SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of
the Commission Only
(as permitted by
Rule 14a6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
XCL LTD.
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or
the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
PRELIMINARY COPY
XCL LTD.
DEAR SHAREHOLDER:
You are cordially invited to attend the Special
Meeting in Lieu of Annual Meeting of Shareholders of XCL Ltd.
to be held at 10:00 a.m., Central Standard Time, on
Wednesday, December 17, 1997, in the Acadia Room of the Hotel
Acadiana, located at 1801 West Pinhook Road, Lafayette,
Louisiana 70508.
The attached materials include the Notice of
Special Meeting in Lieu 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, a proposal to amend and restate
the Company's Certificate of Incorporation to effect a one-
for-[] reverse split of the Common Stock of the Company,
approval of a proposal to amend and restate the Long Term
Stock Incentive Plan, and other relevant matters.
Management will report on the Company's activities
and future plans and prospects of the Company 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
[November 17], 1997
<PAGE>
XCL LTD.
(a Delaware corporation)
110 Rue Jean Lafitte, 2nd Floor
Lafayette, Louisiana 70508
NOTICE OF SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On December 17, 1997
TO OUR SHAREHOLDERS:
The Special Meeting in Lieu of Annual Meeting of
Shareholders (the "Meeting") of XCL Ltd. (the "Company")
will be held in the Acadia Room of the Hotel Acadiana, located
at 1801 West Pinhook Road, Lafayette, Louisiana, on December
17, 1997 at 10:00 a.m., Central Standard Time, to consider
and take action on the following matters:
1. The election of three Class I directors for
three-year terms, each to hold office until the 2000
Annual Meeting of Shareholders or until a successor
shall have been elected and shall have qualified;
2. To approve the amendment and restatement of the
Company's Certificate of Incorporation to effect a
reverse split of the Company's issued and
outstanding Common Stock on the basis that each []
shares then outstanding will be converted into one
share of Common Stock, par value $.01 per share,
with a payment in cash in lieu of fractional shares
to stockholders who presently own fewer than []
shares and certain other nonsubstantive ministerial
changes.
3. To approve the amendment and restatement of the
Company's Long Term Stock Incentive Plan, effective
as of June 1, 1997, and certain grants made
thereunder.
4. To approve the award of an Appreciation Option
to M.W. Miller, Jr.
5. 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
Monday, November 10, 1997 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,
LISHA C. FALK
Secretary
[November 17], 1997
<PAGE>
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 November 10, 1997, 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.
XCL LTD.
(Incorporated with limited liability in the United States of
America under the laws of the State of Delaware)
[November 17], 1997
Directors: Principal Executive Office:
M.W. Miller, Jr.* (Chairman of the Board 110 Rue Jean Lafitte, 2nd Floor
and Chief Executive Officer) Lafayette, Louisiana 70508
J.T. Chandler* USA
David A. Melman*
R. Thomas Fetters, Jr.*
F. Hofheinz*
A.W. Hummel, Jr.*
M. Palliser
F.J. Reinhardt, Jr.*
* U.S. Citizen
PROXY STATEMENT
FOR
SPECIAL MEETING IN LIEU OF 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
Special Meeting in Lieu of Annual Meeting of Shareholders (the
"Meeting") to be held in the Acadia Room of the Hotel
Acadiana, located at 1801 West Pinhook Road, Lafayette,
Louisiana, on Wednesday, December 17, 1997, at 10:00 a.m.,
Central Standard 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 [November 17], 1997.
The Board of Directors of the Company has fixed the close of
business on November 10, 1997 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
November 10, 1997, there were outstanding: [] shares of common
stock, $.01 par value ("Common Stock"), the holders of which
will be entitled to cast one vote per share on each matter
submitted to a vote at the Meeting; [] shares of Amended
Series A, Cumulative Convertible Preferred Stock, $1.00 par value
("Amended Series A Preferred Stock"), the holders of which will be
entitled to cast one hundred seventy (170) votes per share on each
matter submitted to a vote at the Meeting; [] shares of Series B,
Cumulative Preferred Stock, $1.00 par value ("Series B Preferred Stock"),
the holders of which will be entitled to cast fifty (50) votes
per share on each matter submitted to a vote at the Meeting;
and [] shares of Series F, Cumulative Convertible Preferred
Stock, $1.00 par value ("Series F Preferred Stock"), the holders
of which are not entitled to 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" Proposals 1, 2, 3 and 4 set
forth in the accompanying forms of proxy.
Shareholders have 3 choices as to their vote on
Proposals 2, 3 and 4 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 and broker non-votes (matters of a nonroutine
nature as to which brokers holding shares in street name
have received no instructions from their clients and,
accordingly, do not vote) on Proposal 2 will have the effect
of a negative vote since the amendment of the Certificate
of Incorporation requires the affirmative vote of holders of a
majority of the outstanding shares of voting capital stock
entitled to vote on the matter. Abstentions will be
counted in the tabulations of votes and broker non-votes will
not be counted for the purposes of determining whether
Proposals 3 and 4 have been approved since these proposals
require the approval of a majority of the votes entitled to
be cast by the shares of voting capital stock present at the
Meeting, in person or by proxy, and entitled to vote on the
matters. Abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum
for the transaction of business. The Board of Directors hopes
that shareholders will exercise their right to vote rather than abstaining
from voting. It is necessary that proxies be 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
ChaseMellon Shareholder Services to solicit proxies on behalf
of the Company. Services to be performed under the
engagement 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 holders. The fee for this solicitation
service is estimated to be approximately $9,500, depending
upon the services performed by the soliciting agent 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 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
November [], 1997. As of that date there were [] shares of
Common Stock issued and outstanding. The mailing address for all
such individuals is XCL Ltd., 110 Rue Jean Lafitte, 2nd Floor,
Lafayette, Louisiana 70508.
Common Stock
Number Percent
Name of Beneficial Owner of Shares of Class (5)
------------------------ --------- ------------
Marsden W. Miller, Jr......... [] (1)(2)(3) []
John T. Chandler.............. [] (1)(2)(3) []
David A. Melman............... [] (2)(3) []
Benjamin B. Blanchet.......... [] (2)(3) []
Fred Hofheinz................. [] (2) []
Arthur W. Hummel, Jr.......... [] (2) []
Sir Michael Palliser [] (2) []
Francis J. Reinhardt, Jr...... [] (2)(4) []
R. Thomas Fetters, Jr......... [] (2) []
All directors and officers
of the Company as a group ([] persons) [](2)(3) []
___________
(1) 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.
(2) Includes shares of Common Stock which may be
acquired pursuant to options which are exercisable within
60 days
(3) Includes shares of Common Stock which may be
acquired pursuant to stock purchase warrants exercisable
within 60 days.
(4) 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.
(5) Calculated without taking into account the results of
the Reverse Stock Split (as hereinafter defined). See
"Proposal 2 - To Amend and Restate the Company's
Certificate of Incorporation to Effect A Reverse Stock
Split."
Security Ownership of Certain Beneficial Owners
The following table sets forth as of November [], 1997,
the individuals or entities known to the Company to own
more than 5 percent of the Company's outstanding shares of
voting securities. As of that date there were [] shares of
Common Stock; [and] [] shares of Amended Series A
Preferred Stock and [] shares of Series B Preferred
Stock issued and outstanding. Except as otherwise
indicated, all shares are owned both of record and
beneficially and the Percent of Class figure does not
reflect the results of the Reverse Stock Split.
<TABLE>
Amended Series A Series B
Common Stock (1) Preferred Stock (2) Preferred Stock (3)
--------------------- -------------------- --------------------
Name and Address Number of Percent Number of Percent Number of Percent
of Beneficial Owner Shares of Class Shares of Class Shares of Class
------------------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
China Investment & [] [] [] [] [] []
Development
Co., Ltd.
16th Floor, No. 563
Chung Hsiao E.
Road, Sec. 4
Taipei, Taiwan
Cumberland [] [] [] [] - -
Associates
1114 Avenue of the
Americas
New York, New York
10036
Kayne Anderson [] [] [] [] - -
Investment
Management, Inc.
1800 Avenue of the
Stars, 2nd Floor
Los Angeles,
California 90026
Mitch Leigh [] [] [] [] - -
29 West 57th Street
New York, New York
10019
Phildrew Nominees [] [] [] [] - -
Limited
Triton Court
14 Finsbury Square
London EC2A 1PD
United Kingdom
T. Rowe Price & [] [] [] [] - -
Associates, Inc.
100 East Pratt
Street, 9th Floor
Baltimore, Maryland
21202
</TABLE>
_______________
(1) This table includes shares of Common Stock issuable upon
conversion of the shares of Amended Series A Preferred
Stock, and Series F Preferred Stock. Each share of Amended
Series A Preferred Stock is convertible into approximately 170
shares of Common Stock. Each share of Series F Preferred
Stock is convertible into approximately 400 shares of Common Stock.
The Series F Preferred Stock is nonvoting except in certain limited
circumstances. The holders of Amended Series A Preferred Stock
are entitled to cast the same number of votes as the shares
of Common Stock then issuable upon conversion thereof
(currently 170 votes) on any matter subject to the vote of
Common Stockholders.
(2) Each share of Series B Preferred Stock is entitled to 50 votes per share.
(3) Includes 3,325,000 shares which are issuable upon
exercise of outstanding Class B Warrants and 14,940,244
shares reserved for redemption of the Series B Preferred
Stock, which may be issued to or sold on behalf of the
holder.
(4) Includes [] shares issuable upon conversion of Amended
Series A Preferred Stock.
(5) Includes [] shares issuable upon conversion of Amended
Series A Preferred Stock, 6,602,000 shares issuable upon
conversion of Series E Preferred Stock, and [] shares
issuable upon the exercise of outstanding stock purchase
warrants.
(6) Includes 7,379,200 shares issuable upon conversion
of Series F Preferred Stock; 3,000,000 shares issuable
upon the exercise of outstanding stock purchase
warrants; 692,400 shares issuable upon conversion
of Series F Preferred Stock owned by Mr. Leigh's wife;
1,028,026 shares held in custodial and trust accounts
for Mr. Leigh's minor children; and 432,526 shares
issuable upon exercise of outstanding stock purchase
warrants held in trust for Mr. Leigh's minor children.
Mr. Leigh disclaims beneficial ownership of all shares
held by his wife and minor children.
(7) Represents shares issuable upon conversion of
Amended Series A Preferred Stock.
(8) Includes [] shares issuable upon conversion of
Amended Series A Preferred Stock.
PROPOSAL 1 - ELECTION OF DIRECTORS
Board of Directors and Committees
Under the Certificate of Incorporation, as amended,
and the Amended and Restated 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 I directors, whose terms of office expire at
the Meeting are Messrs. David A. Melman, Sir Michael Palliser and
Arthur W. Hummel, Jr., the current Class II directors are
Messrs. Marsden W. Miller, Jr., R. Thomas Fetters, Jr. and
Francis J. Reinhardt, Jr. and the current Class III directors
are Messrs. John T. Chandler and Fred Hofheinz. Mr. Melman,
a Class I director, has elected for personal reasons not to
stand for reelection as a Class I director.
The Board held five meetings in 1996. The average
attendance by directors at these meetings was 97 percent, and
all directors attended 98 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 and 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. On June 5, 1997, Mr. Fetters was
appointed to fill the vacancy created by the resignation of
Edmund McIlhenny, Jr. as a Class II director.
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 upon exercise of the Class B Warrants. CIDC
has commenced a legal action against the Company in respect
of its shares of Series B Preferred Stock as described in
greater detail in "Certain Relationships and Related
Transactions" below. The Company is presently in negotiations
with CIDC to settle the action.
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
1996 members included Messrs. Miller, Chandler and Melman. The
Committee met twice during 1996 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. Palliser, Hofheinz, Hummel and Reinhardt. The
Compensation Committee met once in 1996. 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, Palliser and Reinhardt. The
Audit Committee met once in 1996. 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. Arthur W. Hummel, Jr., Michael Palliser and
Benjamin B. Blanchet, have been nominated by the Board for
election as Class I directors, to hold office for three-year
terms expiring at the 2000 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 I
directors.
Biographical Information
Set forth below is a brief biographical summary of the
nominees for election as directors. Messrs. Arthur W. Hummel,
Jr. and Michael Palliser presently serve as a director.
ARTHUR W. HUMMEL, JR., seventy-seven years old,
a director since April 1994, is the former U.S. Ambassador to
the People's Republic of China during the period 1981 to 1985.
He 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 for approximately two years,
he escaped and fought for approximately three years 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 19611963; Deputy Chief of Mission of
the American Embassy in Taiwan, 1965-1968; Ambassador to
Burma, 1968-1970; Ambassador to Ethiopia, 1975-1976; and
Ambassador to Pakistan, 19771981; and Ambassador to the
People's Republic of China. He was Assistant Secretary of
State for East Asia 1976-1977. He has received numerous
professional awards from within and outside the Government.
SIR MICHAEL PALLISER, seventy-five years old, a
director since April 1994, was Chairman of Samuel Montagu & Co.
Limited from 1984 to 1993, the London 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 Vice Chairman of Samuel
Montagu from 1993 to 1996. Mr. Palliser is a former Director
of Shell Oil Company, BAT Industries, Bookers, Eagle Star, and
United Biscuits.
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, 19661969,
Minister in the British Embassy in Paris, 19691971, 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. Mr. Palliser, until December 31, 1995 was President of
the China-Britain Trade Group and a director of the UKJapan
2000 Group, and until February 29, 1996, was Deputy Chairman
of British Invisibles. Mr. Palliser currently is 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.
Sir Michael Palliser was educated at Wellington
College and Merton College, Oxford. He saw wartime service
in the British Army with the Coldstream Guards.
BENJAMIN B. BLANCHET, forty-four years old, is
Executive Vice President of the Company. Prior to joining the
Company in August 1997, and since 1983, he was a partner in
the law firm of Gordon, Arata, McCollam & Duplantis, L.L.P.
in its Lafayette, Louisiana office. During that time, he
practiced in the areas of commercial litigation, corporate
mergers and acquisitions, oil and gas transactions, secured
financings, securities, tax and international law matters.
Since 1985, he has provided substantial legal services to the
Company, and has been the Company's lead attorney in China.
During that period, Mr. Blanchet's activities in the
Company's China operations have become more oriented to
management responsibilities than legal ones. He served on the
Management Committee of Gordon, Arata, McCollam & Duplantis,
L.L.P. from 1991 to 1997 and as the Managing Partner of the
firm for four years from 1992 through 1995. He practiced law
with the firm of Monroe & Lemann in New Orleans from 1978
through 1983. He is a member of the Louisiana Bar and
admitted to practice before the United States Tax Court. Mr.
Blanchet holds a B.A. degree, with highest distinction, from
the University of Southwestern Louisiana and a J.D., cum laude,
from Harvard Law School.
The following pages contain biographical information
concerning the directors whose terms of office will expire
after the Meeting.
MARSDEN W. MILLER, JR., fifty-six years old,
Chairman, has been Chief Executive Officer and a director
since the Company's incorporation in 1981. He has engaged
in the independent domestic and international oil business
since 1964 on an individual basis, as a stockholder and
officer in several companies and as a practicing attorney. In
addition to the U.S. and China, he has been involved in various
aspects of the oil business in Southeast Asia, Africa,
Europe, South America, several former Soviet Republics and
Canada. Mr. Miller graduated from Louisiana State University in 1964.
JOHN T. CHANDLER, sixty-five years old, is President
of the Company and Chairman and Chief Executive Officer of
XCLChina Ltd., a wholly owned subsidiary of the Company
responsible for the Company's operations in the PRC. 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.
FRED HOFHEINZ, fifty-nine years old, is an attorney
at law in Houston, Texas. From 1984 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 founder and director of United Kiev
Resources, Inc., an oil and gas production company operating
in the Republic of the Ukraine in the name of its wholly
owned subsidiary, Carpatsky Petroleum Company. Mr. Hofheinz
earned a Ph.D. degree in Economics from the University of
Texas and his law degree from the University of Houston. He
has been a director since March 21, 1991.
FRANCIS J. REINHARDT, JR., sixty-seven years old,
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 30 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 several privately
held companies. Mr. Reinhardt has been a director since
December 11, 1992.
R. THOMAS FETTERS, JR., fifty-eight years old is an
independent oil and gas consultant. He has over 25 years of
exploration, production and management experience, both domestic
and foreign. From 1995 to 1997 Mr. Fetters was Senior Vice
President of Exploration of National Energy Group, Inc.,
Dallas, Texas, and from February 1990, until September 1995, he was
Vice President of Exploration of XCL Ltd., and President of
XCLChina, Ltd. During 1989, until joining the Company, he
served as Chairman and Chief Executive Officer of Independent
Energy Corporation. From 1984 to 1989, he served as
President and Chief Executive Officer of CNG Producing
Company in New Orleans, Louisiana, and from 1983 to 1984 as
General manager of the Planning and Technology Division of
Consolidated Natural Gas Service Co. in Pittsburgh,
Pennsylvania. From 1966 to 1983, he served in various
positions, from Geologist to Exploration Manager, with several
divisions of Exxon, primarily in the Gulf Coast region of the
U.S. and internationally, in Malaysia and Australia. Mr.
Fetters holds B.S. and M.S. degrees in geology from the
University of Tennessee.
Executive Management
Set forth below are brief biographical summaries of
members of executive management who do not serve as directors
of the Company.
DANNY M. DOBBS, fifty-two years old, is the Executive
Vice President and Chief Operating Officer of
the Company. Mr. Dobbs previously served as Vice President
Exploration of XCL Exploration & Production, Inc., a wholly
owned subsidiary of the Company, having joined the Company in
1985 as Senior Exploration Geologist. From 1981 to 1985 Mr.
Dobbs was a consulting geologist. From 1976 to 1981, he held
the position of Exploration Geologist in the South Louisiana
District for Edwin L. Cox in Lafayette, Louisiana. He served in
various geologic positions with Texaco, Inc. from 1971 to 1976
where his experience encompassed management, structural and
stratigraphic mapping, coordination of seismic programs and
budget evaluation and preparation. Mr. Dobbs holds B.S. and
M.S. degrees in geology from the University of Alabama,
Tuscaloosa, Alabama.
STEVEN B. TOON, forty-nine years old, is Chief Financial
Officer of the Company since October 6, 1997. Prior to
joining the Company, Mr. Toon provided consulting
services to the Company beginning in June 1997. Since 1994 he
has been engaged in private consulting/CPA practice with
various clients in the energy and services sectors in Houston.
He was Chief Financial Officer of Lend Lease Trucks, Inc.
prior to the sale of its assets to Ryder System Inc. in 1994.
From 1977 until 1992, Mr. Toon served as Vice President
Finance and Treasurer of United Energy Resources, Inc. and
United Gas Pipe Line Company. From 1971 to 1977, he was a Vice
President in Bank of America's World Banking Division. Mr.
Toon holds B.B.A. and M.B.A. degrees and is a certified public
accountant
RICHARD K. KENNEDY, forty-three years old, is
Vice President of Engineering and is responsible for
certain engineering aspects of the Company's oil and gas
operations. From 1987, until he joined the Company in 1989,
he was an operations engineer for Wintershall Corporation.
From 1981 to 1986 he was with Borden Energy, originally as
a petroleum engineer and later as regional operations manager.
From 1979 to 1981, Mr. Kennedy was employed with Marathon Oil
Company as a reservoir engineer, then as a drilling engineer.
He was employed with Shell Oil Company as a petroleum engineer
and reservoir engineer from 1977 to 1979. Mr. Kennedy
graduated from Louisiana Tech University with a B.S. degree in
petroleum engineering. He is a registered professional
engineer in the State of Louisiana and a member of the
Society of Petroleum Engineers.
HERBERT F. HAMILTON, sixty-one years old, is
Vice President Operations of XCL-China Ltd., having joined
the Company in 1995. Mr. Hamilton has more than 30 years
of experience inthe fields of engineering, construction,
construction management and consulting on heavy civil works,
offshore platforms, submarine pipelines and construction equipment
in over 35 countries. From 1990 to 1993, Mr. Hamilton served as
Senior Project Manager for Earl and Wright in Houston, Texas.
From 1993 to 1994, he served as President and a consultant to
Planterra, Inc. in Houston, Texas and from 1994 until joining
the Company, he was an independent consultant. Mr. Hamilton is
a Registered Professional Engineer and holds a B.S. in
Architectural Engineering from the University of Texas at Austin.
Compliance with Section 16(a) Filing Requirements
To the Company's knowledge, instances of failure to
file reports with respect to reportable transactions during
the year ended December 31, 1996, as required by Section 16(a)
of the Exchange Act are as follows:
Reports Number of Known Failure Number of
Reporting Person Filed Late Transactions to File Transactions
- ---------------- ---------- ------------ ------------- ------------
M.W. Miller, Jr.... Form 4 7 - -
All other 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 1996, 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>
Summary Compensation Table
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
(1) (2) (3) (4) (5)
Other Restricted
Name and Annual Stock Options/ LTIP All Other
Principal Salary Bonus Compen- Awards SARs Payout Compen-
Position Year ($) ($) ($) ($) (#) ($) sation ($)
--------- ---- ------ ----- ------- -------- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marsden W. Miller, Jr. 1996 150,000 - - - - - -
Chairman and 1995 150,000 - - - - - -
Chief Executive 1994 150,000 - - - 1,625,000 - -
Officer 1,875,000
525,000
John T. Chandler (6)(7) 1996 150,000 - - - - - -
President; 1995 150,000 - - - 120,000 - -
Chairman and Chief 1994 150,000 - - - 470,000 - -
Executive Officer of 1,025,000
XCL- China, Ltd. 100,000
David A. Melman (8) 1996 150,000 - - - - - -
Executive Vice 1995 150,000 - - - 300,000 - -
President, General 1994 150,000 - - - 470,000 - -
Counsel and Secretary 1,025,000
100,000
Danny M. Dobbs (9) 1996 135,000 - - - 97,000 - -
Executive Vice 1995 116,250 - - - - - -
President and Chief 1994 110,000 - - - 148,000 - -
Operations Officer
Herbert F. Hamilton (10) 1996 144,000 - - - - - -
Executive Vice 1995 98,800 - - - 200,000 - -
President Operations, 1994 - - - - - - -
XCL-China
</TABLE>
_________
(1) 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 30 months. Such
employment agreements were surrendered, effective April
1, 1994, in exchange for stock purchase warrants (see
"Employment Agreements" below).
(2) Effective March 30, 1994, the Management Incentive Plan
was terminated.
(3) 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.
(4) 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 prior to 1997. See Proposal 3
"Awards to Management" below.
(5) 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 fiveyear 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 15-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.) See also Proposal 3 "Awards
to Management" below.
(6) XCL-China Ltd. is a wholly owned subsidiary of the
Company which manages the Company's operations in China.
(7) Mr. Chandler was granted 120,000 options to replace
options granted in 1984 which expired unexercised in
December 1994. See also Proposal 3 - "Awards to Management" below.
(8) Mr. Melman was granted 120,000 options to replace
options granted in 1984 which expired unexercised in
December 1994, and 180,000 options to replace options
granted in 1985 which expired unexercised in March
1995. See also Proposal 3 - "Awards to Management"
below.
(9) Mr. Dobbs was granted 97,000 options to replace options
granted in 1985 which expired unexercised in December 1995.
See also Proposal 3 - "Awards to Management" below.
(10) Mr. Hamilton commenced employment with the Company
on April 24, 1995. As part of his employment package he was
awarded 200,000 options.
Stock Options
The Company currently maintains three 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 ("1992 LTSIP"). The 1992 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 1992 LTSIP. By action of the Board of
Directors, effective June 1, 1997, the 1992 LTSIP was amended and
restated, subject to approval by the shareholders. See "Proposal 3
Approval of Long Term Stock Incentive Plan as Amended and Restated
Effective as of June 1, 1997" below, for details of the proposed
amendments to the Company's LTSIP being voted on at this Meeting and
certain grants of incentive awards in 1997 to certain members of
management made thereunder.
The 1992 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 1992 LTSIP also formally incorporates resolutions
previously adopted by the Board regarding one time
grants of NSOs covering 100,000 shares to each new
nonemployee 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 1992 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 1992 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
nonemployee 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 nonexecutive officers, employees and
consultants of the Company.
See Proposal 3, for details of the proposed amendments to
the Company's 1992 LTSIP being voted on at this Meeting.
The closing price of the Company's Common Stock on the
American Stock Exchange on November 10, 1997 was $ [] per
share.
The following tables set forth, for those persons named
in the "Summary Compensation Table" information on stock
options granted during 1996 and all stock options outstanding
as of December 31, 1996. See Proposal 3 - "Awards to
Management" for details regarding certain awards to members of
management, including the individuals listed below, made
pursuant to the 1997 LTSIP Restatement (as hereinafter
defined), subject to shareholder approval, none of which
are reflected in the following tables.
<TABLE>
Option/SAR Grants in Last Fiscal Year
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
(a) (b) (c) (d) (e) (f) (g)
% of
Total
Options/
SARs
Granted to
Options/ Employees in Exercise or
SARs Fiscal Base Price Expiration
Name Granted(#) Year (3) ($/Share) Date 0% ($) 5% ($) 10% ($)
- --------------- ---------- ----------- ---------- --------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
M.W. Miller, Jr. - 0% - - - - -
J.T. Chandler - 0% - - - - -
D.A. Melman - 0% - - - - -
D.M. Dobbs 97,000 40% $1.25 4/10/00 (90,937.50) (71,874.13) (42, 627.18)
H.F. Hamilton - 0% - - - - -
</TABLE>
__________________
(1) Mr. Dobbs was granted 97,000 options to replace options
granted in 1985 which expired unexercised in December 1995.
<TABLE>
Aggregated Option/SAR Exercises In Last Fiscal Year
and Fiscal Year-End Option/SAR Values
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Shares Underlying Unexercised in-the-Money
Acquired Options/SARs at Options/SARs at
on Value Fiscal Year End (#) Fiscal Year-End ($)(3)
Exercise Realized ------------------------ -------------------------
Name (#) ($) Exercisable Unxercisable Exercisable Unexercisable
----- -------- -------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Marsden W. Miller, Jr. - - 5,025,000 (1) - - -
- - 2,400,000 (2) - - -
John T. Chandler - - 1,130,000 (1) - - -
- - 1,125,000 (2) - - -
David A. Melman - - 1,130,000 (1) - - -
- - 1,125,000 (2) - - -
Danny M. Dobbs - - 336,333 (1) 64,667 - -
- - 582,000 (2) - - -
Herbert F. Hamilton - - 133,333 (1) 66,667 - -
</TABLE>
___________
(1) Represents options exercisable under the Company's Stock
Option Plans at December 31, 1996.
(2) 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 15-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.)
(3) At December 31, 1996, the Company's Common Stock price
was lower than the option exercise prices.
(4) Mr. Melman is not standing for reelection as a director of
the Company.
These options were all awarded under the Company's
Stock Option Plans described above. See Proposal 3 "Awards
to Management" for descriptions of grants made in 1997 pursuant
to the 1997 LTSIP Restatement.
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. The
Company has obtained a favorable determination from the Internal
Revenue Service regarding the tax-favored status of the 401(k) plan.
Employees can contribute up to 10 percent of their compensation.
The Company, at its discretion and subject to certain limitations,
may contribute up to 75 percent of the contributions of each participant.
The Company has not made contributions to the 401(k) plan since
December 31, 1991.
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) are being 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 Messrs. Hummel and
Palliser, 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, both
directors are 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 1992 LTSIP, Messrs. Hummel, Palliser, Reinhardt
and Hofheinz, each a non-employee director, were granted stock
options for 100,000 shares of Common Stock exercisable
at $1.25 per share at such time as they became directors.
In June 1997, the Company entered into a consulting
agreement with Mr. Fetters, a director the Company.
The agreement is for a one year term ending July 31,
1998, thereafter to continue on a month to month basis.
The agreement may be terminated by either party on thirty
days written notice. Pursuant to the terms of the agreement
Mr. Fetters is to consult with the Company on all aspects of
the Company's exploration, development and production
projects. For his services Mr. Fetters is to receive $30,000 per
annum, which is in addition to the compensation he receives
as a director for attending meetings of the Board. In addition
to the above compensation Mr. Fetters is entitled to receive a
finder's fee on certain specifically identified projects.
Effective June 1, 1997, each of Messrs. Melman, Hummel,
Palliser, Reinhardt, Hofheinz and Fetters were granted
nonqualified stock options to purchase 1,000,000 shares of
Common Stock exercisable at $0.25 per share under the 1997
LTSIP Restatement, subject to shareholder approval of such
plan. See Proposal 3 herein.
Benjamin B. Blanchet, in his capacity as Executive Vice
President is entitled to a salary of $80,000 per year for up to
80 hours per month of services.
Effective August 1, 1997, the Company entered into a
Services Agreement with Benjamin B. Blanchet. The Agreement is
terminable by either party at any time without cause. Under
the Agreement, Mr. Blanchet is engaged to act as counsel to the
Company to perform such services as the Company may request
of him in that capacity from time to time. In general,
compensation for services under the Services Agreement will
be at the rate of $175 per hour for up to 80 hours per month.
Also, under the Services Agreement, the Company has agreed to
provide Mr. Blanchet with office space, supplies, secretarial
assistance, a library allowance, professional liability insurance,
reimbursement for continuing legal education expenses and bar dues.
Under the Services Agreement Mr. Blanchet may, except as prohibited
by law or the Louisiana Rules of Professional Responsibility,
represent other clients and engage in business for his own account.
In connection with his employment by the Company, Mr. Blanchet
received from the Company a $100,000 loan to replace benefits
that he forfeited when he withdrew as a partner of Gordon,
Arata, McCollam & Duplantis, L.L.P. ("GAMD") to become
Executive Vice President of the Company. The loan is to be
repaid over eight years from annual bonus payments equal to
interest, at the rate of 6.5% per annum, plus one-eighth of the original
principal balance to be paid by the Company to Mr. Blanchet each year
and shall be forgiven in its entirety if (i) the Company
shall fail to pay timely any such bonus payment, shall breach
the Services Agreement or shall terminate his employment
without "cause" or (ii) Mr. Blanchet terminates his employment
with "good reason," in either case as such terms are defined in
the note evidencing such loan.
During 1996 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;
Termination of Employment and Changein-Control Arrangements
Effective April 1, 1994, Messrs. M.W. Miller, Jr., J.T.
Chandler, D.A. Melman and D.M. Dobbs, 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 and
Mr. Dobbs, 575,000 shares.
Effective January 1, 1989, the Company adopted a
policy addressing severance upon separation from the Company.
Under this policy benefits due upon a "change-in-control" as therein
defined, range from three months salary for employees with less
than one year of service to 24 months salary for employees with
more than 10 years of service. Report on Repricing of Options/SARs
During the fiscal year ended December 31, 1996,there were no
repricings of stock options awarded to any of the named executive officers.
Compensation Committee Interlocks and Insider Participation
For the year ended December 31, 1996, the
following nonexecutive directors of the Company, served as
members of the Compensation Committee of the Board of
Directors: Messrs. M. Palliser (Chairman), A.W. Hummel, Jr., F.
Hofheinz and F.J. Reinhardt, Jr. 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.
Fred Hofheinz, who serves as Chairman, Michael Palliser ,
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 [], 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 1996,
the Company did not retain the services of a compensation
consulting firm.
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. Generally, 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 10 years and vest onethird six
months after grant, one-third one year after grant and the
remaining onethird 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 nonqualified
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 nonmaterial loss
of a portion of the deductions associated with that compensation.
On March 20, 1997, the Committee reviewed the
Company's 1996 financial results and 1996 nonfinancial
goals and determined to await further developments in the Company's
intended financing program prior to assessing management's
accomplishments.
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. It determined that the CEO had been successful
in disposing of assets and raising capital throughout the
year. However, taking into consideration the current cash
position and near-term requirements, the Committee determined
that cash was unavailable for either salary increase or bonus.
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 20, 1997 COMPENSATION COMMITTEE
Fred Hofheinz , Chairman
Arthur W. Hummel Michael
Palliser
Francis J. Reinhardt, Jr.
Subsequent Compensation Adjustments
Since the date of the Compensation Committee Report, the
Company circumstances have improved as a result of the
successful drilling results on the Zhao Dong Block in the
Bohai Bay in China during the last three and one-half years,
the fact that the Company has been informed that it will be
offered additional exploration and development contracts in
China, and the successful placement in May, 1997 of $100
million of Preferred Stock and Senior Secured Notes, the
proceeds of which will now permit the Company to commence
achieving its objectives in China. In recognition of the
efforts and sacrifices of management that have enabled the
Company to achieve such results, and the need to retain
existing management, all as described in greater detail in "Proposal
3 Approval of Long Term Stock Incentive Plan as Amended and
Restated Effective June 1, 1997," the Compensation Committee
and Board of Directors have reassessed the need for adjusting
management's compensation to provide for additional incentives
to management. As a result of this reassessment, the
Board of Directors has adopted certain amendments to the 1992
LTSIP and has made certain equity based incentive awards, all
as described in greater detail in "Proposal 3 - Approval of
Long Term Stock Incentive Plan as Amended and Restated Effective
June 1, 1997" and "Proposal 4 - Approval of
Appreciation Option for M.W. Miller, Jr." All such awards are
subject to the receipt of approval thereof by shareholders.
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 AMEX Market Value
Index for the years 1992 through 1996, 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 DeKalb Energy Company which was acquired by
Apache Corporation, namely: Alta Energy Corporation; Amerac
Energy Corporation (formerly Wolverine Exploration Company);
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; Edisto Resources Company;
Energen Corporation; Chemfirst Inc. (formerly First
Mississippi Corporation); Forest Oil Corporation; Geodyne
Resources, Inc.; Global Natural Resources, Inc.; Goodrich
Petroleum Corporation (formerly Patrick Petroleum Company);
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; Penn Virginia
Corporation; Plains Resources, Inc.; Presidio Oil; Wainoco Oil
Corporation; Wichita River Oil; and Wiser Oil 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,
1991 and that all dividends were reinvested.
1992 1993 1994 1995 1996
Return Return Return Return Return
------ ------ ------ ------ ------
XCL 200.00 100.00 144.44 66.67 33.33
Peer Group 80.38 97.96 97.65 123.35 147.19
AMEX 101.06 120.78 109.84 138.77 147.65
Certain Relationships and Related Transactions
In July 1997, China Investment and Development Corporation
("CIDC"), holders of the Company's Series B, Cumulative Preferred
Stock, $.01 par value per share ("Series B Preferred Stock") sued the
Company and each of its directors in an action entitled China
Investment and Development Corporation vs. XCL Ltd.; Marsden W. Miller,
Jr.; John T. Chandler; David A. Melman; Fred Hofheinz; Arthur W.
Hummel, Jr.; Michael Palliser; and Francis J. Reinhardt, Jr.
(Court of Chancery of the State of Delaware in and for New
Castle County, Civil Action No. 15783-NC). The suit alleges
breach of (i) contract, (ii) corporate charter, (iii) good
faith and fair dealing and (iv) fiduciary duty with respect
to the alleged failure of the Company to redeem CIDC's
Series B Preferred shares for a claimed aggregate redemption
price of $5.0 million, in accordance with the terms of the Purchase
Agreement and Certificate of Designation. In addition, CIDC
alleged that the individual directors tortiouosly interfered
with its contractual relationship with the Company. The
Company believes it has fulfilled the obligations of the
Preferred Stock and that the Preferred Stock is not in
default, and accordingly an answer has been filed on behalf of
the Company denying liability and a motion to dismiss has been
filed on behalf of the directors. The Company has
indemnification obligations to the directors on the claims
asserted against the directors. The Company intends to
vigorously defend this action. The Company and CIDC are
presently in negotiations to settle this action.
See "Compensation of Directors and Other Arrangements" above
for a discussion of certain compensatory and other arrangements
entered into by the Company with certain directors or a nominee
for director (whoe is also an officer) of the Company.
As a matter of policy the Company approves all transactions
involving insiders through the majority vote of disinterested directors.
PROPOSAL 2 -- TO AMEND AND RESTATE THE COMPANY'S CERTIFICATE OF
INCORPORATION TO EFFECT A REVERSE STOCK SPLIT
The Board of Directors has approved an amendment to the
Company's Certificate of Incorporation as set forth in
Appendix A hereto to effect a one for [] reverse stock split
of the Company's outstanding shares of Common Stock (the
"Reverse Stock Split") and that the amendment be submitted to
the Company's stockholders for consideration and action.
Concurrently, the Board also approved a proposal to restate
the Company's Certificate of Incorporation and include the
Reverse Stock Split in such Restated Certificate
of Incorporation as permitted by Section 245(b) of the
Delaware General Corporation Law ("DGCL"). The effect of
such restatement will be to incorporate the amendment into a
single instrument which will also integrate all of the
provisions of the Company's Certificate of Incorporation which
are in effect and are operative as of the date hereof as a
result of there having been filed with the Secretary of
State of Delaware ("Secretary of State") one or more
certificates, amendments or other instruments as permitted or
required by the DGCL. The full text of the Restated
Certificate of Incorporation, including the Reverse Stock
Split, is attached as Appendix B to this Proxy Statement
(the "Restated Certificate of Incorporation"). The Board of
Directors recommends a vote "FOR" such amendment and
restatement of the Certificate of Incorporation.
If the Reverse Stock Split is approved by
stockholders, the Board of Directors will effect the Reverse
Stock Split, without further shareholder action. The Reverse
Stock Split would become effective on the date (the
"Effective Date") on which the Restated Certificate of
Incorporation is filed with the Secretary of State. The
procedures for consummation of the Reverse Stock Split are
set forth in "Recapitalization and Conversion Procedures"
below and in Appendix A hereto.
Vote Required
The approval of the Reverse Stock Split and the
Restated Certificate of Incorporation requires the affirmative
vote of a majority of the votes entitled to be cast by the
outstanding shares of voting capital stock entitled to vote
on the matter with abstentions and broker non-votes being
counted as negative votes.
Purposes and Effects of the Reverse Stock Split
The principal purpose of the Reverse Stock Split is to
increase the marketability of the Company's Common Stock by
increasing the trading price of Common Stock to levels more
acceptable to institutional and other investors. The Board of
Directors believes that to achieve the Company's objectives in
China it is essential that the Common Stock of the Company has
better marketability and trades at a higher price.
One effect of the Reverse Stock Split is to increase the
number of shares of Common Stock available for issuance on
conversion of the issued shares of the Company's Amended
Series A Preferred Stock and on exercise of outstanding Common
Stock purchase warrants without increasing the authorized
Common Stock, and, simultaneously, increasing the
marketability of the Common Stock. As of November 10, 1997,
the Company had [] shares of authorized but unissued and
unreserved shares of Common Stock available for issuance upon
conversion of all the issued shares of Amended Series A
Preferred Stock, Series F Preferred Stock and upon exercise of
all outstanding warrants to purchase Common Stock. Such
number of shares are insufficient to permit such conversion
and exercise to the full extent required
by the terms of such securities. As described below,
failure to provide a sufficient number of available
authorized but unissued shares of Common Stock by May 20,
1998, will entail certain disadvantageous consequences to
Common Stockholders. See "Certain Considerations" below.
Consummation of the Reverse Stock Split will not alter
the number of authorized shares of Common Stock, currently
500,000,000 shares. Proportionate voting rights and other
rights of stockholders will not be altered by the Reverse
Stock Split, except for the limited occasion where a small
shareholder may own only a fractional interest after the
Reverse Stock Split, in which event the small shareholder will
be paid for the fractional interest and will cease to be a
holder of the Company's Common Stock. Consummation of the
Reverse Stock Split will have no material federal tax
consequences to stockholders.
The Common Stock is listed for trading on the
American Stock Exchange, Inc. ("Exchange"). On the Record
Date, the reported closing price of the Common Stock was $[]
per share.
The Board believes that a decrease in the number of
shares of Common Stock outstanding without any material
alteration of the proportionate economic interest in the
Company represented by individual shareholdings may increase
the trading price of such shares to a price more appropriate
for an Exchange-listed security, although no assurance can be
given that the market price of the Common Stock will rise in
proportion to the reduction in the number of outstanding
shares resulting from the Reverse Stock Split or that it
will remain at such level.
Additionally, although the Company has not yet
experienced identifiable problems in the marketability
and liquidity of its Common Stock, the Board believes that
the current per share price of the Common
Stock limits the effective marketability of the Common Stock
because of the reluctance of many brokerage firms and
institutional investors to recommend lower-priced stocks to
their clients or to hold them in their own portfolios.
Certain policies and practices of the securities industry
tend to discourage individual brokers within those firms
from dealing in lowerpriced stocks. Some of those policies
and practices involve timeconsuming procedures that make the
handling of lower priced stocks economically unattractive.
The brokerage commission on a sale of lower-priced stock
usually represents a higher percentage of the sale price than
the brokerage commission on a higher-priced issue. Any
reduction in brokerage commissions resulting from a Reverse
Stock Split may be offset, however, in whole or in part,
by increased brokerage commissions required to be paid by
stockholders selling "odd lots" created by such Reverse Stock
Split.
The par value of the Common Stock will remain at $.01
following the Reverse Stock Split, and the number of shares of
Common Stock outstanding will be reduced. As a consequence,
the aggregate par value of the outstanding Common Stock will
be reduced, while the aggregate capital in excess of par value
attributable to the outstanding Common Stock for statutory and
accounting purposes will be correspondingly increased. The
resolution approving the Reverse Stock Split provides that
this increase in capital in excess of par value will
be treated as capital for statutory purposes.
The conversion ratios of any shares of outstanding stock
having a conversion or redemption feature and the exercise
price of outstanding stock options and warrants would be
correspondingly adjusted upon consummation of the Reverse
Stock Split.
The Company has authorized capital stock of
502,400,000 shares, consisting of 500,000,000 shares of Common
Stock and 2,400,000 shares of Preferred Stock. As of November
10, 1997, the number of issued and outstanding shares of
Common Stock was [] and [] shares of Preferred Stock were
issued and outstanding. Based upon the Company's best estimates,
the number of issued and outstanding shares of Common Stock will be
reduced from [] to [] as a result of the Reverse Stock Split. As a
result of the Reverse Split the number of stockholders of record is
not expected to be significantly reduced, since only []
shareholders of record own fewer than [] shares.
The Board of Directors has authority to cause
authorized but unissued shares of Common Stock to be issued
for any proper corporate purpose without further action by
stockholders. The Company has no arrangements, agreements,
understandings or plans at the present time for the issuance
or use of the authorized but unissued shares of Common Stock
except in connection with the exercise or conversion of
outstanding securities or pursuant to employee benefit plans.
The Board of Directors does not intend to issue any Common
Stock except on terms which the Board deems to be in the best
interests of the Company and its then existing stockholders.
Any future issuance of Common Stock will be subject to the
rights of holders of any preferred stock which are outstanding
and which the Company may issue in the future and, under
certain circumstances, may require the approval of Common
Stockholders under applicable Exchange rules.
The issuance of additional shares of Common Stock may
have a dilutive effect on earnings per share and, for persons
who do not purchase additional shares to maintain their pro
rata interest in the Company, on such stockholders' percentage
voting power. Upon issuance, such shares will have the same
rights as the outstanding shares of Common Stock. Holders of
Common Stock have no preemptive rights. Although the Company
has no present intention to issue shares of Common Stock in the
future in order to make acquisition of control of the
Company more difficult, future issuances of Common Stock could
have that effect. For example, the acquisition of shares of the
Company's Common Stock by an entity in order to acquire
control of the Company might be discouraged through the public
or private issuance of additional shares of Common Stock to
persons who might side with the Board.
The Board of Directors is authorized to issue shares of
Preferred Stock in one or more series ("Serial Preferred
Stock") and to fix the rights, preferences, privileges and
restrictions, including dividend rights, conversion rights,
voting rights and terms of redemption, redemption price or
prices, liquidation preferences and the number of shares
constituting any series or the designation of such series,
without any further vote or action by the stockholders. The issuance
of Serial Preferred Stock may have the effect of delaying,
deferring, or preventing a change in control of the Company
without further action by the stockholders. The
issuance of Serial Preferred Stock with voting and conversion
rights may adversely effect the voting power of the holders of
Common Stock, including the loss of voting control to others.
Currently, the Company has 2,400,000 shares of Serial
Preferred Stock authorized consisting of [] shares of Amended
Series A Preferred Stock of which [] shares are outstanding;
[] shares of Series B Preferred Stock of which [] shares are
outstanding and [] shares of Series F Preferred Stock of which
[] shares are outstanding.
Recapitalization and Conversion Procedures
At the Effective Date, each share of the Common
Stock issued and outstanding immediately prior thereto (the
"Old Common Stock"), will be reclassified as and
changed into the appropriate fraction of a share of the
Company's Common Stock, par value $.01 (the "New Common
Stock"), subject to the treatment of fractional share interests
as described below. Shortly, after the Effective Date, the
Company will send transmittal forms to the holders of the Old Common
Stock to be used in forwarding their certificates formerly representing
shares of Old Common Stock for surrender and exchange for
certificates representing whole shares of New Common Stock and
cash payments in lieu of any fractional share entitlements.
Failure to exchange such certificates within one year after
the Effective Date, will result in the forfeiture to the
Company of any right to receive dividends and any cash
payments in respect of any fractional shares.
No certificates or script representing fractional
share interests in the New Common Stock will be issued, and no
such fractional share interest will entitle the holder thereof to
vote, or to any rights as a stockholder of the Company. In
lieu of any such fractional share interests, each holder
of Old Common Stock who would otherwise be entitled to receive
a fractional share of New Common Stock will, at the discretion
of the Board, either be (i) paid cash by the Company upon
surrender of certificates formerly representing Old Common
Stock held by such holder in an amount equal to the product of
such fraction multiplied by the closing price of the Old
Common Stock on the Exchange on the Effective Date (or in the
event that Common Stock is not so traded on the Effective Date,
such closing price on the next preceding day on which such stock
is traded on the Exchange); or, alternatively, (ii) the
Company will make arrangements with, and provide
assistance to, a third party who shall pool said fractional
share interests, sell the same, and return appropriate payment
to the holders of fractional share interests in
the amount described in (i) above.
Other Changes
The approval of Proposal 2 will also result in the
amendment and restatement of the Certificate of Incorporation
in its entirety to reflect the foregoing substantial changes
as well as several nonsubstantive, ministerial, changes as
contained in Restated Certificate of Incorporation attached hereto as
Appendix B. These changes: eliminate five other
series of Serial Preferred Stock (i.e., the Series A,
Cumulative Convertible Preferred Stock; Series C, Cumulative
Convertible Preferred Stock; Series D, Cumulative, Convertible
Preferred Stock and Series E, Cumulative Convertible Preferred
Stock, which had been previously designated and issued in
specific capitalization transactions and are no longer outstanding
(having been either converted, redeemed or recapitalized) or
required for any proposed transaction or capitalization needs of
the Company; make conforming changes to the terms of the Amended
Series A Preferred Stock to reflect the elimination of such other
series of Serial Preferred Stock; eliminate the name and address
of the original incorporator of the Company; reflect the fact that
the name of the Company has been previously changed from The
Exploration Company of Louisiana, Inc. to XCL Ltd. and that
the Certificate of Incorporation has been restated and
renumber certain Articles.
Certain Considerations
As described below, the failure to approve Proposal 2
and, thereby, to provide a sufficient number of available but
unissued shares of common Stock, will result in certain
adverse consequences to the Company's shareholders.
In connection with a series of privately placed debt and
equity financings concluded by the Company on May 20, 1997 in
which the Company raised $100 million in gross sales proceeds
in order to pay certain existing secured indebtedness, to fund
the Company's China operations and for general working capital
purposes, the Company issued an aggregate of 384,124 Common
Stock purchase warrants ("Warrants") exercisable for an
aggregate of 211,384,266 shares of Common Stock (before
adjustment to reflect the Reverse Stock Split). The Company
currently has an insufficient number of shares of Common Stock
available for issuance upon exercise of the Warrants. Failure
to secure and to reserve a sufficient number of shares of
Common Stock to permit exercise of all the Warrants by May 20, 1998
shall automatically convert each such Warrant into a
warrant to purchase one share of Amended Series A Preferred
Stock (or an aggregate of 384,124 shares) at an exercise price
of $34.00 per share. Some of the Warrant holders also hold
Amended Series A Preferred Stock and shares of Common Stock.
Since the Amended Series A Preferred Stock has a liquidation value of
$85.00 per share and would rank senior to the Common Stock in
connection with the distribution of dividends and upon
dissolution, liquidation and winding up of the Company as well
as having certain other preferential rights, Common
Stockholders would be disadvantaged if such Warrants were to
be exercised for such Amended Series A Preferred Shares.
Approval of the Reverse Stock Split will provide a sufficient
number of shares of Common Stock to permit the exercise of all
the Warrants thereby eliminating such contingency.
Effective November 10, 1997, the Company
recapitalized its outstanding shares of Series A, Preferred
Stock and Series E Preferred Stock and converted them into an
aggregate of [] shares of Amended Series A Preferred Stock.
Each such Amended Series A Preferred Share is currently
convertible at any time on or after May 20, 1998 into 170
shares of Common Stock. The Company currently does not have a
sufficient number of shares of Common Stock available to
permit conversion of all such issued shares of Amended
Series A Preferred Stock. Each Amended Series A Preferred
Share is entitled to cast the same number of votes at the
Meeting on the Reverse Stock Split as the number of shares of
Common Stock issuable upon conversion thereof as of the Record
Date for the Meeting (currently 170 votes). It can be
anticipated that the Amended Series A Preferred Stockholders
will vote in favor of the Reverse Stock Split.
The Common Stock is currently listed on the Exchange and
is registered under Section 12(b) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and as a result,
the Company is subject to the periodic reporting and other
requirements of the Exchange Act. The Reverse Stock Split
will not affect the registration of the Common Stock under the
Exchange Act or its listing on the Exchange and the Company
has no present intention of terminating the registration under
the Exchange Act or relinquishing such listing on the Exchange
in order to become a "private" company.
The Exchange has, since November 1996, continued to
review the Company's listing eligibility, in that the Company
does not currently meet certain financial requirements for
continued listing. The Company intends to satisfy the
Exchange's concerns regarding the Company's continuing listing
eligibility.
Federal Income Tax Consequences of the Proposed Reverse Stock Split
The following discussion describes certain federal
income tax consequences of the Reverse Stock Split to
stockholders of the Company who are citizens or residents
of the United States, and who are not dealers with respect
to the Common Stock. The actual consequences for each stockholder
will be governed by the specific facts and circumstances
pertaining to his acquisition and ownership of the Common
Stock. Thus, the Company makes no representations or warranties
concerning the tax consequences for any of its stockholders
and recommends that each stockholder consult with his tax
advisor concerning the tax consequences (including federal,
state, local and foreign income or other tax consequences) of
the Reverse Stock Split. The Company has not sought and
will not seek an opinion of counsel or a ruling from the
Internal Revenue Service regarding the federal income tax
consequences of the Reverse Stock Split. However, the Company
believes that the Reverse Stock Split will be a "recapitalization"
for purposes of Section 368(a)(1)(E) of the Internal Revenue Code
of 1986, as amended, which should have the following federal
income tax consequences for the stockholders and the Company:
1. A stockholder will not recognize gain or loss
with respect to the New Common Stock received in
exchange for the Old Common Stock. The adjusted
basis and holder period of the shares
of New Common Stock received will be the same as
the adjusted basis and holding period of the Old
Common Stock surrendered.
2. To the extent that a stockholder receives a
payment from the Company of cash in lieu of
fractional shares, that payment will be treated as
made in redemption f the fractional shares. Due to
the Company's lack of current or accumulated
earnings and profits, this redemption should result
in capital gain or loss to the stockholders in an
amount equal to the difference between the cash
received and the adjusted basis of the fractional
shares. If the Company makes arrangements with a
third party to pool the fractional shares and sell
them, stockholders will be treated as if they had
received the fractional shares and sold them.
3. A stockholder who owns fewer than []shares of
Common Stock immediately prior to the Reverse Stock
Split, and who therefore receives only cash in lieu
of a fractional share as a result of the Reverse
Stock Split, generally will be treated as having
sold the fractional shares of Common Stock and will
recognize capital gain or loss in an amount equal to
the difference between the cash received and the
adjusted basis of the fractional share.
4. The Company will not recognize any gain or loss
as a result of the Reverse Stock Split.
Vote Required for Approval
The Board of Directors recommends that shareholders vote
FOR Proposal 2. The affirmative vote of the holders of
a majority of the votes entitled to be cast by the holders of
Common Stock, Amended Series A Preferred Stock, 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 the proxies will be voted "FOR" approval of the
proposal.
PROPOSAL 3 - APPROVAL OF LONG TERM STOCK INCENTIVE PLAN AS
AMENDED AND RESTATED EFFECTIVE AS OF JUNE 1, 1997
As described under "PROPOSAL NO. 1-ELECTION OF DIRECTORS -
Options to Management" above, the Company presently
maintains the 1992 LTSIP, previously approved by shareholders,
which was initially effective on June 2, 1992, for employees
and certain other individuals connected with the Company or its
affiliates, pursuant to which options to purchase [] shares of
Common Stock are outstanding, leaving only [] shares available
for stock option grants. The 1992 LTSIP did not contemplate
the grant of stock options to purchase shares of any issue of the
Company's Serial Preferred Stock or the grant of
Appreciation Options.
On June 5, 1997, the Board of Directors unanimously
approved amendment and restatement of the 1992 LTSIP,
effective as of June 1, 1997 (hereinafter the "1997 LTSIP
Restatement"), a copy of which is attached hereto as Appendix C.
The Board determined that the 1997 LTSIP Restatement was in
the best interest of the Company and its shareholders for the
following reasons:
1. The Company now has the opportunity to achieve
its objective of becoming a leading and significant participant
in the development of China's oil and gas industry. The
principal facts relied upon for that opinion include the fact
that drilling on the Zhao Dong Block in the Bohai Bay in China
during the last three and one-half years has resulted in the
development of sufficient proven reserves to justify
development and production, the fact that it has been
indicated that the Company will be offered additional,
attractive properties in China, and the fact of the completion
of a $100 million offering of Preferred Stock and Senior
Secured Notes in May, 1997. Furthermore, this opinion has
been reinforced by statements made to the Board by various top
officials in the China oil industry. The underlying reasons
for the existence of these facts include (i) the relationships
in China which have been established by the executives and
employees of the Company during the last seven years, (ii) the
ability of the executives and employees to negotiate and
obtain the first onshore Production Sharing Contract in China
which allowed the Company to explore and develop the Zhao Dong
Block, (iii) the ability of the executives and other
employees, under very difficult circumstances, to obtain funds
to conduct exploration activities on the Zhao Dong Block up to
this point and, now, funds for development of the first
discovery on the Zhao Dong Block, and (iv) the ability
developed during the last seven years by the executives and
employees to negotiate and obtain additional oil and gas
exploration and development contracts in China.
2. Although the Company is now in the position
to achieve its objectives in China, in the Board's judgment
the objectives cannot be achieved without the continued
employment of the Company's present executives and
employees. Completion of development of the Zhao Dong
Block, achieving profitable production and obtaining
additional properties in China will require reliance on
the long-term relationships developed between the Company's
management and employees and Chinese oil officials and
personnel, as well as management's knowledge of the manner
of conducting business in China.
3. During the last several years, the Company has been
strained financially because of the demands for funds
for operations in China. Management has made personal
financial sacrifices to ensure that the Company
could retain its interest in China, including foregoing
competitive salaries and, on occasion, not receiving timely
payment of salaries. Members of management have received
offers from other groups to leave the Company and join such
groups, but have declined such offers because of management's
belief in the ultimate success of the Company's efforts in China and
management's dedication to the Company's objectives in China.
4. In order to retain present management, and in order
to compensate management for what it has achieved in China to
this point, the Company must ensure that present management
has a significant ownership in the equity of the Company.
5. The 1997 LTSIP Restatement would assist the Company
in retaining present management and in employing and retaining
qualified and competent personnel and would encourage valuable
contributions by such personnel to the success of the Company
by providing additional incentives to those employees and
others who contribute significantly to the successful and
profitable operations of the Company and its affiliates. The
Board believes that this purpose will be furthered through the
granting of awards ("Awards"), as authorized under the 1997
LTSIP Restatement, so that such individuals will be encouraged
and enabled to acquire a substantial personal interest in the
Company and its affiliates.
Nature of Awards. The 1997 LTSIP Restatement makes
available to the Compensation Committee the power to grant
certain awards to acquire shares of the Company's Serial
Preferred Stock, par value $1.00 per share ("Preferred Stock")
as well as shares of Common Stock. In common with the 1992
LTSIP, the 1997 LTSIP Restatement makes available to the
Compensation Committee a number of incentive devices in
addition to Incentive Stock Options ("ISOs") (which are not
available with respect to Preferred Stock) and Nonqualified
Stock Options ("NSOs"), including reload options ("ROs")
(which are not available with respect to Preferred Stock),
restricted stock awards ("RSAs"), and performance units
("PUs") or appreciation options ("AOs") (which were not
authorized under the 1992 LTSIP), each of which is described
below and in the 1997 LTSIP Restatement. NSOs to acquire
Preferred Stock, a new feature, may include an accrued
dividend feature (see Federal Income Tax Effects below). The
Board believes that these award alternatives will enable the
Committee to tailor the type of compensation to be granted to
key personnel to meet both the Company's and such employee's
requirements in the most efficient manner possible.
Number of Awards. For Common Stock Awards, the 1997
LTSIP Restatement authorizes an aggregate of 60 million shares
of Common Stock for issuance pursuant to awards granted
thereunder, including grants to nonemployee directors. For
Preferred Stock Awards, the 1997 LTSIP Restatement authorizes
an aggregate of 200,000 shares of the Company's Amended Series
A Preferred Stock, or any other series of Preferred Stock of
the Company as designated by the Committee with respect to an Award.
Description of Awards. As set forth above, and in common
with the 1992 LTSIP previously approved by shareholders,
the 1997 LTSIP Restatement authorizes the Compensation
Committee to grant NSOs, ISOs, 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., sharedenominated 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 "taxwithholding" (i.e., where the employee
has the option of having the Company withhold shares on
exercise of an award to satisfy tax withholding requirements).
AOs (i.e., share or other Company-related business criteria
appreciation measurement awards for payments based upon
appreciation in shares or other criteria determined by the
Compensation Committee) are a new feature added to the 1992 LTSIP.
Outside Director Awards. The 1997 LTSIP Restatement also
authorizes the Board to grant Awards to non-employee directors
and to set the terms and conditions of such Awards, without
the restrictions previously set forth in the 1992 LTSIP which
were required by certain federal securities law rules since
abolished.
Administration of Plan. In keeping with the
provisions of the 1992 LTSIP, the Compensation Committee will
develop administration guidelines from time to time which will
define specific eligibility criteria, the types of awards
to be employed, whether such awards relate to Common Stock or
Preferred Stock, and the value of such awards. Specific terms of each
award will be 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. The Committee may establish
different general Award eligibility criteria for Awards
involving Preferred Stock which may require a higher level of
management responsibility and authority.
Change of Control Provisions. The 1997 LTSIP Restatement
contains the same change-in-control provisions as did the 1992
LTSIP except that the threshold for determining if a "change
of control of XCL" has occurred as a result of a person or
entity acquiring Company stock has been lowered from 30% to
20% (disregarding the acquisition of such stock by certain
existing shareholders of the Company). The 1997 LTSIP
Restatement retains the 1992 LTSIP's provisions pursuant
to which a "change of control of XCL" will be deemed to occur
as a result of certain contested Board of Director elections.
If a "change of control of XCL" occurs pursuant to the
provisions described above, ISOs and NSOs then outstanding
will become exercisable in full, the forfeiture restrictions
on any RSAs to the extent then applicable will lapse and
amounts payable with respect to PUs and AOs then outstanding
will become payable in full. Also, under certain awards
made under the 1997 LTSIP Restatement (see discussion below)
the occurrence of a "change of control of XCL" could obligate
the Company with respect to making payments with respect to awards
in cash rather than in kind or in obligating the Company to repurchase
individuals shares of Common Stock or Preferred Stock received
under certain 1997 LTSIP Restatement awards. Under certain
circumstances which are unforeseen at this time, the existence
of the change of control protections for individuals
receiving awards under the 1997 LTSIP Restatement and
resulting obligations to the Company may impede the
consummation of a change of control of the Company.
Option Exercise Price. Under the 1997 LTSIP
Restatement, the Compensation Committee shall determine 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 or Preferred Stock traded on the relevant date,
as reported on the Exchange, or other national securities exchange,
or an automated quotation system, or pursuant to a good faith
determination by the Board of Directors, if not so traded in a
public market.
Awards to Management
The Board made certain awards under the 1997
LTSIP Restatement on June 5,1997. These awards are subject
to approval by the shareholders of the Company of the 1997
LTSIP Restatement. If such shareholder approval is not
obtained, these awards will be null and void.
Set forth below is summary information in tabular
form regarding the grant of RSAs and NSOs pursuant to the
1997 LTSIP Restatement. The information set forth in
column headed "Number of Units" has not been adjusted to
reflect the proposed Reverse Stock Split. See Proposal 2
herein. The closing price on the Exchange for the Common
Stock was $0.21875 on June 2, 1997, and the fair market value
of the Amended Series A Preferred Stock, based upon last sales
price information in the PORTAL Market (as defined) as supplied
by Jefferies & Company, Inc. was $85.00 on June 2, 1997.
Mr. Miller's Appreciation Option is not included because of
the indeterminate nature of the Award. See Proposal 4.
Long Term Stock Incentive Plan as Amended and Restated
Effective June 1, 1997
Number
Name and Position Grant Type of
Units
Marsden W. Miller, Jr., RSA - Common Stock (a) 15,000,000
Chairman and Chief NSO - Amended Series
Executive Officer A Stock (b) 110,000
John T. Chandler, RSA - Common Stock (c) 5,000,000
President RSA - Amended Series
A Stock (c) 20,000
NSO - Common Stock (d) 2,000,000
NSO - Amended Series
A Stock (e) 5,000
Danny M. Dobbs, NSO - Common Stock (f) 6,000,000
Executive Vice President NSO - Amended Series
and Chief Operating Officer A Stock (g) 25,000
Benjamin B. Blanchet, NSO - Common Stock (h) 6,000,000
Executive Vice NSO - Amended Series
President A Stock (i) 25,000
Steven B. Toon, Chief NSO - Common Stock (j) 6,000,000
Financial Officer
Executive Group RSA - Common Stock (a)(c) 20,000,000
RSA - Amended Series 20,000
A Stock (c)
NSO - Amended Series 165,000
A Stock (e)(g) (i)
NSO - Common Stock (d)(f)(h)(j) 20,000,000
Non-Executive Director NSO - Common Stock (k) 6,000,000
Non-Executive Officer NSO - Common Stock (h) 4,000,000
Employee Group NSO - Amended Series 5,000
A Stock (l)
_____________________
(a) Effective June 1, 1997, M. W. Miller, Jr.
was granted an RSA for 15,000,000 shares of Common Stock.
These shares are subject to forfeiture if Mr. Miller's
employment with the Company other than by reason of disability,
death or involuntary termination without cause prior to the
specified "lapse dates." The "lapse dates" (i.e., the dates as
of which forfeiture restrictions ceases to become
applicable with respect to shares under the RSA are June 1,
1999, June 1, 2000, June 1, 2001 and June 1, 2002 as to,
respectively, 1,500,000 shares, 3,000,000 shares, 4,500,000
shares and 6,000,000 shares, provided that the then per share
fair market value of the Company's Common Stock as of such
dates is, respectively, $0.3802, $0.4372, $0.5028 and $0.5782.
In addition, the forfeiture penalties (to the extent they have
not theretofore lapsed) will lapse in full on June 1, 2007 if
Mr. Miller is employed by the Company on such date. Pursuant
to a "catch-up" provision, the potential forfeiture penalties
will also lapse if the Company's Common Stock was not equal to
or greater than the Fair Market Value specified above but
thereafter reaches at a relevant forfeiture penalty lapse date the
Fair Market Value designated for such date as described
above. The forfeiture penalties will also lapse upon Mr.
Miller's termination of employment by reason of death,
disability, involuntary termination without cause or voluntary
termination for good reason.
(b) Effective June 1, 1997, M. W. Miller, Jr. was
granted a NSO to purchase 110,000 shares of Amended Series A
Preferred Stock for an option exercise price of
$85.00 per share (aggregate purchase price of $9,350,000).
Such NSO is exercisable as follows: as to 27,500 shares on
June 1, 2000; as to 66,000 shares on June 1, 2001 and as to
16,500 shares on June 1, 2002. Mr. Miller's NSO will expire on
June 1, 2007 or, if earlier, the date his employment is
terminated by the Company for cause or the date he
voluntarily terminates his employment without good reason.
(c) Effective June 1, 1997, John T. Chandler was granted
a RSA for 5,000,000 shares of Common Stock and 20,000 shares
of Amended Series A Stock. These shares are subject to
forfeiture if Mr. Chandler's employment with the Company other
than by reason of disability, death or involuntary termination
without cause prior to the specified "lapse dates."
The "lapse dates" (i.e., the dates as of which
forfeiture restrictions ceases to become applicable with
respect to shares under the RSA are June 1, 1999 as to
1,000,000 shares of Common Stock and 1,000 shares of Amended
Series A Stock, June 1, 2000 as to 1,500,000 shares of Common
Stock and 1,500 shares of Amended Series A Stock, June 1, 2001
as to 2,500,000 shares of Common Stock and 2,500 shares of
Amended Series A Stock[, provided that the then per share
fair market value of the Company's Common Stock as of such
dates is, respectively, $0.3802, $0.4372 and $0.5028]. In
addition, the forfeiture penalties (to the extent they have
not theretofore lapsed) will lapse in full on June 1, 2007 if
Mr. Chandler is employed by the Company on such date.
Pursuant to a "catch-up" provision, the potential forfeiture
penalties will also lapse if the Company's Common Stock was
not equal to or greater than the Fair Market Value specified
above but thereafter reaches at a relevant forfeiture penalty
lapse date the Fair Market Value designated for such date as
described above. The forfeiture penalties will also lapse upon Mr.
Chandler's termination of employment by reason of death,
disability, involuntary termination without cause or voluntary
termination for good reason.
(d) Effective June 1, 1997, John T. Chandler was
granted a NSO to purchase 2,000,000 shares of Common Stock
for an option exercise price of $0.25 per share (aggregate
purchase price of $500,000). Such NSO is exercisable as
follows: as to 666,666 shares on June 1, 1999; as to 666,667
shares on June 1, 2000 and as to 666,667 shares on June 1, 2001.
Mr. Chandler' NSO will expire on June 1, 2007 or, if earlier, the
date his employment is terminated by the Company for cause or
the date he voluntarily terminates his employment without good
reason.
(e) Effective June 1, 1997, John T. Chandler was
granted a NSO to purchase 5,000 shares of Amended Series A
Preferred Stock for an option exercise price of $85.00 per
share (aggregate purchase price of $425,000). Such NSO is
exercisable as follows: as to 1,250 shares on June 1, 2000;
as to 1,750 shares on June 1, 2001 and as to 2,000 shares on
June 1, 2002. Mr. Chandler' NSO will expire on June 1, 2007
or, if earlier, the date his employment is terminated by the
Company for cause or the date he voluntarily terminates his
employment without good reason.
(f) Effective June 1, 1997, Danny M. Dobbs was granted a
NSO to purchase 6,000,000 shares of Common Stock for an option
exercise price of $0.25 per share (aggregate purchase price of
$1,500,000). Such NSO is exercisable as follows: as to
2,000,000 shares on June 1, 1999; as to 2,000,000 shares on
June 1, 2000 and as to 2,000,000 shares on June 1, 2001. Mr.
Dobbs' NSO will expire on June 1, 2007 or, if earlier, the
date his employment is terminated by the Company for cause or
the date he voluntarily terminates his employment without good
reason.
(g) Effective June 1, 1997, Danny M. Dobbs was granted a
NSO to purchase 25,000 shares of Amended Series A Preferred
Stock for an option exercise price of $85.00 per share
(aggregate purchase price of $2,125,000). Such NSO is
exercisable as follows: as to 6,250 shares on June 1, 2000;
as to 8,750 shares on June 1, 2001 and as to 10,000 shares on
June 1, 2002. Mr. Dobbs' NSO will expire on June 1, 2007 or,
if earlier, the date his employment is terminated by the
Company for cause or the date he voluntarily terminates his
employment without good reason.
(h) Effective August 1, 1997, Benjamin B. Blanchet
was granted a NSO to purchase 6,000,000 shares of Common Stock
for an option exercise price of $0.25 per share
(aggregate purchase price of $1,500,000). Such NSO is
exercisable as follows: as to 2,000,000 shares on August
1, 1999; as to 2,000,000 shares on August 1, 2000 and as to
2,000,000 shares on August 1, 2001. Mr. Blanchet's NSO will
expire on August 1, 2007 or, if earlier, the date his employment
is terminated by the Company for cause or the date he voluntarily
terminates his employment without good reason. This grant was approved at
the June 5, 1997 Board meeting, subject to Mr. Blanchet's
joining the Company. Mr. Blanchet joined the Company on August 1,
1997 and became Executive Vice President of the Company on
October 27, 1997.
(i) Effective August 1, 1997, Benjamin B. Blanchet
was granted a NSO to purchase 25,000 shares of Amended Series
A Preferred Stock for an option exercise price of $85.00 per
share (aggregate purchase price of $2,125,000). Such NSO is
exercisable as follows: as to 6,250 shares on August 1, 2000;
as to 8,750 shares on August 1, 2001 and as to 10,000 shares
on August 1, 2002. Mr. Blanchet's NSO will expire on August 1,
2007 or, if earlier, the date his employment is terminated by
the Company for cause or the date he voluntarily terminates
his employment without good reason. This grant was approved at
the June 5, 1997 Board meeting, subject to Mr. Blanchet's
joining the Company. Mr. Blanchet joined the Company on August 1,
1997, and became Executive Vice President on October 27, 1997.
(j) Effective October 6, 1997, Steven B. Toon
was granted a NSO to purchase 6,000,000 shares of Common Stock
for an option exercise price of $0.25 per share
(aggregate purchase price of $1,500,000). Such NSO is
exercisable as follows: as to 2,000,000 shares on October
6, 1999; as to 2,000,000 shares on October 6, 2000 and as to
2,000,000 shares on October 6, 2001. Mr. Toon's NSO will expire
on October 6, 2007 or, if earlier, the date his employment is
terminated by the Company for cause or the date he voluntarily
terminates his employment without good reason. This grant was
approved at the June 5, 1997 Board meeting, subject to Mr. Toon's
joining the Company. Mr. Toon joined the Company on October 6, 1997,
and became the Chief Financial Officer of the Company on October 27, 1997.
(k) Effective June 1, 1997, each of Messrs. Hummel,
Palliser, Melman, Reinhardt, Hofheinz and Fetters, directors,
were each granted a NSO to purchase 1,000,000 shares of Common
Stock at an option exercise price of $0.25 per share
(aggregate purchase price to each grantee of $250,000),
exercisable as follows: 250,000 shares on June 1, 1998;
250,000 shares on June 1, 1999, and 500,000 shares on June 1,
2000. These NSOs will expire on June 1, 2007.
(l) Effective June 1, 1997, Mr. Richard Kennedy, a
Vice President, was granted a NSO to purchase 4,000,000 shares
of Common Stock at an exercise price of $0.25 per
share (aggregate purchase price of $1,000,000),
and a NSO to purchase 5,000 shares of Amended Series A Stock
at an exercise price of $85.00 per share (aggregate
purchase price of $425,000). Such Common Stock NSO is
exercisable as follows: as to 1,333,333 shares on June 1, 1999; as to
1,333,333 shares on June 1, 2000 and as to 1,333,334 shares
on June 1, 2001. Mr. Kennedy's NSO will expire on June 1, 2007
or, if earlier, the date his employment is terminated by the
Company for cause or the date he voluntarily terminates his
employment without good reason. Such Amended Series A Stock
NSOs are exercisable as follows: as to 1,250 shares on June
1, 2000; as to 1,750 shares on June 1, 2001 and as to 3,000
shares on June 1, 2002. Mr. Kennedy's NSOs will expire on
August 1, 2007 or, if earlier, the date his employment is
terminated by the Company for cause or the date he voluntarily
terminates his employment without good reason.
Effective June 1, 1997, M. W. Miller, Jr. was granted
an Appreciation Option with respect to appreciation in
the Company's total market capitalization (as defined) from
and after June 1, 1997. See "Proposal 4 Approval of
Appreciation Option for M.W. Miller, Jr." below for a more
definitive discussion of such grant (which is subject
to and conditioned upon a specific vote of approval by the
shareholders of the Company.)
Accounting Effect
The Company anticipates that the aforementioned
Awards will result in a significant non-cash charge to earnings
which is expected to be recognized in the fourth quarter.
As a result of the accounting treatment for such non-cash
charge, the Company does not expect any change to its net
worth. As of the date hereof the amount of such charge is
indeterminate.
Federal Income Tax Effects
The following is a general summary of the principle
federal income tax effects under current law to award
recipients and to the Company in connection with
the various awards which may be granted under the 1997 LTSIP
Restatement. These descriptions do not purport to cover
all of the potential tax consequences with respect to such
awards.
(i) An NSO (including for this purpose an RO relating to
Common Stock) is a right to purchase a specified number
of shares of Common Stock or Preferred Stock at a fixed
option price over a specified period of time. In the case of
an NSO to purchase shares of Preferred Stock, the specified
number of shares acquirable upon exercise thereof may, as determined
by the Committee and specified in the agreement evidencing
the NSO, be increased (without a corresponding increase in
the aggregate option price) to include a number of shares
based upon dividends which would have been received by the
optionee if he had owned outright the shares he is
acquiring upon exercise of the NSO between the date of its
grant and the date of such exercise. An optionee will realize
no income for federal income tax purposes upon the grant of a
NSO under the 1997 LTSIP Restatement, but will recognize
income upon the exercise of the NSO in an amount equal to
the excess of the fair market value of the shares
received upon exercise (including dividend accrual shares of
Preferred Stock in the case of a NSO to acquire shares of
Preferred Stock) over the aggregate amount paid to acquire
such shares. Subject to certain limitations imposed by
Section 162(m) of the Code (see discussion below), the Company
will be entitled to a deduction for federal income tax purposes
in the same year as, and in an amount equal to, the income
recognized by the optionee. The optionee's adjusted basis for the
shares of Common Stock or Preferred Stock received upon exercise
will be the fair market value of such shares as of the date of exercise.
(ii) An ISO is a right to purchase at a fixed option
price, over a period not to exceed ten years, a specified
number of shares of Common Stock (an ISO may not be granted to
purchase shares of Preferred Stock), that complies with
Section 422 of the Internal Revenue Code of 1986, as amended
("Code"). An optionee who receives an ISO under the 1997
LTSIP Restatement will recognize no income for federal income
tax purposes upon either the grant or the exercise of such
ISO. Income will be taxable to the optionee upon the sale of
the shares acquired. In general, the adjusted basis for the
shares of Common Stock received upon exercise will be the
option price paid with respect to such shares. The Company
will not be entitled to a deduction upon the exercise of an
ISO. However, if the shares are sold within a period of one
year from the date of exercise, the optionee will recognize
compensation income in an amount equal to the
lesser of the excess of the fair market value on the date of
exercise over the option exercise price, or the excess of the
price received upon sale over the option exercise price, and
the Company would be entitled to a corresponding deduction,
subject to the limitations imposed under Section 162(m) of
the Code (see discussion below). The amount by which the fair
market value of the shares of Common Stock received upon the
exercise of an ISO exceeds the exercise price is an item of
tax adjustment under the Code and is therefore included
in alternative minimum taxable income.
(iii) An RSA is Common Stock or Preferred Stock
that is transferred subject to a risk of forfeiture under
certain circumstances and restrictions on transfer of
ownership. RSAs may be made with or without cash payment by the
employee. An individual who receives a grant of restricted stock who
does not elect to be taxed at the time of grant will not recognize
income upon an award of shares of Common Stock or Preferred
Stock, and the Company will not be entitled to a deduction
until the termination of the restrictions. Upon
such termination, the individual will recognize ordinary income
in an amount equal to the fair market value of the Common Stock
or Preferred Stock at that time (less any amount paid by the
employee for such shares), and the Company will be entitled to
a deduction in the same amount, subject to the limitations
imposed under Section 162(m) of the Code (see discussion below).
However, the individual may elect to recognize ordinary income
in the year the restricted stock award is granted in an amount equal
to the fair market value of the shares of Common Stock or Preferred
Stock subject to such award at that time, determined without regard
to the restrictions. In that event, the Company will be entitled to
a deduction in such year and in the same amount. Any gain or
loss recognized by the employee upon subsequent disposition of
the stock will be capital in nature.
(iv) A PU or AO is a promise by the Company to
make payment contingent upon the achievement of one
or more performance targets. Amounts payable in respect of
PUs or AOs are payable in cash, in shares of Common Stock, in shares of
Preferred Stock or in a combination of cash and Common Stock
and/or Preferred Stock. For PUs or AOs, any cash plus the
fair market value of any Common Stock and/or Preferred Stock
received as payment under the 1997 LTSIP Restatement over any
amounts paid to exercise an AO will be considered ordinary
income to the recipient in the year in which paid, and the
Company will be entitled to a deduction in the same year and
in the same amount, subject to the limitations imposed under
Section 162(m) of the Code (see discussion below).
Section 162(m) of the Code limits deductibility of
certain compensation for the Company's Chief Executive Officer
and the additional four executive officers of the Company who
are highest paid and employed at year end to $1 million per
year unless certain conditions are met which result
in compensation being characterized as
"performance based" compensation. Awards under the Plan will
not satisfy the conditions necessary to cause the
compensation earned under them to qualify as "performance-
based" compensation which is not subject to the deductibility
limit of Section 162(m) of the Code. It is the position of
the Board of Directors that the mechanistic approach necessary
in the design of incentive compensation in order to satisfy
the criteria under Section 162(m) of the Code for
compensation to be "performance based" would
unnecessarily compromise the best interests of the Company
and its shareholders.
Certain provisions in the Plan may afford the recipient
of an Award under the Plan with special protections or
payments which are contingent upon a change in the ownership
or effective control of the Company or in the ownership of a
substantial portion of the Company's assets. To the extent
triggered by the occurrence of any such event, these special
protections or payments may constitute "parachute payments"
which, when aggregated with other "parachute payments"
received by the recipient could result in the recipient
receiving "excess parachute payments". The Company would not
be allowed a deduction for any such "excess parachute
payments" and the recipient of such "excess parachute
payments" would be subject to a nondeductible 20% excise tax
upon such payments in addition to income tax otherwise owed
with respect to such payments.
The foregoing summary of the proposed 1997
LTSIP Restatement is qualified in its entirety by reference to
the specific provisions of the 1997 LTSIP Restatement the
full text of which is set forth as Appendix C hereto. The
1997 LTSIP Restatement does not extend the term of the 1992
LTSIP and, therefore, the 1997 LTSIP Restatement will terminate
(and no further awards thereunder will be granted after) June
2, 2002. The fair market value of the Company's Common Stock,
computed as the average of the high and low sale prices for
each, as reported on the American Stock Exchange on [], 1997,
was $[] per share. In view of the fact that there is no
public market for the Amended Series A Preferred Stock, the
fair market value of the Amended Series A Preferred Stock on
[], 1997, determined in good faith by the Board of Directors
based upon the last sales price of the Amended Series A
Preferred Stock in the Private Offering, Resales and Trading
through Automated Linkage ("PORTAL") Market of the National
Association of Securities Dealers, Inc., as reported to the
Company by Jefferies & Company, Inc., was $[] per share.
Vote Required for Approval
The Board of Directors recommends that shareholders
vote FOR Proposal 3. The affirmative vote of a majority of
the votes cast by shareholders present or represented by proxy
and entitled to vote at the Meeting, a quorum being present,
is required to approve this proposal. Unless otherwise
instructed the proxies will be voted "FOR" approval of the
proposal.
PROPOSAL 4 - APPROVAL OF APPRECIATION OPTION FOR M.W. MILLER, JR.
Subject to shareholder approval and pursuant to the
1997 LTSIP Restatement (see Proposal 3 above), the Board
has approved an Appreciation Option for M. W. Miller, Jr. A
copy of the Appreciation Option Agreement is attached hereto
as Appendix D. The Board has determined that the
Appreciation Option to M. W. Miller, Jr. is in the best
interests of the Company and its shareholders in order to,
and is required to, retain the services of Mr. Miller, who
has been instrumental in developing the Company's China
activities and in successfully concluding the Company's recent
$100 million financing. The Appreciation Option would also provide
Mr. Miller with additional incentive to increase the value of the
Company based upon its market capitalization thereby directly
benefiting the shareholders of the Company by increasing the
value of their investments in the Company.
The Appreciation Option Agreement provides Mr. Miller
with the right, upon his payment of the Exercise Price (as
defined below) to additional compensation (payable in cash or
in shares of Common Stock or Preferred Stock or a combination
thereof, as elected by the Company) based upon 5% of the
difference between the market capitalization of the Company as
of June 1, 1997 and the market capitalization of the Company
as of the date that Mr. Miller exercises the Appreciation
Option. For purposes of the Appreciation Option, the
Company's market capitalization is the total fair market value
of the Company's outstanding shares of Common Stock, Preferred
Stock and outstanding options and warrants. In general, fair
market value is determined based on the trading price of
marketable securities and by the Board of Directors as to the
fair market value for securities for which there is no ready
market. Fair market value as of the date of exercise of the
Option is based on the average fair market value of the 30-day
period immediately preceding the date of the Appreciation
Option exercise. On June 1, 1997, the aggregate market
capitalization of the Company was $161,547,223 million. Upon
exercise of his Option, in the event the Company elects to
settle the Option with shares of Stock, Mr. Miller must pay
the Company twenty percent (20%) of the amount he is entitled
to receive upon exercise of the Appreciation Option (before
any reduction as hereinafter set forth), or any increment
thereof, up to an aggregate maximum of $5 million (the
"Exercise Price") in cash. In the event the Company elects to
settle the Option in cash, the amount of cash Mr. Miller will
receive will be reduced by the amount of the Exercise Price.
Because Mr. Miller's Appreciation Option contemplates compensation
determined with reference to increases in the Company's
market capitalization without restriction, there is no
effective limit on the amount of compensation which may become
payable thereunder. Mr. Miller may exercise his Appreciation Option
as of any June 1 or December 1 commencing June 1, 2002 upon 45
days written notice, in whole or in 10% increments. In the event
that Mr. Miller exercises his Appreciation Option for less
than the total amount available thereunder, the percentage
increment as to which it is exercised will cease to be available
to create additional compensation opportunity for Mr. Miller based
upon appreciation thereafter in the Company's market
capitalization. Mr. Miller's Appreciation Option expires on
June 1, 2007 and will remain exercisable at any time prior to
such expiration notwithstanding his termination of employment
with the Company unless such employment is terminated by the
Company for "cause" or is terminated by Mr. Miller without
"good reason." In keeping with the provisions of the 1997
LTSIP Restatement discussed in Proposal 3 - "Change of Control
Provisions," in the event of a "change of control of XCL" the
Appreciation Option will become immediately exercisable and
the Company will be obligated to pay Mr. Miller upon any
exercise of his Appreciation Option at least 40% in cash, of
the net amount payable in respect of such exercise. This
obligation may impede the consummation of a change of control
of the Company.
Federal Income Tax Effects
The following is a general summary of the principal
federal income tax effects of Mr. Miller's Appreciation
Option. Such description does not purport to cover all
potential tax consequences thereof. Mr. Miller will not
recognize any taxable compensation as a result of his
Appreciation Option until his exercise of such Appreciation
Option, in whole or in part. Upon such exercise, Mr. Miller
shall recognize compensation income taxable at ordinary income
rates equal to the net cash he receives (i.e., the cash
received less exercise price owed allocable to such cash) and
the excess of the fair market value of the common stock and/or
preferred stock he receives over the exercise price he paid
which is allocable to such stock upon such exercise. Subject
to certain limitations imposed by section 162(m) of the Code
(see discussion below), the Company will be entitled to a
deduction for federal income tax purposes in the same year as,
and in an amount equal to, the income recognized by Mr. Miller
in connection with such exercise. In the event that Mr.
Miller receives shares of Common Stock and/or Preferred Stock
upon exercise of his Appreciation Option, his basis in such
shares will be equal to their fair market value as of the date
of his receipt thereof. Because Mr. Miller is the Chief
Executive Officer of the Company, section 162(m) of the Code
limits deductibility of certain compensation paid to him
to one million dollars per year unless certain conditions are
met which result in such compensation being characterized
as "performance based" compensation. The amount of
taxable income generated as a result of Mr. Miller's exercise
of the Appreciation Option will constitute compensation for
purposes of section 162(m) of the Code but will not satisfy
the conditions necessary to cause such compensation to qualify
as "performance based" compensation which is not subject to
the deductibility limit of section 162(m) of the Code. It is
the position of the Company that the incentive created by
the Agreement for Mr. Miller to maximize the value of
the Appreciation Option of the Company's market capitalization
is such that the Appreciation Option is in the best interests
of the Company and its shareholders notwithstanding the
loss pursuant to Code section 162(m) of a deduction
for compensation which may be earned by Mr. Miller for
federal income tax purposes pursuant to the Appreciation Option.
Vote Required for Approval
The Board of Directors recommends that shareholders vote
FOR Proposal 4. The affirmative vote of a majority
of the votes cast by shareholders present or represented by
proxy and entitled to vote at the Meeting, a quorum being
present, is required to approve this proposal. Unless otherwise
instructed the 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 to serve as independent accountants of
the Company for the fiscal year ending December 31, 1997.
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
1998 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 1998 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 1998 annual
meeting of shareholders is held on May 19, 1998, as provided
in the Bylaws, proposals of shareholders intended to be
presented at that meeting should be received by the Company
prior to January 20, 1998.
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 Special
Meeting in Lieu 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 for the fiscal year
ended December 31, 1996, has been mailed to shareholders on or
about May 15, 1997. 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.
Yours sincerely,
MARSDEN W. MILLER, JR.
Chairman
and Chief Executive Officer
November 10, 1997
<PAGE>
APPENDIX A
On October 27, 1997, the Board of Directors of the
Company unanimously adopted the following resolutions:
RESOLVED: that Article FOURTH of the
Certificate of Incorporation be amended and restated by
adding the following provisions thereto:
" Simultaneously with the effective date of this Restated
Certificate of Incorporation (the "Effective Date"),
each share of Common Stock, par value $.01 per share,
issued and outstanding immediately prior to the
Effective Date (the "Old Common Stock") shall
automatically and without any action on the part of the
holder thereof be reclassified as and changed into one-
[] (1/[]) of a share of the Corporation's Common
Stock, par value $.01 per share (the "New Common
Stock"), subject to the treatment of fractional share
interests as described below. Each holder of a
certificate or certificates which immediately prior to
the Effective Date represented outstanding shares of Old
Common Stock (the "Old Certificates", whether one or more)
shall be entitled to receive upon surrender of such Old
Certificates to the Corporation's Transfer Agent, or an
Exchange Agent appointed by the Corporation, for
cancellation, a certificate or certificates (the "New
Certificates", whether one or more) representing the number
of whole shares of the New Common Stock into which and for
which the shares of the Old Common Stock formerly
represented by such Old Certificates so surrendered, are
reclassified under the terms hereof. From and after the
Effective Date, Old Certificates shall represent only the
right to receive New Certificates (and, where
applicable, cash in lieu of fractional shares, as provided
below) pursuant to the provisions hereof. No certificates or
scrip representing fractional share interests in New
Common Stock will be issued, and no such fractional
share interest will entitle the holder thereof to
vote, or to any rights of a shareholder of the
Corporation. A holder of Old Certificates shall receive,
in lieu of any fraction of a share of New
Common Stock to which the holder would otherwise be
entitled, a cash payment therefor on the basis of the
closing price of the Old Common Stock on the
American Stock Exchange, Inc. on the Effective Date,
as reported on the composite tape of the American Stock
Exchange, Inc. (or in the event the Corporation's
Common Stock is not so traded on the
Effective Date, such closing price on the next preceding
day on which such stock was traded on the American
Stock Exchange, Inc.). The Corporation may retain a third
party to collect and pool fractional share interests, sell
the same, and return payment to the holders of the
interests. If more than one Old Certificate shall be
surrendered at one time for the account of the same
stockholder, the number of full shares of New Common Stock
for which New Certificates shall be issued shall be
computed on the basis of the aggregate number of shares
represented by the Old Certificates so surrendered. In
the event that the Corporation's Transfer Agent or
Exchange Agent determines that a holder of Old
Certificates has not tendered all his certificates
for exchange, the Transfer Agent or Exchange Agent shall
carry forward any fractional share until all certificates
of that holder have been presented for exchange such
that payment for fractional shares to any one person
shall not exceed the value of one share. If any New
Certificate is to be issued in a name other than that
in which the Old Certificates surrendered for exchange
are issued, the Old Certificates so surrendered shall be
properly endorsed and otherwise in proper form for
transfer, and the person or persons requesting such
exchange shall affix any requisite stock transfer tax
stamps to the Old Certificates surrendered, to provide
funds for their purchase, or establish to the
satisfaction of the Transfer Agent or the Exchange
Agent that such taxes are not payable."
;and it was further
RESOLVED: that any share of New Common Stock to be
issued in exchange for shares of Old Common Stock and any cash
to be paid in lieu of fractional share interests in New
Common Stock shall revert in full ownership to the Company
one year after the Effective Date if such shares and cash
are not claimed by the persons entitled thereto; and it was
further
RESOLVED: that the shares of New Common Stock to
be issued in exchange for shares of Old Common Stock shall,
upon such issuance, be deemed to have been duly authorized
and will be fully paid, validly issued and nonassessable; and
it was further
RESOLVED: that the appropriate officers of the Company be,
and they hereby are authorized and directed to adjust the
capital accounts of the Company to transfer an amount from
capital to surplus to cover the aggregate decrease in the par
value of the issued shares of New Common Stock in light of
the adoption of the foregoing resolutions; and it was further
RESOLVED: that the Certificate of Incorporation of the
Corporation be amended to reflect the aforementioned amendment to
Article FOURTH and restated in accordance with Section 245(b) of the
Delaware General Corporation Law to read in its entirety as provided in
Appendix B attached hereto and that such Certificate of
Incorporation, as so amended and restated (the "Restated
Certificate of Incorporation"), be submitted to the
stockholders of the Corporation for their approval; and it was
further
RESOLVED: that the appropriate officers of the
Corporation are hereby authorized and directed to do all
things and to prepare, execute, deliver, file, record and
affix the Corporate seal to all agreements, documents and
other instruments, their execution thereof to be
conclusive evidence of their approval thereof and their
authority so to do, including, without limitation,
subject to the receipt of the requisite approval of the
stockholders, the Restated Certificate of Incorporation,
which in their sole judgement are deemed necessary or
advisable to implement the foregoing resolutions.
APPENDIX B
RESTATED CERTIFICATE OF INCORPORATION
OF XCL LTD.
1. The name of the corporation (which is
hereinafter referred to as the "Corporation") is XCL LTD.
2. The original Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on
December 30, 1987, under the name The Exploration Company of
Louisiana, inc. (the "Original Certificate").
3. This Restated Certificate of Incorporation has
been duly proposed by resolutions adopted and declared advisable
by the Board of Directors of the Corporation, duly adopted by the
stockholders of the Corporation at a meeting duly called and
held, and duly executed and acknowledged by the officers of
the Corporation in accordance with the provisions of
Sections 103, 242 and 245 of the General Corporation Law of
the State of Delaware and, restates, integrates and further
amends the provisions of the Original Certificate and, upon
filing with the Secretary of State in accordance with Section
103, shall thenceforth supersede the Original Certificate as
amended by all amendments filed subsequent thereto prior to
the date hereof and shall, as it may thereafter be amended in
accordance with its terms and applicable law, be the Restated
Certificate of Incorporation of the Corporation.
4. The text of the Original Certificate, as amended,
is hereby amended and restated to read in its entirety as
follows:
FIRST: The name of this corporation (the
"Corporation") is XCL Ltd.
SECOND: The address of the Corporation's
registered office in the State of Delaware is 1105 North Market
Street, Suite 1300, in the City of Wilmington, County of New
Castle.
THIRD: The nature of the business and the purposes
to be conducted, promoted and carried on are:
To engage in any lawful act or activity
for which corporations may be organized under the
Delaware General Corporation Law, either for its
own account, or for the account of others as agent,
and either as agent or principal, to enter upon or
engage in any kind of business of any nature
whatsoever, which corporations organized under the
Delaware General Corporation Law may engage; to the
extent not prohibited thereby, to enter upon and engage
in any kind of business of any nature whatsoever and to
acquire real property and personal property in any other
state of the United States of America, any foreign
nation, and any territory of any country to the extent
permitted by the laws of such other state, nation or
territory.
FOURTH: A. 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 2,400,000
shares of "Preferred Stock," par value $1.00 per
share, and 500,000,000 shares of "Common Stock," par value of
$0.01 per share. Simultaneously with the effective date of
this Restated Certificate of Incorporation (the "Effective
Date"), each share of Common Stock, par value $.01 per
share, issued and outstanding immediately prior to the
Effective Date (the "Old Common Stock") shall automatically
and without any action on the part of the holder thereof be
reclassified as and changed into one-[] (1/[]) of a share of
the Corporation's Common Stock, par value $.01 per share
(the "New Common Stock"), subject to the treatment of
fractional share interests as described below. Each holder of
a certificate or certificates which immediately prior to the
Effective Date represented outstanding shares of Old Common
Stock (the "Old Certificates", whether one or more) shall be
entitled to receive upon surrender of such Old Certificates
to the Corporation's Transfer Agent, or an Exchange Agent
appointed by the Corporation, for cancellation, a
certificate or certificates (the "New Certificates", whether
one or more) representing the number of whole shares of the New
Common Stock into which and for which the shares of the Old
Common Stock formerly represented by such Old Certificates so
surrendered, are reclassified under the terms hereof. From and
after the Effective Date, Old Certificates shall represent only the
right to receive New Certificates (and, where applicable, cash
in lieu of fractional shares, as provided below) pursuant
to the provisions hereof. No certificates or scrip
representing fractional share interests in New Common Stock
will be issued, and no such fractional share interest will
entitle the holder thereof to vote, or to any rights of a
shareholder of the Corporation. A holder of Old Certificates shall
receive, in lieu of any fraction of a share of New Common Stock to
which the holder would otherwise be entitled, a cash payment
therefor on the basis of the closing price of the Old Common Stock
on the American Stock Exchange, Inc. on the Effective Date, as
reported on the composite tape of the American Stock Exchange, Inc.
(or in the event the Corporation's Common Stock is not so traded on
the Effective Date, such closing price on the next preceding
day on which such stock was traded on the American Stock
Exchange, Inc.). The Corporation may retain a third party to
collect and pool fractional share interests, sell the same,
and return payment to the holders of the interests. If more
than one Old Certificate shall be surrendered at one time
for the account of the same stockholder, the number of full
shares of New Common Stock for which New Certificates shall be
issued shall be computed on the basis of the aggregate number
of shares represented by the Old Certificates so
surrendered. In the event that the Corporation's Transfer
Agent or Exchange Agent determines that a holder of Old
Certificates has not tendered all his certificates for
exchange, the Transfer Agent or Exchange Agent shall carry
forward any fractional share until all certificates of that
holder have been presented for exchange such that payment
for fractional shares to any one person shall not exceed the
value of one share. If any New Certificate is to be issued in
a name other than that in which the Old Certificates
surrendered for exchange are issued, the Old Certificates so
surrendered shall be properly endorsed and otherwise in
proper form for transfer, and the person or persons
requesting such exchange shall affix any requisite stock
transfer tax stamps to the Old Certificates surrendered, to
provide funds for their purchase, or establish to the
satisfaction of the Transfer Agent or the Exchange Agent
that such taxes are not payable. The Board of 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. The number of shares of the Preferred Stock
initially authorized to be issued as Amended Series A,
Cumulative Convertible Preferred Stock[,] [and] Series B,
Cumulative Preferred Stock [and Series F, Cumulative
Convertible Preferred Stock] and the relative rights and
preferences of such shares are set forth in Paragraphs B[,]
and [C] [and D], of this Article FOURTH. Authority is hereby
expressly vested in the board of directors to increase the
number of authorized shares of such series of Preferred
Stock and to divide the Preferred Stock into additional
series and, within the limitations imposed by applicable
law, to fix and determine the relative rights and
preferences of the shares of any series so established by
resolution of the board of directors and to provide for the
issuance thereof. Each series shall be so designated as to
distinguish the shares thereof from the shares of all other
series and classes. All shares of Preferred Stock shall be
identical except as to the following relative rights and
preferences, as to which there may be variations between
different series:
(1) the rate of dividend;
(2) the price at and the terms and conditions on which
shares may be redeemed or otherwise purchased;
(3) the amount payable upon shares in the event of
dissolution of the Corporation;
(4) sinking fund provisions for the redemption or
purchase of shares;
(5) the terms and conditions on which the shares
may be converted, if the shares of a series are issued with the
privilege of conversion;
(6) voting rights; and
(7) such other preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or
resolutions providing for the issue of such stock adopted by
the Board of Directors.
B. The Corporation shall have the authority to
issue up to [] shares of Preferred Stock, which shall be
designated Amended Series A, Cumulative Convertible
Preferred Stock (the "Amended Series A Preferred Stock"),
each share of Amended Series A Preferred Stock being
identical with each other share of Amended Series A
Preferred Stock and all shares of Amended Series A Preferred
Stock having the following characteristics, rights and
preferences:
Section 1. Designation; Number of Shares.
The shares of the series authorized by this resolution shall
be designated as Amended Series A, Cumulative Convertible
Preferred Stock (the "Convertible Preferred Stock" or
"Amended Series A Preferred Stock"). The number of shares
initially constituting such series shall be limited to []
Million [] Hundred Twenty Thousand ([]). Such number of
shares may be decreased, at any time and from time to time, by
resolution of the Board of Directors; provided, however, that
no decrease shall reduce the number of shares of
Convertible Preferred Stock to a number less than the number of
shares then outstanding.
Section 2. Dividends.
(a) Amount. The holders of Convertible Preferred
Stock shall be entitled to receive, when, as and if declared by
the Board of Directors, out of funds legally available for
the payment of dividends, dividends at the rate of
$8.075 per share per annum, and no more, payable semi
annually, on May 1, and November 1 in each year, commencing
November 1, 1997, except that if such date is not a business
day then such dividend shall be payable on the next
succeeding business day (the "Dividend Payment Date" or
"Dividend Payment Dates") (as used herein, the term
"business day" shall mean any day except a Saturday, Sunday or
day on which banking institutions are authorized or
required by law to close in New York City or in the City of
Lafayette, Louisiana). Such dividends shall be cumulative
(whether or not declared) and shall accrue, without
interest, from the first day in which such dividend may be
payable as provided herein, except that with respect to the
first semi-annual dividend, such dividend shall accrue from
the date of issuance of such shares of Convertible Preferred
Stock (the "Issue Date"). Dividends shall be payable to
holders of record as they appear on the share transfer
records of the Corporation on such record dates as may be
fixed by the Board of Directors, not more than sixty (60) days
nor less than ten (10) days preceding such Dividend
Payment Date. Dividends in arrears may be declared and paid at
any time, without reference to any regular Dividend
Payment Date, to holders of record on such date, not more
than sixty (60) days preceding the payment date thereof, as
may be fixed by the Board of Directors of the Corporation. The
amount of dividends payable on shares of Convertible Preferred
Stock for each full semi-annual dividend period (the "Semi-
Annual Dividend"), shall be computed by dividing by two the
annual rate per share set forth in this subsection (a).
During the period commencing on the Issue Date to and including
the Dividend Payment Date on November 1, 2000, dividends shall
be paid in additional fully paid and nonassessable shares of
Convertible Preferred Stock (the "Preferred Dividend Stock"), and,
thereafter, dividends shall be paid in cash, or, at the sole election
of the Corporation, in shares of Preferred Dividend Stock.
The amount of Preferred Dividend Stock payable on the
Convertible Preferred Stock for each semi-annual dividend
period shall be computed by dividing the amount of the full
SemiAnnual Dividend by eighty-five (85). No fractional shares
of Preferred Dividend Stock shall be issued by the
Corporation. Instead of any fractional share of Preferred
Dividend Stock that would otherwise be issuable to a holder by
way of a dividend on the Convertible Preferred Stock, the
Corporation shall either (i) pay a cash adjustment in respect
of such fractional share in an amount equal to the
same fraction of $85.00 computed to the nearest whole cent
or (ii) aggregate all such fractional shares into a whole
number of shares and sell such aggregated fractional shares on
behalf of the holders entitled thereto in a public or
private sale and distribute the net cash proceeds from the sale
thereof to such holders pro rata. If the Corporation
shall elect so to aggregate and sell such fractional shares, it
shall endeavor to use its best efforts to secure the best
available sales price for such shares but shall not be
obligated to secure the highest price obtainable for such
shares. The amount of Preferred Dividend Stock issuable to
a holder by way of a dividend shall be computed on the basis of
the aggregate number of shares of Convertible Preferred Stock
registered in such holder's name on the record date fixed
for the payment of such dividend. Dividends payable on the
Convertible Preferred Stock for any period less than a full
semiannual period shall be computed on the basis of a 360-day
year of twelve 30-day months.
(b) Priority. If dividends upon any shares of
Convertible Preferred Stock, or any other outstanding class or
series of Stock of the Corporation ranking on a parity with
the Convertible Preferred Stock as to dividends, are in
arrears, all dividends or other distributions declared upon
each class or series of such Stock (other than dividends
paid in Stock of the Corporation ranking junior to the
Convertible Preferred Stock as to dividends and upon
liquidation, dissolution or winding up) may only be declared
pro rata so that in all cases the amount of dividends or
other distributions declared per share on the Convertible
Preferred Stock and such class or series bear to each other the
same ratio that the accrued and unpaid dividends per share
on the shares of the Convertible Preferred Stock and such
class or series bear to each other. Except as set
forth above, if dividends upon any shares of Convertible
Preferred Stock are in arrears: (i) no dividends (in cash,
Stock or other property) may be paid, declared or set aside
for payment or any other distribution made on any Stock of
the Corporation ranking junior to the Convertible Preferred
Stock as to dividends (other than dividends or distributions
in Stock of the Corporation ranking junior to the
Convertible Preferred Stock as to dividends and upon
liquidation, dissolution or winding up) and upon
liquidation, dissolution or winding up; and (ii) no Stock of
the Corporation ranking junior to or on a parity with the
Convertible Preferred Stock as to dividends may be redeemed,
purchased or otherwise acquired by the Corporation, except
by conversion of such Stock into, or exchange of such Stock
for, Stock of the Corporation ranking junior to the
Convertible Preferred Stock as to dividends and upon
liquidation, dissolution or winding up.
(c) No Interest. No interest, sum of money in lieu of
interest, or other property or securities shall be payable
in respect of any dividend payment or payments which are
accrued but unpaid. Dividends paid on shares of Convertible
Preferred Stock in an amount less than the total amount of
such dividends at the time accumulated and payable on such
shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.
Section 3. Conversion Privilege.
(a) Right of Conversion. At any time on or
after May 20, 1998 (the "Conversion Date"), each share of
Convertible Preferred Stock shall be convertible at the
option of the holder thereof into fully paid and
nonassessable shares of Common Stock ("Conversion Stock"), at
a conversion rate per full share of Convertible Preferred Stock
determined by dividing $85.00 by the conversion price per
share of Common Stock in effect on the date such share is
surrendered for conversion, or into such additional or other
securities, cash or property and at such other rates as
required in accordance with the provisions of this Section
3, except that if shares have been called for redemption,
the conversion right will terminate as to the shares called
for redemption at 5:00 p.m. New York City time, on the
business day prior to the date fixed for such redemption.
For purposes of this resolution, the "conversion price"
per share of Convertible Preferred Stock shall initially be $0.50
and shall be adjusted from time to time in accordance with the
provisions of this Section 3. For purposes of this resolution,
the "conversion rate" per share of Convertible Preferred Stock
shall initially be 170 shares of Conversion Stock and shall be
adjusted from time to time in accordance with the provisions of
this Section 3. Each share of Convertible Preferred Stock may be
converted in whole or in part.
(b) Conversion Procedures. Any holder of shares
of Convertible Preferred Stock desiring to convert such shares
into Common Stock shall surrender the certificate or
certificates evidencing such shares of Convertible Preferred
Stock at the office of the transfer agent for the
Convertible Preferred Stock, which certificate or
certificates, if the Corporation shall so require, shall be
duly endorsed to the Corporation or in blank, or accompanied by
proper instruments of transfer to the Corporation or in blank,
accompanied by irrevocable written notice to the
Corporation that the holder elects to convert such shares of
Convertible Preferred Stock and specifying the name or names
(with address or addresses) in which a certificate or
certificates evidencing shares of Common Stock are to be
issued.
Except as otherwise described in Section 3(i) or in this
paragraph, no payments or adjustments in respect of dividends on
shares of Convertible Preferred Stock surrendered for conversion,
whether paid or unpaid and whether or not in arrears, or on account
of any dividend on the Conversion Stock issued upon conversion shall
be made by the Corporation upon the conversion of any shares of
Convertible Preferred Stock at the option of the holder,
including, without limitation, the special conversion rights
provided in Section 4. The holder of record of shares of
Convertible Preferred Stock on a dividend record date who
surrenders such shares for conversion during the period
between such dividend record date and the corresponding
Dividend Payment Date will be entitled to receive the
dividend on such Dividend Payment Date notwithstanding the
conversion of such shares; provided, however, that unless
such shares, prior to such surrender, had been called for
redemption on a redemption date during the period between
such dividend record date and the Dividend Payment Date,
such shares must be accompanied, upon surrender for
conversion, by payment from the holder to the Corporation of an
amount equal to the dividend payable on such shares on that
Dividend Payment Date.
The Corporation shall, as soon as practicable
after such surrender of certificates evidencing shares of
Convertible Preferred Stock accompanied by the written
notice and compliance with any other conditions herein
contained, delivered at such office of such transfer agent to
the person for whose account such shares of Convertible
Preferred Stock were so surrendered, or to the nominee or
nominees of such person, certificates evidencing the number of
full shares of Common Stock to which such person shall be
entitled as aforesaid, together with a cash adjustment in
respect of any fraction of a share of Common Stock as
hereinafter provided. Such conversion shall be deemed to
have been made as of the date of such surrender of the
shares of Convertible Preferred Stock to be converted, and
the person or persons entitled to receive the Common Stock
deliverable upon conversion of such Convertible Preferred
Stock shall be treated for all purposes as the record holder or
holders of such Common Stock on such date.
(c) Adjustment of Conversion Price and Conversion
Rate. The conversion price at which a share of Convertible
Preferred Stock is convertible into Common Stock, and the
conversion rate at which shares of Conversion Stock are
issuable upon conversion of Convertible Preferred Stock,
shall be subject to adjustment in certain events including,
without duplication, the following:
(i) In case the Corporation shall pay or make
a dividend or other distribution on its Common Stock
exclusively in Common Stock to all holders of its
Common Stock, the conversion price in effect at the
opening of business on the business day following the
date fixed for the determination of stockholders
entitled to receive such dividend or other distribution
shall be reduced by multiplying such conversion price
by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the
close of business on the date fixed for such
determination and the denominator shall be the sum of
such number of shares and the total number of shares
constituting or included in such dividend or other
distribution, such reduction to become effective
immediately after the opening of business on the day
following the date fixed for such determination. For
the purposes of this paragraph (i), the number of
shares of Common Stock at any time outstanding shall
not include shares held in the treasury of the
Corporation. The Corporation shall not pay any
dividend or make any distribution on shares of Common
Stock held in the treasury of the Corporation.
(ii) In case the Corporation shall pay or
make a dividend or other distribution on its Common
Stock consisting exclusively of, or shall otherwise issue
to all holders of its Common Stock, rights or warrants entitling
the holders thereof to subscribe for or purchase shares of
Common Stock at a price per share less than the Market
Price per share (determined as provided in paragraph (vi) of
this Section 3(c)) of the Common Stock on the date fixed for
the determination of stockholders entitled to receive such rights or
warrants, the conversion price in effect at the opening of
business on the day following the date fixed for such
determination shall be reduced by multiplying such
conversion price by a fraction of which the numerator
shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed
for such determination plus the number of shares of
Common Stock which the aggregate of the offering price
of the total number of shares of Common Stock so
offered for subscription or purchase would purchase at
such Market Price and the denominator shall be the
number of shares of Common Stock outstanding at the close
of business on the date fixed for such
determination plus the number of shares of Common Stock so
offered for subscription or purchase, such reduction to
become effective immediately after the opening of
business on the day following the date fixed for such
determination. In case any rights or warrants referred to
in this paragraph (ii) in respect of which an
adjustment shall have been made shall expire
unexercised, the conversion price shall be readjusted at the
time of such expiration to the conversion price that would
have been in effect if no adjustment had been made on account
of the distribution or issuance of such expired rights or
warrants.
(iii) In case outstanding shares of Common Stock
shall be subdivided into a greater number of
shares of Common Stock, the conversion price in effect at the
opening of business on the day following the day upon which
such subdivision becomes effective shall be
proportionately reduced, and conversely, in case
outstanding shares of Common Stock shall each be
combined into a smaller number of shares of Common Stock,
the conversion price in effect at the opening of business on
the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective
immediately after the opening of business on the day
following the day upon which such subdivision or combination
becomes effective.
(iv) Subject to the last sentence of this
paragraph (iv), in case the Corporation shall, by
dividend or otherwise, distribute to all holders of its Common
Stock evidences of its indebtedness, shares of
any class or series of capital stock, cash or assets
(including securities, but excluding any rights or
warrants referred to in paragraph (ii) of this Section
3(c), any dividend or distribution paid
exclusively in cash and any dividend or distribution
referred to in paragraph (i) of this Section 3(c)), the
conversion price in effect on the day following the date
fixed for the payment of such distribution (the date fixed
for payment being referred to as the "Reference Date")
shall be reduced by multiplying such conversion price by a
fraction of which the numerator shall be the Market Price
per share (determined as provided in paragraph (vi) of this
Section 3(c)) of the Common Stock on the Reference Date less
the fair market value (as determined in good faith by the
Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors) on the
Reference Date of the portion of the evidences of
indebtedness, shares of capital stock, cash and assets so
distributed applicable to one share of Common Stock, and the
denominator shall be such Market Price per share of the
Common Stock, such reduction to become effective immediately
prior to the opening of business on the day following the
Reference Date. If the Board of Directors determines the fair
market value of any distribution for purposes of this
paragraph (iv) by reference to the actual or when issued
trading market for any securities comprising such distribution,
it must in doing so consider the prices in such market over
the same period used in computing the Market Price per share of
Common Stock pursuant to paragraph (vi) of this Section 3(c).
For purposes of this paragraph (iv), any dividend or
distribution that includes shares of Common Stock or rights or
warrants to subscribe for or purchase shares of Common Stock
shall be deemed to be (A) a dividend or distribution of the
evidences of indebtedness, cash, assets or shares of capital
stock other than such shares of Common Stock or rights or
warrants (making any conversion price reduction
required by this paragraph (iv)) immediately followed by (B)
a dividend or distribution of such shares of Common Stock
or such rights or warrants (making any further conversion
price reduction required by paragraph (i) or (ii) of this
Section 3(c)), except (1) the Reference Date of such dividend or
distribution as defined in this paragraph (iv) shall be substituted
as "the date fixed for the determination of stockholders entitled
to receive such dividend or other distribution," "the date fixed
for the determination of stockholders entitled to receive such rights
or warrants" and "the date fixed for such determination" within
the meaning of paragraphs (i) and (ii) of this Section 3(c)
and (2) any shares of Common Stock included in such
dividend or distribution shall not be deemed "outstanding at
the close of business on the date fixed for such
determination" within the meaning of paragraph (i) of this
Section 3(c).
(v) In case the Corporation shall pay or make a dividend
or other distribution on its Common Stock in cash (excluding
(A) cash that is part of a distribution referred to in
paragraph (iv) above and (B) in the case of any quarterly cash
dividend on the Common Stock, the portion thereof that does
not exceed the per share amount of the next preceding
quarterly cash dividend on the Common Stock (as adjusted to
appropriately reflect any of the events referred to in
paragraphs (i), (ii), (iii), (iv) and (v) of this Section
3(c)), or all of such quarterly cash dividend if the amount
thereof per share of Common Stock multiplied by four does
not exceed 15% of the Market Price per share (determined as
provided in paragraph (vi) of this Section 3(c)) of the Common
Stock as of the trading day next preceding
the date of declaration of such dividend, the conversion
price in effect immediately prior to the opening of business
on the day following the date fixed for the payment for
such distribution shall be reduced by multiplying such
conversion price by a fraction of which the numerator shall
be the Market Price per share (determined as provided in
paragraph (vi) of this Section 3(c)) of the Common Stock on
the date fixed for the payment of such distribution less the
amount of cash so distributed and not excluded as provided
above applicable to one share of Common Stock, and the
denominator of which shall be such Market Price per share
of the Common Stock, such reduction to become effective
immediately prior to the opening of business on the day
following the date fixed for the payment of such distribution.
(vi) For the purpose of any computation under
paragraph (ii), (iii), (iv) or (v) of this Section 3(c) or
Section 3(d), the Market Price per share of Common Stock on
any date shall be deemed to be the average of
the Market Prices for the five consecutive trading days ending
with and including the date in question;
provided, however, that (A) if the "ex" date (as
hereinafter defined) for any event (other than the
issuance or distribution requiring such computation) that
requires an adjustment to the conversion price pursuant to
paragraph (i), (ii), (iii), (iv) or (v)
above ("Other Event") occurs after the fifth trading day
prior to the date in question and prior to the "ex" date for
the issuance or distribution requiring such computation (the
"Current Event"), the Market Price for each trading day prior
to the "ex" date for such Other Event shall be adjusted by
multiplying such Market Price by the same fraction by
which the conversion price is so required to be adjusted as a
result of such Other Event, (B) if the "ex" date for any Other
Event occurs after the "ex" date for the Current Event and on
or prior to the date in question, the Market Price for each
trading day on and after the "ex" date for such Other Event
shall be adjusted by multiplying such Market Price by the
reciprocal of the fraction by which the conversion price is so
required to be adjusted as a result of such Other
Event, (C) if the "ex" date for
any Other Event occurs on the "ex" date for the Current Event,
one of those events shall be deemed for purposes of clauses
(A) and (B) of this proviso to have an "ex" date occurring
prior to the "ex" date for the other event, and (D) if
the "ex" date for the Current Event is on or prior to the date
in question, after taking into account any adjustment required
pursuant to clause (B) of this proviso, the Market Price for each
trading day on or after such "ex" date shall be
adjusted by adding thereto the amount of any cash and the
fair market value on the date in question (as
determined in good faith by the Board of Directors in a
manner consistent with any determination of such value for
purposes of paragraph (iv) or (v) of this
Section 3(c), whose determination shall be conclusive
and described in a resolution of the Board of
Directors) of the portion of the rights, warrants,
evidences of indebtedness, shares of capital stock or
assets being distributed applicable to one share of
Common Stock. For purposes of this paragraph, the term "ex"
date, (1) when used with respect to any issuance or
distribution, means the first date on which the Common
Stock trades regular way on the relevant exchanges or
in the relevant market from which the Market Price was
obtained without the right to receive such issuance or distribution
and (2) when used with respect to any subdivision or combination of
shares of Common Stock, means the first date on which the Common
Stock trades regular way on such exchange or in such market
after the time at which such subdivision or
combination becomes effective. As used in this
Section 3(c) or in Section 3(d), the term "Market
Price" of the Common Stock for any day means the last
reported sale price, regular way, on such day, or, if no
sale takes place on such day, the average of the
reported closing bid and asked prices on such day,
regular way, in either case reported on the American
Stock Exchange ("AMEX") Consolidated Transaction Tape, or, if
the Common Stock is not listed or admitted to
trading on the AMEX on such day, on the principal
national securities exchange on which the Common Stock is
listed or admitted to trading, if the Common Stock is listed
on a national securities exchange, or the
National Market Tier of The Nasdaq Stock Market
("Nasdaq NMS") or, if not listed or admitted to trading on
such quotation system, on the principal quotation system on
which the Common Stock may be listed or admitted to
trading or quoted or, if not listed or admitted to
trading or quoted on any national securities exchange or
quotation system, the average of the closing bid and asked
prices of the Common Stock in the over-the-counter market on
the day in question as reported by the National Quotation
Bureau Incorporated, or similar generally accepted reporting
service, or, if not so available in such manner, as
furnished by any AMEX member firm selected from time to
time by the Board of Directors of the Corporation for that
purpose or, if not so available in such manner, as otherwise
determined in good faith by the Board of Directors of the
Corporation.
(vii) No adjustment in the conversion price shall
be required unless such adjustment would require
an increase or decrease of at least 1% in the
conversion price; provided, however, that any
adjustments which by reason of this paragraph (vii) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment.
(viii) Whenever the conversion price is
adjusted as herein provided:
(A) the Corporation shall make an
appropriate corresponding proportional adjustment to
the conversion rate which shall become
effective when the adjustment to the conversion price
becomes effective;
(B) the Corporation shall compute
the adjusted conversion price and conversion rate and
shall prepare a certificate signed by a Vice
President or the Treasurer of the Corporation setting
forth the adjusted conversion price and conversion
rate and showing in reasonable detail the facts upon
which such adjustments are based, and such certificate
shall forthwith be filed with the transfer agent for the
Convertible Preferred Stock; and
(C) as soon as practicable after
the adjustments, the Corporation shall mail to all
record holders of Convertible Preferred Stock at their
last addresses as they shall appear in stock transfer
books of the Corporation a notice stating that the
conversion price
and conversion rate have been adjusted and setting
forth the adjusted conversion price and conversion rate.
(ix) The Corporation from time to time may reduce the
conversion price or increase the conversion rate by any
amount for any period of time if the period is at least
twenty (20) days and the Board of Directors has made a
determination that such reduction (or increase) would be
in the best interest of the Corporation, which determination
shall be conclusive. Whenever the conversion price is reduced
(or the conversion rate increased) pursuant to the preceding sentence,
the Corporation shall mail to the record holders of Convertible
Preferred Stock a notice of the reduction (or increase) at least
fifteen (15) days prior to the date the reduced conversion
price (or increased conversion rate) takes effect, and such
notice shall state the reduced conversion price (or
increased conversion rate) and the period it will be in
effect.
(d) No Fractional Shares. No fractional shares of
Common Stock shall be issued upon conversion of the
Convertible Preferred Stock. If more than one certificate
evidencing shares of Convertible Preferred Stock shall be
surrendered for conversion at such time by the holder, the
number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of
Convertible Preferred Stock so surrendered. Instead of
any fractional share of Common Stock that would otherwise be
issuable to a holder upon conversion of any shares of
Convertible Preferred Stock, the Corporation shall either
(i) pay a cash adjustment in respect of such fractional
share in an amount equal to the same fraction of the Market
Price for the shares of Common Stock as of the day of such conversion
or (ii) aggregate all such fractional shares into a whole number
of shares and sell such aggregated fractional shares on behalf
of the holders entitled thereto in a public or private sale
and distribute the net cash proceeds from the sale
thereof to such holders pro rata. If the
Corporation should so elect so to aggregate and sell such
fractional shares, it shall endeavor to use its best efforts to
secure the best available sales price for such shares but shall
not be obligated to secure the highest price obtainable
for such shares.
(e) Reclassification, Consolidation, Merger or Sale of
Assets. In the event that the Corporation shall be a party to
any transaction pursuant to which the Common Stock is
converted into the right to receive other securities, cash or
other property (including without limitation any
recapitalization or reclassification of the Common Stock
(other than a change in par value, or from par value to no
par value, or from no par value to par value, or as a result of
a subdivision or combination of the Common Stock), any
consolidation of the Corporation with, or merger of the
Corporation into, any other person, any merger or another
person into the Corporation (other than a merger which does
not result in a reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock), any
sale or transfer of all or substantially all of the assets
of the Corporation or any share exchange), then lawful
provisions shall be made as part of the terms of such
transaction whereby the holder of each share of Convertible
Preferred Stock then outstanding shall have the right
thereafter to convert such share only into the kind and
amount of securities, cash and other property receivable upon
such transaction by a holder of the number of shares of Common
Stock into which such share might have been converted
immediately prior to such transaction provided, however,
that if the holders of Common Stock were entitled by the
terms of the transaction to make an election to receive
securities, cash or property, or any combination of the
foregoing, lawful provision shall be made as part of the
terms of such transaction whereby the holder of each share of
Convertible Preferred Stock then outstanding shall have the
right thereafter to convert such share only into the kind
and amount of securities, cash or other property
receivable upon such transaction by a holder of the number of
shares of Common Stock who made one of the elections
provided for in such transaction (as determined by the Board of
Directors, whose determination shall be conclusive) into which
such share might have been converted immediately prior to such
transaction. The Corporation or the person formed by such
consolidation or resulting from such merger or which acquires
such shares or which acquires the Corporation's shares, as
the case may be, shall make provisions in its certificate or
articles of incorporation or other constituting document
to establish such right. Such certificate or articles
of incorporation or other constituting document shall provide for
adjustments which, for events subsequent to the effective date
of such certificate or articles of incorporation or other
constituting document, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this
Section 3. The above provisions shall similarly apply to
successive transactions of the foregoing type.
(f) Reservation of Shares; Etc. The Corporation shall at
all times reserve and keep available, free from
preemptive rights out of its authorized and unissued Common
Stock and/or Common Stock held in treasury, solely for the
purpose of effecting the conversion of the Convertible
Preferred Stock, such number of shares of its Common Stock as
shall from time to time be sufficient to effect the
conversion of all shares of Convertible Preferred Stock from
time to time outstanding. The Corporation shall from time to
time, in accordance with the laws of the State of
Delaware, in good faith and as expeditiously as possible,
endeavor to cause the authorized number of shares of Common
Stock to be increased (or combine or repurchase its
outstanding shares of Common Stock) if at any time the
number of shares of authorized and unissued Common Stock
and/or Common Stock held in treasury, shall not be
sufficient to permit the conversion of all the then
outstanding shares of Convertible Preferred Stock.
If any shares of Common Stock required to be
reserved for the purposes of conversion of the Convertible
Preferred Stock hereunder require registration with or approval
of any governmental authority under any Federal or State law
before such shares may be issued upon conversion, the
Corporation will in good faith and as expeditiously as possible
endeavor to cause such shares to be duly registered or
approved as the case may be. If the Common Stock is listed
on any national securities exchange, the Corporation will,
if permitted by the rules of such exchange, list and keep
listed on such exchange, upon official notice of issuance,
all shares of Common Stock issuable upon conversion of the
Convertible Preferred Stock, for so long as the Common Stock
continues to be so listed.
(g) Prior Notice of Certain Events. In case:
(i) the Corporation shall (A) declare
any dividend (or any other distribution) on its
Common Stock, other than (1) a dividend payable in
shares of Common Stock or (2) a dividend payable in
cash out of its retained earnings other than
any special or nonrecurring or other extraordinary
dividend or (B) declare or authorize a redemption or
repurchase of in excess of 10% of the then
outstanding shares of Common Stock; or
(ii) the Corporation shall authorize
the granting to all holders of Common Stock of
rights
or warrants to subscribe for or purchase any
shares of stock of any class or series or of any
other rights or warrants; or
(iii) of any reclassification of Common
Stock (other than a subdivision or combination of
the outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no
par value to par value), or of any
consolidation or merger to which the Corporation is
party and for which approval of any
stockholders of the Corporation shall be required, or
of the sale or transfer of all or substantially all of the
assets of the Corporation or of any share exchange whereby
the Corporation is converted into other securities,
cash or other property; or
(iv) of the voluntary or involuntary
dissolution, liquidation or winding up of the
Corporation; then the Corporation shall cause to
be filed with the transfer agent for the Convertible
Preferred Stock, and shall cause to be mailed to all
holders of record of the Convertible Preferred Stock at
their last addresses as they shall appear upon the stock
transfer books of the Corporation, at least fifteen (15)
days prior to the applicable record or effective date hereinafter specified,
a notice stating (x) the date on which a record (if any) is to be
taken for the purpose of such dividend, distribution,
redemption, repurchase, or grant of rights or warrants or, if
a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such
dividend, distribution, redemption, repurchase, rights or
warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer,
share exchange, dissolution, liquidation or winding up is
expected to become effective and the date as of which it is
expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock, for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer,
share exchange, dissolution, liquidation or winding up (but no
failure to mail such notice or any defect therein or in
the mailing thereof shall affect the validity of the
corporate action required to be specified in such notice).
(h) Certain Additional Rights. In case the
Corporation shall, by dividend or otherwise, declare or make a
distribution on its Common Stock referred to in
Section 3(c)(iv) or 3(c)(v) (including, without limitation,
dividends or distribution referred to in the last sentence
of Section 3(c)(iv)), the holder of each share
of Convertible Preferred Stock upon the conversion
thereof subsequent to the close of business on the date
fixed for the determination of stockholders entitled to
receive such distribution and prior to the effectiveness of
the conversion price adjustment in respect of such distribution,
shall be entitled to receive for each share of Common Stock
into which such share of Convertible Preferred Stock is
converted, the portion of the shares of Common Stock,
rights, warrants, evidences of indebtedness, shares
of capital stock, cash and assets as distributed applicable
to one share of Common Stock; provided, however, that at the
election of the Corporation (whose election shall
be evidenced by a resolution of the Board of Directors) with
respect to all holders so converting, the Corporation may, in
lieu of distributing to such holder any portion of such
distribution not consisting of cash or securities of the
Corporation, pay such holder an amount in cash equal to the
fair market value thereof (as determined in good faith
by the Board of Directors, which determination shall
be conclusive). If any conversion of a share of Convertible
Preferred Stock described in the immediately preceding
sentence occurs prior to the payment date for a distribution to
holders of Common Stock which the holder of the share of
Convertible Preferred Stock so converted is entitled
to receive in accordance with the immediately preceding
sentence, the Corporation may elect (such election to
be evidenced by a resolution of the Board of Directors)
to distribute to such holder a due bill for the shares
of Common Stock, rights, warrants, evidences of indebtedness,
shares of capital stock, cash or assets to which such holder is
so entitled, provided that such due bill (a) meets any
applicable requirements of the principal national securities
exchange or other market on which the Common Stock is then
traded and (b) requires payment or delivery of such shares of
Common Stock, rights, warrants, evidences
of indebtedness, shares of capital stock, cash or assets
no later than the date of payment or delivery thereof
to holders of shares of Common Stock receiving
such distribution.
(i) Mandatory Conversion Right.
(i) At any time after November 20, 1997, and
provided that the Corporation is current in the payment of
dividends on the Convertible Preferred Stock to the
Mandatory Conversion Date, the Corporation may, at its
option, require the conversion of all the outstanding
shares of Convertible Preferred Stock. The Corporation
may exercise this option only if for twenty (20)
trading days within any period of thirty (30)
consecutive trading days, including the last trading
day of such period, the Current Market Price (as
defined in subparagraph (iii) below) of the Common
Stock equals or exceeds 150% of the current conversion
price of the Convertible Preferred Stock, such
conversion price to be subject to adjustments in the
same manner and for the same events as the conversion
price in Section 3. In order to exercise its mandatory
conversion option, the Corporation must issue a press
release for publication on the Dow Jones News Service,
Reuters, Bloomberg, or other widely disseminated
publicly available financial news service, announcing the
effective date of the mandatory conversion of the
Convertible Preferred Stock (the "Mandatory Conversion
Date") prior to the opening of business on the second
trading day after any period in which the condition in
the preceding sentence has been met, but in no event
prior to November 20, 1997. The press release shall
announce the Mandatory Conversion Date and provide the
current conversion price, current conversion rate and
Current Market Price of the Common Stock, in each case as
of the close of business on the trading day next
preceding the date of the press release. Effective on
the Mandatory Conversion Date, all of the issued and
outstanding shares of Convertible Preferred Stock shall be
converted into fully paid and non-assessable shares of
Common Stock at such current conversion price and current
conversion rate set forth in such press release
in the manner provided in this Section 3. Effective as of
the close of business on the Mandatory Conversion Date,
the shares of Convertible Preferred Stock shall no
longer be deemed to be issued and outstanding and
certificates evidencing such Stock shall solely
evidence the right to receive the shares of Common
Stock issuable in such conversion.
(ii) Notice of the exercise of the
Mandatory Conversion Right will be given by first-class
mail to the record holders of the Convertible Preferred
Stock not more than four (4) business days after
the Corporation issues the press release. The
Mandatory Conversion Date will be a date selected
by the Corporation not less than thirty (30) nor more than
sixty (60) days after the date on which the Corporation
issues the press release announcing its intention to
exercise its Mandatory Conversion Right.
(iii) The term "Current Market Price' of the
Common Stock for any day means the reported closing bid
price, regular way, on such day, as reported on the
AMEX, or, if the Common Stock is not listed or admitted to
trading on the AMEX on such day, on the principal national
securities exchange on which the Common Stock is listed or
admitted to trading, if the Common Stock is listed on a
national securities exchange, or the Nasdaq NMS or, if the
Common Stock is not quoted or admitted to trading on such
quotations system, on the principal quotation system in
which the Common Stock may be listed or admitted to trading
or quoted or, if not listed or admitted to trading or
quoted on any national securities exchange or quotation
system, the average of the closing bid and asked prices of
the Common Stock in the over-the-counter market on the day in
question as reported by the National Quotation Bureau
Incorporated, or similar generally accepted reporting
service, or, if not so available in such manner, as
furnished by any AMEX member firm selected from time to
time by the Board of Directors of the Corporation for that
purpose or, if not so available in such manner, as otherwise
determined in good faith by the Board of Directors of the
Corporation, which determination shall be conclusive. Section
4. Special Conversion Rights.
(a) Change of Control. Upon the occurrence of
a Change of Control (as defined in Section 4(e)) with respect
to the Corporation, each holder of Convertible Preferred
Stock shall have the right, at the holder's option, for a
period of thirty (30) days after the mailing of a notice by
the Corporation that a Change of Control has occurred, to
convert all, but not less than all, of such holder's
Convertible Preferred Stock into Common Stock of the
Corporation at an adjusted conversion price per share equal to
the Special Conversion Price (as defined in Section 4(e)).
The Corporation may, at its option, in lieu of
providing Common Stock upon any such special conversion,
provide the holder with cash equal to the Market Value (as
defined in Section 4(e)) of the Common Stock multiplied by
the number of shares of Common Stock into which such
Convertible Preferred Stock would have been convertible
immediately prior to such Change of Control at an adjusted
conversion price equal to the Special Conversion Price. The
special conversion right arising upon a Change of Control
shall only be applicable with respect to the first Change of
Control that occurs after the first date of issuance of any
Convertible Preferred Stock. Convertible Preferred Stock
which becomes convertible pursuant to a special conversion
right shall, unless so converted, remain convertible
pursuant to Section 3 at the conversion price and conversion
rate in effect immediately before the effective date of the
Change of Control, subject to subsequent adjustment as
provided in Section 3(c).
(b) Fundamental Change. Upon the occurrence of
a Fundamental Change (as defined in Section 4(e)) with respect
to the Corporation, each holder of Convertible Preferred
Stock shall have a special conversion right, at the holder's
option, for a period of thirty (30) days after the mailing of
a notice by the Corporation that a Fundamental Change has
occurred, to convert all, but not less than all, of such
holder's Convertible Preferred Stock into the kind and
amount of cash, securities, property or other assets
receivable upon such Fundamental Change by a holder of the
number of shares of Common Stock into which such Convertible
Preferred Stock would have been convertible immediately
prior to such Fundamental Change at an adjusted conversion
price equal to the Special Conversion Price. The
Corporation or a successor corporation, as the case may be,
may, at its option and in lieu of providing
the consideration as required above upon such conversion,
provide the holder with cash equal to the Market Value of
the Common Stock multiplied by the number of shares of
Common Stock into which such Convertible Preferred Stock
would have been convertible immediately prior to such
Fundamental Change at an adjusted conversion price equal to
the Special Conversion Price.
(c) Notice. Upon the occurrence of a Change of
Control or a Fundamental Change with respect to the
Corporation, within thirty (30) days after such occurrence,
the Corporation shall mail to each holder of Convertible
Preferred Stock a notice of such occurrence (the "Special
Conversion Notice") setting forth the following:
(i) the event constituting the Change of
Control or Fundamental Change;
(ii) the date upon which the applicable
special conversion right will terminate;
(iii) the Special Conversion Price;
(iv) the conversion price and conversion rate
then in effect under Section 3 and the continuing
conversion rights, if any, under Section 3;
(v) the name and address of the paying
agent and conversion agent;
(vi) that holders who want to convert
Convertible Preferred Stock must satisfy the
requirements of Section 4(d) and must exercise such
conversion right within the thirty (30)-day period after
the mailing of such notice by the Corporation;
(vii) that exercise of such conversion
right shall be irrevocable and no dividends
on the
Convertible Preferred Stock (or portions thereof)
tendered for conversion shall accrue from and after the
conversion date; and
(viii) that the Corporation (or a successor
corporation, if applicable) may, at its option, elect to
pay cash (specifying the amount thereof per share) for
all Convertible Preferred Stock tendered for
conversion.
(d) Exercise Procedures. A holder of
Convertible Preferred Stock must exercise the special
conversion right within the thirty (30)-day period after the
mailing of the Special Conversion Notice or such special
conversion right shall expire. Such right must be exercised
in accordance with Section 3(b) to the extent the
procedures in Section 3(b) are consistent with the special provisions of
this Section 4. Exercise of such conversion right shall be
irrevocable and no payments or adjustments in respect of
dividends on shares of Convertible Preferred Stock
surrendered for conversion, whether paid or unpaid and
whether or not in arrears shall be made by the Corporation
upon exercise of such conversion right. The conversion date
with respect to the exercise of a special conversion right
arising upon a Change of Control or Fundamental Change shall be
the thirtieth (30th) day after the mailing of the Special
Conversion Notice.
Convertible Preferred Stock which becomes
convertible pursuant to a special conversion right shall,
unless converted, remain convertible pursuant to Section 3 into
the kind and amount of cash, securities, property or other
assets that the holders of the Convertible Preferred Stock
would have owned immediately after the Fundamental Change if
the holders had converted the Convertible Preferred Stock
immediately before the effective date of the Fundamental
Change, subject to subsequent adjustment under the
provisions contemplated by Section 3(c), if applicable.
(e) Definitions. The following definitions shall
apply to terms used in this Section 4:
(i) A "Change of Control" with respect to
the Corporation shall be deemed to have occurred at
the first time after the Issue Date that any person
(within the meaning of Sections 13(d)(3) and 14(d)(2) of
the Exchange Act)), including a group (within the meaning
of Rule 13d5 under the Exchange Act), together with any
of its Affiliates or Associates (as defined below), files
or becomes obligated to file a report (or any amendment
or supplement thereto) on Schedule 13D or 14D1 pursuant
to the Exchange Act, disclosing that such person has
become the beneficial owner of either (A) 50% or more
of the shares of Common Stock of the Corporation then
outstanding or (B) securities representing 50% or
more of the combined voting power of the Voting Stock
(as defined below) of the Corporation then
outstanding; provided a Change of Control shall not
be deemed to have occurred with respect to any
transaction that constitutes a
Fundamental Change. As used herein, a person shall be
deemed to have "beneficial ownership" with respect to,
and shall be deemed to "beneficially own," any
securities of the Corporation in accordance with
Section 13 of the Exchange Act and the rules and
regulations (including Rule 13d-3, Rule 13d-5 and any
successor rules) promulgated by the Securities and
Exchange Commission thereunder; provided that a person
shall be deemed to have beneficial ownership of all
securities that any such person has a right to acquire whether
such right is exercisable immediately or only after the
passage of time and without regard to the sixty (60)-day
limitation referred to in Rule 13d-3 and, provided
further, that a beneficial owner of Convertible Preferred
Stock shall not be deemed to beneficially own the Common
Stock into which such Convertible Preferred Stock is
convertible solely by reason of ownership of the Convertible
Preferred Stock. An "Affiliate" of a specified person is a
person that directly or indirectly controls, or is controlled
by or is under common control with, the person specified. An
"Associate" of a person means (i) any corporation or
organization, other than the Corporation or any
subsidiary of the Corporation, of which the person is an
officer or partner or is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity
securities; (ii) any trust or estate in which the person has
a substantial beneficial interest or as to which the person
serves as trustee or in a similar fiduciary capacity; and
(iii) any relative or spouse of the person or any relative of
the spouse, who has the same home as the person or who is a
director or officer of the person or any of its parents or
subsidiaries.
(ii) "Exchange Act" means the Securities Exchange Act
of 1934, as amended, and as in effect on the date hereof.
(iii) A "Fundamental Change" with respect to the
Corporation means (A) the occurrence of any
transaction or event in connection with which all or
substantially all of the Common Stock of the
Corporation shall be exchanged for, converted into,
acquired for or constitute solely the right to receive cash,
securities, property or other assets (whether by means of an
exchange offer, liquidation, tender offer, consolidation,
merger, combination, reclassification, recapitalization or
otherwise) or (B) the conveyance, sale, lease, assignment,
transfer or other disposal of all or substantially all of the
Corporation's property, business or assets; provided,
however, that a Fundamental Change shall not be deemed to
have occurred with respect to either of the following
transactions or events: (1) any transaction or event in which
more than 50% (by value as determined in good faith by the
Board of Directors) of the consideration received by holders
of Common Stock consists of Marketable Stock (as defined
below); or (2) any consolidation or merger of the Corporation
immediately prior to such transaction own, directly or
indirectly, (x) 50% or more of the common stock of the
surviving corporation (or of the ultimate parent of
such surviving corporation) outstanding at the time
immediately after such consolidation or merger and (y)
securities representing 50% or more of the combined voting
power of the surviving corporation's Voting Stock (or for the
Voting Stock of the ultimate parent of such surviving
corporation) outstanding at such time. The phrase "all or
substantially all" as used in this definition in reference
to the Common Stock shall mean 66% or more of the aggregate
outstanding amount of Common Stock.
(iv) "Voting Stock" means, with respect to any
person, capital stock of such person having general
voting power under ordinary circumstances to elect at
least a majority of the board of directors, managers or
trustees of such person (irrespective of whether or not at
the time capital stock of any other class or classes shall
have or might have voting power by reason of the
happening of any contingency).
(v) The "Special Conversion Price" shall mean
the lesser of the Market Value of the Common Stock and
the prevailing conversion price.
(vi) The "Market Value" of the Common Stock or
any other Marketable Stock shall be the average of the
last reported sales prices of the Common Stock or such
other Marketable Stock, as the case may be, for the
five business days ending on the last business day
preceding the date of the Change of Control or
Fundamental Change; provided, however, that if the
Marketable Stock is not traded on any national securities
exchange or similar quotation system as described in the
definition of "Marketable Stock" during such period,
then the Market Value of such Marketable Stock shall
be the average of the last reported sales prices per
share of such Marketable Stock during the first five
business days commencing with the first day after the
date on which such Marketable Stock was first
distributed to the general public and traded on the New
York Stock Exchange
("NYSE"), the AMEX, the Nasdaq NMS or any similar system of
automated dissemination of quotations of securities prices in
the United States.
(vii) "Marketable Stock" shall mean
Common Stock or common stock of any corporation that is
the successor to all or substantially all of the
business or assets of the corporation as a result
of a Fundamental Change (or of the ultimate parent of
such successor), which is (or will, upon
distribution thereof, be) listed or quoted on the NYSE,
the AMEX, the Nasdaq NMS or any similar system of
automated dissemination of quotations of securities prices
in the United States.
Section 5. General Class and Series Voting
Rights. The Convertible Preferred Stock shall have the
following voting rights in addition to (i) any special voting
rights specifically required by the laws of the State
of Delaware,(ii) as are provided in Section 6 and (iii) as
provided by the provisions of this Restated Certificate of
Incorporation of the Corporation:
(a) So long as any shares of Convertible Preferred
Stock remain outstanding, the holders of Convertible
Preferred Stock will be entitled to receive notice of any
meeting of, and solicitation of any consent from the
holders of Common Stock and to vote with the holders of
Common Stock on, and to consent to all matters on which the
holders of Common Stock are entitled to vote or consent to,
respectively. Each share of Convertible Preferred Stock
shall be entitled to cast the same number of votes as the
full number of shares of Common Stock that are then issuable
upon conversion thereof.
(b) So long as any shares of Convertible
Preferred Stock remain outstanding, the vote or consent of the
holders of at least two-thirds of the shares of
Convertible Preferred Stock outstanding at the time (voting
separately as a class) given in person or by proxy, either in writing or
at any special or annual meeting called for the purpose, shall
be necessary to permit, effect or validate any one or more of
the following:
(i) The authorization, creation or
issuance, or any increase in the authorized or issued
amount, of any class or series of stock (including any
class or series of preferred stock) ranking prior (as
that term is hereinafter defined in this Section 5)
to the Convertible
Preferred Stock; or
(ii) The amendment, alteration or repeal,
whether by merger, consolidation or otherwise, of any of
the provisions of this Restated Certificate
of Incorporation or of these resolutions which would
alter, change or repeal the powers, preferences, or
special rights of the shares of the Convertible
Preferred Stock so as to affect them adversely.
(c) The foregoing voting provisions shall
not apply if, at or prior to the time when the act with respect to
which such vote would otherwise be required shall be
effected, all outstanding shares of Convertible Preferred
Stock shall have been redeemed or sufficient funds and/or
shares of Common Stock shall have been deposited in trust to
effect such redemption.
(d) For purposes of this resolution, any
class or series of stock of the Corporation shall be deemed to rank:
(i) prior to the Convertible Preferred Stock
as to dividends or as to distribution of assets upon
liquidation, dissolution or winding up, if the holders of
such class or series shall be entitled to the
receipt of dividends or amounts distributable upon
liquidation, dissolution or winding up, as the case may
be, in preference or priority to the holders of
Convertible Preferred Stock;
(ii) on a parity with the Convertible
Preferred Stock as to dividends or as to distribution of
assets upon liquidation, dissolution or winding up,
whether or not the dividend rates, dividend payment
dates, or redemption or liquidation prices per share
thereof shall be different from those of the
Convertible Preferred Stock, if the holders of such class
or series of stock and the Convertible Preferred Stock
shall be entitled to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in proportion to
their respective dividend rates or liquidation prices,
without preference or priority one over the other as of
the date of adoption of this resolution. The
[Series A], Series B[, Series E] and Series F Preferred
Stock are on a parity with the Convertible Preferred
Stock as to dividends and as to distribution of assets
upon liquidation, dissolution or winding up; and
(iii) junior to the Convertible
Preferred Stock as to dividends or as to distribution of
assets upon liquidation, dissolution or winding up, if
such class or series shall be Common Stock or if the
holders of the Convertible Preferred Stock shall be
entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding
up, as the case may be, in preference or priority to the
holders of shares of such class or series.
Section 6. Default Voting Rights.
(a) Election of Directors. Whenever, at any time or
times, dividends payable on the shares of Convertible
Preferred Stock shall be in arrears in an amount equal to at
least three semi-annual dividends (whether or not
consecutive and whether payable in cash or shares of
Convertible Preferred Stock), the holders of the outstanding
shares of Convertible Preferred Stock shall have the
exclusive right (voting separately as a class) to elect two
directors of the Corporation.
(b) Vote Per Share. At elections for such
directors, each holder of Convertible Preferred Stock shall be
entitled to one vote for each share of Convertible Preferred
Stock held. Upon the vesting of such right with the holders of Convertible
Preferred Stock, the maximum authorized number of members of
the Board of Directors shall automatically be increased by
two, which shall be of the class or classes
selected by the Corporation's Board of Directors which has
the least number of director positions then currently
filled, and the two vacancies so created shall be filled by
vote of the holders of the outstanding shares of Convertible
Preferred Stock as hereinafter set forth. The right of the
holders of Convertible Preferred Stock, voting separately as a
class to elect members of the Board of Directors of the
Corporation shall continue until such time as all dividends
accrued and unpaid on the Convertible Preferred Stock shall
have been paid or declared and funds set aside to provide
for payment in full, at which time such right shall
terminate, except as herein or by law expressly provided,
subject to revesting in the event of each and every
subsequent default of the character above mentioned, and the
term of office of all directors so elected shall terminate
also.
(c) Meetings. Whenever the voting right described in
subsection (a) above shall have vested in the holders of the
Convertible Preferred Stock, the right may be exercised
initially either at a special meeting of the holders of the
Convertible Preferred Stock called as hereinafter provided,
or at any annual meeting of stockholders held for the
purpose of electing directors, and thereafter at each
successive annual meeting.
(d) Call of Meeting. At any time when the voting
right described in subsection (a) above shall have vested in
the holders of the Convertible Preferred Stock, and if the
right shall not already have been initially exercised, a
proper officer of the Corporation shall, upon the written
request of the holders of record of 10% in number of the
shares of the Convertible Preferred Stock then outstanding,
addressed to the Secretary of the Corporation, call a
special meeting of the holders of the Convertible Preferred
Stock for the purpose of electing directors. Such meeting
shall be held at the earliest practicable date upon the
notice required for annual meetings of stockholders at the
place for holding of annual meetings of stockholders of the
Corporation, or, if none, at a place designated by the
Secretary of the Corporation. If the meeting shall not be
called by the proper officers of the Corporation within
thirty (30) days after the personal service of such written
request upon the Secretary of the Corporation, or within
thirty (30) days after mailing it within the United States
of America, by registered mail, addressed to the Secretary of
the Corporation at its principal office (such mailing to be
evidenced by the registry receipt issued by the postal
authorities), then the holders of record of 10% in number of
the shares of the Convertible Preferred Stock then
outstanding may designate in writing one of their members to
call such meeting at the expense of the Corporation, and
such meeting may be called by such person so designated upon
the notice required for annual meetings of stockholders and
shall be held at the same place as is elsewhere provided for
in this subsection (d). Any holder of the Convertible
Preferred Stock shall have access to the share transfer
books of the Corporation as permitted under the Delaware
General Corporation Law for the purpose of causing a meeting
of the stockholders to be called pursuant to the provisions
of this subsection (d). Notwithstanding the provisions of
this subsection (d), however, no such special meeting shall
be held during a period within
sixty (60) days immediately preceding the date fixed for the
next annual meeting of stockholders.
(e) Quorum. At any meeting held for the purpose of
electing directors at which the holders of the Convertible
Preferred Stock shall have the right to elect directors as
provided herein, the presence in person or by proxy of the
holders of 50% of the then outstanding shares of the
Convertible Preferred Stock shall be required and be
sufficient to constitute a quorum of the holders of the
Convertible Preferred Stock for the election of directors.
At any such meeting or adjournment thereof (i) the absence of
a quorum of the holders of the Convertible Preferred Stock
shall not prevent the election of directors other than those
to be elected by the holders of the Convertible Preferred
Stock and the absence of a quorum or quorums of the holders
of other classes or series of capital stock entitled to
elect such other directors shall not prevent the election of
directors to be elected by the holders of the Convertible Preferred
Stock and (ii) in the absence of a
quorum of the holders of the Convertible Preferred Stock, a
majority of the holders present in person or by proxy of the
Convertible Preferred Stock shall have the power to adjourn
the meeting, or appropriate portion thereof for the election
of directors which the holders of the Convertible Preferred
Stock are entitled to elect, from time to time, without
notice other than announcement at the meeting, until a
quorum shall be present. The Chairman of the Board or the
President of the Corporation shall preside at any such
meeting.
(f) Term. Each director elected by the holders of
shares of Convertible Preferred Stock shall continue to
serve as a director until such time as all dividends accrued
and unpaid on the Convertible Preferred Stock shall have
been paid or declared and funds set aside to provide for
payment in full, at which time the term of office of all
persons elected as directors by the holders of shares of
Convertible Preferred Stock shall forthwith terminate and
the number of members of the Board of Directors of the
Corporation shall be reduced accordingly. Whenever the term
of office of the directors elected by the holders of
Convertible Preferred Stock voting as a class shall end and
the special voting powers vested in the holders of
Convertible Preferred Stock as provided in this Section 6
shall have expired, the number of directors shall be such
number as may be provided for in the By-Laws irrespective of
any increase made pursuant to the provisions of this Section 6.
Section 7. Redemption Rights.
(a) Optional Redemption. The Corporation may at its
option, at any time on or after May 1, 2002, in the years
indicated below, redeem (an "Optional Redemption") all, or
any number less than all, of the outstanding shares of
Convertible Preferred Stock, provided, that the Convertible
Preferred Stock may not be redeemed, in whole or in part,
prior to May 1, 2002. All optional redemptions of shares of
Convertible Preferred Stock shall be effected during the
twelve (12) month period beginning on May 1 of the year
indicated at the applicable redemption prices set forth
below:
Redemption Price
Year Per Share $
2002 $ 90.00
2003 88.33
2004 86.67
2005 85.00
and thereafter at $85.00 per share, plus, in each case,
an amount equal to all dividends (whether or not declared)
accrued and unpaid on such share of Convertible Preferred
Stock to the date fixed for redemption (the price from time to
time to redeem the Convertible Preferred Stock excluding any
dividends (whether or not declared) accrued and unpaid, is
referred to herein as the "Redemption Price").
(b) Mandatory Redemption. Each issued and outstanding
share of Convertible Preferred Stock shall be redeemed on
May 1, 2007, or the next succeeding business day (the
"Mandatory Redemption") at a Redemption Price of $85.00 per
share, plus all dividends (whether or not declared) accrued
and unpaid on such share of Convertible Preferred Stock to the
date fixed for redemption, payable in cash or, at the
election of the Corporation, in shares of Common Stock
("Redemption Stock").
(c) Accrued Dividends. The Corporation may
not purchase, redeem or otherwise acquire for value any
shares of Convertible Preferred Stock or shares of any other
series of Preferred Stock then outstanding ranking on a parity
with or junior to the Convertible Preferred Stock unless
all accrued dividends on all shares of Convertible Preferred
Stock then outstanding shall have been paid or declared and a
sum of cash (or shares of Preferred Dividend Stock)
sufficient for the payment thereof set apart. No sinking
fund shall be established for the Convertible Preferred
Stock.
(d) Mandatory Redemption Price Paid in Common
Stock. The Corporation may pay the Redemption Price for
Convertible Preferred Stock called for Mandatory Redemption
pursuant to Section 7(b) by issuing, for each full share of
Convertible Preferred Stock being redeemed, to the holder
thereof, such number of shares of Redemption Stock equal to
the value of the Market Price averaged over the twenty (20)
trading days preceding the date of notice of redemption
provided for in Section 7(e). All such shares of Redemption
Stock shall be duly authorized, validly issued, fully
paid and nonassessable. The Corporation will not issue any
fractional shares or script representing fractional shares of
Common Stock upon such redemption of the Convertible Preferred
Stock and, in lieu thereof, will either (i) pay a cash
adjustment based on the Market Price of the Common Stock as of
the last trading day prior to the Redemption Date (as
hereinafter defined) or (ii) aggregate and sell all such
fractional shares and distribute the proceeds to holders as
provided in Section 3(d).
For purpose of this Section 7(d), "Common Stock"
shall mean the Common Stock of the Corporation or any other
cash, securities or property that the holder of
Convertible Preferred Stock is entitled to receive upon
conversion of the Convertible Preferred Stock pursuant to
Section 3(c).
(e) Notice of Redemption. Notice of any proposed
Optional or Mandatory Redemption of shares of Convertible
Preferred Stock shall be mailed to each record holder of the
shares of Convertible Preferred Stock to be redeemed at
least thirty (30) but not more than sixty (60) days prior to
the date fixed for such redemption (herein referred to as the
"Redemption Date"). Each such notice shall set forth the
following:
(i) the Redemption Date;
(ii) the Redemption Price per share;
(iii) the place for payment and for
delivering the stock certificate(s) and transfer
instrument(s) in order to receive the Redemption Price;
(iv) the shares of Convertible Preferred
Stock to be redeemed;
(v) the then effective conversion price
and conversion rate;
(vi) the Market Price of the Common Stock on
the last trading day prior to the date of the notice;
(vii) whether the Corporation will pay
the Redemption Price of the Convertible Preferred Stock
to be redeemed by issuing shares of Common Stock as
provided in subsection (d) above and, if so, the
average of the Market Prices over the twenty (20)
trading days preceding the date of the notice; and
(viii) that the right of holders of shares
of Convertible Preferred Stock being redeemed to exercise
their conversion right shall terminate as to such
shares at the close of business on the date fixed for
redemption (provided that no default by the Corporation in
the payment of the applicable Redemption Price
(including any accrued and unpaid dividends) shall have
occurred and be continuing).
Any notice mailed in such manner shall be conclusively
deemed to have been duly given regardless of whether such
notice is in fact received. If less than all the
outstanding shares of Convertible Preferred Stock are to be
redeemed, the Corporation will select those to be redeemed
ratably or by lot in a manner determined by the Board of
Directors. In order to facilitate the redemption of the
Convertible Preferred Stock, the Board of Directors may fix a
record date for determination of holders of Convertible
Preferred Stock to be redeemed, which shall not be more than
thirty (30) days prior to the Redemption Date with respect
thereto.
The holder of any shares of Convertible Preferred Stock
redeemed pursuant to this Section 7 upon any exercise of the
Corporation's redemption right shall not be entitled to
receive payment of the Redemption Price for such shares
until such holder shall cause to be delivered to the place
specified in the notice given with respect to such
redemption (i) the certificate(s) representing such share of
Convertible Preferred Stock and (ii) transfer instrument(s)
sufficient to transfer such shares of Convertible Preferred
Stock to the Corporation free of any adverse interest. No
interest shall accrue on the Redemption Price of any share of
Convertible Preferred Stock after the Redemption Date.
At the close of business on the Redemption Date for any
share of Convertible Preferred Stock, such share shall
(provided the Redemption Price (including any accrued and
unpaid dividends to the Redemption Date) of such shares has
been paid or properly provided for) be deemed to cease to be
outstanding and all rights of any person other than the
Corporation in such share shall be extinguished on the
Redemption Date for such share (including all rights to
receive future dividends with respect to such share) except
for the right to receive the Redemption Price (including any
accrued and unpaid dividends to the Redemption Date),
without interest, for such share in accordance with the
provisions of this Section 7, subject to applicable escheat
laws.
In the event that any shares of Convertible Preferred
Stock shall be converted into Common Stock prior to the
Redemption Date pursuant to Section 3 or 4, then (i) the
Corporation shall not have the right to redeem such shares
and (ii) any funds, securities or other property which shall
have been deposited for the payment of the Redemption Price for
such shares shall be returned to the Corporation
immediately after such conversion (subject to declared
dividends payable to holders of shares of Convertible Preferred
Stock on the record date for such dividends being so payable,
to the extent set forth in Section 3 hereof; regardless of
whether such shares are converted subsequent to such record
date and prior to the related Dividend Payment Date) and
any shares of Common Stock reserved for issuance upon
redemption of such converted shares need no longer be so
reserved.
Notwithstanding the foregoing provisions of this
Section 7, and subject to the provisions of Section 2
hereof; if a dividend upon any shares of Convertible
Preferred Stock is past due, (i) no share of the Convertible
Preferred Stock may be redeemed, except by means of a
redemption pursuant to which all outstanding shares of the
Convertible Preferred Stock are simultaneously redeemed and
all accrued dividends paid and (ii) the Corporation shall not
purchase or otherwise acquire any shares of the
Convertible Preferred Stock, except pursuant to a purchase or
exchange offer made on the same terms to all holders of the
Convertible Preferred Stock.
Section 8. Rank; Liquidation. Upon any voluntary or
involuntary dissolution, liquidation or winding up of the
Corporation (for the purposes of this Section 8, a
"Liquidation"), after payment or provision for payment of
the debts and other liabilities of the Corporation, the
holders of Convertible Preferred Stock shall be entitled to be
paid out of the assets of the Corporation available for
distribution to its stockholders, an amount equal to $85.00
per share of Convertible Preferred Stock then held by such
stockholder, plus all dividends (whether or not declared or
due) accrued and unpaid on such share to the date fixed for
the distribution of assets of the Corporation to the holders of
Convertible Preferred Stock. The shares of Convertible
Preferred Stock shall rank prior to the shares of Common
Stock and any other class or series of stock of the
Corporation ranking junior to the Convertible Preferred
Stock, so that the holders of the Convertible Preferred
Stock shall receive the full amount to which they shall be
entitled before any distribution of assets shall be made to
the holders of the Common Stock or the holders of any other
stock that ranks junior to the Convertible Preferred Stock
in respect of distributions upon the Liquidation of the
Corporation.
If upon any Liquidation of the Corporation, the assets
available for distribution to the holders of Convertible
Preferred Stock and any other stock of the Corporation
ranking on a parity with the Convertible Preferred Stock
upon Liquidation which shall then be outstanding
(hereinafter in this paragraph called the "Total Amount
Available") shall be insufficient to pay the holders of all
outstanding shares of Convertible Preferred Stock and all
other such parity stock the full amounts (including all
dividends accrued and unpaid) to which they shall be
entitled by reason of such Liquidation of the Corporation,
then there shall be paid to the holders of the Convertible
Preferred Stock in connection with such Liquidation of the
Corporation, an amount equal to the product derived by
multiplying the Total Amount Available times a fraction, the
numerator of which shall be the full amount to which the
holders of the Convertible Preferred Stock shall be entitled
under the terms of the preceding paragraph by reason of such
Liquidation of the Corporation and the denominator of which
shall be the total amount which would have been distributed
by reason of such Liquidation of the Corporation with
respect to the Convertible Preferred Stock and all other
stock ranking on a parity with the Convertible Preferred
Stock upon Liquidation then outstanding had the Corporation
possessed sufficient assets to pay the maximum amount which
the holders of all such stock would be entitled to receive in
connection with such Liquidation of the Corporation.
The voluntary sale, conveyance, lease, exchange or
transfer of all or substantially all of the property or
assets of the Corporation, or the merger or consolidation of
the Corporation into or with any other corporation, or the
merger of any other corporation into the Corporation, or any
purchase or redemption of some or all of the shares of any
class or series of stock of the Corporation, shall not be
deemed to be a Liquidation of the Corporation for the
purposes of this Section 8 (unless in connection therewith
the Liquidation of the Corporation is specifically
approved).
The holder of any shares of Convertible Preferred Stock
shall not be entitled to receive any payment owed for such
shares under this Section 8 until such holder shall cause to be
delivered to the Corporation (i) the certificate(s)
representing such shares of Convertible Preferred Stock and
(ii) transfer instrument(s) satisfactory to the Corporation and
sufficient to transfer such shares of Convertible
Preferred Stock to the Corporation free of any adverse
interest. No interest shall accrue on any payment upon
Liquidation after the due date thereof.
After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of
shares of the Convertible Preferred Stock will not be
entitled to any further participation in any distribution of
assets by the Corporation.
Section 9. Payments. The Corporation may
provide funds for any payment of the Redemption Price for any
shares of Convertible Preferred Stock or any amount
distributable with respect to any Convertible Preferred
Stock under Sections 7 and 8 hereof by depositing such funds
with a bank or trust company selected by the Corporation
having a net worth of at least $50,000,000, in trust for the
benefit of the holders of such shares of Convertible
Preferred Stock under arrangements providing irrevocably for
payment upon satisfaction of any conditions to such
payments by the holders of such shares of Convertible
Preferred Stock which shall reasonably be required by the
Corporation. The Corporation shall be entitled to make any
deposit of funds contemplated by this Section 9 under arrangements
designed to permit such funds to generate interest or other income for
the Corporation, and the Corporation shall be entitled to
receive all interest and other income earned by any funds while
they shall be deposited as contemplated by this Section
9, provided that the Corporation shall maintain on deposit
funds sufficient to satisfy all payments which the deposit
arrangement shall require to be paid by the Corporation.
Any payment which may be owed for the payment of the
Redemption Price for any shares of Convertible Preferred
Stock pursuant to Section 7 or the payment of any amount
distributable with respect to any shares of Convertible
Preferred Stock under Section 8 shall be deemed to have been
"paid or properly provided for" upon the earlier to occur
of: (i) the date upon which such funds sufficient to make
such payment shall be deposited in a manner contemplated by
the preceding paragraph or (ii) the date upon which a check
payable to the person entitled to receive such payment shall be
delivered to such person or mailed to such person at
either the address of such person then appearing on the
books of the Corporation or such other address as the
Corporation shall deem reasonable or (iii) in the case of a
Mandatory Redemption the Corporation shall have deposited a
sufficient amount of shares of Common Stock to pay the Redemption
Price as provided in Section 7(e).
Subject to applicable escheat laws, if the
conditions precedent to the disbursement of any funds
deposited by the Corporation pursuant to this Section 9 shall
not have been satisfied within six (6) months after the
establishment of the trust for such funds (or shares), then
(i) such funds (or shares) shall be returned to the
Corporation upon its request; (ii) after such return, such
funds (or shares) shall be free of any trust which shall
have been impressed upon them; (iii) the person entitled to
this payment for which such funds (or shares) shall have
been originally intended shall have the right to look
only to the Corporation for such payment, subject to applicable
escheat laws; and (iv) the trustee which shall have held such funds
(or shares) shall be relieved of any responsibility for such
funds (or shares) upon the return of such funds (or shares)
to the Corporation.
Section 10. Status of Reacquired Shares. Shares
of Convertible Preferred Stock issued and reacquired by
the Corporation (including, without limitation, shares
of Convertible Preferred Stock which have been
redeemed pursuant to the terms of Section 7 hereof and
shares of Convertible Preferred Stock which have been
converted into shares of Common Stock) shall have the status
of authorized and unissued shares of preferred stock,
undesignated as to series, subject to later issuance.
Section 11. Preemptive Rights. The
Convertible Preferred Stock is not entitled to any
preemptive or subscription rights in respect of any
securities of the Corporation.
Section 12. Miscellaneous.
(a) Transfer Taxes. The Corporation shall pay any and
all stock transfer and documentary stamp taxes that may be
payable in respect of any original issuance and delivery of
shares of Convertible Preferred Stock or shares of Common
Stock or Preferred Dividend Stock or Redemption Stock or
other securities issued on account of Convertible Preferred
Stock pursuant hereto or certificates or instruments
evidencing such shares or securities. The Corporation shall
not, however, be required to pay any such tax which may be
payable in respect of any transfer involved in the issuance
or delivery of shares of Convertible Preferred Stock or
Common Stock or other securities in a name other than that
in which the shares of Convertible Preferred Stock with
respect to which such shares or other securities are issued
or delivered were registered, or in respect of any payment
to any person with respect to any such shares or securities
other than a payment to the registered holder thereof; and
shall not be required to make any such issuance, delivery or
payment unless and until the person otherwise entitled to
such issuance, delivery or payment has paid to the
Corporation the amount of any such tax or has established,
to the satisfaction of the Corporation, that such tax has
been paid or is not payable.
(b) Failure to Designate Stockholder or Payee. In the
event that a holder of shares of Convertible Preferred Stock
shall not by written notice designate the name in which
shares of Common Stock to be issued upon conversion or
Preferred Dividend Stock to be issued as a dividend or
Redemption Stock to be issued upon redemption of such
shares, should be registered or to whom payment upon
redemption of shares of Convertible Preferred Stock should be
made or the address to which the certificates or
instruments evidencing such shares or such payment should be
sent, the Corporation shall be entitled to register such
shares and make such payment in the name of the holder of
such Convertible Preferred Stock as shown on the records of
the Corporation and to send the certificates or instruments
evidencing such shares or such payment, to the address of such
holder shown on the records of the Corporation.
(c) Registrar and Transfer Agent. The Corporation may
appoint, and from time to time discharge and change, the
registrar and transfer agent for the Convertible Preferred
Stock. The initial registrar and transfer agent for the
Convertible Preferred Stock shall be the Corporation.
(d) Severability. Whenever possible, each provision
hereof shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any
provision hereof is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective
only to the extent of such prohibition or invalidity,
without invalidating or otherwise adversely affecting the
remaining provisions hereof. If a court of competent jurisdiction
should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or
a particular percentage were increased or decreased, then
such court may make such change as shall be necessary to
render the provision in question effective and valid under
applicable law.
C. The Corporation shall have the authority to issue
up to 50,000 shares of Preferred Stock designated Series B,
Cumulative Preferred Stock (the "Series B Preferred Stock"),
each share of Series B Preferred Stock being identical with
each other share of Series B Preferred Stock and all shares of
Series B Preferred Stock having the following
characteristics, rights and preferences:
Paragraph 1. Designation and Amount.
The shares of this series of Preferred Stock
shall be designated as Series B, Cumulative Preferred
Stock, par value of $1.00 per share ("Series B Preferred Stock"),
and the number of shares constituting such series
shall be 50,000.
Paragraph 2. Definitions.
The following terms, not defined elsewhere
herein, shall have the following meanings:
"The American Stock Exchange" means the
American Stock Exchange, Inc.
"Board of Directors" means the Board of
Directors of the Company as may be constituted from time
to time.
"Business Day" means any day (other
than a Saturday, Sunday or public holiday in the
Borough of Manhattan, City of New York, New York) on
which banking institutions in New York City are not authorized or
obligated by law or executive order to close.
"Common Stock" means the shares of
common stock, par value $.01 per share, of the Company.
"Company" or "XCL" means The
Exploration Company of Louisiana, Inc., a Delaware
corporation.
"Convertible Loan Notes" means the 8%
Subordinated Convertible Notes of the Company.
"Directors" means the directors of the Company.
"Dividend Stock" means the shares of
Common Stock paid to holders of Series B Preferred Stock
in lieu of a cash dividend as provided in Section 3(b)
hereof.
"$" means Dollars.
"Dollars" means the freely transferable currency
of the USA.
"Redemption Stock" means the shares of Common
Stock that may be issuable by the Company upon
redemption of the Series B Preferred Stock as
hereinafter provided.
"Shareholders" means the holders of the Common Stock.
"Stock Option Plans" means the Incentive and
(nonqualified) Stock Option Plans adopted by the Company for
employees and certain other individuals rendering services to
the Company.
"The London Stock Exchange" means The
International Stock Exchange of the United Kingdom and the
Republic Of Ireland Limited.
"The New York Stock Exchange" means The New York Stock
Exchange. Inc.
"Transfer Agent" means the transfer agent for the
Series B Preferred Stock from time to time obtaining.
"UK" and" "United Kingdom" means the United
Kingdom of Great Britain and Northern Ireland.
[ "The UK Preferred Stock" means the shares of the
Series A, Cumulative Convertible Preferred Stock, par value
$1.00 per share, of the Company.]
"U.K. Warrants" means the stock purchase warrants, each
dated July 30, 1990, which entitle the holder thereof to
subscribe for one share of Common Stock for each warrant and
which expire on July 30, 1993.
"USA" and "US" means the United States of America.
"U.S. Warrants" means the stock purchase warrants
representing the right to purchase, in the aggregate,
2,500,000 shares of Common Stock. issued pursuant to a Warrant
Agreement dated September 28, 1990 by and between, the
Company and Manufacturers Hanover Trust Company.
Paragraph 3. Dividends and Distributions.
(a) Each share of Series B Preferred Stock shall
entitle the record holder to receive, out of funds legally
available therefor, when, as and if declared by the Board of
Directors, dividends in cash at the annual rate of $10.00 per
share, which shall be payable in arrears in equal semi-annual installments
on June 30th and December 31st, or in the event any such date
is a Saturday, Sunday or public holiday in the Borough of
Manhattan, the City of New York, New York, on the first
Business Day following such date (hereinafter a "Dividend
Payment Date") in each year, provided, however, that the
dividend payable on the first such Dividend Payment Date
occurring after December 31, 1990 shall be equal to the
product obtained by multiplying $5.00 by a fraction, the
denominator of which shall be 182 and the numerator of which
shall be the number of days expired in the period between the
date of issuance of the first share of Series B Preferred
Stock (the "Issuance Date") and such first Dividend Payment Date
(inclusive of both such dates); provided, however, that if as
of the tenth Business Day prior to any such Dividend
Payment date the Board of Directors has neither (i)
declared a cash dividend of $10.00 per share nor (ii)
delivered written notice of the Company's election to pay a
dividend hereunder in kind in shares of Common Stock, the Company
shall, to the extent legally and contractually permitted, declare
a dividend and use its best efforts to pay such dividend in shares
of Common Stock as set forth in sub-paragraph 3(b).
(b) The Company may, at its option exercised by
written notice to the holders of the Series B Preferred Stock
given at least ten (10) Business Days prior to
the Dividend Payment Date, elect to pay any dividend due and
payable hereunder, and the Company shall to the extent required
by sub-paragraph 3(a), in kind in
shares of Common Stock in-lieu of a dividend payment in cash.
The amount of shares of Dividend Stock issuable
to each holder of Series B Preferred Stock pursuant to this
subparagraph 3(b) on each such Dividend Payment Date shall
equal $6.00 divided by the lowest average Closing Price per
share of the Common Stock as
calculated for the last 5, 10 and 30 Trading Days (the "Trading
Periods") preceding such Dividend Payment Date multiplied by
the total number of shares of Series B Preferred Stock
registered in the name of each such holder of the Series B
Preferred Stock on the record date for the payment of the
dividend. As used herein, the term "Closing Price" of a
security on any day shall mean the last sales price, regular
way, per share of such security on such day as reported in the principal
consolidated reporting system with respect to such security
listed on The American Stock Exchange or The New York Stock
Exchange or, if the shares of such security are not listed or
admitted to trading on The American Stock Exchange or The New
York Stock Exchange, the middle market quotations for the
shares of such security (derived from The London Stock
Exchange Daily Official List) listed or admitted to trading
on The London Stock Exchange, or if the shares of such
security are not listed or admitted to trading on The London
Stock Exchange, the last sales price as reported in the
National Market System ("NMS") of the National Association of
Securities Dealers, Inc.'s Automated Quotation System
("NASDAQ"), or if the shares of such security are not listed
or admitted to trading in NMS, the average of the high bid and
low asked prices in the over-the-counter market as reported by
NASDAQ, or if the bid and asked prices on each such day shall
not have been reported through NASDAQ, the average of the bid and
asked prices for such day as furnished by any New York Stock
Exchange member firm regularly making a market in such
security selected for such purpose by the Board of Directors or a
committee thereof on each Trading Day during such Trading Periods.
The term "Trading Day" shall mean a day on which the market used for
calculating the Closing Price is open for the transaction of
business or, if the shares of such security are not so listed or
admitted to trading, a Business Day. In any of such
alternate cases when such security is not traded in prices
expressed in Dollars, such Closing Price shall be converted
into Dollars at the spot market exchange rate of pounds sterling (UK)
into Dollars as quoted by Manufacturers Hanover Trust Company
on the date of determination. Fractions of Common Stock
arising in respect of the payment of any dividend in shares
of Dividend Stock shall not be issued to the holders of
Series B Preferred Stock; instead they shall be aggregated
and sold in the market on behalf of such holders at the best
price reasonably obtainable and the net proceeds of sale
shall be distributed pro rata among such holders unless
in respect of any holding of the relevant shares the amount
to be distributed would be less than $2.00 in which case
such amount shall not be distributed but shall be retained for
the benefit of the Company. For the purpose of implementing
the provision in the immediately preceding sentence the Board of
Directors may appoint a person to execute transfers on behalf of persons
otherwise entitled to any such fractions and generally may
make all arrangements which appear to them necessary or
appropriate for the settlement and disposal of fractional
entitlements. Within fifteen (15) Business Days after each
Dividend Payment Date on which the Company has elected. by
written notice to each holder of shares of Series B
Preferred Stock, to pay the dividend due thereon in shares
of Dividend Stock, each holder of Series B Preferred Stock
shall have the right to notify the Company of its election to
have the Company sell its shares of Dividend Stock on behalf
of such holder. As soon as practicable after receipt of
such holder's written election so to sell such shares the
Company shall use its best efforts to sell such Dividend
Shares in the market or in one or more private transactions,
without commission or any other remuneration payable to the
Company, at the best price reasonably obtainable for shares of
Common Stock, either directly or through one or more brokers or
other agents selected by the Company. The Company may, but
shall not be required to purchase such shares of
Dividend Stock at such price. While the Company shall seek
to obtain the best price for such shares it shall not be
required to obtain the highest possible price; provided,
however, in the event the amount of the net proceeds of sales
paid to such holder from the sale of the Dividend Stock
(after payment of all sales commissions or fees but before
payment of any transfer, stamp, documentary or income taxes) is less
than $5.50 per share of Series B Preferred Stock, the Company
shall pay such holder the difference in cash. Within ten (10)
Business Days after receipt of such holder's written election to sell
its shares of Dividend Stock, the Company will sell such stock and pay the
holders of the Preferred Stock the net proceeds of such sale
and any amount payable under the preceding sentence.
(c) Dividends shall be cumulative, whether or not earned
and whether or not surplus shall be available therefor and
shall commence to accrue and accumulate from day to day
from the Issuance Date. Such accumulation shall include,
if not paid, the dividend payable on such Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Such
dividends shall be declared and set apart or paid before
any dividends (other than dividends payable in Common Stock)
shall be paid on the Common Stock. No dividend shall be paid upon
or set apart for shares of any other class of stock of XCL (other
than shares of preference stock ranking pari passu with the Series B
Preferred Stock) until all dividend arrears on the Series
B Preferred Stock shall be fully paid. The shares of Series B
Preferred Stock shall rank pari passu with the shares of the U.K.
Preferred Stock with respect to the payment of dividends.
(d) Dividends paid on the shares of Series B
Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such
shares shall be allocated pro-rata on a share-byshare
basis among all such shares at the time
outstanding. The Board of Directors may fix a record date
for the determination of holders of Series B Preferred
Stock entitled to receive payment of a dividend declared
thereon, which record date shall be no more than sixty days
prior to the date fixed for the payment thereof.
Paragraph 4. Dissolution, Liquidation or Winding Up.
In the event of any dissolution, liquidation or
winding up of the affairs of XCL, after payment or
provision for payment of the debts and other
liabilities of XCL, the registered holders of Series B
Preferred Stock shall be entitled to share on a pro rata
basis with the shares of U.K. Preferred Stock and all other
series of XCL's preference stock ranking on a parity with the
Series B Preferred Stock in respect of distributions upon
dissolution, liquidation or winding up of the Company and to
receive, out of the net assets of XCL, $100.00 per share, plus
an amount equal to all the dividend arrears on each such share
up to the date fixed for distribution and no more, before
distribution shall be made to the holders of the Common Stock
or any other shares ranking junior to the Series B Preferred
Stock in respect of distributions upon dissolution,
liquidation or winding up of the Company. Neither the merger
or consolidation of XCL, nor the sale, lease or conveyance of
all or a part of its assets, shall be deemed to be a
dissolution, liquidation or winding up of the affairs of
XCL within the meaning of this Paragraph 4.
Paragraph 5. Redemption.
The Series B Preferred Stock shall be redeemable at
the redemption price specified below and on the following
terms and conditions:
(a) Series B Preferred Stock is redeemable at the option
of the holder at any time after May 13, 1994 ("Optional
Redemption"), at $100.00 per share plus an amount equal to
the accrued and unpaid dividends thereon to the
Redemption Date (as hereinafter defined), whether or not
earned and whether or not surplus is available therefor,
payable out of funds legally available therefor. In order
to exercise an Optional Redemption, such holder must give
written notice of such redemption to the Company ninety (90)
calendar days prior to the redemption date ("Redemption Date").
In the event funds are legally available to redeem only a
portion of the Series B Preferred Stock outstanding, such
funds shall be applied to redemption to the extent available
and the shares to be redeemed shall be selected by lot as
determined by the Board of Directors and the remainder of the shares
to be redeemed shall be promptly redeemed as funds become legally
available. Each holder so electing to have the Company redeem
its shares of Series B Preferred Stock shall elect such redemption with
respect to at least 5,000 such shares registered in its name on
the Redemption Date; provided, however, that a holder of less
than 16,667 shares of Series B Preferred Stock so electing to
have the Company redeem any of its shares of Series B
Preferred Stock shall elect such redemption with respect to
all such shares registered in its name on the Redemption Date.
(b) In the event of an Optional Redemption, the Company
may elect, at its option, to pay the redemption price by
issuing shares of Redemption Stock to those
holders of Series B Preferred Stock who have elected to redeem
their shares of Series B Preferred Stock,
provided the Company's Common Stock is then listed on The
American Stock Exchange. The New York Stock
Exchange or The London Stock Exchange or is admitted to trading
in NASDAQ National Market. In the event the Company elects
to pay the redemption price in shares of Redemption Stock, the
Company shall advise the holders by written notice within
thirty (30) calendar days after receipt of written notice
of such holders' election to redeem shares of Series B
Preferred Stock. The number of shares of Redemption Stock
so to be issued to such holders shall equal the product of the
number of shares of Series B Preferred Stock registered in the
name of each such holder, multiplied by the quotient
obtained by dividing the sum of $100.00 plus an amount equal
to the accrued and unpaid dividends on each share of Series
B Preferred Stock to the Redemption Date by the lowest average
Closing Price per share of the Common Stock as calculated for the last
5, 10 and 30 Trading Days preceding the Redemption Date.
Issuance and delivery of the Redemption Stock to such holders
shall be effected by the Company or the Redemption Agent
(as hereinafter defined) in the same manner and to the same
effect as the payment of the redemption price in cash in
accordance with the procedures set forth in sub-paragraph 5(d) below.
In the event the Company has notified a redeeming holder of
its election to pay the redemption price in Redemption
Stock, within fifteen (15) Business Days after receipt of
such notice, such holder of Series B Preferred Stock shall
have the right to notify the Company of its election to
have the Company sell its shares of Redemption Stock on behalf
of such holder. As soon as practicable after receipt of such
holder's written election so to sell such shares the Company
shall use its best efforts to sell such Redemption Stock
in the market or in one or more private
transactions, without commission or any other
remuneration payable to the Company, at the best price
reasonably obtainable for shares of Common Stock, either
directly or through one or more brokers or other agents
selected by the Company. The Company may, but
shall not be required to purchase such shares of
Redemption Stock at such price. While the Company shall
seek to obtain the best price for such shares it shall not
be required to obtain the highest possible price; provided,
however, in the event the amount of
the net proceeds of sales paid to such holder from the sale
of the Redemption Stock (after payment of all sales
commissions or fees but before payment of any
transfer, stamp, documentary or income taxes) is less than
$100.00 per share of Series B Preferred Stock (the difference
being herein referred to as the "Deficit Amount"), the
Company shall issue to such holder additional shares of
Common Stock (the "Additional Stock") in an amount equal
in value to the Deficit Amount computed, to the nearest
whole share of Common Stock, by dividing the Deficit Amount by
the last sales price per share at which the Redemption Stock
was sold as hereinabove provided. Within ten (10) Business
Days after receipt of such holders' written election to sell
its shares of Redemption Stock, the Company will sell such shares,
pay such holder the net proceeds of such sale and issue to
such holder the amount of shares of Additional Stock, if any,
required to be issued under the preceding sentence. Within
fifteen (15) Business Days after the issuance of shares of
Additional Stock to such holder, such holder shall have the
right to notify the Company of its election to have the
Company sell its shares of Additional Stock on behalf of such
holder. Within ten (10) Business Days after receipt of such
holders' written election to sell its shares of Additional
Stock, the Company will sell such shares and pay such holder
the net proceeds of such sale. If the net proceeds of such
sale of Additional Stock are less than the Deficit Amount
(the difference being herein referred to as the "New Deficit
Amount"), the Company shall issue to such holder additional
shares of Common Stock (the "New Additional Stock") in an
amount equal in value to the New Deficit Amount computed to
the nearest whole share of Common Stock, by dividing the New
Deficit Amount by the last sales price per share at which the
Additional Stock was sold as hereinabove provided.
Within ten (10) Business Days after the
issuance to such holder of the amount of shares of New
Additional Stock, if any, required to be issued under the
preceding sentence, the Company will sell such shares and
pay such holder the net proceeds of such sale. The Company
shall continue to issue to such holder additional shares of
Common Stock, sell such shares on such holder's behalf and
pay such holder the net proceeds of such sale or sales on the
same terms as hereinabove provided with respect to the New
Additional Stock until such holder has received from the
Company aggregate net proceeds of not less than $100.00 per
share of Series B Preferred Stock. The Company shall use its
best efforts to sell all such Additional Stock, New Additional
Stock and such other additional shares of Common Stock on
behalf of the Holder in the same manner contemplated for
sales of the Redemption Stock, as hereinabove provided.
(c) Shares of Series B Preferred Stock shall be
automatically redeemed upon the exercise, in full or in part,
in accordance with the Warrant Agreement dated as of March
27, 1991, between the Company and China Investment &
Development Co., Ltd. ("CIDC-ROC"), of the Class B Warrants
(the "Class B Warrants") issued pursuant to the Securities
Purchase Agreement, dated as of March 27, 1991 between the
Company, China Investment and Development Corporation and CIDC-
ROC, to the extent that the Class B Warrants are exercised
("Automatic Redemption"). The number of shares of Series
B Preferred Stock which shall be automatically redeemed upon
partial exercise of the Class B Warrants shall be calculated
by dividing the product of the number of
Class B Warrants exercised and the Class B Exercise
Price (as defined in the Warrant Agreement) by $100.00, to the
nearest whole share of Series B Preferred Stock. The particular
shares of Series B Preferred Stock which shall be
automatically redeemed upon any partial
exercise of the Class B Warrants shall be selected by the
Board of Directors of the Company by lottery. The redemption
price payable upon Automatic Redemption of the Series B
Preferred Stock shall not be payable by issuing shares of
Redemption Stock but shall be paid in cash in accordance with
the provisions of sub-paragraph 5(d);
provided, however, in no event shall such
redemption price exceed the amount actually collected by the
Company upon exercise of the Class B Warrants.
(d) If a holder of record submits to the Company, on or
prior to a Redemption Date, the certificate or certificates
for the Series B Preferred Stock to be redeemed, with the
redemption notice thereon appropriately completed, the redemption
price shall be payable as soon as practicable thereafter, but in
any event no later than the earlier of (i) ten (10)
Business Days after receipt of such certificate or
certificates or (ii) in the event of an Automatic
Redemption the date of the receipt and collection of the
Class B Exercise Price of the Class B Warrants being
exercised. The Company may deposit the aggregate redemption
price in trust with a bank or trust company (in good
standing, organized under the laws of the United States of
America or of the State of New York, doing business in the
Borough of Manhattan, City of New York, New York,
and having capital surplus and
undivided profits aggregating at least $25,000,000) as the
"Redemption Agent", for payment to the holders so the shares
so to be redeemed, upon surrender (and endorsement, if
required by the Board of Directors) of the certificates for
such shares. Upon a Redemption Date (unless the Company
shall fail to make payment or deposit of the redemption
price as above set forth), each holder of the shares of
Series B Preferred Stock so to be redeemed shall cease to be
a shareholder with respect to such shares and shall have no
interest in, or claim against, the Company and shall have no
voting or other rights with respect to such shares, except the
right to receive the moneys payable upon such
redemption from such bank or trust company, or from the
Company, without interest thereon, upon surrender (and
endorsement if required by the Board of Directors) of the
certificates; and the shares represented thereby shall
no longer be deemed to be outstanding.
In the event the holder of any shares of Series B Preferred
Stock shall not, within six years after such deposit
claim the amount deposited as above stated for the
redemption thereof, the depositary shall, upon demand, pay
over to the Company such unclaimed amount so deposited,
and the depositary shall thereupon be relieved of all
responsibility therefor to such holder.
(e) In the event of an Automatic Redemption, the
dividend on the Series B Preferred Stock as redeemed shall
accrue up to the fixed Dividend Payment Date last preceding the
relevant redemption date but shall cease to accrue thereafter
in respect of shares of Series B Preferred Stock being
redeemed.
(f) Any dividend arrears on the Series B
Preferred Stock tendered to the Company upon exercise
of the Class B Warrants as therein provided shall be
payable in full to the respective last holders of record
of the shares of Series B Preferred Stock so
tendered to the Company (notwithstanding any subsequent
transfer of the shares of Common Stock issued upon
exercise of the Class B Warrants), pro rata with
payment of corresponding dividend arrears on the Series B
Preferred Stock remaining outstanding.
Paragraph 6. Voting Rights.
Except as may be otherwise provided herein or in this
Restated Certificate of Incorporation of XCL, as
amended from time to time with the consent of the holders
of Series B Preferred Stock, provided such consent is
required to be obtained hereunder, or as
required by applicable law:
(a) The Series B Preferred Stock shall vote
together with the Common Stock of the Company as a single
class on all actions to be taken by the stockholders of
the Company. Each share of Series B Preferred Stock
shall entitle the holder thereof to
cast 50 votes on all matters on which the Series B
Preferred Stock shall vote with the Common Stock. No
adjustment shall be made in the voting rights per share of
the Series B Preferred Stock on any matters (including,
without limitation, the voting rights set forth in this
Section 6 and in Sections 7 and 8 hereof) upon any increase or
decrease in the number of shares outstanding of any class
of stock which is also entitled to vote on such matters;
(b) The Series B Preferred Stock shall vote as a separate
class on any resolution proposed for adoption by the
stockholders of the Company which seeks to
amend, alter or repeal, the provisions of XCL's
Restated Certificate of Incorporation or of the
resolutions contained in the Certificate of Designation of the
Series B Preferred Stock designating the Series B Preferred
Stock and the preferences and privileges, relative,
participating, optional or other special
rights and qualifications, limitations and restrictions
thereof, so as to adversely affect any right,
preference, privilege or voting power of the Series B
Preferred Stock or the holders thereof; provided,
however, that any increase in the amount of the issued Series
B Preferred Stock or the creation and issue of
other series of preference stock (whether or not
denominated in Dollars), or any increase in the amount
of authorized shares of Series B Preferred Stock, in
each case either being Parity Stock (as defined below) or
junior to the Series B Preferred Stock with respect to
the payment of dividends and the distribution of
assets upon dissolution, liquidation or winding up and with
or without similar voting rights will not be
deemed to affect adversely such rights, preferences,
privileges or voting powers of the Series B Preferred
Stock;
(c) Except in the event that arrangements are or
have been offered to the holders of the Series B
Preferred Stock which ensure that the rights of such
holders would not be prejudiced, XCL will ensure that no
plan of compromise or arrangement affecting the
Common Stock shall become effective unless the holders of the
Series B Preferred Stock shall be parties to the plan and
unless the plan shall be approved by the holders of at
least two thirds of the then issued and outstanding shares of
Series B Preferred Stock, voting as a class together with all
other series of preference stock ranking on a parity with the
Series B Preferred Stock as to the right to receive any
dividends and any payment or distribution of assets upon
dissolution, liquidation or winding up (herein referred
to as "Parity Stock"). The U.K. Preferred Stock shall be
deemed Parity Stock for all purposes herein;
(d) In the case of a vote on a resolution
regarding (i) the capital reorganization, dissolution or
liquidation of XCL; or (ii) any matter for which the consent
of the holders of Series B Preferred Stock is sought in
accordance with the provisions of subparagraphs 6(b) or
6(c) or Paragraphs 7 or 8 hereof; every record holder of
Series B Preferred Stock who is present at that meeting in
person or by proxy shall be entitled to cast one (1) vote for
each share of Series B Preferred Stock registered in its name
(voting (A) as a separate class with respect to the matters set forth
in sub-paragraph 6(b) and (B) together with all other Parity,
Stock with respect to the matters set forth in sub-paragraphs
6(c) and 6(d)(i) and Paragraphs 7 and 8) and the decision of
at least two thirds of the votes cast at the meeting by such
holders (as to any matters set forth in clause (A) above) and
such, holders and the holders of any Parity Stock (as to any
matters set forth in clause (B) above) shall be determinative
of the matter so long as a quorum (as defined in sub
paragraph 6(e) below) is present; provided that in the case
of sub-paragraph 6(d)(ii) above such consent may be sought
without a meeting and shall be deemed to be granted upon the
receipt of the written consent of at least two thirds of
the then issued and outstanding shares of stock entitled to
vote on such matter as a class.
(e) At each meeting of stockholders at which the
holders of the Series B Preferred Stock shall have the right
to vote as a separate class or together with any other class
of stock, the presence in person or by proxy of the
holders of record of a majority of the total number of shares
of stock entitled to vote as a single class then
outstanding shall be necessary and sufficient to constitute a
quorum of such class for the transaction of business by such
stockholders as a class. At any such meeting or adjournment
thereof:
(i) the absence of a quorum of the holders of the
Series B Preferred Stock shall not prevent the election of
Directors or the transaction of business other than the
transaction of business with respect to which the holders of
the Series B Preferred Stock are entitled to vote as a
separate class and the absence of a quorum of the
holders of any other class of stock for the election of
Directors or the conduct of such other business shall not
prevent the conduct of business on which the Series B
Preferred Stock is entitled to vote as a separate class, and
(ii) in the absence of any such quorum, the
holders present in person or by proxy of the class
or classes which lack a quorum shall have the power to
adjourn (for a period of up to 30 days) the meeting for
the election of Directors which they are entitled to elect
from time to time, or for the conduct of such business,
without notice other than announcement at the meeting until
a quorum shall be present.
Paragraph 7. Further Issues: Par Value.
So long as any shares of Series B Preferred Stock
remain outstanding, XCL will not without the
affirmative vote or consent of the holders of the Series
B Preferred Stock and any Parity Stock, in each case
outstanding at the time, given in person or by proxy,
either in writing or at a meeting,
(i) authorize, create or issue, or increase the authorized or
issued amount, of any class or series of stock ranking
senior to the Series B Preferred Stock with respect to
payment of dividends or distribution of assets on
dissolution, liquidation or winding up or which may be
convertible into any class of shares ranking as regards
participation in dividends or the distribution of assets on
dissolution, liquidation or winding up senior to the Series B
Preferred Stock; or (ii) increase or decrease the par value
of the Common Stock.
Paragraph 8. Other Matters.
So long as any Series B Preferred Stock remains issued
and outstanding then:
(a) except as authorized by the adoption of an
appropriate resolution by the affirmative vote or consent
of the holders of the Series B Preferred Stock and any
Parity Stock in accordance with sub-paragraph 6(d):
(i) XCL will cause the Group (as defined below)
not to directly engage or become materially interested in
any business, other than in oil and gas exploration,
development and production,
including the operation of processing plants and gas
gathering systems and pipelines, but excluding any
downstream activities such as petroleum refining or
retailing of refined products unless such retailing is
incidental to a permitted activity;
(ii) XCL will not purchase any of
its own outstanding shares of Common Stock otherwise
than (A) in accordance with XCL's Stock Option Plans to
the extent Common Stock is used to satisfy the
exercise stock options granted thereunder; or (B) pursuant to a
resolution of the Shareholders adopted at an Extraordinary
General Meeting held on December 4, 1987; and
(iii) XCL shall cause the Group not to
incur Indebtedness which shall exceed in aggregate
principal amount an amount equal to 200 percent of the
amount of Shareholders' Equity of the Group as reported in
XCL's Latest Consolidated Balance Sheet.
For the purposes of sub-paragraph (iii) above:
(A) "Indebtedness" means all borrowed moneys
and shall be deemed to include to the extent not
otherwise taken into account:
(1) the principal amount raised
in respect of loans or acceptances by any bank or
accepting house under any loan facility or acceptance
credit opened on behalf of and in favor of XCL and any
corporation a majority of whose shares of voting
securities are owned by XCL (a "Subsidiary");
(2) the principal amount of any
debentures (secured or unsecured) of XCL or any
Subsidiary; and
(3) the principal amount for
which XCL is liable as a guarantor of, or surety for
the obligations of a third party;
But shall not include, as determined in accordance with
generally accepted U.S. accounting principles:
(1) intra-Group debt;
(2) the amount of all
consolidated current liabilities of XCL and its
Subsidiaries incurred in the ordinary course of business,
other than for current maturities of long term debt and
other than short term borrowings;
(3) deferred revenues; and
(4) deferred U.S. taxes.,
(B) "Shareholders' Equity" means the
aggregate amount appearing as shareholders' equity in the
applicable Latest Consolidated Balance Sheet as
determined in accordance with generally accepted US
accounting principles;
(C) "Latest Consolidated Balance Sheet"
means at any date the then latest published consolidated
balance sheet of the Group prepared in accordance with
generally accepted US accounting principles and which has been
audited and has been reported on by
XCL's auditors for the time being.
(D) "the Group" means XCL and its Subsidiaries
from time to time.
(b) XCL shall concurrently send a copy of every
report and financial statement sent to its Shareholders to
every holder of Series B Preferred Stock.
Paragraph 9. Reacquired Shares.
Any shares of the Series B Preferred Stock
redeemed or purchased or otherwise acquired by the
Company in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become
authorized but unissued shares of Series B Preferred Stock,
par value $1.00, and may be reissued as Series B Preferred
Stock or part of a new series of preference
stock to be created by resolution or resolutions of the Board
of Directors, subject to the conditions or
restrictions on issuance set forth herein.
Paragraph 10. Miscellaneous.
(a) All notices referred to herein shall be in
writing, and all notices hereunder shall be deemed to have
been given upon the earlier of receipt thereof or three (3)
Business Days after the mailing thereof if
sent by registered or certified mail (unless firstclass
mail shall be specifically permitted for such notice under
the terms hereof) with postage prepaid, addressed: (i) if to
the Company, to its office as
specified in its most recent Annual Report on Form 10-K (or
any successor report or form) or to the Transfer Agent or
other agent of the Company designated as
permitted thereby or (ii) if to any holder of the Series
B Preferred Stock or Common Stock, as the case may be, to such
holder at the address of such holder as listed in the stock
record books of the Company (which may include the records of
any Transfer Agent for the Series B Preferred Stock or Common
Stock, as the case may be) or (iii) to such other address as
the Company or any such holder, as the case may be, shall
have designated by notice similarly given.
(b) A copy of any notice given hereunder to any
holder of Series B Preferred Stock shall be provided to
Shearman & Sterling, 555 California Street,
San Francisco, CA 94104, Attention: William M. Kelly, Esq.
unless otherwise requested in writing by any such holder.
(c) The Company shall pay any and all stock
transfer
and documentary stamp taxes that may be
payable in respect of any original issuance or delivery of
shares of Series B Preferred Stock or shares of
Common Stock or other securities issued on account of
Series B Preferred Stock pursuant hereto or
certificates representing such shares or securities.
The Company shall not, however, be required to pay any such tax
which may be payable in respect of any transfer involved
in the issuance or delivery of shares of Series B Preferred
Stock or Common Stock or other securities in a name other
than that in which the shares of Series B Preferred Stock
with respect to
which such shares or other securities are issued or
delivered were registered (including, without
limitation, any sales or transfers of Dividend and
Redemption Stock arranged by the Company on behalf of a holder
of Series B Preferred Stock), or in respect of
any payment to any person with respect to any such shares
or securities other than a payment to the registered
holder thereof, and shall not be required to make any such
issuance, delivery or payment unless and until the person
otherwise entitled to such issuance, delivery or payment has
made arrangements satisfactory to the Transfer Agent for the
payment to the Company of the amount of any such tax or has
established, to the satisfaction of the Company, that such
tax has been paid or is not payable.
Until after the third anniversary of the Issuance Date neither
the Company nor the Transfer Agent shall be
required to recognize or record on the books and records
of the Company or the Transfer Agent any transfer of any
shares of Series B Preferred Stock to a
person who is not a citizen or resident of the United
States of America without the prior written consent of
the Company to such transfer, which consent shall not be
unreasonably withheld, and the Company shall be
entitled to request and receive reasonable proof of the
citizenship or residency of any such proposed
transferee before authorizing the transfer of such
shares of Series B Preferred Stock.
(d) In the event that a holder of shares
of Series B Preferred Stock shall not by written notice
designate to whom payment upon redemption of shares of
Series B Preferred Stock should be made or the address to
which the such payment, should be sent, the Company shall
be entitled to make such payment, in the name of the
holder of such Series B Preferred Stock as shown on the
records of the Company and to send such payment, to the
address of such holder shown on the records of the
Company.
(e) Unless otherwise provided in this
Restated Certificate of Incorporation of the Company,
all payments in the form of dividends, distributions
on voluntary or involuntary dissolution, liquidation or
winding-up or otherwise made Upon the shares of Series B
Preferred Stock and any other stock ranking on a
parity with the Series B Preferred Stock with respect to
such dividend or distribution shall be made pro rata,
so that amounts paid per share on the Series B Preferred
Stock and such other stock shall in all cases bear to
each other the same ratio that the required dividend
distributions or payments, as the case may be, then
payable per share on the shares of the Series B
Preferred Stock and such other stock bear to each
other.
(f) The Company may appoint, and from time
to time discharge and change, the Transfer Agent for the
Series B Preferred Stock. Upon any such appointment or
discharge of a Transfer Agent, the Company shall send
notice thereof by first-class mail, postage prepaid, to
each holder of record of Series B Preferred, Stock. The
initial Transfer Agent for the Series B Preferred Stock
shall be the Company.
D. The Corporation shall have the authority to issue
up to 50,000 shares of Preferred Stock, which shall be
designated Series F, Cumulative Convertible Preferred Stock
(the "Series F Preferred Stock"), each share of Series F
Preferred Stock being identical with each other share of
Series F Preferred Stock and all shares of Series F
Preferred Stock having the following characteristics, rights
and preferences:
Paragraph 1. Designation and Amount. The shares of this
series of Preferred Stock, par value $1.00 per share
("Preferred Stock"), shall be designated as Series F,
Cumulative Convertible Preferred Stock, par value of $1.00
per share ("Series F Preferred Stock"), and the number of
shares constituting such series shall be 50,000.
Paragraph 2. Definitions and Rules of
Construction.
(a) The following terms, not defined elsewhere herein,
shall have the following meanings:
"The American Stock Exchange" means the American Stock
Exchange, Inc.
"Amended Series A Preferred Stock" means the shares
of the Company's Amended Series A, Cumulative Convertible
Preferred Stock, par value $1.00 per share.
"Board of Directors" means the Board of Directors of the
Company as may be constituted from time to time.
"Business Day" means any day (other than a
Saturday, Sunday or public holiday in the Borough of
Manhattan, City of New York, New York) on which banking
institutions in New York City are not authorized or
obligated by law or executive order to close.
"Closing Price" of a security on any day means the last
sales price, regular way, per share of such security on such
day as reported in the principal consolidated reporting system
with respect to such security listed on the principal US stock
exchange on which such security was listed for trading or,
if the shares of such security are not listed or admitted to
trading on a US stock exchange, the middle market
quotations for the shares of such security (derived from The
London Stock Exchange Daily Official List) listed or admitted
to trading on The London Stock Exchange Limited, or if the
shares of such security are not listed or admitted to trading
on The London Stock Exchange, the last sales price as
reported, in the National Market System ("NMS") of the
National Association of Securities Dealers Inc. Automated
Quotation System ("NASDAQ"), or if the shares of such
security are not listed or admitted to trading in NMS, the
average of the high bid and low asked prices in the overthe-
counter market as reported by NASDAQ, or if the bid and asked
prices on each such day shall not have been reported through
NASDAQ, the average of the bid and asked prices for such day
as furnished by any American Stock Exchange member firm
regularly making a market in such security selected for such
purpose by the Board of Directors or a committee thereof
on each Trading Day. In any of such alternate cases when such
security is not traded in prices expressed in Dollars, such
Closing Price shall be converted into Dollars at the then
spot market exchange rate of pounds sterling (UK) into Dollars
as quoted by Chase Manhattan Bank, N.A. on the date of
determination.
"Common Stock" means the shares of common stock, par
value $.01 per share, of the Company.
"Company" means XCL Ltd., a Delaware corporation.
"Conversion Commencement Date" means six months
after the initial Issuance Date.
"Conversion Stock" means the shares of Common Stock
issuable upon conversion of the Series F Preferred
Stock in accordance with Paragraph 6.
"Directors" means the directors of the Company.
"Dividend Stock" means the shares of Series F
Preferred Stock paid to holders of Series F Preferred Stock in
lieu of a cash dividend.
"$" means Dollars.
"Dollars" means the freely transferable currency of the
USA.
"Forced Conversion Date" means that date on which the
shares of Common Stock have traded at or in excess of $0.50
per share for 30 consecutive Trading Days.
"Parity Stock" means all other series of
preference stock ranking on a parity with the Series F
Preferred Stock as to the right to receive any dividends and
any payment or distribution of assets upon dissolution,
liquidation or winding up of the Company. The Amended Series
A[,] [and] [Series A,] Series B [and Series E] Preferred
Stock shall be deemed Parity Stock for all purposes herein.
"Securities Act" means the Securities Act of 1933,
as amended.
["Series A Preferred Stock" means the shares of the
Company's Series A, Cumulative Convertible Preferred Stock,
par value $1.00 per share.]
"Series B Preferred Stock" means the shares of the
Company's Series B, Cumulative Preferred Stock, par value
$1.00 per share.
["Series E Preferred Stock" means the shares of the
Company's Series E, Cumulative Convertible Preferred Stock,
par value $1.00 per share.]
"Shareholders" means the holders of the Common Stock.
"Stock Option Plans" means the employee stock option
plans adopted by the Company and approved by
Shareholders, in effect from time to time, for employees and
certain other individuals rendering services to the Company.
"The London Stock Exchange" means The London Stock
Exchange Limited.
"Trading Day" shall mean a day on which the market
used for calculating the Closing Price is open for the
transaction of business or, if the shares of such
security are not so listed or admitted to trading, a
Business Day.
"Transfer Agent" means the transfer agent for the Series
F Preferred Stock from time to time obtaining.
"UK" and "United Kingdom" mean the United Kingdom of
Great Britain and Northern Ireland.
"USA" and "US" means the United States of
America.
"Warrants" means an aggregate of 45,491,863 issued
and outstanding and to be issued warrants to purchase Common
Stock.
(b) References herein to Paragraphs and
subparagraphs are to paragraphs and subparagraphs of this
Designation of the Series F Preferred Stock ("Designation")
unless otherwise indicated. The words "hereof", "herein",
"hereunder" and comparable terms refer to the entirety of
this Designation and not to any particular Paragraph or
other subdivision hereof. Words in the singular include the
plural and in the plural include the singular. Words in the
neuter gender shall include the masculine and feminine and
vice versa. The word "or" is not exclusive. The word
"including" shall be deemed to mean "including, without
limitation." The Paragraph headings contained in this
Designation are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Designation.
Paragraph 3. Dividends and Distributions.
(a) Each share of Series F Preferred Stock
shall entitle the record holder to receive, out of funds
legally available therefor, when, as and if declared by the
Board of Directors, dividends in cash at the annual rate of
$12.00 per share, which shall be payable in arrears in equal
semiannual installments on June 30th and December 31st, or in
the event any such date is a Saturday, Sunday or public
holiday in the Borough of Manhattan, in the City of New
York, New York, on the first Business Day following such
date (hereinafter a "Dividend Payment Date") in each year,
provided, however, that the dividend payable on the first
such Dividend Payment Date shall be equal to the product
obtained by multiplying $6.00 by a fraction, the denominator of
which shall be 182 and the numerator of which shall be
the number of days expired in the period between the date of
issuance of the share of Series F Preferred Stock (the
"Issuance Date") and such first Dividend Payment Date
(inclusive of both such dates).
(b) The Company may, at its option exercised
by written notice to the holders of the Series F Preferred
Stock given at least ten (10) Business Days prior to the
Dividend Payment Date, elect to pay any dividend due and
payable hereunder, in kind in additional shares of Series F
Preferred Stock in lieu of a dividend payment in cash. The
amount of shares of Dividend Stock issuable to each holder of
Series F Preferred Stock pursuant to this subparagraph 3(b)
on each such Dividend Payment Date shall equal .06
share of Series F Preferred Stock for each share of Series F
Preferred Stock registered in the name of each such holder of
the Series F Preferred Stock on the record date for the
payment of the dividend. Fractional shares of Series F
Preferred Stock arising in respect of the payment of any
dividend in shares of Dividend Stock shall not be issued to
the holders of Series F Preferred Stock.
(c) Dividends shall be cumulative, whether or not
earned and whether or not surplus shall be available
therefor and shall commence to accrue and accumulate from
day to day from the Issuance Date. Such accumulation shall
include, if not paid, the dividend payable on each Dividend
Payment. Accrued but unpaid dividends shall not bear
interest. Such dividends shall be declared and set apart or
paid before any dividends (other than dividends payable in
Common Stock or any other series or class of the
Company's stock hereafter issued which ranks junior as
to dividends and as to distributions upon the
dissolution, liquidation or winding up of the Company to
the Series F Preferred Stock, such junior securities
being hereinafter referred to as
"Junior Securities") shall be paid on the Common Stock or
such other series or class of Junior Securities. No cash
dividend shall be paid upon or set apart for shares of any
other class of stock of the Company (other than shares of
preference stock ranking pari passu with the Series F
Preferred Stock in respect of the payment of dividends)
until all dividend arrears on the Series F Preferred Stock
shall be fully paid. The shares of Series F Preferred Stock
shall rank pari passu with the shares of the Amended Series A
Preferred Stock[,] [and] [Series A Preferred Stock,]
Series B Preferred Stock [and Series E Preferred Stock] with
respect to the payment of dividends.
(d) Dividends paid on the shares of Series F
Preferred stock in an amount less than the total amount of
such dividends at the time accrued and payable on such
shares shall be allocated pro-rata on a share-by-share basis
among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of
holders of Series F Preferred Stock entitled to receive
payment of a dividend declared thereon, which record date
shall be no more than sixty days prior to the date fixed for
payment thereof.
(e) In the event the Company fails to declare and pay any
dividend on a Dividend Payment Date (the "Defaulted Date"), the
dividend rate on the outstanding shares of Series F
Preferred Stock in effect on the Defaulted Date
shall be increased effective such Date so that the aggregate
dividend payable on the next succeeding Dividend Payment
Date shall equal the dividend that would have been paid on all
then outstanding shares of Series F Preferred Stock had the
Company declared and paid the dividend on the Defaulted Date
in Dividend Stock. Upon payment of all such dividend
arrearages in cash or with shares of Dividend Stock (or some
combination of both), the dividend rate shall revert to the
dividend rate in effect on the initial Defaulted Date. The
Company shall notify all holders of Series F Preferred Stock in
writing at least fifteen (15) days prior to the payment by
the Company of any dividend arrearages in cash, in which case
such holders may elect to receive such dividend arrearage
payment in shares of Dividend Stock (computed
based upon the annual cash dividend rate then applicable
divided by 100) in lieu of such cash payment by notice in
writing delivered to the Company within five (5) days after
receipt of the Company's dividend payment notice, provided
that such notice is received by the Company from the holders of
at least a majority of the outstanding shares of Series F
Preferred Stock.
Paragraph 4. Dissolution. Liquidation or Winding Up.
In the event of any dissolution, liquidation or winding
up of the affairs of the Company, after payment or provision
for payment of the debts and other liabilities of the Company,
the registered holders of Series F Preferred Stock shall be
entitled to share on a pro rata basis with the holders of
shares of Amended Series A Preferred Stock, [Series A
Preferred Stock,] Series B Preferred Stock [and Series E
Preferred Stock] and all other series of the
Company's preference stock ranking on a parity with the
Series F Preferred Stock in respect of distributions upon
dissolution, liquidation or winding up of the Company and to
receive, out of the net assets of the Company, $100.00 per
share, plus an amount equal to all the dividend arrears on
each such share up to the date fixed for distribution and no
more, before distribution shall be made to the holders of the
Common
Stock or any Junior Securities. Neither the merger or
consolidation of the Company, nor the sale, lease
or conveyance of all or a part of its assets, shall be
deemed to be a dissolution, liquidation or winding up of the
affairs of the Company within the meaning of this Paragraph 4.
Paragraph 5. Redemption.
(a) The Series F Preferred Stock shall be
redeemable at the election of the Company, in whole or in
part at any time and from time to time, at a redemption
price ("Redemption Price") of $100.00 per share, in each
case plus all accrued and unpaid dividends to and including the
redemption date. The Company shall notify each holder of
record of shares of Series F Preferred Stock in writing (the
"Redemption Notice") mailed by first class mail, postage
prepaid, at least twenty (20) days and not more than sixty
(60) days prior to the date fixed by the Company for
redemption, mailed to his address as the same shall appear
on the books of the Company. The Redemption Notice shall
state the redemption date, the Redemption Price and the
place and manner of payment thereof. If less than all of the
outstanding shares of Series F Preferred Stock are to be
redeemed, the Company shall select those shares to be
redeemed pro rata or by lot or in such other manner as the
Board of Directors may determine.
(b) The Company may deposit the aggregate
Redemption Price in trust with a bank or trust company (in
good standing, organized under the laws of the United States of
America or of the State of New York, doing business in
the Borough of Manhattan, in the City of New York, New York,
and having capital surplus and undivided profits aggregating at
least $25,000,000) as "Redemption Agent", for payment to the
holders of the shares so to be redeemed, upon surrender (and
endorsement, if required by the Board of Directors) of the
certificates for such shares. At the close of business on a
redemption date (unless the Company shall fail to make payment
or deposit of the Redemption Price as above set
forth), dividends shall cease to accrue on the shares of
Series F Preferred Stock called for redemption (except on
any such shares of Series F Preferred Stock in respect of
which, upon due presentation of the certificate(s) relating
thereto, payment of the money due at such redemption shall be
refused in which case the dividend shall be deemed to
have continued and shall continue to accrue from the
relevant date of redemption to the date of payment); each
holder of the shares of Series F Preferred Stock so to be
redeemed shall cease to be a shareholder with respect to
such shares and shall have no interest in, or claim against,
the Company and shall have no voting or other rights with
respect to such shares, except the right to receive the
moneys payable upon such redemption from such bank or trust
company, or from the Company, without interest thereon, upon
surrender (and endorsement if required by the Board of
Directors) of the certificates; and the shares represented
thereby shall no longer be deemed to be outstanding. In the
case of a call for redemption by the Company pursuant to
subparagraph 5(a) above, the right of conversion shall cease
and terminate as to the shares designated for redemption on
the close of business on the third Business Day preceding
the redemption date unless default shall be made in the
payment of the Redemption Price. In the event the holder of
any shares of Series F Preferred Stock shall not, within six
years after such deposit, claim the amount deposited as
above stated for the redemption thereof, the depositary
shall, upon demand, pay over to the Company such unclaimed
amount so deposited, and the depositary shall thereupon be
relieved of all responsibility therefor to such holder.
(c) So long as any shares of Series F
Preferred Stock are outstanding, the Company shall
not redeem,
purchase or otherwise acquire, or permit any subsidiary to
purchase or otherwise acquire, any shares of Common Stock or
any Junior Securities if at the time of making such
redemption, purchase or acquisition the Company shall be in
default with respect to any dividend payable on, or any
obligation to purchase shares of, Series F Preferred Stock;
provided, however, that, notwithstanding the foregoing the
Company may at any time redeem, purchase or otherwise
acquire shares of Common Stock or any Junior Securities in
exchange for, or out of the net cash proceeds from the sale
of, Common Stock or other shares of Junior Securities. If in
any case the amounts payable with respect to the Company's
obligation to retire shares of Preferred Stock are not paid
in full in the case of all series with respect to which such
obligations exist, the number of shares of the various
series to be retired shall be in proportion to the
respective amounts which would be payable on account of such
obligations if all amounts payable were discharged in full.
Any dividend arrears on the Series F Preferred Stock
tendered to the Company shall be payable in full to the
respective last holders of record of the shares of Series F
Preferred Stock so tendered to the Company pro rata with
payment of corresponding dividend arrears on the Series F
Preferred Stock remaining outstanding.
Paragraph 6. Conversion.
(a) Subject as hereinafter provided. at any
time after the Conversion Commencement Date at the option of
the record holder of the Series F Preferred Stock, the
Series F Preferred Stock shall be convertible, in whole or in
part, at the office of the Transfer Agent into fully paid and
nonassessable shares of Common Stock at a rate (the
"Conversion Rate") per share of Series F Preferred Stock
equal to that number of shares of Common Stock as shall
equal the quotient of $100 divided by $.25 (the "Conversion
Price") (subject in any case to adjustment as hereinafter
provided in Paragraph 7), provided that if a Conversion
Notice (as hereinafter defined in subparagraph 6(c) below) is
given in respect of only a part of a holding of Series F
Preferred Stock so that there would remain following
conversion three or fewer such shares in that holding, all
the Series F Preferred Stock in the holding shall be
converted notwithstanding the figure inserted in the
Conversion Notice.
(b) For the purposes of the provisions hereof, a
"Conversion Date" shall be the date falling 90 days after
the date of the Conversion Notice (or such sooner date as the
Company may notify the converting holder of Series F
Preferred Stock in writing) and provided always that if any
Conversion Date would otherwise fall on a day which is not a
Business Day such Conversion Date shall be the first
Business Day following such date.
(c) The right to convert shall be
exercisable at any time and from time to time after the
Conversion Commencement Date by completing the notice of
conversion endorsed on the share certificate relating to the
Series F Preferred Stock to be converted or a notice in such
other form as may from time to time be prescribed by the Board
of Directors in lieu thereof (any such notice being herein
called a "Conversion Notice") and delivering the same to the
Transfer Agent together with such other evidence (if any) as
the Board of Directors may reasonably require to prove title of
the person exercising such right to convert. The
Conversion Notice shall be deemed dated as of the date of
receipt thereof by the Transfer Agent. A Conversion Notice
once given may not be withdrawn without the consent in
writing of the Company.
(d) On conversion the dividend on the Series F
Preferred Stock so converted shall cease to accrue with
effect from the close of business on the date preceding the
Conversion Date. The Common Stock issued on such conversion
shall entitle the holder to all dividends and other
distributions payable on the Common Stock by reference to a
record date after the applicable Conversion Date.
(e) Any dividend arrears on the Series F
Preferred Stock surrendered for conversion shall be payable in
full to the respective last holders of record of the shares
of Series F Preferred Stock surrendered for
conversion (notwithstanding any subsequent transfer of the
shares of Common Stock into which such shares have been
converted), pro rata with payment of corresponding dividend
arrears on the Series F Preferred Stock
remaining
outstanding.
(f) Conversion shall be deemed to have been
effected on the Conversion Date, and the holder shall as of
the close of business on such date have the full rights of the
Common Stock resulting from such conversion.
(g) On the Conversion Date all shares of
Series F Preferred Stock in respect of which a Conversion
Notice has been delivered ("relevant shares") shall be
converted into shares of Common Stock at the Conversion
Rate. Upon issuance of the Common Stock, the relevant shares
shall be retired and cancelled. Within 30 days after the
Conversion Date, the Company shall, or shall cause, the
forwarding to each holder of the relevant shares, at his own
risk, free of charge, a definitive certificate for the
appropriate number of fully paid shares of Common Stock and a
new certificate for any unconverted Series F Preferred Stock
comprised in the certificate(s) surrendered by him.
(h) Fractions of Common Stock arising on
conversion shall not be issued to the holders of the
relevant shares otherwise entitled thereto but (if
arrangements can be so made) such fractions shall be
aggregated and sold in the market on behalf of such holders at
the best price reasonably obtainable and the net proceeds of
sale shall be distributed pro rata among such holders unless
in respect of any holding of the relevant shares the amount
to be distributed would be less than $2.00 in which case such
amount shall not be distributed but shall be
retained for the benefit of the Company. For the purpose of
implementing the provisions of this subparagraph (h), the
Board of Directors may appoint a person to execute transfers on
behalf of persons otherwise entitled to any such
fractions and generally may make all arrangements which
appear to the Board necessary or appropriate for the
settlement and disposal of fractional entitlements.
(i) In case of the voluntary dissolution,
liquidation or winding up of the Company, all conversion
rights relating to the Series F Preferred Stock shall
terminate 45 days after the mailing of a notice of such
action to all record holders of Series F Preferred Stock;
provided that such date of termination of conversion rights
shall be not more than sixty (60) days nor less than twenty
(20) days prior to the date on which such dissolution is to become
effective or such liquidation or winding up is to commence.
Any such notice shall call attention to the date
of such termination of the conversion rights, the per share
amount payable on the Common Stock, the per share amount
payable on the Series F Preferred Stock held by such holder in
connection with such action (in each case, if then known, or a
reasonable estimate if such amount is not known with
any reasonable degree of certainty), and the then current
Conversion Rate of the Series F Preferred Stock held by such
holder of record.
(j) At any time after the Forced Conversion Date, or any
time after at least seventy five percent (75%) of the aggregate
number of shares of Series F Preferred Stock originally
issued on the Issuance Date have been purchased or redeemed by
the Company or converted into Common Stock by the holders
thereof, the Company may, at its option, cause the conversion
of all the remaining issued and outstanding shares
of the Series F Preferred Stock at the Conversion Rate upon
at least 45 days written notice to all holders of record.
(k) The Company shall use its best efforts to ensure
that the shares of Conversion Stock are listed on all the
principal stock exchanges on which the Company's Common Stock
is listed for trading.
Paragraph 7. Adjustments of Conversion Rate.
The Conversion Rate for the Series F Preferred
Stock shall be subject to adjustment from time to time as
follows:
(a) If the Company shall at any time or from
time to time pay a dividend or other distribution on its
outstanding shares of Common Stock in shares of Common
Stock, subdivide its outstanding shares of Common Stock into a
larger number of shares or combine its outstanding shares of
Common Stock into a smaller number of shares, the
Conversion Rate in effect immediately prior to the record
date for such dividend or the effective date for such
subdivision or combination shall be adjusted so that each
share of Series F Preferred Stock shall thereafter be
convertible into the number of shares of Common Stock which
the holder of a share of Series F Preferred Stock would have
been entitled to receive after the happening of any of the
events described above had such share been converted
immediately prior to the happening of such event. An
adjustment made pursuant to this subparagraph (a) shall
become effective immediately after the close of business on
such a record date in the case of a dividend and shall
become effective on the close of business on the day
immediately prior to the effective date in the case of a
subdivision or combination.
(b) If the Company shall issue rights or
warrants to all holders of Common Stock (expiring within 45
days after the record date for determining stockholders
entitled to receive them) for the purpose of entitling them
to subscribe for or purchase shares of Common Stock at a
price per share less than the average of the Closing Prices
per share for the 30 consecutive Trading Days ending on the
record date for the determination of the stockholders
entitled to receive such rights or warrants, then at the
discretion of the Board of Directors, either (i) the Company
shall make a like issue at the same time to each holder of
the Series F Preferred Stock as if his conversion rights had
been exercisable in full on the record date for such issue on
the basis of the Conversion Rate; or (ii) the number of shares
of Common Stock into which each share of the Series F Preferred
Stock shall thereafter be convertible shall be adjusted by
multiplying the
number of shares of Common Stock into which each share of
Series F Preferred Stock was convertible on the day
immediately preceding such record date by a fraction the
numerator of which shall be the sum of the number of shares
of Common Stock outstanding on such record date and the number
of additional shares of Common Stock so offered for
subscription or purchase, and the denominator of which
shall be the sum of the number of shares of Common Stock
outstanding on such record date and the number of shares of
Common Stock which the aggregate offering price of the
total number of shares so offered would purchase at such
average of the Closing Prices for such 30 Trading Days. Such
adjustment shall become effective immediately after the close
of business on such record date. Notwithstanding anything in
the foregoing to the contrary, no such issue or adjustment
shall be made in respect of the shares of Common Stock
issuable upon exercise of the Warrants, any stock options
granted pursuant to the
Company's Stock Option Plans approved by Shareholders
(provided that option exercise price shall not be less than
the market value of the Common Stock on the date of grant of
the options), [the Amended Series A Preferred Stock and the
shares of Amended Series A Preferred Stock issuable as
dividends on, or the shares of Common Stock issuable upon
conversion of the Amended Series A Preferred Stock, and] the
Series B Preferred Stock and the shares of Common Stock
issuable as dividends on or upon redemption of the Series B
Preferred Stock [or the Series E Preferred Stock and the
shares of Series E Preferred Stock issuable as dividends on, or
the shares of Common Stock issuable upon conversion of, the
Series E Preferred Stock].
(c) If any offer or invitation by way of rights or
otherwise (not being an offer or invitation to which the
provisions of subparagraph 7(b) apply) is made to all the
Shareholders by the Company, the Company shall make or, so
far as it is able, cause that there be made a like offer at
the same time to each holder of Series F Preferred Stock as if
his conversion rights had been exercisable on and had been
exercised in full on the record date for such offer or
invitation on the basis of the Conversion Rate.
(d) If the Company shall distribute to all holders
of Common Stock any assets (other than any ordinary dividend
payable solely in cash in an amount not excessive in
comparison to its current earnings), any rights to
subscribe for securities (other than those referred to in
subparagraph 7(b) above) or any evidence of indebtedness or
other securities (other than Common Stock or Junior
Securities), then in each such case the number of shares of
Common Stock into which each share of Series F Preferred
Stock shall thereafter be convertible shall be adjusted by
multiplying the number of shares of Common Stock into which
each share of Series F Preferred Stock was convertible on the
date immediately preceding the record date for the
determination of the stockholders entitled to receive such
distribution by a fraction the numerator of which shall be
the average of the Closing Prices per share of Common Stock
for the thirty (30) consecutive Trading Days ending on such
record date and the denominator of which shall be such
average of the Closing Prices per share less the then fair
market value (as determined in a resolution adopted by the
Board and reviewed and approved by the Company's auditors for
the time being) of the portion of the assets or
evidences of indebtedness or securities so distributed or of
such subscription rights applicable to one share of Common
Stock. Such adjustment shall become effective immediately after the
close of business on such record date.
(e) Whenever the Conversion Rate is adjusted as herein
provided, the Company shall forthwith file with the Transfer
Agent a certificate stating the adjusted Conversion Rate
determined as provided in this Paragraph 7. Such
certificate shall show in detail the facts requiring such
adjustment. The calculation of such adjustment shall have
been reviewed and approved by the Company's auditors for the
time being. Whenever the Conversion Rate is adjusted, the
Company will forthwith cause a notice stating the adjustment
and the resulting Conversion Rate to be mailed to the
respective holders of record of Series F Preferred Stock.
(f) In case of any capital reorganization or any
reclassification of the capital stock of the Company or
in case of the consolidation or merger of the Company with
another corporation or in case of any sale or conveyance of
all or substantially all of the property of the Company,
each share of Series F Preferred Stock shall thereafter be
convertible into the number of shares of stock or other
securities or property receivable upon such capital
reorganization, reclassification of capital stock,
consolidation, merger, sale or conveyance, as the case may
be, by a holder of the number of shares of Common Stock into
which such share of Series F Preferred Stock was convertible
immediately prior to such capital reorganization,
reclassification of capital stock, consolidation, merger,
sale or conveyance; and, in any case, appropriate adjustment
(as determined by the Board of Directors and reviewed and
approved by the Company's auditors for the time being) shall be
made in the application of the provisions herein set forth
with respect to rights and interests thereafter of the holders
of the Series F Preferred Stock, to the end that provisions
set forth herein (including the specified changes in and
other adjustment of the Conversion Rate) shall thereafter
be applicable, as near as reasonably may be, in
relation to any shares of stock or other securities or other
property thereafter deliverable upon the conversion of the
Series F Preferred Stock.
(g) No adjustment shall be made hereunder unless by
reason of the happening of any one or more of the events herein
specified, the Conversion Rate then in effect would be
changed by 1 % or more, but any adjustment of less than 1%
that would otherwise be required to be made shall be
carried forward and shall be made at the time of and
together with any subsequent adjustment which, together with
any adjustment or adjustments so carried forward, amounts to 1
% or more, provided that such adjustment shall be made in any
case (regardless of whether or not the amount thereof or the
cumulative amount thereof amounts to 1% or more) upon the
happening of one or more of the events specified in
subparagraph (f) of this Paragraph 7.
Paragraph 8. Voting Rights.
Except as may be otherwise provided herein or in
this Restated Certificate of Incorporation of the Company, as
amended from time to time with the consent of the holders of
Series F Preferred Stock, provided such consent is
required to be obtained hereunder or as required
by applicable law:
(a) the Series F Preferred Stock shares shall not entitle
the holders thereof to receive notice of or attend or vote at
any meeting of stockholders except in the
following circumstances:
(i) The Series F Preferred Stock shall vote as
a separate class on any resolution proposed for
adoption by the stockholders of the Company which
seeks to amend, alter or repeal, the provisions of
the Company's Restated Certificate of
Incorporation or of the resolutions contained in
the Certificate of Designation of the Series F
Preferred Stock designating the Series F Preferred
Stock and the preferences and privileges,
relative, participating, optional or other special
rights and qualifications, limitations and
restrictions thereof, so as to adversely affect
any right, preference, privilege or voting power of
the Series F Preferred Stock or the holders
thereof; provided, however, that any increase in the
amount of the issued Series F Preferred Stock or the
creation and issue of any other series of preference
stock (whether or not denominated in Dollars,
or any increase in the amount of
authorized shares of Series F Preferred Stock, in
each case either being Parity Stock or Junior
Securities and with or without similar voting
rights) will not be deemed to affect adversely
such rights, preferences, privileges or voting
powers of the Series F Preferred Stock;
(ii) Except in the event that arrangements are
or have been offered to the holders of the Series
F Preferred Stock which ensure that the rights of
such holders would not be prejudiced, the Company
will ensure that no plan of compromise or
arrangement affecting the Common Stock shall become
effective unless the holders of the Series F
Preferred Stock shall be parties to the plan and
unless the plan shall be approved by the holders of
at least a majority of the then issued and
outstanding shares of Series F Preferred Stock,
voting as a class together with all other Parity
Stock;
(iii) In the case of a vote on a
resolution regarding (A) the capital
reorganization, dissolution or liquidation of the
Company; or (B) any matter for which the consent of
the holders of Series F Preferred Stock is sought
in accordance with the provisions of
subparagraphs 8(a)(i) and 8(a)(ii) and Paragraphs 9
or 10; every record holder of Series F Stock who
is present at that meeting in person or by proxy
shall be entitled to cast one (1) vote for each
share of Series F Preferred Stock registered
in his name (voting (1) as a separate class with
respect to the matters set forth in subparagraph
8(a)(i) and (2) together with all other Parity
Stock with respect to the matters set forth in
subparagraphs 8(a)(ii) and 8(a)(iii)(1) and
Paragraphs 9 and 10) and the decision of at least
two thirds of the outstanding shares of Series F
Preferred Stock (as to any matters set forth in
clause (A) above) and a majority of
the outstanding shares of Series F Preferred
Stock and any Parity Stock, voting separately as
a class (as to any matters set forth in clause (B)
above) shall be determinative of the matter so
long as a quorum (as defined in subparagraph 8(b)
below) is present; or
(iv) if at the date of the notice
convening a meeting of Shareholders the dividend on
the Series F Preferred Stock has not been paid in
an aggregate amount equal to at least two (2)
consecutive semi-annual dividends on such shares,
the number of Directors of the Company will be
increased by two and a majority of votes cast by
the holders of the Series F Preferred Stock
together with the holders of Parity Stock on which
like voting rights have been conferred and are
exercisable, present in person or by proxy at such
meeting, will be entitled to elect such two
additional Directors to the Board of Directors,
with each holder being entitled to cast one vote
for each share of Series F Preferred Stock
registered in his name. The right to elect such
Directors and the term of office of all such
Directors so elected shall terminate when all such
accrued and unpaid dividends are paid in full or
set apart for payment subject to such right being
reinstated in the case of fixture unpaid dividends as
hereinabove provided. In case any vacancy shall occur
among the Directors elected by the holders of
Series F Preferred Stock and Parity Stock as herein
provided, such vacancy may be filled for the
unexpired portion of the term by vote of the
remaining Director elected by such stockholders, or
such Director's successor in office or by the vote
of such stockholders given at a special meeting
of such stockholders called for such purpose.
(b) At each meeting of stockholders at which the
holders of the Series F Preferred Stock shall have the right to
vote as a separate class or together with any other class of
stock the presence in person or by proxy of the holders of
record of a majority of the total number of shares of stock
entitled to vote as a single class then outstanding shall be
necessary and sufficient to constitute a quorum of such
class for the transaction of business by such
stockholders as a class. At any such meeting or adjournment
thereof,
(i) the absence of a quorum of
the holders of the Series F Preferred Stock shall not
prevent the election of Directors or the transaction
of business other than the transaction of business
with respect to which the holders of the Series F
Preferred Stock are entitled to vote as a separate
class and the absence of a quorum of the holders
of any other class of stock for the election of
Directors or the conduct of such other business
shall not prevent the conduct of business on which
the Series F Preferred Stock is entitled to vote as
a separate class, and
(ii) in the absence of any
such quorum, the holders present in person or by
proxy of the class or classes which lack a quorum
shall have the power to adjourn (for a period of
up to 30 days) the meeting for the election of
Directors which they are entitled to elect from
time to time, or for the conduct of such business,
without notice other than announcement at the
meeting, until a quorum shall be present.
(c) Any action required or permitted to be
taken by the holders of Series F Preferred Stock pursuant to
this Paragraph 8 or Paragraphs 9 or 10, voting either separately
as a class or together with all Parity Stock at any annual
or special meeting of stockholders, may be taken without a
meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the action so
taken, shall be signed by the holders of such
stock having not less than the minimum number of votes that
would be necessary to authorize such action to be taken at a
meeting at which all such shares entitled to vote thereon
were present and voted.
Paragraph 9. Further Issues; Par Value.
So long as any shares of Series F Preferred Stock
remain outstanding, the Company shall not without the
affirmative vote or consent of the holders of the Series F
Preferred Stock and any Parity Stock, in each case
outstanding at the time, given in person or by proxy, either in
writing or at a meeting, (i) authorize, create or issue, or
increase the authorized or issued amount, of any class or
series of stock ranking senior to the Series F Preferred
Stock with respect to payment of dividends or distribution of
assets on dissolution, liquidation or winding up or which may
be convertible into any class of shares ranking as regards
participation in dividends or the distribution of assets on
dissolution, liquidation or winding up senior to the Series F
Preferred Stock; or (ii) increase or decrease the par value of
the Common Stock. The holders of Series F Preferred Stock
shall not be entitled to any preemptive rights with respect
to any further issuances of securities by the Company.
Paragraph 10. Other Matters.
So long as any Series F Preferred Stock remains
issued and outstanding then:
(a) except as authorized by the adoption of an
appropriate resolution by the affirmative vote or consent of
the holders of a majority of the outstanding shares of the
Series F Preferred Stock and any Parity Stock, voting or
consenting separately as a class, the Company shall not:
(i) sell, lease or convey all or
substantially all of the assets of the Company; or
(ii) approve any merger,
consolidation or compulsory share exchange to which
the Company
is a party, unless (1) the terms of such merger,
consolidation or compulsory share exchange do not
provide for a change in the terms of the Series F
Preferred Stock and (2) the Series F Preferred
Stock is on a parity with or prior to (in respect of
dividends and upon liquidation, dissolution or
winding up) any other class or series of capital
stock authorized by the surviving corporation,
other than any class or series of stock of the
Company ranking senior to the Series F Preferred
Stock either as to dividends or upon liquidation,
dissolution or winding up of the Company and
previously authorized with the consent of the
holders of the Series F Preferred Stock (or other
than any capital stock into which such prior stock is
converted as a result of such merger,
consolidation or compulsory share exchange).
(b) the Company shall concurrently send a copy of every
communication or other information, including annual reports
and proxy materials, sent to its Shareholders to every
holder of Series F Preferred Stock.
Paragraph 11. Reacquired Shares.
Any shares of the Series F Preferred Stock
redeemed or purchased or otherwise acquired by the Company in
any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued
shares of Series F Preferred Stock, and may be reissued as
Series F Preferred Stock or part of a new series of
preference stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions or
restrictions on issuance set forth herein.
Paragraph 12. Miscellaneous.
(a) All notices referred to herein shall be in
writing, and all notices hereunder shall be deemed to have
been given upon the earlier of receipt thereof or three (3)
Business Days after the mailing thereof if sent
by registered or certified mail (unless first-class mail shall
be specifically permitted for such notice under the terms
hereof) with postage prepaid, addressed: (i) if to the
Company, to its office as specified in its most recent
Annual Report on Form 10-K (or any successor report or form) or
to the Transfer Agent or other agent of the Company
designated as permitted hereby or (ii) if to any holder of
the Series F Preferred Stock or Common Stock, as the case
may be, to such holder at the address of such holder as
listed in the stock record books of the Company (which may
include the records of any Transfer Agent for the Series F
Preferred Stock or Common Stock, as the case may be) or
(iii) to such other address as the Company or any such
holder, as the case may be, shall have designated by notice
similarly given.
(b) The Company shall pay any and all stock
transfer and documentary stamp taxes that may be payable in
respect of any original issuance or delivery of shares of
Series F Preferred Stock or shares of Common Stock or other
securities issued on account of Series F Preferred Stock
pursuant hereto or certificates representing such shares or
securities. The Company shall not, however, be required to
pay any such tax which may be payable in respect of any
transfer involved in the issuance or delivery of shares of
Series F Preferred Stock or Common Stock or other securities in
a name other than that in which the shares of Series F
Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered, or in
respect of any payment to any person with respect to any
such shares or securities other than a payment to the
registered holder thereof and shall not be required to make
any such issuance, delivery or payment unless and until the
person otherwise entitled to such issuance, delivery or
payment has made arrangements satisfactory to the Transfer
Agent for the payment to the Company of the amount of any
such tax or has established, to the satisfaction of the
Company, that such tax has been paid or is not payable.
(d) In the event that a holder of shares of
Series F Preferred Stock shall not by written notice
designate to whom payment upon redemption of shares of
Series F Preferred Stock should be made or the address to
which such payment should be sent, the Company shall be
entitled to make such payment, in the name of the holder of
such Series F Preferred Stock as shown on the records of the
Company, and to send such payment, to the address of such
holder shown on the records of the Company.
(e) Unless otherwise provided in this Restated
Certificate of Incorporation of the Company, all payments in
the form of dividends, distributions on voluntary or
involuntary dissolution, liquidation or winding-up or
otherwise made upon the shares of Series F Preferred Stock
and any other stock ranking on a parity with the Series F
Preferred Stock with respect to such dividend or
distribution shall be made pro rata, so that amounts paid
per share on the Series F Preferred Stock and such other
stock shall in all cases bear to each other the same ratio
that the required dividends, distributions or payments, as
the case may be, then payable per share on the shares of the
Series F Preferred Stock and such other stock bear to each
other.
(f) The Company may appoint, and from time
to time discharge and change, the Transfer Agent for the Series
F Preferred Stock. Upon any such appointment or discharge of a
Transfer Agent, the Company shall send notice thereof by first
class mail, postage prepaid, to each holder of record of
Series F Preferred Stock. The initial Transfer Agent for the
Series F Preferred Stock shall be the Company.
(g) The Company covenants that it will at
all times on and after the Conversion Commencement Date
reserve and keep available out of its authorized Common Stock
and/or shares of its Common Stock then owned or held by or for
the account of the Company, solely for the purpose of
delivery upon conversion of the Series F Preferred Stock as
herein provided, such number of shares of Common Stock as
shall then be deliverable upon conversion of all shares of
Series F Preferred Stock from time to time outstanding.]
FIFTH: A. Unless and until otherwise provided in the
Bylaws, all of the corporate powers of this Corporation shall
be vested in, and managed by, a board of not less than 3 nor
more than 15 directors, except that when all of the
outstanding shares are held of record by fewer than 3
stockholders, then there need be only as many directors as
there are stockholders, but this shall not prevent a greater
number of directors as aforementioned.
B. The board of directors shall be and is divided
into three classes: Class I, Class II and Class III, which
shall be as nearly equal in number as possible. Each
director shall serve for a term ending on the date of the
third annual meeting of stockholders following the annual
meeting at which the director was elected; provided,
however, that each initial director in Class I shall hold
office until the annual meeting of stockholders in 1988;
each initial director in Class II shall hold office until the
annual meeting of stockholders in 1989; and each initial
director in Class III shall hold office until the annual
meeting of stockholders in 1990. Notwithstanding the
foregoing provisions in this Article FIFTH, each director
shall serve until his successor is duly elected and
qualified or until his death, resignation or removal.
C. The number of directors may be increased or
decreased within the limits above provided by a majority
vote of the directors. In the event of any increase or
decrease in the authorized number of directors, the newly
created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the board of
directors among the three classes of directors so as to
maintain such classes as nearly equal as possible. No
decrease in the number of directors constituting the board of
directors shall shorten the term of any incumbent
director.
D. Newly created directorships resulting from any
increase in the number of directors and any vacancies on the
board of directors resulting from death, resignation,
disqualification, removal or other cause shall be filled by
the affirmative vote of a majority of the remaining
directors then in office (and not by stockholders), even
though less than a quorum of the board of directors. Any
director elected in accordance with the preceding sentence
shall 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 and until such director's successor shall
have been elected and qualified.
E. No director may be removed from office without
cause, except upon the affirmative vote of the holders of
not less than sixty-seven percent (67%) of the outstanding
shares of stock of the Corporation then entitled to vote
generally in the election of directors, voting together as a
single class. Any amendment, change or repeal of this
Article FIFTH, or any other amendment to this Restated
Certificate of Incorporation that will have the effect of
permitting circumvention of or modifying this Article FIFTH,
shall require the favorable vote, at a stockholders'
meeting, of the holders of at least sixty-seven percent
(67%) of the outstanding shares of stock of the Corporation
then entitled to vote generally in the election
of directors, voting together as a single class.
SIXTH: A. The board of directors shall
have authority to adopt, amend or repeal Bylaws, including the
right to adopt, amend or repeal Bylaws fixing their
qualifications, or fixing or increasing their compensation,
subject to the ratification of the action taken by the board so
to adopt, amend or repeal any such Bylaws by the
stockholders at the next regularly scheduled annual meeting of
stockholders or at a special meeting of stockholders.
Pending such ratification by the stockholders, such action
taken by the board of directors shall be presumed to have
been authorized by the stockholders.
B. The board shall further have authority to exercise
all such powers and to do all such other lawful acts and
things which the Corporation or its stockholders might do,
unless prohibited from doing so by applicable laws, by this
Restated Certificate of Incorporation or by the Bylaws of the
Corporation.
SEVENTH: A. For the purposes of this Article SEVENTH:
(1) A "person" shall mean any
individual, firm, corporation, partnership, trust or other entity.
(2) "Net Assets" shall mean the
difference between the aggregate amount of all assets and the
aggregate amount of all liabilities of the Corporation as
they appear on the Corporation's most recent audited
financial statements.
(3) "Voting Stock" means then outstanding
shares of stock of all classes and series of the
Corporation entitled to vote in the election of directors.
(4) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b2
of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on
September 1, 1987.
(5) "Subsidiary" means any corporation of which
more than a majority of any class of equity security is
owned, directly or indirectly, by the Corporation;
provided, however, that for purposes of the definition of
Interested Stockholder set forth in Paragraph A(7) of
this Article EIGHTH, the term "Subsidiary" shall mean
only a corporation of which a majority of each class
of equity security is owned by the Corporation, by a
Subsidiary, or by the Corporation and one or more
Subsidiaries.
(6) A person shall be a "Beneficial
Owner" of any Voting Stock:
(A) which such person or any of its
Affiliates or Associates beneficially owns,
directly or indirectly; or
(B) which such person or any of its
Affiliates or Associates has (i) the right to acquire
(whether such right is exercisable immediately or only
after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the
exercise Of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right
to vote or to direct the vote pursuant to any
agreement, arrangement or understanding; or
(C) which is beneficially owned,
directly or indirectly, by any other person with
which such person or any of its Affiliates or
Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding,
voting or disposing of any shares of Voting Stock.
(7) "Interested Stockholder" shall mean
any person (other than the Corporation or any Subsidiary) who
or which:
(A) is the Beneficial Owner, directly or
indirectly, of more than 20% of the combined voting power
of the then outstanding Voting Stock; or
(B) is an Affiliate of the Corporation
and at any time within the two-year period immediately
prior to the date in question was the Beneficial Owner,
directly or indirectly, of 20% or. more of the combined
voting power of the then outstanding Voting Stock; or
(C) is an assignee of or has
otherwise succeeded to any shares of Voting Stock which
were at any time within the two-year period immediately
prior to the date in question beneficially owned by any
Interested Stockholder, if such assignment or succession
shall have occurred in the course of a transaction or
series of transactions not involving a public offering
within the meaning of the
Securities Act of 1933.
(8) "Disinterested Director" means any member
of the board of directors of the Corporation who is
unaffiliated with, and not a nominee of, the Interested
Stockholder and was a member of the board of directors prior
to the time that the Interested Stockholder became an Interested
Stockholder and any successor of a Disinterested Director who is
unaffiliated with, and not a nominee of, the Interested
Stockholder and who is recommended to succeed a Disinterested
Director by a majority of Disinterested Directors then on the
board of directors.
(9) "Fair Market Value" means:
(A) in the case of stock, the highest closing sale
price during the 30-day period immediately preceding the
date in question of a share of such stock on the
Composite Tape for New York Stock Exchange-Listed
Stocks, or, if such stock is not quoted on such Composite
Tape, on the New York Stock Exchange, or, if such stock is
not listed on such Exchange, on the principal United
States securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid
quotation with respect to a share of such stock during
the 30-day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such
quotations are available, the fair market value on the date
in question of a share of such stock as determined by a
majority of the Disinterested Directors in good faith; and
(B) in the case of stock of any
class of securities not traded on any securities exchange
or in the over-the-counter-market or in the case of
property other than cash or stock, the fair market value
of such securities or property on the date in question as
determined by a majority of the Disinterested Directors in good faith.
(10) "Business Combination" means any
transaction which is referred to in any one or more of
Paragraphs B(1) through (5) below.
(11) In the event of any Business
Combination in which the Corporation survives,
the phrase "consideration to be received as used in Paragraphs
C(2)(A) and (B) shall include the shares of Common
Stock and/or the shares of any other class of
outstanding Voting Stock retained by the holders of
such shares.
(12) For the purposes of determining
whether a person is an Interested Stockholder pursuant to
Paragraph A(7), the number of shares of Voting Stock
deemed to be outstanding shall include shares deemed
owned through application of Paragraph A(6)(B)(i) but
shall not include any other shares of Voting Stock
which may be issuable to other persons pursuant to any
agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or
otherwise.
B. In addition to any affirmative vote required by
law or any other Article of this Restated Certificate of
Incorporation, and except as otherwise expressly provided in
Paragraph C of this Article SEVENTH:
(1) any merger or consolidation of the
Corporation or any Subsidiary with (i) any Interested
Stockholder or (ii) any other corporation (whether or
not itself an Interested Stockholder) which is, or
after such merger or consolidation would be, an
Affiliate or Associate of an Interested Stockholder; or
(2) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition (in one
transaction or a series of transactions) to or with
any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder of any
assets of the Corporation, or of any Subsidiary, having an aggregate
Fair Market Value equal to ten percent (10%) or more of
the Net Assets of the Corporation; or
(3) the issuance or transfer by the Corporation
or any Subsidiary (in one transaction or a series of
transactions) of any securities of the Corporation or
any Subsidiary to any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder in
exchange for cash, securities or other property (or a
combination thereof) having an aggregate Fair Market
Value equal to ten percent (10%) or more of the Net
Assets of the Corporation, other than the issuance of
securities by the Corporation or any Subsidiary upon
the conversion of convertible securities of the
Corporation or any Subsidiary which were not acquired
from the Corporation or any Subsidiary by any
Interested Stockholder or any Affiliate or Associate of
any Interested Stockholder; or
(4) the adoption of any plan or proposal
for the liquidation or dissolution of the Corporation
proposed by or on behalf of an Interested Stockholder or
any Affiliate or Associate of any Interested
Stockholder;
or
(5) any reclassification of securities
(including any reverse stock split), or recapitalization
of the Corporation, or any merger or consolidation
of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or
otherwise involving an Interested Stockholder) which
has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding
stock of any class of equity or convertible
securities of the Corporation or any Subsidiary
directly or indirectly owned by any Interested
Stockholder or any Affiliate or Associate of any
Interested Stockholder;
shall require the affirmative vote of the holders of at
least (i) 67% of the then outstanding shares of Voting
Stock, and (ii) a majority of the then outstanding shares of
Voting Stock held by persons who are not Interested
Stockholders or Affiliates or Associates of Interested
Stockholders; provided, however, that the majority vote
requirement of this clause (ii) shall not be applicable if
the Business Combination is approved by the affirmative vote
of the holders of not less than 80% of the then outstanding
shares of Voting Stock. The foregoing affirmative vote
requirements are hereinafter referred to as the "Special Vote
Requirement." The Special Vote Requirement shall be
applicable notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by
law or in any agreement with any national securities
exchange or otherwise.
C. The provisions of Paragraph B shall not be
applicable to any particular Business Combination, and such
Business Combination shall require only such affirmative
vote as is required by law and any other Article of this
Restated Certificate of Incorporation, if all of the
conditions specified in either of the following Paragraphs
(1) and (2) are met:
(1) Approval by Disinterested
Directors. The Business Combination shall have been approved by a
majority of the Disinterested Directors.
(2) Price and Procedural
Requirements. All of the following conditions shall have been met:
(A) The aggregate amount of the cash and the Fair
Market Value, as of the date of the
consummation of the Business Combination, of
consideration other than cash to be received per
share by holders of Common Stock or any series of
Preferred Stock of the Corporation in such Business
Combination shall be at-least equal to the higher of
(i) the highest price paid for any share (including
brokerage commissions, transfer taxes and soliciting
dealers' fees) of such class or series of stock by
any person who is an Interested Stockholder, or by
any of his Affiliates or Associates, within the
twoyear period immediately prior to the time of the
first public announcement of the proposed Business
Combination (the "Announcement Date") or in the
transaction in which such person became an
Interested Stockholder, whichever price is the
higher; or (ii) the Fair Market Value per share of
such class or series of stock on the Announcement
Date or on the date on which the Interested
Stockholder became an Interested Stockholder (the
"Determination Date"), whichever is higher; provided however,
that if the Interested Stockholder has not previously paid
for shares of series of Preferred Stock or if the highest
preferential amount per share of a series of Preferred
Stock to which the holders thereof would be entitled in the
event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the
Corporation (regardless of whether the Business
Combination to be consummated constitutes such an event)
is greater than such aggregate amount,
holders of such series of Preferred Stock shall receive
an amount for each such share at least equal to the highest
preferential amount applicable to such series of Preferred
Stock. The provisions of this Paragraph C(2)(A) shall be
required to be met with respect to every class or series of
Preferred Stock, whether or not the Interested Stockholder has
previously become the Beneficial Owner of any shares of a
particular class or series of Preferred Stock prior to
proposing the Business Combination. The
price paid for any share of any such class or series of stock
shall be the amount of cash plus the Fair Market Value of
any consideration to be received therefor, determined at the
time of payment thereof.
(B) The consideration to be received by
holders of a particular class of outstanding Voting Stock
shall be in cash or in the same form as the Interested
Stockholder has previously paid for
shares of such class of Voting Stock. If the
Interested Stockholder has paid for shares of any class of
Voting Stock with varying forms of
consideration, the form of consideration for such class of
Voting Stock shall be either cash or the form of
consideration used to acquire the largest number of shares
of such class of Voting Stock previously acquired by it.
The prices determined in accordance with Paragraph C(2)(A)
above shall be subject to an appropriate adjustment in the
event of any stock dividend, stock split, subdivision,
combination of shares or similar event.
(C) After such Interested Stockholder has
become an Interested Stockholder and through to the date of
consummation of such Business Combination: (i) there shall
have been (1) no reduction in the annual rate of dividends
paid on the Common Stock (except as necessary to reflect any
subdivision of the Common Stock), except as approved by a
majority of the Disinterested Directors, and (2) no failure
to increase such annual rate of dividends as necessary to
reflect any reclassification (including any reverse
stock split), recapitalization,
reorganization or any similar transaction which has the
effect of reducing the number of outstanding shares of the
Common Stock, unless the failure so to increase such annual
rate is approved by a majority of the Disinterested
Directors; and (ii) such Interested Stockholder shall not
have become the beneficial owner of any additional shares of
Voting Stock except as part of the transaction which
results in such Interested Stockholder becoming an Interested
Stockholder.
(D) After such Interested Stockholder has
become an Interested Stockholder, such Interested
Stockholder
shall not have received the benefit, directly or indirectly
(except proportionately as a stockholder), of any loans,
advances, guarantees, pledges or other financial assistance
or any tax credits or other tax advantages provided by
the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
(E) A proxy or information statement
describing the proposed Business Combination and
complying with the requirements of the Securities Exchange
Act of 1934 and the rules and regulations thereunder (or
any subsequent provisions replacing such Act, rules or
regulations) shall be mailed to all stockholders of the
Corporation at least 30 days prior to the
consummation
of such Business
Combination (whether or not such proxy or
information statement is required to be mailed
pursuant to such Act or subsequent provisions).
D. The majority of the Disinterested Directors of
the Corporation shall have the power and duty to determine
for the purpose of this Article SEVENTH, on the basis of
information known to them after reasonable inquiry, all facts
necessary to determine the
applicability of the various provisions of this Article
SEVENTH, including, (i) whether a person is an
Interested Stockholder, (ii) the number of shares of Voting
Stock of which any person is the Beneficial Owner, (iii)
whether a person is an Affiliate or Associate of another,
(iv) whether the requirements of Paragraph B(2) have been
met with respect to any Business Combination, and (v)
whether the assets which are the subject of any Business
Combination have, or the consideration to be received for the
issuance or transfer of securities by the Corporation or
any Subsidiary in any Business Combination has, an
aggregate Fair Market Value equal to ten percent (10%) or
more of the Net Assets of the Corporation; and the good
faith determination of a majority of the
Disinterested Directors shall be conclusive and binding for all
purposes of this Article SEVENTH.
E. Nothing contained in this Article SEVENTH shall
be construed to relieve any Interested
Stockholder from any fiduciary obligation imposed by law.
F. Notwithstanding any other-provisions of this
Restated Certificate of Incorporation or the Bylaws of the
Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, this Certificate of
Incorporation or the Bylaws of the Corporation), any
proposal to amend or
repeal, or adopt any provisions inconsistent with, this
Article SEVENTH of this Restated Certificate of Incorporation
shall be approved by the affirmative vote of at least (1) 67%
of the then outstanding shares of Voting Stock and (2) a
majority of the then outstanding shares of Voting Stock held by
persons who are not Interested Stockholders or Affiliates or
Associates of Interested Stockholders, provided that the
majority vote requirement of this
clause (2) shall not be applicable if the proposal is
approved by the affirmative vote of not less than 80% of
the then outstanding shares of Voting Stock.
EIGHTH: A. No director of the Corporation shall
be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, or
(iv) for any transaction from which the director derived an
improper personal benefit.
B. (1) Each person who was or is made a party or
is threatened to be made a party to or involved in any action
suit or proceeding whether civil, criminal, administrative
or investigative (hereinafter a "proceeding"), by reason of
the fact that he or she is or was a director, officer or
employee of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with
respect to an employee benefit plan, whether the basis of
such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be
amended (but in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation
to provide prior to such
amendment), against all expense, liability and loss
(including attorneys fees, judgments, fines, including
excise taxes with respect to an employee benefit plan, or
penalties and amounts paid in settlement) reasonably
incurred or suffered by such person in connection therewith
and such indemnification shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall
inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as
provided in paragraph (2) hereof, the Corporation shall
indemnify any such person seeking indemnification in
connection with a proceeding (or part hereof) initiated by
such person only if such proceeding (or part thereof) was
authorized by the board of directors of the Corporation.
The right to indemnification conferred in this paragraph (1) of
Paragraph B shall include the right to be paid by the
Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided,
however, that if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or
is rendered by such person while a director or officer,
including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a
proceeding shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it
shall ultimately be determined that such director of officer is
not entitled to be indemnified under this Paragraph B or
otherwise.
(2) If a claim under paragraph (1) of this Paragraph B is
not paid in full by the Corporation within thirty (30) days
after written claim has been received by the
Corporation, the claimant may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the
claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is
required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it
permissible under the Delaware General Corporation Law for
the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on
the Corporation. Neither the failure of the Corporation
(including its board of directors, independent legal
counsel, or its stockholders) to have made a determination
prior to the commencement of such action that
indemnification of the claimant is proper in the
circumstances because he or she has met the applicable
standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the
Corporation (including its board of directors, independent
legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(3) The right to indemnification and the payment
of expenses incurred in defending a proceeding in advance of
its final disposition conferred in this Paragraph B shall not
be exclusive of any right which any person may have or
hereafter acquire under any statute, provision of the
Restated Certificate of Incorporation, Bylaw, agreement,
vote of stockholders or disinterested directors or
otherwise.
(4) The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer,
employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise,
including an employee benefit plan, against any such
expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such
expense, liability or loss under the Delaware General
Corporation Law.
(5) Upon resolution passed by the board of
directors, the Corporation may establish a trust or other
designated account, grant a security interest or use other
means (including, without limitation, a letter of credit)
to ensure the payment of certain of its obligations arising
under this Article EIGHTH.
(6) If any part of this Article EIGHTH shall be found, in
any action, suit or proceeding or appeal therefrom or in any
other circumstances or as to any particular officer,
director or employee to be unenforceable, ineffective or
invalid for any reason, the enforceability, effect and
validity of the remaining parts or of such parts in other
circumstances shall not be affected, except as otherwise
required by applicable law.
NINTH: A. The annual meeting of the stockholders for the
election of directors shall be held at the principal office
of the Corporation beginning in 1988, unless and until
otherwise provided in the Bylaws.
B. Elections of directors need not be by ballot
unless the Bylaws of the Corporation shall so provide.
C. Unless authorized by a majority of the
Disinterested Directors (as defined in Article SEVENTH), no
action required to be taken at any annual or special meeting of
stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied. In the event a majority of the
Disinterested Directors authorizes the Corporation to take
action upon such written consent, the consent in writing to
such action signed by stockholders holding at least that
proportion of the total voting power on the question which is
required by law or this Restated Certificate
of Incorporation shall be sufficient for the purpose, without
the necessity for a meeting of the stockholders. In order
that the Corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the
board of directors may fix a record date by majority vote,
which record date shall not precede the date upon
which the resolution fixing the record date is adopted by
the board of directors, and which date shall not be more
than ten days after the date upon which the resolution
fixing the record date is adopted by the board of directors.
Any amendment, change or repeal of this Paragraph C of
Article NINTH, or any other amendment of this Restated
Certificate of Incorporation that will have the effect of
permitting circumvention of or modifying this Paragraph of
Article NINTH, shall require the favorable vote, at a
stockholders' meeting, of the holders of at least sixty-seven
percent (67%) of the outstanding shares of stock of
the Corporation then entitled to vote generally in the
election of directors, voting together as a single class.
TENTH: A. The Corporation may purchase or redeem its
own shares in the manner and on the conditions permitted and
provided in Section 160 of the Delaware General
Corporation Law or other applicable law, and as may be
authorized by the board of directors. Shares so purchased
shall be considered treasury shares, and may be reissued and
disposed of as authorized by law, or may be canceled and the
capital stock reduced, as the board of directors may, from
time to time, determine in accordance with law.
B. The Corporation may issue convertible securities
and rights to convert shares or obligations of the
Corporation into shares of any authorized class of stock,
and the right or option to purchase shares of any authorized
class of stock, in the manner and on the conditions
permitted and provided in Sections 151 and 157 of the
Delaware General Corporation Law or other applicable law,
and as may be authorized by the board of directors.
C. The board of directors shall have such power and
authority with respect to capital, surplus and dividends,
including allocation, increase, reduction, utilization,
distribution and payment, as is permitted and provided in
Sections 154, 170 and 244 of the Delaware General
Corporation Law or other applicable law.
ELEVENTH: Except as otherwise expressly provided
in this Restated Certificate of Incorporation, amendments to
this Restated Certificate of Incorporation, including any
change in the right of holders of stock of any class and any
increase or reduction of capital stock, shall require the
affirmative vote of the holders of a majority of the
outstanding stock entitled to vote thereon and a majority of
the outstanding shares of stock of each class entitled to
vote thereon as a class in accordance with the provisions of
Section 242 of the Delaware General Corporation Law.
TWELFTH: Except as may be otherwise required
by applicable law, the sale and any other transfer of fully
paid stock in the Corporation shall be free from any
restrictions or all liens imposed by the Corporation.
IN WITNESS WHEREOF, this Restated Certificate of
Incorporation has been signed this ____ day of [], 1997.
XCL LTD.
_____________________
Marsden W. Miller, Jr.
Chairman and Chief Executive
Officer
[SEAL]
ATTEST:
________________________________
Lisha C. Falk, Secretary
STATE OF LOUISIANA
PARISH OF LAFAYETTE
BE IT REMEMBERED that on this _____ day of [] 1997,
personally came before me, a Notary Public for the State of
Louisiana, Parish of Lafayette, Marsden W. Miller, Jr., who
acknowledged himself to be the Chairman of the Board and
Chief Executive Officer of XCL Ltd., a Delaware corporation, an
that he, as such Chairman of the Board and Chief
Executive Officer, being authorized so to do, executed the
foregoing Restated Certificate of Incorporation, and
acknowledged the same to be his act and deed and the act and
deed of the corporation, and that the facts therein stated are
true.
GIVEN under my hand and seal of office the day and year
aforesaid.
________________________
Notary Public
My Commission Expires:
_________________________
APPENDIX C
XCL LTD. LONG-TERM STOCK
INCENTIVE PLAN
AS AMENDED AND RESTATED EFFECTIVE AS OF JUNE 1, 1997
1. Purpose.
(a) The purpose of the XCL Ltd. Long-Term
Stock Incentive Plan (the "Plan") is to promote the interests of
XCL Ltd. ("XCL") and its shareholders by strengthening the
ability of the Company (as hereinafter defined) to attract
and retain directors, officers and key employees, and certain other
individuals who the Company deems can render a valuable contribution to the
direction and success of the Company's efforts by helping
create an entrepreneurial environment in which such
individuals are encouraged to maximize shareholder
value. The Plan permits the granting of Incentive Stock
Options, Nonqualified Stock Options, Reload Options,
Restricted Stock and Performance Units or Appreciation Grants,
all as hereinafter defined.
(b) The Plan as set forth herein constitutes an
amendment and restatement, effective as of the date of
adoption of this amendment and restatement by the Board, of
the Plan as previously adopted by the Company, and shall
supersede and replace in its entirety such prior plan with
respect to Awards granted under the Plan from and after June
1, 1997; the provisions of the Plan as in effect prior to
June 1, 1997 shall control as to Awards granted under the
Plan prior to such date.
2. Definitions; Construction.
(a) As used in the Plan the defined terms
"Plan" and "XCL" shall have the meanings ascribed to
them above and the following
defined terms shall have the following meanings:
(i) "Affiliates" shall mean any
parent corporation or subsidiary corporation of XCL as
defined in Sections 425(e) and (f) of the Code, as the
same may be in effect from time to time.
(ii) "Agreement" shall mean an
agreement between the Company and a participant setting
forth the terms and conditions of an Award.
(iii) "Award" shall mean an Incentive
Stock Option, Nonqualified Stock Option, Reload Option,
Restricted Stock, Performance Unit or Appreciation Grant
as described in and granted under the Plan.
(iv) "Board" shall mean the Board of Directors of
XCL.
(v) "Code" shall mean the Internal Revenue
Code of 1986, as amended.
(vi) "Committee" shall mean the
Compensation Advisory Committee of the Board, as the same
may be constituted from time to time.
(vii) "Common Stock" shall mean
shares of capital stock of XCL designated as "Common
Stock" pursuant to XCL's Certificate of Incorporation.
(viii) "Company" shall mean XCL and its
Affiliates.
(ix) "Directors" shall mean the members of the
Company's Board.
(x) "Fair Market Value" on any Trading Day
shall mean the
last sales price, regular way, per share of Stock on
such day as reported in the principal
consolidated reporting system with respect to Stock listed on
the principal United States securities exchange on which
Stock is listed or admitted to trading, or if Stock is not
then listed on any United States stock exchange, the last
sales price reported on each such day in the National Market
System of the National Association of Securities Dealers'
Automated Quotation System ("NASDAQ"), or, if not so reported, the
average of the bid and asked prices on each such day as
reported in the "pink sheets" published by the National
Quotation Bureau, Inc. or any successor thereof, or, if not so
reported, the average of the middle market quotations on each such
day as reported on The Stock Exchange Daily Official List or any other
stock exchange on which Stock is traded and, if not so reported, then as
determined in good faith by the Board. The term "Trading Day"
shall mean a day on which the market used for calculating the
last sales price of Stock is open for the transaction of
business, or, if shares of Stock are not so listed or admitted
to trading, a business day.
(xi) "Incentive Stock Option" shall mean an option
granted pursuant to the provisions of this Plan which
meets the requirements of Section 422 of the Code,
as the same may be in effect from time to time.
(xii) "Non-employee Director" shall mean any member of
the Board who is not also an employee of the Company.
(xiii) "Nonqualified Stock Option" shall mean
any option granted pursuant to the provisions of the Plan
which is not an Incentive Stock Option.
(xiv) "Performance Unit" or "Appreciation
Grant" shall mean a grant described in Section 8.
(xv) "Preferred Stock" shall mean shares of the
Amended Series A, Cumulative Convertible Preferred Stock
of the Company, $1.00 par value or any other
series of preferred stock
of the Company as designated by the Committee with respect
to an Award.
(xvi) "Reload Option" shall mean any
Nonqualified Stock
Option granted pursuant to the provisions of Section 6(j).
(xvii) "Restricted Stock" shall mean any
Stock delivered subject to the restrictions set forth in
Section 7.
(xviii) "Stock" shall mean Common Stock,
Preferred Stock, or a combination of both, as
determined in the discretion of the Committee at the time an
Award is granted pursuant to the provisions of this Plan.
(xix) "Stockholder employee" shall mean any
employee owning Stock (using the attribution rules of
Section 425(d) of the Code, as the same may be in effect
from time to time) possessing more than 10% of the total
combined voting power of all classes of Stock of XCL or
any of its Affiliates.
(b) References in the Plan to Sections are to
Sections of the Plan unless otherwise indicated. The words
"hereof", "herein", "hereunder" and comparable terms refer to the
entirety of the Plan and not to any particular Section
or other subdivision hereof. Words in the singular include the plural
and vice versa. Words in the masculine gender shall
include the feminine and neuter and vice
versa. The word "or" is not exclusive. The word
"including" shall be deemed to mean "including, without
limitation". The Section headings contained herein are for
reference purposes only and shall not affect in
any way the meaning or interpretation of the Plan.
3. Stock Available under Plan. Subject to adjustment
as provided in Section 9, the total number of shares of Common
Stock with respect to which Awards may be granted may equal
but shall not exceed 60 million shares of Common Stock. For
purposes of computing the number of shares of Common Stock available
for Awards at any time, there shall be debited against the total
number of shares (i) the number of shares of
Common Stock issuable upon exercise of any options, (ii) the number of
shares of Common Stock which is Awarded as Restricted Stock,
and (iii) the maximum number of shares of Common
Stock that may be issued under Performance Units.
Any shares of Common Stock represented by Awards which are canceled,
forfeited, terminated or expire unexercised shall again be available
for grants and issuance under the Plan. Subject to adjustment as
provided in Section 9, the total number of shares of Preferred Stock with
respect to which Awards may be granted may equal but shall not exceed
200,000 shares of Preferred Stock. For purposes of computing the number
of shares of Preferred Stock available for Awards at any
time, there shall be debited against the total number of shares
(i) the number of shares of Preferred Stock issuable upon exercise
of any such options, (ii) the number of shares of Preferred Stock
which is Awarded as Restricted Stock, and (iii) the maximum number of
shares of Preferred Stock that may be issued under
Performance Units. Any shares of Preferred Stock
represented by Awards which are canceled, forfeited,
terminated or expire unexercised shall again be available for
grants and issuance under the Plan.
4. Participants. Persons eligible for Awards under the
Plan shall be limited to such key employees of the
Company (including Directors) who have substantial
responsibility in the direction and management of the
Company, Non-employee Directors and other individuals who,
while not employees of the Company, are identified
by the Committee or the Board as persons who can render a
valuable contribution to the direction and success of
the Company's efforts. Except in the case of Non-
employee Directors, the Committee shall have the sole
discretion to select those persons
eligible for Awards. Non-employee Directors shall
be eligible to participate in the Plan as provided in Section
5.
5. Non-employee Director Awards. Awards other than
Incentive Stock Options may be granted to Non-employee
Directors. Any Award to a Non-employee Director shall be
made by the remaining Directors. A Non-employee Director
shall not act with respect to any Award made to himself. With
respect to Awards to Non-employee Directors, the Directors
shall have all of the powers that the Committee has under
the Plan with respect to Awards to employees of the Company.
6. Terms and Conditions of Options. Options granted
pursuant to the Plan shall be evidenced by Agreements in
such form, not inconsistent with the Plan, as the Committee
shall determine. The following terms and conditions shall
apply to all Incentive Stock Options, Nonqualified Stock
Options and Reload Options:
(a) Option Shares. The Committee shall
determine whether a Nonqualified Stock Option shall be an Option
to purchase shares of Common Stock or an Option to purchase shares of
Preferred Stock. Incentive Stock Options shall only give the optionee
the option to purchase shares of Common Stock.
(b) Option Price. The Committee shall
determine the option price of all
Nonqualified Stock Options and all
Incentive Stock Options; provided, however, in the
case of Incentive Stock Options, the option price shall not
be less than the Fair Market Value of
the Stock on the date the option is granted
and, provided, further, that in the case
of an individual who is a Stockholder employee on
the date of grant, the option price of an
Incentive Stock Option shall be at least 110% of the then
Fair Market Value of the Stock.
(c) Option Term. The Committee shall determine the
expiration date of a Nonqualified Stock Option and an
Incentive Stock Option; provided, however, in the case of
Incentive Stock Options, the term shall expire no later than
one day prior to the end of ten years from the date the option
was granted, and, provided, further, that Incentive
Stock Options granted to employees who are
Stockholder employees on the date of grant shall expire no later
than one day prior to the end of five years from the date of grant.
Options may terminate earlier as provided herein.
(d) Exercise of Options. The
Committee shall determine when Incentive Stock
Options and Nonqualified Stock
Options are exercisable, in whole or in
part, provided, however, that except as expressly set
forth herein to the contrary under no circumstances will
an option be exercisable within 6 months (or such
greater or lesser period prescribed or permitted by
any applicable rule
promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), including without
limitation Rule 16(b)-3, as in effect from time to time),
from its date of grant.
(e) Manner of Exercise. Upon exercise of an
Option, shares of Stock shall be paid for as described
in the Agreement evidencing the Option. The provisions of
Option granted under the Plan need not be the same with
respect to the manner of
exercise. Specifically, an Option may permit payment for
shares of Stock upon its exercise in full with one or more of
any of (i) cash (including a certified or official bank
check or the equivalent acceptable to XCL), (ii) the
equivalent Fair Market Value of shares of Stock, properly
endorsed, (iii) the equivalent fair market value of any other
property acceptable to XCL, or (iv) any combination of (i),
(ii), or (iii). Options may be exercised by written notice to
XCL in the manner provided in the applicable Agreement. In
the event the Stock issuable upon exercise of an option is
not registered under the Securities Act of 1933, as amended
(the "Securities Act"), then XCL will require that the
registered owner deliver an investment representation in the
form acceptable to XCL and its counsel and XCL will place a
legend on the certificate for such Stock restricting the
transfer of the same.
(f) Limitation on Amount. In the case of Incentive
Stock Options only, no employee may be granted
Incentive Stock Options to the extent the aggregate Fair
Market Value (as of the date of grant) of the Stock
subject to Incentive Stock Options that are first
exercisable during any calendar year exceeds $100,000.
(g) Non-Transferability. All options granted
under this Plan shall be non-assignable and non-
transferable
otherwise than by will or by the laws of descent
and distribution. During the lifetime of the optionee,
the option is exercisable only by him, or, in the case
of his incapacity, by his legal representative.
(h) Termination of Employment. In the case of
Nonqualified Stock Options, the Committee shall
determine the applicable provisions of such Options in the
event of an Optionee's death, disability and
termination of employment. In the case of Incentive
Stock Options, (i) on termination of an optionee's
employment with the Company other than by reason of death
or disability, the optionee shall have the right to
exercise his then
outstanding Incentive Stock Options within three months of
such termination to the extent he was entitled to exercise
the same immediately prior to termination; and (ii) on
termination of employment by reason of death or disability
(within the meaning of Section 22(e)(3) of the
Code, as the same may be in effect from time
to time), the optionee, his estate, personal
representative, or beneficiary shall have the right
to exercise his then outstanding Incentive
Stock Options at any time within twelve months from the date of
death or termination of employment by reason of disability
for the full number of shares subject to Incentive Stock
Options at the date of termination of employment by
reason of death or disability, irrespective of any vesting
provisions except as provided in the first sentence of
Section 6(c) above.
(i) Time of Grant. The grant of an option shall
occur as of the date or time when the Company
completes the corporate action constituting an offer of
Stock for sale to an optionee.
(j) Reload Options. In the event an optionee exercises a
Nonqualified Stock Option to purchase shares of Common Stock
by payment of all or a portion of the exercise price with
shares of Stock which the optionee has owned for at least six
months, the optionee may receive a Reload Option in the form
a new Nonqualified Stock Option to purchase a number of shares
of Common Stock equal to the number of shares of Common Stock
used in payment of the exercise price of
the original option.
No Reload Options shall be granted in connection with the
exercise of any Nonqualified Stock Option to purchase
shares of Preferred Stock.
(k) No Stockholder Rights. Nothing contained in the
Plan or in any Agreement shall be construed to
confer upon the holder of an option the right to vote or to
receive dividends (except in the case of Options on
Preferred Stock as provided in Section 6(m) below) or
subscription rights, or to consent or to receive
notice as a stockholder in respect of the meetings of
stockholders of XCL or the election of directors of
XCL or any other matter, or any other rights whatsoever
as a stockholder of XCL.
(l) No Fractional Shares. XCL shall not be
required to issue fractional shares of Stock upon
exercise of any options.
(m) Dividend Accruals. A Nonqualified Stock
Option to purchase shares of Preferred Stock may, as
determined by the Committee, include a provision pursuant
to which the number of shares of Preferred Stock acquirable
upon exercise of such Option shall be increased (without increase
in the Option price) by a number of shares of Preferred Stock
equal to the dividends that would have
been received by the Optionee (i) had the Optionee owned the
shares of Preferred Stock as to which the Nonqualified Stock
Option is being exercised from the date of grant
of such Option to the date of such exercise and
(ii) assuming the Company had declared and paid in kind
all regularly scheduled dividends as provided
under such Preferred Stock.
7. Restricted Stock. Except as otherwise provided herein,
the Committee shall have the sole discretion to determine the
restrictions that shall apply to each Award of
Restricted Stock hereunder (including, without limitation, the
time and manner of vesting, provisions applicable on death, disability
or other termination of employment, conditions of forfeiture
and whether any consideration should be paid by the grantee).
Any such restrictions shall be embodied in the applicable Agreement and
in a legend placed on the certificate for Restricted Stock. As
soon as practicable following a grant of Restricted Stock, XCL
shall transfer to the name of the grantee any and all Awarded
shares. A certificate or certificates for all shares of
Restricted Stock registered in the name of a grantee shall be
promptly drawn and held for the grantee by XCL. The grantee shall
thereupon be a stockholder and shall have all the rights of a stockholder
with respect to such shares, including the right to vote and
receive all dividends or other distributions made or paid with
respect to such shares. As the restrictions described below are
released, a certificate (without the legend described above
but with an appropriate restrictive legend setting forth transfer
restrictions under the Securities Act) for the number of
shares with respect to which restrictions have been released
will be delivered to the grantee as soon as practicable. Any
new, additional or different securities, cash or other
property the grantee may become entitled to receive shall be subject to
the same restrictions applicable to the Restricted Stock with
respect to which such new, additional or different securities
or property are received. Shares of Restricted Stock may
not be sold, exchanged, transferred, pledged, hypothecated,
or otherwise disposed of until such time as the stated restrictions lapse.
8. Performance Units or Appreciation Grants.
The Committee may grant Performance Units or Appreciation
Grants entitling the holder to receive a fixed or
variable number of share-denominated units subject to such conditions of
vesting and time of payment as the Committee may determine and as set
forth in the applicable Agreement in case of Performance Units or
entitling the holder to receive compensation based upon
appreciation measured by Common Stock, Preferred Stock
or such other market-based criteria relating to the Company or
its business as the Committee may establish and subject to
such conditions of vesting and time of payment as the
Committee may determine and set forth in the applicable Agreement in the
case of Appreciation Grants. Payments in respect of
Performance Units or Appreciation Grants may be paid in cash,
in Stock, or in a combination of cash and Stock, as the
Committee shall determine. Such payments in respect of
Performance Units or Appreciation Grants shall represent an unsecured
and unfunded promise to pay such amounts and the holder shall have
no rights other than as a general creditor of the Company.
Performance Units or Appreciation Grants may not be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed
of except as provided in the applicable Agreement.
9. Recapitalization or Reorganization. (a) The
aggregate number of shares of Stock for which
Awards may be granted under the Plan, the number of
shares covered by outstanding Awards and the exercise price
per share for each outstanding option, shall be
proportionately adjusted for any increase or decrease
in the number of issued shares of
Stock resulting from the subdivision or consolidation
of all outstanding shares, or the payment of a Stock dividend on all
outstanding shares of Stock after the effective date of
the Plan, or other increase or decrease in such shares
effected without receipt of consideration by XCL; provided, however,
that any adjustment to Awards resulting in the right to receive
fractional shares shall be eliminated. The provisions of
this Section 9 shall be applied separately with respect to
shares of Common Stock and shares of Preferred Stock.
(b) If XCL shall at any time merge or consolidate
with or into another corporation, the holder of each
Award will thereafter receive, upon exercise or transfer of
shares, the securities or property to which a holder of an
equivalent number of shares of Stock would have been
entitled upon such merger or consolidation, and XCL shall take
such steps in connection with such merger or consolidation as may be
necessary to assure that the provisions of this Plan
shall thereafter be applicable, as
nearly as reasonably may be, in relation to any securities or
property thereafter deliverable. A sale of all or
substantially all of the assets of XCL for a
consideration (apart from the assumption of obligations)
consisting primarily of securities shall be deemed a
merger or consolidation for the foregoing purposes.
10. Change in Control. Notwithstanding any
provision in the Plan to the contrary, but subject to the first sentence
of Section 6(c) hereof, (i) each option granted under the Plan
shall become immediately exercisable in whole or in part,
at the election of the optionee, (ii) the restrictions applicable to
each share of Restricted Stock shall immediately lapse,
and (iii) payment in respect of Performance Units or Appreciation
Grants shall be immediately due upon the occurrence of an
event which constitutes a change in control of XCL. For purposes of this
Section 10, a "change in control of XCL" shall mean a change in
control of a nature that would be required to be reported in
response to Item 5(f) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act; provided that, without
limitation, such a change in control shall be deemed to have
occurred if:
(A) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other
than XCL or any person who
on the effective date the Plan (as hereinafter
provided in Section 13) is an officer or director of
XCL, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act, as such Rule
is in effect from time to time), directly or
indirectly, of securities of XCL representing 20% or
more of the combined voting power of
XCL's then outstanding securities, unless such person
owns, directly or indirectly, as of such effective date
of the Plan, more than 25% of the combined voting power
of XCL's then outstanding securities, in which case, if
any such person (a "Major Stockholder") becomes the
beneficial owner, directly or indirectly, of 33 % or
more of the combined voting power of XCL's then
outstanding securities; provided, further, however, that
acquisition of 33 % or more of such combined voting
power shall not constitute a "change in control of
XCL" if (1) such combined voting power does not exceed
37-1/2% or more of the combined voting power of XCL's then
outstanding securities, and (2) either (i) to the
extent any such increase in a Major Stockholder's
beneficial ownership results from a redemption of
purchase by XCL of its securities,
or (ii) if the Board, by vote of two-thirds (2/3)
of the full Board, in good faith, determines
(hereinafter referred to as a "Determination") both (X)
that such acquisition does not constitute, in fact, a
change in control of XCL, and (Y) that such Major
Stockholder does not and cannot then control XCL; and
(B) during any period of two consecutive
years prior to the date of such Determination,
individuals who at the beginning of such period
constituted the Board cease for any reason to constitute
at least a majority thereof, unless the election of each
Director who was not a Director at the beginning of
such period has been approved in advance by Directors
representing at least two-thirds ( ) of the Directors
then in office who were Directors at the beginning of the
period. 11. Administration.
(a) The Plan shall be administered by the Committee
or, in the case of Awards to Non-employee Directors, by the
remaining Directors. The Committee shall be comprised solely
of two (2) or more disinterested Directors constituted so as to
permit the Plan to comply with Rule 16b-3, as currently in
effect or as hereinafter modified or amended ("Rule 16b3"),
promulgated under the Exchange Act. The Board may from time to
time remove members from or add members
to the Committee. Vacancies in the
Committee, however caused, shall be filled by the Board. The
Committee shall select one of its members chairman and shall
hold meetings at such time and places as it
may determine. The Committee may appoint a secretary and, subject to
the provisions of the Plan and to policies determined by
the Board, may make such rules and regulations for the
conduct of its business as it shall deem advisable. A
majority of the Committee shall constitute a quorum. All
action of the Committee shall be taken by a majority of its
members. Any action may be taken by a written instrument
signed by at least a majority of the members or at a meeting
conducted by means of telephone or similar communications equipment
pursuant to which all persons participating in the meeting can
hear each other, and action so taken shall be as fully effective as
if it had been taken at a meeting duly called and held.
(b) Subject to the express terms and conditions of the
Plan, the Committee or, if applicable, the Directors shall
have full power to make Awards, to construe or interpret the
Plan, to prescribe, amend and rescind rules and regulations
relating to it and to make all other determinations necessary
or advisable for its administration.
(c) Except as otherwise provided herein, the Committee
or, if applicable, the Directors may determine which persons
shall be granted Awards, the number of shares subject to
Awards, the time at which Awards
shall vest and the terms of the Awards. In
making such determinations, the Committee or, if
applicable, the Directors may take into consideration the
anticipated value to XCL of the services rendered by such
individuals, their present and potential contributions to
XCL's success and such other
factors as the Committee in its discretion shall deem
relevant. All decisions made by the Committee or, if
applicable, the Directors in selecting the optionees, in
establishing the number of shares which may be issued under
each Award and in construing the provisions of the Plan shall
be final.
(d) The Committee shall report to the Board the names
of persons granted Awards, the number of shares involved, and
the terms and conditions of each Award.
(e) No member of the Board or of the Committee
shall be liable for any action or determination made in good
faith with respect to the Plan or any option or Award and
service on the Committee shall constitute service as a
director, entitling such Committee member to indemnification
and reimbursement for such service to the same extent as for
service rendered as a director.
12. Tax Withholding. The Committee may require
any person entitled to receive payment in respect of an Award
to remit to the Company, prior to such payment, an amount
sufficient to satisfy any Federal, state or local tax
withholding requirements. The Committee shall also have the
exclusive right to permit an individual to satisfy, in whole
or in part, such obligation to remit taxes by directing the
Company to withhold shares of Stock that would otherwise be
received by such individual, pursuant to such rules as the
Committee may determine from time to time in compliance with
the provisions of Rule 16b-3(e) promulgated under the Exchange
Act, as such Rule or any other comparable Rule may be in
effect from time to time.
13. Effective Date and Termination. The effective date
of the prior plan as approved by the shareholders of XCL was
June 2, 1992. The effective date of this amended and restated
Plan shall be June 1, 1997 provided that it is approved by the
shareholders of XCL within twelve months of such date.
Specifically, Options granted under the Plan shall not be
exercisable unless and until such approval is obtained. This
Plan shall terminate on June 2, 2002, but the Board of
Directors may terminate the Plan at any time prior thereto.
Termination of the Plan shall not alter or impair, without
the consent of the optionee or grantee, any of his rights or
obligations and any Award made under the Plan.
14. Amendments. The Board may from time to time alter,
amend, suspend or discontinue the Plan; provided, however,
that no such action of the Board may alter the provisions of
the Plan so as to alter any outstanding Awards to the
detriment of the optionee or grantee without his consent,
and, no amendment to the Plan shall be made without
stockholder approval which shall (i) increase (except as
provided in Section 9) the total number of shares reserved
for issuance pursuant to the Plan; (ii) change the class of
individuals entitled to participate under the Plan; or (iii)
withdraw the administration of the Plan from a committee
consisting of at least two "disinterested persons" (as defined in
Section 11(a)). The Committee may, from time to time,
alter, amend, cancel or terminate any outstanding Award, in
any manner not inconsistent with the Plan; provided, however,
that no such action of the Committee may alter, amend, cancel
or terminate an Award to the detriment of the optionee or
grantee without his consent. The Plan may not be amended
more than once every six months except to comport with changes
to the Code, the Employee Retirement Income Security Act, the
Exchange Act, or the rules and regulations thereunder. Notwithstanding
anything in the Plan to the contrary, the Board shall have the
power to amend the Plan to conform the Plan to all applicable
requirements of law.
15. No Right to Employment. No person shall have any
claim or right to receive grants of Awards under the Plan.
Neither the Plan, the grant of Awards under the Plan, nor any
action taken or omitted to be taken under the Plan shall be
deemed to create or confer on any employee any right to be
retained in the employ of the Company or to interfere with or
to limit in any way the right of the Company to terminate the
employment of such individual at any time.
16. Registration. Although there shall be no
obligation or duty for XCL to register under the Securities
Act or any state securities law at any time the Awards
that may be granted hereunder or the Stock that may be
issuable upon grant or exercise of such Awards, XCL shall
make commercially reasonable efforts to do so. XCL shall not
be required to issue or deliver any shares of Stock prior to
completion of such registration or other qualification of
such shares under any state or Federal law, rule or
regulation if XCL shall determine that issuance or delivery
will hinder such registration or qualification to be
necessary or desirable.
APPENDIX D
XCL LTD. APPRECIATION OPTION AGREEMENT
XCL Ltd., a Delaware corporation (the "Company" or
"XCL"), as of this 1st day of June, 1997, hereby irrevocably
grants to M. W. Miller, Jr. ("Executive") in consideration
of services rendered and to be rendered by the Executive,
the right to receive certain compensation from time to time
upon exercise of this appreciation option (the "Appreciation
Option") based upon the then-appreciation amount
("Appreciation Amount") as described hereunder pursuant to
the Company's Long-Term Stock Incentive Plan (as amended
and restated effective June 1, 1997) (the "Plan") on or
before June 1, 2007 (the "Expiration Date") as of which date
this Appreciation Option expires, subject however to the
following terms and conditions:
1. Appreciation Amount. As of any time of
exercise by Executive, the total then-Appreciation Amount will
be an amount equal to 5% of the positive difference, if
any, between the market capitalization of XCL as of June 1,
1997 and the market capitalization of XCL as of such time
of exercise, reduced in each case by a percentage equal to
the total percentages as to which Executive has
previously exercised this Appreciation Option. For
purposes of the foregoing provision, the market
capitalization of XCL shall be the aggregate total of :
the total number of outstanding shares of XCL's Common Stock as
of such date, the total number of outstanding shares of any
issue of Preferred Stock issued by XCL as of such date, plus the
total number of outstanding options and warrants to acquire
(whether by purchase, conversion or otherwise) XCL securities
issued by XCL as of such date; multiplied, in the case of
shares of XCL's Common Stock or XCL's Preferred Stock, by
the per share average of the Fair Market Value of such shares
as of June 1, 1997 or for the 30-day period immediately
preceding such date of exercise, as applicable, and in the
case of options or warrants by the per unit fair market
value of such options or warrants as of such date as
determined by the Board of Directors of the Company.
2. Time and Rules of Exercise. Executive may exercise
this Appreciation Option, in whole or in 10% increments, as
of each June 1 or December 1 from and after June 1, 2002 by
giving 45 days advance written notice of such exercise to the
Company and of the percentage of the Appreciation Option as to
which the Appreciation Option is to be exercised. Upon each
exercise of the Appreciation Option, Executive must tender to
the Company a payment equal to twenty percent (20%) of the
Appreciation Amount payable to him upon such exercise (which
payment shall be deemed made and netted against such
Appreciation Amount in the case of payment to him of the
Appreciation Amount in cash); provided, however, that Executive
shall cease to have an obligation to pay any exercise price
to the Company as consideration for exercise of the
Appreciation Option after he has paid an aggregate of five
million dollars in the exercise of the Appreciation Option.
From and after the date he has paid an aggregate of five
million dollars to the Company in exercise of the
Appreciation Option, Executive shall not be required to
tender any further consideration to the Company as a condition
to exercise of this Appreciation Option. Within 10 days after
receipt of notice from Executive of Executive's election to exercise
this Appreciation Option in whole or in part provided that it
has by such time received from Executive any exercise price
owed in consideration of such exercise, the Company shall
tender to Executive a compensation payment equal to the
percentage of the thentotal Appreciation Amount (or
applicable net amount in the case of cash payment thereof) as
to which the Appreciation Option is being exercised. Such
compensation payment shall be paid, as elected by the
Company, in cash or in shares of Common Stock or a
combination thereof. In the event that Executive exercises
this Appreciation Option as to less than the entire amount of
the thentotal Appreciation Amount, the percentage as to which
Executive exercises this Appreciation Option shall be canceled
and shall no longer be available for payment of
compensation based upon appreciation thereafter in the
Company's market capitalization.
3. Mergers, Consolidations, Etc. If the Company shall at
any time merge or consolidate with or into another
corporation, Executive will thereafter receive, upon the
exercise of this Appreciation Option at the election of the
Company either cash or the securities or property which a
holder of the Company's Stock would be entitled to receive
upon such merger or consolidation, and the Company shall take
such steps in connection with such merger or consolidation
as may be necessary to assure that provisions of this
Appreciation Option shall thereafter be applicable, as
nearly as reasonably may be, in relation to any securities or
property thereafter deliverable in connection with any such
merger or consolidation. A sale of all or substantially all of the
assets of the Company for a consideration (apart from the
assumption of obligations) constituted primarily
of securities shall be deemed a merger or consolidation for
the foregoing purposes. In the event of the proposed dissolution,
liquidation or reorganization of the Company, other than
pursuant to a merger or consolidation as hereinabove
provided, this Appreciation Option shall terminate as of a date to be
fixed by the Company's Compensation Advisory Committee; provided
that not less than 120 days (or such shorter period as
shall elapse between the date the Board of Directors shall
decide upon a dissolution, liquidation or reorganization and
the effective date of such dissolution, liquidation or
reorganization) prior written notice shall be given to
Executive and Executive shall have the right, during such
period to exercise this Appreciation Option as to all or
any part of the then Appreciation Amount covered thereby,
including Shares as to which this Appreciation Option would
not otherwise be exercisable.
4. Expiration.
(a) This Appreciation Option shall expire and become
null and void at 5:00 p.m. Lafayette, Louisiana time, on
the Expiration Date or, if earlier, the date Executive's
employment with the Company is terminated by the Company for
"cause" or by Executive without "good reason". This Appreciation Option
shall not terminate upon the Executive's termination of
employment with the Company for any reason other than
termination of such employment by the Company for "cause"
or termination of such employment by Executive without "good
reason". For purposes of this agreement, the term "cause" shall
mean Executive's (i) engagement in gross negligence or willful
misconduct in the performance of his duties with respect to the Company
and any of its affiliates, (ii) conviction of a felony or misdemeanor,
(iii) refusal without proper legal reason to perform his
duties and responsibilities to the Company or any of its
affiliates or (iv) breach of any provision of a written
employment agreement; provided, however, that if
Executive's employment with the Company is subject to and
governed by the terms of a written employment contract as of
the date of Executive's termination of
employment, the term "cause" for purposes of this agreement
shall include only those events or circumstances which,
pursuant to the terms of such employment agreement, enable the
Company to terminate Executive's employment without liability to
Executive (whether in the nature of breach of contract
damages, liquidated damages, punitive damages,
compensatory damages or otherwise). For purposes of this
Agreement, the term "good reason" shall mean (i) the removal
of Executive as Chief Executive Officer of the Company, (ii)
a reduction in Executive's annual base salary by
more than 10% unless such reduction was pursuant to a Company
wide cost reduction program pursuant to which all
Company employees were treated substantially equally, (iii) a
breach by the Company of any obligation owed to Executive under any
written agreement between Executive and the Company
with respect to Executive's employment with, or benefits from, the
Company or any of its affiliates), or (iv) death or total
disability of Executive.
(b) Notwithstanding any provision in this Appreciation
Option or the Plan to the contrary, this Appreciation
Option shall become immediately exercisable in whole or in
part, at the election of Executive, upon the occurrence of
an event which constitutes a change of control of XCL. For
purposes of this Paragraph (b), a "change in control of XCL"
shall mean a change in control of a nature that would be
required to be reported in response to Item 5(f) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act; provided that,
without limitation, such a change in control shall be deemed
to have occurred if (Y) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act), other
than XCL or any person who on the date the Plan is amended is a
director or officer of XCL is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of XCL representing 20% or more of
the combined voting power of XCL's then outstanding
securities, unless such person owns, directly or
indirectly, as of the date the Plan is amended, more than 25% of the
combined voting power of XCL's then outstanding securities, in
which case, if any such person (a "Major Stockholder") becomes the
beneficial owner, directly or indirectly, of 33 % or more of the
combined voting power of XCL's then outstanding securities; provided,
further, however, that acquisition of 33 % or more of such combined
voting power shall not constitute a "change in control of XCL" if (1)
such combined voting power does not exceed 37-1/2% or more of
the combined voting power of XCL's then outstanding
securities, and (2) either (i) to the extent any such
increase in a Major Stockholder's beneficial ownership
results from a redemption or purchase by XCL of its
securities, or (ii) if the Board, by vote of two-thirds (2/3) of
the full Board, in good faith, determines (hereinafter
referred to as a "Determination") both (A) that such
acquisition does not constitute, in fact, a change in the
control of XCL and (B) that such Major Stockholder
does not and cannot then control XCL or
(Z) during any period of two consecutive years prior to the
date of such Determination, individuals who at the beginning
of such period constituted the Board cease for any reason to
constitute at least a majority thereof,
unless the election of each director who was not a director at
the beginning of such period has been
approved in advance by directors representing at least
twothirds of the directors then in office who were
directors at the beginning of the period. Further
notwithstanding any provision in this Appreciation
Option and the Plan to the contrary, from and after
the occurrence of a "change of control of XCL", the
Company shall pay to Executive upon any exercise
of this Appreciation Option at least 40% in cash of the
net amount payable in respect of such exercise.
5. Transferability. This Appreciation Option is granted
in recognition of personal services of the Executive to
the Company or its affiliates and is not assignable or
transferable other than by will or by the laws of
descent and distribution. During the
lifetime of the Executive, this Appreciation Option
may be exercisable only by him.
6. Subject to Plan. This Appreciation Option has been
issued under the Plan and is specifically subject to and
conditioned upon approval by the stockholders of the
Company of (i) the June 1, 1997 amendment and restatement of the
Plan and (ii) separately, this Appreciation Option and
shall be null and void ab initio if either of such
approvals are not obtained. In addition to the provisions hereof, this
Appreciation Option will be subject to the power under the Plan of
the Company's Compensation Advisory Committee and Board of
Directors to make interpretations of the Plan, and to make
determinations and take other actions with respect to the
Plan; provided, however, that if any such interpretations,
determinations, or other actions shall conflict with any of
the provisions of this Agreement, the provisions hereof shall
control. By acceptance hereof, Executive acknowledges receipt of a
copy of the Plan and recognizes and agrees that
determinations, interpretations or other actions
respecting the Plan may be made by a majority of the Board of
Directors or by the Compensation Advisory Committee.
7. Status of Shares of Common Stock. Executive agrees
that (i) any shares of Common Stock acquired upon exercise of
this Appreciation Option will not be sold or otherwise disposed of in any
manner which would constitute a violation of any
applicable federal or state securities laws, (ii) the
certificates representing such shares of Common Stock shall
bear such legend or legends as the Committee
deems appropriate to assure compliance with applicable securities laws,
(iii) the Company may refuse to register the transfer of the
shares of Common Stock on the stock transfer records of the Company
if such proposed transfer would constitute a violation of
any applicable securities laws, and (iv) the Company may give
related instructions to its transfer agent, if any, to stop
registration of the transfer of shares of Common Stock.
8. Securities Laws. Executive acknowledges that he has
been informed of, or is otherwise familiar with, the nature
and the limitations imposed by the Securities Act of 1933, as
amended (the "Act"), the Exchange Act, state securities or Blue
Sky laws, and the rules and regulations thereunder (in
particular, Rule 144, promulgated under the Act and Section 16
of the Exchange Act, and Rule 16b-3 promulgated
thereunder), concerning the shares which may be
issued upon exercise of this Appreciation Option and agrees to be
bound by the restrictions embodied in such Act, the Exchange Act,
state securities or Blue Sky laws, and all the rules and regulations
promulgated thereunder.
9. The Company's Right to Terminate Employment.
Nothing contained in this Agreement shall confer upon Executive
the right to employment by the Company or any of its
Affiliates.
10. Withholding. Executive hereby agrees that he will
make such arrangements as the Company deems necessary to
discharge any federal, state or local employment or
withholding taxes imposed upon the Company in respect of this
Appreciation Option.
11. Entire Agreement. This Agreement contains the
entire agreement of the parties relative to the subject matter
hereof, superseding and terminating all prior agreements
or under standings, whether oral or
written, between the parties hereto relative to the
subject hereof, and this Agreement may not be
extended, amended, modified or supplemented without
written consent of the parties hereto.
12. Governing Law. This Agreement and all
amendments or changes relating hereto shall be deemed to
have been entered into pursuant to, and shall be governed
by, the laws of the State of Delaware.
13. Notices. Notices given pursuant hereto
shall be registered or certified mail and shall be deemed
delivered four (4) days after deposit in the United
States mail, postage prepaid, addressed as follows:
If to the Company:
c/o XCL Ltd.
110 Rue Jean Lafitte
Lafayette, Louisiana 70508
If to Executive, to the address below
Executive's signature.
IN WITNESS WHEREOF, this Agreement is executed as of
the ____day of ___________, 19___.
Attest XCL LTD.
By: By:
Name: Name:
Title: Title:
The undersigned Executive hereby accepts the
foregoing Appreciation Option Agreement dated as of 1st day of
June, 1997 (the "Date of Option"), and the undertakings on his
part contained therein, and agrees to all of the terms and
conditions thereof.
_____________________________
By
EXECUTIVE
Address:
XCL LTD.
(a Delaware corporation)
COMMON STOCK PROXY
FOR THE SPECIAL MEETING IN LIEU OF ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD DECEMBER 17, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
The undersigned hereby appoints Marsden W. Miller, Jr. and
Benjamin B. Blanchet, and either of them, attorneys and
proxies, with full power of substitution, and authorizes them
to vote all shares of Common Stock, $.01 par value ("Common
Stock") of XCL Ltd. (the "Company") held of record by the
undersigned on November 10, 1997, at the Special Meeting in
Lieu of Annual Meeting of Shareholders to be held in the
Acadia Room of the Hotel Acadiana, located at 1801 West
Pinhook Road, Lafayette, Louisiana, Wednesday, December 17,
1997 at 10:00 AM, Central Standard Time, and 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, 2, 3 and 4 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 and restatement of the Company's Certificate of
Incorporation, FOR approval of the 1997 LTSIP Restatement, FOR
approval of the award of the Appreciation Option Award to
Mr. Miller 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 2000 Annual Meeting of
Shareholders, to wit: Arthur W. Hummel, Jr.,
Michael Palliser and Benjamin B. Blanchet.
[ ] 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 an amendment and restatement of
the Certificate of Incorporation to provide for a
onefor-[] reverse split of the issued Common
Stock and certain nonsubstantive
ministerial changes.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3. The approval of amendment and restatement of
the Company's Long Term Stock Incentive Plan,
effective as of June 1, 1997, and certain grants
made thereunder.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 4. The approval of an award of an Appreciation
Option to M.W. Miller, Jr.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 5. In their discretion, to vote upon such other
business as may properly come before the meeting.
Receipt is acknowledged of the Proxy Statement dated [November 17], 1997.
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 Special Meeting in Lieu of Annual
Meeting of Shareholders:
Yes [ ] No [ ]
XCL LTD.
(a Delaware corporation)
AMENDED SERIES A PREFERRED STOCK PROXY
FOR THE SPECIAL MEETING IN LIEU OF ANNUAL
MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 17, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Marsden W. Miller,
Jr. and Benjamin B. Blanchet, and either of them, attorneys
and proxies, with full power of substitution, and authorizes
them to vote all shares of Amended Series A, Cumulative Convertible
Preferred Stock, $1.00 par value ("Amended Series A Preferred Stock")
of XCL Ltd. (the "Company") held of record by the undersigned
on November 10, 1997, at the Special Meeting in Lieu of Annual
Meeting of Shareholders to be held in the Acadia Room of the
Hotel Acadiana, located at 1801 West Pinhook Road, Lafayette,
Louisiana, Wednesday, December 17, 1997 at 10:00 AM, Central Standard
Time, and 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
Amended Series A Preferred Stock represented thereby will
be voted for items 1, 2, 3 and 4 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 and
restatement the Company's Certificate of
Incorporation, FOR approval of the 1997 LTSIP Restatement,
and FOR approval of the award of the Appreciation Option to Mr.
Miller 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 2000 Annual Meeting of
Shareholders, to wit: Arthur W. Hummel, Jr.,
Michael Palliser and Benjamin B. Blanchet.
[ ] 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 an amendment and restatement of
the Certificate of Incorporation to provide for a
one-for-[] reverse split of the issued Common Stock
and certain nonsubstantive ministerial changes.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3. The approval of amendment and restatement of
the Company's Long Term Stock Incentive Plan,
effective as of June 1, 1997, and certain grants
made thereunder.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 4. The approval of an award of an Appreciation
Option to M.W. Miller, Jr.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 5. In their discretion, to vote upon such other
business as may properly come before the meeting.
Receipt is acknowledged of the Proxy Statement dated [November 17], 1997.
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 Special Meeting in Lieu of Annual
Meeting of Shareholders:
Yes [ ] No [ ]
XCL LTD.
(a Delaware corporation)
SERIES B PREFERRED STOCK PROXY
FOR THE SPECIAL MEETING IN LIEU OF ANNUAL
MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 17, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Marsden W. Miller, Jr. and
Benjamin B. Blanchet, 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,
$1.00 par value ("Series B Preferred Stock") of XCL Ltd. (the
"Company") held of record by the undersigned on November 10,
1997, at the Special Meeting in Lieu of Annual Meeting of
Shareholders to be held in the Acadia Room of the Hotel Acadiana,
located at 1801 West Pinhook Road, Lafayette, Louisiana, Wednesday,
December 17, 1997 at 10:00 AM, Central Standard Time, and 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
Preferred Stock represented thereby will be voted for items
1, 2, 3 and 4 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 and restatement of the Company's
Certificate of Incorporation, FOR approval of the 1997 LTSIP
Restatement, and FOR approval of the award of the Appreciation
Option Award to Mr. Miller 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 2000 Annual Meeting of
Shareholders, to wit: Arthur W. Hummel, Jr., Michael
Palliser and Benjamin B. Blanchet.
[ ] 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 an amendment and restatement of
the Certificate of Incorporation to provide for a
one-for-[] reverse split of the issued Common Stock
and certain nonsubstantive ministerial changes.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3. The approval of amendment and restatement of
the Company's Long Term Stock Incentive Plan,
effective as of June 1, 1997, and certain grants
made thereunder.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 4. The approval of an award of an Appreciation
Option to M.W. Miller, Jr.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 5. In their discretion, to vote upon such other
business as may properly come before the meeting.
Receipt is acknowledged of the Proxy Statement dated [November 17], 1997.
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 Special Meeting in Lieu of Annual Meeting
of Shareholders:
Yes [ ] No [ ]
