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     F. The term “Exhibit B Properties” shall mean the wells listed on Exhibit B together with anyflowlines, structures, facilities and equipment associated with such wells.II. **Background**     Whereas, Shell has made demand for reimbursement of certain costs and expenses pursuant to:(1) that certain Purchase and Sale Agreement between Shell Western E&P Inc. and The MeridianResource Exploration Company dated Effective October 1, 1997 (Gibson/Humphreys and Turtle BayouFields, Terrebonne Parish, Louisiana) (the “PSA”); and, (2) that certain Agreement and Plan ofMerger by and among The Meridian Resource Corporation, LOPI Acquisition Corp., Shell LouisianaOnshore Properties, Inc., and Louisiana Onshore Properties, Inc. dated March 27, 1998 (the“Agreement and Plan of Merger”), which two agreements are collectively hereinafter referred to asthe “Agreements.” By virtue of the Agreements, Meridian acquired, among other things, certain oiland gas producing properties with associated wells, equipment and facilities (the “Properties”).     Whereas, demands have been made and lawsuits filed with respect to the Properties which haveresulted in the expenditure of money by Shell and agreements to pay additional monies either asremediation expenditures or cash settlement payments to the owners of the Properties.     Whereas, Shell and Meridian disagree as to the scope of the indemnity contained in theAgreements, and the responsibility of Meridian to reimburse Shell for costs already incurred orwhich may be incurred in the future.     Whereas, Shell has invoked and Meridian has responded to an arbitration proceeding involvingmany of the items in covered by this agreement (the “Arbitration”).     Whereas, Meridian has been in negotiations with various entities for the purpose ofconsummating a sale or other disposition of Meridian’s assets, or completing an equity transactionwith a third party (the “Corporate Transaction”).III. **Terms**     A. Meridian     In consideration of the covenants contained herein, Meridian agrees to the following: 1. Meridian’s obligations pursuant to this Sections III(A)(2) and (3)and Section V(B) below shall become binding and effective upon either a. the closing of a Corporate Transaction; or  b. the payment of the Initial Payment and the transferof the Savanne Fee Property, as set forth Sections III(A)(2) and (3)below, with
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   the prior consent, if contractually-required, of the Agent and theRequired Lenders under The Meridian Amended and Restated Credit Agreementdated as of December 23, 2004 (as amended).   Otherwise, unless the Parties agree to extend the Compromise as set forth inSection III(A)(4) below, this Compromise will terminate and neither Meridian norShell shall be bound by its terms.  2. Meridian will either make or cause to be made a cash payment to Shellin the amount of $5,000,000.00, payable in five equal, annual payments beginningon April 1, 2010, or at the closing of the Corporate Transaction, whichever occursearlier (the “Initial Payment”). In the event that the closing date occurs beforeApril 1, 2010, Meridian will notify Shell of the closing date. Subsequent annualinstallments will be made on January 4th for each of the following four years(“Yearly Installments”). Should Meridian fail to timely make any subsequentannual installment interest shall begin to run on such payment at a rate of 18%,or the maximum rate allowed by law, whichever is lower, compounded annuallybeginning thirty (30) days after said payment was due. Furthermore, Shell shallbe entitled to recover from Meridian its reasonable and necessary attorney’s feesand costs in any action to recover such payment.  3. At the time of closing of the Corporate Transaction or at the time ofthe Initial Payment, whichever is earlier, Meridian will convey good title to theSavanne Fee Property (as described in Exhibit A hereto), to Shell and inconnection with same will provide any and all information concerning title andexisting environmental conditions or activities on the Savanne Fee Property.  4. In the event that 1) Meridian is unable to close a CorporateTransaction on or before April 1, 2010, and 2) Meridan fails to make or cause tobe made the Initial Payment and transfer the Savanne Fee Property as set forth inSections III(A)(2) and (3) above, this Compromise shall terminate on April 2,2010, and neither Party shall be obligated pursuant to its terms, unless theParties agree in writing to extend the time for Meridian to 1) close a CorporateTransaction or 2) make or cause to be made the Initial Payment and transfer theSavanne Fee Property as set forth in Sections III(A)(2) and (3) above. Should theParties agree to such an extension, this Compromise will remain in force andeffect as set out in any such extension agreement.  5. Meridian owns and operates the Exhibit B Properties. Meridianagrees to a. plug and abandon these wells; and  b. to remove all flowlines, structures, facilities, andequipment associated with these wells. 6. In addition, Meridian shall remediate any land, to the extent andonly to the extent, that its operation of the Exhibit B Properties has causedcontamination or damage to the environment.  7. Meridian agrees to restore any lands associated with the Exhibit BProperties consistent with, and not greater than, Meridian’s obligations
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   pursuant to existing mineral lease or other applicable contractual standard, andapplicable regulatory standards.  8. No action taken or not taken by Meridian pursuant to SectionsIII(A)(5) or (6) to restore or remediate any property shall preclude or prejudiceany argument by Meridian pursuant to any informal dispute resolution procedures orarbitration instituted pursuant to Sections XI and XII of this Compromise that anyor all restoration or remediation undertaken by Meridian was, in fact, theobligation of Shell pursuant to this Compromise.  9. Meridian will indemnify Shell, only as set forth in Section IV below,for Claims related to or arising out of the Exhibit B Properties.  10. Notwithstanding any other provision of this Section IIIA, if anyobligations are outstanding under the Meridian Amended and Restated CreditAgreement dated as of December 23, 2004 (as amended), Meridian shall not pay theInitial Payment or transfer the Savanne Fee Property as provided herein until theclosing of a Corporate Transaction or with the prior consent of the Agent and theRequired Lenders under such Credit Agreement.     B. Shell     In consideration of the covenants contained herein, Shell agrees to the following: 1. Shell’s obligations pursuant to Sections III(B)(3) and V(A) belowshall become binding and effective upon the payment of the Initial Payment and thetransfer of the Savanne Fee Property as set forth Sections IIIA(2) and (3) above.Otherwise, unless the Parties agree to extend the Compromise as set forth inSection IIIA(4) above, this Compromise will terminate and neither Meridian norShell shall be bound by its terms.  2. Shell will abate the Arbitration until Meridian makes the InitialPayment and transfers the Savanne Fee Property, or until this Compromiseterminates.  3. Upon receipt of the Initial Payment and the transfer of the SavanneFee Property, Shell will dismiss the Arbitration with prejudice.Notwithstanding such dismissal, Shell shall retain the right to make any claim forbreach of this Compromise, including but not limited to a claim for indemnitypursuant to Section IV of this Compromise.  4. Should Shell undertake any restoration or remediation on lands onwhich the Exhibit B Properties are contained then no action taken or not taken byShell shall preclude or prejudice any argument by Shell pursuant to any informaldispute resolution procedures or arbitration instituted pursuant to Section XII ifthis Compromise that any or all restoration or remediation undertaken by Shellwas, in fact, the obligation of Meridian pursuant to this Compromise.
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IV. **Indemnity**     To the fullest extent permitted by law, Meridian shall indemnify and hold harmless Shell, itsaffiliates, successors and assigns, and the respective officers, directors, employees and agents ofeach (the “Shell Indemnified Parties”), only for, and only to the extent that, a Claim or portionthereof arises, results from, or is caused by the use, operation, lack of maintenance, occupation,ownership or abandonment of the Exhibit B Properties on or after the Effective Dates of theAgreements. If contamination on the land on which the Exhibit B Properties are contained aroseprior to the Effective Dates of the Agreements, but spreads after the Effective Dates of theAgreements, then Meridian shall not owe any indemnity to Shell for Claims relating to suchcontamination or damage to the environment unless, and only to the extent that, Meridian’s use of,or failure to properly maintain, the Exhibit B Properties contributed to such contamination ordamage to the environment. THE FOREGOING OBLIGATION SHALL APPLY REGARDLESS OF THE NEGLIGENCE,FAULT OR THE STRICT OR STATUTORY LIABILITY OF SHELL INDEMNIFIED PARTIES UNDER ANY LAW (INCLUDINGSTATUTORY, REGULATORY AND CASE LAW), REGARDLESS OF WHETHER SUCH LAW WAS IN EXISTENCE AS OF THEEFFECTIVE DATES OF THE AGREEMENTS. In the event of such a Claim, Shell may select the counsel ofits choice, and Meridian further covenants and agrees to reimburse Shell for reasonable legal andexpert fees and costs incurred in response to any Claim or in defense of any suit(s) oradministrative proceeding(s) brought against Shell Indemnified Parties on account of any suchClaims involving the Exhibit B Properties indemnified hereunder and to pay or discharge the fullamount or obligation of such Claims incurred by, accruing to or imposed on Shell Indemnifiedparties resulting from any such Claim(s). Reimbursement of these fees and costs shall be limitedto the percentage of a Claim, if any, which is indemnified hereunder and there will be noreimbursement of such fees and costs for the percentage of any Claim which is not indemnifiedhereunder.     “Claims” shall mean any and all claims, demands, loss, liability, liens, demands, judgments,settlements, suits, causes of action, fines and penalties assessed or costs of complying with anyjudgments, orders or decrees of courts, administrative tribunals or other governmental entities,costs and any costs, expenses and fees associated with the investigation, defense and resolution ofthe foregoing, including without limitation, reasonable attorney’s fees, expert costs and any costor expense of any nature whatsoever incurred to contain, remove, remedy, respond to, clean up, orabate any environmental impacts or other contamination or pollution of the air, surface water,sediment, groundwater, land surface or subsurface strata resulting from or related to theoperation, use, maintenance or ownership of the Properties, whether such environmental impacts,contamination or pollution is located on, within, under or above, or emanates from real propertyincluded in the Properties. Claims may be based on any theory of tort, contract, strict liability,statutory liability (including without limitation, fines, penalties, obligations or requirements),property damage, damage to the environment, or damage to natural resources made or any other basisfor liability and shall include, without limitation, any Claims arising, occurring or resultingfrom, related to or based on the injury, disease, or death of any persons (including, withoutlimitation, the indemnifying Party’s employees,
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agents and representatives) or damage to, loss or destruction of any property, real or personal.     “Historical or Pending Claims” shall mean Claims asserted or noticed prior to September 1,2009.V. **Releases**     A. Shell, for consideration recited herein and subject to the terms indicated does herebyrelease, remise and forever discharge Meridian from responsibility for all indemnity claims, past,present and future, under Section 21 of the PSA and Section 12.1(c) and (d) of the Agreement andPlan of Merger except for indemnity associated with the properties described in the Exhibit BProperties, as set forth in Section IV of the Compromise. Shell also releases Meridian for anyHistorical or Pending Claims for environmental impacts or contamination relating to the Propertiesregardless of whether they are 1) contained within the scope of Section 21 of the PSA and/orSection 12.1(c) and (d) of the Agreement and Plan of Merger or 2) whether such claims wouldotherwise constitute indemnifiable claims pursuant to Section IV of this Compromise.     B. Meridian, for consideration recited herein and subject to the terms indicated does herebyrelease, remise and forever discharge Shell from responsibility for all indemnity claims underSection 21 of the PSA and Section 12.1(c) and (d) of the Agreement and Plan of Merger. Thisrelease includes any Historical or Pending Claims for environmental impacts or contaminationregardless of whether they are contained within the scope of those sections.VI. **Assignment of Rights for Properties Not Listed on Exhibit B**     Meridian has assigned or sold those Properties not listed in Exhibit B. To the extent thatthe agreements under which those Properties not listed on Exhibit B were sold or assigned containobligations on the part of the assignees to conduct decommissioning, abandonment, remediation orrestoration, or provide defense and indemnity, Meridian agrees, to make such rights available toShell. Meridian shall cooperate in the enforcement of said rights by (i) at Shell’s request,assigning such rights to Shell or (ii) pursuing rights against the assignees in Meridian’s name atShell’s direction and expense. For all Claims not arising from Exhibit B Properties and notinvolving Historical or Pending Claims, Shell shall reimburse Meridian out of any recovery fromsuch assigned rights in an amount equal to the ratio between any amounts paid by Meridian and Shellwith respect to the Claim. If the parties are unable to agree on the proper ratio, then eitherparty may invoke the dispute resolution procedures of Section XII of this Compromise. Meridianagrees to remain contractually obligated to the terms and conditions of this Compromise even thoughthe Exhibit B Properties have been sold or divested.
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VII. **Cooperation**     Shell and Meridian agree to reasonably cooperate with respect to Claims relating to theProperties by providing documents, participating in discovery if necessary, and providing witnessesfor deposition to defend or otherwise address the Claims which may arise with respect to theProperties in order to resolve those Claims, demands or lawsuits in the most feasible andeconomical manner. Nothing in this sub-paragraph shall obligate either party to make any financialcontribution with regard to the Claims. This obligation of cooperation does not prohibit eitherparty from resolving Claims against it, but such resolution does not eliminate that party’sobligation to cooperate with the other. Furthermore, as part of this duty to cooperate, Shell andMeridian agree that neither party will initiate contact with a landowner, regulator, or other thirdparty and suggest or recommend that environmental-related work needs to be done on any of theProperties that would be the responsibility of the other party pursuant to this Compromise. If alandowner or a regulator delivers to either Meridian or Shell a written notification seeking aresponse concerning an alleged environmental problem with respect to the Properties, the receivingparty shall notify the other prior to responding.     If after the Effective Date of this Compromise Meridian discovers contamination on the land onwhich the Exhibit B Properties are located that Meridian contends arose prior to the Effective Dateof the Agreements, Meridian shall notify Shell of such contamination within a reasonable time.VIII. **Business Focal Point**.     Meridian shall appoint its Vice President of Engineering and Operations as a point of contactfor Shell. Such individual shall be empowered to coordinate access by Shell to the Properties tothe extent Meridian still owns any or all of the Properties. Meridian shall allow reasonableaccess by Shell to said Properties for the purpose of conducting work of an environmental,decommissioning, or safety-related nature so long as there is no material interference withMeridian’s operations. Shell agrees to execute the Agreement for Indemnification and Responsibilityfor Damages (the “Indemnification Agreement”) made part of this Compromise as Exhibit C, and to bethe Indemnifying Party as defined in the Indemnification Agreement, in advance of entering upon theProperties.IX. **Cooperation With Funded Efforts**.     Meridian agrees as is reasonable, in instances where Shell requests Meridian’s assistance, tocontract directly with contractors to undertake environmental cleanup, decommissioning orsafety-related work on the Properties as directed by, or in conjunction with, Shell so long asthere is no material interference with Meridian’s operations. Shell agrees to pay for all suchcosts or expenses within 30 days of receiving
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any invoice from Meridian for reimbursement of such third-party costs or expenses. Shellagrees to execute the Indemnification Agreement made part of this Compromise as Exhibit C, and tobe the Indemnifying Party as defined in the Indemnification Agreement, before Meridian willcontract for this work.X. **Regulatory Compliance**     Meridian acknowledges the existence of certain laws and regulations pursuant to whichgovernmental authorities may require it to perform work on the Exhibit B Properties. Meridian willundertake to complete any and all of these activities timely and completely in accordance withgovernmental policies, practices, protocols and standards, and will protect and indemnify Shell inaccordance with the above provisions of this Compromise with respect to such governmental action.XI. **Future Dispute Resolution**     Meridian and Shell adopt the arbitration provisions set out Article 12.5 of the Agreement andPlan of Merger, which are hereby incorporated by reference, and made applicable to this Compromise.To the extent that any provisions in this Compromise regarding the recovery or reimbursement ofattorneys’ fees and costs conflict with the provisions of Article 12.5 of the Agreement and Plan ofMerger, the provisions of this Compromise control. As a precursor to binding arbitration, butwithout prejudice to the right of either party to invoke same, Meridian and Shell agree to appointBusiness Liaisons who shall be charged with the obligation of sharing information with respect tothe Properties and existing or potential demands, claims or lawsuits by third parties relating tothe Properties, and to resolve any disputes between Meridian and Shell relating to the Properties,the Agreements or this Compromise. The Business Liaisons shall be designated in Exhibit D, hereto.In the event of any dispute between Meridian and Shell with regard to the Properties, theAgreements or this Compromise, the Business Liaisons agree to meet within 5 business days ofreceipt of written notice of the dispute by either party. If the dispute cannot be resolved by theBusiness Liaisons, either Business liaison shall call for the engagement of the services of amutually agreed upon mediator to resolve the dispute. The mediation shall be conducted within 30business days of the receipt of the written notice of dispute. The parties agree to employ theirbest efforts to resolve the dispute by meeting and mediation promptly. In the event that thedispute is not resolved within 30 business days of the receipt of the written notice of dispute,then the parties are free to invoke the mandatory arbitration procedure as set forth in theAgreements.**XII.** **Resolution of Future Claims**     In the event that Claims are made against Shell after the Effective Date of this Compromisewith respect to the Exhibit B Properties, the following procedures shall be employed if Shellcontends that all or part of the Claims are indemnified pursuant to this Compromise.
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 1. Shell will provide written notice to Meridian or its successor or assign ofsuch Claims within 30 days of receipt of those Claims.  2. Shell and Meridian will cooperate in an effort to facilitate the resolutionof such Claims.  3. After final resolution of the underlying Claims, Shell and Meridian will meetand attempt to reach agreement concerning the percentage, if any, of such Claims thatare covered by the indemnity provisions of this Compromise.. In reaching thisallocation, the parties will not be bound by any responsibility determinations in thisunderlying litigation or settlement.  4. If the parties are unable to agree, Shell and/or Meridian shall thereafterhave the right to initiate arbitration under the provisions of this Compromise. Inany such arbitration: a. The arbitrator will not be bound by any responsibilitydeterminations in the underlying litigation or settlement;  b. Meridian shall have the right to challenge the reasonablenessand necessity of any amounts spent or obligations undertaken by Shell toresolve any Claim or satisfy any judgment or governmental order; and  c. Meridian and Shell shall retain the right to contend thatsome or all costs and expenses incurred by either party in resolving theunderlying Claims relate to contamination or environmental damage arisingeither prior to, or after, the Effective Dates of the Agreements as defined inSection IV above.**XIII.** **Voluntary Agreement**     The Parties acknowledge that each has had an opportunity to consult with its or his respectiveattorney concerning the meaning, import, and legal significance of this Compromise, and each hasread this Compromise, as signified by their signatures hereto, and is voluntarily executing thesame for the purposes and consideration herein expressed.**XIV.** **Representations and Warranties of Authority**     All Parties represent and warrant (1) that the signatories to this Compromise have full legalright, power, and authority to execute this Compromise and bind the parties for whom they executethe Compromise; (2) that they have read the above and foregoing Compromise; and (3) that they arenot relying on any representations not contained herein. The parties further understand that thisCompromise covers and includes every claim of every kind that they have or may have had, contingentor otherwise, against the other parties. Each Party hereby represents that no one connected withor representing the other Party has made any representations of any kind either as to the liabilityor as to damages in order to induce such party to make this settlement and release, and each Partyhereby states that it is making this settlement and executing this release solely of its/his ownjudgment.
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**XV.** **No Assignment of Claims**     Each Party represents and warrants that it/he is the full and sole owner of the claims,demands, actions, or causes of action referred to in this Compromise at the time of the executionof this Compromise and that it/he has not assigned, transferred or purported to assign or transferany of the claims, actions or liabilities released in the paragraph entitled Releases above.**XVI.** **Authority of Signatories**     Each of the signatories to this Compromise warrants that he/she is authorized and empowered toexecute this Compromise.**XVII.** **Counterparts**     This agreement may be executed simultaneously or in counterpart and those counterparts shallbe construed together as one agreement.**XVIII.** **Joint Drafting**     All parties to this agreement have, with the aid of legal counsel, jointly participated in thedrafting of this agreement and understand and freely agree to the terms and conditions herein.**XIX.** **Binding Effect**     This Compromise shall be binding upon and inure to the benefit of the parties hereto and totheir respective representatives, successors and assigns. Meridian agrees to cause any successoror assign who purchase or acquires a controlling interest in Meridian, if any, assume theobligations herein and acknowledge that assumption by written agreement, a copy of which shall beprovided to Shell.**XX.** **Copies**     It is understood and agreed that this Compromise may be executed in a number of identicalcounterparts, each of which shall be deemed an original for all purposes.**XXI.** **Headings**     The headings and subsections of this Compromise are inserted for convenience only and shallnot control or affect the meaning, construction, or effect of this Compromise, or any of itsprovisions hereof.SIGNATURE PAGES FOLLOW
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Signature Page Compromise and Settlement AgreementCounty Of Harris