PRELIMINARY COPY
XCL LTD.
DEAR SHAREHOLDER:
You are cordially invited to attend the Annual Meeting of
Shareholders of XCL Ltd. to be held at 10:00 a.m., Eastern
Daylight Savings Time, on Wednesday, June 14, 1995, in the
Stuyvesant Room of the New York Marriott East-Side Hotel, located
at 525 Lexington Avenue, New York, New York 10017.
The attached materials include the Notice of Annual Meeting
of Shareholders and the Proxy Statement, which contains
information concerning the meeting, the nominees for election as
members of the Board of Directors, and other relevant matters.
Management will report on the Company's activities during
the last fiscal year and future plans and prospects of the
Company, and shareholders will have an opportunity to ask
questions about its operations and prospects.
Shareholder interest in the affairs of the Company is
welcomed and encouraged, and it is requested that you please
complete, sign, date, and promptly return your proxy in the
enclosed envelope. Such action will not limit your right to vote
in person if you attend the meeting in person, but will assure
your representation if you cannot attend.
Sincerely,
MARSDEN W. MILLER, JR.
Chairman of the Board
and Chief Executive Officer
May __, 1995
XCL LTD.
(a Delaware corporation)
110 Rue Jean Lafitte
Lafayette, Louisiana 70508
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
To Be Held On June 14, 1995
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders (the "Meeting") of XCL
Ltd. (the "Company") will be held in the Stuyvesant Room of the
New York Marriott East-Side Hotel, located at 525 Lexington
Avenue, New York, New York, on Wednesday, June 14, 1995 at 10:00
a.m., Eastern Daylight Savings Time, to consider and take action
on the following matters:
1. The election of three Class II directors for three-year
terms, each to hold office until the 1998 Annual
Meeting of Shareholders or until a successor shall have
been elected and shall have qualified;
2. To amend the Company's Certificate of Incorporation to
increase the number of authorized shares of Common
Stock, par value $.01 per share, from 325,000,000
shares to 350,000,000 shares; and
3. The transaction of such other business as may properly
come before the Meeting or any adjournments thereof.
Only shareholders of record at the close of business on
April 28, 1995 are entitled to notice of and to vote at the
Meeting.
YOUR PROXY IS IMPORTANT TO ASSURE A QUORUM AT THE MEETING.
WHETHER OR NOT YOU EXPECT TO BE PERSONALLY PRESENT AT THE
MEETING, PLEASE BE SURE THAT THE ENCLOSED PROXY IS PROPERLY
COMPLETED, DATED, SIGNED AND RETURNED WITHOUT DELAY IN THE
ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS,
DAVID A. MELMAN
Secretary
May __, 1995
This document is important and requires your immediate
attention. If you are in any doubt as to the action you should
take, you should consult your stockbroker, bank manager,
solicitor, accountant or other professional advisor immediately.
If you have sold all of your shares of XCL Ltd. after April
28, 1995, the record date of the Meeting, you should hand this
document and accompanying form of proxy to the purchaser or to
the agent through whom the sale was effected for transmission to
the purchaser.
<PAGE>
XCL LTD.
(Incorporated with limited liability in the United States of
America under the laws of the State of Delaware)
May __, 1995
Directors: Principal Executive Office:
M.W. Miller, Jr.* (Chairman 110 Rue Jean Lafitte
and Chief Executive Officer) Lafayette, Louisiana 70508
J.T. Chandler* USA
D.A. Melman*
E. McIlhenny, Jr.*
F. Hofheinz*
A.W. Hummel, Jr.*
M. Palliser
F.J. Reinhardt, Jr.*
* U.S. Citizen
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
Solicitation and Voting of Proxies
This Proxy Statement is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of
XCL Ltd. (the "Company") to be voted at the Annual Meeting of
Shareholders (the "Meeting") to be held in the Stuyvesant Room of
the New York Marriott East-Side Hotel, located at 525 Lexington
Avenue, New York, New York, on Wednesday, June 14, 1995, at 10:00
a.m., Eastern Daylight Savings Time, and at any adjournment
thereof. The approximate date on which this Proxy Statement and
the enclosed form of proxies are first being sent or given to
shareholders of record is May __, 1995.
The Board of Directors of the Company has fixed the close of
business on April 28, 1995 as the record date for the
determination of holders of shares of outstanding capital stock
entitled to notice of and to vote at the Meeting. On April 28,
1995, there were outstanding [_________________] shares of common
stock, $.01 par value ("Common Stock"), the holders of which will
be entitled to one vote per share on each matter submitted to a
vote at the Meeting, and 50,000 shares of Series B, Cumulative
Preferred Stock, $1.00 par value ("Series B Preferred Stock"),
the holders of which will be entitled to fifty (50) votes per
share on each matter submitted to a vote at the Meeting. The
presence, in person or by proxy, of the holders of issued and
outstanding shares of capital stock entitled to cast an aggregate
of [____________] votes at the Meeting will constitute a quorum
for the transaction of business.
Proxies in the accompanying forms which are properly
completed, signed, dated and returned to the Company and not
revoked will be voted in accordance with instructions contained
therein. Shareholders are urged to specify their choices by
marking the appropriate boxes on the enclosed proxy card; if no
choice has been specified, the shares will be voted as
recommended by the Board of Directors. Accordingly, proxies will
be voted "FOR" the election of the nominees for Class II
directors and Proposal 2 set forth in the accompanying forms of
proxy.
Shareholders have three choices as to their vote on Proposal
2 to be voted upon at the Meeting in addition to the election of
directors. Shareholders may vote "FOR" such Proposal or vote
"AGAINST" such Proposal or "ABSTAIN" from voting by checking the
appropriate box. Abstentions on Proposal[s 2] will have the
effect of a negative vote since the amendment of the Certificate
of Incorporation requires the approval of a majority of the
outstanding shares of Common Stock and Series B Preferred Stock
voting as a single class. Abstentions and broker non-votes
(matters of a non-routine nature as to which brokers holding
shares in street name have received no instructions from their
clients and, accordingly, do not vote) are counted for purposes
of determining the presence or absence of a quorum for the
transaction of business. Abstentions are counted in tabulations
of the votes cast on proposals presented to shareholders, whereas
broker non-votes are not counted for purposes of determining
whether a proposal has been approved. The Board of Directors
hopes that shareholders will exercise their right to vote rather
than abstaining from voting. It is necessary that proxies be
completed, signed, dated and returned for all such shares to be
voted at the Meeting.
Each shareholder who executes the enclosed proxy may revoke
it at any time prior to its being exercised by delivering written
notice to the Secretary of the Company. Mere attendance at the
Meeting will not revoke the proxy, but a shareholder present at
the Meeting, upon notice to the Secretary, may revoke such proxy
and vote in person.
Expenses of Solicitation
The cost of soliciting proxies will be borne by the Company,
including expenses incurred in connection with the preparation
and mailing of this Proxy Statement and all documents which now
accompany or may hereafter supplement it. The solicitations will
be made in person and by mail. The Company will supply brokers or
persons holding shares of record in their names or in the names
of their nominees for other persons, as beneficial owners, with
such additional copies of proxies and Proxy Statements as may
reasonably be requested in order for such record holders to send
one copy to each beneficial owner, and will, upon request of such
record holders, reimburse them for their reasonable expenses in
mailing such materials.
The Company has retained the services of Chemical Bank to
solicit proxies on behalf of the Company. Services to be
performed under the agreement will include consultation with
respect to planning and organizing the Meeting, search and
distribution of materials, and solicitation of proxies from
brokers, banks, nominees and other institutional holders. The fee
for this solicitation service is [$4,500] and will be paid by the
Company, as well as reimbursement of out-of-pocket expenses.
Further, certain directors, officers and employees of the
Company and its financial advisors, not especially employed for
this purpose, may solicit proxies, without additional
remuneration therefor, by mail, telephone, telegraph; facsimile
or personal interview.
Security Ownership of Management
The following table sets forth information concerning the
shares of the Company's Common Stock owned beneficially by each
director and nominee for director of the Company and all
directors and officers as a group as of March 30, 1995. As of
that date there were 237,420,181 shares of Common Stock issued
and outstanding. The mailing address for all such individuals is
XCL Ltd., 110 Rue Jean Lafitte, Lafayette, Louisiana 70508.
Common Stock (1)
-------------------------------
Number Percent
Name of Beneficial Owner of Shares of Class
- ------------------------- -------------------- --------
Marsden W. Miller, Jr. 10,922,617 (2)(3)(4) 4.47
John T. Chandler 2,860,614 (2)(3)(4) 1.19
David A. Melman 1,921,075 (3)(4) 0.80
Edmund McIlhenny, Jr. 537,205 (3)(5) 0.21
Fred Hofheinz 100,000 (3) 0.04
Arthur W. Hummel, Jr. 66,666 (3) 0.03
Sir Michael Palliser 66,666 (3) 0.03
Francis J. Reinhardt, Jr. 618,683 (3)(6) 0.26
All directors and officers of
the Company as a group
(14 persons) 21,479,108 (2)(3)(4) 8.46
(1) This table includes shares of Common Stock issuable upon
conversion of the shares of Series A, Cumulative Convertible
Preferred Stock ("Series A Preferred Stock"). Each share of
Series A Preferred Stock is convertible into approximately
21 shares of Common Stock, subject to adjustment. The Series
A Preferred Stock is not entitled to any voting privileges,
except in certain limited circumstances.
(2) Includes 200,000 shares which are subject to an option
granted under agreement dated October 1, 1985 in favor of
John T. Chandler. Such shares are also included in Mr.
Chandler's holding inasmuch as the option is presently
exercisable. For purposes of the total holdings of the
group, the shares are included solely in Mr. Miller's share
holdings.
(3) Includes shares of Common Stock which may be acquired
pursuant to options which are exercisable within 60 days.
(4) Includes shares of Common Stock which may be acquired
pursuant to stock purchase warrants exercisable within 60
days.
(5) Includes 82,898 shares of Common Stock owned by Mrs. Kathy
M. McIlhenny, wife of Edmund McIlhenny, Jr. Mr. McIlhenny
disclaims beneficial ownership of such shares.
(6) Includes a presently exercisable warrant to acquire 14,286
shares; and includes 100,000 shares of Common Stock owned by
Carl H. Pforzheimer & Co. of which Mr. Reinhardt is a
general partner and 200,000 shares owned by Petroleum and
Trading Corporation of which Mr. Reinhardt is an officer and
director. Mr. Reinhardt disclaims beneficial ownership of
the shares owned by Petroleum and Trading Corporation.
Security Ownership of Certain Beneficial Owners
The following table sets forth as of March 30, 1995, the
individuals or entities known to the Company to own more
than 3 percent of the Company's outstanding shares of voting
securities. As of that date there were 237,420,181 shares of
Common Stock issued and outstanding. Except as otherwise
indicated, all shares are owned both of record and
beneficially.
<TABLE>
<CAPTION>
Series B
Common Stock <F1> Preferred Stock<F2>
----------------------- --------------------
Name and Address Number of Percent Number of Percent
of Beneficial Owner Shares of Class Shares of Class
- ---------------------- ------------ -------- --------- --------
<S> <C> <C> <C> <C>
China Investment &
Development Co., Ltd.
16th Floor, No. 563
Chung Hsiao E. Road,Sec. 4
Taipei, Taiwan 3,325,000<F3> 1.38 50,000 100
Clydesdale Bank
Nominees Limited
30 St. Vincent Place
Glasgow G1 2HL
Scotland 13,757,431 5.79 -- --
Cumberland Associates
1114 Avenue of
the Americas
New York, NY 10036 9,160,344<F4> 3.81 -- --
Fidelity International Limited
Pembroke Hall
42 Crow Lane
Pembroke Bermuda 15,949,575<F5> 6.72 -- --
Kayne Anderson Investment
Management, Inc.
1800 Avenue of the Stars
Suite 1425
Los Angeles, CA 90067 12,110,330<F6> 4.99 -- --
Marsden W. Miller, Jr.
110 Rue Jean Lafitte
Lafayette, LA 70508 10,922,617<F7> 4.47 -- --
MSS Nominees Limited
Midland Bank Plc
Suffolk House
5 Laurence Pountney Hill
London EC4R 0EU
United Kingdom 8,250,776<F8> 3.45 -- --
Royal Bank of Scotland
Edinburgh Nominees Limited
31 St. Andrews Square
Edinburgh EH2 2PS
Scotland 10,935,788<F9> 4.59 -- --
<FN>
<F1>
This table includes shares of Common Stock issuable upon
conversion of the shares of Series A Preferred Stock. Each
share of Series A Preferred Stock is convertible into
approximately 21 shares of Common Stock, subject to
adjustment. The Series A Preferred Stock is not entitled to
any voting privileges, except in certain limited
circumstances.
<F2>
Each share of Series B Preferred Stock is entitled to 50
votes per share.
<F3>
Includes 3,325,000 shares of Common Stock which are issuable
upon exercise of outstanding Class B Warrants.
<F4>
Includes 2,534,511 shares issuable upon conversion of Series
A Preferred Stock and 533,333 shares issuable upon exercise
of stock purchase warrants exercisable within 60 days.
<F5>
Pursuant to Schedule 13D dated January 20, 1995. Fidelity
International Limited is an investment adviser providing
advisory and management services to a number of non-U.S.
investment companies or instrument trusts and certain
institutional investors.
<F6>
Includes 2,605,953 shares issuable upon conversion of Series
A Preferred Stock and 2,647,632 shares issuable upon
exercise of stock purchase warrants exercisable within 60
days. These shares are held by four limited partnerships,
of which Kayne Anderson Investment Management is General
Partner.
<F7>
Includes 200,000 shares which are subject to an option
granted under agreement dated October 1, 1985 in favor of
John T. Chandler. Includes 4,483,333 shares issuable upon
exercise of options and 2,385,000 shares issuable upon
exercise of stock purchase warrants exercisable within 60
days.
<F8>
Includes 1,614,850 shares issuable upon conversion of Series
A Preferred Stock.
<F9>
Includes 972,636 shares of Common Stock which are issuable
upon conversion of Series A Preferred Stock.
</FN>
</TABLE>
PROPOSAL 1 - ELECTION OF DIRECTORS
Board of Directors and Committees
Under the Certificate of Incorporation and Bylaws of the
Company, the Board of Directors is divided into three classes of
directors serving staggered three-year terms, with one class of
directors to be elected at each annual meeting of shareholders
and to hold office until the end of their term or until their
successors have been elected and qualified. The current Class II
directors, whose terms of office expire at the 1995 annual
meeting of shareholders are Messrs. Marsden W. Miller, Jr.,
Edmund McIlhenny, Jr. and Francis J. Reinhardt, Jr.; the current
Class III directors are Messrs. John T. Chandler and Fred
Hofheinz; and the current Class I directors are Messrs. David A.
Melman, Sir Michael Palliser and Arthur W. Hummel, Jr.
The Board held six meetings in 1994. The average attendance
by directors at these meetings was 96 percent, and all directors
attended 99 percent of the Board and Committee meetings they were
scheduled to attend.
Under Delaware law and the Bylaws, incumbent directors have
the power to fill any vacancies on the Board of Directors,
however occurring, whether by an increase in the number of
directors, death, resignation, retirement, disqualification,
removal from office or otherwise. Any director elected by the
Board to fill a vacancy would hold office for the unexpired term
of the director whose place has been filled; except that a
director elected to fill a newly created directorship resulting
from an increase in the number of directors, whether elected by
the Board or shareholders, would hold office for the remainder of
the full term of the class of directors in which the new
directorship was created or the vacancy occurred or until his
successor is elected and qualified. If the size of the Board is
increased, the additional directors would be apportioned among
the three classes to make all classes as nearly equal as
possible.
Pursuant to the terms of an agreement dated April 17, 1992
between the Company and China Investment & Development Co., Ltd.
("CIDC"), the Company granted to CIDC the right to appoint a
nonvoting observer to the Company's Board of Directors so long as
CIDC owns at least 16,667 shares of Series B Preferred Stock or
their equivalent in Common Stock on an as converted basis. To
date CIDC has not exercised this right.
There are no arrangements or understandings with any
directors pursuant to which he has been elected a director nor
are there any family relationships among any directors or
executive officers.
The Company has an Executive Committee, whose present
members include Messrs. Miller, Chandler and Melman. The
Committee met seven times during 1994 and, subject to certain
statutory limitations on its authority, has all of the powers of
the Board of Directors while the Board is not in session, except
the power to declare dividends, make and alter Bylaws, fill
vacancies on the Board or the Executive Committee, or change the
membership of the Executive Committee. The Company also has a
Compensation Committee whose present members are Messrs.
Hofheinz, Hummel and Palliser. The Compensation Committee met
once in 1994. It is charged with the responsibility of
administering and interpreting the Company's stock option plans;
it also recommends to the Board the compensation of employee-
directors, approves the compensation of other executives and
recommends policies dealing with compensation and personnel
engagements. The Company also has an Audit Committee whose
present members are Messrs. Hofheinz Hummel and Palliser. The
Audit Committee met [once] in 1994. It reviews with the
independent auditors the general scope of audit coverage. Such
review includes consideration of the Company's accounting
practices, procedures and system of internal accounting controls.
The Audit Committee also recommends to the Board the appointment
of the Company's independent auditors engaged by the Company.
The Company has no standing nominating committee, the functions
customarily attributable to such committee being performed by the
Board of Directors as a whole.
Nominees for Directors and Recommendation of the Board
Messrs. Marsden W. Miller, Jr., Edmund McIlhenny, Jr., and
Francis J. Reinhardt, Jr. have been nominated by the Board for
election as Class II directors, to hold office for three-year
terms expiring at the 1998 annual meeting of shareholders, or in
all cases until their successors are elected and qualified.
Unless authority to vote for election of directors (or for one or
all nominees) shall have been withheld in the manner provided in
the accompanying proxies, the votes represented by such proxies
will be cast for the election of the nominees set forth herein,
or for one or more substitute nominees recommended by the Board
of Directors in the event that, by reason of contingencies not
presently known to the Board of Directors, one or all nominees
should become unavailable for election. The affirmative vote of
a plurality of the votes cast at the Meeting by shareholders
present in person or by proxy, a quorum being present, is
required for the election of such directors. The Board of
Directors recommends that shareholders vote FOR the nominees for
election as Class II directors.
Biographical Information
Set forth below is a brief biographical summary of the
nominees for election as directors, each of whom presently serves
as a director.
MARSDEN W. MILLER, JR., fifty-three years old, is the
Chairman and Chief Executive Officer of the Company, as well as a
director, and has held the positions of Chief Executive Officer
and director since its incorporation. Prior to 1981, from 1964,
Mr. Miller engaged in the oil business as an independent, was an
officer in various oil companies, principally Westrans
Industries, Inc. from 1970 to 1973, Meridian Minerals, Inc. from
1973 to 1976, and Miller Coal Services, Inc. and its subsidiaries
from 1979 to 1981, and practiced law.
EDMUND McILHENNY, JR., forty-nine years old and a director
since 1990, joined the Company full-time in August 1991 as
President of XCL Land, Ltd., a wholly owned subsidiary of the
Company. From 1972 to 1974, he was involved in the practice of
law in New Orleans, Louisiana. From 1975, Mr. McIlhenny held
various administrative positions with E. McIlhenny's Son
Corporation, and subsidiaries, involved primarily in the
manufacture of TABASCO (registred trademark), including Vice
President, Secretary and a director, as well as a member of its
Executive Committee. From 1984 to the present, he has been a
director, member of the Executive Committee and Land Management
Committee, and in 1988 was elected Vice President and Secretary,
of Vermilion Corporation, a land holding company located in
Abbeville, Louisiana. Mr. McIlhenny is a graduate of the
University of North Carolina at Chapel Hill with a B.A. degree
and the Tulane University School of Law with a J.D. degree.
FRANCIS J. REINHARDT, JR., sixty-five years old and a
director since 1992, is a partner in the New York investment
banking firm of Carl H. Pforzheimer & Co. Mr. Reinhardt has been
a partner in the firm for 29 years and has held various
positions, specializing in independent oil and gas securities,
mergers and acquisitions, placements participation and
institutional sales since 1956. Mr. Reinhardt holds a B.S. degree
from Seton Hall University and received his M.B.A. from New York
University. Mr. Reinhardt is a member of the New York Society of
Security Analysts, is a member of and has previously served as
president of the Oil Analysts Group of New York, is a member and
past president of the National Association of Petroleum
Investment Analysts and is a member of the Petroleum Exploration
Society of New York. Mr. Reinhardt also serves as a director of
Mallon Resources Corporation, a NASDAQ traded petroleum and
mining company, as well as a director of several privately held
companies.
The following pages contain biographical information
concerning the directors whose terms of office will expire after
the Meeting.
JOHN T. CHANDLER, sixty-two years old, is President of the
Company and Chairman and Chief Executive Officer of XCL-China
Ltd., a wholly owned subsidiary of the Company responsible for
the Company's operations in The People's Republic of China. He
joined the Company in June 1982, becoming a director in May 1983.
From 1976 until he joined the Company, he was the Managing
Partner of the Oil and Gas Group of GSA Equity, Inc., New York
and director of Executive Monetary Management, Inc., the parent
company of GSA Equity, Inc. From 1972 to 1976, he was director
and Vice President of Exploration and Production of Westrans
Petroleum, Inc. and a director of a number of its subsidiaries.
During 1971 and 1972, he was a petroleum consultant and manager
of the oil department of Den Norske Creditbank in Oslo, Norway.
Mr. Chandler was Vice President and Manager of the Petroleum
Department of the Deposit Guaranty National Bank in Jackson,
Mississippi from 1969 to August 1971 and, from 1967 to February
1969, was a petroleum engineer first for First National City Bank
and then The Bank of New York. From March 1963 to July 1967, he
was employed by Ashland Oil and Refining Company as a petroleum
engineer. From 1959 to 1963, he held the same position with
United Producing Company, Inc., which was acquired by Ashland
Oil.
Mr. Chandler graduated from the Colorado School of Mines
with a Professional degree in petroleum engineering and is a
Registered Professional Engineer in the States of Colorado and
Texas, a member of the Society of Petroleum Evaluation Engineers
and a member of AIME.
DAVID A. MELMAN, fifty-two years old, is Executive Vice
President, General Counsel and Secretary of the Company and,
since September 14, 1987, a director of the Company. Prior to
joining the Company in December of 1983, he held senior
management positions with an oil and gas venture capital
partnership sponsored by Citibank N.A. (since May 1981) and with
Energy Assets International Corporation from September 1978 to
May 1981. His professional experience includes the practice of
law with Burke & Burke (1969-1971) and of accountancy with
Coopers & Lybrand (1968-1969). He is a member of the New York
State Bar and is a director of Sheffield Exploration Company,
Inc., an American Stock Exchange listed company, and Terrenex
Ventures, Inc., an Alberta Stock Exchange listed company. Mr.
Melman holds a B.S. degree in economics and J.D. and LL.M
(taxation) law degrees.
SIR MICHAEL PALLISER, seventy-two years old and a director
since April 1994, is Vice Chairman of Samuel Montagu & Co.
Limited, the merchant bank which was owned by Midland Bank, of
which he was Deputy Chairman from 1987 to 1991, and which is now
part of the Hong Kong & Shanghai Banking Corporation. He was
Chairman of Samuel Montagu from 1984 to 1993. In 1947, he joined
the British Diplomatic Service and served in a variety of
overseas and Foreign Office posts before becoming head of the
Planning Staff in 1964-1966, Private Secretary to the Prime
Minister, 1966-1969, Minister in the British Embassy in Paris,
1969-1971, and the British Ambassador and Permanent
Representative to the European Communities in Brussels from 1971-
1975. He was, from 1975 until his retirement in 1982, Permanent
Under-Secretary of State in the Foreign and Commonwealth Office,
and Head of the Diplomatic Service. From April to July 1982, he
was a special adviser to the Prime Minister in the Cabinet Office
during the Falklands War. He was appointed a Member of the Privy
Council in 1983. He is President of the China-Britain Trade
Group, Deputy Chairman of British Invisibles, a director the UK-
Japan 2000 Group, a member of the Trilateral Commission, a
director of the Royal National Theatre, and Chairman of the Major
Projects Association, designed to assist in and for the handling
of major industrial projects. He is a former Director of BAT
Industries, Bookers, Eagle Star, Shell and United Biscuits.
Sir Michael Palliser was educated at Wellington College and
Merton College, Oxford. He saw wartime service in the British
Army with the Coldstream Guards.
ARTHUR W. HUMMEL, JR., seventy-four years old and a director
since April 1994, has been active in consulting with firms doing
business in East Asia, and participating in academic and
scholarly conferences in the U.S. and in the East Asia region
since his retirement, after thirty five years of service, from
the State Department in 1985. He is a member and trustee of many
academic, business, and philanthropic organizations involved in
international affairs.
Mr. Hummel was born in China. After education in the U.S.
he returned to China prior to Pearl Harbor. After internment by
the Japanese he escaped and fought with Chinese guerrillas behind
the Japanese lines in north China until the end of the war.
He obtained an M.A. (Phi Beta Kappa) in Chinese studies from
the University of Chicago in 1949, and joined the State
Department in 1950. His early foreign assignments include Hong
Kong, Japan and Burma. He was Deputy Director of the Voice of
America in 1961-1963; he was Deputy Chief of Mission of the
American Embassy in Taiwan, 1965-1968; Ambassador to Burma, 1968-
1970; Ambassador to Ethiopia, 1975-1976; Ambassador to Pakistan,
1977-1981: and Ambassador to The Peoples Republic of China, 1981-
1985. He was Assistant Secretary of State for East Asia 1976-
1977. He has received numerous professional awards from within
and outside the government.
FRED HOFHEINZ, fifty-seven years old and a director since
1991 is an attorney at law in Houston, Texas. From 1986 to 1987,
he served as President of Energy Assets International
Corporation, a fund management company, now a subsidiary of Torch
Energy Advisors, then served as a consultant to Torch Energy
Advisors until 1989. Mr. Hofheinz also served as the Mayor of
Houston, Texas, from 1974 to 1978. He, along with his family,
developed the Astrodome in Houston, and owned the Houston Astros
baseball team until 1974. He is currently a director of Viewpoint
Hospital Administrators, Inc. and Carpatsky Petroleum Company.
Compliance with Section 16(a) Filing Requirements
To the Company's knowledge, there were no instances of
failure to file reports with respect to reportable transactions
during the year ended December 31, 1994, as required by Section
16(a) of the Securities Exchange Act of 1934, as amended. All
reporting persons who are officers or directors of the Company
have provided the Company with written representations that no
Form 5 filing was required in that all reportable transactions
were timely filed on the appropriate forms.
Executive Compensation
The following table sets forth information regarding the
total compensation of the Chief Executive Officer and each of the
four most highly compensated executive officers of the Company at
the end of 1994, as well as the total compensation paid to each
such individual for the Company's two previous fiscal years.
Each of the named individuals has held his/her respective office
throughout the entire fiscal year.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
------------------------------- -------------------- ----------------
<F1> <F2> <F3> <F4> <F5> <F6>
Other Restricted
Name and Annual Stock Options/ LTSIP All Other
Principal Salary Bonus Compen- Awards SARs Payout Compen-
Position Year ($) ($) sation($) ($) (#) ($) sation($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marsden W. Miller, Jr. 1994 150,000 -- -- -- 1,625,000 -- --
Chairman and 1,875,000
Chief Executive 525,000
Officer 1993 168,750 -- -- -- -- -- -- --
1992 175,000 -- 546,000 -- 400,000 -- --
John T. Chandler <F7> 1994 150,000 -- -- -- 470,000 -- --
President; Chairman 1,025,000
and Chief Executive 100,000
Officer of 1993 168,750 -- -- -- -- -- --
XCL-China Ltd. 1992 175,000 -- -- -- 60,000 -- --
David A. Melman 1994 150,000 -- -- -- 470,000 -- --
Executive Vice 1,025,000
President, General 100,000
Counsel and Secretary 1993 168,750 -- -- -- -- -- --
1992 175,000 -- -- -- 60,000 -- --
R. Thomas Fetters, Jr.<F7>
Vice President- 1994 135,000 -- -- -- 163,500 -- --
Exploration; President 875,000
of XCL-China Ltd. 65,500
1993 152,250 -- -- -- -- -- --
1992 158,000 -- -- -- 34,000 -- --
Pamela G. Shanks <F8> 1994 128,600 -- -- -- -- -- --
Vice President- 500,000
Finance, Chief 21,400
Financial Officer 1993 144,050 -- -- -- -- -- --
and Treasurer 1992 34,586 -- -- -- 360,000 -- --
<FN>
<F1>
Prior to April 1, 1994, each executive was employed under an
agreement with the Company which provided that if his/her
employment was terminated prior to the agreement's
termination under certain circumstances he/she would receive
compensation for thirty months. Such employment agreements
were surrendered, effective April 1, 1994, in exchange for
stock purchase warrants (see "Employment Agreements" below).
<F2>
Annual bonus amounts earned under the Management Incentive
Plan are accrued during the fiscal years indicated, and paid
subsequent to the end of each fiscal year (see "Management
Incentive Plan" below). Effective March 30, 1994, the
Management Incentive Plan was terminated.
<F3>
Excludes the cost to the Company of other compensation that,
with respect to any above named individual, does not exceed
the lesser of $50,000 or 10 percent of such individual's
salary and bonus. Mr. Miller was reimbursed certain legal
costs incurred in defending proceedings pursuant to the
terms of an indemnification agreement approved by
shareholders on December 4, 1987.
<F4>
Although the Company's Long Term Stock Incentive Plan
permits grants of restricted stock and stock appreciation
rights, no grants of those incentive awards have been made.
<F5>
The first amount represents awards of stock options granted
under the Company's Long Term Stock Incentive Plan. The
second amount represents the number of five-year stock
purchase warrants, received upon surrender of an employment
agreement with the Company, determined based upon a formula
whereby each of the individuals were to be offered a
warrant, based upon the length of time of employment with
the Company, for a maximum of two shares of Common Stock for
each dollar of compensation remaining to be paid to such
individual under his or her agreement (based upon the
product of his or her highest monthly base salary and the
number of months remaining under his or her contract), at an
exercise price of $1.25 per share. The third number
represents five-year stock purchase warrants, received for
each dollar of salary reduction for the fifteen-month period
commencing January 1, 1993 through March 31, 1994,
determined based on the same formula and at the same
exercise price used in the granting of warrants upon
surrender of the employment agreements. (See "Employment
Agreements" below.)
<F6>
No payments have been made in respect of the Company's
Shareholder Value Performance Plan. The measurement period
for compensation under such plan ended on December 31, 1993,
and the Plan was terminated pursuant to its terms.
<F7>
XCL-China Ltd. is a wholly owned subsidiary of the Company
which manages the Company's operations in the People's
Republic of China.
<F8>
Ms. Shanks commenced employment on October 8, 1992. As part
of her employment package she was awarded 360,000 options.
</FN>
</TABLE>
Stock Options
The Company currently maintains seven stock option plans
which were adopted by shareholders at various times commencing in
1985. All of the plans are administered by the Compensation
Committee and provide for the granting of options to purchase
shares of Common Stock to key employees and directors of the
Company, and certain other persons who are not employees of the
Company but who from time to time provide substantial advice or
other assistance or services to the Company.
The most recent stock option plan was adopted on June 2,
1992, by shareholders who approved the Long Term Stock Incentive
Plan ("LTSIP"). The LTSIP was adopted with the view of conforming
the Company's plans to certain regulatory changes adopted by the
SEC and affording holders of previously granted options the
opportunity to exchange their options for equivalent options
under the LTSIP.
The LTSIP authorizes the Compensation Committee to grant
stock options intended to qualify as "incentive stock options"
under Section 422 of the Internal Revenue Code of 1986, as
amended ("ISOs"), options which do not qualify under such tax
provision ("NSOs"), "ROs" (i.e., the granting of additional
options, where an employee exercises an option with previously
owned stock, covering the number of shares tendered as part of
the exercise price), "RSAs" (i.e., stock awarded to an employee
that is subject to forfeiture in the event of a premature
termination of employment, failure of the Company to meet certain
performance objectives or other conditions), "PUs" (i.e., share-
denominated units credited to the employee's account for delivery
or cash-out at some future date based upon performance criteria
to be determined by the Compensation Committee) and "tax
withholding" (i.e., where the employee has the option of having
the Company withhold shares on exercise of an award to satisfy
tax withholding requirements).
The LTSIP also formally incorporates resolutions previously
adopted by the Board regarding one-time grants of NSOs covering
100,000 shares to each new non-employee director upon his taking
office.
The Compensation Committee develops administration
guidelines from time to time which define specific eligibility
criteria, the types of awards to be employed, and the value of
such awards. Specific terms of each award, including minimum
performance criteria which must be met to receive payment, are
provided in individual award agreements granted each award
recipient. Key employees and other individuals who the Committee
deems may provide a valuable contribution to the success of the
Company and its affiliates will be eligible to participate under
the Plan. Award agreements generally contain change-in-control
provisions.
Under the LTSIP, the Compensation Committee determines the
option price of all NSOs and ISOs; provided, however, in the case
of ISOs, the option price shall not be less than the fair market
value of the Common Stock on the date of grant. Such "fair
market value" is the average of the high and low prices of a
share of Common Stock traded on the relevant date, as reported on
the American Stock Exchange, or other national securities
exchange or an automated quotation system.
On July 1, 1994, the shareholders approved amendments to the
LTSIP to increase the number of shares reserved for issuance
under the Plan by an additional 1,500,000 shares to an aggregate
of 16.5 million and corresponding amendment to the Plan
increasing the limitation on the total number of shares subject
to options that can be granted to directors to 13,200,000 of
which 3,300,000 shares may be granted to non-employee directors.
At the same time, shareholders ratified the conditional grant of
options to acquire 3,076,500 shares, made by the Board of
Directors on March 30, 1994, to various executive officers and
directors. In 1994, additional options totaling 1,820,183 were
awarded to non-executive officers, employees and consultants of
the Company.
The closing price of the Company's Common Stock on the
American Stock Exchange on April 11, 1995 was $.8125 per share.
The following tables set forth, for those persons named in
the "Summary Compensation Table" information on stock options
granted during 1994 and all stock options outstanding as of
December 31, 1994.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term <F4>
(a) (b) (c) (d) (e) (f) (g)
% of Total
Options/
SARs
Granted to
Options/ Employees Exercise or
SARs in Fiscal Base Price Expiration
Name Granted(#) Year<F3> ($/Share) Date 0%($) 5%($) 10%($)
- ---------------------- ------------- -------- --------- -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Marsden W. Miller, Jr. 1,625,000<F1> 33% 1.25 03/29/04 203.125 1,608,311 3,764,143
2,400,000<F2> 1.25 03/31/99 300,000 1,211,729 2,314,683
John T. Chandler 470,000<F1> 13% 1.25 03/29/04 58,750 465,173 1,088,706
1,125,000<F2> 1.25 03/31/99 140,625 567,998 1,085,008
David A. Melman 470,000<F1> 13% 1.25 03/29/04 58,750 465,173 1,088,706
1,125,000<F2> 1.25 03/31/99 140,625 567,998 1,085,008
R. Thomas Fetters, Jr. 163,500<F1> 9% 1.25 03/29/04 20,438 161,821 378,731
940,500<F2> 1.25 03/31/99 117,925 474,846 907,066
Pamela G. Shanks -<F1> 4% - - - - -
521,400<F2> 1.25 03/31/99 65,175 263,248 502,865
__________________
<FN>
<F1>
Represents options granted under the Company's Long Term
Stock Incentive Plan during 1994.
<F2>
Represents the aggregate number of five-year stock purchase
warrants, received (a) upon surrender of an employment
agreement with the Company, determined based upon a formula
whereby each of the individuals were to be offered a
warrant, based upon the length of time of employment with
the Company, for a maximum of two shares of Common Stock for
each dollar of compensation remaining to be paid to such
individual under his or her agreement (based upon the
product of his or her highest monthly base salary and the
number of months remaining under his or her contract) at an
exercise price of $1.25 per share, and (b) for each dollar
of salary reduction for the fifteen-month period commencing
January 1, 1993 through March 31, 1994, determined based on
the same formula and at the same exercise price used in the
granting of warrants upon surrender of the employment
agreements. (See "Employment Agreements" below.)
<F3>
Represents the percentage of all options and warrants
granted to employees in the fiscal year.
<F4>
The options and warrants, while originally granted on March
31, 1994, became effective on July 1, 1994, with the
approval by shareholders of an increase in the authorized
capital of the Company. Accordingly, the market price of
the Common Stock on July 1, 1994 of $1.375 was used in
calculating the above potential realizable values. On March
31, 1994, the market price of the Common Stock was $1.125.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises In Last Fiscal Year
and Fiscal Year-End Option/SAR Values
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Shares Underlying Unexercised in-the-Money
Acquired Options/SARs Options/SARs
on Value Fiscal Year-End (#) Fiscal Year-End($)<F3>
Exercise Realized ------------------------- -------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- -------- -------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Marsden W. Miller, Jr. - - 3,941,666<F1> 1,083,334 - -
- - 2,400,000<F2> - - -
John T. Chandler - - 696,666<F1> 433,334 - -
- - 1,125,000<F2> - - -
David A. Melman - - 696,666<F1> 433,334 - -
- - 1,125,000<F2> - - -
R. Thomas Fetters, Jr. - - 448,500<F1> 109,000 - -
- - 940,500<F2> - - -
Pamela G. Shanks - - 360,000<F1> - - -
- - 521,400<F2> - - -
___________
<FN>
<F1>
Represents options exercisable under the Company's Long Term
Stock Incentive Plan at December 31, 1994.
<F2>
Represents the aggregate number of five-year stock purchase
warrants, received (a) upon surrender of an employment
agreement with the Company, determined based upon a formula
whereby each of the individuals were to be offered a
warrant, based upon the length of time of employment the
Company, for a maximum of two shares of Common Stock for
each dollar of compensation remaining to be paid to such
individual under his or her agreement (based upon the
product of his or her highest monthly base salary and the
number of months remaining under his or her contract), at an
exercise price of $1.25 per share, and (b) for each dollar
of salary reduction for the fifteen-month period commencing
January 1, 1993 through March 31, 1994, determined based on
the same formula and at the same exercise price used in the
granting of warrants upon surrender of the employment
agreements. (See "Employment Agreements" below.)
<F3>
At December 31, 1994, the Company's Common Stock price was
lower than the option exercise price.
</FN>
</TABLE>
These options were all awarded under the Company's Stock
Option Plans described above.
Section 401(k) Plan
In 1989, the Company adopted an employee benefit plan under
Section 401(k) of the Internal Revenue Code for the benefit of
employees meeting certain eligibility requirements. Employees
can contribute up to 10 percent of their compensation (as
defined) to the plan on a pre-tax basis, and the Company matches
up to 75 percent of deferred contributions allocable to each
participant subject to certain limitations. The Company intends
to make contributions aggregating approximately $150,000 for
years 1992, 1993 and 1994. The Company made no matching
contributions in 1992, 1993 or 1994. Administrative costs of the
plan have been paid by the Company. The Company has obtained a
favorable determination from the Internal Revenue Service
regarding the tax favored status of the 401(k) plan. For the year
ended December 31, 1994, Mr. Miller contributed $9,240 to his
account and Messrs. Chandler and Melman each contributed to their
account $7,500. Mr. Fetters and Ms. Shanks did not participate in
the 401(k) plan in 1994.
Management Incentive Plan
In 1989, the Company adopted the Management Incentive Plan
that provides for annual incentive compensation awards to all
eligible management employees based upon the successful
accomplishment of performance objectives as determined by the
Board of Directors at the beginning of each year. No bonuses were
awarded under this plan in 1992, 1993 or 1994 and the Plan was
formally canceled upon recommendation of the Compensation
Committee effective March 30, 1994.
Compensation of Directors and Other Arrangements
The Company reimburses its directors for their travel and
lodging expenses incurred in attending meetings of the Board of
Directors. Effective January 1, 1990, directors (other than
Messrs. Hummel and Palliser and those directors who are officers
of the Company) were paid an annual retainer of $18,000 plus a
fee of $1,000 for each Board meeting attended. In addition, such
directors were paid a fee of $1,000 for each committee meeting
attended.
In April 1994, the Company entered into separate consulting
agreements with two directors of the Company, upon their becoming
directors. Each of the agreements is terminable by each of the
parties thereto upon written notice and provides that the
individuals will render consulting services to the Company in
their respective areas of expertise. Pursuant to the terms of
the agreements, each of the directors will be entitled to receive
compensation at the rate of $50,000 per annum, which includes the
compensation they would otherwise be entitled to receive as
directors and for attending meetings of the Board. In addition,
pursuant to the terms of the LTSIP, each were granted stock
options for 100,000 shares of Common Stock exercisable at $1.25
per share.
During 1994 all regular employees were provided health
insurance, a portion of the premium for which is paid by the
Company, and life and disability insurance based upon a factor of
the employee's base salary.
Employment Agreements
Effective April 1, 1994, Messrs. M.W. Miller, Jr., J.T.
Chandler, D.A. Melman, D.M. Dobbs, R.T. Fetters, Jr., R.C. Cline,
P.L. Dragon, and Ms. P.G. Shanks, in their capacities as
executive and administrative officers of the Company and its
various subsidiaries agreed to surrender their employment
agreements in consideration of the issuance of five year warrants
to purchase Common Stock at an exercise price of $1.25 per share,
subject to customary anti-dilution adjustments. The number of
warrants issued to such individuals was determined based upon a
formula whereby each of the individuals was offered a warrant to
purchase, based upon the length of time of employment with the
Company, a maximum of two shares of Common Stock for each dollar
of compensation remaining to be paid to such individual under his
or her agreement (based upon the product of his or her highest
monthly base salary and the number of months remaining under his
or her agreement). Accordingly, Mr. Miller received warrants to
purchase 1,875,000 shares; Mr. Chandler, 1,025,000 shares; Mr.
Melman, 1,025,000 shares; Mr. Fetters, 875,000 shares; Mr. Dobbs,
575,000 shares; Mr. Dragon, 315,000 shares; Mr. Cline, 250,000
shares; and Ms. Shanks, 500,000 shares.
Mr. Roy F.C. Chase, General Manager of XCL-China retained
his employment agreement which extends for an initial period of
24 months expiring on May 1, 1995.
Report on Repricing of Options/SARs
During the fiscal year ended December 31, 1994, there were
no repricings of stock options awarded to any of the named
executive officers.
Compensation Committee Interlocks and Insider Participation
From September 23, 1993, through July 1, 1994, the following
nonexecutive directors of the Company, served as members of the
Compensation Committee of the Board of Directors: Messrs. F.
Hofheinz (Chairman), R.W. Brittain and A.D. Steel. Effective July
1, 1994, Messrs. Brittain and Steel resigned as directors of the
Company and members of its Compensation Committee. On that same
date, Messrs. M. Palliser (Chairman), A.W. Hummel, Jr., F.
Hofheinz and F.J. Reinhardt, Jr. were elected as members of the
Compensation Committee. None of the members of the Compensation
Committee were formerly, nor are any members currently, officers
or employees of the Company or any of its subsidiaries.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors
("Committee") establishes the general compensation policies of
the Company, establishes the compensation plans and specific
compensation levels for executive officers and certain other
managers and administers the Stock Option Plans and Long Term
Stock Incentive Plan. The Committee currently consists of four
independent, non-employee directors Messrs. M. Palliser, who
serves as Chairman, Fred Hofheinz, Arthur W. Hummel, Jr. and
Francis J. Reinhardt, Jr..
Compensation Policies and Philosophy
The Committee has determined that the compensation program
of the Company should not only be adequate to attract, motivate
and retain executives, key employees and other individuals who
the Company believes may make significant contribution to the
Company's results, but should also be linked to the value
delivered to shareholders as reflected in the price of the
Company's Common Stock.
The Committee believes that the cash compensation of
executive officers, as well as other key employees, should be
competitive with other similarly situated companies while, within
the Company, being fair and discriminating on the basis of
personal performance. In general, in establishing total cash
compensation for its executives, the Committee has taken into
account the median cash compensation of executives employed by
competitors including some of the companies reflected in the peer
group identified in the Performance Graph found on page 79, which
the Committee believes represent the Company's most direct
competition for executive talent. The Committee receives
recommendations from management as to executive compensation and,
in light of the Company's performance and the economic conditions
facing the Company, determines appropriate compensation levels
for recommendation to the Board of Directors. The Committee does
not assign relative weights to individual factors and criteria
used in determining executive compensation and does not use
quantifiable targets in determining compensation. For 1994, the
Company did not retain the services of a compensation consulting
firm.
In order to cause an overall reduction to general and
administrative expenses of the Company in fiscal 1992, the
Committee, upon consultation with executive management, requested
that salaries of essentially all officers and employees be
reduced as of January 1, 1992. As described in a Proxy Statement
dated August 20, 1993, the Committee, to compensate such
individuals for the salary reductions (amounting to $350,000 in
total for 1992), awarded effective January 1, 1992, to all
individuals participating in the salary reduction program a stock
option exercisable from January 1, 1993 to December 31, 1994, to
purchase at $1.50 per share, two shares of Common Stock for each
dollar of salary reduction for that year. During 1994, the
Committee extended the expiration of these options by two years
to December 31, 1996. The reduced salary levels were continued in
1993 and, effective October 1, 1993, members of senior management
and certain other employees took further salary reductions in
order to again reduce general and administrative expenses. To
compensate for such continued, and for those certain individuals,
further reductions, on March 30, 1994, the Committee granted to
employees without employment agreements who participated in the
salary reduction programs, a five-year stock option to purchase
at $1.25 per share, two shares of Common Stock for each dollar of
salary reduction for the fifteen month period commencing January
1, 1993 and terminating March 31, 1999 (total stock options were
issued to acquire 229,183 shares). For those officers and
employees to which the Company was obligated under employment
agreements, the Committee authorized the issuance of a five-year
warrant to purchase at $1.25 per share two shares of Common Stock
for each dollar of salary reduction for the fifteen month period
commencing January 1, 1993 and terminating March 31, 1999 (total
stock purchase warrants were issued to acquire 878,900 shares).
One employee, upon becoming an officer, received a minimal
increase in cash salary during 1993.
As previously discussed in the section entitled "Employment
Agreements," the Committee, at the meeting held on March 30,
1994, after consultation with executive management of the
Company, adopted a plan offering each officer holding an
employment agreement the option of surrendering such agreement
and relieving the Company of all obligations thereunder in return
for the grant of a five-year stock purchase warrant pursuant to
which such employee would be granted the right to acquire, based
upon the term of employment with the Company, at $1.25 per share,
a maximum of two shares of Common Stock for each dollar of
"contract value." "Contract value" is defined as the contractual
monthly base salary (at the highest level prior to the above-
referenced salary reductions) multiplied by the number of months
remaining on such employment agreement after April 1, 1994.
Effective April 1, 1994, Messrs. Miller, Chandler, Melman, Dobbs,
Fetters, Cline, Dragon and Ms. Shanks surrendered their
employment agreements in consideration for such warrants. The
Committee determined that it was in the best interests of the
Company to seek cancellation of the employment agreements in
order to remove a total future contractual financial burden of
approximately $3.4 million from the Company, and to provide the
Company with greater flexibility in personnel matters.
Awards of stock options are intended both to retain
executives, key employees and other individuals who the Company
believes may make significant contributions to the Company's
results and to motivate them to improve long-term stock market
performance. Options are granted at or above the prevailing
market price and will have value only if the price of the
Company's Common Stock increases. Generally, options have a term
of ten years and vest one-third six months after grant, one-third
one year after grant and the remaining one-third two years after
grant.
Effective January 1, 1994, Section 162(m) of the Internal
Revenue Code of 1986 (the "Code") generally denies a tax
deduction to any publicly-held corporation for compensation that
exceeds $1 million paid to certain senior executives in a taxable
year, subject to an exception for "performance-based
compensation" as defined in the Code and subject to certain
transition provisions. Gains on the exercise of non-qualified
stock options granted through December 31, 1994, will be tax
deductible under the transition rules. Restricted stock awards
by definition granted after February 17, 1993, are not
deductible. At present the Committee does not intend to recommend
amendment to the Stock Option Plans to meet the restrictive
requirements of the Code.
The Committee believes that annual incentive awards should
be commensurate with performance. It further believes that in
order to meet this objective it needs to have the ability to
exercise its judgment or discretion to evaluate performance
against qualitative criteria. It is the Committee's opinion that
the benefits to the Company of the use of a qualitative approach
to the compensation of senior executives such as the Chairman
outweigh the non-material loss of a portion of the deductions
associated with that compensation.
On March 14, 1995, the Committee reviewed the Company's 1994
financial goals (consisting of completing the registered Common
Stock offering, refinancing its bank debt, reducing total
indebtedness by more than $15 million and simplifying the equity
profile of the Company by eliminating two classes of preferred
stock) and 1994 non-financial goals (consisting of development of
the Zhao Dong Block by drilling two successful wells and
positioning the Company to expand its participation in the
Chinese energy industry resulting in the January 1995 agreement
in principle to participate in a lubricating oil plant joint
venture) and determined that the Company had met each objective
in all significant respects.
Company Performance and Chief Executive Officer Compensation
The Committee, in connection with determining the
appropriate compensation for Marsden W. Miller, Jr. as Chief
Executive Officer ("CEO"), took into account the financial
condition of the Company, including its liquidity requirements,
and the Company's performance in 1994 in meeting its financial
and non-financial goals. It determined that the CEO had been
instrumental in causing the Company to meet the goals established
early in 1994. Taking into consideration the current cash
position and near-term requirements, the Committee determined
that cash was unavailable for either salary increase or bonus.
Therefore, the Committee authorized a two-year extension of the
Chairman's stock options scheduled to expire in July 1997 with
the exercise price increased from $1.07 to $1.25 for the
extension period.
Compensation of Other Executive Officers
The Committee, in consultation with the CEO, applied the
information and other factors outlined above in reviewing and
approving the compensation of the Company's other executive
officers.
March 14, 1995 COMPENSATION COMMITTEE
Michael Palliser, Chairman
Arthur W. Hummel
Fred Hofheinz
Francis J. Reinhardt, Jr.
Shareholder Return Performance Presentation
Set forth below is a line graph comparing the percentage
change in the cumulative total shareholder return on the
Company's Common Stock against the total return of the NASDAQ
Composite Index (for the year 1990) and the AMEX Market Value
Index for the years 1991 through 1994, with a peer group selected
by the Company for the past five fiscal years. The peer group
consists of the same independent oil and gas exploration and
production companies used in last year's comparison, with the
exception of Alta Energy Corporation which was acquired by Devon
Energy Corporation and Geodyne Resources, Inc. which was merged
with Samson Investment Company, namely: American Exploration
Company; Bellwether Exploration Company; Brock Exploration
Corporation; Tom Brown, Inc.; Caspen Oil, Inc.; Cobb Resources
Corporation; Coda Energy, Inc.; Comstock Resources, Inc.; Crystal
Oil Company; DeKalb Energy Company; Edisto Resources Company;
Energen Corporation; First Mississippi Corporation; Forest Oil
Corporation; Global Natural Resources, Inc.; Hallador Pete
Company; Hondo Oil & Gas Company; Kelley Oil & Gas Partners;
Magellan Petroleum Corporation; Maynard Oil Company; McFarland
Energy, Inc.; MSR Exploration Limited; Numac Energy, Inc.;
Pacific Enterprises; Patrick Petroleum Company; Penn Virginia
Corporation; Plains Resources, Inc.; Presidio Oil; Wainoco Oil
Corporation; Wichita River Oil; Wiser Oil Company; and Wolverine
Exploration Company. The relevant information with respect to
the peer group was furnished by Standard & Poors Compustat
Service. The graph assumes that the value of the investment in
the Company's Common Stock and the peer group stocks were $100 on
January 1, 1990 and that all dividends were reinvested.
1990 Return 1991 Return 1992 Return 1993 Return 1994 Return
----------- ----------- ----------- ----------- -----------
XCL 39.39 13.64 27.27 13.64 19.70
Peer Group 76.60 60.77 48.85 59.53 59.34
NASDAQ/AMEX 82.20 105.38 106.50 127.29 115.75
Certain Relationships and Related Transactions
Guinness Mahon Energy Services Limited ("GMES"), of which
Mr. R.W. Brittain, a former director of the Company, is Managing
Director was paid $16,042 in 1994 for financial consulting
services provided to the Company. An affiliate of GMES, Guinness
Mahon & Co. Limited ("GM&Co"), acted as an escrow agent in the
Company's registered public offering completed in January 1994
and received $13,475 in payment therefor. GM&Co. owns $2.25
million in principal amount of the Company's Secured Subordinated
Notes due April 5, 2000 and in 1994 received 292,335 shares of
Common Stock in respect of interest due thereon. In respect of
the Net Revenue Interest acquired as a result of the Subordinated
Debt GM&Co. was paid $733. Another affiliate of GMES, Henderson
Crosthwaite Institutional Brokers Limited ("HCIB") has, from time
to time, acted on behalf of the Company as a placing agent for
sales of the Company's securities in the United Kingdom and
provided financial consulting services for the Company. HCIB
earned fees totaling $1,169,925 in such capacities. Also in
1994, HCIB was issued 417,566 shares of Common Stock in lieu of a
cash payment for fees and expenses for services rendered and to
be rendered in connection with an introduction to the Hong Kong
Stock Exchange and other corporate advisory services related to
the Company's activities in the Far East. All such arrangements
during Mr. Brittain's tenure were approved by the Board of
Directors of the Company with Mr. Brittain abstaining.
Mr. Francis J. Reinhardt, Jr., a director of the Company, is
a holder of net profits interests on certain properties of the
Company received in connection with his purchase of one Lease
Note Unit. During 1994 Mr. Reinhardt received cash payments
totaling $690 as a consequence of such net profit interests. Mr.
Reinhardt further received 77,231 shares of Common Stock for the
principal and accrued interest ($91,712) upon tender of his Lease
Note to the Company.
During October 1992, the Company executed an assignment
agreement with Independent Investment Company Plc, an affiliate
of Ivory & Sime PLC, an investment management firm in which Mr.
Andrew D. Steel, a former director of the Company, is employed.
The agreement covers a 72,000-acre ranch in south Texas whereby
the Company obtained certain property rights and other interests,
the consideration for the acquisition to be satisfied by issuance
of shares of Common Stock so as to fulfill a dollar denominated
obligation of $3.7 million. Mr. Steel disclaims any beneficial
interest in Independent Investment Company Plc. In connection
with an extension of terms for repayment in April 1994, the
Company granted to Ivory & Sime Enterprise Capital PLC, an
affiliate of the above-mentioned entities, a two-year warrant to
acquire 375,000 shares of Common Stock. During October 1994, the
Company issued 2.75 million shares of Common Stock in
satisfaction of this obligation.
During 1994, the Company was sued in an action entitled
Kathy M. McIlhenny vs. The Exploration Company of Louisiana, Inc.
(15th Judicial District Court, Parish of Lafayette, Louisiana,
Docket No. 941845). Kathy McIlhenny, wife of an officer and
director of the Company, has asserted a claim in the aggregate
amount of approximately $.5 million in respect of compensation
for certain services alleged to have been performed on behalf of
the Company and under an alleged verbal employment agreement and,
by amendment, asserted a claim for payments arising from
purported rights to mineral interests. The Company believes that
such claim is without merit and rejects the existence of any such
alleged agreement.
As a matter of policy the Company approves all transactions
involving insiders through the majority vote of disinterested
directors.
PROPOSAL 2 - APPROVAL OF
AMENDMENT TO ARTICLE FOURTH OF THE
CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF
AUTHORIZED SHARES OF THE COMPANY
On March 14, 1995, the Company's Board of Directors
unanimously adopted a resolution recommending that the Company's
shareholders adopt an amendment to the Company's Certificate of
Incorporation to increase the authorized Common Stock of the
Company from 325,000,000 shares to 350,000,000 shares, par value
$.01 per share.
The proposed amendment will be submitted to the shareholders
for approval at the Meeting in substantially the following form:
"That Article FOURTH of the Certificate of
Incorporation of the Corporation be and the same hereby
is amended to provide that the total number of shares
and the par value, if any, of each class of stock which
the Corporation is authorized to issue shall be
1,200,000 shares of Preferred Stock, par value $1.00
per share, and 350,000,000 shares of Common Stock, par
value of $0.01 per share, and that the Board if
Directors be and hereby is authorized to issue all or
any part of the unissued shares of Preferred Stock and
Common Stock thus authorized without further action by
the stockholders, unless such action is required by law
or by the rules of any stock exchange on which the
Corporation's securities are then listed."
As of March 30, 1995, there were reserved an aggregate of
(i) 12,465,173 shares of Common Stock subject to outstanding
options; (ii) 12,584,124 shares issuable upon conversion of the
Company's outstanding Series A Preferred Stock; (iii) 23,075,979
shares issuable upon exercise of the Company's outstanding
warrants; (iv) 5,300,000 shares issuable upon redemption of the
Company's outstanding Series B Preferred Stock; and (v) 6,598,582
shares issuable in connection with contractual obligations.
The proposed amendment would not change the number of
authorized shares of Preferred Stock of the Company, which would
remain at 1,200,000 shares, nor affect the right of the Board of
Directors to issue Preferred Stock in one or more series having
such designations, preferences, and relative rights,
qualifications and limitations as it may fix by resolution at the
time of issuance. The shareholders have previously authorized the
Board to issue all of the presently authorized but unissued
shares of Common Stock and Preferred Stock of the Corporation,
and it is proposed that such authorization be extended to include
the additional shares of Common Stock proposed to be authorized.
The Board of Directors believes that it would be desirable
to have additional shares of Common Stock that would be
authorized by the proposed amendment available for issuance in
connection with the payment of dividends on the Series B
Preferred Stock and interest due under the Company's Secured
Subordinated Notes in kind with shares of Common Stock, possible
future stock dividends or splits, financing transactions,
acquisitions of other companies or business properties, employee
benefit plans and other proper corporate purposes. Having such
additional authorized shares available will give the Company
greater flexibility by permitting such shares to be issued
without the expense or delay of a special meeting of the
shareholders. Such delay might deprive the Company of the
flexibility the Board views as important in effectively using the
Company's shares. These additional shares of Common Stock will be
available without further action by the shareholders, unless such
action is required by applicable law or the rules of the American
Stock Exchange or The International Stock Exchange of the United
Kingdom and the Republic of Ireland Ltd. (the "London Stock
Exchange"). Such rules require stockholder approval as a
prerequisite to the listing of shares in several instances,
including for certain stock option plans, and under the rules of
the American Stock Exchange, for acquisition transactions where
the present or potential issuance of shares could result in an
increase in the number of shares of Common Stock outstanding of
20 percent or more.
The Board currently has no agreements or arrangements for
the future issuance of additional shares of Common Stock, other
than the issuance of shares pursuant to the exercise of employee
stock options or other stock-related employee benefit plans, upon
the conversion or exercise of outstanding convertible and
redeemable securities, options and warrants or in connection with
certain contractual obligations.
The additional shares of Common Stock for which
authorization is sought would become part of the existing class
of Common Stock and, when issued, would have the same rights and
privileges as the shares of Common Stock presently outstanding.
The holders of Common Stock do not have preemptive rights to
subscribe for any of the Company's securities and will not have
any such rights to subscribe for the additional Common Stock
proposed to be authorized. If the proposed amendment is adopted
by the shareholders, each certificate representing shares of
Common Stock, par value $.01 per share, issued and outstanding or
held in the treasury of the Company will represent the same
number of shares of Common Stock having a par value of $0.01 per
share. Certificates representing outstanding shares of Common
Stock should be retained by the holder and should not be
forwarded to the Company or its transfer agent.
The increase in the number of authorized shares of Common
Stock is not designed to deter or prevent a change in control of
the Company. However, under certain circumstances the issuance of
additional shares of Common Stock could be used to make a change
in control more difficult if the Board caused such shares to be
issued to holders who might side with the Board in opposing a
takeover bid that the Board determines is not in the best
interests of the Company and its stockholders. In addition, the
availability of the additional shares might theoretically
discourage an attempt by another person or entity to acquire
control of the Company through the acquisition of a substantial
number of shares of Common Stock, since the issuance of such
shares could dilute the stock ownership of such person or entity.
Pursuant to the rules of the London Stock Exchange, no issue of
shares of Common Stock will be made which would effectively alter
the control of the Company without prior approval of the
shareholders in general meeting.
Wholly apart from this proposed amendment, the Board could
issue a series of Preferred Stock with rights and preferences
that might similarly impede or discourage proposed mergers,
tender offers, or attempts to gain control of the Company. In
addition, the Certificate of Incorporation contains a so-called
"fair price" provision and provides for a classified Board each
of which could be viewed as discouraging some attempts to obtain
control of the Company. Under the "fair price" provision, an
affirmative vote of 67 percent or more of the Company's voting
stock is required for business combinations between the Company
and an "interested stockholder" unless the business combination
is approved by the Board of Directors or a minimum price is
received by all stockholders and certain other conditions are
met.
The Board has no present intention of issuing additional
shares of Common or Preferred Stock for any of the purposes
described in the two immediately preceding paragraphs.
The Board of Directors recommends that shareholders vote FOR
Proposal 2. The affirmative vote of the holders of a majority of
the shares of Common and Series B Preferred Stock outstanding and
entitled to vote at the Meeting, voting together as a single
class, is required to approve this proposal. Consequently, any
shares not voted (whether by abstention or broker non-votes) have
the same effect as votes against Proposal 2. Unless otherwise
instructed proxies will be voted "FOR" approval of the proposal.
INDEPENDENT AUDITORS
The Board of Directors of the Company, upon the
recommendation of the Audit Committee, appointed the firm of
Coopers & Lybrand L.L.P. to serve as independent accountants of
the Company for the fiscal year ending December 31, 1995.
Coopers & Lybrand has served as independent accountants of the
Company since its inception and is considered by management of
the Company to be well qualified. The Company has been advised
by that firm that neither it nor any member thereof has any
financial interest, direct or indirect, in the Company or any of
its subsidiaries in any capacity.
One or more representatives of Coopers & Lybrand will be
present at the Meeting, will have an opportunity to make a
statement if he or she desires to do so and will be available to
respond to appropriate questions.
SHAREHOLDERS' PROPOSALS FOR
1994 ANNUAL MEETING OF SHAREHOLDERS
Pursuant to Rule 14a-8(a)(3)(i) promulgated by the U.S.
Securities and Exchange Commission, proposals of shareholders
intended to be presented at the 1996 annual meeting of
shareholders must be received by the Company a reasonable time
prior to the solicitation of proxies for such meeting to be
eligible for inclusion in the Company's proxy statement and proxy
relating to that meeting. Assuming the 1996 annual meeting of
shareholders is held on May 21, 1996, as provided in the Bylaws,
proposals of shareholders intended to be presented at that
meeting should be received by the Company prior to January 14,
1996.
OTHER BUSINESS
The Board of Directors of the Company knows of no other
matters to come before the Meeting, other than those set forth
herein and in the accompanying Notice of Annual Meeting of
Shareholders. However, if any other matters should properly come
before the Meeting, it is the intention of the persons named in
the accompanying proxies to vote such proxies as in their
discretion they may deem advisable.
ANNUAL REPORT
The Annual Report of the Company on Form 10-K for the fiscal
year ended December 31, 1994, is being mailed to shareholders on
or about May 15, 1995. The Annual Report does not form any part
of the material for solicitation of proxies.
ADDITIONAL INFORMATION
The form of proxy and Proxy Statement have been approved by
the Board of Directors and are being mailed and delivered to
shareholders by its authority. In accordance with the rules of
the London Stock Exchange, copies of all directors' service
agreements are available for inspection at the offices of
Barclays Registrars Limited, Bourne House, 34 Beckenham Road,
Beckenham, Kent BR3 4TU, England, during normal business hours on
weekdays (except Saturdays, Sundays and public holidays) from the
date hereof until the date of the Meeting and at the place of the
Meeting from 9:00 AM until conclusion of the Meeting. Copies
will also be available for inspection at the Company's offices at
110 Rue Jean Lafitte, Lafayette, Louisiana 70508, at such times
during such period.
Yours sincerely,
MARSDEN W. MILLER, JR.
Chairman and Chief Executive
Officer
May __, 1995
<PAGE>
XCL LTD.
(a Delaware corporation)
COMMON STOCK PROXY
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 14, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John T. Chandler and David
A. Melman, and either of them, attorneys and proxies, with full
power of substitution, and authorizes them to vote all shares of
Common Stock of XCL Ltd. (the "Company") held of record by the
undersigned on April 28, 1995 at the Annual Meeting of
Shareholders to be held in the Stuyvesant Room of the New York
Marriott East-Side Hotel, located at 525 Lexington Avenue, New
York, New York on Wednesday, June 14, 1995 at 10:00 AM, Eastern
Daylight Savings Time, and at any adjournments thereof, on the
matters set forth on the reverse side.
THE MATTERS TO BE VOTED UPON, THE INSTRUCTIONS AND
A SPACE FOR YOUR VOTE AND SIGNATURE
ARE SET FORTH ON THE REVERSE SIDE.
PLEASE VOTE, SIGN AND RETURN PROMPTLY.
If this proxy is properly executed, the shares of Common Stock
represented thereby will be voted for items 1 and 2 in accordance
with the instructions on this proxy. If no instructions are
given, such shares will be voted FOR the election of all nominees
for director, FOR approval of the amendment to the Company's
Certificate of Incorporation and in the discretion of the proxies
upon any other matter which may properly come before the meeting.
Proposal 1. The election of three (3) directors to be
designated as Class II directors to serve a three year
term until the 1998 Annual Meeting of Shareholders, to
wit: Sir Marsden W. Miller, Jr., Edmund McIlhenny, Jr.
and Francis J. Reinhardt, Jr.
[ ] FOR ALL NOMINEES
[ ] WITHHOLD FOR ALL NOMINEES
TO WITHHOLD VOTE on any nominee write the nominee's
name in the space below
-----------------------------------------------------
Proposal 2. The approval of the amendment to Article FOURTH
of the Company's Certificate of Incorporation to
increase the number of authorized shares of Common
Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3. In their discretion, to vote upon such other
business as may properly come before the meeting.
Receipt is acknowledged of the Proxy Statement dated May __,
1995.
THIS PROXY MUST BE SIGNED AS NAME APPEARS HEREON. Executors,
administrators, trustees, etc., should give full title as such.
If the signer is a corporation, please sign full corporate name
by a duly authorized officer.
___________________________________
DATE
___________________________________
SIGNATURE
___________________________________
SIGNATURE
I plan to attend the Annual Meeting of Shareholders:
Yes [ ] No [ ]
<PAGE>
XCL LTD.
(a Delaware corporation)
PREFERRED STOCK PROXY
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 14, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John T. Chandler and David
A. Melman, and either of them, attorneys and proxies, with full
power of substitution, and authorizes them to vote all shares of
Series B, Cumulative Preferred Stock of XCL Ltd. (the "Company")
held of record by the undersigned on April 28, 1995 at the Annual
Meeting of Shareholders to be held in the Stuyvesant Room of the
New York Marriott East-Side Hotel, located at 525 Lexington
Avenue, New York, New York on Wednesday, June 14, 1995 at 10:00
a.m., Eastern Daylight Savings Time, and at any adjournments
thereof, on the matters set forth on the reverse side.
THE MATTERS TO BE VOTED UPON, THE INSTRUCTIONS AND
A SPACE FOR YOUR VOTE AND SIGNATURE
ARE SET FORTH ON THE REVERSE SIDE.
PLEASE VOTE, SIGN AND RETURN PROMPTLY.
If this proxy is properly executed, the shares of Series B,
Cumulative Preferred Stock represented thereby will be voted for
items 1 and 2 in accordance with the instructions on this proxy.
If no instructions are given, such shares will be voted FOR the
election of all nominees for director, FOR approval of the
amendment to the Company's Certificate of Incorporation and in
the discretion of the proxies upon any other matter which may
properly come before the meeting.
Proposal 1. The election of three (3) directors to be
designated as Class I directors to serve a three year
term until the 1998 Annual Meeting of Shareholders, to
wit: Sir Marsden W. Miller, Jr., Edmund McIlhenny, Jr.
and Francis J. Reinhardt, Jr.
[ ] FOR ALL NOMINEES
[ ] WITHHOLD FOR ALL NOMINEES
TO WITHHOLD VOTE on any nominee write the nominee's
name in the space below
______________________________________________________
Proposal 2. The approval of the amendment to Article FOURTH
of the Company's Certificate of Incorporation to
increase the number of authorized shares of Common
Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3. In their discretion, to vote upon such other
business as may properly come before the meeting.
Receipt is acknowledged of the Proxy Statement dated May __,
1995.
THIS PROXY MUST BE SIGNED AS NAME APPEARS HEREON. Executors,
administrators, trustees, etc., should give full title as such.
If the signer is a corporation, please sign full corporate name
by a duly authorized officer.
___________________________________
DATE
___________________________________
SIGNATURE
___________________________________
SIGNATURE
I plan to attend the Annual Meeting of Shareholders:
Yes [ ] No [ ]
