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EXHIBIT 1.1
TERMINATION AGREEMENT
This Termination Agreement (this "Agreement") by and between The
Meridian Resource Corporation, a Texas corporation ("Meridian"), and Shell
Louisiana Onshore Properties Inc., a Delaware corporation ("SLOPI"), is entered
into this 29th day of January, 2001.
WITNESSETH
WHEREAS, Meridian and SLOPI entered into that certain Option and
Standstill Agreement dated July 17, 2000 (the "Option Agreement");
WHEREAS, in connection with Meridian's exercise of the Option (as
defined in the Option Agreement), Meridian and SLOPI propose to enter into
various agreements, including a Registration Rights Agreement dated the date
hereof;
WHEREAS, Meridian and SLOPI entered into that certain Stock Rights and
Restrictions Agreement dated June 30, 1998 (the "Stock Rights and Restrictions
Agreement"), a copy of which is attached to this Agreement as ANNEX A, and that
certain Registration Rights Agreement dated June 30, 1998 (the "1998
Registration Rights Agreement"), a copy of which is attached to this Agreement
as ANNEX B; and
WHEREAS, Meridian and SLOPI desire to terminate the Stock Rights and
Restrictions Agreement and the 1998 Registration Rights Agreement upon the
closing of the exercise of the Option (the "Effective Time").
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Meridian and SLOPI mutually agree that the Stock Rights and
Restrictions Agreement and the 1998 Registration Rights Agreement shall be
terminated and canceled and shall be of no further force and effect as of the
Effective Time. Meridian and SLOPI mutually agree that Section 2.1(c) of the
Stock Rights and Restrictions Agreement will not survive the termination of the
Stock Rights and Restrictions Agreement.
2. This Agreement constitutes the entire understanding and agreement
between Meridian and SLOPI with respect to the subject matter hereof and
supersedes all prior negotiations, understandings and agreements between them
relating to the same subject matter.
(SIGNATURES BEGIN ON NEXT PAGE)
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
agreement on the date first written above.
THE MERIDIAN RESOURCE CORPORATION
/s/ Xxxxxx X. Xxxxxx Xx.
---------------------------------------
Xxxxxx X. Xxxxxx, Xx.
Chairman of the Board
and Chief Executive Officer
SHELL LOUISIANA ONSHORE PROPERTIES INC.
By: /s/ R. V. Deere
-------------------------------------
Name: R. V. Deere
-----------------------------------
Title: Treasurer
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ANNEX A TO EXHIBIT 1.1
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): X.X. Xxxx.
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.
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(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.
(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
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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.
(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 Xxxxx 00, 0000 xxxxx XXX, XXXX 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
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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 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).
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(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.
(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
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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 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.
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(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 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
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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.
(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:
(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.
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(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 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):
12
Percentage of
Common Shares
Permitted to Transfer*
Anniversary of ---------------------------------------
this Agreement Incremental* Aggregate*
-------------- ------------ ----------
Second 25% 25%
Third 25% 50%
Fourth 25% 75%
Fifth 25% 100%
----------
*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:
Percentage of
Preferred Shares
Permitted to Transfer
Anniversary of ------------------------------------
this Agreement Incremental Aggregate
-------------- ----------- ---------
Third 33a% 33a%
Fourth 33a% 66B%
Fifth 33a% 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
13
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.
(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.
14
For paragraph (g):
Percentage of Preferred
Shares Permitted to Transfer
-------------------------------------
Date Incremental Aggregate
---- ------------ -----------
Immediately 33 alpha% 33 alpha%
1 year after Relevant Date 33 alpha% 66 beta%
2 years after Relevant Date 33 alpha% 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
15
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 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 the Applicable Percentage of the then to be
outstanding shares of Common Stock, then (y) TMR shall provide written notice
16
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.
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
17
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.
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.
18
(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 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
19
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 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
20
(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:
(a) If to TMR:
The Meridian Resource Corporation
00000 X. Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Xx., Chairman
and Chief Executive Officer
Fax: (000) 000-0000
with a copy to:
Fulbright & Xxxxxxxx L.L.P.
0000 XxXxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxx
Fax: (000) 000-0000
(b) If to SLOPI:
Shell Louisiana Onshore Properties Inc.
X.X. Xxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Corporate Secretary
with a copy to:
Shell Oil Company Legal Firm
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax: 000-000-0000
21
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 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.
22
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/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
----------------------------------
Title: Chief Executive Officer
---------------------------------
SHELL LOUISIANA ONSHORE PROPERTIES INC.
By: /s/ X. X. Xxxxxxx
------------------------------------
Name: X. X. Xxxxxxx
----------------------------------
Title: President
---------------------------------
23
SCHEDULE I
List of Acceptable Investment Banking
and Asset Valuation Firms
1. Xxxxxxx Xxxxx
2. CS First Boston
3. Xxxxxxx Xxxxx
4. Chase Securities
5. Xxxxx Xxxxxx
6. Xxxxxxxxx Lufkin Xxxxxxxx
7. Xxxxxx Xxxxxxx
8. Xxxx Xxxxxxxx
9. Xxxxxx Xxxxxxx
10. Xxxxxx Xxxx
The above list may be revised from time to time by a written instrument signed
by both TMR and SLOPI.
24
ANNEX B TO EXHIBIT 1.1
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated June 30, 1998 by and between The
Meridian Resource Corporation, a Texas corporation (the "Company"), and Shell
Louisiana Onshore Properties Inc., a Delaware corporation ("Security Holder").
WITNESSETH:
WHEREAS, the Company and Security Holder have entered into an Agreement
and Plan of Merger dated as of March 27, 1998 (the "Merger Agreement") which
provides, among other things, for the execution of this Agreement;
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and in the Merger Agreement the parties hereto agree as
follows:
Section 1. Definitions. The terms defined in this Section, whenever
used in this Agreement, shall, unless the context otherwise requires, have the
respective meanings hereinafter specified. Terms not defined in this Agreement,
and defined in the Merger Agreement have the meanings assigned them in the
Merger Agreement.
"Agreement" shall mean this Registration Rights Agreement.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock" shall mean the Company's authorized Common Stock, par
value $0.01 per share.
"Company" shall mean The Meridian Resource Corporation, a Texas
corporation, and any successor corporation by merger, consolidation or otherwise
and any parent corporation resulting from the merger or consolidation of the
Company with or into a subsidiary of another corporation.
"Eligible Stock" means the issued and outstanding shares of Common
Stock (i) that have been issued pursuant to the Agreement and Plan of Merger
(the "Merger Agreement") by and among the Company, the Security Holder, LOPI
Acquisition Corp. and Louisiana Onshore Properties, Inc., (ii) that have been
issued upon conversion of the Series A Convertible Preferred Stock issued
pursuant to the Merger Agreement; (iii) that have been purchased by the Security
Holder upon the exercise of its rights pursuant to the Stock Rights and
Restrictions Agreement; and (iv) that may be issued pursuant to Section 2.7 of
the Stock Rights and Restriction Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect at the time.
"Person" shall mean an individual, a corporation, a partnership, a
trust, an unincorporated organization or a government or any agency or political
subdivision thereof.
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"Public Offering" shall mean a firm commitment underwritten public
offering pursuant to a registration statement under the Securities Act.
"Registrable Securities" shall mean that portion of the shares of
Eligible Stock that any Security Holder is permitted to sell under Section
2.4(f) of the Stock Rights and Restriction Agreement, as such Section may be
adjusted in accordance with terms of such Agreement.
"Registration" shall mean the registration under the Securities Act of
Registrable Securities pursuant to either Section 2.A hereof or 2.B hereof.
"Registration Statement" shall mean a registration statement filed
under the Securities Act or a similar document filed pursuant to any other
statute then in effect corresponding to the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, and the rules
and regulations of the Commission thereunder, all as the same shall be in effect
at the time.
"Security Holder" shall mean Shell Louisiana Onshore Properties Inc., a
Delaware corporation, its permitted assigns, or any affiliate thereof holding
Common Stock or any successor corporation to any of the foregoing by merger or
consolidation or otherwise.
"Stock Rights and Restrictions Agreement" means that certain Stock
Rights and Restrictions Agreement of even date herewith between the Company and
the Security Holder.
Section 2. Registration Rights.
A. Demand Registrations. Subject to the provisions of Section 5 in the
event of assignment of this Agreement, if the Company shall receive a written
request from Security Holder requesting that the Company file a Registration
Statement relating to Registrable Securities, the Company will as promptly as
practicable prepare and file a Registration Statement and use reasonable best
efforts to cause the Registration Statement to become effective; subject,
however, to the following provisions:
(1) the Company shall be required to file no more than an
aggregate of 5 Registration Statements on behalf of Security Holder (or Security
Holders in the event of an assignment of this Agreement) pursuant to this
Subsection 2.A, plus any number of additional Registration Statements (not to
exceed an aggregate of an additional 5) as to which, at the time of the first
filing with the SEC, the Security Holder (or Security Holders in the event of an
assignment of this Agreement) and its underwriter(s) have reasonably estimated
that the price to the public of the Registrable Securities to be sold (before
discounts, commissions, and expenses) will be equal to or greater than
$50,000,000;
(2) the Company shall not be obligated (i) to file a requested
Registration in the event that the aggregate number of Registrable Securities to
be included in such requested Registration is less than 2 1/2% of the issued and
outstanding Common Stock; or (ii) to prepare or file such Registration Statement
or an amendment or supplement thereto, and may suspend sales, at any time when
the Company reasonably determines (by action of the Company's Board of Directors
or an officer duly authorized by the Board of Directors to make such decision)
that the
26
filing thereof at the time requested, or the offering of Registrable Securities
pursuant thereto, would materially and adversely affect a pending or proposed
offering of securities of the Company, an acquisition, merger, recapitalization,
consolidation, reorganization or similar transaction relating to the Company or
negotiations, discussions or pending proposals with respect thereto or require
premature disclosure of information not otherwise required to be disclosed to
the potential detriment of the Company; provided, however, that such period of
sale or distribution shall resume after any such suspension for a number of days
necessary to keep such Registration effective for permitted sales thereunder for
a term of 90 days. The filing of a Registration Statement, or any amendment or
supplement thereto, by the Company may not be deferred, and the sale and
distribution of shares may not be suspended, in each case pursuant to the
foregoing provisions, for more than 60 days after the abandonment or
consummation (or the completion of the distribution of securities in the case of
a public offering) of any of the proposals or transactions described therein or,
in any event, for more than 120 days during any one year;
(3) a Registration Statement filed pursuant to a request of
Security Holder shall first include all Registrable Securities requested to be
included by Security Holder and, only after such inclusion, may, include
securities of the Company being sold for the account of the Company provided,
however, that securities to be offered on behalf of the Company will be included
in such Registration Statement only to the extent that, in the reasonable
opinion of the managing underwriter for the Public Offering of Registrable
Securities on behalf of Security Holder, such inclusion will not materially
adversely affect the distribution of Registrable Securities on behalf of
Security Holder;
(4) the selection of an underwriter for a Public Offering of
Registrable Securities by Security Holder shall be subject to the approval of
the Company, which shall not be unreasonably withheld;
(5) for purposes of paragraph (1) of this Subsection A, if a
requested Registration Statement is filed and the Company otherwise complies
with its obligations hereunder, but the Registration Statement is withdrawn by
Security Holder due to a delay in the offering requested by the Company for a
period of more than 15 business days pursuant to Section 2, then no requested
Registration Statement shall be deemed to have been filed; and
(6) no Other Holder (as defined below) shall be entitled to
include securities or piggyback in any Registration demanded by Security Holder.
B. Incidental/"Piggy-back" Registrations. If the Company at any time
proposes to file a Registration Statement (other than a Registration Statement
filed pursuant to Subsection A of this Section) under the Securities Act
relating to a Public Offering of Common Stock to be sold for cash that would
permit the registration of Registrable Securities, it will give Security Holder
as much advance notice, in writing, as is reasonably practicable under the
circumstances, but in any event not less than 5 days, before the filing with the
Commission of such Registration Statement, which notice shall set forth the
securities proposed to be registered. The notice shall offer to include in such
filing such amount of Registrable Securities as Security Holder may request. If
Security Holder wishes to have Registrable Securities registered for sale in the
Public Offering pursuant to this Subsection B, it shall advise the Company in
writing within 20 days after the date of receipt of such offer from the Company
(or such shorter period, but in any event
27
not less than 5 days, as the Company shall specify in its notice to Security
Holder), setting forth the amount of Registrable Securities for which
registration is requested. If the managing underwriter of the proposed Public
Offering of Common Stock by the Company shall advise the Company in writing
that, in the reasonable opinion of the managing underwriter, the distribution of
the Registrable Securities requested by Security Holder to be included in the
Registration Statement concurrently with securities being registered for sale by
the Company would materially adversely affect the distribution of such
securities by the Company and Security Holder, then the Company shall so advise
the Security Holder and the number of securities that are entitled to be
included in the registration and underwriting shall be allocated as follows: (i)
in the event a Registration Statement is being filed in connection with the
exercise of registration rights by a security holder other than the Security
Holder (an "Other Holder"), all of any Other Holder's shares of Common Stock
shall be included in the registration and the remaining number of securities
that are entitled to be included in the registration shall be allocated (A) 80%
to the Company and any other shareholders (not including the Other Holder or the
Security Holder) whose shares are to be included in such Registration Statement
and (B) 20% to the Security Holder, and (ii) in the event the registration is
not being filed in connection with the exercise of registration rights of any
Other Holder (a) 80% to the Company and any other shareholders (not including
Security Holder) whose shares are to be included in such Registration Statement
and (b) 20% to Security Holder. If any Person does not agree to the terms of any
such underwriting, such Person shall be excluded therefrom by written notice
from the Company or the underwriter.
Nothing contained in this Subsection B shall, however, limit
the Company's right to cancel, postpone or withdraw any such registration
proposed by the Company for any reason.
Any obligation of the Company to effect a registration
pursuant to this Subsection B shall be conditioned upon Security Holder entering
into an underwriting agreement with the Company and the managing underwriters of
the registered offering of the type described in paragraph (10) of Subsection C.
C. Registration Procedures. If the Company is required by the
provisions of Subsections A or B of this Section 2 to effect the Registration of
any of the Registrable Securities under the Securities Act, the Company will, as
soon as in reasonably practicable:
(1) Prepare and file with the Commission a Registration
Statement with respect to such securities and use its reasonable best efforts to
cause such Registration Statement to become and, subject to paragraph (2) of
this Subsection C, remain effective.
(2) Keep such Registration effective, and the prospectus used
in connection therewith, current for a period of ninety (90) days or until the
Security Holder has completed the distribution described in the Registration
Statement relating thereto, whichever first occurs (the "Selling Period");
provided, however, that (a) the Selling Period shall be extended for a period of
time equal to any period that Security Holder refrains from selling any
securities included in such registration pursuant to a suspension under
Subsection A.
(3) Prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective and
such prospectus current in compliance with Section 10 of the Securities Act, and
to comply with the provisions of the
28
Securities Act with respect to the sale or other disposition of all Common Stock
covered by such Registration Statement; provided, however, that the Company
shall have no obligation under this paragraph (3) after the period required by
paragraph (2) of this Subsection C has lapsed.
(4) Furnish to Security Holder such number of copies of such
Registration Statement and of each amendment and supplement thereto (in each
case including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus, summary
prospectus and prospectus supplement), in conformity with the requirements of
the Securities Act, and such other documents, as Security Holder may reasonably
require in order to facilitate the public offering, sale or other disposition of
the Registrable Securities owned by Security Holder.
(5) Use reasonable best efforts to register or qualify the
Common Stock covered by such Registration Statement under such other securities
or blue sky laws of jurisdictions in the United States of America as Security
Holder shall reasonably request (excluding however any jurisdiction in which the
filing would subject the Company to additional tax liability, and any
jurisdiction in which the Company would be required to execute a general consent
to service of process in effecting such registration or qualification which
consent would not be required but for this paragraph (5)), and do such other
acts and things as may be required to enable Security Holder to consummate the
public sale or other disposition in such jurisdictions of the Registrable
Securities owned by Security Holder.
(6) Otherwise use reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement which
satisfies the provisions of Section 11(a) of the Securities Act.
(7) Immediately notify Security Holder at any time when a
prospectus is required to be delivered under the Securities Act within the
Selling Period referred to in paragraph (2) of this Subsection C, of the Company
becoming aware that the prospectus included in the Registration Statement, or as
such prospectus may be amended or supplemented, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading in
light of the circumstances then existing, and at the request of Security Holder
to promptly prepare and furnish to Security Holder a number of copies of an
amended or supplemental prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading in the light of the circumstances then
existing. In the event the Company shall give any such notice, Security Holder
shall immediately suspend use of the prospectus and the Selling Period shall be
extended by the number of days during the period from and including the date of
the giving of such notice to and including the date when Security Holder shall
have received the copies of such supplemented or amended prospectus.
(8) In the event that the Company suspends use by Security
Holder of a prospectus relating to an offering of Registrable Securities
pursuant to a suspension under Subsection A, because the Company is conducting
negotiations for a material business combination or due to pending material
developments or events that have not yet been publicly
29
disclosed and as to which the Company believes public disclosure will be
prejudicial to the Company, the Company shall deliver notice in writing to the
effect of the foregoing and, upon receipt of such notice, the Security Holder
shall not use the prospectus, and the Selling Period shall cease to run or will
not commence, until such Security Holder has received copies of the supplemented
or amended prospectus provided for in paragraph 3 of this Subsection C, or until
it is advised in writing by the Company that the prospectus may be used, and has
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in such prospectus. The Company will use
reasonable best efforts to ensure that the use of the prospectus may be resumed,
and the Selling Period will commence, as promptly as is practicable and, in any
event, promptly after the earlier of (x) public disclosure of such material
business combination or pending material development or event sufficient to
permit an affiliate of the Company to sell Common Stock or (y) in the judgment
of the Company, public disclosure of such material business combination or
material development or event would not be prejudicial to the Company.
(9) Use its reasonable best efforts to list such Registrable
Securities on the primary securities exchange or other trading market on which
the Common Stock is then listed, if such Registrable Securities are not already
so listed and if such listing is then permitted under the rules of such exchange
or other trading market, and to provide a transfer agent and registrar for such
Registrable Securities covered by such Registration Statement not later than the
effective date of such Registration Statement.
(10) Enter into such agreements (including an underwriting
agreement in customary form and containing customary provisions relating to
legal opinions and accountants' letters and customary representations and
warranties and customary provisions for mutual indemnification and contribution
between the Company and the underwriters for Security Holder) and take such
other actions as Security Holder may reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities.
(11) Make available for inspection by Security Holder, by any
underwriter participating in any disposition to be effected pursuant to such
Registration Statement and by any attorney, accountant or other agent retained
by Security Holder or any such underwriter, all customary financial and other
records, customary corporate documents and properties of the Company, and cause
all of the Company's officers, directors and employees to supply all customary
information requested by Security Holder, such underwriter, attorney, accountant
or agent, as is reasonably needed in connection with such Registration
Statement; provided such parties execute confidentiality agreements reasonably
acceptable to the Company.
Except as otherwise provided in Section 2.7(b) of the Stock
Rights and Restriction Agreement, underwriting discounts and commissions
attributable to securities offered on behalf of Security Holder plus the fees
and expenses of separate counsel for Security Holder incurred in connection with
effecting a Registration pursuant to this Section 2 shall be borne by Security
Holder. All other expenses incurred in connection with the Registration
Statement shall be borne by the Company.
It shall be a condition precedent to the obligation of the
Company to take any action pursuant to this Section 2 in respect of the
Registrable Securities which are to be registered at the request of Security
Holder that Security Holder shall furnish to the Company
30
such information regarding the securities held by it and the intended method of
disposition thereof as the Company shall reasonably request and as shall be
required in connection with the action taken by the Company.
D. Indemnification.
(1) In the event of any Registration of any Registrable
Securities under the Securities Act pursuant to this Section 2, the Company
agrees to indemnify and hold harmless Security Holder, its directors, officers
and employees, and each other Person, if any, who controls Security Holder
within the meaning of Section 15 of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which Security Holder or
any such director, officer, employee or controlling Person may become subject
under the Securities Act or any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any alleged untrue statement of any material fact
contained, on the effective date thereof, in any Registration Statement under
which such securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or (ii) any alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and shall reimburse Security Holder or such director, officer, employee or
controlling Person for reasonable legal or any other expenses reasonably
incurred by Security Holder or such director, officer, employee or controlling
Person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any alleged untrue statement or alleged
omission made in such Registration Statement, preliminary prospectus,
prospectus, or amendment or supplement in reliance upon and in conformity with
written information furnished to the Company in writing for use therein; and
provided, further, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or expense arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission in the prospectus if such untrue statement or alleged untrue
statement or omission or alleged omission has been the subject of a notice given
to Security Holder pursuant to paragraph (7) of Subsection C if Security Holder
after receipt of such notice and prior to the receipt of a corrected prospectus
sold a Registrable Security to the Person asserting such loss, claim, damage,
liability or expense who purchased such Registrable Security which is the
subject thereof form Security Holder. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of Security
Holder or such director, officer, employee or participating Person or
controlling Person, and shall survive the transfer of such securities by
Security Holder.
(2) Security Holder agrees to indemnify and hold harmless the
Company, its directors, officers and employees and each other Person, if any,
who controls the Company against any losses, claims, damages or liabilities
joint or several, to which the Company or any such director, officer, or
employee or any such Person may become subject under the Securities Act or any
other statute or at common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any alleged untrue statement of any material fact contained, on the effective
date thereof, in any Registration Statement under which Registrable Securities
were registered under the Securities Act at the request of Security Holder, any
preliminary prospectus or final prospectus contained therein, or any amendment
or
31
supplement thereto, or (ii) any alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
alleged untrue statement or alleged omission was made in such Registration
Statement, preliminary prospectus, prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company in writing by Security Holder for use therein, and shall reimburse the
Company or such director, officer, employee or other Person for any reasonable
legal or any other expenses reasonably incurred in connection with investigating
or defending any such loss, claim, damage, liability or action.
(3) Promptly after receipt by an indemnified party hereunder
of written notice of the commencement of any action or proceeding involving a
claim referred to in the preceding paragraphs of this Subsection E, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided, that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligation
under this Subsection D to the extent the indemnifying party is not materially
prejudiced by such failure. In case any such action is brought against an
indemnified party, the indemnified party shall permit the indemnifying party to
assume the defense of such action or proceeding, provided that counsel for the
indemnifying party, who shall conduct the defense of such action or proceeding
shall be approved by the indemnified party (whose approval shall not be
unreasonably withheld) and the indemnified party may participate in such defense
at such indemnified party's expense unless in the opinion of counsel to such
indemnified party a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim that would prevent the
indemnified party's counsel from adequately representing both parties, in which
event the indemnifying party shall pay the reasonable fees and expense of
separate counsel for the indemnified party. No indemnifying party will consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation. The indemnifying party shall not, in connection with any proceeding
or related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm for all indemnified parties. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent.
(4) Indemnification similar to that specified in the preceding
paragraphs of this Subsection E shall be given by the Company and Security
Holder (with such modifications as shall be appropriate) with respect to
liability related to any required registration or other qualification of
Registrable Securities under any Federal or state law or regulation of
governmental authority other than the Securities Act.
(5) If the indemnification provided for in this Subsection D
is unavailable or insufficient to hold harmless an indemnified party under
paragraphs (1) or (2) above, then the indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in paragraphs (1) or (2) above, in
such proportion as is appropriate to reflect the relative fault of the Company
on the one hand and Security Holder on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equity considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material
32
fact relates to information supplied by the Company or Security Holder and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Company and Security
Holder agree that it would not be just and equitable if contributions pursuant
to this paragraph (5) were to be determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the first sentence of this paragraph (5). The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this paragraph (5) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim (which shall be limited as provided in paragraph (3) above if the
indemnifying party has assumed the defense of any such action in accordance with
the provisions thereof) which is the subject of this paragraph (5).
Notwithstanding the provisions of this paragraph (5), in respect of any loss,
claim, damage or liability based upon any untrue or alleged untrue statement of
a material fact or omission or alleged omission to state a material fact which
relates to information other than information supplied by Security Holder,
Security Holder shall not be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities offered by
it and distributed to the public were offered to the public exceeds the amount
of any damages which Security Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. Promptly after receipt
by an indemnified party under this paragraph (5) of notice of the commencement
of any action against such party in respect of which a claim for contribution
may be made against an indemnifying party under this paragraph (5), such
indemnified party shall notify the indemnifying party in writing of the
commencement thereof if the notice specified in paragraph (3) above has not been
given with respect to such action; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party under this paragraph (5) to the extent such omission is
not prejudicial.
E. Public Availability of Information. The Company shall comply with
all public information reporting requirements of the Commission, to the extent
required from time to time to enable Security Holder to sell Registrable
Securities without Registration under the Securities Act within the limitation
of the exemptions provided by (i) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of Security Holder, the
Company will deliver to Security Holder a written statement as to whether it has
complied with such requirements.
F. Supplying Information. The Company shall cooperate with Security
Holder in supplying such information as may be necessary for Security Holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from the Securities Act for the sale of any Registrable Securities.
G. Specific Performance. Each party hereto acknowledges and agrees that
each other party hereto would be irreparably harmed and would have no adequate
remedy of law if any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. Accordingly, it
is agreed that, in addition to any other remedies by law or in equity which may
be available, the parties hereto shall be entitled to obtain temporary and
33
permanent injunctive relief with respect to any breach or threatened breach of,
or otherwise obtain specific performance of the covenants and other agreements
contained in this Agreement.
Section 3. Representations and Warranties of the Company. The Company
represents and warrants to Security Holder that (a) the Company 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, (b) the execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or any of
the transactions contemplated hereby, and (c) this Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, and, assuming this Agreement constitutes a valid and
binding obligation of Security Holder is enforceable against the Company 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, and except as the enforceability thereof may be limited by
considerations of public policy.
Section 4. Representations and Warranties of Security Holder. Security
Holder represents and warrants to the Company that (a) it 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, (b) the execution and delivery of
this Agreement by Security Holder and the consummation by Security Holder of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Security Holder and no other corporate
proceedings on the part of Security Holder are necessary to authorize this
Agreement or any of the transactions contemplated hereby, and (c) this Agreement
has been duly executed and delivered by Security Holder and constitutes a valid
and binding obligation of Security Holder, and, assuming this Agreement
constitutes a valid and binding obligation of the Company, is enforceable
against Security Holder 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, and except as the enforceability thereof may be
limited by considerations of public policy.
Section 5. Stock Rights and Restrictions Agreement. This Agreement
shall be in all respects subject to the terms and conditions of the Stock Rights
and Restrictions Agreement between the parties hereto and of even date herewith.
As provided in the next sentence, this Agreement may be assigned by Security
Holder, in whole or in part, in connection with any transfer (one or more) of
Registrable Securities that is permitted under the Stock Rights and Restrictions
Agreement except for transfers (i) in a Public Offering or (ii) pursuant to Rule
144 or Rule 145; provided, however, that any such transferee who is not an
Affiliate of Security Holder must acquire from the Security Holder a number of
Registrable Securities equal to at least 25% of the Eligible Stock then held by
Security Holder and its Affiliates. In order for any such transferee to be
entitled to the benefits of this Agreement and thereby become a "Security
Holder," such transferee must agree to be bound by this Agreement by executing a
counterpart of this Agreement. In the event of an assignment or partial
assignment of this Agreement pursuant to this Section 5, notices and requests to
and from the Company pursuant to this Agreement shall
34
continue to be made only to and from the Security Holder until such time as
Security Holder shall otherwise advise the Company in writing from time to time
that a transferee-Security Holder(s) will give and receive notices and requests.
In the event that any such transferee-Security Holder is an E&P Company
(as defined in the Stock Rights and Restriction Agreement), then any underwriter
for such E&P Company shall have customary access to perform its due diligence
obligations with respect to any Registration Statement subject to
confidentiality obligations that prohibit the sharing or disclosure of
information with such E&P Company, and no such E&P Company shall, by virtue of
this Agreement, have access to non-public information of the Company.
No transfer or assignment of this Agreement shall increase the number
of Registrations which the Company is obligated to make under this Agreement.
Section 6. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or
transmitted by telex, telegram or facsimile transmission or mailed by registered
or certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Security Holder, to:
Shell Louisiana Onshore Properties Inc.
X.X. Xxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Corporate Secretary
with a copy to:
Shell Oil Company Legal Firm
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax: 000-000-0000
(b) if to the Company, to:
The Meridian Resource Corporation
00000 X. Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Xx., Chairman and
Chief Executive Officer
Fax: (000) 000-0000
35
with a copy to:
Fulbright & Xxxxxxxx L.L.P.
0000 XxXxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxx
Fax: (000) 000-0000
Section 7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
Section 8. Counterparts. This Agreement may be executed in any number
of counterparts, which together shall constitute a single agreement.
36
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their officers thereunto duly authorized.
THE MERIDIAN RESOURCE CORPORATION
By /s/ Xxxxxx X. Xxxxxx
------------------------------------------
Name Xxxxxx X. Xxxxxx
----------------------------------------
Title Chief Executive Officer
---------------------------------------
SHELL LOUISIANA ONSHORE PROPERTIES INC.
By /s/ X. X. Xxxxxxx
------------------------------------------
Name X. X. Xxxxxxx
----------------------------------------
Title President
---------------------------------------
