SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) May 20, 1997
__________________________________________
XCL LTD.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or other Jurisdiction of Incorporation)
1-10669 51-0305643
(Commission File Number) (I.R.S. Employer
Identification Number)
110 Rue Jean Lafitte
Lafayette, Louisiana 70508
(Address of Principal Executive Offices)
318-237-0325
(Registrant's Telephone Number, Including Area Code)
Item 5. Other Events.
On May 20, 1997, the Company sold through Jefferies &
Company, Inc. ("Jefferies"), 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
Sock 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"). The Notes and the Note
Warrants will not be separately transferable until the date which
is the earlier of (i) August 17, 1997 or (ii) such date as
Jefferies in its discretion deems appropriate.
Concurrently, the Company also offered through Jefferies, in
an unregistered offering to qualified institutional buyers and
accredited institutional investors (the "Concurrent 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.
The Amended Series A Preferred Stock and Equity Warrants will not
be separately transferable until the date which is the earlier of
(i) October 16, 1997 or (ii) such date as the Company in its
discretion deems appropriate.
Jefferies was the initial purchaser ("Initial Purchaser") in
connection with the Note Offering and Concurrent Equity Offering
(referred to together as the "Offerings") for which it was paid
usual and customary compensation as well as reimbursement for its
out-of-pocket expenses in the Offerings.
Interest on the Notes will be 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.
Prior to the issuance of the Notes, the Company had
approximately $32.3 million aggregate principal amount of
existing full recourse indebtedness (the "Existing Secured
Debt"), collateralized by substantially all of the outstanding
capital stock of XCL-China Ltd., the Company's principal
operating subsidiary ("XCL-China"). Initially, the Notes will be
secured by all of the gross proceeds of the Offering. A portion
of such gross proceeds (approximately $14.6 million) will be
segregated into a separate account (the "Capitalized Interest
Account") to pay interest on the Notes through November 1, 1998.
If certain conditions are met, the collateral for the Notes
(exclusive of the amount in the Capitalized Interest Account)
will be released and used to repay the Existing Secured Debt, to
fund the Company's China operations, and for additional working
capital for general corporate purposes, the Notes will then be
secured by a pledge of all of the outstanding capital stock of
XCL-China, and XCL-China will guarantee the Notes on a senior
basis. If such conditions do not occur prior to November 1,
1997, however, the Notes will be mandatorily redeemed on November
30, 1997, at a redemption price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest to the date of
redemption. Any remaining unpaid amount in respect of the Notes
shall become a claim against the Company subordinate in right of
payment to the Existing Secured Debt.
The Note Warrants will entitle the holders thereof to
purchase in the aggregate 96,000,000 shares of the Common Stock,
or approximately 12.5% of the outstanding Common Stock, at the
closing of this Offerings, on a fully diluted basis, assuming the
exercise of all the Note Warrants. The Note Warrants will be
exercisable at any time after the later of the first anniversary
of the issue date or such date on which the Company has reserved
or has available a sufficient number of shares of its Common
Stock to permit exercise of all the outstanding Note Warrants
("Initial Note Warrant Exercise Date") and until 5:00 p.m. New
York City time on the seventh anniversary of the issue date, at
an initial exercise price of $0.2063 per share, subject to
adjustment . If the Initial Note Warrant Exercise Date does not
occur by May 20, 1998, then each Note Warrant will automatically
convert into the right to purchase one share of Amended Series A
Preferred Stock at an exercise price of $34.00 per share.
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.
The Equity Warrants will entitle the holders thereof to
purchase in the aggregate 96,176,586 shares of the Common Stock,
or approximately 12.5% of the outstanding Common Stock at the
closing of the Offerings, on a fully diluted basis, assuming the
exercise of all the Equity Warrants. The Equity Warrants are
exercisable at any time after the later of the first anniversary
of the issue date or such date on which the Company has reserved
or has available a sufficient number of shares of its Common
Stock to permit exercise of all outstanding Equity Warrants
("Initial Equity Warrant Exercise Date") and until 5:00 p.m. New
York City time on the seventh anniversary of the issue date, at
an initial exercise price of $0.2063 per share, subject to
adjustment. If the Initial Equity Warrant Exercise Date does not
occur by May 20, 1998, then each Equity Warrant will
automatically convert into the right to purchase one share of
Amended Series A Preferred Stock at an exercise price of $34.00
per share. In the event the appropriate Chinese governmental
authorities fail to approve the overall development plan for the
Zhao Dong Block in the shallow waters of the Bohai Bay in which
the Company has an interest, on or prior to February 1, 1998,
then the holders of the Equity Warrants will have the right to
require the Company to purchase on March 2, 1998, one share of
Amended Series A Preferred Stock for each Equity Warrant such
holder owns, at a price of $85.00 per share, plus accrued and
unpaid dividends to the purchase date.
The securities issued in the Note Offering and in the
Concurrent Equity Offering are "restricted securities" as defined
in Rule 144 under the Securities Act of 1933, as amended. The
Note Units and Equity Units, and upon separation, the Notes,
Amended Series A Preferred Stock, Note Warrants and Equity
Warrants are eligible for trading in the Private Offering,
Resales and Trading through Automated Linkage Market of the
National Association of Securities Dealers, Inc. Holders will
also be entitled to certain registration rights with respect to
their securities. The interest rate on the Notes is subject to
increase under certain circumstances if the Company is not in
compliance with its registration obligations to the Note holders.
The Company agreed to issue to Jefferies in connection with
the Note Offering a total of 15,006 warrants to purchase
19,207,680 shares of Common Stock at an initial exercise price of
$0.2063 per share. Of such warrants, 2,251 will be issued
directly to a finder, who, will also receive from the Company
$295,000 in cash, and from the Initial Purchaser, 5,882 of the
Units being issued in the Concurrent Equity Offering.
Proceeds of the Concurrent Equity Offering, net of
commissions and expenses, were used to repay certain indebtedness
and the remainder added to the working capital of the Company.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
INDEX TO EXHIBITS
Exhibit No. Description
Instruments defining the rights of Security holders:
4.1 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").
4.2 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").
4.3 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.
4.4 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.
4.5 Form of Designation of Amended Series A Preferred Stock
dated May 19, 1997.
4.6 Form of Amended Series A Preferred Stock certificate.
4.7 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.
4.8 Form of Global Unit Certificate for 293,765 Units consisting
of Amended Series A Preferred Stock and Warrants to Purchase
Shares of Common Stock.
4.9 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.
Material Contracts:
10.1 Form of Indenture dated as of May 20, 1997, between the
Company, as Issuer and Fleet National Bank, as Trustee
("Indenture").
10.2 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).
10.3 Form of Pledge Agreement dated as of May 20, 1997, between
the Company and Fleet National Bank, as Trustee (Exhibit C
to the Indenture).
10.4 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).
10.5 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).
10.6 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).
10.7 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).
10.8 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.
10.9 Form of Restated Forbearance Agreement dated effective as of
May 20, 1997, between the Company, XCL-Texas, Inc. and ING
(U.S.) Capital Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
XCL LTD.
June 3, 1997 /s/ David A. Melman
________________________ By:_______________________________
Date David A. Melman
Executive Vice President
XCL Ltd.
75,000 Units
Consisting of
$75,000,000 13.50% Senior Secured Notes due May 1, 2004
with
Common Stock Purchase Warrants
PURCHASE AGREEMENT
May 13, 1997
JEFFERIES & COMPANY, INC.
Two Houston Center
909 Fannin St., Suite 3100
Houston, Texas 77010
Ladies and Gentlemen:
XCL Ltd., a Delaware corporation (the "Company"), and
XCL-China Ltd., a British Virgin Islands company ("XCL-
China"), hereby confirm their agreement with you (the
"Initial Purchaser"), as set forth below.
1. The Securities. Subject to the terms and conditions
herein contained, the Company shall issue and sell to the
Initial Purchaser 75,000 units (each a "Unit" and
collectively, the "Units"), each consisting of $1,000
principal amount of its 13.50% Senior Secured Notes due May
1, 2004, Series A (the "Senior Notes") and one warrant
(collectively, the "Warrants") to purchase initially 1,280
shares of the Company's common stock, par value $0.01 per
share (the "Common Stock"), at an initial purchase price of
$0.2063 per share. The Senior Notes are to be issued under
an indenture (the "Indenture") to be dated as of the Closing
Date (as defined in Section 3 below) by and between the
Company and Fleet National Bank, as trustee (the "Trustee").
Pursuant to a Cash Collateral and Disbursement Agreement
(the "Disbursement Agreement") to be entered into effective
as of the Closing Date among the Company, the Trustee, Fleet
National Bank, as disbursement agent (the "Disbursement
Agent"), and Herman J. Schellstede & Associates, Inc., as
representative for the holders of the Senior Notes (the
"Representative"), the proceeds from the sale of the Units
(including an amount equal to the Initial Purchaser's
discount) will be placed in an account (the "Cash Collateral
Account"), to be held and invested by the Disbursement Agent
in Cash Equivalents (as defined in the Indenture) at the
discretion of the Company. Interest and other income, if
any, earned on the invested proceeds (together with such
Cash Equivalents and proceeds, the "Collateral") will be
added to the balance of the Cash Collateral Account.
Pursuant to the Indenture and the Security Agreement, Pledge
and Financing Statement to be entered into by the Company
and the Trustee effective as of the Closing Date (the
"Security Agreement"), the Company will grant and pledge to
the Trustee, for the equal and ratable benefit of the Senior
Noteholders, a security interest in and first lien on the
Collateral to secure the performance of the obligations of
the Company under the Indenture and the Senior Notes.
Simultaneously with the disbursement of the Collateral to
the Company, and as a condition to such disbursement,
(i) the Company and XCL-China and, under certain
circumstances, certain other subsidiaries of the Company,
will execute and deliver to the Trustee a supplement to the
Indenture pursuant to which XCL-China and any such other
subsidiary (upon execution and delivery of such supplemental
indenture, each being called a "Subsidiary Guarantor") shall
guarantee, on a senior basis, to each Senior Noteholder and
the Trustee, the performance of the Company's obligations
under the Indenture and the Senior Notes (each such
guarantee being called herein a "Guarantee") and (ii) the
Company will execute and deliver to the Trustee a Pledge
Agreement (the "Pledge Agreement", which together with the
Disbursement Agreement and the Security Agreement, as they
may be in effect from time to time, are collectively
referred to hereinafter as the "Security Documents")
pursuant to which the Company will grant and pledge to the
Trustee, for the equal and ratable benefit of the Senior
Noteholders, a security interest in all of the outstanding
capital stock of XCL-China and, under certain circumstances,
other subsidiaries of the Company to secure the performance
of the Company's obligations under the Indenture and the
Senior Notes. The Warrants are to be issued under a warrant
agreement of the Company to be dated as of the Closing Date
(the "Warrant Agreement") for the benefit of the Senior
Noteholders from time to time of the certificates evidencing
the Warrants. The shares of Common Stock issuable upon
exercise of the Warrants are herein referred to as the
"Warrant Shares." The Senior Notes, the Guarantee (when
issued), the Warrants, the Additional Warrants (as defined
in Section 3 below), the Warrant Shares, the Additional
Warrant Shares (as defined in Section 3 below) and the Units
are collectively referred to herein as the "Securities."
The Securities are being offered and sold to the
Initial Purchaser without being registered under the
Securities Act of 1933, as amended (the "Act"), in reliance
on exemptions therefrom.
In connection with the sale of the Securities, the
Company has prepared a preliminary offering memorandum dated
April 28, 1997 (the "Preliminary Memorandum"), and a final
offering memorandum dated May 13, 1997 (the "Final
Memorandum"; the Preliminary Memorandum and the Final
Memorandum each herein being referred to as a "Memorandum"),
setting forth a description of the terms of the Securities
and the Security Documents, the terms of the offering of the
Securities, and a description of the business of the Company
and XCL-China.
The Initial Purchaser and its direct and indirect
transferees of the Securities will be entitled to the
benefits of a registration rights agreement, substantially
in the form attached hereto as Exhibit A (the "Registration
Rights Agreement"), pursuant to which the Company shall
agree, among other things, (i) to file a registration
statement (the "Registration Statement") with the Securities
and Exchange Commission (the "Commission") registering the
Senior Notes or the Exchange Notes (as defined in the
Registration Rights Agreement) under the Act and (ii) to
grant certain "piggy-back" registration rights to the
holders of the Warrant Shares.
2. Representations and Warranties. The Company and XCL-
China, jointly and severally, represent and warrant to and
agree with the Initial Purchaser that:
(a) Neither the Final Memorandum, nor any amendment
or supplement thereto, as of the date thereof and at all
times subsequent thereto up to the Closing Date, contained
or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the
representations and warranties set forth in this Section
2(a) do not apply to statements or omissions made in
reliance upon and in conformity with information relating to
the Initial Purchaser furnished to the Company or XCL-China
in writing by the Initial Purchaser expressly for use in the
Final Memorandum or any amendment or supplement thereto.
(b) As of the Closing Date, the Company will have
the authorized capitalization set forth in the Final
Memorandum; all of the outstanding shares of capital stock
of the Company and XCL-China have been, and as of the
Closing Date will be, duly authorized and validly issued,
are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights; except as set
forth in the Final Memorandum, all of the outstanding shares
of capital stock of XCL-China are, and as of the Closing
Date will be, owned, directly or indirectly, by the Company,
free and clear of all liens, encumbrances, equities and
claims or restrictions on transferability (other than those
imposed by the Act and the securities or "Blue Sky" laws of
certain jurisdictions) or voting; except as set forth in the
Final Memorandum, there are no outstanding (i) options,
warrants or other rights to purchase from the Company or XCL-
China, (ii) agreements or other obligations of the Company
or XCL-China to issue or (iii) other rights to convert any
obligation into, or exchange any securities for, in the case
of each clause (i) through (iii) shares of capital stock of
the Company or XCL-China. The Company does not have any
Subsidiaries (as defined in the Indenture) except for XCL-
China and the other corporations identified in Exhibit B
hereto; except for the capital stock of the Subsidiaries
identified in Exhibit B hereto and as otherwise disclosed in
the Final Memorandum, the Company does not own, directly or
indirectly, any shares of capital stock or any other equity
or long-term debt securities or have any equity interest in
any firm, partnership, joint venture or other entity.
(c) Each of the Company and its Subsidiaries has
been duly incorporated, is validly existing and is in good
standing as a corporation under the laws of its jurisdiction
of incorporation, with all requisite corporate power and
authority to own its properties and conduct its business as
now conducted, and as described in the Final Memorandum;
each of the Company and its Subsidiaries is duly qualified
to do business as a foreign corporation in good standing in
all other jurisdictions where the ownership or leasing of
its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified
would not, individually or in the aggregate, have a material
adverse effect on the general affairs, management, business,
condition (financial or otherwise), prospects or results of
operations of the Company and its Subsidiaries, taken as a
whole (any such event, a "Material Adverse Effect").
(d) The Company has all requisite corporate power
and authority to execute, deliver and perform each of its
obligations under the Senior Notes, the Exchange Notes and
the Private Exchange Notes (as defined in the Registration
Rights Agreement). The Senior Notes, the Exchange Notes and
the Private Exchange Notes have each been duly and validly
authorized by the Company and, when executed by the Company
and authenticated by the Trustee in accordance with the
provisions of the Indenture and, in the case of the Senior
Notes, when delivered to and paid for by the Initial
Purchaser in accordance with the terms of this Agreement,
will have been duly executed, issued and delivered and will
constitute valid and legally binding obligations of the
Company, entitled to the benefits of the Indenture and the
Intercreditor Agreement (as defined in the Final Memorandum)
and enforceable against the Company in accordance with their
terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter
in effect relating to creditors' rights generally and,
(ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought.
(e) The Company has all requisite corporate power
and authority to execute, deliver and perform each of its
obligations under the Indenture, the Intercreditor Agreement
and the Security Documents. The Indenture meets the
requirements for qualification under the Trust Indenture Act
of 1939, as amended (the "TIA"). The Indenture, the
Intercreditor Agreement and the Security Documents have been
duly and validly authorized by the Company and, when
executed and delivered by the Company (assuming the due
authorization, execution and delivery by each other party
thereto), each will constitute a valid and legally binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other
similar laws now or hereafter in effect relating to
creditors' rights generally, (ii) general principles of
equity and the discretion of the court before which any
proceeding therefor may be brought and (iii), in the case of
the Security Documents, federal or state securities laws or
principles of public policy affecting enforcement of rights
to indemnity or contribution.
(f) The Company has all requisite corporate power
and authority to execute, deliver and perform its
obligations under the Registration Rights Agreement. The
Registration Rights Agreement has been duly and validly
authorized by the Company and, when executed and delivered
by the Company (assuming the due authorization, execution
and delivery by the Initial Purchaser), will constitute a
valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its
terms, except that (A) the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now
or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor
may be brought and (B) any rights to indemnity or
contribution thereunder may be limited by federal and state
securities laws and public policy considerations.
(g) Subject to the availability of a sufficient
number of authorized but unissued or treasury shares to
permit the exercise of the outstanding Warrants and
Additional Warrants, the Company has all requisite corporate
power and authority to execute, deliver and perform each of
its obligations under the Warrant Agreement. The Warrant
Agreement has been duly and validly authorized by the
Company and, subject to the availability of a sufficient
number of authorized but unissued or treasury shares to
permit the exercise of the outstanding Warrants and
Additional Warrants, when executed and delivered by the
Company, will constitute a valid and legally binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other
similar laws now or hereafter in effect relating to
creditors' rights generally, (ii) general principles of
equity and the discretion of the court before which any
proceeding therefor may be brought, and (iii) federal or
state securities laws or principles of public policy
affecting enforcement of rights to indemnity or
contribution.
(h) Subject to the availability of a sufficient
number of authorized but unissued or treasury shares to
permit the exercise of the outstanding Warrants and
Additional Warrants, the Company has all requisite corporate
power and authority to execute, deliver and perform each of
its obligations under the Warrants and the Additional
Warrants. The Warrants and the Additional Warrants have
been duly and validly authorized by the Company and, when
executed by the Company and countersigned by the Warrant
Agent in accordance with the provisions of the Warrant
Agreement and when delivered to and paid for (in the case of
the Warrants) by the Initial Purchaser in accordance with
the terms of this Agreement, will have been duly executed,
issued and delivered and, subject to the availability of a
sufficient number of authorized but unissued or treasury
shares to permit the exercise of the outstanding Warrants
and Additional Warrants, will constitute valid and legally
binding obligations of the Company, entitled to the benefits
of the Warrant Agreement and enforceable against the Company
in accordance with their terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other
similar laws now or hereafter in effect relating to
creditors' rights generally, (ii) general principles of
equity and the discretion of the court before which any
proceeding therefor may be brought and (iii) federal or
state securities laws or principles of public policy
affecting enforcement of rights to indemnity or
contribution.
(i) The Warrant Shares and the Additional Warrant
Shares, upon becoming available for issuance upon the
exercise of the Warrants and the Additional Warrants in
accordance with their respective terms, will have been duly
and validly authorized for issuance by the Company and, when
issued in accordance with the terms and conditions contained
in the Warrant Agreement upon exercise of the Warrants and
upon exercise of the Additional Warrants, the Warrant Shares
and the Additional Warrant Shares, as the case may be, will
be duly authorized, validly issued, fully paid and non-
assessable and will not be subject to any preemptive or
similar rights. The Warrant Shares and the Additional
Warrant Shares, as the case may be, upon becoming available
for issuance upon the exercise of the Warrants and the
Additional Warrants in accordance with their respective
terms, will have been duly reserved for issuance in
accordance with the terms of the Warrants, the Additional
Warrants and the Warrant Agreement, as the case may be.
(j) The Company and XCL-China have all requisite
corporate power and authority to execute, deliver and
perform each of their obligations under this Agreement and
to consummate the transactions contemplated hereby. This
Agreement has been duly and validly authorized, executed and
delivered by the Company and XCL-China. No consent,
approval, authorization or order of any court or
governmental agency or body, or third party is required for
the performance of this Agreement by the Company or XCL-
China or the consummation by the Company or XCL-China of the
transactions contemplated hereby, except such as have been
(or will be, upon execution and delivery of the
Intercreditor Agreement) obtained and other than such as may
be required under the Act or state securities or "Blue Sky"
laws in connection with the purchase and resale of the
Securities by the Initial Purchaser. Neither the Company
nor XCL-China is (i) in violation of its certificate of
incorporation or bylaws or its Memorandum and Articles of
Association, respectively, (ii) in breach or violation of
any statute (including, without limitation, the Foreign
Corrupt Practices Act), judgment, decree, order, rule or
regulation applicable to either of them or any of their
respective properties or assets, except as disclosed in the
Final Memorandum or except for any such breach or violation
which would not, individually or in the aggregate, have a
Material Adverse Effect, or (iii) except as disclosed in the
Final Memorandum, in breach of or default under (nor has any
event occurred which, with notice or passage of time or
both, would constitute a default under) or in violation of
any of the terms or provisions of any indenture, mortgage,
deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract or other
agreement or instrument to which either of them is a party
or to which either of them or their respective properties or
assets is subject, except for any such breach, default,
violation or event which would not, individually or in the
aggregate, have a Material Adverse Effect.
(k) The execution, delivery and performance by the
Company and XCL-China of this Agreement and the consummation
by the Company and XCL-China of the transactions
contemplated hereby, and the fulfillment of the terms
hereof, will not conflict with or constitute or result in a
breach of or a default under (or an event which with notice
or passage of time or both would constitute as a default
under) or violation of any of (i) the terms or provisions of
any indenture, mortgage, deed of trust, loan agreement,
note, lease, license, franchise agreement, permit,
certificate, contract or other agreement or instrument to
which the Company or XCL-China is a party or to which either
of them or their respective properties or assets is subject,
(ii) the respective certificate of incorporation or bylaws
or Memorandum or Articles of Association of the Company or
XCL-China, as the case may be, or (iii) (assuming compliance
with the Act and all applicable state securities or "Blue
Sky" laws) any statute, judgment, decree, order, rule or
regulation applicable to the Company or XCL-China or any of
their respective properties or assets.
(l) The audited consolidated financial statements
of the Company and its subsidiaries included in the Final
Memorandum present fairly in all material respects the
consolidated financial position, the consolidated results of
their operations and their cash flows at the dates and for
the periods to which they relate and have been prepared in
conformity with generally accepted accounting principles
applied on a consistent basis, except as otherwise stated
therein. The summary and selected consolidated historical
financial data in the Final Memorandum present fairly in all
material respects the financial information shown therein
and have been prepared and compiled on a basis consistent
with the audited financial statements included therein,
except as otherwise stated therein. Coopers & Lybrand
L.L.P. (the "Independent Accountants") is an independent
public accounting firm within the meaning of the Act and the
rules and regulations promulgated thereunder.
(m) Except as described in the Final Memorandum,
there is not pending or, to the knowledge of the Company or
XCL-China, threatened, any action, suit, proceeding, inquiry
or investigation to which the Company or any Subsidiary is a
party, or to which the property or assets of the Company or
any Subsidiary are subject, before or brought by any court
or governmental agency or body which, if determined
adversely to the Company or such Subsidiary, would have,
individually or in the aggregate, a Material Adverse Effect
or which seeks to restrain, enjoin, prevent the consummation
of or otherwise challenge the issuance or sale of the
Securities to be sold hereunder or the consummation of the
other transactions described in the Final Memorandum.
(n) Each of the Company and XCL-China owns or
possesses adequate licenses or other rights to use all
trademarks, service marks, trade names and know-how
necessary to conduct the businesses now or proposed to be
operated by it as described in the Final Memorandum, and
neither the Company nor XCL-China has received any notice of
conflict with (or knows of any such conflict with) asserted
rights of others with respect to any trademarks, service
marks, trade names or know-how which, if such assertion of
conflict were sustained, would, individually or in the
aggregate, have a Material Adverse Effect.
(o) Each of the Company and XCL-China possesses all
licenses, permits, certificates, consents, orders, approvals
and other authorizations from, and has made all declarations
and filings with, all federal, state, local and foreign
governmental authorities with jurisdiction (including,
without limitation, the Ministry of Foreign Trade and
Economic Cooperation of the People's Republic of China
("MOFTEC")), all self-regulatory organizations and all
courts and other tribunals, presently required or necessary
to own or lease, as the case may be, and to operate its
properties and to carry on its business as now or proposed
to be conducted as set forth in the Final Memorandum, except
for MOFTEC's (or any other requisite Chinese governmental
authority's) approval of the ODP (as defined in the
Memorandum) and except where the failure to obtain such
licenses, permits, certificates, consents, orders, approvals
and other authorizations, or to make all declarations and
filings, would not, individually or in the aggregate, have a
Material Adverse Effect, and neither the Company nor XCL-
China has received any notice of any proceeding relating to
revocation or modification of any such license, permit,
certificate, consent, order, approval or other
authorization, except as described in the Final Memorandum
or except where such revocation or modification would not,
individually or in the aggregate, have a Material Adverse
Effect.
(p) Since the respective dates as of which
information is given in the Final Memorandum, except as
described therein and except for the transactions
contemplated hereby, (i) neither the Company nor any
Subsidiary has incurred any liabilities or obligations,
direct or contingent, or entered into or agreed to enter
into any transactions or contracts (written or oral) not in
the ordinary course of business and (ii) neither the Company
nor XCL-China has purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or
distribution of any kind on its capital stock.
(q) Each of the Company and its Subsidiaries has
filed all necessary federal, state and foreign income and
franchise tax returns, except where the failure to so file
such returns would not, individually or in the aggregate,
have a Material Adverse Effect, and, except as set forth in
the Final Memorandum, has paid all taxes shown as due
thereon; and other than tax deficiencies which the Company
or any Subsidiary is contesting in good faith and for which
the Company or such Subsidiary has provided adequate
reserves, there is no tax deficiency that has been asserted
against the Company or any Subsidiary that would have,
individually or in the aggregate, a Material Adverse Effect.
(r) Subject to the Cautionary Statements (as
defined in the Final Memorandum) and other qualifications
set forth in the Final Memorandum, the projected financial
and operating data included in the Final Memorandum are
based on or derived from sources or assumptions which the
Company and XCL-China believe to be reliable and reasonable.
Subject to the Cautionary Statements and the assumptions and
qualifications set forth in the Gruy Report (as defined in
the Final Memorandum), the projected reserve data included
in the Final Memorandum by incorporation by reference to the
Gruy Report are based on or derived from sources or
assumptions which the Company and XCL-China believe to be
reliable and reasonable.
(s) None of the Company, XCL-China or any agent
acting on their behalf has taken or will take any action
that could cause the transactions contemplated by this
Agreement (including, without limitation, any pledge of the
capital stock of XCL-China pursuant to the Pledge Agreement)
or the sale of the Securities to violate Regulation G, T, U
or X of the Board of Governors of the Federal Reserve
System, in each case as in effect, or as the same may
hereafter be in effect, on the Closing Date.
(t) Each of the Company and XCL-China has good and
defensible title to all real property and good title to all
personal property described in the Final Memorandum as being
owned by it and good and defensible title to a leasehold
estate in the real and personal property described in the
Final Memorandum as being leased by it free and clear of all
liens, charges, encumbrances or restrictions, except as
described in the Final Memorandum or to the extent the
failure to have such title or the existence of such liens,
charges, encumbrances or restrictions would not,
individually or in the aggregate, have a Material Adverse
Effect.
(u) There are no legal or governmental proceedings
involving or affecting the Company or any Subsidiary or any
of their respective properties or assets which would be
required to be described in a prospectus pursuant to the Act
that are not described in the Final Memorandum, nor are
there any material contracts or other documents which would
be required to be described in a prospectus pursuant to the
Act that are not described in the Final Memorandum.
(v) Except as described in the Final Memorandum,
each of the Company and its Subsidiaries is in compliance in
all respects with all existing and applicable domestic and
foreign laws, rules or regulations relating to pollution or
protection of public or employee health or the environment
("Environmental Law") and with the terms and conditions of
any permit, license or approval issued to the Company or its
Subsidiaries thereunder in connection with the ownership,
operation or use of its business, property and assets,
except where the failure to be in such compliance would not,
individually or in the aggregate, have a Material Adverse
Effect; except as disclosed in the Final Memorandum, none of
the Company or its Subsidiaries is subject to any known
liability, absolute or contingent, under any Environmental
Law except for any such liability which would not,
individually or in the aggregate, have a Material Adverse
Effect; except as disclosed in the Final Memorandum, there
is no civil, criminal or administrative action, suit,
demand, hearing, notice of violation or deficiency,
investigation, proceeding or notice of potential
responsibility or demand letter or request for information
pending or, to the knowledge of the Company or XCL-China,
threatened against the Company or any of its Subsidiaries
under any Environmental Law which, if determined adversely
to the Company or any such Subsidiary would, individually or
in the aggregate, result in a Material Adverse Effect.
(w) Except as disclosed in the Final Memorandum,
each of the Company or its Subsidiaries carries insurance
(including self insurance) in such amounts and covering such
risks as in its reasonable determination is adequate for the
conduct of its business and the value of its properties.
(x) None of the Company or its Subsidiaries has any
liability for any prohibited transaction or funding
deficiency or any complete or partial withdrawal liability
with respect to any pension, profit sharing, 401(k) plan or
other plan which is subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), to which
the Company or any Subsidiary makes or ever has made a
contribution and in which any employee of the Company or any
Subsidiary is or has ever been a participant. With respect
to such plans, the Company and each Subsidiary is in
compliance in all material respects with all applicable
provisions of ERISA.
(y) After giving effect to the offering and sale of
the Securities, neither the Company nor XCL-China will be an
"investment company" or "promoter" or "principal
underwriter" for an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
(z) The Senior Notes, the Exchange Notes, the
Warrants, the Warrant Shares, the Common Stock, the Units,
the Indenture, the Intercreditor Agreement, the Security
Documents, the Warrant Agreement, the Additional Warrants,
the Additional Warrant Shares and the Registration Rights
Agreement will, and this Agreement does, conform in all
material respects to the descriptions thereof in the Final
Memorandum.
(aa) Except as disclosed in the Final Memorandum,
no holder of securities of the Company or any Subsidiary
will be entitled to have such securities registered under
the registration statements required to be filed by the
Company pursuant to the Registration Rights Agreement other
than as expressly permitted thereby.
(bb) Immediately after the consummation of the
transactions contemplated by this Agreement, the fair value
and current fair saleable value of the assets of the Company
(on a consolidated basis) will exceed the sum of its stated
liabilities and identified contingent liabilities; the
Company (on a consolidated basis) is not, nor will the
Company (on a consolidated basis) be, after giving effect to
the execution, delivery and performance of this Agreement,
and the consummation of the transactions contemplated
hereby, (a) left with unreasonably small capital with which
to carry on its business as it is proposed to be conducted,
(b) unable to pay its debts (contingent or otherwise) as
they mature or (c) otherwise insolvent.
(cc) Neither the Company nor any person acting on
its behalf has offered or sold the Securities by means of
any general solicitation or general advertising within the
meaning of Rule 502(c) under the Act or, with respect to
Securities sold outside the United States to non-U.S.
persons (as defined in Rule 902 under the Act), by means of
any directed selling efforts within the meaning of Rule 902
under the Act, and the Company, any affiliate of the Company
and any person acting on its or their behalf (other than the
Initial Purchaser) have complied with and will implement the
"offering restriction" within the meaning of such Rule 902.
(dd) Except as disclosed in the Final Memorandum,
within the six months preceding the date hereof, neither the
Company nor any other person acting on behalf of the Company
(other than the Initial Purchaser) has offered or sold to
any person any Securities, or any securities of the same or
a similar class as the Securities, other than Securities
offered or sold to the Initial Purchaser hereunder or
securities included in the Concurrent Equity Offering (as
such term is defined in the Memorandum); and the Company
will take reasonable precautions designed to insure that any
offer or sale, direct or indirect, in the United States or
to any U.S. person (as defined in Rule 902 under the Act) of
any Securities or any substantially similar security issued
by the Company, within six months subsequent to the date on
which the distribution of the Securities has been completed
(as notified to the Company by the Initial Purchaser), is
made under restrictions and other circumstances reasonably
designed not to affect the status of the offer and sale of
the Securities in the United States and to U.S. persons
contemplated by this Agreement as transactions exempt from
the registration provisions of the Act;
(ee) Neither the Company nor any of its affiliates
does business with the government of Cuba or with any person
or affiliate located in Cuba within the meaning of Section
517.075, Florida Statutes.
(ff) Assuming the accuracy of the representations
and warranties of the Initial Purchaser in Section 8 hereof,
it is not necessary in connection with the offer, sale and
delivery of the Securities to the Initial Purchaser in the
manner contemplated by this Agreement to register any of the
Securities under the Act or to qualify the Indenture under
the TIA.
(gg) No securities of the Company or XCL-China are
of the same class (within the meaning of Rule 144A under the
Act) as the Securities and listed on a national securities
exchange registered under Section 6 of the Exchange Act, or
quoted in a U.S. automated inter-dealer quotation system.
(hh) None of the Company or its Subsidiaries has
taken, nor will any of them take, directly or indirectly,
any action designed to, or that might be reasonably expected
to, cause or result in stabilization or manipulation of the
price of the Securities.
(ii) Upon (i) execution and delivery of (A) the
Security Agreement by the Company and the Trustee and (B)
the Disbursement Agreement by the Company, the Trustee, the
Disbursement Agent and the Representative , (ii) the
delivery to the Disbursement Agent of the Collateral as
provided therein and (iii) the execution and filing of all
appropriate forms as required under the Uniform Commercial
Code, the Security Agreement will create and constitute a
valid and enforceable first priority pledge of and perfected
security interest in the Collateral.
(jj) Neither the Company nor any of its
Subsidiaries is a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of a
"holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
Any certificate signed by any officer of the Company or
XCL-China and delivered to the Initial Purchaser or to
counsel for the Initial Purchaser shall be deemed a joint
and several representation and warranty by the Company and
XCL-China to the Initial Purchaser as to the matters covered
thereby.
3. Purchase, Sale and Delivery of the Securities. On
the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and
conditions herein set forth, the Company agrees to issue and
sell to the Initial Purchaser, and the Initial Purchaser
agrees to purchase from the Company, 75,000 Units at a
purchase price of $960 per Unit plus accrued interest on the
Senior Notes from May 20, 1997, if any. One or more
certificates in definitive form for the Securities that the
Initial Purchaser has agreed to purchase hereunder, and in
such denomination or denominations and registered in such
name or names as the Initial Purchaser requests upon notice
to the Company at least 24 hours prior to the Closing Date,
shall be delivered by or on behalf of the Company to the
Initial Purchaser, against payment by or on behalf of the
Initial Purchaser of the purchase price therefor, plus an
additional amount equal to $3,000,000 (the "Discount"), by
wire transfer (same day funds) to such account or accounts
as the Disbursement Agent shall specify prior to the Closing
Date. Such delivery of and payment for the Securities shall
be made at 10:00 a.m., New York time, on May 20, 1997, or at
such other place, time or date as the Initial Purchaser, on
the one hand, and the Company, on the other hand, may agree
upon, such time and date of delivery against payment being
herein referred to as the "Closing Date." The Company shall
reimburse the Initial Purchaser for making payment of the
Discount to the Disbursement Agent on behalf of the Company
by transferring an equal amount (in same day funds) on the
Closing Date to such account as the Initial Purchaser shall
specify prior to the Closing Date, it being understood that
the Company shall be obligated to make such payment only out
of the proceeds of the Concurrent Equity Offering. The
Company has requested that the Closing Date be scheduled to
occur five business days after the date of this Agreement in
order to provide sufficient time to satisfy the conditions
for closing set forth in Section 7 below. With respect to
Securities to be delivered in definitive certificated form,
the Company will make certificates for such Securities
available for checking and packaging by the Initial
Purchaser at the offices of Jefferies & Company, Inc. in New
York, New York, or at such other place as the Initial
Purchaser may designate, at least 24 hours prior to the
Closing Date. Securities to be represented by one or more
definitive global Securities in book-entry form will be
deposited on the Closing Date, by or on behalf of the
Company, with The Depository Trust Company ("DTC") or its
designated custodian, and registered in the name of Cede &
Co.
As additional compensation to the Initial Purchaser,
the Company agrees to issue to (or on the order of) the
Initial Purchaser, pursuant to the Warrant Agreement and at
the Closing Date, for no additional consideration, 15,006
Warrants to purchase initially 19,207,680 shares of Common
Stock at an initial exercise price of $0.2063 per share of
Common Stock (the "Additional Warrants") The shares of
Common Stock issuable upon exercise of the Additional
Warrants are herein referred to as the "Additional Warrant
Shares." Unless otherwise requested by the Initial
Purchaser at least 24 hours prior to the Closing Date, a
single certificate representing 12,755 Additional Warrants
shall be issued in the name of Jefferies & Company, Inc. and
a second certificate representing 2,251 Additional Warrants
shall be registered in the name of Patrick Collins.
4. Offering by the Initial Purchaser. The Initial
Purchaser proposes to make an offering of the Securities at
the price and upon the terms set forth in the Final
Memorandum, as soon as practicable after this Agreement is
entered into and as in the judgment of the Initial Purchaser
is advisable.
5. Covenants of the Company and XCL-China. Each of the
Company and XCL-China jointly and severally covenants and
agrees with the Initial Purchaser that:
(a) The Company and XCL-China shall not make any
amendment or supplement to the Final Memorandum of which the
Initial Purchaser shall not previously have been advised and
furnished a copy for a reasonable period of time prior to
the proposed amendment or supplement and as to which the
Initial Purchaser shall not have given its consent. The
Company and XCL-China shall promptly, upon the reasonable
request of the Initial Purchaser, make any amendments or
supplements to the Preliminary Memorandum or the Final
Memorandum that may be necessary or advisable in connection
with the resale of the Securities by the Initial Purchaser.
(b) The Company and XCL-China shall cooperate with
the Initial Purchaser in arranging for the qualification of
the Securities for offering and sale under the securities or
"Blue Sky" laws of such jurisdictions as the Initial
Purchaser may designate and shall continue such
qualifications in effect for as long as may be necessary to
complete the resale of the Securities; provided, however,
that in connection therewith, neither of the Company nor XCL-
China shall be required to qualify as a foreign corporation
or to execute a general consent to service of process in any
jurisdiction or subject itself to taxation in excess of a
nominal dollar amount in any such jurisdiction where it is
not then so subject.
(c) If, at any time prior to the completion of the
initial resale by the Initial Purchaser of the Securities to
persons other than affiliates of the Initial Purchaser (as
determined by the Initial Purchaser), any event occurs as a
result of which the Final Memorandum as then amended or
supplemented would include any untrue statement of a
material fact, or omit to state a material fact necessary to
make the statements therein, in the light of the
circumstances under which they were made, not misleading, or
if for any other reason it is necessary at any time to amend
or supplement the Final Memorandum to comply with applicable
law, the Company and XCL-China will promptly notify the
Initial Purchaser thereof and will prepare, at the expense
of the Company and XCL-China, an amendment or supplement to
the Final Memorandum that corrects such statement or
omission or effects such compliance.
(d) The Company will, without charge, provide to
the Initial Purchaser and to counsel for the Initial
Purchaser as many copies of the Final Memorandum or any
amendment or supplement thereto as the Initial Purchaser may
reasonable request.
(e) The Initial Purchaser will deposit the proceeds
from the sale of the Securities with the Disbursement Agent
on the Closing Date, on behalf of the Company, and, upon the
disbursement of such proceeds to the Company pursuant to the
Disbursement Agreement, the Company will apply such proceeds
as set forth under "Use of Proceeds" in the Final
Memorandum.
(f) For and during the period ending on the fifth
anniversary of the Closing Date, the Company will furnish to
the Initial Purchaser copies of all reports and other
communications (financial or otherwise) furnished by the
Company or XCL-China to the Trustee, the Disbursement Agent,
the Warrant Agent or the holders of the Securities and, as
soon as available, copies of any reports or financial
statements furnished to or filed by the Company or XCL-China
with the Commission or any national securities exchange on
which any class of securities of the Company or XCL-China
may be listed.
(g) Prior to the Closing Date, the Company will
furnish to the Initial Purchaser, as soon as they have been
prepared, if at all, a copy of any unaudited interim
financial statements of the Company for any period
subsequent to the period covered by the most recent
financial statements appearing in the Final Memorandum.
(h) Except as described in the Final Memorandum,
none of the Company or any of its affiliates will sell,
offer for sale or solicit offers to buy or otherwise
negotiate in respect of any "security" (as defined in the
Act) which could be integrated with the sale of the
Securities in a manner which would require the registration
under the Act of the Securities.
(i) The Company and XCL-China will not solicit any
offer to buy or offer to sell the Securities by means of any
form of general solicitation or general advertising (as
those terms are used in Regulation D under the Act) or in
any manner involving a public offering within the meaning of
Section 4(2) of the Act.
(j) For so long as any of the Securities remain
outstanding, the Company and XCL-China will make available,
upon request, to any seller or prospective purchaser of such
Securities the information specified in Rule 144A(d)(4)
under the Act, unless the Company is then subject to Section
13 or 15(d) of the Exchange Act.
(k) Each of the Company and XCL-China will use its
best efforts to (i) permit the Securities to be designated
PORTAL securities in accordance with the rules and
regulations adopted by the NASD relating to trading in the
Private Offering, Resales and Trading through Automated
Linkages market (the "PORTAL Market") and (ii) permit the
Securities to be eligible for clearance and settlement
through DTC.
(l) (i) During the period beginning from the date
hereof and continuing until the date 90 days after the
Closing Date, neither the Company nor XCL-China will offer,
sell, contract to sell or otherwise dispose of, except as
provided hereunder, any securities that are substantially
similar to the Securities or the Common Stock, including,
but not limited to, any securities that are convertible into
or exchangeable for, or that represent the right to receive,
Common Stock or any such substantially similar securities,
except that the Company may, without such consent (A) issue
shares of Common Stock upon conversion of preferred stock or
exercise of warrants outstanding on the Closing Date, (B)
issue units consisting of shares of preferred stock and
warrants to purchase Common Stock upon consummation of the
Concurrent Equity Offering and thereafter issue comparable
securities to Patrick Collins valued at $500,000, (C) issue
shares of Common Stock pursuant to options or similar rights
granted to directors, officers or employees, (D) issue
shares of Common Stock pursuant to any long-term incentive
or employee benefit plan of the Company, (E) issue shares of
Common Stock and Preferred Stock in payment of dividends on
Preferred Stock, (F) issue shares of Common Stock in
redemption of Preferred Stock, (G) issue shares of Amended
Series A Preferred Stock in payment of interest on the
Subordinated Debt (as such terms are defined in the Final
Memorandum) and (H) grant options or other derivative
securities pursuant to existing stock option plans of the
Company; and provided, that, the Company shall not offer,
sell, contract to sell or otherwise dispose of securities of
the Company after such 90 day period if such transaction
would cause the initial offer and sale by the Company and
resale by the Initial Purchaser of the Securities not to be
exempt from the registration requirements of the Act, and
(ii) the Company it will use its best efforts to cause each
person who has entered into a Lock-up Agreement (as herein
defined) to comply therewith, will not grant any waivers or
consents to noncompliance therewith and will enforce its
rights under each such agreement, in each case unless and to
the extent that it shall have obtained the Initial
Purchaser's prior written consent.
(m) During the period of two years after the
Closing Date (or such shorter period as may be provided for
in Rule 144(k) under the Act, as the same may be in effect
from time to time), the Company will not, and will not
permit any of its subsidiaries or other affiliates (as
defined in Rule 144A under the Act) controlled by it to,
resell any of the Securities which constitute "restricted
securities" under Rule 144 that have been reacquired by any
of them, except pursuant to an effective registration
statement under the Act.
(n) The Company shall pay all stamp and other
duties, if any, which may be imposed by the United States or
the United Kingdom or any political subdivision thereof or
taxing authority thereof or therein with respect to the
issuance of the Securities; provided, however, the Company
shall not be required to make any payment with respect to
any other tax, assessment or government charge imposed by
any government or any political subdivision thereof or
taxing authority.
6. Expenses. The Company and XCL-China agree, jointly
and severally, to pay all costs and expenses incident to the
performance of their obligations under this Agreement,
whether or not the transactions contemplated herein are
consummated or this Agreement is terminated pursuant to
Section 11 hereof, including all costs and expenses incident
to (i) the printing, word processing or other production of
documents with respect to the transactions contemplated
hereby, including any costs of printing the Preliminary
Memorandum and the Final Memorandum and any amendment or
supplement thereto, (ii) all arrangements relating to the
delivery to the Initial Purchaser of copies of the foregoing
documents, (iii) the fees and disbursements of the counsel,
the accountants and any other experts or advisors retained
by the Company, (iv) preparation, issuance and delivery to
the Initial Purchaser of the Securities, (v) the
qualification of the Securities under state securities and
"Blue Sky" laws, including filing fees and fees and
disbursements of counsel incurred by the Initial Purchaser
relating thereto, (vi) the reasonable fees, disbursements
and charges of Vinson & Elkins L.L.P., counsel to the
Initial Purchaser, incurred in connection with the
transactions contemplated hereby, (vii) expenses in
connection with any meetings with prospective investors in
the Securities, (viii) fees and expenses of the Trustee, the
Disbursement Agent, the Representative, the Warrant Agent
and the transfer agent for the Common Stock including fees
and expenses of their respective counsel incurred by any of
them, (ix) all expenses and listing fees incurred in
connection with the application for quotation of the
Securities on the PORTAL Market and (x) any fees charged by
investment rating agencies for the rating of the Securities.
If the sale of the Securities provided for herein is not
consummated because any condition to the obligations of the
Initial Purchaser set forth in Section 7 hereof is not
satisfied, because this Agreement is terminated or because
of any failure, refusal or inability on the part of the
Company or XCL-China to perform all obligations and satisfy
all conditions on their part to be performed or satisfied
hereunder (other than solely by reason of a default by the
Initial Purchaser on its obligations hereunder after all
conditions hereunder have been satisfied in accordance
herewith), the Company and XCL-China, jointly and severally,
agree to promptly reimburse the Initial Purchaser upon
demand for all out-of-pocket expenses (including reasonable
fees, disbursements and charges of Vinson & Elkins L.L.P.,
counsel for the Initial Purchaser) that shall have been
incurred by the Initial Purchaser in connection with the
proposed purchase and sale of the Securities. The Company
and XCL-China shall not be liable to the Initial Purchaser
for loss of contemplated profits from the transactions
covered by this Agreement.
7. Conditions of the Initial Purchaser's Obligations.
The obligation of the Initial Purchaser to purchase and pay
for the Securities shall, in its sole discretion, be subject
to the satisfaction or waiver of the following conditions on
or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchaser
shall have received the opinion, dated as of the Closing
Date and addressed to the Initial Purchaser, of Satterlee
Stephens Burke & Burke LLP, counsel for the Company and XCL-
China, in form and substance satisfactory to counsel for the
Initial Purchaser, substantially to the effect that:
(i) Each of the Company and XCL-China is duly
incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to own, lease
and operate its properties and to conduct its business as
described in the Final Memorandum. The Company is duly
qualified as a foreign corporation and is in good standing
under the laws of the State of Louisiana.
(ii) To the knowledge of such counsel, all of
the outstanding shares of capital stock of XCL-China are
owned, directly or indirectly, by the Company, free and
clear of all liens, encumbrances, equities and claims or
restrictions on transferability or voting, except for those
arising under the Participation Agreement or under the
applicable laws, rules or regulations (including
interpretations thereof) of the People's Republic of China
or securing the Existing Secured Debt (as such terms are
defined in the Final Memorandum).
(iii) Except as set forth in the Final
Memorandum, to the knowledge of such counsel (A) no options,
warrants or other rights to purchase from the Company or XCL-
China shares of capital stock in the Company or XCL-China
are outstanding, (B) no agreements or other obligations of
the Company or XCL-China to issue, or other rights to cause
the Company or XCL-China to convert, any obligation into, or
exchange any securities for, shares of capital stock in the
Company or XCL-China are outstanding and (C) no holder of
securities of the Company or XCL-China is entitled to have
such securities registered under a registration statement
filed by the Company or XCL-China under the Act with respect
to the Securities or the Warrant Shares.
(iv) The Senior Notes have been duly and
validly authorized and executed by the Company and, when
delivered by the Company (assuming the due authorization,
execution, and delivery of the Indenture by the Trustee and
the due authentication of the Senior Notes by the Trustee in
accordance with the Indenture) and paid for by the Initial
Purchaser in accordance with the terms of this Agreement,
the Indenture and the Intercreditor Agreement, will
constitute the valid and legally binding obligations of the
Company, entitled to the benefits of the Indenture and the
Intercreditor Agreement and enforceable against the Company
in accordance with their terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other
similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any
proceeding therefor may be brought.
(v) The Company has all requisite corporate
power and authority to execute, deliver and perform its
obligations under the Indenture, the Intercreditor Agreement
and the Security Documents; the Indenture is in sufficient
form for qualification under the TIA; the Indenture, the
Intercreditor Agreement and the Security Documents have been
duly and validly authorized, executed and delivered by the
Company and (assuming the due authorization, execution and
delivery thereof by each other party thereto), each
constitutes the valid and legally binding agreement of the
Company, enforceable against the Company in accordance with
its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now
or hereafter in effect relating to creditors' rights
generally, (ii) general principles of equity and the
discretion of the court before which any proceeding therefor
may be brought and (iii), in the case of the Security
Documents, federal or state securities laws or principles of
public policy affecting enforcement of rights to indemnity
or contribution; and, assuming the Disbursement Agent takes
and keep possession of the Collateral on behalf of the
Trustee as contemplated by the Disbursement Agreement and
the Security Agreement and all requisite filings under the
Uniform Commercial Code have been made, all actions have
been taken to create and perfect a security interest and
pledge of the Collateral in favor of the Trustee.
(vi) The Company has all requisite corporate
power and authority to execute, deliver and perform its
obligations under the Registration Rights Agreement; the
Registration Rights Agreement has been duly and validly
authorized, executed and delivered by the Company and
(assuming the due authorization, execution and delivery
thereof by the Initial Purchaser), constitutes the valid and
legally binding agreement of the Company, enforceable
against the Company in accordance with its terms, except
that (A) the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter
in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court
before which any proceeding therefor may be brought and (B)
any rights to indemnity or contribution thereunder may be
limited by federal and state securities laws and public
policy considerations.
(vii) Subject to the availability of a
sufficient number of authorized but unissued or treasury
shares to permit the exercise of the outstanding Warrants
and Additional Warrants, the Company has all requisite
corporate power and authority to execute, deliver and
perform its obligations under the Warrant Agreement. The
Warrant Agreement has been duly and validly authorized,
executed and delivered by the Company and, subject to the
availability of a sufficient number of authorized but
unissued or treasury shares to permit the exercise of the
outstanding Warrants and Additional Warrants, constitutes
the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its
terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter
in effect relating to creditors' rights generally, (ii)
general principles of equity and the discretion of the court
before which any proceeding therefor may be brought and
(iii) federal or state securities laws or principles of
public policy affecting enforcement of rights to indemnity
or contribution.
(viii) Subject to the availability of a
sufficient number of authorized but unissued or treasury
shares to permit the exercise of the outstanding Warrants
and Additional Warrants, the Company has all requisite
corporate power and authority to execute, deliver and
perform its obligations under the Warrants and the
Additional Warrants. The Warrants and the Additional
Warrants have been duly and validly authorized and executed
by the Company and, when countersigned by the Warrant Agent
in accordance with the provisions of the Warrant Agreement
and delivered to and paid for (in the case of the Warrants)
by the Initial Purchaser in accordance with the terms of
this Agreement, will have been duly issued and delivered
and, subject to the availability of a sufficient number of
authorized but unissued or treasury shares to permit the
exercise of the outstanding Warrants and Additional
Warrants, will constitute the valid and legally binding
obligations of the Company, entitled to the benefits of the
Warrant Agreement, and enforceable against the Company in
accordance with their terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other
similar laws now or hereafter in effect relating to
creditors' rights generally, (ii) general principles of
equity and the discretion of the court before which any
proceeding therefor may be brought and (iii) federal or
state securities laws or principles of public policy
affecting enforcement of rights to indemnity or
contribution.
(ix) Subject to the availability of a
sufficient number of authorized but unissued or treasury
shares to permit the exercise of the outstanding Warrants
and Additional Warrants, when issued in accordance with the
terms and conditions contained in the Warrant Agreement,
upon exercise of the Warrants and upon exercise of the
Additional Warrants, the Warrant Shares and the Additional
Warrant Shares, respectively, will be duly authorized,
validly issued, fully paid and non-assessable and will not
be subject to any preemptive or similar rights.
(x) Each of the Company and XCL-China has all
requisite corporate power and authority to execute, deliver
and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby; the
execution, delivery and performance of this Agreement by the
Company and XCL-China and the consummation by the Company
and XCL-China of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate
action on the part of the Company and XCL-China. This
Agreement has been duly executed and delivered by the
Company and XCL-China.
(xi) The Indenture, the Senior Notes, the
Guarantee (when issued in accordance with the Indenture),
the Intercreditor Agreement, the Security Documents, the
Warrants, the Additional Warrants, the Warrant Shares, the
Common Stock, the Registration Rights Agreement and the
Warrant Agreement conform in all material respects to the
descriptions thereof contained in the Final Memorandum.
(xii) To the knowledge of such counsel, no
legal or governmental proceedings are pending or threatened
to which any of the Company or any of its Subsidiaries is a
party or to which the property or assets of the Company or
any Subsidiary is subject which, if determined adversely to
the Company or the Subsidiary, would result, individually or
in the aggregate, in a Material Adverse Effect, or which
seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Securities
to be sold hereunder or the consummation of the other
transactions described in the Final Memorandum under the
caption "Use of Proceeds."
(xiii) The execution and delivery of the
Exchange Notes and the Private Exchange Notes by the Company
have been duly authorized by all necessary corporate action
of the Company, and when the Exchange Notes and Private
Exchange Notes have been duly executed and delivered by the
Company in accordance with the terms of the Registration
Rights Agreement and the Indenture (and assuming due
authentication by the Trustee), the Exchange Notes and the
Private Exchange Notes will constitute the valid and legally
binding obligations of the Company, entitled to the benefits
of the Indenture and enforceable against the Company in
accordance with their terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other
similar laws now or hereafter in effect relating to
creditors' rights generally and, (ii) general principles of
equity and the discretion of the court before which any
proceeding therefor may be brought.
(xiv) The execution and delivery of this
Agreement, the Indenture, the Intercreditor Agreement, the
Security Documents, the Warrant Agreement and the
Registration Rights Agreement and the consummation of the
transactions contemplated hereby and thereby (including,
without limitation, the issuance and sale of the Securities
to the Initial Purchaser) will not conflict with or
constitute or result in a material breach or violation of or
a default under (or an event which with notice or passage
of time or both would constitute a material default under)
(i) to such counsel's knowledge, any of the terms or
provisions of any indenture, mortgage, deed of trust, loan
agreement, note, lease, license, franchise agreement,
permit, certificate, contract or other agreement or
instrument (including in any event any of the foregoing
which have been filed by the Company with the Commission) to
which the Company or XCL-China is a party or to which either
of them or their respective properties or assets is subject,
except for any such conflict, breach, violation, default or
event which would not, individually or in the aggregate,
have a Material Adverse Effect, (ii) the certificate of
incorporation or bylaws of the Company or the Memorandum and
Articles of Association of XCL-China, or (iii) to such
counsel's knowledge, any statute, judgment, decree, order,
rule or regulation known to such counsel to be applicable to
the Company or XCL-China or any of their respective
properties or assets, except for any securities or antifraud
law.
(xv) To the knowledge of such counsel, no
consent, approval, authorization or order of any domestic
governmental authority is required for the issuance and sale
by the Company and XCL-China of the Securities to the
Initial Purchaser or the other transactions contemplated
hereby, except such as may be required under applicable
securities laws, as to which such counsel need express no
opinion pursuant to this clause (xv), and those which have
previously been obtained.
(xvi) No registration under the Act of the
Securities is required in connection with the sale of the
Securities to the Initial Purchaser as contemplated by this
Agreement and the Final Memorandum or in connection with the
initial resale of the Securities by the Initial Purchaser in
accordance with Section 8 of this Agreement, and prior to
the commencement of the Exchange Offer (as defined in the
Registration Rights Agreement) or the effectiveness of the
Shelf Registration Statement (as defined in the Registration
Rights Agreement), the Indenture is not required to be
qualified under the TIA, in each case assuming (i) that the
Purchasers who buy such Securities in the initial resale
thereof are qualified institutional buyers as defined in
Rule 144A promulgated under the Act ("QIBs" or "Qualified
Institutional Buyers"), accredited investors as defined in
Rule 501(a)(1), (2), (3) or (7) promulgated under the Act
("Accredited Investors"), or foreign Purchaser (as defined
in Section 8), (ii) the accuracy and completeness of the
Initial Purchaser's representations in Section 8 and those
of the Company and XCL-China contained in this Agreement
regarding the offer and sale of the Securities and the
absence of a general solicitation in connection with the
sale of such Securities to the Initial Purchaser and the
initial resale thereof and (iii) the due performance by the
Initial Purchaser of the agreements set forth in Section 8
hereof.
(xvii) Neither the consummation of the
transactions contemplated by this Agreement (including,
without limitation, any pledge of the capital stock of XCL-
China pursuant to the Pledge Agreement) nor the sale,
issuance, execution or delivery of the Securities will
violate Regulation G, T, U or X of the Board of Governors of
the Federal Reserve System.
At the time the foregoing opinion is delivered,
Satterlee Stephens Burke & Burke LLP shall additionally
state that it has participated in conferences with officers
and other representatives of the Company and XCL-China,
representatives of the independent public accountants for
the Company, representatives of the Initial Purchaser and
counsel for the Initial Purchaser, at which conferences the
contents of the Final Memorandum and related matters were
discussed, and, although it has not independently verified
and is not passing upon and assumes no responsibility for
the accuracy, completeness or fairness of the statements
contained in the Final Memorandum (except to the extent
specified in clause (xi)), no facts have come to its
attention which lead it to believe that the Final
Memorandum, on the date thereof or at the Closing Date,
contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light
of the circumstances under which they were made, not
misleading (it being understood that such firm need not
comment with respect to the financial statements and related
notes thereto and the other financial, statistical, reserve
and other geological data (including projections) included
in the Final Memorandum). In rendering such opinion, such
counsel may (i) rely in respect to matters of fact upon the
representations and warranties of the Company and XCL-China
set forth herein, upon certificates of officers of the
Company and its Subsidiaries and upon information obtained
from public officials, (ii) assume that all documents
submitted to such counsel as originals are authentic, that
all copies submitted to such counsel conform to the
originals thereof, and that the signatures on all documents
examined by such counsel are genuine, (iii) state that such
counsel's opinion is limited to the federal law of the
United States and the laws of the State of New York and the
General Corporation Law of the State of Delaware, (iv) rely
in respect to all matters involving XCL-China and the laws
of the British Virgin Islands upon the opinion of local
counsel, and (v) may make such other assumptions and
qualifications as may be reasonably acceptable to the
Initial Purchaser. The opinion of Satterlee Stephens
Burke & Burke LLP described in this subsection (a) shall be
rendered at the request of the Company and XCL-China to, and
may be relied upon solely by, the Initial Purchaser and
shall so state therein.
References to the Final Memorandum in this subsection
(a) shall include any amendment or supplement thereto
prepared in accordance with the provisions of this Agreement
at the Closing Date.
(b) On the Closing Date, the Initial Purchaser
shall have received the opinion, in form and substance
satisfactory to the Initial Purchaser, dated as of the
Closing Date and addressed to the Initial Purchaser, of
Vinson & Elkins L.L.P., counsel for the Initial Purchaser,
with respect to certain legal matters relating to this
Agreement and such other related matters as the Initial
Purchaser may require. In rendering such opinion, Vinson &
Elkins L.L.P. shall have received and may rely upon such
certificates and other documents and information as it may
reasonably request to pass upon such matters.
(c) The Initial Purchaser shall have received from
the Independent Accountants a comfort letter dated the date
hereof, in form and substance satisfactory to the Initial
Purchaser, to the effect set forth in Exhibit C hereto.
(d) The representatives and warranties of each of
the Company and XCL-China contained in this Agreement shall
be true and correct in all material respects on and as of
the date hereof and on and as of the Closing Date as if made
on and as of the Closing Date (except for the
representations and warranties which were true and correct
as of a certain specified date which shall continue to be
true and correct as of such date); the statements of the
Company's and XCL-China's officers made pursuant to any
certificate delivered in accordance with the provisions
hereof shall be true and correct in all material respects on
and as of the date made and on and as of the Closing Date;
the Company and XCL-China shall have complied in all
material respects with all agreements and satisfied all
conditions on their part to be performed or satisfied
hereunder at or prior to the Closing Date; and, except as
described in the Final Memorandum (exclusive of any
amendment or supplement thereto after the date hereof),
subsequent to the date of the most recent financial
statements in such Final Memorandum, there shall have been
no development that, singly or in the aggregate, is
reasonably likely to have a Material Adverse Effect.
(e) The sale of the Securities hereunder shall not
be enjoined (temporarily or permanently) on the Closing
Date.
(f) Subsequent to the date of the most recent
financial statements in the Final Memorandum (exclusive of
any amendment or supplement thereto after the date hereof),
other than as described in such Final Memorandum or
contemplated hereby, neither the Company nor any Subsidiary
shall have incurred any liabilities or obligations, direct
or contingent (other than in the ordinary course of
business), that are material to the Company and its
Subsidiaries, taken as a whole, or entered into any
transactions not in the ordinary course of business that are
material to the business, condition (financial or other) or
results of operations or prospects of the Company, taken as
a whole, and there shall not have been any adverse change in
the capital stock or long-term indebtedness of the Company
or any Subsidiary that is material to the business,
condition (financial or other) or results of operations or
prospects of the Company and the Subsidiaries, taken as a
whole.
(g) Subsequent to the date of the most recent
financial statements in the Final Memorandum (exclusive of
any amendment or supplement thereto after the date hereof),
the conduct of the business and operations of the Company or
XCL-China shall not have been interfered with by strike,
fire, flood, hurricane, accident or other calamity (whether
or not insured) or by any court or governmental action,
order or decree, and, except as otherwise stated therein,
the properties of the Company or XCL-China shall not have
sustained any loss or damage (whether or not insured) as a
result of any such occurrence, except any such interference,
loss or damage which would not, individually or in the
aggregate, have a Material Adverse Effect.
(h) The Initial Purchaser shall have received
certificates of the Company and XCL-China, dated the Closing
Date, signed on behalf of the Company and XCL-China by their
respective Chairman of the Board or President and their
Chief Financial Officer, to the effect that:
(i) the representations and warranties of the
Company and XCL-China contained in this Agreement are true
and correct in all material respects as of the date hereof
and as of the Closing Date (except for the representations
and warranties which were true and correct as of a certain
specified date which shall continue to be true and correct
as of such date), and the Company and XCL-China have
performed all covenants and agreements and satisfied
hereunder all conditions on their part to be performed or
satisfied hereunder at or prior to the Closing Date;
(ii) at the Closing Date, since the date
hereof or since the date of the most recent financial
statements in the Final Memorandum (exclusive of any
amendment or supplement thereto after the date hereof), no
event or events have occurred, no information has become
known nor does any condition exist that, individually or in
the aggregate, would have a Material Adverse Effect;
(iii) since the date hereof or since the date
of the most recent financial statements in the Final
Memorandum (exclusive of any amendment or supplement thereto
after the date hereof), other than as described in the Final
Memorandum or contemplated hereby, neither the Company nor
any Subsidiary has incurred any liabilities or obligations,
direct or contingent (other than in the ordinary course of
business), that are material to the Company and its
Subsidiaries, taken as a whole, or entered into any
transactions not in the ordinary course of business that are
material to the business, condition (financial or other) or
results of operations or prospects of the Company and its
Subsidiaries, taken as a whole, and there has not been any
change in the capital stock or long-term indebtedness of the
Company or any Subsidiary that is material to the business,
condition (financial or other) or results of operations or
prospects of the Company and its Subsidiaries, taken as a
whole;
(iv) the sale of the Securities hereunder has
not been enjoined (temporarily or permanently; and
(v) the Concurrent Equity Offering shall have
been consummated as contemplated by the Final Memorandum.
(i) On the Closing Date, the Initial Purchaser
shall have received the Registration Rights Agreement
executed by the Company and shall have received the
Additional Warrants executed by the Company.
(j) The Initial Purchaser shall have received from
H.J. Gruy and Associates, Inc. a letter dated the date
hereof, in form and substance satisfactory to the Initial
Purchaser, to the effect set forth in Exhibit D hereto.
(k) The Concurrent Equity Offering shall have been
consummated as contemplated by the Final Memorandum.
(l) ING (U.S.) Capital Corporation and the holders
of the Company's Secured Subordinated Notes due April 5,
2000 shall have executed and delivered the Intercreditor
Agreement, in form and substance satisfactory to the Initial
Purchaser and its counsel.
(m) The directors and executive officers of the
Company who are holders of outstanding shares of or
securities exercisable or exchangeable for or convertible
into shares of capital stock of the Company and the
principal holders of the Company's Series A, Cumulative
Convertible Preferred Stock shall have entered into a
written agreement with the Initial Purchaser in the form of
Exhibit E hereto (each such agreement a "Lock-up
Agreement"), and executed originals of each Lock-up
Agreement shall have been delivered to you.
On or before the Closing Date, the Initial Purchaser
and counsel for the Initial Purchaser shall have received
such further documents, opinions, certificates, letters and
schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and
XCL-China as they shall have heretofore reasonably requested
from the Company and XCL-China.
All such documents, opinions, certificates, letters,
schedules or instruments delivered pursuant to this
Agreement will comply with the provisions hereof only if
they are reasonably satisfactory in all material respects to
the Initial Purchaser and counsel for the Initial Purchaser.
The Company and XCL-China shall furnish to the Initial
Purchaser such conformed copies of such documents, opinions,
certificates, letters, schedules and instruments in such
quantities as the Initial Purchaser shall reasonably
request.
8. Representations and Warranties by the Initial
Purchaser. The Initial Purchaser represents and warrants
that it has duly authorized, executed and delivered this
Agreement. The Initial Purchaser hereby acknowledges that
the Securities have not been registered under the Act; they
are being offered and sold pursuant to an exemption from
registration contained in the Act based in part on the
Initial Purchaser's representations contained in this
Agreement, including, without limitation, the following: it
has substantial experience in evaluating and investing in
private placement transactions of securities in companies
similar to the Company so that it is capable of evaluating
the merits and risks of its investment in the Company; it
acknowledges that it must bear the economic risk of this
investment indefinitely unless the Securities are registered
under the Act or an exemption from registration is
available; it is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act; it has received
and read the Final Memorandum, in particular the
information set forth in the sections entitled "Disclosure
of Forward-Looking Information," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Transfer Restrictions" and
"Private Placement," and has had an opportunity to discuss
the Company's business, management and financial affairs
with directors, officers and other management of the Company
and its subsidiaries and ask questions of, and receive
answers from, the Company and its management regarding the
terms and conditions of its investment in the Company. The
Initial Purchaser represents and warrants that it is a QIB.
The Initial Purchaser agrees with the Company and XCL-China
that (a) it has not and will not solicit offers for, or
offer or sell, the Securities by any form of general
solicitation or general advertising (as those terms are used
in Regulation D under the Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the
Act and the rules and regulations promulgated thereunder,
and (b) it has and will solicit offers for the Securities
only from, and will offer the Securities only to (A) in the
case of offers inside the United States, (i) persons whom
the Initial Purchaser reasonably believes to be QIBs, if any
such person is buying for one or more institutional accounts
for which such person is acting as fiduciary or agent, only
when such person has represented to the Initial Purchaser
that each such account is a QIB, to whom notice has been
given that such sale or delivery is being made in reliance
on Rule 144A under the Act, and, in each case, in
transactions under Rule 144A or (ii) a limited number of
other institutional investors reasonably believed by the
Initial Purchaser to be Accredited Investors that, prior to
their purchase of the Securities, deliver to the Initial
Purchaser a letter containing the representations and
agreements set forth in Appendix A to the Final Memorandum
and (B) in the case of offers outside the United States,
persons other than U.S. persons ("foreign purchaser"), which
term shall include dealers or other professional fiduciaries
in the United States acting on a discretionary basis for
foreign beneficial owners (other than an estate or trust));
provided, however, that, in the case of this clause (b), in
purchasing such Securities, such persons are deemed to have
represented and agreed as provided under the caption
"Transfer Restrictions" contained in the Final Memorandum.
The Initial Purchaser acknowledges and agrees that, except
as permitted by this Agreement, it will not offer, sell or
deliver any Securities (i) as part of the distribution at
any time or (ii) otherwise until 40 days (or such longer
period as may be provided under Regulation S, as amended)
after the later of the commencement of the offering of the
Units and the last original issue date of the Units, within
the United States or to, or for the account or benefit of,
U.S. Persons, and that it will send to each dealer to which
it sells Units in reliance on Regulation S during the
restricted period a confirmation or other notice setting
forth the restrictions on offers and sales of the Securities
within the United States or to, or for the account or
benefit of, U.S. Persons (terms used in this paragraph
having the meanings given to them by Regulation S under the
Securities Act). The Initial Purchaser further represents,
warrants and agrees that (i) it has not offered or sold and
prior to the date six months after the date of issue of the
Securities will not offer or sell any Securities to persons
in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances
which have not resulted and will not result in an offer to
the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995, (ii) it has
complied, and will comply, with all applicable provisions of
the Financial Services Act 1986 of Great Britain with
respect to anything done by it in relation to the Securities
in, from or otherwise involving the United Kingdom, and
(iii) it has only issued or passed on, and will only issue
or pass on, in the United Kingdom, any document received by
it in connection with the issuance of the Securities to a
person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995 of Great Britain or is a person to
whom the document may otherwise lawfully be issued or passed
on. The Initial Purchaser agrees that it will not offer,
sell or deliver any of the Securities in any jurisdiction
outside the United States, its territories and possessions
except under circumstances that will result in compliance
with the provisions of Regulation S promulgated under the
Act and the applicable laws of such jurisdiction, and that
it will take at its own risk and expense whatever action is
required to permit its purchase and resale of the Securities
in such jurisdictions. The Initial Purchaser understands
that no action has been taken to permit a public offering of
the Securities in any jurisdiction within or without the
United States where action would be required for such
purpose. The Initial Purchaser agrees not to cause any
advertisement of the Securities to be published in any
newspaper or periodical or posted in any public place and
not to issue any circular relating to the Securities, except
in any such case with the consent of the Company. The
Initial Purchaser agrees to send and give a copy of the
Final Memorandum (as the same may be supplemented or
amended) to each Purchaser of the Units at or prior to the
written confirmation of the sale of the Units to such
person.
9. Indemnification and Contribution. (a) The
Company and XCL-China, jointly and severally, agree to
indemnify and hold harmless the Initial Purchaser, and each
person, if any, who controls the Initial Purchaser within
the meaning of Section 15 of the Act or Section 20 of the
Exchange Act of 1934, as amended (the "Exchange Act"),
against any losses, claims, damages or liabilities to which
the Initial Purchaser or such controlling person may become
subject under the Act, the Exchange Act or otherwise,
insofar as any such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based
upon:
(i) any untrue statement or alleged untrue
statement of any material fact contained in any
Memorandum or any amendment or supplement thereto;
(ii) the omission or alleged omission to
state, in any Memorandum or any amendment or supplement
thereto, a material fact required to be stated therein
or necessary to make the statements therein not
misleading; or
(iii) any breach by the Company or XCL-China
of their respective representations, warranties and
agreements set forth herein;
and, subject to the provisos hereto, will reimburse, as
incurred, the Initial Purchaser and each such controlling
person for any legal or other expenses incurred by the
Initial Purchaser or such controlling person in connection
with investigating, defending against or appearing as a
third-party witness in connection with any such loss, claim,
damage, liability or action in respect thereof; provided,
however, the Company and XCL-China will not be liable in any
such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged
omission made in any Memorandum or any amendment or
supplement thereto in reliance upon and in conformity with
written information concerning the Initial Purchaser
furnished to the Company or XCL-China by the Initial
Purchaser specifically for use therein. This indemnity
agreement will be in addition to any liability that the
Company or XCL-China may otherwise have to the indemnified
parties. Neither the Company nor XCL-China shall be liable
under this Section 9 for any settlement of any claim or
action effected without its prior written consent, which
shall not be unreasonably withheld; and provided further,
however, that this indemnity, as to the Preliminary
Memorandum, shall not inure to the benefit of the Initial
Purchaser (or any person controlling such Initial Purchaser)
on account of any loss, claim, damage or liability arising
from the sale of Securities to any person by such Initial
Purchaser if such Initial Purchaser failed to send or give a
copy of the Final Memorandum (as the same may be
supplemented or amended) to such person at or prior to the
written confirmation of the sale of the Securities to such
person, and the untrue statement or alleged untrue statement
or omission or alleged omission of a material fact in such
Preliminary Memorandum was corrected in the Final
Memorandum, unless such failure resulted from noncompliance
by the Company with Section 5(d).
(b) The Initial Purchaser agrees to indemnify and
hold harmless each of the Company, XCL-China, their
directors, their officers and each person, if any, who
controls the Company or XCL-China within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act
against any losses, claims, damages or liabilities to which
the Company or XCL-China or any such director, officer or
controlling person may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise
out of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in any
Memorandum or any amendment or supplement thereto, (ii) the
omission or the alleged omission to state therein a material
fact required to be stated in any Memorandum or any
amendment or supplement thereto or necessary to make the
statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written
information concerning such Initial Purchaser, furnished to
the Company or XCL-China by the Initial Purchaser
specifically for use therein or (iii) any breach by the
Initial Purchaser of its representations, warranties and
agreements set forth herein; and subject to the limitation
set forth immediately preceding this clause, will reimburse,
as incurred, any legal or other expenses incurred by the
Company or XCL-China or any such director, officer or
controlling person in connection with investigating or
defending against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or
action in respect thereof. This indemnity agreement will be
in addition to any liability that the Initial Purchaser may
otherwise have to the indemnified parties. The Initial
Purchaser shall not be liable under this Section 9 for any
settlement of any claim or action effected without its prior
written consent, which shall not be unreasonably withheld.
Neither the Company nor XCL-China shall, without the prior
written consent of the Initial Purchaser, effect any
settlement or compromise of any pending or threatened
proceeding in respect of which the Initial Purchaser is or
could have been a party, or indemnity could have been sought
hereunder by the Initial Purchaser, unless such settlement
(A) includes an unconditional written release of the Initial
Purchaser, in form and substance reasonably satisfactory to
the Initial Purchaser, from all liability on claims that are
the subject matter of such proceeding and (B) does not
include any statement as to an admission of fault,
culpability or failure to act by or on behalf of the Initial
Purchaser.
(c) Promptly after receipt by an indemnified party
under this Section 9 of notice of the commencement of any
action for which such indemnified party is entitled to
indemnification under this Section 9, such indemnified party
will, if a claim in respect thereof is to be made against
the indemnifying party under this Section 9, notify the
indemnifying party of the commencement thereof in writing;
but the omission to so notify the indemnifying party (i)
will not relieve it from any liability under paragraph (a)
or (b) above unless and to the extent such failure results
in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve
the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation
provided in paragraphs (a) and (b) above. In case any such
action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to
such indemnified party; provided, however, that if (i) the
use of counsel chosen by the indemnifying party to represent
the indemnified party would present such counsel with a
conflict of interest, (ii) the defendants in any such action
include both the indemnified party and the indemnifying
party and the indemnified party shall have been advised by
counsel that there may be one or more legal defenses
available to it and/or other indemnified parties that are
different from or additional to those available to the
indemnifying party, or (iii) the indemnifying party shall
not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within
a reasonable time after receipt by the indemnifying party of
notice of the institution of such action, then, in each such
case, the indemnifying party shall not have the right to
direct the defense of such action on behalf of such
indemnified party or parties and such indemnified party or
parties shall have the right to select separate counsel to
defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense
thereof and approval by such indemnified party of counsel
appointed to defend such action, the indemnifying party will
not be liable to such indemnified party under this Section 9
for any legal or other expenses, other than reasonable costs
of investigation, subsequently incurred by such indemnified
party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in
accordance with the proviso to the immediately preceding
sentence (it being understood, however, that in connection
with such action the indemnifying party shall not be liable
for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but
substantially similar actions in the same jurisdiction
arising out of the same general allegations or
circumstances, designated by the Initial Purchaser in the
case of paragraph (a) of this Section 9 or the Company or
XCL-China in the case of paragraph (b) of this Section 9,
representing the indemnified parties under such paragraph
(a) or paragraph (b), as the case may be, who are parties to
such action or actions) or (ii) the indemnifying party has
authorized in writing the employment of counsel for the
indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable
for the costs and expenses of any settlement of such action
effected by such indemnified party without the prior written
consent of the indemnifying party (which consent shall not
be unreasonably withheld), unless such indemnified party
waived in writing its rights under this Section 9, in which
case the indemnified party may effect such a settlement
without such consent.
(d) In circumstances in which the indemnity
agreement provided for in the preceding paragraphs of this
Section 9 is unavailable to, or insufficient to hold
harmless, an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect
thereof), each indemnifying party, in order to provide for
just and equitable contribution, shall contribute to the
amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions
in respect thereof) in such proportion as is appropriate to
reflect (i) the relative benefits received by the
indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the
Securities or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, not
only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the
statements or omissions or alleged statements or omissions
that resulted in such losses, claims, damages or liabilities
(or actions in respect thereof). The relative benefits
received by the Company and XCL-China on the one hand and
the Initial Purchaser on the other shall be deemed to be in
the same proportion as the total proceeds from the offering
(before deducting expenses) received by the Company bear to
the total discounts and commissions received by such Initial
Purchaser. The relative fault of the parties shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact
relates to information supplied by the Company or XCL-China
on the one hand, or such Initial Purchaser on the other, the
parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or
omission or alleged statement or omission, and any other
equitable considerations appropriate in the circumstances.
(e) The Company, XCL-China and the Initial
Purchaser agree that it would not be equitable if the amount
of such contribution were determined by pro rata or per
capita allocation or by any other method of allocation that
does not take into account the equitable considerations
referred to in the first sentence of the immediately
preceding paragraph (d). Notwithstanding any other
provision of the immediately preceding paragraph (d), the
Initial Purchaser shall not be obligated to make
contributions hereunder that in the aggregate exceed the
total discounts, commissions and other compensation received
by such Initial Purchaser under this Agreement, less the
aggregate amount of any damages that such Initial Purchaser
has otherwise been required to pay by reason of the untrue
or alleged untrue statements or the omissions or alleged
omissions to state a material fact, and no person guilty of
fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent
misrepresentation. For purposes of the immediately
preceding paragraph (d), each person, if any, who controls
the Initial Purchaser within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act shall have the
same rights to contribution as the Initial Purchaser, and
each director of the Company and XCL-China, each officer of
the Company and XCL-China and each person, if any, who
controls the Company and XCL-China within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act,
shall have the same rights to contribution as the Company
and XCL-China.
10. Survival Clause. The respective
representations, warranties, agreements, covenants,
indemnities and other statements of the Company and XCL-
China, their respective officers and the Initial Purchaser
set forth in this Agreement or made by or on behalf of them
pursuant to this Agreement shall remain in full force and
effect, regardless of (i) any investigation made by or on
behalf of the Company and XCL-China, any of their respective
officers or directors, the Initial Purchaser or any
controlling person referred to in Section 9 hereof and (ii)
delivery of and payment for the Securities. The respective
agreements, covenants, indemnities and other statements set
forth in Sections 6, 9 and 16 hereof shall remain in full
force and effect, regardless of any termination or
cancellation of this Agreement.
11. Termination. (a) This Agreement may be
terminated in the sole discretion of the Initial Purchaser
by notice to the Company given prior to the Closing Date in
the event that the Company or XCL-China shall have failed,
refused or been unable to perform all obligations and
satisfy all conditions on their respective part to be
performed or satisfied hereunder at or prior thereto or, if
at or prior to the Closing Date:
(i) either the Company or XCL-China shall have
sustained any loss or interference with respect to its
businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by
insurance, or from any strike, labor dispute, slow down
or work stoppage or any legal or governmental
proceeding, which loss or interference, in the sole
judgment of the Initial Purchaser, has had or has a
Material Adverse Effect, or there shall have been, in
the sole judgment of the Initial Purchaser, any
Material Adverse Change, or any event or development
involving or reasonably likely to cause or result in a
Material Adverse Effect (including without limitation a
change in management or control of the Company or XCL-
China), except in each case as described in the Final
Memorandum (exclusive of any amendment or supplement
thereto);
(ii) trading in securities of the Company or
in securities generally on the New York Stock Exchange,
American Stock Exchange or the NASDAQ National Market
shall have been suspended or minimum or maximum prices
shall have been established on any such exchange or
market;
(iii) a banking moratorium shall have been
declared by New York or United States authorities;
(iv) there shall have been (A) an outbreak or
escalation of hostilities between the United States and
any foreign power, or (B) an outbreak or escalation of
any other insurrection or armed conflict involving the
United States or any other national or international
calamity or emergency, or (C) any material change in
the financial markets of the United States which, in
the case of clause (A), (B) or (C) and in the sole
judgment of the Initial Purchaser, makes it
impracticable or inadvisable to proceed with the
private offering or the delivery of the Securities as
contemplated by the Final Memorandum; or
(v) any securities of the Company shall have
been downgraded or placed on any "watch list" for
possible downgrading by any nationally recognized
statistical rating organization.
(b) Termination of this Agreement pursuant to this
Section 11 shall be without liability of any party to any
other party except as provided in Section 10 hereof.
12. Information Supplied by the Initial Purchaser.
The statements set forth in the last paragraph on the front
cover page, the first paragraph on page 3, and in the third,
fourth, ninth, thirteenth, fifteenth and sixteenth
paragraphs under the heading "Private Placement" in the
Memorandum (to the extent such statements relate to the
Initial Purchaser) constitute the only information furnished
by the Initial Purchaser to the Company or XCL-China for the
purposes of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be
in writing and, if sent to the Initial Purchaser, shall be
mailed or delivered or telecopied and confirmed in writing
to (i) Jefferies & Company, Inc., 909 Fannin Street, Suite
3100, Houston, Texas 77010, Attention: Robert W. Carington,
Telecopy No. (713) 650-8730; and if sent to the Company or
XCL-China, shall be mailed or delivered or telecopied and
confirmed in writing to it at 110 Rue Jean Lafitte,
Lafayette, Louisiana 70508, Attention: General Counsel,
Telecopy No. (318) 327-3316; with a copy to Satterlee
Stephens Burke & Burke LLP, 230 Park Avenue, Suite 1130, New
York, New York 10169, Attention: Peter A. Basilevsky, Esq.,
Telecopy No. (212) 818-9606.
All such notices and communications shall be deemed to
have been duly given: when delivered by hand, if personally
delivered; five business days after being deposited in the
United States mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier;
and when receipt is acknowledged by the addressee, if
telecopied.
14. Successors. This Agreement shall inure to the
benefit of and be binding upon the Initial Purchaser, the
Company and XCL-China and their respective successors and
legal representatives, and nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any
other person any legal or equitable right, remedy or claim
under or in respect of this Agreement, or any provisions
herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the
sole and exclusive benefit of such persons and for the
benefit of no other person except that (i) the indemnities
of the Company and XCL-China contained in Section 9 of this
Agreement shall also be for the benefit of any person or
persons who control the Initial Purchaser within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act
and (ii) the indemnities of the Initial Purchaser contained
in Section 9 of this Agreement shall also be for the benefit
of the directors of the Company and XCL-China, their
respective officers and any person or persons who control
the Company or XCL-China within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act. No purchaser of
Securities from the Initial Purchaser will be deemed a
successor because of such purchase.
15. Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York.
16. Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute one
and the same instrument.
If the foregoing correctly sets forth our
understanding, please indicate your acceptance thereof in
the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement among the
Company, XCL-China and the Initial Purchaser.
Very truly yours,
XCL LTD.
By:_____________________________
David A. Melman
Executive Vice President,
General Counsel and
Secretary
XCL-CHINA LTD.
By:_____________________________
David A. Melman
Vice President and
Secretary
The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.
JEFFERIES & COMPANY, INC.
By:_________________________________
Robert W. Carington
Senior Vice President
XCL LTD.
294,118 Units
Consisting of
Amended Series A, Cumulative Convertible Preferred Stock
with
Common Stock Purchase Warrants
PURCHASE AGREEMENT
------------------
May 13, 1997
JEFFERIES & COMPANY, INC.
Two Houston Center
909 Fannin St., Suite 3100
Houston, Texas 77010
Ladies and Gentlemen:
XCL Ltd., a Delaware corporation (the "Company"), and XCL-
China Ltd., a Delaware corporation ("XCL-China"), hereby confirm
their agreement with you (the "Initial Purchaser"), as set forth
below.
1. The Securities. Subject to the terms and conditions
herein contained, the Company shall issue and sell to the Initial
Purchaser 294,118 Units (each a "Unit" and collectively, the
"Units"), each consisting of one share of Amended Series A,
Cumulative Convertible Preferred Stock, par value $1.00 per
share, of the Company ("Amended Series A Preferred Stock") and
one warrant (collectively, the "Warrants") to purchase initially
327 shares of the Company's Common Stock, par value $0.01 per
share (the "Common Stock"), at an initial purchase price of
$0.2063 per share. The terms of the Amended Series A Preferred
Stock are set forth in the certificate of the Company (the "151
Certificate") to be filed with the Secretary of State of Delaware
pursuant to Section 151 of the Delaware General Corporation Law.
A copy of the 151 Certificate, in substantially final form, has
been delivered to the Initial Purchaser. The shares of Common
Stock issuable upon conversion of the Amended Series A Preferred
Stock are herein referred to as the "Conversion Stock." The
Warrants are to be issued under a Warrant Agreement to be dated
as of the Closing Date (the "Warrant Agreement") of the Company
for the benefit of the holders from time to time of the
certificates evidencing the Warrants. The shares of Common Stock
issuable upon exercise of the Warrants are herein referred to as
the "Warrant Shares." The Amended Series A Preferred Stock, the
Warrants and the Units are collectively referred to herein as the
"Securities."
The Securities will be offered and sold to the Initial
Purchaser without being registered under the Securities Act of
1933, as amended (the "Act"), in reliance on exemptions
therefrom.
In connection with the sale of the Securities, the Company
has prepared a preliminary offering memorandum dated May 7, 1997
(the "Preliminary Memorandum"), and a final offering memorandum
dated May 13, 1997 (the "Final Memorandum"; the Preliminary
Memorandum and the Final Memorandum each herein being referred to
as a "Memorandum"), setting forth a description of the terms of
the Securities, the terms of the offering of the Securities, and
a description of the business of the Company and XCL-China.
The Initial Purchaser and its direct and indirect
transferees of the Securities will be entitled to the benefits of
the Registration Rights Agreement, substantially in the form
attached hereto as Exhibit A (the "Registration Rights
Agreement"), pursuant to which the Company shall agree, among
other things, (i) to file a shelf registration statement (the
"Registration Statement") with the Securities and Exchange
Commission (the "Commission") registering the resale of the
Amended Series A Preferred Stock included in the Units, the
Conversion Stock and the Warrant Shares and (ii) to grant certain
"piggy-back" registration rights to the holders of the Conversion
Stock and the Warrant Shares.
2. Representations and Warranties. The Company and XCL-
China, jointly and severally, represent and warrant to and agree
with the Initial Purchaser that:
(a) Neither the Final Memorandum nor any amendment or
supplement thereto as of the date thereof and at all times
subsequent thereto up to the Closing Date contained or contains
any untrue statement of a material fact or omitted or omits to
state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set
forth in this Section 2(a) do not apply to statements or
omissions made in reliance upon and in conformity with
information relating to the Initial Purchaser furnished to the
Company or XCL-China in writing by the Initial Purchaser
expressly for use in the Final Memorandum or any amendment or
supplement thereto.
(b) As of the Closing Date, the Company will have the
authorized capitalization set forth in the Final Memorandum; all
of the outstanding shares of capital stock of the Company and XCL-
China have been, and as of the Closing Date will be, duly
authorized and validly issued, are fully paid and nonassessable
and were not issued in violation of any preemptive or similar
rights; except as set forth in the Final Memorandum, all of the
outstanding shares of capital stock of XCL-China are, and as of
the Closing Date will be, owned, directly or indirectly, by the
Company, free and clear of all liens, encumbrances, equities and
claims or restrictions on transferability (other than those
imposed by the Act and the securities or "Blue Sky" laws of
certain jurisdictions) or voting; except as set forth in the
Final Memorandum, there are no outstanding (i) options, warrants
or other rights to purchase from the Company or XCL-China, (ii)
agreements or other obligations of the Company or XCL-China to
issue or (iii) other rights to convert any obligation into, or
exchange any securities for, in the case of each clause (i)
through (iii) shares of capital stock of the Company or XCL-
China. The Company does not have any Subsidiaries (as defined in
the Indenture) except for XCL-China and the other corporations
identified in Exhibit B hereto; except for the capital stock of
the Subsidiaries identified in Exhibit B hereto and as otherwise
disclosed in the Final Memorandum, the Company does not own,
directly or indirectly, any shares of capital stock or any other
equity or long-term debt securities or have any equity interest
in any firm, partnership, joint venture or other entity.
(c) Each of the Company and its Subsidiaries has been
duly incorporated, is validly existing and is in good standing as
a corporation under the laws of its jurisdiction of
incorporation, with all requisite corporate power and authority
to own its properties and conduct its business as now conducted,
and as described in the Preliminary Memorandum and the Final
Memorandum; each of the Company and its Subsidiaries is duly
qualified to do business as a foreign corporation in good
standing in all other jurisdictions where the ownership or
leasing of its properties or the conduct of its business requires
such qualification, except where the failure to be so qualified
would not, individually or in the aggregate, have a material
adverse effect on the general affairs, management, business,
condition (financial or otherwise), prospects or results of
operations of the Company and its Subsidiaries, taken as a whole
(any such event, a "Material Adverse Effect").
(d) The Company has all requisite corporate power and
authority to make, execute, authenticate and file with the
Secretary of State of Delaware the 151 Certificate, whereupon the
Amended Series A Preferred Stock will be duly created as a series
of preferred stock, par value $1.00 per share (the "Preferred
Stock"), of the Company. The shares of Amended Series A
Preferred Stock included in the Units have been duly and validly
authorized for issuance by the Company and, when issued and paid
for by the Initial Purchaser in accordance with the terms of this
Agreement, will be duly authorized, validly issued, fully paid
and non-assessable, will not be subject to any preemptive or
similar rights and the holders thereof will be entitled to the
benefits of the preferences and other rights set forth in the 151
Certificate.
(e) [Intentionally Omitted]
(f) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under
the Registration Rights Agreement. The Registration Rights
Agreement has been duly and validly authorized by the Company
and, when executed and delivered by the Company (assuming the due
authorization, execution and delivery by the Initial Purchaser),
will constitute a valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its
terms, except that (A) the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which
any proceeding therefor may be brought and (B) any rights to
indemnity or contribution thereunder may be limited by federal
and state securities laws and public policy considerations.
(g) Subject to the availability of a sufficient number
of authorized but unissued or treasury shares to permit the
exercise of the oustanding Warrants, the Company has all
requisite corporate power and authority to execute, deliver and
perform each of its obligations under the Warrant Agreement. The
Warrant Agreement has been duly and validly authorized by the
Company and, subject to the availability of a sufficient number
of authorized but unissued or treasury shares to permit the
exercise of the outstanding Warrants, when executed and delivered
by the Company, will constitute a valid and legally binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement thereof
may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or
hereafter in effect relating to creditors' rights generally and
(ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought, and (iii)
federal or state securities laws or principles of public policy
affecting enforcement of rights to indemnity or contribution.
(h) Subject to the availability of a sufficient number
of authorized but unissued or treasury shares to permit the
exercise of the outstanding Warrants, the Company has all
requisite corporate power and authority to execute, deliver and
perform each of its obligations under the Warrants). The
Warrants have been duly and validly authorized by the Company
and, when executed by the Company and countersigned by the
Warrant Agent in accordance with the provisions of the Warrant
Agreement and when delivered to and paid for by the Initial
Purchaser in accordance with the terms of this Agreement, will
have been duly executed, issued and delivered and subject to the
availability of a sufficient number of authorized but unissued or
treasury shares to permit the exercise of the outstanding
Warrants, will constitute valid and legally binding obligations
of the Company, entitled to the benefits of the Warrant Agreement
and enforceable against the Company in accordance with their
terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which
any proceeding therefor may be brought, and (iii) federal or
state securities laws or principles of public policy affecting
enforcement rights to indemnity or contribution.
(i) The Warrant Shares, upon becoming available for
issuance upon the exercise of the Warrants in accordnace with
their terms, will have been, and the Conversion Stock have been
duly and validly authorized for issuance by the Company and, when
issued in accordance with the terms and conditions contained in
the Warrant Agreement upon exercise of the Warrants and upon
conversion of the Amended Series A Preferred Stock, as the case
may be, the Warrant Shares and the Conversion Stock, as the case
may be, will be duly authorized, validly issued, fully paid and
non-assessable and will not be subject to any preemptive or
similar rights. The Warrant Shares, upon becoming available for
issuance upon the exercise of the Warrants in accordance with
their terms, will have been duly reserved for issuance in
accordance with the terms of the Warrants and the Warrant
Agreement.
(j) The Company and XCL-China have all requisite
corporate power and authority to execute, deliver and perform
each of their obligations under this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been
duly and validly authorized, executed and delivered by the
Company and XCL-China. No consent, approval, authorization or
order of any court or governmental agency or body, or third party
is required for the performance of this Agreement by the Company
or XCL-China or the consummation by the Company or XCL-China of
the transactions contemplated hereby, except such as have been
(or will be, upon execution and delivery of the Intercreditor
Agreement) obtained and other than such as may be required under
state securities or "Blue Sky" laws in connection with the
purchase and resale of the Securities by the Initial Purchaser.
Neither the Company nor XCL-China is (i) in violation of its
certificate of incorporation or bylaws, (ii) in breach or
violation of any statute (including, without limitation, the
Foreign Corrupt Practices Act), judgment, decree, order, rule or
regulation applicable to either of them or any of their
respective properties or assets, except as disclosed in the Final
Memorandum or except for any such breach or violation which would
not, individually or in the aggregate, have a Material Adverse
Effect, or (iii) except as disclosed in the Final Memorandum, in
breach of or default under (nor has any event occurred which,
with notice or passage of time or both, would constitute a
default under) or in violation of any of the terms or provisions
of any indenture, mortgage, deed of trust, loan agreement, note,
lease, license, franchise agreement, permit, certificate,
contract or other agreement or instrument to which either of them
is a party or to which either of them or their respective
properties or assets is subject, except for any such breach,
default, violation or event which would not, individually or in
the aggregate, have a Material Adverse Effect.
(k) The execution, delivery and performance by the
Company and XCL-China of this Agreement and the consummation by
the Company and XCL-China of the transactions contemplated
hereby, and the fulfillment of the terms hereof, will not
conflict with or constitute or result in a breach of or a default
under (or an event which with notice or passage of time or both
would constitute as a default under) or violation of any of (i)
the terms or provisions of any indenture, mortgage, deed of
trust, loan agreement, note, lease, license, franchise agreement,
permit, certificate, contract or other agreement or instrument to
which the Company or XCL-China is a party or to which either of
them or their respective properties or assets is subject, (ii)
the respective certificate of incorporation or bylaws or
Memorandum or Articles of Association of the Company or XCL-
China, as the case may be, or (iii) (assuming compliance with all
applicable state securities or "Blue Sky" laws) any statute,
judgment, decree, order, rule or regulation applicable to the
Company or XCL-China or any of their respective properties or
assets.
(l) The audited consolidated financial statements of the
Company and its subsidiaries included in the Final Memorandum
present fairly in all material respects the consolidated
financial position, the consolidated results of their operations
and their cash flows at the dates and for the periods to which
they relate and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis,
except as otherwise stated therein. The summary and selected
consolidated historical financial data in the Final Memorandum
present fairly in all material respects the financial information
shown therein and have been prepared and compiled on a basis
consistent with the audited financial statements included
therein, except as otherwise stated therein. Coopers & Lybrand
L.L.P. (the "Independent Accountants") is an independent public
accounting firm within the meaning of the Act and the rules and
regulations promulgated thereunder.
(m) Except as described in the Final Memorandum, there
is not pending or, to the knowledge of the Company or XCL-China,
threatened, any action, suit, proceeding, inquiry or
investigation to which the Company or any Subsidiary is a party,
or to which the property or assets of the Company or any
Subsidiary are subject, before or brought by any court or
governmental agency or body which, if determined adversely to the
Company or such Subsidiary, would have, individually or in the
aggregate, a Material Adverse Effect or which seeks to restrain,
enjoin, prevent the consummation of or otherwise challenge the
issuance or sale of the Securities to be sold hereunder or the
consummation of the other transactions described in the Final
Memorandum.
(n) Each of the Company and XCL-China owns or possesses
adequate licenses or other rights to use all trademarks, service
marks, trade names and know-how necessary to conduct the
businesses now or proposed to be operated by it as described in
the Final Memorandum, and neither the Company nor XCL-China has
received any notice of conflict with (or knows of any such
conflict with) asserted rights of others with respect to any
trademarks, service marks, trade names or know-how which, if such
assertion of conflict were sustained, would, individually or in
the aggregate, have a Material Adverse Effect.
(o) Each of the Company and XCL-China possesses all
licenses, permits, certificates, consents, orders, approvals and
other authorizations from, and has made all declarations and
filings with, all federal, state, local and foreign governmental
authorities (including, without limitation, the Ministry of
Foreign Trade and Economic Cooperation of the People's Republic
of China ("MOFTEC")), all self-regulatory organizations and all
courts and other tribunals, presently required or necessary to
own or lease, as the case may be, and to operate its properties
and to carry on its business as now or proposed to be conducted
as set forth in the Final Memorandum, except for MOFTEC's (or any
other requisite Chinese governmental authority's) approval of the
ODP (as defined in the Memorandum) and except where the failure
to obtain such licenses, permits, certificates, consents, orders,
approvals and other authorizations, or to make all declarations
and filings, would not, individually or in the aggregate, have a
Material Adverse Effect, and neither the Company nor XCL-China
has received any notice of any proceeding relating to revocation
or modification of any such license, permit, certificate,
consent, order, approval or other authorization, except as
described in the Final Memorandum and except where such
revocation or modification would not, individually or in the
aggregate, have a Material Adverse Effect.
(p) Since the respective dates as of which information
is given in the Final Memorandum, except as described therein,
(i) neither the Company nor any Subsidiary has incurred any
liabilities or obligations, direct or contingent, or entered into
or agreed to enter into any transactions or contracts (written or
oral) not in the ordinary course of business and (ii) neither the
Company nor XCL-China has purchased any of its outstanding
capital stock, nor declared, paid or otherwise made any dividend
or distribution of any kind on its capital stock.
(q) Each of the Company and its Subsidiaries has filed
all necessary federal, state and foreign income and franchise tax
returns, except where the failure to so file such returns would
not, individually or in the aggregate, have a Material Adverse
Effect, and, except as set forth in the Final Memorandum, has
paid all taxes shown as due thereon; and other than tax
deficiencies which the Company or any Subsidiary is contesting in
good faith and for which the Company or such Subsidiary has
provided adequate reserves, there is no tax deficiency that has
been asserted against the Company or any Subsidiary that would
have, individually or in the aggregate, a Material Adverse
Effect.
(r) Subject to the Cautionary Statements (as defined in
the Final Memorandum) and other qualifications set forth in the
Final Memorandum, the projected fianncial, reserve and operating
data included in the Final Memorandum are based on or derived
from sources or assumptions which the Company and XCL-China
believe to be reliabel and reasonable. Subject to the Cautionary
Statements and the assumptions and qualifications set forth in
the Gruy Report (as defined in the Final Memorandum), the
projected financial, reserve and operating data included in the
Final Memorandum by incoporation by reference to the Gruy Report
are based on or derived from sources or assumptions which the
Company and XCL-China believe to be reliable and reasonable.
(s) None of the Company, XCL-China or any agent acting
on their behalf has taken or will take any action that might
cause the transactions contemplated by this Agreement (including,
without limitation, any pledge of the capital stock of XCL-China
pursuant to the Pledge Agreement) or the sale of the Securities
to violate Regulation G, T, U or X of the Board of Governors of
the Federal Reserve System, in each case as in effect, or as the
same may hereafter be in effect, on the Closing Date.
(t) Each of the Company and XCL-China has good and
defensible title to all real property and good title to all
personal property described in the Final Memorandum as being
owned by it and good and defensible title to a leasehold estate
in the real and personal property described in the Final
Memorandum as being leased by it free and clear of all liens,
charges, encumbrances or restrictions, except as described in the
Final Memorandum or to the extent the failure to have such title
or the existence of such liens, charges, encumbrances or
restrictions would not, individually or in the aggregate, have a
Material Adverse Effect.
(u) There are no legal or governmental proceedings
involving or affecting the Company or any Subsidiary or any of
their respective properties or assets which would be required to
be described in a prospectus pursuant to the Act that are not
described in the Final Memorandum, nor are there any material
contracts or other documents which would be required to be
described in a prospectus pursuant to the Act that are not
described in the Final Memorandum.
(v) Except as described in the Final Memorandum, each of
the Company and its Subsidiaries is in compliance in all respects
with all existing and applicable domestic and foreign laws, rules
or regulations relating to pollution or protection of public or
employee health or the environment ("Environmental Law") and with
the terms and conditions of any permit, license or approval
issued to the Compny or its Subsidiaries thereunder in connection
with the ownership, operation or use of its business, property
and assets, except where the failure to be in such compliance
would not, individually or in the aggregate, have a Material
Adverse Effect; except as disclosed in the Final Memorandum, none
of the Company or its Subsidiaries is subject to any known
liability, absolute or contingent, under any Environmental Law
except for any such liability which would not, individually or in
the aggregate, have a Material Adverse Effect; except as
disclosed in the Final Memorandum, there is no civil, criminal or
administrative action, suit, demand, hearing, notice of violation
or deficiency, investigation, proceeding or notice of potential
responsibility or demand letter or request for information
pending or, to the knowledge of the Company or XCL-China,
threatened against the Company or any of its Subsidiaries under
any Environmental Law which, if determined adversely to the
Company or any such Subsidiary would, individually or in the
aggregate, result in a Material Adverse Effect.
(w) Except as disclosed in the Final Memorandum, each of
the Company or its Subsidiaries carries insurance (including self
insurance) in such amounts and covering such risks as in its
reasonable determination is adequate for the conduct of its
business and the value of its properties.
(x) None of the Company or its Subsidiaries has any
liability for any prohibited transaction or funding deficiency or
any complete or partial withdrawal liability with respect to any
pension, profit sharing, 401(k) plan or other plan which is
subject to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), to which the Company or any Subsidiary
makes or ever has made a contribution and in which any employee
of the Company or any Subsidiary is or has ever been a
participant. With respect to such plans, the Company and each
Subsidiary is in compliance in all material respects with all
applicable provisions of ERISA.
(y) After giving effect to the offering and sale of the
Securities, neither the Company nor XCL-China will be an
"investment company" or "promoter" or "principal underwriter" for
an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
(z) The Amended Series A Preferred Stock the Warrants,
the Warrant Shares, the Common Stock, the Preferred Stock, the
Units, the Warrant Agreement, and the Registration Rights
Agreement will, and this Agreement does, conform in all material
respects to the descriptions thereof in the Final Memorandum.
(aa) Except as disclosed in the Final Memorandum, no
holder of securities of the Company or any Subsidiary will be
entitled to have such securities registered under the
registration statements required to be filed by the Company
pursuant to the Registration Rights Agreement other than as
expressly permitted thereby.
(bb) Immediately after the consummation of the
transactions contemplated by this Agreement, the fair value and
current fair saleable value of the assets of the Company (on a
consolidated basis) will exceed the sum of its stated liabilities
and identified contingent liabilities; the Company (on a
consolidated basis) is not, nor will the Company (on a
consolidated basis) be, after giving effect to the execution,
delivery and performance of this Agreement, and the consummation
of the transactions contemplated hereby, (a) left with
unreasonably small capital with which to carry on its business as
it is proposed to be conducted, (b) unable to pay its debts
(contingent or otherwise) as they mature or (c) otherwise
insolvent.
(cc) Neither the Company nor any person acting on its
behalf has offered or sold the Securities by means of any general
solicitation or general advertising within the meaning of Rule
502(c) under the Act or, with respect to Securities sold outside
the United States to non-U.S. persons (as defined in Rule 902
under the Act), by means of any directed selling efforts within
the meaning of Rule 902 under the Act, and the Company, any
affiliate of the Company and any person acting on its or their
behalf (other than the Initial Purchaser) have complied with and
will implement the "offering restriction" within the meaning of
such Rule 902.
(dd) Except as diclosed in the Final Memorandum, within
the six months preceding the date hereof, neither the Company nor
any other person acting on behalf of the Company (other than the
Initial Purchaser) has offered or sold to any person any
Securities, or any securities of the same or a similar class as
the Securities, other than Securities offered or sold to the
Initial Purchaser hereunder or securities included in the
Concurrent Debt Offering (as such term is defined in the
Memorandum); and the Company will take reasonable precautions
designed to insure that any offer or sale, direct or indirect, in
the United States or to any U.S. person (as defined in Rule 902
under the Act) of any Securities or any substantially similar
security issued by the Company, within six months subsequent to
the date on which the distribution of the Securities has been
completed (as notified to the Company by the Initial Purchaser),
is made under restrictions and other circumstances reasonably
designed not to affect the status of the offer and sale of the
Securities in the United States and to U.S. persons contemplated
by this Agreement as transactions exempt from the registration
provisions of the Act;
(ee) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or
affiliate located in Cuba within the meaning of Section 517.075,
Florida Statutes.
(ff) Assuming the accuracy of the representations and
warranties of the Initial Purchaser in Section 8 hereof, it is
not necessary in connection with the offer, sale and delivery of
the Securities to the Initial Purchaser in the manner
contemplated by this Agreement to register any of the Securities
under the Act.
(gg) No securities of the Company or XCL-China are of
the same class (within the meaning of Rule 144A under the Act) as
the Securities and listed on a national securities exchange
registered under Section 6 of the Exchange Act, or quoted in a
U.S. automated inter-dealer quotation system.
(hh) None of the Company or its Subsidiaries has taken,
nor will any of them take, directly or indirectly, any action
designed to, or that might be reasonably expected to, cause or
result in stabilization or manipulation of the price of the
Securities.
(ii) [Intentionally omitted.]
(jj) Neither the Company nor any of its Subsidiaries is
a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as
amended.
Any certificate signed by any officer of the Company or XCL-
China and delivered to the Initial Purchaser or to counsel for
the Initial Purchaser shall be deemed a joint and several
representation and warranty by the Company and XCL-China to the
Initial Purchaser as to the matters covered thereby.
3. Purchase, Sale and Delivery of the Securities. On the
basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and
conditions herein set forth, the Company agrees to issue and sell
to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company, 294,118 Units at a purchase price of
$79.90 per Unit. One or more certificates in definitive form for
the Securities that the Initial Purchaser has agreed to purchase
hereunder, and in such denomination or denominations and
registered in such name or names as the Initial Purchaser
requests upon notice to the Company at least 24 hours prior to
the Closing Date, shall be delivered by or on behalf of the
Company to the Initial Purchaser, against payment by or on behalf
of the Initial Purchaser of the purchase price therefor, by wire
transfer (same day funds) to such account or accounts as the
Company shall specify prior to the Closing Date. Such delivery
of and payment for the Securities shall be made at 10:00 a.m.,
New York time, on May 20, 1997, or at such other place, time or
date as the Initial Purchaser, on the one hand, and the Company,
on the other hand, may agree upon, such time and date of delivery
against payment being herein referred to as the "Closing Date."
The Company has requested that the Closing Date be scheduled to
occur five business days after the date of this Agreement in
order to provide sufficient time to satisfy the conditions for
closing set forth in Section 7 below. With respect to Securities
to be delivered in definitive certificated form, the Company will
make certificates for such Securities available for checking and
packaging by the Initial Purchaser at the offices of Jefferies &
Company, Inc. in New York, New York, or at such other place as
the Initial Purchaser may designate, at least 24 hours prior to
the Closing Date. Securities to be represented by one or more
definitive global Securities in book-entry form will be deposited
on the Closing Date, by or on behalf of the Company, with The
Depository Trust Company ("DTC") or its designated custodian, and
registered in the name of Cede & Co.
4. Offering by the Initial Purchaser. The Initial Purchaser
proposes to make an offering of the Securities at the price and
upon the terms set forth in the Final Memorandum, as soon as
practicable after this Agreement is entered into and as in the
judgment of the Initial Purchaser is advisable.
5. Covenants of the Company and XCL-China. Each of the
Company and XCL-China jointly and severally covenants and agrees
with the Initial Purchaser that:
(a) The Company and XCL-China shall not make any
amendment or supplement the Final Memorandum of which the Initial
Purchaser shall not previously have been advised and furnished a
copy for a reasonable period of time prior to the proposed
amendment or supplement and as to which the Initial Purchaser
shall not have given its consent. The Company and XCL-China will
promptly, upon the reasonable request of the Initial Purchaser,
make any amendments or supplements to the Preliminary Memorandum
or the Final Memorandum that may be necessary or advisable in
connection with the resale of the Securities by the Initial
Purchaser.
(b) The Company and XCL-China will cooperate with the
Initial Purchaser in arranging for the qualification of the
Securities for offering and sale under the securities or "Blue
Sky" laws of such jurisdictions as the Initial Purchaser may
designate and shall continue such qualifications in effect for as
long as may be necessary to complete the resale of the
Securities; provided, however, that in connection therewith,
neither of the Company nor XCL-China shall be required to qualify
as a foreign corporation or to execute a general consent to
service of process in any jurisdiction or subject itself to
taxation in excess of a nominal dollar amount in any such
jurisdiction where it is not then so subject.
(c) If, at any time prior to the completion of the
initial resale by the Initial Purchaser of the Securities to
persons other than affiliates of the Initial Purchaser (as
determined by the Initial Purchaser), any event occurs as a
result of which the Final Memorandum as then amended or
supplemented would include any untrue statement of a material
fact, or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading, or if for any other reason it is
necessary at any time to amend or supplement the Final Memorandum
to comply with applicable law, the Company and XCL-China will
promptly notify the Initial Purchaser thereof and will prepare,
at the expense of the Company and XCL-China, an amendment or
supplement to the Final Memorandum that corrects such statement
or omission or effects such compliance.
(d) The Company will, without charge, provide to the
Initial Purchaser and to counsel for the Initial Purchaser as
many copies of the Preliminary Memorandum and the Final
Memorandum or any amendment or supplement thereto as the Initial
Purchaser may reasonable request.
(e) The Company will apply the proceeds from the sale of
the Securities as set forth under "Use of Proceeds" in the Final
Memorandum.
(f) For and during the period ending on the fifth
anniversary of the Closing Date, the Company will furnish to the
Initial Purchaser copies of all reports and other communications
(financial or otherwise) furnished by the Company or XCL-China to
the Trustee, the Warrant Agent or the holders of the Securities
and, as soon as available, copies of any reports or financial
statements furnished to or filed by the Company or XCL-China with
the Commission or any national securities exchange on which any
class of securities of the Company or XCL-China may be listed.
(g) Prior to the Closing Date, the Company will furnish
to the Initial Purchaser, as soon as they have been prepared, if
at all, a copy of any unaudited interim financial statements of
the Company for any period subsequent to the period covered by
the most recent financial statements appearing in the Final
Memorandum.
(h) Except as disclosed in the Final Memorandum, none of
the Company or any of its affiliates will sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) which could be integrated with
the sale of the Securities in a manner which would require the
registration under the Act of the Securities.
(i) The Company and XCL-China will not solicit any offer
to buy or offer to sell the Securities by means of any form of
general solicitation or general advertising (as those terms are
used in Regulation D under the Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Act.
(j) For so long as any of the Securities remain
outstanding, the Company and XCL-China will make available, upon
request, to any seller or prospective purchaser of such
Securities the information specified in Rule 144A(d)(4) under the
Act, unless the Company is then subject to Section 13 or 15(d) of
the Exchange Act.
(k) Each of the Company and XCL-China will use its best
efforts to (i) permit the Securities to be designated PORTAL
securities in accordance with the rules and regulations adopted
by the NASD relating to trading in the Private Offering, Resales
and Trading through Automated Linkages market (the "PORTAL
Market") and (ii) permit the Securities to be eligible for
clearance and settlement through DTC.
(l) (i) During the period beginning from the date hereof
and continuing until the date 90 days after the Closing Date,
neither the Company nor XCL-China will offer, sell, contract to
sell or otherwise dispose of, except as provided hereunder, any
securities that are substantially similar to the Securities or
the Common Stock, including, but not limited to, any securities
that are convertible into or exchangeable for, or that represent
the right to receive, Common Stock or any such substantially
similar securities, except that the Company may, without such
consent (A) issue shares of Common Stock upon conversion of
preferred stock or warrants outstanding on the Closing Date, (B)
issue units consisting of notes and warrants to purchase Common
Stock upon consummation of the Concurrent Debt Offering (C) issue
shares of Common Stock pursuant to options or similar rights
granted to directors, officers or employees, (D) issue shares of
Common Stock pursuant to any long-term incentive or employee
benefit plan of the Company, (E) issue shares of Common Stock and
Preferred Stofck in payment of dividends on Preferred Stock, (F)
issue shares of Common Stock in redemption of Preferred Stock,
(G) issue shares of Amended Preferred Stock in payment of
interest on the Subordinated Debt (as defined in the Final
Memorandum), (H) issue securities to Patrick Collins valued at
$500,000, after the Closing Date, comparable to the Units and (I)
grant options or other derivative securities pursuant to existing
stock option plans of the Company; and provided, that, the
Company shall not offer, sell, contract to sell or otherwise
dispose of securities of the Company after such 90 day period if
such transaction would cause the initial offer and sale by the
Company and resale by the Initial Purchaser of the Securities not
to be exempt from the registration requirements of the Act, and
(ii) the Company it will use its best efforts to cause each
person who has entered into a Lock-up Agreement (as herein
defined) to comply therewith, will not grant any waivers or
consents to noncompliance therewith and will enforce its rights
under each such agreement, in each case unless and to the extent
that it shall have obtained the Initial Purchaser's prior written
consent.
(m) During the period of two years after the Closing
Date (or such shorter period as may be provided for in Rule
144(k) under the Act, as the same may be in effect from time to
time), the Company will not, and will not permit any of its
affiliates (as defined in Rule 144 under the Act) to, resell any
of the Securities which constitute "restricted securities" under
Rule 144 that have been reacquired by any of them, except
pursuant to an effective registration statement under the Act.
(n) The Company shall pay all stamp and other duties, if
any, which may be imposed by the United Sates or the United
Kingdom or any political subdivision thereof or taxing authority
thereof or therein with respect to the issuance of the
Securities; provided, however, the Company shall not be required
to make any payment with respect to any other tax, assessment or
government charge imposed by any government or any political
subdivision therefore taxing authority.
6. Expenses. The Company and XCL-China agree, jointly and
severally, to pay all costs and expenses incident to the
performance of their obligations under this Agreement, whether or
not the transactions contemplated herein are consummated or this
Agreement is terminated pursuant to Section 11 hereof, including
all costs and expenses incident to (i) the printing, word
processing or other production of documents with respect to the
transactions contemplated hereby, including any costs of printing
the Preliminary Memorandum and the Final Memorandum and any
amendment or supplement thereto, (ii) all arrangements relating
to the delivery to the Initial Purchaser of copies of the
foregoing documents, (iii) the fees and disbursements of the
counsel, the accountants and any other experts or advisors
retained by the Company, (iv) preparation, issuance and delivery
to the Initial Purchaser of the Securities, (v) the qualification
of the Securities under state securities and "Blue Sky" laws,
including filing fees and fees and disbursements of counsel for
the Initial Purchaser relating thereto, (vi) the reasonable fees,
disbursements and charges of Vinson & Elkins L.L.P., counsel to
the Initial Purchaser, in connection with the transactions
contemplated hereby, (vii) expenses in connection with any
meetings with prospective investors in the Securities, (viii)
fees and expenses of the Trustee, the Warrant Agent and the
transfer agents for the Common Stock and the Preferred Stock
including fees and expenses of their respective counsel, (ix) all
expenses and listing fees incurred in connection with the
application for quotation of the Securities on the PORTAL Market
and (x) any fees charged by investment rating agencies for the
rating of the Securities. If the sale of the Securities provided
for herein is not consummated because any condition to the
obligations of the Initial Purchaser set forth in Section 7
hereof is not satisfied, because this Agreement is terminated or
because of any failure, refusal or inability on the part of the
Company or XCL-China to perform all obligations and satisfy all
conditions on their part to be performed or satisfied hereunder
(other than solely by reason of a default by the Initial
Purchaser on its obligations hereunder after all conditions
hereunder have been satisfied in accordance herewith), the
Company and XCL-China, jointly and severally, agree to promptly
reimburse the Initial Purchaser upon demand for all out-of-pocket
expenses (including reasonable fees, disbursements and charges of
Vinson & Elkins L.L.P., counsel for the Initial Purchaser) that
shall have been incurred by the Initial Purchaser in connection
with the proposed purchase and sale of the Securities. The
Company and XCL-China shall not be liable to the Initial
Purchaser for loss of contemplated profits from the transactions
covered by this Agreement.
7. Conditions of the Initial Purchaser's Obligations. The
obligation of the Initial Purchaser to purchase and pay for the
Securities shall, in its sole discretion, be subject to the
satisfaction or waiver of the following conditions on or prior to
the Closing Date:
(a) On the Closing Date, the Initial Purchaser shall
have received the opinion, dated as of the Closing Date and
addressed to the Initial Purchaser, of Satterlee Stephens Burke &
Burke LLP, counsel for the Company and XCL-China, in form and
substance satisfactory to counsel for the Initial Purchaser, to
the effect that:
(i) Each of the Company and XCL-China is duly
incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate
power and authority to own, lease and operate its properties and
to conduct its business as described in the Final Memorandum.
The Company is duly qualified as a foreign corporation and in
good standing under the laws of the State of Louisiana.
(ii) To the knowledge of such counsel, all of the
outstanding shares of capital stock of XCL-China are owned,
directly or indirectly, by the Company, free and clear of all
liens, encumbrances, equities and claims or restrictions on
transferability or voting, except for those arising under the
Participation Agreement or under the applicable laws, reulse and
regulations (including interpretations thereof) of the People's
Republic of China or securing the Existing Secured Debt (as such
terms are defined in the Final Memorandum).
(iii) Except as set forth in the Final Memorandum,
to the knowledge of such counsel (A) no options, warrants or
other rights to purchase from the Company or XCL-China shares of
capital stock in the Company or XCL-China are outstanding, (B) no
agreements or other obligations of the Company or XCL-China to
issue, or other rights to cause the Company or XCL-China to
convert, any obligation into, or exchange any securities for,
shares of capital stock in the Company or XCL-China are
outstanding and (C) no holder of securities of the Company or XCL-
China is entitled to have such securities registered under a
registration statement filed by the Company or XCL-China under
the Act with respect to the Securities or the Warrant Shares.
(iv) The 151 Certificate has been filed in the
State of Delaware in the manner provided by the Delaware General
Corporation Law; and the shares of Amended Series A Preferred
Stock included in the Units have been duly and validly authorized
for issuance by the Company and, when issued and paid for by the
Initial Purchaser in accordance with the terms of this Agreement,
will be duly authorized, validly issued, fully paid and non-
assessable, will not be subject to any preemptive or similar
rights and the holders thereof will be entitled to the benefits
of the preferences and other rights set forth in the 151
Certificate.
(v) [Intentionally omitted.]
(vi) The Company has all requisite corporate power
and authority to execute, deliver and perform its obligations
under the Registration Rights Agreement; the Registration Rights
Agreement has been duly and validly authorized, executed and
delivered by the Company and (assuming the due authorization,
execution and delivery thereof by the Initial Purchaser),
constitutes the valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its
terms, except that (A) the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which
any proceeding therefor may be brought and (B) any rights to
indemnity or contribution thereunder may be limited by federal
and state securities laws and public policy considerations.
(vii) Subject to the availability of a sufficient
number of authorized but unissued or treasury shares to permit
the exercise of the outstanding Warrants, the Company has all
requisite corporate power and authority to execute, deliver and
perform its obligations under the Warrant Agreement. The Warrant
Agreement has been duly and validly authorized, executed and
delivered by the Company and, subject to the availability of a
sufficient number of authorized but unissued or treasury shares
to permit the exercise of the outstanding Warrants, constitutes
the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms,
except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which
any proceeding therefor may be brought and (iii) Federal or state
securities laws or principles of public policy affecting
enforcement of rights to indemnity or contribution.
(viii) Subject to the availability of a sufficient
number of authorized but unissued or treasury shares to permit
the exercise of the outstanding Warrants, the Company has all
requisite corporate power and authority to execute, deliver and
perform its obligations under the Warrants. The Warrants have
been duly and validly authorized and executed by the Company and,
when countersigned by the Warrant Agent in accordance with the
provisions of the Warrant Agreement and delivered to and paid for
by the Initial Purchaser in accordance with the terms of this
Agreement, will have been duly issued and delivered and, subject
to the availability of a sufficient number of authorized but
unissued or treasury shares to permit the exercise of the
outstanding Warrants, will constitute the valid and legally
binding obligations of the Company, entitled to the benefits of
the Warrant Agreement, and enforceable against the Company in
accordance with their terms, except that the enforcement thereof
may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or
hereafter in effect relating to creditors' rights generally and
(ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought and (iii)
Federal or state securities laws or principles of public policy
affecting enforcement of rights to indemnity or contribution..
(ix) Subject to the availability of a sufficient
number of authorized but unissued or treasury shares to permit
the execise of the outstanding Warrants, when issued upon
exercise of the Warrants and upon conversion of the Amended
Series A Preferred Stock, the Warrant Shares and the Conversion
Stock, respectively, will be duly authorized, validly issued,
fully paid and non-assessable and will not be subject to any
preemptive or similar rights.
(x) Each of the Company and XCL-China has all
requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement and to consummate
the transactions contemplated hereby; the execution, delivery and
performance of this Agreement by the Company and XCL-China and
the consummation by the Company and XCL-China of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company and XCL-
China. This Agreement has been duly executed and delivered by
the Company and XCL-China.
(xi) The Amended Series A Preferred Stock, the
Warrants, the Warrant Shares, the Common Stock, the Preferred
Stock, the Registration Rights Agreement and the Warrant
Agreement conform in all material respects to the descriptions
thereof contained in the Final Memorandum.
(xii) To the knowledge of such counsel, no legal or
governmental proceedings are pending or threatened to which any
of the Company or any of its Subsidiaries is a party or to which
the property or assets of the Company or any Subsidiary is
subject which, if determined adversely to the Company or the
Subsidiary, would result, individually or in the aggregate, in a
Material Adverse Effect, or which seeks to restrain, enjoin,
prevent the consummation of or otherwise challenge the issuance
or sale of the Securities to be sold hereunder or the
consummation of the other transactions described in the Final
Memorandum under the caption "Use of Proceeds."
(xiii) [Intentionally omitted]
(xiv) The execution and delivery of this Agreement,
the Warrant Agreement and the Registration Rights Agreement and
the consummation of the transactions contemplated hereby and
thereby (including, without limitation, the issuance and sale of
the Securities to the Initial Purchaser) will not conflict with
or constitute or result in a breach or violation of or a default
under (or an event which with notice or passage of time or both
would constitute a default under) any of (i) to such counsel's
knowledge, any of the terms or provisions of any indenture,
mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract or other
agreement or instrument (including in any event any of the
foregoing which have been filed by the Company with the
Commission) to which the Company or XCL-China is a party or to
which either of them or their respective properties or assets is
subject, except for any such conflict, breach, violation, default
or event which would not, individually or in the aggregate, have
a Material Adverse Effect, (ii) the certificate of incorporation
or bylaws of the Company or the Memorandum and Articles of
Association of XCL-China, or (iii) to such counsel's knowledge,
any statute, judgment, decree, order, rule or regulation known to
such counsel to be applicable to the Company or XCL-China or any
of their respective properties or assets, except for any
securities or antifraud law.
(xv) To the knowledge of such counsel, no consent,
approval, authorization or order of any governmental authority is
required for the issuance and sale by the Company and XCL-China
of the Securities to the Initial Purchaser or the other
transactions contemplated hereby, except such as may be required
under applicable securities laws, as to which such counsel need
express no opinion pursuant to this clause (xv), and those which
have previously been obtained.
(xvi) No registration under the Act of the
Securities is required in connection with the sale of the
Securities to the Initial Purchaser as contemplated by this
Agreement and the Final Memorandum or in connection with the
initial resale of the Securities by the Initial Purchaser in
accordance with Section 8 of this Agreement, and prior to the
commencement of the Exchange Offer (as defined in the
Registration Rights Agreement) or the effectiveness of the Shelf
Registration Statement (as defined in the Registration Rights
Agreement), the Indenture is not required to be qualified under
the TIA, in each case assuming (i) that the Purchaser who buy
such Securities in the initial resale thereof are qualified
institutional buyers as defined in Rule 144A promulgated under
the Act ("QIBs" or "Qualified Institutional Buyers"), accredited
investors as defined in Rule 501(a)(1), (2), (3) or (7)
promulgated under the Act ("Accredited Investors"), or foreign
Purchaser (as defined in Section 8), (ii) the accuracy of the
Initial Purchaser's representations in Section 8 and those of the
Company and XCL-China contained in this Agreement regarding the
absence of a general solicitation in connection with the sale of
such Securities to the Initial Purchaser and the initial resale
thereof and (iii) the due performance by the Initial Purchaser of
the agreements set forth in Section 8 hereof.
(xvii) Neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution
or delivery of the Securities will violate Regulation G, T, U or
X of the Board of Governors of the Federal Reserve System.
At the time the foregoing opinion is delivered, Satterlee
Stephens Burke & Burke LLP shall additionally state that it has
participated in conferences with officers and other
representatives of the Company and XCL-China, representatives of
the independent public accountants for the Company,
representatives of the Initial Purchaser and counsel for the
Initial Purchaser, at which conferences the contents of the Final
Memorandum and related matters were discussed, and, although it
has not independently verified and is not passing upon and
assumes no responsibility for the accuracy, completeness or
fairness of the statements contained in the Final Memorandum
(except to the extent specified in clause (xi)), no facts have
come to its attention which lead it to believe that the Final
Memorandum, on the date thereof or at the Closing Date, contained
an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements contained therein, in light of the circumstances
under which they were made, not misleading (it being understood
that such firm need express no opinion with respect to the
financial statements and related notes thereto and the other
financial, statistical and geological data included in the Final
Memorandum). In rendering such opinion, such counsel may (i)
rely in respect to matters of fact upon certificates of officers
of the Company and its Subsidiaries and upon information obtained
from public officials, (ii) assume that all documents submitted
to such counsel as originals are authentic, that all copies
submitted to such counsel conform to the originals thereof, and
that the signatures on all documents examined by such counsel are
genuine, (iii) state that such counsel's opinion is limited to
the federal law of the United States and the laws of the State of
New York and the General Corporation Law of the State of
Delaware, (iv) rely in respect to all matters involving XCL-China
and the laws of the British Virgin Islands upon the opinion of
local counsel, and (v) may make such other assumptions and
qualifications as may be reasonably acceptable to the Initial
Purchaser. The opinion of Satterlee Stephens Burke & Burke LLP
described in this subsection (a) shall be rendered to the Initial
Purchaser at the request of the Company and XCL-China and shall
so state therein.
References to the Final Memorandum in this subsection (a)
shall include any amendment or supplement thereto prepared in
accordance with the provisions of this Agreement at the Closing
Date.
(b) On the Closing Date, the Initial Purchaser shall
have received the opinion, in form and substance satisfactory to
the Initial Purchaser, dated as of the Closing Date and addressed
to the Initial Purchaser, of Vinson & Elkins L.L.P., counsel for
the Initial Purchaser, with respect to certain legal matters
relating to this Agreement and such other related matters as the
Initial Purchaser may require. In rendering such opinion, Vinson
& Elkins L.L.P. shall have received and may rely upon such
certificates and other documents and information as it may
reasonably request to pass upon such matters.
(c) The Initial Purchaser shall have received from the
Independent Accountants a comfort letter or letters dated the
date hereof and the Closing Date, in form and substance
satisfactory to the Initial Purchaser, to the effect set forth in
Exhibit C hereto.
(d) The representatives and warranties of each of the
Company and XCL-China contained in this Agreement shall be true
and correct in all material respects on and as of the date hereof
and on and as of the Closing Date as if made on and as of the
Closing Date (except for the representations and warranties which
were true and correct as of acertain specified date which shall
continue to be true and correct as of such date); the statements
of the Company's and XCL-China's officers made pursuant to any
certificate delivered in accordance with the provisions hereof
shall be true and correct in all material respects on and as of
the date made and on and as of the Closing Date; the Company and
XCL-China shall have complied in all material respects with all
agreements and satisfied all conditions on their part to be
performed or satisfied hereunder at or prior to the Closing Date;
and, except as described in the Final Memorandum (exclusive of
any amendment or supplement thereto after the date hereof),
subsequent to the date of the most recent financial statements in
such Final Memorandum, there shall have been no development that,
singly or in the aggregate, is reasonably likely to cause a
Material Adverse Effect.
(e) The sale of the Securities hereunder shall not be
enjoined (temporarily or permanently) on the Closing Date.
(f) Subsequent to the date of the most recent financial
statements in the Final Memorandum (exclusive of any amendment or
supplement thereto after the date hereof), other than as
described in such Final Memorandum or contemplated hereby,
neither the Company nor any Subsidiary shall have incurred any
liabilities or obligations, direct or contingent (other than in
the ordinary course of business), that are material to the
Company and its Subsidiaries, taken as a whole, or entered into
any transactions not in the ordinary course of business that are
material to the business, condition (financial or other) or
results of operations or prospects of the Company, taken as a
whole, and there shall not have been any adverse change in the
capital stock or long-term indebtedness of the Company or any
Subsidiary that is material to the business, condition (financial
or other) or results of operations or prospects of the Company
and the Subsidiaries, taken as a whole.
(g) Subsequent to the date of the most recent financial
statements in the Final Memorandum (exclusive of any amendment or
supplement thereto after the date hereof), the conduct of the
business and operations of the Company or XCL-China shall not
have been interfered with by strike, fire, flood, hurricane,
accident or other calamity (whether or not insured) or by any
court or governmental action, order or decree, and, except as
otherwise stated therein, the properties of the Company or XCL-
China shall not have sustained any loss or damage (whether or not
insured) as a result of any such occurrence, except any such
interference, loss or damage which would not, individually or in
the aggregate, have a Material Adverse Effect.
(h) The Initial Purchaser shall have received
certificates of the Company and XCL-China, dated the Closing
Date, signed on behalf of the Company and XCL-China by their
respective Chairman of the Board or President and their Chief
Financial Officer, to the effect that:
(i) the representations and warranties of the
Company and XCL-China contained in this Agreement are true and
correct in all material respects as of the date hereof and as of
the Closing Date (except for the representations and warranties
which were true and correct as of a certain specified date which
shall continue to be true and correct as of such date), and the
Company and XCL-China have performed all covenants and agreements
and satisfied hereunder all conditions on their part to be
performed or satisfied hereunder at or prior to the Closing Date;
(ii) at the Closing Date, since the date hereof or
since the date of the most recent financial statements in the
Final Memorandum (exclusive of any amendment or supplement
thereto after the date hereof), no event or events have occurred,
no information has become known nor does any condition exist
that, individually or in the aggregate, would have a Material
Adverse Effect;
(iii) since the date hereof or since the date of
the most recent financial statements in the Final Memorandum
(exclusive of any amendment or supplement thereto after the date
hereof), other than as described in the Final Memorandum or
contemplated hereby, neither the Company nor any Subsidiary has
incurred any liabilities or obligations, direct or contingent
(other than in the ordinary course of business), that are
material to the Company and its Subsidiaries, taken as a whole,
or entered into any transactions not in the ordinary course of
business that are material to the business, condition (financial
or other) or results of operations or prospects of the Company
and its Subsidiaries, taken as a whole, and there has not been
any change in the capital stock or long-term indebtedness of the
Company or any Subsidiary that is material to the business,
condition (financial or other) or results of operations or
prospects of the Company and its Subsidiaries, taken as a whole;
(iv) the sale of the Securities hereunder has not
been enjoined (temporarily or permanently; and
(v) the Concurrent Debt Offering shall have been
consummated as contemplated by the Final Memorandum.
(i) On the Closing Date, the Initial Purchaser shall
have received the Registration Rights Agreement executed by the
Company.
(j) The Initial Purchaser shall have received from H.J.
Gruy and Associates, Inc. (1) a letter dated the date hereof, in
form and substance satisfactory to the Initial Purchaser, to the
effect set forth in Exhibit D hereto.
(k) The Concurrent Debt Offering shall have been
consummated as contemplated by the Final Memorandum.
(l) [Intentionally omitted.]
(m) The directors and executive officers of the Company
who are holders of outstanding shares of or securities
exercisable or exchangeable for or convertible into shares of
capital stock of the Company and the principal holders of the
Company's Series A, Cumulative Convertible Preferred Stock shall
have entered into a written agreement with the Initial Purchaser
in the form of Exhibit E hereto (each such agreement a "Lock-up
Agreement"), and executed originals of each Lock-up Agreement
shall have been delivered to you.
On or before the Closing Date, the Initial Purchaser and
counsel for the Initial Purchaser shall have received such
further documents, opinions, certificates, letters and schedules
or instruments relating to the business, corporate, legal and
financial affairs of the Company and XCL-China as they shall have
heretofore reasonably requested from the Company and XCL-China.
All such documents, opinions, certificates, letters,
schedules or instruments delivered pursuant to this Agreement
will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Initial
Purchaser and counsel for the Initial Purchaser. The Company and
XCL-China shall furnish to the Initial Purchaser such conformed
copies of such documents, opinions, certificates, letters,
schedules and instruments in such quantities as the Initial
Purchaser shall reasonably request.
8. Representations and Warranties by the Initital
Purchaser. The Initial Purchaser represents and warrants that it
has duly authorized, executed and delivered this Agreement. The
Initial Purchaser hereby acknowledges that the Securiteis have
not been registered under the Act; they are being offered and
sold pursuant to an exemption from registration contained in the
Act based in part on the Initial Purchaser's representations
contained in this Agreement, including, without limitatin, the
following: it has substantial experience in evaluating and
investing in private placement transactions of securities in
companies dimilar to the Company so that it is capable of
evaluating the merits and resks of its investment in the Company;
it acknolwedges that it must bear the economic risk of this
investment indefinitely unless the Securiteis are regitered under
the Act or an exemption from registration is available; it is an
"accredited investor" within the meaning of Rule 501(a)
prolulgated under the Act; it has received and read the Final
Memorandum, in particular the information set forth in the
sections entitled "Disclosure of Forwrd-Looking Information,"
"Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Transfer
Restrictions" and "Private Placement," and has had an opportunity
to discuss the Company's business, management and financial
affairs with directors, officers and other management of the
Company and its subsidiaries and ask questiosn of, and receive
answers from the Compandy and its managment regarding the terms
and conditions of its investment in the Company. The Initital
Purchaser represents and warrants that it is a QIB. The Initial
Purchaser agrees with the Company and XCL-China that (a) it has
not and will not solicit offers for, or offer or sell, the
Securities by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the
Act) or in any manner involving a public offering within the
meaning of Section 4(2) of the Act and (b) it has and will
solicit offers for the Securities only from, and will offer the
Securities only to (A) in the case of offers inside the United
States, (i) persons whom the Initial Purchaser reasonably
believes to be QIBs, if any such person is buying for one or more
institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to the
Initial Purchaser that each such account is a QIB, to whom notice
has been given that such sale or delivery is being made in
reliance on Rule 144A under the Act, and, in each case, in
transactions under Rule 144A or (ii) a limited number of other
institutional investors reasonably believed by the Initial
Purchaser to be Accredited Investors that, prior to their
purchase of the Securities, deliver to the Initial Purchaser a
letter containing the representations and agreements set forth in
Appendix A to the Final Memorandum and (B) in the case of offers
outside the United States, to persons other than U.S. persons
("foreign purchaser") which term shall include dealers or other
professional fiduciaries in the United States acting on a
discretionary basis for foreign beneficial owners (other than an
estate or trust)); provided, however, that, in the case of this
clause (b), in purchasing such Securities such persons are deemed
to have represented and agreed as provided under the caption
"Transfer Restrictions" contained in the Final Memorandum. The
Initial Purchaser further represents and agrees that, except as
permitted by this Agreement, it will not offered, sell or deliver
any Securities (i) as part of the distribtution at any time or
(ii) otherwise until 40 days (or such longer period as may be
provided under Regulation S, as amended) after the later of the
commencment of the offering of the Units, within the United
States or to, or for the account or benefit of, U.S. Persons, and
that it will send to each dealer to which it sells Units in
reliance on Regulation S during the restricted period a
confirmation or other notice setting forth the restrictions on
offers and sales of the Securities within the United States or
to, or for the account or benefit of, U.S. Person (terms used in
this paragraph having the meanings given to them by Regulation S
under the Securities Act). The Initital Purchaser further
represents, warrants and agrees that (i) it has not offered or
sold and prior to the date six months after the date of issue of
the Securities will not offer or sell any Securities to persons
in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted
and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities
Regulations 1995, (ii) it has complied, and will comply, with all
applicable provisions of the Financial Services Act 1986 of Great
Britain with respect to anything done by it in relation to the
Securities in, from or otherwise involving the United Kingdom,
and (iii) it has only issued or passed on, and will only issue or
pass on, in the United Kingdom, any document received by it in
connection with the issuance of the Securities to a person who is
of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1995 of
Great Britain or is a person to whom the document may otherwise
lawfully be issued or passed on. The Initial Purchaser agrees
that it will not offer, sell or deliver any of the Securities in
any jurisdiction outside the United States except under
circumstances that will result in compliance with the provisions
of Regulation S promulgated under the Act and the applicable laws
of such jurisdiction, and that it will take at its own expense
whatever action is required to permit its purchase and resale of
the Securities in such jurisdictions. The Initial Purchaser
understands that no action has been taken to permit a public
offering in any jurisdiction outside the United States where
action would be required for such purpose. The Initial Purchaser
agrees not to cause any advertisement of the Securities to be
published in any newspaper or periodical or posted in any public
place and not to issue any circular relating to the Securities,
except in any such case with the consent of the Company. The
Initial Purchaser agrees to send and give a copy of the Final
Memorandum (as the same may be supplement or amended) to each
Purchaser of the Units at or prior to the written confirmation of
the sale of the Units to such person.
9. Indemnification and Contribution. (a) The Company
and XCL-China, jointly and severally, agree to indemnify and hold
harmless the Initial Purchaser, and each person, if any, who
controls the Initial Purchaser within the meaning of Section 15
of the Act or Section 20 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), against any losses, claims,
damages or liabilities to which the Initial Purchaser or such
controlling person may become subject under the Act, the Exchange
Act or otherwise, insofar as any such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon:
(i) any untrue statement or alleged untrue
statement of any material fact contained in any Memorandum or any
amendment or supplement thereto; or
(ii) the omission or alleged omission to state, in
any Memorandum or any amendment or supplement thereto, a material
fact required to be stated therein or necessary to make the
statements therein not misleading; or
(iii) any breach by the Company or XCL-China of
their respective representations, warranties and agreements set
forth herein;
and, subject to the provisos hereto will reimburse, as incurred,
the Initial Purchaser and each such controlling person for any
legal or other expenses incurred by the Initial Purchaser or such
controlling person in connection with investigating, defending
against or appearing as a third-party witness in connection with
any such loss, claim, damage, liability or action in respect
thereof; provided, however, the Company and XCL-China will not be
liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged
omission made in any Memorandum or any amendment or supplement
thereto in reliance upon and in conformity with written
information concerning the Initial Purchaser furnished to the
Company or XCL-China by the Initial Purchaser specifically for
use therein. This indemnity agreement will be in addition to any
liability that the Company or XCL-China may otherwise have to the
indemnified parties. Neither the Company nor XCL-China shall be
liable under this Section 9 for any settlement of any claim or
action effected without its prior written consent, which shall
not be unreasonably withheld; and provided further, however, that
this indemnity, as to the Preliminary Offering Memorandum, shall
not inure to the benefit of the Initial Purchaser (or any person
controlling such Initial Purchaser) on account of any loss,
claim, damage or liability arising from the sale of Securities to
any person by such Initial Purchaser if such Initial Purchaser
failed to send or give a copy of the Final Memorandum (as the
same may be supplemented or amended) to such person at or prior
to the written confirmation of the sale of the Securities to such
person, and the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact in such
Preliminary Offering Memorandum was corrected in the Final
Memorandum, unless such failure resulted from noncompliance by
the Company with Section 5(d).
(b) The Initial Purchaser agrees to indemnify and hold
harmless each of the Company, XCL-China, their directors, their
officers and each person, if any, who controls the Company or XCL-
China within the meaning of Section 15 of the Act or Section 20
of the Exchange Act against any losses, claims, damages or
liabilities to which the Company or XCL-China or any such
director, officer or controlling person may become subject under
the Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any
Memorandum or any amendment or supplement thereto or (ii) the
omission or the alleged omission to state therein a material fact
required to be stated in any Memorandum or any amendment or
supplement thereto or necessary to make the statements therein
not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information concerning such Initial
Purchaser, furnished to the Company or XCL-China by the Initial
Purchaser specifically for use therein or (iii) any breach by the
Initial Purchaser of its representations, warranties and
agreements set forth herein; and subject to the limitation set
forth immediately preceding this clause, will reimburse, as
incurred, any legal or other expenses incurred by the Company or
XCL-China or any such director, officer or controlling person in
connection with investigating or defending against or appearing
as a third party witness in connection with any such loss, claim,
damage, liability or action in respect thereof. This indemnity
agreement will be in addition to any liability that the Initial
Purchaser may otherwise have to the indemnified parties. The
Initial Purchaser shall not be liable under this Section 9 for
any settlement of any claim or action effected without its prior
written consent, which shall not be unreasonably withheld.
Neither the Company nor XCL-China shall, without the prior
written consent of the Initial Purchaser, effect any settlement
or compromise of any pending or threatened proceeding in respect
of which the Initial Purchaser is or could have been a party, or
indemnity could have been sought hereunder by the Initial
Purchaser, unless such settlement (A) includes an unconditional
written release of the Initial Purchaser, in form and substance
reasonably satisfactory to the Initial Purchaser, from all
liability on claims that are the subject matter of such
proceeding and (B) does not include any statement as to an
admission of fault, culpability or failure to act by or on behalf
of the Initial Purchaser.
(c) Promptly after receipt by an indemnified party under
this Section 9 of notice of the commencement of any action for
which such indemnified party is entitled to indemnification under
this Section 9, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party of the
commencement thereof in writing; but the omission to so notify
the indemnifying party (i) will not relieve it from any liability
under paragraph (a) or (b) above unless and to the extent such
failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation
provided in paragraphs (a) and (b) above. In case any such
action is brought against any indemnified party, and it notifies
the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and,
to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if (i) the use of counsel chosen
by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the
defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have
been advised by counsel that there may be one or more legal
defenses available to it and/or other indemnified parties that
are different from or additional to those available to the
indemnifying party, or (iii) the indemnifying party shall not
have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time
after receipt by the indemnifying party of notice of the
institution of such action, then, in each such case, the
indemnifying party shall not have the right to direct the defense
of such action on behalf of such indemnified party or parties and
such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying
party to such indemnified party of its election so to assume the
defense thereof and approval by such indemnified party of counsel
appointed to defend such action, the indemnifying party will not
be liable to such indemnified party under this Section 9 for any
legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in
connection with the defense thereof, unless (i) the indemnified
party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being
understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more
than one separate counsel (in addition to local counsel) in any
one action or separate but substantially similar actions in the
same jurisdiction arising out of the same general allegations or
circumstances, designated by the Initial Purchaser in the case of
paragraph (a) of this Section 9 or the Company or XCL-China in
the case of paragraph (b) of this Section 9, representing the
indemnified parties under such paragraph (a) or paragraph (b), as
the case may be, who are parties to such action or actions) or
(ii) the indemnifying party has authorized in writing the
employment of counsel for the indemnified party at the expense of
the indemnifying party. After such notice from the indemnifying
party to such indemnified party, the indemnifying party will not
be liable for the costs and expenses of any settlement of such
action effected by such indemnified party without the prior
written consent of the indemnifying party (which consent shall
not be unreasonably withheld), unless such indemnified party
waived in writing its rights under this Section 9, in which case
the indemnified party may effect such a settlement without such
consent.
(d) In circumstances in which the indemnity agreement
provided for in the preceding paragraphs of this Section 9 is
unavailable to, or insufficient to hold harmless, an indemnified
party in respect of any losses, claims, damages or liabilities
(or actions in respect thereof), each indemnifying party, in
order to provide for just and equitable contribution, shall
contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the
indemnifying party or parties on the one hand and the indemnified
party on the other from the offering of the Securities or (ii) if
the allocation provided by the foregoing clause (i) is not
permitted by applicable law, not only such relative benefits but
also the relative fault of the indemnifying party or parties on
the one hand and the indemnified party on the other in connection
with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof). The relative
benefits received by the Company and XCL-China on the one hand
and the Initial Purchaser on the other shall be deemed to be in
the same proportion as the total proceeds from the offering
(before deducting expenses) received by the Company bear to the
total discounts and commissions received by such Initial
Purchaser. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information
supplied by the Company or XCL-China on the one hand, or such
Initial Purchaser on the other, the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission or alleged statement or
omission, and any other equitable considerations appropriate in
the circumstances.
(e) The Company, XCL-China and the Initial Purchaser
agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation
or by any other method of allocation that does not take into
account the equitable considerations referred to in the first
sentence of the immediately preceding paragraph (d).
Notwithstanding any other provision of the immediately preceding
paragraph (d), the Initial Purchaser shall not be obligated to
make contributions hereunder that in the aggregate exceed the
total discounts, commissions and other compensation received by
such Initial Purchaser under this Agreement, less the aggregate
amount of any damages that such Initial Purchaser has otherwise
been required to pay by reason of the untrue or alleged untrue
statements or the omissions or alleged omissions to state a
material fact, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of
the immediately preceding paragraph (d), each person, if any, who
controls the Initial Purchaser within the meaning of Section 15
of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Initial Purchaser, and each
director of the Company and XCL-China, each officer of the
Company and XCL-China and each person, if any, who controls the
Company and XCL-China within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act, shall have the same rights to
contribution as the Company and XCL-China.
10. Survival Clause. The respective representations,
warranties, agreements, covenants, indemnities and other
statements of the Company and XCL-China, their respective
officers and the Initial Purchaser set forth in this Agreement or
made by or on behalf of them pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company and XCL-China,
any of their respective officers or directors, the Initial
Purchaser or any controlling person referred to in Section 9
hereof and (ii) delivery of and payment for the Securities. The
respective agreements, covenants, indemnities and other
statements set forth in Sections 6, 9 and 16 hereof shall remain
in full force and effect, regardless of any termination or
cancellation of this Agreement.
11. Termination. (a) This Agreement may be terminated
in the sole discretion of the Initial Purchaser by notice to the
Company given prior to the Closing Date in the event that the
Company or XCL-China shall have failed, refused or been unable to
perform all obligations and satisfy all conditions on their
respective part to be performed or satisfied hereunder at or
prior thereto or, if at or prior to the Closing Date:
(i) either the Company or XCL-China shall have
sustained any loss or interference with respect to its businesses
or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any
strike, labor dispute, slow down or work stoppage or any legal or
governmental proceeding, which loss or interference, in the sole
judgment of the Initial Purchaser, has had or has a Material
Adverse Effect, or there shall have been, in the sole judgment of
the Initial Purchaser, any Material Adverse Effect, or any event
or development involving or reasonably likely to cause or result
in a Material Adverse Change (including without limitation a
change in management or control of the Company or XCL-China),
except in each case as described in the Final Memorandum
(exclusive of any amendment or supplement thereto);
(ii) trading in securities of the Company or in
securities generally on the New York Stock Exchange, American
Stock Exchange or the NASDAQ National Market shall have been
suspended or minimum or maximum prices shall have been
established on any such exchange or market;
(iii) a banking moratorium shall have been declared
by New York or United States authorities;
(iv) there shall have been (A) an outbreak or
escalation of hostilities between the United States and any
foreign power, or (B) an outbreak or escalation of any other
insurrection or armed conflict involving the United States or any
other national or international calamity or emergency, or (C) any
material change in the financial markets of the United States
which, in the case of clause (A), (B) or (C) and in the sole
judgment of the Initial Purchaser, makes it impracticable or
inadvisable to proceed with the private offering or the delivery
of the Securities as contemplated by the Final Memorandum; or
(v) any securities of the Company shall have been
downgraded or placed on any "watch list" for possible downgrading
by any nationally recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this
Section 11 shall be without liability of any party to any other
party except as provided in Section 10 hereof.
12. Information Supplied by the Initial Purchaser. The
statements set forth in the last paragraph on the front cover
page, the first paragraph on page 3, and the third, fourth,
ninth, thirteenth, fifteenth and sixteenth paragraphs under the
heading "Private Placement" in the Memorandum (to the extent such
statements relate to the Initial Purchaser) constitute the only
information furnished by the Initial Purchaser to the Company or
XCL-China for the purposes of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be in
writing and, if sent to the Initial Purchaser, shall be mailed or
delivered or telecopied and confirmed in writing to (i) Jefferies
& Company, Inc., 909 Fannin Street, Suite 3100, Houston, Texas
77010, Attention: Robert W. Carington, Telecopy No. (713) 650-
8730; and if sent to the Company or XCL-China, shall be mailed or
delivered or telecopied and confirmed in writing to it at 110 Rue
Jean Lafitte, Lafayette, Louisiana 70508, Attention: General
Counsel, Telecopy No. (318) 327-3316; with a copy to Satterlee
Stephens Burke & Burke LLP, 230 Park Avenue, Suite 1130, New
York, New York 10169, Attention: Peter A. Basilevsky, Esq.,
Telecopy No.: (212) 818-9606.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally
delivered; five business days after being deposited in the United
States mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and when
receipt is acknowledged by the addressee, if telecopied.
14. Successors. This Agreement shall inure to the
benefit of and be binding upon the Initial Purchaser, the Company
and XCL-China and their respective successors and legal
representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in
respect of this Agreement, or any provisions herein contained,
this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of
such persons and for the benefit of no other person except that
(i) the indemnities of the Company and XCL-China contained in
Section 9 of this Agreement shall also be for the benefit of any
person or persons who control the Initial Purchaser within the
meaning of Section 15 of the Act or Section 20 of the Exchange
Act and (ii) the indemnities of the Initial Purchaser contained
in Section 9 of this Agreement shall also be for the benefit of
the directors of the Company and XCL-China, their respective
officers and any person or persons who control the Company or XCL-
China within the meaning of Section 15 of the Act or Section 20
of the Exchange Act. No purchaser of Securities from the Initial
Purchaser will be deemed a successor because of such purchase.
15. Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New
York.
16. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided
below for that purpose, whereupon this letter shall constitute a
binding agreement among the Company, XCL-China and the Initial
Purchaser.
Very truly yours,
XCL LTD.
By:______________________________
Name:
Title:
XCL-CHINA LTD.
By:______________________________
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.
JEFFERIES & COMPANY, INC.
By:________________________________
Name:
Title:
WARRANT AGREEMENT
Dated as of May 20, 1997
Of
XCL LTD.
Warrants to Purchase Shares of Common Stock,
Par Value $0.01 Per Share
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES 1
SECTION 1.01. Issuance of Warrants 1
SECTION 1.02. Form of Warrant Certificates 2
SECTION 1.03. Execution of Warrant Certificates 2
SECTION 1.04. Authentication and Delivery 2
SECTION 1.05. Temporary Warrant Certificates 3
SECTION 1.06. Separation of Note Warrants and Notes 3
SECTION 1.07. Registration 3
SECTION 1.08. Registration of Transfers and
Exchanges 4
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or
Mutilated Warrant Certificates 10
SECTION 1.10. Offices for Exercise, etc. 11
ARTICLE II DURATION, EXERCISE OF WARRANTS AND EXERCISE
PRICE 11
SECTION 2.01. Duration of Warrants 11
SECTION 2.02. Exercise, Exercise Price, Settlement
and Delivery 12
SECTION 2.03. Cancellation of Warrant Certificates 13
ARTICLE III OTHER PROVISIONS RELATING TO RIGHTS OF
HOLDERS OF WARRANTS 14
SECTION 3.01. Enforcement of Rights 14
ARTICLE IV CERTAIN COVENANTS OF THE COMPANY 14
SECTION 4.01. Payment of Taxes 14
SECTION 4.02 Notice of Expiration Date 14
ARTICLE V ADJUSTMENTS 15
SECTION 5.01. Adjustment of Exercise Price and
Number of Shares Issuable 15
SECTION 5.02. Fractional Interest 22
SECTION 5.03. When Adjustment Not Required 22
SECTION 5.04. Challenge to Good Faith
Determination 22
SECTION 5.05. Treasury Stock 23
SECTION 5.06. Notices to Warrant Holders 23
ARTICLE VI CONCERNING THE WARRANT AGENT 24
SECTION 6.01. Warrant Agent 24
SECTION 6.02. Conditions of Warrant Agent's
Obligations 24
SECTION 6.03. Resignation and Appointment of
Successor 27
ARTICLE VII
MISCELLANEOUS 29
SECTION 7.01. Amendment 29
SECTION 7.02. Notices and Demands to the Company
and Warrant Agent 29
SECTION 7.03. Address for Notices to the Company
and for Transmission of Documents 29
SECTION 7.04. Notices to Holders 30
SECTION 7.05. APPLICABLE LAW 30
SECTION 7.06. Obtaining of Governmental Approvals 30
SECTION 7.07. Persons Having Rights Under
Agreement 30
SECTION 7.08. Headings 30
SECTION 7.09. Counterparts 30
SECTION 7.10. Inspection of Agreement 31
EXHIBIT A - Form of Warrant Certificate
EXHIBIT B - Certificate to be Delivered Upon Exchange or
Registration of Transfer of Warrants
EXHIBIT C - Transferee Letter of Representation
<PAGE.
INDEX OF DEFINED TERMS
Defined Term Section
- ------------ -------
Additional Warrants Recitals
Agreement Recitals
Amended Series A Preferred Stock 5.01(g)
Business Day 2.01
Common Stock Recitals
Company Recitals
Conversions 5.01 (g)
Convertible Securities 5.01(c)
Definitive Warrants 1.02
Depository 1.02
Distribution 5.01(c)
Election to Exercise 2.02(b)
Exercisability Date 2.02(a)
Exercise Date 2.02(d)
Exercise Price 2.02(a)
Expiration Date 2.01
Expiration Time 5.01(e)
Global Warrants 1.02
Indenture Recitals
Initial Purchasers Recital
Issue Date 2.02(g)
Majority Holders 5.04
Notes Recitals
Note Warrants Recitals
Officers' Certificate 1.08(f)
Options 5.01(c)
Purchased Shares 5.01(e)
Registrar 1.07
Registration Rights Agreement 7.06
Redemption Warrants Recitals
Related Parties 6.02(e)
Resale Restriction Termination Date 1.08(a)
Securities Act 1.08(a)
Separability Date 1.06
Shares 1.01
Time of Determination 5.01(g)
Trustee Recitals
Units Recitals
Warrant Agent Recitals
Warrant Agent Office 1.10
Warrant Certificates Recitals
Warrant Register 1.07
Warrants Recitals
<PAGE>
WARRANT AGREEMENT
THIS WARRANT AGREEMENT ("Agreement"), dated as of May 20,
1997 is executed and delivered by XCL Ltd., a Delaware
corporation (together with any successor thereto, the "Company"),
for the benefit of the holders from time to time of the Warrant
Certificates (as hereinafter defined).
WHEREAS, the Company has entered into a purchase agreement
dated May 13, 1997 (the "Purchase Agreement") with Jefferies &
Company, Inc. (the "Initial Purchaser") in which the Company has
agreed, among other things, to sell to the Initial Purchaser (A)
75,000 units (the "Units") consisting in the aggregate of (i)
$75,000,000 aggregate principal amount of 13.50% Senior Secured
Notes due May 1, 2004 (the "Notes") of the Company to be issued
under an indenture dated as of May 20, 1997 (the "Indenture"),
between the Company and Fleet National Bank, as trustee (the
"Trustee"), and (ii) 75,000 warrants to purchase an aggregate of
96,000,000 shares of common stock, $0.01 par value per share (the
"Common Stock"), of the Company (the "Note Warrants") and (B)
15,006 warrants to purchase an additional 19,207,680 shares of
Common Stock (the "Additional Warrants" and, together with the
Note Warrants, the "Warrants", and the certificates evidencing
the Warrants being hereinafter referred to as "Warrant
Certificates"), in each case subject to adjustment in accordance
with the terms hereof; and
WHEREAS, the Note Warrants and the Notes comprising part of
the Units shall be separately transferable on the Separability
Date (as hereinafter defined); and
WHEREAS, the Company initially shall act as its own warrant
agent (together with any successor warrant agent, the "Warrant
Agent") in connection with the issuance, exchange, cancellation,
replacement and exercise of the Warrants, and the Company wishes
to set forth in this Agreement, among other things, the terms and
conditions on which the Warrants may be issued, exchanged,
canceled, replaced and exercised;
NOW, THEREFORE, in consideration of the purchase of the
Units by the Initial Purchaser, the Company executes and delivers
this Agreement for the benefit of the holders from time to time
of the Warrant Certificates.
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
SECTION 1.01. Issuance of Warrants. Each Warrant
Certificate shall evidence the number of Warrants specified
therein, and each Warrant evidenced thereby shall represent the
right, subject to the provisions contained herein and therein, to
purchase from the Company (and the Company shall issue and sell
to such holder of the Warrant) 1,280 fully paid and non-
assessable shares of the Company's Common Stock (the shares of
Common Stock purchasable upon exercise of a Warrant being
hereinafter referred to as the "Shares" and, where appropriate,
such term shall also mean the other securities or property
purchasable and deliverable upon exercise of a Warrant as
provided in Article V) at the price specified herein and therein,
in each case subject to adjustment as provided herein and
therein.
SECTION 1.02. Form of Warrant Certificates. The Warrant
Certificates will initially be issued either in global form (the
"Global Warrants"), substantially in the form of Exhibit A hereto
(including footnote 1 thereto), or in registered form as
definitive Warrant certificates (the "Definitive Warrants"). The
Warrant Certificates evidencing the Global Warrants or the
Definitive Warrants to be delivered pursuant to this Agreement
shall be substantially in the form set forth in Exhibit A
attached hereto. Such Global Warrants shall represent such of
the outstanding Warrants as shall be specified therein and each
shall provide that it shall represent the aggregate amount of
outstanding Warrants from time to time endorsed thereon and that
the aggregate amount of outstanding Warrants represented thereby
may from time to time be reduced or increased, as appropriate.
Any endorsement of a Global Warrant to reflect the amount of any
increase or decrease in the amount of outstanding Warrants
represented thereby shall be made by the Warrant Agent and
Depositary (as defined below) in accordance with instructions
given by the holder thereof. The Depository Trust Company shall
act as the depositary with respect to the Global Warrants (the
"Depositary") until a successor shall be appointed by the
Company. Upon written request, a Warrant holder may receive from
the Warrant Agent Definitive Warrants as set forth in Section
1.08 hereof.
SECTION 1.03. Execution of Warrant Certificates. The
Warrant Certificates shall be executed on behalf of the Company
by the chairman of its Board of Directors, its president or any
vice president and attested by its secretary or assistant
secretary, under its corporate seal. Such signatures may be the
manual or facsimile signatures of the present or any future such
officers. The seal of the Company may be in the form of a
facsimile hereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Warrant Certificates. Typographical
and other minor errors or defects in any such reproduction of the
seal or any such signature shall not affect the validity or
enforceability of any Warrant Certificate that has been duly
countersigned and delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any
of the Warrant Certificates shall cease to be such officer before
the Warrant Certificate so signed shall be countersigned and
delivered by the Warrant Agent or disposed of by the Company,
such Warrant Certificate nevertheless may be countersigned and
delivered or disposed of as though the person who signed such
Warrant Certificate had not ceased to be such officer of the
Company; and any Warrant Certificate may be signed on behalf of
the Company by such persons as, at the actual date of the
execution of such Warrant Certificate, shall be the proper
officers of the Company, although at the date of the execution
and delivery of this Agreement any such person was not such an
officer.
SECTION 1.04. Authentication and Delivery. Subject to
the immediately following paragraph, Warrant Certificates shall
be authenticated by manual signature and dated the date of
authentication by the Warrant Agent and shall not be valid for
any purpose unless so authenticated and dated. The Warrant
Certificates shall be numbered and shall be registered in the
Warrant Register (as defined in Section 1.07 hereof).
Upon the receipt by the Warrant Agent of a written order of
the Company, which order shall be signed by the chairman of its
Board of Directors, its president or any vice president and
attested by its secretary or assistant secretary, and shall
specify the amount of Warrants to be authenticated, whether the
Warrants are to be Global Warrants or Definitive Warrants, the
date of such Warrants and such other information as the Warrant
Agent may reasonably request, without any further action by the
Company, the Warrant Agent is authorized, upon receipt from the
Company at any time and from time to time of the Warrant
Certificates, duly executed as provided in Section 1.03 hereof,
to authenticate the Warrant Certificates and deliver them. Such
authentication shall be by a duly authorized signatory of the
Warrant Agent (although it shall not be necessary for the same
signatory to sign all Warrant Certificates).
In case any authorized signatory of the Warrant Agent who
shall have authenticated any of the Warrant Certificates shall
cease to be such authorized signatory before the Warrant
Certificate shall be disposed of by the Company, such Warrant
Certificate nevertheless may be delivered or disposed of as
though the person who authenticated such Warrant Certificate had
not ceased to be such authorized signatory of the Warrant Agent;
and any Warrant Certificate may be authenticated on behalf of the
Warrant Agent by such persons as, at the actual time of
authentication of such Warrant Certificates, shall be the duly
authorized signatories of the Warrant Agent, although at the time
of the execution and delivery of this Agreement any such person
is not such an authorized signatory.
The Warrant Agent's authentication on all Warrant
Certificates shall be in substantially the form set forth in
Exhibit A hereto.
SECTION 1.05. Temporary Warrant Certificates. Pending
the preparation of definitive Warrant Certificates, the Company
may execute, and the Warrant Agent shall authenticate and
deliver, temporary Warrant Certificates, which are printed,
lithographed, typewritten or otherwise produced, substantially of
the tenor of the definitive Warrant Certificates in lieu of which
they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such
Warrant Certificates may determine, as evidenced by their
execution of such Warrant Certificates.
If temporary Warrant Certificates are issued, the Company
will cause definitive Warrant Certificates to be prepared without
unreasonable delay. After the preparation of definitive Warrant
Certificates, the temporary Warrant Certificates shall be
exchangeable for definitive Warrant Certificates upon surrender
of the temporary Warrant Certificates at any office or agency
maintained by the Company for that purpose pursuant to Section
1.10 hereof. Subject to the provisions of Section 4.01 hereof,
such exchange shall be without charge to the holder. Upon
surrender for cancellation of any one or more temporary Warrant
Certificates, the Company shall execute, and the Warrant Agent
shall authenticate and deliver in exchange therefor, one or more
definitive Warrant Certificates representing in the aggregate a
like number of Warrants. Until so exchanged, the holder of a
temporary Warrant Certificate shall in all respects be entitled
to the same benefits under this Agreement as a holder of a
definitive Warrant Certificate.
SECTION 1.06. Separation of Note Warrants and Notes.
The Notes and Note Warrants will not be separately transferable
until the date (the "Separability Date") which is the earlier of
(i) 90 days from the Issue Date (as defined in Section
1.08(a)(ii)(y) hereof) and (ii) such date as the Initial
Purchaser may, in its discretion, deem appropriate.
SECTION 1.07. Registration. The Company will keep, at
the office or agency maintained by the Company for such purpose,
a register or registers in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for
the registration of, and registration of transfer and exchange
of, Warrants as provided in this Article. Each person designated
by the Company from time to time as a person authorized to
register the transfer and exchange of the Warrants is hereinafter
called, individually and collectively, the "Registrar".
Initially, the Company shall act as Registrar. Upon written
notice to the Warrant Agent and any acting Registrar, the Company
may appoint a successor Registrar for such purposes.
The Company will at all times designate one person (who may
be the Company and who need not be a Registrar) to act as
repository of a master list of names and addresses of the holders
of Warrants (the "Warrant Register"). The Company will act as
such repository unless and until some other person is, by written
notice from the Company to the Warrant Agent and the Registrar,
designated by the Company to act as such. The Company shall
cause each Registrar to furnish to such repository, on a current
basis, such information as to all registrations of transfer and
exchanges effected by such Registrar, as may be necessary to
enable such repository to maintain the Warrant Register on as
current a basis as is practicable.
SECTION 1.08. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Definitive Warrants.
When Definitive Warrants are presented to the Warrant Agent with
a request:
(i) to register the transfer of the Definitive
Warrants; or
(ii) to exchange such Definitive Warrants for an
equal number of Definitive Warrants, the
Warrant Agent shall register the transfer or
make the exchange as requested if the
requirements under this Warrant Agreement as
set forth in this Section 1.08 for such
transactions are met; provided, however, that
the Definitive Warrants presented or
surrendered for registration of transfer or
exchange:
(x) shall be duly endorsed or accompanied by
a written instruction of transfer in
form satisfactory to the Company and the
Warrant Agent, duly executed by the
holder thereof or by its attorney, duly
authorized in writing; and
(y) in the case of Warrants the offer and
sale of which has not been registered
under the Securities Act of 1933, as
amended, (the "Securities Act"), and are
presented for transfer or exchange prior
to (x) the date which is two years after
the later of the date of original issue
(the "Issue Date") and the last date on
which the Company or any affiliate of
the Company was the owner of such
Warrant, or any predecessor thereto and
(y) such later date, if any, as may be
required by any subsequent change in
applicable law (the "Resale Restriction
Termination Date"), such Warrants shall
be accompanied, in the sole discretion
of the Company, by the following
additional information and documents, as
applicable:
(A) if such Warrant is being delivered
to the Warrant Agent by a holder
for registration in the name of
such holder, without transfer, a
certification from such holder to
that effect (in substantially the
form of Exhibit B hereto); or
(B) if such Warrant is being
transferred to a qualified
institutional buyer (as defined in
Rule 144A under the Securities Act)
in accordance with Rule 144A under
the Securities Act or pursuant to
an exemption from registration in
accordance with Rule 144 or
Regulation S under the Securities
Act, a certification to that effect
(in substantially the form of
Exhibit B hereto); or
(C) if such Warrant is being
transferred to an institutional
"accredited investor" within the
meaning of subparagraph (a)(l),
(a)(2), (a)(3) or (a)(7) of Rule
501 under the Securities Act,
delivery of a certification to that
effect (in substantially the form
of Exhibit B hereto) and a letter
of representation from the
transferee in substantially the
form of Exhibit C hereto; or
(D) if such Warrant is being
transferred in reliance on another
exemption from the registration
requirements of the Securities Act,
a certification to that effect (in
substantially the form of Exhibit B
hereto) and an opinion of counsel
reasonably acceptable to the
Company to the effect that such
transfer is in compliance with the
Securities Act.
(b) Restrictions on Transfer of a Definitive
Warrant for a Beneficial Interest in a Global Warrant. A
Definitive Warrant may not be transferred for a beneficial
interest in a Global Warrant except upon satisfaction of the
requirements set forth below. Upon receipt by the Warrant Agent
of a Definitive Warrant, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the
Warrant Agent, together with:
(A) certification, substantially in the form of
Exhibit B hereto, that such Definitive
Warrant is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with
Rule 144A under the Securities Act; and
(B) written instructions directing the Warrant
Agent to make, or to direct the Depositary to
make, an endorsement on the Global Warrant to
reflect an increase in the aggregate amount
of the Warrants represented by the Global
Warrant
then the Warrant Agent shall cancel such Definitive Warrant and
cause, or direct the Depositary to cause, in accordance with the
standing instructions and procedures existing between the
Depositary and the Warrant Agent, the number of Warrants
represented by the Global Warrant to be increased accordingly.
If no Global Warrant is then outstanding, the Company shall issue
and the Warrant Agent shall authenticate a new Global Warrant in
the appropriate amount.
(c) Transfer and Exchange of Global Warrants. The
transfer and exchange of Global Warrants or beneficial interests
therein shall be effected through the Depositary, in accordance
with this Section 1.08 and the procedures of the Depositary
therefor.
(d) Transfer of a Beneficial Interest in a Global
Warrant for a Definitive Warrant.
(i) Any person having a beneficial interest in a
Global Warrant may upon request transfer such
beneficial interest for a Definitive Warrant.
Upon receipt by the Warrant Agent of written
instructions or such other form of
instructions as is customary for the
Depositary from the Depositary or its nominee
on behalf of any person having a beneficial
interest in a Global Warrant and upon receipt
by the Warrant Agent of a written order or
such other form of instructions as is
customary for the Depositary or the person
designated by the Depositary as having such a
beneficial interest containing registration
instructions and, in the case of any such
transfer or exchange prior to the Resale
Restriction Termination Date, the following
additional information and documents:
(A) if such beneficial interest is being
transferred to the person designated by
the Depositary as being the beneficial
owner, a certification from such person
to that effect (in substantially the
form of Exhibit B hereto); or
(B) if such beneficial interest is being
transferred to a qualified institutional
buyer (as defined in Rule 144A under the
Securities Act) in accordance with Rule
144A under the Securities Act or
pursuant to an exemption from
registration in accordance with Rule 144
or Regulation S under the Securities
Act, a certification to that effect from
the transferee or transferor (in
substantially the form of Exhibit B
hereto); or
(C) if such beneficial interest is being
transferred to an institutional
"accredited investor" within the meaning
of subparagraph (a)(l), (a)(2), (a)(3)
or (a)(7) of Rule 501 under the
Securities Act, delivery of a
certification to that effect (in
substantially the form of Exhibit B
hereto), a letter of representation from
the transferee in substantially the form
of Exhibit C hereto and an opinion of
counsel reasonably acceptable to the
Company to the effect that such transfer
is in compliance with the Securities
Act; or
(D) if such beneficial interest is being
transferred in reliance on another
exemption from the registration
requirements of the Securities Act, a
certification to that effect (in
substantially the form of Exhibit B
hereto) and an opinion of counsel
reasonably acceptable to the Company to
the effect that such transfer is in
compliance with the Securities Act
then the aggregate amount of the Global Warrant
will be reduced by the Depositary or its custodian
and, following such reduction, the Company will
execute and, upon receipt of an authentication
order in the form of an Officers' Certificate (as
defined), the Warrant Agent will authenticate and
deliver to the transferee a Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a
beneficial interest in a Global Warrant
pursuant to this Section 1.08(d) shall be
registered in such names and in such
authorized denominations as the Depositary,
pursuant to instructions from its direct or
indirect participants or otherwise, shall
instruct the Warrant Agent in writing. The
Warrant Agent shall deliver such Definitive
Warrants to the persons in whose names such
Warrants are so registered.
(e) Restrictions on Transfer and Exchange of Global
Warrants. Notwithstanding any other provisions of this Warrant
Agreement (other than the provisions set forth in subsection (f)
of this Section 1.08), a Global Warrant may not be transferred as
a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such
nominee to a successor Depositary or a nominee of such successor
Depositary.
(f) Authentication of Definitive Warrants in
Absence of Depositary. If at any time:
(i) the Depositary for the Warrants notifies the
Company that the Depositary is unwilling or
unable to continue as Depositary for the
Global Warrant and a successor Depositary for
the Global Warrant is not appointed by the
Company within 90 days after delivery of such
notice or
(ii) the Company, at its sole discretion, notifies
the Warrant Agent in writing that it elects
to cause the issuance of Definitive Warrants
under this Warrant Agreement,
then the Company will execute, and the Warrant Agent, upon
receipt of an officers' certificate signed by two officers of the
Company (one of whom must be the principal executive officer,
principal financial officer or principal accounting officer) (an
"Officers' Certificate") requesting the authentication and
delivery of Definitive Warrants, will authenticate and deliver
Definitive Warrants, in an aggregate number equal to the
aggregate number of warrants represented by the Global Warrant,
in exchange for such Global Warrant.
(g) Legends.
(i) Except to the extent permitted by the
following paragraph (ii), each Warrant
Certificate evidencing the Global Warrants
and the Definitive Warrants (and all Warrants
issued in exchange therefor or substitution
thereof) shall bear a legend substantially to
the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT" )
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 903 OR 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT
WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO XCL LTD. (THE "COMPANY") OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A
U.S. BROKER-DEALER) TO THE COMPANY AND THE WARRANT AGENT A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT
WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY, IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE WARRANT AGENT AND THE COMPANY SUCH
CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER INFORMATION
AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION, "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT
DATED AS OF MAY 20, 1997 BETWEEN THE COMPANY AND JEFFERIES &
COMPANY, INC., A COPY OF WHICH IS ON FILE WITH THE SECRETARY
OF THE COMPANY.
To the extent a Warrant Certificate evidences a Global
Warrant, such Warrant Certificate shall also bear the
legend with respect thereto substantially in the form
set forth on Exhibit A hereto.
(ii) Upon any sale or transfer of a Warrant
pursuant to Rule 144 under the Securities Act
in accordance with this Section 1.08 or an
effective registration statement under the
Securities Act:
(A) in the case of any Warrant that is a
Definitive Warrant, the Warrant Agent shall
permit the holder thereof to exchange such
Warrant for a Definitive Warrant that does
not bear the first paragraph of the legend
set forth above and rescind any related
restriction on the transfer of such Warrant;
and
(B) any such Warrant represented by a Global
Warrant shall not be subject to the
provisions set forth in (i) above (such sales
or transfers being subject only to the
provisions of Section 1.08(c) hereof);
provided, however, that with respect to any
request for an exchange of a Warrant that is
represented by a Global Warrant for a
Definitive Warrant that does not bear the
first paragraph of the legend set forth
above, which request is made in reliance upon
Rule 144 under the Securities Act, the holder
thereof shall certify in writing to the
Warrant Agent that such request is being made
pursuant to Rule 144 under the Securities Act
(such certification to be substantially in
the form of Exhibit B hereto).
(h) Cancellation and/or Adjustment of a Global
Warrant. At such time as all beneficial interests in a Global
Warrant have either been exchanged for Definitive Warrants,
redeemed, repurchased or canceled, such Global Warrant shall be
returned to or retained and canceled by the Warrant Agent. At
any time prior to such cancellation, if any beneficial interest
in a Global Warrant is exchanged for Definitive Warrants,
redeemed, repurchased or cancelled, the number of Warrants
represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant by the Warrant
Agent or the Depositary to reflect such reduction.
(i) Obligations with Respect to Transfers and
Exchanges of Definitive Warrants.
(i) To permit registrations of transfers and
exchanges, the Company shall execute, at the
Warrant Agent's request, and the Warrant
Agent shall authenticate Definitive Warrants
and Global Warrants.
(ii) All Definitive Warrants and Global Warrants
issued upon any registration of transfer or
exchange of Definitive Warrants or Global
Warrants shall be the valid obligations of
the Company, entitled to the same benefits
under this Warrant Agreement as the
Definitive Warrants or Global Warrants
surrendered upon the registration of transfer
or exchange.
(iii) Prior to due presentment for registration of
transfer of any Warrant, the Warrant Agent
and the Company may deem and treat the person
in whose name any Warrant is registered as
the absolute owner of such Warrant, and
neither the Warrant Agent nor the Company
shall be affected by notice to the contrary.
(j) Payment of Taxes. The Company or the Warrant
Agent may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with
any exchange or transfer pursuant to this Section 1.08.
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or
Mutilated Warrant Certificates. Upon receipt by the Company and
the Warrant Agent (or any agent of the Company or the Warrant
Agent, if requested by the Company) of evidence satisfactory to
them of the loss, theft, destruction, defacement, or mutilation
of any Warrant Certificate and of indemnity reasonably
satisfactory to them and, in the case of mutilation or
defacement, upon surrender thereof to the Warrant Agent for
cancellation, then, in the absence of notice to the Company or
the Warrant Agent that such Warrant Certificate has been acquired
by a bona fide purchaser or holder in due course, the Company
shall execute, and an authorized signatory of the Warrant Agent
shall manually authenticate and deliver, in exchange for or in
lieu of the lost, stolen, destroyed, defaced or mutilated Warrant
Certificate, a new Warrant Certificate representing a like number
of Warrants, bearing a number or other distinguishing symbol not
contemporaneously outstanding. Upon the issuance of any new
Warrant Certificate under this Section, the Company may require
the payment from the holder of such Warrant Certificate of a sum
sufficient to cover any tax, stamp tax or other governmental
charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Warrant Agent
and the Registrar) in connection therewith. Every substitute
Warrant Certificate executed and delivered pursuant to this
Section in lieu of any lost, stolen or destroyed Warrant
Certificate shall constitute an additional contractual obligation
of the Company, whether or not the lost, stolen or destroyed
Warrant Certificate shall be at any time enforceable by anyone,
and shall be entitled to the benefits of (but shall be subject to
all the limitations of rights set forth in) this Agreement
equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder. The
provisions of this Section 1.09 are exclusive with respect to the
replacement of lost, stolen, destroyed, defaced or mutilated
Warrant Certificates and shall preclude (to the extent lawful)
any and all other rights or remedies notwithstanding any law or
statute existing or hereafter enacted to the contrary with
respect to the replacement of lost, stolen, destroyed, defaced or
mutilated Warrant Certificates.
The Warrant Agent is hereby authorized to authenticate and
deliver the new Warrant Certificates required pursuant to the
provisions of this Section.
SECTION 1.10. Offices for Exercise, etc. So long as any
of the Warrants remain outstanding, the Company will designate
and maintain in the continental United States: (a) an office or
agency where the Warrant Certificates may be presented for
exercise, (b) an office or agency where the Warrant Certificates
may be presented for registration of transfer and for exchange
(including the exchange of temporary Warrant Certificates for
definitive Warrant Certificates pursuant to Section 1.05 hereof),
and (c) an office or agency where notices and demands to or upon
the Company in respect of the Warrants or of this Agreement may
be served. The Company may from time to time change or rescind
such designation, as it may deem desirable or expedient. The
Company will give to the Warrant Agent written notice of the
location of any such office or agency and of any change of
location thereof. The Company hereby designates its principal
executive offices in Lafayette, Louisiana (the "Warrant Agent
Office"), as the initial agency maintained for each such purpose.
ARTICLE II
DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE
SECTION 2.01. Duration of Warrants. Subject to the
terms and conditions established herein, the Warrants shall
expire at 5:00 p.m., New York City time, on May 20, 2004 (the
"Expiration Date"). Each Warrant may be exercised on any
Business Day (as defined below) on or after the Exercisability
Date (as defined below) and on or prior to the Expiration Date.
Any Warrant not exercised before the close of business on
the Expiration Date relating to such Warrant shall become void,
and all rights of the holder under the Warrant Certificate
evidencing such Warrant and under this Agreement shall cease.
"Business Day" shall mean any day on which (i) banks in New
York City or the City of Lafayette, Louisiana, (ii) the
principal national securities exchange or market on which the
Common Stock is listed or admitted to trading and (iii) the
principal national securities exchange or market, if any, on
which the Warrants are listed or admitted to trading are open for
business.
SECTION 2.02. Exercise, Exercise Price, Settlement and
Delivery. (a) Subject to the provisions of this Agreement, a
holder of Warrants shall have the right to purchase from the
Company on or after the later of May 20, 1998, or such date on
which the Company has reserved or has available a sufficient
number of shares of its Common Stock to permit exercise of all
outstanding Warrants (the "Exercisability Date") and on or prior
to the Expiration Date 1,280 fully paid and non-assessable Shares
per each Warrant such holder owns, subject to adjustment in
accordance with Article V hereof, at the initial purchase price
of $0.2063 for each Share purchased subject to adjustment in
accordance with Article V hereof (the "Exercise Price").
(b) Warrants may be exercised on or after the
Exercisability Date by (i) surrendering at any Warrant Agent
Office the Warrant Certificate evidencing such Warrants with the
form of election to purchase Shares set forth on the reverse side
of the Warrant Certificate (the "Election to Exercise") duly
completed and signed by the registered holder or holders thereof
or by the duly appointed legal representative thereof or by a
duly authorized attorney, and (ii) paying in full the Exercise
Price for each such Share purchased and any other amounts
required to be paid pursuant to Section 4.01 hereof.
(c) Simultaneously with the exercise of each
Warrant, payment in full of the Exercise Price shall be made in
cash or by certified or official bank check payable to the order
of the Company, delivered to the office or agency where the
Warrant Certificate is being surrendered. No payment or
adjustment shall be made on account of any dividends on the
Shares issued upon exercise of a Warrant.
(d) Upon such surrender of a Warrant Certificate
and payment and collection of the Exercise Price at any Warrant
Agent Office (other than any Warrant Agent Office that also is an
office of the Warrant Agent), such Warrant Certificate and
payment shall be promptly delivered to the Warrant Agent. The
"Exercise Date" for a Warrant shall be the date when all of the
items referred to in the first sentence of paragraphs (b) and (c)
of this Section 2.02 are received by the Warrant Agent at or
prior to 2:00 p.m., New York City time, on a Business Day and the
exercise of the Warrants will be effective as of such Exercise
Date. If any items referred to in the first sentence of
paragraphs (b) and (c) are received after 2:00 p.m., New York
City time, on a Business Day, the exercise of the Warrants to
which such item relates will be effective on the next succeeding
Business Day. Notwithstanding the foregoing, in the case of an
exercise of Warrants on the Expiration Date (as defined in
Section 2.01), if all of the items referred to in the first
sentence of paragraphs (b) and (c) are received by the Warrant
Agent at or prior to 5:00 p.m., New York City time, on such
Expiration Date, the exercise of the Warrants to which such items
relate will be effective on the Expiration Date.
(e) Upon the exercise of a Warrant in accordance
with the terms hereof, the receipt of a Warrant Certificate and
payment of the Exercise Price, the Warrant Agent shall: (i)
cause an amount equal to the Exercise Price to be paid to the
Company by crediting the same to the account designated by the
Company in writing to the Warrant Agent for that purpose; (ii)
advise the Company immediately by telephone of the amount so
deposited to the Company's account and promptly confirm such
telephonic advice in writing; and (iii) as soon as practicable,
advise the Company in writing of the number of Warrants (giving
effect to Section 5.01(o) below) exercised in accordance with the
terms and conditions of this Agreement and the Warrant
Certificates, the instructions of each exercising holder of the
Warrant Certificates with respect to delivery of the Shares to
which such holder is entitled upon such exercise, and such other
information as the Company shall reasonably request.
(f) Subject to Section 5.02 hereof, as soon as
practicable after the exercise of any Warrant or Warrants in
accordance with the terms hereof, the Company shall issue or
cause to be issued to or upon the written order of the registered
holder of the Warrant Certificate evidencing such exercised
Warrant or Warrants, a certificate or certificates evidencing the
Shares to which such holder is entitled, in fully registered
form, registered in such name or names as may be directed by such
holder pursuant to the Election to Exercise, as set forth on the
reverse of the Warrant Certificate. The Warrant Agent shall have
no obligation to ascertain the number of Shares to be issued with
respect to the exercised Warrant or Warrants. Such certificate
or certificates evidencing the Shares shall be deemed to have
been issued and any persons who are designated to be named
therein shall be deemed to have become the holder of record of
such Shares as of the close of business on the Exercise Date.
After such exercise of any Warrant or Warrants, the Company shall
also issue or cause to be issued to or upon the written order of
the registered holder of such Warrant Certificate, a new Warrant
Certificate, countersigned by the Warrant Agent pursuant to the
Company's written instruction, evidencing the number of Warrants,
if any, remaining unexercised unless such Warrants shall have
expired.
(g) If during the first year after issuance of the
Units, the Current Market Price of the Common Stock fails to
exceed the Exercise Price for at least 20 trading days within any
30 consecutive trading days, then the Exercise Price shall be
reduced to 75% of the prevailing Exercise Price, effective as of
the first anniversary of the Issue Date. For purposes of this
adjustment provision, the term "Issue Date" means the date of
original issuance of the Units and 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 National Market Tier of the Nasdaq Stock Market ("Nasdaq
NMS") or, if the Common Stock is not quoted or admitted to
trading on such quotations 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
Company for that purpose or, if not so available in such manner,
as otherwise determined in good faith by the Board of Directors
of the Company, which determination shall be conclusive.
SECTION 2.03. Cancellation of Warrant Certificates. In
the event the Company shall purchase or otherwise acquire
Warrants, the Warrant Certificates evidencing such Warrants may
thereupon be delivered to the Warrant Agent, and if so delivered,
shall be canceled by it and retired. The Warrant Agent shall
cancel all Warrant Certificates properly surrendered for
exchange, substitution, transfer or exercise. The Warrant Agent
shall destroy canceled Warrant Certificates held by it and
deliver a certificate of destruction to the Company. The Warrant
Agent shall account promptly to the Company with respect to
Warrants exercised and concurrently pay to the Company all money
received by the Warrant Agent for the purchase of Warrant Shares
through the exercise of such Warrants.
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
SECTION 3.01. Enforcement of Rights. (a)
Notwithstanding any of the other provisions of this Agreement,
any holder of any Warrant Certificate, without the consent of the
Warrant Agent, the holder of any Shares or the holder of any
other Warrant Certificate, may, in and for its own behalf,
enforce, and may institute and maintain any suit, action or
proceeding against the Company suitable to enforce, its right to
exercise the Warrant or Warrants evidenced by its Warrant
Certificate as provided in such Warrant Certificate and in this
Agreement.
(b) Neither the Warrants nor any Warrant
Certificate shall entitle the holders thereof to any of the
rights of a holder of Shares, including, without limitation, the
right to vote or to receive any dividends or other payments or to
consent or to receive notice as stockholders in respect of the
meetings of stockholders or for the election of directors of the
Company or to share in the assets of the Company in the event of
the liquidation, dissolution or winding up of the Company's
affairs or any other matter, or any rights whatsoever as
stockholders of the Company.
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Taxes. The Company will pay
all documentary stamp taxes attributable to the initial issuance
of Warrants and of the Shares upon the exercise of Warrants or to
the separation of the Note Warrants and Notes on the Separability
Date; provided, however, that the Company shall not be required
to pay any tax or other governmental charge which may be payable
in respect of any transfer involved in the issue of any Warrant
Certificates or any certificates for Shares in a name other than
the registered holder of a Warrant Certificate surrendered upon
the exercise of a Warrant. In any such case, the Company shall
not be required to issue or deliver such Warrant Certificate or
certificate for Shares unless or until the person or persons
requesting issuance thereof shall have paid to the Company the
amount of such tax or other governmental charge or shall have
established to the satisfaction of the Company that such tax or
other governmental charge has been paid or an exemption is
available therefrom.
SECTION 4.02 Notice of Expiration Date. The Company
will give notice of the Expiration Date to all holders of the
then outstanding Warrants, not less than 90 nor more than 120
days prior to the Expiration Date.
ARTICLE V
ADJUSTMENTS
SECTION 5.01. Adjustment of Exercise Price and Number of
Shares Issuable. The number and kind of Shares purchasable upon
the exercise of each Warrant and the Exercise Price shall be
subject to adjustment from time to time as follows:
(a) Stock Splits, Combinations, etc. In case the
Company shall hereafter (A) pay a dividend or make a
distribution on its Common Stock in shares of its capital
stock (whether shares of Common Stock or of capital stock of
any other class), (B) subdivide its outstanding shares of
Common Stock or (C) combine its outstanding shares of Common
Stock into a smaller number of shares, the (a) number of
Shares purchasable upon exercise of each Warrant immediately
prior thereto shall be adjusted so that the holder of any
Warrant thereafter exercised shall be entitled to receive
the number of Shares which such holder would have owned
immediately following such action had such Warrant been
exercised immediately prior thereto, and (b) the Exercise
Price shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, of which
the numerator shall be the number of Shares purchasable upon
the exercise of each Warrant immediately prior to such
adjustment, and of which the denominator shall be the number
of Shares purchasable immediately thereafter. An adjustment
made pursuant to this paragraph shall become effective
immediately after the record date in the case of a dividend
and shall become effective immediately after the effective
date in the case of a subdivision, combination or
reclassification. If, as a result of an adjustment made
pursuant to this paragraph, the holder of any Warrant
thereafter exercised shall become entitled to receive shares
of two or more classes of capital stock of the Company, the
Board of Directors of the Company (whose determination shall
be conclusive) shall determine the allocation of the
adjusted Exercise Price between or among shares of such
classes of capital stock.
(b) Reclassification, Combinations, Mergers, etc.
In case of any reclassification or change of outstanding
shares of Common Stock (other than as set forth in paragraph
(a) above and other than a change in par value, or from par
value to no par value, or from no par value to par value),
or in case of any consolidation or merger of the Company
with or into another corporation or other entity (other than
a merger in which the Company is the continuing corporation
and which does not result in any reclassification or change
of the then outstanding shares of Common Stock or other
capital stock of the Company (other than a change in par
value, or from par value to no par value, or from par value
to par value or as a result of a subdivision or
combination)) or in case of any sale or conveyance to
another corporation or other entity of all or substantially
all of the assets of the Company, then, as a condition of
such reclassification, change, consolidation, merger, sale
or conveyance, the Company or such a successor or purchasing
corporation or other entity, as the case may be, shall
forthwith make lawful and adequate provision whereby the
holder of such Warrant then outstanding shall have the right
thereafter to receive on exercise of such Warrant the kind
and amount of shares of stock and other securities and
property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the
number of shares of Common Stock issuable upon exercise of
such Warrant immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and enter
into a supplemental warrant agreement so providing. Such
provisions shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article V. If the issuer
of securities deliverable upon exercise of Warrants under
the supplemental warrant agreement is an affiliate of the
formed, surviving or transferee corporation or other entity,
that issuer shall join in the supplemental warrant
agreement. The above provisions of this paragraph (b) shall
similarly apply to successive reclassifications and changes
of shares of Common Stock and to successive consolidations,
mergers, sales or conveyances.
In case of any such reclassification, merger,
consolidation or disposition of assets, the successor or
acquiring corporation or other entity (if other than the
Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and
condition of this Warrant Agreement to be performed and
observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined by resolution of the
Board of Directors of the Company) in order to provide for
adjustments of shares of the Common Stock for which each
Warrant is exercisable, which shall be as nearly equivalent
as practicable to the adjustments provided for in this
Article V. The foregoing provisions of this Section 5.01(b)
shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or dispositions
of assets.
(c) Issuance of Options or Convertible Securities.
In the event the Company shall, at any time or from time to
time after the date hereof, issue, sell, distribute or
otherwise grant in any manner (including by assumption) to
all holders of the Common Stock any rights to subscribe for
or to purchase, or any warrants or options for the purchase
of, Common Stock or any stock or securities convertible into
or exchangeable for Common Stock (any such rights, warrants
or options being herein called "Options" and any such
convertible or exchangeable stock or securities being herein
called "Convertible Securities") or any Convertible
Securities (other than upon exercise of any Option), whether
or not such Options or the rights to convert or exchange
such Convertible Securities are immediately exercisable, and
the price per share at which Common Stock is issuable upon
the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by
dividing (i) the aggregate amount, if any, received or
receivable by the Company as consideration for the issuance,
sale, distribution or granting of such Options or any such
Convertible Security, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company
upon the exercise of all such Options or upon conversion or
exchange of all such Convertible Securities, plus, in the
case of Options to acquire Convertible Securities, the
minimum aggregate amount of additional consideration, if
any, payable upon the conversion or exchange of all such
Convertible Securities, by (ii) the total maximum number of
shares of Common Stock issuable upon the exercise of all
such Options or upon the conversion or exchange of all such
Convertible Securities or upon the conversion or exchange of
all Convertible Securities issuable upon the exercise of all
Options) shall be less than the current market price per
share of Common Stock (determined pursuant to Section
5.01(g)) on the record date for the issuance, sale,
distribution or granting of such Options (any such event
being herein called a "Distribution") then, effective upon
such Distribution, the Exercise Price shall be reduced to
the price (calculated to the nearest 1/1,000 of one cent)
determined by multiplying the Exercise Price in effect
immediately prior to such Distribution by a fraction, the
numerator of which shall be the sum of (i) the number of
shares of Common Stock outstanding (exclusive of any
treasury shares) immediately prior to such Distribution
multiplied by the current market price per share of Common
Stock (determined pursuant to Section 5.01(g)) on the date
of such Distribution plus (ii) the consideration, if any,
received by the Company upon such Distribution, and the
denominator of which shall be the product of (A) the total
number of shares of Common Stock outstanding (exclusive of
any treasury shares) immediately after such Distribution
multiplied by (B) the current market price per share of
Common Stock (determined pursuant to Section 5.01(g)) on the
record date for such Distribution. For purposes of the
foregoing, the total maximum number of shares of Common
Stock issuable upon exercise of all such Options or upon the
conversion or exchange of all such Convertible Securities or
upon the conversion or exchange of the total maximum amount
of the Convertible Securities issuable upon the exercise of
all such Options shall be deemed to have been issued as of
the date of such Distribution and thereafter shall be deemed
to be outstanding and the Company shall be deemed to have
received as consideration therefor such price per share,
determined as provided above. Except as provided in
paragraphs (j) and (k) below, no additional adjustment of
the Exercise Price shall be made upon the actual exercise of
such Options or upon conversion or exchange of the
Convertible Securities or upon the conversion or exchange of
the Convertible Securities issuable upon the exercise of
such Options. Notwithstanding anything in this Article V to
the contrary, neither the payment of dividends on any shares
of Amended Series A Preferred Stock (as defined in Section
5.01(q)) in additional shares of Amended Series A Preferred
Stock, nor the issuance of shares of Common Stock on
conversion of the Amended Series A Preferred Stock, nor the
issuance of shares of Common Stock in payment of any
dividends due on any shares of Preferred Stock of the
Company outstanding on the Issue Date, nor on redemption of
any such shares, nor in payment of any interest due under
the Company's Secured Subordinated Notes, nor upon exercise
of any options granted to management pursuant to an employee
benefit plan approved by stockholders of the Company, nor
upon the exercise of any outstanding Warrants (including
Warrants issued in the Concurrent Equity Offering (as
defined below)), shall require any adjustment to either the
Exercise Price of the Warrants or the number of shares
issuable upon exercise of the Warrants.
(d) Dividends and Distributions. In the event the
Company shall, at any time or from time to time after the
date hereof, distribute to all the holders of Common Stock
any dividends or other distribution of cash, evidences of
its indebtedness, other securities or other properties or
assets (in each case other than (i) dividends payable in
Common Stock, Options or Convertible Securities and (ii) any
cash dividend from current or retained earnings), or any
options, warrants or other rights to subscribe for or
purchase any of the foregoing, then (A) the Exercise Price
shall be decreased to a price determined by multiplying the
Exercise Price then in effect by a fraction, the numerator
of which shall be the current market price per share of
Common Stock (determined pursuant to Section 5.01(g)) on the
record date for such distribution less the sum of (X) the
cash portion, if any, of such distribution per share of
Common Stock outstanding (exclusive of any treasury shares)
on the record date for such distribution plus (Y) the then
fair market value (as determined in good faith by the Board
of Directors of the Company) per share of Common Stock
outstanding (exclusive of any treasury shares) on the record
date for such distribution of that portion, if any, of such
distribution consisting of evidences of indebtedness, other
securities, properties, assets (other than cash), options,
warrants or subscription or purchase rights, and the
denominator of which shall be such current market price per
share of Common Stock and (B) the number of Shares
purchasable upon the exercise of each Warrant shall be
increased to a number determined by multiplying the number
of shares of Common Stock so purchasable immediately prior
to the record date for such distribution by a fraction, the
numerator of which shall be the Exercise Price in effect
immediately prior to the adjustment required by clause (A)
of this sentence and the denominator of which shall be the
Exercise Price in effect immediately after such adjustment.
The adjustments required by this paragraph (d) shall be made
whenever any such distribution occurs retroactive to the
record date for the determination of stockholders entitled
to receive such distribution.
(e) Self-Tenders. In case of the consummation of a
tender or exchange offer (other than an odd-lot tender
offer) made by the Company or any subsidiary of the Company
for all or any portion of the Common Stock to the extent
that the cash and value of any other consideration included
in such payment per share of Common Stock exceeds the first
reported sales price per share of Common Stock on the
trading day next succeeding the last time tenders or
exchanges may be made pursuant to the tender or exchange
offer (the "Expiration Time"), the Exercise Price shall be
reduced so that the same shall equal the price determined by
multiplying the Exercise Price in effect immediately prior
to the Expiration Time by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) at the
Expiration Time multiplied by the first reported sales price
of the Common Stock on the trading day next succeeding the
Expiration Time, and the denominator shall be the sum of (A)
the fair market value (determined by the Board of Directors
of the Company, whose determination shall be conclusive and
described in a resolution of the Board of Directors) of the
aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the
tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the
shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (B) the product
of the number of shares of Common Stock outstanding (less
any Purchased Shares) on the Expiration Time and the first
reported sales price of the Common Stock on the trading day
next succeeding the Expiration Time, such reduction to
become effective immediately prior to the opening of
business on the day following the Expiration Time.
(f) Exercise Price Reset. The Exercise Price, but
not the number of Shares purchasable upon exercise of each
Warrant, shall be reset under the circumstances and in the
manner provided in Section 2.02(g) as a one time adjustment,
and, after any such adjustment, the provisions of this
Article V shall apply in respect of any other subsequent
adjustments to the Exercise Price, as so reset, and to the
number and kind of Shares purchasable upon exercise of the
Warrants.
(g) Current Market Price. Except as provided in
Section 2.02(g), for the purpose of any computation of
current market price, the current market price per share of
Common Stock at any date shall be (x) for purposes of
Section 5.02, the closing price on the trading day
immediately prior to the exercise of the applicable Warrant
and (y) in all other cases, the average of the daily closing
prices for the shorter of (i) the 20 consecutive trading
days ending on the last full trading day on the exchange or
market specified in the second succeeding sentence prior to
the Time of Determination (as defined below) and (ii) the
period commencing on the date next succeeding the first
public announcement of the issuance, sale, distribution or
granting in question through such last full trading day
prior to the Time of Determination. The term "Time of
Determination" as used herein shall be the time and date of
the earlier to occur of (A) the date as of which the current
market price is to be computed and (B) the last full trading
day on such exchange or market before the commencement of
"ex-dividend" trading in the Common Stock relating to the
event giving rise to the adjustment required by paragraph
(a), (b), (c) or (d). The closing price for any day shall
be the last reported sale price regular way or, in case no
such reported sale takes place on such day, the average of
the closing bid and asked prices regular way for such day,
in each case (1) on the principal national securities
exchange on which the shares of Common Stock are listed or
to which such shares are admitted to trading or (2) if the
Common Stock is not listed or admitted to trading on a
national securities exchange, in the over-the-counter market
as reported by the Nasdaq NMS or any comparable system or
(3) if the Common Stock is not listed on the Nasdaq NMS or a
comparable system, as furnished by two members of the
American Stock Exchange, Inc. selected from time to time in
good faith by the Board of Directors of the Company for that
purpose. In the absence of all of the foregoing, or if for
any other reason the current market price per share cannot
be determined pursuant to the foregoing provisions of this
paragraph (g), the current market price per share shall be
the fair market value thereof as determined in good faith by
the Board of Directors of the Company.
(h) Certain Distributions. If the Company shall
pay a dividend or make any other distribution payable in
Options or Convertible Securities, then, for purposes of
paragraph (c) above, such Options or Convertible Securities
shall be deemed to have been issued or sold without
consideration.
(i) Consideration Received. If any shares of
Common Stock, Options or Convertible Securities shall be
issued, sold or distributed for a consideration other than
cash, the amount of the consideration other than cash
received by the Company in respect thereof shall be deemed
to be the then fair market value of such consideration (as
determined in good faith by the Board of Directors of the
Company). If any Options shall be issued in connection with
the issuance and sale of other securities of the Company,
together comprising one integral transaction in which no
specific consideration is allocated to such Options by the
parties thereto, such Options shall be deemed to have been
issued without consideration; provided, however, that if
such Options have an exercise price equal to or greater than
the current market price of the Common Stock on the date of
issuance of such Options, then such Options shall be deemed
to have been issued for consideration equal to such exercise
price.
(j) Deferral of Certain Adjustments. No adjustment
to the Exercise Price (including the related adjustment to
the number of Shares purchasable upon the exercise of each
Warrant) shall be required hereunder unless such adjustment,
together with other adjustments carried forward as provided
below, would result in an increase or decrease of at least
one percent (1%) of the Exercise Price; provided, however,
that any adjustments which by reason of this paragraph (j)
are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. No
adjustment need be made for a change in the par value of the
Common Stock. All calculations under this Section and
Section 2.02(g) shall be made to the nearest 1/1,000 of one
cent or to the nearest l/1,000th of a Share, as the case may
be.
(k) Changes in Options and Convertible Securities.
If the exercise price provided for in any Options referred
to in paragraph (c) above, the additional consideration, if
any, payable upon the conversion or exchange of any
Convertible Securities referred to in paragraph (c) above,
or the rate at which any Convertible Securities referred to
in paragraph (c) above are convertible into or exchangeable
for Common Stock shall change at any time (other than under
or by reason of provisions designed to protect against
dilution upon an event which results in a related adjustment
pursuant to this Article V), the Exercise Price then in
effect and the number of Shares purchasable upon the
exercise of each Warrant shall forthwith be readjusted
(effective only with respect to any exercise of any Warrant
after such readjustment) to the Exercise Price and number of
Shares so purchasable that would then be in effect had the
adjustment made upon the issuance, sale, distribution or
granting of such Options or Convertible Securities been made
based upon such changed purchase price, additional
consideration or conversion rate, as the case may be, but
only with respect to such Options and Convertible Securities
as then remain outstanding.
(l) Expiration of Options and Convertible
Securities. If, at any time after any adjustment to the
number of Shares purchasable upon the exercise of each
Warrant shall have been made pursuant to paragraph (c) or
(k) above or this paragraph (1), any Options or Convertible
Securities shall have expired unexercised, the number of
such Shares so purchasable shall, upon such Expiration, be
readjusted and shall thereafter be such as they would have
been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (i)
the only shares of Common Stock deemed to have been issued
in connection with such Options or Convertible Securities
were the shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or Convertible
Securities and (ii) such shares of Common Stock, if any,
were issued or sold for the consideration actually received
by the Company upon such exercise plus the aggregate
consideration, if any, actually received by the Company for
the issuance, sale, distribution or granting of all such
Options or Convertible Securities, whether or not exercised;
provided, however, that no such readjustment shall have the
effect of decreasing the number of such shares so
purchasable by an amount (calculated by adjusting such
decrease to account for all other adjustments made pursuant
to this Article V following the date of the original
adjustment referred to above) in excess of the amount of the
adjustment initially made in respect of the issuance, sale,
distribution or granting of such Options or Convertible
Securities.
(m) Other Adjustments. In the event that at any
time, as a result of an adjustment made pursuant to this
Article V, holders of Warrants shall become entitled to
receive any securities of the Company other than shares of
Common Stock, including shares of Amended Series A Preferred
Stock as provided in paragraph (q) below, thereafter the
number of such other securities so receivable upon exercise
of each Warrant and the Exercise Price applicable to such
exercise 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 of Common Stock
contained in this Article V.
(n) Other Action Affecting Common Stock. In case
at any time or from time to time the Company shall take any
action in respect of its outstanding shares of Common Stock,
other than any action described in Section 2.02 (g), this
Article V or the Concurrent Equity Offering (as such term is
defined in the Offering Memorandum relating to the Units),
then the number of Shares for which each Warrant is
exercisable shall be adjusted in such manner as may be
equitable in the circumstances. If the Company shall at any
time and from time to time issue or sell (i) any shares of
any class of common stock other than Common Stock, (ii) any
evidences of its indebtedness, shares of stock or other
securities which are convertible into or exchangeable for
such shares of common stock, with or without the payment of
additional consideration in cash or property, or (iii) any
warrants or other rights to subscribe for or purchase any
such shares of common stock or any such evidences, shares of
stock or other securities referred to in (ii) above, then in
each such case such issuance shall be deemed to be of, or in
respect of, Common Stock for purposes of this Article V;
provided, however, that, without limiting the generality of
the foregoing, if the Company shall take a record of the
holders of its Common Stock for the purpose of entitling
them to receive a dividend payable in, or other distribution
of, common stock other than Common Stock, including shares
of non-voting common stock, then the number of Shares for
which each Warrant is exercisable immediately after the
occurrence of any such event shall be adjusted to equal the
aggregate number of shares of such common stock and of
Common Stock which a record holder of the same number of
Shares for which each Warrant is exercisable immediately
prior to the occurrence of such event would own or be
entitled to receive after the happening of such event.
(o) Statement of Warrant Certificates.
Irrespective of any adjustment in the number or kind of
Shares issuable upon the exercise of each Warrant or the
Exercise Price, Warrant Certificates theretofore or
thereafter issued shall continue to express the same number
and kind of Shares and Exercise Price as are stated in the
Warrant Certificates initially issuable pursuant to this
Agreement.
(p) Increased Shares or Reduced Exercise Price.
From time to time, the Company may, for a period of not less
than 20 days, in its discretion, increase the number of
Shares purchasable upon the exercise of each Warrant,
without making any adjustment to the Exercise Price, or
reduce the Exercise Price, without making any adjustment to
the number of Shares purchasable upon the exercise of each
Warrant.
(q) Exercise for Preferred Stock. In the event
that the Exercisability Date does not occur by May 20, 1998,
then each outstanding Warrant shall automatically, with no
further action by either the Company or the holder, be
converted (the "Conversion") into a Warrant solely to
purchase one share of Amended Series A, Cumulative
Convertible Preferred Stock, par value $1.00 per share, of
the Company (the "Amended Series A Preferred Stock") at an
Exercise Price of $34.00 per share, subject to adjustment as
provided in this Article V. The Conversion shall become
effective as of 5:00 p.m. New York City time on May 20,
1998, unless by such time on such date all of the
outstanding Warrants may be exercisable into shares of
Common Stock as provided herein. Prior to such time and
date and the Conversion, the Warrant holder shall not be
entitled to, or have any right to acquire, any shares of
Amended Series A Preferred Stock upon exercise of the
Warrant, or be entitled to exercise any rights, privileges
or preferences accorded the holders of Amended Series A
Preferred Stock. In the event all the Outstanding Warrants
are fully exercisable for shares of Common Stock by
5:00 p.m. New York City time on May 20, 1998, the Warrants
shall not be subject to Conversion as provided herein.
SECTION 5.02. Fractional Interest. The Company shall
not be required to issue fractional shares of Common Stock on the
exercise of Warrants. If more than one Warrant shall be
presented for exercise in full at the same time by the same
holder, the number of full shares of Common Stock which shall be
issuable upon such exercise shall be computed on the basis of the
aggregate number of shares of Common Stock acquirable on exercise
of the Warrants so presented. If any fraction of a share of
Common Stock would, except for the provisions of this Section, be
issuable on the exercise of any Warrant, the Company shall either
(i) pay an amount in cash calculated by the Company to equal the
then current market price per share (determined pursuant to
Section 5.01(g)) multiplied by such fraction 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. While the Company will
endeavor to use its best efforts to secure the best available
sales price for such aggregated fractional shares, such price
shall not necessarily be the highest price obtainable for such
shares. Holders of Warrants, by their acceptances of the Warrant
Certificates, expressly waive any and all rights to receive any
fraction of a share of Common Stock or a stock certificate or
scrip representing a fraction of a share of Common Stock.
SECTION 5.03. When Adjustment Not Required. If the
Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend or
distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend,
distribution, subscription or purchase rights, then thereafter no
adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
SECTION 5.04. Challenge to Good Faith Determination.
Whenever the Board of Directors of the Company shall be required
to make a determination in good faith of the fair value of any
item under this Article V, such determination may be challenged
in good faith by holders holding a majority of the outstanding
Warrants (the "Majority Holders"), and any dispute shall be
resolved by an investment banking firm of national standing
selected by the Company. The fee of such investment banking firm
shall be paid by the Company, unless such fair market value as
determined by the investment banking firm is more than 95% of the
fair market value determined by the Board of Directors of the
Company, in which case the challenging holders shall be jointly
and severally liable for such fee.
SECTION 5.05. Treasury Stock. The sale or other
disposition of any issued shares of Common Stock owned or held by
or for the account of the Company shall be deemed an issuance
thereof and, except for a voluntary tender or exchange offer made
by the Company or any subsidiary of the Company subject to
Section 13(e) of the Exchange Act, a repurchase thereof and
designation of such shares as treasury stock shall not be deemed
to be a redemption thereof for the purposes of this Agreement.
SECTION 5.06. Notices to Warrant Holders. In connection
with any adjustment of the Exercise Price or in connection with
the Conversion of the Warrants pursuant to this Article V, the
Company shall (i) promptly after such adjustment or Conversion
or, if earlier, at least five (5) days prior to the date on which
notice of such adjustment or Conversion is required to be given,
if at all, to The Depository Trust Company cause to be filed with
the Warrant Agent a certificate (A) in the case of any such
adjustment, of a firm of independent public accountants of
national standing selected by the Board of Directors of the
Company (who may be the regular auditors of the Company) setting
forth the Exercise Price after such adjustment and setting forth
in reasonable detail the method of calculation and the facts upon
which such calculations are based and setting forth the number of
Shares (or portion thereof) issuable after such adjustment in the
Exercise Price, upon exercise of a Warrant and payment of the
adjusted Exercise Price, or (B) in the case of the Conversion of
the Warrants, an Officers' Certificate stating that the
Conversion has become effective, which certificates shall be
conclusive evidence of the correctness of the matters set forth
therein, and (ii) promptly after such adjustment or Conversion
cause to be given to each of the holders of the Warrant
Certificates notice of such adjustment or Conversion. The
Warrant Agent shall be entitled to conclusively rely on the above-
referenced certificates and shall be under no duty or
responsibility with respect to any such certificate, except to
exhibit the same from time to time to any holder desiring an
inspection thereof during normal business hours upon reasonable
notice. The Warrant Agent shall not at any time be under any
duty or responsibility to any holder to determine whether any
facts exist that may require any adjustment of the number of
Shares issuable on exercise of any Warrant or the Exercise Price
or with respect to the nature or extent of any such adjustment
when made, or with respect to the method employed in making such
adjustment or the validity or value (or the kind or amount) of
any Shares which may be issuable on exercise of any Warrant or
whether or not the Conversion has taken place. The Warrant Agent
shall not be responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver any Shares or
stock certificates or other common stock or property upon the
exercise of any Warrant.
The Company shall, in addition, promptly notify the holders
of the Warrant Certificates of any determination of its Board of
Directors pursuant to Section 5.01(n) that any actions affecting
its Common Stock generally will not require an adjustment to the
Exercise Price or the number of Shares for which a Warrant is
exercisable, and shall specify in such notice the reasons for
such determination. In the event that the Majority Holders shall
challenge any of the calculations set forth in such notice within
20 days after the Company's delivery thereof, the Company shall
retain a firm of independent certified public accountants of
national standing selected by the Company to prepare and execute
a certificate verifying that no adjustment is required. The
Company shall promptly cause a signed copy of any certificate
prepared pursuant to this Section 5.06 to be delivered to each
holder. The Company shall keep at the Warrant Agent Office
copies of all such certificates and cause the same to be
available for inspection at said office during normal business
hours upon reasonable notice by any holder or any prospective
purchaser of a Warrant designated by a holder thereof.
ARTICLE VI
CONCERNING THE WARRANT AGENT
SECTION 6.01. Warrant Agent. Initially, the Company
shall act as its own Warrant Agent upon the terms and subject to
the conditions herein and in the Warrant Certificates set forth,
it being understood that Sections 6.02(a) and (n) and 7.01 hereof
and the provisions hereof regarding delivery of Officers'
Certificates or notices of the Company to the Warrant Agent or
vice versa shall not apply to the Company when acting as its own
Warrant Agent. At no time when the Company may be acting as its
own Warrant Agent shall any of its obligations to the holders of
the Warrant Certificates be in any respect reduced as a result
thereof. The Warrant Agent shall have the powers and authority
specifically granted to and conferred upon it in the Warrant
Certificates and this Agreement and such further powers and
authority to act on behalf of the Company as the Company may
hereafter grant to or confer upon it and it shall accept in
writing. All of the terms and provisions with respect to such
powers and authority contained in the Warrant Certificates are
subject to and governed by the terms and provisions hereof.
SECTION 6.02. Conditions of Warrant Agent's Obligations.
The Warrant Agent accepts its obligations herein set forth upon
the terms and conditions hereof and in the Warrant Certificates,
including the following, to all of which the Company agrees and
to all of which the rights hereunder of the holders from time to
time of the Warrant Certificates shall be subject:
(a) The Warrant Agent shall be entitled to
compensation to be agreed upon with the Company in writing for
all services rendered by it and the Company agrees promptly to
pay such compensation and to reimburse the Warrant Agent for its
reasonable out-of-pocket expenses (including reasonable fees and
expenses of counsel) incurred without gross negligence or willful
misconduct on its part in connection with the services rendered
by it hereunder. The Company also agrees to indemnify the
Warrant Agent, each predecessor Warrant Agent, and their
respective directors, officers, affiliates, agents and employees
for, and to hold it and its directors, officers, affiliates,
agents and employees harmless against, any loss, liability or
expense of any nature whatsoever (including, without limitation,
fees and expenses of counsel) incurred without gross negligence
or willful misconduct on the part of the Warrant Agent or
predecessor Warrant Agent, arising out of or in connection with
its acting as such Warrant Agent hereunder and its exercise or
failure to exercise of its rights and performance of its
obligations hereunder. The obligations of the Company under this
Section 6.02 shall survive the exercise and the expiration of the
Warrant Certificates and the resignation and removal of the
Warrant Agent.
(b) In acting under this Agreement and in
connection with the Warrant Certificates, the Warrant Agent is
acting solely as agent of the Company and does not assume any
obligation or relationship of agency or trust for or with any of
the owners or holders of the Warrant Certificates.
(c) The Warrant Agent may consult with counsel and
any advice or written opinion of such counsel shall be full and
complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion.
(d) The Warrant Agent shall be fully protected and
shall incur no liability for or in respect of any action taken or
omitted to be taken or thing suffered by it in reliance upon any
Warrant Certificate, notice, direction, consent, certificate,
affidavit, opinion of counsel, instruction, statement or other
paper or document reasonably believed by it to be genuine and to
have been presented or signed by the proper parties.
(e) The Warrant Agent, and its officers, directors,
affiliates and employees ("Related Parties"), may become the
owners of, or acquire any interest in, Warrant Certificates,
shares or other obligations of the Company with the same rights
that it or they would have it if were not the Warrant Agent
hereunder and, to the extent permitted by applicable law, it or
they may engage or be interested in any financial or other
transaction with the Company and may act on, or as depositary,
trustee or agent for, any committee or body of holders of shares
or other obligations of the Company as freely as if it were not
the Warrant Agent hereunder. Nothing in this Agreement shall be
deemed to prevent the Warrant Agent or such Related Parties from
acting in any other capacity for the Company.
(f) The Warrant Agent shall not be under any
liability for interest on, and shall not be required to invest,
any money at any time received by it pursuant to any of the
provisions of this Agreement or of the Warrant Certificates.
(g) The Warrant Agent shall not be under any
responsibility in respect of the validity of this Agreement (or
any term or provision hereof) or the execution and delivery
hereof or in respect of the validity or execution of any Warrant
Certificate (except its authentication thereof).
(h) The recitals and other statements contained
herein and in the Warrant Certificates (except as to the Warrant
Agent's authentication thereon) shall be taken as the statements
of the Company and the Warrant Agent assumes no responsibility
for the correctness of the same. The Warrant Agent does not make
any representation as to the validity or sufficiency of this
Agreement or the Warrant Certificates; provided, however, that
the Warrant Agent shall not be relieved of its duty to
authenticate the Warrant Certificates as authorized by this
Agreement. The Warrant Agent shall not be accountable for the
use or application by the Company of the proceeds of the exercise
of any Warrant.
(i) Before the Warrant Agent acts or refrains from
acting with respect to any matter contemplated by this Warrant
Agreement, it may require:
(1) an Officers' Certificate stating that, in
the opinion of the signers, all conditions precedent, if
any, provided for in this Warrant Agreement relating to the
proposed action have been complied with; and
(2) if reasonably necessary in the sole
judgment of the Warrant Agent, an opinion of counsel for the
Company stating that, in the opinion of such counsel, all
such conditions precedent have been complied with.
Each Officers' Certificate or, if requested, an opinion
of counsel with respect to compliance with a condition or
covenant provided for in this Warrant Agreement shall include:
(1) a statement that the person making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and
scope of the examination or investigation upon which the
statements or opinions contained in such certificate or
opinion are based;
(3) a statement that, in the opinion of such
person, he or she has made such examination or investigation
as is necessary to enable him or her to express an informed
opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the
opinion of such person, such condition or covenant has been
complied with.
(j) The Warrant Agent shall be obligated to perform
such duties as are herein and in the Warrant Certificates
specifically set forth and no implied duties or obligations shall
be read into this Agreement or the Warrant Certificates against
the Warrant Agent. The Warrant Agent shall not be accountable or
under any duty or responsibility for the use by the Company of
any of the Warrant Certificates authenticated by the Warrant
Agent and delivered by it to the Company pursuant to this
Agreement. The Warrant Agent shall have no duty or
responsibility in case of any default by the Company in the
performance of its covenants or agreements contained in the
Warrant Certificates or in the case of the receipt of any written
demand from a holder of a Warrant Certificate with respect to
such default, including, without limiting the generality of the
foregoing, any duty or responsibility to initiate or attempt to
initiate any proceedings at law or otherwise or, except as
provided in Section 7.02 hereof, to make any demand upon the
Company. The Warrant Agent shall not be obligated to perform any
duty to the extent prohibited by law.
(k) Unless otherwise specifically provided herein,
any order, certificate, notice, request, direction or other
communication from the Company made or given under any provision
of this Agreement shall be sufficient if signed by its chairman
of the Board of Directors, its president, its treasurer, its
controller or any vice president or its secretary or any
assistant secretary.
(l) The Warrant Agent shall have no responsibility
in respect of any adjustment pursuant to Article V hereof.
(m) The Company agrees that it will perform,
execute, acknowledge and deliver, or cause to be performed,
executed, acknowledged and delivered, all such further and other
acts, instruments and assurances as may reasonably be required by
the Warrant Agent for the carrying out or performing by the
Warrant Agent of the provisions of this Agreement.
(n) The Warrant Agent is hereby authorized and
directed to accept written instructions with respect to the
performance of its duties hereunder from any one of the chairman
of the Board of Directors, the president, the treasurer, the
controller, any vice president or the secretary of the Company or
any other officer or official of the Company reasonably believed
to be authorized to give such instructions and to apply to such
officers or officials for advice or instructions in connection
with its duties, and it shall not be liable for any action taken
or suffered to be taken by it in good faith in accordance with
instructions with respect to any matter arising in connection
with the Warrant Agent's duties and obligations arising under
this Agreement. Such application by the Warrant Agent for
written instructions from the Company may, at the option of the
Warrant Agent, set forth in writing any action proposed to be
taken or omitted by the Warrant Agent with respect to its duties
or obligations under this Agreement and the date on or after
which such action shall be taken and the Warrant Agent shall not
be liable for any action taken or omitted in accordance with a
proposal included in any such application on or after the date
specified therein (which date shall be not less than 10 Business
Days after the Company receives such application unless the
Company consents to a shorter period), provided that (i) such
application includes a statement to the effect that it is being
made pursuant to this paragraph (n) and that unless objected to
prior to such date specified in the application, the Warrant
Agent will not be liable for any such action or omission to the
extent set forth in such application and (ii) prior to taking or
omitting any such action, the Warrant Agent has not received
written instructions objecting to such proposed action or
omission.
(o) Whenever in the performance of its duties under
this Agreement the Warrant Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the
Company prior to taking or suffering any action hereunder, such
fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by any one of the
chairman of the Board of Directors, the president, the treasurer,
the controller, any vice president or the secretary of the
Company or any other officer or official of the Company
reasonably believed to be authorized to give such instructions
and delivered to the Warrant Agent; and such certificate shall be
full authorization to the Warrant Agent for any action taken or
suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(p) The Warrant Agent shall not be required to risk
or expend its own funds in the performance of its obligations and
duties hereunder.
SECTION 6.03. Resignation and Appointment of Successor.
(a) The Company agrees, for the benefit of the holders from time
to time of the Warrant Certificates, that there shall at all
times be a Warrant Agent hereunder.
(b) The Warrant Agent may at any time resign as
Warrant Agent by giving written notice to the Company of such
intention on its part, specifying the date on which its desired
resignation shall become effective, provided that such date shall
be at least 30 days after the date on which such notice is given
unless the Company agrees to accept less notice. Upon receiving
such notice of resignation, or in the event the Company shall
determine not to continue to act as its own Warrant Agent, the
Company shall promptly appoint a successor Warrant Agent,
qualified as provided in Section 6.03(d) hereof, by written
instrument in duplicate signed on behalf of the Company, one copy
of which shall be delivered to the resigning Warrant Agent and
one copy to the successor Warrant Agent. As provided in Section
6.03(d) hereof, such resignation shall become effective upon the
earlier of (x) the acceptance of the appointment by the successor
Warrant Agent or (y) 30 days after receipt by the Company of
notice of such resignation. The Company may, at any time and for
any reason, and shall, upon any event set forth in the next
succeeding sentence, remove the Warrant Agent and appoint a
successor Warrant Agent by written instrument in duplicate,
specifying such removal and the date on which it is intended to
become effective, signed on behalf of the Company, one copy of
which shall be delivered to the Warrant Agent being removed and
one copy to the successor Warrant Agent. The Warrant Agent shall
be removed as aforesaid if it shall become incapable of acting,
or shall be adjudged a bankrupt or insolvent, or a receiver of
the Warrant Agent or of its property shall be appointed, or any
public officer shall take charge or control of it or of its
property or affairs for the purpose of rehabilitation,
conservation or liquidation. Any removal of the Warrant Agent
and any appointment of a successor Warrant Agent shall become
effective upon acceptance of appointment by the successor Warrant
Agent as provided in Section 6.03(d). As soon as practicable
after appointment of the successor Warrant Agent, the Company
shall cause written notice of the change in the Warrant Agent to
be given to each of the registered holders of the Warrants in the
manner provided for in Section 7.04 hereof.
(c) Upon resignation or removal of the Warrant
Agent, if the Company shall fail to appoint a successor Warrant
Agent within a period of 30 days after receipt of such notice of
resignation or removal, then the holder of any Warrant
Certificate or the Warrant Agent may apply to a court of
competent jurisdiction for the appointment of a successor to the
Warrant Agent. Pending appointment of a successor to the Warrant
Agent, either by the Company or by such a court, the duties of
the Warrant Agent shall be carried out by the Company.
(d) Any successor Warrant Agent, whether appointed
by the Company or by a court, shall be a bank or trust company in
good standing, incorporated under the laws of the United States
of America or any State thereof and having, at the time of its
appointment, a combined capital surplus of at least $50 million.
Such successor Warrant Agent shall execute and deliver to its
predecessor and to the Company an instrument accepting such
appointment hereunder and all the provisions of this Agreement,
and thereupon such successor Warrant Agent, without any further
act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with
like effect as if originally named as Warrant Agent hereunder,
and such predecessor shall thereupon become obligated to (i)
transfer and deliver, and such successor Warrant Agent shall be
entitled to receive, all securities, records or other property on
deposit with or held by such predecessor as Warrant Agent
hereunder and (ii) upon payment of the amounts then due it
pursuant to Section 6.02(a) hereof, pay over, and such successor
Warrant Agent shall be entitled to receive, all money deposited
with or held by any predecessor Warrant Agent hereunder.
(e) Any corporation or bank into which the Warrant
Agent hereunder may be merged or converted, or any corporation or
bank with which the Warrant Agent may be consolidated, or any
corporation or bank resulting from any merger, conversion or
consolidation to which the Warrant Agent shall be a party, or any
corporation or bank to which the Warrant Agent shall sell or
otherwise transfer all or substantially all of its corporate
trust business, shall be the successor to the Warrant Agent under
this Agreement (provided that such corporation or bank shall be
qualified as aforesaid) without the execution or filing of any
document or any further act on the part of any of the parties
hereto.
(f) No Warrant Agent under this Warrant Agreement
shall be personally liable for any action or omission of any
successor Warrant Agent or of the Company.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendment. This Agreement and the terms
of the Warrants may be amended by the Company and the Warrant
Agent, without the consent of the holder of any Warrant
Certificate, for the purpose of curing any ambiguity, or of
curing, correcting or supplementing any defective or inconsistent
provision contained herein or therein or in any other manner
which the Company may deem necessary or desirable and which shall
not adversely affect in any material respect the interests of the
holders of the Warrant Certificates.
The Company and the Warrant Agent may modify this Agreement
and the terms of the Warrants with the consent of not less than a
majority in number of the then outstanding Warrants for the
purpose of adding any provision to or changing in any manner or
eliminating any of the provisions of this Agreement or modifying
in any manner the rights of the holders of the outstanding
Warrants; provided, however, that no such modification that
increases the Exercise Price (except pursuant to Section 5.01
(q)), reduces the period of time during which the Warrants are
exercisable hereunder, otherwise materially and adversely affects
the exercise rights of the holders of the Warrants, reduces the
percentage required for modification, or effects any change to
this Section 7.01 may be made with respect to an outstanding
Warrant without the consent of the holder of such Warrant.
Any modification or amendment made in accordance with this
Agreement will be conclusive and binding on all present and
future holders of Warrant Certificates whether or not they have
consented to such modification or amendment or waiver and whether
or not notation of such modification or amendment is made upon
such Warrant Certificates. Any instrument given by or on behalf
of any holder of a Warrant Certificate in connection with any
consent to any modification or amendment will be conclusive and
binding on all subsequent holders of such Warrant Certificate.
SECTION 7.02. Notices and Demands to the Company and
Warrant Agent. If the Warrant Agent shall receive any notice or
demand addressed to the Company by the holder of a Warrant
Certificate pursuant to the provisions hereof or of the Warrant
Certificates, the Warrant Agent shall promptly forward such
notice or demand to the Company.
SECTION 7.03. Address for Notices to the Company and for
Transmission of Documents. All notices hereunder to the Company
shall be deemed to have been given when sent by certified or
registered mail, postage prepaid, or by telecopy, confirmed by
first class mail, postage prepaid, addressed to the Company as
follows:
XCL Ltd.
110 Rue Jean Lafitte
Lafayette, Louisiana 70508
(Telecopy no. 318/237-3316)
Attention: General Counsel
SECTION 7.04. Notices to Holders. Notices to holders of
Warrants shall be mailed to such holders at the addresses of such
holders as they appear in the Warrant Register. Any such notice
shall be sufficiently given if sent by first-class mail, postage
prepaid.
SECTION 7.05. APPLICABLE LAW. THE VALIDITY,
INTERPRETATION AND PERFORMANCE OF THIS AGREEMENT AND EACH WARRANT
ISSUED HEREUNDER AND OF THE RESPECTIVE TERMS AND PROVISIONS
THEREOF SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.06. Obtaining of Governmental Approvals. The
Company will from time to time take all action required to be
taken by it which may be necessary to obtain and keep effective
any and all permits, consents and approvals of governmental
agencies and authorities and Securities Acts filings under United
States Federal and State laws, and the rules and regulations of
all stock exchanges on which the Warrants may be listed, which
may be or become requisite in connection with the issuance, sale,
transfer, and delivery of the Warrant Certificates, the exercise
of the Warrants or the issuance, sale, transfer and delivery of
the shares issued upon exercise of the Warrants, it being
understood, however, that the only contractual registration
rights of the holders of the Warrant Certificates are those set
forth in the Registration Rights Agreement dated as of May 20,
1997 (the "Registration Rights Agreement") between the Company
and the Initial Purchaser.
SECTION 7.07. Persons Having Rights Under Agreement.
Nothing in this Agreement expressed or implied and nothing that
may be inferred from any of the provisions hereof is intended, or
shall be construed, to confer upon, or give to, any person other
than the Company, the Warrant Agent and the holders from time to
time of the Warrant Certificates any right, remedy or claim under
or by reason of this Agreement or of any covenant, condition,
stipulation, promise or agreement hereof; and all covenants,
conditions, stipulations, promises and agreements in this
Agreement contained shall be for the sole and exclusive benefit
of the Company and the Warrant Agent and their successors and of
the holders from time to time of the Warrant Certificates.
SECTION 7.08. Headings. The descriptive headings of
the several Articles and Sections of this Agreement are inserted
for convenience only and shall not control or affect the meaning
or construction of any of the provisions hereof.
SECTION 7.09. Counterparts. This Agreement may be
executed in any number of Counterparts, each of which so executed
shall be deemed to be an original; but such Counterparts shall
together constitute but one and the same instrument.
SECTION 7.10. Inspection of Agreement. A copy of
this Agreement shall be available at all reasonable times at the
Warrant Agent Office, for inspection by the holder of any Warrant
Certificate. The Warrant Agent may require such holder to submit
his Warrant Certificate for inspection by it.
IN WITNESS WHEREOF, this Agreement has been duly executed by
the Company as of the day and year first above written.
XCL LTD.
By:______________________________
David A. Melman,
Executive Vice President,
General Counsel and Secretary
<PAGE>
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
[Unless and until it is exchanged in whole or in part for
Warrants in certificated form, this Warrant may not be
transferred except as a whole by the Depositary to a nominee of
the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary. Unless this certificate is
presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC"), to the issuer or its
agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or
such other name as requested by an authorized representative of
DTC (and any payment is made to Cede & Co. or such other entity
as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.] [FN] 1
- -----------------------
<F1> This paragraph is to be included only if the Warrant
Certificate is in global form.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT
ASSET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER
(1)REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS
AN INSTITUTIONAL "ACCREDITED INVESTOR" ( AS DEFINED IN RULE
501(a)(l), (2), (3) OR (7) UNDER THE SECURITIES ACT)(AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 903 OR 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT
WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO
XCL LTD. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE
THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES (OR FURNISHES ON ITS BEHALF BY
A U.S. BROKER-DEALER) TO THE COMPANY AND THE WARRANT AGENT A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES
THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE WARRANT AGENT AND
THE COMPANY SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT
DATED AS OF MAY 20, 1997 BETWEEN THE COMPANY AND JEFFERIES &
COMPANY, INC., A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY.
CUSIP #[ ]
No. [ ] [ ] Warrants
WARRANT CERTIFICATE
XCL LTD.
This Warrant Certificate certifies that [ ], or
registered assigns, is the registered holder of [ ] Warrants
(the "Warrants") to purchase shares of Common Stock, par value
$0.01 per share (the "Common Stock"), of XCL Ltd., a Delaware
corporation (the "Company"). Each Warrant entitles the holder to
purchase from the Company at any time on or after the later of
May 20, 1998 or such date on which the Company has reserved or
has available a sufficient number of shares of its Common Stock
to permit exercise of all outstanding Warrants and until 5:00
p.m., New York City time, on May 20, 2004 (the "Expiration
Date"), 1,280 fully paid and non-assessable shares of Common
Stock (as such number may be adjusted from time to time, the
"Shares", which may also include any other securities or property
purchasable upon exercise of a Warrant, such adjustment and
inclusion each as provided in the Warrant Agreement) at the
exercise price (the "Exercise Price") of $0.2063 per Share upon
surrender of this Warrant Certificate and payment of the Exercise
Price at any office or agency maintained for that purpose by the
Company (the "Warrant Agent Office"), subject to the conditions
set forth herein and in the Warrant Agreement.
The Exercise Price shall be payable in cash or by certified
or official bank check in the lawful currency of the United
States of America which as of the time of payment is legal tender
for payment of public or private debts. The Company has
initially designated its principal executive offices in
Lafayette, Louisiana, as the initial Warrant Agent Office. The
number of Shares issuable upon exercise of the Warrants
("Exercise Rate") is subject to adjustment upon the occurrence of
certain events set forth in the Warrant Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New
York City time, on May 20, 2004 shall thereafter be void.
Reference is hereby made to the further provisions on the
reverse hereof, which provisions shall for all purposes have the
same effect as though fully set forth at this place. Capitalized
terms used in this Warrant Certificate but not defined herein
shall have the meanings ascribed thereto in the Warrant
Agreement.
This Warrant Certificate shall not be valid unless
authenticated by the Warrant Agent, as such term is used in the
Warrant Agreement. Initially, the Company shall act as its own
Warrant Agent.
THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE SHALL
BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
WITNESS the corporate seal of the Company and the signatures
of its duly authorized officers.
Dated: _________________, 19__
XCL LTD.
By:_____________________
Name:_____________________
Title:_____________________
Attest:
By:_______________________________
Name:______________________
Title:_______________________
Certificate of Authentication:
This is one of the Warrants
referred to in the within-
mentioned Warrant Agreement:
XCL LTD.,
as Warrant Agent
By:_____________________________
Authorized Signatory
<PAGE>
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
XCL LTD.
The Warrants evidenced by this Warrant Certificate are part
of a duly authorized issue of Warrants, each of which represents
the right to purchase at any time on or after the later of May
20, 1998, or such date on which the Company has reserved or has
available a sufficient number of shares of its Common Stock to
permit exercise of all outstanding Warrants and until 5:00 p.m.,
New York City time, on May 20, 2004, 1,280 Shares, subject to
adjustment as set forth in the Warrant Agreement. The Warrants
are issued pursuant to a Warrant Agreement dated as of May 20,
1997 (the "Warrant Agreement"), duly executed and delivered by
the Company for the benefit of the holders from time to time of
the Warrant Certificates, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument
and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities
thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or holder" meaning the registered holders or
registered holder) of the Warrant Certificates. Warrants may be
exercised by (i) surrendering at any Warrant Agent Office this
Warrant Certificate with the form of Election to Exercise set
forth hereon duly completed and executed and (ii) paying in full
the Warrant Exercise Price for each such Warrant exercised and
any other amounts required to be paid pursuant to the Warrant
Agreement.
If all of the items referred to in the last sentence of the
preceding paragraph are received by the Warrant Agent at or prior
to 2:00 p.m., New York City time, on a Business Day, the exercise
of the Warrant to which such items relate will be effective on
such Business Day. If any items referred to in the last sentence
of the preceding paragraph are received after 2:00 p.m., New York
City time, on a Business Day, the exercise of the Warrants to
which such item relates will be deemed to be effective on the
next succeeding Business Day. Notwithstanding the foregoing, in
the case of an exercise of Warrants on the Expiration Date, if
all of the items referred to in the last sentence of the
preceding paragraph are received by the Warrant Agent at or prior
to 5:00 p.m., New York City time, on such Expiration Date, the
exercise of the Warrants to which such items relate will be
effective on the Expiration Date.
Subject to the terms of the Warrant Agreement, as soon as
practicable after the exercise of any Warrant or Warrants, the
Company shall issue or cause to be issued to or upon the written
order of the registered holder of this Warrant Certificate, a
certificate or certificates evidencing the Share or Shares to
which such holder is entitled, in fully registered form,
registered in such name or names as may be directed by such
holder pursuant to the Election to Exercise, as set forth on the
reverse of this Warrant Certificate. Such certificate or
certificates evidencing the Share or Shares shall be deemed to
have been issued and any persons who are designated to be named
therein shall be deemed to have become the holder of record of
such Share or Shares as of the close of business on the date upon
which the exercise of this Warrant was deemed to be effective as
provided in the preceding paragraph.
The Company will not be required to issue fractional shares
of Common Stock upon exercise of the Warrants or distribute Share
certificates that evidence fractional shares of Common Stock. In
lieu of fractional shares of Common Stock, there shall be paid to
the registered Holder of this Warrant Certificate at the time
such Warrant Certificate is exercised an amount in cash equal to
the same fraction of the current market price per share of Common
Stock as determined in accordance with the Warrant Agreement.
Warrant Certificates, when surrendered at any Warrant Agent
Office by the holder thereof in person or by legal representative
or attorney duly authorized in writing, may be exchanged for a
new Warrant Certificate or new Warrant Certificates evidencing in
the aggregate a like number of Warrants, in the manner and
subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge
imposed in connection therewith.
Upon due presentment for registration of transfer of this
Warrant Certificate at any office or agency maintained by the
Company for that purpose, a new Warrant Certificate evidencing in
the aggregate a like number of Warrants shall be issued to the
transferee in exchange for this Warrant Certificate, subject to
the limitations provided in the Warrant Agreement, without charge
except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder hereof as the absolute owner of this Warrant
Certificate (notwithstanding any notation of ownership or other
writing hereon made by anyone) for the purpose of any exercise
hereof and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the
contrary.
The term "Business Day" shall mean any day on which (i)
banks in New Orleans, (ii) the principal national securities
exchange or market on which the Common Stock is listed or
admitted to trading and (iii) the principal national securities
exchange or market, if any, on which the Warrants are listed or
admitted to trading are open for business.
<PAGE>
ELECTION TO EXERCISE
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise
_______________ of the Warrants represented by this Warrant
Certificate and purchase the whole number of Shares issuable upon
the exercise of such Warrants and herewith tenders payment for
such Shares in the amount of $_____in cash or by certified or
official bank check, in accordance with the terms hereof. The
undersigned requests that a certificate representing such Shares
be registered in the name of _________________, whose address is
_____________, and that such certificate be delivered to
____________, whose address is ____________________. Any cash
payments to be paid in lieu of a fractional Share should be made
to __________, whose address is _____________________, and the
check representing payment thereof should be delivered to
_______________, whose address is _______________________.
Name of holder of
Warrant Certificate: _________________________________
(Please Print)
Tax Identification or
Social Security Number: _____________________________
Signature: _________________________________________
Note: The above signature must
correspond with the name as written
upon the face of this Warrant
Certificate in every particular,
without alteration or enlargement
or any change whatever.
Dated ______________ , ___
<PAGE>
ASSIGNMENT
For value received, _________________________________ hereby
sells, assigns and transfers unto
_________________________________ the within Warrant Certificate,
together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint
_________________________________ attorney, to transfer said
Warrant Certificate on the books of the within-named Company,
with full power of substitution in the premises.
Dated _________________ , ____
Signature:_________________________________
Note: The above signature must
correspond with the name as written
upon the face of this Warrant
Certificate in every particular,
without alteration or enlargement
or any change whatever.
SCHEDULE OF EXCHANGES OF DEFINITIVE WARRANTS <FN 2>
The following exchanges of a part of this Global Warrant for
Definitive Warrants have been made:
<TABLE>
<S> <S> <S> <S> <S>
Number of
Warrants of
Amount of Amount of this Global Signature of
decrease in increase in Warrant authorized
Number of Number of following signatory of
Date of Warrants of this Warrants of this such decrease Warrant Agent
Exchange Global Warrant Global Warrant (or increase) or Depositary
- -------- ---------------- ---------------- ------------- -------------
</TABLE>
__________________
<F2> This is to be included only if the Warrant Certificate is
in global form.
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of XCL
Ltd.
This Certificate relates to _____ Warrants held in* _____
book-entry or *_____ certificated form by _________________ (the
"Transferor").
The Transferor:*
has requested the Warrant Agent by written order to
deliver in exchange for its beneficial interest in the Global
Warrant held by the Depositary a Warrant or Warrants in
definitive, registered form of authorized denominations and an
aggregate number equal to its beneficial interest in such Global
Warrant (or the portion thereof indicated above) or
has requested the Warrant Agent by written order to
exchange or register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such
Warrant, the Transferor does hereby certify that the Transferor
is familiar with the Warrant Agreement relating to the above
captioned Warrants and the restrictions on transfers thereof as
provided in Section 1.08 of such Warrant Agreement, and that the
transfer of this Warrant does not require registration under the
Securities Act of 1933, as amended (the "Act") because[*]:
Such Warrant is being acquired for the Transferor's
own account, without transfer (in satisfaction of Section
1.08(a)(ii)(y)(A) or Section 1.08(d)(i)(A) of the Warrant
Agreement).
Such Warrant is being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Act), in
reliance on Rule 144A or in accordance with Regulation S under
the Act.
Such Warrant is being transferred in accordance with
Rule 144 under the Act.
Such Warrant is being transferred in reliance on and
in compliance with an exemption from the registration
requirements of the Act, other than Rule 144A or Rule 144 or
Regulation S under the Act. An opinion of counsel to the effect
that such transfer does not require registration under the Act
accompanies this Certificate.
[INSERT NAME OF TRANSFEROR]
By:__________________________
Date: _________________
*Check applicable box.
<PAGE>
EXHIBIT C
Transferee Letter of Representation
XCL Ltd.
110 Rue Jean Lafitte
Lafayette, Louisiana 70508
Ladies and Gentlemen:
In connection with our proposed purchase of warrants
("Warrants") to purchase Common Stock, par value $0.01 per share
(the "Common Stock"; together with the Warrants, the
"Securities"), of XCL Ltd. (the "Company") we confirm that:
1. We understand that the Securities have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and, unless so registered, may not be
sold except as permitted in the following sentence. We
agree on our own behalf and on behalf of any investor
account for which we are purchasing Securities to offer,
sell or otherwise transfer such Securities prior to the date
which is two years after the later of the date of original
issue and the last date on which the Company or any
affiliate of the Company was the owner of such Securities,
or any predecessor thereto (the "Resale Restriction
Termination Date") only (a) to the Company, (b) pursuant to
a registration statement which has been declared effective
under the Securities Act, (c) so long as the Securities are
eligible for resale pursuant to Rule 144A, under the
Securities Act, to a person we reasonably believe is a
qualified institutional buyer under Rule 144A (a "QIB") that
purchases for its own account or for the account of a QIB
and to whom notice is given that the transfer is being made
in reliance on Rule 144A, (d) pursuant to offers and sales
that occur outside the United States within the meaning of
Regulation S under the Securities Act, (e) to an
institutional "accredited investor" within the meaning of
subparagraph (a)(l), (2), (3) or (7) of Rule 501 under the
Securities Act that is purchasing for his own account or for
the account of such an institutional "accredited investor,"
or (f) pursuant to any other available exemption from the
registration requirements of the Securities Act, subject in
each of the foregoing cases to any requirement of law that
the disposition of our property or the property of such
investor account or accounts be at all times within our or
their control and to compliance with any applicable state
securities laws. The foregoing restrictions on resale will
not apply subsequent to the Resale Restriction Termination
Date. If any resale or other transfer of the Securities is
proposed to be made pursuant to clause (e) above prior to
the Resale Restriction Termination Date, the transferor
shall deliver a letter from the transferee substantially in
the form of this letter to the warrant agent under the
Warrant Agreement pursuant to which the Securities were
issued (the "Warrant Agent") which shall provide, among
other things, that the transferee is an institutional
"accredited investor" within the meaning of subparagraph
(a)(l), (2), (3) or (7) of Rule 501 under the Securities Act
and that it is acquiring such Securities for investment
purposes and not for distribution in violation of the
Securities Act. The Warrant Agent and the Company reserve
the right prior to any offer, sale or other transfer prior
to the Resale Restriction Termination Date of the Securities
pursuant to clause (e) or (f) above to require the delivery
of a written opinion of counsel, certifications, and or
other information satisfactory to the Company and the
Warrant Agent.
2. We are an institutional "accredited investor"
(as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation
D under the Securities Act) purchasing for our own account
or for the account of such an institutional "accredited
investor," and we are acquiring the Securities for
investment purposes and not with a view to, or for offer or
sale in connection with, any distribution in violation of
the Securities Act and we have such knowledge and experience
in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the
Securities, and we and any accounts for which we are acting
are each able to bear the economic risk of our or its
investment for an indefinite period.
3. We are acquiring the Securities purchased by us
for our own account or for one or more accounts as to each
of which we exercise sole investment discretion.
4. You, the Warrant Agent and your respective
counsel are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or
legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
________________________
(Name of Purchaser)
By:____________________________
Date:__________________________
Upon transfer the Securities would be registered in the name
of the new beneficial owner as follows:
Name: _____________________________
Address: ___________________________
Taxpayer ID Number: ________________
WARRANT AGREEMENT
Dated as of May 20, 1997
Of
XCL LTD.
Warrants to Purchase Shares of Common Stock,
Par Value $0.01 Per Share
(Equity)
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I ISSUANCE, FORM, EXECUTION, DELIVERY ANDREGISTRATION OF
WARRANT CERTIFICATES
SECTION 1.01. Issuance of Warrants 1
SECTION 1.02. Form of Warrant Certificates 2
SECTION 1.03. Execution of Warrant Certificates 2
SECTION 1.04. Authentication and Delivery 2
SECTION 1.05. Temporary Warrant Certificates 3
SECTION 1.06. Separation of Warrants and Amended
Series A Preferred Stock 3
SECTION 1.07. Registration 4
SECTION 1.08. Registration of Transfers and Exchanges 4
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or
Mutilated Warrant Certificates 10
SECTION 1.10. Offices for Exercise, etc. 11
ARTICLE II DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE
SECTION 2.01. Duration of Warrants 11
SECTION 2.02. Exercise, Exercise Price, Settlement
and Delivery 12
SECTION 2.03. Cancellation of Warrant Certificates 13
ARTICLE III OTHER PROVISIONS RELATING TORIGHTS OF HOLDERS OF
WARRANTS
SECTION 3.01. Enforcement of Rights 14
SECTION 3.02. Put Right 14
ARTICLE IV CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Taxes 15
SECTION 4.02. Notice of Expiration Date 15
SECTION 4.03. Notice Respecting Put 15
ARTICLE V ADJUSTMENTS
SECTION 5.01. Adjustment of Exercise Price and Number
of Shares Issuable 15
SECTION 5.02. Fractional Interest 22
SECTION 5.03. When Adjustment Not Required 23
SECTION 5.04. Challenge to Good Faith Determination 23
SECTION 5.05. Treasury Stock 23
SECTION 5.06. Notices to Warrant Holders 23
ARTICLE VI CONCERNING THE WARRANT AGENT
SECTION 6.01. Warrant Agent 24
SECTION 6.02. Conditions of Warrant Agent's
Obligations 24
SECTION 6.03. Resignation and Appointment of Successor 28
ARTICLE VII MISCELLANEOUS
SECTION 7.01. Amendment 29
SECTION 7.02. Notices and Demands to the Company and
Warrant Agent 30
SECTION 7.03. Address for Notices to the Company
and for Transmission of Documents 30
SECTION 7.04. Notices to Holders 31
SECTION 7.05. APPLICABLE LAW 31
SECTION 7.06. Obtaining of Governmental Approvals 31
SECTION 7.07. Persons Having Rights Under Agreement 31
SECTION 7.08. Headings 31
SECTION 7.09. Counterparts 31
SECTION 7.10. Inspection of Agreement 32
EXHIBIT A - Form of Warrant Certificate
EXHIBIT B - Certificate to be Delivered Upon
Exchange or Registration of
Transfer of Warrants
EXHIBIT C - Transferee Letter of Representation
<PAGE>
WARRANT AGREEMENT
THIS WARRANT AGREEMENT ("Agreement"), dated as of May 20,
1997 is executed and delivered by XCL Ltd., a Delaware
corporation (together with any successor thereto, the "Company"),
for the benefit of the holders from time to time of the Warrant
Certificates (as hereinafter defined).
WHEREAS, the Company has entered into a purchase agreement
dated May 13, 1997 (the "Purchase Agreement") with Jefferies &
Company, Inc. (the "Initial Purchaser") in which the Company has
agreed, among other things, to sell to the Initial Purchaser
294,118 units (the "Units") consisting in the aggregate of (i)
294,118 shares of Amended Series A, Cumulative Convertible
Preferred Stock, par value $1.00 per share (the "Amended Series A
Preferred Stock"), of the Company and (ii) 294,118 warrants to
purchase an aggregate of 96,176,586 shares of common stock, $0.01
par value per share (the "Common Stock"), of the Company (the
"Warrants") and the certificates evidencing the Warrants being
hereinafter referred to as "Warrant Certificates"), in each case
subject to adjustment in accordance with the terms hereof; and
WHEREAS, the Warrants and the Amended Series A Preferred
Stock comprising part of the Units shall be separately
transferable on the Separability Date (as hereinafter defined);
and
WHEREAS, the Company initially shall act as its own warrant
agent (together with any successor warrant agent, the "Warrant
Agent") in connection with the issuance, exchange, cancellation,
replacement and exercise of the Warrants, and the Company wishes
to set forth in this Agreement, among other things, the terms and
conditions on which the Warrants may be issued, exchanged,
canceled, replaced and exercised;
NOW, THEREFORE, in consideration of the purchase of the
Units by the Initial Purchaser, the Company executes and delivers
this Agreement for the benefit of the holders from time to time
of the Warrant Certificates.
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
SECTION 1.01. Issuance of Warrants. Each Warrant
Certificate shall evidence the number of Warrants specified
therein, and each Warrant evidenced thereby shall represent the
right, subject to the provisions contained herein and therein, to
purchase from the Company (and the Company shall issue and sell
to such holder of the Warrant) 327 fully paid and non-assessable
shares of the Company's Common Stock (the shares of Common Stock
purchasable upon exercise of a Warrant being hereinafter referred
to as the "Shares" and, where appropriate, such term shall also
mean the other securities or property purchasable and deliverable
upon exercise of a Warrant as provided in Article V) at the price
specified herein and therein, in each case subject to adjustment
as provided herein and therein.
SECTION 1.02. Form of Warrant Certificates. The Warrant
Certificates will initially be issued either in global form (the
"Global Warrants"), substantially in the form of Exhibit A hereto
(including footnote 1 thereto), or in registered form as
definitive Warrant certificates (the "Definitive Warrants"). The
Warrant Certificates evidencing the Global Warrants or the
Definitive Warrants to be delivered pursuant to this Agreement
shall be substantially in the form set forth in Exhibit A
attached hereto. Such Global Warrants shall represent such of
the outstanding Warrants as shall be specified therein and each
shall provide that it shall represent the aggregate amount of
outstanding Warrants from time to time endorsed thereon and that
the aggregate amount of outstanding Warrants represented thereby
may from time to time be reduced or increased, as appropriate.
Any endorsement of a Global Warrant to reflect the amount of any
increase or decrease in the amount of outstanding Warrants
represented thereby shall be made by the Warrant Agent and
Depositary (as defined below) in accordance with instructions
given by the holder thereof. The Depository Trust Company shall
act as the depositary with respect to the Global Warrants (the
"Depositary") until a successor shall be appointed by the
Company. Upon written request, a Warrant holder may receive from
the Warrant Agent Definitive Warrants as set forth in Section
1.08 hereof.
SECTION 1.03. Execution of Warrant Certificates. The
Warrant Certificates shall be executed on behalf of the Company
by the chairman of its Board of Directors, its president or any
vice president and attested by its secretary or assistant
secretary, under its corporate seal. Such signatures may be the
manual or facsimile signatures of the present or any future such
officers. The seal of the Company may be in the form of a
facsimile hereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Warrant Certificates. Typographical
and other minor errors or defects in any such reproduction of the
seal or any such signature shall not affect the validity or
enforceability of any Warrant Certificate that has been duly
countersigned and delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any
of the Warrant Certificates shall cease to be such officer before
the Warrant Certificate so signed shall be countersigned and
delivered by the Warrant Agent or disposed of by the Company,
such Warrant Certificate nevertheless may be countersigned and
delivered or disposed of as though the person who signed such
Warrant Certificate had not ceased to be such officer of the
Company; and any Warrant Certificate may be signed on behalf of
the Company by such persons as, at the actual date of the
execution of such Warrant Certificate, shall be the proper
officers of the Company, although at the date of the execution
and delivery of this Agreement any such person was not such an
officer.
SECTION 1.04. Authentication and Delivery. Subject to
the immediately following paragraph, Warrant Certificates shall
be authenticated by manual signature and dated the date of
authentication by the Warrant Agent and shall not be valid for
any purpose unless so authenticated and dated. The Warrant
Certificates shall be numbered and shall be registered in the
Warrant Register (as defined in Section 1.07 hereof).
Upon the receipt by the Warrant Agent of a written order of
the Company, which order shall be signed by the chairman of its
Board of Directors, its president or any vice president and
attested by its secretary or assistant secretary, and shall
specify the amount of Warrants to be authenticated, whether the
Warrants are to be Global Warrants or Definitive Warrants, the
date of such Warrants and such other information as the Warrant
Agent may reasonably request, without any further action by the
Company, the Warrant Agent is authorized, upon receipt from the
Company at any time and from time to time of the Warrant
Certificates, duly executed as provided in Section 1.03 hereof,
to authenticate the Warrant Certificates and deliver them. Such
authentication shall be by a duly authorized signatory of the
Warrant Agent (although it shall not be necessary for the same
signatory to sign all Warrant Certificates).
In case any authorized signatory of the Warrant Agent who
shall have authenticated any of the Warrant Certificates shall
cease to be such authorized signatory before the Warrant
Certificate shall be disposed of by the Company, such Warrant
Certificate nevertheless may be delivered or disposed of as
though the person who authenticated such Warrant Certificate had
not ceased to be such authorized signatory of the Warrant Agent;
and any Warrant Certificate may be authenticated on behalf of the
Warrant Agent by such persons as, at the actual time of
authentication of such Warrant Certificates, shall be the duly
authorized signatories of the Warrant Agent, although at the time
of the execution and delivery of this Agreement any such person
is not such an authorized signatory.
The Warrant Agent's authentication on all Warrant
Certificates shall be in substantially the form set forth in
Exhibit A hereto.
SECTION 1.05. Temporary Warrant Certificates. Pending
the preparation of definitive Warrant Certificates, the Company
may execute, and the Warrant Agent shall authenticate and
deliver, temporary Warrant Certificates, which are printed,
lithographed, typewritten or otherwise produced, substantially of
the tenor of the definitive Warrant Certificates in lieu of which
they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such
Warrant Certificates may determine, as evidenced by their
execution of such Warrant Certificates.
If temporary Warrant Certificates are issued, the Company
will cause definitive Warrant Certificates to be prepared without
unreasonable delay. After the preparation of definitive Warrant
Certificates, the temporary Warrant Certificates shall be
exchangeable for definitive Warrant Certificates upon surrender
of the temporary Warrant Certificates at any office or agency
maintained by the Company for that purpose pursuant to Section
1.10 hereof. Subject to the provisions of Section 4.01 hereof,
such exchange shall be without charge to the holder. Upon
surrender for cancellation of any one or more temporary Warrant
Certificates, the Company shall execute, and the Warrant Agent
shall authenticate and deliver in exchange therefor, one or more
definitive Warrant Certificates representing in the aggregate a
like number of Warrants. Until so exchanged, the holder of a
temporary Warrant Certificate shall in all respects be entitled
to the same benefits under this Agreement as a holder of a
definitive Warrant Certificate.
SECTION 1.06. Separation of Warrants and Amended Series
A Preferred Stock. The Amended Series A Preferred Stock and
Warrant will not be separately transferable until the date (the
"Separability Date") which is the earlier of (i) 150 days from
the Issue Date (as defined in Section 1.08(a)(ii)(y) hereof) and
(ii) such date as the Initial Purchaser may, in its discretion,
deem appropriate.
SECTION 1.07. Registration. The Company will keep, at
the office or agency maintained by the Company for such purpose,
a register or registers in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for
the registration of, and registration of transfer and exchange
of, Warrants as provided in this Article. Each person designated
by the Company from time to time as a person authorized to
register the transfer and exchange of the Warrants is hereinafter
called, individually and collectively, the "Registrar".
Initially, the Company shall act as Registrar. Upon written
notice to the Warrant Agent and any acting Registrar, the Company
may appoint a successor Registrar for such purposes.
The Company will at all times designate one person (who may
be the Company and who need not be a Registrar) to act as
repository of a master list of names and addresses of the holders
of Warrants (the "Warrant Register"). The Company will act as
such repository unless and until some other person is, by written
notice from the Company to the Warrant Agent and the Registrar,
designated by the Company to act as such. The Company shall
cause each Registrar to furnish to such repository, on a current
basis, such information as to all registrations of transfer and
exchanges effected by such Registrar, as may be necessary to
enable such repository to maintain the Warrant Register on as
current a basis as is practicable.
SECTION 1.08. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Definitive Warrants.
When Definitive Warrants are presented to the Warrant Agent with
a request:
(i) to register the transfer of the Definitive
Warrants; or
(ii) to exchange such Definitive Warrants for an
equal number of Definitive Warrants, the
Warrant Agent shall register the transfer or
make the exchange as requested if the
requirements under this Warrant Agreement as
set forth in this Section 1.08 for such
transactions are met; provided, however, that
the Definitive Warrants presented or
surrendered for registration of transfer or
exchange:
(x) shall be duly endorsed or accompanied by
a written instruction of transfer in
form satisfactory to the Company and the
Warrant Agent, duly executed by the
holder thereof or by its attorney, duly
authorized in writing; and
(y) in the case of Warrants the offer and
sale of which has not been registered
under the Securities Act of 1933, as
amended, (the "Securities Act"), and are
presented for transfer or exchange prior
to (x) the date which is two years after
the later of the date of original issue
(the "Issue Date") and the last date on
which the Company or any affiliate of
the Company was the owner of such
Warrant, or any predecessor thereto and
(y) such later date, if any, as may be
required by any subsequent change in
applicable law (the "Resale Restriction
Termination Date"), such Warrants shall
be accompanied, in the sole discretion
of the Company, by the following
additional information and documents, as
applicable:
(A) if such Warrant is being delivered
to the Warrant Agent by a holder
for registration in the name of
such holder, without transfer, a
certification from such holder to
that effect (in substantially the
form of Exhibit B hereto); or
(B) if such Warrant is being
transferred to a qualified
institutional buyer (as defined in
Rule 144A under the Securities Act)
in accordance with Rule 144A under
the Securities Act or pursuant to
an exemption from registration in
accordance with Rule 144 or
Regulation S under the Securities
Act, a certification to that effect
(in substantially the form of
Exhibit B hereto); or
(C) if such Warrant is being
transferred to an institutional
"accredited investor" within the
meaning of subparagraph (a)(l),
(a)(2), (a)(3) or (a)(7) of Rule
501 under the Securities Act,
delivery of a certification to that
effect (in substantially the form
of Exhibit B hereto) and a letter
of representation from the
transferee in substantially the
form of Exhibit C hereto; or
(D) if such Warrant is being
transferred in reliance on another
exemption from the registration
requirements of the Securities Act,
a certification to that effect (in
substantially the form of Exhibit B
hereto) and an opinion of counsel
reasonably acceptable to the
Company to the effect that such
transfer is in compliance with the
Securities Act.
(b) Restrictions on Transfer of a Definitive
Warrant for a Beneficial Interest in a Global Warrant. A
Definitive Warrant may not be transferred for a beneficial
interest in a Global Warrant except upon satisfaction of the
requirements set forth below. Upon receipt by the Warrant Agent
of a Definitive Warrant, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the
Warrant Agent, together with:
(A) certification, substantially in
the form of Exhibit B hereto, that such
Definitive Warrant is being transferred to a
"qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in
accordance with Rule 144A under the
Securities Act; and
(B) written instructions directing
the Warrant Agent to make, or to direct the
Depositary to make, an endorsement on the
Global Warrant to reflect an increase in the
aggregate amount of the Warrants represented
by the Global Warrant
then the Warrant Agent shall cancel such Definitive Warrant and
cause, or direct the Depositary to cause, in accordance with the
standing instructions and procedures existing between the
Depositary and the Warrant Agent, the number of Warrants
represented by the Global Warrant to be increased accordingly.
If no Global Warrant is then outstanding, the Company shall issue
and the Warrant Agent shall authenticate a new Global Warrant in
the appropriate amount.
(c) Transfer and Exchange of Global Warrants. The
transfer and exchange of Global Warrants or beneficial interests
therein shall be effected through the Depositary, in accordance
with this Section 1.08 and the procedures of the Depositary
therefor.
(d) Transfer of a Beneficial Interest in a Global
Warrant for a Definitive Warrant.
(i) Any person having a beneficial interest in a
Global Warrant may upon request transfer such
beneficial interest for a Definitive Warrant.
Upon receipt by the Warrant Agent of written
instructions or such other form of
instructions as is customary for the
Depositary from the Depositary or its nominee
on behalf of any person having a beneficial
interest in a Global Warrant and upon receipt
by the Warrant Agent of a written order or
such other form of instructions as is
customary for the Depositary or the person
designated by the Depositary as having such a
beneficial interest containing registration
instructions and, in the case of any such
transfer or exchange prior to the Resale
Restriction Termination Date, the following
additional information and documents:
(A) if such beneficial interest is being
transferred to the person designated by
the Depositary as being the beneficial
owner, a certification from such person
to that effect (in substantially the
form of Exhibit B hereto); or
(B) if such beneficial interest is being
transferred to a qualified institutional
buyer (as defined in Rule 144A under the
Securities Act) in accordance with Rule
144A under the Securities Act or
pursuant to an exemption from
registration in accordance with Rule 144
or Regulation S under the Securities
Act, a certification to that effect from
the transferee or transferor (in
substantially the form of Exhibit B
hereto); or
(C) if such beneficial interest is being
transferred to an institutional
"accredited investor" within the meaning
of subparagraph (a)(l), (a)(2), (a)(3)
or (a)(7) of Rule 501 under the
Securities Act, delivery of a
certification to that effect (in
substantially the form of Exhibit B
hereto), a letter of representation from
the transferee in substantially the form
of Exhibit C hereto and an opinion of
counsel reasonably acceptable to the
Company to the effect that such transfer
is in compliance with the Securities
Act; or
(D) if such beneficial interest is being
transferred in reliance on another
exemption from the registration
requirements of the Securities Act, a
certification to that effect (in
substantially the form of Exhibit B
hereto) and an opinion of counsel
reasonably acceptable to the Company to
the effect that such transfer is in
compliance with the Securities Act
then the aggregate amount of the Global Warrant
will be reduced by the Depositary or its custodian
and, following such reduction, the Company will
execute and, upon receipt of an authentication
order in the form of an Officers' Certificate (as
defined), the Warrant Agent will authenticate and
deliver to the transferee a Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a
beneficial interest in a Global Warrant
pursuant to this Section 1.08(d) shall be
registered in such names and in such
authorized denominations as the Depositary,
pursuant to instructions from its direct or
indirect participants or otherwise, shall
instruct the Warrant Agent in writing. The
Warrant Agent shall deliver such Definitive
Warrants to the persons in whose names such
Warrants are so registered.
(e) Restrictions on Transfer and Exchange of Global
Warrants. Notwithstanding any other provisions of this Warrant
Agreement (other than the provisions set forth in subsection (f)
of this Section 1.08), a Global Warrant may not be transferred as
a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such
nominee to a successor Depositary or a nominee of such successor
Depositary.
(f) Authentication of Definitive Warrants in
Absence of Depositary. If at any time:
(i) the Depositary for the Warrants notifies the
Company that the Depositary is unwilling or
unable to continue as Depositary for the
Global Warrant and a successor Depositary for
the Global Warrant is not appointed by the
Company within 90 days after delivery of such
notice or
(ii) the Company, at its sole discretion, notifies
the Warrant Agent in writing that it elects
to cause the issuance of Definitive Warrants
under this Warrant Agreement,
then the Company will execute, and the Warrant Agent, upon
receipt of an officers' certificate signed by two officers of the
Company (one of whom must be the principal executive officer,
principal financial officer or principal accounting officer) (an
"Officers' Certificate") requesting the authentication and
delivery of Definitive Warrants, will authenticate and deliver
Definitive Warrants, in an aggregate number equal to the
aggregate number of warrants represented by the Global Warrant,
in exchange for such Global Warrant.
(g) Legends.
(i) Except to the extent permitted by the
following paragraph (ii), each Warrant
Certificate evidencing the Global Warrants
and the Definitive Warrants (and all Warrants
issued in exchange therefor or substitution
thereof) shall bear a legend substantially to
the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT" )
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 903 OR 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT
WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO XCL LTD. (THE "COMPANY") OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A
U.S. BROKER-DEALER) TO THE COMPANY AND THE WARRANT AGENT A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT
WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY, IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE WARRANT AGENT AND THE COMPANY SUCH
CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER INFORMATION
AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION, "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT
DATED AS OF MAY 20, 1997 BETWEEN THE COMPANY AND JEFFERIES &
COMPANY, INC., A COPY OF WHICH IS ON FILE WITH THE SECRETARY
OF THE COMPANY.
To the extent a Warrant Certificate evidences a Global
Warrant, such Warrant Certificate shall also bear the
legend with respect thereto substantially in the form
set forth on Exhibit A hereto.
(ii) Upon any sale or transfer of a Warrant
pursuant to Rule 144 under the Securities Act
in accordance with this Section 1.08 or an
effective registration statement under the
Securities Act:
(A) in the case of any Warrant that is a
Definitive Warrant, the Warrant Agent shall
permit the holder thereof to exchange such
Warrant for a Definitive Warrant that does
not bear the first paragraph of the legend
set forth above and rescind any related
restriction on the transfer of such Warrant;
and
(B) any such Warrant represented by a Global
Warrant shall not be subject to the
provisions set forth in (i) above (such sales
or transfers being subject only to the
provisions of Section 1.08(c) hereof);
provided, however, that with respect to any
request for an exchange of a Warrant that is
represented by a Global Warrant for a
Definitive Warrant that does not bear the
first paragraph of the legend set forth
above, which request is made in reliance upon
Rule 144 under the Securities Act, the holder
thereof shall certify in writing to the
Warrant Agent that such request is being made
pursuant to Rule 144 under the Securities Act
(such certification to be substantially in
the form of Exhibit B hereto).
(h) Cancellation and/or Adjustment of a Global
Warrant. At such time as all beneficial interests in a Global
Warrant have either been exchanged for Definitive Warrants,
redeemed, repurchased or canceled, such Global Warrant shall be
returned to or retained and canceled by the Warrant Agent. At
any time prior to such cancellation, if any beneficial interest
in a Global Warrant is exchanged for Definitive Warrants,
redeemed, repurchased or canceled, the number of Warrants
represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant by the Warrant
Agent or the Depositary to reflect such reduction.
(i) Obligations with Respect to Transfers and
Exchanges of Definitive Warrants.
(i) To permit registrations of transfers and
exchanges, the Company shall execute, at the
Warrant Agent's request, and the Warrant
Agent shall authenticate Definitive Warrants
and Global Warrants.
(ii) All Definitive Warrants and Global Warrants
issued upon any registration of transfer or
exchange of Definitive Warrants or Global
Warrants shall be the valid obligations of
the Company, entitled to the same benefits
under this Warrant Agreement as the
Definitive Warrants or Global Warrants
surrendered upon the registration of transfer
or exchange.
(iii) Prior to due presentment for registration of
transfer of any Warrant, the Warrant Agent
and the Company may deem and treat the person
in whose name any Warrant is registered as
the absolute owner of such Warrant, and
neither the Warrant Agent nor the Company
shall be affected by notice to the contrary.
(j) Payment of Taxes. The Company or the Warrant
Agent may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with
any exchange or transfer pursuant to this Section 1.08.
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or
Mutilated Warrant Certificates. Upon receipt by the Company and
the Warrant Agent (or any agent of the Company or the Warrant
Agent, if requested by the Company) of evidence satisfactory to
them of the loss, theft, destruction, defacement, or mutilation
of any Warrant Certificate and of indemnity reasonably
satisfactory to them and, in the case of mutilation or
defacement, upon surrender thereof to the Warrant Agent for
cancellation, then, in the absence of notice to the Company or
the Warrant Agent that such Warrant Certificate has been acquired
by a bona fide purchaser or holder in due course, the Company
shall execute, and an authorized signatory of the Warrant Agent
shall manually authenticate and deliver, in exchange for or in
lieu of the lost, stolen, destroyed, defaced or mutilated Warrant
Certificate, a new Warrant Certificate representing a like number
of Warrants, bearing a number or other distinguishing symbol not
contemporaneously outstanding. Upon the issuance of any new
Warrant Certificate under this Section, the Company may require
the payment from the holder of such Warrant Certificate of a sum
sufficient to cover any tax, stamp tax or other governmental
charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Warrant Agent
and the Registrar) in connection therewith. Every substitute
Warrant Certificate executed and delivered pursuant to this
Section in lieu of any lost, stolen or destroyed Warrant
Certificate shall constitute an additional contractual obligation
of the Company, whether or not the lost, stolen or destroyed
Warrant Certificate shall be at any time enforceable by anyone,
and shall be entitled to the benefits of (but shall be subject to
all the limitations of rights set forth in) this Agreement
equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder. The
provisions of this Section 1.09 are exclusive with respect to the
replacement of lost, stolen, destroyed, defaced or mutilated
Warrant Certificates and shall preclude (to the extent lawful)
any and all other rights or remedies notwithstanding any law or
statute existing or hereafter enacted to the contrary with
respect to the replacement of lost, stolen, destroyed, defaced or
mutilated Warrant Certificates.
The Warrant Agent is hereby authorized to authenticate and
deliver the new Warrant Certificates required pursuant to the
provisions of this Section.
SECTION 1.10. Offices for Exercise, etc. So long as any
of the Warrants remain outstanding, the Company will designate
and maintain in the continental United States: (a) an office or
agency where the Warrant Certificates may be presented for
exercise, (b) an office or agency where the Warrant Certificates
may be presented for registration of transfer and for exchange
(including the exchange of temporary Warrant Certificates for
definitive Warrant Certificates pursuant to Section 1.05 hereof),
and (c) an office or agency where notices and demands to or upon
the Company in respect of the Warrants or of this Agreement may
be served. The Company may from time to time change or rescind
such designation, as it may deem desirable or expedient. The
Company will give to the Warrant Agent written notice of the
location of any such office or agency and of any change of
location thereof. The Company hereby designates its principal
executive offices in Lafayette, Louisiana (the "Warrant Agent
Office"), as the initial agency maintained for each such purpose.
ARTICLE II
DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE
SECTION 2.01. Duration of Warrants. Subject to the
terms and conditions established herein, the Warrants shall
expire at 5:00 p.m., New York City time, on May 20, 2004 (the
"Expiration Date"). Each Warrant may be exercised on any
Business Day (as defined below) on or after the Exercisability
Date (as defined below) and on or prior to the Expiration Date.
Any Warrant not exercised before the close of business on
the Expiration Date relating to such Warrant shall become void,
and all rights of the holder under the Warrant Certificate
evidencing such Warrant and under this Agreement shall cease.
"Business Day" shall mean any day on which (i) banks in New
York City or the City of Lafayette, Louisiana, (ii) the
principal national securities exchange or market on which the
Common Stock is listed or admitted to trading and (iii) the
principal national securities exchange or market, if any, on
which the Warrants are listed or admitted to trading are open for
business.
SECTION 2.02. Exercise, Exercise Price, Settlement and
Delivery. (a) Subject to the provisions of this Agreement, a
holder of Warrants shall have the right to purchase from the
Company on or after the later of May 20, 1998, or such date on
which the Company has reserved or has available a sufficient
number of shares of its Common Stock to permit exercise of all
outstanding Warrants (the "Exercisability Date") and on or prior
to the Expiration Date 327 fully paid and non-assessable Shares
per each Warrant such holder owns, subject to adjustment in
accordance with Article V hereof, at the initial purchase price
of $0.2063 for each Share purchased subject to adjustment in
accordance with Article V hereof (the "Exercise Price").
(b) Warrants may be exercised on or after the
Exercisability Date by (i) surrendering at any Warrant Agent
Office the Warrant Certificate evidencing such Warrants with the
form of election to purchase Shares set forth on the reverse side
of the Warrant Certificate (the "Election to Exercise") duly
completed and signed by the registered holder or holders thereof
or by the duly appointed legal representative thereof or by a
duly authorized attorney, and (ii) paying in full the Exercise
Price for each such Share purchased and any other amounts
required to be paid pursuant to Section 4.01 hereof.
(c) Simultaneously with the exercise of each
Warrant, payment in full of the Exercise Price shall be made in
cash or by certified or official bank check payable to the order
of the Company, delivered to the office or agency where the
Warrant Certificate is being surrendered. No payment or
adjustment shall be made on account of any dividends on the
Shares issued upon exercise of a Warrant.
(d) Upon such surrender of a Warrant Certificate
and payment and collection of the Exercise Price at any Warrant
Agent Office (other than any Warrant Agent Office that also is an
office of the Warrant Agent), such Warrant Certificate and
payment shall be promptly delivered to the Warrant Agent. The
"Exercise Date" for a Warrant shall be the date when all of the
items referred to in the first sentence of paragraphs (b) and (c)
of this Section 2.02 are received by the Warrant Agent at or
prior to 2:00 p.m., New York City time, on a Business Day and the
exercise of the Warrants will be effective as of such Exercise
Date. If any items referred to in the first sentence of
paragraphs (b) and (c) are received after 2:00 p.m., New York
City time, on a Business Day, the exercise of the Warrants to
which such item relates will be effective on the next succeeding
Business Day. Notwithstanding the foregoing, in the case of an
exercise of Warrants on the Expiration Date (as defined in
Section 2.01), if all of the items referred to in the first
sentence of paragraphs (b) and (c) are received by the Warrant
Agent at or prior to 5:00 p.m., New York City time, on such
Expiration Date, the exercise of the Warrants to which such items
relate will be effective on the Expiration Date.
(e) Upon the exercise of a Warrant in accordance
with the terms hereof, the receipt of a Warrant Certificate and
payment of the Exercise Price, the Warrant Agent shall:
(i) cause an amount equal to the Exercise Price to be paid to the
Company by crediting the same to the account designated by the
Company in writing to the Warrant Agent for that purpose; (ii)
advise the Company immediately by telephone of the amount so
deposited to the Company's account and promptly confirm such
telephonic advice in writing; and (iii) as soon as practicable,
advise the Company in writing of the number of Warrants (giving
effect to Section 5.01(o) below) exercised in accordance with the
terms and conditions of this Agreement and the Warrant
Certificates, the instructions of each exercising holder of the
Warrant Certificates with respect to delivery of the Shares to
which such holder is entitled upon such exercise, and such other
information as the Company shall reasonably request.
(f) Subject to Section 5.02 hereof, as soon as
practicable after the exercise of any Warrant or Warrants in
accordance with the terms hereof, the Company shall issue or
cause to be issued to or upon the written order of the registered
holder of the Warrant Certificate evidencing such exercised
Warrant or Warrants, a certificate or certificates evidencing the
Shares to which such holder is entitled, in fully registered
form, registered in such name or names as may be directed by such
holder pursuant to the Election to Exercise, as set forth on the
reverse of the Warrant Certificate. The Warrant Agent shall have
no obligation to ascertain the number of Shares to be issued with
respect to the exercised Warrant or Warrants. Such certificate
or certificates evidencing the Shares shall be deemed to have
been issued and any persons who are designated to be named
therein shall be deemed to have become the holder of record of
such Shares as of the close of business on the Exercise Date.
After such exercise of any Warrant or Warrants, the Company shall
also issue or cause to be issued to or upon the written order of
the registered holder of such Warrant Certificate, a new Warrant
Certificate, countersigned by the Warrant Agent pursuant to the
Company's written instruction, evidencing the number of Warrants,
if any, remaining unexercised unless such Warrants shall have
expired.
(g) If during the first year after issuance of the
Units, the Current Market Price of the Common Stock fails to
exceed the Exercise Price for at least 20 trading days within any
30 consecutive trading days, then the Exercise Price shall be
reduced to 75% of the prevailing Exercise Price, effective as of
the first anniversary of the Issue Date. For purposes of this
adjustment provision, the term "Issue Date" means the date of
original issuance of the Units and 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 National Market Tier of the Nasdaq Stock Market ("Nasdaq
NMS") or, if the Common Stock is not quoted or admitted to
trading on such quotations 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
Company for that purpose or, if not so available in such manner,
as otherwise determined in good faith by the Board of Directors
of the Company, which determination shall be conclusive.
SECTION 2.03. Cancellation of Warrant Certificates. In
the event the Company shall purchase or otherwise acquire
Warrants, the Warrant Certificates evidencing such Warrants may
thereupon be delivered to the Warrant Agent, and if so delivered,
shall be canceled by it and retired. The Warrant Agent shall
cancel all Warrant Certificates properly surrendered for
exchange, substitution, transfer or exercise. The Warrant Agent
shall destroy canceled Warrant Certificates held by it and
deliver a certificate of destruction to the Company. The Warrant
Agent shall account promptly to the Company with respect to
Warrants exercised and concurrently pay to the Company all money
received by the Warrant Agent for the purchase of Warrant Shares
through the exercise of such Warrants.
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
SECTION 3.01. Enforcement of Rights. (a)
Notwithstanding any of the other provisions of this Agreement,
any holder of any Warrant Certificate, without the consent of the
Warrant Agent, the holder of any Shares or the holder of any
other Warrant Certificate, may, in and for its own behalf,
enforce, and may institute and maintain any suit, action or
proceeding against the Company suitable to enforce, its right to
exercise the Warrant or Warrants evidenced by its Warrant
Certificate as provided in such Warrant Certificate and in this
Agreement.
(b) Neither the Warrants nor any Warrant
Certificate shall entitle the holders thereof to any of the
rights of a holder of Shares, including, without limitation, the
right to vote or to receive any dividends or other payments or to
consent or to receive notice as stockholders in respect of the
meetings of stockholders or for the election of directors of the
Company or to share in the assets of the Company in the event of
the liquidation, dissolution or winding up of the Company's
affairs or any other matter, or any rights whatsoever as
stockholders of the Company.
SECTION 3.02. Put Right. (a) Any holder of a Warrant
Certificate will have the right to require the Company to
purchase on March 2, 1998, one share of Amended Series A
Preferred Stock for each Warrant such person owns of record, at a
price equal to $85.00 per share plus accrued and unpaid dividends
to the purchase date, if MOFTEC fails to approve the Overall
Development Plan (as such terms are defined in the Final
Memorandum referred to in the Purchase Agreement) on or before
February 1, 1998. In order to exercise such an election, a
holder must deliver to the Company, at its executive offices in
Lafayette, Louisiana, certificates representing the shares of
Amended Series A Preferred Stock as to which an election is being
made, together with a duly signed and completed notice to
election to have such shares purchased by the Company. Such
shares and such notice of exercise of a put right must be
delivered to the Company no later than February 16, 1998.
(b) Once made, the exercise of a put right by a
holder of a Warrant Certificate will be irrevocable. Such put
right may be exercised with respect to no more shares of Amended
Series A Preferred Stock owned of record by the Warrant
Certificate holder than the number of Warrants such holder owns
of record.
(c) All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any
shares of Amended Series A Preferred Stock for purchase will be
determined by the Company, whose determination will be final and
binding.
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Taxes. The Company will pay
all documentary stamp taxes attributable to the initial issuance
of Warrants and of the Shares upon the exercise of Warrants or to
the separation of the Warrants and the Amended Series A Preferred
Stock on the Separability Date; provided, however, that the
Company shall not be required to pay any tax or other
governmental charge which may be payable in respect of any
transfer involved in the issue of any Warrant Certificates or any
certificates for Shares in a name other than the registered
holder of a Warrant Certificate surrendered upon the exercise of
a Warrant. In any such case, the Company shall not be required
to issue or deliver such Warrant Certificate or certificate for
Shares unless or until the person or persons requesting issuance
thereof shall have paid to the Company the amount of such tax or
other governmental charge or shall have established to the
satisfaction of the Company that such tax or other governmental
charge has been paid or an exemption is available therefrom.
SECTION 4.02. Notice of Expiration Date. The Company
will give notice of the Expiration Date to all holders of the
then outstanding Warrants, not less than 90 nor more than 120
days prior to the Expiration Date.
SECTION 4.03. Notice Respecting Put Right. The Company
will give notice to all holders of the then outstanding Warrants,
as soon as practicable after February 1, 1998, if MOFTEC has not
then approved the Overall Development Plan.
ARTICLE V
ADJUSTMENTS
SECTION 5.01. Adjustment of Exercise Price and Number of
Shares Issuable. The number and kind of Shares purchasable upon
the exercise of each Warrant and the Exercise Price shall be
subject to adjustment from time to time as follows:
(a) Stock Splits, Combinations, etc. In case the
Company shall hereafter (A) pay a dividend or make a
distribution on its Common Stock in shares of its capital
stock (whether shares of Common Stock or of capital stock of
any other class), (B) subdivide its outstanding shares of
Common Stock or (C) combine its outstanding shares of Common
Stock into a smaller number of shares, the (a) number of
Shares purchasable upon exercise of each Warrant immediately
prior thereto shall be adjusted so that the holder of any
Warrant thereafter exercised shall be entitled to receive
the number of Shares which such holder would have owned
immediately following such action had such Warrant been
exercised immediately prior thereto, and (b) the Exercise
Price shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, of which
the numerator shall be the number of Shares purchasable upon
the exercise of each Warrant immediately prior to such
adjustment, and of which the denominator shall be the number
of Shares purchasable immediately thereafter. An adjustment
made pursuant to this paragraph shall become effective
immediately after the record date in the case of a dividend
and shall become effective immediately after the effective
date in the case of a subdivision, combination or
reclassification. If, as a result of an adjustment made
pursuant to this paragraph, the holder of any Warrant
thereafter exercised shall become entitled to receive shares
of two or more classes of capital stock of the Company, the
Board of Directors of the Company (whose determination shall
be conclusive) shall determine the allocation of the
adjusted Exercise Price between or among shares of such
classes of capital stock.
(b) Reclassification, Combinations, Mergers, etc.
In case of any reclassification or change of outstanding
shares of Common Stock (other than as set forth in paragraph
(a) above and other than a change in par value, or from par
value to no par value, or from no par value to par value),
or in case of any consolidation or merger of the Company
with or into another corporation or other entity (other than
a merger in which the Company is the continuing corporation
and which does not result in any reclassification or change
of the then outstanding shares of Common Stock or other
capital stock of the Company (other than a change in par
value, or from par value to no par value, or from par value
to par value or as a result of a subdivision or
combination)) or in case of any sale or conveyance to
another corporation or other entity of all or substantially
all of the assets of the Company, then, as a condition of
such reclassification, change, consolidation, merger, sale
or conveyance, the Company or such a successor or purchasing
corporation or other entity, as the case may be, shall
forthwith make lawful and adequate provision whereby the
holder of such Warrant then outstanding shall have the right
thereafter to receive on exercise of such Warrant the kind
and amount of shares of stock and other securities and
property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the
number of shares of Common Stock issuable upon exercise of
such Warrant immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and enter
into a supplemental warrant agreement so providing. Such
provisions shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article V. If the issuer
of securities deliverable upon exercise of Warrants under
the supplemental warrant agreement is an affiliate of the
formed, surviving or transferee corporation or other entity,
that issuer shall join in the supplemental warrant
agreement. The above provisions of this paragraph (b) shall
similarly apply to successive reclassifications and changes
of shares of Common Stock and to successive consolidations,
mergers, sales or conveyances.
In case of any such reclassification, merger,
consolidation or disposition of assets, the successor or
acquiring corporation or other entity (if other than the
Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and
condition of this Warrant Agreement to be performed and
observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined by resolution of the
Board of Directors of the Company) in order to provide for
adjustments of shares of the Common Stock for which each
Warrant is exercisable, which shall be as nearly equivalent
as practicable to the adjustments provided for in this
Article V. The foregoing provisions of this Section 5.01(b)
shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or dispositions
of assets.
(c) Issuance of Options or Convertible Securities.
In the event the Company shall, at any time or from time to
time after the date hereof, issue, sell, distribute or
otherwise grant in any manner (including by assumption) to
all holders of the Common Stock any rights to subscribe for
or to purchase, or any warrants or options for the purchase
of, Common Stock or any stock or securities convertible into
or exchangeable for Common Stock (any such rights, warrants
or options being herein called "Options" and any such
convertible or exchangeable stock or securities being herein
called "Convertible Securities") or any Convertible
Securities (other than upon exercise of any Option), whether
or not such Options or the rights to convert or exchange
such Convertible Securities are immediately exercisable, and
the price per share at which Common Stock is issuable upon
the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by
dividing (i) the aggregate amount, if any, received or
receivable by the Company as consideration for the issuance,
sale, distribution or granting of such Options or any such
Convertible Security, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company
upon the exercise of all such Options or upon conversion or
exchange of all such Convertible Securities, plus, in the
case of Options to acquire Convertible Securities, the
minimum aggregate amount of additional consideration, if
any, payable upon the conversion or exchange of all such
Convertible Securities, by (ii) the total maximum number of
shares of Common Stock issuable upon the exercise of all
such Options or upon the conversion or exchange of all such
Convertible Securities or upon the conversion or exchange of
all Convertible Securities issuable upon the exercise of all
Options) shall be less than the current market price per
share of Common Stock (determined pursuant to Section
5.01(g)) on the record date for the issuance, sale,
distribution or granting of such Options (any such event
being herein called a "Distribution") then, effective upon
such Distribution, the Exercise Price shall be reduced to
the price (calculated to the nearest 1/1,000 of one cent)
determined by multiplying the Exercise Price in effect
immediately prior to such Distribution by a fraction, the
numerator of which shall be the sum of (i) the number of
shares of Common Stock outstanding (exclusive of any
treasury shares) immediately prior to such Distribution
multiplied by the current market price per share of Common
Stock (determined pursuant to Section 5.01(g)) on the date
of such Distribution plus (ii) the consideration, if any,
received by the Company upon such Distribution, and the
denominator of which shall be the product of (A) the total
number of shares of Common Stock outstanding (exclusive of
any treasury shares) immediately after such Distribution
multiplied by (B) the current market price per share of
Common Stock (determined pursuant to Section 5.01(g)) on the
record date for such Distribution. For purposes of the
foregoing, the total maximum number of shares of Common
Stock issuable upon exercise of all such Options or upon the
conversion or exchange of all such Convertible Securities or
upon the conversion or exchange of the total maximum amount
of the Convertible Securities issuable upon the exercise of
all such Options shall be deemed to have been issued as of
the date of such Distribution and thereafter shall be deemed
to be outstanding and the Company shall be deemed to have
received as consideration therefor such price per share,
determined as provided above. Except as provided in
paragraphs (j) and (k) below, no additional adjustment of
the Exercise Price shall be made upon the actual exercise of
such Options or upon conversion or exchange of the
Convertible Securities or upon the conversion or exchange of
the Convertible Securities issuable upon the exercise of
such Options. Notwithstanding anything in this Article V to
the contrary, neither the payment of dividends on any shares
of Amended Series A Preferred Stock in additional shares of
Amended Series A Preferred Stock, nor the issuance of shares
of Common Stock on conversion of the Amended Series A
Preferred Stock, nor the issuance of shares of Common Stock
in payment of any dividends due on any shares of Preferred
Stock of the Company outstanding on the Issue Date, nor on
redemption of any such shares, nor in payment of any
interest due under the Company's Secured Subordinated Notes,
nor upon exercise of any options granted to management
pursuant to an employee benefit plan approved by
stockholders of the Company, nor upon the exercise of any
outstanding Warrants (including Warrants issued in the
Concurrent Debt Offering (as defined below)), shall require
any adjustment to either the Exercise Price of the Warrants
or the number of shares issuable upon exercise of the
Warrants.
(d) Dividends and Distributions. In the event the
Company shall, at any time or from time to time after the
date hereof, distribute to all the holders of Common Stock
any dividends or other distribution of cash, evidences of
its indebtedness, other securities or other properties or
assets (in each case other than (i) dividends payable in
Common Stock, Options or Convertible Securities and (ii) any
cash dividend from current or retained earnings), or any
options, warrants or other rights to subscribe for or
purchase any of the foregoing, then (A) the Exercise Price
shall be decreased to a price determined by multiplying the
Exercise Price then in effect by a fraction, the numerator
of which shall be the current market price per share of
Common Stock (determined pursuant to Section 5.01(g)) on the
record date for such distribution less the sum of (X) the
cash portion, if any, of such distribution per share of
Common Stock outstanding (exclusive of any treasury shares)
on the record date for such distribution plus (Y) the then
fair market value (as determined in good faith by the Board
of Directors of the Company) per share of Common Stock
outstanding (exclusive of any treasury shares) on the record
date for such distribution of that portion, if any, of such
distribution consisting of evidences of indebtedness, other
securities, properties, assets (other than cash), options,
warrants or subscription or purchase rights, and the
denominator of which shall be such current market price per
share of Common Stock and (B) the number of Shares
purchasable upon the exercise of each Warrant shall be
increased to a number determined by multiplying the number
of shares of Common Stock so purchasable immediately prior
to the record date for such distribution by a fraction, the
numerator of which shall be the Exercise Price in effect
immediately prior to the adjustment required by clause (A)
of this sentence and the denominator of which shall be the
Exercise Price in effect immediately after such adjustment.
The adjustments required by this paragraph (d) shall be made
whenever any such distribution occurs retroactive to the
record date for the determination of stockholders entitled
to receive such distribution.
(e) Self-Tenders. In case of the consummation of a
tender or exchange offer (other than an odd-lot tender
offer) made by the Company or any subsidiary of the Company
for all or any portion of the Common Stock to the extent
that the cash and value of any other consideration included
in such payment per share of Common Stock exceeds the first
reported sales price per share of Common Stock on the
trading day next succeeding the last time tenders or
exchanges may be made pursuant to the tender or exchange
offer (the "Expiration Time"), the Exercise Price shall be
reduced so that the same shall equal the price determined by
multiplying the Exercise Price in effect immediately prior
to the Expiration Time by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) at the
Expiration Time multiplied by the first reported sales price
of the Common Stock on the trading day next succeeding the
Expiration Time, and the denominator shall be the sum of (A)
the fair market value (determined by the Board of Directors
of the Company, whose determination shall be conclusive and
described in a resolution of the Board of Directors) of the
aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the
tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the
shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (B) the product
of the number of shares of Common Stock outstanding (less
any Purchased Shares) on the Expiration Time and the first
reported sales price of the Common Stock on the trading day
next succeeding the Expiration Time, such reduction to
become effective immediately prior to the opening of
business on the day following the Expiration Time.
(f) Exercise Price Reset. The Exercise Price, but
not the number of Shares purchasable upon exercise of each
Warrant, shall be reset under the circumstances and in the
manner provided in Section 2.02(g) as a one time adjustment,
and, after any such adjustment, the provisions of this
Article V shall apply in respect of any other subsequent
adjustments to the Exercise Price, as so reset, and to the
number and kind of Shares purchasable upon exercise of the
Warrants.
(g) Current Market Price. Except as provided in
Section 2.02(g), for the purpose of any computation of
current market price, the current market price per share of
Common Stock at any date shall be (x) for purposes of
Section 5.02, the closing price on the trading day
immediately prior to the exercise of the applicable Warrant
and (y) in all other cases, the average of the daily closing
prices for the shorter of (i) the 20 consecutive trading
days ending on the last full trading day on the exchange or
market specified in the second succeeding sentence prior to
the Time of Determination (as defined below) and (ii) the
period commencing on the date next succeeding the first
public announcement of the issuance, sale, distribution or
granting in question through such last full trading day
prior to the Time of Determination. The term "Time of
Determination" as used herein shall be the time and date of
the earlier to occur of (A) the date as of which the current
market price is to be computed and (B) the last full trading
day on such exchange or market before the commencement of
"ex-dividend" trading in the Common Stock relating to the
event giving rise to the adjustment required by paragraph
(a), (b), (c) or (d). The closing price for any day shall
be the last reported sale price regular way or, in case no
such reported sale takes place on such day, the average of
the closing bid and asked prices regular way for such day,
in each case (1) on the principal national securities
exchange on which the shares of Common Stock are listed or
to which such shares are admitted to trading or (2) if the
Common Stock is not listed or admitted to trading on a
national securities exchange, in the over-the-counter market
as reported by the Nasdaq NMS or any comparable system or
(3) if the Common Stock is not listed on the Nasdaq NMS or a
comparable system, as furnished by two members of the
American Stock Exchange, Inc. selected from time to time in
good faith by the Board of Directors of the Company for that
purpose. In the absence of all of the foregoing, or if for
any other reason the current market price per share cannot
be determined pursuant to the foregoing provisions of this
paragraph (g), the current market price per share shall be
the fair market value thereof as determined in good faith by
the Board of Directors of the Company.
(h) Certain Distributions. If the Company shall
pay a dividend or make any other distribution payable in
Options or Convertible Securities, then, for purposes of
paragraph (c) above, such Options or Convertible Securities
shall be deemed to have been issued or sold without
consideration.
(i) Consideration Received. If any shares of
Common Stock, Options or Convertible Securities shall be
issued, sold or distributed for a consideration other than
cash, the amount of the consideration other than cash
received by the Company in respect thereof shall be deemed
to be the then fair market value of such consideration (as
determined in good faith by the Board of Directors of the
Company). If any Options shall be issued in connection with
the issuance and sale of other securities of the Company,
together comprising one integral transaction in which no
specific consideration is allocated to such Options by the
parties thereto, such Options shall be deemed to have been
issued without consideration; provided, however, that if
such Options have an exercise price equal to or greater than
the current market price of the Common Stock on the date of
issuance of such Options, then such Options shall be deemed
to have been issued for consideration equal to such exercise
price.
(j) Deferral of Certain Adjustments. No adjustment
to the Exercise Price (including the related adjustment to
the number of Shares purchasable upon the exercise of each
Warrant) shall be required hereunder unless such adjustment,
together with other adjustments carried forward as provided
below, would result in an increase or decrease of at least
one percent (1%) of the Exercise Price; provided, however,
that any adjustments which by reason of this paragraph (j)
are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. No
adjustment need be made for a change in the par value of the
Common Stock. All calculations under this Section and
Section 2.02(g) shall be made to the nearest 1/1,000 of one
cent or to the nearest l/1,000th of a Share, as the case may
be.
(k) Changes in Options and Convertible Securities.
If the exercise price provided for in any Options referred
to in paragraph (c) above, the additional consideration, if
any, payable upon the conversion or exchange of any
Convertible Securities referred to in paragraph (c) above,
or the rate at which any Convertible Securities referred to
in paragraph (c) above are convertible into or exchangeable
for Common Stock shall change at any time (other than under
or by reason of provisions designed to protect against
dilution upon an event which results in a related adjustment
pursuant to this Article V), the Exercise Price then in
effect and the number of Shares purchasable upon the
exercise of each Warrant shall forthwith be readjusted
(effective only with respect to any exercise of any Warrant
after such readjustment) to the Exercise Price and number of
Shares so purchasable that would then be in effect had the
adjustment made upon the issuance, sale, distribution or
granting of such Options or Convertible Securities been made
based upon such changed purchase price, additional
consideration or conversion rate, as the case may be, but
only with respect to such Options and Convertible Securities
as then remain outstanding.
(1) Expiration of Options and Convertible
Securities. If, at any time after any adjustment to the
number of Shares purchasable upon the exercise of each
Warrant shall have been made pursuant to paragraph (c) or
(k) above or this paragraph (1), any Options or Convertible
Securities shall have expired unexercised, the number of
such Shares so purchasable shall, upon such Expiration, be
readjusted and shall thereafter be such as they would have
been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (i)
the only shares of Common Stock deemed to have been issued
in connection with such Options or Convertible Securities
were the shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or Convertible
Securities and (ii) such shares of Common Stock, if any,
were issued or sold for the consideration actually received
by the Company upon such exercise plus the aggregate
consideration, if any, actually received by the Company for
the issuance, sale, distribution or granting of all such
Options or Convertible Securities, whether or not exercised;
provided, however, that no such readjustment shall have the
effect of decreasing the number of such shares so
purchasable by an amount (calculated by adjusting such
decrease to account for all other adjustments made pursuant
to this Article V following the date of the original
adjustment referred to above) in excess of the amount of the
adjustment initially made in respect of the issuance, sale,
distribution or granting of such Options or Convertible
Securities.
(m) Other Adjustments. In the event that at any
time, as a result of an adjustment made pursuant to this
Article V, holders of Warrants shall become entitled to
receive any securities of the Company other than shares of
Common Stock, including shares of Amended Series A Preferred
Stock as provided in paragraph (q) below, thereafter the
number of such other securities so receivable upon exercise
of each Warrant and the Exercise Price applicable to such
exercise 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 of Common Stock
contained in this Article V.
(n) Other Action Affecting Common Stock. In case
at any time or from time to time the Company shall take any
action in respect of its outstanding shares of Common Stock,
other than any action described in Section 2.02 (g), this
Article V or the Concurrent Debt Offering (as such term is
defined in the Offering Memorandum relating to the Units),
then the number of Shares for which each Warrant is
exercisable shall be adjusted in such manner as may be
equitable in the circumstances. If the Company shall at any
time and from time to time issue or sell (i) any shares of
any class of common stock other than Common Stock, (ii) any
evidences of its indebtedness, shares of stock or other
securities which are convertible into or exchangeable for
such shares of common stock, with or without the payment of
additional consideration in cash or property, or (iii) any
warrants or other rights to subscribe for or purchase any
such shares of common stock or any such evidences, shares of
stock or other securities referred to in (ii) above, then in
each such case such issuance shall be deemed to be of, or in
respect of, Common Stock for purposes of this Article V;
provided, however, that, without limiting the generality of
the foregoing, if the Company shall take a record of the
holders of its Common Stock for the purpose of entitling
them to receive a dividend payable in, or other distribution
of, common stock other than Common Stock, including shares
of non-voting common stock, then the number of Shares for
which each Warrant is exercisable immediately after the
occurrence of any such event shall be adjusted to equal the
aggregate number of shares of such common stock and of
Common Stock which a record holder of the same number of
Shares for which each Warrant is exercisable immediately
prior to the occurrence of such event would own or be
entitled to receive after the happening of such event.
(o) Statement of Warrant Certificates.
Irrespective of any adjustment in the number or kind of
Shares issuable upon the exercise of each Warrant or the
Exercise Price, Warrant Certificates theretofore or
thereafter issued shall continue to express the same number
and kind of Shares and Exercise Price as are stated in the
Warrant Certificates initially issuable pursuant to this
Agreement.
(p) Increased Shares or Reduced Exercise Price.
From time to time, the Company may, for a period of not less
than 20 days, in its discretion, increase the number of
Shares purchasable upon the exercise of each Warrant,
without making any adjustment to the Exercise Price, or
reduce the Exercise Price, without making any adjustment to
the number of Shares purchasable upon the exercise of each
Warrant.
(q) Exercise for Preferred Stock. In the event
that the Exercisability Date does not occur by May 20, 1998,
then each outstanding Warrant shall automatically, with no
further action by either the Company or the holder, be
converted (the "Conversion") into a Warrant solely to
purchase one share of Amended Series A Preferred Stock, at
an Exercise Price of $34.00 per share, subject to adjustment
as provided in this Article V. The Conversion shall become
effective as of 5:00 p.m. New York City time on May 20,
1998, unless by such time on such date all of the
outstanding Warrants may be exercisable into shares of
Common Stock as provided herein. Prior to such time and
date and the Conversion, the Warrant holder shall not be
entitled to, or have any right to acquire, any shares of
Amended Series A Preferred Stock upon exercise of the
Warrant, or be entitled to exercise any rights, privileges
or preferences accorded the holders of Amended Series A
Preferred Stock. In the event all the Outstanding Warrants
are fully exercisable for shares of Common Stock by
5:00 p.m. New York City time on May 20, 1998, the Warrants
shall not be subject to Conversion as provided herein.
SECTION 5.02. Fractional Interest. The Company shall
not be required to issue fractional shares of Common Stock on the
exercise of Warrants. If more than one Warrant shall be
presented for exercise in full at the same time by the same
holder, the number of full shares of Common Stock which shall be
issuable upon such exercise shall be computed on the basis of the
aggregate number of shares of Common Stock acquirable on exercise
of the Warrants so presented. If any fraction of a share of
Common Stock would, except for the provisions of this Section, be
issuable on the exercise of any Warrant, the Company shall either
(i) pay an amount in cash calculated by the Company to equal the
then current market price per share (determined pursuant to
Section 5.01(g)) multiplied by such fraction 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. While the Company will
endeavor to use its best efforts to secure the best available
sales price for such aggregated fractional shares, such price
shall not necessarily be the highest price obtainable for such
shares. Holders of Warrants, by their acceptances of the Warrant
Certificates, expressly waive any and all rights to receive any
fraction of a share of Common Stock or a stock certificate or
scrip representing a fraction of a share of Common Stock.
SECTION 5.03. When Adjustment Not Required. If the
Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend or
distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend,
distribution, subscription or purchase rights, then thereafter no
adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
SECTION 5.04. Challenge to Good Faith Determination.
Whenever the Board of Directors of the Company shall be required
to make a determination in good faith of the fair value of any
item under this Article V, such determination may be challenged
in good faith by holders holding a majority of the outstanding
Warrants (the "Majority Holders"), and any dispute shall be
resolved by an investment banking firm of national standing
selected by the Company. The fee of such investment banking firm
shall be paid by the Company, unless such fair market value as
determined by the investment banking firm is more than 95% of the
fair market value determined by the Board of Directors of the
Company, in which case the challenging holders shall be jointly
and severally liable for such fee.
SECTION 5.05. Treasury Stock. The sale or other
disposition of any issued shares of Common Stock owned or held by
or for the account of the Company shall be deemed an issuance
thereof and, except for a voluntary tender or exchange offer made
by the Company or any subsidiary of the Company subject to
Section 13(e) of the Exchange Act, a repurchase thereof and
designation of such shares as treasury stock shall not be deemed
to be a redemption thereof for the purposes of this Agreement.
SECTION 5.06. Notices to Warrant Holders. In connection
with any adjustment of the Exercise Price or in connection with
the Conversion of the Warrants pursuant to this Article V, the
Company shall (i) promptly after such adjustment or Conversion
or, if earlier, at least five (5) days prior to the date on which
notice of such adjustment or Conversion is required to be given,
if at all, to The Depository Trust Company cause to be filed with
the Warrant Agent a certificate (A) in the case of any such
adjustment, of a firm of independent public accountants of
national standing selected by the Board of Directors of the
Company (who may be the regular auditors of the Company) setting
forth the Exercise Price after such adjustment and setting forth
in reasonable detail the method of calculation and the facts upon
which such calculations are based and setting forth the number of
Shares (or portion thereof) issuable after such adjustment in the
Exercise Price, upon exercise of a Warrant and payment of the
adjusted Exercise Price, or (B) in the case of the Conversion of
the Warrants, an Officers' Certificate stating that the
Conversion has become effective, which certificates shall be
conclusive evidence of the correctness of the matters set forth
therein, and (ii) promptly after such adjustment or Conversion
cause to be given to each of the holders of the Warrant
Certificates notice of such adjustment or Conversion. The
Warrant Agent shall be entitled to conclusively rely on the
above-referenced certificates and shall be under no duty or
responsibility with respect to any such certificate, except to
exhibit the same from time to time to any holder desiring an
inspection thereof during normal business hours upon reasonable
notice. The Warrant Agent shall not at any time be under any
duty or responsibility to any holder to determine whether any
facts exist that may require any adjustment of the number of
Shares issuable on exercise of any Warrant or the Exercise Price
or with respect to the nature or extent of any such adjustment
when made, or with respect to the method employed in making such
adjustment or the validity or value (or the kind or amount) of
any Shares which may be issuable on exercise of any Warrant or
whether or not the Conversion has taken place. The Warrant Agent
shall not be responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver any Shares or
stock certificates or other common stock or property upon the
exercise of any Warrant.
The Company shall, in addition, promptly notify the holders
of the Warrant Certificates of any determination of its Board of
Directors pursuant to Section 5.01(n) that any actions affecting
its Common Stock generally will not require an adjustment to the
Exercise Price or the number of Shares for which a Warrant is
exercisable, and shall specify in such notice the reasons for
such determination. In the event that the Majority Holders shall
challenge any of the calculations set forth in such notice within
20 days after the Company's delivery thereof, the Company shall
retain a firm of independent certified public accountants of
national standing selected by the Company to prepare and execute
a certificate verifying that no adjustment is required. The
Company shall promptly cause a signed copy of any certificate
prepared pursuant to this Section 5.06 to be delivered to each
holder. The Company shall keep at the Warrant Agent Office
copies of all such certificates and cause the same to be
available for inspection at said office during normal business
hours upon reasonable notice by any holder or any prospective
purchaser of a Warrant designated by a holder thereof.
ARTICLE VI
CONCERNING THE WARRANT AGENT
SECTION 6.01. Warrant Agent. Initially, the Company
shall act as its own Warrant Agent upon the terms and subject to
the conditions herein and in the Warrant Certificates set forth,
it being understood that Sections 6.02(a) and (n) and 7.01 hereof
and the provisions hereof regarding delivery of Officers'
Certificates or notices of the Company to the Warrant Agent or
vice versa shall not apply to the Company when acting as its own
Warrant Agent. At no time when the Company may be acting as its
own Warrant Agent shall any of its obligations to the holders of
the Warrant Certificates be in any respect reduced as a result
thereof. The Warrant Agent shall have the powers and authority
specifically granted to and conferred upon it in the Warrant
Certificates and this Agreement and such further powers and
authority to act on behalf of the Company as the Company may
hereafter grant to or confer upon it and it shall accept in
writing. All of the terms and provisions with respect to such
powers and authority contained in the Warrant Certificates are
subject to and governed by the terms and provisions hereof.
SECTION 6.02. Conditions of Warrant Agent's Obligations.
The Warrant Agent accepts its obligations herein set forth upon
the terms and conditions hereof and in the Warrant Certificates,
including the following, to all of which the Company agrees and
to all of which the rights hereunder of the holders from time to
time of the Warrant Certificates shall be subject:
(a) The Warrant Agent shall be entitled to
compensation to be agreed upon with the Company in writing for
all services rendered by it and the Company agrees promptly to
pay such compensation and to reimburse the Warrant Agent for its
reasonable out-of-pocket expenses (including reasonable fees and
expenses of counsel) incurred without gross negligence or willful
misconduct on its part in connection with the services rendered
by it hereunder. The Company also agrees to indemnify the
Warrant Agent, each predecessor Warrant Agent, and their
respective directors, officers, affiliates, agents and employees
for, and to hold it and its directors, officers, affiliates,
agents and employees harmless against, any loss, liability or
expense of any nature whatsoever (including, without limitation,
fees and expenses of counsel) incurred without gross negligence
or willful misconduct on the part of the Warrant Agent or
predecessor Warrant Agent, arising out of or in connection with
its acting as such Warrant Agent hereunder and its exercise or
failure to exercise of its rights and performance of its
obligations hereunder. The obligations of the Company under this
Section 6.02 shall survive the exercise and the expiration of the
Warrant Certificates and the resignation and removal of the
Warrant Agent.
(b) In acting under this Agreement and in
connection with the Warrant Certificates, the Warrant Agent is
acting solely as agent of the Company and does not assume any
obligation or relationship of agency or trust for or with any of
the owners or holders of the Warrant Certificates.
(c) The Warrant Agent may consult with counsel and
any advice or written opinion of such counsel shall be full and
complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion.
(d) The Warrant Agent shall be fully protected and
shall incur no liability for or in respect of any action taken or
omitted to be taken or thing suffered by it in reliance upon any
Warrant Certificate, notice, direction, consent, certificate,
affidavit, opinion of counsel, instruction, statement or other
paper or document reasonably believed by it to be genuine and to
have been presented or signed by the proper parties.
(e) The Warrant Agent, and its officers, directors,
affiliates and employees ("Related Parties"), may become the
owners of, or acquire any interest in, Warrant Certificates,
shares or other obligations of the Company with the same rights
that it or they would have it if were not the Warrant Agent
hereunder and, to the extent permitted by applicable law, it or
they may engage or be interested in any financial or other
transaction with the Company and may act on, or as depositary,
trustee or agent for, any committee or body of holders of shares
or other obligations of the Company as freely as if it were not
the Warrant Agent hereunder. Nothing in this Agreement shall be
deemed to prevent the Warrant Agent or such Related Parties from
acting in any other capacity for the Company.
(f) The Warrant Agent shall not be under any
liability for interest on, and shall not be required to invest,
any money at any time received by it pursuant to any of the
provisions of this Agreement or of the Warrant Certificates.
(g) The Warrant Agent shall not be under any
responsibility in respect of the validity of this Agreement (or
any term or provision hereof) or the execution and delivery
hereof or in respect of the validity or execution of any Warrant
Certificate (except its authentication thereof).
(h) The recitals and other statements contained
herein and in the Warrant Certificates (except as to the Warrant
Agent's authentication thereon) shall be taken as the statements
of the Company and the Warrant Agent assumes no responsibility
for the correctness of the same. The Warrant Agent does not make
any representation as to the validity or sufficiency of this
Agreement or the Warrant Certificates; provided however, that the
Warrant Agent shall not be relieved of its duty to authenticate
the Warrant Certificates as authorized by this Agreement. The
Warrant Agent shall not be accountable for the use or application
by the Company of the proceeds of the exercise of any Warrant.
(i) Before the Warrant Agent acts or refrains from
acting with respect to any matter contemplated by this Warrant
Agreement, it may require:
(1) an Officers' Certificate stating that, in
the opinion of the signers, all conditions precedent, if
any, provided for in this Warrant Agreement relating to the
proposed action have been complied with; and
(2) if reasonably necessary in the sole
judgment of the Warrant Agent, an opinion of counsel for the
Company stating that, in the opinion of such counsel, all
such conditions precedent have been complied with.
Each Officers' Certificate or, if requested, an opinion
of counsel with respect to compliance with a condition or
covenant provided for in this Warrant Agreement shall include:
(1) a statement that the person making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and
scope of the examination or investigation upon which the
statements or opinions contained in such certificate or
opinion are based;
(3) a statement that, in the opinion of such
person, he or she has made such examination or investigation
as is necessary to enable him or her to express an informed
opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the
opinion of such person, such condition or covenant has been
complied with.
(j) The Warrant Agent shall be obligated to perform
such duties as are herein and in the Warrant Certificates
specifically set forth and no implied duties or obligations shall
be read into this Agreement or the Warrant Certificates against
the Warrant Agent. The Warrant Agent shall not be accountable or
under any duty or responsibility for the use by the Company of
any of the Warrant Certificates authenticated by the Warrant
Agent and delivered by it to the Company pursuant to this
Agreement. The Warrant Agent shall have no duty or
responsibility in case of any default by the Company in the
performance of its covenants or agreements contained in the
Warrant Certificates or in the case of the receipt of any written
demand from a holder of a Warrant Certificate with respect to
such default, including, without limiting the generality of the
foregoing, any duty or responsibility to initiate or attempt to
initiate any proceedings at law or otherwise or, except as
provided in Section 7.02 hereof, to make any demand upon the
Company. The Warrant Agent shall not be obligated to perform any
duty to the extent prohibited by law.
(k) Unless otherwise specifically provided herein,
any order, certificate, notice, request, direction or other
communication from the Company made or given under any provision
of this Agreement shall be sufficient if signed by its chairman
of the Board of Directors, its president, its treasurer, its
controller or any vice president or its secretary or any
assistant secretary.
(l) The Warrant Agent shall have no responsibility
in respect of any adjustment pursuant to Article V hereof.
(m) The Company agrees that it will perform,
execute, acknowledge and deliver, or cause to be performed,
executed, acknowledged and delivered, all such further and other
acts, instruments and assurances as may reasonably be required by
the Warrant Agent for the carrying out or performing by the
Warrant Agent of the provisions of this Agreement.
(n) The Warrant Agent is hereby authorized and
directed to accept written instructions with respect to the
performance of its duties hereunder from any one of the chairman
of the Board of Directors, the president, the treasurer, the
controller, any vice president or the secretary of the Company or
any other officer or official of the Company reasonably believed
to be authorized to give such instructions and to apply to such
officers or officials for advice or instructions in connection
with its duties, and it shall not be liable for any action taken
or suffered to be taken by it in good faith in accordance with
instructions with respect to any matter arising in connection
with the Warrant Agent's duties and obligations arising under
this Agreement. Such application by the Warrant Agent for
written instructions from the Company may, at the option of the
Warrant Agent, set forth in writing any action proposed to be
taken or omitted by the Warrant Agent with respect to its duties
or obligations under this Agreement and the date on or after
which such action shall be taken and the Warrant Agent shall not
be liable for any action taken or omitted in accordance with a
proposal included in any such application on or after the date
specified therein (which date shall be not less than 10 Business
Days after the Company receives such application unless the
Company consents to a shorter period), provided that (i) such
application includes a statement to the effect that it is being
made pursuant to this paragraph (n) and that unless objected to
prior to such date specified in the application, the Warrant
Agent will not be liable for any such action or omission to the
extent set forth in such application and (ii) prior to taking or
omitting any such action, the Warrant Agent has not received
written instructions objecting to such proposed action or
omission.
(o) Whenever in the performance of its duties under
this Agreement the Warrant Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the
Company prior to taking or suffering any action hereunder, such
fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by any one of the
chairman of the Board of Directors, the president, the treasurer,
the controller, any vice president or the secretary of the
Company or any other officer or official of the Company
reasonably believed to be authorized to give such instructions
and delivered to the Warrant Agent; and such certificate shall be
full authorization to the Warrant Agent for any action taken or
suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(p) The Warrant Agent shall not be required to risk
or expend its own funds in the performance of its obligations and
duties hereunder.
SECTION 6.03. Resignation and Appointment of Successor.
(a) The Company agrees, for the benefit of the holders from time
to time of the Warrant Certificates, that there shall at all
times be a Warrant Agent hereunder.
(b) The Warrant Agent may at any time resign as
Warrant Agent by giving written notice to the Company of such
intention on its part, specifying the date on which its desired
resignation shall become effective, provided that such date shall
be at least 30 days after the date on which such notice is given
unless the Company agrees to accept less notice. Upon receiving
such notice of resignation, or in the event the Company shall
determine not to continue to act as its own Warrant Agent, the
Company shall promptly appoint a successor Warrant Agent,
qualified as provided in Section 6.03(d) hereof, by written
instrument in duplicate signed on behalf of the Company, one copy
of which shall be delivered to the resigning Warrant Agent and
one copy to the successor Warrant Agent. As provided in Section
6.03(d) hereof, such resignation shall become effective upon the
earlier of (x) the acceptance of the appointment by the successor
Warrant Agent or (y) 30 days after receipt by the Company of
notice of such resignation. The Company may, at any time and for
any reason, and shall, upon any event set forth in the next
succeeding sentence, remove the Warrant Agent and appoint a
successor Warrant Agent by written instrument in duplicate,
specifying such removal and the date on which it is intended to
become effective, signed on behalf of the Company, one copy of
which shall be delivered to the Warrant Agent being removed and
one copy to the successor Warrant Agent. The Warrant Agent shall
be removed as aforesaid if it shall become incapable of acting,
or shall be adjudged a bankrupt or insolvent, or a receiver of
the Warrant Agent or of its property shall be appointed, or any
public officer shall take charge or control of it or of its
property or affairs for the purpose of rehabilitation,
conservation or liquidation. Any removal of the Warrant Agent
and any appointment of a successor Warrant Agent shall become
effective upon acceptance of appointment by the successor Warrant
Agent as provided in Section 6.03(d). As soon as practicable
after appointment of the successor Warrant Agent, the Company
shall cause written notice of the change in the Warrant Agent to
be given to each of the registered holders of the Warrants in the
manner provided for in Section 7.04 hereof.
(c) Upon resignation or removal of the Warrant
Agent, if the Company shall fail to appoint a successor Warrant
Agent within a period of 30 days after receipt of such notice of
resignation or removal, then the holder of any Warrant
Certificate or the Warrant Agent may apply to a court of
competent jurisdiction for the appointment of a successor to the
Warrant Agent. Pending appointment of a successor to the Warrant
Agent, either by the Company or by such a court, the duties of
the Warrant Agent shall be carried out by the Company.
(d) Any successor Warrant Agent, whether appointed
by the Company or by a court, shall be a bank or trust company in
good standing, incorporated under the laws of the United States
of America or any State thereof and having, at the time of its
appointment, a combined capital surplus of at least $50 million.
Such successor Warrant Agent shall execute and deliver to its
predecessor and to the Company an instrument accepting such
appointment hereunder and all the provisions of this Agreement,
and thereupon such successor Warrant Agent, without any further
act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with
like effect as if originally named as Warrant Agent hereunder,
and such predecessor shall thereupon become obligated to (i)
transfer and deliver, and such successor Warrant Agent shall be
entitled to receive, all securities, records or other property on
deposit with or held by such predecessor as Warrant Agent
hereunder and (ii) upon payment of the amounts then due it
pursuant to Section 6.02(a) hereof, pay over, and such successor
Warrant Agent shall be entitled to receive, all money deposited
with or held by any predecessor Warrant Agent hereunder.
(e) Any corporation or bank into which the Warrant
Agent hereunder may be merged or converted, or any corporation or
bank with which the Warrant Agent may be consolidated, or any
corporation or bank resulting from any merger, conversion or
consolidation to which the Warrant Agent shall be a party, or any
corporation or bank to which the Warrant Agent shall sell or
otherwise transfer all or substantially all of its corporate
trust business, shall be the successor to the Warrant Agent under
this Agreement (provided that such corporation or bank shall be
qualified as aforesaid) without the execution or filing of any
document or any further act on the part of any of the parties
hereto.
(f) No Warrant Agent under this Warrant Agreement
shall be personally liable for any action or omission of any
successor Warrant Agent or of the Company.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendment. This Agreement and the terms
of the Warrants may be amended by the Company and the Warrant
Agent, without the consent of the holder of any Warrant
Certificate, for the purpose of curing any ambiguity, or of
curing, correcting or supplementing any defective or inconsistent
provision contained herein or therein or in any other manner
which the Company may deem necessary or desirable and which shall
not adversely affect in any material respect the interests of the
holders of the Warrant Certificates.
The Company and the Warrant Agent may modify this Agreement
and the terms of the Warrants with the consent of not less than a
majority in number of the then outstanding Warrants for the
purpose of adding any provision to or changing in any manner or
eliminating any of the provisions of this Agreement or modifying
in any manner the rights of the holders of the outstanding
Warrants; provided, however, that no such modification that
increases the Exercise Price (except pursuant to Section 5.01
(q)), reduces the period of time during which the Warrants are
exercisable hereunder, otherwise materially and adversely affects
the exercise rights of the holders of the Warrants, reduces the
percentage required for modification, or effects any change to
this Section 7.01 may be made with respect to an outstanding
Warrant without the consent of the holder of such Warrant.
Any modification or amendment made in accordance with this
Agreement will be conclusive and binding on all present and
future holders of Warrant Certificates whether or not they have
consented to such modification or amendment or waiver and whether
or not notation of such modification or amendment is made upon
such Warrant Certificates. Any instrument given by or on behalf
of any holder of a Warrant Certificate in connection with any
consent to any modification or amendment will be conclusive and
binding on all subsequent holders of such Warrant Certificate.
SECTION 7.02. Notices and Demands to the Company and
Warrant Agent. If the Warrant Agent shall receive any notice or
demand addressed to the Company by the holder of a Warrant
Certificate pursuant to the provisions hereof or of the Warrant
Certificates, the Warrant Agent shall promptly forward such
notice or demand to the Company.
SECTION 7.03. Address for Notices to the Company and for
Transmission of Documents. All notices hereunder to the Company
shall be deemed to have been given when sent by certified or
registered mail, postage prepaid, or by telecopy, confirmed by
first class mail, postage prepaid, addressed to the Company as
follows:
XCL Ltd.
110 Rue Jean Lafitte
Lafayette, Louisiana 70508
(Telecopy no. 318/237-3316)
Attention: General Counsel
SECTION 7.04. Notices to Holders. Notices to holders of
Warrants shall be mailed to such holders at the addresses of such
holders as they appear in the Warrant Register. Any such notice
shall be sufficiently given if sent by first-class mail, postage
prepaid.
SECTION 7.05. APPLICABLE LAW. THE VALIDITY,
INTERPRETATION AND PERFORMANCE OF THIS AGREEMENT AND EACH WARRANT
ISSUED HEREUNDER AND OF THE RESPECTIVE TERMS AND PROVISIONS
THEREOF SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.06. Obtaining of Governmental Approvals. The
Company will from time to time take all action required to be
taken by it which may be necessary to obtain and keep effective
any and all permits, consents and approvals of governmental
agencies and authorities and Securities Acts filings under United
States Federal and State laws, and the rules and regulations of
all stock exchanges on which the Warrants may be listed, which
may be or become requisite in connection with the issuance, sale,
transfer, and delivery of the Warrant Certificates, the exercise
of the Warrants or the issuance, sale, transfer and delivery of
the shares issued upon exercise of the Warrants, it being
understood, however, that the only contractual registration
rights of the holders of the Warrant Certificates are those set
forth in the Registration Rights Agreement dated as of May 20,
1997 (the "Registration Rights Agreement") between the Company
and the Initial Purchaser.
SECTION 7.07. Persons Having Rights Under Agreement.
Nothing in this Agreement expressed or implied and nothing that
may be inferred from any of the provisions hereof is intended, or
shall be construed, to confer upon, or give to, any person other
than the Company, the Warrant Agent and the holders from time to
time of the Warrant Certificates any right, remedy or claim under
or by reason of this Agreement or of any covenant, condition,
stipulation, promise or agreement hereof; and all covenants,
conditions, stipulations, promises and agreements in this
Agreement contained shall be for the sole and exclusive benefit
of the Company and the Warrant Agent and their successors and of
the holders from time to time of the Warrant Certificates.
SECTION 7.08. Headings. The descriptive headings of
the several Articles and Sections of this Agreement are inserted
for convenience only and shall not control or affect the meaning
or construction of any of the provisions hereof.
SECTION 7.09. Counterparts. This Agreement may be
executed in any number of Counterparts, each of which so executed
shall be deemed to be an original; but such Counterparts shall
together constitute but one and the same instrument.
SECTION 7.10. Inspection of Agreement. A copy of
this Agreement shall be available at all reasonable times at the
Warrant Agent Office, for inspection by the holder of any Warrant
Certificate. The Warrant Agent may require such holder to submit
his Warrant Certificate for inspection by it.
IN WITNESS WHEREOF, this Agreement has been duly executed by
the Company as of the day and year first above written.
XCL LTD.
By:-----------------------------
David A. Melman,
Executive Vice President,
General Counsel and Secretary
<PAGE>
[EQUITY]
GLOBAL WARRANT CERTIFICATE
Unless and until it is exchanged in whole or in part for
Warrants in certificated form, this Warrant may not be
transferred except as a whole by the Depositary to a nominee of
the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary. Unless this certificate is
presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC"), to the issuer or its
agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or
such other name as requested by an authorized representative of
DTC (and any payment is made to Cede & Co. or such other entity
as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT
ASSET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER
(1)REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS
AN INSTITUTIONAL "ACCREDITED INVESTOR" ( AS DEFINED IN RULE
501(a)(l), (2), (3) OR (7) UNDER THE SECURITIES ACT)(AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 903 OR 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT
WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO
XCL LTD. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE
THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES (OR FURNISHES ON ITS BEHALF BY
A U.S. BROKER-DEALER) TO THE COMPANY AND THE WARRANT AGENT A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES
THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE WARRANT AGENT AND
THE COMPANY SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT
DATED AS OF MAY 20, 1997 BETWEEN THE COMPANY AND JEFFERIES &
COMPANY, INC., A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY.
CUSIP #983701-137
No. RE-1 293,765 Warrants
WARRANT CERTIFICATE
XCL LTD.
This Warrant Certificate certifies that Cede & Co. or
registered assigns, is the registered holder of Two Hundred
Ninety-Three Thousand, Seven Hundred and Sixty-Five Warrants (the
"Warrants") to purchase shares of Common Stock, par value
$0.01 per share (the "Common Stock"), of XCL Ltd., a Delaware
corporation (the "Company"). Each Warrant entitles the holder to
purchase from the Company at any time on or after the later of
May 20, 1998 or such date on which the Company has reserved or
has available a sufficient number of shares of its Common Stock
to permit exercise of all outstanding Warrants and until 5:00
p.m., New York City time, on May 20, 2004 (the "Expiration
Date"), 327 fully paid and non-assessable shares of Common Stock
(as such number may be adjusted from time to time, the "Shares",
which may also include any other securities or property
purchasable upon exercise of a Warrant, such adjustment and
inclusion each as provided in the Warrant Agreement) at the
exercise price (the "Exercise Price") of $0.2063 per Share upon
surrender of this Warrant Certificate and payment of the Exercise
Price at any office or agency maintained for that purpose by the
Company (the "Warrant Agent Office"), subject to the conditions
set forth herein and in the Warrant Agreement.
The Exercise Price shall be payable in cash or by certified
or official bank check in the lawful currency of the United
States of America which as of the time of payment is legal tender
for payment of public or private debts. The Company has
initially designated its principal executive offices in
Lafayette, Louisiana, as the initial Warrant Agent Office. The
number of Shares issuable upon exercise of the Warrants
("Exercise Rate") is subject to adjustment upon the occurrence of
certain events set forth in the Warrant Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New
York City time, on May 20, 2004 shall thereafter be void.
Reference is hereby made to the further provisions on the
reverse hereof, which provisions shall for all purposes have the
same effect as though fully set forth at this place. Capitalized
terms used in this Warrant Certificate but not defined herein
shall have the meanings ascribed thereto in the Warrant
Agreement.
This Warrant Certificate shall not be valid unless
authenticated by the Warrant Agent, as such term is used in the
Warrant Agreement. Initially, the Company shall act as its own
Warrant Agent.
THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE SHALL
BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
WITNESS the corporate seal of the Company and the signatures
of its duly authorized officers.
Dated: May 20, 1997
XCL LTD.
By:---------------------------
Marsden W. Miller, Jr.
Chairman and Chief Executive
Officer
Attest:
By:-------------------------
David A. Melman
Secretary
Certificate of Authentication:
This is one of the Warrants
referred to in the within-
mentioned Warrant Agreement:
XCL LTD.,
as Warrant Agent
By:--------------------------
Authorized Signatory
<PAGE>
GLOBAL WARRANT CERTIFICATE
REVERSE
XCL LTD.
The Warrants evidenced by this Warrant Certificate are part
of a duly authorized issue of Warrants, each of which represents
the right to purchase at any time on or after the later of May
20, 1998, or such date on which the Company has reserved or has
available a sufficient number of shares of its Common Stock to
permit exercise of all outstanding Warrants and until 5:00 p.m.,
New York City time, on May 20, 2004, 327 Shares, subject to
adjustment as set forth in the Warrant Agreement. The Warrants
are issued pursuant to a Warrant Agreement dated as of May 20,
1997 (the "Warrant Agreement"), duly executed and delivered by
the Company for the benefit of the holders from time to time of
the Warrant Certificates, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument
and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities
thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or holder" meaning the registered holders or
registered holder) of the Warrant Certificates. Warrants may be
exercised by (i) surrendering at any Warrant Agent Office this
Warrant Certificate with the form of Election to Exercise set
forth hereon duly completed and executed and (ii) paying in full
the Warrant Exercise Price for each such Warrant exercised and
any other amounts required to be paid pursuant to the Warrant
Agreement.
If all of the items referred to in the last sentence of the
preceding paragraph are received by the Warrant Agent at or prior
to 2:00 p.m., New York City time, on a Business Day, the exercise
of the Warrant to which such items relate will be effective on
such Business Day. If any items referred to in the last sentence
of the preceding paragraph are received after 2:00 p.m., New York
City time, on a Business Day, the exercise of the Warrants to
which such item relates will be deemed to be effective on the
next succeeding Business Day. Notwithstanding the foregoing, in
the case of an exercise of Warrants on the Expiration Date, if
all of the items referred to in the last sentence of the
preceding paragraph are received by the Warrant Agent at or prior
to 5:00 p.m., New York City time, on such Expiration Date, the
exercise of the Warrants to which such items relate will be
effective on the Expiration Date.
Subject to the terms of the Warrant Agreement, as soon as
practicable after the exercise of any Warrant or Warrants, the
Company shall issue or cause to be issued to or upon the written
order of the registered holder of this Warrant Certificate, a
certificate or certificates evidencing the Share or Shares to
which such holder is entitled, in fully registered form,
registered in such name or names as may be directed by such
holder pursuant to the Election to Exercise, as set forth on the
reverse of this Warrant Certificate. Such certificate or
certificates evidencing the Share or Shares shall be deemed to
have been issued and any persons who are designated to be named
therein shall be deemed to have become the holder of record of
such Share or Shares as of the close of business on the date upon
which the exercise of this Warrant was deemed to be effective as
provided in the preceding paragraph.
The Company will not be required to issue fractional shares
of Common Stock upon exercise of the Warrants or distribute Share
certificates that evidence fractional shares of Common Stock. In
lieu of fractional shares of Common Stock, there shall be paid to
the registered Holder of this Warrant Certificate at the time
such Warrant Certificate is exercised an amount in cash equal to
the same fraction of the current market price per share of Common
Stock as determined in accordance with the Warrant Agreement.
Warrant Certificates, when surrendered at any Warrant Agent
Office by the holder thereof in person or by legal representative
or attorney duly authorized in writing, may be exchanged for a
new Warrant Certificate or new Warrant Certificates evidencing in
the aggregate a like number of Warrants, in the manner and
subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge
imposed in connection therewith.
Upon due presentment for registration of transfer of this
Warrant Certificate at any office or agency maintained by the
Company for that purpose, a new Warrant Certificate evidencing in
the aggregate a like number of Warrants shall be issued to the
transferee in exchange for this Warrant Certificate, subject to
the limitations provided in the Warrant Agreement, without charge
except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder hereof as the absolute owner of this Warrant
Certificate (notwithstanding any notation of ownership or other
writing hereon made by anyone) for the purpose of any exercise
hereof and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the
contrary.
The term "Business Day" shall mean any day on which (i)
banks in New Orleans, (ii) the principal national securities
exchange or market on which the Common Stock is listed or
admitted to trading and (iii) the principal national securities
exchange or market, if any, on which the Warrants are listed or
admitted to trading are open for business.
<PAGE>
ELECTION TO EXERCISE
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise ------
- -------- of the Warrants represented by this Warrant Certificate
and purchase the whole number of Shares issuable upon the
exercise of such Warrants and herewith tenders payment for such
Shares in the amount of $--------- in cash or by certified or
official bank check, in accordance with the terms hereof. The
undersigned requests that a certificate representing such Shares
be registered in the name of ---------------, whose address is --
- -------------, and that such certificate be delivered to --------
- -------------, whose address is ------------------------------.
Any cash payments to be paid in lieu of a fractional Share should
be made to -------------, whose address is -----------------, and
the check representing payment thereof should be delivered to ---
- -------------------, whose address is -------------------------.
Name of holder of
Warrant Certificate: --------------------------------
(Please Print)
Tax Identification or
Social Security Number: -----------------------------
Signature: ------------------------------------------
Note: The above signature must
correspond with the name as written
upon the face of this Warrant
Certificate in every particular,
without alteration or enlargement
or any change whatever.
Dated ------------ , ----
<PAGE>
ASSIGNMENT
For value received, ------------------------------ hereby
sells, assigns and transfers unto ------------------------- the
within Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint --------------------------- attorney, to transfer said
Warrant Certificate on the books of the within-named Company,
with full power of substitution in the premises.
Dated --------------------- , -------
Signature:-------------------------------
Note: The above signature must
correspond with the name as written
upon the face of this Warrant
Certificate in every particular,
without alteration or enlargement
or any change whatever.
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE WARRANTS
The following exchanges of a part of this Global Warrant for
Definitive Warrants have been made:
Number of
Warrants of
Amount of Amount of this Global Signature of
decrease in increase in Warrant authorized
Number of Number of following signatory of
Date of Warrants of this Warrants of this such decrease Warrant Agent
Exchange Global Warrant Global Warrant (or increase) or Depositary
- -------- ---------------- ---------------- ------------- -------------
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of XCL
Ltd.
This Certificate relates to --------- Warrants held in* ----
- ----- book-entry or *--------- certificated form by -------------
- ----------- (the "Transferor").
The Transferor:*
has requested the Warrant Agent by written order to
deliver in exchange for its beneficial interest in the Global
Warrant held by the Depositary a Warrant or Warrants in
definitive, registered form of authorized denominations and an
aggregate number equal to its beneficial interest in such Global
Warrant (or the portion thereof indicated above) or
has requested the Warrant Agent by written order to
exchange or register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such
Warrant, the Transferor does hereby certify that the Transferor
is familiar with the Warrant Agreement relating to the above
captioned Warrants and the restrictions on transfers thereof as
provided in Section 1.08 of such Warrant Agreement, and that the
transfer of this Warrant does not require registration under the
Securities Act of 1933, as amended (the "Act") because[*]:
Such Warrant is being acquired for the Transferor's
own account, without transfer (in satisfaction of Section
1.08(a)(ii)(y)(A) or Section 1.08(d)(i)(A) of the Warrant
Agreement).
Such Warrant is being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Act), in
reliance on Rule 144A or in accordance with Regulation S under
the Act.
Such Warrant is being transferred in accordance with
Rule 144 under the Act.
Such Warrant is being transferred in reliance on and
in compliance with an exemption from the registration
requirements of the Act, other than Rule 144A or Rule 144 or
Regulation S under the Act. An opinion of counsel to the effect
that such transfer does not require registration under the Act
accompanies this Certificate.
[INSERT NAME OF TRANSFEROR]
By:---------------------------------
Date: --------------------
*Check applicable box.
<PAGE>
EXHIBIT C
Transferee Letter of Representation
XCL Ltd.
110 Rue Jean Lafitte
Lafayette, Louisiana 70508
Ladies and Gentlemen:
In connection with our proposed purchase of warrants
("Warrants") to purchase Common Stock, par value $0.01 per share
(the "Common Stock"; together with the Warrants, the
"Securities"), of XCL Ltd. (the "Company") we confirm that:
1. We understand that the Securities have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and, unless so registered, may not be
sold except as permitted in the following sentence. We
agree on our own behalf and on behalf of any investor
account for which we are purchasing Securities to offer,
sell or otherwise transfer such Securities prior to the date
which is two years after the later of the date of original
issue and the last date on which the Company or any
affiliate of the Company was the owner of such Securities,
or any predecessor thereto (the "Resale Restriction
Termination Date") only (a) to the Company, (b) pursuant to
a registration statement which has been declared effective
under the Securities Act, (c) so long as the Securities are
eligible for resale pursuant to Rule 144A, under the
Securities Act, to a person we reasonably believe is a
qualified institutional buyer under Rule 144A (a "QIB") that
purchases for its own account or for the account of a QIB
and to whom notice is given that the transfer is being made
in reliance on Rule 144A, (d) pursuant to offers and sales
that occur outside the United States within the meaning of
Regulation S under the Securities Act, (e) to an
institutional "accredited investor" within the meaning of
subparagraph (a)(l), (2), (3) or (7) of Rule 501 under the
Securities Act that is purchasing for his own account or for
the account of such an institutional "accredited investor,"
or (f) pursuant to any other available exemption from the
registration requirements of the Securities Act, subject in
each of the foregoing cases to any requirement of law that
the disposition of our property or the property of such
investor account or accounts be at all times within our or
their control and to compliance with any applicable state
securities laws. The foregoing restrictions on resale will
not apply subsequent to the Resale Restriction Termination
Date. If any resale or other transfer of the Securities is
proposed to be made pursuant to clause (e) above prior to
the Resale Restriction Termination Date, the transferor
shall deliver a letter from the transferee substantially in
the form of this letter to the warrant agent under the
Warrant Agreement pursuant to which the Securities were
issued (the "Warrant Agent") which shall provide, among
other things, that the transferee is an institutional
"accredited investor" within the meaning of subparagraph
(a)(l), (2), (3) or (7) of Rule 501 under the Securities Act
and that it is acquiring such Securities for investment
purposes and not for distribution in violation of the
Securities Act. The Warrant Agent and the Company reserve
the right prior to any offer, sale or other transfer prior
to the Resale Restriction Termination Date of the Securities
pursuant to clause (e) or (f) above to require the delivery
of a written opinion of counsel, certifications, and or
other information satisfactory to the Company and the
Warrant Agent.
2. We are an institutional "accredited investor"
(as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation
D under the Securities Act) purchasing for our own account
or for the account of such an institutional "accredited
investor," and we are acquiring the Securities for
investment purposes and not with a view to, or for offer or
sale in connection with, any distribution in violation of
the Securities Act and we have such knowledge and experience
in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the
Securities, and we and any accounts for which we are acting
are each able to bear the economic risk of our or its
investment for an indefinite period.
3. We are acquiring the Securities purchased by us
for our own account or for one or more accounts as to each
of which we exercise sole investment discretion.
4. You, the Warrant Agent and your respective
counsel are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or
legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
-----------------------
(Name of Purchaser)
By:--------------------
Date:------------------
Upon transfer the Securities would be registered in the name
of the new beneficial owner as follows:
Name: -----------------------------
Address: --------------------------
Taxpayer ID Number: ----------------
XCL LTD.
DESIGNATION OF AMENDED SERIES A, CUMULATIVE CONVERTIBLE
PREFERRED STOCK
The following resolutions, establishing and designating
a series of shares and fixing and determining the
designations, preferences, limitations and relative rights
thereof, was duly adopted by the Board of Directors of the
Corporation or an authorized committee thereof on May 19,
1997.
RESOLVED, that pursuant to Article Four of the
Certificate of Incorporation of the Corporation,
as amended, which authorizes the issuance of
502,400,000 shares of capital stock ("Stock"),
consisting of 2,400,000 shares of preferred stock
of the par value of $1.00 per share ("Preferred
Stock"), 850,000 of which have been designated
Series A, Cumulative Convertible Preferred Stock
(the "Series A Preferred Stock"); 50,000 of which
have been designated Series B, Cumulative
Preferred Stock ("Series B Preferred Stock");
80,000 of which have been designated Series E,
Cumulative Preferred Stock ("Series E Preferred
Stock") and 50,000 of which have been designated
Series F, Cumulative Convertible Preferred Stock
("Series F Preferred Stock"), of which 756,352
shares are currently outstanding and 500,000,000
shares of Common Stock of the par value of $.01
per share (the "Common Stock"), the Corporation
hereby provides for the issuance of a series of
Preferred Stock, designated as Amended Series A,
Cumulative Convertible Preferred Stock, and hereby
fixes the designations, preferences, limitations
and relative rights of the shares of the Amended
Series A, Cumulative Convertible Preferred Stock,
in addition to those set forth in such Article
Four, which shall be as follows:
Section 1. Designation; Number of Shares. The
shares of the series authorized by this resolution shall be
designated as Amended Series A, Cumulative Convertible
Preferred Stock (the "Convertible Preferred Stock" or
"Amended Series A Preferred Stock"). The number of shares
initially constituting such series shall be limited to One
Million Three Hundred Seventy Thousand (1,370,000). 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.
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 the Certificate of
Incorporation of the Corporation, as amended:
(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 the 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.
Such resolution was duly adopted by all necessary
action on the part of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be signed by David A. Melman, its Executive
Vice President, General Counsel and Secretary, this 19th day
of May, 1997.
XCL LTD.
David A. Melman
Executive Vice President,
General Counsel
and Secretary
[FACE OF AMENDED SERIES A, CUMULATIVE CONVERTIBLE
PREFERRED STOCK CERTIFICATE]
Incorporated Under the Laws of Delaware
CUSIP No. ________________
NUMBER ______ SHARES __________
Amended Series A, Cumulative Convertible Preferred Stock
(par value $1.00 per share) of XCL Ltd.
THIS CERTIFIES THAT __________________________ is the registered
holder of ________________________________________ shares
transferable only on the books of the Corporation by the holder
hereof in person or by Attorney upon surrender of this
Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this
Certificate to be signed by its duly authorized officers and its
Corporate Seal to be hereunto affixed this _____ day of
________________, 19__.
_______________________ [CORPORATE SEAL] ______________________
Secretary/Treasurer Vice President/President
[REVERSE SIDE OF AMENDED SERIES A, CUMULATIVE CONVERTIBLE
PREFERRED STOCK CERTIFICATE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3), or
(7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C)
IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 903 OR 904 UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSER, FURNISHES (OR
HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER DEALER) TO THE
COMPANY OR THE TRANSFER AGENT, AS THE CASE MAY BE, A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING
TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE COMPANY OR TRANSFER AGENT
FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITEIS ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY,
INITIAL PURCHASER OR THE TRANSFER AGENT SUCH CERTIFICATIONS,
WRITTEN LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRED TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.
THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT DATED
AS OF MAY 20, 1997 BETWEEN THE COMPANY AND THE INITIAL PURCHASER,
A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
For Value Received ________________ hereby sell, assign and
transfer unto __________________________________________
__________ Shares represented by the within Certificate, and do
hereby irrevocably constitute and appoint
______________________________________ Attorney to transfer the
said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated ________________________, 19__
In presence of
_________________________________
Notice: The signature of this assignment must corresponde with
the name as written upon the face of the certificate in every
particular without alteration or enlargement or any change
whatever.
CUSIP NO. 983701 AA1
XCL Ltd.
75,000 Units
Consisting of
13.50% Senior Secured Notes due May 1, 2004
and
Warrants to Purchase Shares of Common Stock
THIS GLOBAL UNIT IS COMPRISED OF THE ATTACHED GLOBAL NOTE AND
GLOBAL WARRANT.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT", AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (a)(1), (2), (3) OR
(7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C)
IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 903 OR 904 UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO XCL LTD. (THE "COMPANY") OR
ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER
THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER
DEALER) TO THE COMPANY AND THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSACTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE COMPANY OR THE TRUSTEE AND
WARRANT CLIENTS FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO
WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIAL TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY, IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE OR THE WARRANT AGENT AND THE COMPANY SUCH
CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER INFORMATION AS
ANY OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE AND WARRANT AGREEMENT HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A
DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON
OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND THE WARRANT
AGREEMENT, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A
TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A
NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE
REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE AND THE WARRANT AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
<PAGE>
GLOBAL NOTE
XCL LTD.
13.50% SENIOR SECURED NOTE DUE MAY 1, 2004, SERIES A
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3), OR (7) UNDER THE SECURITIES ACT), (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 903 or 904 UNDER
THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A)
TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR
HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO
THE COMPANY AND THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE COMPANY OR THE
TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY,
IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT.
THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS
AGREEMENT DATED AS OF MAY 20, 1997 BETWEEN THE COMPANY
AND JEFFERIES & COMPANY, INC., A COPY OF WHICH IS ON
FILE WITH THE SECRETARY OF THE COMPANY.
THIS SECURITY IS A GLOBAL NOTE WITHIN THE MEANING OF
THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED
IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A
DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS
NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME
OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN
A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OR DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
No. R-1 $75,000,000
CUSIP 983701-AC-7
XCL LTD., a Delaware corporation (hereinafter the
"Company," which term includes any successor corporation under
the Indenture hereinafter referred to), for value received,
hereby promises to pay to CEDE & Co., or registered assigns, the
principal sum of Seventy-Five Million Dollars, on May 1, 2004.
Interest Payment Dates: May 1 and November 1,
commencing November 1, 1997
Record Dates: April 15 and October 15
Reference is made to the further provisions of this
Note on the reverse side, which will, for all purposes, have the
same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this
Instrument to be duly executed under its corporate seal.
Dated: May 20, 1997
XCL LTD.
By:__________________________________
Chairman and Chief Executive
Officer
Attest:
________________________
Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-
mentioned Indenture.
FLEET NATIONAL BANK, as Trustee
By:______________________________
Authorized Signatory
Dated: May 20, 1997
<PAGE>
XCL LTD.
13.50% Senior Secured Note due May 1, 2004, Series A
1. Interest.
XCL Ltd., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of the 13.50%
Senior Secured Notes due May 1, 2004, Series A (the "Notes") at
a rate of 13.50% per annum (subject to adjustment). To the
extent it is lawful, the Company promises to pay interest on any
interest payment due but unpaid on such principal amount at a
rate of 13.50% per annum compounded semi-annually.
The Company will pay interest semi-annually on May 1
and November 1 of each year (each, an "Interest Payment Date"),
commencing November 1, 1997. Interest on the Notes will accrue
from the most recent date to which interest has been paid or, if
no interest has been paid, from May 20, 1997.
Under certain circumstances, the Company shall be obligated to
pay liquidated damages to the Holders, all as set forth in
Section 2.18 of the Indenture.
2. Method of Payment.
The Company shall pay interest on the Notes (except
defaulted interest) to the Persons who are the registered Holders
at the close of business on the Record Date immediately preceding
the Interest Payment Date. Holders must surrender Notes to a
Paying Agent to collect principal payments. Except as provided
below, the Company shall pay principal and interest in such coin
or currency of the United States of America as at the time of
payment shall be legal tender for payment of public and private
debts ("U.S. Legal Tender"). However, the Company may pay
principal and interest by wire transfer of Federal funds, or
interest by its check payable in such U.S. Legal Tender. The
Company may deliver any such interest payment to the Paying Agent
or the Company may mail any such interest payment to a Holder at
the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Fleet National Bank (the "Trustee") will act
as Paying Agent and Registrar. The Company may change any Paying
Agent, Registrar or co-Registrar without notice to the Holders.
The Company or any of its Subsidiaries may, subject to certain
exceptions, act as Paying Agent, Registrar or co-Registrar.
4. Indenture.
The Company issued the Notes under an Indenture, dated
as of May 20, 1997 (the "Indenture"), between the Company and the
Trustee. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the
Notes include those stated in the Indenture and those made part
of the Indenture by reference to the TIA, as in effect on the
date of the Indenture. The Notes are subject to all such terms,
and Holders of Notes are referred to the Indenture and said Act
for a statement of them. The Notes are senior obligations of the
Company limited in aggregate principal amount to $75,000,000.
5. Redemption.
Prior to May 1, 2002, the Company may redeem at its
election, within 90 days after completion of any Equity Offering,
with the net proceeds of such Equity Offering, up to $26,250,000
principal amount of the Notes in cash at the Redemption Prices
(expressed as a percentage of the principal amount thereof) set
forth below, in each case, including accrued and unpaid interest
to the Redemption Date, if any; provided, however, that at least
$48,750,000 aggregate principal amount of all Notes remains
outstanding immediately after giving effect to any such
redemption (it being expressly agreed that for purposes of
determining whether this condition is satisfied, Notes owned by
the Company or any of its Affiliates shall be deemed not to be
outstanding). The Notes may be redeemed at the election of the
Company, as a whole or from time to time in part, at any time on
and after May 1, 2002, at the Redemption Prices (expressed as a
percentage of the principal amount thereof) set forth below with
respect to the indicated Redemption Date, in each case, together
with any accrued but unpaid interest to the Redemption Date.
If redeemed during
the 12-month period
beginning May 1 Redemption Price
------------------- ----------------
1997.......................... 113.500%
1998........................... 113.500%
1999........................... 113.500%
2000........................... 113.500%
2001........................... 113.500%
2002........................... 106.750%
2003 and thereafter.... 100.000%
The Notes are also subject, in certain circumstances,
to Mandatory Redemption at par on November 30, 1997.
Any redemption will comply with Article Three of the
Indenture.
6. Notice of Redemption.
Notice of redemption will be mailed by first class mail
at least 30 days but not more than 60 days before the Redemption
Date to each Holder of Notes to be redeemed at his registered
address. Notes in denominations larger than $1,000 may be
redeemed in part.
Except as set forth in the Indenture, from and after
any Redemption Date, if monies for the redemption of the Notes
called for redemption shall have been deposited with the Paying
Agent on such Redemption Date the Notes called for redemption
will cease to bear interest and the only right of the Holders of
such Notes will be to receive payment of the Redemption Price and
any accrued and unpaid interest to the Redemption Date.
7. Denominations; Transfer; Exchange.
The Notes are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A
Holder may register the transfer of, or exchange Notes in
accordance with, the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements
and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Notes selected for
redemption.
8. Persons Deemed Owners.
The registered Holder of a Note may be treated as the
owner of it for all purposes.
9. Unclaimed Money.
If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying
Agent(s) will pay the money back to the Company at its written
request. After that, all liability of the Trustee and such
Paying Agent(s) with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Company at any time deposits into an irrevocable
trust with the Trustee U.S. Legal Tender or Government Securities
sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of
the Indenture relating thereto, the Company will be discharged
from certain provisions of the Indenture and the Notes (including
the financial covenants, but excluding its obligation to pay the
principal of and interest on the Notes).
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the
Notes may be amended or supplemented with the written consent of
the Holders of at least a majority in aggregate principal amount
of the Notes then outstanding, and any existing Default or Event
of Default or compliance with any provision may be waived with
the consent of the Holders of a majority in aggregate principal
amount of the Notes then outstanding. Without notice to or
consent of any Holder, the parties thereto may amend or
supplement the Indenture or the Notes to, among other things,
cure any ambiguity, defect or inconsistency, or make any other
change that does not adversely affect the rights of any Holder of
a Note.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the
ability of the Company and its Subsidiaries to, among other
things, incur additional Indebtedness or issue Disqualified
Capital Stock, make payments in respect of its Capital Stock,
enter into transactions with Affiliates, incur Liens, sell
assets, change the nature of its business, merge or consolidate
with any other Person and sell, lease, transfer or otherwise
dispose of substantially all of its properties or assets. The
Indenture requires the Company to repurchase Notes under certain
circumstances with the Net Cash Proceeds of certain Asset Sales.
The limitations are subject to a number of important
qualifications and exceptions. The Company must report to the
Trustee on compliance with such limitations on a quarterly basis.
13. Change of Control.
In the event there shall occur any Change of Control,
each Holder of Notes shall have the right, at such Holder's
option but subject to the limitations and conditions set forth in
the Indenture, to require the Company to purchase on the Change
of Control Payments Date in the manner specified in the
Indenture, all or any part (in integral multiples of $1,000) of
such Holder's Notes at a Change of Control Purchase Price equal
to 101% of the principal amount thereof, together with accrued
and unpaid interest, if any, to the Change of Control Payment
Date.
14. Successors.
When a successor assumes all the obligations of its
predecessor under the Notes and the Indenture, the predecessor
will be released from those obligations.
15. Defaults and Remedies.
If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be
due and payable immediately in the manner and with the effect
provided in the Indenture. Holders of Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Notes. Subject to certain
limitations, Holders of a majority in aggregate principal amount
of the Notes then outstanding may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of
Default (except a Default in payment of principal, premium, if
any, or interest, including a Default at any Maturity Date), if
it determines that withholding notice is their interest.
16. No Recourse Against Others.
No stockholder, director, officer, employee or
incorporator, as such, past, present or future, of any obligor
under the Notes or any successor corporation shall have any
liability for any obligation of any obligor under the Notes or
the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a
Note by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for the
issuance of the Notes.
17. Authentication.
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on
the other side of this Note.
18. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a
Holder of a Note or an assignee, such as: TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common),
CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
19. CUSIP Numbers.
Pursuant to recommendation promulgated by the Committee
on Uniform Security Identification Procedures, the Company will
cause CUSIP numbers to be printed on the Notes as a convenience
to the Holder of the Notes. No representation is made as to the
accuracy of such numbers as printed on the Notes and reliance may
be placed only on the other identification numbers printed
hereon.
20. Subsidiary Guarantees.
Concurrently with and subject to the release to the
Company of the Collateral subject to the Principal Account,
payment of the principal of, premium, if any, and interest on the
Notes will be unconditionally guaranteed by XCL-China Ltd., a
British Virgin Islands company wholly owned by the Company ("XCL-
China"), and certain future Restricted Subsidiaries pursuant to
and in accordance with the terms of Article Twelve of the
Indenture.
21. Security and Collateral.
Payment of the principal of, premium, if any, and
interest on the Notes is secured by a Security Interest in the
Collateral created by the Security Documents in favor of the
Trustee for the benefit of the Holders.
ASSIGNMENT
I or we assign this Note to:
____________________________
____________________________
____________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of
assignee:
_____________________________
and irrevocably appoint______________________________________
agent to transfer this Note on the books of the Company. The
agent may substitute another to act for him.
Dated:_________________________
Signature:______________________
(Sign exactly as name appears on the other side of this Note)
<PAGE>
EXCHANGE
I or we assign this Note to:
XCL LTD.
110 Rue Jean Lafitte
Lafayette, LA 70508
I.R.S. Employer Identification No.: 51-0305643
and irrevocably appoint__________________________________ agent
to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Dated:______________________________
Signature:___________________________
(Sign exactly as name appears on the other side of this Note)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.15 or 4.16 of the Indenture, check
the appropriate box:
[ ] Section 4.15 [ ] Section 4.16
If you want to elect to have only part of this Note
purchased by the Company pursuant to Section 4.15 or 4.16 of the
Indenture, as the case may be, state the amount you want to be
purchased:
$_______________________
Dated:__________________________________
Signature:_______________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:_________________________
CUSIP NO. 983701 400
XCL Ltd.
293,765 Units
Consisting of
Amended Series A, Cumulative Convertible Preferred Stock
and
Warrants to Purchase Shares of Common Stock
THIS GLOBAL UNIT IS COMPRISED OF THE ATTACHED GLOBAL
PREFERRED STOCK CERTIFICATE AND GLOBAL WARRANT.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT",
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 903 OR 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT
WILL NOT, WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY, RESELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO XCL LTD. (THE "COMPANY") OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A
U.S. BROKER DEALER) TO THE COMPANY AND THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSACTIONS ON TRANSFER OF THIS SECURITY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE COMPANY
OR THE TRUSTEE AND WARRANT CLIENTS FOR THIS SECURITY), (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIAL TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE
OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE TRUSTEE OR THE WARRANT AGENT
AND THE COMPANY SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS
OR OTHER INFORMATION AS ANY OF THEM MAY REASONABLY REQUIRE
TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
WARRANT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED
IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR
A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT EXCHANGEABLE
FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN
THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE WARRANT AGREEMENT, AND NO
TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE
DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE
REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE WARRANT AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE>
[FACE OF AMENDED SERIES A, CUMULATIVE CONVERTIBLE
PREFERRED STOCK CERTIFICATE]
Incorporated Under the Laws of Delaware
CUSIP No. _____________
NUMBER ______ SHARES __________
Amended Series A, Cumulative Convertible Preferred
Stock (par value $1.00 per share) of XCL Ltd.
THIS CERTIFIES THAT __________________________ is
the registered holder of
________________________________________ shares
transferable only on the books of the Corporation
by the holder hereof in person or by Attorney upon
surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused
this Certificate to be signed by its duly
authorized officers and its Corporate Seal to be
hereunto affixed this _____ day of
________________, 19__.
_______________________ [CORPORATE SEAL] ______________________
Secretary/Treasurer Vice President/President
<PAGE>
[REVERSE SIDE OF AMENDED SERIES A, CUMULATIVE
CONVERTIBLE PREFERRED STOCK CERTIFICATE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT
AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3), or (7) UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 903 OR
904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT
WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR
ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) INSIDE THE UNITED STATES TO AN INSITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER DEALER) TO THE COMPANY OR THE TRANSFER
AGENT, AS THE CASE MAY BE, A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE COMPANY OR TRANSFER AGENT FOR THIS
SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITEIS ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO
EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY,
INITIAL PURCHASER OR THE TRANSFER AGENT SUCH
CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY
REQUIRED TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS
AGREEMENT DATED AS OF MAY 20, 1997 BETWEEN THE
COMPANY AND THE INITIAL PURCHASER, A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE COMPANY.
For Value Received ________________ hereby sell,
assign and transfer unto
__________________________________________
__________ Shares represented by the within
Certificate, and do hereby irrevocably constitute
and appoint ______________________________________
Attorney to transfer the said Shares on the books
of the within named Corporation with full power of
substitution in the premises.
Dated ________________________, 19__
In presence of
_________________________________
Notice: The signature of this assignment must
corresponde with the name as written upon the face
of the certificate in every particular without
alteration or enlargement or any change whatever.
<PAGE>
[EQUITY]
WARRANT CERTIFICATE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT ASSET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1)REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" ( AS DEFINED IN RULE 501(a)(l), (2), (3) OR (7)
UNDER THE SECURITIES ACT)(AN "ACCREDITED INVESTOR") OR (C)
IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 903 OR 904
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO XCL
LTD. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR
FURNISHES ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE
COMPANY AND THE WARRANT AGENT A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE WARRANT AGENT AND THE COMPANY
SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS
AGREEMENT DATED AS OF MAY 20, 1997 BETWEEN THE COMPANY AND
JEFFERIES & COMPANY, INC., A COPY OF WHICH IS ON FILE WITH
THE SECRETARY OF THE COMPANY.
CUSIP #983701-145
No. RE-__ _____ Warrants
WARRANT CERTIFICATE
XCL LTD.
This Warrant Certificate certifies that ___________
________________ or registered assigns, is the registered
holder of ________________ Warrants (the "Warrants") to
purchase shares of Common Stock, par value $0.01 per share
(the "Common Stock"), of XCL Ltd., a Delaware corporation
(the "Company"). Each Warrant entitles the holder to
purchase from the Company at any time on or after the later
of May 20, 1998 or such date on which the Company has
reserved or has available a sufficient number of shares of
its Common Stock to permit exercise of all outstanding
Warrants and until 5:00 p.m., New York City time, on May 20,
2004 (the "Expiration Date"), 327 fully paid and non
assessable shares of Common Stock (as such number may be
adjusted from time to time, the "Shares", which may also
include any other securities or property purchasable upon
exercise of a Warrant, such adjustment and inclusion each as
provided in the Warrant Agreement) at the exercise price
(the "Exercise Price") of $0.2063 per Share upon surrender
of this Warrant Certificate and payment of the Exercise
Price at any office or agency maintained for that purpose by
the Company (the "Warrant Agent Office"), subject to the
conditions set forth herein and in the Warrant Agreement.
The Exercise Price shall be payable in cash or by
certified or official bank check in the lawful currency of
the United States of America which as of the time of payment
is legal tender for payment of public or private debts. The
Company has initially designated its principal executive
offices in Lafayette, Louisiana, as the initial Warrant
Agent Office. The number of Shares issuable upon exercise
of the Warrants ("Exercise Rate") is subject to adjustment
upon the occurrence of certain events set forth in the
Warrant Agreement.
Any Warrants not exercised on or prior to 5:00
p.m., New York City time, on May 20, 2004 shall
thereafter be void.
Reference is hereby made to the further
provisions on the reverse hereof, which provisions
shall for all purposes have the same effect as though
fully set forth at this place. Capitalized terms
used in this Warrant Certificate but not defined
herein shall have the meanings ascribed thereto in
the Warrant Agreement.
This Warrant Certificate shall not be valid unless
authenticated by the Warrant Agent, as such term is
used in the Warrant Agreement. Initially, the
Company shall act as its own Warrant Agent.
THE WARRANTS REPRESENTED BY THIS WARRANT
CERTIFICATE SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
WITNESS the corporate seal of the Company and the
signatures of its duly authorized officers.
Dated: May 20, 1997
XCL LTD.
By:___________________________
Marsden W. Miller, Jr.
Chairman and Chief
Executive Officer
Attest:
By:_______________________________
David A. Melman
Secretary
Certificate of Authentication:
This is one of the Warrants
referred to in the within-
mentioned Warrant Agreement:
XCL LTD.,
as Warrant Agent
By:_____________________________
Authorized Signatory
GLOBAL WARRANT CERTIFICATE REVERSE
XCL LTD.
The Warrants evidenced by this Warrant
Certificate are part of a duly authorized issue of
Warrants, each of which represents the right to
purchase at any time on or after the later of May
20, 1998, or such date on which the Company has
reserved or has available a sufficient number of
shares of its Common Stock to permit exercise of
all outstanding Warrants and until 5:00 p.m., New
York City time, on May 20, 2004, 327 Shares,
subject to adjustment as set forth in the Warrant Agreement.
The Warrants are issued pursuant to a Warrant Agreement
dated as of May 20, 1997 (the "Warrant Agreement"),
duly executed and delivered by the Company for the
benefit of the holders from time to time of the Warrant
Certificates, which Warrant Agreement is hereby
incorporated by reference in and made a part of
this instrument and is hereby referred to for a
description of the rights, limitation of rights,
obligations, duties and immunities thereunder of
the Warrant Agent, the Company and the holders (the
words "holders" or holder" meaning the registered
holders or registered holder) of the Warrant
Certificates. Warrants may be exercised by
(i) surrendering at any Warrant Agent Office this
Warrant Certificate with the form of Election to
Exercise set forth hereon duly completed and
executed and (ii) paying in full the Warrant
Exercise Price for each such Warrant exercised and
any other amounts required to be paid pursuant to
the Warrant Agreement.
If all of the items referred to in the last
sentence of the preceding paragraph are received by
the Warrant Agent at or prior to 2:00 p.m., New
York City time, on a Business Day, the exercise of
the Warrant to which such items relate will be
effective on such Business Day. If any items
referred to in the last sentence of the preceding
paragraph are received after 2:00 p.m., New York
City time, on a Business Day, the exercise of the
Warrants to which such item relates will be deemed
to be effective on the next succeeding Business
Day. Notwithstanding the foregoing, in the case of
an exercise of Warrants on the Expiration Date, if
all of the items referred to in the last sentence
of the preceding paragraph are received by the
Warrant Agent at or prior to 5:00 p.m., New York
City time, on such Expiration Date, the exercise of
the Warrants to which such items relate will be
effective on the Expiration Date.
Subject to the terms of the Warrant Agreement,
as soon as practicable after the exercise of any
Warrant or Warrants, the Company shall issue or
cause to be issued to or upon the written order of
the registered holder of this Warrant Certificate,
a certificate or certificates evidencing the Share
or Shares to which such holder is entitled, in
fully registered form, registered in such name or
names as may be directed by such holder pursuant to
the Election to Exercise, as set forth on the
reverse of this Warrant Certificate. Such
certificate or certificates evidencing the Share or
Shares shall be deemed to have been issued and any
persons who are designated to be named therein
shall be deemed to have become the holder of record
of such Share or Shares as of the close of business
on the date upon which the exercise of this Warrant
was deemed to be effective as provided in the
preceding paragraph.
The Company will not be required to issue
fractional shares of Common Stock upon exercise of
the Warrants or distribute Share certificates that
evidence fractional shares of Common Stock. In
lieu of fractional shares of Common Stock, there
shall be paid to the registered Holder of this
Warrant Certificate at the time such Warrant
Certificate is exercised an amount in cash equal to
the same fraction of the current market price per
share of Common Stock as determined in accordance
with the Warrant Agreement.
Warrant Certificates, when surrendered at any
Warrant Agent Office by the holder thereof in
person or by legal representative or attorney duly
authorized in writing, may be exchanged for a new
Warrant Certificate or new Warrant Certificates
evidencing in the aggregate a like number of
Warrants, in the manner and subject to the
limitations provided in the Warrant Agreement,
without charge except for
any tax or other governmental charge imposed in
connection therewith.
Upon due presentment for registration of transfer
of this Warrant Certificate at any office or agency
maintained by the Company for that purpose, a new
Warrant Certificate evidencing in the aggregate a
like number of Warrants shall be issued to the
transferee in exchange for this Warrant
Certificate, subject to the limitations provided in
the Warrant Agreement, without charge except for
any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat
the registered holder hereof as the absolute owner
of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made
by anyone) for the purpose of any exercise hereof
and for all other purposes, and neither the Company
nor the Warrant Agent shall be affected by any
notice to the contrary.
The term "Business Day" shall mean any day on which
(i) banks in New Orleans, (ii) the principal
national securities exchange or market on which the
Common Stock is listed or admitted to trading and
(iii) the principal national securities exchange or
market, if any, on which the Warrants are listed or
admitted to trading are open for business.
ELECTION TO EXERCISE
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise
_______________ of the Warrants represented by this
Warrant Certificate and purchase the whole number
of Shares issuable upon the exercise of such
Warrants and herewith tenders payment for such
Shares in the amount of $_____in cash or by
certified or official bank check, in accordance
with the terms hereof. The undersigned requests
that a certificate representing such Shares be
registered in the name of _________________, whose
address is _____________, and that such certificate
be delivered to ____________, whose address is
____________________. Any cash payments to be paid
in lieu of a fractional Share should be made to
__________, whose address is _____________________,
and the check representing payment thereof should
be delivered to _______________, whose address is
_______________________.
Name of holder of
Warrant Certificate:_________________________
(Please Print)
Tax Identification or
Social Security Number:_________________________
Signature:_____________________________________
Note: The above signature must
correspond with the name as
written upon the face of this Warrant
Certificate in every
particular, without alteration
or enlargement or any change
whatever.
Dated ______________ , ___
<PAGE>
ASSIGNMENT
For value received,_________________________________ hereby sells,
assigns and transfers unto _________________________________ the within
Warrant Certificate, together with all right, title
and interest therein, and does hereby irrevocably
constitute and appoint _________________________________
attorney, to transfer said Warrant Certificate on the books of
the within-named Company, with full power of
substitution in the premises.
Dated _________________ , ____
Signature:________________________
Note: The above signature must
correspond with the name as
written upon the face of this
Warrant Certificate in every
particular, without alteration
or enlargement
or any change whatever.
ADDITIONAL WARRANT CERTIFICATE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT ASSET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1)REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" ( AS DEFINED IN RULE 501(a)(l), (2), (3) OR (7)
UNDER THE SECURITIES ACT)(AN "ACCREDITED INVESTOR") OR (C)
IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 903 OR 904
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO XCL
LTD. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR
FURNISHES ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE
COMPANY AND THE WARRANT AGENT A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE WARRANT AGENT AND THE COMPANY
SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS
AGREEMENT DATED AS OF MAY 20, 1997 BETWEEN THE COMPANY AND
JEFFERIES & COMPANY, INC., A COPY OF WHICH IS ON FILE WITH
THE SECRETARY OF THE COMPANY.
No. AR-1 12,755 Warrants
WARRANT CERTIFICATE
XCL LTD.
This Warrant Certificate certifies that Jefferies &
Company, Inc., or registered assigns, is the registered
holder of Twelve Thousand Seven Hundred Fifty-Five (12,755)
Warrants (the "Warrants") to purchase shares of Common
Stock, par value $0.01 per share (the "Common Stock"), of XCL
Ltd., a Delaware corporation (the "Company"). Each Warrant
entitles the holder to purchase from the Company at any time on
or after the later of May 20, 1998 or such date on which the
Company has reserved or has available a sufficient number of
shares of its Common Stock to permit exercise of all outstanding
Warrants and until 5:00 p.m., New York City time, on May 20, 2004
(the "Expiration Date"), 1,280 fully paid and non-assessable
shares of Common Stock (as such number may be adjusted from
time to time, the "Shares", which may also include any other
securities or property purchasable upon exercise of a
Warrant, such adjustment and inclusion each as provided in
the Warrant Agreement) at the exercise price (the "Exercise
Price") of $0.2063 per Share upon surrender of this Warrant
Certificate and payment of the Exercise Price at any office
or agency maintained for that purpose by the Company (the
"Warrant Agent Office"), subject to the conditions set forth
herein and in the Warrant Agreement.
The Exercise Price shall be payable in cash or by
certified or official bank check in the lawful currency of
the United States of America which as of the time of payment
is legal tender for payment of public or private debts. The
Company has initially designated its principal executive
offices inLafayette, Louisiana, as the initial Warrant Agent
Office. The number of Shares issuable upon exercise of the
Warrants ("Exercise Rate") is subject to adjustment upon the
occurrence of certain events set forth in the Warrant
Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New
York City time, on May 20, 2004 shall thereafter be void.
Reference is hereby made to the further provisions on
the reverse hereof, which provisions shall for all purposes
have the same effect as though fully set forth at this
place. Capitalized terms used in this Warrant Certificate
but not defined herein shall have the meanings ascribed
thereto in the Warrant Agreement.
This Warrant Certificate shall not be valid unless
authenticated by the Warrant Agent, as such term is used in
the Warrant Agreement. Initially, the Company shall act as
its own Warrant Agent.
THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
WITNESS the corporate seal of the Company and the
signatures of its duly authorized officers.
Dated: May 20, 1997
XCL LTD.
By:_______________________
Marsden W. Miller, Jr.
Chairman and Chief Executive
Officer
Attest:
By:_______________________________
David A. Melman
Secretary
Certificate of Authentication:
This is one of the Warrants
referred to in the within-
mentioned Warrant Agreement:
XCL LTD.,
as Warrant Agent
By:_____________________________
David A. Melman
<PAGE>
GLOBAL WARRANT CERTIFICATE
REVERSE
XCL LTD.
The Warrants evidenced by this Warrant Certificate are
part of a duly authorized issue of Warrants, each of which
represents the right to purchase at any time on or after the
later of May 20, 1998, or such date on which the Company has
reserved or has available a sufficient number of shares of its
Common Stock to permit exercise of all outstanding Warrants and
until 5:00 p.m., New York City time, on May 20, 2004, 1,280
Shares, subject to adjustment as set forth in the Warrant
Agreement. The Warrants are issued pursuant to a Warrant
Agreement dated as of May 20, 1997 (the "Warrant Agreement"),
duly executed and delivered by the Company for the benefit of
the holders from time to time of the Warrant Certificates,
which Warrant Agreement is hereby incorporated by reference in
and made a part of this instrument and is hereby referred to
for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Warrant
Agent, the Company and the holders (the words "holders" or
holder" meaning the registered holders or registered holder) of
the Warrant Certificates. Warrants may be exercised by (i)
surrendering at any Warrant Agent Office this Warrant
Certificate with the form of Election to Exercise set forth
hereon duly completed and executed and (ii) paying in full the
Warrant Exercise Price for each such Warrant exercised and any
other amounts required to be paid pursuant to the Warrant
Agreement.
If all of the items referred to in the last sentence of
the preceding paragraph are received by the Warrant Agent at or
prior to 2:00 p.m., New York City time, on a Business Day, the
exercise of the Warrant to which such items relate will be
effective on such Business Day. If any items referred to in
the last sentence of the preceding paragraph are received after
2:00 p.m., New York City time, on a Business Day, the exercise
of the Warrants to which such item relates will be deemed to be
effective on the next succeeding Business Day. Notwithstanding
the foregoing, in the case of an exercise of Warrants on the
Expiration Date, if all of the items referred to in the last
sentence of the preceding paragraph are received by the Warrant
Agent at or prior to 5:00 p.m., New York City time, on such
Expiration Date, the exercise of the Warrants to which such
items relate will be effective on the Expiration Date.
Subject to the terms of the Warrant Agreement, as soon as
practicable after the exercise of any Warrant or Warrants, the
Company shall issue or cause to be issued to or upon the
written order of the registered holder of this Warrant
Certificate, a certificate or certificates evidencing the Share
or Shares to which such holder is entitled, in fully registered
form, registered in such name or names as may be directed by
such holder pursuant to the Election to Exercise, as set forth
on the reverse of this Warrant Certificate. Such certificate
or certificates evidencing the Share or Shares shall be deemed
to have been issued and any persons who are designated to be
named therein shall be deemed to have become the holder of record
of such Share or Shares as of the close of business on the date
upon which the exercise of this Warrant was deemed to be
effective as provided in the preceding paragraph.
The Company will not be required to issue fractional
shares of Common Stock upon exercise of the Warrants or
distribute Share certificates that evidence fractional shares
of Common Stock. In lieu of fractional shares of Common Stock,
there shall be paid to the registered Holder of this Warrant
Certificate at the time such Warrant Certificate is exercised
an amount in cash equal to the same fraction of the current
market price per share of Common Stock as determined in
accordance with the Warrant Agreement.
Warrant Certificates, when surrendered at any Warrant
Agent Office by the holder thereof in person or by legal
representative or attorney duly authorized in writing, may be
exchanged for a new Warrant Certificate or new Warrant
Certificates evidencing in the aggregate a like number of
Warrants, in the manner and subject to the limitations provided
in the Warrant Agreement, without charge except for any tax or
other governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this
Warrant Certificate at any office or agency maintained by the
Company for that purpose, a new Warrant Certificate evidencing
in the aggregate a like number of Warrants shall be issued to
the transferee in exchange for this Warrant Certificate,
subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder hereof as the absolute owner of this Warrant
Certificate (notwithstanding any notation of ownership or other
writing hereon made by anyone) for the purpose of any exercise
hereof and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the
contrary.
The term "Business Day" shall mean any day on which (i)
banks in New Orleans, (ii) the principal national securities
exchange or market on which the Common Stock is listed or
admitted to trading and (iii) the principal national securities
exchange or market, if any, on which the Warrants are listed or
admitted to trading are open for business.
<PAGE>
ELECTION TO EXERCISE
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise
_______________ of the Warrants represented by this Warrant
Certificate and purchase the whole number of Shares issuable
upon the exercise of such Warrants and herewith tenders payment
for such Shares in the amount of $_____in cash or by certified
or official bank check, in accordance with the terms hereof.
The undersigned requests that a certificate representing such
Shares be registered in the name of _________________, whose
address is _____________, and that such certificate be
delivered to ____________, whose address is
____________________. Any cash payments to be paid in lieu of
a fractional Share should be made to __________, whose address
is _____________________, and the check representing payment
thereof should be delivered to _______________, whose address
is _______________________.
Name of holder of
Warrant Certificate:
________________________________
(Please Print)
Tax Identification or
Social Security Number:____________________________
Signature: _________________________________________
Note: The above signature must
correspond with the name as
written upon the face of this
Warrant Certificate in every
particular, without alteration or
enlargement or any change
whatever.
Dated ______________ , ___
<PAGE>
ASSIGNMENT
For value received, _________________________________
hereby sells, assigns and transfers unto
_________________________________ the within Warrant
Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
_________________________________ attorney, to transfer said
Warrant Certificate on the books of the within-named Company,
with full power of substitution in the premises.
Dated _________________ , ____
Signature:_________________________________
Note: The above signature must
correspond with the name as
written upon the face of this
Warrant Certificate in every
particular, without alteration or
enlargement or any change
whatever.
XCL LTD.
the Issuer
and
FLEET NATIONAL BANK,
as Trustee
INDENTURE
Dated as of May 20, 1997
$75,000,000
13.50% Senior Secured Notes due May 1, 2004, Series A
13.50% Senior Secured Notes due May 1, 2004, Series B
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
310(a)(1) 7.10
(a)(2) 7.10, 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.08, 7.10
(b) 7.08, 7.10
11.02
(c) N.A.
311(a) 7.11
(b) 7.11
(c) N.A.
312(a) 2.05
(b) 10.03
(c) 10.03
313(a) 7.06
(b)(1) N.A.
(b)(2) 7.06
(c) 7.06, 10.02
(d) 7.06
314(a) 4.07, 4.08
10.02
(b) 11.02
(c)(1) 10.04
(c)(2) 10.04
(c)(3) N.A.
(d) 11.04
(e) 10.05
(f) N.A.
315(a) 7.01(b)
(b) 7.05, 10.02
(c) 7.01(a)
(d) 7.01(c)
(e) 6.11
316(a) (last sentence) 2.09
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
(c) 9.04
317(a)(1) 6.08
(a)(2) 6.09
(b) 2.04
318(a) 10.01
(c) 10.01
- ----------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Definitions 1
Section 1.02 Incorporation by Reference
of TIA 27
Section 1.03 Rules of Construction 27
ARTICLE TWO
THE NOTES
Section 2.01 Form and Dating 28
Section 2.02 Execution and Authentication;
Aggregate Principal Amount 30
Section 2.03 Registrar and Paying Agent 31
Section 2.04 Paying Agent To Hold Assets
in Trust 31
Section 2.05 Holder Lists 32
Section 2.06 Transfer and Exchange 32
Section 2.07 Replacement Notes 32
Section 2.08 Outstanding Notes 33
Section 2.09 Treasury Notes 33
Section 2.10 Temporary Notes 33
Section 2.11 Cancellation 34
Section 2.12 Defaulted Interest. 34
Section 2.13 CUSIP Numbers. 35
Section 2.14 Deposit of Monies 35
Section 2.15 Restrictive Legends 35
Section 2.16 Book-Entry Provisions for
Global Security 37
Section 2.17 Special Transfer Provisions 38
Section 2.18 Additional Interest Under
Registration Rights Agreement 41
ARTICLE THREE
REDEMPTION
Section 3.01 Notices to Trustee 41
Section 3.02 Selection of Notes To Be
Redeemed 41
Section 3.03 Optional Redemption 41
Section 3.04 Mandatory Redemption. 42
Section 3.05 Notice of Redemption. 42
Section 3.06 Effect of Notice of Redemption 43
Section 3.07 Deposit of Redemption Price 44
Section 3.08 Notes Redeemed in Part 44
ARTICLE FOUR
COVENANTS
Section 4.01 Payment of Notes 44
Section 4.02 Maintenance of Office or
Agency 45
Section 4.03 Corporate Existence 45
Section 4.04 Payment of Taxes and Other
Claims 45
Section 4.05 Maintenance of Properties and
Insurance 45
Section 4.06 Compliance Certificate; Notice
of Default 46
Section 4.07 Compliance with Laws 47
Section 4.08 Reports to Holders 47
Section 4.09 Waiver of Stay, Extension or
Usury Laws 47
Section 4.10 Limitation on Restricted
Payments 47
Section 4.11 Limitation on Transactions with
Affiliates 50
Section 4.12 Limitation on Incurrence of
Additional Indebtedness 51
Section 4.13 Limitation on Dividend and
Other Payment Restrictions
Affecting Restricted
Subsidiaries 52
Section 4.14 Limitation on Restricted and
Unrestricted Subsidiaries 52
Section 4.15 Change of Control 54
Section 4.16 Limitation on Asset Sales 56
Section 4.17 Limitation on Capital Stock of
Restricted Subsidiaries 59
Section 4.18 Limitations on Liens 59
Section 4.19 Limitation on Conduct of
Business 59
Section 4.20 Additional Subsidiary
Guarantees. 60
Section 4.21 Payment of Existing Secured
Debt. 60
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01 Merger, Consolidation and Sale
of Assets 60
Section 5.02 Successor Corporation
Substituted 62
ARTICLE SIX
REMEDIES
Section 6.01 Events of Default 62
Section 6.02 Acceleration 64
Section 6.03 Other Remedies 65
Section 6.04 Waiver of Past Defaults 65
Section 6.05 Control by Majority 65
Section 6.06 Limitation on Suits 66
Section 6.07 Right of Holders to Receive
Payment 66
Section 6.08 Collection Suit by Trustee 66
Section 6.09 Trustee May File Proofs of
Claim 66
Section 6.10 Priorities 67
Section 6.11 Undertaking for Costs 67
Section 6.12 Restoration of Rights and
Remedies 68
ARTICLE SEVEN
TRUSTEE
Section 7.01 Duties of Trustee 68
Section 7.02 Rights of Trustee 69
Section 7.03 Individual Rights of Trustee 70
Section 7.04 Trustee's Disclaimer 70
Section 7.05 Notice of Default 70
Section 7.06 Reports by Trustee to Holders 71
Section 7.07 Compensation and Indemnity 71
Section 7.08 Replacement of Trustee 72
Section 7.09 Successor Trustee by Merger,
Etc. 73
Section 7.10 Eligibility; Disqualification 73
Section 7.11 Preferential Collection of
Claims Against Company 73
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.01 Termination of Company's
Obligations 74
Section 8.02 Application of Trust Money 76
Section 8.03 Repayment to the Company 76
Section 8.04 Reinstatement 76
Section 8.05 Acknowledgment of Discharge by
Trustee 77
ARTICLE NINE
MODIFICATION OF THE INDENTURE
Section 9.01 Without Consent of Holders 77
Section 9.02 With Consent of Holders 78
Section 9.03 Compliance with TIA 78
Section 9.04 Revocation and Effect of
Consents 78
Section 9.05 Notation on or Exchange of
Notes 79
Section 9.06 Trustee 79
ARTICLE TEN
MISCELLANEOUS
Section 10.01 TIA Controls 80
Section 10.02 Notices 80
Section 10.03 Communications by Holders
with Other Holders 81
Section 10.04 Certificate and Opinion as to
Conditions Precedent 81
Section 10.05 Statements Required in
Certificate or Opinion 82
Section 10.06 Rules by Trustee, Paying
Agent, Registrar 82
Section 10.07 Legal Holidays 82
Section 10.08 Governing Law 83
Section 10.09 No Adverse Interpretation of
Other Agreements. 83
Section 10.10 No Personal Liability 83
Section 10.11 Successors 83
Section 10.12 Duplicate Originals 83
Section 10.13 Severability 83
Section 10.14 Independence of Covenants 84
ARTICLE ELEVEN
SECURITY
Section 11.01 Grant of Security Interest. 84
Section 11.02 Execution of Intercreditor
Agreement. 84
Section 11.03 Recording and Opinions 84
Section 11.04 Release of Collateral. 85
Section 11.05 Specified Releases of
Collateral 86
Section 11.06 Form and Sufficiency of
Release 87
Section 11.07 Purchase Protected 87
Section 11.08 Authorization of Actions To
Be Taken by the Trustee Under
the Security Documents 88
Section 11.09 Authorization of Receipt of
Funds by the Trustee Under
the 88
Section 11.10 Collateral Account 88
ARTICLE TWELVE
GUARANTEE
Section 12.01 Unconditional Guarantee 89
Section 12.02 Limitations on Subsidiary
Guarantees 90
Section 12.03 Execution and Delivery of
Subsidiary Guarantee 90
Section 12.04 Release of a Subsidiary
Guarantor. 91
Section 12.05 Waiver of Subrogation 92
Section 12.06 Immediate Payment 92
Section 12.07 No Set-Off 92
Section 12.08 Obligations Absolute. 93
Section 12.09 Obligations Continuing. 93
Section 12.10 Obligations Not Reduced. 93
Section 12.11 Obligations Reinstated. 93
Section 12.12 Obligations Not Affected. 94
Section 12.13 Waiver. 95
Section 12.14 No Obligation To Take Action
Against the Company. 95
Section 12.15 Dealing with the Company and
Others. 95
Section 12.16 Default and Enforcement. 96
Section 12.17 Amendment, Etc. 96
Section 12.18 Acknowledgment.
Section 12.19 Costs and Expenses. 96
Section 12.20 No Merger or Waiver; Cumulative
Remedies. 97
Section 12.21 Survival of Obligations. 97
Section 12.22 Subsidiary Guarantee in Addition
to Other Obligations. 97
Section 12.23 Severability. 97
Section 12.24 Successors and Assigns. 97
SIGNATURES 96
EXHIBITS
Exhibit A - Initial Note
Exhibit B - Exchange Note
Exhibit C - Pledge Agreement
Exhibit D - Certificate re transfer to Institutional
Accredited Investor
Exhibit E - Certificate re transfer to Non-U.S. Person
Exhibit F - Disbursement Agreement
Exhibit G - Intercreditor Agreement
Exhibit H - Registration Rights Agreement
Exhibit I - Security Agreement
Exhibit J - Notation of Subsidiary Guarantee
<PAGE>
INDENTURE, dated as of May 20, 1997, between XCL Ltd., a
Delaware corporation (the "Company"), and Fleet National Bank, as
Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of
13.50% Senior Secured Notes due May 1, 2004, Series A (the
"Initial Notes") and 13.50% Senior Secured Notes due May 1, 2004,
Series B to be issued in exchange for the Initial Notes pursuant
to the Registration Rights Agreement (as defined herein) (the
"Exchange Notes" and, together with the Private Exchange Notes
(as defined herein) and the Initial Notes, the "Notes") and, to
provide therefor, the Company has duly authorized the execution
and delivery of this Indenture. The Notes will be secured by a
first lien and security interest in the Collateral (as defined
below) maintained with the Disbursement Agent (as defined below)
pursuant to the terms of the Cash Collateral and Disbursement
Agreement (as defined below). Upon satisfaction of certain
conditions precedent, the Notes will also be secured by a pledge
of all of outstanding capital stock of XCL-China Ltd., a British
Virgin Islands company wholly owned by the Company ("XCL-China")
and all other then existing Restricted Subsidiaries (as defined
below) of the Company, subject to release of such collateral as
provided herein, and by the unconditional guarantee of payment
thereof by XCL-China and such Restricted Subsidiaries as herein
provided. All things necessary to make the Notes, when duly
issued and executed by the Company, and authenticated and
delivered hereunder, the valid obligations of the Company, and to
make this Indenture a valid and binding agreement of the Company,
have been done.
Each party hereto agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the Holders
of the Notes, without preference of one series of the Notes over
the other.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions.
"Acquired Indebtedness" means Indebtedness of a Person or
any of its Subsidiaries (i) existing at the time such Person
becomes a Restricted Subsidiary or at the time it merges or
consolidates with the Company or any of its Restricted
Subsidiaries or (ii) which becomes Indebtedness of the Company or
a Restricted Subsidiary in connection with the acquisition of
assets from such Person, in each case not incurred in connection
with, or in anticipation or contemplation of, such Person
becoming a Restricted Subsidiary or such acquisition, merger or
consolidation.
"Additional Interest" shall have the meaning set forth in
the Registration Rights Agreement.
"Adjusted Consolidated Net Tangible Assets" means (without
duplication), as of the date of determination, (a) the sum of (i)
discounted future net revenues from proved oil and gas reserves
of the Company and its Restricted Subsidiaries, calculated in
accordance with Commission guidelines (before any state or
federal income tax), as estimated by a nationally recognized firm
of independent petroleum engineers in a reserve report prepared
as of the end of the Company's most recently completed fiscal
year, as increased by, as of the date of determination, the
estimated discounted future net revenues from (A) estimated
proved oil and gas reserves acquired since the date of such year-
end reserve report, and (B) estimated oil and gas reserves
attributable to upward revisions of estimates of proved oil and
gas reserves since the date of such year-end reserve report due
to exploration, development or exploitation activities, in each
case calculated in accordance with Commission guidelines
(utilizing the prices utilized in such year-end reserve report),
and decreased by, as of the date of determination, the estimated
discounted future net revenues from (C) estimated proved oil and
gas reserves produced or disposed of since the date of such year-
end reserve report and (D) estimated oil and gas reserves
attributable to downward revisions of estimates of proved oil and
gas reserves since the date of such year-end reserve report due
to changes in geological conditions or other factors which would,
in accordance with standard industry practice, cause such
revisions, in each case calculated in accordance with Commission
guidelines (utilizing the prices utilized in such year-end
reserve report); provided, however, that, in the case of each of
the determinations made pursuant to clauses (A) through (D), such
increases and decreases shall be as estimated by the Company's
petroleum engineers, unless in the event that there is a Material
Change as a result of such acquisitions, dispositions or
revisions, then the discounted future net revenues utilized for
purposes of this clause (a)(i) shall be confirmed in writing, by
a nationally recognized firm of independent petroleum engineers
plus (ii) the capitalized costs that are attributable to oil and
gas properties of the Company and its Restricted Subsidiaries to
which no proved oil and gas reserves are attributable, based on
the Company's books and records as of a date no earlier than the
date of the Company's latest annual or quarterly financial
statements, plus (iii) the Net Working Capital on a date no
earlier than the date of the Company's latest consolidated annual
or quarterly financial statements plus (iv) with respect to each
other tangible asset of the Company or its Restricted
Subsidiaries, specifically including, but not to the exclusion of
any other qualifying tangible assets, the Company's or its
Restricted Subsidiaries' oil and gas producing facilities and
unproved oil and gas properties (less any remaining deferred
income taxes which have been allocated to such oil and gas
producing facilities in connection with the acquisition thereof),
land, equipment, leasehold improvements, investments carried on
the equity method, restricted cash and the carrying value of
marketable securities, the greater of (A) the net book value of
such other tangible asset on a date no earlier than the date of
the Company's latest consolidated annual or quarterly financial
statements or (B) the appraised value, as estimated by an
Independent Advisor, of such other tangible assets of the Company
and its Restricted Subsidiaries, as of a date no earlier than the
date of the Company's latest audited financial statements minus
(b) the sum of (i) minority interests, (ii) any gas balancing
liabilities of the Company and its Restricted Subsidiaries
reflected in the Company's latest audited financial statements,
(iii) to the extent included in (a)(i) above, the discounted
future net revenues, calculated in accordance with Commission
guidelines (utilizing the prices utilized in the Company's year-
end reserve report), attributable to reserves which are required
to be delivered to third parties to fully satisfy the obligations
of the Company and its Restricted Subsidiaries with respect to
Volumetric Production Payments on the schedules specified with
respect thereto and (iv) the discounted future net revenues,
calculated in accordance with Commission guidelines, attributable
to reserves subject to Dollar-Denominated Production Payments
which, based on the estimates of production and price assumptions
included in determining the discounted future net revenues
specified in (a)(i) above, would be necessary to fully satisfy
the payment obligations of the Company and its Restricted
Subsidiaries with respect to Dollar-Denominated Production
Payments on the schedules specified with respect thereto. If the
Company changes its method of accounting from the full cost
method to the successful efforts method or a similar method of
accounting, "Adjusted Consolidated Net Tangible Assets" will
continue to be calculated as if the Company was still using the
full cost method of accounting. In addition to, but without
duplication of, the foregoing, for purposes of this definition,
"Adjusted Consolidated Net Tangible Assets" shall be calculated
after giving effect, on a pro forma basis, to (1) any Investment
not prohibited by this Indenture, to and including the date of
the transaction giving rise to the need to calculate Adjusted
Consolidated Net Tangible Assets (the "Assets Transaction Date"),
in any other Person that, as a result of such Investment, becomes
a Restricted Subsidiary of the Company, (2) the acquisition, to
and including the Assets Transaction Date (by merger,
consolidation or purchase of stock or assets), of any business or
assets, including, without limitation, Permitted Industry
Investments, and (3) any sales or other dispositions of assets
permitted by this Indenture (other than sales of Hydrocarbons or
other mineral products in the ordinary course of business)
occurring on or prior to the Assets Transaction Date.
"Affiliate" means, with respect to any specified Person, (a)
any other Person who directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, such specified Person and (b) any Related Person of
such Person. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of
the foregoing.
"Affiliate Transaction" has the meaning provided in Section
4.11.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.16.
"Asset Acquisition" means (a) an Investment by the Company
or any Restricted Subsidiary in any other Person pursuant to
which such Person shall become a Restricted Subsidiary, or shall
be merged with or into the Company or any Restricted Subsidiary,
or (b) the acquisition by the Company or any Restricted
Subsidiary of the properties and assets of any Person (other than
a Restricted Subsidiary) which constitute all or substantially
all of the properties and assets of such Person or comprises any
division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary
course of business.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, exchange, lease (other than operating
leases entered into in the ordinary course of business),
assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Wholly
Owned Restricted Subsidiary of (a) any Capital Stock of any
Restricted Subsidiary; or (b) any other property or assets
(including any interests therein) of the Company or any
Restricted Subsidiary, including any disposition by means of a
merger, consolidation or similar transaction; provided, however,
that Asset Sales shall not include (i) the sale, lease,
conveyance, disposition or other transfer of all or substantially
all of the properties and assets of the Company in a transaction
which is made in compliance with the provisions of Section 5.01,
(ii) any Investment in an Unrestricted Subsidiary which is made
in compliance with the provisions of Section 4.10, (iii)
disposals or replacements of obsolete equipment in the ordinary
course of business, (iv) the sale, lease, conveyance, disposition
or other transfer (each, a "Transfer") by the Company or any
Restricted Subsidiary of assets or property to the Company or one
or more Wholly Owned Restricted Subsidiaries, (v) any disposition
of Hydrocarbons or other mineral products for value in the
ordinary course of business, (vi) the Transfer of the Company's
interests in the Lutcher Moore Tract or the Cox Field (both as
defined in the Offering Memorandum), and (vii) the Transfer by
the Company or any Restricted Subsidiary of other assets or
property in the ordinary course of business; provided, however,
that the aggregate amount (valued at the Fair Market Value of
such assets or property at the time of such Transfer) of all such
assets and property Transferred since the Issue Date pursuant to
this clause (vii) shall not exceed $1,000,000 in any one year.
"Authenticating Agent" has the meaning provided in Section
2.02.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal, state or foreign law for the relief of debtors.
"Board of Directors" means, as to any Person, the board of
directors of such Person or any duly authorized committee
thereof.
"Board Resolution" means, with respect to any Person, a copy
of a resolution certified by the Secretary or an Assistant
Secretary of such Person to have been duly adopted by the Board
of Directors of such Person and be in full force and effect on
the date of such certification, and delivered to the Trustee.
"Business Day" means any day other than a Saturday, Sunday
or any other day on which banking institutions in the Cities of
New York, New York, Hartford, Connecticut, or Boston,
Massachusetts are required or authorized by law or other
governmental action to be closed.
"Capitalized Interest Account" has the meaning given to such
term in the Disbursement Agreement.
"Capitalized Lease Obligation" means, as to any Person, the
discounted present value of the rental obligations of such Person
under a lease of (or other agreement conveying the right to use)
any property (whether real, personal or mixed) that is required
to be classified and accounted for as a capital lease obligation
at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is
a corporation, any and all shares, interests, participations or
other equivalents (however designated and whether or not voting)
of capital stock, including each class of Common Stock and
Preferred Stock of such Person and including any rights, warrants
or options to acquire any of the foregoing and instruments
convertible into any of the foregoing and (ii) with respect to
any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Cash Equivalents" means (a) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States
Government or issued by any agency thereof and backed by the full
faith and credit of the United States, in each case maturing
within six months from the date of acquisition thereof; (b)
marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state
or any public instrumentality thereof maturing within six months
from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable
from either S&P or Moody's; (c) commercial paper maturing no more
than one year from the date of creation thereof and, at the time
of acquisition, having a rating of at least A-1 from S&P or at
least P-1 from Moody's; (d) certificates of deposit or bankers'
acceptances maturing within one year from the date of acquisition
thereof issued by any bank organized under the laws of the United
States of America or any state thereof or the District of
Columbia or any United States branch of a foreign bank having at
the date of acquisition thereof combined capital and surplus of
not less than $250,000,000; (e) repurchase obligations with a
term of not more than seven days for underlying securities of the
types described in clause (a) above entered into with any bank
meeting the qualifications specified in clause (d) above; (f)
money market mutual or similar funds having assets in excess of
$100,000,000; and (g) investments in money market funds
registered under the Investment Company Act of 1940, as amended,
substantially all of whose assets are limited to United States
government obligating and United States Agency obligations.
"Change of Control" means the occurrence of one or more of
the following events: (a) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions)
of all or substantially all of the properties and assets of the
Company (determined on a consolidated basis for the Company and
its Restricted Subsidiaries), whether as an entirety or
substantially as an entirety to any Person or group of related
Persons for purposes of Section 13(d) of the Exchange Act (a
"Group") (whether or not otherwise in compliance with the
provisions of this Indenture); (b) the approval by the holders of
Capital Stock of the Company of any plan or proposal for the
liquidation or dissolution of the Company (whether or not
otherwise in compliance with the provisions of this Indenture);
(c) any Person or Group shall become the owner, directly or
indirectly, beneficially or of record, of shares representing
more than 35% of the aggregate ordinary voting power represented
by the issued and outstanding Capital Stock of the Company; or
(d) the replacement of a majority of the Board of Directors of
the Company over a two-year period from the directors who
constituted the Board of Directors of the Company at the
beginning of such period with directors whose replacement shall
not have been approved (by recommendation, nomination or
election, as the case may be) by a vote of at least a majority of
the Board of Directors of the Company then still in office who
either were members of such Board of Directors at the beginning
of such period or whose election as a member of such Board of
Directors was previously so approved.
"Change of Control Offer" has the meaning provided in
Section 4.15.
"Change of Control Payment Date" has the meaning provided in
Section 4.15.
"Change of Control Purchase Price" has the meaning provided
in Section 4.15.
"Collateral" shall have the meaning set forth in Section
11.02.
"Collateral Accounts" shall have the meaning set forth in
the Disbursement Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means any and all shares,
interests or other participations in, and other equivalents
(however designated and whether voting or non-voting) of such
Person's common stock, whether outstanding on the Issue Date or
issued after the Issue Date, and includes, without limitation,
all series and classes of such common stock.
"Company" means XCL Ltd., a Delaware corporation, until a
successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"Company Properties" means all properties and assets, and
equity, partnership or other ownership interests therein, that
are related or incidental to, or used or useful in connection
with, the conduct or operation of any business activities of the
Company or the Subsidiaries, which business activities are not
prohibited by the terms of this Indenture.
"Consolidated EBITDA" means, for any period, the sum
(without duplication) of (a) Consolidated Net Income and (b) to
the extent Consolidated Net Income has been reduced thereby, (i)
all income taxes of the Company and its Restricted Subsidiaries
paid or accrued in accordance with GAAP for such period (other
than income taxes attributable to extraordinary, unusual or
nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business), (ii)
Consolidated Interest Expense, (iii) the amount of any Preferred
Stock dividends paid by the Company and its Restricted
Subsidiaries and (iv) Consolidated Non-cash Charges, less any
non-cash items increasing Consolidated Net Income for such
period, all as determined on a consolidated basis for the Company
and its Restricted Subsidiaries in accordance with GAAP.
"Consolidated EBITDA Coverage Ratio" means, with respect to
the Company, the ratio of (a) Consolidated EBITDA of the Company
during the four full fiscal quarters for which financial
information in respect thereof is available (the "Four Quarter
Period") ending on or prior to the date of the transaction giving
rise to the need to calculate the Consolidated EBITDA Coverage
Ratio (the "Transaction Date") to (b) Consolidated Fixed Charges
of the Company for the Four Quarter Period. In addition to and
without limitation of the foregoing, for purposes of this
definition, "Consolidated EBITDA" and "Consolidated Fixed
Charges" shall be calculated after giving effect (without
duplication) on a pro forma basis for the period of such
calculation to (a) the incurrence or repayment of any
Indebtedness of the Company or any of its Restricted Subsidiaries
(and the application of the proceeds thereof), giving rise to the
need to make such calculation and any incurrence or repayment of
other Indebtedness (and the application of the proceeds thereof),
other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant
to working capital facilities, occurring during the Four Quarter
Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if
such incurrence or repayment, as the case may be (and the
application of the proceeds thereof), occurred on the first day
of the Four Quarter Period and (b) any Asset Sales or Asset
Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a
result of the Company or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise
being liable for Acquired Indebtedness, and also including,
without limitation, any Consolidated EBITDA attributable to the
properties or assets which are the subject of the Asset
Acquisition or Asset Sale during the Four Quarter Period)
occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such Asset Sale or Asset
Acquisition (including the incurrence, assumption or liability
for any such Acquired Indebtedness) occurred on the first day of
the Four Quarter Period. If the Company or any of its Restricted
Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the
incurrence of such guaranteed Indebtedness as if the Company or
the Restricted Subsidiary, as the case may be, had directly
incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator)
of this "Consolidated EBITDA Coverage Ratio," (i) interest on
outstanding Indebtedness determined on a fluctuating basis as of
the Transaction Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per
annum equal to the rate of interest on such Indebtedness in
effect on the Transaction Date; (ii) if interest on any
Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor
of a prime or similar rate, a eurocurrency interbank offered
rate, or other rates, then the interest rate in effect on the
Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (iii) notwithstanding clauses (i) and
(ii) above, interest on Indebtedness determined on a fluctuating
basis, to the extent such interest is covered by agreements
relating to Interest Swap Obligations, shall be deemed to accrue
at the rate per annum resulting after giving effect to the
operation of such agreements.
"Consolidated Fixed Charges" means, with respect to the
Company for any period, the sum, without duplication, of (a)
Consolidated Interest Expense (including any premium or penalty
paid in connection with redeeming or retiring Indebtedness of the
Company and its Restricted Subsidiaries prior to the stated
maturity thereof pursuant to the agreements governing such
Indebtedness), plus (b) the product of (i) the amount of all
dividend payments on any series of Preferred Stock of the Company
(other than dividends paid in Qualified Capital Stock) paid,
accrued or scheduled to be paid or accrued during such period
times (ii) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective
consolidated federal, state and local income tax rate of the
Company, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to the
Company for any period, the sum of, without duplication: (a) the
aggregate of the interest expense of the Company and its
Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, including without
limitation, (i) any amortization of original issue discount, (ii)
the net costs under Interest Swap Obligations, (iii) all
capitalized interest and (iv) the interest portion of any
deferred payment obligation; and (b) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to
be paid or accrued by the Company and its Restricted Subsidiaries
during such period, as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income" means, with respect to the Company
for any period, the aggregate net income (or loss) of the Company
and its Restricted Subsidiaries for such period on a consolidated
basis, determined in accordance with GAAP; provided, however,
that there shall be excluded therefrom (a) after-tax gains from
Asset Sales or abandonments or reserves relating thereto, (b)
after-tax items classified as extraordinary or nonrecurring
gains, (c) the net income of any Person acquired in a "pooling of
interests" transaction accrued prior to the date it becomes a
Restricted Subsidiary or is merged or consolidated with the
Company or any Restricted Subsidiary, (d) the net income (but not
loss) of any Restricted Subsidiary to the extent that the
declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is restricted by charter,
contract, operation of law or otherwise, (e) the net income of
any Person in which the Company has an interest, other than a
Restricted Subsidiary, except to the extent of cash dividends or
distributions actually paid to the Company or to a Restricted
Subsidiary by such Person, (f) income or loss attributable to
discontinued operations (including, without limitation,
operations disposed of during such period whether or not such
operations were classified as discontinued) and (g) in the case
of a successor to the Company by consolidation or merger or as a
transferee of the Company's properties and assets, any net income
(or loss) of the Surviving Entity prior to such consolidation,
merger or transfer of properties and assets.
"Consolidated Net Worth" of any Person as of any date means
the consolidated stockholders' equity of such Person, determined
on a consolidated basis in accordance with GAAP, less (without
duplication) amounts attributable to Disqualified Capital Stock
of such Person.
"Consolidated Non-cash Charges" means, with respect to the
Company, for any period, the aggregate depreciation, depletion,
amortization and other non-cash expenses of the Company and its
Restricted Subsidiaries reducing Consolidated Net Income of the
Company for such period, determined on a consolidated basis in
accordance with GAAP (excluding any such charges constituting an
extraordinary item or loss or any such charge which requires an
accrual of or a reserve for cash charges for any future period).
"consolidation" means, with respect to any Person, the
consolidation of the accounts of the Restricted Subsidiaries of
such Person with those of such Person, all in accordance with
GAAP; provided, however, that "consolidation" will not include
consolidation of the account of any Unrestricted Subsidiary of
such Person with the accounts of such Person. The term
"consolidated" has a correlative meaning to the foregoing.
"Corporate Trust Office" means the office of the Trustee at
which at any particular time its corporate trust business shall
be principally administered, which office at the date of
execution of this Indenture is located at 777 Main Street,
Hartford, Connecticut 06115.
"Covenant Defeasance" has the meaning set forth in Section
8.01.
"Crude Oil and Natural Gas Business" means (i) the
acquisition, exploration, development, operation and disposition
of interests in oil, gas and other Hydrocarbon properties, and
(ii) the gathering, marketing, treating, processing, storage,
selling and transporting of all production from such interests or
properties of the Company or of others.
"Crude Oil and Natural Gas Hedge Agreement" means, with
respect to any Person, any oil and gas agreement and other
agreements or arrangements or any combination thereof entered
into by such Person and that is designed to provide protection
against oil and natural gas price fluctuations.
"Crude Oil and Natural Gas Properties" means all properties,
including equity or other ownership interests therein, owned by
any Person which have been assigned "proved oil and gas reserves"
as defined in Rule 4-10 of Regulation S-X of the Securities Act
as in effect on the Issue Date.
"Crude Oil and Natural Gas Related Assets" means any
Investment or capital expenditure (but not including additions to
working capital or repayments of any revolving credit or working
capital borrowings) by the Company or any Restricted Subsidiary
of the Company which is related to the business of the Company
and its Restricted Subsidiaries as it is conducted on the date of
the Asset Sale giving rise to the Net Cash Proceeds to be
reinvested.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement
designed to protect the Company or any Restricted Subsidiary of
the Company against fluctuations in currency values.
"Custodian" means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bankruptcy
Law.
"Default" means an event or condition the occurrence of
which is, or with the lapse of time or the giving of notice or
both would be, an Event of Default.
"Default Interest Payment Date" has the meaning provided in
Section 2.12.
"Depository" means The Depository Trust Company, its
nominees and successors.
"Disbursement Agreement" means the Cash Collateral and
Disbursement Agreement of even date herewith by and among the
Company, Fleet National Bank, as Disbursement Agent, Fleet
National Bank, as Trustee, and Herman J. Schellstede &
Associates, Inc., as Representative, as amended and supplemented
from time to time in accordance with its terms, substantially in
the form attached hereto as Exhibit F, with such changes thereto
that do not have a material adverse effect on the Holders.
"Disbursement Agent" means the party named as such in the
Disbursement Agreement until a successor replaces it in
accordance with the provisions of the Disbursement Agreement and
thereafter means such successor.
"Disqualified Capital Stock" means that portion of any
Capital Stock which, by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is mandatorily redeemable at the sole option of the
holder thereof, in whole or in part, in either case, on or prior
to the final maturity of the Notes. The Company's shares of
Series A, Series B, Series E, Series F and Amended Series A
Preferred Stock shall not be deemed Disqualified Capital Stock.
"Dollar-Denominated Production Payments" means production
payment obligations recorded as liabilities in accordance with
GAAP, together with all undertakings and obligations in
connection therewith.
"Equity Offering" means an offering of Qualified Capital
Stock of the Company.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"Exchange Notes" has the meaning provided in the preamble to
this Indenture.
"Fair Market Value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length,
free market transaction, for cash, between an informed and
willing seller and an informed and willing buyer, neither of whom
is under undue pressure or compulsion to complete the
transaction. Fair Market Value shall be determined by the Board
of Directors of the Company acting reasonably and in good faith
and shall be evidenced by a Board Resolution of the Company
delivered to the Trustee; provided, however, that (a) if the
aggregate non-cash consideration to be received by the Company or
any Restricted Subsidiary from any Asset Sale shall reasonably by
expected to exceed $5,000,000 or (b) if the net worth of any
Restricted Subsidiary to be designated as an Unrestricted
Subsidiary shall reasonably be expected to exceed $10,000,000,
the Fair Market Value shall be determined by an Independent
Advisor.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board as of any date of determination.
"Global Note" has the meaning provided in Section 2.01.
"Global Note Legend" has the meaning provided in Section
2.15.
"guarantee" means any obligation, contingent or otherwise,
of any Person directly or indirectly guaranteeing any
Indebtedness or other obligation of any other Person and, without
limiting the generally of the foregoing, any obligation, direct
or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchaser or
payment of) such Indebtedness or other obligation of such other
Person (whether arising by virtue of partnership arrangements, or
by agreement to keep-well, to purchase assets, goods, securities
or services, to take-or-pay, or to maintain financial statements
conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part)
(but if in part, only to the extent thereof); provided, however,
that the term "guarantee" shall not include (a) endorsements for
collection or deposit in the ordinary course of business and (b)
guarantees (other than guarantees of Indebtedness) by the Company
in respect of assisting one or more Subsidiaries in the ordinary
course of their respective businesses, including without
limitation guarantees of trade obligations and operating leases,
on ordinary business terms. The term "guarantee" used as a verb
has a corresponding meaning.
"Holder" means any Person holding a Note.
"Hydrocarbons" means oil, gas, casinghead gas, drip
gasoline, natural gasoline, condensate, distillate, liquid
hydrocarbons, gaseous hydrocarbons, including, without
limitation, coal bed methane, and all constituents, elements or
compounds thereof and products processed therefrom.
"incur" has the meaning set forth in Section 4.12.
"Indebtedness" means, with respect to any Person, without
duplication (a) all Obligations of such Person for borrowed
money, (b) all Obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all
Capitalized Lease Obligations of such Person, (d) all Obligations
of such Person issued or assumed as the deferred purchase price
of property, all conditional sale obligations and all Obligations
under any title retention agreement (but excluding trade accounts
payable), (e) all Obligations of such Person for the
reimbursement of any obligor on a letter of credit, banker's
acceptance or similar credit transaction, (f) guarantees and
other contingent obligations of such Person in respect of
Indebtedness referred to in clauses (a) through (e) above and
clauses (h) and (i) below, (g) all Obligations of any Person of
the type referred to in clauses (a) through (f) above which are
secured by any Lien on any property or asset of such Person, the
amount of such Obligation being deemed to be the lesser of the
Fair Market Value of such property or asset or the amount of the
Obligation so secured, (h) all Obligations of such Person under
either Crude Oil and Natural Gas Hedging Agreements or Currency
Agreements and Interest Swap Obligations of such Person, (i) all
Obligations of such Person in respect of any Production Payment
or production imbalances and (j) all Disqualified Capital Stock
issued by such Person with the amount of Indebtedness represented
by such Disqualified Capital Stock being equal to the greater of
its voluntary or involuntary liquidation preference and its
maximum fixed Redemption Price or repurchase price. For purposes
hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Disqualified
Capital Stock as if such Disqualified Capital Stock were
purchased on any date on which Indebtedness shall be required to
be determined pursuant to this Indenture, and if such price is
based upon, or measured by, the Fair Market Value of such
Disqualified Capital Stock, such Fair Market Value shall be
determined reasonably and in good faith by the Board of Directors
of the Company. The "amount" or "principal amount" of
Indebtedness at any time of determination represented by (a) any
Indebtedness issued at a price that is less than the principal
amount at maturity thereof shall be the face amount of the
liability in respect thereof, (b) any Capitalized Lease
Obligation shall be the amount determined in accordance with the
definition thereof, (c) any Interest Swap Obligations or
Indebtedness under either Crude Oil and Natural Gas Hedging
Agreements or Currency Agreements included in the definition of
Permitted Indebtedness shall be zero, (d) all other unconditional
obligations shall be the amount of the liability thereof
determined in accordance with GAAP and (e) all other contingent
obligations shall be the maximum liability at such date of such
Person.
"Indenture" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof.
"Independent Advisor" means a reputable accounting,
appraisal or nationally recognized investment banking,
engineering or consulting firm (a) which does not, and whose
directors, officers and employees or Affiliates do not have a
direct or indirect material financial interest in the Company and
(b) which, in the judgment of the Board of Directors of the
Company, is otherwise disinterested, independent and qualified to
perform the task for which it is to be engaged.
"ING" means ING (U.S.) Capital Corporation (formerly known
as Internationale Nederlanden (U.S.) Capital Corporation).
"ING Credit Facility" means that certain Credit Agreement
dated January 31, 1994 by and among the Company, XCL-Texas, Inc.
and ING, as amended and supplemented from time to time.
"Initial Notes" has the meaning provided in the preamble to
this Indenture.
"Initial Purchaser" means Jefferies & Company, Inc.
"Institutional Accredited Investor" means an institution
that is an "accredited investor" as that term is defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act.
"Intercreditor Agreement" means that certain Intercreditor
Agreement of even date herewith by and among the Company, the
Trustee, ING and the Subordinated Debt Holders substantially in
the form attached hereto as Exhibit G, with such changes thereto
that do not have a material adverse effect on the Holders.
"interest" when used with respect to any Note means the
amount of all interest accruing on such Note, including
applicable defaulted interest pursuant to Section 2.12 and any
Additional Interest pursuant to the Registration Rights
Agreement.
"Interest Payment Date" means the stated maturity of an
installment of interest on the Notes.
"Interest Swap Obligations" means the obligations of any
Person pursuant to any arrangement with any other Person,
whereby, directly or indirectly, such Person is entitled to
receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a
stated notional amount in exchange for periodic payments made by
such other Person calculated by applying a fixed or a floating
rate of interest on the stated notional amount and shall include,
without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended to the date hereof and from time to time
hereafter.
"Investment" means, with respect to any Person, any direct
or indirect (i) loan, advance or other extension of credit
(including, without limitation, a guarantee) or capital
contribution to any Person (by means of any transfer of cash or
other property (valued at the Fair Market Value thereof as of the
date of transfer) to others or any payment of property or
services for the account or use of others), (ii) purchase or
acquisition by such Person of any Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness
issued by, any Person (whether by merger, consolidation,
amalgamation or otherwise and whether or not purchased directly
from the issuer of such securities or evidences of Indebtedness),
(iii) guarantee or assumption of the Indebtedness of any other
Person (other than the guarantee or assumption of Indebtedness of
such Person or a Restricted Subsidiary of such Person which
guarantee or assumption is made in compliance with the provisions
of Section 4.12), and (iv) other items that would be classified
as investments on a balance sheet of such Person prepared in
accordance with GAAP. Notwithstanding the foregoing,
"Investment" shall exclude extensions of trade credit by the
Company and its Restricted Subsidiaries on commercially
reasonable terms in accordance with normal trade practices of the
Company or such Restricted Subsidiary, as the case may be. The
amount of any Investment shall not be adjusted for increases or
decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment. If the Company or any Restricted
Subsidiary sells or otherwise disposes of any Capital Stock of
any Restricted Subsidiary such that, after giving effect to any
such sale or disposition, it ceases to be a Subsidiary of the
Company, the Company shall be deemed to have made an Investment
on the date of any such sale or disposition equal to the Fair
Market Value of the Capital Stock of such Restricted Subsidiary
not sold or disposed of.
"Issue Date" means the date of original issuance of the
Initial Notes.
"Legal Defeasance" has the meaning set forth in Section
8.01.
"Legal Holiday" has the meaning provided in Section 10.07.
"Lien" means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including
any conditional sale or other title retention agreement, any
lease in the nature thereof and any agreement to give any
security interest).
"Lube Oil Business" means (i) the acquisition, design,
construction, and operation of lubrication oil plants and the
distribution and marketing of lubrication oils in China and
Southeast Asia and (ii) the joint venture with CNPC United Lube
Oil Corporation with respect to the acquisition, design,
construction, and operation of other facilities for the down-
stream processing and treatment, refining, storage, selling and
transporting of refined products.
"Mandatory Redemption" has the meaning set forth in Section
3.04.
"Material Change" means an increase or decrease of more than
10% during a fiscal quarter in the discounted future net cash
flows (excluding changes that result solely from changes in
prices) from proved oil and gas reserves of the Company and its
Restricted Subsidiaries (before any state or federal income tax),
calculated in accordance with accordance with clause (a)(i) of
the definition of Adjusted Consolidated Net Tangible Assets;
provided, however, that the following will be excluded from the
Material Change calculation: (i) any acquisitions during the
quarter of oil and gas reserves that have been estimated by a
nationally recognized firm of independent petroleum engineers and
on which a report or reports exist, and (ii) any reserves added
during the quarter attributable to the drilling or recompletion
of wells not included in previous reserves estimates, but which
will be included in future quarters.
"Maturity Date" means May 1, 2004.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" means, with respect to any Asset Sale,
the proceeds in the form of cash or Cash Equivalents including
payments in respect of deferred payment obligations when received
in the form of cash or Cash Equivalents received by the Company
or any of its Restricted Subsidiaries from such Asset Sale net of
(a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or
payable after taking into account any reduction in consolidated
tax liability due to available tax credits or deductions and any
tax sharing arrangements, (c) repayment of Indebtedness that is
required to be repaid in connection with such Asset Sale and (d)
an appropriate amount to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve, in
accordance with GAAP, against any post-closing adjustments or
liabilities associated with such Asset Sale and retained by the
Company or any Restricted Subsidiary , as the case may be, after
such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale (but excluding any
payments which, by the terms of the indemnities, will not, be
made during the term of the Notes).
"Net Proceeds Offer" has the meaning set forth in Section
4.16.
"Net Proceeds Offer Amount" has the meaning set forth in
Section 4.16.
"Net Proceeds Offer Payment Date" has the meaning set forth
in Section 4.16.
"Net Proceeds Offer Trigger Date" has the meaning set forth
in Section 4.16.
"Net Working Capital" means (i) all current assets of the
Company and its consolidated Subsidiaries, minus (ii) all current
liabilities of the Company and its consolidated Subsidiaries,
except current liabilities included in Indebtedness, in each case
as set forth in financial statements of the Company prepared in
accordance with GAAP.
"Non-Recourse Indebtedness" with respect to any Person means
Indebtedness of such Person for which (i) the sole legal recourse
for collection of principal and interest on such Indebtedness is
against the specific property identified in the instruments
evidencing or securing such Indebtedness and such property was
acquired with the proceeds of such Indebtedness or such
Indebtedness was incurred within 90 days after the acquisition of
such property and (ii) no other assets of such Person may be
realized upon in collection of principal or interest on such
Indebtedness; provided, however, that any such Indebtedness shall
not cease to be "Non-Recourse Indebtedness" solely as a result of
the instrument governing such Indebtedness containing terms
pursuant to which such Indebtedness becomes recourse upon (a)
fraud or misrepresentation by the Person in connection with such
Indebtedness, (b) such Person failing to pay taxes or other
charges that result in the creation of liens on any portion of
the specific property securing such Indebtedness or failing to
maintain any insurance on such property required under the
instruments securing such Indebtedness, (c) the conversion of any
of the collateral for such Indebtedness, (d) such Person failing
to maintain any of the collateral for such Indebtedness in the
condition required under the instruments securing the
Indebtedness, (e) any income generated by the specific property
securing such Indebtedness being applied in a manner not
otherwise allowed in the instruments securing such Indebtedness,
(f) the violation of any applicable law or ordinance governing
hazardous materials or substances or otherwise affecting the
environmental condition of the specific property securing the
Indebtedness or (g) the rights of the holder of such Indebtedness
to the specific property becoming impaired, suspended or reduced
by any act, omission or misrepresentation of such Person;
provided, further, however, that upon the occurrence of any of
the foregoing clauses (a) through (g) above, any such
Indebtedness which shall have ceased to be "Non-Recourse
Indebtedness" shall be deemed to have been Indebtedness incurred
by such Person at such time.
"Non-U.S. Person" means a Person who is not a U.S. person,
as defined in Regulation S.
"Notes" means the Initial Notes, the Exchange Notes and, if
required, the Private Exchange Notes, treated as a single class
of securities, as amended or supplemented from time to time in
accordance with the terms hereof, that are issued pursuant to
this Indenture.
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements,
damages and other liabilities payable under the documentation
governing any Indebtedness.
"Offering Memorandum" means the Confidential Offering
Memorandum dated May 13, 1997 of the Company relating to the
offering of the Notes.
"Officer" means, with respect to any Person, the Chairman of
the Board of Directors, the Chief Executive Officer, the
President, any Vice President, the Chief Financial Officer, the
Treasurer, the Controller, or the Secretary of such Person, or
any other officer designated by the Board of Directors serving in
a similar capacity.
"Officers' Certificate" means a certificate signed by two
Officers of the Company.
"Opinion of Counsel" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee complying
with the requirements of Sections 10.04 and 10.05, as they relate
to the giving of an Opinion of Counsel.
"Paying Agent" has the meaning provided in Section 2.03.
"Payment Default" has the meaning set forth in Section 5.01.
"Payment Restriction" has the meaning set forth in Section
4.13.
"Permitted Indebtedness" means, without duplication, each of
the following:
(a) Indebtedness under the Notes, this Indenture,
the Security Documents and the Subsidiary Guarantees;
(b) Indebtedness incurred pursuant to one or more
credit facilities with banks and other financial institutions to
be entered into by the Company in an aggregate principal amount
at any time outstanding not to exceed $5,000,000, reduced by any
required permanent repayments (which are accompanied by a
corresponding permanent commitment reduction) thereunder (the
"Maximum Bank Credit Amount"), and any renewals, amendments,
extensions, supplements, modifications, deferrals, refinancings
or replacements (each, for the purpose of this clause (b), a
"refinancing") thereof, including any successive refinancing
thereof, so long as the aggregate principal amount of any such
new Indebtedness outstanding pursuant to this clause (b), shall
not at any one time exceed the Maximum Bank Credit Amount;
(c) Interest Swap Obligations of the Company or a
Restricted Subsidiary covering Indebtedness of the Company or any
of its Restricted Subsidiaries; provided, however, that such
Interest Swap Obligations are entered into to protect the Company
and its Restricted Subsidiaries from fluctuations in interest
rates on Indebtedness incurred in accordance with this Indenture
to the extent the notional principal amount of such Interest Swap
Obligations does not exceed the principal amount of the
Indebtedness to which such Interest Swap Obligation relates;
(d) Indebtedness of a Restricted Subsidiary to the
Company or to a Wholly Owned Restricted Subsidiary for so long as
such Indebtedness is held by the Company or a Wholly Owned
Restricted Subsidiary, in each case subject to no Lien held by a
Person other than the Company or a Wholly Owned Restricted
Subsidiary; provided, however, that if as of any date any Person
other than the Company or a Wholly Owned Restricted Subsidiary
owns or holds any such Indebtedness or holds a Lien in respect of
such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the
issuer of such Indebtedness;
(e) Indebtedness of the Company to a Wholly Owned
Restricted Subsidiary for so long as such Indebtedness is held by
a Wholly Owned Restricted Subsidiary, in each case subject to no
Lien; provided, however, that (i) any such Indebtedness is
unsecured and subordinated, pursuant to a written agreement, to
the Company's obligations under this Indenture and the Notes and
(ii) if as of any date any Person other than a Wholly Owned
Restricted Subsidiary owns or holds any such Indebtedness or
holds a Lien in respect of such Indebtedness, such date shall be
deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the Company;
(f) Indebtedness arising from the honoring by a
bank or other financial institution of a check, draft or similar
instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary
course of business; provided, however, that such Indebtedness is
extinguished within two Business Days of incurrence;
(g) Indebtedness of the Company or any of its
Restricted Subsidiaries represented by letters of credit for the
account of the Company or such Restricted Subsidiary, as the case
may be, in order to provide security for workers' compensation
claims, payment obligations in connection with self-insurance or
similar requirements in the ordinary course of business;
(h) Refinancing Indebtedness;
(i) Capitalized Lease Obligations and Purchase
Money Indebtedness of the Company or any of its Restricted
Subsidiaries not to exceed $5,000,000 at any one time
outstanding;
(j) Permitted Operating Obligations;
(k) Obligations arising in connection with Crude
Oil and Natural Gas Hedge Agreements of the Company or a
Restricted Subsidiary entered into in the ordinary course of its
Crude Oil and Natural Gas Business and not for purposes of
speculation;
(l) Non-Recourse Indebtedness;
(m) Indebtedness under Currency Agreements;
provided, however, that in the case of Currency Agreements which
relate to Indebtedness, such Currency Agreements do not increase
the Indebtedness of the Company and its Restricted Subsidiaries
outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(n) additional Indebtedness of the Company or any
of its Restricted Subsidiaries in an aggregate principal amount
at any time outstanding not to exceed the greater of (i) $3.0
million or (ii) 2.5% of Adjusted Consolidated Net Tangible Assets
of the Company; and
(o) Indebtedness outstanding on the Issue Date,
including without limitation, Indebtedness outstanding under the
ING Credit Facility and the Subordinated Debt.
"Permitted Industry Investments" means, in relation to the
Crude Oil and Natural Gas Business, (i) capital expenditures,
including, without limitation, acquisitions of Company
Properties; (ii) (a) entry into operating agreements, joint
ventures, working interests, royalty interests, mineral leases,
unitization agreements, pooling arrangements or other similar
customary agreements, transactions, properties, interests or
arrangements, and Investments and expenditures in connection
therewith or pursuant thereto, in each case made or entered into
in the ordinary course of the oil and gas business, and (b)
exchanges of Company Properties for other Company Properties of
at least equivalent value as determined in good faith by the
Board of Directors of the Company; and (iii) Investments of
operating funds on behalf of co-owners of Crude Oil and Natural
Gas Properties of the Company or a Restricted Subsidiary pursuant
to joint operating agreements.
"Permitted Investments" means (a) Investments by the Company
or any Restricted Subsidiary in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted
Subsidiary or that will merge or consolidate into the Company or
a Wholly Owned Restricted Subsidiary that is not subject to any
Payment Restriction; (b) Investments in the Company by any
Restricted Subsidiary; provided, however, that any Indebtedness
evidencing any such Investment is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations
under the Notes and this Indenture; (c) investments in cash and
Cash Equivalents; (d) Investments made by the Company or its
Restricted Subsidiaries as a result of consideration received in
connection with an Asset Sale made in compliance with Section
4.16; and (e) Permitted Industry Investments.
"Permitted Liens" means each of the following types of
Liens:
(a) Liens securing (i) the Existing Secured Debt
and (ii) other Liens existing as of the Issue Date (to the extent
and in the manner such Liens are in effect on the Issue Date);
(b) Liens securing Indebtedness outstanding under a
new credit facility entered into by the Company and Liens arising
under this Indenture;
(c) Liens securing the Notes and the Subsidiary
Guarantees;
(d) Liens of the Company or a Restricted Subsidiary
on assets of any Restricted Subsidiary;
(e) Liens securing Refinancing Indebtedness which
is incurred to refinance, renew, replace, defease or refund any
Indebtedness which has been secured by a Lien permitted under
this Indenture and which has been incurred in accordance with the
provisions of this Indenture; provided, however, that such Liens
(x) are no less favorable to the Holders and are not more
favorable to the lienholders with respect to such Liens than the
Liens in respect of the Indebtedness being refinanced, renewed,
replaced, defeased or refunded and (y) do not extend to or cover
any property or assets of the Company or any of its Restricted
Subsidiaries not securing the Indebtedness so refinanced,
renewed, replaced, defeased or refunded;
(f) Liens for taxes, assessments or governmental
charges or claims either (i) not delinquent or (ii) contested in
good faith by appropriate proceedings and as to which the Company
or a Restricted Subsidiary, as the case may be, shall have set
aside on its books such reserves as may be required pursuant to
GAAP;
(g) statutory and contractual Liens of landlords to
secure rent arising in the ordinary course of business to the
extent such Liens relate only to the tangible property of the
lessee which is located on such property and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and
other Liens imposed by law incurred in the ordinary course of
business for sums not yet delinquent or being contested in good
faith, if such reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made in respect
thereof;
(h) Liens incurred or deposits made in the ordinary
course of business (i) in connection with workers' compensation,
unemployment insurance and other types of social security,
including any Lien securing letters of credit issued in the
ordinary course of business consistent with past practice in
connection therewith, or (ii) to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for
the payment of borrowed money);
(i) judgment and attachment Liens not giving rise
to an Event of Default;
(j) easements, rights-of-way, zoning restrictions,
restrictive covenants, minor imperfections in title and other
similar charges or encumbrances in respect of real property not
interfering in any material respect with the ordinary conduct of
the business of the Company or any of its Restricted
Subsidiaries;
(k) any interest or title of a lessor under any
Capitalized Lease Obligation; provided that such Liens do not
extend to any property or assets which is not leased property
subject to such Capitalized Lease Obligation;
(l) Liens securing Purchase Money Indebtedness of
the Company or any Restricted Subsidiary; provided, however, that
(i) the Purchase Money Indebtedness shall not be secured by any
property or assets of the Company or any Restricted Subsidiary
other than the property and assets so acquired or constructed and
(ii) the Lien securing such Indebtedness shall be created within
90 days of such acquisition or construction;
(m) Liens securing reimbursement obligations with
respect to commercial letters of credit which encumber documents
and other property relating to such letters of credit and
products and proceeds thereof;
(n) Liens encumbering deposits made to secure
obligations arising from statutory, regulatory, contractual, or
warranty requirements of the Company or any of its Restricted
Subsidiaries, including rights of offset and set-off;
(o) Liens securing Interest Swap Obligations which
Interest Swap Obligations relate to Indebtedness that is
otherwise permitted under this Indenture and Liens securing Crude
Oil and Natural Gas Hedge Agreements permitted under this
Indenture;
(p) Liens securing acquired Indebtedness incurred
in accordance with Section 4.12; provided, however, that (i) such
Liens secured such acquired Indebtedness at the time of and prior
to the incurrence of such Acquired Indebtedness by the Company or
a Restricted Subsidiary and were not granted in connection with,
or in anticipation of, the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary and (ii)
such Liens do not extend to or cover any property or assets of
the Company or of any of its Restricted Subsidiaries other than
the property or assets that secured the Acquired Indebtedness
prior to the time such Indebtedness became Acquired Indebtedness
of the Company or a Restricted Subsidiary and are no more
favorable to the lienholders than those securing the Acquired
Indebtedness prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary;
(q) Liens on, or related to, properties and assets
of the Company and its Subsidiaries to secure all or a part of
the costs incurred in the ordinary course of business of
exploration, drilling, development, production, processing,
transportation, marketing or storage, or operation thereof;
(r) Liens on pipeline or pipeline facilities,
Hydrocarbons or properties and assets of the Company or its
Subsidiaries which arise out of operation of law;
(s) royalties, overriding royalties, revenue
interests, net revenue interests, net profit interests,
revisionary interests, production payments, production sales
contracts, operating agreements and other similar interests,
properties, arrangements and agreements, all as ordinarily exist
with respect to properties and assets of the Company and its
Subsidiaries or otherwise as are customary in the oil and gas
business;
(t) with respect to any properties and assets of
the Company and its Subsidiaries, Liens arising under, or in
connection with, or related to, farm-out, farm-in, joint
operation, area of mutual interest agreements and/or other
similar or customary arrangements, agreements or interests that
the Company or any Subsidiary determines in good faith to be
necessary for the economic development of such property or
assets;
(u) any (a) interest or title of a lessor or
sublessor under any lease; (b) restriction or encumbrance that
the interest or title of such lessor or sublessor may be subject
to (including, without limitation, ground leases or other prior
leases of the demised premises, mortgages, mechanics' liens, tax
liens, and easements); or (c) subordination of the interest of
the lessee or sublessee under such lease to any restrictions or
encumbrance referred to in the preceding clause (b);
(v) Liens in favor of collecting or payor banks
having a right of setoff, revocation, refund or chargeback with
respect to money or instruments of the Company or any Restricted
Subsidiary on deposit with or in possession of such bank;
(w) Liens securing Non-Recourse Indebtedness; and
(x) Liens with respect to any properties and assets
of the Company and any Subsidiary and any production attributable
thereto in favor of any governmental agency of the People's
Republic of China;
provided, however, no Lien on any property subject to the Lien of
the Security Documents (except a Lien described in clause (c) of
this definition or a nonconsensual Lien described in clause (f)
of this definition) shall be deemed to be a Permitted Lien.
"Permitted Operating Obligations" means Indebtedness of the
Company or any Restricted Subsidiary in respect of one or more
standby letters of credit, bid, performance or surety bonds, or
other reimbursement obligations, issued for the account of, or
entered into by, the Company or any Restricted Subsidiary in the
ordinary course of business (excluding obligations related to the
purchase by the Company or any Restricted Subsidiary of
Hydrocarbons for which the Company or such Restricted Subsidiary
has contracts to sell), or in lieu of any thereof or in addition
to any thereto, guarantees and letters of credit supporting any
such obligations and Indebtedness (in each case, other than for
an obligation for borrowed money, other than borrowed money
represented by any such letter of credit, bid, performance or
surety bond, or reimbursement obligation itself, or any guarantee
and letter of credit related thereto).
"Person" means an individual, partnership, corporation,
unincorporated organization, limited liability company, trust,
estate or joint venture, or a governmental agency or political
subdivision thereof.
"Physical Notes" has the meaning provided in Section 2.01.
"Plan of Liquidation" means, with respect to any Person, a
plan (including by operation of law) that provides for,
contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously)
(i) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such Person otherwise than as
an entirety or substantially as an entirety and (ii) the
distribution of all or substantially all of the proceeds of such
sale, lease, conveyance or other disposition and all or
substantially all of the remaining assets of such Person to
holders of Capital Stock of such Person.
"Pledge Agreement" means the Pledge Agreement to be entered
into by and between the Company and the Trustee in substantially
the form of Exhibit C hereto with such changes thereto that do
not have a material adverse effect on the Holders, as amended or
supplemented from time to time in accordance with its terms.
"Preferred Stock" of any Person means any Capital Stock of
such Person that has preferential rights to any other Capital
Stock of such Person with respect to dividends or redemptions or
upon liquidation.
"principal" of any Indebtedness (including the Notes) means
the principal amount of such Indebtedness plus the premium, if
any, on such Indebtedness.
"Principal Account" has the meaning set forth in the
Disbursement Agreement.
"Private Exchange Notes" has the meaning set forth in the
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set
forth on the Initial Notes in the form set forth in Section 2.15.
"pro forma" means, with respect to any calculation made or
required to be made pursuant to the terms of this Indenture, a
calculation in accordance with Article 11 of Regulation S-X under
the Securities Act, as determined by the Board of Directors of
the Company in consultation with its independent public
accountants.
"Production Payments" means Dollar-Denominated Production
Payments and Volumetric Production Payments, collectively.
"Purchase Money Indebtedness" means Indebtedness the net
proceeds of which are used to finance the cost (including the
cost of construction) of property or assets acquired in the
normal course of business by the Person incurring such
Indebtedness.
"Qualified Capital Stock" means any Capital Stock that is
not Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" has the meaning
specified in Rule 144A under the Securities Act.
"Record Date" means the Record Dates specified in the Notes.
"Redemption Date" when used with respect to any Note to be
redeemed, means the date fixed for such redemption pursuant to
this Indenture and the Notes.
"Redemption Price" when used with respect to any Note to be
redeemed, means the price fixed for such redemption, including
principal and premium, if any, pursuant to this Indenture and the
Notes.
"Redemption Warrants" have the meaning set forth in Section
3.04(b).
"Reference Date" has the meaning set forth in Section 4.10.
"Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange
for, or the net proceeds of which are used to refinance, renew,
replace, defease or refund, other Indebtedness of the Company or
any of its Restricted Subsidiaries incurred pursuant to clause
(a), (h) or (o) of the definition of "Permitted Indebtedness";
provided that: (i) the principal amount (or accreted value, if
applicable) of such Refinancing Indebtedness does not exceed the
principal amount (or accreted value, if applicable) of the
Indebtedness so exchanged, refinanced, renewed, replaced,
defeased or refunded (plus the amount of related prepayment
penalties, fees and reasonable expenses incurred in connection
therewith); (ii) such Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being
exchanged, refinanced, renewed, replaced, defeased or refunded;
(iii) if the Indebtedness being exchanged, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of
payment to the Notes or the Subsidiary Guarantees, such
Refinancing Indebtedness is subordinated in right of payment to
the Notes or the Subsidiary Guarantees, as the case may be, on
terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being
exchanged, refinanced, renewed, replaced, defeased or refunded;
and (iv) such Indebtedness is incurred either by the Company or
by the Restricted Subsidiary that is the obligor on the
Indebtedness being exchanged, refinanced, renewed, replaced,
defeased or refunded.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration
Rights Agreement dated as of the Issue Date between the Company
and the Initial Purchaser, substantially in the form attached
hereto as Exhibit H, with such changes thereto that do not have a
material adverse effect on the Holders or the holders of the
Warrants.
"Regulation S" means Regulation S under the Securities Act.
"Related Person" of any Person means any other Person
directly or indirectly owning 10% or more of the outstanding
voting Common Stock of such Person (or, in the case of a Person
that is not a corporation, 10% or more of the equity interest in
such Person).
"Replacement Assets" shall have the meaning set forth in
Section 4.16.
"Restricted Payment" shall have the meaning set forth in
Section 4.10.
"Restricted Security" has the meaning assigned to such term
in Rule 144(a)(3) under the Securities Act; provided, however,
that the Trustee shall be entitled to request and conclusively
rely on an Opinion of Counsel with respect to whether any Note
constitutes a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company
(including, without limitation, XCL-China), unless such
Subsidiary is an Unrestricted Subsidiary or is designated by the
Board of Directors of the Company, by a Board Resolution
delivered to the Trustee, as an Unrestricted Subsidiary pursuant
to and in compliance with Section 4.14. Any such designation may
be revoked by a Board Resolution of the Company delivered to the
Trustee, subject to the provisions of such covenant.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Rating Services, a division of
The McGraw-Hill Companies, Inc. and its successors.
"Sale and Leaseback Transaction" means any direct or
indirect arrangement with any Person or to which any such Person
is a party providing for the leasing to the Company or a
Restricted Subsidiary of any property, whether owned by the
Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the
Company or such Restricted Subsidiary to such Person or to any
other Person from whom funds have been or are to be advanced by
such Person on the security of such property.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission
promulgated thereunder.
"Security Agreement" means the Security Agreement, Pledge
and Financing Statement of even date herewith by and between the
Company and Fleet National Bank, as Trustee, as amended and
supplemented from time to time in accordance with its terms,
substantially in the form attached hereto as Exhibit I, with such
changes thereto that do not have a material adverse effect on the
Holders.
"Security Documents" means, collectively, the Disbursement
Agreement, the Security Agreement and the Pledge Agreement, as
the same may be in force from time to time.
"Security Interest" means the Lien on the Collateral created
by the Security Documents in favor of the Trustee for the benefit
of the Holders.
"Subordinated Debt" means those certain Secured Subordinated
Notes due April 5, 2000 issued by the Company in the original
aggregate principal amount of $15,000,000.
"Subordinated Debt Holders" means the registered holders at
any time and from time to time of the Subordinated Debt.
"Subsidiary" with respect to any Person, means (a) any
corporation of which the outstanding Capital Stock having at
least a majority of the votes entitled to be cast in the election
of directors under ordinary circumstances shall at the time be
owned, directly or indirectly, by such Person or (b) any other
Person of which at least a majority of the voting interests under
ordinary circumstances is at the time, directly or indirectly,
owned by such Person.
"Subsidiary Guarantee" shall have the meaning set forth in
Section 12.01.
"Subsidiary Guarantor" means XCL-China upon disbursement to
the Company of the Collateral subject to the Principal Account
and each of the Company's other Restricted Subsidiaries that in
the future executes a supplemental indenture in which such
Restricted Subsidiary agrees to be bound by the terms of this
Indenture as a Subsidiary Guarantor; provided, however, that any
Person constituting a Subsidiary Guarantor as described above
shall cease to constitute a Subsidiary Guarantor when its
Subsidiary Guarantee is released in accordance with this
Indenture.
"Surviving Entity" shall have the meaning set forth in
Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb), as amended, as in effect on the date of
this Indenture, except as otherwise provided in Section 9.03.
"Trust Officer" means any officer or assistant officer of
the Trustee assigned by the Trustee to administer this Indenture,
or in the case of a successor trustee, an officer assigned to the
department, division or group performing the corporation trust
work of such successor and assigned to administer this Indenture.
"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions
of this Indenture and thereafter means such successor.
"U.S. Government Obligations" means direct obligations of,
and obligations guaranteed by, the United States of America for
the payment of which the full faith and credit of the United
States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the
Untied States of America as at the time of payment shall be legal
tender for the payment of public and private debts.
"Units" means units consisting of Initial Notes and Warrants
sold to the Initial Purchaser on the Issue Date pursuant to a
private offering conducted by the Company.
"Unrestricted Subsidiary" means any Subsidiary of the
Company designated as such pursuant to and in compliance with
Section 4.14; provided, however, that Unrestricted Subsidiaries
shall initially include all Subsidiaries of the Company as of the
Issue Date (other than XCL-China to the extent provided in
Section 4.17) and no Subsidiary whose Capital Stock is subject to
the Lien of the Pledge Agreement may be an Unrestricted
Subsidiary. Any such designation may be revoked by a Board
Resolution of the Company delivered to the Trustee, subject to
the provisions of such Section 4.14.
"Volumetric Production Payments" means production payment
obligations recorded as deferred revenue in accordance with GAAP,
together with all undertakings and obligations in connection
therewith.
"Warrants" means the seven year warrants to purchase Common
Stock of the Company issued together with the Initial Notes to
the Initial Purchaser as part of the Units.
"Weighted Average Life to Maturity" means, when applied to
any Indebtedness at any date, the number of years obtained by
dividing (a) the then outstanding aggregate principal amount of
such Indebtedness into (b) the sum of the total of the products
obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required
payment of principal, including payment at final maturity, in
respect thereof, by (ii) the number of years (calculated to the
nearest one-twelfth) which will elapse between such date and the
making of such payment.
"Wholly Owned Restricted Subsidiary" means any Restricted
Subsidiary of which all the outstanding voting securities
normally entitled to vote in the election of directors are owned
by the Company or another Wholly Owned Restricted Subsidiary.
"XCL-China" means XCL-China Ltd., a British Virgin Islands
company wholly-owned by the Company.
Section 1.02 Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA,
such provision is incorporated by reference in, and made a part
of, this Indenture. The following TIA terms used in this
Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company or
any other obligor on the Notes.
All other TIA terms used in this Indenture that are defined
by the TIA, defined by TIA reference to another statute or
defined by Commission rule and not otherwise defined herein have
the meanings assigned to them therein.
Section 1.03 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has
the meaning assigned to it in accordance with GAAP as of any date
of determination;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and
words in the plural include the singular;
(5) "herein," "hereof" and other words of similar
import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision; and
(6) any reference to a statute, law or regulation
means that statute, law or regulation as amended and in effect
from time to time and includes any successor statute, law or
regulation; provided, however, that any reference to the
Bankruptcy Law shall mean the Bankruptcy Law as applicable to the
relevant case.
ARTICLE TWO
THE NOTES
Section 2.01 Form and Dating.
The Initial Notes and the Trustee's certificate of
authentication relating thereto shall be substantially in the
form of Exhibit A hereto. The Exchange Notes and the Trustee's
certificate of authentication relating thereto shall be
substantially in the form of Exhibit B hereto. The Private
Exchange Notes, if required, and the Trustee's certificate of
authentication relating thereto shall be substantially in the
form of Exhibit B hereto but shall bear the Private Placement
Legend. The Notes may have notations, legends or endorsements
required by law, stock exchange rule or depository rule or usage.
The Company and the Trustee shall approve the form of the Notes
and any notation, legend or endorsement on them. Each Note shall
be dated the date of its issuance and shall show the date of its
authentication.
The terms and provisions contained in the Notes,
annexed hereto as Exhibits A and B, shall constitute, and are
hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such
terms and provisions and to be bound thereby.
Initial Notes offered and sold in reliance on Rule 144A
and Notes offered and sold in reliance on Regulation S shall be
issued initially in the form of one or more permanent global
Notes in registered form (each a "Global Note"), substantially in
the form set forth in Exhibit A, deposited with the Trustee, as
custodian for the Depository, duly executed by the Company and
authenticated by the Trustee as hereinafter provided and shall
bear the legends set forth in Section 2.15. Exchange Notes shall
be issued initially in the form of one or more permanent Global
Notes, substantially in the form set forth in Exhibit B,
deposited with the Trustee, as custodian for the Depository, duly
executed by the Company and authenticated by the Trustee as
hereinafter provided and shall bear the Global Note Legend. The
aggregate principal amount of a Global Note may from time to time
be increased or decreased by adjustments made on the records of
the Trustee, as custodian for the Depository, as hereinafter
provided.
Notes issued in exchange for an interest in a Global
Note pursuant to Section 2.16 may be issued in the form of
permanent certificated Notes in registered form in substantially
the form set forth in Exhibit A (the "Physical Notes"). Initial
Notes offered and sold to Institutional Accredited Investors and
Private Exchange Notes shall be issued in the form of Physical
Notes in substantially the form set forth in Exhibits A and B,
respectively, and shall bear the Private Placement Legend.
[THIS PAGE INTENTIONALLY LEFT BLANK]
Section 2.02 Execution and Authentication; Aggregate
Principal Amount.
Two Officers, or an Officer and an Assistant Secretary
of the Company, shall sign, or one Officer shall sign and one
Officer or an Assistant Secretary (each of whom shall, in each
case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for the Company by manual or
facsimile signature. The corporate seal of the Company shall be
affixed to each Note or reproduced thereon.
If any Officer or Assistant Secretary whose signature
is on a Note was an Officer or Assistant Secretary at the time of
such execution but no longer holds that office or position at the
time the Trustee authenticates the Note, the Note shall
nevertheless be valid.
A Note shall not be valid until an authorized signatory
of the Trustee manually signs the certificate of authentication
on the Note. The signature shall be conclusive evidence that the
Notes has been authenticated under this Indenture.
The Trustee shall authenticate (i) Initial Notes for
original issue in the aggregate principal amount not to exceed
$75.0 million and (ii) Exchange Notes or Private Exchange Notes
from time to time for issue only in exchange for a like principal
amount of Initial Notes, in each case upon written order of the
Company in the form of an Officers' Certificate of the Company.
Each such written order shall specify the amount of Notes to be
authenticated and the date on which the Notes are to be
authenticated, whether the Notes are to be Initial Notes,
Exchange Notes or Private Exchange Notes and whether the Notes
are to be issued as Physical Notes or Global Notes or such other
information as the Trustee may reasonably request. In addition,
with respect to authentication pursuant to clause (ii) of the
first sentence of this paragraph, the first such written order
from the Company shall be accompanied by an Opinion of Counsel of
the Company in a form reasonably satisfactory to the Trustee
stating that the issuance of the Exchange Notes or Private
Exchange Notes, as the case may be, does not give rise to an
Event of Default, complies with this Indenture and has been duly
authorized by the Company. The aggregate principal amount of
Notes outstanding at any time may not exceed $75.0 million,
except as provided in Sections 2.07 and 2.08.
The Trustee may appoint an authentication agent (the
"Authenticating Agent") reasonably acceptable to the Company to
authenticate Notes. Unless otherwise provided in the appointment,
an Authenticating Agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such
Authenticating Agent. An Authenticating Agent has the same
rights as an Agent to deal with the Company or with any Affiliate
of the Company.
The Notes shall be issuable in fully registered form
only, without coupons, in denominations of $1,000 and any
integral multiple thereof.
Section 2.03 Registrar and Paying Agent.
The Company shall maintain an office or agency where
(a) Notes may be presented or surrendered for registration of
transfer or for exchange ("Registrar"), (b) Notes may be
presented or surrendered for payment ("Paying Agent") and (c)
notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Registrar shall keep
a register of the Notes and of their transfer and exchange. The
Company, upon prior written notice to the Trustee, may have one
or more co-Registrars and one more additional Paying Agents
reasonably acceptable to the Trustee. The term "Paying Agent"
includes any additional Paying Agent. The Company may act as its
own Paying Agent, except that for the purposes of payments on the
Notes pursuant to Sections 4.15 and 4.16, neither the Company nor
any Affiliate of the Company may act as Paying Agent.
The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, which
agreement shall incorporate the provisions of the TIA and
implement the provisions of this Indenture that relate to such
Agent. The Company shall notify the Trustee, in advance, of the
name and address of any such Agent. If the Company fails to
maintain a Registrar or Paying Agent, or fails to give the
foregoing notice, the Trustee shall act as such.
The Company initially appoints the Trustee as
Registrar, Paying Agent and agent for service of demands and
notices in connection with the Notes, until such time as the
Trustee has resigned or a successor has been appointed. Any of
the Registrar, the Paying Agent or any other Agent may resign
upon 30 days' notice to the Company.
Section 2.04 Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than
the Trustee to agree in writing that such Paying Agent shall hold
in trust for the benefit of the Holders or the Trustee all assets
held by the Paying Agent for the payment of principal of,
premium, if any, or interest on, the Notes (whether such assets
have been distributed to it by the Company or any other obligor
on the Notes), and the Company and the Paying Agent shall notify
the Trustee of any Default by the Company in making any such
payment. The Company at any time may require a Paying Agent to
distribute all assets held by it pursuant hereto to the Trustee
and account for any assets disbursed and the Trustee may at any
time during the continuance of any payment Default, upon written
request to a Paying Agent, require such Paying Agent to
distribute all assets held by it pursuant hereto to the Trustee
and to account for any assets distributed. Upon distribution to
the Trustee of all assets that shall have been delivered by the
Company to the Paying Agent, the Paying Agent shall have no
further liability for such assets.
Section 2.05 Holder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of
the names and addresses of the Holders. If the Trustee is not the
Registrar, the Company shall furnish or cause the Registrar to
furnish to the Trustee before each Record Date and at such other
times as the Trustee may request in writing a list as of such
date and in such form as the Trustee may reasonably require of
the names and addresses of the Holders, which list may be
conclusively relied upon by the Trustee.
Section 2.06 Transfer and Exchange.
When Notes are presented to the Registrar or a co-
Registrar with a request to register the transfer of such Notes
or to exchange such Notes for an equal principal amount of Notes
or other authorized denominations, the Registrar or co-Registrar
shall register the transfer or make the exchange as requested if
its requirements for such transaction are met; provided, however,
that the Notes presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a
written instrument of transfer in form satisfactory to the
Company, the Trustee and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in
writing. To permit registration of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Notes at
the Registrar's or co-Registrar's request. No service charge
shall be made for any registration of transfer or exchange, but
the Company may require repayment of a sum sufficient to cover
any transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchanges or transfers
pursuant to Section 2.10, 3.04, 4.15, 4.16 or 9.05, in which
event the Company shall be responsible for the payment of such
tax or charge).
The Registrar or co-Registrar shall not be required to
register the transfer or exchange of any Note (i) during a period
beginning at the opening of business 15 days before the mailing
of a notice of redemption of Notes and ending at the close of
business on the day of such mailing and (ii) selected for
redemption in whole or in part pursuant to Article Three, except
the unredeemed portion of any Note being redeemed in part.
Any Holder of a beneficial interest in a Global Note
shall, by acceptance of such Global Note, agree that transfers of
beneficial interests in such Global Notes may be effected only
through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial
interest in the Note shall be required to be reflected in a book
entry system.
Section 2.07 Replacement Notes.
If a mutilated Note is surrendered to the Trustee or
the Holder of a Note claims that the Note has been lost,
destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company,
such Holder must provide an indemnity bond or other indemnity of
reasonable tenor, sufficient in the reasonable judgment of the
Company, to protect the Company, the Trustee or any Agent from
any loss which any of them may suffer if a Note is replaced.
Every replacement Note shall constitute an additional obligation
of the Company.
Section 2.08 Outstanding Notes.
Notes outstanding at any time are all the Notes that
have been authenticated by the Trustee except those canceled by
it, those delivered to it for cancellation and those described in
this Section as not outstanding. Subject to the provisions of
Section 2.09, a Note does not cease to be outstanding because the
Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other
than a mutilated Note surrendered for replacement), it ceases to
be outstanding unless the Trustee receives proof satisfactory to
it that the replaced Note is held by a bona fide purchaser. A
mutilated Note ceases to be outstanding upon surrender of such
Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying
Agent holds U.S. Legal Tender or, if the Company has exercised
either Legal Defeasance or Covenant Defeasance, U.S. Government
Obligations sufficient to pay all of the principal, premium, if
any, and interest due on the Notes payable on that date and is
not prohibited from paying such money to the Holders thereof
pursuant to the terms of this Indenture, then on and after that
date such Notes shall be deemed not to be outstanding and
interest on them shall cease to accrue.
Section 2.09 Treasury Notes.
In determining whether the Holders of the required
principal amount of Notes have concurred in any direction,
waiver, consent or notice, Notes owned by the Company or an
Affiliate of the Company shall be considered as though they are
not outstanding, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which a Trust Officer of
the Trustee actually knows are so owned shall be so considered.
The Company shall notify the Trustee, in writing, when it or, to
its knowledge, any of its Affiliates repurchases or otherwise
acquires Notes, of the aggregate principal amount of such Notes
so repurchased or otherwise acquired and such other information
as the Trustee may reasonably request and the Trustee shall be
entitled to rely thereon.
Section 2.10 Temporary Notes.
Until definitive Notes are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary
Notes upon receipt of a written order of the Company in the form
of an Officers' Certificate. The Officers' Certificate shall
specify the amount of temporary Notes to be authenticated and the
date on which the temporary Notes are to be authenticated.
Temporary Notes shall be substantially in the form of definitive
Notes but may have variations that the Company considers
appropriate for temporary Notes and so indicates in the Officers'
Certificate. Without unreasonable delay, the Company shall
prepare, and the Trustee shall authenticate upon receipt of a
written order of the Company pursuant to Section 2.02, definitive
Notes in exchange for temporary Notes.
Section 2.11 Cancellation.
The Company at any time may deliver Notes to the
Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Notes surrendered to them for
transfer, exchange or payment. The Trustee, or at the direction
of the Trustee, the Registrar or the Paying Agent, and no one
else, shall cancel and shall dispose, in its customary manner, of
all Notes surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.07, the Company may not issue
new Notes to replace Notes that they have paid or delivered to
the Trustee for cancellation. If the Company shall acquire any
of the Notes, such acquisition shall not operate as a redemption
or satisfaction of the Indebtedness represented by such Notes
unless and until the same are surrendered to the Trustee for
cancellation pursuant to this Section 2.11.
Section 2.12 Defaulted Interest.
The Company shall pay interest on overdue principal
from time to time on demand at the rate of interest then borne by
the Notes. The Company shall, to the extent lawful, pay interest
on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the rate
of interest then borne by the Notes. Interest will be computed
on the basis of a 360-day year comprised of twelve 30 day months,
and, in the case of a partial month, the actual number of days
elapsed.
If the Company defaults in a payment of interest on the
Notes, it shall pay the defaulted interest, plus (to the extent
lawful) any interest payable on the defaulted interest, to the
Persons who are Holders on a subsequent special record date,
which special record date shall be the fifteenth day next
preceding the date fixed by the Company for the payment of
defaulted interest or the next succeeding Business Day if such
date is not a Business Day. The Company shall notify the Trustee
in writing of the amount of defaulted interest proposed to be
paid on each Note and the date of the proposed payment (a
"Default Interest Payment Date"), and at the same time the
Company shall deposit with the Trustee an amount of money equal
to the aggregate amount proposed to be paid in respect of such
defaulted interest or shall make arrangements satisfactory to the
Trustee for such deposit on or prior to the date of the proposed
payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such defaulted interest as
provided in this Section; provided, however, that in no event
shall the Company deposit monies proposed to be paid in respect
of defaulted interest later than 11:00 a.m. New York City time of
the proposed Default Interest Payment Date. At least 15 days
before the subsequent special record date, the Company shall mail
(or cause to be mailed) to each Holder, as of a recent date
selected by the Company, with a copy to the Trustee, a notice
that states the subsequent special record date, the payment date
and the amount of defaulted interest, and interest payable on
such defaulted interest, if any, to be paid. Notwithstanding the
foregoing, any interest which is paid prior to the expiration of
the 30-day period set forth in Section 6.01(a) shall be paid to
Holders as of the regular record date for the Interest Payment
Date for which interest has not been paid. Notwithstanding the
foregoing, the Company may make payment of any defaulted interest
in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Notes may be listed, and
upon such notice as may be required by such exchange.
Section 2.13 CUSIP Numbers.
The Company in issuing the Notes of each series may use
a "CUSIP" number, and, if so, the Trustee shall use the
appropriate CUSIP number in notices of redemption or exchange as
a convenience to Holders; provided, however, that no
representation is hereby deemed to be made by the Trustee as to
the correctness or accuracy of the CUSIP number printed in the
notice or on the notes, and that reliance may be placed only on
the other identification numbers printed on the Notes. The
Company shall promptly notify the Trustee of any change in a
CUSIP number.
Section 2.14 Deposit of Monies.
Prior to 11:00 a.m. New York City time on each Interest
Payment Date, Maturity Date, Redemption Date, Change of Control
Payment Date and Net Proceeds Offer Payment Date, the Company
shall have deposited with the Paying Agent in immediately
available funds U.S. Legal Tender sufficient to make the cash
payments, if any, due on such Interest Payment Date, Maturity
Date, Redemption Date, Change of Control Payment Date and Net
Proceeds Offer Payment Date, as the case may be, in a timely
manner which permits the Paying Agent to remit payment to the
Holders on such Interest Payment Date, Maturity Date, Redemption
Date, Change of Control Payment Date and Net Proceeds Offer
Payment Date, as the case may be. At the option of the Company,
payment of interest on Physical Notes may be made by check mailed
to the Holders on or before the relevant Interest Payment Date.
Section 2.15 Restrictive Legends.
Each Global Note and Physical Note that constitutes a
Restricted Security, including, without limitation, the Private
Exchange Notes, shall bear the following legend (the "Private
Placement Legend") on the face thereof until after the second
anniversary of the later of the Issue Date and the last date on
which the Company or any Affiliate of the Company was the owner
of such Note (or any predecessor security) (or such shorter
period of time as permitted by Rule 144(k) under the Securities
Act or any successor provision thereunder) (or such longer period
of time as may be required under the Securities Act or applicable
state securities laws in the opinion of counsel for the Company,
unless otherwise agreed by the Company and the Holder thereof):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 903 OR 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT
WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO
THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-
DEALER) TO THE COMPANY AND THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE COMPANY OR THE TRUSTEE FOR THIS
SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND
THE COMPANY SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS
AGREEMENT DATED AS OF MAY 20, 1997 BETWEEN THE COMPANY AND
JEFFERIES & COMPANY, INC., A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
Each Global Note shall also bear the following legend
(the "Global Note Legend") on the face thereof:
THIS SECURITY IS A GLOBAL NOTE WITHIN THE MEANING OF
THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE
NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR
DEPOSITORY. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR
ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A
TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A
NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE
REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OR DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.
Section 2.16 Book-Entry Provisions for Global Security.
(a) The Global Notes initially shall (i) be
registered in the name of the Depository or the nominee of such
Depository, (ii) be delivered to the Trustee as custodian for
such Depository and (iii) bear the Global Note Legend as set
forth in Section 2.15.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect
to any Global Note held on their behalf by the Depository, or the
Trustee as its custodian, or under the Global Notes, and the
Depository may be treated by the Company, the Trustee and any
Agent of the Company or the Trustee as the absolute owner of such
Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee
or any Agent of the Company or the Trustee from giving effect to
any written certification, proxy or other authorization furnished
by the Depository or impair, as between the Depository and its
Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
(b) Transfers of a Global Note shall be limited to
transfers in whole, but not in part, to the Depository, its
successors or their respective nominees. Interests of beneficial
owners in a Global Note may be transferred or exchanged for
Physical Notes in accordance with the rules and procedures of the
Depository and the provisions of Section 2.17. In addition,
Physical Notes shall be transferred to all beneficial owners in
exchange for their beneficial interests in a Global Note if (i)
the Depository notifies the Company that it is unwilling or
unable to continue as Depository for the Global Notes and a
successor depositary is not appointed by the Company within 90
days of such notice; or (ii) the Company, in its sole discretion,
elects to issue Physical Notes.
(c) In connection with any transfer or exchange of
a portion of the beneficial interest in a Global Note to
beneficial owners pursuant to paragraph (b), the Registrar shall
(if one or more Physical Notes are to be issued) reflect on its
books and records the date and a decrease in the principal amount
of such Global Note in an amount equal to the principal amount of
the beneficial interest in the Global Note to be transferred, and
the Company shall execute, and the Trustee shall authenticate and
deliver, one or more Physical Notes of like tenor and amount.
(d) In connection with the transfer of an entire
Global Note to beneficial owners pursuant to paragraph (b), such
Global Note shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee
shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial
interest in the Global Note, an equal aggregate principal amount
of Physical Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted
Security delivered in exchange for an interest in a Global Note
pursuant to paragraph (b) or (c) shall, except as otherwise
provided by paragraphs (a)(i)(x) and (c) of Section 2.17, bear
the legend regarding transfer restrictions applicable to the
Physical Notes set forth in Section 2.15.
(f) The Holder of a Global Note may grant proxies
and otherwise authorize any Person, including Agent Members and
Persons that may hold interests through Agent Members, to take
any action which a Holder is entitled to take under this
Indenture or the Notes.
Section 2.17 Special Transfer Provisions.
(a) Transfer to Non-QIB Institutional Accredited
Investors and Non-U.S. Persons. The following provisions shall
apply with respect to the registration of any proposed transfer
of a Note constituting a Restricted Security to any Institutional
Accredited Investor which is not a QIB or to any Non-U.S. Person:
(i) the Registrar shall register the transfer
of any Note constituting a Restricted Security, whether or not
such Note bears the Private Placement Legend, if (x) the
requested transfer is after the second anniversary of the Issue
Date (provided, however, that neither the Company nor any
Affiliate of the Company has held any beneficial interest in such
Note, or portion thereof, at any time on or prior to the second
anniversary of the Issue Date) or (y) (1) in the case of a
transfer to an Institutional Accredited Investor which is not a
QIB (excluding Non-U.S. Persons), the proposed transferee has
delivered to the Registrar a certificate substantially in the
form of Exhibit D hereto or (2) in the case of a transfer to a
Non-U.S. Person, the proposed transferee has delivered to the
Registrar a certificate substantially in the form of Exhibit E
hereto; and
(ii) if the proposed transferor is an Agent
Member holding a beneficial interest in the Global Note, upon
receipt by the Registrar of (x) the certificate, if any, required
by paragraph (i) above and (y) written instructions given in
accordance with the Depository's and the Registrar's procedures,
whereupon
(iii) the Registrar shall reflect on its books
and records the date and (if the transfer does not involve a
transfer of outstanding Physical Notes) a decrease in the
principal amount of such Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to
be transferred, and
(iv) the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Physical
Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions
shall apply with respect to the registration of any proposed
transfer of a Note constituting a Restricted Security to a QIB
(excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer
if such transfer is being made by a proposed transferor who has
checked the box provided for on the form of Note stating, or has
otherwise advised the Company and the Registrar in writing, that
the transferee is purchasing the Note for its own account or an
account with respect to which it exercises sole investment
discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being
made in reliance on Rule 144A and represents that it has
furnished such information regarding the Company as such
transferee has requested pursuant to Rule 144A or has determined
not to request such information and that the transferee is aware
that the Company is relying upon the transferor's foregoing
representations in order to claim the exemption from registration
provided by Rule 144A; and
(ii) if the proposed transferee is an Agent
Member, and the Notes to be transferred consist of Physical Notes
which after transfer are to be evidenced by an interest in a
Global Note, upon receipt by the Registrar of written
instructions given in accordance with the Depository's and the
Registrar's procedures, the Registrar shall reflect on its books
and records the date and an increase in the principal amount of
the Physical Notes to be transferred, and the Trustee shall
cancel the Physical Notes so transferred.
(c) Private Placement Legend. Upon the transfer,
exchange or replacement of Notes not bearing the Private
Placement Legend, the Registrar shall deliver Notes that do not
bear the Private Placement Legend. Upon the transfer, exchange
or replacement of Notes bearing the Private Placement Legend, the
Registrar shall deliver only Notes that bear the Private
Placement Legend unless (i) the requested transfer is after the
second anniversary of the Issue Date (provided, however, that
neither the Company nor any Affiliate of the Company has held any
beneficial interest in such Note, or portion thereof, at any time
prior to or on the second anniversary of the Issue Date), or (ii)
there is delivered to the Registrar an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the
effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the
provisions of the Securities Act.
(d) General. By its acceptance of any Note bearing
the Private Placement Legend, each Holder of such a Note
acknowledges the restrictions on transfer of such Note set forth
in this Indenture and in the Private Placement Legend and agrees
that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters,
notices and other written communications received pursuant to
Section 2.16 or this Section 2.17. The Company shall have the
right to inspect and make copies of all such letters, notices or
other written communications at any reasonable time during the
Registrar's normal business hours upon the giving of reasonable
written notice to the Registrar.
(e) Transfers of Notes Held by Affiliates. Any
certificate (i) evidencing a Note that has been transferred to an
Affiliate of the Company within two years after the Issue Date,
as evidenced by a notation on the assignment form for such
transfer or in the representation letter delivered in respect
thereof or (ii) evidencing a Note that has been acquired from an
Affiliate (other than by an Affiliate) in a transaction or a
chain of transactions not involving any public offering, shall,
until two years after the last date on which the Company or any
Affiliate of the Company was an owner of such Note, in each case,
bear a Private Placement Legend in substantially the form set
forth in Section 2.15 hereof, unless otherwise agreed by the
Company (with written notice thereof to the Trustee).
(f) No Separate Transfers Prior to Separability
Date. Notwithstanding any other provision of this Article Two,
no Note may be transferred separately from the Warrants until the
date which is the earlier of (i) 90 days from the Issue Date or
(ii) such date as the Initial Purchaser may, in its discretion,
deem appropriate. The Company shall promptly notify the
Registrar of the occurrence of the Separability Date.
Section 2.18 Additional Interest Under Registration
Rights Agreement.
Under certain circumstances, the Company shall be
obligated to pay Additional Interest to the Holders, all as set
forth in Section 4 of the Registration Rights Agreement. The
terms thereof are hereby incorporated herein by reference.
ARTICLE THREE
REDEMPTION
Section 3.01 Notices to Trustee.
If the Company elects to redeem Notes pursuant to
Paragraph 5 of the Notes, it shall notify the Trustee and the
Paying Agent in writing of the Redemption Date and the principal
amount of the Notes to be redeemed.
The Company shall give each notice provided for in this
Section 3.01 60 days before the Redemption Date (unless a shorter
notice period shall be satisfactory to the Trustee, as evidenced
in a writing signed on behalf of the Trustee), together with an
Officers' Certificate stating that such redemption shall comply
with the conditions contained herein and in the Notes.
Section 3.02 Selection of Notes To Be Redeemed.
In the event that less than all of the Notes are to be
redeemed at any time, selection of such Notes, or portions
thereof, for redemption will be made by the Trustee in compliance
with the requirements of the principal national securities
exchange, if any, on which the Notes are listed or, if the Notes
are not then listed on a national securities exchange, on a pro
rata basis, by lot or by such other method as the Trustee shall
deem fair and appropriate; provided, however, that no Notes of a
principal amount of $1,000 or less shall be redeemed in part, and
provided, further, that if a partial redemption is made with the
proceeds of an Equity Offering, selection of the Notes or
portions thereof for redemption shall be made by the Trustee only
on a pro rata basis or on as nearly a pro rata basis as is
practicable (subject to the procedures of the Depository), unless
such method is otherwise prohibited.
Section 3.03 Optional Redemption.
At any time, or from time to time, prior to May 1,
2002, the Company may, at its option, use all or a portion of the
net cash proceeds of one or more Equity Offerings to redeem up to
35% of the aggregate principal amount of the Initial Notes issued
on the Issue Date at the following Redemption Prices (expressed
as percentages of the aggregate principal amount of the Notes to
be redeemed) set forth below with respect to the indicated
Redemption Date, plus accrued and unpaid interest, if any,
thereon to the Redemption Date; provided, however, that at least
$48.75 million aggregate principal amount of Notes remains
outstanding immediately after giving effect to any such
redemption (it being expressly agreed that for purposes of
determining whether this condition is satisfied, Notes owned by
the Company or any of its Affiliates shall be deemed not to be
outstanding). In order to effect the foregoing redemption with
the proceeds of any Equity Offering, the Company shall make such
redemption not more than 90 days after the consummation of any
such Equity Offering.
The Notes will also be redeemable, at the Company's
option, in whole at any time or in part from time to time, on and
after May 1, 2002, at the following Redemption Prices (expressed
as percentages of the principal amount thereof) set forth below
with respect to the indicated Redemption Date, plus, in each
case, accrued and unpaid interest, if any, thereon to the
Redemption Date:
If redeemed during
the 12-month period
beginning May 1 Redemption Price
------------------- ----------------
1997.............................113.500%
1998.............................113.500%
1999.............................113.500%
2000.............................113.500%
2001.............................113.500%
2002.............................106.750%
2003 and thereafter...... 100.000%
Section 3.04 Mandatory Redemption.
The Company shall redeem (the "Mandatory Redemption")
the issued and outstanding Notes, in whole only, at a Redemption
Price equal to 100.00% of the principal amount thereof, plus
accrued and unpaid interest thereon to the Redemption Date, in
the event that the conditions specified in Section 5.2 of the
Disbursement Agreement have not been satisfied on or prior to
November 1, 1997, solely from amounts on deposit in the
Collateral Accounts. The Redemption Date on such Mandatory
Redemption shall be November 30, 1997.
Section 3.05 Notice of Redemption.
At least 30 days but not more than 60 days before a
Redemption Date, the Company shall mail or cause to be mailed a
notice of redemption by first class mail to each Holder of Notes
to be redeemed at its registered address, with a copy to the
Trustee and any Paying Agent. At the Company's request, the
Trustee shall give the notice of redemption in the Company's name
and at the Company's expense. The Company shall provide such
notices of redemption to the Trustee at least five days before
the intended mailing date.
Each notice of redemption shall identify (including the
CUSIP number) the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued
interest, if any, to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which
such redemption is being made;
(5) that any Physical Notes called for redemption
must be surrendered to the Paying Agent to collect the Redemption
Price plus accrued interest, if any;
(6) that, unless the Company defaults in making the
redemption payment, interest on Notes (or applicable portions
thereof) called for redemption ceases to accrue, on and after the
Redemption Date, and the only remaining right of the Holders of
such Notes is to receive payment of the Redemption Price plus
accrued interest as of the Redemption Date, if any, upon
surrender to the Paying Agent of the Notes redeemed;
(7) if any Physical Note is being redeemed in part,
the portion of the principal amount of such Note to be redeemed
and that, after the Redemption Date, and upon surrender of such
Physical Note, a new Physical Note or Notes in the aggregate
principal amount equal to the unredeemed portion thereof will be
issued; and
(8) if fewer than all the Notes are to be redeemed,
the identification of any particular Physical Notes (or portions
thereof) to be redeemed, as well as the aggregate principal
amount of Notes to be redeemed and the aggregate principal amount
of Notes to be outstanding after such partial redemption.
The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations
are applicable in connection with the purchase of Notes.
Section 3.06 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with
Section 3.05, such notice of redemption shall be irrevocable and
Notes called for redemption become due and payable on the
Redemption Date and at the Redemption Price plus accrued interest
as of such date, if any. Upon surrender to the Trustee or Paying
Agent, such Notes called for redemption shall be paid at the
Redemption Price plus accrued interest thereon to the Redemption
Date, but installments of interest, the maturity of which is on
or prior to the Redemption Date, shall be payable to Holders of
record at the close of business on the relevant record dates
referred to in the Notes. Interest shall accrue on or after the
Redemption Date and shall be payable only if the Company defaults
in payment of the Redemption Price.
Section 3.07 Deposit of Redemption Price.
On or before the Redemption Date and in accordance with
Section 2.14, the Company shall deposit, or shall cause the
deposit by the Disbursement Agent (in connection with a
redemption pursuant to Section 3.04 hereof) with the Paying
Agent, U.S. Legal Tender sufficient to pay the Redemption Price
plus accrued interest, if any, on all Notes to be redeemed on
that date in accordance with Section 3.03 or 3.04 hereof and
Section 5 of the Notes. The Paying Agent shall promptly return
to the Company any U.S. Legal Tender so deposited which is not
required for that purpose, except with respect to monies owed as
obligations to the Trustee pursuant to Article Seven.
Unless the Company fails to comply with the preceding
paragraph and defaults in the payment of such Redemption Price
plus accrued interest, if any, interest on the Notes to be
redeemed will cease to accrue, as the case may be, on and after
the applicable Redemption Date, whether or not such Notes are
presented for payment.
Section 3.08 Notes Redeemed in Part.
Upon surrender of a Note that is to be redeemed in
part, the Trustee shall authenticate for the Holder a new Note or
Notes equal in principal amount to the unredeemed portion of the
Note surrendered.
ARTICLE FOUR
COVENANTS
Section 4.01 Payment of Notes.
(a) The Company shall pay the principal of,
premium, if any, and interest on the Notes on the dates and in
the manner provided in the Notes and this Indenture.
(b) An installment of principal of or interest on
the Notes shall be considered paid on the date it is due if the
Trustee or Paying Agent (other than the Company or any of its
Affiliates) holds, prior to 11:00 a.m. Hartford, Connecticut time
on that date, U.S. Legal Tender designated for and sufficient to
pay the installment in full and is not prohibited from paying
such money to the Holders pursuant to the terms of this Indenture
or the Notes.
(c) Notwithstanding anything to the contrary
contained in this Indenture, the Company may, to the extent it is
required to do so by law, deduct or withhold income or other
similar taxes imposed by the United States of America from
principal or interest payments hereunder.
Section 4.02 Maintenance of Office or Agency.
The Company shall maintain the office or agency
required under Section 2.03. The Company shall give prior
written notice to the Trustee of the location, and any change in
the location, of such office or agency. If at any time the
Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made
or served at the address of the Trustee set forth in Section
10.02.
Section 4.03 Corporate Existence.
Except as otherwise permitted by Article Five, the
Company shall do or cause to be done, at its own cost and
expense, all things necessary to preserve and keep in full force
and effect its corporate existence and the corporate existence of
each of its Restricted Subsidiaries in accordance with the
organizational documents of each such Restricted Subsidiary and
the material rights (charter and statutory) and franchises of the
Company and each such Restricted Subsidiary; provided, however,
that the Company shall not be required to preserve, with respect
to itself, any material right or franchise and, with respect to
any of its Restricted Subsidiaries, any such existence, material
right or franchise, if the Board of Directors of the Company
shall determine in good faith that the preservation thereof is no
longer desirable in the conduct of the business of the Company
and its Subsidiaries, taken as a whole.
Section 4.04 Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid
or discharged, before the same shall become delinquent, (i) all
material taxes, assessments and governmental charges (including
withholding taxes and any penalties, interest and additions to
taxes) levied or imposed upon the Company or any of its
Subsidiaries or properties of the Company or any of its
Subsidiaries and (ii) all material lawful claims for labor,
materials and supplies that, if unpaid, might by law become a
Lien upon the property of the Company or any of its Subsidiaries;
provided, however, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate
negotiations or proceedings properly instituted and diligently
conducted for which adequate reserves, to the extent required
under GAAP, have been taken.
Section 4.05 Maintenance of Properties and Insurance.
(a) The Company shall, and shall cause each of its
Restricted Subsidiaries to, maintain all properties used or
useful in the conduct of its business in good working order and
condition (subject to ordinary wear and tear) and make all
necessary repairs, renewals, replacements, additions, betterments
and improvements thereto and actively conduct and carry on its
business; provided, however, that nothing in this Section 4.05
shall prevent the Company or any of its Restricted Subsidiaries
from discontinuing the operation and maintenance of any of its
properties, if such discontinuance is (i) in the ordinary course
of business pursuant to customary business terms or (ii) in the
good faith judgment of the Boards of Directors or other governing
body of the Company or Restricted Subsidiary, as the case may be,
desirable in the conduct of their respective businesses and is
not disadvantageous in any material respect to the Holders.
(b) The Company shall provide or cause to be
provided, for itself and each of the Restricted Subsidiaries,
insurance (including appropriate self-insurance) against loss or
damage of the kinds that, in the good faith judgment of the
Company, are adequate and appropriate for the conduct of the
business of the Company and its Restricted Subsidiaries in a
prudent manner, with reputable insurers or with the government of
the United States of America or an agency or instrumentality
thereof, in such amounts, with such deductibles, and by such
methods as shall be customary, in the good faith judgment of the
Company, for companies similarly situated in the industry.
Section 4.06 Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee,
within 105 days after the end of its fiscal quarters and fiscal
years, an Officers' Certificate of the Company (provided,
however, that one of the signatories to each such Officers'
Certificate shall be the Company's principal executive officer,
principal financial officer or principal accounting officer), as
to such Officers' knowledge without independent investigation, of
the Company's compliance with all conditions and covenants under
this Indenture (without regard for any period of grace or
requirement of notice provided hereunder) and in the event any
Default exists, such Officers shall specify the nature of such
Default. Each such Officers' Certificate shall also notify the
Trustee should the Company elect to change the manner in which it
fixes its fiscal year end.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public
Accountants, the annual financial statements delivered pursuant
to Section 4.08 shall be accompanied by a written report of the
Company's independent certified public accountants (who shall be
a firm of established national reputation) stating (A) that their
audit examination has included a review of the terms of this
Indenture and the form of the Notes as they relate to accounting
matters, and (B) whether, in connection with their audit
examination, any Default or Event of Default has come to their
attention and if such a Default or Event of Default has come to
their attention, specifying the nature and period of existence
thereof; provided, however, that, without any restriction as to
the scope of the audit examination, such independent certified
public accountants shall not be liable by reason of any failure
to obtain knowledge of any such Default or Event or Default that
would not be disclosed in the course of an audit examination
conducted in accordance with generally accepted auditing
standards.
(c) (i) If any Default or Event of Default has
occurred and is continuing or (ii) if any Holder seeks to
exercise any remedy hereunder with respect to a claimed Default
under this Indenture or the Notes, the Company shall deliver to
the Trustee, at its address set forth in Section 10.02 hereof, by
registered or certified mail, or by facsimile transmission
followed by hard copy by registered or certified mail, an
Officers' Certificate specifying such event, notice or other
action within 10 days of its becoming aware of such occurrence.
Section 4.07 Compliance with Laws.
The Company shall comply, and shall cause each of its
Subsidiaries to comply, with all applicable statutes, rules,
regulations, orders and restrictions of the United States of
America, all states and municipalities thereof, and of any
governmental department, commissions, boards, regulatory
authority, bureau, agency and instrumentality of the foregoing,
in respect of the conduct of their respective businesses and the
ownership of their respective properties, except for such
noncompliances as could not singly or in the aggregate reasonably
be expected to have a material adverse effect on the financial
condition, business, prospects or results of operations of the
Company and its Subsidiaries taken as a whole.
Section 4.08 Reports to Holders.
The Company will deliver to the Trustee within 15 days
after filing the same with the Commission, copies of the
quarterly and annual reports and of the information, documents
and other reports, if any, which the Company is required to file
with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. Notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, the Company shall file with the Commission, to
the extent permitted, and provide the Trustee and Holders with
such annual reports and such information, documents and other
reports specified in Section 13 of the Exchange Act. The Company
will also comply with the other provisions of Section 314(a) of
the TIA.
Section 4.09 Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law or any usury law or other
law that would prohibit or forgive the Company from paying all or
any portion of the principal of or interest on the Notes as
contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit
or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted
to the Trustee, but will suffer and permit execution of every
such power as though no such law had been enacted.
Section 4.10 Limitation on Restricted Payments.
The Company will not, and will not cause or permit any
of its Restricted Subsidiaries to, directly or indirectly,
(i) declare or pay any dividend or make any
distribution (other than dividends or distributions payable
solely in Qualified Capital Stock of the Company) on or in
respect of shares of the Company's Capital Stock to holders of
such Capital Stock;
(ii) purchase, redeem or otherwise acquire or
retire for value any Capital Stock of the Company or any
warrants, rights or options to purchase or acquire shares of any
class of such Capital Stock;
(iii) make any principal payment on, purchase,
defease, redeem, prepay, decrease or otherwise acquire or retire
for value, prior to any scheduled final maturity, scheduled
repayment or scheduled sinking fund payment, any Indebtedness of
the Company or any Subsidiary Guarantor that is subordinate or
junior in right of payment to the Notes or such Subsidiary
Guarantor's Subsidiary Guarantee, as the case may be; or
(iv) make any Investment (other than a
Permitted Investment)
(each of the foregoing actions set forth in clauses (i), (ii),
(iii) and (iv) being referred to as a "Restricted Payment"), if
at the time of such Restricted Payment or immediately after
giving effect thereto, (a) a Default or an Event of Default shall
have occurred and be continuing, or (b) the Company is not able
to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with Section 4.12 or (c)
the aggregate amount of Restricted Payments (including such
proposed Restricted Payment) made subsequent to the Issue Date
(the amount expended for such purposes, if other than in cash,
being the Fair Market Value of such property as determined
reasonably and in good faith by the Board of Directors of the
Company, but shall not include the value of the Company's
interest in the lubrication oil joint venture contemplated to be
transferred to an Unrestricted Subsidiary upon receipt of the
approval of the Chinese Government) shall exceed the sum of:
(A) 50% of the cumulative Consolidated Net Income
(or if cumulative Consolidated Net Income shall be a loss, minus
100% of such loss) of the Company earned subsequent to the Issue
Date and on or prior to the last date of the Company's fiscal
quarter immediately preceding such Restricted Payment (the
"Reference Date") (treating such period as a single accounting
period); plus
(B) 100% of the aggregate net cash proceeds
received by the Company from any Person (other than a Restricted
Subsidiary of the Company) from the issuance and sale subsequent
to the Issue Date and on or prior to the Reference Date of
Qualified Capital Stock of the Company; plus
(C) without duplication of any amounts included in
the immediately preceding subclause (B), 100% of the aggregate
net cash proceeds of any equity contribution received by the
Company subsequent to the Issue Date from a holder of the
Company's Capital Stock (excluding in the case of the immediately
preceding clause (B) and this clause (C), any net cash proceeds
from an Equity Offering to the extent used to redeem the Notes);
plus
(D) an amount equal to the net reduction in
Investments in Unrestricted Subsidiaries resulting from
dividends, interest payments, repayments of loans or advances, or
other transfers of cash, in each case to the Company or to any
Wholly Owned Restricted Subsidiary of the Company subsequent to
the Issue Date from Unrestricted Subsidiaries (but without
duplication of any such amount included in calculating cumulative
Consolidated Net Income of the Company), or from designations of
Unrestricted Subsidiaries as Restricted Subsidiaries (in each
case valued as provided in Section 4.14), not to exceed, in the
case of any Unrestricted Subsidiary, the amount of Investments
previously made by the Company or any Restricted Subsidiary in
such Unrestricted Subsidiary and which was treated as a
Restricted Payment hereunder; plus
(E) without duplication of the immediately
preceding subclause (D), an amount equal to the lesser of the
cost or net cash proceeds received upon the sale or other
disposition of any Investment made after the Issue Date which had
been treated as a Restricted Payment (but without duplication of
any such amount included in calculating cumulative Consolidated
Net Income of the Company); plus
(F) $5 million.
Notwithstanding the foregoing, the provisions set forth
above will not prohibit:
(1) The payment of any dividend or redemption
payment within 60 days after the date of declaration of such
dividend or applicable redemption if the dividend or redemption
payment, as the case may be, would have been permitted on the
date of declaration;
(2) The redemption or other acquisition of any
shares of Capital Stock of the Company, either (a) solely in
exchange for shares of Qualified Capital Stock of the Company, or
(b) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Restricted Subsidiary
of the Company) of shares of Qualified Capital Stock of the
Company;
(3) If no Default or Event of Default shall have
occurred and be continuing, the acquisition of any Indebtedness
of the Company or Subsidiary Guarantor that is subordinate or
junior in right of payment to the Notes or such Subsidiary
Guarantor's Subsidiary Guarantee, as the case may be, either (a)
solely in exchange for shares of Qualified Capital Stock of the
Company or (b) through the application of the net proceeds of a
substantially concurrent sale for cash (other than to a
Restricted Subsidiary of the Company) of (i) shares of Qualified
Stock of the Company or (ii) Refinancing Indebtedness; and
(4) The initial designation of XCL-China, XCL-China
LubeOil, Ltd., XCL-China Coal Methane, Ltd., XCL-Texas, Ltd., XCL-
Acquisitions, Inc., The Exploration Company of Louisiana, Inc.
and XCL Land Ltd. as Unrestricted Subsidiaries hereunder and the
transfer of the Company's interest in the lubrication oil joint
venture to XCL-China LubeOil, Ltd.
In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in accordance with clause (C) of
this Section 4.10, amounts expended pursuant to clauses (1),
(2)(b) and 3(b)(i) shall be included in such calculation.
Furthermore, the Company may pay cash dividends in respect of its
Preferred Stock in an amount of up to $9,400,000 in any twelve-
month period, commencing with the twelve months beginning on the
third anniversary of the Issue Date, if such Restricted Payments
comply with the provisions set forth in the initial paragraph of
this Section 4.10, but for such purposes losses incurred prior to
the third anniversary of the Issue Date shall be disregarded in
determining the amount referred to in clause (A) of such
paragraph.
Section 4.11 Limitation on Transactions with Affiliates.
(i) The Company will not, and will not cause
or permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into, amend or permit or suffer to exist any
transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any
property, the guaranteeing of any Indebtedness or the rendering
of any service) with, or for the benefit of, any of their
respective Affiliates (each an "Affiliate Transaction"), other
than (a) Affiliate Transactions permitted under paragraph (ii) of
this Section 4.11 and (b) Affiliate Transactions that are on
terms that are fair and reasonable to the Company or the
applicable Restricted Subsidiary and are no less favorable to the
Company or the applicable Restricted Subsidiary than those that
might reasonably have been obtained in a comparable transaction
at such time on an arm's-length basis from a Person that is not
an Affiliate of the Company or such Restricted Subsidiary. All
Affiliate Transactions (and each series of related Affiliate
Transactions which are similar or part of a common plan)
involving aggregate payments or other property with a Fair Market
Value in excess of $1,000,000 shall be approved by the Board of
Directors of the Company, such approval to be evidenced by a
Board Resolution stating that such Board of Directors has
determined that such transaction complies with the foregoing
provisions. If the Company or any Restricted Subsidiary enters
into an Affiliate Transaction (or a series of related Affiliate
Transactions related to a common plan) that involves an aggregate
Fair Market Value of more than $10,000,000, the Company shall,
prior to the consummation thereof, obtain a favorable opinion as
to the fairness of such transaction or series of related
transactions to the Company or the relevant Restricted
Subsidiary, as the case may be, from a financial point of view,
from a nationally recognized investment banking firm and file the
same with the Trustee.
(ii) The restrictions set forth in clause (i)
shall not apply to (a) reimbursement of expenses incurred in the
conduct of the Company's or any Restricted Subsidiary's business
by, and reasonable fees and compensation paid to and indemnity
provided on behalf of, officers, directors, employees or
consultants of the Company or any Restricted Subsidiary as
determined in good faith by the Board of Directors or senior
management of the Company or such Restricted Subsidiary, as the
case may be; (b) transactions exclusively between or among the
Company and any of its Restricted Subsidiaries or exclusively
between or among such Restricted Subsidiaries; provided, however,
that such transactions are not otherwise prohibited hereunder;
and (c) Restricted Payments permitted hereunder.
Section 4.12 Limitation on Incurrence of Additional
Indebtedness.
Other than Permitted Indebtedness, the Company will
not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume,
guarantee, acquire, become liable, contingently or otherwise,
with respect to, or otherwise become responsible for payment of
(collectively, "incur") any Indebtedness; provided, however, that
if no Default or Event of Default shall have occurred and be
continuing at the time of or as a consequence of the incurrence
of any such Indebtedness, the Company and the Restricted
Subsidiaries or any of them may incur Indebtedness (including,
without limitation, Acquired Indebtedness), in each case, if on
the date of the incurrence of such Indebtedness, after giving pro
forma effect to the incurrence thereof and the receipt and
application of the proceeds therefrom, both (a) the Company's
Consolidated EBITDA Coverage Ratio would have been greater than
2.5 to 1.0 and (b) the Company's Adjusted Consolidated Net
Tangible Assets are equal to or greater than 150% of the
aggregate consolidated Indebtedness of the Company and its
Restricted Subsidiaries.
For purposes of determining any particular amount of
Indebtedness under this Section 4.12, guarantees of Indebtedness
otherwise included in the determination of such amount shall not
also be included.
Indebtedness of a Person existing at the time such
Person becomes a Restricted Subsidiary (whether by merger,
consolidation, acquisition of Capital Stock or otherwise) or is
merged with or into the Company or any Restricted Subsidiary or
which is secured by a Lien on an asset acquired by the Company or
a Restricted Subsidiary (whether or not such Indebtedness is
assumed by the acquiring Person) shall be deemed incurred at the
time the Person becomes a Restricted Subsidiary or at the time of
the asset acquisition, as the case may be.
The Company will not, and will not permit any
Subsidiary Guarantor to incur any Indebtedness which by its terms
(or by the terms of any agreement governing such Indebtedness) is
subordinated in right of payment to any other Indebtedness of the
Company or such Subsidiary Guarantor unless such Indebtedness is
also by its terms (or by the terms of any agreement governing
such Indebtedness) made expressly subordinate in right of payment
to the Notes or the Subsidiary Guarantee of such Subsidiary
Guarantor, as the case may be, pursuant to subordination
provisions that are substantively identical to the subordination
provisions of such Indebtedness (or such agreement) that are most
favorable to the holders of such other Indebtedness of the
Company or such Subsidiary Guarantor, as the case may be.
Section 4.13 Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries.
The Company will not, and will not cause or permit any
of its Restricted Subsidiaries to, directly or indirectly, create
or otherwise cause or permit to exist or become effective any
encumbrances or restriction on the ability of any Restricted
Subsidiary to: (a) pay dividends or make any other distributions
on or in respect of its Capital Stock; (b) make loans or
advances, or pay any Indebtedness or other obligation owed, to
the Company or any other Restricted Subsidiary; (c) guarantee any
Indebtedness or any other obligation of the Company or any
Restricted Subsidiary; or (d) transfer any of its property or
assets to the Company or any other Restricted Subsidiary (each
such encumbrance or restriction, a "Payment Restriction"), except
for such encumbrances or restrictions existing under or by reason
of: (1) applicable law; (2) this Indenture; (3) a credit
facility described in clause (b) of the definition of Permitted
Indebtedness; (4) customary non-assignment provisions of any
contract or any lease governing a leasehold interest of any
Restricted Subsidiary; (5) any instrument governing Acquired
Indebtedness, which encumbrance or restriction is not applicable
to such Restricted Subsidiary, or the properties or assets of
such Restricted Subsidiary, other than the Person or the property
or assets of the Person so acquired; (6) agreements existing on
the Issue Date to the extent and in the manner such agreements
are in effect on the Issue Date; (7) customary restrictions with
respect to a Restricted Subsidiary of the Company pursuant to an
agreement that has been entered into for the sale or disposition
of Capital Stock or assets of such Restricted Subsidiary to be
consummated in accordance with the terms of this Indenture solely
in respect of the assets or Capital Stock to be sold or disposed
of; (8) any instrument governing a Permitted Lien, to the extent
and only to the extent such instrument restricts the transfer or
other disposition of assets subject to such Permitted Lien; or
(9) an agreement governing Refinancing Indebtedness in relation
to the Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (2) or (6) above; provided,
however, that the provisions relating to such encumbrance or
restriction contained in any such Refinancing Indebtedness are
not less favorable to the Holders in any material respect (as
determined by the Board of Directors of the Company in their
reasonable and good faith judgment) than the provisions relating
to such encumbrance or restriction contained in the applicable
agreement referred to in such clause (2) or (6).
Section 4.14 Limitation on Restricted and Unrestricted
Subsidiaries.
The Board of Directors may, if no Default or Event of
Default shall have occurred and be continuing or would arise
therefrom, designate an Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that (i) any such
designation shall be deemed to be an incurrence as of the date of
such designation by the Company and its Restricted Subsidiaries
of the Indebtedness (if any) of such designated Subsidiary for
purposes of Section 4.12 and (ii) unless such designated
Subsidiary shall not have any Indebtedness outstanding, other
than Indebtedness which would be Permitted Indebtedness, no such
designation shall be permitted if immediately after giving effect
to such designation and the incurrence of any such Indebtedness
the Company could not incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to Section 4.12.
Notwithstanding the foregoing, however, the Company shall
designate XCL-China a Restricted Subsidiary effective on the date
its Subsidiary Guarantee becomes effective.
The Board of Directors of the Company also may, if no
Default or Event of Default shall have occurred and be continuing
or would arise therefrom, designate any Restricted Subsidiary to
be an Unrestricted Subsidiary if (i) such designation is at that
time permitted under Section 4.10 and (ii) immediately after
giving effect to such designation, the Company could incur $1.00
of additional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 4.12. Any such designation by the Board of
Directors shall be evidenced to the Trustee by the filing with
the Trustee of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and setting
forth in reasonable detail the underlying calculations. In the
event that any Restricted Subsidiary is designated an
Unrestricted Subsidiary in accordance with this Section 4.14,
such Restricted Subsidiary's Subsidiary Guarantee will be
released.
For purposes of Section 4.10, (i) an "Investment" shall
be deemed to have been made at the time any Restricted Subsidiary
is designated as an Unrestricted Subsidiary in an amount
(proportionate to the Company's equity interest in such
Subsidiary) equal to the net worth of such Restricted Subsidiary
at the time that such Restricted Subsidiary is designated as an
Unrestricted Subsidiary; (ii) at any date the aggregate amount of
all Restricted Payments made as Investments since the Issue Date
shall exclude and be reduced by an amount (proportionate to the
Company's equity interest in such Subsidiary) equal to the net
worth of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary,
not to exceed, in the case of any such designation of an
Unrestricted Subsidiary as a Restricted Subsidiary, the amount of
Investments previously made by the Company and the Restricted
Subsidiaries in such Unrestricted Subsidiary (in each case (i)
and (ii) "net worth" to be calculated based upon the Fair Market
Value of the assets of such Subsidiary as of any such date of
designation); and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its Fair Market Value
at the time of such transfer.
Notwithstanding the foregoing, after the Issue Date the
Board of Directors may not designate any Subsidiary of the
Company to be an Unrestricted Subsidiary if, after such
designation, (a) the Company or any Restricted Subsidiary (i)
provides credit support for, or a guarantee of, any Indebtedness
of such Subsidiary (including any undertaking, agreement or
instrument evidencing such Indebtedness) or (ii) is directly or
indirectly liable for any Indebtedness of such Subsidiary or (b)
such Subsidiary owns any Capital Stock of, or owns or holds any
Lien on any property of, any Restricted Subsidiary which is not a
Subsidiary of the Subsidiary to be so designated.
Notwithstanding any provisions of this Section 4.14,
all Subsidiaries of an Unrestricted Subsidiary will be
Unrestricted Subsidiaries.
Section 4.15 Change of Control.
(a) Upon the occurrence of a Change of Control,
each Holder will have the right to require that the Company
purchase all or a portion of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer"), at a
purchase price equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, thereon to the date of
purchase.
(b) Within 30 days following the date upon which
the Change of Control occurred, the Company will send, by first
class mail, a notice to each Holder at such Holder's last
registered address, with a copy to the Trustee, which notice
shall govern the terms of the Change of Control Offer. The
notice to the Holders shall contain all instructions and
materials necessary to enable such Holders to tender Notes
pursuant to the Change of Control Offer. Such notice shall
state:
(i) that the Change of Control Offer is being
made pursuant to this Section 4.15, that all Notes tendered and
not withdrawn will be accepted for payment and that the Change of
Control Offer shall remain open for a period of 20 Business Days
or for such longer period as may be required by law;
(ii) the purchase price (including the amount
of any accrued interest) and the purchase date (which shall be no
earlier than 30 days nor later than 45 days from the date such
notice is mailed, other than as may be required by law) (the
"Change of Control Payment Date");
(iii) that any Note not tendered will continue
to accrue interest;
(iv) that, unless the Company defaults in
making payment therefor, any Note accepted for payment pursuant
to the Change of Control Offer shall cease to accrue interest,
after the Change of Control Payment Date;
(v) that Holders electing to have a Physical
Note purchased pursuant to a Change of Control Offer will be
required to surrender the Note, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Note completed,
to the Paying Agent at the address specified in the notice prior
to the close of business on the third Business Day prior to the
Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw
their election if the Paying Agent receives, not later than the
second Business Day prior to the Change of Control Payment Date,
a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Notes the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased;
(vii) that Holders whose Physical Notes are
purchased only in part will be issued new Physical Notes in a
principal amount equal to the unpurchased portion of the Physical
Notes surrendered; provided, however, that each Physical Note
purchased and each new Physical Note issued shall be in an
original principal amount of $1,000 or integral multiples
thereof; and
(viii) the circumstances and relevant facts
regarding such Change of Control.
On or before the Change of Control Payment Date, the
Company shall (i) accept for payment Notes or portions thereof
tendered pursuant to the Change of Control Offer, (ii) deposit
with the Paying Agent in accordance with Section 2.14 U.S. Legal
Tender sufficient to pay the purchase price plus accrued
interest, if any, of all Notes so tendered and (iii) deliver to
the Trustee any Physical Notes so accepted together with an
Officers' Certificate stating the Notes or portions thereof being
purchased by the Company. Upon receipt by the Paying Agent of
the monies specified in clause (ii) above and a copy of the
Officers' Certificate specified in clause (iii) above, the Paying
Agent shall promptly mail to the Holders of Notes so accepted
payment in an amount equal to the purchase price plus accrued
interest, if any, and the Trustee shall promptly authenticate and
mail to the Holders of any Physical Notes so accepted new
Physical Notes equal in principal amount to any unpurchased
portion of the Physical Notes surrendered. Any Physical Notes
not so accepted shall be promptly mailed by the Paying Agent to
the Holder thereof. For purposes of this Section 4.15, the
Trustee shall act as the Paying Agent.
The Company shall not be required to make a Change of
Control Offer upon a Change of Control if a third party makes the
Change of Control Offer at the same purchase price and time and
otherwise in compliance with the requirements applicable to a
Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of
Control Offer.
Neither the Board of Directors of the Company nor the
Trustee may waive the provisions of this Section 4.15 relating to
the Company's obligation to make a Change of Control Offer.
The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations
are applicable in connection with the repurchase of Notes
pursuant to a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with
the provisions of this Section 4.15, the Company shall comply
with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under the provisions
of this Section 4.15 by virtue thereof.
Section 4.16 Limitation on Asset Sales.
(a) The Company will not, and will not cause or
permit any of its Restricted Subsidiaries to, consummate an Asset
Sale unless:
(i) the Company or the applicable Restricted
Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value
of the assets sold or otherwise disposed of (as determined in
good faith by the Company's Board of Directors or, in the case of
any Asset Sale involving total cash consideration of less than
$2.0 million, senior management of the Company);
(ii) (a) at least 70% of the consideration
received by the Company or such Restricted Subsidiary, as the
case may be, from such Asset Sale shall be in the form of cash or
Cash Equivalents and is received at the time of such disposition
and (b) at least 15% of such consideration received if in a form
other than cash or Cash Equivalents is converted into or
exchanged for cash or Cash Equivalents within 120 days of such
disposition; and
(iii) upon the consummation of an Asset Sale,
the Company shall apply, or cause such Restricted Subsidiary to
apply, the Net Cash Proceeds relating to such Asset Sale within
365 days of receipt thereof either (a) to repay or prepay
Indebtedness (other than Indebtedness that is subordinate or
junior in right of payment to the Notes), provided, in each case,
that any related loan commitment is thereby permanently reduced
by the amount of the Indebtedness so paid, (b) to repay or prepay
any Indebtedness of the Company that is secured by a Lien
permitted to be incurred pursuant to Section 4.18, (c) to make an
investment in properties or assets that replace the properties or
assets that were the subject of such Asset Sale or in properties
or assets that will be used in the Crude Oil and Natural Gas
Business of the Company and its Restricted Subsidiaries as
existing on the Issue Date ("Replacement Assets"), (d) to an
investment in Crude Oil and Natural Gas Related Assets or (e) a
combination of prepayment and investment permitted by the
foregoing clauses (iii)(a) through (iii)(d). On the 366th day
after an Asset Sale or such earlier date, if any, following the
disbursement of all the Collateral subject to the Principal
Account in accordance with the Disbursement Agreement as the
Board of Directors of the Company determines not to apply the Net
Cash Proceeds relating to such Asset Sale as set forth in clauses
(iii)(a) through (iii)(e) of the next preceding sentence (each a
"Net Proceeds Offer Trigger Date"), such aggregate amount of Net
Cash Proceeds which have been received by the Company or such
Restricted Subsidiary but which have not been applied on or
before such Net Proceeds Offer Trigger Date as permitted in
clauses (iii)(a) through (iii)(e) of the next preceding sentence
(each a "Net Proceeds Offer Amount") shall be applied by the
Company or such Restricted Subsidiary, as the case may be, to
make an offer to purchase (a "Net Proceeds Offer") on a date (the
"Net Proceeds Offer Payment Date") not less than 30 nor more than
45 days following the applicable Net Proceeds Offer Trigger Date,
from all Holders on a pro rata basis, that principal amount of
Notes purchasable with the Net Proceeds Offer Amount at a price
equal to 100% of the principal amount of the Notes to be
purchased, plus accrued and unpaid interest, if any, thereon to
the date of purchase; provided, however, that if at any time any
non-cash consideration received by the Company or any Restricted
Subsidiary, as the case may be, in connection with any Asset Sale
is converted into or sold or otherwise disposed of for cash or
Cash Equivalents (other than interest received with respect to
any such non-cash consideration), then such conversion or
disposition shall be deemed to constitute an Asset Sale hereunder
and the Net Cash Proceeds thereof shall be applied in accordance
with this Section 4.16. The Company may defer the Net Proceeds
Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $7.5 million resulting from one
or more Asset Sales (at which time, the entire unutilized Net
Proceeds Offer Amount, and not just the amount in excess of $7.5
million, shall be applied as required pursuant to this
paragraph).
In the event of the transfer of substantially all (but
not all) of the properties and assets of the Company and its
Restricted Subsidiaries as an entirety to a Person in a
transaction permitted under Section 5.01, such Person shall be
deemed to have sold the properties and assets of the Company and
its Restricted Subsidiaries not so transferred for purposes of
this Section 4.16, and shall comply with the provisions of this
Section 4.16 with respect to such deemed sale as if it were an
Asset Sale. In addition, the Fair Market Value of such
properties and assets of the Company or its Restricted
Subsidiaries deemed to be sold shall be deemed to be Net Cash
Proceeds for purposes of this Section 4.16.
Notwithstanding the two immediately preceding
paragraphs, the Company and its Restricted Subsidiaries will be
permitted to consummate an Asset Sale without complying with such
paragraphs to the extent (a) the consideration for such Asset
Sale constitutes Replacement Assets and/or Crude Oil and Natural
Gas Related Assets and (b) such Asset Sale is for Fair Market
Value; provided, however, that any consideration not constituting
Replacement Assets and Crude Oil and Natural Gas Related Assets
received by the Company or any of its Restricted Subsidiaries in
connection with any Asset Sale permitted to be consummated under
this paragraph shall constitute Net Cash Proceeds subject to the
provisions of the two immediately preceding paragraphs.
(b) Subject to the deferral of the Net Proceeds
Offer contained in clause (a)(iii) above, each notice of a Net
Proceeds Offer pursuant to this Section 4.16 shall be mailed or
caused to be mailed, by first class mail, by the Company not more
than 30 days after the Net Proceeds Offer Trigger Date to all
Holders at their last registered addresses, with a copy to the
Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the
Net Proceeds Offer and shall state the following terms:
(i) that the Net Proceeds Offer is being made
pursuant to Section 4.16, that all Notes tendered will be
accepted for payment; provided, however, that if the aggregate
principal amount of Notes tendered in a Net Proceeds Offer plus
any accrued interest at the expiration of such offer exceeds the
aggregate amount of the Net Proceeds Offer, the Company shall
select the Notes to be purchased on a pro rata basis with such
adjustments as may be deemed appropriate by the Company (so that
only Notes in denominations of $1,000 or multiples thereof shall
be purchased) and that the Net Proceeds Offer shall remain open
for a period of 20 Business Days or such longer period as may be
required by law;
(ii) the purchase price (including the amount
of any accrued interest) and the Net Proceeds Offer Payment Date
(which shall be not less than 30 nor more than 45 days following
the applicable Net Proceeds Offer Trigger Date and which shall be
at least five Business Days after the Trustee receives notice
thereof from the Company);
(iii) that any Note not tendered will continue
to accrue interest;
(iv) that, unless the Company defaults in
making payment therefor, any Note accepted for payment pursuant
to the Net Proceeds Offer shall cease to accrue interest, after
the Net Proceeds Offer Payment Date;
(v) that Holders electing to have a Physical
Note purchased pursuant to a Net Proceeds Offer will be required
to surrender the Note, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of the Note completed, to the
Paying Agent at the address specified in the notice prior to the
close of business on the third Business Day prior to the Net
Proceeds Offer Payment Date;
(vi) that Holders will be entitled to withdraw
their election if the Paying Agent receives, not later than the
second Business Day prior to the Net Proceeds Offer Payment Date,
a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Notes the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased; and
(vii) that Holders whose Physical Notes are
purchased only in part will be issued new Physical Notes in a
principal amount equal to the unpurchased portion of the Physical
Notes surrendered; provided, however, that each Physical Note
purchased and each new Physical Note issued shall be in an
original principal amount of $1,000 or integral multiples
thereof.
On or before the Net Proceeds Offer Payment Date, the
Company shall (i) accept for payment Notes or portions thereof
tendered pursuant to the Net Proceeds Offer which are to be
purchased in accordance with item (b)(i) above, (ii) deposit with
the Paying Agent in accordance with Section 2.14 U.S. Legal
Tender sufficient to pay the purchase price plus accrued
interest, if any, of all Notes to be purchased and (iii) deliver
to the Trustee any Physical Notes so accepted together with an
Officers' Certificate stating the Notes or portions thereof being
purchased by the Company. Upon receipt by the Paying Agent of
the monies specified in clause (ii) above and a copy of the
Officers' Certificate specified in clause (iii) above, the Paying
Agent shall promptly mail to the Holders of Notes so accepted
payment in an amount equal to the purchase price plus accrued
interest, if any, and the Trustee shall promptly authenticate and
mail to the Holders of any Physical Notes so accepted new
Physical Notes equal in principal amount to any unpurchased
portion of the Physical Notes surrendered. Any Physical Notes
not so accepted shall be promptly mailed by the Paying Agent to
the Holder thereof. For purposes of this Section 4.16, the
Trustee shall act as the Paying Agent.
The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations
are applicable in connection with the repurchase of Notes
pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with
the provisions of this Section 4.16, the Company shall comply
with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under the provisions
of this Section 4.16 by virtue thereof.
Section 4.17 Limitation on Capital Stock of Restricted
Subsidiaries.
The Company will not cause or permit any of its
Restricted Subsidiaries to issue or sell Capital Stock (other
than to the Company or to another Wholly Owned Restricted
Subsidiary) or permit any Person (other than the Company or
another Wholly Owned Restricted Subsidiary) to own any Stock of
any Restricted Subsidiary. For purposes of this Section 4.17
only, XCL-China will be deemed to be a Restricted Subsidiary at
all times prior to the pledge of its capital stock pursuant to
the Pledge Agreement.
Section 4.18 Limitations on Liens.
Other than Permitted Liens, the Company will not, and
will not cause or permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, assume or permit or suffer
to exist any Liens of any kind against or upon any property or
assets of the Company or any of its Restricted Subsidiaries
(whether owned on the Issue Date or acquired after the Issue
Date) or any proceeds therefrom, or assign or otherwise convey
any right to receive income or profits therefrom unless (a) in
the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes or any
Subsidiary Guarantee, the Notes or such Subsidiary Guarantee, as
the case may be, is secured by a Lien on such property, assets or
proceeds that is senior in priority to such Liens at least to the
same extent as the Notes or such Subsidiary Guarantee, as the
case may be, is senior in priority to such indebtedness and (b)
in all other cases, the Notes and the Subsidiary Guarantees are
equally and ratably secured.
Section 4.19 Limitation on Conduct of Business.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, engage in the conduct of any business
other than the Crude Oil and Natural Gas Business and the Lube
Oil Business.
Section 4.20 Additional Subsidiary Guarantees.
If the Company or any of its Restricted Subsidiaries
transfers or causes to be transferred, in one transaction or a
series of related transactions, any property to any Restricted
Subsidiary that is not a Subsidiary Guarantor, or if the Company
or any of its Restricted Subsidiaries shall organize, acquire or
otherwise invest in or hold an Investment in another Restricted
Subsidiary having total consolidated assets with a book value in
excess of $1,000,000 that is not a Subsidiary Guarantor, then
such transferee or acquired or other Restricted Subsidiary shall
(a) execute and deliver to the Trustee a supplemental indenture
in form reasonably satisfactory to the Trustee pursuant to which
such Restricted Subsidiary shall unconditionally guarantee all of
the Company's obligations under the Notes and this Indenture on
the terms set forth in this Indenture and (b) deliver to the
Trustee an Opinion of Counsel and an Officers' Certificate,
stating that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary
and constitutes a legal, valid, binding and enforceable
obligation of such Restricted Subsidiary. Thereafter, such
Restricted Subsidiary shall be a Subsidiary Guarantor for all
purposes of this Indenture.
Section 4.21 Payment of Existing Secured Debt.
Concurrently with the release of the funds in the
Principal Account to the Company, the Company shall pay in full
the Indebtedness under the ING Credit Facility and the
Subordinated Debt (including, for this purpose, any Refinancing
Debt issued in respect of any such Indebtedness).
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01 Merger, Consolidation and Sale of Assets.
The Company will not, in a single transaction or series
of related transactions, consolidate or merge with or into any
Person, or sell, assign, transfer, lease, convey or otherwise
dispose of (or cause or permit any Restricted Subsidiary to sell,
assign, transfer, lease, convey or otherwise dispose of) all or
substantially all of the Company's properties and assets
(determined on a consolidated basis for the Company and its
Restricted Subsidiaries), whether as an entirety or substantially
as an entirety to any Person, unless: (a) either (i) the Company
shall be the surviving or continuing corporation or (ii) the
Person (if other than the Company) including, without limitation,
a Restricted Subsidiary, formed by such consolidation or into
which the Company is merged or the Person which acquires by sale,
assignment, transfer, lease, conveyance or other disposition the
properties and assets of the Company and its Restricted
Subsidiaries substantially as an entirety (the "Surviving
Entity") (x) shall be a corporation organized and validly
existing under the laws of the United States or any state thereof
or the District of Columbia and (y) shall expressly assume, by
supplemental indenture (in form and substance satisfactory to the
Trustee), executed and delivered to the Trustee, the due and
punctual payment of the principal of, premium, if any, and
interest on all of the Notes and the performance of every
covenant of the Notes, the Indenture, the Security Documents and
the Registration Rights Agreement on the part of the Company to
be performed or observed; (b) immediately after giving effect to
such transaction and the assumption contemplated by clause
(a)(ii)(y) above (including giving effect to any Indebtedness
incurred or anticipated to be incurred in connection with or in
respect of such transaction), the Company or such Surviving
Entity, as the case may be, (i) shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the
Company immediately prior to such transaction and (ii) shall be
able to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to Section 4.12 hereof; (c)
immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (a)(ii)(y)
above (including, without limitation, giving effect to any
Indebtedness incurred or anticipated to be incurred and any Lien
granted in connection with or in respect of the transaction), no
Default or Event of Default shall have occurred or be continuing;
and (d) the Company or the Surviving Entity, as the case may be,
shall have delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that such consolidation,
merger, sale, assignment, transfer, lease, conveyance or other
disposition and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture
comply with the applicable provisions hereof and that all
conditions precedent in this Indenture relating to such
transaction have been satisfied; provided, however, that such
counsel may rely, as to matters of fact, on a certificate or
certificates of officers of the Company.
For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series
of transactions) of all or substantially all of the properties or
assets of one or more Restricted Subsidiaries, the Capital Stock
of which constitutes all or substantially all of the properties
and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the
Company.
Each Subsidiary Guarantor (other than any Subsidiary
Guarantor whose Subsidiary Guarantee is to be released in
accordance with the terms of the Subsidiary Guarantee and this
Indenture in connection with any transaction complying with the
provisions of the Indenture described under Article Five) will
not, and the Company will not cause or permit any Subsidiary
Guarantor to, consolidate with or merge with or into, or sell,
assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties and assets to, any Person
other than the Company or another Subsidiary Guarantor unless:
(a) the entity formed by or surviving any such consolidation or
merger (if other than the Subsidiary Guarantor) or to which such
disposition shall have been made is a corporation organized and
existing under the laws of the United States or any state thereof
or the District of Columbia; (b) such entity assumes by execution
of a supplemental indenture all of the obligations of the
Subsidiary Guarantor under its Subsidiary Guarantee; (c)
immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing; and
(d) immediately after giving effect to such transaction and the
use of any net proceeds therefrom on a pro forma basis, the
Company could satisfy the provisions of clause (b) of the first
paragraph of this Section 5.01. Any merger or consolidation of a
Subsidiary Guarantor with and into, or disposition of all or
substantially all of its properties and assets to, the Company
(with the Company being the Surviving Entity) or another
Subsidiary Guarantor need only comply with clause (d) of the
first paragraph of this Section 5.01.
Section 5.02 Successor Corporation Substituted.
Upon any consolidation, combination or merger,
conveyance, lease or transfer in accordance with Section 5.01, in
which the Company is not the continuing corporation, the
Surviving Entity shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this
Indenture and the Notes with the same effect as if such Surviving
Entity had been named as the Company herein and therein, and
thereafter (except in the case of a lease) the predecessor
corporation will be relieved of all further obligations and
covenants under this Indenture and the Notes.
ARTICLE SIX
REMEDIES
Section 6.01 Events of Default.
An "Event of Default" means any of the following
events:
(a) the failure to pay interest (including any
Additional Interest) on any Notes when the same becomes due and
payable and such default continues for a period of 30 days:
(b) the failure to pay the principal of any Notes,
when such principal becomes due and payable, at maturity, upon
redemption or otherwise (including the failure to make a payment
to purchase Notes tendered pursuant to a Change of Control Offer
or a Net Proceeds Offer);
(c) a default in the performance or breach of the
provisions of Section 5.01, failure to make or consummate a
Change of Control Offer in accordance with Section 4.15, or
failure to make a consummate a Net Proceeds Offer in accordance
with Section 4.16;
(d) a default in the observance or performance of
any other covenant or agreement contained in this Indenture which
default continues for a period of 30 days after the Company
receives written notice specifying the default (and demanding
that such default be remedied) from the Trustee or the Holders of
at least 25% of the outstanding principal amount of the Notes;
(e) a default in the observance or performance of
any covenant or agreement contained in the Security Documents
which default continues for a period of 30 days after the Company
receives written notice specifying the default (and demanding
that such default be remedied) from the Trustee or the Holders of
least 25% of the outstanding principal amount of the Notes;
(f) a default under any mortgage, indenture or
instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness of the Company or of any
Restricted Subsidiary (or the payment of which is guaranteed by
the Company or any Restricted Subsidiary), whether such
Indebtedness now exists or is created after the Issue Date,
excluding, however, the Indebtedness under the ING Credit
Facility and the Subordinated Debt, which default (i) is caused
by a failure to pay principal of or premium, if any, or interest
on such Indebtedness after any applicable grace period provided
in such Indebtedness (a "Payment Default") or (ii) results in the
acceleration of such Indebtedness prior to its express maturity
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates at least $5,000,000;
(g) one or more judgments in an aggregate amount in
excess of $5,000,000 (unless covered by insurance by a reputable
insurer as to which the insurer has acknowledged coverage) shall
have been rendered against the Company or any of its Restricted
Subsidiaries and such judgments remain undischarged, unvacated,
unpaid or unstayed for a period of 60 days after such judgment or
judgments become final and non-appealable;
(h) the Security Documents shall, at any time,
cease to be in full force and effect (unless released by the
Trustee) or shall be declared null and void, or the validity or
enforceability thereof shall be contested by the Company or any
of its Affiliates, or any of the Liens intended to be created by
the Security Documents, shall cease to be or shall not be a valid
and perfected Lien having the priority contemplated thereby;
(i) the Company or any of its Subsidiaries pursuant
to or under or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case or proceeding;
(ii) consents to the entry of an order for
relief against it in an involuntary case or proceeding;
(iii) consents to the appointment of a
Custodian of it or for all or substantially all of its property;
(iv) makes a general assignment for the
benefit of its creditors; or
(v) shall generally not pay its debts when
such debts become due or shall admit in writing its inability to
pay its debts generally; or
(j) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that:
(i) is for relief against the Company or any
Subsidiary of the Company in an involuntary case or proceeding;
(ii) appoints a Custodian of the Company or
any Subsidiary of the Company for all or substantially all of its
Properties; or
(iii) orders the liquidation of the Company or
any Subsidiary of the Company, and in each case the order or
decree remains unstayed and in effect for 60 days; or
(k) any of the Subsidiary Guarantees cease to be in
full force and effect or any of the Subsidiary Guarantees are
declared to be null and void or invalid and unenforceable or any
of the Subsidiary Guarantors denies or disaffirms its liability
under its Subsidiary Guarantee (other than by reason of release
of a Subsidiary Guarantor in accordance with the terms of the
Indenture).
Section 6.02 Acceleration.
Upon the happening of any Event of Default specified in
Section 6.01 (other than an Event of Default specified in clause
(i) or (j)), the Trustee may, or the holders of at least 25% in
aggregate principal amount of outstanding Notes may, declare the
principal of, premium, if any, and accrued and unpaid interest on
all the Notes to be due and payable by notice in writing to the
Company and the Trustee specifying the respective Event of
Default and that it is a "notice of acceleration," and the same
shall become immediately due and payable. If an Event of Default
of the type described in clause (i) or (j) above occurs and is
continuing, then such amount will ipso facto become and be
immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder.
At any time after a declaration of acceleration with
respect to the Notes as described in the preceding paragraph, the
Holders of a majority in aggregate principal amount of the Notes
then outstanding by written notice to the Company and the Trustee
may rescind and cancel such declaration and its consequences (a)
if the rescission would not conflict with any judgment or decree,
(b) if all existing Events of Default have been cured or waived
except nonpayment of principal or interest that has become due
solely because of such acceleration, (c) to the extent the
payment of such interest is lawful, interest on overdue
installments of interest and overdue principal, which has become
due otherwise than by such declaration of acceleration, has been
paid, (d) if the Company has paid the Trustee its reasonable
compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (e) in the event of the cure or
waiver of an Event of Default of the type described in clause (i)
or (j) of the description of Events of Default above, the Trustee
shall have received an Officers' Certificate and an Opinion of
Counsel that such Event of Default has been cured or waived;
provided, however, that such counsel may rely, as to matters of
fact, on a certificate or certificates of officers of the
Company. No such rescission shall affect any subsequent Default
or impair any right consequent thereto.
Section 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the
Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of the principal of, premium, if
any, or interest on the Notes or to enforce the performance of
any provision of the Notes or this Indenture.
All rights of action and claims under this Indenture or
the Notes may be enforced by the Trustee even if it does not
possess any of the Notes or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Holder in
exercising any right or remedy accruing upon an Event of Default
shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of
any other remedy. All available remedies are cumulative to the
extent permitted by law.
Section 6.04 Waiver of Past Defaults.
Prior to the declaration of acceleration of the Notes,
the Holders of not less than a majority in aggregate principal
amount of the Notes then outstanding by notice to the Trustee
may, on behalf of the Holders of all the Notes, waive any
existing Default or Event of Default and its consequences under
this Indenture, except a Default or Event of Default specified in
Section 6.01(a) or (b) or in respect of any provision hereof
which cannot be modified or amended without the consent of the
Holder so affected pursuant to Section 9.02. When a Default or
Event of Default is so waived, it shall be deemed cured and shall
cease to exist. This Section 6.04 shall be in lieu of Section
316(a)(1)(B) of the TIA and such Section 316(a)(1)(B) of the TIA
is hereby expressly excluded from this Indenture and the Notes,
as permitted by the TIA.
Section 6.05 Control by Majority.
Holders of the Notes may not enforce this Indenture or
the Notes except as provided in this Article Six and under the
TIA. The Holders of not less than a majority in aggregate
principal amount of the outstanding Notes shall have the right to
direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust
of power conferred on the Trustee, provided, however, that the
Trustee may refuse to follow any direction (a) that conflicts
with any rule of law or this Indenture, (b) that the Trustee
determines may be unduly prejudicial to the rights of another
Holder, or (c) that may expose the Trustee to personal liability
for which reasonable indemnity provided to the Trustee against
such liability shall be inadequate; provided, further, however,
that the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction or this
Indenture. This Section 6.05 shall be in lieu of Section
316(a)(1)(A) of the TIA, and such Section 316(a)(1)(A) of the TIA
is hereby expressly excluded from this Indenture and the Notes,
as permitted by the TIA.
Section 6.06 Limitation on Suits.
No Holder of any Notes shall have any right to
institute any proceeding with respect to this Indenture or the
Notes or any remedy hereunder, unless the Holders of at least 25%
in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee
to institute such proceeding as Trustee under the Notes and this
Indenture, the Trustee has failed to institute such proceeding
within 30 days after receipt of such notice, request and offer of
indemnity and the Trustee, within such 30-day period, has not
received directions inconsistent with such written request by
Holders of not less than a majority in aggregate principal amount
of the outstanding Notes.
The foregoing limitations shall not apply to a suit
instituted by a Holder of a Note for the enforcement of the
payment of the principal of, premium, if any, or interest on,
such Notes on or after the respective due dates expressed or
provided for in such Note.
A Holder may not use this Indenture to prejudice the
rights of any other Holders or to obtain priority or preference
over such other Holders.
Section 6.07 Right of Holders to Receive Payment.
Notwithstanding any other provision in this Indenture,
the right of any Holder of a Note to receive payment of the
principal of, premium, if any, and interest on such Note, on or
after the respective due dates expressed or provided for in such
Note, or to bring suit for the enforcement of any such payment on
or after the respective due dates, is absolute and unconditional
and shall not be impaired or affected without the consent of the
Holder.
Section 6.08 Collection Suit by Trustee.
If an Event of Default specified in clause (a) or (b)
of Section 6.01 occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust
against the Company, or any other obligor on the Notes, for the
whole amount of the principal of, premium, if any, and accrued
interest, remaining unpaid, together with interest on overdue
principal and, to the extent that payment of such interest is
lawful, interest on overdue installments of interest, in each
case at the rate per annum provided for by the Notes and such
further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel.
Section 6.09 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other
papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents, counsel, accountants and experts) and
the Holders allowed in any judicial proceedings relative to the
Company or Restricted Subsidiaries (or any other obligor upon the
Notes), their creditors or their property and shall be entitled
and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the
same, and any Custodian in any such judicial proceedings is
hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section
7.07. Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf
of any Holder any plan of reorganization, arrangement, adjustment
or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
Section 6.10 Priorities.
If the Trustee collects any money pursuant to this
Article Six it shall pay out such money in the following order:
First: to the Trustee for amounts due under Section
7.07;
Second: to Holders for interest accrued on the Notes,
ratably, without preference or priority of any kind, according to
the amounts due and payable on the Notes for interest, if any;
Third: to Holders for the principal amounts (including
any premium) owing under the Notes, ratably, without preference
or priority of any kind, according to the amounts due and payable
on the Notes for the principal thereof (including any premium);
and
Fourth: the balance, if any, to the Company.
The Trustee, upon prior written notice to the Company,
may fix a record date and payment date for any payment to Holders
pursuant to this Section 6.10.
Section 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy
under this Indenture or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court may in its
discretion require the filing by any party litigant in the suit
of an undertaking to pay the costs of the suit, and the court in
its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having
due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to
any suit by the Trustee, any suit by a Holder pursuant to Section
6.06, or a suit by a Holder or Holders of more than 10% in
aggregate principal amount of the outstanding Notes.
Section 6.12 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this Indenture or
any Note and such proceeding has been discontinued or abandoned
for any reason, or has been determined adversely to the Trustee
or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in
such proceeding, be restored severally and respectively to their
former positions hereunder, and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
ARTICLE SEVEN
TRUSTEE
Section 7.01 Duties of Trustee.
(a) If an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture and use the same degree of
care and skill in its exercise thereof as a prudent person would
exercise or use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of an Event of
Default:
(1) The Trustee need perform only those duties as
are specifically set forth in this Indenture and no covenants or
obligations shall be implied in this Indenture that are adverse
to the Trustee.
(2) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture. However, in the case of
any such certificates or opinions that by any provision hereof
are specifically required to be furnished to the Trustee, the
Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this
Indenture.
(c) Notwithstanding anything to the contrary
herein contained, the Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act,
or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of
paragraph (b) of this Section 7.01.
(2) The Trustee shall not be liable for any error
of judgment made in good faith by a Trust Officer, unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts.
(3) The Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section
6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require
the Trustee to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(e) Every provision of this Indenture that in any
way relates to the Trustee is subject to paragraphs (a), (b), (c)
and (d) of this Section 7.01 and Section 7.02.
(f) The Trustee shall not be liable for interest
on any money or assets received by it except as the Trustee may
agree in writing with the Company. Assets held in trust by the
Trustee need not be segregated from other assets except to the
extent required by law.
Section 7.02 Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully
protected in acting or refraining from acting upon any document
believed by it to be genuine and to have been signed or presented
by the proper Person. The Trustee need not investigate any fact
or matter stated in the document.
(b) Before the Trustee acts or refrains from
acting, it may consult with counsel of its selection and may
require an Officers' Certificate or an Opinion of Counsel, which
shall conform to Sections 10.04 and 10.05. The Trustee shall not
be liable for any action it takes or omits to take in good faith
in reliance on such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and
agents and shall not be responsible for the misconduct or
negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action
that it takes or omits to take in good faith which it reasonably
believes to be authorized or within its rights or powers.
(e) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, notice, request,
direction, consent, order, bond, debenture, or other paper or
document, but the Trustee, in its discretion, may makes such
further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled, upon
reasonable notice to the Company, to examine the books, records,
and premises of the Company, personally or by agent or attorney
and to consult with the officers and representatives of the
Company, including the Company's accountants and attorneys.
(f) The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Indenture at the request, order or direction of any of the
Holders pursuant to the provisions of this Indenture, unless such
Holders shall have offered to the Trustee security or indemnity
reasonably satisfactory to the Trustee against the costs,
expenses and liabilities which may be incurred by it in
compliance with such request, order or direction.
(g) The Trustee shall not be required to give any
bond or surety in respect of the performance of its powers and
duties hereunder.
(h) Delivery of reports, information and documents
to the Trustee under Section 4.08 is for informational purposes
only and the Trustee's receipt of the foregoing shall not
constitute constructive notice of any information contained
therein or determinable from information contained therein,
including the Company's compliance with any of its covenants
hereunder (as to which the Trustee is entitled to rely
exclusively on Officers' Certificates).
Section 7.03 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may
become the owner or pledgee of Notes and may otherwise deal with
the Company, any of its Subsidiaries, or Affiliates, with the
same rights it would have if it were not Trustee. Any Agent may
do the same with like rights. However, the Trustee must comply
with Sections 7.10 and 7.11.
Section 7.04 Trustee's Disclaimer.
The Trustee makes no representation as to the validity
or adequacy of this Indenture or the Notes, and it shall not be
accountable for the Company's use of the proceeds from the Notes,
and it shall not be responsible for any statement of the Company
in this Indenture or the Notes other than the Trustee's
certificate of authentication.
Section 7.05 Notice of Default.
If a Default or an Event of Default occurs and is
continuing and if it is known to a Trust Officer, the Trustee
shall mail to each Holder notice of the uncured Default or Event
of Default within 90 days after obtaining knowledge thereof.
Except in the case of a Default or an Event of Default in payment
of principal of, or interest on, any Note, including an
accelerated payment, a Default in payment on the Change of
Control Payment Date pursuant to a Change of Control Offer or on
the Net Proceeds Offer Payment Date pursuant to a Net Proceeds
Offer and a Default in compliance with Article Five hereof, the
Trustee may withhold the notice if and so long as its Board of
Directors, the executive committee of its Board of Directors or a
committee of its directors and/or Trust Officers in good faith
determines that withholding the notice is in the interest of the
Holders. The foregoing sentence of this Section 7.05 shall be in
lieu of the proviso to Section 315(b) of the TIA and such proviso
to Section 315(b) of the TIA is hereby expressly excluded from
this Indenture and the Notes, as permitted by the TIA.
Section 7.06 Reports by Trustee to Holders.
Within 60 days after May 15 of each year beginning with
1998, the Trustee shall, to the extent that any of the events
described in TIA Section 313(a) occurred with the previous twelve
months, but not otherwise, mail to each Holder a brief report
dated as of such date that complies with TIA Section 313(a). The
Trustee also shall comply with TIA Sections 313(b), (c) and (d).
A copy of each report at the time of its mailing to
Holders shall be mailed to the Company and filed with the
Commission and each stock exchange, if any, on which the Notes
are listed.
The Company shall promptly notify the Trustee if the
Notes become listed on any stock exchange and the Trustee shall
comply with TIA Section 313(d).
Section 7.07 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time
such compensation for its services as has been agreed to in
writing signed by the Company and the Trustee. The Trustee's
compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it in connection with the performance of its
duties under the Indenture. Such expenses shall include the
reasonable fees and expenses of the Trustee's agents, counsel,
accountants and experts.
The Company shall indemnify each of the Trustee (or any
predecessor Trustee) and its agents, employees, stockholders,
Affiliates and directors and officers for, and hold them each
harmless against, any and all loss, liability, damage, claim or
expense (including reasonable fees and expenses of counsel),
including taxes (other than taxes based on the income of the
Trustee) incurred by them except for such actions to the extent
caused by any negligence, bad faith or willful misconduct on
their part, arising out of or in connection with the acceptance
of administration of this trust including the reasonable costs
and expenses of defending themselves against any claim or
liability in connection with the exercise or performance of any
of their rights, powers or duties hereunder. The Trustee shall
notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity. At the Trustee's sole
discretion, the Company shall defend the claim and the Trustee
shall cooperate and may participate in the defense, provided,
however, that any settlement of a claim shall be approved in
writing by the Trustee if such settlement would result in an
admission of liability by the Trustee or if such settlement would
not be accompanied by a full release of the Trustee for all
liability arising out of the events giving rise to such claims.
Alternatively, the Trustee may at its option have separate
counsel of its own choosing and the Company shall pay the
reasonable fees and expenses of such counsel.
To secure the Company's payment obligations in this
Section 7.07, the Trustee shall have a lien prior to the Notes on
all assets or money held or collected by the Trustee, in its
capacity as Trustee, except assets or money held in trust to pay
principal of or premium, if any, or interest on particular Notes.
When the Trustee incurs expenses or renders services
after an Event of Default specified in Section 6.01(i) or (j)
occurs, such expenses and the compensation for such services are
intended to constitute expenses of administration under any
Bankruptcy Law.
The provisions of this Section 7.07 shall survive the
termination of this Indenture.
Section 7.08 Replacement of Trustee.
The Trustee may resign at any time by so notifying the
Company. The Holders of a majority in principal amount of the
outstanding Notes may remove the Trustee and appoint a successor
Trustee with the Company's consent, by so notifying the Company
and the Trustee. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge
of the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason, the Company shall
notify each Holder of such event and shall promptly appoint a
successor Trustee. Within one year after the successor Trustee
takes office, the Holders of a majority in aggregate principal
amount of the outstanding Notes may appoint a successor Trustee
to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance
of its appointment to the retiring Trustee and to the Company.
Immediately after that, the retiring Trustee shall transfer all
property held by it as Trustee to the successor Trustee, subject
to the lien provided in Section 7.07, the resignation or removal
of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The Company shall mail notice of
such successor Trustee's appointment to each Holder.
If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Company or the Holders of at least 10% in
aggregate principal amount of the outstanding Notes may petition
any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Holder may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor
Trustee.
Notwithstanding any resignation or replacement of the
Trustee pursuant to this Section 7.08, the Company's obligations
under Section 7.07 shall continue for the benefit of the retiring
Trustee.
Section 7.09 Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts
into, or transfers all or substantially all of its corporate
trust business to, another corporation, the resulting, surviving
or transferee corporation without any further act shall, if such
resulting, surviving or transferee corporation is otherwise
eligible hereunder, be the successor Trustee; provided, however,
that such corporation shall be otherwise qualified and eligible
under this Article Seven.
Section 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who
satisfies the requirement of TIA Sections 310(a)(1), (2) and (5).
The Trustee (or, in the case of a Trustee that is a corporation
included in a bank holdings company system, the related bank
holding company) shall have a combined capital and surplus of at
least $150 million as set forth in its most recent published
annual report of condition, and have a Corporate Trust Office in
the City of New York. In addition, if the Trustee is a
corporation included in a bank holding company system, the
Trustee, independently of such bank holding company, shall meet
the capital requirements of TIA Section 310(a)(2). The Trustee
shall comply with TIA Section 310(b); provided, however, that
there shall be excluded from the operation of TIA Section
310(b)(1) any indenture or indentures under which other
securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if the requirements
for such exclusion set forth in TIA Section 310(b)(1) are met.
The provisions of TIA Section 310 shall apply to the Company, as
obligor of the Notes.
Section 7.11 Preferential Collection of Claims Against
Company.
The Trustee shall comply with TIA Section 311(a),
excluding any creditor relationship listed in TIA Section 311(b).
A Trustee who has resigned or been removed shall be subject to
TIA Section 311(a) to the extent indicated therein. The
provisions of TIA Section 311(a) shall apply to the Company, as
obligor on the Notes.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.01 Termination of Company's Obligations.
This Indenture will be discharged and will cease to be
of further effect (except as to surviving rights of registration
of transfer or exchange of the Notes, as expressly provided for
in this Indenture) as to all outstanding Notes when (a) either
(i) all Notes, theretofore authenticated and delivered (except
lost, stolen or destroyed Notes which have been replaced or paid
and Notes for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust)
have been delivered to the Trustee for cancellation or (ii) all
Notes not therefore delivered to the Trustee for cancellation
have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire Indebtedness on
the Notes not theretofore delivered to the Trustee for
cancellation, for principal of, premium, if any, and interest on
the Notes to the date of deposit together with irrevocable
instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the
case may be; (b) the Company has paid all other sums payable
under this Indenture by the Company; and (c) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion
of Counsel stating that all conditions precedent under this
Indenture relating to the satisfaction and discharge of this
Indenture have been complied with; provided, however, that such
counsel may rely, as to matters of fact, on a certificate or
certificates of officers of the Company.
The Company may, at its option and at any time, elect
to have its obligations and the corresponding obligations of each
Subsidiary Guarantor discharged with respect to the outstanding
Notes ("Legal Defeasance"). Such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Notes, and satisfied
all of its obligations with respect to the Notes, except for (a)
the rights of Holders to receive payments in respect of the
principal of, premium, if any, and interest in the Notes when
such payments are due, (b) the Company's Obligations with respect
to the Notes concerning issuing temporary Notes, registration of
Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payments, (c) the rights,
powers, trust, duties and immunities of the Trustee and the
Company's obligations in connection therewith and (d) the Legal
Defeasance provisions of this Section 8.01. In addition, the
Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to covenants
contained in Sections 4.04, 4.05, 4.07, 4.08 and 4.10 through
4.21 and Article Five ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the
event of Covenant Defeasance, those events described under
Section 6.01 (except those events described in Section 6.01(a),
(b), (i) and (j)) will no longer constitute an Event of Default
with respect to the Notes.
In order to exercise either Legal Defeasance or
Covenant Defeasance:
(a) the Company must irrevocably deposit with the
Trustee, in trust, for the benefit of the Holders cash in United
States dollars, non-callable U.S. Government Obligations, or a
combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and
interest on the Notes on the stated date for payment thereof or
on the applicable Redemption Date, as the case may be;
(b) in the case of Legal Defeasance, the Company
shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming
that (i) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (ii) since
the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel shall confirm
that, the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance
and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred;
(c) in the case of Covenant Defeasance, the Company
shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming
that the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit or insofar
as Events of Default under Section 6.01(i) or (j) from bankruptcy
or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance
shall not result in a breach or violation of, or constitute a
default under this Indenture or any other agreement or instrument
to which the Company or any of its Restricted Subsidiaries is a
party or by which the Company or any its Restricted Subsidiaries
is bound;
(f) the Company shall have delivered to the Trustee
an Officers' Certificate stating that the deposit was not made by
the Company with the intent of preferring the Holders over any
other creditors of the Company or with the intent of defeating,
hindering, delaying or defrauding any other creditors of the
Company or others;
(g) the Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent provided for or relating to the
Legal Defeasance or the Covenant Defeasance, as the case may be,
have been complied with; provided, however, that such counsel may
rely, as to matters of fact, on a certificate or certificates of
officers of the Company; and
(h) the Company shall have delivered to the Trustee
an Opinion of Counsel to the effect that after the 91st day
following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally.
Section 8.02 Application of Trust Money.
The Trustee or Paying Agent shall hold in trust U.S.
Legal Tender or U.S. Government Obligations deposited with it
pursuant to Section 8.01, and shall apply the deposited U.S.
Legal Tender and the money from U.S. Government Obligations in
accordance with this Indenture to the payment of the principal of
and interest on the Notes. The Trustee shall be under no
obligation to invest said U.S. Legal Tender or U.S. Government
Obligations except as it may agree in writing with the Company.
The Company shall pay and indemnify the Trustee against
any tax, fee or other charge imposed or assessed against the U.S.
Legal Tender or U.S. Government Obligations deposited pursuant to
Section 8.01 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law
is for the account of the Holders of outstanding Notes.
Section 8.03 Repayment to the Company.
Subject to Section 8.01, the Trustee and the Paying
Agent shall promptly pay to the Company upon request any excess
U.S. Legal Tender or U.S. Government Obligations held by them at
any time and thereupon shall be relieved from all liability with
respect to such money. The Trustee and the Paying Agent shall
pay to the Company upon request any money held by them for the
payment of principal or interest that remains unclaimed for one
year; provided, however, that the Trustee or such Paying Agent,
before being required to make any payment, may at the expense of
the Company cause to be published once in a newspaper of general
circulation in the City of New York or mail to each Holder
entitled to such money notice that such money remains unclaimed
and that after a date specified therein which shall be at least
30 days from the date of such publication or mailing any
unclaimed balance of such money then remaining will be repaid to
the Company. After payment to the Company, Holders entitled to
such money must look to the Company for payment as general
creditors unless an applicable law designates another Person.
Section 8.04 Reinstatement.
If the Trustee or Paying Agent is unable to apply any
U.S. Legal Tender or U.S. Government Obligations in accordance
with Section 8.01 by reason of any legal proceeding or by reason
of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application,
the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.01 until such time as the Trustee or Paying
Agent is permitted to apply all such U.S. Legal Tender or U.S.
Government Obligations in accordance with Section 8.01; provided,
however, that if the Company has made any payment of interest on
or principal of any Notes because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the
Holders of such Notes to receive such payment from the U.S. Legal
Tender or U.S. Government Obligations held by the Trustee or
Paying Agent.
Section 8.05 Acknowledgment of Discharge by Trustee.
After (i) the conditions of Section 8.01 have been
satisfied, (ii) the Company has paid or cause to be paid all
other sums payable hereunder by the Company and (iii) the Company
has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent
referred to in clause (i) above relating to the satisfaction and
discharge of this Indenture have been complied with, the Trustee
upon request shall acknowledge in writing the discharge of the
Company's obligations under this Indenture except for those
surviving obligations specified in Section 8.01; provided that
the legal counsel delivering such Opinion of Counsel may rely as
to matters of fact on one or more Officers' Certificates of the
Company.
ARTICLE NINE
MODIFICATION OF THE INDENTURE
Section 9.01 Without Consent of Holders.
Subject to the provisions of Section 9.02, the Company,
the Subsidiary Guarantors and the Trustee may modify or amend,
waive or supplement this Indenture without notice to or consent
of any Holder: (a) to cure any ambiguity, defect or
inconsistency; (b) to comply with Section 5.01 of this Indenture;
(c) to provide for uncertificated Notes in addition to
certificated Notes; (d) to comply with any requirements of the
Commission in order to effect or maintain the qualification of
this Indenture under the TIA; or (e) to make any change that
would provide any additional benefit or rights of any Holder.
Notwithstanding the foregoing, the Trustee, the Subsidiary
Guarantors and the Company may not make any change that adversely
affects the rights of any Holder under this Indenture without the
consent of such Holder. In formulating its opinion on such
matters, the Trustee will be entitled to rely on such evidence as
it deems appropriate, including, without limitation, solely on an
Opinion of Counsel; provided, however, that in delivering such
Opinion of Counsel, such counsel may rely as to matters of fact,
on a certificate or certificates of officers of the Company.
Section 9.02 With Consent of Holders.
The provisions of this Indenture respecting a Mandatory
Redemption may be modified or amended with the consent of the
Holders of a majority in principal amount of the then outstanding
Notes. All other modifications and amendments of this Indenture
may be made with the consent of the Holders of two-thirds in
principal amount of the then outstanding Notes, except that,
without the consent of each Holder of the Notes affected thereby,
no amendment may, directly or indirectly, (i) reduce the amount
of Notes whose Holders must consent to any amendment; (ii) reduce
the rate of or change the time for payment of interest, including
Defaulted Interest, on any Notes; (iii) reduce the principal of
or change the fixed maturity of any Notes, or change the date on
which any Notes may be subject to redemption or repurchase, or
reduce the redemption or repurchase price therefor; (iv) make any
Notes payable in money other than that stated in the Notes; (v)
make any change in provisions of this Indenture protecting the
right of each Holder of a Note to receive payment of principal of
and interest on such Note on or after the due date thereof or to
bring suit to enforce such payment or permitting Holders or a
majority in aggregate principal amount of the then outstanding
Notes to waive Defaults or Events of Default; (vi) amend, change
or modify in any material respect the obligation of the Company
to make and consummate a Change of Control Offer in the event of
a Change of Control or make and consummate a Net Proceeds Offer
with respect to any Asset Sale that has been consummated or
modify any of the provisions or definitions with respect thereto;
(vii) modify or change any provisions of this Indenture or any
Security Document or the related definitions affecting the
ranking of the Notes or any Subsidiary Guarantee or the security
for the Notes in a manner which adversely affects the Holders; or
(viii) release any Subsidiary Guarantor from any of its
obligations under its Subsidiary Guarantee or this Indenture
otherwise than in accordance with the terms of this Indenture.
Section 9.03 Compliance with TIA.
Every amendment, waiver or supplement of this Indenture
or the Notes shall comply with the TIA as then in effect;
provided, however, that this Section 9.03 shall not of itself
require that this Indenture or the Trustee be qualified under the
TIA or constitute any admission or acknowledgment by any party
hereto that any such qualification is required prior to the time
this Indenture and the Trustee are required by the TIA to be so
qualified.
Section 9.04 Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes
effective, a consent to it by a Holder is a continuing consent by
the Holder and every subsequent Holder of a Note or portion of a
Note that evidences the same debt as the consenting Holder's
Note, even if notation of the consent is not made on any Note.
Subject to the following paragraph, any such Holder or subsequent
Holder may revoke the consent as to such Holder's Note or portion
of such Note by notice to the Trustee or the Company received
before the date on which the Trustee receives an Officers'
Certificate certifying that the Holders of the requisite
principal amount of Notes have consented (and not theretofore
revoked such consent) to the amendment, supplement or waiver. An
amendment, supplement or waiver becomes effective upon receipt by
the Trustee of such Officers' Certificate and evidence of consent
by the Holders of the requisite percentage in principal amount of
outstanding Notes.
The Company may, but shall not be obligated to, fix a
Record Date for the purpose of determining the Holders entitled
to consent to any amendment, supplement or waiver, which Record
Date shall be at least 30 days prior to the first solicitation of
such consent. If a Record Date is fixed, then notwithstanding
the second sentence of the immediately preceding paragraph, those
Persons who were Holders at such Record Date (or their duly
designated proxies), and only those Persons, shall be entitled to
revoke any consent previously given, whether or not such Persons
continue to be Holders after such Record Date. No such consent
shall be valid or effective for more than 90 days after such
Record Date unless consents from Holders of the requisite
percentage in principal amount of outstanding Notes required
hereunder for the effectiveness of such consents shall have also
been given and not revoked within such 90 day period.
Section 9.05 Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms
of a Note, the Trustee may require the Holder of such Note to
deliver it to the Trustee. The Trustee may place an appropriate
notation on the Note about the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so
determine, the Company in exchange for the Note shall issue and
the Trustee shall authenticate a new Note that reflects the
changed terms.
Section 9.06 Trustee.
The Trustee shall execute any amendment, supplement or
waiver authorized pursuant to this Article Nine; provided,
however, that the Trustee may, but shall not be obligated to,
execute any such amendment, supplement or waiver which affects
the Trustee's own rights, duties or immunities under this
Indenture. In executing such supplement or waiver the Trustee
shall be entitled to receive indemnity reasonably satisfactory to
it, and shall be fully protected in relying upon an Opinion of
Counsel and an Officers' Certificate of the Company, each stating
that no Event of Default shall occur as a result of such
amendment, supplement or waiver and that the execution of any
amendment, supplement or waiver authorized pursuant to this
Article Nine is authorized or permitted by this Indenture,
provided the legal counsel delivering such Opinion of Counsel may
rely as to matters of fact on one or more Officers' Certificates
of the Company. Such Opinion of Counsel shall not be an expense
of the Trustee.
ARTICLE TEN
MISCELLANEOUS
Section 10.01 TIA Controls.
If any provision of this Indenture limits, qualifies,
or conflicts with another provision which is required to be
included in this Indenture by the TIA, the required provision
shall control; provided, however, that this Section 10.01 shall
not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or
acknowledgment by any party hereto that any such qualification is
required prior to the time this Indenture and the Trustee are
required by the TIA to be so qualified.
Section 10.02 Notices.
Any notices or other communications required or
permitted hereunder shall be in writing, and shall be
sufficiently given if made by hand delivery, by telex, by
telecopier or registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
if to the Company:
XCL Ltd.
110 Rue Jean Lafitte
Lafayette, LA 70508
Telecopier Number: (318) 237-3316
Attn: Chief Executive Officer
with a copy to:
Peter A. Basilevsky, Esq.
Satterlee Stephens Burke & Burke LLP
230 Park Avenue
New York, NY 10169
Telecopier Number: (212) 818-9606
if to the Trustee:
Fleet National Bank
777 Main Street
Hartford, CT 06115
Attn: Corporate Trust Administration
Ref: XCL Ltd. Indenture 1997
Telecopier Number: (860) 986-7920
Each of the Company and the Trustee by written notice
to the other may designate additional or different addresses for
notices to such Person. Any notice or communication to the
Company or the Trustee shall be deemed to have been given or made
as of the date so delivered if hand delivered; when answered
back, if telexed; when receipt is acknowledged, if faxed; and
five (5) calendar days after mailing, if sent by registered or
certified mail, postage prepaid (except that a notice of change
of address shall not be deemed to have been given until actually
received by the addressee).
Any notice or communication mailed to a Holder shall be
mailed to him by first class mail or other equivalent means at
his address as it appears on the registration books of the
Registrar ten (10) days prior to such mailing and shall be
sufficiently given to him if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Holder
or any defect in it shall not affect its sufficiency with respect
to other Holders. If a notice or communication is mailed in the
manner provided above, it is duly given, whether or not the
addressee receives it.
Section 10.03 Communications by Holders with Other
Holders.
Holders may communicate pursuant to TIA Section 312(b)
with other Holders with respect to their rights under this
Indenture or the Notes. The Company, the Trustee, the Registrar
and any other Person shall have the protection of TIA Section
312(c).
Section 10.04 Certificate and Opinion as to
Conditions Precedent.
Upon any request or application by the Company to the
Trustee to take any action under this Indenture, the Company
shall furnish to the Trustee:
(1) an Officers' Certificate, in form and
substance satisfactory to the Trustee, stating that, in the
opinion of the signers, all conditions precedent to be performed
by the Company, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the
opinion of such counsel, all such conditions precedent to be
performed by the Company, if any, provided for in this Indenture
relating to the proposed action have been complied with (which
counsel, as to factual matters, may rely on an Officers'
Certificate).
Section 10.05 Statements Required in Certificate or
Opinion.
Each certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture,
other than the Officers' Certificate required by Section 4.06,
shall include:
(1) a statement that the Person making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and
scope of the examination or investigation upon which the
statements or opinions contained in such certificate or opinion
are based;
(3) a statement that, in the opinion of such
Person, he has made such examination or investigation as is
reasonably necessary to enable him to express an informed opinion
as to whether or not such covenant or condition has been complied
with; and
(4) a statement as to whether or not, in the
opinion of each such Person, such condition or covenant has been
complied with.
Section 10.06 Rules by Trustee, Paying Agent,
Registrar.
The Trustee may make reasonable rules in accordance
with the Trustee's customary practices for action by or at a
meeting of Holders. The Paying Agent or Registrar may make
reasonable rules for its functions.
Section 10.07 Legal Holidays.
A "Legal Holiday" used with resect to a particular
place of payment is a Saturday, a Sunday or a day on which
banking institutions in New York, New York or at such place of
payment are not required to be open. If a payment date is a
Legal Holiday at such place, payment may be made at such place on
the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
Section 10.08 Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. Each
of the parties hereto agrees to submit to the non-exclusive
jurisdiction of the competent courts of the State of New York
sitting in the City of New York or the Untied States District
Court for the Southern District of New York, in any action or
proceeding arising out of or relating to this Indenture or the
Notes.
Section 10.09 No Adverse Interpretation of Other
Agreements.
This Indenture may not be used to interpret another
indenture, loan or debt agreement of the Company or any of its
Subsidiaries. Any such indenture, loan or debt agreement may not
be used to interpret this Indenture.
Section 10.10 No Personal Liability.
No director, officer, employee or stockholder, as such,
of the Company or any Subsidiary, as such, shall have any
liability for any obligations of the Company or any Subsidiary
Guarantor under the Notes, any Subsidiary Guarantee, this
Indenture, the Security Documents, or the Registration Rights
Agreement or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance
of the Notes.
Section 10.11 Successors.
All agreements of the Company and any Subsidiary
Guarantor in this Indenture and in the Notes and under any
Subsidiary Guarantee, as the case may be, shall bind its
successors. All agreements of the Trustee in this Indenture
shall bind its successors.
Section 10.12 Duplicate Originals.
All parties may sign any number of copies of this
Indenture. Each signed copy shall be an original, but all of
them together shall represent the same agreement.
Section 10.13 Severability.
In case any one or more of the provisions in this
Indenture or in the Notes shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity,
legality and enforceability of any such provision in every other
respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent
permitted by law.
Section 10.14 Independence of Covenants.
All covenants and agreements in this Indenture and the
Notes shall be given independent effect so that if any particular
action or condition is not permitted by any of such covenants,
the fact that it would be permitted by an exception to, or
otherwise be within the limitations of, another covenant shall
not avoid the occurrence of a Default or an Event of Default if
such action is taken or condition exists.
ARTICLE ELEVEN
SECURITY
Section 11.01 Grant of Security Interest.
In order to secure the due and punctual payment of the
principal of, premium, if any, and interest on the Notes when and
as the same shall be due and payable, whether on an Interest
Payment Date, at maturity, by acceleration, purchase, repurchase,
redemption or otherwise, and interest on the overdue principal
of, premium, if any, and interest (to the extent permitted by
law), if any, on the Notes and the performance of all other
Obligations of the Company to the Holders or the Trustee under
this Indenture and the Notes, the Company hereby covenants to
execute and deliver the Security Documents concurrently with this
Indenture (or, in the case of the Pledge Agreement, concurrently
with the release of funds in the Principal Account). The
Security Documents shall grant to the Trustee a security interest
in the collateral therein described (collectively referred to
herein as the "Collateral") and when filed shall be deemed hereby
incorporated by reference herein to the same extent and as fully
as if set forth in their entirety at this place, and reference is
made hereby to each Security Document for a more complete
description of the terms and provisions thereof. Each Holder, by
accepting a Note, agrees to all of the terms and provisions of
the Security Documents and the Trustee agrees to all of the terms
and provisions of the Security Documents signed by it.
Section 11.02 Execution of Intercreditor Agreement.
Concurrently with the execution and delivery of this
Indenture, the Trustee and the Company, ING and the Subordinated
Debt Holders will execute and deliver the Intercreditor
Agreement.
Section 11.03 Recording and Opinions.
(a) The Company shall take or cause to be
taken all action required to perfect, maintain, preserve and
protect the Lien and Security Interest in the Collateral granted
by the Security Documents, including, without limitation, the
filing of financing statements, continuation statements and any
instruments of further assurance, in such manner and in such
places as may be required by law fully to preserve and protect
the rights of the Holders and the Trustee under this Indenture
and the Security Documents to all property comprising the
Collateral. The Company shall from time to time promptly pay all
financing and continuation statement recording and/or filing
fees, charges and taxes relating to this Indenture and the
Security Documents any amendments thereto and any other
instruments of further assurance required pursuant to the
Security Documents.
(b) The Company shall furnish to the Trustee,
at such time as required by Section 314(b) of the TIA, Opinion(s)
of Counsel either (a) substantially to the effect that, in the
opinion of such counsel, this Indenture and the grant of a
Security Interest in the Collateral intended to be made by the
Security Documents and all other instruments of further
assurance, including, without limitation, financing statements,
have been properly recorded and filed to the extent necessary to
perfect the Security Interest in the Collateral created by the
Security Documents and reciting the details of such action, and
stating that as to the Security Interests created pursuant to the
Security Documents, such recordings and filings are the only
recordings and filings necessary to give notice thereof and that
no re-recordings or refilings are necessary to maintain such
notice (other than as stated in such opinion), or (b) to the
effect that, in the opinion of such counsel, no such action is
necessary to perfect such Security Interest.
(c) To the extent required by the TIA, the
Company shall furnish to the Trustee on May 1 in each year,
beginning with 1998, an Opinion of Counsel, dated as of such
date, either (i)(A) stating that, in the opinion of such counsel,
action has been taken with respect to the recording, filing, re-
recording and refiling of all supplemental indentures, financing
statements, continuation statements and other documents as is
necessary to maintain the Lien of the Security Documents and
reciting with respect to the Security Interest in the Collateral
the details of such action or referring to prior Opinions of
Counsel in which such details are given, and (B) stating that,
based on relevant laws as in effect on the date of such Opinion
of Counsel, all financing statements, continuation statements and
other documents have been executed and filed that are necessary
as of such date and during the succeeding 24 months fully to
maintain the Security Interests of the Holders and the Trustee
hereunder and under the Security Documents with respect to the
Collateral, or (ii) stating that, in the opinion of such counsel,
no such action is necessary to maintain such Lien.
Section 11.04 Release of Collateral.
(a) The Trustee, in its capacity as Trustee
under the Security Documents, shall not at any time release
Collateral from the Security Interest created by this Indenture
and the Security Documents unless such release is in accordance
with the provisions of this Indenture and the Security Documents.
(b) At any time when an Event of Default shall
have occurred and be continuing, no release of Collateral
pursuant to the provisions of this Indenture and the Security
Documents shall be effective as against the Holders of the Notes.
(c) The release of any Collateral from the
terms of the Security Documents shall not be deemed to impair the
security under this Indenture in contravention of the provisions
hereof if and to the extent the Collateral is released pursuant
to this Indenture and the Security Documents. To the extent
applicable, the Company shall cause TIA Section 314(d) relating
to the release of property from the Lien of the Security
Documents and relating to the substitution therefor of any
property to be subjected to the Lien of the Security Documents to
be complied with. Any certificate or opinion required by TIA
314(d) may be made by an Officer of the Company, except in cases
where TIA Section 314(d) requires that such certificate or
opinion be made by an independent Person, which Person shall be
an independent engineer, appraiser or other expert selected or
approved by the Trustee in the exercise of reasonable care. A
Person is "independent" if such Person (a) is in fact
independent, (b) does not have any direct financial interest or
any material indirect financial interest in the Company or in any
Affiliate of the Company and (c) is not an officer, employee,
promoter, underwriter, trustee, partner or director or person
performing similar functions to any of the foregoing for the
Company. The Trustee shall be entitled to receive and rely upon
a certificate provided by any such Person confirming that such
Person is independent within the foregoing definition.
Section 11.05 Specified Releases of Collateral.
(a) The Company shall be entitled to obtain a
full release of all of the Collateral from the Lien of this
Indenture and of the Security Documents upon compliance with the
conditions precedent set forth in Section 8.01 for satisfaction
and discharge of this Indenture or for Legal Defeasance pursuant
to Section 8.01. Upon delivery by the Company to the Trustee of
an Officers' Certificate and an Opinion of Counsel, each to the
effect that such conditions precedent have been complied with
(and which may be the same Officers' Certificate and Opinion of
Counsel required by Article Eight), the Trustee shall forthwith
take all necessary action (at the request of and the expense of
the Company) to release and reconvey to the Company all of the
Collateral, and shall deliver such Collateral in its possession
to the Company and its applicable Subsidiary Guarantors
including, without limitation, the execution and delivery of
releases and satisfactions wherever required.
(b) Upon the sale of all of the capital stock
or other equity securities of a Restricted Subsidiary that are
Collateral under the Pledge Agreement ("Transferred Collateral"),
which sale is in accordance with all applicable provisions of the
Indenture, the Company shall be entitled to obtain a full release
of all of the Transferred Collateral from the Lien of this
Indenture and of the Security Documents. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an Opinion
of Counsel, each to the effect that such provisions of the
Indenture have been complied with, the Trustee shall forthwith
take all necessary action (at the request and expense of the
Company) to release and reconvey to the Company all of the
Transferred Collateral, and shall deliver such Transferred
Collateral in its possession to the Company and its applicable
Subsidiary Guarantors, including, without limitation, the
execution and delivery of releases and satisfactions wherever
required.
(c) The Company shall be entitled to obtain a
release of, and the Trustee shall release, all other items of
Collateral (the "Released Interests") upon compliance with the
condition precedent that the Company and shall have satisfied all
applicable conditions precedent to any such release set forth in
the applicable Security Documents and shall have delivered to the
Trustee the following:
(i) An Officers' Certificate certifying that
such release complies with the terms and conditions of the
applicable Security Documents; and
(ii) All certificates, opinions and other
documentation required by the TIA or this Indenture, if any.
Upon compliance by the Company with the conditions
precedent set forth above, the Trustee shall cause to be released
and reconveyed to the Company, the Released Interests.
Section 11.06 Form and Sufficiency of Release.
In the event that the Company has sold, exchanged, or
otherwise disposed of or proposes to sell, exchange or otherwise
dispose of any portion of the Collateral that may be sold,
exchanged or otherwise disposed of by the Company, and the
Company requests the Trustee to furnish a written disclaimer,
release or quit-claim of any interest in such property under this
Indenture and the Security Documents, the Trustee, in its
capacity as Trustee under the Security Documents, shall execute,
acknowledge and deliver to the Company (in proper form) such an
instrument promptly after satisfaction of the conditions set
forth herein for delivery of any such release. Notwithstanding
the preceding sentence, all purchasers and grantees of any
property or rights purporting to be released herefrom shall be
entitled to rely upon any release executed by the Trustee
hereunder as sufficient for the purpose of this Indenture and as
constituting a good and valid release of the property therein
described from the Lien of this Indenture or of the Security
Documents.
Section 11.07 Purchaser Protected.
No purchaser or grantee of any property or rights
purporting to be released herefrom shall be bound to ascertain
the authority of the Trustee to execute the release or to inquire
as to the existence of any conditions herein prescribed for the
exercise of such authority; nor shall any purchaser or grantee or
any property or rights permitted by this Indenture to be sold or
otherwise disposed of by the Company be under any obligation to
ascertain or inquire into the authority of the Company to make
such sale or other disposition.
Section 11.08 Authorization of Actions To Be Taken
by the Trustee Under the Security Documents.
Subject to the provisions of the applicable Security
Document, (a) the Trustee may, in its sole discretion and without
the consent of the Holders, take all actions it deems necessary
or appropriate in order to (i) enforce any of the terms of the
Security Documents and (ii) collect and receive any and all
amounts payable in respect of the Obligations of the Company
hereunder and (b) the Trustee shall have power to institute and
to maintain such suits and proceedings as it may deem expedient
to prevent any impairment of the Collateral by any act that may
be unlawful or in violation of the Security Documents or this
Indenture, and such suits and proceedings as the Trustee may deem
expedient to preserve or protect its interests and the interests
of the Holders in the Collateral (including the power to
institute and maintain suits or proceedings to restrain the
enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the
security interest thereunder or be prejudicial to the interests
of the Holders or of the Trustee).
Section 11.09 Authorization of Receipt of Funds by
the
Trustee Under the Security Documents.
The Trustee is authorized to receive any funds for the
benefit of the Holders distributed under the Security Documents,
and to make further distributions of such funds to the Holders in
accordance with the provisions of Section 6.10 and the other
provisions of this Indenture.
Section 11.10 Collateral Accounts.
(a) The Trustee shall maintain and establish two
Collateral Accounts, which, subject to the terms of the
Disbursement Agreement and the Intercreditor Agreement, shall
hold Collateral for the equal and ratable benefit of the Holders
without preference, priority or distinction of any thereof over
any other by reason of difference in time of issuance, sale or
otherwise, as security for the Company's Obligations under the
Indenture and the Notes. The Trustee (or the Disbursement Agent
under the Disbursement Agreement) shall have sole dominion and
control over the Collateral Accounts and the funds from time to
time on deposit therein, and such funds may be withdrawn or
transferred from the Collateral Accounts only in accordance with
the provisions of the Disbursement Agreement and the
Intercreditor Agreement.
(b) All proceeds from the issuance of the Units
shall be deposited in the Collateral Accounts on the Issue Date
as contemplated by Section 4.2 of the Disbursement Agreement.
ARTICLE TWELVE
GUARANTEE
Section 12.01 Unconditional Guarantee
Subject to the provisions of this Article Twelve, on or
prior to the date on which the Disbursement Agent disburses to
the Company the amounts on deposit in the Principal Account
pursuant to Section 5.4(b) of the Disbursement Agreement, the
Company, XCL-China and the Trustee shall execute a supplemental
indenture in form and substance reasonably satisfactory to the
Trustee pursuant to which XCL-China (herein a "Subsidiary
Guarantor") and each future Subsidiary Guarantor, if any, shall,
jointly and severally, unconditionally and irrevocably guarantee,
on a senior basis (such guarantee to be referred to herein as a
"Subsidiary Guarantee") to each Holder of a Note authenticated
and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and
enforceability of this Indenture, the Notes or the Obligations of
the Company or any other Subsidiary Guarantors to the Holders or
the Trustee hereunder or thereunder, that: (a) the principal of,
premium, if any, and interest on the Notes (and any Additional
Interest payable thereon) shall be duly and punctually paid in
full when due, whether at maturity, upon redemption at the option
of Holders pursuant to the provisions of the Notes relating
thereto, by acceleration or otherwise, and interest on the
overdue principal and (to the extent permitted by law) interest,
if any, on the Notes and all other Obligations of the Company or
the Subsidiary Guarantors to the Holders or the Trustee hereunder
or thereunder (including amounts due the Trustee under Section
7.07 hereof) and all other Obligations shall be promptly paid in
full or performed, all in accordance with the terms hereof and
thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other Obligations, the same
shall be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at
maturity, by acceleration or otherwise. Failing payment when due
of any amount so guaranteed, or failing performance of any other
Obligation of the Company to the Holders under this Indenture or
under the Notes, for whatever reason, each Subsidiary Guarantor
shall be obligated to pay, or to perform or cause the performance
of, the same immediately. An Event of Default under this
Indenture or the Notes shall constitute an event of default under
each such Subsidiary Guarantee, and shall entitle the Holders of
Notes to accelerate the Obligations of the Subsidiary Guarantors
in the same manner and to the same extent as the Obligations of
the Company.
Each of the Subsidiary Guarantors shall agree that its
Obligations under its Subsidiary Guarantee shall be
unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any
action to enforce the same, any waiver or consent by any Holder
of the Notes with respect to any provisions thereof, any release
of any other Subsidiary Guarantor, the recovery of any judgment
against the Company, any action to enforce the same, whether or
not a Subsidiary Guarantee is affixed to any particular Note, or
any other circumstance which might otherwise constitute a legal
or equitable discharge or defense of a guarantor. Each of the
Subsidiary Guarantors shall waive the benefit of diligence,
presentment, demand of payment, filing of claims with a court in
the event of insolvency or bankruptcy of the Company, any right
to require a proceeding first against the Company, protest,
notice and all demands whatsoever and covenants that its
Subsidiary Guarantee shall not be discharged except by complete
performance of the Obligations contained in the Notes, this
Indenture and its Subsidiary Guarantee. Each Subsidiary
Guarantee shall be a guarantee of payment and not of collection.
If any Holder or the Trustee is required by any court or
otherwise to return to the Company or to any Subsidiary
Guarantor, or any custodian, trustee, liquidator or other similar
official acting in relation to the Company or such Subsidiary
Guarantor, any amount paid by the Company or such Subsidiary
Guarantor to the Trustee or such Holder, the Subsidiary
Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Subsidiary Guarantor
shall further agree that, as between it, on the one hand, and the
Holders of Notes and the Trustee, on the other hand, (a) subject
to this Article Twelve, the maturity of the Obligations
guaranteed may be accelerated as provided in Article Six hereof
for the purposes of its Subsidiary Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed thereby,
and (b) in the event of any acceleration of such Obligations as
provided in Article Six hereof, such Obligations (whether or not
due and payable) shall forthwith become due and payable by each
Subsidiary Guarantor for the purpose of its Subsidiary Guarantee.
No stockholder, officer, director, employee or
incorporator, past, present or future, of any Subsidiary
Guarantor, as such, shall have any personal liability under any
Subsidiary Guarantee by reason of his, her or its status as such
stockholder, officer, director, employee or incorporator.
Each Subsidiary Guarantor that makes a payment or
distribution under its Subsidiary Guarantee shall be entitled to
a contribution from each other Subsidiary Guarantor, determined
in accordance with GAAP.
Section 12.02 Limitations on Subsidiary Guarantees
The obligations of each Subsidiary Guarantor under its
Subsidiary Guarantee will be limited to the maximum amount which,
after giving effect to all other contingent and fixed liabilities
of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other
Subsidiary Guarantor in respect of the obligations of such
Subsidiary Guarantor under its Subsidiary Guarantee or pursuant
to its contribution obligations under the Indenture, will result
in the obligations of such Subsidiary Guarantor under the
Subsidiary Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law.
Section 12.03 Execution and Delivery of Subsidiary
Guarantee
To further evidence each Subsidiary Guarantee referred
to in Section 12.01, each Subsidiary Guarantor shall agree that a
notation of such Subsidiary Guarantee, substantially in the form
of Exhibit J herein, shall be endorsed on each Note authenticated
and delivered by the Trustee. Such Subsidiary Guarantee shall be
executed on behalf of each Subsidiary Guarantor by either manual
or facsimile signature of two Officers of each Subsidiary
Guarantor, each of whom, in each case, shall have been duly
authorized to so execute by all requisite corporate action. The
validity and enforceability of any Subsidiary Guarantee shall not
be affected by the fact that it is not affixed to any particular
Note.
Each of the Subsidiary Guarantors shall agree that its
Subsidiary Guarantee set forth in Section 12.01 shall remain in
full force and effect notwithstanding any failure to endorse on
each Note a notation of such Subsidiary Guarantee.
If an Officer of a Subsidiary Guarantor whose signature
is on a Subsidiary Guarantee no longer holds that office at the
time the Trustee authenticates the Note on which such Subsidiary
Guarantee is endorsed or at any time thereafter, such Subsidiary
Guarantor's Subsidiary Guarantee of such Note shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery
of any Subsidiary Guarantee set forth in this Indenture on behalf
of each Subsidiary Guarantor.
Section 12.04 Release of a Subsidiary Guarantor.
(a) If no Default exists or would exist under this
Indenture, upon the sale or disposition of all of the Capital
Stock of a Subsidiary Guarantor by the Company or a Restricted
Subsidiary of the Company in a transaction constituting an Asset
Sale the Net Cash Proceeds of which are applied in accordance
with Section 4.16, or upon the consolidation or merger of a
Subsidiary Guarantor with or into any Person in compliance with
Article Five (in each case, other than to the Company or an
Affiliate of the Company or a Restricted Subsidiary), such
Subsidiary Guarantor and each Subsidiary of such Subsidiary
Guarantor that is also a Subsidiary Guarantor shall be deemed
released from all Obligations under this Article Twelve and its
Subsidiary Guarantee without any further action required on the
part of the Trustee or any Holder; provided, however, that each
such Subsidiary Guarantor is sold or disposed of in accordance
with this Indenture. Any Subsidiary Guarantor not so released or
the entity surviving such Subsidiary Guarantor, as applicable,
shall remain or be liable under its Subsidiary Guarantee as
provided in this Article Twelve.
(b) The Trustee shall deliver an appropriate
instrument evidencing the release of a Subsidiary Guarantor upon
receipt of a request by the Company or such Subsidiary Guarantor
accompanied by an Officers' Certificate and an Opinion of Counsel
certifying as to the compliance with this Section 12.04, provided
the legal counsel delivering such Opinion of Counsel may rely as
to matters of fact on one or more Officers' Certificates of the
Company.
The Trustee shall execute any documents reasonably
requested by the Company or a Subsidiary Guarantor in order to
evidence the release of such Subsidiary Guarantor from its
obligations under its Subsidiary Guarantee, whether or not
endorsed on the Notes, and under this Article Twelve.
Except as set forth in Articles Four and Five and this
Section 12.04, nothing contained in this Indenture or in any of
the Notes shall prevent any consolidation or merger of a
Subsidiary Guarantor with or into the Company or another
Subsidiary Guarantor or shall prevent any sale or conveyance of
the property of a Subsidiary Guarantor as an entirety or
substantially as an entirety to the Company or another Subsidiary
Guarantor.
Section 12.05 Waiver of Subrogation
Until this Indenture is discharged and all of the Notes
are discharged and paid in full, each Subsidiary Guarantor shall
irrevocably waive and agree not to exercise any claim or other
rights which it may hereafter acquire against the Company that
arise from the existence, payment, performance or enforcement of
the Company's Obligations under the Notes or this Indenture and
such Subsidiary Guarantor's Obligations under its Subsidiary
Guarantee and this Indenture, in any such instance including,
without limitation, any right of subrogation, reimbursement,
exoneration, contribution, indemnification, and any right to
participate in any claim, remedy or right arises in equity, or
under contract, statute or common law, including, without
limitation, the right to take or receive from the Company,
directly or indirectly, in cash or other property or by set-off
or in any other manner, payment or security on account of such
claim or other rights. If any amount shall be paid to any
Subsidiary Guarantor in violation of the preceding sentence and
any amounts owing to the Trustee or the Holders of Notes under
the Notes, this Indenture, or any other document or instrument
delivered under or in connection with such agreements or
instruments, shall not have been paid in full, such amount shall
have been deemed to have been paid to such Subsidiary Guarantor
for the benefit of, and held in trust for the benefit of, the
Trustee or the Holders and shall forthwith be paid to the Trustee
for the benefit of itself or such Holders to be credited and
applied to the obligations in favor of the Trustee or the
Holders, as the case may be whether matured or unmatured, in
accordance with the terms of this Indenture. Each Subsidiary
Guarantor shall acknowledge that it will receive direct and
indirect benefits from the financing arrangements contemplated by
this Indenture and that the waiver set forth in this Section
12.05 is knowingly made in contemplation of such benefits.
Section 12.06 Immediate Payment
Each Subsidiary Guarantor shall agree to make immediate
payment to the Trustee on behalf of the Holders of all
Obligations owing or payable to the respective Holders upon
receipt of a demand for payment therefor by the Trustee to such
Subsidiary Guarantor in writing.
Section 12.07 No Set-Off
Each payment to be made by a Subsidiary Guarantor
hereunder in respect of the Obligations shall be payable in the
currency or currencies in which such Obligations are denominated,
and shall be made without set-off, counterclaim, reduction or
diminution of any kind or nature.
Section 12.08 Obligations Absolute.
The Obligations of each Subsidiary Guarantor shall be
absolute and unconditional and any monies or amounts expressed to
be owing or payable by each Subsidiary Guarantor which may not be
recoverable from such Subsidiary Guarantor on the basis of a
Subsidiary Guarantee shall be recoverable from such Subsidiary
Guarantor as a primary obligor and principal debtor in respect
thereof.
Section 12.09 Obligations Continuing.
The Obligations of each Subsidiary Guarantor shall be
continuing and shall remain in full force and effect until all
the Obligations have been paid and satisfied in full. Each
Subsidiary Guarantor shall agree with the Trustee that it will
from time to time deliver to the Trustee suitable acknowledgments
of this continued liability hereunder and under any other
instrument or instruments in such form as counsel to the Trustee
may advise and as will prevent any action brought against it in
respect of any default hereunder being barred by an statute of
limitations now or hereafter in force and, in the event of the
failure of a Subsidiary Guarantor so to do, it shall irrevocably
appoint the Trustee the attorney and agent of such Subsidiary
Guarantor to make, execute and deliver such written
acknowledgment or acknowledgments or other instruments as may
from time to time become necessary or advisable, in the judgment
of the Trustee on the advice of counsel, to fully maintain and
keep in force the liability of such Subsidiary Guarantor under
its Subsidiary Guarantee.
Section 12.10 Obligations Not Reduced.
The Obligations of each Subsidiary Guarantor shall not
be satisfied, reduced or discharged solely by the payment of such
principal, premium, if any, interest, fees and other monies or
amounts as may at any time prior to discharge of this Indenture
pursuant to Article Eight be or become owing or payable under or
by virtue of or otherwise in connection with the Notes or this
Indenture.
Section 12.11 Obligations Reinstated.
The Obligations of each Subsidiary Guarantor shall
continue to be effective or shall be reinstated, as the case may
be, if at any time any payment which would otherwise have reduced
the Obligations of any Subsidiary Guarantor (whether such payment
shall have been made by or on behalf of the Company or by or on
behalf of a Subsidiary Guarantor) is rescinded or reclaimed from
any of the Holders upon the insolvency, bankruptcy, liquidation
or reorganization of the Company or any Subsidiary Guarantor or
otherwise, all as though such payment had not been made. If
demand for, or acceleration of the time for, payment by the
Company is stayed upon the insolvency, bankruptcy, liquidation or
reorganization of the Company, all such indebtedness otherwise
subject to demand for payment or acceleration shall nonetheless
by payable by each Subsidiary Guarantor as provided herein.
Section 12.12 Obligations Not Affected.
The Obligations of each Subsidiary Guarantor shall not
be affected, impaired or diminished in any way by any act,
omission, matter or thing whatsoever, occurring before, upon or
after any demand for payment (and whether or not known or
consented to by any Subsidiary Guarantor or any of the Holders)
which, but for this provision, might constitute a whole or
partial defense to a claim against any Subsidiary Guarantor under
its Subsidiary Guarantee or might operate to release or otherwise
exonerate any Subsidiary Guarantor from any of its Obligations or
otherwise affect such Obligations, whether occasioned by default
of any of the Holders or otherwise, including, without
limitation:
(a) any limitation of status or power, disability,
incapacity or other circumstance relating to the Company or any
other Person, including any insolvency, bankruptcy, liquidation,
reorganization, readjustment, composition, dissolution, winding-
up or other proceeding involving or affecting either Issuer or
any other person;
(b) any irregularity, defect, unenforceability or
invalidity in respect of any indebtedness or other Obligation of
the Company or any other Person under this Indenture, the Notes
or any other document or instrument;
(c) any failure of the Company, whether or not
without fault on its part, to perform or comply with any of the
provisions of this Indenture or the Notes, or to give notice
thereof to a Subsidiary Guarantor;
(d) the taking or enforcing or exercising or the
refusal or neglect to take or enforce or exercise any right or
remedy from or against the Company or any other Person or their
respective assets or the release or discharge of any such right
or remedy;
(e) the granting of time, renewals, extensions,
compromises, concessions, waivers, releases, discharges and other
indulgences to the Company or any other Person;
(f) any change in the time, manner or place of
payment of, or in any other term of, any of the Notes, or any
other amendment, variation, supplement, replacement or waiver of,
or any consent to departure from, any of the Notes or this
Indenture, including, without limitation, any increase or
decrease in the principal amount of or premium, if any, or
interest on any of the Notes;
(g) any change in the ownership, control, name,
objects, businesses, assets, capital structure or constitution of
the Company or a Subsidiary Guarantor;
(h) any merger or amalgamation of the Company or a
Subsidiary Guarantor with any Person or Persons;
(i) the occurrence of any change in the laws,
rules, regulations or ordinances of any jurisdiction by an
present or future action of any governmental authority or court
amending, varying, reducing or otherwise affecting, or purporting
to amend, vary, reduce or otherwise affect, any of the
Obligations of the Company under this Indenture or the Notes or
the Obligations of a Subsidiary Guarantor under its Subsidiary
Guarantee, and
(j) any other circumstance, including release of
the Subsidiary Guarantor pursuant to Section 12.04 (other than by
complete, irrevocable payment) that might otherwise constitute a
legal or equitable discharge or defense of the Company under this
Indenture or the Notes or of a Subsidiary Guarantor in respect of
its Subsidiary Guarantee.
Section 12.13 Waiver.
Without in any way limiting the provisions of Section
12.01 hereof, each Subsidiary Guarantor shall waive notice of
acceptance hereof, notice of any liability of any Subsidiary
Guarantor under its Subsidiary Guarantee, notice or proof of
reliance by the Holders upon the Obligations of any Subsidiary
Guarantor, and diligence, presentment, demand for payment on the
Company, protest, notice of dishonor or non-payment of any of the
Company's Obligations under this Indenture or the Notes, or other
notice or formalities to the Company or any Subsidiary Guarantor
of any kind whatsoever.
Section 12.14 No Obligation To Take Action Against the
Company.
Neither the Trustee nor any other Person shall have any
obligation to enforce or exhaust any rights or remedies or to
take any other steps under any security for the Company's
Obligations under this Indenture or the Notes, or against the
Company or any other Person or any Property of the Company or any
other Person before the Trustee is entitled to demand payment and
performance by any or all Subsidiary Guarantors of their
liabilities and obligations under their Subsidiary Guarantees or
under this Indenture.
Section 12.15 Dealing with the Company and Others.
The Holders, without releasing, discharging, limiting
or otherwise affecting in whole or in part the obligations and
liabilities of any Subsidiary Guarantor hereunder and without the
consent of or notice to any Subsidiary Guarantor, may
(a) grant time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences
to the Company or any other Person;
(b) take or abstain from taking security or
collateral from the Company or from perfecting security or
collateral of the Company;
(c) release, discharge, compromise, realize,
enforce or otherwise deal with or do any act or thing in respect
of (with or without consideration) any and all collateral,
mortgages or other security given by the Company or any third
party with respect to the Company's Obligations under, or matters
contemplated by, this Indenture or the Notes;
(d) accept compromises or arrangements from the
Company;
(e) apply all monies at any time received from the
Company or from any security upon such part of the Company's
Obligations under this Indenture or the Notes as the Holders may
see fit or change any such application in whole or in part from
time to time as the Holders may see fit; and
(f) otherwise deal with, or waive or modify their
right to deal with, the Company and all other Persons and any
security as the Holders or the Trustee may see fit.
Section 12.16 Default and Enforcement.
If any Subsidiary Guarantor fails to pay in accordance
with Section 12.06 hereof, the Trustee may proceed in its name as
trustee hereunder in the enforcement of the Subsidiary Guarantee
of any such Subsidiary Guarantor and such Subsidiary Guarantor's
Obligations thereunder and hereunder by any remedy provided by
law, whether by legal proceedings or otherwise, and to recover
from such Subsidiary Guarantor the Company's Obligations under
this Indenture and the Notes.
Section 12.17 Amendment, Etc.
No amendment, modification or waiver of any provision
of this Indenture relating to any Subsidiary Guarantor or consent
to any departure by any Subsidiary Guarantor or any other Persons
from any such provision will in any event be effective unless it
is signed by such Subsidiary Guarantor and the Trustee.
Section 12.18 Acknowledgment.
Each Subsidiary Guarantor shall acknowledge
communication of the terms of this Indenture and the Notes and
consents to and approves of the same.
Section 12.19 Costs and Expenses.
Each Subsidiary Guarantor shall pay on demand by the
Trustee any and all costs, fees and expenses (including, without
limitation, legal fees on a solicitor and client basis) incurred
by the Trustee, its agents, advisors and counsel or any of the
Holders in enforcing any of their rights under any Subsidiary
Guarantee.
Section 12.20 No Merger or Waiver; Cumulative Remedies.
No Subsidiary Guarantee shall operate by way of merger
of any of the obligations of a Subsidiary Guarantor under any
other agreement, including, without limitation, this Indenture.
No failure to exercise and no delay in exercising, on the part of
the Trustee or the Holders, any right, remedy, power or privilege
hereunder or under the Indenture or the Notes, shall operate as a
waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder or under this
Indenture or the Notes preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges in each
Subsidiary Guarantee and under this Indenture, the Notes and any
other document or instrument between a Subsidiary Guarantor
and/or the Company and the Trustee are cumulative and not
exclusive of any rights, remedies, powers and privilege provided
by law.
Section 12.21 Survival of Obligations.
Without prejudice to the survival of any of the other
obligations of each Subsidiary Guarantor, the obligations of each
Subsidiary Guarantor under Section 12.01 shall survive the
payment in full of the Company's Obligations under this Indenture
and the Notes and shall be enforceable against such Subsidiary
Guarantor without regard to and without giving effect to any
defense, right of offset or counterclaim available to or which
may be asserted by the Company or any Subsidiary Guarantor.
Section 12.22 Subsidiary Guarantee in Addition to Other
Obligations.
The obligations of each Subsidiary Guarantor under its
Subsidiary Guarantee and this Indenture are in addition to and
not in substitution for any other obligations to the Trustee or
to any of the Holders in relation to this Indenture or the Notes
and any guarantees or security at any time held by or for the
benefit of any of them.
Section 12.23 Severability.
Any provision of this Article Twelve which is
prohibited or unenforceable in any jurisdiction shall not
invalidate the remaining provisions and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any jurisdiction unless
its removal would substantially defeat the basic intent, spirit
and purpose of this Indenture and this Article Twelve.
Section 12.24 Successors and Assigns.
Each Subsidiary Guarantee shall be binding upon and
inure to the benefit of each Subsidiary Guarantor and the Trustee
and the other Holders and their respective successors and
permitted assigns, except that no Subsidiary Guarantor may assign
any of its obligations hereunder or thereunder.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written
above.
XCL LTD.
By:___________________________
David A. Melman
Executive Vice President,
General Counsel and Secretary
FLEET NATIONAL BANK
By:____________________________
Susan C. Merker
Assistant Vice President
VEHOU05:49653.1
XCL LTD.
13.50% Senior Secured Note due May 1, 2004, Series A
1. Interest.
XCL Ltd., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of the
13.50% Senior Secured Notes due May 1, 2004, Series A (the
"Notes") at a rate of 13.50% per annum (subject to
adjustment). To the extent it is lawful, the Company
promises to pay interest on any interest payment due but
unpaid on such principal amount at a rate of 13.50% per
annum compounded semi-annually.
The Company will pay interest semi-annually on May
1 and November 1 of each year (each, an "Interest Payment
Date"), commencing November 1, 1997. Interest on the Notes
will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from May 20,
1997.
Under certain circumstances, the Company shall be obligated
to pay liquidated damages to the Holders, all as set forth
in Section 2.18 of the Indenture.
2. Method of Payment.
The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are the
registered Holders at the close of business on the Record
Date immediately preceding the Interest Payment Date.
Holders must surrender Notes to a Paying Agent to collect
principal payments. Except as provided below, the Company
shall pay principal and interest in such coin or currency of
the United States of America as at the time of payment shall
be legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Company may pay
principal and interest by wire transfer of Federal funds, or
interest by its check payable in such U.S. Legal Tender.
The Company may deliver any such interest payment to the
Paying Agent or the Company may mail any such interest
payment to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Fleet National Bank (the "Trustee")
will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-Registrar without
notice to the Holders. The Company or any of its
Subsidiaries may, subject to certain exceptions, act as
Paying Agent, Registrar or co-Registrar.
4. Indenture.
The Company issued the Notes under an Indenture,
dated as of May 20, 1997 (the "Indenture"), between the
Company and the Trustee. Capitalized terms herein are used
as defined in the Indenture unless otherwise defined herein.
The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the
TIA, as in effect on the date of the Indenture. The Notes
are subject to all such terms, and Holders of Notes are
referred to the Indenture and said Act for a statement of
them. The Notes are senior obligations of the Company
limited in aggregate principal amount to $75,000,000.
5. Redemption.
Prior to May 1, 2002, the Company may redeem at
its election, within 90 days after completion of any Equity
Offering, with the net proceeds of such Equity Offering, up
to $26,250,000 principal amount of the Notes in cash at the
Redemption Prices (expressed as a percentage of the
principal amount thereof) set forth below, in each case,
including accrued and unpaid interest to the Redemption
Date, if any; provided, however, that at least $48,750,000
aggregate principal amount of all Notes remains outstanding
immediately after giving effect to any such redemption (it
being expressly agreed that for purposes of determining
whether this condition is satisfied, Notes owned by the
Company or any of its Affiliates shall be deemed not to be
outstanding). The Notes may be redeemed at the election of
the Company, as a whole or from time to time in part, at any
time on and after May 1, 2002, at the Redemption Prices
(expressed as a percentage of the principal amount thereof)
set forth below with respect to the indicated Redemption
Date, in each case, together with any accrued but unpaid
interest to the Redemption Date.
If redeemed during
the 12-month period
beginning May 1 Redemption Price
------------------- ----------------
1997...........................113.500%
1998...........................113.500%
1999...........................113.500%
2000...........................113.500%
2001...........................113.500%
2002...........................106.750%
2003 and thereafter............100.000%
The Notes are also subject, in certain
circumstances, to Mandatory Redemption at par on November
30, 1997.
Any redemption will comply with Article Three of
the Indenture.
6. Notice of Redemption.
Notice of redemption will be mailed by first class
mail at least 30 days but not more than 60 days before the
Redemption Date to each Holder of Notes to be redeemed at
his registered address. Notes in denominations larger than
$1,000 may be redeemed in part.
Except as set forth in the Indenture, from and
after any Redemption Date, if monies for the redemption of
the Notes called for redemption shall have been deposited
with the Paying Agent on such Redemption Date the Notes
called for redemption will cease to bear interest and the
only right of the Holders of such Notes will be to receive
payment of the Redemption Price and any accrued and unpaid
interest to the Redemption Date.
7. Denominations; Transfer; Exchange.
The Notes are in registered form, without coupons,
in denominations of $1,000 and integral multiples of $1,000.
A Holder may register the transfer of, or exchange Notes in
accordance with, the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The
Registrar need not register the transfer of or exchange any
Notes selected for redemption.
8. Persons Deemed Owners.
The registered Holder of a Note may be treated as
the owner of it for all purposes.
9. Unclaimed Money.
If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying
Agent(s) will pay the money back to the Company at its
written request. After that, all liability of the Trustee
and such Paying Agent(s) with respect to such money shall
cease.
10. Discharge Prior to Redemption or Maturity.
If the Company at any time deposits into an
irrevocable trust with the Trustee U.S. Legal Tender or
Government Securities sufficient to pay the principal of and
interest on the Notes to redemption or maturity and complies
with the other provisions of the Indenture relating thereto,
the Company will be discharged from certain provisions of
the Indenture and the Notes (including the financial
covenants, but excluding its obligation to pay the principal
of and interest on the Notes).
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or
the Notes may be amended or supplemented with the written
consent of the Holders of at least a majority in aggregate
principal amount of the Notes then outstanding, and any
existing Default or Event of Default or compliance with any
provision may be waived with the consent of the Holders of a
majority in aggregate principal amount of the Notes then
outstanding. Without notice to or consent of any Holder,
the parties thereto may amend or supplement the Indenture or
the Notes to, among other things, cure any ambiguity, defect
or inconsistency, or make any other change that does not
adversely affect the rights of any Holder of a Note.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the
ability of the Company and its Subsidiaries to, among other
things, incur additional Indebtedness or issue Disqualified
Capital Stock, make payments in respect of its Capital
Stock, enter into transactions with Affiliates, incur Liens,
sell assets, change the nature of its business, merge or
consolidate with any other Person and sell, lease, transfer
or otherwise dispose of substantially all of its properties
or assets. The Indenture requires the Company to repurchase
Notes under certain circumstances with the Net Cash Proceeds
of certain Asset Sales. The limitations are subject to a
number of important qualifications and exceptions. The
Company must report to the Trustee on compliance with such
limitations on a quarterly basis.
13. Change of Control.
In the event there shall occur any Change of
Control, each Holder of Notes shall have the right, at such
Holder's option but subject to the limitations and
conditions set forth in the Indenture, to require the
Company to purchase on the Change of Control Payments Date
in the manner specified in the Indenture, all or any part
(in integral multiples of $1,000) of such Holder's Notes at
a Change of Control Purchase Price equal to 101% of the
principal amount thereof, together with accrued and unpaid
interest, if any, to the Change of Control Payment Date.
14. Successors.
When a successor assumes all the obligations of
its predecessor under the Notes and the Indenture, the
predecessor will be released from those obligations.
15. Defaults and Remedies.
If an Event of Default occurs and is continuing,
the Trustee or the Holders of at least 25% in aggregate
principal amount of Notes then outstanding may declare all
the Notes to be due and payable immediately in the manner
and with the effect provided in the Indenture. Holders of
Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations,
Holders of a majority in aggregate principal amount of the
Notes then outstanding may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold
from Holders of Notes notice of any continuing Default or
Event of Default (except a Default in payment of principal,
premium, if any, or interest, including a Default at any
Maturity Date), if it determines that withholding notice is
their interest.
16. No Recourse Against Others.
No stockholder, director, officer, employee or
incorporator, as such, past, present or future, of any
obligor under the Notes or any successor corporation shall
have any liability for any obligation of any obligor under
the Notes or the Indenture or for any claim based on, in
respect of or by reason of, such obligations or their
creation. Each Holder of a Note by accepting a Note waives
and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Notes.
17. Authentication.
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication
on the other side of this Note.
18. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of
a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not
as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
19. CUSIP Numbers.
Pursuant to recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the
Company will cause CUSIP numbers to be printed on the Notes
as a convenience to the Holder of the Notes. No
representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the
other identification numbers printed hereon.
20. Subsidiary Guarantees.
Concurrently with and subject to the release to
the Company of the Collateral subject to the Principal
Account, payment of the principal of, premium, if any, and
interest on the Notes will be unconditionally guaranteed by
XCL-China Ltd., a British Virgin Islands company wholly
owned by the Company ("XCL-China"), and certain future
Restricted Subsidiaries pursuant to and in accordance with
the terms of Article Twelve of the Indenture.
21. Security and Collateral.
Payment of the principal of, premium, if any, and
interest on the Notes is secured by a Security Interest in
the Collateral created by the Security Documents in favor of
the Trustee for the benefit of the Holders.
<PAGE>
ASSIGNMENT
I or we assign this Note to:
_______________________
_______________________
________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of
assignee:___________________________
and irrevocably appoint _______________________________
agent to transfer this Note on the books of the Company.
The agent may substitute another to act for him.
Dated:_______________________
Signature:_____________________
(Sign exactly as name appears on the other side of this
Note)
<PAGE>
EXCHANGE
I or we assign this Note to:
XCL LTD.
110 Rue Jean Lafitte
Lafayette, LA 70508
I.R.S. Employer Identification No.: 51-0305643
and irrevocably appoint _________________________________
agent to transfer this Note on the books of the Company.
The agent may substitute another to act for him.
Dated:___________________________
Signature:________________________
(Sign exactly as name appears on the other side of this
Note)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased
by the Company pursuant to Section 4.15 or 4.16 of the
Indenture, check the appropriate box:
[ ] Section 4.15 [ ] Section 4.16
If you want to elect to have only part of this
Note purchased by the Company pursuant to Section 4.15 or
4.16 of the Indenture, as the case may be, state the amount
you want to be purchased:
$________________________
Dated:______________________
Signature:____________________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:
______________________________
PLEDGE AGREEMENT
This PLEDGE AGREEMENT, together with any amendments,
replacements and supplements hereafter entered into (the
"Pledge Agreement"), dated as of [ ], 1997, between XCL LTD.
(together with its successors and assigns, the "Pledgor"),
and Fleet National Bank (together with its successors and
assigns, the "Trustee"), is made for the benefit of the
Holders. As used herein, all capitalized terms not
otherwise defined herein shall have the meanings set forth
in the Indenture (together with all amendments and
supplements thereto, the "Indenture"), dated as of May 20,
1997, among the Pledgor and the Trustee, relating to the
Pledgor's 13.50% Senior Secured Notes due May 1, 2004,
Series A (the "Discount Notes") and the 13.50% Senior
Secured Notes due May 1, 2004, Series B ("Exchange Notes"
and, together with the Discount Notes, and the Private
Exchange Notes (as defined in the Indenture), the "Notes"),
as amended from time to time in accordance with the terms
thereof.
W I T N E S S E T H:
WHEREAS, the Pledgor has issued $75 million aggregate
principal amount of Notes pursuant to the Indenture; and
WHEREAS, the Pledgor is the legal and beneficial owner of
the issued and outstanding shares of capital stock set forth
on Schedule A attached hereto; and
WHEREAS, the Pledgor, XCL-China Ltd., a British Virgin
Islands company wholly owned by the Pledgor and each other
Subsidiary identified on Schedule A attached hereto (each a
"Subsidiary Guarantor"), have executed and delivered to the
Trustee a supplement to the Indenture dated of even date
herewith pursuant to which each Subsidiary Guarantor has
guaranteed the Company's Obligations under the Indenture and
the Notes; and
WHEREAS, in order to secure the payment and performance in
full of the Obligations of the Pledgor under the Indenture
and the Notes, the parties hereto desire to set forth their
mutual understanding and certain agreements regarding the
terms and conditions of the pledge of the Pledged Collateral
(as defined below) made by the Pledgor to the Trustee for
the ratable benefit of the Holders of the Notes.
NOW, THEREFORE, in consideration of the premises and other
benefits to the Pledgor, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby
agree as follows:
Section 1. Pledge. As collateral security for the
indefeasible payment and performance in full of the
Indenture obligations of the Pledgor, the Pledgor hereby
pledges, assigns, transfers, sets over and delivers unto the
Trustee, and hereby grants unto the Trustee for the ratable
benefit of the Holders and unto their respective successors
and assigns, a continuing security interest in all of the
right, title and interest of the Pledgor in, to and under
any and all of the following described property, rights and
interests (collectively, the "Pledged Collateral"):
(a) all of the issued and outstanding shares of
Capital Stock identified on Schedule A attached hereto of
the Subsidiary Guarantors therein set forth (the "Pledged
Subsidiaries");
(b) all other shares of Capital Stock or other
equity securities issued by the Pledged Subsidiaries now or
hereafter owned or acquired by the Pledgor in any manner,
and the certificates representing such securities, and any
present or future options, warrants or other rights to
subscribe for or purchase any property described in Section
1(a) or any notes, bonds, debentures or other evidences of
indebtedness that are at any time convertible, exchangeable
or exercisable into Capital Stock or other equity securities
of the Pledged Subsidiaries or have or at any time could by
their terms have voting rights with respect to any matter
affecting the Pledged Subsidiaries and all securities,
certificates and instruments representing or evidencing
ownership of any of the property described in Section 1(a)
and Section 1(b) hereof;
(c) all shares of Capital Stock or other equity
securities of any entity issued to the Pledgor if, at the
time of issuance, the entity is or as a result of such
issuance becomes a Restricted Subsidiary under the Indenture
(the property described in Section 1(a), Section 1(b) and
Section 1(c) being referred to herein collectively as the
"Pledged Securities");
(d) any additional property of the kind or type
described in this Section 1 required to be supplied under
the terms of this Pledge Agreement; and
(e) all proceeds and products of the Pledged
Securities, including without limitation dividends,
distributions, cash, instruments and other property or
securities, now or hereafter at any time or from time to
time received or receivable or otherwise distributed or
distributable in respect of or in exchange for any or all of
the Pledged Securities;
TO HAVE AND TO HOLD the Pledged Collateral, together with
all rights, titles, interests, powers, privileges and
preferences pertaining or incidental thereto, unto the
Trustee for the benefit of the Holders and unto their
respective successors and assigns.
Section 2. Representations, Warranties and
Covenants of the Pledgor. The Pledgor hereby represents and
warrants (as of the date of execution hereof as to the
Pledged Collateral existing on such date and as of the date
of acquisition as to the Pledged Collateral acquired
subsequently), covenants and agrees that:
(a) The Pledgor is the legal and beneficial
owner of the Pledged Collateral, holds the Pledged
Collateral free and clear of all Liens (except for the
security interest granted hereunder to the Trustee for the
ratable benefit of Holders of Notes and except for Liens for
taxes not yet payable), and has not made and will not make
any other pledge, assignment, mortgage, hypothecation or
transfer of the Pledged Collateral.
(b) The Pledged Securities have been duly
authorized and validly issued and are fully paid and non-
assessable.
(c) Upon delivery of physical certificates
evidencing the Pledged Securities to the Trustee, the
Trustee will have a perfected first priority security
interest in the Pledged Securities, securing the
indefeasible payment and performance in full of the
Indenture obligations of the Pledgor.
(d) The Pledgor has the requisite corporate
power and authority to pledge the Pledged Collateral in the
manner hereby done or contemplated and will defend its title
thereto against the lawful claims of all persons whomsoever
and shall maintain and preserve the security interest
granted hereunder with respect to the Pledged Collateral as
long as this Pledge Agreement shall remain in full force and
effect.
(e) Neither the execution and delivery of this
Pledge Agreement by the Pledgor, the performance by the
Pledgor of its obligations hereunder, nor the transactions
herein contemplated will violate the Pledgor's Certificate
of Incorporation or bylaws, each as currently in effect,
violate the terms of any agreement, indenture, mortgage,
deed of trust, equipment lease, instrument or other document
to which the Pledgor is a party, violate any law, order,
rule or regulation applicable to the Pledgor of any court or
any government, regulatory body or administrative agency or
other governmental body having jurisdiction over the Pledgor
or its properties, or result in or require the creation or
imposition of any Lien (other than the Lien contemplated
hereby), upon or with respect to any of the property now
owned or hereafter acquired by the Pledgor, which violation
or conflict would have a material adverse effect on the
financial condition, business, assets or liabilities of the
Pledgor and its Subsidiaries, taken as a whole, or on the
value of the Pledged Collateral or a material adverse effect
on the security interests hereunder; provided, however, that
a foreclosure by the Trustee with respect to the Pledged
Collateral may result in the triggering of a right of first
refusal in Apache Corporation as provided under that certain
agreement dated in March, 1994, by and between the Pledgor
and Apache Corporation (the "Apache Option") and require the
consent of the governmental authorities of the People's
Republic of China (the "Chinese Approval Requirement").
(f) The Pledged Securities include the issued
and outstanding shares of Capital Stock of the Pledged
Subsidiaries as described in Schedule A attached hereto, and
as of the date of execution hereof, except for the Apache
Option, there are no outstanding options, warrants or other
rights to subscribe for or purchase any property described
in Section 1(a) or any notes, bonds, debentures or other
evidences of indebtedness that are at any time convertible
into capital stock of the Pledged Subsidiaries or have or
at any time could by their terms have voting rights with
respect to any matters affecting the Pledged Subsidiaries.
(g) No consent or approval which has not been
obtained prior to the date hereof of any other person or
entity and no authorization, approval or other action (other
than delivery of physical certificates evidencing the
Pledged Securities) by, and no notice to or filing with any
governmental body (other than UCC filings), regulatory
authority or securities exchange, was or is necessary as a
condition to the validity of the pledge hereunder of the
Pledged Collateral, and such pledge is effective to vest in
the Trustee the rights of the Trustee in the Pledged
Collateral as set forth herein. Except for the Apache
Option and the Chinese Approval Requirement, there are no
restrictions on the transferability of any of the Pledged
Collateral transferred or delivered by the Pledgor hereunder
or, except for restrictions related to federal and state
securities laws governing the sale of "restricted stock" or
"control stock," with respect to the foreclosure, transfer
or disposition thereof by the Trustee.
(h) The Pledgor shall deliver to the Trustee
concurrently with the execution of this Pledge Agreement or,
to the extent acquired subsequent to the date of execution
hereof, immediately upon the Pledgor's acquisition thereof:
all certificates and instruments representing the Pledged
Securities, and each other item of Pledged Collateral
(including all certificates, instruments and notes
representing any such Pledged Collateral). Any and all
Pledged Securities delivered to the Trustee shall be
accompanied by undated duly executed powers in blank and by
such other instruments of transfer or documents as the
Trustee may reasonably request. The Trustee shall hold the
certificates representing the Pledged Securities delivered
to it in its own name or in the name of its nominee, all in
form and substance satisfactory to the Trustee. The Pledgor
hereby acknowledges that the Trustee may, in its discretion,
appoint one or more financial institutions to act as the
Trustee's agent in holding in custodial accounts instruments
or other financial assets in which the Trustee is granted a
security interest hereunder, including, without limitation,
certificates of deposit and other instruments evidencing
short term obligations.
(i) The Trustee shall at all times have full
and free access during normal business hours to all of the
books, correspondence and records of the Pledgor relating to
the Pledged Collateral (other than information that is
privileged and confidential) and the Trustee and its
representatives may examine the same, make abstracts
therefrom and make photocopies thereof, and the Pledgor
agrees to render to the Trustee, at the Pledgor's cost and
expense, such clerical and other assistance as may be
reasonably requested by the Trustee with regard thereto.
(j) The Pledgor shall not permit any of the
Pledged Subsidiaries or any other entity that is a
Restricted Subsidiary under the Indenture to issue any
securities of the type required to be pledged hereunder
unless such securities are promptly pledged and delivered
hereunder to the Trustee in accordance with Section 2(h).
(k) If, while this Pledge Agreement is in
effect, any stock dividend, stock split, reclassification,
readjustment, reorganization, merger, consolidation,
exchange offer, tender offer or other change in the capital
structure, including the creation of any subscription or
other rights relating to the Pledged Securities, is declared
or made, or proposed to be declared or made, by any of the
Pledged Subsidiaries or any other issuer of Pledged
Collateral, all substituted and additional securities or
interest issued with respect to the Pledged Collateral and
evidenced by certificates shall be endorsed in blank by the
Pledgor promptly upon receipt thereof or otherwise
appropriately transferred to the Trustee in negotiable form,
and all certificates or instruments evidencing such
securities shall be delivered to the Trustee to be held
under the terms of this Pledge Agreement in the same manner
as, and as a part of the Pledged Collateral. All Pledged
Securities shall be evidenced by one or more certificates.
Any securities that may be issued upon exercise of any
subscription or other rights relating to the Pledged
Securities shall be endorsed in blank and delivered to the
Trustee with any necessary powers.
(l) The Pledgor shall pay and discharge all
taxes, assessments and governmental charges or levies
against any Pledged Collateral prior to delinquency thereof
and shall keep all Pledged Collateral free of all unpaid
charges whatsoever, unless contested in good faith and
appropriate reserves have been set aside in accordance with
GAAP.
(m) The Pledgor has, independently and without
reliance on the Trustee or any Holder and based on such
documents and information as it deemed appropriate, made its
own credit analysis and decision to enter into this Pledge
Agreement.
(n) The Pledgor shall promptly notify the
Trustee of any material changes in any fact or circumstance
represented or warranted by the Pledgor with respect to any
material portion of the Pledged Collateral, of any material
impairment of the Pledged Collateral and of any claim,
action or proceeding affecting title to all or any of the
Pledged Collateral. On or prior to [ ] of each year
beginning in 1998, the Pledgor will deliver to the Trustee
an opinion of counsel (which can be in-house counsel) to the
effect that all actions have been taken that are necessary
to preserve and continue in full effect the perfection of
the liens and security interests created hereby through [ ]
of the following year, and on which opinion the Trustee is
entitled to rely. Such opinion may assume, unless such
counsel has reason to believe otherwise, the continued
possession of the Pledged Securities delivered to the
Trustee by the Pledgor.
(o) The chief executive office and principal
place of business of the Pledgor is located at 110 Rue Jean
Lafitte, Lafayette, Louisiana 70508. The Pledgor shall not
relocate its principal place of business or chief executive
office to another county or state unless the Pledgor gives
30 days' prior written notice to the Trustee, which notice
shall specify the county and state into which such
relocation is to be made.
(p) Upon any Subsidiary of the Pledgor becoming
a Restricted Subsidiary, the Pledgor shall amend Schedule A
attached hereto to include such Subsidiary and such
Subsidiary shall thenceforth be treated hereunder for all
purposes as a Pledged Subsidiary and all shares of capital
stock or other equity securities of such Subsidiary issued
to Pledgor shall be treated hereunder for all purposes as
Pledged Securities.
Section 3. Administration of the Pledged Collateral.
The Trustee shall administer the Pledged Collateral in
accordance with the provisions hereof and of the Indenture.
Section 4. Release and Substitution of Pledged
Collateral. The Pledged Collateral shall not be released
from the security interest created hereunder and no property
shall be substituted for any of the Pledged Collateral,
except in accordance with the provisions of Article Eleven
of the Indenture and in accordance with the provisions of
Section 18 hereof. The Trustee shall return the physical
certificates and related stock powers evidencing Pledged
Collateral in its possession when so permitted by the
Indenture or this Pledge Agreement.
Section 5. Voting Rights, Dividends, Etc.
(a) Until an Event of Default (as defined
below) shall have occurred and be continuing:
(i) except as otherwise provided in this
Pledge Agreement, the Pledgor shall be entitled to exercise
any and all voting or consensual rights and powers,
including subscription rights, accruing to an owner of the
Pledged Collateral or any part thereof for any purpose not
inconsistent with the terms of this Pledge Agreement or any
agreement giving rise to any of the Indenture obligations;
(ii) except as otherwise provided in this
Pledge Agreement, the Pledgor shall be entitled to retain
and use any and all dividends, distributions or other
payments which are permitted by the Indenture and paid in
cash or property (other than securities which are subject to
this Pledge Agreement) and the Trustee, upon receipt of any
of the foregoing, shall promptly pay or distribute the same
to the Pledgor; and
(iii) the Trustee shall execute and
deliver to the Pledgor or cause to be executed and delivered
to the Pledgor, all such proxies, powers of attorney,
dividend orders and other instruments as the Pledgor may
reasonably request for the purpose of enabling it to
exercise the voting or consensual rights and powers which
the Pledgor is entitled to exercise pursuant to the
foregoing Section 5(a)(i) or to receive the dividends,
distributions or other payments which the Pledgor is
authorized to retain pursuant to the foregoing Section
5(a)(ii).
(b) Upon the occurrence and during the
continuance of an Event of Default, all rights of the
Pledgor to exercise the voting or consensual rights and
powers which the Pledgor would otherwise be entitled to
exercise pursuant to Section 5(a)(i) and to receive the
dividends, distributions and other payments which the
Pledgor would otherwise be authorized to receive and retain
pursuant to Section 5(a)(ii) shall automatically cease, and
all such rights shall thereupon become vested in the
Trustee, which shall then have the sole and exclusive right
and authority to exercise, in its sole discretion, all such
voting and consensual rights and powers and to receive and
retain as Pledged Collateral all such dividends,
distributions and other payments.
(c) The Trustee shall have the sole and
exclusive right and authority to receive and retain as
Pledged Collateral all dividends, distributions and other
payments which are paid on the Pledged Collateral (other
than dividends, distributions or other payments permitted by
the Indenture and paid on the shares of common stock of the
Company) in cash or property. Any and all money and other
property paid over to or received by the Trustee pursuant to
the provisions of Section 5(b) or this Section 5(c) shall be
retained by the Trustee as additional Pledged Collateral
hereunder and shall be administered and applied in
accordance with the provisions of this Pledge Agreement and
the Indenture. All dividends and interest payments which
are received by the Pledgor contrary to the provisions of
Section 5(b) or this Section 5(c) shall be received in trust
for the benefit of the Trustee, shall be segregated from
other funds of the Pledgor and shall be forthwith paid over
to the Trustee as Pledged Collateral in the same form as so
received (with any necessary endorsement).
Section 6. Default; Remedies.
(a) Defined. For purposes of this Pledge
Agreement, the terms "Default" and "Event of Default" shall
have the respective meanings provided in the Indenture.
(b) Exercise of Remedies Under the Pledge
Agreement. If an Event of Default shall have occurred and
be continuing to the actual knowledge of the Trustee, the
Trustee shall commence the taking of such actions (or
refrain from taking actions) toward collection or
enforcement of this Pledge Agreement and the Pledged
Collateral (or any portion thereof), including without
limitation action toward foreclosure upon any Pledged
Collateral, as it deems appropriate in its sole discretion
or as instructed by the Requisite Holders (as defined in
Section 6(f) below) to the extent allowed by law. If any
Event of Default that was the basis for the commencement of
such action shall have been cured or waived, and, in the
case where there has been an acceleration, rescission of
such acceleration shall have occurred, in each case in
accordance with the terms of the Indenture, any direction to
the Trustee to take any action in connection with the
aforementioned notice shall be deemed rescinded upon
notification by that percentage of Holders necessary to
effect such waiver with respect to such Event of Default as
provided for in the Indenture. The Trustee shall have no
obligation to take any collection or enforcement action
except upon satisfaction of the conditions set forth in
Section 7.01 and Section 7.02 of the Indenture applied to
this Security Agreement.
(c) Remedies Generally. If an Event of Default
shall have occurred and be continuing, the Trustee itself or
by its agents or attorneys may exercise any or all of its
rights and remedies hereunder or under the Indenture, or any
other instrument or agreement securing, evidencing or
relating to the Indenture obligations or under applicable
laws (including all of the rights and remedies of a secured
creditor under the Uniform Commercial Code then in effect in
the State of New York; the "NYUCC"), retain possession of
the Pledged Collateral or sell, assign, transfer, or
dispose of, endorse and deliver the whole or, from time to
time, any part of the Pledged Collateral at public or
private sale or sales, at any exchanges, brokers board or at
any of the Trustee's offices or elsewhere, for cash, upon
credit or for other property, for immediate or future
delivery, and, to the extent permitted by applicable law,
for such price or prices and on such other terms as the
Trustee may deem commercially reasonable. Upon consummation
of any such sale, the Trustee shall have the right to
assign, transfer, endorse and deliver to the purchaser or
purchasers thereof the Pledged Collateral so sold. Each
such purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the
Pledgor, and the Pledgor hereby waives (to the full extent
permitted by law) all rights of redemption, stay or
appraisal which the Pledgor now has or may at any time in
the future have under any rule of law or statute now
existing or hereafter enacted. The Trustee shall give the
Pledgor ten (10) Business Days' written notice (which the
Pledgor agrees shall be deemed to be reasonable notification
within the meaning of Section 9-504(3) of the NYUCC) of the
Trustee's intention to make any such public or private sale.
Any such sale shall be held at such time or times and at
such place or places as the Trustee may fix. At any such
sale, the Pledged Collateral, or portion thereof to be sold,
may be sold as an entirety or in separate portions, as the
Trustee may, in its sole discretion, determine. The Trustee
shall not be obligated to make any sale of the Pledged
Collateral if it shall determine not to do so, regardless of
the fact that notice of sale of the Pledged Collateral may
have been given. The Trustee may, without notice or
publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at
the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to
which the same was so adjourned. In case sale of all or any
part of the Pledged Collateral is made on credit for future
delivery, the Pledged Collateral so sold may be retained by
the Trustee until the sale price is paid by the purchaser or
purchasers thereof, but the Trustee shall not incur any
liability in case any such purchaser or purchasers shall
fail to take up and pay for the Pledged Collateral so sold
and, in case of any such failure, such Pledged Collateral
may be sold again upon like notice. As an alternative to
exercising the power of sale herein conferred upon it, the
Trustee may proceed by suit or suits at law or in equity to
exercise its remedies regarding the Pledged Collateral and
sell the Pledged Collateral or any portion thereof pursuant
to judgment or decree of a court or courts having competent
jurisdiction. If under mandatory requirements of applicable
law, the Trustee shall be required to make disposition of
the Pledged Collateral within a period of time that does not
permit the giving of notice to the Pledgor as hereinbefore
provided, the Trustee need give the Pledgor only such notice
of disposition as shall be reasonably practicable in view of
such mandatory requirements of law.
(d) Remedies; Obtaining the Pledged Collateral
Upon Default. The Pledgor agrees that if any Event of
Default shall have occurred and be continuing, then and in
every such case, and in addition to the rights and remedies
available to a secured party under any applicable provision
of the NYUCC, or any other applicable law, the Trustee may:
(i) personally, or by agents or attorneys,
immediately take possession of the Pledged Collateral or any
part thereof from the Pledgor or any other person who then
has possession of any part thereof, with or without notice
or process of law, and for that purpose may enter upon the
Pledgor's premises where any of the Pledged Collateral is
located and remove the same and use in connection with such
removal any and all services, supplies, aids and other
facilities of the Pledgor;
(ii) instruct the obligor or obligors on
any agreement, instrument or other obligation constituting
Pledged Collateral to make any payment or render any
performance required by the terms of such agreement,
instrument or obligation directly to the Trustee or its
designee;
(iii) sell or otherwise liquidate, or
direct the Pledgor to sell or otherwise liquidate, any or
all investments made in whole or in part with the Pledged
Collateral or any part thereof, and take possession of the
proceeds of any such sale or liquidation; and
(iv) take possession of the Pledged
Collateral or any part thereof by directing the Pledgor in
writing to deliver the same to the Trustee at any place or
places designated by the Trustee, in which event the Pledgor
shall at its own expense:
(A) forthwith cause the same
to be moved to the place or places so designated
by the Trustee and there delivered to the Trustee;
(B) store and keep any
Pledged Collateral so delivered to the Trustee at
such place or places pending further action by the
Trustee as provided in this Section 6(d); and
(C) while any such Pledged
Collateral shall be so stored and kept, provide
such guard and maintenance services as shall be
necessary to protect the same and to preserve and
maintain such Pledged Collateral in good
condition;
it being understood that the Pledgor's obligation so to
deliver the Pledged Collateral is of the essence of this
Pledge Agreement and that, accordingly, upon application to
a court of equity having jurisdiction, the Trustee shall be
entitled to a decree requiring specific performance by the
Pledgor of such obligation.
(e) Preventing Impairment of the Pledged
Collateral. Regardless of whether or not there shall have
occurred any Default or Event of Default, the Trustee may
institute and maintain or cause in the name of the Pledgor
or of the Trustee, or any of them, to be instituted and
maintained, such suits and proceeds as the Trustee may be
advised by counsel shall be necessary or expedient to
prevent any impairment of the security interest in or
perfection of the Pledged Collateral in contravention of the
terms of the Indenture. The Pledgor agrees not to knowingly
take or permit to be taken any action which would impair the
Pledged Collateral or the Trustee's rights in the Pledged
Collateral.
(f) Requisite Holders. For purposes of this
Section 6, "Requisite Holders" means the Holder or Holders
of 25% of the aggregate principal amount of the outstanding
Notes.
Section 7. Trustee Appointed Attorney-in-Fact. The
Pledgor hereby constitutes and appoints the Trustee its
attorney-in-fact for the purpose of carrying out the
provisions, but subject to the terms and conditions, of this
Pledge Agreement and taking any action and executing any
instrument, including, without limitation, any financing
statement or continuation statement, and taking any other
action to maintain the validity, perfection, priority and
enforcement of the security interest intended to be created
hereunder, that the Trustee may reasonably deem necessary or
advisable to accomplish the purposes hereof, which
appointment is irrevocable and coupled with an interest;
provided, however, that nothing herein contained shall be
construed as requiring or obligating the Trustee to make any
commitment or to make any inquiry as to the nature or
sufficiency of any payment received by it, or to present or
file any claim or notice, or to take any action with respect
to the Pledged Collateral or any part thereof or the monies
due or to become due in respect thereof or any property
covered thereby, and no action taken or omitted shall give
rise to any defense, counterclaim or right of action against
the Trustee, unless the Trustee actions are taken or omitted
to be taken with gross negligence or bad faith or constitute
willful misconduct.
Section 8. Purchase of Pledged Collateral by Trustee
or Holders. At any sale of the Pledged Collateral, whether
pursuant to power of sale or otherwise hereunder, the
Trustee or any Holder may, subject to the exercise of the
Apache Option and compliance with the Chinese Approval
Requirement, to the extent permitted by applicable law, bid
for and purchase, free from any right of redemption, stay or
appraisal (all such rights being hereby waived and released
by the Pledgor to the extent permitted by law), the Pledged
Collateral or any part thereof or an interest therein and
upon compliance with the terms of such sale may hold,
retain, exploit, resell or otherwise dispose of such
property without further accountability to the Pledgor for
the proceeds of such sale (except in the event that there is
a surplus of such proceeds in excess of the Indenture
obligations, in which case, the Trustee shall account to the
Pledgor for such surplus). The Pledgor will execute and
deliver or cause to be executed and delivered, such
instruments, endorsements, assignments, waivers,
certificates and other documents and take such further
action as the Trustee shall request in connection with any
such sale.
Section 9. Disposition of Proceeds. The proceeds of
any sale of the whole or any part of the Pledged Collateral,
together with any other monies held by the Trustee under the
provisions of this Pledge Agreement, shall be applied by the
Trustee in accordance with the provisions of the Indenture.
Section 10. Waiver of Claims. Except as otherwise
provided in this Pledge Agreement, THE PLEDGOR HEREBY
WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE OF
JUDICIAL HEARING IN CONNECTION WITH THE TRUSTEE'S TAKING
POSSESSION OR THE TRUSTEE'S DISPOSITION OF ANY OF THE
PLEDGED COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND
ALL PRIOR NOTICES AND HEARINGS FOR ANY PREJUDGMENT REMEDY OR
REMEDIES AND ANY SUCH RIGHT THAT THE PLEDGOR WOULD OTHERWISE
HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED
STATES OR OF ANY STATE, and, to the full extent permitted by
applicable law, the Pledgor hereby further waives:
(a) all damages occasioned by such taking of
possession or disposition except any damages which are the
direct result of the Trustee's negligence, bad faith or
willful misconduct;
(b) all other requirements as to the time,
place and terms of sale or other requirements, with respect
to the enforcement of the Trustee's rights and powers
hereunder; and
(c) except as provided in Section 6(c) hereof,
all rights of redemption, appraisement, valuation, stay,
marshalling of assets, extension or moratorium, existing at
law or in equity, by statute or otherwise, now or hereafter
in force, in order to prevent or delay the enforcement of
this Pledge Agreement or the sale or other disposition of
the Pledged Collateral or any portion thereof, and the
Pledgor, for itself and all who may claim under it, insofar
as it now or hereafter lawfully may, hereby waives all such
rights.
Any sale of, or the exercise of any options to purchase, or
any other realization upon, any Pledged Collateral shall
operate to divest all right, title, interest, claim and
demand, at law or in equity, of the Pledgor therein and
thereto, and shall be a perpetual bar both at law and in
equity against the Pledgor and against any and all persons
claiming or attempting to claim the Pledged Collateral so
sold, optioned or realized upon, or any part thereof,
through and under the Pledgor.
Section 11. Remedies Cumulative; No Waiver. Each
right, power and remedy of the Trustee provided for herein
or in the Indenture or in another agreement pursuant to
which a Lien is created in favor of the Trustee for the
benefit of any Holder, or now or hereafter existing at law
or in equity, by statute or otherwise, shall be cumulative
and concurrent and shall be in addition to every other
right, power or remedy of the Trustee or any Holder provided
for herein or in the Indenture or in another agreement
pursuant to which a Lien is created in favor of the Trustee
for the benefit of any Holder or now or hereafter existing
at law or in equity, by statute or otherwise. No failure on
the part of the Trustee or any Holder to exercise, and no
delay in exercising, any right, power or remedy hereunder or
under the Indenture or under another agreement pursuant to
which a Lien is created in favor of the Trustee for the
benefit of any Holder or now or hereafter existing at law or
in equity, by statute or otherwise, shall operate as a
waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right,
power or remedy. No notice to or demand on the Pledgor
hereunder shall, of itself, entitle the Pledgor to any other
or further notice or demand in the same, similar or other
circumstances.
Section 12. Additional Pledged Collateral. Without
notice or consent of the Pledgor and without impairment of
the security interests and rights created by this Pledge
Agreement, the Trustee may accept from any Person or Persons
additional collateral or other security for the obligations
of the Subsidiary Guarantors or other Indenture Obligations.
Neither the creation of the security interests created
hereunder nor the acceptance of any such additional
collateral or security shall prevent the Trustee from
resorting to such additional collateral or security or to
the Pledged Collateral, in any order, without affecting the
Trustee's rights hereunder.
Section 13. Further Assurances. The Pledgor agrees
that it shall, at its own expense, promptly file or record
such notices, financing statements, continuation statements
or other documents and take all further action as may be
necessary to perfect, maintain and protect the perfection of
the security interests of the Trustee hereunder or to enable
the Trustee to exercise and enforce its rights and remedies
hereunder with respect to the Pledged Collateral, and as the
Trustee may reasonably request, such instruments to be in
form and substance satisfactory to the Trustee, and that it
shall, at its own expense, do such further acts and things
and execute and deliver to the Trustee such additional
conveyances, assignments, endorsements, agreements and
instruments as the Trustee may at any time reasonably
request in connection with the administration and
enforcement of this Pledge Agreement or relative to the
Pledged Collateral or any part thereof or in order to assure
and confirm unto the Trustee its rights, powers and remedies
hereunder.
Section 14. Indemnification and Expenses.
(a) The Pledgor agrees to indemnify the Trustee
from and against any and all claims, losses and liabilities
growing out of or resulting from this Pledge Agreement
(including, without limitation, enforcement of this Pledge
Agreement), except valid claims (as determined by a
nonappealable order of any court of competent jurisdiction)
arising out of a breach by the Trustee of this Agreement or
claims, losses or liabilities resulting from the Trustee's
negligence, bad faith, recklessness or willful misconduct,
as determined by a final judgment of a court of competent
jurisdiction. The indemnification of the Trustee set forth
in the immediately preceding sentence is cumulative and not
exclusive of any indemnity of the Trustee set forth in the
Indenture or provided for under the TIA.
(b) The Pledgor will pay upon demand to the
Trustee the amount of any and all reasonable out-of-pocket
expenses, including the reasonable fees and charges of its
counsel and of any experts and agents, that the Trustee may
incur in connection with the negotiation, execution and
enforcement of this Pledge Agreement, the custody,
preservation, use or operation of, or the sale of,
collection from or other realization upon, any of the
Pledged Collateral, the exercise or enforcement of any of
the rights of the Trustee or the Holders hereunder or the
failure by the Pledgor to perform or observe any of the
provisions hereof, and all amounts so incurred by the
Trustee shall be entitled to the benefits of Section 7.7 of
the Indenture.
Section 15. Registration Rights, etc.
(a) If the Trustee determines that the
registration of any of the securities included in the
Pledged Collateral under, or other compliance with, the
Securities Act or any similar Federal or state law is
desirable, upon or at any time after an Event of Default and
acceleration of the Notes in accordance with Section 6.2 of
the Indenture, and the failure of Apache to exercise the
Apache Option, the Pledgor will use its best efforts to
cause such registration or compliance to be effectively
made, at no expense to the Trustee or to the Holders, and to
continue any such registration effective for such time as
may be reasonably necessary in the opinion of the Trustee.
The Pledgor will reimburse the Trustee upon demand for any
expenses incurred by the Trustee (including reasonable
attorneys' fees) incurred in connection therewith, which
obligation to pay such expenses shall be secured hereunder.
(b) If the Pledgor is unable to effect a public
sale of any or all of the Pledged Collateral or if the
Trustee determines that it is desirable to sell the Pledged
Collateral in one or more private sales, subject to the
provisions of the Apache Option, the Trustee may limit such
sales to a restricted group of purchasers who will be
obliged to agree, among other things, to acquire such
securities for their own account for investment and not with
a view to distribution or resale. The Pledgor acknowledges
and agrees that any such private sale may result in prices
and other terms less favorable to the seller than if such
sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable
manner. Subject to the provisions of the Apache Option and
compliance with the Chinese Approval Requirement, the
Trustee shall be under no obligation to delay a sale of any
of the Pledged Collateral for the period of time necessary
to permit the issuer of such securities to register such
securities for public sale under the Securities Act or under
applicable state securities laws even if such issuer would
agree to do so.
(c) The Pledgor further agrees to do or use all
reasonable efforts to cause to be done, to the extent the
Pledgor may legally do so, all such other acts and things as
may be necessary to make such sale or sales of all or any
part of the Pledged Collateral valid and binding and in
compliance with any and all applicable laws, rules and
regulations and orders and decrees of any and all courts
having jurisdiction over such sales, all at the Pledgor's
expense. The Pledgor further agrees that a breach of any
of the covenants contained in this Pledge Agreement will
cause irreparable injury to the Trustee, as secured party,
for which the Trustee would have no adequate remedy at law
in respect of such breach and, as a consequence, agrees that
each and every covenant contained in this Section 15 shall
be specifically enforceable against the Pledgor and, to the
full extent permitted by applicable law, the Pledgor waives
and agrees not to assert as a defense against an action for
specific performance of such covenant that Pledgor's
failure to perform such covenants will not cause irreparable
injury to the Trustee or the Holders or the Trustee on
behalf of the Holders has an adequate remedy at law in
respect of such breach.
Section 16. Pledgor's Indenture Obligations
Absolute. The liability of the Pledgor under this Pledge
Agreement shall remain in full force and effect without
regard to, and shall not be released, suspended, discharged,
terminated or otherwise affected by: any change in the
time, place or manner of payment of all or any of the
Indenture obligations, or in any other term of the
Indenture, the Notes or any Subsidiary Guarantee, any
waiver, indulgence, renewal, extension, amendment or
modification of or addition, consent or supplement to or
deletion from or any other action or inaction under or in
respect of the Indenture, the Notes or any Subsidiary
Guarantee, or any assignment or transfer thereof; any lack
of validity or enforceability, in whole or in part, of the
Indenture, the Notes or any Subsidiary Guarantee; any
furnishing of any additional security for the Indenture
obligations or any acceptance thereof or any release or non-
perfection of any security interest in property; any
limitation on any party's liability or obligations under the
Indenture, the Notes or any Subsidiary Guarantee; any
bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like
proceeding relating to the Pledgor or any Person other than
the Pledgor, or any action taken with respect to this Pledge
Agreement by any trustee or receiver, or by any court, in
any such proceeding, whether or not the Pledgor shall have
notice or knowledge of any of the foregoing; or any
exchange, release or amendment or waiver of or consent to
departure from any other agreement pursuant to which a Lien
is created in favor of the Trustee for the benefit of the
Holder, pursuant to which a person other than the Pledgor
has granted a security interest.
Section 17. Waiver. To the extent permitted by
applicable law, the Pledgor hereby waives promptness,
diligence, notice of acceptance and any other notice with
respect to the Subsidiary Guarantees or any of the Indenture
obligations and this Pledge Agreement and any requirement
that the Trustee protect, secure, perfect or insure any
security interest or any property subject thereto or exhaust
any right or take any action against the Pledgor or any
other person or entity; provided, however, that the Trustee
shall in any event take such care in the handling of any
Pledged Securities in its possession as it takes with
respect to its own property of a similar nature in its
possession.
Section 18. Termination. Upon indefeasible payment
and performance in full and satisfaction of all of the
Indenture Obligations and all other amounts payable under
this Pledge Agreement, this Pledge Agreement shall terminate
and the Trustee shall assign and redeliver to the Pledgor
all of the Pledged Collateral hereunder that has not been
sold, disposed of, retained or applied by the Trustee in
accordance with the terms hereof and the Indenture. Such
reassignment and redelivery shall be without warranty by or
recourse to the Trustee, and shall be at the expense of the
Pledgor. At such time, this Pledge Agreement shall no
longer constitute a Lien upon or a grant of any security
interest in any of the Pledged Collateral, and the Trustee
shall, at the Pledgor's expense deliver to the Pledgor
written acknowledgment thereof and of cancellation of this
Pledge Agreement in a form reasonably requested by the
Pledgor; provided, however, that this Pledge Agreement shall
continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Indenture
Obligations is rescinded or must otherwise be returned upon
the insolvency, bankruptcy or reorganization of the Pledgor
all as though such payment had not been made; and provided,
further, however, this Pledge Agreement shall no longer
constitute a Lien upon or a grant of any security interest
in any of the Pledged Collateral that has been released in
accordance with the provisions of Article Eleven of the
Indenture.
Section 19. Notices. Any notices or other
communications required or permitted hereunder shall be in
writing, and shall be sufficiently given if made by hand
delivery, by telex, by facsimile or registered or certified
mail, postage prepaid, return receipt requested, addressed
as provided in Section 10.02 of the Indenture.
Any party hereto may by notice to the other party designate
such additional or different addresses as shall be furnished
in writing by such party. Any notice or communication to
any party shall be deemed to have been given or made as of
the date so delivered, if personally delivered; when
answered back, if telexed; when receipt is acknowledged, if
faxed; and five (5) calendar days after mailing, if sent by
registered or certified mail (except that a notice of change
of address shall not be deemed to have been given until
actually received by the addressee). The Pledgor may give
notice to the Holders at the addresses set forth for them in
the register kept by the Registrar under the Indenture or
may request that the Trustee notify the Holders at such
addresses.
Section 20. Binding Agreement; Assignment. This
Pledge Agreement shall be binding upon and inure to the
benefit of the Trustee, the Pledgor and their respective
successors and permitted assigns. Neither this Pledge
Agreement nor any interest herein or in the Pledged
Collateral, or any part thereof, may be assigned by the
Pledgor without the prior written consent of the Trustee
(which consent shall not be unreasonably withheld), except
as expressly permitted herein or in the Indenture. This
Pledge Agreement shall be deemed to be automatically
assigned by the Trustee to any person who succeeds to the
Trustee in accordance with Section 7.08 or Section 7.09 of
the Indenture, and its assignee shall have all rights and
powers of, and act as, the Trustee hereunder.
Section 21. Governing Law. This Pledge Agreement
shall be construed in accordance with, and this Pledge
Agreement and the transactions described herein shall be
governed by, the laws of the State of New york as to all
issues, including (without limitation) issues of validity,
interpretation, effect, performance and remedies.
Section 22. Amendments. This Pledge Agreement may
not be amended or modified, except in accordance with
Article Nine of the Indenture.
Section 23. Severability. In the event that any
provisions contained in this Pledge Agreement shall for any
reason be held to be illegal or invalid under the laws of
any jurisdiction, such illegality or invalidity shall in now
way impair the effectiveness of any other provision hereof,
or of such provision under the laws of any other
jurisdiction; provided, that in the construction and
enforcement of such provision under the laws of the
jurisdiction in which such holding of illegality or
invalidity exists, and to the extent only of such illegality
or invalidity, this Pledge Agreement shall be construed and
enforced as though such illegal or invalid provision had not
been contained herein.
Section 24. Headings. Section headings used herein
are inserted for convenience only and shall not in any way
affect the meaning or construction of any provision of this
Pledge Agreement.
Section 25. Counterparts. This Pledge Agreement may
be executed in any number of counterparts, each of which
when so executed and delivered shall be an original, and all
of which shall together constitute but one and the same
instrument. A complete set of counterparts shall be lodged
with the Trustee.
Section 26. Cooperation of Pledged Subsidiaries and
Subsidiary Guarantors. The Pledgor shall cause the Pledged
Subsidiaries to take all actions necessary to facilitate the
Pledgor's compliance with the terms hereof. If any entity
issues shares of Capital Stock or other equity securities to
a Pledged Subsidiary and, at the time of such issuance, the
entity is, or a result of such issuance becomes, a
Subsidiary Guarantor under the Indenture, the Pledgor shall
cause such Pledged Subsidiary to enter into a supplement
hereto, substantially in the form of this Pledge Agreement,
pursuant to which such Pledged Subsidiary shall pledge,
assign, transfer, set over and deliver unto the Trustee, and
grant unto the Trustee for the ratable benefit of the
Holders and their respective successors and assigns, a
continuing security interest in all of the right, title and
interest of the Pledged Subsidiary in, to and under any and
all of such Capital Stock or other equity securities as
collateral security for the indefeasible payment and
performance in full of the Indenture obligations of the
Pledgor and the Subsidiary Guarantors. Such Capital Stock
or equity security shall thereafter be included as "Pledged
Securities" hereunder, such Pledged Subsidiary shall
thereafter be included as a "Pledgor" hereunder, and such
entity shall thereafter be included as one of the "Pledged
Subsidiaries" hereunder.
Section 27. Confidentiality. The parties agree that
they and their employees have maintained and will maintain,
in confidence, all data, summaries, reports or information
of all kinds, whether oral or written, provided pursuant to
this Pledge Agreement or acquired or developed in any manner
from the other party's personnel or files (the "Confidential
Information"), and that they have not and will not reveal
the same to any persons not employed by the other party
except: at the written direction of such party; to
the extent necessary to comply with applicable law,
reporting requirements imposed by the Securities and
Exchange Commission, or the valid order of a court of
competent jurisdiction, in which event the disclosing party
shall so notify the other party as promptly as practicable
(and, if possible, prior to making any disclosure) and shall
seek confidential treatment of such information, or in
connection with any arbitration proceeding; as part of its
normal reporting or review procedure to its parent company,
its auditors and its attorneys, and such parent company,
auditors and attorneys agree to be bound by the provisions
of this Section; in order to enforce any of its rights
pursuant to, or in any other dispute with respect to, this
Agreement; if, at the time of disclosure to the recipient,
the Confidential Information is in the public domain; if,
after disclosure to the recipient, the Confidential
Information becomes part of the public domain by written
publication through no fault of the recipient; or to any
one or more Holders and their representatives and agents.
IN WITNESS WHEREOF, the Pledgor and the Trustee have caused
this Pledge Agreement to be duly executed and delivered by
its officer thereunto duly authorized as of the date first
above written.
XCL LTD.
By:____________________
Name:
Title:
FLEET NATIONAL BANK,
as Trustee
By:_____________________
Name:
Title:
CASH COLLATERAL AND DISBURSEMENT AGREEMENT
CASH COLLATERAL AND DISBURSEMENT AGREEMENT, dated
as of May 20, 1997 (the "Agreement"), among XCL Ltd., a
Delaware corporation (the "Company"), Fleet National Bank,
as trustee for the Holders (in such capacity, together with
its successor in trust appointed pursuant to the Indenture,
the "Trustee") under an Indenture, dated the date hereof, by
and between the Company and the Trustee (such Indenture, as
amended, supplemented or otherwise modified from time to
time, the "Indenture"), Fleet National Bank, as Disbursement
Agent (the "Disbursement Agent") and Herman J. Schellstede &
Associates, Inc., as representative acting on behalf of the
Holders, as such term is defined in the Indenture
("Representative").
W I T N E S S E T H:
WHEREAS, the Company has entered into the
Indenture pursuant to which the Company will issue
$75,000,000 aggregate principal amount of 13.50% Senior
Secured Notes due May 1, 2004, Series A ("Initial Notes")
and 13.50% Senior Secured Notes due May 1, 2004, Series B to
be issued in exchange for the Initial Notes pursuant to a
Registration Rights Agreement (the "Exchange Notes" and,
together with the Private Exchange Notes (as defined in the
Indenture) and the Initial Notes, the "Notes");
WHEREAS, as security for the prompt and complete
payment and performance in full of the Company's obligations
under the Indenture and the Notes, the Company has granted
to the Trustee a first "Lien" on, and "Security Interest"
in, the "Collateral" pursuant to the provisions of the
Security Agreement, Pledge and Financing Agreement of even
date herewith by and between the Company and the Trustee
(the "Security Agreement"), as each such term is defined in
the Security Agreement; and
WHEREAS, the Disbursement Agent has agreed to take
such action with respect to the Collateral as is specified
herein.
NOW, THEREFORE, in consideration of the foregoing
and of the mutual covenants hereinafter set forth, and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms.
Capitalized terms used but not defined herein and in any
schedules and exhibits hereto shall have the meanings set
forth in the Indenture.
SECTION 1.2 Computation of Time Periods.
In this Agreement, in the computation of periods of time
from a specified date to a later specified date, the word
"from" means "from and including", the word "through" means
"to and including" and the words "to" and "until" each means
"to but excluding."
ARTICLE II
DISBURSEMENT AGENT
SECTION 2.1 Appointment and Duties.
(a) The Company and the Trustee (on
behalf of the Holders of Notes) hereby designate and appoint
Fleet National Bank as the Disbursement Agent under this
Agreement, and authorize the Disbursement Agent to take such
actions, exercise such powers and perform such duties as are
expressly delegated to the Disbursement Agent by the terms
of this Agreement, together with such other powers as are
reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere herein, the Disbursement
Agent shall not have any duties or responsibilities except
those expressly set forth herein, and no implied covenants,
functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or otherwise
exist against the Disbursement Agent. If the Disbursement
Agent consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust
business to another entity, the resulting surviving or
transferee entity, without any further act, shall be the
successor Disbursement Agent
(b) The Disbursement Agent shall give
written notice to the Trustee and the Company of any action
taken by it hereunder (provided that no such notice need be
given under circumstances in which the Trustee and the
Company shall have received such notice by any other Person
pursuant to the terms of any such document); such notice
shall be given prior to the taking of such action unless the
Disbursement Agent determines that to do so would be
detrimental to the interests of the Holders of Notes, in
which event such notice shall be given promptly after the
taking of such action.
(c) The Disbursement Agent shall maintain
appropriate books and records with respect to the Collateral
in which shall be recorded all deposits in and disbursements
from the Collateral Accounts (as defined in Section 4.1) and
any Collateral Investments (as defined in Section 4.3) made
by the Disbursement Agent and shall permit the Trustee and
the Company or any of their agents or representatives to
inspect and to make copies of such books and records at the
Company's sole cost and expense.
(d) The Disbursement Agent shall use its
good faith efforts and utilize prudence in performing its
duties hereunder consistent with those of similar and
prudent institutions disbursing disbursement control funds.
SECTION 2.2 Rights of Disbursement Agent.
(a) The Disbursement Agent may execute
any of its duties under this Agreement by or through agents
or attorneys-in-fact and shall be entitled to rely on advice
of counsel concerning all matters pertaining to such duties,
and shall be protected in respect of any action taken in
good faith and in accordance with such advice.
(b) Neither the Disbursement Agent nor
any of its officers, directors, employees, agents, attorneys-
in-fact or affiliates shall be liable for any action
lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement (except for its
or such Person's own gross negligence or willful
misconduct), or responsible in any manner to any of the
Holders of Notes for any recitals, statements,
representations or warranties made by the Company or the
Representative or any officer thereof contained in any
certificate, report, statement or other document referred to
or provided for in, or received by the Disbursement Agent
under or in connection with, this Agreement. The
Disbursement Agent shall not be under any obligation to any
Holders of Notes to inspect the properties, books or records
of the Company.
(c) The Disbursement Agent shall be
entitled to rely, and shall be fully protected in relying,
upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram,
telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the
Company), independent accountants and other experts selected
by the Disbursement Agent. The Disbursement Agent shall be
fully justified in failing or refusing to take any action
hereunder if such action would, in the opinion of the
Disbursement Agent, be contrary to law or the terms of this
Agreement.
(d) If, with respect to a proposed action
to be taken by it, the Disbursement Agent shall determine in
good faith that the provisions of this Agreement relating to
the functions or responsibilities or discretionary powers of
the Disbursement Agent are or may be ambiguous or
inconsistent, the Disbursement Agent shall notify the
Company, the Trustee and the Representative (identifying the
proposed action and the provisions that it considers are or
may be ambiguous or inconsistent) and may decline either to
perform such function or responsibility or to exercise such
discretionary power unless it has received the written
confirmation of each of the Company and the Trustee that it
concurs, in the circumstances, that the action proposed to
be taken by the Disbursement Agent is consistent with the
terms of this Agreement or is otherwise appropriate.
(e) The Disbursement Agent shall not be
deemed to have knowledge or notice of the occurrence of any
Event of Default unless the Disbursement Agent has received
written notice from the Trustee or the Company, describing
such Event of Default and stating that such notice is a
"notice of default." The Disbursement Agent shall take such
action with respect to such Event of Default as shall be
required by this Agreement. No provision of this Agreement
shall require the Disbursement Agent to expend or risk its
own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the
exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
SECTION 2.3 Resignation and Removal of
Disbursement Agent.
(a) Subject to the appointment and
acceptance of a successor Disbursement Agent as provided
below, the Disbursement Agent may, at any time, give a
notice of resignation to the Trustee, the Company and the
Representative. Upon receipt of any such notice of
resignation, the Company shall have the right to appoint a
successor Disbursement Agent, which shall be a bank or trust
company reasonably acceptable to the Trustee (including a
successor Trustee under the Indenture). If no successor
Disbursement Agent shall have been appointed by the Company
and shall have accepted such appointment within 30 days
after the retiring Disbursement Agent's giving of notice of
resignation, then the retiring Disbursement Agent may
appoint a successor Disbursement Agent, which shall be a
bank or trust company reasonably acceptable to the Company
and the Trustee.
(b) Each of the Trustee and the Company
shall have the right, upon the expiration of thirty (30)
days following delivery of written notice to the
Disbursement Agent and the other party, to cause the
Disbursement Agent to be relieved of its duties hereunder
and to select a successor Disbursement Agent to serve
hereunder, which shall be a bank or trust company reasonably
acceptable to the other party; provided, however, that any
successor Disbursement Agent selected by the Company shall
also be the Trustee so long as the Trustee is willing to
accept such selection.
(c) Upon the acceptance of any
appointment as Disbursement Agent hereunder by a successor
Disbursement Agent, such successor Disbursement Agent, the
Trustee, the Company and the Representative shall enter into
an agreement substantially identical to this Agreement,
such agreement shall provide that such successor
Disbursement Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of
the retiring Disbursement Agent, and that the retiring
Disbursement Agent shall be discharged from its duties and
obligations hereunder and the retiring Disbursement Agent
shall promptly transfer all Collateral (as hereinafter
defined) within its possession or control to the possession
or control of the successor Disbursement Agent and shall
execute and deliver such notices, instructions and
assignments as may be necessary to transfer the rights of
the Disbursement Agent with respect to the Collateral to the
successor Disbursement Agent. After any retiring
Disbursement Agent's resignation or removal hereunder as
Disbursement Agent, the provisions of this Article shall
continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as
Disbursement Agent.
SECTION 2.4 Successor Disbursement Agent
by Merger, Etc.
If the Disbursement Agent consolidates with,
merges or converts into, or transfers all or substantially
all of its corporate trust business to, another bank or
trust company, then the resulting, surviving or transferee
bank or trust company, without any further act, shall be the
successor Disbursement Agent.
ARTICLE III
REPRESENTATIVE
SECTION 3.1 Appointment. The Company
hereby designates and appoints Herman J. Schellstede &
Associates, Inc. as the Representative under this Agreement,
and authorizes the Representative to take such actions,
exercise such powers and perform such duties as are
expressly delegated to the Representative by the terms of
this Agreement, together with such other powers as are
reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere herein, the
Representative shall not have any duties or
responsibilities, except those expressly set forth herein,
and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Representative.
SECTION 3.2 Duties. The Representative's
sole duty shall be to review the Disbursement Certificate
(as defined below) submitted by the Company and to issue the
Representative's Certificate (as defined below) approving
the request for the disbursement of funds set forth in the
Disbursement Certificate. The Representative shall deliver
the Representative's Certificate to the Disbursement Agent
approving the request for disbursement of funds made in the
Disbursement Certificate, if and only if, the Representative
satisfies itself that the Chinese Ministry of Foreign Trade
and Economic Cooperation or any other requisite Chinese
governmental authority with jurisdiction (collectively,
"MOFTEC") has approved the Overall Development Plan for the
C-D Field of the Zhao Dong Block. No other grounds for
disapproving such request for disbursement shall be
permitted. If the Representative is unable to approve the
request for disbursement set forth in the Disbursement
Certificate within five (5) Business Days after receipt
thereof, the Representative shall give written notice to
such effect to the Company, the Disbursement Agent and the
Trustee. As used herein, the terms "Contract", "Zhao Dong
Block" and "Overall Development Plan" and "C-D Field" shall
have the meanings ascribed thereto in the Offering
Memorandum.
SECTION 3.3 Rights of Representative.
(a) The Representative may execute any of
its duties under this Agreement by or through agents and
shall be entitled to advice of counsel concerning all
matters pertaining to such duties.
(b) Neither the Representative nor any of
its officers, directors, employees, agents, attorneys-in-
fact or affiliates shall be liable for any action lawfully
taken or omitted to be taken by it or such Person under or
in connection with this Agreement (except for its or such
Person's own gross negligence or willful misconduct).
(c) The Representative shall be entitled
to rely, and shall be fully protected in relying, upon any
note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Company),
independent accountants and other experts selected by the
Representative. The Representative shall be fully justified
in failing or refusing to taken any action hereunder if such
action would, in the opinion of the Representative, be
contrary to law or the terms of this Agreement.
(d) If, with respect to a proposed action
to be taken by it, the Representative shall determine in
good faith that the provisions of this Agreement relating to
the functions or responsibilities or discretionary powers of
the Representative are or may be ambiguous or inconsistent,
the Representative shall notify the Company and the Trustee
(identifying the proposed action and the provisions that it
considers are or may be ambiguous or inconsistent) and may
decline either to perform such function or responsibility or
to exercise such discretionary power unless it has received
the written confirmation of each of the Company and the
Trustee that it concurs, in the circumstances, that the
action proposed to be taken by the Representative is
consistent with the terms of this Agreement or is otherwise
appropriate.
SECTION 3.4 Resignation and Removal of
Representative.
(a) Subject to the appointment and
acceptance of a successor Representative as provided below,
the Representative may, at any time, give a notice of
resignation to the Trustee and the Company. Upon receipt of
any such notice, the Trustee shall have the right to appoint
a successor Representative, which successor shall not be
affiliated with, or under the control of, the Company or any
of its Affiliates. If no successor Representative shall
have been appointed by the Trustee and shall have accepted
such appointment within 30 days after the retiring
Representative's giving of notice of resignation, then the
retiring Representative may appoint a successor
Representative, which shall be reasonably acceptable to the
Company but not affiliated with, or under the control of,
the Company or any of its Affiliates.
(b) Upon a written request by the Holders
of a majority in aggregate principal amount of the
outstanding Notes, the Trustee shall have the right, upon
the expiration of thirty (30) days following delivery of
written notice to the Representative, the Company, the
Trustee and the Disbursement Agent, to cause the
Representative to be relieved of its duties hereunder and to
select a successor Representative to serve hereunder, which
shall be reasonably acceptable to the Company.
(c) Upon the acceptance of any
appointment as Representative hereunder by a successor
Representative, (i) such agreement shall provide that such
successor Representative, the Trustee, the Company and the
Disbursement Agent shall enter into an agreement
substantially identical to this Agreement, (ii) such
successor Representative shall thereupon succeed to and
become vested with all the rights, powers, privileges and
duties of the retiring Representative, and that the retiring
Representative shall be discharged from its duties and
obligations hereunder. After any retiring Representative's
resignation or removal hereunder as Representative, the
provisions of this Article shall continue in effect for its
benefit in respect of any actions taken or omitted to be
taken by it while it was acting as Representative.
ARTICLE IV
COLLATERAL ACCOUNTS
SECTION 4.1 Establishment of Collateral
Accounts. There are hereby established with and at the
Disbursement Agent two custodial accounts (the first such
account is referred to herein as the "Principal Account",
the second such account is referred to herein as the
"Capitalized Interest Account" and both such Accounts are
referred to herein collectively as the "Collateral
Accounts") in the name of the Company, as both such accounts
are more fully identified on Schedule I to the Security
Agreement, under the sole dominion and control of the
Trustee and the Disbursement Agent. Funds shall be released
from the Collateral Accounts only in accordance with Article
V.
SECTION 4.2 Deposits to Collateral
Accounts. Pursuant to the Purchase Agreement, the Initial
Purchaser, acting on behalf of the Company shall deposit
$60,375,000 in immediately available funds in the Principal
Account and $14,625,000 in immediately available funds in
the Capitalized Interest Account representing, collectively,
all of the proceeds in respect of the issuance and sale of
the Units (including an amount equal to the Initial
Purchaser's discount). Such funds shall be invested in
Collateral Investments as provided in Section 4.3(b)(ii).
SECTION 4.3 Security Interest.
(a) As security for the prompt and
complete payment and performance in full of all its
"Obligations" (as such term is defined in the Indenture)
under the Indenture and the Notes, the Company has agreed,
pursuant to the Security Agreement, to pledge, assign and
grant to the Trustee, for the equal and ratable benefit of
the Holders, a Security Interest in all of its right, title
and interest in and to the Collateral.
(b) The Disbursement Agent acknowledges
notice of, and consents to the terms and provisions of, the
Security Agreement and agrees that:
(i) notwithstanding anything to the
contrary in this or any other agreement relating to the
Collateral, the Collateral is and will be subject to the
terms and conditions of the Security Agreement and the
Indenture, will be held in trust on behalf of the Trustee
for the equal and ratable benefit of the Holders and not
commingled with any ordinary deposit or commercial bank
account, will be maintained with the corporate trust
department of the Disbursement Agent solely for the Trustee
for the equal and ratable benefit of the Holders pursuant to
the Security Agreement and will be subject to the written
instructions of the Trustee given in accordance with the
Security Agreement;
(ii) in accordance with written
instructions received from the Company, the Disbursement
Agent shall, unless otherwise instructed by the Trustee, (A)
invest amounts on deposit in each of the Collateral Accounts
in such "Cash Equivalents" (as such term is defined in the
Security Agreement) in the name of the Trustee as the
Company may select, (B) invest interest paid on the
respective Cash Equivalents referred to in clause (A) above,
and reinvest other proceeds of any such respective Cash
Equivalents that may mature or be sold, in such Cash
Equivalents to be held in the respective Collateral Accounts
in the name of the Trustee as the Company may select (the
Cash Equivalents referred to in clauses (A) and (B) above
being, collectively, "Collateral Investments") and (C)
deposit and hold in the respective Collateral Accounts all
monies, interest and proceeds that are not invested or
reinvested in such Collateral Investments;
(iii) all disbursements and releases
made pursuant to this Agreement shall be made by the
Disbursement Agent irrespective of, and without deduction
for, any counterclaim, defense, recoupment or set-off and
shall be final, and the Disbursement Agent will not seek to
recover from the Trustee for any reason any such payment
once made;
(iv) all service charges and fees
with respect to this Agreement or the Collateral shall be
paid by the Company; and
(v) the Trustee shall be entitled to
exercise any and all rights of the Company in respect of the
Collateral in accordance with the terms of the Security
Agreement, and the Disbursement Agent shall comply in all
respects with such exercise.
ARTICLE V
DISBURSEMENTS FROM THE COLLATERAL ACCOUNT
SECTION 5.1 Priority Releases. Funds in
the Collateral Accounts shall be released by the
Disbursement Agent to any account specified by the Trustee,
upon receipt of a Trustee's Certificate substantially in the
form of Exhibit A hereto (each, a "Trustee's Certificate"),
certifying that such funds will promptly be used for the
purpose of making payments to Holders of Notes pursuant to
the terms of the Indenture if any payment shall become due
and payable with respect to the Notes as a result of (i) a
Mandatory Redemption, (ii) a Change of Control, or (iii)
upon acceleration of the maturity of the Notes following an
Event of Default. If funds have not been released (x) from
the Collateral Accounts pursuant to either Section 5.1(ii)
or (iii), or (y) from the Principal Account pursuant to
Section 5.2(a) on or prior to November 1, 1997, then the
Disbursement Agent shall release funds in the Collateral
Accounts to any account specified by the Trustee in
sufficient time to facilitate the Mandatory Redemption of
all outstanding Notes effective on November 30, 1997.
SECTION 5.2 Disbursement of Principal
Account Funds. Funds in the Principal Account shall be
disbursed for the account of the Company pursuant to Section
5.4(b) only upon satisfaction of the following conditions:
(a) The Company shall have delivered to
the Disbursement Agent, the Trustee and the Representative,
not later than one "Business Day" (as such term is defined
in the Indenture) prior to the date of any proposed
disbursement, a written notice substantially in the form of
Exhibit B attached hereto (the "Disbursement Certificate"),
requesting the disbursement of all the funds on deposit in
the Principal Account and specifying the manner and date of
the requested disbursement. The Disbursement Certificate
shall be executed by a duly authorized officer of the
Company and shall be completed and certified to be accurate
by the Company.
(b) In addition to the copy of the
Disbursement Certificate referred to above and the documents
referred to therein (but without duplication), the Company
shall have delivered, or caused the delivery, to the extent
available, to the Disbursement Agent, the Trustee and the
Representative copies of any written notice or other written
evidence issued by MOFTEC approving the Overall Development
Plan and any further information or certificates required
hereunder and such other information as the Trustee or the
Representative may reasonably require to determine the
accuracy of the information set forth in the Disbursement
Certificate.
(c) The Representative shall have
reviewed and approved the Disbursement Certificate and shall
have delivered a written notice substantially in the form of
Exhibit C attached hereto (the "Representative Certificate")
to the Disbursement Agent and the Trustee confirming its
approval of the request for disbursement of funds made in
the Disbursement Certificate..
(d) An Event of Default under the
Indenture shall not have occurred and be continuing.
(e) In a simultaneous transaction, (i)
the Company shall have extinguished its "Indebtedness" under
the "Existing Secured Debt" (as each such term is defined in
the Indenture); (ii) the Company and XCL-China Ltd., a
British Virgin Islands company wholly owned by the Company
("XCL-China"), and any other existing "Restricted
Subsidiaries" (as such term is defined in the Indenture)
(collectively, the "Subsidiary Guarantors"), shall have
executed and delivered to the Trustee a supplement to the
Indenture in a form reasonably acceptable to the Trustee
pursuant to which the Subsidiary Guarantors unconditionally
guarantees prompt and complete payment of all the Company's
Obligations under the Indenture and the Notes; and (iii) the
Company shall have executed and delivered to the Trustee the
Pledge Agreement in substantially the form of Exhibit C to
the Indenture (together with one or more certificates
evidencing all of the issued and outstanding capital stock
of all such Subsidiary Guarantors) pursuant to which the
Trustee is granted a prior perfected first lien on all of
the outstanding capital stock of all such Subsidiary
Guarantors for the ratable benefit of the Holders in
accordance with the provisions of the Pledge Agreement.
SECTION 5.3 Disbursement of Capitalized
Interest Account Funds. (a) Funds in the Capitalized
Interest Account shall be disbursed by the Disbursement
Agent as "Paying Agent" (as such term is defined in the
Indenture), subject to and in accordance with the provisions
of the Indenture, to the Holders of Notes on each "Interest
Payment Date" (as defined in the Indenture) through November
1, 1998 (including, without limitation, the Interest Payment
Date which falls on November 1, 1997, whether or not the
conditions to the disbursement of funds from the Principal
Account have been satisfied by such date) in the respective
amounts of the interest on the Notes due and payable on such
Interest Payment Dates in accordance with the provisions of
the Indenture and the Notes.
(b) Commencing with the first Business
Day after the funds on deposit in the Principal Account have
been disbursed to the Company in accordance with the
provisions of Section 5.2(a) and so long as no "Event of
Default" as defined in the Indenture, has occurred and is
continuing, all interest and other earnings on Collateral
Investments held in the Capitalized Interest Account shall
be for the Company's account and shall be disbursed to the
Company with such frequency and to such accounts as may be
designated by the Company in written instructions delivered
to the Disbursement Agent.
SECTION 5.4 Disbursements.
(a) In connection with a disbursement
pursuant to Section 5.1 , 5.2(a) or 5.3, the Disbursement
Agent shall sell the Collateral Investments held in the
applicable Collateral Accounts to fund the required
disbursements (1) in accordance with written instructions of
(i) the Trustee, in connection with a disbursement pursuant
to Section 5.1, or (ii) the Company, in connection with a
disbursement pursuant to Section 5.2(a) or 5.3(b), in either
case delivered to the Disbursement Agent at least one
Business Day prior to the proposed date of disbursement (as
set forth in either the Trustee's Certificate or the
Disbursement Certificate, respectively (the "Proposed Date
of Disbursement")) or (2) pursuant to Section 5.3(a).
Notwithstanding the foregoing, if, on the Proposed Date of
Disbursement, the cash on deposit in the relevant Collateral
Account is less than the amount of the disbursement to be
made on such date, the Disbursement Agent shall make such
disbursement as soon as practicable after liquidating all
such Collateral Investments in accordance with instructions
received from the Trustee or the Company, as the case may
be.
(b) If (1) the Company has delivered a
Disbursement Certificate, the Representative has delivered
the Representative Certificate and the other conditions
specified in Section 5.2 have been satisfied, the
Disbursement Agent shall make the requested disbursement
from the Principal Account in accordance with the
instructions set forth in the Disbursement Certificate by
the later to occur of (i) the Proposed Date of Disbursement
or (ii) the second Business Day after satisfaction of all
such conditions or (2) the Trustee shall have delivered its
Trustee's Certificate, the Disbursement Agent shall make the
requested disbursement from the Collateral Accounts on the
Business Day immediately preceding the Proposed Date of
Disbursement in accordance with the instructions contained
in the Trustee's Certificate (any such date of disbursement
hereinabove specified being hereinafter referred to as the
"Disbursement Date").
ARTICLE VI
COVENANTS
SECTION 6.1 Covenants of the Company.
The Company shall promptly, but no later than thirty (30)
days after its receipt of an invoice, pay the reasonable
fees of the Disbursement Agent and the Representative in
connection with this Agreement and their expenses as
provided in Section 8.4(b).
SECTION 6.2 Covenants of the Trustee.
The Trustee shall give prompt written notice to the
Disbursement Agent upon (i) the occurrence of an Event of
Default under the Indenture known to it and (ii) the cure or
waiver of any such Event of Default known to it.
ARTICLE VII
ARBITRATION
SECTION 7.1 Arbitration. Any
disagreement with respect to the release of funds from the
Collateral Accounts, or any related disagreement with
respect to the construction, meaning or effect of this
Agreement, arising out of this Agreement or concerning the
rights or obligations of the parties hereunder shall be
submitted to arbitration, one arbitrator to be chosen by the
Company, one by the Representative, and a third to be chosen
by the first two arbitrators before they enter into
arbitration. The arbitrators shall be impartial and shall
be active or retired persons with experience in foreign oil
and gas exploration and development and/or project finance
lending. The third arbitrator chosen by the first two
arbitrators shall also have experience in the petroleum
exploration and development industry and/or project finance
lending.
In the event that either party should fail to
choose an arbitrator within 15 days following a written
request by the other party to enter into arbitration, the
requesting party may choose two arbitrators who shall, in
turn, choose the third arbitrator. If the first two
arbitrators have not chosen a third arbitrator at the end of
15 days following the last day of the selection of the first
two arbitrators, each of the first two arbitrators shall
name three candidates, of whom the other arbitrator shall
eliminate two, and the determination of the third arbitrator
shall be made from the remaining two candidates by drawing
lots. Each party shall present its case to the arbitrators
within 15 days following the date of the appointment of the
third arbitrator in accordance with the then obtaining
procedures established by the American Arbitration
Association or such other rules and procedures as the
parties may mutually agree upon. The decision of a majority
of the three arbitrators shall be final and binding upon
both parties. Judgement may be entered upon the arbitration
award in any court having jurisdiction. Each party shall
bear the expense of its own arbitrator and shall jointly and
equally bear with the other the expense of the third
arbitrator and of the arbitration. In the event that the
two arbitrators are chosen by one party, as above provided,
the expense of the arbitrators and the arbitration shall be
equally divided between the two parties. Any such
arbitration shall take place in New Orleans, Louisiana
unless some other location is mutually agreed upon by the
parties. The arbitrators shall resolve any dispute arising
hereunder in a manner consistent with the intent of the
parties as expressed in this Agreement. The arbitrators
shall not award any punitive, consequential or exemplary
damages or any amount in excess of the amount to be released
from the Collateral Accounts. All rewards by the
arbitrators shall be payable solely from the amounts on
deposit in the Collateral Accounts.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Amendments, Etc. No
amendment, modification or waiver of any provision of this
Agreement may be made except by written agreement of the
parties hereto and, with respect to the Company and the
Trustee, in accordance with Article Nine of the Indenture.
SECTION 8.2 Notices, Etc. All notices
and other communications required or permitted hereunder
shall be in writing and shall be sufficiently given if made
by hand delivery, by telex, by facsimile or registered or
certified mail, postage prepaid, return receipt requested,
addressed as follows:
To the Disbursement Agent:
Fleet National Bank
777 Main Street
Hartford, CT 06115
Attention: Corporate Trust Administration
Ref: XCL Ltd.
To the Trustee:
Fleet National Bank
777 Main Street
Hartford, CT 06115
Attention: Corporate Trust Administration
Ref: XCL Ltd.
To the Representative:
Herman J. Schellstede & Associates, Inc.
154 Duperier Avenue
New Iberia, LA 70560
Attention: Mr. Herman J. Schellstede
To the Company:
XCL Ltd.
110 Rue Jean Lafitte
Lafayette, Louisiana 70508
Attention: Marsden W. Miller, Jr.
With a copy to:
Gordon Arata McCollam & Duplantis, L.L.P.
625 East Kaliste Saloom Road
P.O. Box 81829
Lafayette, Louisiana 70508
Attention: Benjamin B. Blanchet, Esq.
Any party hereto may by notice to each other party
designate such additional or different addresses as shall be
furnished in writing by such party. Any notice or
communication to any party shall be deemed to have been
given or made as of the date so delivered, if personally
delivered; when answered back, if telexed; when receipt is
acknowledged, if faxed; five calendar days after mailing, if
sent by registered or certified mail: and one business day
after mailing, if sent by overnight delivery service (except
that a notice of change of address shall not be deemed to
have been given until actually received by the addressee).
SECTION 8.3 No Waiver; Remedies. No
failure on the part of the Disbursement Agent, the Trustee
or any Holder to exercise, and no delay in exercising, any
right under this Agreement or the Security Agreement shall
operate as a waiver thereof, nor shall any single or partial
exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right.
SECTION 8.4 Indemnity and Expenses.
(a) The Company agrees to indemnify the
Trustee, the Holders, the Disbursement Agent and the
Representative (the "Indemnified Parties") from and against
any and all claims, losses and liabilities directly or
indirectly caused by, related to or resulting from this
Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses or liabilities
resulting from (i) valid claims of the Company against such
Indemnified Party arising out of a breach of this Agreement
by such Indemnified Party or (ii) such Indemnified Party's
bad faith, gross negligence or willful misconduct, in either
case, as determined by a final judgment of a court of
competent jurisdiction.
(b) The Company shall, promptly upon
demand, pay to the Disbursement Agent, the Trustee and the
Representative the amount of any and all reasonable
expenses, including the reasonable fees and expenses of
their respective counsel and of any experts and agents, that
the Disbursement Agent, the Trustee or the Representative
may incur in connection with (i) this Agreement, (ii) the
exercise or enforcement of any rights hereunder or (iii) the
failure by the Company to perform or observe any of the
provisions hereof.
(c) The making of any disbursement or
part thereof shall not constitute an approval or acceptance
of the Development Program by the Trustee, the
Representative or the Disbursement Agent, nor shall it give
rise to any liability or responsibility related to:
(i) the terms, provisions and
conditions of the Development Program, its efficacy the
nature of the work, the quantity of the work, the rate
or progress in completion of the work, or the
sufficiency of materials or labor to be supplied in
connection implementing the Development Program; and
(ii) any errors, omissions,
inconsistencies or other defects of any nature in the
Development Program and any inquiry with respect to the
Development Program that either the Trustee, the
Disbursement Agent or the Representative may choose to
make, whether through any consulting engineer, agent or
employee or officer, shall be solely for the Trustee or
the Disbursement Agent's or the Representative's
information, and under no circumstances will any such
inspection be deemed to have been made for the purpose
of supervising or superintending the work or for the
information or protection of any right or interest of
any Persons other than the Trustee, the Disbursement
Agent or the Holders.
(d) In no event shall the Trustee, the
Disbursement Agent or the Representative be liable for any
Liens which may be filed by third parties against the
Collateral Accounts or the Company's direct and indirect
interests in the Zhao Dong Block, except as contemplated
herein, or in the Security Agreement or the Pledge
Agreement.
SECTION 8.5 Execution in Counterparts.
This Agreement may be executed in any number of separate
counterparts and by different parties hereto in separate
counterparts, each of which, when so executed, shall be
deemed to be an original and all of which, taken together,
shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement
by telecopier shall be effective as delivery of a manually
executed counterpart of this Agreement. A complete set of
counterparts shall be lodged with the Trustee.
SECTION 8.6 Relationship of Trustee. The
Trustee and the Disbursement Agent shall not be under any
responsibility in respect of the validity or sufficiency of
this Agreement or the execution and delivery hereof or in
respect of the validity or sufficiency of this Agreement or
the execution and delivery hereof or in respect of the
validity or sufficiency of any document or agreement
delivered in connection herewith, including, but no limited
to, any document or agreement the forms of which are
attached hereto as Exhibits to this Agreement. Neither the
Trustee nor the Disbursement Agent shall be accountable for
the use or application of the funds in the Collateral
Accounts or for disbursements therefrom, except as set forth
in the Indenture and this Agreement.
SECTION 8.7 Governing Law. This
Agreement shall be construed in accordance with, and this
Agreement and the transactions described herein shall be
governed by, the laws of the State of New York as to all
issues, including (without limitation) issues of validity,
interpretation, effect, performance and remedies.
SECTION 8.8 Waiver of Jury Trial. EACH OF THE
COMPANY, THE TRUSTEE, THE DISBURSEMENT AGENT AND THE
REPRESENTATIVE HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR THE ACTIONS OF ANY PARTY
HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT THEREOF.
SECTION 8.9 Certain Rights. Neither the
Disbursement Agent, the Representative, the Trustee, the
Company, nor any of the Holders shall have any rights with
respect to the Collateral Accounts except as specifically
set forth in the Indenture, the Security Agreement, and this
Agreement.
SECTION 8.10 Confidentiality. The parties
agree that they and their employees have maintained and will
maintain, in confidence, all data, summaries, reports or
information of all kinds, whether oral or written, provided
pursuant to this Agreement or acquired or developed in any
manner from the other party's personnel or files (the
"Confidential Information"), and that they have not and will
not reveal the same to any Persons not employed by the other
party except: (a) at the written direction of such party;
(b) to the extent necessary to comply with the law,
reporting requirements imposed by the Securities and
Exchange Commission, or the valid order of a court of
competent jurisdiction, in which event the disclosing party
shall so notify the other party as promptly as practicable
(and, if possible, prior to making any disclosure) and shall
seek confidential treatment of such information, or in
connection with any arbitration proceeding; (c) as part of
its normal reporting or review procedure to its parent
company, its auditors and its attorneys, and such parent
company, auditors and attorneys agree to be bound by the
provisions of this Section; (d) in order to enforce any of
its rights pursuant to, or in any other dispute with respect
to, this Agreement; (e) if, at the time of disclosure to the
recipient, the Confidential Information is in the public
domain; (f) if, after disclosure to the recipient, the
Confidential Information becomes part of the public domain
by written publication through no fault of the recipient; or
(g) to any one or more Holders and their representatives and
agents.
SECTION 8.11 Termination. This Agreement
shall terminate automatically thirty (30) days following
disbursement of all funds remaining in the Collateral
Accounts.
SECTION 8.12 Invalidity. If, for any reason
whatsoever, any one or more of the provisions of this
Agreement shall be held or deemed to be inoperative,
unenforceable or invalid in a particular case or in all
cases, it is the parties' intent that such circumstances
shall not have the effect of rendering any of the other
provisions of this Agreement imperative, enforceable or
invalid, and the inoperative, unenforceable or invalid
provision shall be construed as if it were written so as to
effectuate to the maximum extent possible, the parties'
intent.
SECTION 8.13 Assignment. This Agreement is
personal to the parties hereto, and the rights and duties of
any party hereunder shall not be assignable except with the
prior written consent of the other parties or as provided in
Section 2.4. In any event, this Agreement shall inure to
and be binding upon the parties and their successors and
permitted assigns.
SECTION 8.14 Entire Agreement. This
Agreement contains the entire agreement among the parties
with respect to the subject matter hereof and supersedes any
and all prior agreements, understandings and commitments,
whether oral or written. This Agreement may only be amended
as provided herein.
SECTION 8.15 Captions. Captions in this
Agreement are for convenience only and shall not be
considered or referred to in resolving questions or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above
written.
XCL LTD.
By:_____________________
Name:
Title:
FLEET NATIONAL BANK,
as Trustee
By:_________________________
Name:
Title:
FLEET NATIONAL BANK, as
Disbursement Agent
By:_________________________
Name:
Title:
HERMAN J. SCHELLSTEDE &
ASSOCIATES,
INC., as Representative
By:_________________________
Name:
Title:
INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT dated as of May 20, 1997
(together with all amendments and supplements thereto, the
"Agreement"), by and among XCL Ltd., a Delaware corporation (the
"Company"), ING (U.S.) Capital Corporation ("ING"), Ted W. Hoyt,
as agent (the "Agent") on behalf of the holders (the
"Subordinated Debt Holders") of the Secured Subordinated Notes of
the Company due April 5, 2000 (the "Subordinated Notes")
identified on Schedule A attached hereto, and Fleet National
Bank, as trustee (in such capacity, together with its successor
in trust appointed pursuant to the Indenture (as defined below),
the "Trustee") for the holders (the "Noteholders") of the Notes
(as defined below). Capitalized terms not otherwise defined
herein shall have the meanings assigned to them in the Indenture.
W I T N E S S E T H:
WHEREAS, the Company has entered into a credit
agreement with ING (the "Credit Facility") pursuant to which the
Company has had varying amounts of outstanding Indebtedness owed
to ING from time to time (all debts, liabilities and obligations
of any character whatsoever which are owed to ING by the Company
or any of its subsidiaries are herein called the "ING
Obligations", whether the same are owed as principal, surety,
endorser, guarantor, accommodation party or otherwise, whether
now existing or hereafter incurred or arising, whether principal,
interest, fees or expenses, whether direct, indirect, contingent,
primary, secondary, joint and several, joint or several, or
otherwise, and irrespective of the manner in which the same arise
or were created or the manner in which ING may have acquired
rights with respect thereto, and expressly including any interest
accruing after the commencement of any insolvency proceeding
whether or not such interest is an allowed claim enforceable in
such proceeding); and
WHEREAS, the Company has issued the Subordinated Notes
in the aggregate principal amount of $15,000,000 to the
Subordinated Debt Holders; and
WHEREAS, the Company and the Trustee have entered into
an Indenture dated as of May 20, 1997 (as the same may be
amended, modified or supplemented from time to time in accordance
with its terms, the "Indenture"), pursuant to which the Company
will issue $75,000,000 aggregate principal amount of 13.50%
Senior Secured Notes due May 1, 2004, Series A (the "Initial
Notes") and 13.50% Senior Secured Notes due May 1, 2004, Series B
to be issued in exchange for the Initial Notes (the "Exchange
Notes" and, together with the Private Exchange Notes (as defined
in the Indenture) and the Initial Notes, the "Notes"); and
WHEREAS, the Company, the Trustee, Fleet National Bank,
as disbursement agent (the "Disbursement Agent"), and Herman J.
Schellstede & Associates, Inc., as representative acting on
behalf of the Noteholders, have entered into a Cash Collateral
and Disbursement Agreement dated as of May 20, 1997 (the "Cash
Collateral and Disbursement Agreement"), establishing (i) two
cash collateral accounts (the "Collateral Accounts") in the name
of the Company, as more fully identified on Schedule I to the
Security Agreement, Pledge and Financing Statement dated as of
May 20, 1997 (the "Security Agreement" and, together with the
Indenture and the Cash Collateral and Disbursement Agreement, the
"Security Documents"), by the Company in favor of the Trustee,
under the control of the Trustee and the Disbursement Agent, into
which the Company has agreed to deposit all of the proceeds (the
"Proceeds") received by it from the issuance and sale of the
Units (the "Units"), each consisting of $1,000 aggregate
principal amount of the Initial Notes and one Common Stock
Purchase Warrant to purchase 1,280 shares of Common Stock of the
Company, pursuant to the offering (the "Offering") described in
the Final Offering Memorandum dated May 13, 1997 (the "Offering
Memorandum") of the Company, and (ii) the terms and conditions of
the release of the funds from the Collateral Accounts; and
WHEREAS, pursuant to the Security Documents, the
Company has granted the Trustee, for the ratable benefit of the
Noteholders, a Security Interest in and to, and first Lien on,
the "Collateral", as such term is defined in Schedule I attached
hereto and made apart hereof;
WHEREAS, the parties hereto wish to enter into an
agreement setting forth their respective rights and obligations
with respect to the property and assets of the Company in certain
circumstances.
NOW, THEREFORE, in consideration for the premises,
covenants and agreements contained herein and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows.
SECTION 1. Collateral Accounts.
(a) Each of ING and each Subordinated Debt
Holder agrees that the sale of the Units and the deposit of the
Proceeds in the Collateral Accounts as contemplated in the
Offering Memorandum and the Security Documents, and the
execution, delivery and performance of this Agreement, shall not
constitute a default or event of default, with or without notice
or the passage of time or both, under either the Credit Facility
or the Subordinated Notes.
(b) In the event any principal payment shall
become due with respect to the Notes, whether as a result of a
Mandatory Redemption, a purchase of the Notes by the Company
following a Change of Control or upon acceleration of the Notes
following an Event of Default, the Collateral shall be disbursed
to the Trustee, for the ratable benefit of the Noteholders, and
shall be applied first to the payment of any and all Obligations
of the Company under the Notes and the Security Documents (the
"Note Obligations") and, only after the Note Obligations have
been paid and discharged in full, next to the payment of any ING
Obligations and last to any obligations of the Company to the
Subordinated Debt Holders under the Subordinated Notes (the ING
Obligations and the Subordinated Debt being collectively referred
to herein as the "Existing Secured Debt").
(c) Any and all determinations regarding the
exercise of remedies against the Collateral shall be made by the
Trustee at the direction of the holders of a majority of the
outstanding principal amount of the Notes.
(d) Each of ING and each Subordinated Debt
Holder agrees that (i) it shall have no security interest in the
Collateral, irrespective of the terms and provisions of any
pledge or security agreements heretofore entered into by it and
the Company and any Subsidiary with respect to the Existing
Secured Debt, or the recording or filing of any financing
statements or other recordings or filings with respect to such
obligations of the Company, and (ii) at all times, it shall
refrain from taking any action to foreclose upon, take possession
of, liquidate or otherwise proceed against the Collateral, except
after all of the Note Obligations have been paid and discharged
in full or with the prior written consent of the holders of a
majority of the outstanding principal amount of the Notes.
(e) As used herein, "Shortfall Obligations"
means (i) any claim against the Company by the Trustee, the
Disbursement Agent or the Noteholders (or any person acting for
their benefit) for any portion of the Note Obligations which has
not been or cannot be satisfied by means of recourse to the
Collateral, and (ii) any obligation of the Company to the
Trustee, the Disbursement Agent or the Noteholders (or any person
acting for their benefit) to deposit additional funds into the
Collateral Accounts or otherwise provide collateral or funds from
any source other than the proceeds from the sale of the Notes,
and (iii) any claim of any kind by the Trustee, the Disbursement
Agent or the Noteholders (or any person acting for their benefit)
against any subsidiary of the Company.
SECTION 2. Extinguishment of the Existing Secured Debt.
At such time as the funds on deposit in the
applicable Collateral Account are disburseable to the Company in
accordance with the provisions of the Cash Collateral and
Disbursement Agreement, the Company shall, in connection with any
such disbursement, satisfy all of the outstanding Existing
Secured Debt, which shall then be extinguished.
SECTION 3. Other Assets of the Company.
(a) All Shortfall Obligations are hereby
expressly and in all respects subordinated and made junior and
inferior to the Existing Secured Debt, and until the Existing
Secured Debt is paid and discharged in full (i) neither the
Trustee, the Disbursement Agent nor any Noteholder shall have any
lien or security interest on any property or assets of the
Company other than the Collateral (or on any property or assets
of the Company's subsidiaries), (ii) no Person to whom Shortfall
Obligations are owed shall accept, receive or collect (by set-off
or any other manner) any payment or distribution on account of,
or ask for, demand or accelerate, directly or indirectly, any
Shortfall Obligation, or foreclose upon, take possession of,
liquidate or otherwise proceed against any such property other
than the Collateral, and (iii) the Company shall not make any
payment of Shortfall Obligations.
(b) Upon any distribution of all or any of the
assets of the Company upon the dissolution, winding up,
liquidation or reorganization of the Company (whether or not in
any insolvency proceeding), or upon any assignment for the
benefit of creditors or any other marshalling of the assets and
liabilities of the Company, then any payment or distribution of
any kind (whether in cash, securities or other property) which
otherwise would be payable or deliverable upon or with respect to
the Shortfall Obligations shall be paid and delivered directly to
ING (until the ING Obligations have been paid and discharged in
full), and then to the Agent (until the Subordinated Debt has
been paid and discharged in full). During the pendency of any
insolvency proceeding with respect to the Company, the Trustee
shall promptly execute, deliver and file any documents and
instruments which ING may from time to time request in order to
(i) file appropriate proofs of claim in respect of the Shortfall
Obligations in such insolvency proceeding, (ii) instruct any
receiver, trustee in bankruptcy, liquidating trustee, agent or
other Person making any payment or distribution in such
insolvency proceeding to make all payments which might otherwise
be payable or deliverable in respect of the Shortfall Obligations
directly to ING or the Agent, and (iii) otherwise effect the
purposes of this Agreement. In addition, ING is hereby
irrevocably authorized (but not in any way obligated), as the
agent and attorney of Trustee and Noteholders, to file any such
proofs of claim and give any such instructions in any such
insolvency proceeding and to otherwise prosecute and enforce all
claims for the Shortfall Obligations in any such insolvency
proceeding and to exercise any rights in any such proceeding
which accrue to the holders of the Shortfall Obligations.
(c) If Trustee, Disbursement Agent or any
Noteholder receives any payment or distribution of any kind
(whether in cash, securities or other property) in contravention
of this Agreement, it shall hold such payment or distribution in
trust for ING and the Subordinated Debt Holders and immediately
deliver the same to ING (until the ING Obligations have been paid
and discharged in full) and then to the Agent (until the
Subordinated Debt has been paid and discharged in full) to be
applied first to the ING Obligations and then to the Subordinated
Notes.
(d) No action or inaction of ING, the Agent,
any Subordinated Debt Holder, the Company or any other Person,
and no change of law or circumstances, shall release or diminish
the obligations, liabilities, agreements or duties under this
Section 3 of the Trustee, the Disbursement Agent or any
Noteholder or the rights under this Section 3 of ING, the Agent
or the Subordinated Debt Holders.
SECTION 4. Further Assurances. Each party hereto
covenants to execute and deliver, file and record such further
instruments and documents and to take such further action as any
party hereto may at any time or times reasonably request, at such
requesting party's expense, in order to carry out the provisions
and intent of this Agreement.
SECTION 5. Notices. Any notice or other
communication in connection with this Agreement shall be
effective if made in writing, addressed to such party at its
address set forth underneath its signature below, and delivered
or mailed first class mail, postage prepaid, or sent by facsimile
transmissions (provided confirmation of receipt is received); or
delivered, marked or sent by facsimile to such other addresses as
the addressee shall have specified by notice given in compliance
with this Section. All notices to any Holder shall be given by
delivering or mailing such notice to the Trustee. All notices to
any Subordinated Debt Holder shall be given by delivering or
mailing such notice to the Agent. Notices shall be deemed given
upon the earlier to occur of (i) the third day following deposit
thereof in the U.S. mail, first class postage prepaid, or (ii)
receipt by the party to whom such notice is directed.
SECTION 6. Benefit of Agreement; Obligations
Several. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective heirs,
administrators, successors and assigns of the parties hereto.
The obligations of each of the parties to this Agreement are
several and not joint.
SECTION 7. Governing Law. This Agreement and the
rights and obligations of the parties hereunder shall be
construed in accordance with and be governed by the laws of the
State of New York. Any legal action or proceeding with respect
to this Agreement shall be brought in the competent courts of the
State of New York, sitting in the City of New York, or of the
United States of America for the Southern District of New York
and, by execution and delivery of this Agreement, each party
hereto hereby accepts for itself and in respect of its property,
generally and unconditionally, the non-exclusive jurisdiction of
the aforesaid courts and agrees to waive any objection to venue.
Any legal process in any sale, action or proceeding may be
delivered by first class mail, postage prepaid, in accordance
with the notice provisions of Section 5 provided a sufficient
amount of time is allowed to respond to such process.
SECTION 8. Counterparts. This Agreement may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
SECTION 9. Effectiveness. This Agreement shall
become effective on the date on which all of the parties hereto
shall have signed a copy hereof (whether the same or different
copies). This Agreement shall remain effective until the earlier
of a date on which (i) all Note Obligations have been irrevocably
paid in full, provided that once the Note Obligations shall have
been irrevocably paid in full and each Holder's rights and
obligations under the Indenture have been terminated, such Holder
shall have no further rights or obligations hereunder, and (ii)
all of the Indebtedness under the Existing Secured Debt shall
have been extinguished.
SECTION 10. Headings Descriptive. The headings of
the several sections of this Agreement are inserted for
convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
SECTION 11. Amendment or Waiver. This Agreement
may be amended, changed, waived or terminated with the written
consent of the Company, ING, the holders of seventy percent (70%)
of the outstanding principal amount of the Subordinated Notes,
the Trustee, and the Holders of a majority of the outstanding
principal amount of the Notes, provided that such amendment,
waiver, modification or termination shall not impair the right of
the Holders to receive payments under the Indenture and the Notes
as and when due; provided, further, however, that no such consent
of any Holder shall be required if all the Obligations of the
Company under the Indenture and the Notes to such Holder shall
have been irrevocably paid in full and are no longer outstanding.
The prior written consent of ING will be required to any
amendment of the Cash Collateral and Disbursement Agreement.
SECTION 12. Inconsistent Provisions. If any
provision of this Agreement shall be inconsistent with, or
contrary to, any provision in any Security Document, the Credit
Facility, the Subordinated Notes, or any document ancillary or
related thereto or providing security in connection therewith,
the provision in this Agreement shall be controlling, and shall
supersede such inconsistent provision to the extent necessary to
give full effect to all provisions contained in this Agreement.
SECTION 13. Consent to Representation. Guinness
Mahon & Co. Limited and the Trustee, on behalf of the
Noteholders, hereby consent to the legal representation by Vinson
& Elkins L.L.P., Houston, Texas, of the Initial Purchaser (as
defined in the Offering Memorandum) in the Offering of the Units.
IN WITNESS WHEREOF, the Company, ING, the Subordinated
Debt Holders and the Trustee have caused this Agreement to be
duly executed by their respective representatives, thereunto duly
authorized, as of the date and year first above written.
XCL LTD.
By:________________________________
Name:
Title:
Address for Notice Purposes:
110 Rue Jean Lafitte
Lafayette, LA 70508
Attention: Marsden W. Miller, Jr.
Telecopier No.: (318) 237-3316
ING (U.S.) CAPITAL CORPORATION
By:________________________________
Name:
Title:
Address for Notice Purposes:
135 East 57th Street
New York, NY 10022
Attention: Peter Clinton
Telecopier No.: (212) 758-4419
FLEET NATIONAL BANK,
as Trustee and on behalf of the
Noteholders
By:________________________________
Name:
Title:
Address for Notice Purposes:
777 Main Street
Hartford, CT 06516
Attention: Corporate Trust
Administration
Ref: XCL Ltd.
Telecopier No.: (860) 986-7920
SUBORDINATED DEBT HOLDERS
Identified on Schedule A attached
hereto and made a part hereof:
By:________________________________
Ted W. Hoyt, as agent under an
Agency Agreement dated as of
April 2, 1993 for the
benefit of the Subordinated
Debt Holders
Address for Notice Purposes:
315 S. College Road, Suite 165
P.O. Box 3263
Lafayette, LA 70502
Telecopier No.: (318) 234-1128
REGISTRATION RIGHTS AGREEMENT
Dated as of May 20, 1997
by and between
XCL LTD.
and
JEFFERIES & COMPANY, INC.
13.50% SENIOR SECURED NOTES DUE MAY 1, 2004
and
75,000 COMMON STOCK PURCHASE WARRANTS
TABLE OF CONTENTS
Page
-----
1. Definitions 1
2. Exchange Offer 6
3. Shelf Registration 10
4. Additional Interest 11
5. Notes Registration Procedures 12
6. Registration Expenses 20
7. Indemnification 21
8. Rules 144 and 144A 24
9. Underwritten Registrations of Registrable
Notes 24
10. Registration of Registrable Securities 25
11. Miscellaneous 27
(a) No Inconsistent Agreements 27
(b) Adjustments Affecting Registrable
Securities or Registrable Notes 28
(c) Amendments and Waivers 28
(d) Notices 28
(e) Successors and Assigns 29
(f) Counterparts 29
(g) Headings 29
(h) Governing Law 29
(i) Severability 30
(j) Notes Held by the Issuer or Its
Affiliates 30
(k) Third Party Beneficiaries 30
(1) Entire Agreement 30
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is
made and entered into as of May 20, 1997, by and between XCL
Ltd., a Delaware corporation (the "Company" or the
"Issuer"), and Jefferies & Company, Inc. (the "Initial
Purchaser").
This Agreement is entered into in connection with the
Purchase Agreement, dated May 13, 1997, by and among the
Company, XCL-China Ltd., a Delaware corporation and wholly-
owned subsidiary of the Company ("XCL-China"), and the
Initial Purchaser (the "Purchase Agreement") which provides
for, among other things, the issuance and sale to the
Initial Purchaser of (i) 75,000 units (the "Units"), each
consisting of $1,000 principal amount of the Company's
13.50% Senior Secured Notes due May 1, 2004, Series A (the
"Notes"), and one warrant (collectively, the "Note
Warrants") to purchase 1,280 shares of common stock, par
value $0.01 per share, of the Company (the "Common Stock")
and (ii) 15,006 additional warrants to purchase 19,207,680
shares of Common Stock (the "Additional Warrants" and,
together with the Note Warrants, the "Warrants"). In order
to induce the Initial Purchaser to enter into the Purchase
Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement for the
benefit of the Initial Purchaser and its direct and indirect
transferees and assigns. The execution and delivery of this
Agreement is a condition to the Initial Purchaser's
obligation to purchase the Units under the Purchase
Agreement. As security for the Notes, the Company is to
deposit the proceeds of the issuance of the Units into two
custodial accounts (collectively, the "Cash Collateral
Accounts"), with $14,625,000 (representing the aggregate
amount of interest due on the Notes through November 1,
1998) being deposited in one account (the "Capitalized
Interest Account") and $60,375,000 being deposited into the
other account (the "Principal Account") both to be
maintained by Fleet National Bank, as disbursement agent for
the Trustee (as defined in Section 1 below).
The parties hereby agree as follows:
1. Definitions.
As used in this Agreement, the term "day", unless
otherwise expressly provided, shall mean a calendar day and
following terms shall have the following meanings:
Additional Interest: See Section 4(a).
Additional Warrants: See the second introductory
paragraph to this Agreement.
Advice: See the last paragraph of Section 5.
Agreement: See the first introductory paragraph to
this Agreement.
Applicable Period: See Section 2(b).
Business Day: A day that is not a Saturday, a Sunday,
or a day on which banking institutions in New York, New York
or Hartford, Connecticut are required to be closed.
Capitalized Interest Account: See the second
introductory paragraph to this Agreement.
Cash Collateral Accounts : See the second introductory
paragraph to this Agreement.
Common Stock: See the second introductory paragraph to
this Agreement.
Company: See the first introductory paragraph to this
Agreement.
Effectiveness Date: The 150th day after the Trigger
Date.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(b).
Exchange Act: The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC
promulgated thereunder.
Exchange Notes: See Section 2(a).
Exchange Offer: See Section 2(a).
Exchange Registration Statement: See Section 2(a).
Exercise Date: The date on which the Warrants are
first exercisable.
Filing Date: The 60th day after the Trigger Date.
Holder: Any registered holder of Registrable Notes or
Registrable Securities.
Indemnified Person: See Section 7(c).
Indemnifying Person: See Section 7(c).
Indenture: The Indenture, dated as of the Issue Date,
by and between the Company and Fleet National Bank, as
trustee, pursuant to which the Notes are being issued, as
amended or supplemented from time to time in accordance with
the terms thereof.
Initial Purchaser: See the first introductory
paragraph to this Agreement.
Initial Shelf Registration: See Section 3(a).
Inspectors: See Section 5(o).
Issue Date: The date on which the Units were sold to
the Initial Purchaser pursuant to the Purchase Agreement.
Issuer: See the first introductory paragraph to this
Agreement.
NASD: National Association of Securities Dealers, Inc.
Notes: See the second introductory paragraph to this
Agreement.
Notes Prospectus: The prospectus included in any Notes
Registration Statement (including, without limitation, any
prospectus subject to completion and a prospectus that
includes any information previously omitted from a
prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Notes covered by
such Notes Registration Statement, and all other amendments
and supplements to such prospectus, including post-effective
amendments, and all material incorporated by reference or
deemed to be incorporated by reference in such prospectus.
Notes Registration Statement: Any registration
statement of the Issuer (and any then existing Subsidiary
Guarantor) filed with the SEC under the Securities Act,
including, but not limited to, the Exchange Registration
Statement, that covers any of the Registrable Notes pursuant
to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all
exhibits, and all material incorporated by reference or
deemed to be incorporated by reference in such registration
statement.
Note Warrants: See the second introductory paragraph
to this Agreement.
Participant: See Section 7(a).
Participating Broker-Dealer: See Section 2(b).
Person: An individual, trustee, corporation,
partnership, limited liability company, joint stock company,
trust, unincorporated association, union, business
association, firm or other legal entity.
Piggy-Back Registration: See Section 10(a).
Principal Account: See the second introductory
paragraph to this Agreement.
Private Exchange: See Section 2(b).
Private Exchange Notes: See Section 2(b).
Prospectus: Any Notes Prospectus or Warrants
Prospectus.
Purchase Agreement: See the second introductory
paragraph to this Agreement.
Records: See Section 5(o).
Registrable Notes: Each Note upon original issuance
thereof and at all times subsequent thereto, each Exchange
Note as to which Section 2(c)(iv) hereof is applicable upon
original issuance thereof and at all times subsequent
thereto and each Private Exchange Note upon original
issuance thereof and at all times subsequent thereto, until,
in the case of any such Note, Exchange Note or Private
Exchange Note, as the case may be, the earliest to occur of
(i) a Notes Registration Statement (other than, with respect
to any Exchange Note as to which Section 2(c)(iv) hereof is
applicable, the Exchange Registration Statement) covering
such Note, Exchange Note or Private Exchange Note, as the
case may be, has been declared effective by the SEC and such
Note, Exchange Note or Private Exchange Note, as the case
may be, has been disposed of in accordance with such
effective Notes Registration Statement, (ii) such Note,
Exchange Note or Private Exchange Note, as the case may be,
is sold in compliance with Rule 144, (iii) in the case of
any Note, such Note has been exchanged pursuant to the
Exchange Offer for an Exchange Note or Exchange Notes which
may be resold without restriction under state and federal
securities laws, or (iv) such Note, Exchange Note or Private
Exchange Note, as the case may be, ceases to be outstanding
for purposes of the Indenture.
Registrable Securities: Any of (i) the Warrant Shares
(whether or not the related Warrants have been exercised)
and (ii) any other securities issued or issuable with
respect to any Warrant Shares by way of stock dividends or
stock splits or in connection with a combination of shares,
recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular
Registrable Securities, such securities shall cease to be
Registrable Securities when (i) a Warrants Registration
Statement with respect to the offering of such securities by
the Holder thereof shall have been declared effective under
the Securities Act and such securities shall have been
disposed of by such Holder pursuant to such Warrants
Registration Statement, (ii) such securities are eligible
for sale to the public pursuant to Rule 144(k) (or an
similar provision then in force, but not Rule 144A) or are
all otherwise eligible for sale under Rule 144 by such
Holder in the current calendar quarter, (iii) such
securities shall have been otherwise transferred by such
Holder and new certificates for such securities not bearing
a legend restricting further transfer shall have been
delivered by the Company or its transfer agent and
subsequent disposition of such securities shall not require
registration or qualification under the Securities Act or
any similar state law then in force or (iv) such securities
shall have ceased to be outstanding.
Registration Expenses: All expenses incident to the
Company's performance of or compliance with Section 10 of
this Agreement, including, without limitation, all SEC and
stock exchange or NASD registration and filing fees and
expenses, fees and expenses of compliance with securities or
blue sky laws (including, without limitation, reasonable
fees and disbursements of counsel for any underwriters in
connection with blue sky qualifications of the Registrable
Securities), preparing, printing, filing, duplicating and
distributing a Warrants Registration Statement and the
related Prospectus, the cost of printing stock certificates,
the cost and charges of any transfer agent, rating agency
fees, printing expenses, messenger, telephone and delivery
expenses, fees and disbursements of any counsel for the
Company and all independent certified public accountants,
the fees and disbursements of underwriters customarily paid
by issuers or sellers or securities (but not including any
underwriting discounts or commissions or transfer taxes, if
any, attributable to the sale of Registrable Securities by
Selling Holders), fees and expenses of one counsel for the
Selling Holders and other reasonable out-of-pocket expenses
of the Selling Holders.
Registration Statement: Any Notes Registration
Statement or Warrants Registration Statement.
Rule 144: Rule 144 promulgated under the Securities
Act, as such Rule may be amended from time to time, or any
similar rule (other than Rule 144A) or regulation hereafter
adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers
and sales by subsequent holders that are not affiliates of
an issuer of such securities being free of the registration
and prospectus delivery requirements of the Securities Act.
Rule 144A: Rule 144A promulgated under the Securities
Act, as such Rule may be amended from time to time, or any
similar rule (other than Rule 144) or regulation hereafter
adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities
Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as
amended, and the rules and regulations of the SEC
promulgated thereunder.
Selling Holder: A Holder who is selling Registrable
Securities in accordance with Section 10 hereof.
Shelf Notice: See Section 2(c).
Shelf Registration: See Section 3(b).
Subsequent Shelf Registration: See Section 3(b).
Subsidiary Guarantor: Each subsidiary of the Company
that guarantees the obligations of the Company under the
Notes and the Indenture.
TIA: The Trust Indenture Act of 1939, as amended.
Trigger Date: The date of disbursement to the Company
of funds in the Principal Account.
Trustee: The trustee under the Indenture and, if
existent, the trustee under any indenture governing the
Exchange Notes and Private Exchange Notes (if any).
Underwritten registration or underwritten offering: A
registration in which securities of one or more of the
issuers are sold to an underwriter for reoffering to the
public.
Units: See the second introductory paragraph to this
Agreement.
Warrants: See the second introductory paragraph to
this Agreement.
Warrants Prospectus: The prospectus included in any
Warrants Registration Statement (including, without
limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted
from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities
covered by such Warrants Registration Statement, and all
other amendments and supplements to such prospectus,
including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by
reference in such prospectus.
Warrants Registration Statement: Any registration
statement of the Company that covers any Warrant Shares
filed with the SEC under the Securities Act, including the
Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all
exhibits, and all material incorporated by reference or
deemed to be incorporated by reference in such registration
statement.
Warrant Shares: The shares of Common Stock issuable
upon exercise of the Warrants.
XCL-China: See the second introductory paragraph to
this Agreement.
2. Exchange Offer
(a) Provided that funds subject to the Principal
Account are disbursed to the Issuer, the Issuer agrees to
file (and to cause any then existing Subsidiary Guarantor to
file) with the SEC no later than the Filing Date, an offer
to exchange (the "Exchange Offer") any and all of the
Registrable Notes for a like aggregate principal amount of
debt securities of the Company, guaranteed by each such
Subsidiary Guarantor and secured by the same collateral as
the Notes, which are identical in all material respects to
the Notes (the "Exchange Notes") (and which are entitled to
the benefits of the Indenture or a trust indenture which is
identical in all material respects to the Indenture (other
than such changes to the Indenture or any such identical
trust indenture as are necessary to comply with any
requirements of the SEC to effect or maintain the
qualification thereof under the TIA) and which, in either
case, has been qualified under the TIA), except that the
Exchange Notes shall have been registered pursuant to an
effective Registration Statement under the Securities Act,
shall not provide for Additional Interest and shall contain
no restrictive legend thereon. The Exchange Offer shall be
registered under the Securities Act on the appropriate form
(the "Exchange Registration Statement") and shall comply
with all applicable tender offer rules and regulations under
the Exchange Act. The Issuer agrees to use its best efforts
to (x) cause the Exchange Registration Statement to be
declared effective under the Securities Act on or before the
Effectiveness Date; (y) keep the Exchange Offer open for at
least 30 calendar days (or longer if required by applicable
law) after the date that notice of the Exchange Offer is
mailed to Holders; and (z) consummate the Exchange Offer on
or prior to the 45th day following the date on which the
Exchange Registration Statement is declared effective. If
after such Exchange Registration Statement is initially
declared effective by the SEC, the Exchange Offer or the
issuance of the Exchange Notes thereunder is interfered with
by any stop order, injunction or other order or requirement
of the SEC or any other governmental agency or court, such
Exchange Registration Statement shall be deemed not to have
become effective for purposes of this Agreement. Each
Holder who participates in the Exchange Offer will be
required to represent (i) that any Exchange Notes received
by it will be acquired in the ordinary course of its
business, (ii) that at the time of the commencement of the
Exchange Offer such Holder has not entered into any
arrangement or understanding with any Person to participate
in the distribution (within the meaning of the Securities
Act) of the Exchange Notes in violation of the provisions of
the Securities Act, (iii) that such Holder is not an
affiliate of any of the Issuers within the meaning of the
Securities Act, (iv) if such Holder is not a broker-dealer,
that it is not engaged in, and does not intend to engage in,
the distribution of the Notes and (v) if such Holder is a
Participating Broker-Dealer, that it will deliver a
prospectus in connection with any resale of the Exchange
Notes. Upon consummation of the Exchange Offer in
accordance with this Section 2, the provisions of this
Agreement shall continue to apply, mutatis mutandis, solely
with respect to Registrable Notes that are Private Exchange
Notes and Exchange Notes held by Participating Broker-
Dealers, and the Issuers shall have no further obligation to
register Registrable Notes (other than Private Exchange
Notes and other than in respect of any Exchange Notes as to
which clause 2(c)(iv) hereof applies) pursuant to Section 3
of this Agreement.
(b) The Issuer shall include within the Notes
Prospectus contained in the Exchange Registration Statement
a Section entitled "Plan of Distribution," reasonably
acceptable to the Initial Purchaser, which shall contain a
summary statement of the positions taken or policies made by
the staff of the SEC with respect to the potential
"underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Notes received by such broker-
dealer in the Exchange Offer for its own account in exchange
for Notes that were acquired by it as a result of market-
making or other trading activity (a "Participating Broker-
Dealer"), whether such positions or policies have been
publicly disseminated by the staff of the SEC or such
positions or policies, in the judgment of the Initial
Purchaser, represent the prevailing views of the staff of
the SEC. Such "Plan of Distribution" Section shall also
allow, to the extent permitted by applicable policies and
regulations of the SEC, the use of the Notes Prospectus by
all Persons subject to the prospectus delivery requirements
of the Securities Act, including, to the extent so
permitted, all Participating Broker-Dealers, and include a
statement describing the manner in which Participating
Broker-Dealers may resell the Exchange Notes.
The Issuer shall use its best efforts to keep the
Exchange Registration Statement effective and to amend and
supplement the Notes Prospectus contained therein, in order
to permit such Notes Prospectus to be lawfully delivered by
all Persons subject to the prospectus delivery requirements
of the Securities Act for such period of time as such
Persons must comply with such requirements in order to
resell the Exchange Notes (the "Applicable Period").
If, upon consummation of the Exchange Offer, the
Initial Purchaser holds any Notes acquired by it and having
the status of an unsold allotment in the initial
distribution, the Company (upon the request of such Initial
Purchaser) shall, simultaneously with the delivery of the
Exchange Notes in the Exchange Offer, issue and deliver to
the Initial Purchaser, in exchange (the "Private Exchange")
for the Notes held by the Initial Purchaser, a like
principal amount of debt securities of the Company,
guaranteed by any then existing Subsidiary Guarantor and
secured by the same collateral as the Exchange Notes, that
are identical in all material respects to the Exchange Notes
except for the existence of restrictions on transfer thereof
under the Securities Act and securities laws of the several
states of the U.S. (the "Private Exchange Notes") (and which
are issued pursuant to the same indenture as the Exchange
Notes); provided, however, the Issuer shall not be required
to effect such exchange if, in the written opinion of
counsel for the Issuer (a copy of which shall be delivered
to the Initial Purchaser and any Holder affected thereby),
such exchange cannot be effected without registration under
the Securities Act. The Private Exchange Notes shall bear
the same CUSIP number as the Exchange Notes, if permissible.
Interest on the Exchange Notes and the Private Exchange
Notes will accrue from (A) the later of (i) the last
interest payment date on which interest was paid on the
Notes surrendered in exchange therefor or (ii) if the Notes
are surrendered for exchange on a date in a period which
includes the record date for an interest payment date to
occur on or after the date of such exchange and as to which
interest will be paid, the date of such interest payment
date or (B) if no interest has been paid on the Notes, from
the Issue Date.
In connection with the Exchange Offer, the Issuer
shall:
(1) mail to each Holder a copy of the Notes
Prospectus forming part of the Exchange Registration
Statement, together with an appropriate letter of
transmittal and related documents;
(2) utilize the services of a depositary for
the Exchange Offer, which may be the Trustee or an
affiliate thereof;
(3) permit Holders to withdraw tendered
Registrable Notes at any time prior to the close of
business on the last business day on which the Exchange
Offer shall remain open; and
(4) otherwise comply in all material respects
with all applicable laws.
As soon as practicable after the close of the Exchange
Offer or the Private Exchange, as the case may be, the
Issuer shall:
(1) accept for exchange all Registrable Notes
validly tendered and not validly withdrawn pursuant to
the Exchange Offer or the Private Exchange, as the case
may be;
(2) deliver to the Trustee for cancellation
all Registrable Notes so accepted for exchange; and
(3) cause the Trustee to authenticate and
deliver promptly to each Holder tendering such
Registrable Notes, Exchange Notes or Private Exchange
Notes, as the case may be, equal in principal amount to
the Notes of such Holder so accepted for exchange.
The Exchange Offer and the Private Exchange shall be
subject to only the following conditions: (i) the Exchange
Offer or the Private Exchange, as the case may be, does not
violate applicable law or any applicable interpretation of
the staff of the SEC, (ii) no action or proceeding is
instituted or threatened in any court or by any governmental
agency which might materially impair the ability of the
Issuer to proceed with the Exchange Offer or the Private
Exchange and (iii) all governmental approvals have been
obtained, which approvals the Issuer deem necessary for the
consummation of the Exchange Offer or Private Exchange.
The Exchange Notes and the Private Exchange Notes may
be issued under (i) the Indenture or (ii) an indenture
identical in all material respects to the Indenture, which
in either event will provide that the Exchange Notes will
not be subject to the transfer restrictions set forth in the
Indenture and that the Exchange Notes, the Private Exchange
Notes and the Notes, if any, will be deemed one class of
security (subject to the provisions of the Indenture) and
entitled to participate in all the security granted by the
Company pursuant to the Security Documents and in any
Subsidiary Guarantee (as such terms are defined in the
Indenture) on an equal and ratable basis.
(c) If, (i) because of any change in law or in
currently prevailing interpretations of the staff of the
SEC, the Issuer (and any then existing Subsidiary Guarantor)
are not permitted to effect an Exchange Offer, (ii) the
Exchange Offer is not consummated within 180 days of the
Trigger Date, (iii) any holder of Private Exchange Notes so
requests in writing to the Issuer within 120 days after the
consummation of the Exchange Offer or (iv) in the case of
any Holder that participates in the Exchange Offer, such
Holder does not receive Exchange Notes on the date of the
exchange that may be sold without restriction under state
and federal securities laws (other than due solely to the
status of such Holder as an affiliate of the Issuer within
the meaning of the Securities Act) and so notifies the
Company within 60 days after such Holder first becomes aware
of such restrictions and providing a reasonable basis for
its conclusions, in the case of each of clauses (i)-(iv),
then the Issuer (and any then existing Subsidiary Guarantor)
shall promptly deliver to the Holders and the Trustee
written notice thereof (the "Shelf Notice") and shall file a
Shelf Registration pursuant to Section 3.
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by
Section 2(c), then:
(a) Shelf Registration. The Issuer shall as
promptly as reasonably practicable file (and shall cause any
then existing Subsidiary Guarantor to file) with the SEC a
Notes Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 covering all of the
Registrable Notes (the "Initial Shelf Registration"). If
the Issuer (and any then existing Subsidiary Guarantor)
shall have not yet filed the Exchange Registration
Statement, the Issuer shall use its best efforts to file
(and shall cause any then existing Subsidiary Guarantor to
file) with the SEC the Initial Shelf Registration on or
prior to the Filing Date and shall use its best efforts to
cause such Initial Shelf Registration to be declared
effective under the Securities Act on or prior to the
Effectiveness Date. Otherwise, the Issuer shall use its
best efforts to file (and shall cause any then existing
Subsidiary Guarantor to file) with the SEC the Initial Shelf
Registration within 30 days of the delivery of the Shelf
Notice and shall use its best efforts to cause such Shelf
Registration to be declared effective under the Securities
Act as promptly as practicable thereafter. The Initial
Shelf Registration shall be on Form S-l or another
appropriate form permitting registration of such Registrable
Notes for resale by Holders in the manner or manners
designated by them (including, without limitation, one or
more underwritten offerings). The Issuer shall not permit
any securities other than the Registrable Notes to be
included in any Shelf Registration (as defined below). The
Issuer shall use its best efforts to keep the Initial Shelf
Registration continuously effective under the Securities Act
until the date which is two years from the Issue Date or
such earlier date as may be then authorized under Rule
144(k) under the Securities Act (the "Effectiveness
Period"), or such shorter period ending when (i) all
Registrable Notes covered by the Initial Shelf Registration
have been sold in the manner set forth and as contemplated
in the Initial Shelf Registration or are otherwise eligible
for sale under Rule 144 by the Holders without restriction
by virtue of the operation of the volume limitations set
forth in such Rule or (ii) a Subsequent Shelf Registration
(as defined below) covering all of the Registrable Notes has
been declared effective under the Securities Act.
(b) Subsequent Shelf Registrations. If the Initial
Shelf Registration or any Subsequent Shelf Registration
ceases to be effective for any reason at any time during the
Effectiveness Period (other than because of the sale of all
of the securities registered thereunder), the Issuer shall
use its best efforts to obtain the prompt withdrawal of any
order suspending the effectiveness thereof, and in any event
shall within 45 days of such cessation of effectiveness
amend such Shelf Registration in a manner to obtain the
withdrawal of the order suspending the effectiveness
thereof, or file (and cause any then existing Subsidiary
Guarantor to file) an additional "shelf" Notes Registration
Statement pursuant to Rule 415 covering all of the
Registrable Notes (a "Subsequent Shelf Registration"). If a
Subsequent Shelf Registration is filed, the Issuer shall use
its best efforts to cause the Subsequent Shelf Registration
to be declared effective as soon as practicable after such
filing and to keep such Subsequent Shelf Registration
continuously effective for a period equal to the number of
days in the Effectiveness Period less the aggregate number
of days during which the Initial Shelf Registration or any
Subsequent Shelf Registrations was previously continuously
effective. As used herein the term "Shelf Registration"
means the Initial Shelf Registration and any Subsequent
Shelf Registration.
(c) Supplements and Amendments. The Issuer shall
promptly supplement and amend any Shelf Registration if
required by the rules, regulations or instructions
applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if
reasonably requested by the Holders of a majority in
aggregate principal amount of the Registrable Notes covered
by such Shelf Registration or by any underwriter of such
Registrable Notes.
4. Additional Interest
(a) The Issuer and the Initial Purchaser agree that
the Holders of Registrable Notes will suffer damages if the
Issuer fails to fulfill its obligations under Section 2 or
Section 3 hereof and that it would not be feasible to
ascertain the extent of such damages with precision.
Accordingly, the Issuer, agrees to pay, as liquidated
damages, cash interest on the Notes ("Additional Interest")
under the circumstances and to the extent set forth below
(each of which shall be given independent effect):
(i) if the Exchange Registration Statement has
not been filed on or prior to the Filing Date, then
commencing on the day after the Filing Date, Additional
Interest shall accrue on the Notes over and above any
stated interest at a rate of 0.50% per annum of the
principal amount of such Notes for the first 90 days
immediately following the Filing Date, such Additional
Interest rate increasing by an additional 0.50% per
annum at the beginning of each subsequent 90-day
period;
(ii) if the Exchange Registration Statement is
not declared effective on or prior to the Effectiveness
Date, then commencing on the day after the
Effectiveness Date, Additional Interest shall accrue on
the Notes over and above any stated interest at a rate
of 0.50% per annum of the principal amount of such
Notes for the first 90 days immediately following the
day after the Effectiveness Date, such Additional
Interest rate increasing by an additional 0.50% per
annum at the beginning of each subsequent 90-day
period; and
(iii) if (A) the Issuer (and any then existing
Subsidiary Guarantor) have not exchanged Exchange Notes
for all Notes validly tendered in accordance with the
terms of the Exchange Offer on or prior to the 45th day
after the date on which the Exchange Registration
Statement is declared effective or (B) the Initial
Shelf Registration, if required to be filed hereunder,
is not declared effective on or prior to the
Effectiveness Date or (C) if applicable, a Shelf
Registration has been declared effective and such Shelf
Registration ceases to be effective at any time during
the Effectiveness Period, then Additional Interest
shall accrue on the Notes over and above any stated
interest at a rate of 0.50% per annum of the principal
amount of such Notes for the first 90 days commencing
on the (x) 45th day after the date on which the
Exchange Registration Statement is declared effective,
in the case of (A) or (B) above, or (y) the day such
Shelf Registration ceases to be effective in the case
of (C) above, such Additional Interest rate increasing
by an additional 0.50% per annum at the beginning of
each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the
Notes may not exceed at any one time in the aggregate 2.00%
per annum; and provided further, that (1) upon the filing of
the Exchange Registration Statement (in the case of (i)
above), (2) upon the effectiveness of the Exchange
Registration Statement (in the case of (ii) above), or (3)
upon the exchange of Exchange Notes for all Notes tendered
(in the case of (iii)(A) above), upon the effectiveness of
the Initial Shelf Registration (in the case of (iii)(B)
above) or upon the effectiveness of a Shelf Registration
which had ceased to remain effective (in the case of
(iii)(C) above), Additional Interest on the Notes as a
result of such clause (or the relevant subclause thereof),
as the case may be, shall cease to accrue.
(b) The Issuer shall notify the Trustee within one
business day after each and every date on which an event
occurs in respect of which Additional Interest is required
to be paid (an "Event Date"). Any amounts of Additional
Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this
Section 4 will be payable semi-annually, on the dates and in
the manner provided in the Indenture and whether or not any
cash interest would then be payable on such date, commencing
with the first such semi-annual date occurring after any
such Additional Interest commences to accrue. The amount of
Additional Interest will be determined by multiplying the
applicable Additional Interest rate by the principal amount
of the Notes, multiplied by a fraction, the numerator of
which is the number of days such Additional Interest rate
was applicable during such semi-annual period (determined on
the basis of a 360-day year comprised of twelve 30-day
months and, in the case of a partial month, the actual
number of days elapsed), and the denominator of which is
360.
5. Notes Registration Procedures
In connection with the filing of any Notes Registration
Statement pursuant to Section 2 or 3 hereof, the Issuer
shall effect such registrations to permit the sale of such
securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant
thereto and in connection with any Notes Registration
Statement filed by the Issuer hereunder, the Issuer shall:
(a) Prepare and file with the SEC prior to the
Filing Date, the Exchange Registration Statement or if
the Exchange Registration Statement is not filed
because of the circumstances contemplated by Section
2(c)(i), a Shelf Registration as prescribed by Section
2 or 3, and use its best efforts to cause each such
Notes Registration Statement to become effective and
remain effective as provided herein; provided that, if
(1) a Shelf Registration is filed pursuant to Section
3, or (2) a Notes Prospectus contained in an Exchange
Registration Statement filed pursuant to Section 2 is
required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, before
filing any Notes Registration Statement or Notes
Prospectus or any amendments or supplements thereto,
the Issuer shall, if requested, furnish to and afford
the Holders of the Registrable Notes to be registered
pursuant to such Shelf Registration or each such
Participating Broker-Dealer, as the case may be,
covered by such Notes Registration Statement, their
counsel and the managing underwriters, if any, a
reasonable opportunity to review copies of all such
documents (including copies of any documents to be
incorporated by reference therein and all exhibits
thereto) proposed to be filed (in each case at least
five business days prior to such filing). The Issuer
shall not file any such Notes Registration Statement or
Notes Prospectus or any amendments or supplements
thereto if the Holders of a majority in aggregate
principal amount of the Registrable Notes covered by
such Notes Registration Statement, or any such
Participating Broker-Dealer, as the case may be, their
counsel, or the managing underwriters, if any, shall
reasonably object.
(b) Prepare and file with the SEC such
amendments and post-effective amendments to each Shelf
Registration or Exchange Registration Statement, as the
case may be, as may be necessary to keep such Notes
Registration Statement continuously effective for the
Effectiveness Period or the Applicable Period, as the
case may be; cause the related Notes Prospectus to be
supplemented by any Prospectus supplement required by
applicable law, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; and comply
with the provisions of the Securities Act and the
Exchange Act applicable to it with respect to the
disposition of all securities covered by such Notes
Registration Statement as so amended or in such Notes
Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such
Prospectus. The Issuer shall be deemed not to have
used its best efforts to keep a Notes Registration
Statement effective during the Applicable Period if it
voluntarily takes any action that would result in
selling Holders of the Registrable Notes covered
thereby or Participating Broker-Dealers seeking to sell
Exchange Notes not being able to sell such Registrable
Notes or such Exchange Notes during that period unless
such action is required by applicable law or unless the
Issuer complies with this Agreement, including, without
limitation, the provisions of paragraph 5(k) hereof and
the last paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed
pursuant to Section 3, or (2) a Notes Prospectus
contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under
the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable
Period from whom the Company has received written
notice that it will be a Participating Broker-Dealer in
the Exchange Offer, notify the selling Holders of
Registrable Notes, or each such Participating Broker-
Dealer, as the case may be, their counsel and the
managing underwriters, if any, promptly (but in any
event within two business days), (i) when a Notes
Prospectus or any Notes Prospectus supplement or post-
effective amendment has been filed, and, with respect
to a Notes Registration Statement or any post-effective
amendment, when the same has become effective
(including in such notice a written statement that any
Holder may, upon request, obtain, without charge, one
conformed copy of such Notes Registration Statement or
post-effective amendment including financial statements
and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the
issuance by the SEC of any stop order suspending the
effectiveness of a Notes Registration Statement or of
any order preventing or suspending the use of any Notes
Prospectus or the initiation of any proceedings for
that purpose, (iii) if at any time when a prospectus is
required by the Securities Act to be delivered in
connection with sales of the Registrable Notes the
representations and warranties of the Issuer contained
in any agreement (including any underwriting agreement)
contemplated by Section 5(n) hereof cease to be true
and correct, (iv) of the receipt by the Issuer of any
notification with respect to the suspension of the
qualification or exemption from qualification of a
Notes Registration Statement or any of the Registrable
Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer for offer or sale in any
jurisdiction, or the initiation or threatening of any
proceeding for such purpose, (v) of the happening of
any event, the existence of any condition or any
information becoming known that makes any statement
made in such Notes Registration Statement or related
Notes Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any
material respect or that requires the making of any
changes in, or amendments or supplements to, such Notes
Registration Statement, Notes Prospectus or documents
so that, in the case of the Notes Registration
Statement, it will not contain any untrue statement of
a material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading, and that in the case
of the Notes Prospectus, it will not contain any untrue
statement of a material fact or omit to state any
material fact required to be stated therein or
necessary to make the statements therein, in light of
the circumstances under which they were made, not
misleading, and (vi) of any of the Issuer's reasonable
determination that a post-effective amendment to a
Notes Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed
pursuant to Section 3, or (2) a Notes Prospectus
contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under
the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable
Period, use its best efforts to prevent the issuance of
any order suspending the effectiveness of a Notes
Registration Statement or of any order preventing or
suspending the use of a Notes Prospectus or suspending
the qualification (or exemption from qualification) of
any of the Registrable Notes or the Exchange Notes to
be sold by any Participating Broker-Dealer, for sale in
any jurisdiction, and, if any such order is issued, to
use its best efforts to obtain the withdrawal of any
such order at the earliest possible date.
(e) If a Shelf Registration is filed pursuant
to Section 3 and if requested by the managing
underwriters, if any, or the Holders of a majority in
aggregate principal amount of the Registrable Notes
being sold in connection with an underwritten offering,
(i) promptly as practicable incorporate in a prospectus
supplement or post-effective amendment such information
or revisions to information therein relating to such
underwriters or selling Holders as the managing
underwriters, if any, or such Holders or their counsel
reasonably request to be included or made therein and
(ii) make all required filings of such prospectus
supplement or such post-effective amendment as soon as
practicable after the Issuer has received notification
of the matters to be incorporated in such prospectus
supplement or post-effective amendment.
(f) If (1) a Shelf Registration is filed
pursuant to Section 3, or (2) a Notes Prospectus
contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under
the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable
Period, furnish to each selling Holder of Registrable
Notes and to each such Participating Broker-Dealer who
so requests and to counsel and each managing
underwriter, if any, without charge, one conformed copy
of the Notes Registration Statement or Notes
Registration Statements and each post-effective
amendment thereto, including financial statements and
schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by
reference and all exhibits.
(g) If (1) a Shelf Registration is filed
pursuant to Section 3, or (2) a Notes Prospectus
contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under
the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable
Period, deliver to each selling Holder of Registrable
Notes or each such Participating Broker-Dealer, as the
case may be, their respective counsel, and the
underwriters, if any, without charge, as many copies of
the Notes Prospectus and each amendment or supplement
thereto and any documents incorporated by reference
therein as such Persons may reasonably request; and,
subject to the last paragraph of this Section 5, the
Issuer hereby consents to the use of such Notes
Prospectus and each amendment or supplement thereto by
each of the selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may
be, and the underwriters or agents, if any, and dealers
(if any), in connection with the offering and sale of
the Registrable Notes covered by, or the sale by
Participating Broker-Dealers of the Exchange Notes
pursuant to, such Notes Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of
Registrable Notes or any delivery of a Notes Prospectus
contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, to use its best
efforts to register or qualify, and to cooperate with
the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the
underwriters, if any, and their respective counsel in
connection with the registration or qualification (or
exemption from such registration or qualification) of
such Registrable Notes or Exchange Notes, as the case
may be, for offer and sale under the securities or Blue
Sky laws of such jurisdictions within the United States
as any selling Holder, Participating Broker-Dealer, or
the managing underwriter or underwriters, if any,
reasonably request in writing; provided that where
Exchange Notes held by Participating Broker-Dealers or
Registrable Notes are offered other than through an
underwritten offering, the Issuer agrees to cause its
counsel to perform Blue Sky investigations and file any
registrations and qualifications required to be filed
pursuant to this Section 5(h); keep each such
registration or qualification (or exemption therefrom)
effective during the period such Notes Registration
Statement is required to be kept effective and do any
and all other acts or things reasonably necessary or
advisable to enable the disposition in such
jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the Registrable Notes
covered by the applicable Registration Statement;
provided that neither the Issuer nor any Subsidiary
Guarantor shall be required to (A) qualify generally to
do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to
general service of process in any such jurisdiction
where it is not then so subject or (C) subject itself
to taxation in excess of a nominal dollar amount in any
such jurisdiction where it is not then so subject.
(i) If a Shelf Registration is filed pursuant
to Section 3, cooperate with the selling Holders of
Registrable Notes and the managing underwriter or
underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing
Registrable Notes to be sold, which certificates shall
not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company;
and enable such Registrable Notes to be in such
denominations and registered in such names as the
managing underwriter or underwriters, if any, or
Holders may reasonably request.
(j) Use its best efforts to cause the
Registrable Notes covered by any Notes Registration
Statement to be registered with or approved by such
governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or
the underwriters, if any, to consummate the disposition
of such Registrable Notes, except as may be required
solely as a consequence of the nature of such selling
Holder's business, in which case the Issuer will
cooperate in all reasonable respects with the filing of
such Notes Registration Statement and the granting of
such approvals.
(k) If (1) a Shelf Registration is filed
pursuant to Section 3, or (2) a Notes Prospectus
contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under
the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable
Period, upon the occurrence of any event contemplated
by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as
practicable prepare and (subject to Section 5(a)
hereof) file with the SEC, at the expense of the
Issuer, a supplement or post-effective amendment to the
Notes Registration Statement or a supplement to the
related Notes Prospectus or any document incorporated
or deemed to be incorporated therein by reference, or
file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Notes
being sold thereunder or to the purchasers of the
Exchange Notes to whom such Notes Prospectus will be
delivered by a Participating Broker-Dealer, any such
Notes Prospectus will not contain an untrue statement
of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under
which they were made, not misleading.
(1) Use its best efforts to cause the
Registrable Notes covered by a Notes Registration
Statement to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority
in aggregate principal amount of Registrable Notes
covered by such Notes Registration Statement or the
managing underwriter or underwriters, if any.
(m) Prior to the initial issuance of the
Exchange Notes, (i) provide the Trustee with one or
more certificates for the Registrable Notes in a form
eligible for deposit with The Depository Trust Company
and (ii) provide a CUSIP number for the Exchange Notes.
(n) In connection with an underwritten
offering of Registrable Notes pursuant to a Shelf
Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt
securities similar to the Notes and take all such other
actions as are reasonably requested by the managing
underwriter or underwriters in order to expedite or
facilitate the registration or the disposition of such
Registrable Notes and, in such connection, (i) make
such representations, warranties to, and covenants
with, the underwriters, with respect to the business of
the Issuer and its subsidiaries and the Notes
Registration Statement, Notes Prospectus and documents,
if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily
made by issuers to underwriters in underwritten
offerings of debt securities similar to the Notes, and
confirm the same in writing if and when requested; (ii)
obtain the opinion of counsel to the Issuer and updates
thereof in form and substance reasonably satisfactory
to the managing underwriter or underwriters, addressed
to the underwriters covering the matters customarily
covered in opinions requested in underwritten offerings
of debt securities similar to the Notes and such other
matters as may be reasonably requested by underwriters;
(iii) obtain copies of "cold comfort" letters and
updates thereof in form and substance reasonably
satisfactory to the managing underwriter or
underwriters from the independent certified public
accountants of the Issuer (and, if necessary, any other
independent certified public accountants of any
subsidiary of the Issuer or of any business acquired by
the Issuer for which financial statements and financial
data are, or are required to be, included in the Notes
Registration Statement), addressed to each of the
underwriters, such letters to be in customary form and
covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten
offerings of debt securities similar to the Notes and
such other matters as reasonably requested by the
managing underwriter or underwriters; and (iv) if an
underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no
less favorable than those set forth in Section 7 hereof
(or such other provisions and procedures acceptable to
Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Notes Registration
Statement and the managing underwriter or underwriters
or agents) with respect to all parties to be
indemnified pursuant to said Section. The above shall
be done at each closing under such underwriting
agreement, or as and to the extent required thereunder.
(o) If (1) a Shelf Registration is filed
pursuant to Section 3, or (2) a Notes Prospectus
contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under
the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable
Period, make available for inspection by any selling
Holder of such Registrable Notes being sold, or each
such Participating Broker-Dealer, as the case may be,
any underwriter participating in any such disposition
of Registrable Notes, if any, and any attorney,
accountant or other agent retained by any such selling
Holder or each such Participating Broker-Dealer, as the
case may be, or underwriter (collectively, the
"Inspectors"), at the offices where normally kept,
during reasonable business hours, all financial and
other records and pertinent corporate documents of the
Issuers and their respective subsidiaries
(collectively, the "Records") as shall be reasonably
necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers,
directors and employees of the Issuer and its
subsidiaries to supply all information reasonably
requested by any such Inspector in connection with such
Notes Registration Statement. Such Records shall be
kept confidential by each Inspector and shall not be
disclosed by the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a
misstatement or omission in such Notes Registration
Statement, (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of
competent jurisdiction, (iii) the information in such
Records is public or has been made generally available
to the public other than as a result of a disclosure or
failure to safeguard by such Inspector or (iv)
disclosure of such information is, in the opinion of
counsel for any Inspector, necessary or advisable in
connection with any action, claim, suit or proceeding,
directly or indirectly, involving or potentially
involving such Inspector and arising out of, based
upon, related to, or involving this Agreement, or any
transactions contemplated hereby or arising hereunder.
Each selling Holder of such Registrable Notes and each
such Participating Broker-Dealer will be required to
agree that information obtained by it as a result of
such inspections shall be deemed confidential and shall
not be used by it as the basis for any market
transactions in the securities of the Issuers unless
and until such is made generally available to the
public. Each selling Holder of such Registrable Notes
and each such Participating Broker-Dealer will be
required to further agree that it will, upon learning
that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Issuer and
allow the Issuer to undertake appropriate action to
prevent disclosure of the Records deemed confidential
at their expense.
(p) Provide an indenture trustee for the
Registrable Notes or the Exchange Notes, as the case
may be, and cause the Indenture or the trust indenture
provided for in Section 2(a), as the case may be, to be
qualified under the TIA not later than the effective
date of the Exchange Offer or the first Notes
Registration Statement relating to the Registrable
Notes; and in connection therewith, cooperate with the
trustee under any such indenture and the Holders of the
Registrable Notes, to effect such changes to such
indenture as may be required for such indenture to be
so qualified in accordance with the terms of the TIA;
and execute, and use its best efforts to cause such
trustee to execute, all documents as may be required to
effect such changes, and all other forms and documents
required to be filed with the SEC to enable such
indenture to be so qualified in a timely manner.
(q) Comply with all applicable rules and
regulations of the SEC and make generally available to
the securityholders of the Company earnings statements
satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar
rule promulgated under the Securities Act) no later
than 45 days after the end of any 12-month period (or
90 days after the end of any 12-month period if such
period is a fiscal year) (i) commencing at the end of
any fiscal quarter in which Registrable Notes are sold
to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company
after the effective date of a Notes Registration
Statement, which statements shall cover said 12-month
periods.
(r) Upon consummation of the Exchange Offer or
a Private Exchange, obtain an opinion of counsel to the
Issuer, in a form customary for underwritten
transactions, addressed to the Trustee for the benefit
of all Holders of Registrable Notes participating in
the Exchange Offer or the Private Exchange, as the case
may be, that the Exchange Notes or the Private Exchange
Notes, as the case may be, and the related indenture
constitute legally valid and binding obligations of the
Issuer, enforceable against the Issuer in accordance
with their respective terms subject to customary
exceptions and qualifications; provided that the Issuer
need not comply with this Section 5(r) if all Exchange
Notes and Private Notes are issued pursuant to the
Indenture.
(s) If the Exchange Offer or a Private
Exchange is to be consummated, upon delivery of the
Registrable Notes by Holders to the Issuer (or to such
other Person as directed by the Issuer) in exchange for
the Exchange Notes or the Private Exchange Notes, as
the case may be, the Issuer shall mark, or caused to be
marked, on such Registrable Notes that such Registrable
Notes are being canceled in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may
be; in no event shall such Registrable Notes be marked
as paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable
Notes covered by any Notes Registration Statement and
each underwriter, if any, participating in the
disposition of such Registrable Notes and their
respective counsel in connection with any filings
required to be made with the NASD.
(u) Use its best efforts to take all other
steps reasonably necessary to effect the registration
of the Registrable Notes covered by a Notes
Registration Statement contemplated hereby.
The Issuer may require each seller of Registrable Notes
as to which any registration is being effected to furnish to
the Issuer such information regarding such seller and the
distribution of such Registrable Notes as the Issuers may,
from time to time, reasonably request. The Issuer may
exclude from such registration the Registrable Notes of any
seller who fails to furnish such information within a
reasonable time (which time in no event shall exceed 30
days) after receiving such request. Each seller as to which
any Shelf Registration is being effected agrees to furnish
promptly to the Issuer all information required to be
disclosed in order to make the information previously
furnished to the Issuer by such seller not materially
misleading.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such Registrable
Notes or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, that, upon receipt of any
notice from the Issuer of the happening of any event of the
kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or
5(c)(vi), such Holder will forthwith discontinue disposition
of such Registrable Notes covered by a Notes Registration
Statement and such Participating Broker-Dealer will
forthwith discontinue disposition of such Exchange Notes
pursuant to any Notes Prospectus and, in each case,
forthwith discontinue dissemination of such Prospectus until
such Holder's or Participating Broker-Dealer's receipt of
the copies of the supplemented or amended Notes Prospectus
contemplated by Section 5(k), or until it is advised in
writing (the "Advice") by the Issuer that the use of the
applicable Prospectus may be resumed, and has received
copies of any amendments or supplements thereto and, if so
directed by the Issuer, such Holder or Participating Broker-
Dealer, as the case may be, will deliver to the Issuer all
copies, other than permanent file copies, then in such
Holder's or Participating Broker-Dealer's possession, of the
Notes Prospectus covering such Registrable Securities
current at the time of the receipt of such notice. In the
event the Issuer shall give any such notice, the Applicable
Period shall be extended by the number of days during such
periods from and including the date of the giving of such
notice to and including the date when each Participating
Broker-Dealer shall have received (x) the copies of the
supplemented or amended Notes Prospectus contemplated by
Section 5(k) or (y) the Advice.
6. Registration Expenses
(a) All fees and expenses incident to the
performance of or compliance with this Agreement by the
Issuer (other than Registration Expenses, which are dealt
with exclusively in Section 10 hereof) shall be borne by the
Issuer, whether or not the Exchange Offer or a Shelf
Registration is filed or becomes effective, including,
without limitation, (i) all registration and filing fees
(including, without limitation, (A) fees with respect to
filings required to be made with the NASD in connection with
an underwritten offering and (B) fees and expenses of
compliance with state securities or Blue Sky laws as
provided in Section 5(h) hereof, (ii) printing expenses,
including, without limitation, expenses of printing
prospectuses if the printing of prospectuses is requested by
the managing underwriter or underwriters, if any, or by the
Holders of a majority in aggregate principal amount of the
Registrable Notes included in any Notes Registration
Statement or by any Participating Broker-Dealer during the
Applicable Period, as the case may be, (iii) reasonable
messenger, telephone and delivery expenses incurred in
connection with the Exchange Registration Statement and any
Shelf Registration, (iv) fees and disbursements of counsel
for the Issuer and reasonable fees and disbursements of
special counsel for the sellers of Registrable Notes
(subject to the provisions of Section 6(b)), (v) fees and
disbursements of all independent certified public
accountants referred to in Section 5(n)(iii) (including,
without limitation, the expenses of any special audit and
"cold comfort" letters required by or incident to such
performance), (vi) rating agency fees, (vii) Securities Act
liability insurance, if the Issuer desires such insurance,
(viii) fees and expenses of all other Persons retained by
the Issuers, (ix) internal expenses of the Issuer
(including, without limitation, all salaries and expenses of
officers and employees of the Issuer performing legal or
accounting duties), (x) the expense of any annual audit,
(xi) the fees and expenses incurred in connection with the
listing of the securities to be registered on any securities
exchange and (xii) the expenses relating to printing, word
processing and distributing all Registration Statements,
underwriting agreements, securities sales agreements,
indentures and any other documents necessary in order to
comply with this Agreement.
(b) In connection with any Shelf Registration
hereunder, the Issuer shall reimburse the Holders of the
Registrable Notes being registered in such registration for
the fees and disbursements, not to exceed $25,000, of not
more than one counsel (in addition to appropriate local
counsel) chosen by the Holders of a majority in aggregate
principal amount of the Registrable Notes to be included in
such Shelf Registration and other out-of-pocket expenses of
Holders of Registrable Notes incurred in connection with the
registration and sale of Registrable Notes.
7. Indemnification
(a) The Issuer agrees to indemnify and hold
harmless each Holder of Registrable Notes, each Holder of
Registrable Securities and each Participating Broker-Dealer
selling Exchange Notes during the Applicable Period, the
officers and directors of each such Person, and each Person,
if any, who controls any such Person within the meaning of
either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each, a "Participant"), from and against any
and all losses, claims, damages and liabilities (including,
without limitation, the reasonable legal fees and other
reasonable expenses actually incurred in connection with any
suit, action or proceeding or any claim asserted) caused by,
arising out of or based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in any
Registration Statement (as amended or supplemented if the
Issuer shall have furnished any amendments or supplements
thereto) or caused by, arising out of or based upon any
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) any untrue
statement or alleged untrue statement of a material fact
contained in any Prospectus (as amended or supplemented if
the Issuer shall have furnished any amendments or
supplements thereto) or caused by, arising out of or based
upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading, except insofar
as such losses, claims, damages or liabilities are caused by
any untrue statement or omission or alleged untrue statement
or omission made in reliance upon and in conformity with
information relating to any Participant furnished to the
Issuer in writing by or on behalf of such Participant
expressly for use therein; provided, however, that the
Company will not be liable if such untrue statement or
omission or alleged untrue statement or omission was
contained or made in any preliminary prospectus and
corrected in the Prospectus or any amendment or supplement
thereto and the Prospectus does not contain any other untrue
statement or omission or alleged untrue statement or
omission of a material fact that was the subject matter of
the related proceeding and any such loss, liability, claim,
damage or expense suffered or incurred by the Participants
resulted from any action, claim or suit by any Person who
purchased Registrable Securities, Registrable Notes or
Exchange Notes which are the subject thereof from such
Participant and it is established in the related proceeding
that such Participant failed to deliver or provide a copy of
the Prospectus (as amended or supplemented) to such Person
with or prior to the confirmation of the sale of such
Registrable Securities, Registrable Notes or Exchange Notes
sold to such Person if required by applicable law, unless
such failure to deliver or provide a copy of the Prospectus
(as amended or supplemented) was a result of noncompliance
by the Issuer with Section 5 of this Agreement.
(b) Each Participant agrees, severally and not
jointly, to indemnify and hold harmless the Issuer, its
directors and officers and each Person who controls the
Issuer within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Issuer to each Participant,
but only with reference to information relating to such
Participant furnished to the Issuer in writing by such
Participant expressly for use in any Registration Statement
or Prospectus, any amendment or supplement thereto, or any
preliminary prospectus. The liability of any Participant
under this paragraph shall in no event exceed the proceeds
received by such Participant from sales of Registrable
Securities, Registrable Notes or Exchange Notes giving rise
to such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand
shall be brought or asserted against any Person in respect
of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified
Person") shall promptly notify the Person against whom such
indemnity may be sought (the "Indemnifying Person") in
writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably
satisfactory to the Indemnified Person to represent the
Indemnified Person and any others the Indemnifying Person
may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such
counsel related to such proceeding; provided, however, that
the failure to so notify the Indemnifying Person shall not
relieve it of any obligation or liability which it may have
hereunder or otherwise (unless and only to the extent that
such failure directly results in the loss or compromise of
any material rights or defenses by the Indemnifying Person
and the Indemnifying Person was not otherwise aware of such
action or claim). In any such proceeding, any Indemnified
Person shall have the right to retain its own counsel, but
the fees and expenses of such counsel shall be at the
expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have
mutually agreed in writing to the contrary, (ii) the
Indemnifying Person has failed within a reasonable time to
retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding
(including any impleaded parties) include both the
Indemnifying Person and the Indemnified Person and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them. It is understood that, unless there is a
conflict among Indemnified Persons, the Indemnifying Person
shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees
and expenses of more than one separate firm (in addition to
any local counsel) for all Indemnified Persons, and that all
such fees and expenses shall be reimbursed promptly after
receipt of the invoice therefor as they are incurred. Any
such separate firm for the Participants and such control
Persons of Participants shall be designated in writing by
Participants who sold a majority in interest of the
securities sold by all such Participants and any such
separate firm for the Issuer, its directors, its officers
and such control Persons of the Issuer shall be designated
in writing by the Company. The Indemnifying Person shall
not be liable for any settlement of any proceeding effected
without its prior written consent, but if settled with such
consent or if there is a final non-appealable judgment for
the plaintiff for which the Indemnified Person is entitled
to indemnification pursuant to this Agreement, the
Indemnifying Person agrees to indemnify any Indemnified
Person from and against any loss or liability by reason of
such settlement or judgment. Notwithstanding the foregoing
sentence, if at any time an Indemnified Person shall have
requested an Indemnifying Person to reimburse the
Indemnified Person for reasonable fees and expenses actually
incurred by counsel as contemplated by the third sentence of
this paragraph, the Indemnifying Person agrees that it shall
be liable for any settlement of any proceeding effected
without its prior written consent if (i) such settlement is
entered into more than 30 days after receipt by such
Indemnifying Person of the aforesaid request and (ii) such
Indemnifying Person shall not have reimbursed the
Indemnified Person in accordance with such request prior to
the date of such settlement; provided, however, that the
Indemnifying Person shall not be liable for any settlement
effected without its consent pursuant to this sentence if
the Indemnifying Person is contesting, in good faith, the
request for reimbursement. No Indemnifying Person shall,
without the prior written consent of the Indemnified Person,
effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or
could have been a party and indemnity could have been sought
hereunder by such Indemnified Person, unless such settlement
(A) includes an unconditional release of such indemnified
Person, in form and substance satisfactory to such
Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not
include any statement as to an admission of fault,
culpability or failure to act by or on behalf of an
Indemnified Person.
(d) If the indemnification provided for in the
first and second paragraphs of this Section 7 is unavailable
(other than by reason of the exceptions specifically
provided therein) to, or insufficient to hold harmless, an
Indemnified Person in respect of any losses, claims, damages
or liabilities referred to therein, then each Indemnifying
Person under such paragraphs, in lieu of indemnifying such
Indemnified Person thereunder and in order to provide for
just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a
result of such losses, claims, damages or liabilities in
such proportion as is appropriate to reflect (i) the
relative benefits received by the Indemnifying Person or
Persons on the one hand and the Indemnified Person or
Persons on the other from the offering of the Registrable
Securities, Registrable Notes or Exchange Notes, as the case
may be, or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, not only such
relative benefits but also the relative fault of the
Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection
with the statements or omissions (or alleged statements or
omissions) that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative fault
of the parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the
Issuers on the one hand or by the Participants or such other
Indemnified Person, as the case may be, on the other, such
Persons' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or
omission and any other equitable considerations appropriate
under the circumstances.
(e) The parties agree that it would not be just and
equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Participants
were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the
equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an
Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any reasonable legal or
other expenses actually incurred by such Indemnified Person
in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this
Section 7, in no event shall a Participant be required to
contribute any amount in excess of the amount by which
proceeds received by such Participant from sales of
Registrable Securities, Registrable Notes or Exchange Notes,
as the case may be, exceeds the amount of any damages that
such Participant has otherwise been required to pay by
reason of such untrue or alleged untrue statement or
omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(f) The indemnity and contribution agreements
contained in this Section 7 will be in addition to any
liability which the Indemnifying Persons may otherwise have
to the Indemnified Persons referred to above.
8. Rules 144 and 144A
The Issuer covenants that it will file the reports
required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the
SEC thereunder in a timely manner and, if at any time it is
not required to file such reports, it will, upon the request
of any Holder of Registrable Securities or Registrable
Notes, make publicly available other information so long as
necessary to permit sales pursuant to Rule 144 and Rule
144A. The Issuer further covenants, for so long as any
Registrable Securities or Registrable Notes remain
outstanding, to make available to any Holder or beneficial
owner thereof in connection with any sale thereof and any
prospective purchaser of such Registrable Securities or
Registrable Notes from such Holder or beneficial owner, the
information required by Rule 144A(d)(4) under the Securities
Act in order to permit resales of such Registrable
Securities or Registrable Notes pursuant to Rule 144A.
9. Underwritten Registrations of Registrable Notes
If any of the Registrable Notes covered by any Shelf
Registration is to be sold in an underwritten offering, the
investment banker or investment bankers and manager or
managers that will manage the offering will be selected by
the Holders of a majority in aggregate principal amount of
such Registrable Notes included in such offering and
reasonably acceptable to the Issuer.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's Registrable Notes on the basis
provided in any underwriting arrangements approved by the
Persons entitled hereunder to approve such arrangements and
(b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other
documents required under the terms of such underwriting
arrangements.
10. Registration of Registrable Securities
(a) Piggy-Back Registration of Registrable
Securities. If at any time after the Exercise Date the
Company proposes to file a registration statement under the
Securities Act with respect to an offering by the Company
for its own account or for the account of any holders of its
Common Stock (other than (i) a registration statement on
Form S-4 or S-8 (or any substitute form that may be adopted
by the SEC), (ii) a registration statement filed in
connection with an exchange offer or offering of securities
solely to the Company's existing securityholders or (iii)
any Notes Registration Statement), then the Company shall
give written notice of such proposed filing to the Holders
of Registrable Securities as soon as practicable (but in no
event fewer than 20 days before the anticipated filing
date), and such notice shall offer such Holders the
opportunity to register such number of Registrable
Securities as each Holder may request in writing within 20
days after receipt of such written notice from the Company
(which request shall specify the Registrable Securities
intended to be disposed of by such Selling Holder and the
intended method of distribution thereof) (a "Piggy-Back
Registration"). The Company shall use its best efforts to
keep such Piggy-Back Registration continuously effective
under the Securities Act until at least the earlier of (A)
an aggregate of 180 days after the effective date thereof or
(B) the consummation of the distribution by the Holders of
all of the Registrable Securities covered thereby. The
Company shall use its best efforts to cause the managing
underwriter or underwriters, if any, of such proposed
offering to permit the Registrable Securities requested to
be included in a Piggy-Back Registration to be included on
the same terms and conditions as any similar securities of
the Company or any other security holder included therein
and to permit the sale or other disposition of such
Registrable Securities in accordance with the intended
method of distribution thereof. Any Selling Holder shall
have the right to withdraw its request for inclusion of its
Registrable Securities in any Registration Statement
pursuant to this Section 10 by giving written notice to the
Company of its request to withdraw at any time prior to the
filing of such Registration Statement with the SEC. The
Company will pay all Registration Expenses in connection
with each registration of Registrable Securities requested
pursuant to this Section 10, and each Holder of Registrable
Securities shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale
or disposition of such Holder's Registrable Securities
pursuant to a Piggy-Back Registration effected pursuant to
this Section 10.
No registration effected under this Section 10,
and no failure to effect a registration under this Section
10, shall relieve the Company of its obligation to effect a
registration upon the request of Holders of Registrable
Notes pursuant to Section 2 or 3 hereof, and no failure to
effect a registration under this Section 10 and to complete
the sale of securities registered thereunder in connection
therewith shall relieve the Company of any other obligation
under this Agreement.
(b) Priority in Piggy-Back Registration. In a
registration pursuant to this Section 10 involving an
underwritten offering, if the managing underwriter or
underwriters of such underwritten offering have informed, in
writing, the Company and the Selling Holders requesting
inclusion in such offering that in such underwriter's or
underwriters' opinion the total number of securities which
the Company, the Selling Holders and any other Persons
desiring to participate in such registration intend to
include in such offering is such as to adversely affect the
success of such offering, including the price at which such
securities can be sold, then the Company will be required to
include in such registration only the amount of securities
which it is so advised should be included in such
registration. In such event: (x) in cases initially
involving the registration for sale of securities for the
Company's own account, securities shall be registered in
such offering in the following order of priority: (i) first,
the securities which the Company proposes to register, (ii)
second, provided that no securities proposed to be
registered by the Company have been excluded from such
registration, the securities which have been requested to be
included in such registration by the Selling Holders and by
Persons entitled to exercise "piggy-back" registration
rights pursuant to contractual commitments to "piggy-back"
registration rights of the Company entered into prior to,
and in existence on, the date hereof (pro rata based on the
amount of securities sought to be registered by such
Persons), and (iii) third, provided that no securities
sought to be included by the Selling Holders or such Persons
have been excluded from such registration, the securities of
other Persons entitled to exercise "piggy-back" registration
rights pursuant to contractual commitments of the Company
entered into subsequent to the date hereof (pro rata based
on the amount of securities sought to be registered by such
Persons); and (y) in cases not initially involving the
registration for sale of securities for the Company's own
account, securities shall be registered in such offering in
the following order of priority: (i) first, the securities
of any Person whose exercise of a "demand" registration
right pursuant to a contractual commitment of the Company is
the basis for the registration, (ii) second, provided that
no securities of any Person whose exercise of a "demand"
registration right pursuant to a contractual commitment of
the Company is the basis for such registration have been
excluded from such registration, the securities requested to
be included in such registration by the Selling Holders
pursuant to this Agreement and by Persons entitled to
exercise "piggy-back" registration rights pursuant to
contractual commitments to "piggy-back" registration rights
of the Company entered into prior to, and in existence on,
the date hereof (pro rata based on the total amount of
securities sought to be included by such Persons), (iii)
third, provided that no securities sought to be included by
the Selling Holders or such Persons have been excluded from
such registration, securities of other Persons entitled to
exercise "piggy-back" registration rights pursuant to
contractual commitments entered into subsequent to the date
hereof (pro rata based on the amount of securities sought to
be registered by such Persons) and (iv) fourth, provided
that no securities sought to be included by other Persons
entitled to exercise "piggy-back" registration rights
pursuant to such contractual commitments have been excluded
from such registration, any securities which the Company
proposes to register.
(c) Suspension of Sales, etc. Subject to the next
sentence of this paragraph, the Company shall be entitled to
postpone, for a reasonable period of time, the effectiveness
of, or suspend the rights of any Holders to make sales
purchase to any Warrants Registration Statement otherwise
required to be prepared, filed and made and kept effective
by it under this Section 10; provided, however, that the
duration of such postponement or suspension may not exceed
the earlier to occur of (A) 15 days after the cessation of
the circumstances described in the next sentence of this
paragraph on which such postponement or suspension is based
or (B) 120 days after the date of the determination of the
Board of Directors referred to in the next sentence. Such
postponement or suspension may only be effected if the Board
of Directors of the Company determines in good faith that
the effectiveness of, or sales pursuant to, such Warrants
Registration Statement would materially impede, delay or
interfere with any financing, offer or sale of securities,
acquisition, corporate reorganization or other significant
transaction involving the Company or any of its affiliates
or require disclosure of material information which the
Company has a bona fide business purpose for preserving as
confidential. If the Company shall so postpone the
effectiveness of, or suspend the rights of any Holders to
make sales pursuant to, a Warrants Registration Statement,
it shall, as promptly as possible, notify any Selling
Holders of such determination, and the Selling Holders shall
(y) have the right, in the case of a postponement of the
effectiveness of a Warrants Registration Statement, upon the
affirmative vote of Selling Holders of not less than a
majority of the Registerable Securities to be included in
such Warrants Registration Statement, to withdraw the
request for registration by giving written notice to the
Company within 10 days after receipt of such notice or (z)
in the case of a suspension of the right to make sales,
receive an extension of the registration period referred to
in Section 10(a) hereof equal to the number of days of the
suspension.
(d) Exclusion of Registrable Securities. The
Company shall not be required by this Section 10 to include
Registrable Securities in a Piggy-Back Registration if (i)
in the written opinion of counsel to the Company, addressed
to the Holders of Registrable Securities and delivered to
them, the Holders of such Registrable Securities seeking
registration would be free to sell all such Registrable
Securities within the current calendar quarter without
registration under Rule 144, which opinion may be based in
part upon the representation by the Holders of such
Registrable Securities seeking registration, which
representation shall not be unreasonably withheld, that each
such Holder is not an affiliate of the Company within the
meaning of the Securities Act, and (ii) all requirements
under the Securities Act for effecting such sales are
satisfied at such time.
(e) Obligations of Selling Holders. The Company's
obligations under this Section 10 shall be subject to the
obligations of the Selling Holders, which the Selling
Holders acknowledge, to furnish all information and
materials and to take any and all actions as may be required
under applicable federal and state securities laws and
regulations to permit the Company to comply with all
applicable requirements of the SEC and to obtain any
acceleration of the effective date of a Warrants
Registration Statement.
(f) No Special Audit. The Company shall not be
obligated to cause any special audit to be undertaken in
connection with any Piggy-Back Registration unless such
audit is requested by the underwriters with respect to such
Piggy-Back Registration.
11. Miscellaneous
(a) No Inconsistent Agreements. The Issuer has not
entered, as of the date hereof, and the Issuer shall not
enter, after the date of this Agreement, into any agreement
with respect to any of its securities that is inconsistent
with the rights granted to the Holders of Registrable
Securities or Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The Issuer
has not entered and will not enter into any agreement with
respect to any of its securities which will grant to any
Person piggy-back rights with respect to a Notes
Registration Statement.
(b) Adjustments Affecting Registrable Securities or
Registrable Notes. The Company shall not, directly or
indirectly, take any action with respect to the Registrable
Securities or Registrable Notes as a class that would
adversely affect the ability of the Holders to include such
Registrable Securities or Registrable Notes in a
registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written
consent of (A) in circumstances that would adversely affect
any Holders of Registrable Securities or Registrable Notes,
the Holders of a majority of the Registrable Securities or
the Holders of not less than a majority in aggregate
principal amount of the then outstanding Registrable Notes,
as the case may be, and (B) in circumstances that would
adversely affect Participating Broker-Dealers, the
Participating Broker-Dealers holding not less than a
majority in aggregate principal amount of the Exchange Notes
held by all Participating Broker-Dealers; provided, however,
that Section 7 and this Section 11(c) may not be amended,
modified or supplemented without the prior written consent
of each Holder and each Participating Broker-Dealer
(including any Person who was a Holder or Participating
Broker-Dealer of Registrable Securities or Registrable Notes
or Exchange Notes, as the case may be, disposed of pursuant
to any Registration Statement). Notwithstanding the
foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to
the rights of Holders of Registrable Notes whose securities
are being tendered pursuant to the Exchange Offer or sold
pursuant to a Notes Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise
the rights of other Holders of Registrable Notes may be
given by Holders of at least a majority in aggregate
principal amount of the Registrable Notes being tendered or
being sold by such Holders pursuant to such Notes
Registration Statement.
(d) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing
by hand-delivery, registered first-class mail, next-day air
courier or telecopier:
1. if to a Holder of Registrable Securities or
Registrable Notes or to any Participating Broker-
Dealer, at the most current address of such Holder or
Participating Broker-Dealer, as the case may be, set
forth on the records of the registrar of the Warrants
or the Notes, with a copy in like manner to the Initial
Purchaser as follows:
JEFFERIES & COMPANY, INC.
Two Houston Center
909 Fannin St., Suite 3100
Houston, Texas 77010
Facsimile No.: (713) 650-8730
Attention: Robert W. Carington
2. if to the Initial Purchaser, at the address
specified in Section 11(d)(1);
3. if to the Issuer, as follows:
XCL Ltd.
110 Rue Jean Lafitte
Lafayette, Louisiana 70508
Facsimile No.: (318) 237-3316
Attention: General Counsel
All such notices and communications shall be deemed to
have been duly given: when delivered by hand, if personally
delivered; five business days after being deposited in the
United States mail, postage prepaid, if mailed, one business
day after being timely delivered to a next-day air courier
guaranteeing overnight delivery; and when receipt is
acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other
communications shall be concurrently delivered by the Person
giving the same to the Trustee under the Indenture at the
address specified in such Indenture.
(e) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors
and assigns of each of the parties hereto and the Holders;
provided, however, that the provisions of this Agreement
relating to registration rights shall not inure to the
benefit of or be binding upon a successor or assign of a
Holder unless such successor or assign holds Registrable
Securities or Registrable Notes.
(f) Counterparts. This Agreement may be executed
in any number of counterparts and by the parties hereto in
separate counterparts, each of which when so executed shall
be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COMPETENT
COURTS OF THE STATE OF NEW YORK SITTING IN THE CITY OF NEW
YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means
to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(j) Notes Held by the Issuer or Its Affiliates.
Whenever the consent or approval of Holders of a specified
percentage of Registrable Securities or Registrable Notes is
required hereunder, Registrable Securities or Registrable
Notes, as the case may be, held by the Issuer or its
affiliates (as such term is defined in Rule 405 under the
Securities Act) shall not be counted in determining whether
such consent or approval was given by the Holders of such
required percentage.
(k) Third Party Beneficiaries. Holders and
Participating Broker-Dealers are intended third party
beneficiaries of this Agreement and this Agreement may be
enforced by such Persons.
(1) Entire Agreement. This Agreement, together
with the Purchase Agreement, the Indenture and the Security
Documents, is intended by the parties as a final and
exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter
contained herein and therein and any and all prior oral or
written agreements, representations, or warranties,
contracts, understandings, correspondence, conversations and
memoranda between the Initial Purchaser on the one hand and
the Issuer on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates,
predecessors in interest or successors in interest with
respect to the subject matter hereof and thereof are merged
herein and replaced hereby.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
XCL LTD.
By:__________________________
David A. Melman
Executive Vice President,
General Counsel &
Secretary
JEFFERIES & COMPANY, INC.
By:___________________________
Robert W. Carington
Senior Vice President
XCL LTD.
SECURITY AGREEMENT, PLEDGE AND FINANCING STATEMENT
This Security Agreement, Pledge and Financing Statement
(this "Agreement") is made and entered into as of May 20, 1997 by
XCL Ltd., a Delaware corporation (the "Company") in favor of
Fleet National Bank, as Trustee ("Trustee") for the Noteholders
(as defined below) under the Indenture described herein.
W I T N E S S E T H:
WHEREAS, the Company has entered into an Indenture dated as
of May 20, 1997, with the Trustee (said Indenture, as same may
from time to time be amended or modified and in effect, being
herein called the "Indenture"); and
WHEREAS, the Company has entered into the Indenture pursuant
to which the Company will issue $75,000,000 aggregate principal
amount of 13.50 % Senior Secured Notes due May 1, 2004, Series A
("Initial Notes") and 13.50% Senior Secured Notes due May 1,
2004, Series B to be issued in exchange for the Initial Notes
pursuant to a Registration Rights Agreement dated as of May 20,
1997, between the Company and Jefferies & Company, Inc. (the
"Exchange Notes" and, together with the Private Exchange Notes
(as defined in the Indenture) and the Initial Notes, the
"Notes"); and
WHEREAS, the Company is entering into this instrument
pursuant to its obligations under the Indenture and for the
purpose, among other things, of securing and providing for
repayment of the Notes;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Company and the Trustee hereby agree as follows:
SECTION 1. Definitions.
(a) As used in this Agreement, capitalized terms
not otherwise defined herein have the meanings set forth in the
Indenture, and the following terms shall have the respective
meanings set forth below (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Cash" shall have the meaning assigned to that term in
Schedule I attached hereto and made a part hereof.
"Cash Equivalents" shall have the meaning assigned to that
term in Schedule I attached hereto and made a part hereof.
"Capitalized Interest Account" shall have the meaning
assigned to that term in Schedule I attached hereto and made a
part hereof.
"Collateral" shall have the meaning assigned to that term in
Section 2 of this Agreement.
"Collateral Accounts" shall mean, collectively, the
Capitalized Interest Account and the Principal Account.
"Default" and "Event of Default" shall have the meanings
assigned to those terms in Section 6(a) of this Agreement.
"Disbursement Agent" shall have the meaning assigned to that
term in the Disbursement Agreement.
"Disbursement Agreement" shall mean that certain Cash
Collateral and Disbursement Agreement of even date herewith by
and among the Company, the Trustee, Fleet National Bank, as
Disbursement Agent, and Herman J. Schellstede & Associates, Inc.,
as Representative.
"Disbursement Date" shall have the meaning assigned to that
term in the Disbursement Agreement.
"Indebtedness" means the following indebtedness and
liabilities of the Company (and any extensions, renewals,
refunding, increases, substitutions, replacements,
consolidations, modifications or rearrangements of such
indebtedness and liabilities, whether or not the Company executes
any extension agreement or renewal instrument):
(i) all amounts advanced or expended by the Trustee
under the Indenture and/or under or in connection with this
Agreement, all reasonable costs and out-of-pocket expenses
(excluding expenses representing administrative overhead) at any
time and from time to time incurred by the Trustee in connection
with the administration and/or enforcement of this Agreement
(including, without limitation, the reasonable fees and out-of-
pocket expenses of counsel employed by the Trustee in connection
therewith), and all indemnities at any time and from time to time
payable hereunder to the Trustee, and
(ii) all indemnities which relate to the Notes at any
time and from time to time payable to the Trustee or the Holders
of the Notes (the "Noteholders") (or any of them) under or in
connection with the Indenture or any related documents, ratably
according to the amount owing to the Trustee and each Noteholder,
without preference or priority among the Trustee and the
Noteholders, and
(iii) all principal, premium and accrued interest owing
on the Notes, and
(iv) all other amounts payable by the Company under the
Indenture.
"Lien" shall have the meaning assigned to that term in the
Indenture.
"Principal Account" shall have the meaning assigned to that
term in Schedule I attached hereto and made a part hereof.
"Security Interest" shall mean the Lien on the Collateral
created by this Agreement in favor of the Trustee for the equal
and ratable benefit of the Noteholders.
"UCC" means the Uniform Commercial Code as in effect from
time to time in the State of New York.
(b) All terms used in this Agreement which are defined
in the UCC, other than those which are defined in the Indenture
or specifically defined in Section 1(a) above, shall have the
same meaning herein as in the UCC.
SECTION 2. Grant of Security Interest.
The Company hereby grants to the Trustee, for the ratable
benefit of the Noteholders, to secure the payment and performance
in full of all of the Indebtedness, a Security Interest in and a
first Lien on and so pledges and assigns to the Trustee all of
the Company's right, title and interest in, to and under the
Collateral Accounts, including, without limitation, all Cash and
Cash Equivalents on deposit or held in said Collateral Accounts,
whether now owned or hereafter acquired or arising, all
accessions and additions thereto, all substitutions and
replacements therefor, and all proceeds and products thereof (all
of the same being hereinafter called the "Collateral"). The
Company hereby acknowledges that the Disbursement Agent shall act
as the Trustee's agent in holding the Collateral or other
financial assets in which the Trustee is granted a security
interest hereunder subject to the terms of the Disbursement
Agreement.
SECTION 3. Representations and Warranties. The Company
represents and warrants, as of the date hereof, to the Trustee
and each Noteholder as follows:
(a) The chief executive office and principal place of
business of the Company is located at 110 Rue Jean Lafitte,
Lafayette, Louisiana 70508.
(b) The Company is the owner of all the Collateral
free and clear of any lien, security interest, charge or
encumbrance of any kind or nature, except for the Lien and
Security Interest created hereby, pursuant to the Indenture and
the Disbursement Agreement. Except for the Lien and Security
Interest created hereby, all of the Collateral is free from any
material credit, deduction, allowance, defense, dispute, set off
or counterclaim and there is no material extension or indulgence
with respect thereto.
(c) This Agreement has been duly executed and
delivered by the Company and creates a valid Security Interest
in, and Lien on, the Collateral, securing the payment of the
Indebtedness. Upon the making of the filings and the taking of
all other actions necessary to perfect the Security Interests
created hereby, including, without limitation, those actions
specified in Section 4, the Security Interests created by this
Agreement will be duly perfected Security Interests subject to no
equal or prior Lien, security interest or encumbrance of any kind
or nature.
SECTION 4. Covenants. During the term of this
Agreement and until all the Obligations with respect to the
Indebtedness have been fully and finally paid and discharged in
full, the Company covenants and agrees with the Trustee and each
Noteholder that:
(a) Except as permitted by the Indenture or in the
ordinary course of business, the Company will not make any
compromise or settlement with respect to the Collateral without
notice to or consent of the Trustee.
(b) From time to time, the Company shall, at its own
expense, promptly give, execute, deliver, file and/or otherwise
formalize any such notice, statement, instrument, document,
agreement or other papers, and do all such other acts and things,
as may be necessary or desirable, or as the Trustee may
reasonably request, in order to create, evidence, preserve,
perfect, validate or continue any Lien or Security Interest
created pursuant to this Agreement or to enable the Trustee to
exercise or enforce its rights hereunder with respect to such
Lien or Security Interest, or otherwise further to effect the
purposes of this Agreement. Without limiting the generality of
the foregoing, the Company shall, at any time or from time to
time upon the request of the Trustee and at the Company's own
expense, execute, acknowledge, witness, deliver, file and/or
record such financing and continuation statements, notices,
additional assignments and other documents or instruments (all of
which shall be in form and substance satisfactory to the Trustee
and its counsel) as the Trustee may from time to time reasonably
request for the perfection of the Liens and Security Interests
created hereby.
(c) The Company shall promptly notify the Trustee (i)
of any material changes in any fact or circumstance represented
or warranted by the Company with respect to any material portion
of the Collateral; (ii) of any material impairment of the
Collateral; and (iii) of any claim, action or proceeding
affecting title to all or any of the Collateral.
(d) Except for the Liens and Security Interests
created by this Agreement, the Indenture and the Disbursement
Agreement, the Company shall at its own expense defend the
Collateral against any and all Liens, claims, security interests
and other encumbrances or interests, howsoever arising.
(e) The Company shall at all times keep accurate and
complete records with respect to the Collateral, including,
without limitation, records of all payments made and proceeds
received in connection therewith.
(f) The Company shall not relocate its principal place
of business or chief executive office to a county or state other
than that specified in Section 3(a) of this Agreement unless the
company gives 30 days' prior written notice to the Trustee, which
notice shall specify the county and state into which such
relocation is to be made. The Collateral, to the extent not
delivered to the Trustee pursuant to Section 2, will be kept at
those locations listed on the Perfection Certificate delivered to
the Trustee herewith in the form attached as Exhibit A hereto and
the Company will not remove the Collateral from such locations,
without providing at least 30 days' prior written notice to the
Trustee.
(g) The Trustee, or its designee, may inspect the
Collateral at any reasonable time, wherever located.
SECTION 5. Powers of the Secured Party.
(a) The Company hereby irrevocably designates and
appoints the Trustee as its attorney-in-fact, with full power of
substitution, for the purposes of carrying out the provisions of
this Agreement and taking any action and executing any instrument
that the Trustee may reasonably request pursuant to this
Agreement, which appointment as attorney-in-fact is irrevocable
and coupled with an interest.
(b) Without limiting the generality of Section 5(a)
hereof, the Company hereby irrevocably authorizes and empowers
the Trustee for the equal and ratable benefit of the Noteholders,
upon the occurrence and during the continuation of any Event of
Default, at the expense of the Company, either in the Trustee's
own name or in the name of the Company, at any time and from time
to time:
(i) to ask, demand, receive, issue a receipt for,
give acquittance for, settle and compromise any and all monies
which may be or become due or payable or remain unpaid at any
time or times to the Company, and any and all other property
which may be or become deliverable at any time or times to the
Company, under or with respect to the Collateral;
(ii) to endorse any drafts, checks, orders or
other instruments for the payment of money payable to the Company
on account of the Collateral; and
(iii) to settle, compromise, prosecute or defend
any action, claim or proceeding, or take any other action, all
either in its own name or in the name of the Company or
otherwise, which the Trustee may deem to be necessary or
advisable for the purpose of exercising and enforcing its powers
and rights under this Agreement or in furtherance of the purposes
hereof, including any action which by the terms of this Agreement
is to be taken by the Company.
(c) Nothing in this Agreement shall be construed as
requiring or obligating the Trustee to make any demand or to make
any inquiry as to the nature or sufficiency of any payment
received by it or to present or file any claim or notice, or to
take any other action with respect to any of the Collateral or
the amounts due or to become due under any thereof, or to collect
or enforce the payment of any amounts assigned to it or to which
it may otherwise be entitled hereunder at any time or times other
than to account for amounts or Collateral received.
(d) The Trustee shall be entitled at any time to file
this Agreement, or a carbon, facsimile, photocopy, photographic
or any other reproduction of this Agreement, as a financing
statement, but the failure of the Trustee to do so shall not
impair the validity or enforceability of this Agreement. Trustee
shall have no duty to comply with any recording, filing or other
legal requirements necessary to establish or maintain the
validity, priority or enforceability of, or Trustee's rights in
or to, any of the Collateral.
(e) In its discretion, the Trustee may discharge taxes
and other encumbrances at any time levied or placed on any of the
Collateral and pay any necessary filing fees. The Company agrees
to reimburse the Trustee on demand for any and all reasonable
expenditures so made with interest on unpaid amounts at the
maximum rate permitted bylaw. The Trustee shall have no
obligation to the Company to make any such expenditures, nor
shall the making thereof relieve the Company of any default.
(f) The Trustee shall not have any obligation or
liability by reason of or arising out of this Agreement or the
receipt by the Trustee of any payment relating to any of the
Collateral, nor shall the Trustee be obligated in any manner to
make inquiry as to the nature or sufficiency of any payment
received by the Trustee in respect of the Collateral, to present
or file any claim, to take any action to enforce any performance
or to collect the payment of any amounts which may have been
assigned to the Trustee or to which the Trustee may be entitled
at any time or times other than to account for amounts or
Collateral received. The Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Collateral
in its possession, under 9-207 of the UCC or otherwise, shall be
to deal with such Collateral in the same manner as the Trustee
deals with similar property for its own account.
(g) The Trustee may at any time, at its option, after
an Event of Default has occurred and is continuing, transfer to
itself or any nominee any securities constituting Collateral,
receive any income thereon and hold such income as additional
Collateral or apply it to the Indebtedness. Regardless of the
adequacy of Collateral or any other security for the
Indebtedness, any deposits or other sums at any time credited by
or due from the Trustee to the Company may at any time be applied
to or set off against any of the Indebtedness.
(h) If an Event of Default known to the Trustee shall
have occurred and be continuing, the Trustee shall, without
notice to or demand upon the Company, so notify the Disbursement
Agent and execute and deliver the Trustee's Certificate (as
defined in the Disbursement Agreement) pursuant to Section 5.1 of
the Disbursement Agreement. The Trustee shall apply the proceeds
of collection of all Collateral, including, without limitation,
Cash and Cash Equivalents received by the Trustee to the
Indebtedness, such proceeds to be immediately entered after final
payment in cash of the items giving rise to them.
SECTION 6. Default
(a) It shall constitute a Default or an Event of
Default under this Agreement if a "Default" or an "Event of
Default" shall occur under the Indenture.
(b) If an Event of Default shall have occurred and is
continuing and if the maturity of the Notes is accelerated under
the provisions of the Indenture, in addition to any other rights
and remedies that may be available to the Trustee under the UCC
or the Indenture or under Section 5(a) or 5(b) of this Agreement
or otherwise under this Agreement or at law, the Trustee, for the
ratable benefit of the Noteholders, shall also have the following
rights and powers:
(i) The Trustee may, without being required to
give any notice except as hereinafter provided, collect or
otherwise sell all Cash Equivalents, or any part thereof, at
public or private sale, for cash, upon credit or for future
delivery, and the Trustee and/or its collateral agent may be the
purchaser for the ratable benefit of the Noteholders of any or
all of the Collateral so sold and thereafter hold the same
absolutely free from any right or claim of whatsoever kind, and
the Indebtedness or any portion of the Indebtedness may be
applied as a credit against the purchase price.
(ii) Upon any such sale, the Trustee shall have
the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser at any such sale
shall hold the property sold absolutely free from any claim or
right of whatsoever kind by or on behalf of the Company,
including any equity or rights of redemption of the Company and
the Company hereby specifically waives, to the extent permitted
by applicable law, all rights of redemption, stay or appraisal
which it has or may have under any rule or law or statute now
existing or hereafter adopted.
(iii) The Trustee shall give the Company five (5)
Business Days' written notice (which the Company agrees is
reasonable notification within the meaning of 9.504 of the UCC)
of its intention to make any such public or private sale. Such
notice, in case of public sale, shall state the time and place
fixed for such sale and, in case of a private sale, shall state
the date after which such sale is to be made.
(iv) Any such public sale shall be held at such
time or times within ordinary business hours and at such places
as the Trustee may fix in the notices of such sale. At any such
sale the Cash Equivalents may be sold in one lot as an entirety
or in separate parcels, as the Trustee may determine.
(v) The Trustee shall not be obligated to make any
sale pursuant to any such notice. The Trustee may, without
notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be
made at any time or place to which the same shall be so
adjourned.
(vi) In case of any sale of all or any part of the
Cash Equivalents on credit or for future delivery, the Cash
Equivalents so sold may be retained by the Trustee until the
selling price is paid by the purchaser thereof, but the Trustee
shall not incur any liability in case of the failure of such
purchase to take up and pay for the Marketable Securities so sold
and, in case of any such failure, such Cash Equivalents may again
be sold upon like notice.
(vii) The Trustee, instead of exercising the power
of sale herein conferred upon it, may proceed by a suit or suits
at law or in equity to foreclose the Liens and Security Interests
granted in this Agreement and sell the Cash Equivalents, or any
portion thereof, under a judgment or decree of a court of courts
of competent jurisdiction.
(viii) The Trustee shall have the right to take
possession of the Collateral, and for that purpose the Trustee
may, so far as the Company can give authority therefor, enter
upon any premises on which the Collateral may be situated and
remove the same therefrom. The Company waives any and all rights
that it may have to a judicial hearing in advance of the
enforcement of any of the Trustee's rights hereunder, including,
without limitations, its right following an Event of Default to
take immediate possession of the Collateral and to exercise its
rights with respect thereto. To the extent that any of the
indebtedness is to be paid or performed by a person other than
the Company, the Company waives and agrees not to assert any
rights or privileges which it may have under 9-112 of the UCC.
(c) The Trustee shall incur no liability as a result
of the sale of the Cash Equivalents, or any part thereof, at any
private sale other than for its own gross negligence, willful
misconduct or bad faith. Except for Cash Equivalents which are
traded in a regulated public market and as to which a readily
available market price can be ascertained, the Company hereby
waives, to the maximum extent permitted by applicable law, any
claims against the Trustee and each Noteholder arising by reason
for the fact that the price at which such Collateral may have
been sold at such private sale was less than the then the price
which might have been obtained at a public sale (unless such
sales price was materially less than obtaining market price for
such securities) or was less than the aggregate amount of the
Indebtedness, even if the Trustee accepts the first offer
received and does not offer such Collateral to more than one
offeree.
(d) The Trustee shall not be obligated to pursue or
exhaust its rights and remedies against any particular Collateral
or other security for the Indebtedness before pursuing or
enforcing its rights and remedies against any of the Collateral
or other security for the Indebtedness.
(e) To the extent permitted by law, the Company hereby
waives (i) any rights to require the Trustee to proceed first
against any other Person to exhaust its rights in the Collateral
or other security for the Indebtedness or to pursue any other
right that the Trustee might have, (ii) with respect to the
Notes, presentment and demand for payment, protest, notice of
protest and nonpayment, notice of dishonor, notice of the
intention to accelerate and notice of acceleration (except as
otherwise set forth in the Indenture), and (iii) all rights of
marshalling in respect of any and all of the Collateral.
(f) Without precluding any other methods of sale, the
Company acknowledges that the sale of the Cash Equivalents shall
have been made in a commercially reasonable manner if conducted
in conformity with reasonable commercial practices of banks
disposing of similar property. The Trustee shall not be liable
for any depreciation in the value of the Collateral.
(g) Remedies of the Trustee are cumulative and the
exercise of any one or more of the remedies provided herein shall
not be construed as a waiver of any of the other remedies of the
Trustee.
(h) If an Event of Default shall have occurred and be
continuing, the proceeds of any sale or other realization upon
all or any part of the Collateral and any other amounts held by
the Trustee under this Agreement shall be applied by the Trustee
as provided in the Indenture.
Any amounts remaining after such applications and the
payment in full of all Notes and all amounts due with respect to
the Indebtedness shall be remitted to the Company, its successors
or assigns, or as a court of competent jurisdiction may otherwise
direct.
SECTION 7. General Provisions.
(a) This Agreement shall remain in full force and
effect until the earlier to occur of (i) the date when all of the
Indebtedness shall have been satisfied or redeemed in full or
(ii) the close of business on the Disbursement Date.
(b) The Lien and Security Interest created hereunder
and the Company's obligations hereunder and the Trustee's rights
hereunder shall not be released, diminished, impaired or
adversely affected by the occurrence of any one or more of the
following events:
(i) The taking or accepting of any other security
or assurance for any or all of the Indebtedness;
(ii) any release, surrender, exchange,
subordination or loss of any security or assurance at any time
existing in connection with any or all of the Indebtedness;
(iii) the modification of, amendment to, or waiver
of compliance with any terms of the Indenture or the Notes or any
Subsidiary Guarantee;
(iv) any renewal, extension and/or rearrangement
of the payment of any or all of the Indebtedness or any
statement, indulgence, forbearance or compromise that may be
granted or given by the Trustee to the Company or any Subsidiary
Guarantor or any other Person;
(v) any neglect, delay, omission, failure or
refusal of the Trustee to take or prosecute any action in
connection with any agreement, document or other instrument
evidencing, securing or assuring the payment of any or all of the
Indebtedness; or
(vi) the illegality, invalidity or
unenforceability of all or any part of the Indebtedness.
(c) So long as no Default shall have occurred and be
continuing, upon termination of this Agreement and the Security
Interest created hereby in accordance with Section 7(a) above,
the Company shall be entitled to receive and retain any and all
distributions made in accordance with and pursuant to the
provisions of the Disbursement Agreement. Nothing contained
herein shall prevent the Company from making use of distributions
received by the Company as otherwise permitted by the
Disbursement Agreement and the Indenture and any distributions so
received by the Company and transferred to other Persons shall
pass free and clear of the Lien and Security Interest hereof.
Upon any such termination, the Trustee agrees to execute and
deliver to the Company, at the Company's expense, in recordable
form, all such termination statements or other documents or
instruments as the Company may reasonably request, evidencing the
termination of the Lien and Security Interest in the Collateral
granted hereunder.
(d) This Agreement or any term hereof may be amended
or changed only by an instrument in writing executed jointly by
the Company and the Trustee.
(e) Each right, power and remedy herein specifically
granted to the Trustee or otherwise available to it shall be
cumulative, and shall be in addition to every other right, power
and remedy herein specifically given or now or hereafter existing
at law, in equity, or otherwise (including, without limitation,
all rights, powers and remedies granted to a secured party under
the UCC), and each such right, power and remedy, whether
specifically granted herein or otherwise existing, may be
exercised at any time and from time to time as often and in such
order as may be deemed expedient by the Trustee in its sole and
complete discretion. The provisions of this Agreement may only
be waived by an instrument in writing signed by the Trustee, and
no failure on the part of the Trustee to exercise, and no delay
in exercising, and no course of dealing with respect to, any such
right, power or remedy, shall operate as a waiver thereof, nor
shall any single or partial exercise of any such rights, power or
remedy preclude any other or further exercise thereof or the
exercise of any other right.
(f) The manner and place of service of all notices,
requests, demands or other communications to be sent hereunder
shall be sent as set forth in Section 10.2 of the Indenture.
(g) This Agreement shall be binding upon the Company
and its successors and assigns and shall inure to the benefit of
the Trustee and its successors and assigns. The Company may not,
without the prior written consent of the Trustee, assign any of
its rights, duties or obligations hereunder.
(h) This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without
regard to its principles of conflicts of law.
(i) The descriptive headings of the several sections
of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the
provisions hereof.
(j) Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof or affecting the validity of enforceability or such
provision in any other jurisdiction.
(k) All representations and warranties contained
herein, in the Indenture or made in writing by the Company in
connection herewith or therewith, shall survive the execution and
delivery of this Agreement, the Indenture and any documents
executed in connection herewith or therewith.
(l) This Agreement may be executed in any number of
counterparts and by different parties in separate counterparts,
each of which when so executed and delivered shall be deemed to
be an original, but all of which when taken together shall
constitute one and the same instrument.
(m) In the event of any conflict or inconsistency
between the term, covenants, conditions and provisions set forth
in this Agreement and the terms, covenants, conditions and
provisions set forth in the Indenture, the terms, covenants,
conditions and provisions of the Indenture shall prevail.
IN WITNESS WHEREOF, the Company and the Trustee have
executed this Agreement as of the date first above written.
XCL LTD.
By:---------------------
Name: David A. Melman
Title Executive Vice President,
General Counsel and
Secretary
FLEET NATIONAL BANK, as Trustee
By:---------------------
Name: Susan C. Merker
Title Assistant Vice President
<PAGE>
EXHIBIT A
PERFECTION CERTIFICATE
----------------------
The undersigned, Chief Executive Officer and Chief Legal
Officer or Chief Financial Officer, of XCL Ltd., a Delaware
corporation (the "Company"), hereby certify with reference to the
Security Agreement, Pledge and Financing Statement dated as of
May 20, 1997 between the Company and Fleet National Bank, as
Trustee (terms defined therein being used herein as therein
defined), to the Trustee as follows:
SECTION 1. Names.
(a) The exact corporate name of the Company, as it
appears in its certificate of incorporation is as follows:
XCL LTD.
(b) Set forth below is each other corporate name the
Company has had since its organization, together with the date of
the relevant change:
The Exploration Company of Louisiana, Inc.
change of name effected on July 1, 1994
(c) The Company has not changed its identity or
corporate structure in any way within the past five years except:
N/A
(d) The following is a list of all other names
(including trade names or similar appellations) used by the
Company or any of its divisions or other business units at any
time during the past five years:
XCL-China Ltd.; XCL-Texas, Ltd.; XCL-Acquisitions, Inc.;
XCL-Land Ltd.; XCL-China LubeOil Ltd.; XCL-China Coal
Methane, Ltd.; The Exploration Company of Louisiana, Inc.
SECTION 2. Current Locations.
(a) The chief executive office of the Company is
located at the following address:
Mailing Address City County State
- --------------- ---- ------ -----
110 Rue Jean Lafitte Lafayette Lafayette Parish Louisiana 70508
(b) The following are all the places of business of the
Company not identified above:
Mailing Address City County State
- --------------- ---- ------ -----
1105 North Market St. Wilmington New Castle Delaware 19899
Suite 1300
SECTION 3. Prior Locations. Set forth below is the
information required by subparagraphs (a) and (b) of Section 2
with respect to each location or place of business maintained by
the Company at any time during the past five years:
16800 Greenspoint Park Drive
Suite 300 South
(also Suites 225 and 240 at various times)
Houston, TX 77060
5215 McPherson Road
Suite 200
Laredo, TX 78041
9810 FM 1960
Suite 135
Humble, TX 77338
SECTION 4. UCC Filings. A duly signed financing
statement on Form UCC-1 in substantially the form of Schedule
4(A) hereto has been duly filed in the UCC filing office in each
jurisdiction identified in Section 2 hereof. The Company will
deliver a true copy of each such filing duly acknowledged by the
filing officer as soon as practicable after the date hereof.
SECTION 5. Schedule of Filings. Attached hereto as
Schedule 5 is a schedule setting forth filing information with
respect to the filings described in Section 4 above.
SECTION 6. Filings Fees. All filing fees and taxes
payable in connection with the filings described in Section 4
above have been paid.
IN WITNESS WHEREOF, we have hereunto set our hands this
20th day of May, 1997.
By:----------------------
Name: Marsden W. Miller, Jr.
Title:Chief Executive Officer
By:----------------------
Name: David A. Melman
Title: Executive Vice President
REGISTRATION RIGHTS AGREEMENT
Dated as of May 20, 1997
by and between
XCL LTD.
and
JEFFERIES & COMPANY, INC.
9.50% AMENDED SERIES A, CUMULATIVE CONVERTIBLE PREEFERRED STOCK
and
COMMON STOCK PURCHASE WARRANTS
TABLE OF CONTENTS
Page
1. Definitions 1
2. Shelf Registration 5
3. Shelf Registration Procedures 6
4. Shelf Registration Expenses 11
5. Indemnification 12
6. Rules 144 and 144A 15
7. Underwritten Registrations of Registrable
Securities 16
8. Registration of Registrable Securities 16
9. Miscellaneous 19
(a) No Inconsistent Agreements 19
(b) Adjustments Affecting Registrable Shelf
Securities or Registrable Securities 19
(c) Amendments and Waivers 19
(d) Notices 20
(e) Successors and Assigns 20
(f) Counterparts 20
(g) Headings 21
(h) Governing Law 21
(i) Severability 21
(j) Securities Held by the Issuer or Its
Affiliates 21
(k) Third Party Beneficiaries 21
(1) Entire Agreement 21
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made
and entered into as of May 20, 1997, by and between XCL Ltd., a
Delaware corporation (the "Company" or the "Issuer"), and
Jefferies & Company, Inc. (the "Initial Purchaser").
This Agreement is entered into in connection with the
Purchase Agreement, dated May 13, 1997, by and among the Company,
XCL-China Ltd., a Delaware corporation and wholly-owned
subsidiary of the Company and the Initial Purchaser (the
"Purchase Agreement") which provides for, among other things, the
issuance and sale to the Initial Purchaser of 294,118 units (the
"Units"), each consisting of one share of the Company's Amended
Series A, Cumulative Convertible Preferred Stock, par value $1.00
per share ("Amended Series A Preferred Stock"), and one warrant
(collectively, the "Warrants") to purchase 327 shares of common
stock, par value $0.01 per share, of the Company (the "Common
Stock"). In order to induce the Initial Purchaser to enter into
the Purchase Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement for the benefit
of the Initial Purchaser and its direct and indirect transferees
and assigns. The execution and delivery of this Agreement is a
condition to the Initial Purchaser's obligation to purchase the
Units under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the term "day", unless otherwise
expressly provided, shall mean a calendar day and following terms
shall have the following meanings:
Advice: See the last paragraph of Section 5.
Agreement: See the first introductory paragraph to this
Agreement.
Amended Series A Preferred Stock: See the second
introductory paragraph to this Agreement.
Business Day: A day that is not a Saturday, a Sunday, or a
day on which banking institutions in New York, New York or
Hartford, Connecticut are required to be closed.
Common Stock: See the second introductory paragraph to this
Agreement.
Company: See the first introductory paragraph to this
Agreement.
Conversion Shares: The shares of Common Stock issuable upon
conversion of the Amended Series A Preferred Stock included in
the Units.
Effectiveness Period: See Section 2(a).
Exchange Act: The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated
thereunder.
Holder: Any registered holder of Registrable Shelf
Securities or Registrable Securities.
Indemnified Person: See Section 5(c).
Indemnifying Person: See Section 5(c).
Initial Conversion Date: The later of the first anniversary
of the Issue Date or such date on which the Company has reserved
or has available a sufficient number of shares of its Common
Stock to permit conversion of all the outstanding Amended
Series A Preferred Stock.
Initial Purchaser: See the first introductory paragraph to
this Agreement.
Initial Shelf Registration: See Section 2(a).
Inspectors: See Section 3(o).
Issue Date: The date on which the Units were sold to the
Initial Purchaser pursuant to the Purchase Agreement.
Issuer: See the first introductory paragraph to this
Agreement.
NASD: National Association of Securities Dealers, Inc.
Participant: See Section 5(a).
Person: An individual, trustee, corporation, partnership,
limited liability company, joint stock company, trust,
unincorporated association, union, business association, firm or
other legal entity.
Piggy-Back Registration: See Section 8(a).
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject
to completion and a prospectus that includes any information
previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented
by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Shelf Securities or
the Registrable Securities covered by such Registration
Statement, and all other amendments and supplements to such
prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by
reference in such prospectus.
Purchase Agreement: See the second introductory paragraph
to this Agreement.
Records: See Section 3(o).
Registrable Shelf Securities: Any of (i) the shares of
Amended Series A Preferred Stock included in the Units, the
Conversion Shares and the Warrant Shares and (ii) any other
securities issued or issuable with respect to any such Amended
Series A Preferred Stock, Conversion Shares or Warrant Shares by
way of stock dividends or stock splits or in connection with a
combination of shares, recapitalization, merger, consolidation or
other reorganization or otherwise.
Registrable Securities: Any of (i) the Conversion Shares,
(ii) the Warrant Shares (whether or not the related Warrants have
been exercised) and (iii) any other securities issued or issuable
with respect to any Conversion Shares or Warrant Shares by way of
stock dividends or stock splits or in connection with a
combination of shares, recapitalization, merger, consolidation or
other reorganization or otherwise. As to any particular
Registrable Securities, such securities shall cease to be
Registrable Securities when (i) a Registration Statement with
respect to the offering of such securities by the Holder thereof
shall have been declared effective under the Securities Act and
such securities shall have been disposed of by such Holder
pursuant to such Registration Statement, (ii) such securities are
eligible for sale to the public pursuant to Rule 144(k) (or an
similar provision then in force, but not Rule 144A) or are all
otherwise eligible for sale under Rule 144 by such Holder in the
current calendar quarter, (iii) such securities shall have been
otherwise transferred by such Holder and new certificates for
such securities not bearing a legend restricting further transfer
shall have been delivered by the Company or its transfer agent
and subsequent disposition of such securities shall not require
registration or qualification under the Securities Act or any
similar state law then in force or (iv) such securities shall
have ceased to be outstanding.
Registration Expenses: All expenses incident to the
Company's performance of or compliance with Section 8 of this
Agreement, including, without limitation, all SEC and stock
exchange or NASD registration and filing fees and expenses, fees
and expenses of compliance with securities or blue sky laws
(including, without limitation, reasonable fees and disbursements
of counsel for any underwriters in connection with blue sky
qualifications of the Registrable Securities), preparing,
printing, filing, duplicating and distributing a Warrants
Registration Statement and the related Prospectus, the cost of
printing stock certificates, the cost and charges of any transfer
agent, rating agency fees, printing expenses, messenger,
telephone and delivery expenses, fees and disbursements of any
counsel for the Company and all independent certified public
accountants, the fees and disbursements of underwriters
customarily paid by issuers or sellers or securities (but not
including any underwriting discounts or commissions or transfer
taxes, if any, attributable to the sale of Registrable Securities
by Selling Holders), fees and expenses of one counsel for the
Selling Holders and other reasonable out-of-pocket expenses of
the Selling Holders.
Registration Statement: Any appropriate registration
statement of the Issuer filed with the SEC under the Securities
Act that covers any of the Registrable Shelf Securities or the
Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements
to such registration statement, including post-effective
amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule
(other than Rule 144A) or regulation hereafter adopted by the SEC
providing for offers and sales of securities made in compliance
therewith resulting in offers and sales by subsequent holders
that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of
the Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act,
as such Rule may be amended from time to time, or any similar
rule (other than Rule 144) or regulation hereafter adopted by the
SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule
or regulation hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Selling Holder: A Holder who is selling Registrable
Securities in accordance with Section 8 hereof.
Shelf Registration: See Section 2(b).
Subsequent Shelf Registration: See Section 2(b).
Trigger Date: The earlier of (i) December 1, 1997 and (ii)
the date of disbursement to the Company of funds in the Cash
Collateral Account (as defined in the Purchase Agreement).
Underwritten registration or underwritten offering: A
registration in which securities of one or more of the issuers
are sold to an underwriter for reoffering to the public.
Units: See the second introductory paragraph to this
Agreement.
Warrants: See the second introductory paragraph to this
Agreement.
Warrant Shares: The shares of Common Stock issuable upon
exercise of the Warrants.
2. Shelf Registration
(a) Shelf Registration. The Issuer shall file with the
SEC, within 60 days after the Trigger Date, a "Shelf"
Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Registrable Shelf
Securities (the "Initial Shelf Registration"), and shall use its
best efforts to cause such Initial Shelf Registration to be
declared effective under the Securities Act within 150 days after
the Trigger Date. The Initial Shelf Registration shall be on
Form S-l or another appropriate form permitting registration of
such Registrable Shelf Securities for resale by Holders in the
manner or manners designated by them (including, without
limitation, one or more underwritten offerings). The Issuer
shall not permit any securities other than the Registrable Shelf
Securities to be included in any Shelf Registration (as defined
below). The Issuer shall use its best efforts to keep the
Initial Shelf Registration continuously effective under the
Securities Act until the date which is two years from the Issue
Date or such earlier date as may be then authorized under Rule
144(k) under the Securities Act (the "Effectiveness Period"), or
such shorter period ending when (i) all Registrable Shelf
Securities covered by the Initial Shelf Registration have been
sold in the manner set forth and as contemplated in the Initial
Shelf Registration or are otherwise eligible for sale under Rule
144 by the Holders without restriction by virtue of the operation
of the volume limitations set forth in such Rule or (ii) a
Subsequent Shelf Registration (as defined below) covering all of
the Registrable Shelf Securities has been declared effective
under the Securities Act.
(b) Subsequent Shelf Registrations. If the Initial
Shelf Registration or any Subsequent Shelf Registration ceases to
be effective for any reason at any time during the Effectiveness
Period (other than because of the sale of all of the securities
registered thereunder), the Issuer shall use its best efforts to
obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 45 days of
such cessation of effectiveness amend such Shelf Registration in
a manner to obtain the withdrawal of the order suspending the
effectiveness thereof, or file (and cause any then existing
Subsidiary Guarantor to file) an additional "shelf" Registration
Statement pursuant to Rule 415 covering all of the Registrable
Shelf Securities (a "Subsequent Shelf Registration"). If a
Subsequent Shelf Registration is filed, the Issuer shall use its
best efforts to cause the Subsequent Shelf Registration to be
declared effective as soon as practicable after such filing and
to keep such Subsequent Shelf Registration continuously effective
for a period equal to the number of days in the Effectiveness
Period less the aggregate number of days during which the Initial
Shelf Registration or any Subsequent Shelf Registrations was
previously continuously effective. As used herein the term
"Shelf Registration" means the Initial Shelf Registration and any
Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuer shall
promptly supplement and amend any Shelf Registration if required
by the rules, regulations or instructions applicable to the
registration form used for such Shelf Registration, if required
by the Securities Act, or if reasonably requested by the Holders
of a majority in aggregate liquidation amount of the shares of
Amended Series A Preferred Stock covered by such Shelf
Registration (or, if no such shares are so covered, then by the
Holders of a majority of the other securities covered thereby) or
by any underwriter of such securities.
3. Shelf Registration Procedures
In connection with the filing of any Registration Statement
pursuant to Section 2 hereof, the Issuer shall effect such
registration to permit the sale of such securities covered
thereby in accordance with the intended method or methods of
disposition thereof, and pursuant thereto and in connection with
any such Registration Statement filed by the Issuer hereunder,
the Issuer shall:
(a) Before filing any Registration Statement, the
Issuer shall, if requested, furnish to and afford the
Holders of the Registrable Shelf Securities, their counsel
and the managing underwriters, if any, a reasonable
opportunity to review copies of all such documents
(including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be
filed (in each case at least five business days prior to
such filing). The Issuer shall not file any such
Registration Statement or any amendments or supplements
thereto if the Holders of a majority in aggregate
liquidation amount of the shares of Amended Series A
Preferred Stock covered by such Registration Statement (or,
if no such shares are so covered, then by the Holders of a
majority of the other securities covered thereby), their
counsel, or the managing underwriters, if any, shall
reasonably object.
(b) Prepare and file with the SEC such amendments
and post-effective amendments to each Shelf Registration as
may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period; cause
the related Prospectus to be supplemented by any Prospectus
supplement required by applicable law, and as so
supplemented to be filed pursuant to Rule 424 (or any
similar provisions then in force) promulgated under the
Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act applicable to it with
respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus
as so supplemented.
(c) Notify the selling Holders of Registrable Shelf
Securities, their counsel and the managing underwriters, if
any, promptly (but in any event within two business days),
(i) when a Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when
the same has become effective (including in such notice a
written statement that any Holder may, upon request, obtain,
without charge, one conformed copy of such Registration
Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed
to be incorporated by reference and exhibits), (ii) of the
issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or of any order
preventing or suspending the use of any Prospectus or the
initiation of any proceedings for that purpose, (iii) if at
any time when a prospectus is required by the Securities Act
to be delivered in connection with sales of the Registrable
Shelf Securities the representations and warranties of the
Issuer contained in any agreement (including any
underwriting agreement) contemplated by Section 3(n) hereof
cease to be true and correct, (iv) of the receipt by the
Issuer of any notification with respect to the suspension of
the qualification or exemption from qualification of a
Registration Statement or any of the Shelf Securities for
offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (v) of the
happening of any event, the existence of any condition or
any information becoming known that makes any statement made
in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein
by reference untrue in any material respect or that requires
the making of any changes in, or amendments or supplements
to, such Registration Statement, Prospectus or documents so
that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and
that in the case of the Prospectus, it will not contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading, and (vi) of any
of the Issuer's reasonable determination that a post-
effective amendment to a Registration Statement would be
appropriate.
(d) Use its best efforts to prevent the issuance of
any order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use
of a Prospectus or suspending the qualification (or
exemption from qualification) of any of the Registrable
Shelf Securities for sale in any jurisdiction, and, if any
such order is issued, to use its best efforts to obtain the
withdrawal of any such order at the earliest possible date.
(e) If requested by the managing underwriters, if
any, or the Holders of a majority in aggregate liquidation
amount of the shares of Amended Series A Preferred Stock
being sold in connection with an underwritten offering (or,
if no such shares are being so sold, then by the Holders of
a majority of the other securities being so sold), (i)
promptly as practicable incorporate in a prospectus
supplement or post-effective amendment such information or
revisions to information therein relating to such
underwriters or selling Holders as the managing
underwriters, if any, or such Holders or their counsel
reasonably request to be included or made therein and (ii)
make all required filings of such prospectus supplement or
such post-effective amendment as soon as practicable after
the Issuer has received notification of the matters to be
incorporated in such prospectus supplement or post-effective
amendment.
(f) Furnish to each selling Holder of Registrable
Shelf Securities who so requests and to counsel and each
managing underwriter, if any, without charge, one conformed
copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto,
including financial statements and schedules, and, if
requested, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits.
(g) Deliver to each selling Holder of Registrable
Shelf Securities, their respective counsel, and the
underwriters, if any, without charge, as many copies of the
Prospectus and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons
may reasonably request; and, subject to the last paragraph
of this Section 5, the Issuer hereby consents to the use of
such Prospectus and each amendment or supplement thereto by
each of the selling Holders of Registrable Shelf Securities,
and the underwriters or agents, if any, and dealers (if
any), in connection with the offering and sale of the
Registrable Shelf Securities covered by such Prospectus and
any amendment or supplement thereto.
(h) Prior to any public offering of Registrable
Shelf Securities, to use its best efforts to register or
qualify, and to cooperate with the selling Holders of
Registrable Shelf Securities, the underwriters, if any, and
their respective counsel in connection with the registration
or qualification (or exemption from such registration or
qualification) of such Registrable Shelf Securities for
offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any selling
Holder, or the managing underwriter or underwriters, if any,
reasonably request in writing; provided that where
Registrable Shelf Securities are offered other than through
an underwritten offering, the Issuer agrees to cause its
counsel to perform Blue Sky investigations and file any
registrations and qualifications required to be filed
pursuant to this Section 5(h); keep each such registration
or qualification (or exemption therefrom) effective during
the period such Registration Statement is required to be
kept effective and do any and all other acts or things
reasonably necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Shelf Securities
covered by the applicable Registration Statement; provided
that the Issuer shall not be required to (A) qualify
generally to do business in any jurisdiction where it is not
then so qualified, (B) take any action that would subject it
to general service of process in any such jurisdiction where
it is not then so subject or (C) subject itself to taxation
in excess of a nominal dollar amount in any such
jurisdiction where it is not then so subject.
(i) Cooperate with the selling Holders of
Registrable Shelf Securities and the managing underwriter or
underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Shelf
Securities to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for
deposit with The Depository Trust Company; and enable such
Registrable Shelf Securities to be in such denominations and
registered in such names as the managing underwriter or
underwriters, if any, or Holders may reasonably request.
(j) Use its best efforts to cause the Registrable
Shelf Securities covered by any Registration Statement to be
registered with or approved by such governmental agencies or
authorities as may be necessary to enable the seller or
sellers thereof or the underwriters, if any, to consummate
the disposition of such Registrable Shelf Securities, except
as may be required solely as a consequence of the nature of
such selling Holder's business, in which case the Issuer
will cooperate in all reasonable respects with the filing of
such Registration Statement and the granting of such
approvals.
(k) Upon the occurrence of any event contemplated
by paragraph 3(c)(v) or 3(c)(vi) hereof, as promptly as
practicable prepare and (subject to Section 3(a) hereof)
file with the SEC, at the expense of the Issuer, a
supplement or post-effective amendment to the Registration
Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein
by reference, or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable
Shelf Securities being sold thereunder, any such Prospectus
will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(1) Use its best efforts to cause any Amended
Series A Preferred Stock covered by a Registration Statement
to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate
liquidation amount of the shares of Amended Series A
Preferred Stock covered by such Registration Statement or
the managing underwriter or underwriters, if any.
(m) [Intentionally omitted]
(n) In connection with an underwritten offering of
Registrable Shelf Securities pursuant to a Shelf
Registration, enter into an underwriting agreement as is
customary in underwritten offerings of securities similar to
the Registrable Shelf Securities and take all such other
actions as are reasonably requested by the managing
underwriter or underwriters in order to expedite or
facilitate the registration or the disposition of such
Registrable Shelf Securities and, in such connection, (i)
make such representations, warranties to, and covenants
with, the underwriters, with respect to the business of the
Issuer and its subsidiaries and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to
be incorporated by reference therein, in each case, as are
customarily made by issuers to underwriters in underwritten
offerings of securities similar to the Registrable Shelf
Securities, and confirm the same in writing if and when
requested; (ii) obtain the opinion of counsel to the Issuer
and updates thereof in form and substance reasonably
satisfactory to the managing underwriter or underwriters,
addressed to the underwriters covering the matters
customarily covered in opinions requested in underwritten
offerings of securities similar to the Registrable Shelf
Securities and such other matters as may be reasonably
requested by underwriters; (iii) obtain copies of "cold
comfort" letters and updates thereof in form and substance
reasonably satisfactory to the managing underwriter or
underwriters from the independent certified public
accountants of the Issuer (and, if necessary, any other
independent certified public accountants of any subsidiary
of the Issuer or of any business acquired by the Issuer for
which financial statements and financial data are, or are
required to be, included in the Registration Statement),
addressed to each of the underwriters, such letters to be in
customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with
underwritten offerings of securities similar to the
Registrable Shelf Securities and such other matters as
reasonably requested by the managing underwriter or
underwriters; and (iv) if an underwriting agreement is
entered into, the same shall contain indemnification
provisions and procedures no less favorable than those set
forth in Section ___ hereof with respect to all parties to
be indemnified pursuant to said Section. The above shall be
done at each closing under such underwriting agreement, or
as and to the extent required thereunder.
(o) Make available for inspection by any selling
Holder of such Registrable Shelf Securities being sold, any
underwriter participating in any such disposition of
Registrable Shelf Securities, if any, and any attorney,
accountant or other agent retained by any such selling
Holder, or underwriter (collectively, the "Inspectors"), at
the offices where normally kept, during reasonable business
hours, all financial and other records and pertinent
corporate documents of the Issuers and their respective
subsidiaries (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise any
applicable due diligence responsibilities, and cause the
officers, directors and employees of the Issuer and its
subsidiaries to supply all information reasonably requested
by any such Inspector in connection with such Registration
Statement. Such Records shall be kept confidential by each
Inspector and shall not be disclosed by the Inspectors
unless (i) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in such
Registration Statement, (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court
of competent jurisdiction, (iii) the information in such
Records is public or has been made generally available to
the public other than as a result of a disclosure or failure
to safeguard by such Inspector or (iv) disclosure of such
information is, in the opinion of counsel for any Inspector,
necessary or advisable in connection with any action, claim,
suit or proceeding, directly or indirectly, involving or
potentially involving such Inspector and arising out of,
based upon, related to, or involving this Agreement, or any
transactions contemplated hereby or arising hereunder. Each
selling Holder of such Registrable Shelf Securities will be
required to agree that information obtained by it as a
result of such inspections shall be deemed confidential and
shall not be used by it as the basis for any market
transactions in the securities of the Issuers unless and
until such is made generally available to the public. Each
selling Holder of such Registrable Shelf Securities will be
required to further agree that it will, upon learning that
disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Issuer and allow the Issuer
to undertake appropriate action to prevent disclosure of the
Records deemed confidential at their expense.
(p) [Intentionally omitted.]
(q) Comply with all applicable rules and
regulations of the SEC and make generally available to the
securityholders of the Company earnings statements
satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder (or any similar rule promulgated
under the Securities Act) no later than 45 days after the
end of any 12-month period (or 90 days after the end of any
12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which
Registrable Shelf Securities are sold to underwriters in a
firm commitment or best efforts underwritten offering and
(ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of
the Company after the effective date of a Registration
Statement, which statements shall cover said 12-month
periods.
(r) [Intentionally omitted.]
(s) [Intentionally omitted.]
(t) Cooperate with each seller of Registrable Shelf
Securities covered by any Registration Statement and each
underwriter, if any, participating in the disposition of
such Registrable Shelf Securities and their respective
counsel in connection with any filings required to be made
with the NASD.
(u) Use its best efforts to take all other steps
reasonably necessary to effect the registration of the
Registrable Shelf Securities covered by a Registration
Statement contemplated hereby.
The Issuer may require each seller of Registrable Shelf
Securities as to which any registration is being effected to
furnish to the Issuer such information regarding such seller and
the distribution of such Registrable Shelf Securities as the
Issuers may, from time to time, reasonably request. The Issuer
may exclude from such registration the Registrable Shelf
Securities of any seller who fails to furnish such information
within a reasonable time (which time in no event shall exceed 30
days) after receiving such request. Each seller as to which any
Shelf Registration is being effected agrees to furnish promptly
to the Issuer all information required to be disclosed in order
to make the information previously furnished to the Issuer by
such seller not materially misleading.
Each Holder of Registrable Shelf Securities agrees by
acquisition of such Registrable Shelf Securities that, upon
receipt of any notice from the Issuer of the happening of any
event of the kind described in Section 3(c)(ii), 3(c)(iv),
3(c)(v), or 3(c)(vi), such Holder will forthwith discontinue
disposition of such Registrable Shelf Securities covered by a
Registration Statement until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section
5(k), or until it is advised in writing (the "Advice") by the
Issuer that the use of the applicable Prospectus may be resumed,
and has received copies of any amendments or supplements thereto
and, if so directed by the Issuer, such Holder will deliver to
the Issuer all copies, other than permanent file copies, then in
such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of the receipt of such
notice.
4. Shelf Registration Expenses
(a) All fees and expenses incident to the performance of
or compliance with this Agreement by the Issuer (other than
Registration Expenses, which are dealt with exclusively in
Section 8 hereof) shall be borne by the Issuer, whether or not a
Shelf Registration is filed or becomes effective, including,
without limitation, (i) all registration and filing fees
(including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance
with state securities or Blue Sky laws as provided in Section
3(h) hereof, (ii) printing expenses, including, without
limitation, expenses of printing prospectuses if the printing of
prospectuses is requested by the managing underwriter or
underwriters, if any, or by the Holders of a majority in
aggregate liquidation amount of the shares of Amended Series A
Preferred Stock included in any Registration Statement (or, if no
such shares are so included, then by the Holders of a majority of
the other securities included therein), as the case may be,
(iii)reasonable messenger, telephone and delivery expenses
incurred in connection with any Shelf Registration, (iv) fees and
disbursements of counsel for the Issuer and reasonable fees and
disbursements of special counsel for the sellers of Registrable
Shelf Securities (subject to the provisions of Section 4(b)), (v)
fees and disbursements of all independent certified public
accountants referred to in Section 3(n)(iii) (including, without
limitation, the expenses of any special audit and "cold comfort"
letters required by or incident to such performance), (vi) rating
agency fees, (vii) Securities Act liability insurance, if the
Issuer desires such insurance, (viii) fees and expenses of all
other Persons retained by the Issuers, (ix) internal expenses of
the Issuer (including, without limitation, all salaries and
expenses of officers and employees of the Issuer performing legal
or accounting duties), (x) the expense of any annual audit, (xi)
the fees and expenses incurred in connection with the listing of
the securities to be registered on any securities exchange and
(xii) the expenses relating to printing, word processing and
distributing all Registration Statements, underwriting
agreements, securities sales agreements, indentures and any other
documents necessary in order to comply with this Agreement.
(b) In connection with any Shelf Registration hereunder,
the Issuer shall reimburse the Holders of the Registrable Shelf
Securities being registered in such registration for the fees and
disbursements, not to exceed $25,000, of not more than one
counsel (in addition to appropriate local counsel) chosen by the
Holders of a majority in aggregate liquidation amount of the
shares of Amended Series A Preferred Stock to be included in such
Shelf Registration (or, if no such shares are so included, then
by the Holders of a majority of the other securities included
therein) and other out-of-pocket expenses of Holders of
Registrable Shelf Securities incurred in connection with the
registration and sale of Registrable Shelf Securities.
5. Indemnification
(a) The Issuer agrees to indemnify and hold harmless
each Holder of Registrable Shelf Securities and each Holder of
Registrable Securities, the officers and directors of each such
Person, and each Person, if any, who controls any such Person
within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act (each, a "Participant"), from and
against any and all losses, claims, damages and liabilities
(including, without limitation, the reasonable legal fees and
other reasonable expenses actually incurred in connection with
any suit, action or proceeding or any claim asserted) caused by,
arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in any Registration
Statement (as amended or supplemented if the Issuer shall have
furnished any amendments or supplements thereto) or caused by,
arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii)
any untrue statement or alleged untrue statement of a material
fact contained in any Prospectus (as amended or supplemented if
the Issuer shall have furnished any amendments or supplements
thereto) or caused by, arising out of or based upon any omission
or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant furnished
to the Issuer in writing by or on behalf of such Participant
expressly for use therein; provided, however, that the Company
will not be liable if such untrue statement or omission or
alleged untrue statement or omission was contained or made in any
preliminary prospectus and corrected in the Prospectus or any
amendment or supplement thereto and the Prospectus does not
contain any other untrue statement or omission or alleged untrue
statement or omission of a material fact that was the subject
matter of the related proceeding and any such loss, liability,
claim, damage or expense suffered or incurred by the Participants
resulted from any action, claim or suit by any Person who
purchased Registrable Shelf Securities or Registrable Securities
which are the subject thereof from such Participant and it is
established in the related proceeding that such Participant
failed to deliver or provide a copy of the Prospectus (as amended
or supplemented) to such Person with or prior to the confirmation
of the sale of such Registrable Shelf Securities or Registrable
Securities sold to such Person if required by applicable law,
unless such failure to deliver or provide a copy of the
Prospectus (as amended or supplemented) was a result of
noncompliance by the Issuer with Section 3 of this Agreement.
(b) Each Participant agrees, severally and not jointly,
to indemnify and hold harmless the Issuer, its directors and
officers and each Person who controls the Issuer within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from
the Issuer to each Participant, but only with reference to
information relating to such Participant furnished to the Issuer
in writing by such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement
thereto, or any preliminary prospectus. The liability of any
Participant under this paragraph shall in no event exceed the
proceeds received by such Participant from sales of Registrable
Shelf Securities or Registrable Securities giving rise to such
obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall
be brought or asserted against any Person in respect of which
indemnity may be sought pursuant to either of the two preceding
paragraphs, such Person (the "Indemnified Person") shall promptly
notify the Person against whom such indemnity may be sought (the
"Indemnifying Person") in writing, and the Indemnifying Person,
upon request of the Indemnified Person, shall retain counsel
reasonably satisfactory to the Indemnified Person to represent
the Indemnified Person and any others the Indemnifying Person may
reasonably designate in such proceeding and shall pay the
reasonable fees and expenses actually incurred by such counsel
related to such proceeding; provided, however, that the failure
to so notify the Indemnifying Person shall not relieve it of any
obligation or liability which it may have hereunder or otherwise
(unless and only to the extent that such failure directly results
in the loss or compromise of any material rights or defenses by
the Indemnifying Person and the Indemnifying Person was not
otherwise aware of such action or claim). In any such
proceeding, any Indemnified Person shall have the right to retain
its own counsel, but the fees and expenses of such counsel shall
be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have
mutually agreed in writing to the contrary, (ii) the Indemnifying
Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded
parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing
interests between them. It is understood that, unless there is a
conflict among Indemnified Persons, the Indemnifying Person shall
not, in connection with any proceeding or related proceeding in
the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel)
for all Indemnified Persons, and that all such fees and expenses
shall be reimbursed promptly after receipt of the invoice
therefor as they are incurred. Any such separate firm for the
Participants and such control Persons of Participants shall be
designated in writing by Participants who sold a majority in
interest of the securities sold by all such Participants and any
such separate firm for the Issuer, its directors, its officers
and such control Persons of the Issuer shall be designated in
writing by the Company. The Indemnifying Person shall not be
liable for any settlement of any proceeding effected without its
prior written consent, but if settled with such consent or if
there is a final non-appealable judgment for the plaintiff for
which the Indemnified Person is entitled to indemnification
pursuant to this Agreement, the Indemnifying Person agrees to
indemnify any Indemnified Person from and against any loss or
liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an
Indemnified Person shall have requested an Indemnifying Person to
reimburse the Indemnified Person for reasonable fees and expenses
actually incurred by counsel as contemplated by the third
sentence of this paragraph, the Indemnifying Person agrees that
it shall be liable for any settlement of any proceeding effected
without its prior written consent if (i) such settlement is
entered into more than 30 days after receipt by such Indemnifying
Person of the aforesaid request and (ii) such Indemnifying Person
shall not have reimbursed the Indemnified Person in accordance
with such request prior to the date of such settlement; provided,
however, that the Indemnifying Person shall not be liable for any
settlement effected without its consent pursuant to this sentence
if the Indemnifying Person is contesting, in good faith, the
request for reimbursement. No Indemnifying Person shall, without
the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of
which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement (A) includes an unconditional
release of such indemnified Person, in form and substance
satisfactory to such Indemnified Person, from all liability on
claims that are the subject matter of such proceeding and (B)
does not include any statement as to an admission of fault,
culpability or failure to act by or on behalf of an Indemnified
Person.
(d) If the indemnification provided for in the first and
second paragraphs of this Section 5 is unavailable (other than by
reason of the exceptions specifically provided therein) to, or
insufficient to hold harmless, an Indemnified Person in respect
of any losses, claims, damages or liabilities referred to
therein, then each Indemnifying Person under such paragraphs, in
lieu of indemnifying such Indemnified Person thereunder and in
order to provide for just and equitable contribution, shall
contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities
in such proportion as is appropriate to reflect (i) the relative
benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from
the offering of the Registrable Shelf Securities or Registrable
Securities, as the case may be, or (ii) if the allocation
provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the
relative fault of the Indemnifying Person or Persons on the one
hand and the Indemnified Person or Persons on the other in
connection with the statements or omissions (or alleged
statements or omissions) that resulted in such losses, claims,
damages or liabilities (or actions in respect thereof) as well as
any other relevant equitable considerations. The relative fault
of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Issuers on
the one hand or by the Participants or such other Indemnified
Person, as the case may be, on the other, such Persons' relative
intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission and any other
equitable considerations appropriate under the circumstances.
(e) The parties agree that it would not be just and
equitable if contribution pursuant to this Section 5 were
determined by pro rata allocation (even if the Participants were
treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable
considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Person
as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above,
any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this
Section 5, in no event shall a Participant be required to
contribute any amount in excess of the amount by which proceeds
received by such Participant from sales of Registrable Shelf
Securities or Registrable Securities, as the case may be, exceeds
the amount of any damages that such Participant has otherwise
been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained
in this Section 5 will be in addition to any liability which the
Indemnifying Persons may otherwise have to the Indemnified
Persons referred to above.
6. Rules 144 and 144A
The Issuer covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a
timely manner and, if at any time it is not required to file such
reports, it will, upon the request of any Holder of Registrable
Shelf Securities or Registrable Securities, make publicly
available other information so long as necessary to permit sales
pursuant to Rule 144 and Rule 144A. The Issuer further
covenants, for so long as any Registrable Shelf Securities or
Registrable Securities remain outstanding, to make available to
any Holder or beneficial owner thereof in connection with any
sale thereof and any prospective purchaser of such Registrable
Shelf Securities or Registrable Securities from such Holder or
beneficial owner, the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such
Registrable Shelf Securities or Registrable Securities pursuant
to Rule 144A.
7. Underwritten Registrations of Registrable Securities
If any of the Registrable Shelf Securities covered by any
Shelf Registration is to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers
that will manage the offering will be selected by the Holders of
a majority in aggregate liquidation amount of the shares of
Amended Series A Preferred Stock included in such offering (or,
if no such shares are so included, then by the Holders of a
majority of the other securities included therein) and reasonably
acceptable to the Issuer.
No Holder of Registrable Shelf Securities may participate in
any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's Registrable Shelf Securities on the
basis provided in any underwriting arrangements approved by the
Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
8. Registration of Registrable Securities
(a) Piggy-Back Registration of Registrable Securities.
If at any time after the Initial Conversion Date the Company
proposes to file a registration statement under the Securities
Act with respect to an offering by the Company for its own
account or for the account of any holders of its Common Stock
(other than (i) a registration statement on Form S-4 or S-8 (or
any substitute form that may be adopted by the SEC), (ii) a
registration statement filed in connection with an exchange offer
or offering of securities solely to the Company's existing
securityholders or (iii) any Registration Statement pursuant to
Section 2 hereof), then the Company shall give written notice of
such proposed filing to the Holders of Registrable Securities as
soon as practicable (but in no event fewer than 20 days before
the anticipated filing date), and such notice shall offer such
Holders the opportunity to register such number of Registrable
Securities as each Holder may request in writing within 20 days
after receipt of such written notice from the Company (which
request shall specify the Registrable Securities intended to be
disposed of by such Selling Holder and the intended method of
distribution thereof) (a "Piggy-Back Registration"). The Company
shall use its best efforts to keep such Piggy-Back Registration
continuously effective under the Securities Act until at least
the earlier of (A) an aggregate of 180 days after the effective
date thereof or (B) the consummation of the distribution by the
Holders of all of the Registrable Securities covered thereby.
The Company shall use its best efforts to cause the managing
underwriter or underwriters, if any, of such proposed offering to
permit the Registrable Securities requested to be included in a
Piggy-Back Registration to be included on the same terms and
conditions as any similar securities of the Company or any other
security holder included therein and to permit the sale or other
disposition of such Registrable Securities in accordance with the
intended method of distribution thereof. Any Selling Holder
shall have the right to withdraw its request for inclusion of its
Registrable Securities in any Registration Statement pursuant to
this Section 8 by giving written notice to the Company of its
request to withdraw at any time prior to the filing of such
Registration Statement with the SEC. The Company will pay all
Registration Expenses in connection with each registration of
Registrable Securities requested pursuant to this Section 8, and
each Holder of Registrable Securities shall pay all underwriting
discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Holder's Registrable Securities
pursuant to a Piggy-Back Registration effected pursuant to this
Section 8.
No registration effected under this Section 8, and no
failure to effect a registration under this Section 8, shall
relieve the Company of its obligation to effect a registration
pursuant to Section 2 hereof, and no failure to effect a
registration under this Section 8 and to complete the sale of
securities registered thereunder in connection therewith shall
relieve the Company of any other obligation under this Agreement.
(b) Priority in Piggy-Back Registration. In a
registration pursuant to this Section 8 involving an underwritten
offering, if the managing underwriter or underwriters of such
underwritten offering have informed, in writing, the Company and
the Selling Holders requesting inclusion in such offering that in
such underwriter's or underwriters' opinion the total number of
securities which the Company, the Selling Holders and any other
Persons desiring to participate in such registration intend to
include in such offering is such as to adversely affect the
success of such offering, including the price at which such
securities can be sold, then the Company will be required to
include in such registration only the amount of securities which
it is so advised should be included in such registration. In
such event: (x) in cases initially involving the registration
for sale of securities for the Company's own account, securities
shall be registered in such offering in the following order of
priority: (i) first, the securities which the Company proposes to
register, (ii) second, provided that no securities proposed to be
registered by the Company have been excluded from such
registration, the securities which have been requested to be
included in such registration by the Selling Holders and by
Persons entitled to exercise "piggy-back" registration rights
pursuant to contractual commitments to "piggy-back" registration
rights of the Company entered into prior to, and in existence on,
the date hereof (pro rata based on the amount of securities
sought to be registered by such Persons), and (iii) third,
provided that no securities sought to be included by the Selling
Holders or such Persons have been excluded from such
registration, the securities of other Persons entitled to
exercise "piggyback" registration rights pursuant to contractual
commitments of the Company entered into subsequent to the date
hereof (pro rata based on the amount of securities sought to be
registered by such Persons); and (y) in cases not initially
involving the registration for sale of securities for the
Company's own account, securities shall be registered in such
offering in the following order of priority: (i) first, the
securities of any Person whose exercise of a "demand"
registration right pursuant to a contractual commitment of the
Company is the basis for the registration, (ii) second, provided
that no securities of any Person whose exercise of a "demand"
registration right pursuant to a contractual commitment of the
Company is the basis for such registration have been excluded
from such registration, the securities requested to be included
in such registration by the Selling Holders pursuant to this
Agreement and by Persons entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments to "piggy-
back" registration rights of the Company entered into prior to,
and in existence on, the date hereof (pro rata based on the total
amount of securities sought to be included by such Persons),
(iii) third, provided that no securities sought to be included by
the Selling Holders or such Persons have been excluded from such
registration, securities of other Persons entitled to exercise
"piggy-back" registration rights pursuant to contractual
commitments entered into subsequent to the date hereof (pro rata
based on the amount of securities sought to be registered by such
Persons) and (iv) fourth, provided that no securities sought to
be included by other Persons entitled to exercise "piggy-back"
registration rights pursuant to such contractual commitments have
been excluded from such registration, any securities which the
Company proposes to register.
(c) Suspension of Sales, etc. Subject to the next
sentence of this paragraph, the Company shall be entitled to
postpone, for a reasonable period of time, the effectiveness of,
or suspend the rights of any Holders to make sales purchase to
any Registration Statement otherwise required to be prepared,
filed and made and kept effective by it under this Section 8;
provided, however, that the duration of such postponement or
suspension may not exceed the earlier to occur of (A) 15 days
after the cessation of the circumstances described in the next
sentence of this paragraph on which such postponement or
suspension is based or (B) 120 days after the date of the
determination of the Board of Directors referred to in the next
sentence. Such postponement or suspension may only be effected
if the Board of Directors of the Company determines in good faith
that the effectiveness of, or sales pursuant to, such
Registration Statement would materially impede, delay or
interfere with any financing, offer or sale of securities,
acquisition, corporate reorganization or other significant
transaction involving the Company or any of its affiliates or
require disclosure of material information which the Company has
a bona fide business purpose for preserving as confidential. If
the Company shall so postpone the effectiveness of, or suspend
the rights of any Holders of Registrable Securities to make sales
pursuant to, a Registration Statement, it shall, as promptly as
possible, notify any Selling Holders of such determination, and
the Selling Holders shall (y) have the right, in the case of a
postponement of the effectiveness of a Registration Statement,
upon the affirmative vote of Selling Holders of not less than a
majority of the Registerable Securities to be included in such
Registration Statement, to withdraw the request for registration
by giving written notice to the Company within 10 days after
receipt of such notice or (z) in the case of a suspension of the
right to make sales, receive an extension of the registration
period referred to in Section 8(a) hereof equal to the number of
days of the suspension.
(d) Exclusion of Registrable Securities. The Company
shall not be required by this Section 8 to include Registrable
Securities in a Piggy-Back Registration if (i) in the written
opinion of counsel to the Company, addressed to the Holders of
Registrable Securities and delivered to them, the Holders of such
Registrable Securities seeking registration would be free to sell
all such Registrable Securities within the current calendar
quarter without registration under Rule 144, which opinion may be
based in part upon the representation by the Holders of such
Registrable Securities seeking registration, which representation
shall not be unreasonably withheld, that each such Holder is not
an affiliate of the Company within the meaning of the Securities
Act, and (ii) all requirements under the Securities Act for
effecting such sales are satisfied at such time.
(e) Obligations of Selling Holders. The Company's
obligations under this Section 8 shall be subject to the
obligations of the Selling Holders, which the Selling Holders
acknowledge, to furnish all information and materials and to take
any and all actions as may be required under applicable federal
and state securities laws and regulations to permit the Company
to comply with all applicable requirements of the SEC and to
obtain any acceleration of the effective date of a Registration
Statement.
(f) No Special Audit. The Company shall not be
obligated to cause any special audit to be undertaken in
connection with any registration pursuant to this Section 8 or
Section 2 unless such audit is requested by the underwriters with
respect to such registration.
9. Miscellaneous
(a) No Inconsistent Agreements. The Issuer has not
entered, as of the date hereof, and the Issuer shall not enter,
after the date of this Agreement, into any agreement with respect
to any of its securities that is inconsistent with the rights
granted to the Holders of Registrable Shelf Securities or
Registrable Securities in this Agreement or otherwise conflicts
with the provisions hereof. The Issuer has not entered and will
not enter into any agreement with respect to any of its
securities which will grant to any Person piggy-back rights with
respect to a Shelf Registration.
(b) Adjustments Affecting Registrable Shelf Securities
or Registrable Securities. The Company shall not, directly or
indirectly, take any action with respect to the Registrable Shelf
Securities or Registrable Securities as a class that would
adversely affect the ability of the Holders to include such
Registrable Shelf Securities or Registrable Securities in a
registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may
not be given, otherwise than with the prior written consent of in
circumstances that would adversely affect any Holders of
Registrable Shelf Securities or Registrable Securities, the
Holders of a majority in interest of the Registrable Shelf
Securities or Registrable Securities, as the case may be;
provided, however, that Section 5 and this Section 9(c) may not
be amended, modified or supplemented without the prior written
consent of each Holder (including any Person who was a Holder of
Registrable Shelf Securities or Registrable Securities, as the
case may be, disposed of pursuant to any Registration Statement).
(d) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, next-day air courier
or telecopier:
1. if to a Holder of Registrable Shelf Securities
or Registrable Securities, at the most current address of
such Holder set forth on the records of the registrar of the
Warrants or the Amended Series A Preferred Stock, with a
copy in like manner to the Initial Purchaser as follows:
JEFFERIES & COMPANY, INC.
Two Houston Center
909 Fannin St., Suite 3100
Houston, Texas 77010
Facsimile No.: (713) 650-8730
Attention: Robert W. Carington
2. if to the Initial Purchaser, at the address
specified in Section 11(d)(1);
3. if to the Issuer, as follows:
XCL Ltd.
110 Rue Jean Lafitte
Lafayette, Louisiana 70508
Facsimile No.: (318) 237-3316
Attention: General Counsel
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally
delivered; five business days after being deposited in the United
States mail, postage prepaid, if mailed, one business day after
being timely delivered to a next-day air courier guaranteeing
overnight delivery; and when receipt is acknowledged by the
addressee, if telecopied.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to
the Trustee under the Indenture at the address specified in such
Indenture.
(e) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns
of each of the parties hereto and the Holders; provided, however,
that the provisions of this Agreement relating to registration
rights shall not inure to the benefit of or be binding upon a
successor or assign of a Holder unless such successor or assign
holds Registrable Shelf Securities or Registrable Securities.
(f) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute
one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE NON-
EXCLUSIVE JURISDICTION OF THE COMPETENT COURTS OF THE STATE OF
NEW YORK SITTING IN THE CITY OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions
set forth herein shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
(j) Securities Held by the Issuer or Its Affiliates.
Whenever the consent or approval of Holders of a specified
percentage of Registrable Shelf Securities or Registrable
Securities is required hereunder, Registrable Shelf Securities or
Registrable Securities, as the case may be, held by the Issuer or
its affiliates (as such term is defined in Rule 405 under the
Securities Act) shall not be counted in determining whether such
consent or approval was given by the Holders of such required
percentage.
(k) Third Party Beneficiaries. Holders are intended
third party beneficiaries of this Agreement and this Agreement
may be enforced by such Persons.
(1) Entire Agreement. This Agreement, together with the
Purchase Agreement, is intended by the parties as a final and
exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein
and therein and any and all prior oral or written agreements,
representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Initial
Purchaser on the one hand and the Issuer on the other, or between
or among any agents, representatives, parents, subsidiaries,
affiliates, predecessors in interest or successors in interest
with respect to the subject matter hereof and thereof are merged
herein and replaced hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
XCL LTD.
By:_______________________
David A. Melman
Executive Vice President,
General Counsel and Secretary
JEFFERIES & COMPANY, INC.
By:________________________
Robert W. Carington
Senior Vice President
RESTATED FORBEARANCE AGREEMENT
THIS RESTATED FORBEARANCE AGREEMENT (herein called this
"Agreement"), dated for reference purposes as of April 10, 1997
but effective for all purposes on May 20, 1997), is made by and
among XCL-Texas, Inc., a Texas corporation ("Borrower"), XCL
Ltd., a Delaware corporation ("Parent"), and ING (U.S.) Capital
Corporation ("ING").
RECITALS:
1. Borrower, Parent (then named "The Exploration Company of
Louisiana, Inc.") and ING (then named "International Nederlanden
(U.S.) Capital Corporation") have entered into a certain Credit
Agreement dated as of January 31, 1994 (as from time to time
amended, the "Credit Agreement"). ING is a party to the Credit
Agreement in the dual capacities of "Agent" and "Lender" (as
defined therein) and references herein to ING refer to it in both
such capacities. (As provided below, certain terms which are
defined in the Credit Agreement have the same meanings when used
herein.)
2. Pursuant to the Credit Agreement, Borrower has given the
Note to ING. Borrower has failed to make certain payments now
due and owing under the Credit Agreement and the Note, which
failure constitutes an Event of Default under the Credit
Agreement.
3. Parent has informed ING that Parent intends to offer for
sale (the "Notes Offering") to certain qualified institutional
buyers units (the "Units") consisting of Parent's senior secured
notes and common stock purchase warrants, substantially on the
terms (the "Offering Terms") described in Parent's Final Offering
Memorandum (the "Final Memorandum") dated May 13, 1997, and that
if the Notes Offering is successful Parent will use a portion of
the proceeds thereof to pay all outstanding Obligations under the
Credit Agreement in full. Parent has asked ING to agree, as
provided herein, from enforcing its rights under the Loan
Documents for the Standstill Period described below.
4. Parent has also asked ING to consent to XCL-China's
borrowing of the "China Loans" referred to below.
5. Borrower, Parent and ING have previously entered into
that certain Forbearance Agreement dated as of April 9, 1997 (the
"Original Forbearance agreement") and now wish to restate the
Original Agreement on the terms hereof.
NOW, THEREFORE, in consideration of the various
acknowledgments and agreements contained herein, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto do hereby
acknowledge and agree as follows:
1. Definitions. Unless the context otherwise requires or
unless otherwise expressly defined herein, the terms defined in
the Credit Agreement shall have the same meanings whenever used
in this Agreement. As used herein:
"Standstill Period" shall mean the period from March 1, 1997
until 5:00 p.m., New York time, on May 30, 1997, provided that
the Standstill Period shall be extended to November 1, 1997 if,
by May 30, 1997, all of the following conditions have been met:
(a) Parent shall have received gross cash proceeds
before deduction of fees and expenses ("Debt Proceeds") of
$55,000,000 or more from the sale of Units pursuant to the
Notes Offering,and
(b) Parent shall have received gross cash proceeds
before deduction of fees and expenses ("Equity Proceeds")
of $15,000,000 or more from the sale of preferred stock and
warrants pursuant to an offering (the "Equity Offering")
made concurrently with the Notes Offering, and
(c) Either Parent shall have (i) received an
additional $10,000,000 in Equity Proceeds, or (ii) the
holders of approximately $8,000,000 and no more than
$10,000,000 of Parent's subordinated debt shall have
exchanged such subordinated debt for preferred stock and
warrants in Parent, either by (A) exchanging their
subordinated notes for such preferred stock and warrants or
(B) purchasing such preferred stock and warrants for cash
and, in a concurrent transaction, Parent prepaying their
subordinated debt in an aggregate face amount equal to the
net Equity Proceeds received from such purchase and sale.
(d) All of the Equity Proceeds received by Parent
are available to Parent for one or more of the following
purposes: to pay costs of issuance of the Notes Offering and
the Equity Offering, to pay current and future obligations
of XCL-China due on or before November 1, 1997, to pay
reasonable and necessary general and administrative expenses
through November 1, 1997 (not to exceed $2,375,000), to pay
the China Loans, or to pay the Obligations, and
(e) All of the Debt Proceeds received by Parent are
either available to Parent for the same purposes or, if
required under the terms of the Offering, are set apart and
held under Approved Escrow Agreements pending approval of an
overall development plan (a "Development Plan) by the
Ministry of Foreign Trade and Economic Cooperation of the
People's Republic of China or another governmental agency
with jurisdiction ("MOFTEC") for the C-D Field subject to
that certain Contract for Petroleum Exploration, Development
and Production on the Zhao Dong Block, 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.
"Approved Cash Collateral Agreements" shall mean one or more
instruments and agreements satisfactory to Parent, ING, and the
principal underwriter of the Offering which provide, among other
things: (i) for some or all of the Debt Proceeds to be segregated
and held as collateral under a senior lien securing the senior
secured notes included in the Units until approval of a
Development Plan by MOFTEC, (ii) for such Debt Proceeds (and the
earnings thereon) to be the only collateral for such senior notes
until the Obligations owing to ING have been paid in full, (iii)
for ING to disclaim any security interest in such cash collateral
and the proceeds thereof, and (iv) for Debt Proceeds sufficient
to pay the Obligations in full to be paid directly to ING upon
approval of a Development Plan by MOFTEC.
2. Designated Defaults. As of March 15, 1997, the
aggregate unpaid principal balance on the Note is $17,279,008.59
and the unpaid interest which has accrued on such principal
balance through such date is $1,018,233.83. Various reimbursable
expenses of ING are also due and payable by Borrower. Borrower
has, on more than one occasion, failed to pay principal and
interest which has become due on the Note, and such failures
constitute multiple Events of Default under the Credit Agreement.
Such Events of Default, together with any further Events of
Default caused by Borrower's failure to make further payments of
principal and interest on the Note during the Standstill Period
and any present breaches or breaches by Borrower and Parent
during the Standstill Period of the following covenants under the
Credit Agreement:
Sections 5.1(g) and 5.2(b)(ii), insofar as such covenants
would be breached as a result of past-due or delinquent
Debt,
Section 5.2(d), insofar as such covenant would be breached
by the issuance of preferred stock of Parent or options or
warrants to purchase such preferred stock,
Section 5.2(f), insofar as such covenant would be breached
by the use of preferred stock of Parent to pay dividends on
Parent's common or preferred stock, and
Sections 5.2(l), (m), (n) or (o), insofar as such covenants
would be breached by any failure to comply with the terms
thereof
are herein called the "Designated Defaults".
3. Standstill; Consents.
(a) In consideration of the provisions hereof,
ING hereby agrees that during the Standstill Period it will
not (except as provided in Section 7 hereof) accelerate the
maturity of the Note or commence any lawsuit or any
foreclosure proceedings to collect the Note. Borrower and
Parent hereby acknowledge and agree that the execution,
delivery and effectiveness of this Agreement do not in any
way operate as a waiver of any Designated Default, that ING
has not waived any right, power or remedy under any Loan
Document, and that, after the end of the Standstill Period,
ING will possess all of the rights and remedies granted to
it under any Loan Document and all of its other legal and
equitable rights.
(b) ING hereby consents to XCL-China's borrowing
of up $6,200,000 (the "China Loans") from Kayne Anderson (or
associated investors), the Estate of J. Edgar Monroe, the J.
Edgar Monroe Foundation (1976), Patrick A. Tesson or other
investors on the following terms: (i) the China Loans must
be unsecured; (ii) the China Loans must be evidenced by one
or more promissory notes which are substantially in the form
attached as Exhibit B to the Original Forbearance Agreement,
(iii) all fundings of the China Loans must be paid directly
to Apache Corporation (or one of its subsidiaries) to
satisfy current obligations of XCL-China relating to the
Zhao Dong Block, Bohai Bay, China, (iv) ING must be given
prompt written notice of each China Loan and a right to
purchase any or all of the China Loans upon demand, at a
price equal to par plus accrued and unpaid interest, and (v)
if XCL-China makes any payment of the China Loans with funds
obtained by it from Parent or any of its other Subsidiaries,
such funds must be made available to XCL-China in the form
of an intercompany loan under a promissory note (acceptable
to ING in form and substance) made by XCL-China to Parent
and pledged by Parent to ING to secure the Obligations.
Parent hereby covenants that if any such payment of the
China Loans is made, Parent will pledge and deliver such a
promissory note to ING under documents acceptable to ING in
form and substance.
(c) ING hereby consents to, and waives any Default
or Event of Default which may otherwise be caused by, the
offering, sale and issuance of the Units on the Offering
Terms and the offering, sale and issuance of preferred stock
and warrants pursuant to the Equity Offering.
(d) ING hereby consents to the designation of XCL-
China as a "Restricted Subsidiary" under the Indenture
governing the Notes Offering for the limited purpose of the
covenant therein which is described in the Final Memorandum
under "-- Certain Covenants -- Limitation on Capital Stock
of Restricted Subsidiaries" but for no other purpose, and
Parent hereby agrees that, until all of the Obligations have
been paid in full, it will not designate XCL-China as such a
"Restricted Subsidiary" for any other purpose and will not
designate any of its other Subsidiaries as such a
"Restricted Subsidiary" for any purpose.
4. Representations, Warranties and Agreements. Each of
Parent and Borrower hereby represents, warrants, acknowledges,
admits and agrees as follows:
(a) This Agreement, the Credit Agreement and all
Loan Documents (herein, as amended, modified, restated or
supplemented from time to time, collectively called the
"Documents") are and shall continue to be legal, valid and
binding obligations of Borrower and Parent, enforceable
against Borrower and Parent in accordance with their
respective terms.
(b) All covenants, representations and warranties of
Borrower or of Parent which are made in the Documents are
hereby ratified, remade and reaffirmed in all respects
(provided that Parent and Borrower are not representing,
warranting or covenanting that no Designated Defaults now
exist or will exist during the Standstill Period).
(c) Each of Parent and Borrower has the corporate
power, and has been duly authorized by all requisite
corporate action, to execute and deliver this Agreement and
to perform its obligations hereunder. This Agreement has
been duly executed and delivered by Parent and Borrower.
(d) The execution, delivery and performance of this
Agreement by Borrower and by Parent do not and will not (i)
violate any law, rule, regulation or court order to which
Borrower or Parent is subject, (ii) conflict with or result
in a breach of their respective articles of incorporation or
by-laws or any agreement or instrument to which either of
them is a party or by which it or its properties are bound,
or (iii) result in the creation or imposition of any lien,
security interest or encumbrance on any property of Borrower
or Parent, whether not owned or hereafter acquired, other
than liens in favor of ING.
(e) Borrower has no defense, counterclaim or setoff
with respect to the Obligations or the Documents (any such
setoffs, defenses or counterclaims being hereby waived and
released by Borrower and Parent).
(f) The recitals set forth above are true and
accurate and are an operative part of this Agreement.
(g) Concurrently with the Original Forbearance
Agreement, Parent has executed and delivered to ING a First
Amendment to Stock Pledge Agreement by means of which Parent
granted to ING a valid first priority lien and security
interest in all issued and outstanding shares of XCL-Land,
Ltd. and in all proceeds thereof. ING has and will continue
to have a valid first priority lien and security interest in
all Collateral in which such any such lien or security
interest has been granted (or has purportedly been granted)
to ING, and each of Borrower and Parent expressly reaffirms
all such security interests and liens and all Documents
containing any grant thereof. In particular and without
limitation, Parent hereby ratifies and confirms its pledge
to ING of all of the issued and outstanding shares of the
following companies (all shares in each such company being
evidenced by the share certificate listed opposite such
company):
XCL-Acquisitions, Inc. Certificate #1
XCL-China Ltd. Certificate #1
XCL-Exploration & Production, Inc.
(now named The Exploration Company
of Louisiana, Inc.) Certificate #1
XCL-Texas, Inc. Certificate #1
XCL-Land, Ltd. Certificate #1
Parent hereby confirms (i) that it has no subsidiaries other
than the five companies listed immediately above, XCL
Coalbed Methane Ltd. (a company with no material assets) and
XCL China Lube Oil Ltd. (a wholly owned subsidiary of XCL-
China) and (ii) that all share certificates issued by such
five companies have been delivered in pledge to ING.
(h) Borrower and/or Parent will pay all of the
Obligations in full in cash, including principal, interest,
fees, expenses, and all other Obligations, either (i) at the
time of consummation of the Notes Offering, if no Approved
Cash Collateral Agreements are required in connection
therewith, or (ii) at the time of the first release of funds
from the Approved Cash Collateral Agreements, if Approved
Cash Collateral Agreements are required in connection with
the Notes Offering.
(i) Borrower may, and will, use (or cause XCL-China
to use) all of the Equity Proceeds for the following
purposes: first, to pay costs of issuance of the Note
Offering and the Equity Offering and to repay the China
Loans; second, to pay current obligations of XCL-China and
to establish a reserve for such obligations (under terms
reasonably acceptable to ING) pending release of the Debt
Proceeds; third, to pay reasonable and necessary general and
administrative expenses through November 1, 1997 (not to
exceed $2,375,000); and fourth, to the extent any Equity
Proceeds remain, to pay the Obligations.
(j) Within five Business Days after the closing of
the Equity Offering Borrower or Parent shall deposit $50,000
with ING's counsel (Thompson & Knight, P.C.) to be applied
towards legal fees and expenses which are reimbursable under
the Credit Agreement (both past and future), including fees
and expenses of ING's counsel incurred in connection with
the negotiation and preparation of this Agreement.
5. Amendment to Credit Agreement. Section 5.2(e)(iii)
of the Credit Agreement is hereby amended in its entirety to read
as follows:
"(iii) sales of assets which are described in the
definition of "General Funds" in the first sentence of
Section 5.1(p), provided that:
(1) if Parent sells all of its direct or indirect
stockholdings in the Lutcher Moore Subsidiaries or if
the Lutcher Moore Subsidiaries sell any interests in
the Lutcher Moore Tract, the proceeds of such sales
must, to the extent thereof, promptly be used as
follows: first, to pay up to $5,200,000 (plus accrued
and unpaid interest thereon) in Restricted Debt of the
Lutcher Moore Subsidiaries secured by such tract;
second, to pay the China Loans or, if the China Loans
have been paid by the time such proceeds are received,
to establish a reserve of up to $3,100,000, under terms
reasonably acceptable to Agent, for current and future
obligations of XCL-China due on or before September 30,
1997; and third, to pay the Obligations;
(2) if XCL-China sells or farms out any of its
assets in China, the proceeds of such sales must be
made available to Borrower or Parent first used to pay
the China Loans and then used to pay the Obligations."
6. Forbearance Defaults. Each of the following shall
constitute a Forbearance Default:
(a) the existence of any Event of Default (other
than a Designated Default) under the Documents or the
documents governing the China Loans;
(b) Borrower shall fail to keep or perform any of
the terms, obligations, covenants or agreements contained
herein; or
(c) any representation or warranty of Borrower
herein shall be false, misleading or incorrect in any
material respect.
7. Rights and Remedies of ING. During the continuance
of a Forbearance Default, ING shall be immediately entitled to
enforce all of its rights and remedies under the Documents,
including without limitation its rights to accelerate the
principal balance of the Note.
8. Waivers. Each of Borrower and Parent hereby waives
and affirmatively agrees not to allege or otherwise pursue any or
all defenses, affirmative defenses, counterclaims, claims, causes
of action, setoffs or other rights that it may have to contest
(a) any Designated Defaults; (b) any provision of the Documents
or this Agreement; (c) any lien or security interest of ING in
any property, whether real or personal, tangible or intangible,
or any right or other interest, now or hereafter arising in
connection with the Collateral; (d) the actions and inactions of
ING in administering the Documents and the financing arrangements
between Borrower and ING since the execution of the original
Credit Agreement; or (e) the rights of ING to all of the profits,
proceeds and other benefits from the Collateral.
9. Release. Each of Borrower and Parent hereby
releases, remises, acquits and forever discharges ING and ING's
employees, agents, representatives, consultants, attorneys,
fiduciaries, officers, directors, partners, predecessors,
successors and assigns, subsidiary corporations, parent
corporations, and related corporate divisions (all of the
foregoing hereinafter called the "Released Parties"), from any
and all actions and causes of action, judgments, executions,
suits, debts, claims, demands, liabilities, obligations, damages
and expenses of any and every character, known or unknown, direct
and/or indirect, at law or in equity, of whatsoever kind or
nature, for or because of any matter or things done, omitted or
suffered to be done by any of the Released Parties prior to and
including the date of execution hereof, and in any way directly
or indirectly arising out of or in any way connected to this
Agreement or the Documents (all of the foregoing hereinafter
called the "Released Matters"). Each of Borrower and Parent
acknowledges that the standstill by ING pursuant to Section 3
above is in full satisfaction of all or any alleged injuries or
damages arising in connection with the Released Matters.
10. Effect and Construction of Agreement. Except as
expressly provided herein, the Documents shall remain in full
force and effect in accordance with their respective terms, and
this Agreement shall not be construed to:
(a) impair the validity, perfection or priority of
any lien or security interest securing the Obligations;
(b) waive or impair any rights, powers or remedies
of ING under, or constitute a waiver of, any provision of
the Documents upon termination of the Standstill Period; or
(c) constitute an agreement by ING or require ING to
extend the Standstill Period, grant additional forbearance
periods, or extend the term of the Credit Agreement or the
time for payment of any of the Obligations.
11. Conflicts. In the event of any express conflict
between the terms of this Agreement and any of the Documents,
this Agreement shall govern.
12. Presumptions. Borrower acknowledges that it has
consulted with and been advised by its counsel and such other
experts and advisors as it has deemed necessary in connection
with the negotiation, execution and delivery of this agreement
and has participated in the drafting hereof. Therefore, this
Agreement shall be construed without regard to any presumption or
rule requiring that it be construed against any one party causing
this Agreement or any part hereof to be drafted.
13. Conditions of Effectiveness. This Agreement shall
become effective upon satisfaction of the following conditions
precedent: (a) ING shall have received four counterparts of this
Agreement, executed by Borrower and Parent and consented and
agreed to by the persons named as signatories to the "Consent and
Agreement" paragraph following the signatures hereto of Borrower,
Parent and ING, and (b) Parent shall have issued, and ING shall
have received, warrants to ING, in the same form as the warrants
issued in connection with the China Loans (with such minor
changes therein as ING shall reasonably request) and in an amount
equal to two-thirds of the warrants issued in connection with the
China Loans.
14. Entire Agreement. This Agreement restates and amends
the Original Forbearance Agreement in its entirety. This
Agreement sets forth the entire agreement among the parties
hereto with respect to the subject matter hereof. Neither
Borrower nor Parent has received or relied on any agreements,
representations, or warranties of ING, except as specifically set
forth herein. Borrower acknowledges that it is not relying upon
oral representations or statements inconsistent with the terms
and provisions of this Agreement.
15. Loan Document. This Agreement is a Loan Document,
and all provisions in the Credit Agreement pertaining to Loan
Documents (including Section 9.10 of the Credit Agreement, which
provides for waiver of jury trial) apply hereto. This Agreement
may be separately executed in counterparts and by the different
parties hereto in separate counterparts, each of which when so
executed shall be deemed to constitute one and the same
Agreement.
IN WITNESS WHEREOF, this Agreement is executed as of the
date first above written.
XCL-TEXAS, INC.
By:---------------------
Name:-------------------
Title:------------------
XCL LTD.
By:---------------------
Name:-------------------
Title:------------------
ING (U.S.) CAPITAL CORPORATION
By:---------------------
Name:-------------------
Title:------------------
<PAGE>
CONSENT AND AGREEMENT
Each of the undersigned hereby (a) consents to the
provisions of the foregoing Restated Forbearance Agreement and
the transactions contemplated therein, (b) hereby ratifies and
confirms its respective Guaranty dated as of January 31, 1994
(or, in the case of XCL-China Ltd., dated as of April 9, 1997),
made by it for the benefit of Agent, and all other Loan Documents
heretofore made by it, (c) agrees that its obligations and
covenants under such Guaranty and Loan Documents are unimpaired
by such Restated Forbearance Agreement and are and shall remain
in full force and effect, and (d) releases, remises, acquits and
forever discharges all of the Released Parties referred to above
from any and all of the Released Matters referred to above and
acknowledges that the standstill by ING pursuant to Section 3
above is in full satisfaction of all or any alleged injuries or
damages arising in connection with the Released Matters.
XCL, LTD.
By:--------------------
Name:------------------
Title:-----------------
XCL-ACQUISITIONS, INC.
By:--------------------
Name:------------------
Title:-----------------
THE EXPLORATION COMPANY OF
LOUISIANA, INC. (formerly
named XCL Exploration &
Production, Inc.)
By:--------------------
Name:------------------
Title:-----------------
XCL-CHINA LTD.
By:--------------------
Name:------------------
Title:-----------------
