UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report pursuant to Section 13 or 15(d) of the
[X] Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1997
OR
Transition Report Pursuant to Section 13 or 15(d) of
[ ] the Securities Exchange Act of 1934
Commission File No. 1-10669
XCL Ltd.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 51-0305643
- ------------------------ ----------------------
(State of Incorporation) (I.R.S. Employer
Identification Number)
110 Rue Jean Lafitte, 2nd Floor, Lafayette, LA 70508
----------------------------------------------------
(Address of principal executive offices) (Zip Code)
318-237-0325
----------------------------------------------------
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
302,160,240 shares Common Stock, $.01 par value were
outstanding on November 14, 1997.
<PAGE>
XCL LTD.
TABLE OF CONTENTS
PART I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Index to Exhibits
DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933,
as amended (the "Securities Act") and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
All statements other than statements of historical facts included
in this Quarterly Report, including, without limitation, those
regarding the Company's financial position, business strategy,
budgets, reserve estimates, development and exploitation
opportunities and projects, behind-pipe zones, classification of
reserves, projected financial, operating and reserve data and
plans and objectives of management for future operations, are
forward-looking statements. Although the Company believes that
the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will
prove to have been correct. Important factors that could cause
actual results to differ materially from the Company's
expectations ("Cautionary Statements") are disclosed under
"Certain Risk Factors Relating to the Company and the Oil and Gas
Industry" in the Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 and elsewhere in the Annual Report
including, without limitation, in conjunction with the forward-
looking statements included in this Quarterly Report. All
subsequent written and oral forward-looking statements
attributable to the Company or persons acting on behalf of the
Company, are expressly qualified in their entirety by the
Cautionary Statements.
<PAGE>
<TABLE>
XCL Ltd. and Subsidiaries
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
Pro Forma
September 30 September 30 December 31
Assets 1997 1997 1996
-------- ------------ ------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 29,808 $ 2,345 $ 113
Cash held in escrow (restricted) 14,625 75,000 --
Accounts receivable, net 163 163 23
Prepaid expenses 292 292 212
--------- --------- --------
Total current assets 44,888 77,800 348
--------- --------- --------
Property and equipment:
Oil and gas (full cost method):
Proved and unproved properties
under development not
being amortized 51,438 49,913 34,305
Land, at cost -- -- 135
Other 1,158 1,158 2,492
--------- --------- --------
52,596 51,071 36,932
Accumulated depreciation,
depletion and amortization (977) (977) (1,491)
--------- --------- --------
51,619 50,094 35,441
--------- --------- --------
Investments 3,501 2,800 2,383
Assets held for sale 21,058 21,058 21,058
Inventory 1,280 1,280 403
Debt issue cost, less amortization 4,734 4,734 --
Other assets 1,657 1,657 1,231
--------- -------- --------
Total assets $ 128,737 $ 159,423 $ 60,864
========= ======== ========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Senior secured notes $ -- $ 75,000 $ --
Other notes payable -- 3,000 --
Accounts payable and accrued costs 10,985 14,392 3,901
Due to joint venture partner 80 80 4,202
Dividends payable 928 928 928
Current maturities of long-term debt 4,521 28,800 38,022
-------- -------- ---------
Total current liabilities 16,514 122,200 47,053
-------- -------- ---------
Long-term debt, net of current maturities 75,000 -- --
-------- -------- ---------
Other non-current liabilities 2,645 2,645 2,770
-------- -------- ---------
Commitments and contingencies (Note 6)
Shareholders' equity:
Preferred stock-$1.00 par value;
authorized 2,400,000 shares;
issued shares of 1,065,991 at
September 30, 1997 and 669,411
at December 31, 1996-liquidation
preference of $87.4 million at
September 30, 1997 1,066 1,066 669
Common stock-$.01 par value;
authorized 500 million shares;
issued shares of 298,780,945 at
September 30, 1997 and 285,754,151
at December 31, 1996 2,988 2,988 2,858
Common stock held in treasury -
$.01 par value; 1,042,065
shares at September 30, 1997
and December 31, 1996 (10) (10) (10)
Additional paid-in capital 254,767 254,767 226,956
Accumulated deficit (224,233) (224,233) (219,432)
--------- -------- --------
Total shareholders' equity 34,578 34,578 11,041
--------- -------- --------
Total liabilities and
shareholders'equity $ 128,737 $ 159,423 $ 60,864
======== ======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
XCL Ltd. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands, Except Per Share Amounts)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Oil and gas revenues from properties
held for sale $ 52 $ 94 $ 189 $ 1,031
------ ----- ------ -------
Costs and operating expenses:
Operating 60 43 173 280
Depreciation, depletion and
amortization 24 45 104 528
Writedown/loss on sale of other
assets and investments -- 750 -- 2,000
General and administrative 944 862 2,478 2,856
------ ------ ------ ------
1,028 1,700 2,755 5,664
------ ------ ------ ------
Operating loss (976) (1,606) (2,566) (4,633)
------ ------ ------ ------
Other income (expense):
Interest income 1,084 -- 1,582 --
Interest expense, net of amounts
capitalized (1,067) (558) (2,713) (1,765)
Loss on sale of investments -- -- -- (661)
Other, net 542 431 854 623
------ ------ ------ ------
559 (127) (277) (1,803)
------ ------ ------ ------
Net loss (417) (1,733) (2,843) (6,436)
Preferred stock dividends (1,704) (1,343) (5,020) (4,013)
------ ------ ------ -------
Net loss attributable to common stock $(2,121) $(3,076) $(7,863) $(10,449)
====== ====== ====== =======
Net loss per common and common
equivalent share $ (.01) $ (.01) $ (.03) $ (.04)
====== ====== ====== =======
Weighted average number of common
and common equivalent shares
outstanding 295,869 267,542 293,116 262,651
======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
XCL Ltd. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of Dollars)
Nine Months Ended
September 30
-----------------
1997 1996
---- ----
(Unaudited)
Cash flows from operating activities:
Net loss $ (2,843) $ (6,436)
-------- --------
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation, depletion and amortization 104 528
Loss on sale of investments -- 661
Writedown of assets and other investments -- 2,000
Change in assets and liabilities:
Accounts receivable (140) 647
Prepaid expenses (80) (2)
Accounts payable and accrued costs 6,646 2,567
Due to joint venture partner (4,122) --
Other, net (80) 142
------- -------
Total adjustments 2,328 6,543
------- -------
Net cash provided by (used in)
operating activities (515) 107
------- -------
Cash flows from investing activities:
Capital expenditures (9,157) (3,867)
Investments (418) (474)
Proceeds from sale of assets 759 9,151
------- -------
Net cash provided by (used in)
investing activities (8,816) 4,810
------- -------
Cash flows from financing activities:
Proceeds from sales of common stock 732 1,626
Proceeds from loans 81,316 --
Proceeds from sales of treasury stock -- 264
Payment for treasury stock -- (141)
Proceeds from issuance of preferred stock 25,314 282
Proceeds from exercise of common stock
warrants and options 1,184 --
Payment of long-term debt (9,455) (8,348)
Payment of note payable (3,100) --
Issuance of note receivable (100) --
Payment of preferred stock dividends (469) --
Stock issuance costs and other (8,859) (136)
------- ------
Net cash provided by (used in)
financing activities 86,563 (6,453)
------- ------
Net increase (decrease) in cash and cash equivalents 77,232 (1,536)
Cash and cash equivalents at beginning of period 113 1,610
------- -------
Cash and cash equivalents at end of period $ 77,345 $ 74
======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE>
XCL Ltd. and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(1) Basis of Presentation
The consolidated financial statements at September 30, 1997,
and for the three months and nine months then ended have been
prepared by the Company, without audit, pursuant to the Rules and
Regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such Rules and Regulations. The Company believes
that the disclosures are adequate to make the information
presented herein not misleading. These consolidated financial
statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996. In the
opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial
position of XCL Ltd. and subsidiaries as of September 30, 1997,
and December 31, 1996, and the results of their operations for
the three months and nine months ended September 30, 1997 and
1996, have been included. Certain reclassifications have been
made to prior period financial statements to conform to current
year presentation. These reclassifications had no effect on net
loss or shareholders equity. The results of the Company's
operations for such interim periods are not necessarily
indicative of the results for the full year.
The pro forma balance sheet at September 30, 1997 gives
effect to the release of escrow funds on October 15, 1997, and
the concurrent repayment of certain current maturities of long
term debt, additional borrowings, accounts payable and other
accrued liabilities. This transaction had no effect on the
results of operations.
Loss per common and common equivalent share has been
computed by dividing net loss attributable to common stock by the
weighted average number of common and common share equivalents
outstanding.
The amounts of preferred dividends for the three and nine
months ended September 30, 1996 have been restated from amounts
previously reported to include not only declared but also accrued
dividends. Accordingly, the net loss applicable to the common
stock for the three and nine month periods, respectively, were
$(.01) and $(.04) as restated, as compared to a net loss of
$(.01) and $(.03) as previously reported.
See the discussion in the section entitled "Disclosure
Regarding Forward-Looking Information" herein.
(2) Liquidity and Capital Resources
As previously reported, the Company completed a $75 million
debt offering (the "Note Offering") and a $25 million preferred
stock offering (the "Equity Offering") on May 20, 1997
(collectively referred to as the "Offerings"). Under terms of
the trust indenture two cash collateral accounts were established
(reflected in the balance sheet as cash held in escrow), one for
$14.6 million (representing the aggregate amount of interest due
on the Notes through November 1, 1998) and the other for $60.4
million. On October 15, 1997, the $60.4 million (principal
balance) of funds held in the cash collateral account pursuant to
the trust indenture were released. The pro forma balance sheet
at September 30, 1997, reflects the release of these funds and
the concurrent repayment of $17.3 million owed to ING (U.S.)
Capital Corporation ("ING") under its Credit Facility, $7.0
million of Secured Subordinated Debt, $3.0 million of unsecured
notes issued by XCL-China Limited and certain other liabilities.
As a result of these transactions, on a pro forma basis, the
Company had an operating cash balance of $29.8 million. At
September 30, 1997, on a pro forma basis, the Company had working
capital of $28.4 million, including $14.63 million held in escrow
(representing the aggregate amount of interest payable on the $75
million Notes through November 1, 1998) and $4.5 million in
limited recourse debt collateralized by the Lutcher Moore Tract.
At September 30, 1997, the Company had $7.0 million in
accrued interest of which $3.7 million was in respect of the Note
Offering, which will be funded from the funds escrowed for that
purpose. Additionally, the Company has approximately $8.7
million in aggregate of dividends in arrears on its preferred
stock. These dividends will not require payment in cash because
such amount is expected to be satisfied through the issuance of
additional preferred stock.
The Company estimates that most of the available cash will
be used for development of the C-D Field on the Zhao Dong Block.
Additional funds of approximately $13 million are expected from
the sale of the Lutcher Moore Tract (the "Lutcher Moore Tract"),
although there can be no assurance as to the timing and amounts
to be obtained. During 1996, litigation was instituted against
the Company in connection with the remaining domestic oil and gas
property held by the Company, effectively impeding the Company's
ability to consummate a sale by casting doubt as to the Company's
rights to certain leases and demanding damages. Upon resolution
of the litigation the Company will resume its efforts to dispose
of these properties. These transactions will provide partial
funding for the Company to repay the limited recourse debt
secured by the Lutcher Moore Tract, and, combined with projected
cash flow, fund the estimated development expenditures and its
contractual exploration obligations.
The Company will incur a loss for fiscal 1997 and
anticipates incurring losses in fiscal 1998 because production
from the Zhao Dong Block is not expected until late in 1998. If
the Company is successful in additional exploratory drilling on
the Zhao Dong Block, or if the Company is successful in
developing additional oil and gas projects, the Company will need
additional funds for capital expenditures and working capital.
The Company believes that in such events funds will be available
to meet these needs. The exact amounts, source and timing of such
financing is not determinable at this time and there are no
assurances it will be available if needed. In addition, the
Company's efforts to secure additional working capital could be
impaired if its common stock is delisted from the AMEX. See Note
6.
Longer term liquidity is dependent upon the Company's future
performance, including commencement of production in China, as
well as continued access to capital markets, including the
ability to issue additional debt and equity securities. Issuance
of debt and equity securities may require consent of the holders
of the Senior Secured Notes due May 1, 2004, and of one or more
classes of the Company's equity securities.
Effective November 10, 1997, the Company has completed the
first step toward simplifying its capital structure with the
amendment for recapitalization and combination of its outstanding
Series A, Cumulative Convertible Preferred Stock and Series E,
Cumulative Convertible Preferred Stock into Amended Series A,
Cumulative Convertible Preferred Stock which, together with the
Amended Series A Preferred Stock issued in the Equity Offering,
constitutes a single class of Amended Series A Preferred Stock.
As a result of this reclassification, the Series A Preferred
Stock listing on the London Stock Exchange has been terminated,
and the Company has no plans to list the Amended Series A
Preferred Stock on the London Stock Exchange. However, pursuant
to the terms of a registration rights agreement between the
Company and certain holders of the Amended Series A Preferred
Stock, the Company intends to register the Amended Series A
Preferred Stock under the U.S. Securities Act of 1933, as
amended. Upon such registration being declared effective, the
Company expects to apply for a listing on the American Stock
Exchange for the Amended Series A Preferred Stock. The Company
is also considering a reverse stock split of its Common Stock.
The reverse stock split of the Common Stock will require approval
of the holders of a majority of the outstanding shares of capital
stock entitled to vote thereon at a special stockholders' meeting
planned for the December, 1997.
In addition to capital commitments to fund the Company's
share of the Zhao Dong Block development, the Company has capital
requirements for its lubricating oil and coalbed methane
projects.
As a result of the substantial capital requirements
described above, and the Company's recurring net losses, the
report of the Company's independent accountants dated April 10,
1997, as of, and for the year ended December 31, 1996, contains
an explanatory paragraph regarding the ability of the Company to
continue as a going concern. In the offering memoranda dated May
20, 1997, for the Note Offering and Equity Offering, it was noted
that the Company's independent accountants indicated that
assuming no adverse conditions occur in respect of the Company's
projected operations, they will issue an unqualified audit report
that does not contain an explanatory paragraph on such
consolidated financial statements.
(3) Supplemental Cash Flow Information
There were no income taxes paid during the nine month
periods ended September 30, 1997 and 1996.
Interest paid during the three month and nine month periods
ended September 30 amounted to approximately $0.1 million and 0.3
million for 1997, and $0.4 million and $1.5 million, respectively
for 1996.
(4) Debt
Long-term debt consists of the following (000's):
<TABLE>
Pro Forma
September 30 September 30 December 31
1997 1997 1996
------------ ------------ -----------
<S> <C> <C> <C>
13.5% Senior Secured Notes $ 75,000 $ 75,000 $ --
Collateralized credit facility -- 17,279 17,279
Secured Subordinated Debt -- 7,000 15,000
Office building mortgage -- -- 652
-------- -------- -------
75,000 99,279 32,931
Lutcher Moore Group Limited
Recourse Debt 4,521 4,521 5,091
-------- -------- -------
79,521 103,800 38,022
Less current maturities:
13.5% Senior Secured Notes -- (75,000) --
Lutcher Moore Group Limited
Recourse Debt (4,521) (4,521) (5,091)
Collateralized credit facility -- (17,279) (17,279)
Secured Subordinated Debt -- (7,000) (15,000)
Office building mortgage -- -- (652)
-------- -------- --------
$ 75,000 $ -- $ --
======== ======== ========
</TABLE>
Substantially all of the Company's assets collateralize
these borrowings. Accounts payable and accrued expenses include
interest accrued at September 30, 1997, of approximately $7.0
million.
Credit Facility
- ---------------
The Company had been in default of interest payments since
October 1, 1996 and principal payments since January 2, 1997 to
ING, resulting in a default under the Credit Facility and, by
virtue of certain cross default provisions, the Secured
Subordinated Debt. On October 15, 1997, the Credit Facility was
repaid in full from proceeds of the Note Offering.
Secured Subordinated Debt
- -------------------------
During April 1993, the Company issued in a private
placement, $15 million of Secured Subordinated Note Units. Each
of these 40 units consisted of a $375,000 note payable, warrants
to acquire 100,000 shares of the Company's Common Stock at $0.90
per share (which were previously issued to a group of banks in a
prior credit facility), a net profits interest in certain
exploration leases and a contractual interest in the net revenues
of XCL-China, under the Contract relating to the Zhao Dong Block.
This borrowing was collateralized by a second mortgage on all the
Company's producing properties and a second lien on the stock of
XCL-China. In accordance with the terms of a forbearance
agreement between the Company and ING, on May 20, 1997, $8.0
million of the Secured Subordinated Debt was repaid, with
proceeds from the Equity Offering, to those institutional
investors who purchased Amended Series A Preferred Stock in the
Equity Offering. On October 15, 1997, the Company repaid the
remaining $7.0 million in principal amount of the Secured
Subordinated Debt Notes from proceeds of the Note Offering.
Lutcher Moore Group Limited Recourse Debt
- -----------------------------------------
In connection with the Lutcher Moore Tract, the Company's
indirect ownership of such tract is subject to a first mortgage,
with a current principal balance of approximately $2.0 million
(the "Mortgage Notes"), and a number of sellers' notes, with an
aggregate current principal balance of approximately $3.0 million
(the "Seller Notes"). During July 1997, upon payment by the
Company of principal and interest in the aggregate amount of
approximately $430,000, the repayment terms of the Mortgage Notes
were extended until January 17, 1998.
Payments of principal and interest on the Seller Notes are
past due and in July 1997, certain of the sellers have demanded
payment. The Company is negotiating an extension of the maturity
dates of the Seller Notes, however, should the Company be
unsuccessful in negotiating further extension, the holders have
recourse only to the property itself, as the Company is not
liable for the debt. The book value of this property is $12.2
million, therefore, if the Company should allow the mortgagees to
repossess the property for nonpayment of the mortgage debt, the
Company would incur a substantial loss.
Office Building Mortgage
- ------------------------
On March 31, 1997, the Company's office building was sold
for $900,000, $750,000 in cash and a note for $150,000. The
mortgage debt on the building in the amount of $652,000 was
repaid in full with interest and prepayment penalties thereon.
The note bears interest at 9.25% and is of a 22 month term.
Contemporaneously with the sale, the Company leased back one
floor of the two story building for a 22 month term, with the
note payments being equal to and offsetting the lease payments.
Senior Secured Notes
- --------------------
On May 20, 1997, the Company sold through Jefferies &
Company, Inc., in an unregistered offering to qualified
institutional buyers and accredited institutional investors (the
"Note Offering") 75,000 Note Units, each consisting of $1,000
principal amount of 13.5% Senior Secured Notes due May 1, 2004
(collectively, the "Notes") and one Common Stock Purchase Warrant
(collectively the "Note Warrants") to purchase 1,280 shares of
the Company's common stock, par value $0.01 per share (the
"Common Stock"), at an exercise price of $0.2063 per share, first
exercisable after May 20, 1998. The Notes and the Note Warrants
were not separately transferable until August 17, 1997.
The Notes were secured by the gross proceeds from the Note
Offering, and were held in a collateral account, with a portion
of the gross proceeds (approximately $14.6 million) segregated
into a separate account (the "Capitalized Interest Account") to
pay interest on the Notes through November 1, 1998. On October
15, 1997, the Company secured the release of the $60.4 million
held in the collateral account, and concurrently pledged the
stock of XCL-China as security for the Notes.
Interest on the Notes is payable semi-annually on May 1 and
November 1, commencing November 1, 1997. The Notes will mature
on May 1, 2004. The Notes are not redeemable at the option of the
Company prior to May 1, 2002, except that the Company may redeem,
at its option prior to May 1, 2002, up to 35% of the original
aggregate principal amount of the Notes, at a redemption price of
113.5% of the aggregate principal amount of the Notes, plus
accrued and unpaid interest, if any, to the date of redemption,
with the net proceeds of any equity offering completed within 90
days prior to such redemption; provided that at least $48.75
million in aggregate principal amount of the Notes remain
outstanding. On or after May 1, 2002, the Notes are redeemable
at the option of the Company, in whole or in part, at an initial
redemption price of 106.75% of the aggregate principal amount of
the Notes until May 1, 2003, and at par thereafter, plus accrued
and unpaid interest, if any, to the date of redemption. Upon the
occurrence of a change of control, the Company will be obligated
to make an offer to purchase all outstanding Notes at a price
equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase.
On November 3, 1997, $4.5 million were released from the
Capitalized Interest Account and paid to the holders of the Notes
with respect to the first interest payment on the Notes.
(5) Preferred Stock and Common Stock
As of September 30, 1997, the Company had the following
shares of Preferred Stock issued and outstanding:
<TABLE>
Dividends (In Thousands)
_________________________________________
1997
_____________________
Liquidation In Arrears
Shares Value Declared or Accrued Total 1996
------ --------------- --------- ---------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Series A 641,359 $ 51,805,773 (1) $ -- $ 3,154 $ 3,154 $ 3,337
Series B 44,465 4,446,500 335 -- 335 337
Series E 51,915 5,191,500 294 155 449 339
Series F 22,318 2,231,800 126 67 193 --
Amended Series A 305,934 26,004,390 -- 889 889 --
--------- ----------- ----- ------ ------ ------
1,065,991 $ 89,679,963 $ 755 $ 4,265 $ 5,020 $ 4,013
__________
(1) 50 pounds sterling U.K. per share (U.K. 1 pound
sterling = U.S. $1.6155 at September 30, 1997).
</TABLE>
Series A Preferred Stock
- ------------------------
During February 1997, the Company sold 13,458 shares of
Series A Preferred Stock for $157,240. The proceeds were used to
pay the withholding taxes and fractional interests with respect
to the December 31, 1995 dividend payment. In March 1997, the
Company issued an additional 50,137 shares of Series A Preferred
Stock in payment of this dividend, therefore fulfilling its
obligation for such dividend period. The Board of Directors
elected not to declare the dividend payable June 30, 1997.
During March 1997, 39 shares of Series A Preferred Stock
were converted into 819 shares of Common Stock.
Effective November 10, 1997, by consent of in excess of 88
percent of the outstanding shares of Series A Preferred Stock
such series of preferred stock was amended, reclassified and
converted to Amended Series A Preferred Stock. As a consequence
of such consent all dividend arrearages, and accrued and unpaid
dividends were paid in additional shares of Amended Series A
Preferred Stock. This amendment will result in approximately
706,698 shares of Amended Series A Preferred Stock being issued
in respect of such reclassification and payment of accrued
dividends.
Series B Preferred Stock
- ------------------------
During the first quarter of 1997, 1,004,000 shares of Series
B Redemption Stock were sold and the proceeds applied against
accrued dividends. During the second quarter of 1997, 381,000
shares of Series B Redemption Stock were sold, and during July
1997, 1,255,100 shares of Series B Redemption Stock were sold,
with the proceeds applied against redemption of 489 shares of
the Series B Preferred Stock.
In July 1997, the holder of the Company's Series B Preferred
Stock sued the Company and each of its directors with respect to
the alleged failure of the Company to redeem CIDC's Series B
Preferred shares, in accordance with the terms of the Purchase
Agreement and Certificate of Designation. See Note 6
"Commitments, Contingencies and Subsequent Events" regarding this
lawsuit.
Series E Preferred Stock
- ------------------------
In January 1997, the Company issued 2,328 shares of Series E
Preferred Stock in payment of the December 31, 1996 dividend. In
July 1997, the Company issued 2,933 shares of Series E Preferred
Stock in payment of the June 30, 1997 dividend.
Effective November 10, 1997, by consent of in excess of 67
percent of the outstanding shares of Series E Preferred Stock
such series of preferred stock was amended, reclassified and
converted to Amended Series A Preferred Stock. As a consequence
of such consent all accrued and unpaid dividends were paid in
additional shares of Amended Series A Preferred Stock. This
amendment will result in approximately 63,702 shares of Amended
Series A Preferred Stock being issued in respect of such
reclassification and payment of accrued dividends.
Series F Preferred Stock
- ------------------------
In December 1996, XCL authorized the issuance of up to
50,000 shares of a new series of Preferred Stock designated the
Series F, Cumulative Convertible Preferred Stock, $1.00 par value
per share ("Series F Preferred Stock"). During February 1997, the
Company issued a total of 21,057 shares of Series F Preferred
Stock in consideration of $225,000, assignment to the Company of
1,408,125 shares of Common Stock and 2,600,000 warrants to
purchase Common Stock and the release by the purchasers of
certain claims against the Company arising from the Company's
inability to perform under the terms of existing agreements.
Each share of Series F Preferred Stock is convertible, at the
holder's option, into 400 shares of Common Stock. The Series F
Preferred Stock bears a fixed cumulative dividend at the annual
rate of $12 per share, payable semi-annually in cash, or, at the
Company's election, in additional shares of Series F Preferred
Stock, subject to an increase in the event the Company fails to
pay any regularly scheduled dividend.
In July 1997, the Company issued 1,261 shares of Series F
Preferred Stock in payment of the June 30, 1997 dividend.
Amended Series A Preferred Stock
- --------------------------------
On May 20, 1997, the Company sold, in an unregistered
offering to qualified institutional buyers and accredited
institutional investors (the "Equity Offering") 294,118 Equity
Units, each consisting of one share of Amended Series A,
Cumulative Convertible Preferred Stock, par value $1.00 per share
("Amended Series A Preferred Stock"), and one Common Stock
Purchase Warrant (collectively, the "Equity Warrants") to
purchase 327 shares of the Company's Common Stock, at an initial
exercise price of $0.2063 per share, first exercisable until May
20, 1998. The Amended Series A Preferred Stock and Equity
Warrants were separately transferable October 16, 1997.
Each share of Amended Series A Preferred Stock has a
liquidation value of $85.00, plus accrued and unpaid dividends.
Dividends on the Amended Series A Preferred Stock are cumulative
from May 20, 1997 and are payable semi-annually, commencing
November 1, 1997, at an annual rate of $8.075 per share.
Dividends are payable in additional shares of Amended Series A
Preferred Stock (valued at $85.00 per share) through November 1,
2000, and thereafter in cash, or at the election of the Company,
in additional shares of Amended Series A Preferred Stock. The
Amended Series A Preferred Stock is convertible into Common
Stock, at any time after the first anniversary of the issue date,
at the option of the holders thereof, unless previously redeemed,
at an initial conversion price of $0.50 per share of Common Stock
(equivalent to a rate of 170 shares of Common Stock for each
share of Amended Series A Preferred Stock), subject to adjustment
under certain conditions. The Company is entitled to require
conversion of all the outstanding shares of Amended Series A
Preferred Stock, at any time after November 20, 1997 if the
Common Stock shall have traded for 20 trading days during any 30
consecutive trading day period at a market value equal to or
greater than 150% of the prevailing conversion rate.
The Amended Series A Preferred Stock is redeemable at any
time on or after May 1, 2002, in whole or in part, at the option
of the Company initially at a redemption price of $90.00 per
share and thereafter at redemption prices which decrease ratably
annually to $85.00 per share on and after May 1, 2006, plus
accrued and unpaid dividends to the redemption date. The Amended
Series A Preferred Stock is mandatorily redeemable, in whole, on
May 1, 2007, at a redemption price of $85.00 per share, plus
accrued and unpaid dividends to the redemption date, payable in
cash, or at the election of the Company, in Common Stock.
Upon the occurrence of a change in control or certain other
fundamental changes, the conversion price of the Amended Series A
Preferred Stock will be reduced, for a limited period, in certain
circumstances in order to provide holders with loss protection at
a time when the market value of the Common Stock is less than the
then prevailing conversion price.
The Amended Series A Preferred Stock will entitle the holder
thereof to cast the same number of votes as the shares of Common
Stock then issuable upon conversion thereof on any matter subject
to the vote of the holders of the Common Stock. Further, the
holders of the Amended Series A Preferred Stock will be entitled
to vote as a separate class (i) to elect two directors if the
Company is in arrears in payment of three semi-annual dividends,
and (ii) the approval of two-thirds of the then outstanding
Amended Series A Preferred Stock will be required for the
issuance of any class or series of stock ranking prior to the
Amended Series A Preferred Stock, as to dividends, liquidation
rights and for certain amendments to the Company's Certificate of
Incorporation that adversely affect the rights of holders of the
Amended Series A Preferred Stock.
On May 20, 1997, $8.0 million of the Secured Subordinated
Debt was repaid, with proceeds from the Equity Offering, to those
institutional investors who purchased Amended Series A Preferred
Stock in the Equity Offering. Accrued interest through May 20,
1997, totaling approximately $1.0 million, was paid to those
institutional investors by issuance of 11,816 shares of Amended
Series A Preferred Stock and 2,008,720 warrants to purchase
Common Stock.
On November 3, 1997, 12,906 shares of Amended Series A
Preferred Stock were issued in respect of the dividend payable
November 1, 1997, in the amount of $1.1 million.
Effective November 10, 1997, the outstanding shares of
Series A Preferred Stock and Series E Preferred Stock were
amended, to provide for the reclassification and combination of
those series of preferred stock into Amended Series A Preferred
Stock. As a result of this amendment the outstanding shares of
Series A Preferred Stock and Series E Preferred Stock were
converted into approximately 672,631 shares of Amended Series A
Preferred Stock. All dividend arrearages, and accrued and unpaid
dividends on the Series A Preferred Stock and Series E Preferred
Stock will be paid in additional shares of Amended Series A
Preferred Stock upon exchange of old certificates for new
certificates.
Common Stock
- ------------
During the nine months ended September 30, 1997, the Company
issued an aggregate of 11.8 million shares of Common Stock, of
which 8.3 million shares were issued in connection with the
exercise of stock purchase warrants with the Company receiving
approximately $1.3 million; approximately 3.5 million were sold
to raise working capital, generating net proceeds of
approximately $0.7 million; and 819 shares were converted to
Common Stock by a holder of Series A Preferred Stock. Also
during this period, 1.4 million shares of Common Stock were
returned to the Company in partial payment of the purchase price
for shares of Series F Preferred Stock.
(6) Commitments, Contingencies and Subsequent Events
Other commitments, contingencies and subsequent events
include:
o The Company acquired the rights to the exploration,
development and production of the Zhao Dong Block by executing a
Production Sharing Agreement with China National Oil and Gas
Exploration and Development Corporation ("CNODC") in February
1993. Under the terms of the Production Sharing Agreement, the
Company and its partner are responsible for all exploration
costs. If a commercial discovery is made, and if CNODC exercises
its option to participate in the development of the field, all
development and operating costs and related oil and gas
production will be shared up to 51 percent by CNODC and the
remainder by the Company and its partner.
The Production Sharing Agreement includes the following
additional principal terms:
The Production Sharing Agreement is basically divided
into three periods: the Exploration period, the
Development period and the Production period. Work to
be performed and expenditures to be incurred during the
Exploration period, which consists of three phases
totaling seven years from May 1, 1993, are the
exclusive responsibility of the Contractor (the Company
and its partner as a group). The Contractor's
obligations in the three exploration phases are as
follows:
1. During the first three years, the Contractor is
required to drill three wildcat wells, perform
seismic data acquisition and processing and expend
a minimum of $6 million. The Contractor has
drilled two wildcat wells, satisfied the seismic
acquisition and minimum expenditure requirements
and has received an extension allowing the
drilling of the third wildcat well during the
second exploration phase.;
2. During the next two years, the Contractor is
required to drill two wildcat wells, perform
seismic data acquisition and processing and expend
a minimum of $4 million (The Contractor has
elected to proceed with the second phase of the
Contract. The seismic data acquisition
requirement and the minimum expenditure
requirement for the second phase has been
satisfied.);
3. During the last two years, the Contractor is
required to drill two wildcat wells and expend a
minimum of $4 million. (If the Contractor elects
to proceed with the third phase of the Contract,
the minimum expenditure requirement of the third
phase has been satisfied.)
The Production Sharing Agreement may be terminated by
the Contractor at the end of each phase of the
Exploration period, without further obligation.
o The Exchange has, since November 1996, continued to review
the Company's listing eligibility, in that the Company does not
meet certain financial requirements for continued listing. The
Company intends to satisfy the Exchange's concerns regarding the
Company's continuing listing eligibility.
o On April 10, 1997, the Company, through a wholly owned
subsidiary sold $3.1 million of notes and 10.1 million warrants
to purchase a like number of shares of Common Stock of the
Company at $0.01 per share. The proceeds from these notes were
immediately paid to the operator for unpaid cash calls on the
Zhao Dong Block. These notes were repaid in July 1997, from
proceeds of the Equity Offering. In two separate borrowings in
August and September 1997, the same subsidiary reborrowed from
the same lenders an aggregate of $3.0 million to pay Apache for
cash calls. These notes were repaid on October 15, 1997, from
proceeds of the Note Offering.
o The Company has future commitments of $1.0 million
associated with its joint venture contract to enter the
lubricating oil business in China.
o The Company is in dispute over a 1992 tax assessment by the
Louisiana Department of Revenue and Taxation for the years 1987
through 1991 in the approximate amount of $2.5 million. The
Company has also received a proposed assessment from the
Louisiana Department of Revenue and Taxation for income tax years
1991 and 1992, and franchise tax years 1992 through 1996 in the
approximate amount of $3.0 million. The Company has filed written
protests as to these proposed assessments, and will vigorously
contest the asserted deficiencies through the administrative
appeals process and, if necessary, litigation. The Company
believes that adequate provision has been made in the financial
statements for any liability.
o 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 an aggregate claimed 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 its obligations under 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 is presently in negotiations with CIDC to settle this
action.
o The Zhao Dong F-1 wildcat well was spudded on October 9,
1996, and has been drilled to a total measured depth of 4,378
meters or 3,300 meters true vertical depth. The well encountered
indications of sands, some with hydrocarbon shows, in the primary
objective Shahejie section, but downhole conditions prevented
adequate evaluation with electric logs to determine reservoir
quality and therefore commerciality. An unsuccessful attempt to
sidetrack the original F-1 hole was made. The F-1 was drilled
pursuant to a turnkey drilling contract. In accordance with the
terms of the drilling contract, the turnkey driller has elected
to demobilize the rig and has moved it off location. Apache, as
operator, is now in negotiations with the turnkey driller as to
what is due under that contract. The Company has been carried on
the drilling of this well by Apache and has, therefore, not
incurred any cost in the drilling of this well. An evaluation of
drilling procedures and a re-evaluation of the exploration merit
of redrilling the F-1 well must be made prior to any decision on
how to proceed. The Company is waiting to receive Apache's
recommendation on how to proceed.
o In connection with the Lutcher Moore Tract, payments of
principal and interest on the Seller Notes are past due and in
July 1997, certain of the sellers have demanded payment. The
Company is negotiating an extension of the maturity dates of the
Seller Notes, however, should the Company be unsuccessful in
negotiating further extension, the holders have recourse only to
the property itself, as the Company is not liable for the debt.
The book value of this property is $12.2 million, therefore, if
the Company should allow the mortgagees to repossess the property
for nonpayment of the mortgage debt, the Company would incur a
substantial loss.
o Effective August 1, 1997, the Company entered into a
Services Agreement with an attorney who also serves as an
executive officer of the Company. The Agreement is terminable by
either party at any time without cause. Under the Agreement, the
attorney 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 the attorney 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 the attorney may, except as prohibited by law or the
Louisiana Rules of Professional Responsibility, represent other
clients and engage in business for his own account.
The attorney received from the Company a $100,000 loan
to replace benefits that he forfeited when he withdrew
as a partner of a law firm 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 6.25% per annum, plus one-
eighth of the original principal balance to be paid by
the Company 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) the officer terminates his employment
with "good reason," in either case as such terms are
defined in the note evidencing such loan.
o On July 26, 1996, an individual filed three lawsuits against
a wholly owned subsidiary. One suit alleges actual damage of
$580,000 plus additional amounts that could result from an
accounting of a pooled interest. Another seeks legal and related
expenses of $56,473 from an allegation the plaintiff was not
adequately represented before the Texas Railroad Commission. The
third suit seeks a declaratory judgement that a pooling of a 1938
lease and another in 1985 should be declared terminated and
further plaintiffs seek damages in excess of $1 million to effect
environmental restoration. The Company believes these claims are
without merit and intends to vigorously defend itself.
o The Company is subject to other legal proceedings some of
which arise in the ordinary course of its business. In the
opinion of Management, the amount of ultimate liability with
respect to these actions will not materially affect the financial
position or results of operations of the Company.
o The Company is subject to existing United States federal,
state and local laws and regulations and Chinese laws and
regulations governing environmental quality and pollution
control. Although management believes that such operations are in
general compliance with applicable environmental regulations,
risks of substantial costs and liabilities are inherent in oil
and gas operations, and there can be no assurance that
significant costs and liabilities will not be incurred.
(7) Stock Options
On June 5, 1997, the Board of Directors unanimously approved
amendment and restatement of the 1992 Long Term Stock Incentive
Plan ("1997 LTSIP Restatement"), effective as of June 1, 1997,
which is being submitted for shareholder approval at the
Company's Special Meeting in Lieu of Annual Meeting of
Shareholders scheduled for December, 1997.
Under the 1997 LTSIP Restatement, non-qualified stock
options to purchase an aggregate of 30 million shares of Common
Stock and an aggregate of 170,000 shares of Amended Series A
Preferred Stock were granted to certain executive officers, non-
executive officers and directors of the Company. The option
exercise price for the Common Stock is $0.25 per share and the
option exercise price for the Amended Series A Preferred Stock is
$85.00 per share, each being not less than the fair market value
at the date of grant as determined by the Compensation Committee
of the Board of Directors pursuant to provisions in the 1997
LTSIP Restatement. The closing price on the Exchange for the
Common Stock was $0.21875 per share on June 2, 1997 and the fair
market value of the Amended Series A Preferred Stock, based upon
the last sales price information in the PORTAL Market as supplied
by Jefferies & Company, Inc. was $85.00 per share on June 2,
1997.
Effective June 1, 1997, Restricted Stock Awards for an
aggregate of 20 million shares of Common Stock were granted to
two executive officers. In addition, a Restricted Stock Award
for 20,000 shares of Amended Series A Preferred Stock was granted
to one of those executive officers. The Restricted Stock Awards
are subject to forfeiture under certain conditions if employment
is terminated before specified "lapse dates." The lapse dates,
number of shares and per share fair market value of the Company's
Common Stock or Amended Series A Preferred Stock, as the case may
be, that must be achieved when forfeiture restrictions cease to
become applicable are set out in the following table.
<TABLE>
Number of Fair Market Value
Number of Fair Market Value Amended Series A Per Amended Series
Lapse Dates Common Shares Per Common Shares Preferred Shares A Preferred Share
- ----------- ------------- ----------------- ---------------- -------------------
<C> <C> <C> <C> <C>
June 1, 1999 2,500,000 $0.3802 4,000 $112.41
June 1, 2000 4,500,000 $0.4372 6,000 $129.27
June 1, 2001 7,000,000 $0.5028 10,000 $170.96
June 1, 2002 6,000,000 $0.5782 -- --
---------- ------
20,000,000 20,000
</TABLE>
Subject to shareholder approval and pursuant to the 1997
LTSIP Restatement, the Board has approved an Appreciation Option
for the Chairman of the Board. The Board has determined that the
Appreciation Option to the Chairman is in the best interests of
the Company and its shareholders in order to, and is required to,
retain his services. The Appreciation Option Agreement provides
the Chairman 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 (as defined) and the market capitalization of
the Company as of the date that he exercises the Appreciation
Option (as defined). On June 1, 1997, the aggregate market
capitalization of the Company, as computed in accordance with the
Appreciation Option Agreement, was $161,547,223 million. Upon
exercise of his Option, in the event the Company elects to settle
the Option with shares of Stock, the Chairman 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 the Chairman will receive will be
reduced by the amount of the Exercise Price. Because the
Chairman'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. The Chairman 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. The 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 him without "good
reason." 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 the Chairman 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.
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.
<PAGE>
XCL LTD. AND SUBSIDIARIES
March 31, 1997
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Cautionary Statement Pursuant to Safe Harbor Provisions of the
- -----------------------------------------------------------------
Private Securities Litigation Reform Act of 1995.
- ------------------------------------------------
See the discussion in the section entitled "Disclosure
Regarding Forward-Looking Information" herein.
Liquidity and Capital Resources
- -------------------------------
As previously reported, the Company completed a $75 million
debt offering (the "Note Offering") and a $25 million preferred
stock offering (the "Equity Offering") on May 20, 1997
(collectively referred to as the "Offerings"). Under terms of
the trust indenture two cash collateral accounts were established
(reflected in the balance sheet as cash held in escrow), one for
$14.6 million (representing the aggregate amount of interest due
on the Notes through November 1, 1998) and the other for $60.4
million. On October 15, 1997, the $60.4 million (principal
balance) of funds held in the cash collateral account pursuant to
the trust indenture were released. The pro forma balance sheet
at September 30, 1997, reflects the release of these funds and
the concurrent repayment of $17.3 million owed to ING (U.S.)
Capital Corporation ("ING") under its Credit Facility, $7.0
million of Secured Subordinated Debt, $3.0 million of unsecured
notes issued by XCL-China Limited and certain other liabilities.
As a result of these transactions, on a pro forma basis, the
Company had an operating cash balance of $29.8 million. At
September 30, 1997, on a pro forma basis, the Company had working
capital of $28.4 million, including $14.63 million held in escrow
(representing the aggregate amount of interest payable on the $75
million Notes through November 1, 1998) and $4.5 million in
limited recourse debt collateralized by the Lutcher Moore Tract.
At September 30, 1997, the Company had $7.0 million in
accrued interest of which $3.7 million was in respect of the Note
Offering, which will be funded from the funds escrowed for that
purpose. Additionally, the Company has approximately $8.7
million in aggregate of dividends in arrears on its preferred
stock. These dividends will not require payment in cash because
such amount is expected to be satisfied through the issuance of
additional preferred stock.
The Company estimates that most of the available cash will
be used for development of the C-D Field on the Zhao Dong Block.
Additional funds of approximately $13 million are expected from
the sale of the Lutcher Moore Tract (the "Lutcher Moore Tract"),
although there can be no assurance as to the timing and amounts
to be obtained. During 1996, litigation was instituted against
the Company in connection with the remaining domestic oil and gas
property held by the Company, effectively impeding the Company's
ability to consummate a sale by casting doubt as to the Company's
rights to certain leases and demanding damages. Upon resolution
of the litigation the Company will resume its efforts to dispose
of these properties. These transactions will provide partial
funding for the Company to repay the limited recourse debt
secured by the Lutcher Moore Tract, and, combined with projected
cash flow, fund the estimated development expenditures and its
contractual exploration obligations.
The Company will incur a loss for fiscal 1997 and
anticipates incurring losses in fiscal 1998 because production
from the Zhao Dong Block is not expected until late in 1998. If
the Company is successful in additional exploratory drilling on
the Zhao Dong Block, or if the Company is successful in
developing additional oil and gas projects, the Company will need
additional funds for capital expenditures and working capital.
The Company believes that in such events funds will be available
to meet these needs. The exact amounts, source and timing of such
financing is not determinable at this time and there are no
assurances it will be available if needed. In addition, the
Company's efforts to secure additional working capital could be
impaired if its common stock is delisted from the AMEX. See Note
6.
Longer term liquidity is dependent upon the Company's future
performance, including commencement of production in China, as
well as continued access to capital markets, including the
ability to issue additional debt and equity securities. Issuance
of debt and equity securities may require consent of the holders
of the Senior Secured Notes due May 1, 2004, and of one or more
classes of the Company's equity securities.
Effective November 10, 1997, the Company has completed the
first step toward simplifying its capital structure with the
amendment for recapitalization and combination of its outstanding
Series A, Cumulative Convertible Preferred Stock and Series E,
Cumulative Convertible Preferred Stock into Amended Series A,
Cumulative Convertible Preferred Stock which, together with the
Amended Series A Preferred Stock issued in the Equity Offering,
constitutes a single class of Amended Series A Preferred Stock.
As a result of this reclassification, the Series A Preferred
Stock listing on the London Stock Exchange has been terminated,
and the Company has no plans to list the Amended Series A
Preferred Stock on the London Stock Exchange. However, pursuant
to the terms of a registration rights agreement between the
Company and certain holders of the Amended Series A Preferred
Stock, the Company intends to register the Amended Series A
Preferred Stock under the U.S. Securities Act of 1933, as
amended. Upon such registration being declared effective, the
Company expects to apply for a listing on the American Stock
Exchange for the Amended Series A Preferred Stock. The Company
is also considering a reverse stock split of its Common Stock.
The reverse stock split of the Common Stock will require approval
of the holders of a majority of the outstanding shares of capital
stock entitled to vote thereon at a special stockholders' meeting
planned for the December, 1997.
In addition to capital commitments to fund the Company's
share of the Zhao Dong Block development, the Company has capital
requirements for its lubricating oil and coalbed methane
projects.
As a result of the substantial capital requirements
described above, and the Company's recurring net losses, the
report of the Company's independent accountants dated April 10,
1997, as of, and for the year ended December 31, 1996, contains
an explanatory paragraph regarding the ability of the Company to
continue as a going concern. In the offering memoranda dated May
20, 1997, for the Note Offering and Equity Offering, it was noted
that the Company's independent accountants indicated that
assuming no adverse conditions occur in respect of the Company's
projected operations, they will issue an unqualified audit report
that does not contain an explanatory paragraph on such
consolidated financial statements.
Other General Considerations
- ----------------------------
The Company believes that inflation has had no material
impact on the Company's sales, revenues or income during the
reporting periods. In light of increased oil and gas exploration
activity worldwide, and in the Bohai Bay in particular, increased
rates for equipment and services, and limited rig availability
may have an impact in the future.
The Company is subject to existing federal, state and local
U.S. and Chinese laws and regulations governing environmental
quality and pollution control. Although management believes that
such operations are in general compliance with applicable
environmental regulations, risks of substantial costs and
liabilities are inherent in oil and gas operations, and there can
be no assurance that significant costs and liabilities will not
be incurred.
New Accounting Pronouncement
- ----------------------------
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards "SFAS No. 128
Earnings Per Share" effective for financial statements issued for
periods ending after December 15, 1997. The board has also
issued Statement No. 129 "Disclosure of Information About Capital
Structure" also effective the same date. The Company does not
believe the effect of adopting these statements will have a
material impact on the Company.
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards "SFAS No. 130,
Reporting Comprehensive Income" effective for fiscal years
beginning after December 15, 1997. Management believes adoption
of this statement will have a financial statement presentation
impact only and will not have an effect on the Company's
financial position or results of operations.
In June, 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards "SFAS No. 131,
Disclosure about Segments of an Enterprise and Related
Information" effective for financial statements for periods
beginning after December 15, 1997. Management believes adoption
of this statement will have a financial statement disclosure
impact only and will not have an effect on the Company's
financial position or results of operations. This statement need
not be applied to interim financial statements in the initial
year of its application, but comparative information for interim
periods in the initial year of application is to be reported in
financial statements for interim periods in the second year of
application.
Results of Operations
- ---------------------
During the three and nine month periods ended September 30,
1997, the Company incurred net losses of $0.4 million and $2.8
million, respectively, as compared to net losses of $1.7 million
and $6.4 million, respectively, during the corresponding periods
in 1996. The loss in 1996 reflects the effect of a $2.0 million
writedown and $0.7 million loss on sale of the Company's
investments.
Oil and gas revenues for the three and nine month periods
ended September 30, 1997, were $52,000 and $189,000, compared to
$94,000 and $1.0 million during the corresponding period in 1996.
Revenues will continue to decline as the Company completes its
announced program of selling substantially all of its U.S.
producing properties. Interest income increased $1.0 million
during the three month period and $1.6 million during the nine
month period ended September 30, 1997, compared with the same
periods in 1996. The primary reason for these increases was the
interest earned on the $75 million in escrow from the Note
Offering. Interest expense increased in the third quarter of
1997, as compared to the corresponding period in 1996, because of
additional borrowings and higher interest rates.
As the Company continues to focus its resources on
exploration and development of the Zhao Dong Block future oil and
gas revenues will initially be directly related to the degree of
drilling success experienced on the Zhao Dong Block. The Company
does not anticipate significant increases in its oil and gas
production in the short-term and expects to incur operating
losses until such time as sufficient revenues from the China
projects are realized which exceed operating costs.
General and administrative expenses increased $82,000 during
the three months ended September 30, 1997 as compared to the same
period in 1996 due to additional professional fees and general
increases in office expenses. For the nine months ended
September 30, 1997, general and administrative expenses decreased
$378,000 compared to the same period in 1996. The decrease
during the nine months ended September 10, 1997, compared to the
same period in 1996 was the result of less domestic activity in
that the Company is now focused on development of the China
properties.
<PAGE>
XCL LTD. AND SUBSIDIARIES
September 30, 1997
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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 is presently in
negotiations with CIDC to settle this action.
Other than as disclosed in the Company's Annual Report on
Form 10-K, there are no material pending legal proceedings to
which the Company or any of its subsidiaries is a party or to
which any of their properties are subject.
Item 2(c). Changes in Securities
o On July 24, 1997, the Company issued 2,933 shares of Series
E Preferred Stock to the holders thereof in respect of a dividend
payable, pursuant to the terms thereof, in additional shares of
Series E Preferred Stock.
o On July 24, 1997, the Company issued 1,261 shares of Series
F Preferred Stock to the holders thereof in respect of a dividend
payable, pursuant to the terms thereof, in additional shares of
Series F Preferred Stock.
o On November 11, 1997, the Company issued 400,000 shares of
Common Stock and stock purchase warrants to acquire 200,000
shares of Common Stock to a consultant, as compensation pursuant
to an agreement dated effective as of February 20, 1997.
These securities were sold within the United States pursuant to
an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act, pursuant to
Section 4(2), Rule 144A and Regulation D under the Securities
Act, in that the securities were offered and sold only to
"accredited investors," or outside the U.S. pursuant to
Regulation S in "offshore transactions" to "non-U.S. Person."
All of the securities bear a restrictive legend and are subject
to restriction on resale or transfer.
Item 3. Defaults Upon Senior Securities.
(a) Debt
Until October 15, 1997, the Company had been in default of
interest payments since October 1, 1996 and principal payments
since January 2, 1997 to ING, resulting in a default under the
Credit Facility and, by virtue of certain cross default
provisions, the Secured Subordinated Debt. Under the terms of a
Forbearance Agreement between the Company, XCL-China and ING, ING
agreed that it would not accelerate the maturity of, or commence
any foreclosure procedures to collect, the indebtedness under the
Credit Facility until May 31, 1997. As of May 20, 1997, the
closing date for the Offerings, ING's agreement to forbear was
conditionally extended to November 1, 1997. On October 15, 1997,
the Credit Facility and the Secured Subordinated Notes were
repaid from proceeds of the Note Offering and concurrently the
stock of XCL-China Ltd., the Company's principal operating
subsidiary, was released by ING and pledged as security for the
Notes.
(b) Preferred Stock
Until November 10, 1997, the Company was in default in
payment of dividends on the Series A Preferred Stock. The Series
A Preferred Stock dividend requirements were approximately 2.9
million pounds sterling UK annually (approximately $4.7 million)
and the Company had insufficient liquidity to pay such amounts.
Further, the Credit Facility restricted payment of cash
dividends. On November 7, 1997, the Company received consent
from approximately 88.85% of the holders of its Series A
Preferred Stock to amend the terms of such Preferred Stock to the
terms of the Company's Amended Series A Preferred Stock. In
connection with such amendment proposal the Company paid
approximately $900,000, plus interest thereon, remaining to be
paid with respect to the June 30, 1995 dividend, in additional
shares of Amended Series A Preferred Stock. Pursuant to the
terms of the amendment proposal, the Board of Directors declared
payable, in additional shares of Amended Series A Preferred
Stock, the June 30, 1996, December 31, 1996 and June 30, 1997
dividends, conditional upon consent to the amendment. Further,
all accrued dividends from July 1, 1997 through November 9, 1997
will be paid in additional shares of Amended Series A Preferred
Stock. As a consequence of the approval of the amendment,
effective November 10, 1997, the Series A Preferred Stock was
converted and reclassified into an aggregate of approximately
611,555 shares of Amended Series A Preferred Stock. The Amended
Series A Preferred Stock has not been listed on the London Stock
Exchange, and concurrent with the approval of the amendment, the
listing on the London Stock Exchange for the Series A Preferred
Stock was terminated. Pursuant to the registration rights
agreement between the Company and the holders of the Amended
Series A Preferred Stock, the Company intends to register the
shares of Amended Series A Preferred Stock under the Securities
Act. Upon such registration being declared effective, the
Company expects to apply for a listing on the American Stock
Exchange for the Amended Series A Preferred Stock.
The holders of the Series B Preferred Stock, in a legal
action brought against the Company and its directors, have
alleged that the Company is in default of the terms of the Series
B Preferred Stock. See Part II - Item 1 "Legal Proceedings."
Item 4. Submission of Matters to a Vote of Security-Holders
By Circular dated October 21, 1997, the Company solicited
the written consent of the holders of the Company's Series A
Preferred Stock for approval to amend such series of Preferred
Stock to conform to the terms of the Company's recently issued
Amended Series A Preferred Stock. The amendment proposal also
provided for the payment of accrued and unpaid dividends and
dividend arrearages to be paid in additional shares of Amended
Series A Preferred Stock, upon consent to the amendment. The
amendment further provided that upon consent the Company would
not seek a listing of the Amended Series A Preferred Stock on the
London Stock Exchange, thereby resulting in the loss of the
listing on the London Stock Exchange for the Series A Preferred
Stock. The consent of at least two-thirds of the issued and
outstanding shares of Series A Preferred Stock held of record on
October 10, 1997, was required for approval. The amendment was
approved and became effective on November 10, 1997. A total of
569,838 shares were cast as follows with respect to the
amendment:
Consenting: 569,838
Non-Consenting: Nil
By Circular dated October 21, 1997, the Company solicited
the written consent of the holders of the Company's Series E
Preferred Stock for approval to amend such series of Preferred
Stock to conform to the terms of the Company's recently issued
Amended Series A Preferred Stock. The amendment proposal also
provided for the payment of accrued and unpaid dividends to be
paid in additional shares of Amended Series A Preferred Stock,
upon consent to the amendment. The consent of at least two-
thirds of the issued and outstanding shares of Series E Preferred
Stock held of record on October 10, 1997, was required for
approval. The amendment was approved and became effective on
November 10, 1997. A total of 34,989 shares were cast as follows
with respect to the amendment:
Consenting: 34,989
Non-Consenting: Nil
There were no matters submitted to a vote of holders of the
Common Stock of the Company during the period covered by this
report.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-K.
See Index to Exhibits following signature page.
(b) Reports on Form 8-K
A current report on Form 8-K was filed on September 2, 1997,
to report the sale of 638,000 shares of Common Stock, through the
exercise of stock purchase warrants, pursuant to Regulation S
under the Securities Act.
A current report on Form 8-K was filed on September 24,
1997, to report the issuance, pursuant to Regulation S under the
Securities Act, of 3 million stock purchase warrants as
compensation for services to be performed under a consulting
agreement.
A current report on Form 8-K was filed on October 17, 1997,
to report (i) the test results of the Company's C-4 well on the
Zhao Dong Block, (ii) the release of funds held in escrow from
the May 20, 1997 Note Offering, and (iii) the sale of 360,000
shares of Common Stock, through the exercise of stock purchase
warrants, pursuant to Regulation S under the Securities Act.
A current report on Form 8-K was filed on November 5, 1997,
to report the sale of 1,500,000 shares of Common Stock, through
the exercise of stock purchase warrants and the issuance of an
aggregate of 800,000 shares of Common Stock as compensation to a
resident of Taiwan, all pursuant to Regulation S under the
Securities Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
XCL Ltd.
/s/ Marsden W. Miller, Jr.
By: _________________________________
Name: Marsden W. Miller, Jr.
Title: Chairman and Chief Executive
Officer
Date: November 14, 1997
<PAGE>
INDEX TO EXHIBITS
(a) Exhibits required by Item 601 of Regulation S-K.
2.0 Not applicable
3(i) Articles of incorporation
3.1 Certificate of Incorporation of the Company dated
December 28, 1987. (A)(i)
3.2 Certificate of Amendment to the Certificate of
Incorporation of the Company dated March 30, 1988.
(A)(ii)
3.3 Certificate of Amendment to the Certificate of
Incorporation of the Company dated June 22, 1990. (B)(i)
3.4 Certificate of Amendment to the Certificate of
Incorporation of the Company dated June 12, 1993. (C)
3.5 Certificate of Amendment to the Certificate of
Incorporation of the Company dated June 8, 1992, whereby
Article Fourth was amended to increase the number of shares
of Common Stock authorized. (D)(i)
3.6 Certificate of Amendment to the Certificate of
Incorporation of the Company dated September 29, 1993,
whereby Article Fourth was amended to increase the number of
shares of Common Stock authorized. (E)(i)
3.7 Certificate of Amendment dated July 1, 1994, whereby
Article Fourth was amended to increase the number of shares
of Common Stock and the name of the Company was changed.
(F)(i)
3.8 Certificate of Amendment dated June 19, 1995, whereby
Article Fourth was amended to increase the number of shares
of Common Stock. (N)(i)
3.9 Certificate of Amendment dated July 30, 1996, whereby
Article Fourth was amended to increase the number of shares
of Common Stock and Preferred Stock. (Q)(i)
3(ii) Amended and Restated Bylaws of the Company as currently
in effect. (A)(iii)
4.0 Instruments defining rights of security holders,
including indentures:
4.1 Form of Common Stock Certificate. (A)(iv)
4.2 Certificate of Designation of Series A, Cumulative
Convertible Preferred Stock. (G)
4.3 Form of Series A, Cumulative Convertible Preferred Stock
Certificate. (B)(ii)
4.4 Certificate of Designation of Series B, Cumulative
Preferred Stock. (H)(i)
4.5 Form of Series B, Cumulative Preferred Stock Certificate.
(H)(ii)
4.6 Form of Class B Warrants issued to China Investment &
Development Co. Ltd. to purchase 2,500,000 shares of Common
Stock at $2.00 per share payable upon redemption of the
Series B, Cumulative Preferred Stock. (H)(iii)
4.7 Form of Amendment to Certificate of Designation of Series
B Preferred Stock dated August 7, 1992. (D)(ii)
4.8 Certificate of Designation of Series C, Cumulative
Convertible Preferred Stock. (E)(ii)
4.9 Copy of Amendment to Certificate of Designation of Series
C Preferred Stock dated February 18, 1994.(I)(i)
4.10 Form of Series C, Cumulative Convertible Preferred Stock
Certificate. (I)(iii)
4.11 Certificate of Designation of Series D, Cumulative
Convertible Preferred Stock. (I)(iv)
4.12 Form of Amendment to Certificate of Designation of
Series D Preferred Stock dated January 24, 1994. (I)(ii)
4.13 Form of Series D, Cumulative Convertible Preferred Stock
Certificate. (E)(v)
4.14 Form of Warrant dated January 31, 1994 to purchase
2,500,000 shares of Common Stock at an exercise price of
$1.00 per share, subject to adjustment, issued to INCC.
(I)(iii)
4.15 Form of Registrar and Stock Transfer Agency Agreement,
effective March 18, 1991, entered into between the Company
and Manufacturers Hanover Trust Company (predecessor to
Chemical Bank), whereby Chemical Bank (now known as
ChaseMellon Shareholder Services) serves as the Company's
Registrar and U.S. Transfer Agent. (J)
4.16 Copy of Warrant Agreement and Stock Purchase Warrant
dated March 1, 1994 to purchase 500,000 shares of Common
Stock at an exercise price of $1.00 per share, subject to
adjustment, issued to EnCap Investments, L.C. (I)(iv)
4.17 Copy of Warrant Agreement and form of Stock Purchase
Warrant dated March 1, 1994 to purchase an aggregate 600,000
shares of Common Stock at an exercise price of $1.00 per
share, subject to adjustment, issued to principals of San
Jacinto Securities, Inc. in connection with its financial
consulting agreement with the Company. (I)(v)
4.18 Form of Warrant Agreement and Stock Purchase Warrant
dated April 1, 1994, to purchase an aggregate 6,440,000
shares of Common Stock at an exercise price of $1.25 per
share, subject to adjustment, issued to executives of the
Company surrendering all of their rights under their
employment contracts with the Company. (F)(ii)
4.19 Form of Warrant Agreement and Stock Purchase Warrant
dated April 1, 1994, to purchase an aggregate 878,900 shares
of Common Stock at an exercise price of $1.25 per share,
subject to adjustment, issued to executives of the Company
in consideration for salary reductions sustained under their
employment contracts with the Company. (F)(iii)
4.20 Form of Warrant Agreement and Stock Purchase Warrant
dated April 1, 1994, to purchase 200,000 shares of Common
Stock at an exercise price of $1.25 per share, subject to
adjustment, issued to Thomas H. Hudson. (F)(iv)
4.21 Form of Warrant Agreement and Stock Purchase Warrant
dated May 25, 1994, to purchase an aggregate 100,000 shares
of Common Stock at an exercise price of $1.25 per share,
subject to adjustment, issued to the holders of Purchase
Notes B, in consideration of amendment to payment terms of
such Notes. (F)(v)
4.22 Form of Warrant Agreement and Stock Purchase Warrant
dated May 25, 1994, to purchase an aggregate 100,000 shares
of Common Stock at an exercise price of $1.25 per share,
subject to adjustment, issued to the holders of Purchase
Notes B, in consideration for the granting of an option to
further extend payment terms of such Notes. (F)(vi)
4.23 Form of Amendment to Certificate of Designation of
Series B Preferred Stock dated June 30, 1994. (F)(vii)
4.24 Form of Warrant Agreement and Stock Purchase Warrant
dated January 31, 1995, to purchase 100,000 shares of Common
Stock at an exercise price of $.75 per share, subject to
adjustment, issued to Energy Advisors, Inc. (L)(i)
4.25 Copy of Amendment to Certificate of Designation of
Series A Preferred Stock dated October 31, 1995. (N)(ii)
4.26 Copy of Certificate of Designation of Series E,
Cumulative Convertible Preferred Stock dated November 2,
1995. (N)(iii)
4.27 Form of Purchase Agreement between the Company and each
of the Purchasers of Units in the Regulation S Unit Offering
conducted by Rauscher Pierce & Clark with closings as
follows:
December 22, 1995 116 Units
March 8, 1996 34 Units
April 23, 1996 30 Units (O)(i)
4.28 Form of Warrant Agreement between the Company and each
of the Purchasers of Units in the Regulation S Unit Offering
conducted by Rauscher Pierce & Clark, as follows:
Closing Date Warrants Exercise Price
------------ -------- --------------
December 22, 1995 6,960,000 $.50
March 8, 1996 2,040,000 $.35
April 23, 1996 1,800,000 $.35 (O)(ii)
4.29 Form of Warrant Agreement between the Company and
Rauscher Pierce & Clark in consideration for acting as
placement agent in the Regulation S Units Offering, as
follows:
Closing Date Warrants Exercise Price
------------ -------- --------------
December 22, 1995 696,000 $.50
March 8, 1996 204,000 $.35
April 23, 1996 180,000 $.35 (O)(iii)
4.30 Form of Amendment of Certificate of Designation of
Series A Preferred Stock dated April 11, 1996. (O)(iv)
4.31 Stock Purchase Agreement between the Company and Janz
Financial Corp. Ltd. dated August 14, 1996, whereby clients
of Janz Financial Corp. Ltd. purchased 2,800,000 units
comprised of one shares of Common Stock and one warrant to
purchase one share of Common Stock in a Regulation S
transaction. (P)(i)
4.32 Form of a series of Stock Purchase Warrants issued to
Janz Financial Corp. Ltd. dated August 14, 1996, entitling
the holders thereof to purchase up to 3,080,000 shares of
Common Stock at $0.25 per share on or before August 13,
2001. (P)(ii)
4.33 Stock Purchase Agreement between the Company and
Provincial Securities Ltd. dated August 16, 1996, whereby
Provincial purchased 1,500,000 shares of Common Stock in a
Regulation S transaction. (P)(iii)
4.34 Stock Purchase Warrant issued to Terrenex Acquisitions
Corp. dated August 16, 1996, entitling the holder thereof to
purchase up to 3,000,000 shares of Common Stock at $0.25 per
share on or before December 31, 1998. (P)(iv)
4.35 Form of a series of Stock Purchase Warrants dated
November 26, 1996, entitling the following holders thereto
to purchase up to 2,666,666 shares of Common Stock at $0.125
per share on or before December 31, 1999:
Warrant Holder Warrants
Opportunity Associates, L.P. 133,333
Kayne Anderson Non-Traditional
Investments, L.P. 666,666
Arbco Associates, L.P. 800,000
Offense Group Associates, L.P. 333,333
Foremost Insurance Company 266,667
Nobel Insurance Company 133,333
Evanston Insurance Company 133,333
Topa Insurance Company 200,000 (Q)(i)
4.36 Form of a series of Stock Purchase Warrants dated
December 31, 1996 (2,128,000 warrants) and January 8, 1997
(2,040,000 warrants) to purchase up to an aggregate of
4,168,000 shares of Common Stock at $0.125 per share on or
before August 13, 2001. (Q)(ii)
4.37 Form of Stock Purchase Warrants dated February 6, 1997,
entitling the following holders to purchase an aggregate of
1,874,467 shares of Common Stock at $0.25 per share on or
before December 31, 1999:
Warrant Holder Warrants
Donald A. and Joanne R. Westerberg 241,660
T. Jerald Hanchey 1,632,807 (Q)(iii)
4.38 Certificate of Designation of Series F, Cumulative
Convertible Preferred Stock, par value $1.00 per share
(Q)(iv)
4.39 Form of Subscription Agreement for Series F, Cumulative
Convertible Preferred Stock with respect to the following
purchases:
Subscriber Shares
Mitch Leigh 18,448
Abby Leigh 1,731
Arthur Rosenbloom 878 (Q)(v)
4.40 Form of a series of Stock Purchase Warrants dated April
10, 1997, issued as a part of a unit offered with Unsecured
Notes of XCL-China Ltd., exercisable at $0.01 per share on
or before April 9, 2002, entitling the following holders to
purchase up to an aggregate of 10,092,980 shares of Common
Stock:
Warrant Holder Warrants
Kayne Anderson Offshore L.P. 651,160
Offense Group Associates, L.P. 1,627,900
Kayne Anderson Non-Traditional Investments, L.P. 1,627,900
Opportunity Associates, L.P. 1,302,320
Arbco Associates, L.P. 1,627,900
J. Edgar Monroe Foundation 325,580
Estate of J. Edgar Monroe 976,740
Boland Machine & Mfg. Co., Inc. 325,580
Construction Specialists, Inc. d/b/a
Con-Spec, Inc. 1,627,900 (Q)(vi)
4.41 Form of Purchase Agreement dated May 13, 1997, between
the Company and Jefferies & Company, Inc. (the "Initial
Purchaser") with respect to 75,000 Units each consisting of
$1,000 principal amount of 13.5% Senior Secured Notes due
May 1, 2004, Series A and one warrant to purchase 1,280
shares of the Company's Common Stock with an exercise price
of $0.2063 per share ("Note Warrants"). (R)(i)
4.42 Form of Purchase Agreement dated May 13, 1997, between
the Company and Jefferies & Company, Inc. (the "Initial
Purchaser") with respect to 294,118 Units each consisting of
one share of Amended Series A, Cumulative Convertible
Preferred Stock ("Amended Series A Preferred Stock") and one
warrant to purchase 327 shares of the Company's Common Stock
with an exercise price of $0.2063 per share ("Equity
Warrants"). (R)(ii)
4.43 Form of Warrant Agreement and Warrant Certificate dated
May 20, 1997, between the Company and Jefferies & Company,
Inc., as the Initial Purchaser, with respect to the Note
Warrants. (R)(iii)
4.44 Form of Warrant Agreement and Warrant Certificate dated
May 20, 1997, between the Company and Jefferies & Company,
Inc., as the Initial Purchaser, with respect to the Equity
Warrants. (R)(iv)
4.45 Form of Designation of Amended Series A Preferred Stock
dated May 19, 1997. (R)(v)
4.46 Form of Amended Series A Preferred Stock certificate.
(R)(vi)
4.47 Form of Global Unit Certificate for 75,000 Units
consisting of 13.5% Senior Secured Notes due May 1, 2004 and
Warrants to Purchase Shares of Common Stock. (R)(vii)
4.48 Form of Global Unit Certificate for 293,765 Units
consisting of Amended Series A Preferred Stock and Warrants
to Purchase Shares of Common Stock. (R)(viii)
4.49 Form of Warrant Certificate dated May 20, 1997, issued
to Jefferies & Company, Inc., with respect to 12,755
warrants to purchase shares of Common Stock of the Company
at an exercise price of $0.2063 per share. (R)(ix)
4.50 Certificate of Amendment to the Certificate of
Designation of Series A, Cumulative Convertible Preferred
Stock, par value $.01 per share dated November 10, 1997 *
4.51 Certificate of Amendment to the Certificate of
Designation of Series E, Cumulative Convertible Preferred
Stock, par value $.01 per share dated November 10, 1997 *
4.52 Form of Stock Purchase Agreement dated effective as of
October 1, 1997, between the Company and William Wang,
whereby the Company issued 800,000 shares of Common Stock to
Mr. Wang, as partial compensation pursuant to a Consulting
Agreement. *
4.53 Form of Stock Purchase Warrants dated effective as of
February 20, 1997, issued to Mr. Patrick B. Collins with
respect to 200,000 warrants to purchase shares of Common
Stock of the Company at an exercise price of $0.25 per
share, issued as partial compensation pursuant to a
Consulting Agreement. *
10.0 - Material Contracts
10.1 Contract for Petroleum Exploration, Development and
Production on Zhao Dong Block in Bohai Bay Shallow Water Sea
Area of The People's Republic of China between China
National Oil and Gas Exploration and Development Corporation
and XCL - China, Ltd., dated February 10, 1993. (E)(vi)
10.2 $35,000,000 Credit Agreement dated as of January 31,
1994 between the Company and Internationale Nederlanden
(U.S.) Capital Corporation ("INCC"), as Agent. (I)(vi)
10.3 Copy of Subordination Agreement among the Company, INCC
and the holders of the Secured Notes dated. (I)(vii)
10.4 Form of First Amendment of Secured Subordinated Note
dated January 31, 1994. (I)(viii)
10.5 Form of First Amendment of Limited Recourse Secured
Lease Note dated January 31, 1994. (I)(ix)
10.6 Stock Pledge Agreement dated January 31, 1994, among the
Company and INCC. (I)(x)
10.7 Deed of Trust, Mortgage, Assignment, Security Agreement
and Financing Statement from XCL-Texas, Inc. to INCC dated
January 31, 1994. (I)(xi)
10.8 Form of Net Revenue Interest Assignment dated February
23, 1994, between the Company and the purchasers of the
Company's Series D, Cumulative Convertible Preferred Stock.
(I)(xii)
10.9 Modification Agreement for Petroleum Contract on Zhao
Dong Block in Bohai Bay Shallow Water Sea Area of The
People's Republic of China dated March 11, 1994, between the
Company, China National Oil and Gas Exploration and
Development corporation and Apache China Corporation LDC.
(I)(xiii)
10.10 Letter Agreement dated May 25, 1994 between the
Company, L.M. Holdings Associates, L.P. and vendors holding
Purchase Note B with respect to the Lutcher Moore Tract.
(E)(vii)
10.11 Letter Agreement dated June 30, 1994 between the
Company, China Investment & Development Co. Ltd. and China
Investment and Development Corporation. (F)(ix)
10.12 Letter Agreement dated July 10, 1994 between the
Company and holders of the Lease Notes. (F)(x)
10.13 Stock Purchase Agreement between the Company and
Provincial Securities Limited dated May 17, 1994. (F)(xi)
10.14 Consulting agreement between the Company and Sir
Michael Palliser dated April 1, 1994. (K)(i)
10.15 Consulting agreement between the Company and Mr. Arthur
W. Hummel, Jr. dated April 1, 1994. (K)(ii)
10.16 Letter Agreement between the Company and Mr. William
Wang dated June 2, 1992, executed effective February 10,
1993. (K)(iii)
10.17 First Amendment to Credit Agreement between the Company
and Internationale Nederlanden (U.S.) Capital Corporation
dated April 13, 1995. (L)(ii)
10.18 Letter of Intent between the Company and CNPC United
Lube Oil Corporation for a joint venture for the manufacture
and sale of lubricating oil dated January 14, 1995. (L)(iii)
10.19 Purchase and Sale Agreement dated May 10, 1995, between
XCL Land, Ltd., a wholly owned subsidiary of the Company
("Seller") and The Succession of Edward M. Carmouche,
Matilda Gray Stream, Harold H. Stream, III, The Opal Gray
Trust, Matilda Geddings Gray Trust for Harold H. Stream,
III, Matilda Geddings Gray Trust for William Gray Stream,
Matilda Geddings Gray Trust for Sandra Gray Stream, M.G.
Stream Trust for Harold H. Stream, III, M.G. Stream Trust
for William Gray Stream, and M.G. Stream Trust for Sandra
Gray Stream ("Purchasers") whereby the Purchasers will
acquire Seller's fee interest in and to a parcel of
southwestern Louisiana land known as the Phoenix Lake
Tract. (L)(iv)
10.20 Farmout Agreement dated May 10, 1995, between XCL China
Ltd., a wholly owned subsidiary of the Company and Apache
Corporation whereby Apache will acquire an additional
interest in the Zhao Dong Block, Offshore People's Republic
of China. (L)(v)
10.21 Modification Agreement of Non-Negotiable Promissory
Note and Waiver Agreement between Lutcher & Moore
Cypress Lumber Company and L.M. Holding Associates, L.P.
dated June 15, 1995. (M)(i)
10.22 Third Amendment to Credit Agreement between Lutcher-
Moore Development Corp., Lutcher & Moore Cypress Lumber
Company, The First National Bank of Lake Charles, Mary
Elizabeth Mecom, The Estate of John W. Mecom, The Mary
Elizabeth Mecom Irrevocable Trust, Matilda Gray Stream, The
Opal Gray Trust, Harold H. Stream III, The
Succession of Edward M. Carmouche, Virginia Martin
Carmouche and L.M. Holding Associates, L.P. dated June 15,
1995. (M)(ii)
10.23 Second Amendment to Appointment of Agent for
Collection and Agreement to Application of Funds between
Lutcher-Moore Development Corp., Lutcher & Moore Cypress
Lumber Company, L.M. Holding Associates, L.P. and The
First National Bank of Lake Charles, dated June 15,
1995. (M)(iii)
10.24 Contract of Chinese Foreign Joint Venture dated July
17, 1995, between United Lube Oil Corporation and XCL
China Ltd. for the manufacturing and selling of
lubricating oil and related products. (M)(iv)
10.25 Letter of Intent dated July 17, 1995 between CNPC
United Lube Oil Corporation and XCL Ltd. for discussion of
further projects. (M)(v)
10.26 Form of Letter Agreement dated June 26, 1995
between the Company and three of its U.S. holders of
Series A Preferred Stock, whereby the following such
holders have agreed to accept Common Stock in respect of
dividends payable December 31, 1994 and June 30, 1995 in the
amounts set forth:
12/31/94 6/30/95
Holder Dividend Dividend Shares
------ -------- -------- -------
Kayne Anderson
Investment Management $627,788.12 $689,238.87 2,225,024
Cumberland Associates $429,056.51 $445,838.59 1,487,294
T. Rowe Price &
Associates, Inc. $159,975.00 $166,232.25 554,543 (M)(vi)
10.27 Copy of Letter Agreement dated March 31, 1995, between
the Company and China National Administration of Coal
Geology for the exploration and development of coal bed
methane in Liao Ling Tiefa and Shanxi Hanchang Mining
Areas. (N)(iv)
10.28 Copy of Second Amendment to Credit Agreement between
the Company and Internationale Nederlanden (U.S.) Capital
Corporation dated effective as of September 29, 1995.
(N)(v)
10.29 Copy of Fee Agreement dated October 26, 1995, between
the Company and EnCap Investments L.C. for past services and
proposed European equity offering. (N)(vi)
10.30 Copy of Engagement Letter dated November 9, 1995,
between the Company and Rauscher Pierce & Clark for a
proposed Unit offering to be conducted in Europe.
(N)(vii)
10.31 Memo of Understanding dated December 14, 1995, between
XCL Ltd. and China National Administration of Coal Geology.
(O)(v)
10.32 Copy of Purchase and Sale Agreement dated December 28,
1995, between XCL Ltd., XCL-Texas, Inc. and Cody Energy
Corporation, for the sale to Cody Energy of the Mestena
Grande Field located in Texas. (O)(vi)
10.33 Form of Fourth Amendment to Credit Agreement between
Lutcher-Moore Development Corp., Lutcher & Moore Cypress
Lumber Company, The First National Bank of Lake Charles,
Mary Elizabeth Mecom, The Estate of John W. Mecom, The
Mary Elizabeth Mecom Irrevocable Trust, Matilda Gray
Stream, The Opal Gray Trust, Harold H. Stream III, The
Succession of Edward M. Carmouche, Virginia Martin
Carmouche and L.M. Holding Associates, L.P. dated January
16, 1996. (O)(vii)
10.34 Form of Third Amendment to Appointment of Agent for
Collection and Agreement to application of Funds between
Lutcher-Moore Development Corp., Lutcher & Moore Cypress
Lumber Company, L.M. Holding Associates, L.P. and The
First National Bank of Lake Charles, dated January 16,
1996. (O)(viii)
10.35 Copy of Purchase and Sale Agreement dated March 8,
1996, between XCL-Texas, Inc. and Tesoro E&P Company, L.P.
for the sale of the Gonzales Gas Unit located in south
Texas. (O)(ix)
10.36 Copy of Limited Waiver between the Company and
Internationale Nederlanden (U.S.) Capital Corporation
dated April 3, 1996. (O)(x)
10.37 Copy of Purchase and Sale Agreement dated April 22,
1996, between XCL-Texas, Inc. and Dan A. Hughes Company
for the sale of the Lopez Gas Units located in south Texas.
(P)
10.38 Form of Sale of Mineral Servitude dated June 18, 1996,
whereby the Company sold its 75 percent mineral interest in
the Phoenix Lake Tract to the Stream Family Limited Partners
and Virginia Martin Carmouche Gayle. (Q)(ii)
10.39 Form of Fifth Amendment to Credit Agreement between
Lutcher-Moore Development Corp., Lutcher & Moore Cypress
Lumber Company, The First National Bank of Lake Charles,
Mary Elizabeth Mecom, The Estate of John W. Mecom, The
Mary Elizabeth Mecom Irrevocable Trust, Matilda Gray
Stream, The Opal Gray Trust, Harold H. Stream III, The
Succession of Edward M. Carmouche, Virginia Martin
Carmouche and L.M. Holding Associates, L.P. dated August
8, 1996. (Q)(vii)
10.40 Form of Assignment and Sale between XCL Acquisitions,
Inc. and purchasers of an interest in certain promissory
notes held by XCL Acquisitions, Inc. as follows:
Date Purchaser Principal Purchase
Amount Price
November 19, 1996 Opportunity Associates, L.P. $15,627.39 $12,499.98
November 19, 1996 Kayne Anderson Non-Traditional
Investments, L.P. $78,126.36 $62,499.98
November 19, 1996 Offense Group Associates, L.P. $39,063.18 $31,249.99
November 19, 1996 Arbco Associates, L.P. $93,743.14 $75,000.04
November 19, 1996 Nobel Insurance Company $15,627.39 $12,499.98
November 19, 1996 Evanston Insurance Company $15,627.39 $12,499.98
November 19, 1996 Topa Insurance Company $23,435.79 $18,750.01
November 19, 1996 Foremost Insurance Company $31,249.48 $25,000.04
February 10, 1997 Donald A. and Joanne R.
Westerberg $25,000.00 $28,100.00
February 10, 1997 T. Jerald Hanchey $168,915.74 $189,861.29
(Q)(viii)
10.41 Form of Sixth Amendment to Credit Agreement between
Lutcher-Moore Development Corp., Lutcher & Moore Cypress
Lumber Company, The First National Bank of Lake Charles, The
Estate of Mary Elizabeth Mecom, The Estate of John W.
Mecom, The Mary Elizabeth Mecom Irrevocable Trust,
Matilda Gray Stream, The Opal Gray Trust, Harold H.
Stream III, The Succession of Edward M. Carmouche,
Virginia Martin Carmouche and L.M. Holding Associates,
L.P. dated January 28, 1997. (Q)(ix)
10.42 Form of Act of Sale between the Company and The
Schumacher Group of Louisiana, Inc. dated March 31, 1997,
where in the Company sold its office building. (Q)(x)
10.43 Amendment No. 1 to the May 1, 1995 Agreement with
Apache Corp. dated April 3, 1997, effective December 13,
1996. (Q)(xi)
10.44 Form of Guaranty dated April 9, 1997 by XCL-China Ltd.
in favor of ING (U.S.) Capital Corporation executed in
connection with the sale of certain Unsecured Notes issued
by XCL-China Ltd. (Q)(xii)
10.45 Form of First Amendment to Stock Pledge Agreement dated
April 9, 1997, between the Company and ING (U.S.) Capital
Corporation adding XCL Land Ltd. to the Stock Pledge
Agreement dated as of January 31, 1994. (Q)(xiii)
10.46 Form of Agreement dated April 9, 1997, between ING
(U.S.) Capital Corporation, XCL-China and holders of the
Senior Unsecured Notes, subordinating the Guaranty granted
by XCL-China in favor of ING to the Unsecured Notes.
(Q)(xiv)
10.47 Form of Forbearance Agreement dated April 9, 1997
between the Company and ING (U.S.) Capital Corporation.
(Q)(xv)
10.48 Form of a series of Unsecured Notes dated April 10,
1997, between the Company and the following entities:
Note Holder Principal Amount
Kayne Anderson Offshore, L.P. $200,000
Offense Group Associates, L.P. $500,000
Kayne Anderson Non-Traditional
Investments, L.P. $500,000
Opportunity Associates, L.P. $400,000
Arbco Associates, L.P. $500,000
J. Edgar Monroe Foundation $100,000
Estate of J. Edgar Monroe $300,000
Boland Machine & Mfg. Co., Inc. $100,000
Construction Specialists, Inc. d/b/a
Con-Spec, Inc. $500,000 (Q)(xvi)
10.49 Form of Subscription Agreement dated April 10, 1997, by
and between XCL-China, Ltd., the Company and the subscribers
of Units, each unit comprised of $100,000 in Unsecured Notes
and 325,580 warrants. (Q)(xvii)
10.50 Form of Intercompany Subordination Agreement dated
April 10, 1997, between the Company, XCL-Texas, Ltd., XCL
Land Ltd., The Exploration Company of Louisiana, Inc., XCL-
Acquisitions, Inc., XCL-China Coal Methane Ltd., XCL-China
LubeOil Ltd., XCL-China Ltd., and holders of the Unsecured
Notes. (Q)(xviii)
10.51 Form of Indenture dated as of May 20, 1997, between the
Company, as Issuer and Fleet National Bank, as Trustee
("Indenture"). (R)(x)
10.52 Form of 13.5% Senior Secured Note due May 1, 2004,
Series A issued May 20, 1997 to Jefferies & Company, Inc. as
the Initial Purchaser (Exhibit A to the Indenture). (R)(xi)
10.53 Form of Pledge Agreement dated as of May 20, 1997,
between the Company and Fleet National Bank, as Trustee
(Exhibit C to the Indenture). (R)(xii)
10.54 Form of Cash Collateral and Disbursement Agreement
dated as of May 20, 1997, between the Company and Fleet
National Bank, as Trustee and Disbursement Agent, and Herman
J. Schellstede & Associates, Inc., as Representative
(Exhibit F to the Indenture). (R)(xiii)
10.55 Form of Intercreditor Agreement dated as of May 20,
1997, between the Company, ING (U.S.) Capital Corporation,
the holders of the Secured Subordinated Notes due April 5,
2000 and Fleet National Bank, as trustee for the holders of
the 13.5% Senior Secured Notes due May 1, 2004 (Exhibit G to
the Indenture). (R)(xiv)
10.56 Registration Rights Agreement dated as of May 20, 1997,
by and between the Company and Jefferies & Company, Inc.
with respect to the 13.5% Senior Secured Notes due May 1,
2004 and 75,000 Common Stock Purchase Warrants (Exhibit H to
the Indenture). (R)(xv)
10.57 Form of Security Agreement, Pledge and Financing
Statement and Perfection Certificate dated as of May 20,
1997, by the Company in favor of Fleet National Bank, as
Trustee (Exhibit I to the Indenture). (R)(xvi)
10.58 Registration Rights Agreement dated as of May 20, 1997,
by and between the Company and Jefferies & Company, Inc.
with respect to the 9.5% Amended Series A Preferred Stock
and Common Stock Purchase Warrants. (R)(xvii)
10.59 Form of Restated Forbearance Agreement dated effective
as of May 20, 1997, between the Company, XCL-Texas, Inc. and
ING (U.S.) Capital Corporation. (R)(xviii)
10.60 Form of Seventh Amendment to Credit Agreement between
Lutcher-Moore Development Corp., Lutcher & Moore Cypress
Lumber Company, The First National Bank of Lake Charles, The
Estate of Mary Elizabeth Mecom, The Estate of John W.
Mecom, The Mary Elizabeth Mecom Irrevocable Trust,
Matilda Gray Stream, The Opal Gray Trust, Harold H.
Stream III, The Succession of Edward M. Carmouche,
Virginia Martin Carmouche and L.M. Holding Associates,
L.P. dated May 8, 1997. (S)(i)
10.61 Form of Eighth Amendment to Credit Agreement between
Lutcher-Moore Development Corp., Lutcher & Moore Cypress
Lumber Company, The First National Bank of Lake Charles, The
Estate of Mary Elizabeth Mecom, The Estate of John W.
Mecom, The Mary Elizabeth Mecom Irrevocable Trust,
Matilda Gray Stream, The Opal Gray Trust, Harold H.
Stream III, The Succession of Edward M. Carmouche,
Virginia Martin Carmouche and L.M. Holding Associates,
L.P. dated July 29, 1997. (S)(ii)
10.62 Form of Consulting Agreement dated February 20, 1997,
between the Company and Mr. Patrick B. Collins, whereby Mr.
Collins performs certain accounting advisory services. *
10.63 Form of Consulting Agreement dated effective as of June
1, 1997, between the Company and Mr. R. Thomas Fetters, Jr.,
a director of the Company, whereby Mr. Fetters performs
certain geological consulting services. *
10.64 Form of Agreement dated effective October 1, 1997
between the Company and Mr. William Wang, setting forth
compensation for past and future services performed on
behalf of the Company with respect to its projects in China. *
10.65 Form of Services Agreement dated August 1, 1997,
between the Company and Mr. Benjamin B. Blanchet, an officer
of the Company. *
10.66 Form of Promissory Note dated August 1, 1997, in a
principal amount of $100,000, made by Mr. Benjamin B.
Blanchet in favor of the Company. *
11. Not applicable.
15. Not applicable.
18. Not applicable.
19. Not applicable.
22. Not applicable.
23 Not applicable.
24. Not applicable.
27. Financial Data Schedule *
99 Glossary of Terms *
- ------------
* Filed herewith.
(A) Incorporated by reference to the Registration Statement
on Form 8-B filed on July 28, 1988, where it appears as: (i)
through (iii) as Exhibits 3(a) through 3(c), respectively;
and (iv) as Exhibit 4.1.
(B) Incorporated by reference to a Quarterly Report on Form
10-Q filed on August 14, 1990, where it appears as: (i)
Exhibit 3 and (ii) Exhibit 4.4.
(C) Incorporated by reference to an Annual Report on Form 10-
K filed on March 30, 1992, where it appears as Exhibit
(3)(g).
(D) Incorporated by reference to a Quarterly Report on Form
10-Q filed August 14, 1992, where it appears as: (i)
Exhibit 4.25 and (ii) Exhibit 4.28.
(E) Incorporated by reference to a Registration Statement on
Form S-3 (File No. 33-68552) where it appears as: (i)
Exhibit 4.27; (ii) Exhibit 4.14; (iii) Exhibit 4.16; (iv)
Exhibit 4.17; (v) Exhibit 4.19; (vi) Exhibit 10.1; and (vii)
Exhibit 10.6.
(F) Incorporated by reference to Post-Effective Amendment No.
2 to Registration Statement on Form S-3 (File No. 33-68552)
where it appears as: (i) through (iii) Exhibits 4.28 through
4.30, respectively; (iv) through (viii) Exhibits 4.34
through 4.38, respectively; and (ix) through (xi) Exhibits
10.8 through 10.10, respectively.
(G) Incorporated by reference to a Current Report on Form 8-K
filed on August 13, 1990, where it appears as Exhibit 4.
(H) Incorporated by reference to Quarterly Report on Form 10Q
filed May 15, 1991, where it appears as: (i) Exhibit 4.1;
(ii) Exhibit 4.2; and (iii) Exhibit 4.5.
(I) Incorporated by reference to Amendment No. 1 to Annual
Report on Form 10-K filed April 15, 1994, where it appears
as: (i) Exhibit 4.35; (ii) Exhibit 4.31; (iii) Exhibit
4.32; (iv) Exhibit 4.36; (v) Exhibit 4.37; (vi) through
(xii) Exhibit 10.41 through Exhibit 10.47, respectively; and
(xii) Exhibit 10.49.
(J) Incorporated by reference to an Annual Report on Form 10K
for the fiscal year ended December 31, 1990, filed April 1,
1991, where it appears as Exhibit 10.27.
(K) Incorporated by reference to Amendment No. 1 to an Annual
Report on Form 10-K/A No. 1 for the fiscal year ended
December 31, 1994, filed April 17, 1995, where it appears
as: (i) through (iii) Exhibits 10.22 through 10.24,
respectively.
(L) Incorporated by reference to Quarterly Report on Form
10-Q for the quarter ended March 31, 1995, filed May
15, 1995, where it appears as: (i) Exhibit 4.28; and (ii)
through (v) Exhibits 10.25 through 10.28, respectively.
(M) Incorporated by reference to Quarterly Report on Form
10-Q for the quarter ended June 30, 1995, filed August 14,
1995, where it appears as: (i) through (vi) Exhibits 10.29
through 10.34, respectively.
(N) Incorporated by reference to Quarterly Report on Form
10-Q for the quarter ended September 30, 1995, filed
November 13, 1995, where it appears as: (i) Exhibit
3.8; (ii) and (iii) Exhibits 4.29 and 4.30, respectively;
and (iv) through (vii) Exhibits 10.35 through 10.38,
respectively.
(O) Incorporated by reference to Annual Report on Form 10-K
for the year ended December 31, 1995, filed April 15, 1996,
where it appears as: (i) through (iv) Exhibits 4.28
through 4.31, respectively; and (v) through (x)
Exhibits 10.31 through 10.36, respectively.
(P) Incorporated by reference to Quarterly Report on Form 10-
Q for the quarter ended March 31, 1996, filed May 15, 1996,
where it appears as Exhibit 10.37.
(Q) Incorporated by reference to Quarterly Report on Form 10-
Q for the quarter ended June 30, 1996, filed August 14,
1996, where it appears as (i) Exhibit 3.9 and (ii) Exhibit
10.38.
(P) Incorporated by reference to Quarterly Report on Form 10-
Q for the quarter ended September 30, 1996, filed November
14, 1996, where it appears as (i) through (iv) Exhibits 4.31
through 4.34.
(Q) Incorporated by reference to Annual Report on Form 10-K
for the year ended December 31, 1996, filed April 15, 1997,
where it appears as (i) through (vi) Exhibits 4.35 through
4.40 and (vii) through (xviii) Exhibits 10.39 through 10.50.
(R) Incorporated by reference to Current Report on Form 8-K
dated May 20, 1997, filed June 3, 1997, where it appears as
(i) through (ix) Exhibits 4.1 through 4.9 and (x) through
(xviii) Exhibits 10.51 through 10.59.
(S) Incorporated by reference to Quarterly Report on Form 10-
Q for the quarter ended June 30, 1997, filed August 14,
1997, where it appears as (i) and (ii) Exhibits 10.60 and
10.61.
<PAGE>
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STTATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND
CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "XCL LTD.",
FILED IN THIS OFFICE ON THE TENTH DAY OF NOVEMBER, A.D.
1997, AT 12 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO
THE NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
[GREAT SEAL OF THE STATE OF DELAWARE]
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
[SEAL OF SECRETARY OF STATE]
2147839 8100 AUTHENTICATION: 8749044
971381726 DATE: 11-10-97
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF DESIGNATION
OF
XCL LTD.
(Pursuant to Section 242 of the General Corporation Law)
____________________________________________
THE UNDERSIGNED, Marsden W. Miller, Jr. and Lisha C. Falk,
being the duly elected Chairman of the Board and Chief
Executive Officer, and Secretary, respectively, of XCL Ltd.,
a Delaware corporation (the "Company"), for the purposes of
amending the Certificate of Designation of the Company's
Series A, Cumulative Convertible Preferred Stock, par value
$1.00 per share (the "Series A Preferred Stock"), as
originally filed on July 6, 1990 with the Secretary of
State of the State of Delaware pursuant to Section 151 of
the General Corporation Law of the State of Delaware
("DGCL"), as amended on December 22, 1992, October 31, 1995,
and April 12, 1996 (the "Certificate of Designation"),
pursuant to Section 242 of the DGCL, DO HEREBY CERTIFY THAT:
FIRST: On June 5, 1997, the Board of Directors of
said Company duly adopted resolutions proposing the
amendment of the terms of the Series A Preferred Stock to
recapitalize and convert such Stock into shares of the
Company's authorized shares of Amended Series A, Cumulative
Convertible Preferred Stock, par value $1.00 per share
("Amended Series A Preferred Stock"), the terms of which are
set forth in that certain Certificate of Designation of the
Amended Series A Preferred Stock, filed on May 19, 1997 with
the Secretary of State of the State of Delaware pursuant to
Section 151 of the DGCL ("Amended Series A Certificate of
Designation"), declaring such amendment and the
corresponding recapitalization and conversion to be in the
best interests of the Company and its shareholders and
authorizing the solicitation of written consents to such
amendment, recapitalization and conversion (collectively,
the "Amendment") from the holders of the Series A Preferred
Stock. The proposed Amendment as summarized in said
resolutions and submitted in summary form to such
stockholders for approval is as follows:
1. Paragraph 1 of the Certification of
Designation is hereby redesignated as Section 1 and
amended to read in its entirety as follows:
"The shares of this series of Preferred Stock
shall be redesignated as "Amended Series A, Cumulative
Convertible Preferred Stock, par value of $1.00 per
share" ("Convertible Preferred Stock" or "Amended
Series A Preferred Stock"). The existing 850,000
authorized shares of Series A, Cumulative Convertible
Preferred Stock, par value $1.00 per share, are hereby
converted into 650,000 shares of Amended Series A
Preferred Stock which shares shall be added to the
existing 1,370,000 previously authorized shares of
Amended Series A, Cumulative Preferred Stock, par value
$1.00 per share, increasing the total number of
authorized shares of such Preferred Stock to 2,020,000
shares. 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. The liquidation value of the Convertible
Preferred Stock shall be $85.00 per share."
2. The remaining terms and provisions of the
Series A Preferred Stock and the corresponding
provisions of the Certificate of Designation are
hereby amended to read in their entirety as set forth
in Exhibit "A" attached hereto and the Amended Series A
Certificate of Designation.
3. The 641,359 issued and outstanding shares
of Series A Preferred Stock are hereby recapitalized
and converted into an aggregate of 611,555 shares of
Amended Series A Preferred Stock on the basis of
0.95353 share of Amended Series A Preferred Stock for
each issued and outstanding share of Series A
Preferred Stock.
SECOND: In lieu of a meeting and vote of the
holders of the Series A Preferred Stock, the holders of
record on the record date, October 10, 1997, of an aggregate
of 569,838 shares of the Series A Preferred Stock, and
exceeding the two-thirds vote required to approve the
Amendment, representing approximately 88.85% of the issued
and outstanding shares of Series A Preferred Stock, gave
their written consent to said Amendment in accordance with
the provisions of Section 228 of the DGCL and the
provisions of Paragraph 9(iii) of the Certificate of
Designation, which written consents have been filed with the
Company as required under said Section 228.
THIRD: Written notice of the approval of the
Amendment has been given to holders of the Series A
Preferred Stock who have not so consented in writing.
FOURTH: Upon filing this Certificate of Amendment
with the Office of the Secretary of State of the State of
Delaware, the authorized but unissued shares of Series A
Preferred Stock authorized pursuant to the Certificate of
Designation and all amendments thereto shall be canceled and
returned to the status of undesignated authorized but
unissued shares of Preferred Stock.
FIFTH: The foregoing Amendment shall become
effective immediately on the date of the filing of this
Certificate of Amendment with the Office of the Secretary of
State of the State of Delaware.
IN WITNESS WHEREOF, the said Corporation has caused
this Certificate of Amendment to be signed and attested by
its officers thereunto duly authorized and its corporate
seal affixed this 10th day of November, 1997.
/s/ Marsden W. Miller, Jr.
__________________________________
Marsden W. Miller, Jr.
Chairman of the Board and
Chief Executive Officer
ATTEST:
/s/ Lisha C. Falk
_____________________
Lisha C. Falk
Secretary
STATE OF LOUISIANA
PARISH OF LAFAYETTE
BE IT REMEMBERED that on this 10th day of November
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, and that he, as such Chairman of the Board and
Chief Executive Officer, being authorized so to do, executed
the foregoing Amendment to the 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.
/s/ Benjamin B. Blanchet
________________________
Notary Public
My Commission Expires:
With Life
_________________________
<PAGE>
EXHIBIT A
XCL LTD.
DESIGNATION OF AMENDED SERIES A, CUMULATIVE CONVERTIBLE
PREFERRED STOCK
The Corporation shall have the authority to issue up to
2,020,000 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 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
Semi-Annual 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 semi-annual 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 13d-5 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 14D-
1 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 non-assessable. 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.
<PAGE>
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STTATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND
CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "XCL LTD.",
FILED IN THIS OFFICE ON THE TENTH DAY OF NOVEMBER, A.D.
1997, AT 12:01 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO
THE NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
[GREAT SEAL OF THE STATE OF DELAWARE]
/s/ Edward J. Freel
----------------------------------
Edward J. Freel, Secretary of State
[SEAL OF SECRETARY OF STATE]
2147839 8100 AUTHENTICATION: 8750231
971381727 DATE: 11-12-97
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF DESIGNATION
OF
XCL LTD.
(Pursuant to Section 242 of the General Corporation Law)
____________________________________________
THE UNDERSIGNED, Marsden W. Miller, Jr. and Lisha C. Falk,
being the duly elected Chairman of the Board and Chief
Executive Officer, and Secretary, respectively, of XCL Ltd.,
a Delaware corporation (the "Company"), for the purposes of
amending the Certificate of Designation of the Company's
Series E, Cumulative Convertible Preferred Stock, par value
$1.00 per share (the "Series E Preferred Stock"), as
originally filed on November 2, 1995 with the Secretary of
State of the State of Delaware pursuant to Section 151 of
the General Corporation Law of the State of Delaware
("DGCL"), (the "Certificate of Designation"), pursuant to
Section 242 of the DGCL, DO HEREBY CERTIFY THAT:
FIRST: On June 5, 1997, the Board of Directors of
said Company duly adopted resolutions proposing the
amendment of the terms of the Series E Preferred Stock to
recapitalize and convert such Stock into shares of the
Company's authorized shares of Amended Series A, Cumulative
Convertible Preferred Stock, par value $1.00 per share
("Amended Series A Preferred Stock"), the terms of which are
set forth in that certain Certificate of Designation of the
Amended Series A Preferred Stock, filed on May 19, 1997 with
the Secretary of State of the State of Delaware pursuant to
Section 151 of the DGCL ("Amended Series A Certificate of
Designation"), declaring such amendment and the
corresponding recapitalization and conversion to be in the
best interests of the Company and its shareholders and
authorizing the solicitation of written consents to such
amendment, recapitalization and conversion (collectively,
the "Amendment") from the holders of the Series E Preferred
Stock. The proposed Amendment as summarized in said
resolutions and submitted in summary form to such
stockholders for approval is as follows:
1. Paragraph 1 of the Certification of
Designation is hereby redesignated as Section 1 and
amended to read in its entirety as follows:
"The shares of this series of Preferred Stock
shall be redesignated as "Amended Series A, Cumulative
Convertible Preferred Stock, par value of $1.00 per
share" ("Convertible Preferred Stock" or "Amended
Series A Preferred Stock"). The existing 80,000
authorized shares of Series E, Cumulative Convertible
Preferred Stock, par value $1.00 per share, are hereby
converted into 65,000 authorized shares of Amended
Series A Preferred Stock which shares shall be added to
the existing 2,020,000 previously authorized shares of
Amended Series A, Cumulative Preferred Stock, par value
$1.00 per share, increasing the total number of
authorized shares of such Preferred Stock to
2,085,000 shares. 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. The
liquidation value of the Convertible Preferred Stock
shall be $85.00 per share."
2. The remaining terms and provisions of the
Series E Preferred Stock and the corresponding
provisions of the Certificate of Designation are
hereby amended to read in their entirety as set forth
in Exhibit "A" attached hereto and the Amended Series A
Certificate of Designation.
3. The 51,915 issued and outstanding shares of
Series E Preferred Stock are hereby recapitalized and
converted into an aggregate of 61,076 shares of Amended
Series A Preferred Stock on the basis of 1.17647 shares
of Amended Series A Preferred Stock for each issued and
outstanding share of Series E Preferred Stock.
SECOND: In lieu of a meeting and vote of the
holders of the Series E Preferred Stock, the holders of
record on the record date, October 10, 1997, of an aggregate
of 34,989 shares of the Series E Preferred Stock, and
exceeding the two-thirds vote required to approve the
Amendment, representing approximately 67.4% of the issued
and outstanding shares of Series E Preferred Stock, gave
their written consent to said Amendment in accordance with
the provisions of Section 228 of the DGCL and the
provisions of Paragraph 8(a) of the Certificate of
Designation, which written consents have been filed with the
Company as required under said Section 228.
THIRD: Written notice of the approval of the
Amendment has been given to holders of the Series E
Preferred Stock who have not so consented in writing.
FOURTH: Upon filing this Certificate of Amendment
with the Office of the Secretary of State of the State of
Delaware, the authorized but unissued shares of Series E
Preferred Stock authorized pursuant to the Certificate of
Designation and all amendments thereto shall be canceled and
returned to the status of undesignated authorized but
unissued shares of Preferred Stock
FIFTH: The foregoing Amendment shall become
effective immediately on the date of the filing of this
Certificate of Amendment with the Office of the Secretary of
State of the State of Delaware.
IN WITNESS WHEREOF, the said Corporation has caused
this Certificate of Amendment to be signed and attested by
its officers thereunto duly authorized and its corporate
seal affixed this 10th day of November, 1997.
/s/ Marsden W. Miller, Jr.
__________________________________
Marsden W. Miller, Jr.
Chairman of the Board and
Chief Executive Officer
ATTEST:
/s/ Lisha C. Falk
_____________________
Lisha C. Falk
Secretary
STATE OF LOUISIANA
PARISH OF LAFAYETTE
BE IT REMEMBERED that on this 10th day of November
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 Amendment to the 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.
/s/ Benjamin B. Blanchet
________________________
Notary Public
My Commission Expires:
With Life
_________________________
EXHIBIT A
XCL LTD.
DESIGNATION OF AMENDED SERIES A, CUMULATIVE CONVERTIBLE
PREFERRED STOCK
The Corporation shall have the authority to issue up to
2,085,000 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 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
Semi-Annual 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 semi-annual 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 13d-5 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 14D-
1 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 non-assessable. 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.
THE SECURITIES BEING OFFERED AND SOLD HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, OR ANY OTHER DOMESTIC OR FOREIGN SECURITIES LAWS AND
THEIR OFFER AND SALE ARE SUBJECT TO CERTAIN RESTRICTIONS
HEREINAFTER SET FORTH.
PURCHASE AGREEMENT
Purchase of Common Stock
THIS PURCHASE AGREEMENT is made as of the 1st day of
October, 1997, by and between William Wang (the "Purchaser") and
XCL LTD., a Delaware corporation, with its principal offices at
110 Rue Jean Lafitte, Lafayette, Louisiana, United States of
America (the "Company").
WHEREAS, the Company has duly authorized the issuance, sale
and delivery of 800,000 shares (the "Shares") of its common
stock, par value $.01 per share (the "Common Stock"), in
compromise of certain claims and as compensation for services
performed outside of North America, in accordance with the terms
of a compensation agreement dated effective October 1, 1997 (the
"Compensation Agreement");
WHEREAS, the Shares are being offered and sold by the
Company to Purchaser in a transaction intended to qualify for the
exemption from the registration requirements of the United States
Securities Act of 1933, as amended (the "Securities Act")
afforded by Regulation S promulgated under the Securities Act
("Regulation S");
WHEREAS, the Company has made available to Purchaser, copies
of its recent filings with the Securities and Exchange
Commission, including the Company's most recent Annual Report on
Form 10-K for the fiscal year ended December 31, 1996, as
amended, and Forms 10-Q and 8-K filed thereafter (the "SEC
Filings"); and
WHEREAS, the Company wishes to sell to Purchaser, and
Purchaser wishes to buy from the Company, the Shares for delivery
in accordance with this Purchase Agreement and the Compensation
Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained in this Purchase Agreement, the
undersigned agree as follows:
Section 1. Agreement to Sell and Purchase the Common
Stock.
(a) On the basis of the representations, warranties and
agreements contained in this Purchase Agreement but subject to
the terms and conditions set forth in this Purchase Agreement and
the Compensation Agreement the Company agrees to issue and sell
to Purchaser, and Purchaser agrees to buy from the Company,
effective October 1, 1997, or on such other date as shall be
mutually agreed upon by the Company and Purchaser (the "Closing
Date"), 800,000 Shares. The Company has agreed to issue the
Shares to the Purchaser as compensation for services under the
Compensation Agreement.
(b) The completion of the sale and purchase of the
Common Stock (the "Closing") shall take place at the offices of
the Company on the Closing Date. At the Closing, the Company
shall deliver to the Purchaser, or his designees, one or more
stock certificates representing the Shares each registered in the
name of Purchaser or its nominee, against payment of the Purchase
Price therefor to the Company as set forth in Section 1(a) of
this Purchase Agreement.
(c) In the event of any change in the issued and
outstanding Common Stock of the Company by reason of stock
dividends, split-up or combination of the Common Stock,
reclassification of the capital stock of the Company or
recapitalization of the Company which occurs on or before the
Closing, the number of shares of Common Stock to be delivered to
Purchaser at the Closing and the Purchase Price therefor shall be
appropriately adjusted. In addition, in the event that any cash
dividends on the Common Stock of the Company shall be payable to
shareholders of record as of a record date that falls on any date
within the period on and from the time of execution of this
Purchase Agreement to and including the Closing Date, the price
per share of Common Stock payable by Purchaser shall be reduced
by the amount of such cash dividend per share of Common Stock.
(d) The obligation of the Purchaser to purchase the
Shares at the Closing shall be conditional upon the delivery by
the Company, on behalf of all the Purchasers, to the extent that
the Closing Date shall be a date other than the date of this
Purchase Agreement, a certificate of an officer of the Company as
to the correctness in all material respects of the
representations and warranties of the Company contained in
Section 2 of this Purchase Agreement as of the Closing Date, in
the form attached hereto as Schedule 2 dated the Closing Date.
(e) The obligation of the Company to issue and sell the
Shares at the Closing shall be conditional upon:
(i) The receipt and acceptance by the Company of
this Purchase Agreement for all of the Shares which shall be
evidenced by execution of this Purchase Agreement by the
President or any Vice President or any Director of the
Company. Purchaser understands that this Purchase Agreement
is irrevocable and the Company reserves the right in its
complete discretion to reject all or any portion of the
subscription for the Shares represented by this Purchase
Agreement, without regard to the order in which it was
received. All or any portion of the Purchase Price
represented by a rejected subscription for all or any
portion of the Shares subscribed for hereby shall be
promptly returned to the Purchaser without interest.
(ii) Delivery into the closing depository
identified in Section 1(a) hereby by Purchaser of
immediately available funds in United States dollars, in the
full amount of the Purchase Price, as payment in full for
the purchase of the Shares.
(iii) To the extent that the Closing Date shall be
a date other than the date of this Purchase Agreement the
receipt by the Company of a certificate of the Purchaser as
to the correctness in all material respects of the
representations and warranties of the Purchase contained in
Section 4 of this Purchase Agreement as of the closing Date,
in the form attached hereto as Schedule 3, dated the Closing
Date.
Section 2. Representations and Warranties of the
Company. The Company hereby represents and warrants to Purchaser
as follows:
2.1 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite
corporate power and authority to own and lease its properties and
to conduct its business as presently conducted and as described
in the SEC Filings. The Company is duly qualified to do business
as a foreign corporation and is in good standing in every
jurisdiction where such qualification is required by controlling
law and where the failure so to qualify would have a material
adverse effect on the Company and its subsidiaries, taken as a
whole.
2.2. Authorized Capital Stock. The authorized and
outstanding capital stock of the Company is as set out in the SEC
Filings, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are
fully paid and nonassessable. All of the outstanding shares of
capital stock of the Principal Subsidiaries have been duly and
validly authorized and issued and are fully paid and
nonassessable.
2.3 Due Execution, Delivery and Performance of the
Purchase Agreement. The execution, delivery and performance of
the Purchase Agreement by the Company (a) have been duly
authorized by all requisite corporate action of the Company, and
(b) will not violate (i) the Certificate of Incorporation or By-
laws of the Company or (ii) any law applicable to the Company or
any of its subsidiaries or any rule, regulation or order of any
court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or (iii) any provision of any
material indenture, mortgage, agreement, contract or other
instrument to which the Company is subject. Upon execution and
delivery by the Company, the Purchase Agreement will constitute
the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance its respective
terms, except as the enforceability thereof may be limited by an
applicable bankruptcy, insolvency, reorganization or other
similar laws, relating to or affecting the enforcement of
creditors rights generally and by general equitable principles,
regardless of whether such enforceability is considered in a
proceeding in equity or at law.
2.4 Issuance and Delivery of the Shares. the offer,
issuance, sale and delivery of the Shares in accordance with the
Purchase Agreement, have been duly authorized by all requisite
corporate action of the Company. The Shares as and when issued
and sold to the Purchaser pursuant to this Purchase Agreement,
and upon receipt by the Company of the Purchase Price therefor,
will be duly and validly issued and outstanding, fully paid and
nonassessable, will not be subject to any pre-emptive or similar
right, and Purchaser will receive good and valid record title to
the Shares, free and clear of any claim, lien, security interest,
mortgage, pledge, charge or other encumbrance of any nature
whatsoever, except such as may have been created by Purchaser.
2.5 Compliance with Regulation. The Company is a
"reporting issuer" (as defined in Regulation S). The Company,
its affiliates and any person acting on behalf of, or as agent
of, any of the foregoing, whether as principal or agent, (a) has
offered and sold the Shares only in an "offshore transaction" (as
defined in Regulation S), (b) has not engaged with respect to the
Shares in any "directed selling efforts" (as defined in
Regulation S) in respect of the Shares, (d) has not made any
offers or sales of any of the Shares or any interest therein in
the United States or to, or for the account of, any "U.S. person"
(as defined in Regulation S), and (e) has not made any sales of
any of the Shares or any interest therein to any person other
than the Purchasers; provided, however, that insofar as this
representation and warranty involves any broker-dealer
participating in the offering, any affiliate of such broker-
dealer or any officer, director, employee or agent of such broker-
dealer, to the extent such broker-dealer or other person is
acting as placement agent for the offering of the Shares, such
representation and warranty is made by the Company solely on the
basis of and in reliance upon the representations and warranties
of such broker-dealer or other person.
2.6 Representations and Warranties at the Closing. Each
of the representations and warranties contained in Section 2 is
true and correct in all material respects as of the date of this
Purchase Agreement. The Company will make the same
representations and warranties at the Closing and such
representations and warranties when so made will be true and
correct in all material respects as of the Closing Date.
Section 3. Certain Agreements of the Company. The
Company hereby covenants and agrees with Purchaser as follows:
(a) Prior to or contemporaneously with the delivery of
execution copies of this Purchase Agreement, the Company will
make available to Purchaser the SEC Filings.
(b) The Company will make available to Purchaser prior
to the Closing Date the opportunity to ask questions and receive
answers concerning the terms and conditions of the purchase of
the Shares and the business and financial conditions of the
Company and to obtain any additional information that the Company
may possess or can acquire without unreasonable effort or expense
that is necessary to verify the accuracy of the information
furnished in accordance herewith.
(c) At any time after the expiration of the Restricted
Period (as hereinafter defined) the Company will deliver to
Purchaser or its nominee who is acting as custodian therefor or
any subsequent holder who has received a stock certificate
representing the Shares which bears the legend described in
Section 4.4 of this Purchase Agreement (the "Legended Stock
Certificate") , without cost to such Purchaser or subsequent
holder, upon written request therefor, a substitute stock
certificate without the restrictive legend described in Section
4.4 of this Purchase Agreement. The Company shall be required to
deliver such substitute stock certificate only upon surrender of
the Legended Stock Certificate which, in the case of any holder
subsequent to Purchaser, must be duly endorsed for transfer or
surrender and accompanied by certificates signed by the Purchaser
and such holder as provided in Section 4.3(c) hereof.
Section 4. Representations, Warranties and Covenants of
Purchaser. Purchaser hereby represents, warrants and covenants
to the Company as follows:
4.1 Compliance with United States Securities Laws.
Purchaser understands and acknowledges that (a) the Shares have
not been and will not be registered under the Securities Act, and
may not be offered or sold in the United States or to, or for the
account or benefit of, any "U.S. person" (as defined in
Regulation S, which definition is set out in Schedule 4 hereto),
unless such Shares are registered under the Securities Act and
any applicable state securities or blue sky laws or such offer or
sale is made pursuant to exemptions from the registration
requirements of such laws, (b) the Shares are being offered and
sold pursuant to the terms of Regulation S under the Securities
Act, which permits securities to be sold to non-"U.S. persons" in
"offshore transactions" (as defined in Regulation S), subject to
certain terms and conditions, (c) the Company is relying upon the
truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser
set forth herein in order to determine the availability of the
exemptions from registration under the Securities Act relied upon
by the Company and the suitability of the Purchaser to acquire
the Shares; (d) the Shares have been offered and sold to the
Purchaser in an "offshore transaction" and Purchaser has not
engaged in any "directed selling efforts", as each such term is
defined in Regulation S, and (e) in the view of the Commission,
the statutory basis for the exemption from registration claimed
for this offering would not be present if the offering of the
Shares, although in technical compliance with Regulation S, is
part of a plan or scheme to evade the registration provisions of
the Securities Act and, accordingly, the Purchaser is making the
representations and warranties in this Section 4 to evidence its
compliance with the applicable requirements of the Securities Act
and that its participation in such offering is not a part of any
such plan or scheme.
4.2 Status of Purchaser.
(a) Purchaser is purchasing the Shares for its own
account or for persons or accounts as to which it exercises
investment discretion. Neither Purchaser nor such person or
account is a "U.S. person" (as defined in Regulation S) and
neither Purchaser nor such other person or account has any
present intention to sell any of the Shares in the United States
or to a U.S. person or for the account or benefit of a U.S.
person either now or promptly after expiration of the Restricted
Period.
(b) Purchaser (and any person or account on whose behalf
Purchaser is purchasing) is knowledgeable, sophisticated and
experienced in making, and is qualified to make decisions with
respect to investments in restricted securities (such as this
Purchase Agreement and the Shares) and has requested, received,
reviewed and considered all information it deems relevant in
making a decision to execute this Purchase Agreement and purchase
the Shares. Purchaser acknowledges that it is capable of
evaluating the merits and risks of an investment in the Shares
and to make an informed decision relating thereto. In evaluating
its investment, Purchaser has consulted its own investment and/or
legal or tax advisors.
(c) Purchaser acknowledges that the Company had made
available to Purchaser the opportunity to ask questions and
receive answers concerning the terms and conditions of the
offering of the Shares and the business and financial condition
of the Company and to obtain any additional information that the
Company may possess or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy of the
information furnished in accordance herewith. Purchaser and its
advisors, if any, have received complete and satisfactory answers
to all such inquiries. Purchase acknowledges that in making the
decision to purchase the Shares, it has relied solely upon the
representations and warranties of the Company contained herein
and the information contained in the SEC Filings, and other
publicly available documents, copies of which have been furnished
or made available to Purchaser, and upon the independent
investigations made by it and its representatives, if any.
(d) Purchaser has agreed to purchase the Shares for
investment purposes and not with a view to a distribution.
Purchaser is not an underwriter of, or dealer in, the Shares and
is not participating, pursuant to a contractual arrangement, in
the distribution of the Shares. To the extent that the Shares
are registered in the name of Purchaser's nominee, Purchaser
confirms that such nominee is acting merely as custodian for the
Purchaser of such securities.
(e) Purchaser understands that no U.S. Federal or state
or any foreign governmental authority or agency has made or will
make any finding or determination relating to the fairness for
public investment in the Shares, or has passed upon or made, or
will pass upon or make, any recommendation or endorsement of the
Shares.
4.3 Restrictions on Re-Sale.
(a) For a period of forty (40 days) following the
Closing Date ( the "Restricted Period"), Purchaser shall not
engage in any activity for the purpose of, or which may
reasonable be expected to have the effect of, conditioning the
market in the United States for the Shares, or directly or
indirectly offer, sell, transfer, pledge or otherwise dispose of
the Shares, or any interest therein, in the United States or to,
or for the account or benefit of, a "U.S. person" (as defined in
Regulation S). Purchaser hereby also agrees that it shall not,
either directly or indirectly, sell short the Company's shares of
Common Stock on the American Stock Exchange or on any other
exchange or in the over-the-counter market or otherwise in the
United States during the Restricted Period and it has not made
any such sale in anticipation of participating in the offering
and purchasing of the Shares.
(b) Purchaser understands that the Shares or any
interest therein are only transferable on the books and records
of the Transfer Agents and Registrar of the Common Stock of the
Company. Purchaser further understands that the Transfer Agents
and Registrar will not register any transfer of the Shares or any
interest therein which the Company in good faith believes
violates the restrictions set forth herein.
(c) Unless registered under the Securities Act, any
proposed offer, sale, transfer, pledge or other disposition
during the Restricted Period of any of the Shares or any interest
therein, shall be subject to the condition that Purchasers must
deliver to the Company (i) a written certification that neither
record nor beneficial ownership of the Shares or any interest
therein, has been offered or sold in the United States or to, or
for the account or benefit of, any "U.S. person" (as defined in
Regulation S), (ii) a written certification of the proposed
transferee that such transferee (or any account for which such
transferee is acquiring such Shares or any interest therein) is
not a "U.S. person" (as defined in Regulation S), that such
transferee is acquiring such Shares or such interest therein, for
such transferee's own account (or an account over which it has
investment discretion) and for investment and not with a view to
a distribution, and that such transferee is knowledgeable of and
agrees to be bound by the restrictions on re-sale set forth in
this section and Regulation S during the Restricted Period, and
(iii) if requested by the Company, a written opinion of United
States counsel, in form and substance satisfactory to the
Company, the effect that the offer, sale, transfer, pledge or
other disposition of the Shares, or any interest therein, are
exempt from registration under the Securities Act and any
applicable state securities or blue sky laws.
(d) Purchaser will not, directly or indirectly,
voluntarily offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offerings to buy, purchase or otherwise acquire
or take a pledge of ) its rights under this Purchase Agreement,
the Shares, any interest therein, or otherwise than in compliance
with the Securities Act, any applicable state securities or blue
sky laws and any applicable securities laws or jurisdictions
outside the United States, and the rules and regulations
promulgated thereunder.
4.4 Legend. Purchaser agrees that, unless and until
removed as contemplated by Section 3(c) hereof, the stock
certificates representing the Shares shall bear the legend set
forth below:
"The shares of Common Stock represented by this
certificate have not been registered under the United
States Securities Act of 1933, as amended (the "Act"),
or any other securities laws, and have been issued in
reliance upon the exemption from registration under the
Act contained in Regulation S under the Act. Prior to
the later of _______________, 199__, no offer, sale,
transfer, pledge or other disposition (collectively, a
"Disposal") of the shares of Common Stock represented
by this certificate may be made: (a) in the United
States or to, or for the account or benefit of, any
"U.S. person" (as defined in Regulation S) unless (i)
registered under the Act and any applicable state
securities or blue sky laws or (ii) exemptions from the
registration requirements of such laws are available
and XCL Ltd. (the "Company") receives a written opinion
of United States legal counsel in form and substance
satisfactory to it to the effect that such Disposal is
exempt from such registration requirements; and (b)
outside of the United States or to, of for the account
or benefit of a person who is not a "U.S. person" (as
defined in Regulation S) unless (i) the beneficial
owner of such shares and the proposed transferee submit
certain certifications to the Company and (ii) the
Company receives a written opinion of United States
legal counsel in form and substance satisfactory to it
to the effect that such Disposal is exempt from the
registration requirements of the Act."
4.5 Re-Offers by Purchaser in the United States. If
Purchaser publicly re-offers all or any part of the Shares in the
United States, Purchaser (and/or certain persons who participate
in any such re-offer) may be deemed, under certain circumstances,
to be an "underwriter" as defined in section 2(11) of the
Securities Act. If Purchaser plans to make any such re-offer, it
will consult with United States legal counsel prior to any such
re-offer in order to determine its liabilities and obligations
under this Purchase Agreement, the Securities Act and any
applicable state securities or blue sky laws.
4.6 Due Execution, Delivery and Performance of the
Purchase Agreement and Other Obligations. Purchaser has full
right, power, authority and capacity to enter into this Purchase
Agreement and to consummate the transactions contemplated hereby.
Upon the execution and delivery of this Purchase Agreement by
Purchaser, this Purchase Agreement shall constitute the legal,
valid and binding obligation of Purchaser, except as the
enforceability thereof may be limited by any applicable
bankruptcy, insolvency, reorganization or other similar laws
relating to or affecting the enforcement of creditors rights
generally and by general equitable principles, regardless of
whether such enforceability is considered in a proceeding of
equity or at law.
4.7 Representations and Warranties at the Closing. Each
of the representations and warranties contained in this Section 4
is true and correct as of the date of this Purchase Agreement.
Purchaser will make the same representations and warranties on
the Closing Date and the Delivery Date and such representations
and warranties when so made will be true and correct as of the
Closing Date, and the Delivery Date, respectively.
Section 5. Survival of Representations, Warranties and
Agreements. Notwithstanding any investigation made by either
party to this Purchase Agreement, all covenants, agreements,
representations and warranties made by the Company and Purchaser
herein shall survive the execution of this Purchase Agreement,
the delivery to Purchaser of the Shares and the receipt by the
Company of payment for the Shares.
Section 6. Notices. All notices, demands, consents or
other communications under this Purchase Agreement shall be given
or made in writing and shall be delivered personally, or sent by
registered or international recorded airmail, postage prepaid, or
sent by facsimile transmission with a confirmation copy sent by
mail as aforesaid, and shall be deemed given when so personally
delivered, or if mailed as aforesaid, ten (10) business days
after the same shall have been posted or if sent by facsimile
transmission, at the earlier of (i) as soon as written or
telephonic communication is received from the party to whom it
was sent that the message has been received or (ii) ten (10) days
after the confirmation is posted:
(a) if to the Company, at its address as set out at the
head of this Purchase Agreement, or at such address or addresses
as may have been furnished to Purchaser in writing by the
Company;
(b) if to, Purchaser, at its address as set out
following Purchaser's signature on the signature page to his
Purchase Agreement, or at such other address or addresses as may
have been furnished to the Company in writing by Purchaser; or
(c) if to any transferee or transferees of Purchaser, at
such address or addresses as shall have been furnished to the
Company at the time of the transfer or transfers or at such other
address or addresses as may have been furnished by such
transferee or transferees to the Company in writing.
Section 7. Amendments. No amendment, interpretation or
waiver of the provisions of this Purchase Agreement shall be
effective unless made in writing and signed by the parties to
this Purchase Agreement.
Section 8. Headings. The headings of the sections and
sub-sections of this Purchase Agreement are used for convenience
only and shall not affect the meaning or interpretation of the
contents of this Purchase Agreement.
Section 9. Enforcement. The failure to enforce or to
require the performance at any time of any of the provisions of
this Purchase Agreement shall in no way be construed to be a
waiver of such provisions, and shall not affect either the
validity of this Purchase Agreement or any part hereof or the
right of any party thereafter to enforce each and every provision
in accordance with the terms of this Purchase Agreement.
Section 10. Governing Law; Submission to Jurisdiction.
This Purchase Agreement and the relationships of the parties in
connection with the subject matter of this Purchase Agreement
shall be governed by and determined in accordance with the
substantive laws of the State of Delaware, in the United States
of America, applicable to agreements made and to be performed
entirely therein. Purchaser hereby irrevocable and
unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Purchase Agreement to which
it is a party, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of
the courts of the State of New York, the Courts of the United
States of America for the Southern District of New York, and
appellate courts from any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now
or hereafter have to the venue of any such action or proceedings
as brought in an inconvenient forum and agrees not to plead or
claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by respectively delivering or mailing
a copy thereof by personal delivery or by registered or certified
mail (or any substantially similar form of mail), postage
prepaid, to the Purchaser at the address set forth on the
signature page hereof as at such other address of which the
Company shall have been notified in accordance with the
provisions of Section 6 hereof; and
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction.
Section 11. Severability. If any provision of this
Purchase Agreement is held to be invalid or unenforceable by any
judgment of a tribunal of competent jurisdiction, the remainder
of this Purchase Agreement shall not be affected by such
judgment, and the Purchase Agreement shall be carried out as
nearly as possible according to its original terms and intent.
Section 12. Counterparts. This Purchase Agreement may
be executed in counterparts, all of which shall constitute one
agreement, and each such counterpart shall be deemed to have been
made, executed and delivered on the date set out at the head of
this Purchase Agreement without regard to the dates or times when
such counterparts may actually have been made, executed or
delivered.
IN WITNESS WHEREOF, the parties hereto have caused this
Purchase Agreement to be executed by their duly authorized
representatives as of the day and year first above written.
XCL LTD. PURCHASER'S NAME:
By:__________________________ _________________________________
Name:________________________ _________________________________
Title:_______________________ _________________________________
Duly executed by:
_________________________________
Title:
Aggregate number of Shares: PURCHASER'S ADDRESS:
_____________________________ ______________________________
______________________________
Total purchase price: ______________________________
______________________________
$____________________________
Stock certificate registration instructions:
Name of Holder:__________________________________________________
Address of Holder for delivery:__________________________________
_________________________________________________________________
_________________________________________________________________
Contact name and telephone number:_______________________________
_________________________________________________________________
XCL LTD.
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY OTHER FEDERAL OR STATE SECURITIES OR
BLUE SKY LAWS OF ANY OTHER DOMESTIC OR FOREIGN JURISDICTION. NO
OFFER, SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION (COLLECTIVELY,
A "DISPOSAL") OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY
BE MADE UNLESS (i) REGISTERED UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS OR (ii) XCL LTD. (THE "CO
MPANY") RECEIVES A WRITTEN OPINION OF UNITED STATES LEGAL COUNSEL
IN FORM AND SUBSTANCE SATISFACTORY TO IT TO THE EFFECT THAT SUCH
DISPOSAL IS EXEMPT FROM SUCH REGISTRATION REQUIREMENTS.
No.
WARRANTS TO PURCHASE
COMMON STOCK OF XCL LTD.
Initial Issuance on February 20, 1997
Void after 5:00 p.m. New York Time, February 20, 2002
THIS CERTIFIES THAT, for value received, PATRICK B. COLLINS
or registered assigns (the "Holder") is the registered holder of
warrants (the "Warrants") to purchase from XCL Ltd., a Delaware
corporation (the "Company"), at any time or from time to time
beginning on February 20, 1997 and until 5:00 p.m., New York
time, on February 20, 2002 (the "Expiration Date"), subject to
the conditions set forth herein, at the initial exercise price of
$0.25 per share (the "Initial Exercise Price"), subject to adjust
ment as set forth herein (the "Exercise Price"), up to an aggre
gate of twenty-five thousand (25,000) fully paid and non-
assessable common shares, par value $0.01 per share (the "Common
Stock"), of the Company (the "Shares") upon surrender of this
amended and restated warrant certificate (the "Certificate") and
payment of the Exercise Price multiplied by the number of Shares
in respect of which Warrants are then being exercised (the
"Purchase Price") at the principal office of the Company
presently located at 110 Rue Jean Lafitte, Lafayette, LA 70508,
United States of America.
1. Exercise of Warrants.
(a) The exercise of any Warrants represented by this
Certificate is subject to the conditions set forth below in
paragraph 4, "Compliance with U.S. Securities Laws."
(b) Subject to compliance with all of the conditions set
forth herein, the Holder shall have the right at any time and
from time to time after February 20, 1997 to purchase from the
Company the number of Shares which the Holder may at the time be
entitled to purchase pursuant hereto, upon surrender of this
Certificate to the Company at its principal office, together with
the form of election to purchase attached hereto duly completed
and signed, and upon payment to the Company of the Purchase
Price.
No Warrant may be exercised after 5:00 p.m.,
New York time, on the Expiration Date, after which time all
Warrants evidenced hereby shall be void.
(c) Payment of the Purchase Price shall be made in cash, by
wire transfer of immediately available funds or by certified
check or banker's draft payable to the order of the Company, or
any combination of the foregoing.
(d) The Warrants represented by this Certificate are
exercisable at the option of the Holder, in whole or in part (but
not as to fractional Shares). Upon the exercise of less than all
of the Warrants evidenced by this Certificate, the Company shall
forthwith issue to the Holder a new certificate of like tenor
representing the number of unexercised Warrants.
(e) Subject to compliance with all of the conditions set
forth herein, upon surrender of this Certificate to the Company
at its principal office, together with the form of election to
purchase attached hereto duly completed and signed, and upon
payment of the Purchase Price, the Company shall cause to be
delivered promptly to or upon the written order of the Holder and
in such name or names as the Holder may designate, a share
certificate or share certificates for the number of whole Shares
purchased upon the exercise of the Warrants. Such share
certificate or share certificates representing the Shares shall
be free of any restrictive legend. The Company shall ensure that
no "stop transfer" or similar instruction or order with respect
to the Shares purchased upon exercise of the Warrants shall be in
effect at ChaseMellon Shareholders Services, Independent
Registrars Group Limited or any successor transfer agent for the
Common Stock of the Company (the "Transfer Agent").
2. Elimination of Fractional Interests. The Company shall
not be required to issue certificates representing fractions of
Shares and shall not be required to issue scrip in lieu of
fractional interests. Instead of any fractional Shares that
would otherwise be issuable to the Holder, the Company shall pay
to the Holder a cash adjustment in respect of such fractional
interest in an amount equal to such fractional interest of the
then-current Market Price per share (as defined in Section 7(f)
hereof).
3. Payment of Taxes. The Company will pay all documentary
stamp taxes, if any, attributable to the issuance and delivery of
the Shares upon the exercise of the Warrants; provided, however,
that the Company shall not be required to pay any taxes which may
be payable in respect of any transfer involved in the issuance or
delivery of any Warrant or any Shares in any name other than that
of the Holder, which transfer taxes shall be paid by the Holder,
and until payment of such transfer taxes, if any, the Company
shall not be required to issue such Shares.
4. Compliance with U.S. Securities Laws. The Warrants
have not been, and will not be, registered under the United
States Securities Act of 1933, as amended (the "Securities Act"),
or any other federal or state securities or blue sky laws. No
offer, sale, transfer, pledge or other disposition (collectively,
a "Disposal") of the Warrants represented by this Certificate may
be made unless (i) registered under the Act and any applicable
State securities or blue sky laws or (ii) the Company receives a
written opinion of United States legal counsel in form and
substance satisfactory to it to the effect that such Disposal is
exempt from such registration requirements..
5. Transfer of Warrants.
(a) The Warrants shall be transferable only on the
books of the Company maintained at the Company's principal office
upon delivery of this Certificate with the form of assignment
attached hereto duly completed and signed by the Holder or by its
duly authorized attorney or representative, accompanied by proper
evidence of succession, assignment or authority to transfer. The
Company may, in its discretion, require, as a condition to any
transfer of Warrants, a signature guarantee, which may be
provided by a commercial bank or trust company, by a broker or
dealer which is a member of the National Association of
Securities Dealers, Inc., or by a member of a United States
national securities exchange, The Securities and Futures
Authority Limited in the United Kingdom, or The London Stock
Exchange Limited in London, England. Upon any registration of
transfer, the Company shall deliver a new warrant certificate or
warrant certificates of like tenor and evidencing in the
aggregate a like number of Warrants to the person entitled
thereto in exchange for this Certificate, subject to the
limitations provided herein, without any charge except for any
tax or other governmental charge imposed in connection therewith.
(b) Notwithstanding anything in this Certificate to
the contrary, neither any of the Warrants nor any of the Shares
issuable upon exercise of any of the Warrants shall be
transferable, except upon compliance by the Holder with any
applicable provisions of the Securities Act and any applicable
state securities or blue sky laws.
6. Exchange and Replacement of Warrant
Certificates; Loss or Mutilation of
Warrant Certificates.
(a) This Certificate is exchangeable without cost, upon the
surrender hereof by the Holder at the principal office of the
Company, for new warrant certificates of like tenor and date
representing in the aggregate the right to purchase the same
number of Shares in such denominations as shall be designated by
the Holder at the time of such surrender. Any transfer not made
in such compliance shall be null and void and shall be given no
effect hereunder.
(b) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of this Certificate and, in case of such loss, theft or
destruction, of indemnity and security reasonably satisfactory to
it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this
Certificate, if mutilated, the Company will make and deliver a
new warrant certificate of like tenor, in lieu thereof.
7. Initial Exercise Price; Adjustment of Exercise Price and
Number of Shares.
(a) The Warrants initially are exercisable at the Initial
Exercise Price per Share, subject to adjustment from time to time
as provided herein. No adjustments will be made for cash
dividends, if any, paid to shareholders of record prior to the
date on which the Warrants are exercised.
(b) In case the Company shall at any time after the
date of this Certificate (i) declare a dividend on the shares of
Common Stock payable in shares of Common Stock, or (ii) subdivide
or split up the outstanding shares of Common Stock, the amount of
Shares to be delivered upon exercise of any Warrant will be
appropriately increased so that the Holder will be entitled to
receive the amount of Shares that such Holder would have owned
immediately following such actions had such Warrant been
exercised immediately prior thereto, and the Exercise Price in
effect immediately prior to the record date for such dividend or
the effective date for such subdivision shall be proportionately
decreased, all effective immediately after the record date for
such dividend or the effective date for such subdivision or split
up. Such adjustments shall be made successively whenever any
event listed above shall occur.
(c) In case the Company shall at any time after the
date of this Certificate combine the outstanding shares of Common
Stock into a smaller number of shares the amount of Shares to be
delivered upon exercise of any Warrant will be appropriately
decreased so that the Holder will be entitled to receive the
amount of Shares that such Holder would have owned immediately
following such action had such Warrant been exercised immediately
prior thereto, and the Exercise Price in effect immediately prior
to the record date for such combination shall be proportionately
increased, effective immediately after the record date for such
combination. Such adjustment shall be made successively whenever
any such combinations shall occur.
(d) In the event that the Company shall at any time
after the date of this Certificate (i) issue or sell any shares
of Common Stock (other than the Shares) or securities convertible
or exchangeable into Common Stock without consideration or at a
price per share (or having a conversion price per share, if a
security convertible into Common Stock) less than the Market
Value per share of Common Stock (as defined in Section 7(f)
hereof), or (ii) issue or sell options, rights or warrants to
subscribe for or purchase Common Stock at a price per share less
than the Market Price per share of Common Stock (as defined in
Section 7(f) hereof), the Exercise Price to be in effect after
the date of such issuance shall be determined by multiplying the
Exercise Price in effect on the day immediately preceding the
relevant issuance or record date, as the case may be, used in
determining such Market Value or Market Price, by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding on such issuance or record date plus the number of
shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so to be issued or to be
offered for subscription or purchase (or the aggregate initial
conversion price of the convertible securities so to be offered)
would purchase at such Market Value or Market Price, as the case
may be, and the denominator of which shall be the number of
shares of Common Stock outstanding on such issuance or record
date plus the number of additional shares of Common Stock to be
issued or to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially
convertible); such adjustment shall become effective immediately
after the close of business on such issuance or record date;
provided, however, that no such adjustment shall be made for the
issuance of (s) options to purchase shares of Common Stock
granted pursuant to the Company's employee stock option plans
approved by shareholders of the Company (and the shares of Common
Stock issuable upon exercise of such options) (provided that
option exercise prices shall not be less than the Market Value of
the Common Stock (as defined in Section 7(f) hereof) on the date
of the grant of such options), (t) the Company's warrants to
purchase shares of Common Stock (and the shares of Common Stock
issuable upon exercise of such warrants), outstanding on the date
hereof, (u) the Company's shares of Amended Series A, Cumulative
Convertible Preferred Stock (and the shares of such Preferred
Stock issued in lieu of dividend payments thereunder and the
shares of Common Stock issuable upon conversion of such Preferred
Stock), outstanding on the date hereof, (v) the Company's shares
of Series B, Cumulative Preferred Stock (and the shares of Common
Stock issuable in lieu of dividend and redemption payments
thereunder), outstanding on the date hereof or (w) the Company's
shares of Series F, Cumulative Convertible Preferred Stock (and
the shares of such Preferred Stock issued in lieu of dividend
payments thereunder and shares of Common Stock issuable upon
conversion of such Preferred Stock), outstanding on the date
hereof. In case such subscription price may be paid in a
consideration, part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined
reasonably and in good faith by the Board of Directors of the
Company. Shares of Common Stock owned by or held for the account
of the Company or any wholly-owned subsidiary shall not be deemed
outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever the date of such
issuance is fixed (which date of issuance shall be the record
date for such issuance if a record date therefor is fixed); and,
in the event that such shares or options, rights or warrants are
not so issued, the Exercise Price shall again be adjusted to be
the Exercise Price which would then be in effect if the date of
such issuance had not been fixed.
(e) In case the Company shall make a distribution
to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of its
indebtedness, securities other than Common Stock or assets (other
than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in
Common Stock), the Exercise Price to be in effect after such date
of distribution shall be determined by multiplying the Exercise
Price in effect on the date immediately preceding the record date
for the determination of the shareholders entitled to receive
such distribution by a fraction, the numerator of which shall be
the Market Price per share of Common Stock (as defined in Section
7(f) hereof) on such date, less the then-fair market value (as
determined reasonably and in good faith by the Board of Directors
of the Company of the portion of the assets, securities or
evidences of indebtedness so to be distributed applicable to one
share of Common Stock and the denominator of which shall be such
Market Price per share of Common Stock, such adjustment to be
effective immediately after the distribution resulting in such
adjustment. Such adjustment shall be made successively whenever
a date for such distribution is fixed (which date of distribution
shall be the record date for such distribution if a record date
therefor is fixed); and, if such distribution is not so made, the
Exercise Price shall again be adjusted to be the Exercise Price
which would then be in effect if such date of distribution had
not been fixed.
(f) For the purposes of any computation under this
Section 7, the "Market Price per share" of Common Stock on any
date shall be deemed to be the average of the closing bid price
for the 20 consecutive trading days ending on the record date for
the determination of the shareholders entitled to receive any
rights, dividends or distributions described in this Section 7,
and the "Market Value per share" of Common Stock on any date
shall be deemed to be the closing bid price on the date of the
issuance of the securities for which such computation is being
made, as reported on the principal United States securities
exchange on which the Common Stock is listed or admitted to
trading or if the Common Stock is not then listed on any United
States stock exchange, the average of the closing sales price on
each such day during such 20 day period, in the case of the
Market Price computation, or on such date of issuance, in the
case of the Market Value computation, in the over-the-counter
market as reported by the National Association of Securities
Dealers' Automated Quotation System ("NASDAQ"), or, if not so
reported, the average of the closing bid and asked prices on each
such day during such 20 day period in the case of the Market
Price computation, or on such date of issuance, in the case of
the Market Value computation, as reported in the "pink sheets"
published by the National Quotation Bureau, Inc. or any successor
thereof, or, if not so quoted, the average of the middle market
quotations for such 20 day period in the case of the Market Price
computation, or on such date of issuance, in the case of the
Market Value computation, as reported on the daily official list
of the prices of stock listed on The London Stock Exchange
Limited ("The Stock Exchange Daily Official List"). "Trading
day" means any day on which the Common Stock is available for
trading on the applicable securities exchange or in the
applicable securities market. In the case of Market Price or
Market Value computations based on The Stock Exchange Daily
Official List, the Market Price or Market Value shall be
converted into United States dollars at the then spot market
exchange rate of pounds sterling (UK) into United States dollars
as quoted by Chemical Bank or any successor bank thereto on the
date of determination. If a quotation of such exchange rate is
not so available, the exchange rate shall be the exchange rate of
pounds sterling in United States dollars as quoted in The Wall
Street Journal on the date of determination.
(g) No adjustment in the Exercise Price shall be
required unless such adjustment would require an increase or
decrease of at least $.02 in such price; provided that any
adjustments which by reason of this Section 7(g) are not required
to be made shall be carried forward and taken into account in any
subsequent adjustment; provided, further that such adjustment
shall be made in all events (regardless of whether or not the
amount thereof or the cumulative amount thereof amounts to $.02
(or more) upon the happening of one or more of the events
specified in Sections 7(b), (c) or (i). All calculations under
this Section 7 shall be made to the nearest cent.
(h) If at any time, as a result of an adjustment
made pursuant to Section 7(b) or (c) hereof, the Holder of any
Warrant thereafter exercised shall become entitled to receive any
shares of the Company other than shares of Common Stock,
thereafter the number of such other shares so receivable upon
exercise of any Warrant shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Shares
contained in this Section 7, and the provisions of this
Certificate with respect to the Shares shall apply on like terms
to such other shares.
(i) In the case of (l) any capital reorganization
of the Company, or of (2) any reclassification of the shares of
Common Stock (other than a subdivision or combination of
outstanding shares of Common Stock), or (3) any consolidation or
merger of the Company, or (4) the sale, lease or other transfer
of all or substantially all of the properties and assets of the
Company as, or substantially as, an entirety to any other person
or entity, each Warrant shall after such capital reorganization,
reclassification of the shares of Common Stock, consolidation, or
sale be exercisable, upon the terms and conditions specified in
this Certificate, for the number of shares of stock or other
securities or assets to which a holder of the number of Shares
purchasable (immediately prior to the effectiveness of such
capital reorganization, reclassification of shares of Common
Stock, consolidation, or sale) upon exercise of a Warrant would
have been entitled upon such capital reorganization,
reclassification of shares of Common Stock, consolidation, merger
or sale; and in any such case, if necessary, the provisions set
forth in this Section 7 with respect to the rights thereafter of
the Holder shall be appropriately adjusted (as determined
reasonably and in good faith by the Board of Directors of the
Company) so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities or assets thereafter
deliverable on the exercise of a Warrant. The Company shall not
effect any such consolidation or sale, unless prior to or
simultaneously with the consummation thereof, the successor
corporation, partnership or other entity (if other than the
Company) resulting from such consolidation or the corporation,
partnership or other entity purchasing such assets or the
appropriate entity shall assume, by written instrument, the
obligation to deliver to the Holder of each Warrant the shares of
stock, securities or assets to which, in accordance with the
foregoing provisions, such Holder may be entitled and all other
obligations of the Company under this Certificate. For purposes
of this Section 7(i) a merger to which the Company is a party but
in which the Common Stock outstanding immediately prior thereto
is changed into securities of another corporation shall be deemed
a consolidation with such other corporation being the successor
and resulting corporation.
(j) Irrespective of any adjustments in the Exercise
Price or the number or kind of shares purchasable upon the
exercise of the Warrant, Warrant Certificates theretofore or
thereafter issued may continue to express the same Exercise Price
per share and number and kind of Shares as are stated on the
Warrant Certificates initially issuable pursuant to this Warrant.
(k) The Company may, in its sole discretion, at any
time and from time to time before the Expiration Date, reduce the
Exercise Price to any lower amount by notice to the Holders, in
the manner provided in Section 12.
8. Notices to Warrant Holders. Nothing contained in this
Certificate shall be construed as conferring upon the Holder the
right to vote or to consent or to receive notice as a stockholder
in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights whatsoever
as a stockholder of the Company. If, however, at any time prior
to the exercise or expiration of the Warrants, any of the
following events shall occur:
(i) the holders of shares of the Common Stock shall
be entitled to receive a dividend or distribution
payable otherwise than in cash, or a cash dividend
or distribution payable otherwise than out of
current or retained earnings, as indicated by the
accounting treatment of such dividend or dis
tribution on the books of the Company; or
(ii) the Company shall offer to all the holders
of its Common Stock any additional shares of
capital stock of the Company or securities
convertible into or exchangeable for shares of
capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
(iii) a dissolution, liquidation or winding-up of
the Company (other than in connection with a
consolidation or merger) or a sale of all or sub
stantially all of its property, assets and business
as an entirety shall be approved by the Company's
Board of Directors; or
(iv) there shall be any capital reorganization
or reclassification of the capital stock of the
Company (other than a change in the number of
outstanding shares of Common Stock or a change in
the par value of the Common Stock), or
consolidation or merger of the Company with another
entity;
then, in any one or more of said events, the Company shall give
written notice of such event at least fifteen (15) days prior to
the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled
to such dividend, distribution, convertible or exchangeable secur
ities or subscription rights, options or warrants, or entitled to
vote on such proposed dissolution, liquidation, winding-up or
sale. Such notice shall specify such record date or the date of
closing the transfer books, as the case may be. Failure to give
such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment
of any such dividend or distribution, or the issuance of any
convertible or exchangeable securities or subscription rights,
options or warrants, or any proposed dissolution, liquidation,
winding-up or sale.
9. Reservation and Listing of Securities.
The Company covenants and agrees that at all times during
the period after February 20, 1997, the Company shall reserve and
keep available, free from preemptive rights, out of its auth
orized and unissued shares of Common Stock or out of its
authorized and issued shares of Common Stock held in its
treasury, solely for the purpose of issuance upon exercise of the
Warrants, such number of Shares as shall be issuable upon the
exercise of the Warrants.
(b) The Company covenants and agrees that, upon
exercise of the Warrants in accordance with their terms and
payment of the Purchase Price, all Shares issued or sold upon
such exercise shall not be subject to the preemptive rights of
any stockholder and when issued and delivered in accordance with
the terms of the Warrants shall be duly and validly issued, fully
paid and non-assessable, and the Holder shall receive good and
valid title to such Shares free and clear from any adverse claim
(as defined in the applicable Uniform Commercial Code), except
such as have been created by the Holder.
(c) As long as the Warrants shall be outstanding,
the Company shall use its reasonable efforts to cause all Shares
issuable upon the exercise of the Warrants to be quoted by or
listed on any national securities exchange or other securities
listing service on which the shares of Common Stock of the
Company are then listed.
10. Survival. All agreements, covenants, representations
and warranties herein shall survive the execution and delivery of
this Certificate and any investigation at any time made by or on
behalf of any party hereto and the exercise, sale and purchase of
the Warrants and the Shares (and any other securities or
properties) issuable on exercise hereof.
11. Remedies. The Company agrees that the remedies at law
of the Holder, in the event of any default or threatened default
by the Company in the performance of or compliance with any of
the terms hereof, may not be adequate and such terms may, in
addition to and not in lieu of any other remedy, be specifically
enforced by a decree of specific performance of any agreement
contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
12. Registered Holder. The Company may deem and treat the
registered Holder hereof as the absolute owner of this
Certificate and the Warrants represented hereby (notwithstanding
any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise of the Warrants, of any
notice, and of any distribution to the Holder hereof, and for all
other purposes, and the Company shall not be affected by any
notice to the contrary.
13. Notices. All notices and other communications from the
Company to the Holder of the Warrants represented by this Certifi
cate shall be in writing and shall be deemed to have been duly
given if and when personally delivered, two (2) business days
after sent by overnight courier or ten (10) days after mailed by
certified, registered or international recorded mail, postage
prepaid and return receipt requested, or when transmitted by
telefax, telex or telegraph and confirmed by sending a similar
mailed writing, if to the Holder, to the last address of such
Holder as it shall appear on the books of the Company maintained
at the Company's principal office or to such other address as the
Holder may have specified to the Company in writing.
14. Headings. The headings contained herein are for
convenience of reference only and are not part of this
Certificate.
Governing Law. This Certificate shall be deemed to be a
contract made under the laws of the State of Delaware and for all
purposes shall be governed by, and construed in accordance with,
the laws of said state, without regard to the conflict of laws
provisions thereof.
IN WITNESS WHEREOF, the Company has caused this Amended and
Restated Warrant Certificate to be duly executed by its duly
authorized officers under its corporate seal.
Dated: February 20, 1997
XCL LTD.
By:----------------------------------
Marsden W. Miller, Jr.
Chairman and
Chief Executive Officer
Attest:
- ------------------------------------
Secretary
XCL LTD.
FORM OF ELECTION TO PURCHASE
(To be executed by the registered Holder
if such Holder desires to exercise Warrants)
The undersigned registered Holder hereby irrevocably elects
to exercise the right of purchase represented by this Warrant
Certificate for, and to purchase,-------------- Shares hereunder,
and herewith tenders in payment for such Shares cash, a wire
transfer, a certified check or a banker's draft payable to the
order of XCL Ltd. in the amount of -----------------------, all
in accordance with the terms hereof. The undersigned requests
that a share certificate for such Shares be registered in the
name of and delivered to:
- ---------------------------------------------
(Please Print Name and Address)
and, if said number of Shares shall not be all the Shares purchas
able hereunder, that a new Warrant Certificate for the balance
remaining of the Shares purchasable hereunder be registered in
the name of the undersigned Warrant Holder or his Assignee as
below indicated and delivered to the address stated below.
DATED:-----------------------------
Name of Warrant Holder:------------------------------------------
- ------------------------------------------------------------------
(Please Print)
Address:---------------------------------------------------------
- ------------------------------------------------------------------
Signature:-------------------------------------------------------
Note: The above signature must correspond in all respects
with the name of the Holder as specified on the
face of this Warrant Certificate, without
alteration or enlargement or any change whatsoever,
unless the Warrants represented by this Warrant
Certificate have been assigned.
XCL LTD.
FORM OF ASSIGNMENT
(To be executed by the registered Holder if such Holder
desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers to:
- --------------------------------------------------------------
(Please Print Name and Address of Transferee)
Warrants to purchase up to --------- Shares represented by this
Warrant Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
, Attorney, to transfer such Warrants on the books of the
Company, with full power of substitution in the premises. The
undersigned requests that if said number of Shares shall not be
all of the Shares purchaseable under this Warrant Certificate
that a new Warrant Certificate for the balance remaining of the
Shares purchaseable under this Warrant Certificate be registered
in the name of the undersigned Warrant Holder and delivered to
the registered address of said Warrant Holder.
DATED:----------------------------------------------------------
Signature of registered Holder:---------------------------------
Note: The above signature must correspond in all respects
with the name of the Holder as specified on the
face of this Warrant Certificate, without
alteration or enlargement or any change whatsoever.
The above signature of the registered Holder must
be guaranteed by a commercial bank or trust
company, by a broker or dealer which is a member of
the National Association of Securities Dealers,
Inc. or by a member of a national securities
exchange, The Securities and Futures Authority
Limited in the United Kingdom or The London Stock
Exchange Limited in London, England. Notarized or
witnessed signatures are not acceptable as
guaranteed signatures.
Signature Guaranteed: -----------------------------------------
- ------------------------------------------------------------------
Authorized Officer
- -------------------------------------------------------------------
Name of Institution
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement"), effective as
of February 20, 1997 and expiring on February 20, 1998, by and
between XCL Ltd., a Delaware corporation., with offices at 110
Rue Jean Lafitte, Lafayette, Louisiana 70508 (hereinafter the
"Company") and Patrick B. Collins, 14018 Taylorcrest, Houston,
Texas 77079 (hereinafter "Consultant").
W I T N E S S E T H:
WHEREAS, Consultant has substantial experience and
ability in financial reporting and oil and gas accounting; and
WHEREAS, the Company desires to retain and secure for
itself the experience and ability of Consultant for the purpose
of assisting the Company with its financial reporting
requirements; and
WHEREAS, the Company and Consultant desire to enter
into a consulting agreement to set forth this proposed consulting
relationship;
NOW, THEREFORE, the parties to this Agreement hereby
agree as follows:
ARTICLE I
Rights and Duties Under Consulting Agreement
1.1 Term of Agreement and Duties. The Company
and Consultant agree that for the period commencing February 20,
1997 and terminating February 20, 1998, Consultant shall perform
consulting services for the Company with regard to the financial
reporting obligations of the Company, including oil and gas
accounting matters, review of 1996 financial statements,
presentation of financial statements, projections and footnotes
thereto in any debt and equity offering memoranda of the Company,
and preparation or review of 1997 financial statements.
1.2 A. Compensation. For consulting
services performed by Consultant during the term of this
Agreement, the Company shall pay Consultant by the issuance of
400,000 shares of Common Stock and warrants to purchase 200,000
shares of Common Stock of the Company at an exercise price of
$0.25 per share, exercisable for a five-year period.
B. Restricted Securities. Consultant
acknowledges that the Common Stock and stock purchase warrants,
and the shares of Common Stock issuable upon exercise thereof,
(hereinafter collectively referred to as the "Securities"), being
delivered pursuant to Section 1.2 of this Agreement, are being
issued (i) without registration under the Securities Act of 1933,
as amended (the "Act"), or any other securities laws; no federal
or state agency has made any finding or determination as to the
fairness for investment, nor any recommendation or endorsement of
an investment in the Securities, and the Securities are
"restricted securities" as defined in Rule 144 promulgated under
the Act; (ii) to you for your own account, for investment and not
with any present intention to distribute or resell, directly or
indirectly, all or any portion of the interest therein; (iii) you
warrant and represent that you are financially able to bear the
economic risk associated with these Securities for an indefinite
period of time with no assurance of any return thereon; (iv) you
warrant and represent that you have the requisite knowledge and
experience in financial matters, and you have had access to all
information regarding the Company and the Securities which you
have requested, to enable you to evaluate the merits and risks
associated with the Securities; (v) you warrant and represent
that, in making your investment decision with respect to the
Securities, you have reviewed the Company's latest Annual Report
on form 10-K and Quarterly Report on Form 10-Q and that you have
solely relied upon your own investigation of the Company and its
affairs, it being understood that the Company makes no
representations and warranties with respect to the Securities or
the Company, it business affairs, financial condition or
prospects; and (vi) acknowledge that; the Securities may not be
sold or offered for sale in the absence of an effective
registration statement for the Securities under the Act, or an
opinion of counsel acceptable to the Company to the effect that
such registration is not required; the certificate(s) evidencing
the Securities may be imprinted with a suitable restrictive
legend substantially to such effect that the Company is under no
obligation to take any steps to register the Securities under the
Act or otherwise cause the Securities to become freely
transferable (including, without limitation, to make the
provisions of Rule 144 available for any resales of the
Securities under such Rule).
1.3 Reimbursement of Expenses. The Company
shall reimburse Consultant for all reasonable and necessary
travel, or other related out-of-pocket expenses actually incurred
by it during the term of this Agreement in carrying out its
duties and responsibilities hereunder.
1.4 Time Requirements under Consulting Agreement.
Subject to the foregoing, Consultant agrees to provide the time
necessary for the performance of its consulting hereunder.
1.5 Place of Performance of Consulting Services.
Consultant shall perform its services hereunder in Lafayette,
Louisiana; Houston, Texas; and/or such other places as the
Company may direct.
1.6 Indemnification. The Company shall
indemnify Consultant for all liabilities in connection with any
proceeding arising from services performed pursuant to this
Agreement, other than liability arising from the Consultants
gross negligence or willful misconduct.
1.7 Confidentiality of Company's Business.
Consultant acknowledges that the Company's business is highly
competitive and that the Company's books, records and documents,
the Company's technical information concerning its products,
equipment, services and processes, procurement procedures and
pricing techniques, the names of and other information (such as
credit and financial data) concerning the Company's customers and
business affiliates, all comprise confidential business
information and trade secrets of the Company and are valuable,
special, and unique proprietary assets of the Company
("Confidential Information"). Consultant further acknowledges
that protection of Company's Confidential Information against
unauthorized disclosure and use is of critical importance to the
company in maintaining its competitive position. Accordingly,
Consulting hereby agrees that he will not, at any time during or
after the term of this Agreement, make any disclosure of any
Confidential Information, or make any use thereof, except for the
benefit of, and on behalf of, the Company. However, the
Consultant's obligation under this Section 1.7 shall not extend
to information which is or becomes part of the public domain or
is available to the public by publication or otherwise than
through the Consultant. The provisions of this Section 1.7 shall
survive the termination of this Agreement. Money damages would
not be sufficient remedy for breach of this Section 1.7 by
Consultant, and the Company shall be entitled to specific
performance and injunctive relief as remedies for such breach or
any threatened breach. Such remedies for a breach of this
Section 1.7 by the Consultant, but shall be in addition to all
remedies available at law or in equity to the Company including
the recovery of damages from the Consultant. For the purposes of
this paragraph, the term Company shall also include affiliates of
the Company.
1.8 Conflict of Interest. Consultant agrees to use
his best efforts, skill and abilities so long as Consultant's
Services are retained hereunder to promote the best interest of
Company and its business. As part of the consideration for the
compensation to be paid to Consultant hereunder, and as an
additional incentive for the Company to enter into this
Agreement, Company and Consultant agree to the noncompetitive
provisions of this Section 1.8. During the term of this
Agreement, Consultant agrees that, unless prior written approval
of the President of the Company is obtained, Consultant will not
directly or indirectly for himself or for others:
(i) consult, advise, counsel or otherwise assist
any customer, supplier, or direct competitor of the
Company or any affiliate which, in any manner, would
have, or is likely to have, an adverse effect upon the
Company or any affiliate; or
(ii) consult, advise, counsel or otherwise assist
any Federal or State regulatory agency on any matter or
in a regulatory proceeding which, in any manner, would
have, or is likely to have, an adverse effect upon the
Company or any affiliate;
Consultant understands that the foregoing restrictions may
limit Consultant's ability to engage in a business similar to the
Company's business during the period provided for above, but
acknowledges that Consultant will receive sufficiently high
remuneration and other benefits from the Company hereunder to
justify such restrictions. The Company shall be entitled to
enforce the provisions of this Section 1.8 by resorting to
appropriate legal and equitable action.
It is expressly understood and agreed that the Company and
Consultant consider the restrictions contained in this Section
1.8 to be reasonable and necessary for the purposes of preserving
and protecting the goodwill and Confidential Information and
proprietary information of the Company. Nevertheless, if any of
the aforesaid restrictions are found by a court having
jurisdiction to be unreasonable, or over broad as to geographic
area or time, or otherwise unenforceable, the parties intend for
the restrictions therein set forth to be modified by such court
so as to be reasonable and enforceable and, as so modified by the
court, to be fully enforced.
1.9 Independent Contractor:
(i) The parties hereby agree that the services
rendered by Consultant in the fulfillment of the terms
and obligations of this Agreement shall be as an
independent contractor and not as an employee, and with
respect thereto, Consultant is not entitled to the
benefits provided by the Company to its employees
including, but not limited to, group insurance and
participation in the Company's employee benefit and
pension plan. Further, Consultant is not an agent,
partner, or joint venture of the Company. Consultant
shall not represent himself to third persons to be
other than an independent contractor of the Company,
nor shall he permit himself to offer or offer or agree
to incur or assume any obligations or commitments in
the name of the Company or for the Company without the
prior written consent and authorization of the Company.
Consultant warrants that the services to be provided
hereunder will not cause of conflict with any other
duties or obligations of Consultant to third parties.
Consultant shall not subcontract or assign any of the
work to be performed hereunder without obtaining the
prior written consent of the Company, provided,
however, nothing contained herein shall prohibit
Consultant from incorporating and rendering services
hereunder as a corporation.
(ii) Consultant shall be responsible for payment of
all taxes including Federal, State and local taxes
arising out of the Consultant's activities under this
Agreement, including by way of illustration but not
limitation, Federal and State income tax, Social
Security tax, Unemployment Insurance taxes, and any
other taxes or business license fees as required.
ARTICLE II
Miscellaneous
2.1 Succession. This Agreement shall inure to
the benefit of and be binding upon the Company, its successors
and assigns, and upon Consultant. Consultant shall be prohibited
from assigning this Agreement without prior written approval of
the Company.
2.2 Notice. Any notice to be given to the
Company hereunder shall be deemed sufficient if addressed to the
Company in writing and personally delivered or mailed by
certified mail to its office at the address set forth above. Any
notice to be given to Consultant hereunder shall be sufficient if
addressed to it in writing and personally delivered or mailed by
certified mail to its address set forth above. Either party may,
by notice as aforesaid, designate a different address for the
receipt of notice.
2.3 Amendment. This Agreement may not be
amended or supplemented in any respect, except by a subsequent
written instrument entered into by both parties hereto.
2.5 Severability. In the event any provision of
this Agreement shall be held to be illegal, invalid or
unenforceable for any reasons, the illegality, invalidity, or
unenforceablity thereof shall not affect the remaining provisions
hereof, but such illegal, invalid, or unenforceable provision
shall be fully severable and this Agreement shall be construed
and enforced as if the illegal, invalid, or unenforceable
provision had never been included herein.
2.6 Headings. The titles and headings of
Articles and Sections are included for convenience of reference
only and are not to be considered in connection with the
construction or enforcement of the provisions hereof.
2.7 Governing Law. This Agreement shall be
governed in all respects by the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have executed this
Agreement effective as of the 20th day of February, 1997.
XCL LTD.
By:___________________________
Name:_________________________
Title:_________________________
______________________________
PATRICK B. COLLINS
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement"), effective as
of June 1, 1997, by and between XCL Ltd., a Delaware
corporation., with offices at 110 Rue Jean Lafitte, Lafayette,
Louisiana 70508 (hereinafter the "Company") and R. Thomas
Fetters, 101 Red Brick Circle, Lafayette, LA 70503 (hereinafter
"Consultant").
W I T N E S S E T H:
WHEREAS, Consultant has substantial experience and
ability in oil and gas exploration, development and production;
and
WHEREAS, the Company desires to retain and secure for
itself the experience and ability of Consultant for the purpose
of assisting the Company; and
WHEREAS, the Company and Consultant desire to enter
into a nonexclusive consulting agreement to set forth this
proposed consulting relationship;
NOW, THEREFORE, the parties to this Agreement hereby
agree as follows:
ARTICLE I
Rights and Duties Under Consulting Agreement
1.1 Term of Agreement and Duties. The Company
and Consultant agree that for the period commencing June 1, 1997
and terminating July 31, 1998, Consultant shall consult with
Company management in connection with all aspects of the
Company's exploration, development and production projects.
Thereafter, this contract shall continue on a month to month
basis, until terminated by either party on thirty days written
notice.
1.2 Compensation. For consulting services
performed by Consultant during the term of this Agreement, the
Company shall pay Consultant the sum of $30,000.00, to be paid in
monthly installments of $2,500.00, subject to termination of this
Agreement as provided herein. This payment shall constitute full
payment for all services rendered under this Agreement, but is in
addition to the compensation that Consultant is entitled to as a
member of the Board of Directors of the Company. In addition,
Consultant and the Company may, from time to time, enter into
written agreement whereby Consultant shall be entitled
compensation as a finder's fee on certain specifically identified
projects, and any such compensation shall be in addition to the
compensation paid under this agreement.
1.3 Reimbursement of Expenses. The Company
shall reimburse Consultant for all reasonable and necessary
travel, or other related out-of-pocket expenses actually incurred
by him during the term of this Agreement in carrying out his
duties and responsibilities hereunder.
1.4 Time Requirements under Consulting Agreement.
Subject to the foregoing, Consultant agrees devote the reasonable
time necessary to fulfill his obligations hereunder as agreed to
from time to time by Consultant and the Company.
1.5 Place of Performance of Consulting Services.
Consultant shall perform its services hereunder in Lafayette,
Louisiana and such other places as the Company may direct.
1.6 Indemnification. The Company shall
indemnify Consultant for all liabilities in connection with any
proceeding arising from services performed pursuant to this
Agreement, other than liability arising from the Consultants
gross negligence or willful misconduct.
1.7 Confidentiality of Company's Business.
Consultant acknowledges that the Company's business is highly
competitive and that the Company's books, records and documents,
the Company's technical information concerning its properties and
prospects, all comprise confidential business information and
trade secrets of the Company and are valuable, special, and
unique proprietary assets of the Company ("Confidential
Information"). Consultant further acknowledges that protection
of Company's Confidential Information against unauthorized
disclosure and use is of critical importance to the company in
maintaining its competitive position. Accordingly, Consulting
hereby agrees that he will not, at any time during or after the
term of this Agreement, make any disclosure of any Confidential
Information, or make any use thereof, except for the benefit of,
and on behalf of, the Company. However, the Consultant's
obligation under this Section 1.7 shall not extend to information
which is or becomes part of the public domain or is available to
the public by publication or otherwise than through the
Consultant. The provisions of this Section 1.7 shall survive the
termination of this Agreement. Money damages would not be
sufficient remedy for breach of this Section 1.7 by Consultant,
and the Company shall be entitled to specific performance and
injunctive relief as remedies for such breach or any threatened
breach. Such remedies for a breach of this Section 1.7 by the
Consultant, but shall be in addition to all remedies available at
law or in equity to the Company including the recovery of damages
from the Consultant. For the purposes of this paragraph, the
term Company shall also include affiliates of the Company.
1.8 Conflict of Interest. Consultant agrees to use
his best efforts, skill and abilities so long as Consultant's
Services are retained hereunder to promote the best interest of
Company and its business. As part of the consideration for the
compensation to be paid to Consultant hereunder, and as an
additional incentive for the Company to enter into this
Agreement, Company and Consultant agree to the noncompetitive
provisions of this Section 1.8. During the term of this
Agreement, Consultant agrees that, unless prior written approval
of the President of the Company is obtained, Consultant will not
directly or indirectly for himself or for others consult, advise,
counsel or otherwise assist any customer, supplier, or, as to
operations in China, a direct competitor of the Company or any
subsidiary which, in any manner, would have, or is likely to
have, an adverse effect upon the Company or any subsidiary.
Consultant understands that the foregoing restrictions may
limit Consultant's ability to engage in a business similar to the
Company's business during the period provided for above, but
acknowledges that Consultant will receive sufficiently high
remuneration and other benefits from the Company hereunder to
justify such restrictions. The Company shall be entitled to
enforce the provisions of this Section 1.8 by resorting to
appropriate legal and equitable action.
It is expressly understood and agreed that the Company and
Consultant consider the restrictions contained in this Section
1.8 to be reasonable and necessary for the purposes of preserving
and protecting the goodwill and Confidential Information and
proprietary information of the Company. Nevertheless, if any of
the aforesaid restrictions are found by a court having
jurisdiction to be unreasonable, or over broad as to geographic
area or time, or otherwise unenforceable, the parties intend for
the restrictions therein set forth to be modified by such court
so as to be reasonable and enforceable and, as so modified by the
court, to be fully enforced.
1.9 Independent Contractor:
(i) The parties hereby agree that the services
rendered by Consultant in the fulfillment of the terms
and obligations of this Agreement shall be as an
independent contractor and not as an employee, and with
respect thereto, Consultant is not entitled to the
benefits provided by the Company to its employees
including, but not limited to, group insurance and
participation in the Company s employee benefit and
pension plan. Further, Consultant is not an agent,
partner, or joint venture of the Company. Consultant
shall not represent himself to third persons to be
other than an independent contractor of the Company,
nor shall he permit himself to offer or offer or agree
to incur or assume any obligations or commitments in
the name of the Company or for the Company without the
prior written consent and authorization of the Company.
Consultant warrants that the services to be provided
hereunder will not cause of conflict with any other
duties or obligations of Consultant to third parties.
Consultant shall not subcontract or assign any of the
work to be performed hereunder without obtaining the
prior written consent of the Company, provided,
however, nothing contained herein shall prohibit
Consultant from incorporating and rendering services
hereunder as a corporation.
(ii) Consultant shall be responsible for payment of
all taxes including Federal, State and local taxes
arising out of the Consultant's activities under this
Agreement, including by way of illustration but not
limitation, Federal and State income tax, Social
Security tax, Unemployment Insurance taxes, and any
other taxes or business license fees as required.
1.10 Termination: This Agreement may be
terminated at any time by either party, without cause, and
without any liability to the other party, by providing the other
party thirty (30) days written notice of termination. In case of
termination of this Agreement under this provision, all
compensation under this Agreement shall cease except as to the
pro rata portion of the term of this Agreement that is prior to
the effective date of the termination.
ARTICLE II
Miscellaneous
2.1 Succession. This Agreement shall inure to
the benefit of and be binding upon the Company, its successors
and assigns, and upon Consultant. Consultant shall be prohibited
from assigning this Agreement without prior written approval of
the Company.
2.2 Notice. Any notice to be given to the
Company hereunder shall be deemed sufficient if addressed to the
Company in writing and personally delivered or mailed by
certified mail to its office at the address set forth above. Any
notice to be given to Consultant hereunder shall be sufficient if
addressed to it in writing and personally delivered or mailed by
certified mail to its address set forth above. Either party may,
by notice as aforesaid, designate a different address for the
receipt of notice.
2.3 Amendment. This Agreement may not be
amended or supplemented in any respect, except by a subsequent
written instrument entered into by both parties hereto.
2.5 Severability. In the event any provision of
this Agreement shall be held to be illegal, invalid or
unenforceable for any reasons, the illegality, invalidity, or
unenforceablity thereof shall not affect the remaining provisions
hereof, but such illegal, invalid, or unenforceable provision
shall be fully severable and this Agreement shall be construed
and enforced as if the illegal, invalid, or unenforceable
provision had never been included herein.
2.6 Headings. The titles and headings of
Articles and Sections are included for convenience of reference
only and are not to be considered in connection with the
construction or enforcement of the provisions hereof.
2.7 Governing Law. This Agreement shall be
governed in all respects by the laws of the State of Louisiana.
IN WITNESS WHEREOF, the parties have executed this
Agreement effective as of the 1st day of June, 1997.
XCL LTD.
By:___________________________
Title:__________________________
______________________________
R. THOMAS FETTERS
AGREEMENT
This Agreement is between William Shih Chiu Wang
("Wang"), a resident of Taipei, and XCL Ltd., a Delaware
corporation, on behalf of itself and all of its subsidiaries
(collectively, "XCL"). Except to the extent specifically
set forth herein, it supersedes all prior agreements between
Wang and XCL concerning compensation to Wang by XCL,
including, without limitation, the letter agreements dated
January 8, 1992 and June 3, 1992, from XCL and addressed to
and accepted by Wang, and is designed to resolve all
disagreements concerning past compensation.
Wang has been instrumental in XCL's obtaining projects
in China and in helping to develop those projects. Wang has
agreed to continue to assist with existing projects and to
help XCL obtain additional projects in China. This
agreement resolves all disagreements concerning prior
success fees due Wang, including, but not limited to, the
purchase of certain of his interests in the Zhao Dong Block,
and sets forth the exclusive methods by which Wang will be
compensated for his past and future contributions to XCL
projects in China.
1. Compensation. Wang is entitled to the following
compensation and interests in XCL or its projects:
a. Retainer. Wang shall be entitled to a cash
retainer in such amount and at such frequency as
the parties may agree from time to time.
b. Profits Interest in Zhao Dong. Wang is
entitled to an interest in Zhao Dong equal to 1.5%
of XCL's proceeds from the Zhao Dong Block, under
the terms of that agreement dated effective as of
May 1, 1993, and entitled Revenue Interest
Assignment, by and between XCL-China Ltd. and Wang
(the "Revenue Interest Agreement"). This
Agreement shall not alter or amend the Revenue
Interest Agreement, which shall remain in full
force an effect. Wang shall not be entitled to a
revenue interest in any future XCL projects unless
the parties negotiate and enter into a specific
written agreement granting such an interest.
c. Stock Grant. Wang shall receive 800,000
shares of Common Stock of XCL immediately, and
additional stock of XCL Ltd. in an amount equal to
the value of US $445,000. Upon execution of this
Agreement, XCL shall issue the 800,000 shares of
Common Stock. The remaining Common Stock with a
value of US $445,000 shall be issued to Wang from
time to time, as agreed by the parties, but in any
case, one-half of the balance shall be issued to Wang no
later than February 28, 1998, and the balance
shall be issued to Wang no later than December 31,
1998. Such additional stock shall be valued when
the stock is issued to Wang (based on the average
closing price of the stock over the 20 business
days immediately preceding date of issuance of the
stock). Common Stock issued pursuant to this
section shall not be registered under the US
securities laws, and XCL shall have no obligation
to register such stock. XCL shall have no
obligation to issue the stock hereunder, unless
the issuance of the shares would be exempt from
registration under the US federal and state
securities laws, and Wang shall provide XCL with
such representations and warranties, and agree to
such restrictions on transferability of the shares
as may be reasonable or customary for XCL to
require to establish the availability of such
exemptions from registration. The amounts payable
under this section are to resolve disagreements as
to the purchase of Wang's 3% interest in Zhao
Dong, and in cancellation of any right that Wang
may have had to participate on a similar basis in
any other current or future XCL projects.
d. Stock Warrants. XCL may grant warrants to
purchase its stock to Wang from time to time and
on such terms and conditions as XCL and Wang may
agree in writing from time to time. No offer of
warrants or warrant agreement shall be binding
unless and until it is reduced to writing and
approved by the Board of Directors of XCL Ltd.
e. Reimbursement of Expenses. XCL shall
reimburse such out of pocket expenditures that
Wang may incur in the performance of services
hereunder, provided that such expenses were
incurred in compliance with any XCL mandated
approval or documentation procedures then
applicable.
f. Health Insurance, Other Benefits. Wang is not
entitled to participate any XCL sponsored fringe
benefit plans, including the XCL health insurance
plan. In lieu of such participation, XCL shall
reimburse Wang for the cost of an individual
health insurance policy, up to the maximum of $600
per month.
g. $150,000 Promissory Note. The parties agree
that the $150,000 promissory note dated April 15,
1993 from Wang to XCL has been satisfied in full
by Wang, and XCL shall cancel said note and return
the same to Wang marked "paid". XCL has no
further obligation to advance funds to Wang under
that note or any related agreement. The
forgiveness of this note is to resolve
disagreements between Wang and XCL over the amount
of the Revenue Interest that Wang has in the Zhao
Dong Block, as described in subsection (b), above.
2. Independent Contractor. The parties agree that the
services rendered by Wang under this agreement shall be as
an independent contractor, and not an employee.
Accordingly, Wang is not entitled to benefits provided by
XCL to its employees. Further, Wang is not an agent,
partner or joint venturer of XCL's. Wang shall not
represent himself to third person to be other than an
independent contractor; he shall not offer or agree to incur
or assume any obligations or commitments in XCL's name
without the prior written consent and authorization of XCL.
Wang shall be free to perform services for others (whether
inside of or out side of China) provided that either such
services do not conflict with the interests of XCL, or, in
the case of a new oil or gas exploration or development
project, Wang has offered the project to XCL, and XCL has
declined to participate in the project, and has specifically
agreed that Wang may proceed with the project for his own
account, or for the account of others.
3. Conflict of Interest. Wang agrees to use his best
efforts, skill and abilities so long as he is providing he
services hereunder to promote the best interest of XCL and
its business. As part of the consideration for the
compensation to be paid to WANG hereunder, and as an
additional incentive for XCL to enter into this Agreement,
the parties agree that, during the term of this Agreement
and for a period of two (2) years following the termination
of this Agreement, Wang agrees that, unless he is given
prior written approval of XCL (which XCL may withhold for
any reason or no reason at all) Wang shall not directly or
indirectly, for himself or for others, consult, advise,
counsel or otherwise assist any business or venture (current
or potential) in any matter relating to the oil and gas
business in The Peoples' Republic of China in any manner
that could have an adverse effect upon XCL. It is expressly
understood and agreed that the parties consider the
restrictions contained in this section to be reasonable and
necessary for the purposes of preserving and protecting
XCL's goodwill and confidential and proprietary information.
The parties agree that money damages are inadequate to
compensate XCL for a breach of this section, and XCL shall
be entitled to enforce the provisions of the section by
resorting to appropriate legal and equitable action. If any
of the restrictions are found by a court having jurisdiction
to be unreasonable, or over broad as to geographic area or
time, or otherwise unenforceable, the parties intend for the
restrictions to be modified by the court so as to be
reasonable and enforceable to the maximum extent possible,
and, as so modified by the court, to be fully enforced.
4. Confidentiality. Wang acknowledges that XCL's
business is highly competitive and that XCL's books, records
and documents, XCL's technical information, geological
information, the names of and other information concerning
XCL's business affiliates, all comprise confidential
business information and trade secrets of XCL and are
valuable, special, and unique proprietary assets of XCL
("Confidential Information"). Wang further acknowledges
that protection of XCL's Confidential Information against
unauthorized disclosure and use is of critical importance to
XCL in maintaining its competitive position. Accordingly,
Wang hereby agrees that he will not, at any time during or
after the term of this Agreement, make any disclosure of any
Confidential Information, or make any use thereof, except
for the benefit of, and on behalf of, XCL. However, Wang's
obligation under this section shall not extend to
information which is or becomes part of the public domain or
is available to the public by publication or otherwise than
through Wang. The provisions of this section shall survive
the termination of this Agreement. Money damages would not
be sufficient remedy for breach of this section by Wang, and
XCL shall be entitled to specific performance and injunctive
relief as remedies for such breach or any threatened breach.
Such remedies for a breach of this section by Wang are not
exclusive, but shall be in addition to all remedies
available at law or in equity to XCL including the recovery
of damages from Wang. For the purposes of this paragraph,
the term XCL shall also include affiliates of XCL's.
IN WITNESS WHEREOF, the parties have executed this
Agreement effective as of the ____ day of ___________, 1997.
XCL LTD.
By:___________________
its:____________________
______________________
WILLIAM SHIH CHIU WANG
IN REM PROMISSORY NOTE
$100,000.00 August 1, 1997
Due: January 2, 2005 Lafayette, Louisiana
FOR VALUE RECEIVED, Benjamin B. Blanchet (the "Borrower"),
promises to pay to the order of XCL LTD., a Delaware corporation
(the "Lender"), at its office at 110 Rue Jean LaFitte, Lafayette,
Louisiana 70508, the principal sum of ONE HUNDRED THOUSAND AND
NO/100 ($100,000.00) DOLLARS, or so much thereof as may be
outstanding from time to time.
The aggregate outstanding principal shall bear interest at
six and one-half (6.5%) percent per annum from date hereof until
paid.
All payments of interest shall be computed on the per annum
basis of a year of 365 days or 366 days, as the case may be, for
the actual number of days (including the first day, but excluding
the last day) elapsed.
The Borrower shall repay the aggregate outstanding principal
in eight annual installments of $12,500.00 beginning on the 2nd
day of January 1998 and continuing on the 2nd day of each
succeeding January, and the Borrower shall pay the balance of all
outstanding principal at maturity on January 2, 2005. (Each
January 2 commencing January 2, 1998 through and including
January 2, 2005 is sometimes referred to herein as a "Payment
Date".) The Borrower shall pay interest on the aggregate
outstanding principal annually in arrears (together with payments
of principal) on each Payment Date. For so long as Borrower is
employed by Lender, payment of principal and interest shall be
made solely out of Bonus Funds (as defined below) paid to
Borrower by Lender as described below.
All payments and prepayments made by the Borrower hereunder
shall be made in lawful money of the United States to the Lender
in immediately available funds on the date that such payment is
required to be made. If the day for any payment or prepayment
hereunder falls on a day which is not a Business Day, then for
all purposes of this Note, the same shall be deemed to have
fallen on the next following Business Day, and such extension of
time shall in such case be included in the computation of
payments of interest For the purposes of this paragraph "Business
Day" shall mean a day other than a Saturday, Sunday or legal
holiday for commercial banks in Lafayette, Louisiana.
Lender has agreed to pay to Borrower on January 2 of each
year commencing on January 2, 1998 and ending on January 2, 2005,
a bonus in the amount of the principal and interest due hereunder
on that date (the "Bonus Funds"). For so long as Borrower is
employed by Lender, principal and interest due hereunder shall be
paid solely from such Bonus Funds and Borrower shall have no
personal liability for repayment of this Note from any source
other than such Bonus Funds. Lender does specifically covenant
and agree, for itself, its successors and assigns, that for so
long as Borrower is employed by Lender, Lender shall enforce
payment of this Note solely from Bonus Funds due Borrower by
Lender. These provisions are not intended as any release or
discharge of the indebtedness represented by this Note, but are
intended as a covenant not to sue.
The following event shall be considered an "Event of
Default" as that term is used herein: The Borrower fails to make
payment when due of any principal or interest installment on this
Note after Lender has terminated Borrower from employment with
Cause (as defined below) or after Borrower has resigned from
employment with Lender without Good Reason (as defined below) and
such failure to make payment shall continue unremedied for a
period of thirty (30) days after written notice thereof is given
by the Lender to the Borrower. Upon the happening of an Event of
Default (including the passage of the cure period), the Lender
may by written notice to the Borrower declare the entire
principal amount of this Note plus interest accrued hereon to be
immediately due and payable.
Any of the following events shall be considered an "Event of
Cancellation" as that term is used herein: (i) For so long as
Borrower is employed by Lender, Lender fails timely to pay
Borrower the Bonus Funds due Borrower from which Borrower is to
make payments under this Note, (ii) Lender shall terminate
Borrower from employment without Cause (as defined below),
(iii) Borrower shall resign from employment with Lender with Good
Reason (as defined below), or (iv) Borrower shall die or become
disabled. Upon the occurrence of any Event of Cancellation, this
Note shall automatically be cancelled and shall be of no further
force and effect. Upon the occurrence of any Event of
Cancellation, the Lender shall immediately mark this Note "Paid
in Full" and return it to Borrower and no further amounts shall
be due by Borrower to Lender hereunder including any interest
amounts that otherwise would have accrued since the last Payment
Date or any portion of the principal and/or interest payment that
otherwise would have been due at the next Payment Date. If
Borrower is required to bring judicial proceedings in order to
enforce the provisions hereof, Lender agrees to pay Borrower his
reasonable attorneys' fees in connection therewith.
As used herein, the Lender shall have "Cause" to terminate
Borrower's employment upon (i) the willful and continued failure
by the Borrower to substantially perform his duties under that
certain Employment Term Sheet by and between Borrower and Lender
dated August 1, 1997 (the "Employment Term Sheet") or that
certain Services Agreement by and between Borrower and Lender
dated August 1, 1997 (the "Services Agreement") (other than any
such failure resulting from the Borrower's incapacity due to
physical or mental illness), after written demand for substantial
performance is delivered by the Lender that specifically
identifies the manner in which the Lender believes the Borrower
has not substantially performed his duties, (ii) Borrower's
embezzlement of funds of the Lender or (iii) Borrower's
conviction of a felony after lapse of all appeals. For purposes
of this paragraph, no act, or failure to act, on the Borrower's
part shall be considered "willful" unless done or omitted to be
done, by him not in good faith and without reasonable belief that
his action or omission was in or not opposed to the best interest
of Lender. Notwithstanding the foregoing, Borrower shall not be
deemed to have been terminated for Cause under any circumstances
without (i) reasonable written notice to Borrower setting forth
the reasons for Lender's intention to terminate for Cause (the
"Initial Notice"), (ii) a thirty (30) day period following
Borrower's receipt of the notice to cure the alleged reasons
described in the Notice, (iii) a written notice to Borrower
following the thirty-day cure period referred to in the preceding
clause (ii) stating whether Lender continues to intend to
terminate for Cause and setting forth the reasons therefor (the
"Follow Up Notice"), (iv) an opportunity for the Borrower,
together with his counsel, following Borrower's receipt of the
Follow Up Notice, to be heard before a committee of three members
of Lender's board of directors and (v) delivery to the Borrower
of a Notice of Termination from a committee of three members of
Lender's board of directors finding that in the good faith
opinion of such committee, the Borrower was guilty of conduct set
forth above in clause (i), (ii) or (iii) of the preceding
sentence and specifying the particulars thereof in detail.
As used herein, Borrower shall have "Good Reason" to resign
from employment with Lender if (i) a change in control (as
defined below) of Lender shall take place at any time during the
twenty-four (24) months immediately preceding termination of
employment by the Borrower, (ii) the Lender fails to comply with
any material provision of this Note, the Employment Term Sheet or
the Services Agreement, (iii) the Lender purports to terminate
Borrower's employment other than pursuant to a valid Notice of
Termination following the procedure set forth in the preceding
paragraph, (iv) Borrower's duties, authority or responsibilities
are materially altered (as reasonably determined by Borrower)
from those described in the Employment Term Sheet, (v) there is a
material change from the date of this Note in the manner in which
Lender is operated or in Lender's business, (vi) Lender has taken
or intends to take actions that Borrower, in his reasonable
judgment, believes are illegal, immoral, unethical or not in the
best interests of Lender or its shareholders, (vii) Borrower has
a conflict of interest in his obligations to Lender or to a third
party in a matter that was not originally accepted by Borrower in
violation of the Services Agreement that, in Borrower's
reasonable judgment, can only reasonably be cured by his
resignation from employment with Lender, or (viii) Borrower's
health should become impaired to an extent that makes his
continued performance of his duties hereunder hazardous to his
physical or mental health or to his life.
For purposes of this Note, a "Change in Control" of the
Lender shall mean a change of control of a nature that would be
required to be reported in response to item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities and Exchange
Act of 1934 (the "Exchange Act"), provided that, without
limitation, such a change in control shall be deemed to have
occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of Lender
representing 30% or more of the combined voting power of Lender's
then outstanding securities.
As used herein, Borrower shall be considered disabled if, as
a result of his incapacity due to physical or mental illness, he
shall have been absent from his duties as described in the
Employment Term Sheet for the entire period of ninety (90)
consecutive days.
Lender shall have no right to set off any funds of the
Borrower (other than Bonus Funds as defined herein) in the
possession of Lender against any amounts due by Borrower to
Lender hereunder.
This Note shall be governed by and construed under the laws
of the State of Louisiana.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
executed and delivered as of the day first written above.
___________________________________
Benjamin B. Blanchet
SERVICES AGREEMENT
This Services Agreement is between XCL Ltd., a
Delaware Corporation ("XCL"), and Benjamin B. Blanchet d/b/a
The Law Offices of Benjamin B. Blanchet ("Blanchet") for the
provision of legal counsel services by Blanchet to XCL and
its subsidiaries. By separate agreement, Blanchet is
engaged as an officer/employee of XCL with a commitment to
devote 80 hours per month to XCL in that capacity. To the
extent that Blanchet devotes time to XCL in excess of that
amount, such services will be subject to the terms and
conditions of this agreement as follows.
1. Blanchet is hereby engaged to act as
counsel to XCL to perform such services as XCL may request
of him in that capacity from time to time, provided that
Blanchet shall be compensated for no more than 80 hours per
month under this agreement in any calendar month. Hours in
excess of 80 per calendar month shall carry forward to
future months during the same calendar year. Any excess
hours at the end of a calendar year may be considered by the
Compensation Committee of the Board of Directors of XCL in
determining if any additional compensation should be paid to
Blanchet for the year in which such excess hours were
incurred (which determination is in the complete discretion
of such Committee). Excess hours will not carry forward
from one year to the next. Amounts due under this agreement
shall be paid to Blanchet monthly on the last business day
of the month for the time devoted under this agreement that
month. If any amounts due under this agreement in any month
are in dispute, XCL shall timely pay all amounts not
reasonably in dispute and if all amounts due under this
agreement in any month are in dispute, XCL shall timely pay
the amounts it reasonably estimates to be due for such month
and XCL shall use its best efforts to resolve any such
disputes at the earliest practicable date.
2. At the effective time of this agreement,
Blanchet's hourly rate is $250. Compensation for services
under this agreement will be at the rate of $175 per hour.
In consideration for this reduced hourly rate, XCL shall
provide Blanchet with furnished office space and supplies,
reasonable secretarial assistance, a reasonable library
allowance, professional liability insurance in an amount
agreed to by the parties, CLE, bar dues and other similar
matters. In addition, Blanchet shall be entitled to
reimbursement for expenses incurred by him in the
performance of services under this agreement.
3. Except to the extent prohibited by, and
subject to the requirements of, law (including any fiduciary
obligations Blanchet may owe XCL as an officer and director
thereof) or the Louisiana Rules of Professional
Responsibility, Blanchet shall be free to represent other
clients and engage in business for his own account (which
shall be covered by the professional liability insurance
paid for by XCL), including representation of other clients
in China, including representation of groups or entities
that have officers or directors of XCL as principles. In
such cases, Blanchet shall have no obligation to disclose
such representations to XCL except as may be required by
applicable law, the Louisiana Rules of Professional
Responsibility, or policies adopted by XCL's Board of
Directors from time to time. Further, in such cases,
subject to applicable law and the Louisiana Rules of
Professional Responsibility, Blanchet shall have no
obligation to disclose to XCL any information received by
him in connection with such representation or business
undertaking, and XCL acknowledges and understands that
Blanchet may be bound by confidentiality obligations
prohibiting him from disclosing any information about such
matters to XCL.
4. If Blanchet reasonably requests a waiver of
conflict of interest from XCL to enable him to represent
another client, XCL will not unreasonably withhold its
consent to such waiver of conflict of interest if XCL's
Executive Committee determines that granting such waiver
would not cause damage to or otherwise prejudice XCL's
business, financial or other operations or prospects.
5. In keeping time under this agreement,
Blanchet shall report to XCL the number of hours per month
that he devoted to XCL both under this agreement and as an
employee and shall identify any reimbursable expenses and
provide copies of receipts or other backup information with
respect thereto (other than for de minimus expenses) as XCL
may reasonably request. Hours shall first be credited
against his obligations as an officer/employee of XCL (as
described in that certain Employment Term Sheet dated August
1, 1997) and then under this agreement. Except to the
extent reasonably requested to do so from time to time by
XCL, Blanchet shall not be required to allocate the time he
devotes to XCL under this agreement to specific XCL
projects.
6. XCL shall not be permitted to set off any
amounts owed Blanchet pursuant to this agreement against
amounts owed by Blanchet to XCL without Blanchet's prior
written consent.
7. This agreement may be terminated by either
party at any time with or without cause.
8. This agreement shall be construed in
accordance with and governed by the laws of the State of
Louisiana.
Executed as of the 1st day of August, 1997.
XCL LTD.
By:________________________________
Name:______________________________
Title:_____________________________
___________________________________
Benjamin B. Blanchet
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of XCL Ltd. and Subsidiaries for the quarter
ended September 30, 1997, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 77,345
<SECURITIES> 0
<RECEIVABLES> 163
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 77,800
<PP&E> 49,913
<DEPRECIATION> 977
<TOTAL-ASSETS> 159,423
<CURRENT-LIABILITIES> 122,200
<BONDS> 0
0
1,066
<COMMON> 2,988
<OTHER-SE> 30,524
<TOTAL-LIABILITY-AND-EQUITY> 159,423
<SALES> 52
<TOTAL-REVENUES> 52
<CGS> 1,028
<TOTAL-COSTS> 1,028
<OTHER-EXPENSES> (542)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,067
<INCOME-PRETAX> (417)
<INCOME-TAX> 0
<INCOME-CONTINUING> (417)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (417)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
GLOSSARY OF TERMS
The following is a glossary of commonly used terms in the
oil and gas industry which is being provided for ease of
reference and convenience purposes only.
"area of mutual interest" or "AMI" - An agreement by which
parties attempt to describe a geographical area within which
they agree to share certain existing and additional leases
acquired by any of them in the future.
"APO/BPO" - After payout/before payout.
"Btu/MMBtu" - British Thermal Units, a measure of the
heating value of fuel. MMBtu stands for one million Btu.
"Bbls/MBbls" - A Bbl. or barrel is 42 U.S. gallons of crude
oil or condensate measured at 60 degrees Fahrenheit. MBbls
stands for one thousand Bbls.
"carried interest" - A fractional working interest in an oil
and gas lease, the holder of which is carried and has no
liability for a portion or all of the attirubtable
development and operating costs. The person advancing the
costs is the carrying party; the other is the carried party.
"casing point" - The time when the operator recommends that
a completion attempt be made, or when the well is plugged
and abandoned without a completion attempt being made.
"choke/choke size" - A pipe section having an orifice for
restricting and controlling the flow of oil and gas. Choke
size is the orifice diameter and is commonly expressed in
64ths of an inch.
"continuous drilling" - A lease clause providing that
drilling of another well be commenced within a specified
time after completion of the preceding well. As a general
rule, if this is not done, all undeveloped acreage must be
released.
"development" - The drilling of a well within the productive
area of an oil or gas reservoir, as indicated by reasonable
interpretation of available data, with the object of
completing the well in that reservoir.
"exploration" - Operations conducted in search of
undiscovered oil, gas and/or condensate.
"farmout/farmin" - An agreement providing for assignment of
a lease. A typical characteristic of a farmout is the
obligation of the assignee to conduct drilling operations on
the assigned acreage as a pre-requisite to completion of the
assignment. The assignor will usually reserve some type of
interest in the lease. The transaction is characterized as
a farmout to the assignor and farmin to the assignee.
"field" - An area within a lease or leases where production
of oil, gas and/or condensate has been established and which
has been so designated by the appropriate regulatory
authority.
"gathering facilities" - Pipelines and other facilities
used to collect gas from various wells and bring it by
separate and individual lines to a central point where it is
delivered into a single line.
"gathering gas" - The first taking or the first retaining of
possession of gas for transmission through a pipeline, after
the severance of such gas, and after the passage of such gas
through any separator, drip, trap or meter that may be
located at or near the well. In the case of gas containing
gasoline or liquid hydrocarbons that are removed or
extracted in commercial quantities at a plant by scrubbing,
absorption, compression, or any similar process, the term
means the first taking or the first retaining of possession
of such gas for transmission through a pipeline after such
gas has passed through the outlet of such plant. The act of
collecting gas after it has been brought from the earth.
"gathering line" - Pipes used to transport oil or gas from
the lease to the main pipeline in the area. In the case of
oil, the lines run from the lease tanks to a central pump
station at the beginning of the main pipeline. In the case
of gas, the flow is continuous from the well head to the
ultimate consumer, since gas cannot be stored. Gathering
lines collect gas under fluctuating pressures which are then
regulated by regulating stations before the gas is
introduced into trunk or transmission lines.
"gathering system" - The gathering lines, pumps, auxiliary
tanks (in the case of oil), and other equipment used to move
oil or gas from the well site to the main pipeline for
eventual delivery to the refinery or consumer, as the case
may be. In the case of gas, the gathering system includes
the processing plant (if any) in which the gas is prepared
for the market.
"gross/net" - The term "gross" is used when reference is
made, for example, to the total acreage of a lease. The
term "net" is used when reference is made to the working
interest or net revenue interest in a lease of one
particular leaseholder. The same term may be applied to a
leaseholder's interest in reserves and/or production from a
lease.
"held by production" or "HBP" - A provision in a lease to
the effect that such lease will be kept in force as long as
there is production from the lease in paying quantities.
"lease bonus" - A cash payment by the lessee for the
execution of an oil and gas lease by the mineral owner.
"lease" or "leasehold" - An interest for a specified term in
property allowing for the exploration for and production of
oil, gas and/or condensate.
"log" - A record of the formations penetrated by a well,
from which their depth, thickness, rock properties and (if
possible) contents may be obtained.
"Mcf/MMcf/Bcf" - Mcf stands for one thousand cubic feet of
gas, measured at 60 degrees Fahrenheit and at atmospheric
pressure of 14.7 pounds per square inch. MMcf stands for one
million cubic feet of gas. Bcf stands for one million Mcf.
"net revenue interest" or "NRI" - The share of revenues to
which the holder of a working interest is entitled upon
fulfilling the obligations, after deduction of all
royalties, overriding royalties or similar burdens,
attributable to his working interest.
"operator" - The person or company having the operational
management responsibility for the drilling of or production
from any oil, gas and/or condensate well.
"overriding royalty" - A form of royalty, entitling the
holder to receive a percentage of oil, gas and/or condensate
produced from the wells on a specified lease, or the
revenues arising from the sale thereof, free of all expenses
arising therefrom, save for production taxes. Generally, the
rights accruing to working interest holders are subject to
the rights of overriding royalty holders and any rights of
overriding royalty holders terminate upon cancellation or
reversion of the underlying lease.
"pay" - The geological deposit in which oil, gas and/or
condensate is found in commercial quantities.
"payout" - Generally, that point in time, determined by
agreement, when a person has recouped his investment in the
drilling, development, equipping and operating of a well or
wells.
"permeability" - A measure of the resistance offered by rock
to the movement of fluids through it.
"porosity" - The volume of the pore spaces between mineral
grains as compared to the total rock volume. Porosity is a
measure of the capacity of rock to hold oil, gas and water.
"probable reserves" - The estimated quantities of
commercially recoverable hydrocarbons associated with known
accumulations, which are based on engineering and geological
data similar to those used in the estimates of proved
reserves but, for various reasons, these data lack the
certainty required to classify the reserves as proved. In
some cases, economic or regulatory uncertainties may dictate
the probable classification. Probable reserves are less
certain to be recovered than proved reserves.
"prospect" - One lease comprising, or several leases which
together comprise, a geographical area believed to contain
commercial quantities of oil, gas and/or condensate.
"prospective" - A geographical area or structure believed to
contain commercial quantities of oil, gas and/or condensate.
"proved reserves" - Estimated quantities of crude oil,
condensate, natural gas, and natural gas liquids that
geological and engineering data demonstrate with reasonable
certainty to be commercially recoverable in the future from
known reservoirs under existing conditions using established
operating procedures and under current governmental
regulations.
"psig" - Pounds per square inch, gauge.
"rental payment" - A sum of money payable to the lessor by
the lessee for the privilege of deferring the commencement
of drilling operations or the commencement of production
during the primary term of the lease.
"reserves" - The estimated value of oil, gas and/or
condensate which is economically recoverable. Reserves may
be categorized as proved or probable.
"reservoir" - A porous, permeable, sedimentary rock
containing commercial quantities of oil, gas and/or
condensate.
"salt dome" - A mass or plug of salt which has pushed or
domed up sedimentary beds around it; this type structure is
favorable to oil and gas accumulation.
"sand" - A sedimentary rock consisting mostly of sand
grains.
"shut-in royalty" - A payment made when a gas well, capable
of producing in paying quantities, is shut-in for lack of a
market for the gas.
"structure" - A configuration of subsurface rock formations
considered, on the basis of geological or geographical
interpretation, to be capable of containing a reservoir.
"target depth" - The primary geological formation or depth
identified in an agreement applicable to the relevant well
or wells.
"test well" - An exploratory well.
"tight formation" - A zone of relatively low permeability
and thus low well productivity. Wells in such zones usually
require fracturing or other stimulation. Typically, the
productive capacity of a new well completed in a tight zone
declines rapidly for several months or longer after
completion.
"working interest" or "WI" - An interest in a lease carrying
the obligation to bear a proportion of drilling and
operating costs and the right to receive a proportion of the
production or gross revenues attributable thereto.
"workover" - Remedial operations on a well with the
intention of restoring or increasing production.
