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. (2) Employee of Meridian. (3) Affiliates have the right to acquire an aggregate of 3,000,000 shares of Common Stock upon conversion of our 9 1/2% Convertible Subordinated Notes. 10 PLAN OF DISTRIBUTION To our knowledge, no selling shareholder has entered into any agreement, arrangement or understanding with any particular broker, dealer, market maker or underwriter with respect to the shares of common stock offered hereby, nor do we know the identity of the brokers, dealer, market makers or underwriters that will participate in the sale of the shares. As used in this prospectus, the term "selling shareholders" includes donees and pledgees selling shares received from a named selling shareholder after the date of this prospectus. Who may sell, how much and applicable restrictions. The selling shareholders may from time to time offer the shares of common stock they receive upon conversion of the Convertible Preferred Stock listed in the preceding section through brokers, dealers or other agents who may receive compensation in the form of discounts, concessions or commissions from the selling shareholders and/or the purchasers of the shares of common stock for whom they may act as agent. In effecting sales, broker-dealers that are engaged by the selling shareholders may arrange for other broker-dealers to participate. The selling shareholders and any such brokers, dealers or other agents who participate in the distribution of the shares of common stock may be deemed to be underwriters, and any profits on the sale of the shares of common stock by them and any discounts, commissions or concessions received by any such brokers, dealers or other agents might be deemed to be underwriting discounts and commissions under the Securities Act. To the extent the selling shareholders may be deemed to be underwriters, the selling shareholders may be subject to certain statutory liabilities of, including but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act. Manner of sales and applicable restrictions. The selling shareholders will act independently of Meridian in making decisions with respect to the timing, manner and size of each sale. These sales may be made over the New York Stock Exchange or otherwise, at then prevailing market prices, at prices related to prevailing market prices or at negotiated prices. The shares of common stock may be sold according to one or more of the following methods: o a block trade in which the broker or dealer so engaged will attempt to sell the shares of common stock as agent but may position and resell a portion of the block as principal to facilitate the transaction; o purchases by a broker or dealer as principal and resale by such broker or dealer for its account pursuant to this prospectus; o an over-the-counter distribution in accordance with the Nasdaq rules; o ordinary brokerage transactions and transactions in which the broker solicits purchasers; and o privately negotiated transactions. A selling shareholder may decide not to sell any shares. We cannot assure you that any selling shareholder will use this prospectus to sell any or all of the shares. Any shares covered by this prospectus that qualify for sale pursuant to Rule 144 of the Securities Act may be sold under Rule 144 rather than pursuant to this prospectus. In addition, a selling shareholder may transfer, devise or gift the shares by other means not described in this prospectus. Some persons participating in this offering may engage in transactions that stabilize, maintain or otherwise affect the price of our common stock, including the entry of stabilizing bids or syndicate covering transactions or the imposition of penalty bids. The selling shareholders and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder including Regulation M, which may limit the timing of purchases and sales of any of the shares of common stock by the selling shareholders and any other person. The anti-manipulation rules under the Exchange Act may apply to sales of shares of common stock in the market and to the activities of the selling shareholders and their affiliates. Furthermore, Regulation M may restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the particular shares of common stock being distributed for a period of up to five business days prior to the commencement of such distribution. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock. Rules 101 and 102 of Regulation M, among other things, generally prohibit certain participants in a distribution from bidding for or purchasing for an account in which the participant has a beneficial interest in any of 11 the securities that are the subject of the distribution. Rule 104 of Regulation M governs bids and purchases made to stabilize the price of a security in connection with a distribution of the security. Hedging and other transactions with broker-dealers. In connection with distributions of the shares of common stock or otherwise, the selling shareholders may enter into hedging transactions with broker-dealers. In connection with these transactions, broker-dealers may engage in short sales of the shares of common stock registered hereunder in the course of hedging the positions they assume with selling shareholders. The selling shareholders may also sell shares of common stock short and redeliver the shares of common stock to close out such short positions. The selling shareholders may also enter into option or other transactions with broker-dealers which require the delivery to the broker-dealer of the shares of common stock registered hereunder, which the broker-dealer may resell or otherwise transfer pursuant to this prospectus. Selling shareholders may also loan or pledge the shares of common stock registered hereunder to a broker-dealer and the broker-dealer may sell the shares of common stock so loaned or, upon a default, the broker-dealer may effect sales of the pledged shares of common stock pursuant to this prospectus. Expenses associated with registration. We have agreed to pay the expenses of registering the shares of common stock under the Securities Act, including registration and filing fees, printing expenses, administrative expenses and certain legal and accounting fees. Each of the selling shareholders will bear its pro rata share of all discounts, commissions or other amounts payable to underwriters, dealers or agents as well as fees and disbursements for legal counsel retained by any selling shareholder. Indemnification. We have agreed to indemnify each of the selling shareholders against specified liabilities in connection with the offering of the shares of common stock, including liabilities arising under the Securities Act. Prospectus updates and suspension of this offering. At any time a particular offer of the shares of common stock is made, a revised prospectus or prospectus supplement, if required, will be distributed. A prospectus supplement or post-effective amendment will be filed with the SEC to reflect the disclosure of any required additional information with respect to the distribution of the shares of common stock. Under the terms of the agreement giving rise to the selling shareholders being permitted to include their shares in this prospectus, at any time when we reasonably believe that the offering, sale or distribution of shares under this prospectus would adversely affect a pending or proposed public offering of our securities, an acquisition, merger, recapitalization, consolidation, reorganization or similar transaction relating to us or negotiations, discussions or pending proposals with respect thereto or would require premature disclosure, to our potential detriment, of information not otherwise required to be disclosed, we may suspend the period of sale or distribution of the shares offered under this prospectus. LEGAL MATTERS Unless otherwise specified in a prospectus supplement relating to the common stock, certain legal matters with respect to the validity of the common stock offered hereby will be passed upon for us by Fulbright & Jaworski L.L.P., Houston, Texas and for the underwriters, if any, by counsel to be named in the appropriate prospectus supplement. EXPERTS The consolidated financial statements of The Meridian Resource Corporation appearing in The Meridian Resource Corporation's Annual Report on Form 10-K for the year ended December 31, 2001, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing. RESERVE ENGINEERS We have derived the estimates of proved oil and natural gas reserves and related future net revenues and the present value thereof as of December 31, 1999, 2000 and 2001, included in Meridian's Annual Report on Form 10-K for the year ended December 31, 2001, from the reserve report of T.J. Smith & Company, Inc., independent 12 petroleum engineers. We have incorporated all of that information by reference herein on the authority of T.J. Smith & Company, Inc. as experts in such matters. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly, and current reports, proxy statements, and other information with the Securities and Exchange Commission pursuant to the Exchange Act. You may read and copy any document we file at the Securities and Exchange Commission's public reference rooms at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference rooms. Our filings are also available to the public at the Securities and Exchange Commission's web site on the Internet at http://www.sec.gov. You can also inspect and copy such reports, proxy statements, and other information regarding us at the offices of the New York Stock Exchange at 20 Broad Street, New York, New York 10005. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Securities and Exchange Commission allows us to incorporate by reference into this prospectus the information we file with it, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be an important part of this prospectus. Information that we file with the Securities and Exchange Commission after the date of this prospectus will automatically update and supersede this information. We incorporate by reference the following documents and any future filings we make with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until the offering is complete: o Meridian's Annual Report on Form 10-K for the fiscal year ended December 31, 2001; o Meridian's Quarterly Report on Form 10-Q for the three months ended March 31, 2001; and o The description of common stock contained in Meridian's Registration Statement on Form 8-A, as filed with the Commission on March 19, 1997, including any amendment or report filed for the purpose of updating such description. Upon oral or written request, we will provide without charge to each person, including any beneficial owner, to whom this prospectus is delivered a copy of any document incorporated by reference in this prospectus, other than exhibits to any such document not specifically described above. Send your requests to James H. Shonsey, Vice President - Finance and Capital Markets, The Meridian Resource Corporation, 1401 Enclave Parkway, Suite 300, Houston, Texas 77077, telephone number: 281-597-7000. 13 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the estimated expenses in connection with the distribution of the common stock covered by this registration statement. We will bear all of the expenses except as otherwise indicated. Registration fee under the Securities Act $ 4,559.75 Printing and engraving expenses * 5,000 Legal fees and expenses * 8,000 Accounting fees and expenses * 2,500 Miscellaneous * 20,000 Total $40,059.75
* Estimated solely for the purpose of this Item. Actual expenses may be more or less. ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Texas law and our articles of incorporation and bylaws include provisions designed to limit the liability of our officers and directors and, in certain circumstances, to indemnify our officers and directors against certain liabilities. These provisions are designed to encourage qualified individuals to serve as our officers and directors. Indemnification. Article 2.02-1 of the Texas Business Corporation Act provides that any director or officer of a Texas corporation may be indemnified against judgments, penalties (including excise and similar taxes), fines, settlements, and reasonable expenses actually incurred by him in connection with or in defending any of the following: o a threatened, pending, or completed action, suit, or proceeding whether civil, criminal, administrative, arbitrative, or investigative, o an appeal in such an action, suit, or proceeding, or o an inquiry or investigation that could lead to such an action, suit, or proceeding in which he is a party or to which he is subject by reason of his position. With respect to any proceeding arising from actions taken in his official capacity as a director or officer, he may be indemnified so long as he conducted himself in good faith and reasonably believed that such conduct was in the best interest of the corporation. In cases not concerning conduct in his official capacity as a director or officer, a director or officer may be indemnified so long as he conducted himself in good faith and he reasonably believed that his conduct was not opposed to the best interests of the corporation. In the case of any criminal proceeding, a director or officer may be indemnified if he had no reasonable cause to believe his conduct was unlawful. Indemnification is mandatory if a director or officer is wholly successful on the merits or otherwise in defense of any proceeding. Article Nine of Meridian's Articles of Incorporation and Article XII of Meridian's bylaws require the indemnification of officers and directors to the fullest extent permitted by the Texas Business Corporation Act. The bylaws also allow Meridian to maintain insurance coverage that indemnifies any officer or director against liabilities asserted against him in such capacity. Exculpation Of Monetary Liability. Effective as of August 28, 1989, Article 7.06.B of the Texas Miscellaneous Corporation Laws Act was amended to allow a corporation to include provisions in its articles of incorporation that relieve its directors of monetary liability for breaches of their fiduciary duty to the corporation, its shareholders or its members, except under certain circumstances, including: o a breach of the director's duty of loyalty to the corporation, its shareholders or its members, o an act or omission not in good faith or that involves intentional misconduct or a knowing violation of the law, II-1 o a transaction from which the director derived an improper benefit, or o an act or omission for which the director's liability is expressly provided for by statute. Article Ten of Meridian's Articles of Incorporation provides that our directors are not liable to us or to our shareholders for monetary damages for an act or omission in their capacity as director, subject to the above restrictions. These limitations on a director's liability may not affect claims arising under the federal securities laws. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors and officers and controlling persons pursuant to the foregoing provisions, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. ITEM 16. EXHIBITS 4.1 Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of Meridian's Registration Statement on Form S-1, as amended (Reg. No. 33-65504)). 4.2 Common Stock Purchase Warrant of Meridian dated October 16, 1990, issued to Joseph A. Reeves, Jr. (incorporated by reference to Exhibit 10.8 of Meridian's Annual Report on Form 10-K for the year ended December 31, 1991, as amended by Meridian's Form 8 filed March 4, 1993). 4.3 Common Stock Purchase Warrant of Meridian dated October 16, 1990, issued to Michael J. Mayell (incorporated by reference to Exhibit 10.9 of Meridian's Annual Report on Form 10-K for the year ended December 31, 1991, as amended by Meridian's Form 8 filed March 4, 1993). 4.4 Registration Rights Agreement dated October 16, 1990, among Meridian, Joseph A. Reeves, Jr. and Michael J. Mayell (incorporated by reference to Exhibit 10.7 of Meridian's Registration Statement on Form S-4, as amended (Reg. No. 33-37488)). 4.5 Warrant Agreement dated June 7, 1994, between Meridian and Joseph A. Reeves, Jr. (incorporated by reference to Exhibit 4.1 of Meridian's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994). 4.6 Warrant Agreement dated June 7, 1994, between Meridian and Michael J. Mayell (incorporated by reference to Exhibit 4.1 of Meridian's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994). 4.7 Amended and Restated Credit Agreement dated May 22, 1998, among Meridian, the several banks and financial institutions and other entities from time to time parties thereto (the "Lenders"), The Chase Manhattan Bank, as administrative agent for the Lenders, Bankers Trust Company, as syndication agent, Chase Securities Inc., as advisor to Meridian, Chase Securities Inc., B.T. Alex. Brown Incorporated, Toronto Dominion (Texas), Inc. and Credit Lyonnais New York Branch as co-arrangers, and Toronto Dominion (Texas), Inc. and Credit Lyonnais New York Branch, as co-documentation agents (incorporated by reference from Meridian's current report on Form 8-K dated June 30, 1998). 4.8 Second Amended and Restated Guarantee dated June 30, 1998, between the Guarantors signatory thereto and The Chase Manhattan Bank, as Administrative Agent for the Lenders (incorporated by reference from Meridian's current report on Form 8-K dated June 30, 1998). 4.9 Amended and Restated Pledge Agreement, dated May 22, 1998, between Meridian and The Chase Manhattan Bank, as Administrative Agent (incorporated by reference from Meridian's current report on Form 8-K dated June 30, 1998). II-2 4.10 First Amendment to Amended and Restated Pledge Agreement dated June 30, 1998 (incorporated by reference from Meridian's current report on Form 8-K dated June 30, 1998). 4.11 Amendment No. 2 dated November 13, 1998 to Amended and Restated Credit Agreement dated May 22, 1998, by and among Meridian, The Chase Manhattan Bank as administrative agent, and the various lenders party thereto (incorporated by reference from Meridian's Quarterly Report on Form 10-Q for the three months ended September 30, 1998). 4.12 The Meridian Resource Corporation Directors' Stock Option Plan (incorporated by reference to Exhibit 10.5 of Meridian's Annual Report on Form 10-K for the year ended December 31, 1991, as amended by Meridian's Form 8 filed March 4, 1993). 4.13 Registration Rights Agreement dated January 29, 2001, by and between Meridian and Shell Louisiana Onshore Properties Inc. (incorporated by reference from Meridian's Current Report on Form 8-K dated January 29, 2001). 4.14 Termination Agreement, dated January 29, 2001, by and between Meridian and Shell Louisiana Onshore Properties Inc. (incorporated by reference from Meridian's Current Report on Form 8-K dated January 29, 2001). 4.15 Amendment No. 1, dated as of January 29, 2001, to Rights Agreement, dated as of May 5, 1999, by and between the Company and American Stock Transfer & Trust Co., as rights agent (incorporated by reference from the Company's Current Report on Form 8-K dated January 29, 2001). 4.16 First Amendment to Subordinated Credit Agreement, dated December 5, 2001, between Meridian and Fortis Capital Corp. (incorporated by reference to Exhibit 4.17 of the Company's Registration statement on Form S-3, as amended (Reg. No. 333-75414)). 4.17 Ninth Amendment to Amended and Restated Credit Agreement, dated as of November 28, 2001, among Meridian, JP Morgan Chase Bank as administrative agent, and the various lenders party thereto (incorporated by reference to Exhibit 4.18 of the Company's Registration statement on Form S-3, as amended (Reg. No. 333-75414)). *4.18 Amended and Restated Statement of Designation of Series C Redeemable Convertible Preferred Stock. **5.1 Opinion of Fulbright & Jaworski L.L.P. **23.1 Consent of Ernst & Young LLP. **23.2 Consent of T. J. Smith & Company, Inc. **24.1 Power of attorney. * Filed herewith. ** Previously filed as exhibits to the Company's Registration Statement on Form S-3 (Reg. No. 333-89620). ITEM 17. UNDERTAKINGS We hereby undertake: To file, during any period in which the offer or sale is being made, a post-effective amendment to this registration statement: o to include any prospectus required by Section 10(a)(3) of the Securities Act, o to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the II-3 aggregate, represent a fundamental change in the information set forth in the registration statement; notwithstanding the foregoing, any increase or decrease in the volume of securities being offered (if the total dollar value of securities being offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a twenty percent (20%) change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement, and o to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or in any material change to such information in the registration statement; provided, however, that the undertakings set forth in the previous two clauses do not apply if the registration statement is on Form S-3 and the information required to be included in a post-effective amendment by those clauses is contained in periodic reports that we filed with or furnished to the Securities and Exchange Commission pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement. That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. That, for purposes of determining any liability under the Securities Act, each of our filings pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. That, for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by us pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. That, for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, Meridian has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Meridian of expenses incurred or paid by our director, officer, or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-4 SIGNATURES Pursuant to the requirements of the Securities Act, we certify that we have reasonable grounds to believe that we meet all of the requirements for filing on Form S-3 and have duly caused this registration statement to be signed on our behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas on July 9, 2002. THE MERIDIAN RESOURCE CORPORATION By: /s/ JOSEPH A. REEVES, JR. -------------------------------------- Joseph A. Reeves, Jr., Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in their respective capacities on July 9, 2002. /s/ JOSEPH A. REEVES, JR. Chairman of the Board and Chief Executive Officer, - -------------------------------------------- Director Joseph A. Reeves, Jr. (principal executive officer) * President, Chief Operating Officer, Director - -------------------------------------------- Michael J. Mayell * Vice President - -------------------------------------------- (principal accounting officer) Lloyd V. DeLano * Director - -------------------------------------------- Gary A. Messersmith
II-5 * Director - -------------------------------------------- Joe E. Kares * Director - -------------------------------------------- E. L. Henry * Director - -------------------------------------------- Jack A. Prizzi * Director - -------------------------------------------- James T. Bond * By: /s/ JOSEPH A. REEVES, JR. ---------------------------------------- Joseph A. Reeves, Jr. Attorney-in-Fact
II-6 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------ ----------- 4.1 Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of Meridian's Registration Statement on Form S-1, as amended (Reg. No. 33-65504)). 4.2 Common Stock Purchase Warrant of Meridian dated October 16, 1990, issued to Joseph A. Reeves, Jr. (incorporated by reference to Exhibit 10.8 of Meridian's Annual Report on Form 10-K for the year ended December 31, 1991, as amended by Meridian's Form 8 filed March 4, 1993). 4.3 Common Stock Purchase Warrant of Meridian dated October 16, 1990, issued to Michael J. Mayell (incorporated by reference to Exhibit 10.9 of Meridian's Annual Report on Form 10-K for the year ended December 31, 1991, as amended by Meridian's Form 8 filed March 4, 1993). 4.4 Registration Rights Agreement dated October 16, 1990, among Meridian, Joseph A. Reeves, Jr. and Michael J. Mayell (incorporated by reference to Exhibit 10.7 of Meridian's Registration Statement on Form S-4, as amended (Reg. No. 33-37488)). 4.5 Warrant Agreement dated June 7, 1994, between Meridian and Joseph A. Reeves, Jr. (incorporated by reference to Exhibit 4.1 of Meridian's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994). 4.6 Warrant Agreement dated June 7, 1994, between Meridian and Michael J. Mayell (incorporated by reference to Exhibit 4.1 of Meridian's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994). 4.7 Amended and Restated Credit Agreement dated May 22, 1998, among Meridian, the several banks and financial institutions and other entities from time to time parties thereto (the "Lenders"), The Chase Manhattan Bank, as administrative agent for the Lenders, Bankers Trust Company, as syndication agent, Chase Securities Inc., as advisor to Meridian, Chase Securities Inc., B.T. Alex. Brown Incorporated, Toronto Dominion (Texas), Inc. and Credit Lyonnais New York Branch as co-arrangers, and Toronto Dominion (Texas), Inc. and Credit Lyonnais New York Branch, as co-documentation agents (incorporated by reference from Meridian's current report on Form 8-K dated June 30, 1998). 4.8 Second Amended and Restated Guarantee dated June 30, 1998, between the Guarantors signatory thereto and The Chase Manhattan Bank, as Administrative Agent for the Lenders (incorporated by reference from Meridian's current report on Form 8-K dated June 30, 1998). 4.9 Amended and Restated Pledge Agreement, dated May 22, 1998, between Meridian and The Chase Manhattan Bank, as Administrative Agent (incorporated by reference from Meridian's current report on Form 8-K dated June 30, 1998). 4.10 First Amendment to Amended and Restated Pledge Agreement dated June 30, 1998 (incorporated by reference from Meridian's current report on Form 8-K dated June 30, 1998). 4.11 Amendment No. 2 dated November 13, 1998 to Amended and Restated Credit Agreement dated May 22, 1998, by and among Meridian, The Chase Manhattan Bank as administrative agent, and the various lenders party thereto (incorporated by reference from Meridian's Quarterly Report on Form 10-Q for the three months ended September 30, 1998). 4.12 The Meridian Resource Corporation Directors' Stock Option Plan (incorporated by reference to Exhibit 10.5 of Meridian's Annual Report on Form 10-K for the year ended December 31, 1991, as amended by Meridian's Form 8 filed March 4, 1993).
II-7 4.13 Registration Rights Agreement dated January 29, 2001, by and between Meridian and Shell Louisiana Onshore Properties Inc. (incorporated by reference from Meridian's Current Report on Form 8-K dated January 29, 2001). 4.14 Termination Agreement, dated January 29, 2001, by and between Meridian and Shell Louisiana Onshore Properties Inc. (incorporated by reference from Meridian's Current Report on Form 8-K dated January 29, 2001). 4.15 Amendment No. 1, dated as of January 29, 2001, to Rights Agreement, dated as of May 5, 1999, by and between the Company and American Stock Transfer & Trust Co., as rights agent (incorporated by reference from the Company's Current Report on Form 8-K dated January 29, 2001). 4.16 First Amendment to Subordinated Credit Agreement, dated December 5, 2001, between Meridian and Fortis Capital Corp. (incorporated by reference to Exhibit 4.17 of the Company's Registration statement on Form S-3, as amended (Reg. No. 333-75414)). 4.17 Ninth Amendment to Amended and Restated Credit Agreement, dated as of November 28, 2001, among Meridian, JP Morgan Chase Bank as administrative agent, and the various lenders party thereto (incorporated by reference to Exhibit 4.18 of the Company's Registration statement on Form S-3, as amended (Reg. No. 333-75414)). *4.18 Amended and Restated Statement of Designation of Series C Redeemable Convertible Preferred Stock. **5.1 Opinion of Fulbright & Jaworski L.L.P. **23.1 Consent of Ernst & Young LLP. **23.2 Consent of T. J. Smith & Company, Inc. **24.1 Power of attorney.
* Filed herewith. ** Previously filed as exhibits to the Company's Registration Statement on Form S-3 (Reg. No. 333-89620). II-8 EX-4.18 3 h97443a1exv4w18.txt AMENDED STATEMENT OF DESIGNATION OF SERIES C EXHIBIT 4.18 THE MERIDIAN RESOURCE CORPORATION AMENDED AND RESTATED STATEMENT OF DESIGNATION OF SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK PURSUANT TO ARTICLES 2.13 AND 4.03 OF THE TEXAS BUSINESS CORPORATION ACT WHEREAS, by written consent dated March 28, 2002, the Board of Directors of The Meridian Resource Corporation, a Texas corporation (the "Company"), pursuant to the authority conferred on the Board of Directors by the Company's Third Amended and Restated Articles of Incorporation and in accordance with Article 2.13 of the Texas Business Corporation Act (the "TBCA"), established a series of 1,500,000 shares of preferred stock, $1.00 par value, of the Company designated as "Series C Redeemable Convertible Preferred Stock" (the "Series C Preferred Stock"); WHEREAS, by written consent dated as of May 20, 2002, the Board of Directors of the Company approved certain revisions to the provisions of the Series C Preferred Stock to change the conversion price and to provide for certain adjustments to the conversion price in certain circumstances, as more fully set forth herein; WHEREAS, the Board of Directors of the Company and the holders of a majority of the outstanding shares of the Series C Preferred Stock wish to amend and restate the Statement of Designation of the Series C Preferred Stock to reflect such revisions; NOW, THEREFORE, the Company certifies that pursuant to the authority conferred on the Board of Directors of the Company by the Third Amended and Restated Articles of Incorporation of the Company, and in accordance with Articles 2.13 and 4.03 of the TBCA, the Board of Directors by written consent dated as of May 20, 2002, and the holders of a majority of the outstanding shares of the Series C Preferred Stock voting as a class, by written consents dated as of May 30, 2002, in accordance with Articles 4.03 and 9.10A. of the TBCA, duly adopted the following resolution, which remains in full force and effect on the date hereof: RESOLVED, that the voting and other powers, preferences and relative, participating, optional or or other rights of the Series C Preferred Stock as set forth in the Statement of Designation of Series C Redeemable Convertible Preferred Stock are hereby amended and restated in their entirety as follows: SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK 1. Designation and Amount. There shall be a series of preferred stock, $1.00 par value, designated as "Series C Redeemable Convertible Preferred Stock", and the number of shares constituting such series shall be 1,500,000. Such series is referred to herein as the "Convertible Preferred Stock". Such shares may be issued in part on the date hereof and in part on any later date. 2. Stated Capital. The amount to be represented in stated capital at all times for each share of Convertible Preferred Stock shall be $100 (the "Stated Value"). 3. Rank. All shares of Convertible Preferred Stock shall rank prior to all of the Company's common stock, par value $.01 per share (the "Common Stock"), now or hereafter issued, both -1- as to payment of dividends and as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary. 4. Dividends. Subject to the provisions of Section 3 above, the holders of any shares of Convertible Preferred Stock shall be entitled to receive, when, as and if declared, and upon declaration by the Board of Directors out of funds at the time legally available therefor, dividends on each such share at the rate of 8.5% of the Stated Value per annum per share, and no more, which shall be fully cumulative, shall accrue in all events, whether or not declared, without interest from the date of first issuance of such share of Convertible Preferred Stock and shall be payable in cash, semi-annually in arrears on January 2 and July 1 of each year commencing the first such date after issuance of such share Convertible Preferred Stock (except that if any such date is a Saturday, Sunday or legal holiday, then such dividend shall be payable on the next day that is not a Saturday, Sunday or legal holiday) to holders of record as they appear on the stock books of the Company on such dates. For purposes hereof, the term "legal holiday" shall mean any day on which banking institutions are authorized to close in Houston, Texas. Subject to the next paragraph of this Section 4, if dividends on the Convertible Preferred Stock have not been paid in cash pursuant to the provisions of this Section 4 within 30 days after a dividend payment date, the Company, in lieu of its obligation to pay cash dividends pursuant to the provisions of this Section 4, shall pay, within ten days after the end of such 30 day period, any such dividends in the form of additional shares of Convertible Preferred Stock valued at the Stated Value. The amount of dividends payable per share of Convertible Preferred Stock for each semi-annual dividend period shall be computed by dividing the annual dividend amount by two. The amount of dividends payable for the initial dividend period and any period shorter than a full semi-annual dividend period shall be computed on the basis of a 360-day year of twelve 30-day months. Dividends also shall accrue and compound on any dividend arrearages. Subject to the provisions of Section 3, no dividends or other distributions, other than dividends payable solely in shares of Common Stock or other capital stock of the Company ranking junior as to payment of dividends and as to liquidation rights to the Convertible Preferred Stock (or rights to purchase Common Stock or any other such capital stock), shall be declared, paid or set apart for payment on, and no purchase, redemption or other acquisition shall be made by the Company of, any shares of Common Stock or other capital stock of the Company ranking junior as to payment of dividends to the Convertible Preferred Stock (the "Junior Dividend Stock") unless and until all accrued and unpaid dividends on the Convertible Preferred Stock then due shall have been paid or declared and set apart for payment. Subject to the provisions of Section 3, if at any time any dividend on any capital stock of the Company ranking senior as to dividends to the Convertible Preferred Stock (the "Senior Dividend Stock") shall be in default or in arrears, in whole or in part, then (except to the extent allowed by the terms of such Senior Dividend Stock) no dividend shall be paid or declared and set apart for payment on the Convertible Preferred Stock unless and until all accrued and unpaid dividends with respect to the Senior Dividend Stock then due shall have been paid or declared and set apart for payment. No full dividends shall be paid or declared and set apart for payment on any class or series of the Company's capital stock ranking, as to payment of dividends, on a parity with the Convertible Preferred Stock, if any (the "Parity Dividend Stock"), for any period unless full cumulative dividends have been, or contemporaneously are, paid or declared and set apart for such payment on the Convertible Preferred Stock for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. No full dividends shall be paid or declared and set apart for payment on the Convertible Preferred Stock for any period unless full cumulative dividends have been, or contemporaneously are, paid or declared and set apart for payment on the Parity Dividend Stock for all dividend periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full upon the Convertible Preferred Stock and the Parity Dividend Stock, all -2- dividends paid or declared and set aside for payment upon shares of the Convertible Preferred Stock and the Parity Dividend Stock shall be paid or declared and set aside for payment pro rata so that the amount of dividends paid or declared and set aside for payment per share on the Convertible Preferred Stock and the Parity Dividend Stock shall in all cases bear to each other the same ratio that accrued and unpaid dividends per share on the shares of the Convertible Preferred Stock and the Parity Dividend Stock bear to each other. Any reference to "distribution" contained in this Section 4 shall not be deemed to include any distribution made in connection with any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary. 5. Liquidation Preference. Subject to the provisions of Section 3, in the event of a liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of Convertible Preferred Stock shall be entitled to receive out of the assets of the Company available for distribution, whether such assets are stated capital or surplus of any nature, an amount equal to the dividends accrued and unpaid thereon to the date of final distribution to such holders, whether or not declared, without interest, and a sum equal to $100 per share, and no more, before any payment shall be made or any assets distributed to the holders of Common Stock or any other class or series of the Company's capital stock ranking junior as to liquidation rights to the Convertible Preferred Stock (the "Junior Liquidation Stock"); provided, however, that such rights shall accrue to the holders of Convertible Preferred Stock only if the Company's payments with respect to the liquidation preferences of the holders of capital stock of the Company ranking senior as to liquidation rights to the Convertible Preferred Stock (the "Senior Liquidation Stock") are fully met. The entire assets of the Company available for distribution after the liquidation preferences of the Senior Liquidation Stock are fully met shall be distributed ratably among the holders of the Convertible Preferred Stock and any other class or series of the Company's capital stock that may hereafter be created having parity as to liquidation rights with the Convertible Preferred Stock in proportion to the respective preferential amounts to which each is entitled (but only to the extent of such preferential amounts). Neither a consolidation or merger of the Company with another company nor a sale or transfer of all or part of the Company's assets for cash, securities or other property will be considered a liquidation, dissolution or winding up of the Company. 6. Redemption at Option of the Company. Subject to the provisions of Section 3, the Company, at its option at any time following the third anniversary of the date of initial issuance, may redeem all shares of Convertible Preferred Stock, in whole or in part, from time to time at the redemption price of $100 per share, plus an amount in cash equal to any and all accumulated dividends that are accrued and unpaid thereon to and including the date fixed for the redemption. The redemption price per share as determined in this paragraph of this Section 6 shall be hereinafter referred to as the "Redemption Price". In the case of redemption of less than all of the outstanding shares of Convertible Preferred Stock pursuant to this Section 6, the shares to be so redeemed shall be selected pro rata or by lot or in such other manner as the Board of Directors may determine, as may be prescribed by resolution of the Board of Directors of the Company, provided that only whole shares shall be selected for redemption. Not more than 60 nor less than 10 days before the redemption date, notice by first class mail, postage prepaid, shall be given to the holders of record of the Convertible Preferred Stock to be redeemed, addressed to such holders at their last addresses as shown on the books of the Company. Each such notice of redemption shall specify the date fixed for redemption, the Redemption Price, the place or places of payment, that payment will be made upon presentation and surrender of the shares of Convertible Preferred Stock, that on and after the redemption date dividends will cease to accumulate on such shares, the then-effective Conversion Price pursuant to Section 7 and that the right of holders to convert shall terminate at the close of business on the fifth business day prior to the redemption date. -3- Any notice that is mailed as herein provided shall be conclusively presumed to have been duly given, whether or not the holder of the Convertible Preferred Stock receives such notice; and failure properly to give such notice by mail, or any defect in such notice, to the holders of any shares designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Convertible Preferred Stock. On or after the date fixed for redemption as stated in such notice, each holder of the shares called for redemption shall surrender the certificate evidencing such shares to the Company at the place designated in such notice and shall thereupon be entitled to receive payment of the Redemption Price. If, on the date fixed for redemption, funds necessary for the redemption shall be available therefor and shall have been irrevocably deposited or set aside in the manner described in Section 9(i), then, notwithstanding that the certificates evidencing any shares properly called for redemption shall not have been surrendered, the dividends with respect to the shares so called shall cease to accrue after the date fixed for redemption, the shares shall no longer be deemed outstanding, the holders thereof shall cease to be stockholders, and all rights whatsoever with respect to the shares so called for redemption (except the right of the holders to receive the Redemption Price without interest upon surrender of their certificates therefor) shall terminate. The shares of Convertible Preferred Stock shall not be subject to the operation of any purchase, retirement or sinking fund. 7. Conversion Privilege; Mandatory Conversion. (a) Right of Conversion at Option of Holder. Each share of Convertible Preferred Stock shall be convertible at the option of the holder thereof, at any time prior to the close of business on the fifth business day prior to date fixed for redemption of such share as herein provided, into the number of fully paid and nonassessable shares of Common Stock equal to $100 divided by the Conversion Price (as defined in Section 7(d)) in effect from time to time. For the purpose of this Section 7, the term "Common Stock" shall mean the class designated as Common Stock, par value $.01 per share, of the Company, subject to adjustment as hereinafter provided. (b) Mandatory Conversion. (i) If the closing sale price per share of Common Stock, as reported on the New York Stock Exchange, is greater than 150% of the then current Conversion Price for 30 out of 40 consecutive trading days immediately prior to the date of delivery of a Mandatory Conversion Notice (as defined herein), and provided that the Company is not as of the date of delivery of the Mandatory Conversion Notice or as of the Effective Time of the Mandatory Conversion (as defined herein) in material violation of any of its obligations under its senior credit facility or this Statement of Designation, then the Company shall have the right to require the conversion (the "Initial Mandatory Conversion") of up to one-third of the then outstanding shares of Convertible Preferred Stock, which right shall be exercisable by delivery of a Mandatory Conversion Notice (as defined herein) in accordance with the procedures set forth in Section 7(b)(iv). (ii) If, no earlier than 12 months following the Effective Time of the Initial Mandatory Conversion, the closing sale price per share of Common Stock, as reported on the New York Stock Exchange, is again greater than 150% of the then current Conversion Price for 30 out of 40 consecutive trading days immediately prior to the date of delivery of a Mandatory Conversion Notice (as defined herein), and subject to the same restrictions as provided in subparagraph (i) above, then the Company shall have the right to require the conversion (the "Second Mandatory Conversion") of up to one-half of the then outstanding shares of Convertible -4- Preferred Stock, which right shall be exercisable by delivery of a Mandatory Conversion Notice (as defined herein) in accordance with the procedures set forth in Section 7(b)(iv). (iii) If, no earlier than 12 months following the Effective Time of the Second Mandatory Conversion, the closing sale price per share of Common Stock, as reported on the New York Stock Exchange, is again greater than 150% of the then current Conversion Price for 30 out of 40 consecutive trading days immediately prior to the date of delivery of a Mandatory Conversion Notice (as defined herein), and subject to the same restrictions as provided in subparagraph (i) above, then the Company shall have the right to require the conversion (the "Final Mandatory Conversion") of any or all remaining outstanding shares of Convertible Preferred Stock, which right shall be exercisable by delivery of a Mandatory Conversion Notice (as defined herein) in accordance with the procedures set forth in Section 7(b)(iv). (iv) In the case of Initial Mandatory Conversion and Second Mandatory Conversion of less than all of the outstanding shares of Convertible Preferred Stock pursuant to this Section 7(b), the shares to be so converted shall be selected pro rata or by lot or in such other manner as the Board of Directors may determine, as may be prescribed by resolution of the Board of Directors of the Company, provided that only whole shares shall be selected for conversion. Notwithstanding the foregoing, the Company shall not redeem any of the shares of Convertible Preferred Stock at any time outstanding until all dividends accrued and in arrears on all shares of the Convertible Preferred Stock then outstanding shall have been paid for all past dividend periods. The Company shall effect a mandatory conversion under this Section 7(b) by delivering an irrevocable written notice thereof (the "Mandatory Conversion Notice") no less than five nor more than ten business days prior to the time on which any such mandatory conversion is to become effective (the "Effective Time of Mandatory Conversion") to each holder of shares of Convertible Preferred Stock subject to a mandatory conversion in the manner provided in Section 13 hereof. (c) Conversion Procedures. Any holder of shares of Convertible Preferred Stock desiring to convert such shares into Common Stock, and any holders of shares of Convertible Preferred Stock subject to mandatory conversion as provided herein, shall surrender the certificate or certificates for such shares of Convertible Preferred Stock at the office of the transfer agent for the Convertible Preferred Stock, which certificate or certificates, if the Company shall so require, shall be duly endorsed to the Company or in blank, or accompanied by proper instruments of transfer to the Company or in blank, accompanied by irrevocable written notice to the Company that the holder elects so to convert such shares of Convertible Preferred Stock and specifying the name or names (with address) in which a certificate or certificates for Common Stock are to be issued. Upon the conversion of any shares of Convertible Preferred Stock, the Company shall, subject to the provisions of Sections 3 and 4, pay the holder surrendering such shares cash in an amount equal to any accrued but unpaid dividends to the date of conversion on such shares of Convertible Preferred Stock. In the event the Company does not pay such accrued and unpaid dividends, the obligation to pay such dividends shall remain outstanding and dividends shall continue to accrue (at the dividend rate set forth in Section 4) on such outstanding obligation. The Company will, as soon as practicable (but in no event later than ten business days) after such deposit of certificates for Convertible Preferred Stock accompanied by the written notice and compliance with any other conditions herein contained, deliver at such office of such transfer agent to the person for whose account such shares of Convertible Preferred Stock were so surrendered, or to his nominee or nominees, certificates for the number of full shares of Common Stock to which he shall be entitled as aforesaid, together with a cash adjustment of any fraction of a share as hereinafter provided. -5- Subject to the following provisions of this paragraph, such conversion shall be deemed to have been made as of the date of such surrender of the shares of Convertible Preferred Stock to be converted, and the person or persons entitled to receive the Common Stock deliverable upon conversion of such Convertible Preferred Stock shall be treated for all purposes as the record holder or holders of such Common Stock on such date; provided, however, that the Company shall not be required to convert any shares of Convertible Preferred Stock while the stock transfer books of the Company are closed for any purpose, but the surrender of Convertible Preferred Stock for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such books as if the surrender had been made on the date of such reopening, and the conversion shall be at the Conversion Price in effect on such date. (d) Conversion Price. The conversion price for determining the number of shares of Common Stock deliverable upon conversion (the "Conversion Price") shall initially be $4.75 per share of Common Stock. The Conversion Price shall be subject to adjustment from time to time as follows: (i) In case the Company shall (A) pay a dividend to all holders of its Common Stock or make a distribution on the Common Stock to all holders of the Common Stock, which is paid or made (I) in other shares of stock of the Company or (II) in rights to purchase stock or other securities if such rights are not separable from the Common Stock except upon the occurrence of a contingency, (B) subdivide its outstanding shares of Common Stock into a greater number of shares or (C) combine its outstanding shares of Common Stock into a smaller number of shares, then in each such case the Conversion Price in effect immediately prior thereto and the securities issuable shall be adjusted retroactively as provided below so that the holder of any shares of Convertible Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock and other shares and rights to purchase stock or other securities that such holder would have owned or have been entitled to receive after the happening of any of the events described above had such shares of Convertible Preferred Stock been converted immediately prior to the happening of such event. In the event of the redemption of any shares or rights referred to in clause (A), such holder shall have the right to receive, in lieu of any such shares or rights, any cash, property or securities paid in respect of such redemption; provided, however, that if the value of such cash, property or securities is less than $.10 per share of Common Stock, such holder shall not be entitled to such cash, property or securities. An adjustment made pursuant to this subparagraph (i) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination. (ii) In case the Company shall issue rights or warrants to all holders of the Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (determined as provided below) of the Common Stock on the date fixed for the determination of shareholders entitled to receive such rights or warrants, then the Conversion Price in effect at the opening of business on the day following the date fixed for such determination shall be reduced by multiplying such conversion price by a fraction of which the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase and the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock that the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such current market price, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination; provided, however, in the event that all the shares of Common Stock offered for subscription or purchase are not delivered -6- upon the exercise of such rights or warrants, upon the expiration of such rights or warrants the conversion price shall be readjusted to the conversion price that would have been in effect had the denominator and the numerator of the foregoing fraction and the resulting adjustment been made based upon the number of shares of Common Stock actually delivered upon the exercise of such rights or warrants rather than upon the number of shares of Common Stock offered for subscription or purchase. For the purposes of this subparagraph (ii), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. (iii) In case the Company shall sell or otherwise issue, for aggregate consideration in excess of $10 million in a single transaction or series of related transactions, rights, warrants or any other equity or debt security entitling the holder thereof to subscribe for, purchase or otherwise acquire shares of Common Stock at a price per share less than the Conversion Price in effect immediately prior thereto, then such Conversion Price shall be reduced to the conversion price of such newly issued security. (iv) In case the Company at any time that the Convertible Preferred Stock is outstanding shall sell, in a public or private offering, shares of Common Stock for a consideration having a fair market value per share that is less than $4.16 per share (as appropriately adjusted for stock splits and combinations), then the Conversion Price in effect immediately prior thereto shall be reduced to the price determined by multiplying such consideration per share of Common Stock by 1.15. Such adjustment shall be made successively each time any event described above in this subparagraph shall occur. (v) Notwithstanding anything in subparagraphs (iii) or (iv) to the contrary, sales or issuances of shares of Common Stock made by the Company pursuant to any option, warrant or right in existence on the date of the initial issuance of shares of the Convertible Preferred Stock or pursuant to any employee stock option plan or other employee benefit plan of the Company or any of its subsidiaries shall not result in any reduction in the Conversion Price. (vi) For the purpose of any computation under subparagraph (ii), the current market price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices for the 30 consecutive trading days commencing with the 45th trading day before the day in question. The closing price for each day shall be the reported last sales price regular way or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way, in either case on the New York Stock Exchange or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading (based on the aggregate dollar value of all securities listed or admitted to trading) or, if not listed or admitted to trading on any national securities exchange, on the NASDAQ National Market System or, if the Common Stock is not listed or admitted to trading on any national securities exchange or quoted on the NASDAQ National Market System, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Company for that purpose, or, if such prices are not available, the fair market value set by, or in a manner established by, the Board of Directors of the Company in good faith. "Trading day" shall mean a day on which the national securities exchange or the NASDAQ National Market System used to determine the closing price is open for the transaction of business or the reporting of trades or, if the closing price is not so determined, a day on which the New York Stock Exchange is open for the transaction of business. -7- (vii) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that the Company may make any such adjustment at its election; and provided, further, that any adjustments that by reason of this subparagraph (vii) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 7 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. (viii) Whenever the Conversion Price is adjusted as provided in any provision of this Section 7: (1) the Company shall compute the adjusted conversion price in accordance with this Section 7 and shall prepare a certificate signed by the principal financial officer of the Company setting forth the adjusted Conversion Price and showing in reasonable detail the facts upon that such adjustment is based, and such certificate shall forthwith be filed with the transfer agent of the Convertible Preferred Stock; and (2) a notice stating that the Conversion Price has been adjusted and setting forth the adjusted conversion price shall forthwith be required, and as soon as practicable after it is required, such notice shall be mailed by the Company to all record holders of Convertible Preferred Stock at their last addresses as they shall appear in the stock transfer books of the Company. (ix) If at any time, as a result of any adjustment made pursuant to this Section 7, the holder of any shares of Convertible Preferred Stock thereafter surrendered for conversion shall become entitled to receive any shares of the Company other than shares of Common Stock or to receive any other securities, the number of such other shares or securities so receivable upon conversion of any share of Convertible Preferred Stock shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained in this Section 7 with respect to the Common Stock. (e) No Fractional Shares. No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon conversion of Convertible Preferred Stock. If more than one certificate representing shares of Convertible Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Convertible Preferred Stock so surrendered. Instead of any fractional share of Common Stock that would otherwise be issuable upon conversion of any shares of Convertible Preferred Stock, the Company will pay a cash adjustment in respect of such fractional interest in an amount equal to the same fraction of the current market price per share of Common Stock (determined in accordance with subparagraph (d)(vi)) at the close of business on the day of conversion. (f) Reclassification, Consolidation, Merger or Sale of Assets. In case of any reclassification of the Common Stock, any consolidation of the Company with, or merger of the Company into, any other person, any merger of another person into the Company (other than a merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company), any sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which share exchange the Common Stock is converted into other securities, cash or other property, then lawful provision shall be made as part of the terms of such transaction whereby the ranking of the Convertible Preferred Stock shall be preserved as to payment of dividends and distributions upon liquidation, dissolution or winding up and whereby the holder of each -8- share of Convertible Preferred Stock then outstanding shall have the right thereafter, during the period such share shall be convertible hereunder, to convert such share only into the kind and amount of securities, cash and other property receivable upon such reclassification, consolidation, merger, sale, transfer or share exchange by a holder of the number of shares of Common Stock of the Company into which such share of Convertible Preferred Stock might have been converted immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange assuming such holder of Common Stock of the Company (i) is not a person with which the Company consolidated or into which the Company merged or that merged into the Company, to which such sale or transfer was made or a party to such share exchange, as the case may be ("constituent person"), or an affiliate of a constituent person and (ii) failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such reclassification, consolidation, merger, sale, transfer or share exchange (provided that if the kind or amount of securities, cash and other property receivable upon such reclassification, consolidation, merger, sale, transfer or share exchange is not the same for each share of Common Stock of the Company held immediately prior to such consolidation, merger, sale or transfer by other than a constituent person or an affiliate thereof and in respect of which such rights of election shall not have been exercised ("non-electing share"), then the kind and amount of securities, cash and other property receivable upon such reclassification, consolidation, merger, sale, transfer or share exchange by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). The Company, the person formed by such consolidation or resulting from such merger or that acquires such assets or that acquires the Company's shares, as the case may be, shall make provisions in its certificate or articles of incorporation or other constituent document to establish such right. Such certificate or articles of incorporation or other constituent document shall provide for adjustments that, for events subsequent to the effective date of such certificate or articles of incorporation or other constituent document, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 7. The above provisions shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges. (g) Reservation of Shares; Transfer Taxes; Etc. The Company shall at all times reserve and keep available, out of its authorized and unissued stock, solely for the purpose of effecting the conversion of the Convertible Preferred Stock, such number of shares of its Common Stock free of preemptive rights as shall from time to time be sufficient to effect the conversion of all shares of Convertible Preferred Stock from time to time outstanding. The Company shall from time to time, in accordance with the laws of the State of Texas, increase the authorized number of shares of Common Stock if at any time the number of shares of Common Stock not outstanding shall not be sufficient to permit the conversion of all the then-outstanding shares of Convertible Preferred Stock. If any shares of Common Stock required to be reserved for purposes of conversion of the Convertible Preferred Stock hereunder require registration with or approval of any governmental authority under any Federal or State law before such shares may be issued upon conversion, the Company will in good faith and as expeditiously as possible endeavor to cause such shares to be duly registered or approved, as the case may be. If the Common Stock is listed on the New York Stock Exchange or any other national securities exchange, the Company will, if permitted by the rules of such exchange, as soon as practicable following issuance of the Convertible Preferred Stock, list and keep listed on such exchange, upon official notice of issuance, all shares of Common Stock issuable upon conversion of the Convertible Preferred Stock. The Company will pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of the Convertible Preferred Stock. The Company shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of Common Stock (or other securities or assets) in a name other than that in which the shares of Convertible Preferred Stock so converted were registered, and no such issue or -9- delivery shall be made unless and until the person requesting such issue has paid to the Company the amount of such tax or has established, to the satisfaction of the Company, that such tax has been paid. Before taking any action that would cause an adjustment reducing the Conversion Price to less than the then par value of the Common Stock, the Company will take any corporate action that may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock at the conversion price as so adjusted. (h) Prior Notice of Certain Events. In case: (i) the Company shall (1) declare any dividend (or any other distribution) on its Common Stock, other than (A) a dividend payable in shares of Common Stock or (B) regular cash dividends or (2) declare or authorize a redemption or repurchase of in excess of 20% of the then-outstanding shares of Common Stock; or (ii) the Company shall authorize the granting to the holders of Common Stock of rights or warrants to subscribe for or purchase any shares of stock of any class or of any other rights or warrants (other than any rights specified in paragraph (d)(i)(A)(II) of this Section 7); or (iii) of any reclassification of Common Stock (other than a subdivision or combination of the outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company shall be required, or of the sale or transfer of all or substantially all of the assets of the Company or of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or other property; or (iv) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall cause to be mailed to the holders of record of the Convertible Preferred Stock, at their last address as they shall appear upon the stock transfer books of the Company, at least 15 days prior to the applicable record date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption or granting of rights or warrants or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, redemption, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). (i) Other Changes in Conversion Price. The Company may make reductions in the Conversion Price, in addition to those required or allowed by this Section 7, as shall be determined by it, as evidenced by a resolution of the Board of Directors, to be advisable in order to avoid or diminish any income tax to holders of Common Stock resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes. Whenever the Conversion Price is so reduced, the Company shall mail to holders of record of the Convertible Preferred Stock a notice of the reduction at least 10 days before the date the reduced -10- conversion price takes effect, and such notice shall state the reduced conversion price and the period it will be in effect. 8. Mandatory Redemption. The Convertible Preferred Stock shall be subject to mandatory redemption on March 31, 2009 (the "Mandatory Redemption Date"). On the Mandatory Redemption Date, the Company shall, subject to the provisions of Section 3, pay each record holder of Convertible Preferred Stock on the Mandatory Redemption Date the entire Stated Value of the shares of Convertible Preferred Stock held of record by them, plus accrued and unpaid dividends to the Mandatory Redemption Date. The Convertible Preferred Stock shall cease to be outstanding on the Mandatory Redemption Date and dividends shall cease to accrue on the Mandatory Redemption Date and no conversion rights or other rights (except to receive the payment described in the previous sentence) shall exist after the Mandatory Redemption Date; provided, however, in the event the Company fails to redeem the Convertible Preferred Stock on the Maturity Date, whether due to restrictions under the Company's credit facilities or otherwise, the Convertible Preferred Stock not so redeemed, and any accrued and unpaid dividends relating thereto, shall continue to be outstanding and shall continue to accrue dividends in accordance with the provisions hereof. 9. Outstanding Shares. Except as set forth in the next sentence, for purposes of this Statement of Designation, all shares of Convertible Preferred Stock shall be deemed outstanding except (i) from the date fixed for redemption pursuant to Section 6 hereof, all shares of Convertible Preferred Stock that have been so called for redemption under Section 6 if funds necessary for the redemption of such shares are available and have been deposited in trust with a bank having a combined capital and surplus in excess of $50,000,000, as trustee, for the benefit of the holders of such shares to be redeemed for payment of the relevant redemption price; (ii) from the date of surrender of certificates representing shares of Convertible Preferred Stock, all shares of Convertible Preferred Stock converted into Common Stock; (iii) from the date of registration of transfer, all shares of Convertible Preferred Stock held of record by the Company or any subsidiary of the Company; and (iv) upon payment of the Stated Value and accrued and unpaid dividends pursuant to Section 8. For purposes of voting or consenting with respect to any action shares called for redemption pursuant to Section 6 shall not be treated as outstanding from and after the date of any such deposit of the funds for redemption. 10. Status of Acquired Shares. Shares of Convertible Preferred Stock redeemed by the Company, received upon conversion pursuant to Section 7 or otherwise acquired by the Company will be restored to the status of authorized but unissued shares of Preferred Stock, without designation as to class, and may thereafter be issued. 11. Preemptive Rights. The Convertible Preferred Stock is not entitled to any preemptive or subscription rights in respect of any securities of the Company. 12. Severability of Provisions. Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law. 13. Notices. If at the time of the giving of any notice provided for in Section 6 there shall be fewer than ten holders of record of the Convertible Preferred Stock, then such notice shall be given by registered first class mail, postage prepaid, return receipt requested. Any notice shall be given in -11- such manner to the initial holder of the Convertible Preferred Stock so long as it remains a holder of record of any Convertible Preferred Stock. 14. Voting Rights. (a) Except as provided in this Section 14, no holder of Convertible Preferred Stock shall be entitled to any voting rights at any annual or special meeting of shareholders of the Company or otherwise. (b) So long as shares of Convertible Preferred Stock remain outstanding the affirmative vote or consent of the holders of a majority of the shares of Convertible Preferred Stock outstanding at the time, voting as a single class, given in person or by proxy, either in writing or at a meeting, shall be necessary to permit or effect any amendment to the Company's Third Amended and Restated Articles of Incorporation if the amendment would accomplish any of the following: (i) the amendment, restatement, modification, alteration or repeal of any of the provisions of this Statement of Designation; (ii) increase or decrease the aggregate number of authorized shares of Convertible Preferred Stock; (iii) effect an exchange, or create a right of exchange, of all or any part of the shares of another class into the shares of Convertible Preferred Stock; (iv) create a new class or series of shares having rights and preferences equal, prior, or superior to the Convertible Preferred Stock, or increase the rights and preferences of any class or series having rights and preferences equal, prior, or superior to the Convertible Preferred Stock, or increase the rights and preferences of any class or series having rights or preferences later or inferior to the Convertible Preferred Stock in such a manner as to become equal, prior, or superior to the Convertible Preferred Stock; or (v) cancel or otherwise affect dividends on the shares of Convertible Preferred Stock that had accrued but had not been declared. -12- IN WITNESS WHEREOF, The Meridian Resource Company has caused this statement to be signed by the undersigned officer this 11th day of June, 2002. THE MERIDIAN RESOURCE CORPORATION By: /s/ JOSEPH A. REEVES, JR. ------------------------------------ Chairman of the Board and Chief Executive Officer -13- -----END PRIVACY-ENHANCED MESSAGE-----