STOCK RIGHTS AND RESTRICTIONS AGREEMENT
STOCK RIGHTS AND RESTRICTIONS AGREEMENT, dated as of June 30, 1998,
between The Meridian Resource Corporation, a Texas corporation ("TMR"), and
Shell Louisiana Onshore Properties Inc., a Delaware corporation ("SLOPI").
RECITALS:
A. After giving effect to the Closing (as defined below), SLOPI owns
12,082,030 shares of Common Stock (the "Common Shares") and 3,982,906 shares
of Preferred Stock (the "Preferred Shares") (together with any additional Common
Shares or Preferred Shares which SLOPI or any Affiliate of Shell (as defined
below) may from time to time own (collectively, the "Shares")).
B. After giving effect to the Closing, the number of directors
constituting the whole Board of Directors of TMR is seven (7) and the following
person is the initial Preferred Director (as defined below): J.M. Funk.
C. The Boards of Directors of TMR and SLOPI deem it advisable to establish
certain rights and restrictions with respect to the Shares.
ACCORDINGLY, premises considered, the parties have entered into this
Agreement.
1. DEFINITIONS. For purposes of this Agreement, the following terms
have the meanings indicated:
(a) "Affiliate" shall mean, with respect to any specified Person,
any other Person, directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person. For the purposes
of this definition, "control" (including, with correlative meanings,
"controlling," "controlled by," and "under common control with") means the power
to direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract, or otherwise and, with respect to a corporation or partnership,
control shall mean direct or indirect ownership of more than fifty percent (50%)
of the voting stock or general partnership interest or voting interest in any
such corporation or partnership.
(b) "Allocated Price Per Share" shall mean the then existing
conversion price of the Preferred Shares (or if all of the Preferred Shares
shall have been converted, the conversion price that would have then been in
existence had the Preferred Shares not been so converted) as the same may be
adjusted from time to time in accordance with the terms thereof.
(c) "Applicable Percentage" shall mean 21%.
(d) "Average Per Share Market Value" of shares of Common Stock shall
mean the average of the Per Share Market Value of such shares for the 30 Trading
Days immediately preceding (and excluding) the relevant date.
(e) "Beneficially Own" shall have the meaning assigned to such term
in Rule 13d-3 under the Exchange Act in effect on the date hereof. "Beneficial
Owner" and "Beneficial Ownership" shall have correlative meanings.
(f) "Business Combination Transaction" shall mean a merger,
consolidation, "business combination" as defined in Part Thirteen of the TBCA as
in effect on the date hereof, compulsory share exchange, recapitalization or
other transaction in which TMR is a constituent corporation or to which TMR is a
party and pursuant to which the shares of Common Stock are exchanged for cash,
securities or other property or a sale of all or substantially all of the assets
of TMR and its Subsidiaries, taken as a whole; provided that none of the
following shall be deemed a Business Combination Transaction for purposes of
this Agreement: (i) a merger, consolidation, compulsory share exchange,
recapitalization or other transaction in which the Beneficial Ownership of the
capital stock of TMR or the surviving corporation of the transaction (or of the
ultimate parent of TMR or of such surviving corporation) immediately after the
consummation of such transaction is substantially the same as the ownership of
the capital stock of TMR immediately prior to the consummation of the
transaction or (ii) a merger (A) in which TMR is the surviving corporation, (B)
in which all shares of Common Stock immediately prior to the consummation of
such merger remain outstanding immediately after the consummation thereof, (C)
as a result of the consummation of which no Person will own a majority of the
then outstanding shares of Common Stock and (D) following the consummation of
which the Continuing Directors will represent a majority of the Board of
Directors of TMR.
(g) "Certificate of Designation" for the Preferred Shares shall have
the meaning assigned to such term in the Merger Agreement.
(h) "Closing" shall have the meaning assigned to such term in the
Merger Agreement.
(i) "Common Shares" shall have the meaning set forth in Recital
A.
(j) "Common Stock" shall mean TMR's common stock, par value $0.01
per share, and any shares of common stock or similar securities into which the
common stock of TMR are hereafter reclassified into or exchanged for.
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(k) "Continuing Director" shall mean (i) any member of the Board of
Directors of TMR, while such person is a member of such Board of Directors, who
(1) was a member of the Board of Directors of TMR prior to the Effective Time or
(2) is recommended or elected to the Board of Directors by a majority of the
Continuing Directors to fill a vacancy arising as a result of an increase in the
number of directors of TMR occurring after the date hereof, and (ii) any
successor of a Continuing Director, while such successor is a member of the
Board of Directors of TMR, who is recommended or elected to succeed the
Continuing Director by a majority of the Continuing Directors. Notwithstanding
anything to the contrary in this definition, for purposes of this Agreement, the
SLOPI Designee(s) or Preferred Director(s) shall not be considered Continuing
Directors.
(l) "Deficiency Amount" shall mean with respect to any sale by SLOPI
or its Affiliates of Common Shares which were issued upon the conversion of
Preferred Shares, (i) the product of (x) the number of Common Shares sold by
SLOPI or its Affiliates in such sale at a per share price that is less than the
Allocated Price Per Share, times (y) the amount by which the per share sales
price is less than the Allocated Price Per Share. If Common Shares are sold in a
Public Offering, then the net proceeds to selling shareholder (after reasonable
and customary underwriting discounts, commissions, placement fees and expenses
of sale, excluding expenses for Security Holder's legal counsel) shall be deemed
to be the sales price. If Common Shares are sold in a Private Placement or any
transaction other than Public Offering, then the sales price shall be deemed to
be the greater of (i) the actual sales price or (ii) the Average Per Share
Market Value of the Common Stock relating to the date of such sale.
(m) "Director Election Date" shall have the meaning set forth in
Section 2.2(b).
(n) "Director Percentage" shall have the meaning set forth in
Section 2.2(b).
(o) "Effective Time" shall have the meaning assigned to such term in
the Merger Agreement.
(p) "E&P Company" shall have the meaning set forth in the definition
of Private Placement.
(q) "Excess Shares" shall have the meaning set forth in Section 2.5.
(r) "Exchangeable Security" shall mean a security of any type,
including but not limited to debt, equity, warrants or other rights, issued by
TMR or representing the right to acquire Voting Shares from TMR upon exchange,
conversion or exercise thereof.
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(s) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor federal statute as in effect from time to time.
(t) "Fully Diluted Shares" shall mean, at any time, the sum of (i)
the shares of Common Stock then outstanding plus (ii) the number of shares of
Common Stock reserved for issuance or issuable in connection with the exercise,
exchange or conversion of options, warrants or securities of TMR then
outstanding which are exercisable or exchangeable for shares of Common Stock or
are convertible into shares of Common Stock (including, without limitation, the
Preferred Shares).
(u) "Merger Agreement" shall mean the Agreement and Plan of Merger
dated March 27, 1998 among TMR, LOPI Acquisition Corp., SLOPI, and Louisiana
Onshore Properties Inc.
(v) "Per Share Market Value" means on any particular date (a) the
last sale price per share of the Common Stock on such date on the principal
stock exchange on which the Common Stock has been listed or, if there is no such
price on such date, then the last price on such exchange on the date nearest
preceding such date, or (b) if the Common Stock is not listed on any stock
exchange, the final bid price for a share of Common Stock in the
over-the-counter market, as reported by The Nasdaq Stock Market at the close of
business on such date, or the last sales price if such price is reported and
final bid prices are not available, or (c) if the Common Stock is not quoted on
The Nasdaq Stock Market, the bid price for a share of Common Stock in the over-
the-counter market as reported by the National Quotation Bureau Incorporated (or
any similar organization or agency succeeding to its functions of reporting
prices), or (d) if the Common Stock is no longer publicly traded, as determined
by one of the investment banking firms listed on Schedule I, as selected by
SLOPI.
(w) "Person" shall mean any individual, firm, partnership,
association, group (as such term is defined in Section 13(d)(3) of the Exchange
Act, as in effect on the date hereof), corporation, trust, business trust or
other entity, and includes any successor (by merger or otherwise) of any such
entity.
(x) "Preferred Director" shall have the meaning assigned to such
term in the Certificate of Designation for the Preferred Stock.
(y) "Preferred Shares" shall have the meaning set forth in Recital
A.
(z) "Preferred Stock" shall mean TMR's Series A Cumulative
Convertible Preferred Stock, par value $1.00 per share.
(aa) "Private Placement" shall mean a Transfer of Shares pursuant to
a transaction not involving a Pubic Offering; provided, however, that (A) the
sale of Shares pursuant to a tender or exchange offer is not a Private
Placement; (B) a Private Placement shall not include a Transfer to any Person
who, directly or indirectly, has as one of its material businesses the
exploration, development or production of crude oil or natural gas (an "E&P
Company") if, as a result of such Private Placement, such E&P Company would
Beneficially Own and/or have the right to acquire upon conversion of shares of
Preferred Stock, such
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number of shares of Common Stock as would constitute 10% or more of the then
outstanding shares of Common Stock, (x) unless any such E&P Company acquiring
such amount of securities enters into an agreement with TMR limiting the
Transfer of such shares on substantially the same terms as this Agreement except
that the term of such agreement shall be 10 years from the date of such
agreement and (y) if any such E&P Company is acquiring registration rights under
the Registration Rights Agreement (as defined in the Merger Agreement), it must
agree that, although any underwriter for such E&P Company shall have customary
access to TMR to perform its due diligence obligations, such underwriter will be
subject to confidentiality obligations that prohibit the sharing or disclosure
of non-public information with such E&P Company; and (C) a private placement
shall not include a Transfer of Shares to any Person in which following such
Transfer such Person Beneficially Owns or has the right to acquire upon
conversion of the Preferred Stock more than 10% of the Common Stock of TMR
unless such Person enters into an agreement with TMR with terms and conditions
restricting the Transfer of such Shares substantially similar to those contained
herein except that the term of such agreement shall be for 10 years from the
date of such agreement. For purposes of the foregoing, in determining whether
any Person Beneficially Owns shares of Common Stock or shares of Preferred
Stock, SLOPI and its Affiliates shall be entitled to rely exclusively on the
existence or non-existence of any reports on Schedule 13D that may have been
filed by such Person with the SEC, without having to make any inquiry of such
Person or otherwise.
(ab) "Public Offering" shall mean a firm commitment underwritten
public offering pursuant to a registration statement which has been declared
effective by the SEC under the Securities Act.
(ac) "Relevant Date" shall have the meaning set forth in Section
2.4(k).
(ad) "Rule 144" and "Rule 145" shall mean Rule 144 and Rule 145
adopted by the SEC under the Securities Act, or any successor rule.
(ae) "SEC" shall mean the Securities and Exchange Commission.
(af) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute as in effect from time to time.
(ag) "Shares" shall have the meaning set forth in Recital A.
(ah) "Shell" shall mean Shell Oil Company, a Delaware corporation,
which is an Affiliate of SLOPI.
(ai) "Subsidiary" shall mean, with respect to any Person, any other
Person of which at least a majority of the voting power of the voting equity
securities or voting equity interest is owned, directly or indirectly, by such
Person.
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(aj) "SLOPI" shall have the meaning set forth in the first paragraph
hereof; and the term "SLOPI" shall include SLOPI and its Affiliates unless the
context otherwise requires.
(ak) "SLOPI Designee(s)" shall have the meaning set forth in Section
2.2(b) hereof.
(al) "TBCA" shall have the meaning set forth in Section 2.1(c).
(am) "TMR" shall have the meaning set forth in the first paragraph
of this Agreement.
(an) "Trading Days" means (a) a day on which the Common Stock is
traded on the principal stock exchange on which the Common Stock has been
listed, or (b) if the Common Stock is not listed on any stock exchange, a day on
which the Common Stock is quoted in the over-the-counter market, as reported by
The Nasdaq Stock Market, or (c) if the Common Stock is not quoted on The Nasdaq
Stock Market, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting prices).
(ao) "Transfer" shall have the meaning set forth in Section 2.4
hereof.
(ap) "Voting Shares" shall mean the Common Stock and any other
securities of TMR having voting power under ordinary circumstances with respect
to the election of directors of TMR.
2. SHARE RIGHTS AND RESTRICTIONS.
2.1 LIMITATION ON CERTAIN TRANSACTIONS.
(a) Except as otherwise permitted by this Agreement, SLOPI
agrees that SLOPI shall not, during the period from the date of this Agreement
until its termination, (i) engage, or propose to engage, in any Business
Combination Transaction with TMR, or (ii) make any proposal to TMR, the Board of
Directors of TMR or the shareholders of TMR with respect to a tender offer or
exchange offer for shares of Common Stock or a liquidation of TMR, unless either
(A) such transaction shall have been approved by a majority of the Continuing
Directors or (B) (x) the third anniversary of the date of this Agreement shall
have occurred and (y) on the date when such transaction is proposed, either no
Preferred Director(s) or SLOPI Designee(s) shall be serving on the Board of
Directors of TMR or SLOPI and its Affiliates collectively shall Beneficially Own
less than 21% of the then outstanding Common Stock.
(b) Except as otherwise permitted by this Agreement, SLOPI
agrees that SLOPI shall not, during the period from the date of this Agreement
until its termination, (i) request or solicit any Person (A) to make a tender or
exchange offer for shares of Common Stock or (B) to make a proposal for a
Business Combination
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Transaction, unless either (A) a majority of the Continuing Directors shall have
approved of SLOPI taking such action or (B) (x) the third anniversary of the
date of this Agreement shall have occurred on the date when such action is first
requested or solicited by SLOPI and (y) either no SLOPI Designee(s) or Preferred
Director(s) shall be serving on the Board of Directors of TMR or SLOPI and its
Affiliates shall collectively Beneficially Own less than 21% of the then
outstanding Common Stock.
(c) In connection with the Merger, TMR's Board of Directors
has taken all action to assure that (i) no state takeover statute or similar
statute will apply to the Merger or to any of the transactions contemplated in
the Merger Agreement or the items referenced to in Section 2.3(w), (x), (y) and
(z), (ii) Article Eight of TMR's Articles of Incorporation will not apply to the
Merger or any of the transactions contemplated in the Merger Agreement or in the
documents attached thereto, and (iii) Part Thirteen of the Texas Business
Corporation Act ("TBCA") will not apply to the Merger or any of the transactions
contemplated in the Merger Agreement or the items referenced to in Section
2.3(w), (x), (y) and (z). Further, TMR has no "poison pill" or takeover defense
mechanism other than Article Eight of TMR's Articles of Incorporation except
those that exclude SLOPI and its Affiliates from all effects thereof. TMR shall
not amend or modify any of the foregoing actions nor shall TMR implement any
new, additional, amended or modified poison pill or takeover defense mechanism,
unless, in each and every such case, provision shall be made to exclude SLOPI
and its Affiliates from all effects thereof. This Section 2.1(c) shall survive
the termination of this Agreement.
(d) TMR and SLOPI agree that the operative provisions, as
presently in effect, of Article Eight of TMR's Articles of Incorporation and
Part Thirteen of the TBCA will apply to any business combination transaction
covered by said Article Eight or Part Thirteen between SLOPI and its Affiliates
and TMR for the term of this Agreement, notwithstanding that the operative
provisions of said Article Eight and Part Thirteen might otherwise be applicable
for a shorter period of time.
2.2 TMR BOARD OF DIRECTORS.
(a) Subject to restrictions of applicable law and unless this
Agreement has been terminated, on the Director Election Date (defined below),
TMR shall appoint SLOPI Designee(s) (defined below) to fill the vacancies
created by the removal of the Preferred Director(s) in accordance with the
Certificate of Designation for the Preferred Stock, to serve until their
successors are elected or their earlier resignation or removal.
(b) From and after the date on which all the Preferred Shares
shall have been converted into Common Stock (the "Director Election Date") and
until the earlier of (i) termination of this Agreement or (ii) SLOPI and its
Affiliates shall Beneficially Own Shares constituting less than 21% of the then
outstanding shares of Common Stock, then, in connection with each election of
directors of TMR, whether at an annual or special meeting, TMR will nominate,
and, subject to the fiduciary obligations of the TMR directors, solicit proxies
for, in accordance with its procedures
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for the nomination of, and solicitation of proxies for, management-slate
directors, a number of persons designated by SLOPI (all such persons who, at any
time, are or were designated by SLOPI for purposes of this Agreement are
referred to herein as the "SLOPI Designee(s)") such that, after giving effect to
the election of such persons to the Board of Directors of TMR, the number of
SLOPI Designees then serving on the Board of Directors of TMR shall equal the
product (rounded downward to the nearest whole number, but, in any event, not
less than one) of (i) the total number of directors constituting the entire
Board of Directors of TMR multiplied by (ii) 20% (the "Director Percentage").
(c) If at any time the number of directors constituting the
Board of Directors of TMR shall decrease so that SLOPI would be entitled to
designate fewer directors than are then serving as SLOPI Designees, SLOPI shall
cause one or more of the SLOPI Designees serving as TMR directors to resign so
that the percentage of the Board of Directors consisting of SLOPI Designees does
not exceed the Director Percentage (rounded downward to the nearest whole
number, but, in any event, not less than one); provided, that in no event will
there ever be less than one SLOPI Designee. Further, upon termination of this
Agreement in accordance with its terms, SLOPI shall cause all SLOPI Designees
then serving as directors of TMR to resign immediately.
(d) (i) In the event that any SLOPI Designee shall cease to
serve as a director for any reason (other than as set forth in Section 2.2(c)),
the vacancy resulting thereby shall be filled by the remaining directors of the
Company in accordance with its Articles of Incorporation, by-laws and applicable
law by a new SLOPI Designee and such new SLOPI Designee shall thereafter serve
until the expiration of the term of the SLOPI Designee replaced by such new
SLOPI Designee.
(ii) Subject to the provisions of Section 2.2(e), if,
after the Director Election Date, there shall exist at any time any vacancy or
vacancies on the Board of Directors of TMR as a result of any increase in the
number of directors that constitutes the entire Board of Directors of TMR, which
the directors of TMR then in office intend to fill in accordance with TMR's
Articles of Incorporation, by-laws and applicable law, SLOPI shall be entitled
to designate one or more persons as SLOPI Designees to fill such vacancy or
vacancies if and to the extent necessary so that, after giving effect to the
filling of such vacancy or vacancies, the number of SLOPI Designees then serving
on the Board of Directors of TMR shall equal the Director Percentage (rounded
downward to the nearest whole number, but, in any event, not less than one). TMR
agrees to take all actions appropriate or necessary to ensure that any SLOPI
Designees designated pursuant to the preceding sentence are appointed to the
Board of Directors of TMR to fill any such vacancy or vacancies filled by the
Board of Directors of TMR as provided in the preceding sentence.
(e) Notwithstanding anything to the contrary contained herein,
no SLOPI Designee may be a person who previously has been a director of TMR and
was properly removed for cause from the Board of Directors of TMR or a person
who has been convicted of a felony or a crime involving moral turpitude.
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(f) The SLOPI Designees will be furnished with all information
that is provided to all other directors of TMR (in their capacities as such) at
the same time as such information is furnished to such other directors (in their
capacities as such).
(g) SLOPI shall cause all SLOPI Designees serving as directors
of TMR to comply with the retirement policies of TMR as in effect on the date
hereof or as hereafter amended or modified from time to time by the Board of
Directors of TMR or its shareholders; provided that no such amendment or
modification to such policies shall be binding upon SLOPI or the SLOPI Designees
unless at least one SLOPI Designee shall have voted in favor of such amendment
or modification at the meeting, or in the action in lieu of a meeting, of the
Board of Directors of TMR at or in which it is considered.
(h) At all times when there is a SLOPI Designee on TMR's Board
of Directors, at least one SLOPI Designee shall be a member of each Audit
Committee of the Board of Directors. Each SLOPI Designee who is a member of the
Audit Committee shall have unrestricted access to TMR's independent accountants
and all audit and tax work papers to the same extent as any other member of the
Audit Committee.
2.3 LIMITATION ON ACQUISITION OF ADDITIONAL SHARES BY SLOPI. From
and after the date hereof, SLOPI shall not acquire any shares of Common Stock,
other than the Common Shares and the Preferred Shares owned by SLOPI as of the
Effective Time and after giving effect to the Closing, (i) without the prior
written consent of a majority of the Continuing Directors or (ii) unless (A) the
third anniversary of the date of this Agreement shall have occurred and (B) at
the time of such acquisition no SLOPI Designee(s) or Preferred Director(s) shall
be serving on the Board of Directors of TMR or SLOPI and its Affiliates would
collectively Beneficially Own less than 21% of the then outstanding Common
Stock; provided, however, that nothing in this Section 2.3 shall limit SLOPI's
power and right (w) to convert shares of Preferred Stock into shares of Common
Stock, or (x) to purchase or acquire shares as a result of any stock dividend or
stock split, reclassification of the Common Stock, or the exercise or conversion
of any security received by SLOPI from TMR in respect of its Shares, or (y) to
receive shares of Common Stock pursuant to Section 2.7 to make up a Deficiency
Amount or (z) to acquire shares of Common Stock or any TMR Exchangeable Security
pursuant to Section 2.6 or to convert, exchange or exercise any such TMR
Exchangeable Security.
2.4 RESTRICTIONS ON TRANSFER. From and after the date hereof until
the termination of this Agreement, SLOPI and its Affiliates shall not sell,
transfer or otherwise convey (when used as a verb, "Transfer" and, any sale,
transfer or other conveyance, a "Transfer") Beneficial Ownership of any Shares
(including Shares subject to Exchangeable Securities), without the prior written
consent of a majority of the Continuing Directors, which consent shall not be
unreasonably withheld, except that, in any event, any and all of the following
Transfers shall be permitted:
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(a) One or more Transfers to Shell or a direct or indirect
Affiliate of Shell, provided that Shell and each such Affiliate of Shell agrees
in writing with TMR to be bound by the same restrictions as are applicable to
SLOPI hereunder.
(b) One or more Transfers to TMR or a to a direct or indirect
Subsidiary of TMR (pursuant to a tender offer or otherwise).
(c) One or more Transfers pursuant to a merger, consolidation
or compulsory share exchange, in which TMR is a constituent corporation.
(d) One or more Transfers made as a pro rata dividend or
distribution to the holders of the common stock of SLOPI or its Affiliates,
provided, unless such dividend or distribution is to the public shareholders of
any of the Royal Dutch/Shell Group of Companies, such holders agree in writing
with TMR to be bound by the same restrictions as SLOPI hereunder.
(e) One or more Transfers to any Person (other than SLOPI or
any Affiliate of Shell) who shall have commenced a tender or exchange offer for
shares of Common Stock if, at the time of public announcement of the tender or
exchange offer: (i) SLOPI and its Affiliates collectively Beneficially Own less
than 21% of the then outstanding shares of Common Stock and no SLOPI Designee or
Preferred Director is serving on the TMR Board of Directors, or (ii) SLOPI and
its Affiliates collectively Beneficially Own more than 21% of the then
outstanding shares of Common Stock or any SLOPI Designee or Preferred Director
is serving on the TMR Board of Directors, unless SLOPI and any Affiliates first
provide to TMR a preferential right to purchase, for cash, all such shares which
SLOPI and any Affiliates would be willing to tender or exchange at a price of
105% of the tender offer price which SLOPI and any Affiliates would be willing
to accept (which shall be the market value of the security to be exchanged on
such date if publicly traded or the cash equivalent value as reasonably
determined in good faith by SLOPI and its Affiliates). With respect to clause
(ii) above, SLOPI and its Affiliates shall give TMR notice of its willingness to
accept the tender or exchange offer at least 10 calendar days prior to its then
stated expiration date and, if TMR desires to exercise its preferential purchase
right, it must so notify SLOPI and its Affiliates in writing within said 10
calendar day period. Once TMR has given notice to SLOPI and its Affiliates that
TMR will exercise such preferential right, then, on such then stated expiration
date of the tender or exchange offer, TMR will be obligated to close the
purchase and pay in full in cash, and SLOPI and its Affiliates will be obligated
to sell, at the applicable 105% price notwithstanding anything that may
otherwise occur with respect to the tender or exchange offer, including, without
limitation, withdrawal, extension, modification, or increase or decrease in the
tender or exchange price or other consideration. Once TMR has not exercised a
preferential right to purchase with respect to a particular tender or exchange
offer made by a particular Person, then SLOPI and its Affiliates shall not
thereafter be required to make any additional preferential purchase rights
available to TMR with respect to such particular tender or exchange offer, even
if in such tender or exchange offer there is an extension or modification of or
an increase or decrease in price or other consideration, in any tender or
exchange offer made by such particular Person; provided, however, that SLOPI
will
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be required to provide to TMR a preferential purchase right with respect to any
tender or exchange offer made by each other Person or with respect to any new
tender or exchange offer by such particular Person which SLOPI and its
Affiliates would be willing to accept.
(f) From and after the following anniversaries of the date of
this Agreement, SLOPI and its Affiliates may, collectively, sell the following
percentages of the number of their Common Shares in one or more Public
Offerings, Private Placements and/or transactions described below in paragraphs
(h), (i), or (j):
PERCENTAGE OF
COMMON SHARES
ANNIVERSARY OF PERMITTED TO TRANSFER*
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THIS AGREEMENT INCREMENTAL* AGGREGATE*
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Second 25% 25%
Third 25% 50%
Fourth 25% 75%
Fifth 25% 100%
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*These time restrictions and percentages will also apply to any shares of
Common Stock acquired by SLOPI and its Affiliates upon conversion of any
Preferred Shares into Common Shares, which will result in additional
Common Shares that can be Transferred based on the percentage limitations
being applied to a greater number of Common Shares.
Notwithstanding the above, if, at any time or from time to time, SLOPI or any of
its Affiliates receive Common Shares pursuant to Section 2.7 to make up a
Deficiency Amount, then immediately the same number of Common Shares will be
available for Transfer . Such increased availability for Transfer and any actual
Transfer(s) will not reduce or delay other Transfers otherwise permitted to be
made in accordance with the foregoing.
(g) From and after the following anniversaries of the date of
this Agreement, SLOPI may sell the following percentages of the number of its
Preferred Shares in one or more Private Placements:
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PERCENTAGE OF
PREFERRED SHARES
ANNIVERSARY OF PERMITTED TO TRANSFER
-----------------------------
THIS AGREEMENT INCREMENTAL AGGREGATE
-------------- ----------- ---------
Third 33 1/3% 33 1/3%
Fourth 33 1/3% 66 2/3%
Fifth 33 1/3% 100%
(h) Subject to paragraphs (f) and (g), as such may be modified
pursuant to paragraph (k) below, one or more Transfers in accordance with Rule
144 or Rule 145.
(i) Subject to paragraphs (f) and (g) as such may be modified
pursuant to paragraph (k) below, one or more Transfers of Shares in a Public
Offering or in a public offering (other than a Public Offering) made pursuant to
a registration statement which has been declared effective by the SEC under the
Securities Act (any such Public Offering or public offering, a "Registered
Transaction"); provided, however, that, in connection with any such Registered
Transaction, SLOPI and the Company shall obtain from the managing underwriter of
such Public Offering or from each broker through which such public offering is
made, as the case may be, a commitment to use its reasonable best efforts to
make a broad public distribution of the Shares (including an indirect
distribution of Shares as a result of a distribution of Exchangeable Securities)
to be Transferred in such Registered Transaction. The managing underwriter or
broker, as the case may be, will be advised that, for purposes of this
Agreement, a "broad public distribution" means a distribution such that no
Person is allocated for purchase in such Registered Transaction a number of
Shares in excess of (A) 5% of the then outstanding shares of Common Stock (after
giving effect to the offering of the Common Shares and any other securities
being offered by TMR concurrently therewith in such Registered Offering) or (B)
in the case of a Public Offering, in excess of 20% of the number of shares of
Common Shares being offered in such Public Offering, provided that, in the case
of this clause (B), there shall be disregarded Common Shares allocated for
purchase by a mutual fund, a pension fund, an investment adviser (which
investment adviser shall be registered under the Investment Advisers Act of
1940, as amended) for any mutual fund or pension fund, or any party who is
entitled to report such party's holdings of Common Stock on Schedule 13G
promulgated under the Exchange Act in light of that party's investment intent.
(j) Notwithstanding paragraphs (f) or (g), as such may be
modified pursuant to paragraph (k) below, such numbers of shares of Common Stock
as are equal to the numbers of shares that SLOPI and its Affiliates may from
time to time have received pursuant to Section 2.7 to make up a Deficiency
Amount.
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(k) Notwithstanding paragraphs (f) and (g) above, if (i) TMR
shall ever, in connection with a merger, consolidation, share exchange, or
acquisition of a business or properties or similar transaction, sell or issue or
commit to sell or issue 5,000,000 (as adjusted for stock splits, reverse splits,
reclassifications, and similar actions) or more shares of Common Stock or TMR
Exchangeable Securities that, at the time of issuance, sale or commitment and
assuming full conversion, exchange or exercise thereof, represent 5,000,000 (as
adjusted for stock splits, reverse splits, reclassifications, and similar
actions) or more of the Voting Shares and (ii) at or prior to the meeting of the
TMR Board of Directors approving any such transaction the TMR Board of Directors
shall not have received an opinion letter from an investment banking firm of
national recognition to the effect that the contemplated transaction is fair,
from a financial point of view, to TMR, then (x) SLOPI and its Affiliates will,
immediately or at any time thereafter, be permitted to Transfer an additional
number of Common Shares equal to the number of shares of Common Stock and/or the
Common Stock equivalent of the Voting Shares represented by the transaction as
to which the requisite fairness opinion was not obtained, and (y) if such would
result in earlier or greater Transfers by SLOPI and its Affiliates, the tables
in paragraphs (f) and (g) shall upon the date of issuance, sale or commitment
(the "Relevant Date") be revised to read, in their entirety:
For paragraph (f):
PERCENTAGE OF COMMON
SHARES PERMITTED TO TRANSFER*
--------------------------------
DATE INCREMENTAL* AGGREGATE *
---- ------------ -----------
Immediately 25% 25%
1 year after Relevant Date 25% 50%
2 years after Relevant Date 25% 75%
3 years after Relevant Date 25% 100%
--------------------
*These time restrictions and percentages will also apply to any
shares of Common Stock acquired by SLOPI upon conversion of any
Preferred Shares into Common Shares, which will result in additional
Common Shares that can be Transferred based on the percentage
limitations being applied to a greater number of Common Shares.
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For paragraph (g):
PERCENTAGE OF PREFERRED
SHARES PERMITTED TO TRANSFER
-----------------------------
DATE INCREMENTAL AGGREGATE
---- ----------- ---------
Immediately 33 1/3% 33 1/3%
1 year after Relevant Date 33 1/3% 66 2/3%
2 years after Relevant Date 33 1/3% 100%
2.5 VOTING OF COMMON SHARES. During the term of this Agreement and
prior to the conversion of all of the Preferred Shares, the following provisions
will apply: SLOPI and its Affiliates shall be entitled to vote, in its or their
complete discretion, and on all matters, such number of its Common Shares that,
when added to the votes represented by the Preferred Shares, constitute an
aggregate of up to 23% of the then outstanding votes eligible to be cast for
such matter. After the conversion of all the Preferred Shares, SLOPI and its
Affiliates shall be entitled to vote, in its or their complete discretion, and
on all matters, such number of its Common Shares that constitute up to 23% of
the then outstanding votes eligible to be cast for such matter. If only a
portion of the Preferred Shares has been converted, the voting shall be prorated
between the Common Stock and Preferred Stock for a total of up to 23% of the
then outstanding eligible votes to be cast for such matter. With respect to
those Common Shares, if any, that are in excess of the above amounts of the then
outstanding votes eligible to be cast for such matter (the "Excess Shares"),
SLOPI shall vote such Excess Shares pro rata with the votes of all shares, other
than the Excess Shares, that are actually voted for, against or abstain from
voting on each matter. Notwithstanding the previous sentence, SLOPI shall have
complete discretion in voting all of its Common Shares and Preferred Shares on
any matter (i) that constitutes a Business Combination Transaction, (ii) that
would involve a change of control of TMR (for purposes of this section a change
in control shall mean the acquisition by a Person other than SLOPI or its
Affiliates of Beneficial Ownership of more than 50% of the then outstanding
shares of Common Stock), or (iii) with respect to which a vote is taken when any
of the following shall have occurred or shall exist: (w) the Average Per Share
Market Value for TMR's Common Stock with respect to the day in which the matter
is voted upon has been less than $5.50 per share (such amount to be
appropriately adjusted to give effect to stock splits, reverse splits, stock
dividends, reclassifications, share exchanges, dividends and distributions for
which adjustments to the conversion price of the Preferred Shares may be made),
(x) there are any accrued but unpaid dividends on any Preferred Shares, (y) TMR
shall have failed to issue the additional shares of Common Stock required to be
issued pursuant to Section 2.7, or (z) there shall be a continuing and uncured
default by TMR of any of its material obligations under this Agreement, the
Certificate of Designation or Registration Rights Agreement (both as defined in
the Merger Agreement) or the Merger Agreement. The
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foregoing does not limit or restrict SLOPI's or its Affiliates' complete
discretion in voting its or their Preferred Shares.
2.6 RIGHT TO PARTICIPATE IN CERTAIN ISSUANCES BY TMR.
(a) If, when, and for so long as, SLOPI and its Affiliates
Beneficially Own shares of Common Stock that would constitute, after giving
effect to the proposed transaction (but not prior to the proposed transaction),
less than the Applicable Percentage of the then outstanding shares of Common
Stock, TMR shall not issue any shares of Common Stock or any Exchangeable
Securities, for any consideration or in any type of transaction, unless TMR
shall have first complied with, in the case of an issuance other than pursuant
to Public Offering, the provisions of Section 2.6(b) or, in the case of a Public
Offering, the provisions of Section 2.6(c).
(b) If TMR determines to issue any shares of Common Stock or
any Exchangeable Security, other than in a Public Offering, then TMR shall
provide written notice of such determination to SLOPI, which notice shall
include all the terms of such issuance and shall offer to SLOPI the right to
purchase, at the same price and on the same terms as TMR proposes to issue such
shares of Common Stock or Exchangeable Security to others (or, if TMR proposes
to issue such shares of Common Stock or any Exchangeable Security other than for
cash, at a cash price equal to the current market price of the Common Stock or
if a Exchangeable Security, such value to be determined by agreement between TMR
or SLOPI, or if the parties are unable to agree, by an investment banking firm
or other asset valuation firm of national reputation selected by SLOPI from
Schedule I attached hereto (as such Schedule I may be amended in writing from
time to time by both TMR and SLOPI) with the consent of a majority of the
Continuing Directors, which consent shall not be unreasonably withheld, the cost
of which shall be borne by TMR) a number or amount of the shares of Common Stock
or Exchangeable Securities proposed to be issued that represents the right to
acquire upon exercise, exchange or conversion of such Exchangeable Securities a
number of Voting Shares so that, upon closing of the transaction, SLOPI and its
Affiliates will Beneficially Own the Applicable Percentage of the then to be
outstanding Common Stock (the "Offer Notice"). If SLOPI determines to accept the
offer contained in the Offer Notice, SLOPI shall deliver a written notice to TMR
indicating its acceptance within 10 days after its receipt of the Offer Notice,
which notice shall indicate whether SLOPI has accepted such offer in whole or in
part, and, if accepted in part, the number or amount of shares of Common Stock
or Exchangeable Securities as to which such offer has been accepted (an
"Acceptance Notice"). Any acceptance of the offer contained in an Offer Notice
by delivery of an Acceptance Notice shall be irrevocable and shall constitute a
commitment by SLOPI to purchase from TMR, and by TMR to sell to SLOPI, the
number or amount of shares of Common Stock or Exchangeable Securities covered by
such Acceptance Notice upon the terms contained in the Offer Notice.
(c) If at any time and from time to time, (i) TMR determines
to issue any shares of Common Stock or any Exchangeable Security in a Public
Offering, and (ii) as a result thereof SLOPI and its Affiliates would
Beneficially Own less than
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the Applicable Percentage of the then to be outstanding shares of Common Stock,
then (y) TMR shall provide written notice of such determination to SLOPI, which
notice shall include the proposed size and other terms of such issuance, to the
extent then known, the name or names of any managing underwriter or placement
agent(s) and the date when it is proposed that any such issuance will be made,
and (z) TMR shall either sell directly or cause the underwriters or placement
agent(s) to offer to SLOPI the right to purchase from TMR directly or from the
underwriters or placement agent(s), at the applicable offering price, a number
or amount of the shares of Common Stock, Exchangeable Securities or other
securities proposed to be issued that, if purchased by SLOPI, would permit SLOPI
and its Affiliates to Beneficially Own a number of shares of Common Stock equal
to Applicable Percentage of the then to be outstanding Common Stock after
closing the proposed issuance.
2.7 TMR SUPPORT OF CERTAIN STOCK SALES.
(a) In the event that, from time to time, SLOPI and/or any Affiliate
of SLOPI or of Shell shall sell any of the Common Shares to be issued upon
conversion of Preferred Shares and the net proceeds (after reasonable and
customary commissions, underwriters discounts, placement fees and expenses of
sale, excluding expenses of legal counsel for the selling shareholder(s))
received by SLOPI or such Affiliate for such Common Shares shall result in a
Deficiency Amount, then TMR shall, at its option, (i) pay to SLOPI an amount of
cash equal to the Deficiency Amount or (ii) issue to SLOPI or such Affiliate
additional fully paid and non-assessable shares of Common Stock equal in value
to the Deficiency Amount. All shares of Common Stock issued by TMR in respect of
a Deficiency Amount (i) shall be valued in the manner set forth in the
definition of Deficiency Amount and (ii) shall be issued as of the closing of
such sale. If TMR issues shares of Common Stock in respect of a Deficiency
Amount, then TMR will cause such shares to be listed for trading on the
principal stock exchange for the Common Stock.
(b) In the event, (i) SLOPI shall propose to Transfer Shares
to a person who has committed to purchase such Shares pursuant to a transaction
not involving a Public Offering at a time when SLOPI is authorized to sell such
Shares, (ii) under the terms of this Agreement, such person would be required to
enter into an agreement with TMR and such person and TMR are unable to effect
such agreement, and (iii) SLOPI shall subsequently sell such Shares pursuant to
a Public Offering, TMR shall pay the reasonable and customary commissions,
underwriters discounts and expenses of sale payable by SLOPI in such sale,
excluding expenses of legal counsel for SLOPI. If this Section 2.7(b) shall be
applicable in the circumstances, then this Section shall control over Section
2.C (11) g of the Registration Rights Agreement.
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3. STOCK CERTIFICATES AND OTHER RESTRICTIONS.
3.1 ENDORSEMENT OF CERTIFICATES.
(a) All certificates representing Shares shall, subject to
Section 3.1(c), bear the following legend:
"THIS CERTIFICATE IS SUBJECT TO THE PROVISIONS OF A STOCK RIGHTS AND
RESTRICTIONS AGREEMENT BETWEEN THE MERIDIAN RESOURCE CORPORATION AND SHELL
LOUISIANA ONSHORE PROPERTIES, INC. DATED AS OF JUNE 30, 1998. A COPY OF
SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL BUSINESS OFFICE OF THE MERIDIAN
RESOURCE CORPORATION."
(b) All certificates representing Shares shall, subject to
Section 3.1(c), bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE CONVEYED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO RULE 144
UNDER THE ACT, UNLESS THE COMPANY SHALL HAVE BEEN FURNISHED WITH AN
OPINION OF COUNSEL, WHICH OPINION SHALL BE REASONABLY SATISFACTORY TO
COUNSEL FOR TMR ENERGY CORPORATION, THAT REGISTRATION UNDER THE ACT IS NOT
REQUIRED."
(c) After such time as either of the legends set forth in
Sections 3.1(a) and (b) is no longer required hereunder (including without
limitation as a result of the termination of this Agreement in accordance with
its terms) or if the securities represented by a certificate have been
registered under the Securities Act pursuant to an effective registration
statement or are to be sold pursuant to Rule 144, or if the Company shall have
been furnished with an opinion of counsel, which opinion shall be reasonably
satisfactory to counsel for TMR, that registration under the Securities Act is
not required, as the case may be, then, in any such event, upon the request of
SLOPI, TMR shall cause such certificate or certificates to be exchanged for a
certificate or certificates that do not bear any legend.
3.2 IMPROPER TRANSFER. Any attempt by SLOPI or its Affiliates to
Transfer any Shares other than in accordance with this Agreement shall be null
and void and neither TMR nor any transfer agent for such securities shall be
required to give any effect to such attempted Transfer in its stock records.
-17-
4. GENERAL PROVISIONS.
4.1 REPRESENTATIONS AND WARRANTIES.
(a) TMR represents and warrants to SLOPI that (i) TMR is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas and has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder, (ii) the execution
and delivery of this Agreement by TMR and the consummation by TMR of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of TMR and no other corporate proceedings on the
part of TMR are necessary to authorize this Agreement or any of the transactions
contemplated hereby, and (iii) this Agreement has been duly executed and
delivered by TMR and constitutes a valid and binding obligation of TMR, and,
assuming this Agreement constitutes a valid and binding obligation of SLOPI, is
enforceable against TMR in accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance and
similar laws affecting creditors' rights generally from time to time and to
general principles of equity.
(b) SLOPI represents and warrants to TMR that (i) SLOPI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder, (ii) the execution
and delivery of this Agreement by SLOPI and the consummation by SLOPI of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of SLOPI and no other corporate proceedings on the
part of SLOPI are necessary to authorize this Agreement or any of the
transactions contemplated hereby, and (iii) this Agreement has been duly
executed and delivered by SLOPI and constitutes a valid and binding obligation
of SLOPI, and, assuming this Agreement constitutes a valid and binding
obligation of TMR, is enforceable against SLOPI in accordance with its terms,
subject to applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance and similar laws affecting creditors' rights generally
from time to time and to general principles of equity.
4.2 AMENDMENT AND MODIFICATION; WAIVER OF COMPLIANCE. This Agreement
may be amended or waived only by written instrument duly executed by the
parties. In the event of the amendment or modification of this Agreement in
accordance with its terms, the Board of Directors of TMR shall adopt any
amendment to the by-laws of TMR that may be required as a result of such
amendment or modification to this Agreement, and, if required, shall propose any
amendment to the Certificate of Incorporation that may be required as a result
of such amendment or modification to this Agreement to the TMR shareholders
entitled to vote thereon at a meeting duly called and held for such purpose, and
shall recommend that the TMR shareholders vote in favor of such amendment to the
Certificate of Incorporation.
4.3 INJUNCTIVE RELIEF. Each of the parties hereto hereby
acknowledges that in the event of a breach by any of them of any material
provision of this
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Agreement, the aggrieved party may be without an adequate remedy of law. Each of
the parties therefore agrees that in the event of a breach of any material
provision of this Agreement the aggrieved party may elect to institute and
prosecute proceedings in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach of such provision, as well as to
obtain damages for breach of this Agreement. By seeking or obtaining any such
relief, the aggrieved party will not be precluded from seeking or obtaining any
other relief to which it may be entitled in equity or at law.
4.4 BYLAWS. At all times while this Agreement shall be in effect,
TMR shall cause its Bylaws to conform to the provisions of this Agreement,
including by causing its Bylaws to be amended.
4.5 NO ADOPTION OR AMENDMENT OF RIGHTS PLAN. During the term of this
Agreement, TMR's Board of Directors shall not adopt any shareholder rights plan
or amend any rights plan without the approval of a majority of the SLOPI
Designee(s) or Preferred Director(s) then on the Board of Directors of TMR
unless such plan exempts SLOPI and its Affiliates from all effects thereof.
4.6 LIMITATION ON REDUCTIONS OF PUBLIC FLOAT BY TMR. TMR shall not
take any action, including without limitation an acquisition by TMR or any of
its Affiliates of shares of Common Stock then outstanding, or a recapitalization
by TMR, which would reduce the number of shares of Common Stock held by Persons
other than SLOPI, TMR or any Affiliate of either SLOPI or TMR to less than the
minimum number required to maintain TMR's listing on the New York Stock
Exchange, without the prior written consent of SLOPI.
4.7 GOVERNING LAW. This Agreement and the legal relations between
the parties shall be governed by and construed in accordance with the laws of
the State of Texas, without regard to the principles of conflicts of law
thereof.
4.8 TERMINATION.
(a) This Agreement may be terminated:
(i) by the mutual written consent of the parties hereto;
(ii) by SLOPI or TMR if SLOPI shall have become the
Beneficial Owner of less than 10% of the Fully Diluted Shares; or
(iii) by SLOPI if any Person (other than SLOPI or any
Affiliate of SLOPI) shall have proposed to TMR a Business Combination
Transaction and a majority of the Continuing Directors shall have approved such
proposal or shall have retained (or authorized TMR to retain) the services of an
investment banking firm and shall have instructed such investment banking firm
to solicit indications of interest with respect to a Business Combination
Transaction; provided that, if a proposal with respect to a Business Combination
Transaction referred to in this clause (iii) shall have
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been terminated or withdrawn by the Person who made such proposal and SLOPI
shall have withdrawn, terminated or permitted to expire any tender or exchange
offer or proposal with respect to a Business Combination Transaction made by
SLOPI, then the provisions of this Agreement shall thereafter be reinstated
(without liability to any party for any failure to have complied with the terms
and provisions of this Agreement during the period when it shall have been
terminated in accordance with this Section 4.8(a)(iii)) and this Agreement shall
thereafter continue in full force and effect in accordance with its terms; or
(iv) by SLOPI if (A) any Person other than SLOPI or
its Affiliates shall have acquired Beneficial Ownership of 20% (or, if lower,
the percentage specified in the definition of "Affiliated Shareholder" in Part
Thirteen of the TBCA, as amended from time to time), or more of the Voting
Shares and such Person shall not have entered into an agreement with TMR
containing restrictions and other provisions at least as favorable to TMR as
those contained in this Agreement; or
(v) by SLOPI if the Continuing Directors shall not
constitute a majority of the Board of Directors of TMR; or
(vi) by SLOPI if TMR shall have breached any
material provision of this Agreement, the Merger Agreement, or the Certificate
of Designation or the Registration Rights Agreement (both as defined in the
Merger Agreement) and SLOPI shall have delivered a written notice of such breach
to TMR; provided that, if such breach is reasonably susceptible of cure and TMR
shall proceed diligently to cure such breach, then this Agreement shall not be
terminated unless such breach shall not have been cured on or prior to the fifth
day after the delivery of written notice by SLOPI to TMR that TMR has breached a
material provision of any such instrument; or
(vii) by SLOPI if (x) TMR shall seek relief under any
bankruptcy, insolvency, receivership, custodianship, trusteeship, liquidation,
reorganization, composition, readjustment, moratorium or similar law (an
"Insolvency Law"); or (y) a proceeding or case shall be commenced under an
Insolvency Law by a third party against TMR and such proceeding or case shall
continue undismissed or unstayed for 60 days; or (z) an order for relief under
an Insolvency Law shall be entered against TMR.
(b) Unless this Agreement shall have been earlier terminated
as provided in Section 4.8(a), this Agreement shall terminate on the 10th
anniversary of the date of this Agreement.
4.9 NOTICES. All notices, requests, demands or other communications
required or permitted by this Agreement shall be in writing and effective when
received, and delivery shall be made personally or by registered or certified
mail, return receipt requested, postage prepaid, or overnight courier or
confirmed facsimile transmission, addressed as follows:
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(a) If to TMR:
The Meridian Resource Corporation
15995 N. Barkers Landing, Suite 300
Houston, Texas 77079
Attention: Joseph A. Reeves, Jr., Chairman and
Chief Executive Officer
Fax: (281) 558-5595
with a copy to:
Fulbright & Jaworksi L.L.P.
1301 McKinney Street, Suite 5100
Houston, Texas 77010
Attention: Curtis W. Huff
Fax: (713) 651-5246
(b) If to SLOPI:
Shell Louisiana Onshore Properties Inc.
P.O. Box 7986
Newark, Delaware 19714
Attention: Corporate Secretary
with a copy to:
Shell Oil Company Legal Firm
P.O. Box 2463
Houston, Texas 77252
Attention: Danna M. Walton
Fax: 713-241-5056
4.10 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the fullest extent possible.
4.11 ENTIRE AGREEMENT. Except as otherwise expressly stated herein,
this Agreement constitutes the entire agreement among the parties with respect
to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter
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hereof. Except for the permitted Transfers to Shell and Affiliates of Shell or
SLOPI and except as otherwise expressly permitted or contemplated herein, the
rights and obligations under this Agreement shall not be assigned by operation
of law or otherwise. Nothing in this Agreement shall be construed as prohibiting
TMR from effecting a merger, consolidation or other similar transaction with
another entity, provided that (i) the operative terms of this Agreement shall be
applied in respect of any such transaction and (ii) under the express terms of
such transaction this Agreement will be continued in effect by TMR or any
successor thereto.
4.12 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and to Shell and the Affiliates
of Shell and SLOPI if they receive Permitted Transfers in accordance with this
Agreement. Nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement, except as expressly
otherwise contemplated herein.
4.13 HEADINGS. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
4.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
4.15 AUDIT RIGHTS. SLOPI shall have the right to perform, directly
or through its representatives, periodic audits of TMR and its subsidiaries. The
audits may cover financial transactions, operational matters, and other areas
deemed appropriate. The audit frequency will not be more than once a year. The
scope of the audits will be determined by SLOPI. SLOPI will utilize TMR's
independent auditor, Ernst & Young LLP or such other firm as may then be TMR's
outside auditors ("E&Y"), to conduct the audits as long as E&Y performs to
SLOPI's satisfaction. SLOPI reserves the right to use a different E&Y partner to
conduct any audit. SLOPI personnel or representatives may participate in the
audit and/or review all audit work papers. SLOPI will bear the cost of the
audits.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
THE MERIDIAN RESOURCE CORPORATION
By: /s/ JOSEPH A. REEVES, JR.
Name: JOSEPH A. REEVES, JR.
Title: CEO
SHELL LOUISIANA ONSHORE PROPERTIES INC.
By: /s/ S. P. METHVIN
Name: S. P. METHVIN
Title: PRESIDENT
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SCHEDULE I
LIST OF ACCEPTABLE INVESTMENT BANKING
AND ASSET VALUATION FIRMS
1. Goldman Sachs
2. CS First Boston
3. Merrill Lynch
4. Chase Securities
5. Smith Barney
6. Donaldson Lufkin Jenrette
7. Petrie Parkman
8. Dain Rauscher
9. Morgan Stanley
10. Howard Weil
The above list may be revised from time to time by a written instrument signed
by both TMR and SLOPI.
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