SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
XCL LTD.
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
PRELIMINARY COPY
XCL LTD.
DEAR SHAREHOLDER:
You are cordially invited to attend the Annual Meeting of
Shareholders of XCL Ltd. to be held at 10:00 a.m., Central
Daylight Savings Time, on Tuesday, June 30, 1998, in The Monterey
Room of the Hyatt Regency Houston at George Bush Intercontinental
Airport, 15747 JFK Boulevard, Houston, Texas 77032.
The attached materials include the Notice of Annual Meeting
of Shareholders and the Proxy Statement, which contains
information concerning the meeting, the nominees for election as
members of the Board of Directors; a proposal to amend the
Company's Amended and Restated Certificate of Incorporation to
(A) eliminate the requirement for (i) Common Stockholders to vote
on amendments affecting the currently outstanding shares of
Serial Preferred Stock and (ii) stockholders to ratify Bylaw
amendments adopted by the Board, and (B) to require the approval
of at least a majority of the outstanding shares of Amended
Series A Preferred Stock for the creation of a class of Preferred
Stock equal in preference to the Amended Series A Preferred
Stock; a proposal to ratify the Board's amendments of the
Company's Bylaws (i) to change the month in which the Company's
Annual Meeting of Shareholders is scheduled and (ii) to eliminate
the requirement for stockholders to ratify Bylaw amendments
adopted by the Board, and any other relevant matters.
Management will report on the Company's activities during
the last fiscal year and future plans and prospects of the
Company, and shareholders will have an opportunity to ask
questions about its operations and prospects.
Shareholder interest in the affairs of the Company is
welcomed and encouraged, and it is requested that you please
complete, sign, date, and promptly return your proxy in the
enclosed envelope. Such action will not limit your right to vote
in person if you attend the meeting in person, but will assure
your representation if you cannot attend.
Sincerely,
/s/ Marsden W. Miller, Jr.
MARSDEN W. MILLER, JR.
Chairman of the Board
and Chief Executive Officer
June 3, 1998
XCL LTD.
(a Delaware corporation)
110 Rue Jean Lafitte, 2nd Floor
Lafayette, Louisiana 70508
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
To Be Held On June 30, 1998
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders (the "Meeting") of XCL
Ltd. (the "Company") will be held in The Monterey Room of the
Hyatt Regency Houston at George Bush Intercontinental Airport,
located at 15747 JFK Boulevard, Houston, Texas, on June 30, 1998
at 10:00 a.m., Central Daylight Savings Time, to consider and
take action on the following matters:
1. The election of three Class II directors for three-
year terms, each to hold office until the 2001 Annual
Meeting of Shareholders and until a successor shall
have been elected and shall have qualified;
2. To adopt amendments to the Company's Amended and
Restated Certificate of Incorporation (A) to eliminate
the requirement for (i) holders of Common Stock to vote
on amendments affecting outstanding Preferred Stock and
(ii) stockholders to ratify Bylaw amendments adopted by
the Board of Directors and (B) to require the approval
of at least a majority of the outstanding shares of
Amended Series A Preferred Stock for the creation of a
class of Preferred Stock equal in preference to the
Amended Series A Preferred Stock;
3. To ratify the Board's amendments of the Company's
Amended and Restated Bylaws (i) to change the month in
which the Company holds its Annual Meeting of
Shareholders from May to June and (ii) to eliminate the
requirement for stockholders ratification of Bylaw
amendments adopted by the Board; and
4. The transaction of such other business as may
properly come before the Meeting or any adjournments
thereof.
Only shareholders of record at the close of business on
Monday, May 18, 1998 are entitled to notice of and to vote at the
Meeting.
YOUR PROXY IS IMPORTANT TO ASSURE A QUORUM AT THE MEETING.
WHETHER OR NOT YOU EXPECT TO BE PERSONALLY PRESENT AT THE
MEETING, PLEASE BE SURE THAT THE ENCLOSED PROXY IS PROPERLY
COMPLETED, DATED, SIGNED AND RETURNED WITHOUT DELAY IN THE
ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Lisha C. Falk
LISHA C. FALK
Secretary
June 3, 1998
<PAGE>
This document is important and requires your immediate
attention. If you are in any doubt as to the action you should
take, you should consult your stockbroker, bank manager, solicitor,
accountant or other professional advisor immediately.
If you have sold all of your shares of XCL Ltd. after May 18,
1998, the record date of the Meeting, you should hand this document
and accompanying form of proxy to the purchaser or to the agent
through whom the sale was effected for transmission to the
purchaser.
XCL LTD.
(Incorporated with limited liability in the United States of America
under the laws of the State of Delaware)
June 3, 1998
Directors: Principal Executive Office:
- --------- --------------------------
M.W. Miller, Jr.* (Chairman of the Board 110 Rue Jean Lafitte, 2nd Floor
and Chief Executive Officer) Lafayette, Louisiana 70508
J.T. Chandler* USA
Benjamin B. Blanchet *
R. Thomas Fetters, Jr.*
F. Hofheinz*
A.W. Hummel, Jr.*
M. Palliser
F.J. Reinhardt, Jr.*
P.F. Ross
* U.S. Citizen
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
Solicitation and Voting of Proxies
- ----------------------------------
This Proxy Statement is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of XCL
Ltd. (the "Company") to be voted at the Annual Meeting of
Shareholders (the "Meeting") to be held in The Monterey Room of the
Hyatt Regency Houston at George Bush Intercontinental Airport,
located at 15747 JFK Boulevard, Houston, Texas, on Tuesday, June
30, 1998, at 10:00 a.m., Central Daylight Savings Time, and at any
adjournment thereof. The approximate date on which this Proxy
Statement and the enclosed form of proxies are first being sent or
given to shareholders of record is June 3, 1998.
The Board of Directors of the Company has fixed the close of
business on May 18, 1998 as the record date for the determination
of holders of shares of outstanding capital stock entitled to
notice of and to vote at the Meeting. On May 18, 1998, there were
outstanding: 22,926,333 shares of common stock, $.01 par value
("Common Stock"), the holders of which will be entitled to cast one
vote per share on each matter submitted to a vote at the Meeting;
1,177,159 shares of Amended Series A, Cumulative Convertible
Preferred Stock, $1.00 par value ("Amended Series A Preferred
Stock"), the holders of which will be entitled to cast eleven (11)
votes per share on each matter submitted to a vote at the Meeting;
and 47,085 shares of Amended Series B, Cumulative Convertible
Preferred Stock, $1.00 par value ("Amended Series B Preferred
Stock"), the holders of which will be entitled to cast fifty (50)
votes per share on each matter submitted to a vote at the Meeting.
The presence, in person or by proxy, of the holders of issued and
outstanding shares of capital stock entitled to cast an aggregate
of 19,114,667 votes at the Meeting will constitute a quorum for the
transaction of business.
Proxies in the accompanying forms which are properly
completed, signed, dated and returned to the Company and not
revoked will be voted in accordance with instructions contained
therein. Shareholders are urged to specify their choices by
marking the appropriate boxes on the enclosed proxy card; if no
choice has been specified, the shares will be voted as recommended
by the Board of Directors. Accordingly, if no choice is specified,
proxies will be voted "FOR" Proposals 1, 2 and 3 set forth in the
accompanying forms of proxy.
Shareholders have 3 choices as to their vote on Proposals 2
and 3 to be voted upon at the Meeting in addition to the election
of directors. Shareholders may vote "FOR" such Proposal or vote
"AGAINST" such Proposal or "ABSTAIN" from voting by checking the
appropriate box. Abstentions and broker non-votes (matters of a non-
routine nature as to which brokers holding shares in street name
have received no instructions from their clients and, accordingly,
do not vote) on Proposal 2 will have the effect of a negative vote
since the amendment of the Certificate of Incorporation requires
the affirmative vote of holders of a majority of the outstanding
shares of voting capital stock entitled to vote on the matter.
Abstentions will be counted in the tabulations of votes and broker
non-votes will not be counted for the purposes of determining
whether Proposal 3 has been approved since this proposal requires
the approval of a majority of the votes entitled to be cast by the
shares of voting capital stock present at the Meeting, in person or
by proxy, and entitled to vote on the matters. Abstentions and
broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business.
The Board of Directors hopes that shareholders will exercise their
right to vote rather than abstaining from voting. It is necessary
that proxies be signed, dated and returned for all such shares to
be voted at the Meeting.
Each shareholder who executes the enclosed proxy may revoke it
at any time prior to its being exercised by delivering written
notice to the Secretary of the Company. Mere attendance at the
Meeting will not revoke the proxy, but a shareholder present at the
Meeting, upon notice to the Secretary, may revoke such proxy and
vote in person.
Expenses of Solicitation
- ------------------------
The cost of soliciting proxies will be borne by the Company,
including expenses incurred in connection with the preparation and
mailing of this Proxy Statement and all documents which now
accompany or may hereafter supplement it. The solicitations will
be made in person and by mail. The Company will supply brokers or
persons holding shares of record in their names or in the names of
their nominees for other persons, as beneficial owners, with such
additional copies of proxies and Proxy Statements as may reasonably
be requested in order for such record holders to send one copy to
each beneficial owner, and will, upon request of such record
holders, reimburse them for their reasonable expenses in mailing
such materials.
The Company has retained the services of ChaseMellon
Shareholder Services to solicit proxies on behalf of the Company.
Services to be performed under the engagement will include
consultation with respect to planning and organizing the Meeting,
search and distribution of materials, and solicitation of proxies
from brokers, banks, nominees and other holders. The fee for this
solicitation service is estimated to be approximately $6,500.00,
depending upon the services performed by the soliciting agent and
will be paid by the Company, as well as reimbursement of out-of-
pocket expenses.
Further, certain directors, officers and employees of the
Company and its financial advisors, not especially employed for
this purpose, may solicit proxies, without additional remuneration
therefor, by mail, telephone, telegraph or personal interview.
Security Ownership of Management
- --------------------------------
The following table sets forth information concerning the
shares of the Company's Common Stock owned beneficially by each
director and nominee for director of the Company and all directors
and officers as a group as of May 1, 1998. As of that date there
were issued and outstanding 22,926,333 shares of Common Stock
issued and outstanding and 1,177,159 shares of Amended Series A
Preferred Stock and 47,085 shares of Amended Series B Preferred
Stock. No member of management currently owns directly or
beneficially any shares of Amended Series B Preferred Stock. The
mailing address for all such individuals is XCL Ltd., 110 Rue Jean
Lafitte, 2nd Floor, Lafayette, Louisiana 70508.
<TABLE>
<CAPTION>
Common Stock Amended Series A Preferred Stock
------------------------------- --------------------------------
Number Percent Number Percent
Name of Beneficial Owner of Shares of Class of Shares of Class
- ------------------------ --------- -------- --------- ---------
<S> <C> <C> <C> <C>
Marsden W. Miller, Jr. 1,665,713 (1)(2)(3)(4) 7.11 -- --
John T. Chandler 554,940 (1)(2)(3)(4) 2.40 20,950 (2) 0.02
Benjamin B. Blanchet 200 (5) -- -- --
Fred Hofheinz 6,666 (3) 0.03 -- --
Arthur W. Hummel, Jr. 6,666 (3) 0.03 -- --
Sir Michael Palliser 6,666 (3) 0.03 -- --
Francis J. Reinhardt, Jr. 40,798 (3)(6) 0.18 -- --
R. Thomas Fetters, Jr. 62,699 (4) 0.27 -- --
Peter F. Ross -- -- -- --
All directors and officers
of the Company as a group
(16 persons) 2,484,064 (3)(4) 10.83 20,950 (2) 0.02
</TABLE>
_______________
(1) Includes 13,333 shares which are subject to an option
granted under agreement dated October 1, 1985 in favor of
John T. Chandler. Such shares are also included in Mr.
Chandler's holding inasmuch as the option is presently
exercisable. For purposes of the total holdings of the
group, the shares are included solely in Mr. Miller's share
holdings.
(2) Includes shares of restricted stock awarded to Messrs.
Miller and Chandler which are subject to certain forfeiture
provisions.
(3) Includes shares of Common Stock which may be acquired
pursuant to options which are exercisable within 60 days.
(4) Includes shares of Common Stock which may be acquired
pursuant to stock purchase warrants exercisable within 60
days.
(5) Represents shares of Common Stock owned by Mr. Blanchet's
children. Mr. Blanchet disclaims beneficial ownership of
these shares.
(6) Includes 6,666 shares of Common Stock owned by Carl H.
Pforzheimer & Co. of which Mr. Reinhardt is a general
partner and 13,333 shares owned by Petroleum and Trading
Corporation of which Mr. Reinhardt is an officer and
director. Mr. Reinhardt disclaims beneficial ownership of
the shares owned by Petroleum and Trading Corporation.
Security Ownership of Certain Beneficial Owners
- -----------------------------------------------
The following table sets forth as of March 31, 1998, the
individuals or entities known to the Company to own more than
5 percent of the Company's outstanding shares of voting
securities. As of that date there were issued and outstanding
22,926,333 shares of Common Stock; 1,129,453 shares of Amended
Series A Preferred Stock; and 47,085 shares of Amended Series
B Preferred Stock. Except as otherwise indicated, all shares
are owned both of record and beneficially.
<TABLE>
<CAPTION>
Amended Series A Amended Series B
Common Stock (1) Preferred Stock(2) Preferred Stock (3)
--------------------- -------------------- --------------------
Name and Address Number of Percent Number of Percent Number of Percent
of Beneficial Owner Shares of Class Shares of Class Shares of Class
- ------------------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Cumberland Associates
1114 Avenue of the Americas
New York, New York 10036 2,900,228 (4) 11.28 214,909 19.03 -- --
KAIM Non-Traditional, L.P.
1800 Avenue of the Stars,
2nd Floor
Los Angeles, California 90026 4,858,366 (4)(5) 18.08 311,908 (6) 27.62 47,085 100
Mitch Leigh
29 West 57th Street
New York, New York 10019 1,487,341 (4)(7) 8.33 -- -- -- --
Marsden W. Miller, Jr.
110 Rue Jean Lafitte
2nd Floor
Lafayette, Louisiana 70508 1,665,713 (4)(8) 7.11 -- -- -- --
</TABLE>
_______________
(1) This table includes shares of Common Stock issuable upon
conversion of the shares of Amended Series A Preferred
Stock. Each share of Amended Series A Preferred Stock is
convertible into approximately 11 shares of Common Stock.
(2) The holders of Amended Series A Preferred Stock are
entitled to cast the same number of votes as the shares of
Common Stock then issuable upon conversion thereof
(currently 11 votes) on any matter subject to the vote of
Common Stockholders.
(3) Each share of Amended Series B Preferred Stock is
convertible into approximately 26.3 shares of Common Stock,
if the Common Stock issuable on conversion has not been
registered under the Securities Act of 1933, as amended (the
"Securities Act") and 21 shares of Common Stock, if the
Common Stock issuable on conversion has been so registered,
subject to adjustment, on or after August 31, 1998. Each
share of Amended Series B Preferred Stock is entitled to 50
votes per share.
(4) Includes shares issuable upon the exercise of
outstanding stock purchase warrants exercisable within the
next 60 days.
(5) Includes 16,874 shares owned by Richard A. Kayne, a
director, CEO and President of Kayne Anderson Investment
Management, Inc., the general partner of KAIM Non-
Traditional, L.P. ("KAIM LP"). The shares over which Mr.
Kayne has sole voting and dispositive power are held by him
directly or by accounts for which he serves as trustee or
custodian. The shares over which Mr. Kayne and KAIM LP have
shared voting and dispositive power are held by accounts for
which KAIM LP serves as investment adviser (and, in some
cases as general partner). KAIM LP disclaims beneficial
ownership of these shares, except to the extent that they
are held by it or attributable to it by virtue of its
general partner interests in certain limited partnerships
holding such shares. Mr. Kayne disclaims beneficial
ownership of the shares reported, except those shares
attributable to him by virtue of his limited and general
partner interests in such limited partnerships and by virtue
of his indirect interest in the interest of KAIM LP in such
limited partnerships.
(6) Includes 2,610 shares owned by Richard Kayne, a director,
CEO and President of Kayne Anderson Investment Management,
Inc., the general partner of KAIM LP. The shares over which
Mr. Kayne has sole voting and dispositive power are held by
him directly or by accounts for which he serves as trustee
or custodian. The shares over which Mr. Kayne and KAIM LP
have shared voting and dispositive power are held by
accounts for which KAIM LP serves as investment adviser
(and, in some cases as general partner). KAIM LP disclaims
beneficial ownership of these shares, except to the extent
that they are held by it or attributable to it by virtue of
its general partner interests in certain limited
partnerships holding such shares. Mr. Kayne disclaims
beneficial ownership of the shares reported, except those
shares attributable to him by virtue of his limited and
general partner interests in such limited partnerships and
by virtue of his indirect interest in the interest of KAIM
LP in such limited partnerships.
(7) Includes 104,132 shares owned by Mr. Leigh's wife. Does
not include shares and warrants held in custodial and trust
accounts for Mr. Leigh's minor children, which Mr. Leigh
does not control. Mr. Leigh disclaims beneficial ownership
of all shares held by his wife and minor children.
(8) Includes shares issuable upon the exercise of stock
options exercisable within the next 60 days; and 1,000,000
shares of restricted stock subject to certain forfeiture
provisions.
PROPOSAL 1 - ELECTION OF DIRECTORS
Board of Directors and Committees
- ---------------------------------
Under the Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") and the Amended and Restated
Bylaws (the "Bylaws") of the Company, the Board of Directors is
divided into three classes of directors serving staggered three-
year terms, with one class of directors to be elected at each
annual meeting of shareholders and to hold office until the end
of their term and until their successors have been elected and
qualified. The current Class II directors, whose terms of office
expire at the Meeting are Messrs. Marsden W. Miller, Jr., R.
Thomas Fetters, Jr. and Francis J. Reinhardt, Jr.; the current
Class III directors whose terms of office expire at the Annual
Meeting of Shareholders to be held in 1999 are Messrs. John T.
Chandler, Fred Hofheinz and Peter F. Ross; and the current Class
I directors, whose terms of office expire at the Annual Meeting
of Shareholders to be held in 2000, are Messrs. Michael Palliser,
Arthur W. Hummel, Jr., and Benjamin B. Blanchet.
The Board held five meetings in 1997. The average attendance
by directors at these meetings was 100 percent, and all directors
attended 100 percent of the Board and Committee meetings they
were scheduled to attend.
Under Delaware law and the Bylaws, incumbent directors have
the power to fill any vacancies on the Board of Directors,
however occurring, whether by an increase in the number of
directors, death, resignation, retirement, disqualification,
removal from office or otherwise. Any director elected by the
Board to fill a vacancy would hold office for the unexpired term
of the director whose place has been filled; except that a
director elected to fill a newly created directorship resulting
from an increase in the number of directors, whether elected by
the Board or shareholders, would hold office for the remainder of
the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until his
successor is elected and qualified. If the size of the Board is
increased, the additional directors would be apportioned among
the three classes to make all classes as nearly equal as
possible. On April 7, 1998, Mr. Ross was appointed by the Board
as a Class III director.
There are no arrangements or understandings with any
directors pursuant to which he has been elected a director nor
are there any family relationships among any directors or
executive officers.
The Company has an Executive Committee, whose 1997 members
included Messrs. Miller, Chandler and Blanchet. The Committee
met once during 1997 and, subject to certain statutory
limitations on its authority, has all of the powers of the Board
of Directors while the Board is not in session, except the power
to declare dividends, make and alter Bylaws, fill vacancies on
the Board or the Executive Committee, or change the membership of
the Executive Committee. The Company also has a Compensation
Committee whose present members are Messrs. Palliser, Hofheinz,
Hummel and Reinhardt. The Compensation Committee met once in
1997. It is charged with the responsibility of administering and
interpreting the Company's stock option plans; it also recommends
to the Board the compensation of employee-directors, approves the
compensation of other executives and recommends policies dealing
with compensation and personnel engagements. The Company also
has an Audit Committee whose present members are Messrs.
Hofheinz, Hummel, Palliser and Reinhardt. The Audit Committee
met once in 1997. It reviews with the independent auditors the
general scope of audit coverage. Such review includes
consideration of the Company's accounting practices, procedures
and system of internal accounting controls. The Audit Committee
also recommends to the Board the appointment of the Company's
independent auditors engaged by the Company. The Company has no
standing nominating committee, the functions customarily
attributable to such committee being performed by the Board of
Directors as a whole.
Nominees for Directors and Recommendation of the Board
- ------------------------------------------------------
Messrs. Marsden W. Miller, Jr., R. Thomas Fetters, Jr. and
Francis J. Reinhardt, Jr., have been nominated by the Board for
election as Class II directors, to hold office for three-year
terms expiring at the 2001 Annual Meeting of Shareholders, and in
all cases until their successors are elected and qualified.
Unless authority to vote for election of directors (or for one or
all nominees) shall have been withheld in the manner provided in
the accompanying proxies, the votes represented by such proxies
will be cast for the election of the nominees set forth herein,
or for one or more substitute nominees recommended by the Board
of Directors in the event that, by reason of contingencies not
presently known to the Board of Directors, one or all nominees
should become unavailable for election. The affirmative vote of
a plurality of the votes cast at the Meeting by shareholders
present in person or by proxy, a quorum being present, is
required for the election of such directors. The Board of
Directors recommends that shareholders vote FOR the nominees for
election as Class II directors.
Biographical Information
- ------------------------
Set forth below is a brief biographical summary of the
nominees for election as directors, each of whom presently serves
as a director.
MARSDEN W. MILLER, JR., fifty-six years old, Chairman, has
been Chief Executive Officer and a director since the Company's
incorporation in 1981. He has engaged in the independent domestic
and international oil business since 1964 on an individual basis,
as a stockholder and officer in several companies and as a
practicing attorney. In addition to the U.S. and China, he has
been involved in various aspects of the oil business in Southeast
Asia, Africa, Europe, South America, several former Soviet
Republics and Canada. Mr. Miller graduated from Louisiana State
University in 1964.
R. THOMAS FETTERS, JR., fifty-eight years old, is an
independent oil and gas consultant. He has over 25 years of
exploration, production and management experience, both domestic
and foreign. From 1995 to 1997 Mr. Fetters was Senior Vice
President of Exploration of National Energy Group, Inc., Dallas,
Texas, and from February 1990, until September 1995, he was Vice
President of Exploration of XCL Ltd., and President of XCL-China
Ltd. During 1989, until joining the Company, he served as
Chairman and Chief Executive Officer of Independent Energy
Corporation. From 1984 to 1989, he served as President and Chief
Executive Officer of CNG Producing Company in New Orleans,
Louisiana, and from 1983 to 1984 as General Manager of the
Planning and Technology Division of Consolidated Natural Gas
Service Co. in Pittsburgh, Pennsylvania. From 1966 to 1983, he
served in various positions, from Geologist to Exploration
Manager, with several divisions of Exxon, primarily in the Gulf
Coast region of the U.S. and internationally, in Malaysia and
Australia. Mr. Fetters holds B.S. and M.S. degrees in geology
from the University of Tennessee.
FRANCIS J. REINHARDT, JR., sixty-eight years old, is a
partner in the New York investment banking firm of Carl H.
Pforzheimer & Co. Mr. Reinhardt has been a partner in the firm
for over 30 years and has held various positions, specializing in
independent oil and gas securities, mergers and acquisitions,
placements participation and institutional sales since 1956. Mr.
Reinhardt holds a B.S. degree from Seton Hall University and
received his M.B.A. from New York University. Mr. Reinhardt is a
member of the New York Society of Security Analysts, is a member
of and has previously served as president of the Oil Analysts
Group of New York, is a member and past president of the
National Association of Petroleum Investment Analysts and is a
member of the Petroleum Exploration Society of New York. Mr.
Reinhardt also serves as a director of Mallon Resources
Corporation, a NASDAQ traded petroleum and mining company, as
well as several privately held companies. Mr. Reinhardt has been
a director since December 11, 1992.
The following pages contain biographical information
concerning the directors whose terms of office will not expire in
1998.
BENJAMIN B. BLANCHET, forty-five years old, is Executive
Vice President of the Company. Prior to joining the Company in
August 1997, and since 1983, he was a partner in the law firm of
Gordon, Arata, McCollam & Duplantis, L.L.P. in its Lafayette,
Louisiana office. During that time, he practiced in the areas of
commercial litigation, corporate mergers and acquisitions, oil
and gas transactions, secured financings, securities, tax and
international law matters. Since 1985, he has provided
substantial legal services to the Company, and has been the
Company's lead attorney in China. During that period, Mr.
Blanchet's activities in the Company's China operations have
become more oriented to management responsibilities than legal
ones. He served on the Management Committee of Gordon, Arata,
McCollam & Duplantis, L.L.P. from 1991 to 1997 and as the
Managing Partner of the firm for four years from 1992 through
1995. He practiced law with the firm of Monroe & Lemann in New
Orleans from 1978 through 1983. He is a member of the Louisiana
Bar and admitted to practice before the United States Tax Court.
Mr. Blanchet holds a B.A. degree, with highest distinction, from
the University of Southwestern Louisiana and a J.D., cum laude,
from Harvard Law School.
JOHN T. CHANDLER, sixty-five years old, is Vice Chairman of
the Company and Chairman and Chief Executive Officer of XCL-China
Ltd., a wholly owned subsidiary of the Company responsible for
the Company's operations in China. He joined the Company in June
1982, becoming a director in May 1983. From 1976 until he joined
the Company, he was the Managing Partner of the Oil and Gas Group
of GSA Equity, Inc., New York and director of Executive Monetary
Management, Inc., the parent company of GSA Equity, Inc. From
1972 to 1976, he was director and Vice President of Exploration
and Production of Westrans Petroleum, Inc. and a director of a
number of its subsidiaries. During 1971 and 1972, he was a
petroleum consultant and manager of the oil department of Den
norske Creditbank in Oslo, Norway. Mr. Chandler was Vice
President and Manager of the Petroleum Department of the Deposit
Guaranty National Bank in Jackson, Mississippi from 1969 to
August 1971 and, from 1967 to February 1969, was a petroleum
engineer first for First National City Bank and then for The Bank
of New York. From March 1963 to July 1967, he was employed by
Ashland Oil and Refining Company as a petroleum engineer. From
1959 to 1963, he held the same position with United Producing
Company, Inc., which was acquired by Ashland Oil.
Mr. Chandler graduated from the Colorado School of Mines
with a Professional degree in petroleum engineering and is a
Registered Professional Engineer in the States of Colorado and
Texas, a member of the Society of Petroleum Evaluation Engineers
and a member of AIME.
FRED HOFHEINZ, fifty-nine years old, is an attorney at law
in Houston, Texas. From 1984 to 1987, he served as President of
Energy Assets International Corporation, a fund management
company, now a subsidiary of Torch Energy Advisors, then served
as a consultant to Torch Energy Advisors until 1989. Mr. Hofheinz
also served as the Mayor of Houston, Texas from 1974 to 1978. He,
along with his family, developed the Astrodome in Houston, and
owned the Houston Astros baseball team until 1974. He is founder
and director of United Kiev Resources, Inc., an oil and gas
production company operating in the Republic of the Ukraine in
the name of its wholly owned subsidiary, Carpatsky Petroleum
Company. Mr. Hofheinz earned a Ph.D. degree in Economics from
the University of Texas and his law degree from the University of
Houston. He has been a director since March 21, 1991.
ARTHUR W. HUMMEL, JR., seventy-seven years old, a director
since April 1994, is the former U.S. Ambassador to the People's
Republic of China during the period 1981 to 1985. He has been
active in consulting with firms doing business in East Asia, and
participating in academic and scholarly conferences in the U.S.
and in the East Asia region since his retirement, after thirty
five years of service, from the State Department in 1985. He is a
member and trustee of many academic, business, and philanthropic
organizations involved in international affairs.
Mr. Hummel was born in China. After education in the U.S.
he returned to China prior to Pearl Harbor. After internment by
the Japanese for approximately two years, he escaped and fought
for approximately three years with Chinese guerrillas behind the
Japanese lines in north China until the end of the war.
He obtained an M.A. (Phi Beta Kappa) in Chinese studies from
the University of Chicago in 1949, and joined the State
Department in 1950. His early foreign assignments include Hong
Kong, Japan and Burma. He was Deputy Director of the Voice of
America in 1961-1963; Deputy Chief of Mission of the American
Embassy in Taiwan, 1965-1968; Ambassador to Burma, 1968-1970;
Ambassador to Ethiopia, 1975-1976; Ambassador to Pakistan, 1977-
1981; and Ambassador to the People's Republic of China, 1981-
1985. He was Assistant Secretary of State for East Asia, 1976-
1977. He has received numerous professional awards from within
and outside the Government.
SIR MICHAEL PALLISER, seventy-five years old, a director
since April 1994, was Chairman of Samuel Montagu & Co. Limited
from 1984 to 1993, the London merchant bank which was owned by
Midland Bank, of which he was Deputy Chairman from 1987 to 1991,
and which is now part of the Hong Kong & Shanghai Banking
Corporation. He was Vice Chairman of Samuel Montagu from 1993 to
1996. Mr. Palliser is a former Director of Shell, BAT Industries,
Bookers, Eagle Star, and United Biscuits.
In 1947, he joined the British Diplomatic Service and served
in a variety of overseas and Foreign Office posts before becoming
head of the Planning Staff in 1964-1966, Private Secretary to the
Prime Minister, 1966-1969, Minister in the British Embassy in
Paris, 1969-1971, and the British Ambassador and Permanent
Representative to the European Communities in Brussels from 1971-
1975. He was, from 1975 until his retirement in 1982, Permanent
Under-Secretary of State in the Foreign and Commonwealth Office,
and Head of the Diplomatic Service. From April to July 1982, he
was a special adviser to the Prime Minister in the Cabinet Office
during the Falklands War. He was appointed a Member of the Privy
Council in 1983. Effective December 31, 1995, Mr. Palliser
resigned as President of the China-Britain Trade Group and a
director of the UK-Japan 2000 Group, and effective February 29,
1996, he resigned as Deputy Chairman of British Invisibles. Mr.
Palliser is also a former member of the Trilateral Commission and
director of the Royal National Theatre. He is currently Chairman
of the Major Projects Association, designed to assist in and for
the handling of major industrial projects. Mr. Palliser also
serves as Vice-Chairman of the Salzburg Seminar, a center for
intellectual exchange based in Middlebury, Vermont, with its
conference center in Salzburg, Austria.
Sir Michael Palliser was educated at Wellington College and
Merton College, Oxford. He saw wartime service in the British
Army with the Coldstream Guards.
PETER F. ROSS, fifty-nine years old, was appointed Chairman
of Dawnay Day Capital Markets in March 1998. Dawnay Day & Co.
is a London based private investment banking firm. Mr. Ross
retired as Chairman of Henderson Crosthwaite Institutional
Brokers on December 31, 1996, after holding that position since
1987. Under Mr. Ross' term as Chairman, Henderson Crosthwaite
became one of the leading firms in London in the area of oil and
gas placements. From 1977 to 1986 he was head of Henderson
Crosthwaite's institutional sales department, with special
responsibility for the oil and gas division, until its
acquisition by Guinness Mahon Bank in 1986.
Mr. Ross was commissioned into the British Army serving with
the 5th Royal Inniskilling Dragoon Guards, his last posting being
to Libya where he retired and set up an industrial services
business. Following the Islamic Revolution in 1971, he returned
to the United Kingdom and joined London stockbrokers Northcote &
Co. In 1974, he joined George Henderson & Co., becoming a
partner in 1975, upon the merger with Fenn and Crosthwaite. Mr.
Ross was appointed as a director of the Company at a meeting of
the Board held April 7, 1998.
Compliance with Section 16(a) Filing Requirements
- -------------------------------------------------
To the Company's knowledge, instances of failure to file
reports with respect to reportable transactions during the year
ended December 31, 1997, as required by Section 16(a) of the
Exchange Act are as follows:
Reports Number of Known Failure Number of
Reporting Person Filed Late Transactions to File Form Transactions
---------------- ---------- ------------ ------------- ------------
Lisha C. Falk Form 3 1 -- --
R. Thomas Fetters, Jr. Form 4 1 -- --
Richard K. Kennedy Form 3 1 -- --
Marsden W. Miller, Jr. Form 4 1 -- --
Michael Palliser Form 4 1 -- --
Francis J. Reinhardt, Jr. Form 4 1 -- --
Steven B. Toon Form 3 1 -- --
All other reporting persons who are officers or directors of
the Company have provided the Company with written
representations that no Form 5 filing was required in that all
reportable transactions were timely filed on the appropriate
forms.
Executive Compensation
- ----------------------
The following table sets forth information regarding the
total compensation of the Chief Executive Officer and each of the
four most highly compensated executive officers of the Company at
the end of 1997, as well as the total compensation paid to each
such individual for the Company's two previous fiscal years.
Each of the named individuals has held his respective office
throughout the entire fiscal year.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
________________________ ___________________ ________________
(1) (2) (3)
Other Restricted All
Name and Annual Stock Options/ LTIP Other
Principal Salary Bonus Compen- Awards SARs Payout Compen-
Position Year ($) ($) sation ($) (#) (#) ($) sation ($)
-------- ---- ------ ----- --------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marsden W. Miller, Jr. 1997 150,000 - - 1,000,000 - - -
Chairman and - 110,000
Chief Executive Officer 1996 150,000 - - - - - -
1995 150,000 - - - - - -
John T. Chandler (4) 1997 150,000 - - 333,333 133,333 - -
Vice Chairman; Chairman 20,000 5,000
and Chief Executive 1996 150,000 - - - - - -
Officer of XCL-China Ltd. 1995 150,000 - - - 8,000 - -
Danny M. Dobbs 1997 136,875 - - - 400,000 - -
President and Chief 25,000 -
Operating Officer 1996 135,000 - - - 6,466 - -
1995 116,250 - - - - - -
Richard K. Kennedy 1997 112,500 - - - 266,666 - -
Vice President 5,000
1996 75,000 - - - - -
1995 75,000 - - - - - -
Herbert F. Hamilton (5) 1997 144,000 - - - - - -
Executive Vice President 1996 144,000 - - - - - -
Operations, XCL-China Ltd. 1995 98,800 - - - 13,333 - -
</TABLE>
___________
(1) Excludes the cost to the Company of other compensation
that, with respect to any above named individual, does not
exceed the lesser of $50,000 or 10% of such individual's
salary and bonus.
(2) Represents grants of restricted stock awards under the
Long-Term Stock Incentive Plan as amended and restated in
1997. The first line under 1997 reflects restricted stock
awards for shares of Common Stock and the second line
reflects restricted stock awards for shares of Amended
Series A Preferred Stock. See "Awards to Management."
(3) Represents awards of stock options granted under the
Company's Long-Term Stock Incentive Plan as amended and
restated in 1997. The first line under 1997 reflects non-
qualified stock options for shares of Common Stock and the
second line reflects non-qualified stock options for shares
of Amended Series A Preferred Stock. See "Awards to
Management."
(4) XCL-China Ltd. is a wholly-owned subsidiary of the
Company which manages the Company's operations in China.
(5) Mr. Hamilton commenced employment with the Company on
April 24, 1995. As part of his employment package he was
awarded options to purchase 13,333 shares of Common Stock.
Long-Term Stock Incentive Plan
- ------------------------------
The Company currently maintains a Long-Term Stock Incentive
Plan which was originally adopted by shareholders in 1992 and was
amended and restated in 1997 (the "LTSIP"). The LTSIP is
administered by the Compensation Committee and provides for the
granting of options to purchase shares of stock as well as
restricted stock awards, performance units and other long term
incentive awards to key employees and directors of the Company,
and certain other persons who are not employees of the Company
but who from time to time provide substantial advice or other
assistance or services to the Company.
Awards to Management
- --------------------
On June 5, 1997, the Board made certain Awards under the
LTSIP subject to shareholder approval. These Awards were
approved by the shareholders of the Company in December 1997.
Effective June 1, 1997, M. W. Miller, Jr. was granted an
Appreciation Option with respect to appreciation in the Company's
total market capitalization (as defined) from and after June 1,
1997. See "Appreciation Option for M.W. Miller, Jr." below for a
more detailed discussion of such grant.
The following tables set forth, for those persons named in
the "Summary Compensation Table," information on stock options
granted during 1997 and all stock options outstanding as of
December 31, 1997, adjusted to reflect a one-for-fifteen Common
Stock reverse stock split adopted in December 1997 (the "Reverse
Stock Split"). The closing price on the AMEX on June 2, 1997 for
the Common Stock was $0.21875 (which price is not adjusted to
reflect the Reverse Stock Split), and the fair market value of
the Amended Series A Preferred Stock, based upon last sales price
information in the Private Offering, Resales and Trading through
Automated Linkage ("PORTAL") Market of the National Association
of Securities Dealers, Inc. as supplied by Jefferies & Co., Inc.,
was $85.00 on June 2, 1997. Mr. Miller's Appreciation Option
(described below) is not included because of the indeterminate
nature of the Award.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants for Option Term
____________________________________________________ _____________________________
(a) (b) (c) (d) (e) (f) (g ) (h)
% of Total
Options/
SARs
Granted to
Options/ Employees in Exercise or
SARs Fiscal Base Price Expiration
Name Granted (#) Year ($/Share) Date 0% ($) 5% ($) 10% ($)
- --------------------- ----------- ---------- ----------- ---------- ------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
M.W. Miller, Jr. (1) 110,000 * 64.7 85.00 June 1, 2007 - 5,880,165 33,601,492
J.T. Chandler (2) 133,333 + 6.7 3.75 June 1, 2007 - 212,641 1,634,758
5,000 * 2.9 85.00 June 1, 2007 - 267,280 1,527,341
D.M. Dobbs (3) 400,000 + 20.0 3.75 June 1, 2007 - 637,924 4,904,287
25,000 * 14.7 85.00 June 1, 2007 - 1,336,401 7,636,703
R.K. Kennedy (4) 266,666 + 13.3 3.75 June 1, 2007 - 425,282 3,269,516
5,000 * 2.9 85.00 June 1, 2007 - 267,280 1,527,341
H.F. Hamilton - - - - - - -
* Amended Series A Preferred Stock
+ Common Stock
</TABLE>
_______________
(1) Effective June 1, 1997, M. W. Miller, Jr. was
granted a non-qualified stock option ("NSO") to purchase 110,000
shares of Amended Series A Preferred Stock for an option exercise
price of $85.00 per share (aggregate purchase price of
$9,350,000). Such NSO is exercisable as follows: as to 27,500
shares on June 1, 2000; as to 66,000 shares on June 1, 2001, and
as to 16,500 shares on June 1, 2002. Mr. Miller's NSO will expire
on June 1, 2007 or, if earlier, the date his employment is
terminated by the Company for cause or the date he voluntarily
terminates his employment without good reason.
(2) Effective June 1, 1997, John T. Chandler was granted
an NSO to purchase 133,333 shares of Common Stock (adjusted for
the Reverse Stock Split) for an option exercise price (adjusted
for the Reverse Stock Split) of $3.75 per share (aggregate
purchase price of approximately $500,000) and an NSO to purchase
5,000 shares of Amended Series A Preferred Stock for an option
exercise price of $85.00 per share (aggregate purchase price of
$425,000). Such Common Stock NSO is exercisable as follows: as
to 44,445 shares on June 1, 1999; as to 44,444 shares on June 1,
2000, and as to 44,444 shares on June 1, 2001. Such Amended
Series A Preferred Stock NSO is exercisable as follows: as to
1,250 shares on June 1, 2000; as to 1,750 shares on June 1, 2001;
and as to 2,000 shares on June 1, 2002. Mr. Chandler's Common
Stock NSO and his Amended Series A Preferred Stock NSO will each
expire on June 1, 2007 or, if earlier, the date his employment is
terminated by the Company for cause or the date he voluntarily
terminates his employment without good reason.
(3) Effective June 1, 1997, Danny M. Dobbs was granted
an NSO to purchase 400,000 shares of Common Stock (adjusted for
the Reverse Stock Split) for an option exercise price (adjusted
for the Reverse Stock Split) of $3.75 per share (aggregate
purchase price of $1,500,000) and an NSO to purchase 25,000
shares of Amended Series A Preferred Stock for an option exercise
price of $85.00 per share (aggregate purchase price of
$2,125,000). Such Common Stock NSO is exercisable as follows:
as to 133,334 shares on June 1, 1999; as to 133,333 shares on
June 1, 2000; and as to 133,333 shares on June 1, 2001. Such
Amended Series A Preferred Stock NSO is exercisable as follows:
as to 6,250 shares on June 1, 2000; as to 8,750 shares on June 1,
2001; and as to 10,000 shares on June 1, 2002. Mr. Dobbs' Common
Stock NSO and his Amended Series A Preferred Stock NSO will each
expire on June 1, 2007 or, if earlier, the date his employment is
terminated by the Company for cause or the date he voluntarily
terminates his employment without good reason.
(4) Effective June 1, 1997, Mr. Richard Kennedy was
granted an NSO to purchase 266,666 shares of Common Stock
(adjusted for the Reverse Stock Split) at an exercise price
(adjusted for the Reverse Stock Split) of $3.75 per share
(aggregate purchase price of approximately $1,000,000), and an
NSO to purchase 5,000 shares of Amended Series A Preferred Stock
at an exercise price of $85.00 per share (aggregate purchase
price of $425,000). Such Common Stock NSO is exercisable as
follows: as to 88,890 shares on June 1, 1999; as to 88,888
shares on June 1, 2000; and as to 88,888 shares on June 1, 2001.
Mr. Kennedy's Common Stock NSO will expire on June 1, 2007 or, if
earlier, the date his employment is terminated by the Company for
cause or the date he voluntarily terminates his employment
without good reason. Such Amended Series A Preferred Stock NSO
is exercisable as follows: as to 1,250 shares on June 1, 2000;
as to 1,750 shares on June 1, 2001; and as to 3,000 shares on
June 1, 2002. Mr. Kennedy's Amended Series A Preferred Stock NSO
will expire on August 1, 2007 or, if earlier, the date his
employment is terminated by the Company for cause or the date he
voluntarily terminates his employment without good reason.
Aggregated Option/SAR Exercises In Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised in-the-Money
on Value Options/SARs at Options/SARs at
Exercise Realized Fiscal Year-End (#) Fiscal Year-End ($)(3)
________ ________ ____________________________ ___________________________
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Marsden W. Miller, Jr. - - 334,994 (1) - - -
- - - (2) 110,000 (2) - -
160,000 (3) - - -
John T. Chandler - - 75,330 (1) 133,333 (1) - 558,332
- - - (2) 5,000 (2) - -
74,999 (3) - - -
Richard K. Kennedy - - 16,629 (1) 266,666 (1) - 1,116,664
- - - (2) 5,000 (2) - -
Danny M. Dobbs - - 22,653 (1) 402,155 (1) - 1,675,000
- - - (2) 25,000 (2) - -
38,799 (3) - - -
Herbert F. Hamilton - - 13,332 (1) - - -
</TABLE>
___________
(1) Represents options to purchase shares of Common Stock at
December 31, 1997 (as adjusted to reflect the Reverse Stock
Split).
(2) Represents options to purchase shares of Amended Series A
Preferred Stock at December 31, 1997.
(3) Represents the aggregate number of five-year stock
purchase warrants, received (a) upon surrender of an
employment agreement with the Company, determined based upon
a formula whereby each of the individuals was to be offered
a warrant, based upon the length of time of employment with
the Company, for a maximum of two shares of Common Stock for
each dollar of compensation remaining to be paid to such
individual under his agreement (based upon the product of
his highest monthly base salary and the number of months
remaining under his contract), at an exercise price of
$18.75 per share, and (b) for each dollar of salary
reduction for the 15-month period commencing January 1, 1993
through March 31, 1994, as based on the same formula and at
the same exercise price used in the granting of warrants
upon surrender of employment agreements. See "Employment
Agreements; Termination of Employment and Change-in-Control
Arrangements" below.
(4) At December 31, 1997, the Company's Common Stock price
was lower than the option and/or warrant exercise prices (as
adjusted to reflect the Reverse Stock Split) with the
exception of options granted effective June 1, 1997.
(5) At December 31, 1997, the Company's Amended Series A
Preferred Stock price was equal to the option exercise
price.
Appreciation Option for M.W. Miller, Jr.
----------------------------------------
Pursuant to the LTSIP the Board approved an Appreciation
Option for M. W. Miller, Jr. which was approved by shareholders
in December, 1997. The Board determined that the Appreciation
Option to M. W. Miller, Jr. was in the best interests of the
Company and its shareholders, and is required in order to retain
the services of Mr. Miller, who has been instrumental in
developing the Company's China activities and in successfully
concluding the Company's offerings of Amended Series A Preferred
Stock and Senior Secured Notes in May 1997. The Appreciation
Option would also provide Mr. Miller with additional incentive to
increase the value of the Company based upon its market
capitalization, thereby directly benefiting the shareholders of
the Company by increasing the value of their investments in the
Company.
Long-Term Incentive Plans
Awards in Last Fiscal Year
<TABLE>
<CAPTION>
Estimated Future Payouts
Under Non-Stock Price Based Plans
---------------------------------
(a) (b) (c) (d) (e) (f)
Performance or
Number of Other Period
Shares, Units Until Maturation Threshold Target Maximum
Name or Other Rights or Payout ($ or #) ($ or #) ($ or #)
- --------------------- --------------- ---------------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Marsden W. Miller, Jr. (1) (1) (1) (1) (1)
</TABLE>
_____________
(1) The Appreciation Option Agreement provides Mr. Miller
with the right, upon his payment of the Exercise Price (as
defined below), to additional compensation (payable in cash or in
shares of Common Stock or Preferred Stock or a combination
thereof, as elected by the Company) based upon 5% of the
difference between the market capitalization of the Company as of
June 1, 1997 and the market capitalization of the Company as of
the date that Mr. Miller exercises the Appreciation Option. For
purposes of the Appreciation Option, the Company's market
capitalization is the total fair market value of the Company's
outstanding shares of Common Stock, Preferred Stock and
outstanding options and warrants. In general, fair market value
is determined based on the trading price of marketable securities
and by the Board of Directors as to the fair market value for
securities for which there is no ready market. Fair market value
as of the date of exercise of the Option is based on the average
fair market value of the 30-day period immediately preceding the
date of the Appreciation Option exercise. On June 1, 1997, the
aggregate market capitalization of the Company was $161,547,223.
Upon exercise of his Option, in the event the Company elects to
settle the Option with shares of Stock, Mr. Miller must pay the
Company twenty percent (20%) of the amount he is entitled to
receive upon exercise of the Appreciation Option (before any
reduction as hereinafter set forth), or any increment thereof, up
to an aggregate maximum of $5 million (the "Exercise Price") in
cash. In the event the Company elects to settle the Option in
cash, the amount of cash Mr. Miller will receive will be reduced
by the amount of the Exercise Price. Because Mr. Miller's
Appreciation Option contemplates compensation determined with
reference to increases in the Company's market capitalization
without restriction, there is no effective limit on the amount of
compensation which may become payable thereunder. Mr. Miller may
exercise his Appreciation Option as of any June 1 or December 1
commencing June 1, 2002, upon 45 days written notice, in whole or
in 10% increments. In the event that Mr. Miller exercises his
Appreciation Option for less than the total amount available
thereunder, the percentage increment as to which it is exercised
will cease to be available to create additional compensation
opportunity for Mr. Miller based upon subsequent appreciation in
the Company's market capitalization. Mr. Miller's Appreciation
Option expires on June 1, 2007 and will remain exercisable at any
time prior to such expiration notwithstanding his termination of
employment with the Company unless such employment is terminated
by the Company for "cause" or is terminated by Mr. Miller without
"good reason." In the event of a "change in control of XCL" as
defined in the LTSIP the Appreciation Option will become
immediately exercisable and the Company will be obligated to pay
Mr. Miller, in cash, upon any exercise of his Appreciation
Option, at least 40% of the net amount payable. This obligation
may impede the consummation of a change of control of the
Company.
Section 401(k) Plan
- -------------------
In 1989, the Company adopted an employee benefit plan under
Section 401(k) of the Internal Revenue Code for the benefit of
employees meeting certain eligibility requirements. The Company
has obtained a favorable determination from the Internal Revenue
Service regarding the tax-favored status of this plan. Employees
can contribute up to 10% of their compensation. The Company, at
its discretion and subject to certain limitations, may contribute
up to 75% of the contributions of each participant. The Company
did not make any contributions to the 401(k) Plan in 1997.
Compensation of Directors and Other Arrangements
- ------------------------------------------------
The Company reimburses its directors for travel and lodging
expenses incurred in attending meetings of the Board of
Directors. Effective January 1, 1990, directors (other than
Messrs. Hummel and Palliser and those directors who are officers
of the Company) were paid an annual retainer of $18,000 plus a
fee of $1,000 for each Board meeting attended. In addition, such
directors were paid a fee of $1,000 for each committee meeting
attended.
In April 1994, the Company entered into separate consulting
agreements with Messrs. Hummel and Palliser, upon their becoming
directors. Each of the agreements is terminable by either of the
parties thereto upon written notice and provides that the
individuals will render consulting services to the Company in
their respective areas of expertise. Pursuant to the terms of
the agreements, each of those directors receives compensation at
the rate of $50,000 per annum, which includes the compensation
they would otherwise be entitled to receive as directors and for
attending meetings of the Board. In addition, pursuant to the
terms of the LTSIP, Messrs. Hummel, Palliser, Reinhardt and
Hofheinz, each a non-employee director, were each granted stock
options for 6,666 shares of Common Stock exercisable at prices
ranging from $18.75 to $31.59 per share (adjusted for the Reverse
Stock Split).
In June 1997, the Company entered into a consulting
agreement with Mr. Fetters, a director of the Company. The
agreement is for a one-year term ending July 31, 1998, to
continue thereafter on a month to month basis. The agreement may
be terminated by either party on thirty days written notice.
Pursuant to the terms of the agreement, Mr. Fetters is to consult
with the Company on all aspects of the Company's exploration,
development and production projects. For his services Mr. Fetters
is to receive $30,000 per annum, which is in addition to the
compensation he receives as a director for attending meetings of
the Board. In addition to the above compensation, Mr. Fetters is
entitled to receive a finder's fee on certain specifically
identified projects.
Effective June 1, 1997, Messrs. Hummel, Palliser, Reinhardt,
Hofheinz and Fetters were each granted NSOs to purchase 66,666
shares of Common Stock (adjusted for the Reverse Stock Split)
exercisable at $3.75 (adjusted for the Reverse Stock Split) per
share under the LTSIP.
Benjamin B. Blanchet, in his capacity as Executive Vice
President, is entitled to a salary of $80,000 per year for up to
80 hours per month of services.
Effective August 1, 1997, the Company entered into a
Services Agreement with Mr. Blanchet. The Agreement is
terminable by either party at any time without cause. Under the
Agreement, Mr. Blanchet is engaged to act as counsel to the
Company to perform from time to time such services as the Company
may request of him in that capacity. In general, compensation
for services under the Services Agreement will be at the rate of
$175 per hour for up to 80 hours per month. Also, under the
Services Agreement, the Company has agreed to provide Mr.
Blanchet with office space, supplies, secretarial assistance, a
library allowance, professional liability insurance,
reimbursement for continuing legal education expenses and bar
dues. Under the Services Agreement, Mr. Blanchet may, except as
prohibited by law or the Louisiana Rules of Professional
Responsibility, represent other clients and engage in business
for his own account.
In connection with his employment by the Company, Mr.
Blanchet received from the Company a $100,000 loan to replace
benefits that he forfeited when he withdrew as a partner of
Gordon, Arata, McCollam & Duplantis, L.L.P. to become Executive
Vice President of the Company. The loan is to be repaid over
eight years from annual bonus payments equal to interest, at the
rate of 6.5% per annum, plus one-eighth of the original principal
balance to be paid by the Company to Mr. Blanchet each year and
shall be forgiven in its entirety if (i) the Company shall fail
to pay timely any such bonus payment, shall breach the Services
Agreement or shall terminate his employment without "cause" or
(ii) Mr. Blanchet terminates his employment with "good reason,"
in either case as such terms are defined in the note evidencing
such loan.
Effective August 1, 1997, Benjamin B. Blanchet was granted
an NSO to purchase 400,000 shares of Common Stock for an option
exercise price of $3.75 per share (aggregate purchase price of
$1,500,000.00). Such Common Stock NSO is exercisable as to
133,334 shares on August 1, 1999; as to 133,333 shares on August
1, 2000 and as to 133,333 shares on August 1, 2001. On that same
date Mr. Blanchet was granted an NSO to purchase 25,000 shares of
Amended Series A Preferred Stock for an option exercise price of
$85.00 per share (aggregate purchase price of $2,125,000). Such
Amended Series A Preferred Stock NSO is exercisable as to 6,250
shares on August 1, 2000; as to 8,750 shares on August 1, 2001
and as to 10,000 shares on August 1, 2002. Mr. Blanchet's NSOs
will expire on August 1, 2007 or, if earlier, the date his
employment is terminated by the Company for cause or the date he
voluntarily terminates his employment without good reason.
During 1997 all regular employees were provided health
insurance, a portion of the premium for which is paid by the
Company, and life and disability insurance based upon a factor of
the employee's base salary.
As a matter of policy the Company approves all transactions
involving insiders through the majority vote of disinterested
directors.
Employment Agreements; Termination of Employment and
- ----------------------------------------------------
Change-in-Control Arrangements
------------------------------
Effective April 1, 1994, Messrs. M.W. Miller, Jr., J.T.
Chandler, D.M. Dobbs, and R.C. Cline, in their capacities as
executive and administrative officers of the Company and its
various subsidiaries, agreed to surrender their employment
agreements in consideration of the issuance of five-year warrants
to purchase Common Stock at an exercise price of $18.75 per share
(adjusted for the Reverse Stock Split), subject to customary anti-
dilution adjustments. The number of warrants issued to such
individuals was determined based upon a formula whereby each of
the individuals was offered a warrant to purchase, based upon the
length of time of employment with the Company, a maximum of two
shares of Common Stock for each dollar of compensation remaining
to be paid to such individual under his agreement (based upon the
product of his highest monthly base salary and the number of
months remaining under his agreement). Accordingly, Mr. Miller
received warrants to purchase 125,000 shares; Mr. Chandler,
68,333 shares; Mr. Dobbs, 38,333 shares; and Mr. Cline, 16,666
shares, all adjusted for the Reverse Stock Split.
Effective January 1, 1989, the Company adopted a policy
addressing severance upon separation from the Company. Under
this policy benefits due upon a change-in-control as therein
defined range from three months salary for employees with less
than one year of service to 24 months salary for employees with
more than 10 years of service.
Report on Repricing of Options/SARs
- ------------------------------------
During the fiscal year ended December 31, 1997, there were
no repricings of stock options awarded to any of the named
executive officers.
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
For the year ended December 31, 1997, the following
nonexecutive directors of the Company, served as members of the
Compensation Committee of the Board of Directors: Messrs. M.
Palliser, A.W. Hummel, Jr., F. Hofheinz (Chairman) and F.J.
Reinhardt, Jr. None of the members of the Compensation Committee
were formerly, nor are any members currently, officers or
employees of the Company or any of its subsidiaries.
Compensation Committee Report on Executive Compensation
--------------------------------------------------------
The Compensation Committee of the Board of Directors
("Committee") establishes the general compensation policies of
the Company, establishes the compensation plans and specific
compensation levels for executive officers and certain other
managers, and administers the Stock Option Plans and Long Term
Stock Incentive Plan. The Committee currently consists of four
independent, nonemployee directors: Messrs. F. Hofheinz, who
serves as Chairman, M. Palliser, Arthur W. Hummel, Jr. and
Francis J. Reinhardt, Jr.
Compensation Policies and Philosophy
- ------------------------------------
The Committee has determined that the compensation program
of the Company should not only be adequate to attract, motivate
and retain executives, key employees and other individuals who
the Company believes may make significant contributions to the
Company's results, but should also be linked to the value
delivered to shareholders as reflected in the price of the
Company's Common Stock.
The Committee believes that the cash compensation of
executive officers, as well as other key employees, should be
competitive with other similarly situated companies while, within
the Company, being fair and discriminating on the basis of
personal performance. In general, in establishing total cash
compensation for its executives, the Committee has taken into
account the median cash compensation of executives employed by
competitors including some of the companies reflected in the peer
group identified in the Performance Graph set forth below, which
the Committee believes represent the Company's most direct
competition for executive talent. The Committee receives
recommendations from management as to executive compensation and,
in light of the Company's performance and the economic conditions
facing the Company, determines appropriate compensation levels
for recommendation to the Board of Directors. The Committee does
not assign relative weights to individual factors and criteria
used in determining executive compensation and does not use
quantifiable targets in determining compensation. For 1997, the
Company did not retain the services of a compensation consulting
firm.
Awards of stock options are intended both to retain
executives, key employees and other individuals who the Company
believes may make significant contributions to the Company's
results and to motivate them to improve long-term stock market
performance. Options are granted at or above the prevailing
market price and will have value only if the price of the
Company's Common Stock increases.
Effective January 1, 1994, Section 162(m) of the Internal
Revenue Code of 1986 (the "Code") generally denies a tax
deduction to any publicly held corporation for compensation that
exceeds $1 million paid to certain senior executives in a taxable
year, subject to an exception for "performance-based
compensation" as defined in the Code and subject to certain
transition provisions. Gains on the exercise of nonqualified
stock options granted through December 31, 1994, will be tax
deductible under the transition rules. Restricted stock awards
by definition granted after February 17, 1993, are not
deductible. At present the Committee does not intend to recommend
amendment to the LTSIP to meet the restrictive requirements of
the Code.
The Committee believes that annual incentive awards should
be commensurate with performance. It further believes that in
order to meet this objective it needs to have the ability to
exercise its judgment or discretion to evaluate performance
against qualitative criteria. It is the Committee's opinion that
the benefits to the Company of the use of a qualitative approach
to the compensation of senior executives such as the Chairman
outweigh the nonmaterial loss of a portion of the deductions
associated with that compensation.
In recognition of the efforts and sacrifices of management
that had enabled the Company in mid-1997 to be on track to meet
its 1997 goals, the need to retain existing management and the
need to attract qualified and competent personnel, in June 1997,
the Board of Directors reassessed the need for adjusting
management's compensation to provide for additional incentives to
management. As a result of this reassessment, the Board of
Directors approved amendments to and a restatement of the
Company's LTSIP subject to shareholders approval, which was
obtained on December 17, 1997. These amendments generally made
available to the Committee the authority to grant Awards to
executives employed by the Company entitling such executives to
acquire shares of the Company's Preferred Stock and Common Stock.
They also made available to the Committee the authority to grant
appreciation awards. As described in greater detail in "Awards
to Management," the Board of Directors made, subject to the
approval of the shareholders of the Company, which was obtained
on December 17, 1997, certain Awards under the LTSIP effective as
of June 1, 1997 (except for awards to the CFO and an Executive
Vice President which were effective October 6 and August 1, 1997,
respectively). The Committee believes that the LTSIP and the
Awards granted thereunder effectively encourage retention and
continuity of management, appropriately reward management for its
past performance and align the interests of management with those
of the Company's shareholders by providing management with the
opportunity to share in the creation of the Company's value.
On December 17, 1997, the Committee reviewed the Company's
1997 financial results and 1997 nonfinancial goals and determined
that, in light of (i) the Company's continued successful drilling
results in the Zhao Dong Block in the Bohai Bay in China, (ii)
the fact that top officials in China's oil industry have
indicated that the Company will be offered additional exploration
and development rights in China and (iii) the Company's
successful placement in May 1997 of $100 million of Preferred
Stock and Notes, the proceeds of which allowed the Company to
commence achieving its objectives in China, the Company's
financial and operating goals for 1997 had been met and exceeded.
Company Performance and Chief Executive Officer Compensation
- ------------------------------------------------------------
The Committee, in connection with determining the
appropriate compensation for Marsden W. Miller, Jr. as Chief
Executive Officer ("CEO"), took into account the financial
condition of the Company, including its liquidity requirements.
It determined that the CEO had been successful in disposing of
assets and raising capital throughout the year. Taking into
consideration the performance of the CEO, as well as the
Company's current cash position and near term requirements, the
adoption of the LTSIP and the NSO and Appreciation Option awarded
to the CEO under the LTSIP, the Committee decided that the 1997
awards should serve in lieu of a cash salary increase or bonus to
the CEO for the present time.
Compensation of Other Executive Officers
- ----------------------------------------
The Committee, in consultation with the CEO, applied the
information and other factors outlined above in reviewing and
approving the compensation of the Company's other executive
officers.
December 17, 1997 COMPENSATION COMMITTEE
Fred Hofheinz, Chairman
Arthur W. Hummel
Michael Palliser
Francis J. Reinhardt, Jr.
Shareholder Return Performance Presentation
- -------------------------------------------
Set forth below is a line graph comparing the percentage
change in the cumulative total shareholder return on the
Company's Common Stock against the AMEX Market Value Index for
the years 1993 through 1997, with a peer group selected by the
Company for the past five fiscal years. The peer group consists
of the same independent oil and gas exploration and production
companies used in last year's comparison, namely: Alta Energy
Corporation; Amerac Energy Corporation (formerly Wolverine
Exploration Company); Bellwether Exploration Company; Brock
Exploration Corporation; Tom Brown, Inc.; Caspen Oil, Inc.;
Chemfirst Inc. (formerly First Mississippi Corporation); Cobb
Resources Corporation; Coda Energy, Inc.; Comstock Resources,
Inc.; Crystal Oil Company; DeKalb Energy Company; Edisto
Resources Company; Energen Corporation; Forest Oil Corporation;
Geodyne Resources, Inc.; Global Natural Resources, Inc.; Goodrich
Petroleum Corporation (formerly Patrick Petroleum Company);
Hallador Pete Company; Hondo Oil & Gas Company; Kelley Oil & Gas
Partners; Louis Dreyfus Natural Gas (formerly American
Exploration Company); Magellan Petroleum Corporation; Maynard Oil
Company; Monterey Resources, Inc. (formerly McFarland Energy,
Inc.); MSR Exploration Limited; Numac Energy, Inc.; Pacific
Enterprises; Penn Virginia Corporation; Plains Resources, Inc.;
Presidio Oil; Wainoco Oil Corporation; Wichita River Oil; and
Wiser Oil Company. The relevant information with respect to the
peer group was furnished by Standard & Poors Compustat Service.
The graph assumes that the value of the investment in the
Company's Common Stock and the peer group stocks were $100 on
January 1, 1992 and that all dividends were reinvested.
[SHAREHOLDER RETURN PERFORMANCE GRAPH]
1993 Return 1994 Return 1995 Return 1996 Return 1997 Return
----------- ----------- ----------- ----------- -----------
XCL 49.96 72.18 27.73 16.62 24.82
Peer Group 121.87 121.48 153.45 183.12 217.52
AMEX 119.52 108.63 137.32 146.10 171.48
Certain Relationships and Related Transactions
- ----------------------------------------------
See "Compensation of Directors and Other Arrangements" above
for a discussion of certain compensatory and other arrangements
entered into by the Company with certain directors and officers
of the Company.
PROPOSAL 2 -- TO AMEND THE COMPANY'S
CERTIFICATE OF INCORPORATION
On April 7, 1998, the Board of Directors approved for
submission to the shareholders amendments (the "Certificate
Amendment") to the Company's Certificate of Incorporation (i) to
grant sole voting rights to the holders of each currently
outstanding series of Preferred Stock with respect to votes on
any amendments affecting the rights and privileges of such series
of Preferred Stock; (ii) to eliminate the requirement that Bylaw
amendments adopted by the Board of Directors must be ratified by
stockholders and (iii) to require the approval of at least a
majority of the outstanding shares of Amended Series A Preferred
Stock for the issuance of shares equal in preference to the
Amended Series A Preferred Stock.
Voting Rights
-------------
The Certificate Amendment, as it relates to the voting
rights affecting amendments to the Preferred Stock, would affect
the existing classes of Amended Series A Preferred Stock
("Convertible Preferred Stock") and Amended Series B Preferred
Stock. Currently, under the Certificate of Incorporation the
holders of Common Stock are required to vote on any amendments
affecting the rights of the Convertible Preferred Stock and
Amended Series B Preferred Stock.
The proposed amendment will be submitted to the stockholders
for approval at the Meeting in substantially the following form:
Section 5 of Part B of Article FOURTH of the
Certificate of Incorporation shall be amended by adding
the following new subsection (c) and re-lettering
existing subsections (c) and (d) as (d) and (e),
respectively:
"(c) So long as any shares of Convertible
Preferred Stock remain outstanding, the vote
or consent of the holders of at least a
majority of the shares of Convertible
Preferred Stock outstanding at the time
(voting separately as 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 the
creation of any additional class of Preferred
Stock which shall rank on a parity with the
Convertible Preferred Stock."
Section 5 of Part B of Article FOURTH of the
Certificate of Incorporation shall be amended by adding
the following new subsection (f) at the end thereof:
"(f) No class or series of capital stock of
the Corporation other than the Convertible
Preferred Stock shall be entitled to vote
upon any amendment, alteration or repeal of
the provisions of the Corporation's Restated
Certificate of Incorporation or of the
resolutions contained in the Certificate of
Designation of the Convertible Preferred
Stock designating the Convertible Preferred
Stock and the preferences and privileges,
participating, optional or other special
rights or qualifications, limitations and
restrictions thereof."
Subparagraph (b) of Paragraph 6 of Part E of Article
FOURTH of the Certificate of Incorporation will be
amended by adding the following sentence at the end
thereof:
"No class or series of capital stock of the
Corporation other than the Amended Series B
Preferred Stock shall be entitled to vote
upon any amendment, alteration or repeal of
the provisions of the Corporation's Restated
Certificate of Incorporation or of the
resolutions contained in the Certificate of
Designation of the Amended Series B Preferred
Stock designating the Amended Series B
Preferred Stock and the preferences and
privileges, participating, optional or other
special rights or qualifications, limitations
and restrictions thereof;"
Purpose of the Amendment
------------------------
The principal purposes of the Certificate Amendment is (A)
to eliminate the time and expense required to solicit shareholder
approval of all classes of holders when, or if, it becomes
necessary to amend the rights or privileges designated to the
Convertible Preferred Stock or Amended Series B Preferred Stock
and (B) by adding the additional voting requirement attributable
to the issuance of parity stock to the provisions of the
Convertible Preferred Stock, to qualify such stock for listing on
the AMEX. At this time, except as set forth herein, the Board of
Directors has not proposed any other amendment to any rights or
privileges affecting any outstanding series of Preferred Stock.
The Company may however, be required to solicit further
amendments to certain provisions of the Convertible Preferred
Stock in connection with its application to list such security on
the American Stock Exchange. The application process is in the
early stages and the AMEX is reviewing the Certificate of
Designation of the Convertible Preferred Stock to determine if
the terms thereof meet the qualifications for listing. The
Company may also be required to solicit amendment to certain
provisions of the Convertible Preferred Stock or the Amended
Series B Preferred Stock in the future in connection with efforts
to raise additional capital or for other reasons not currently
known. This Certificate Amendment will allow that to be done
without seeking general shareholder approval.
The Board of Directors is authorized to issue shares of
Preferred Stock in one or more series ("Serial Preferred Stock")
and to fix the rights, preferences, privileges and restrictions,
including dividend rights, conversion rights, voting rights and
terms of redemption, redemption price or prices, liquidation
preferences and the number of shares constituting any series or
the designation of such series, without any further vote or
action by the stockholders. The issuance of Serial Preferred
Stock may have the effect of delaying, deferring, or preventing a
change in control of the Company without further action by the
stockholders. The issuance of Serial Preferred Stock with voting
and conversion rights may adversely effect the voting power of
the holders of Common Stock, including the loss of voting control
to others.
The Company has authorized capital stock of 502,400,000
shares, consisting of 500,000,000 shares of Common Stock and
2,400,000 shares of Preferred Stock. As of May 18, 1998, the
number of outstanding shares of Common and Preferred Stock was
22,926,333 and 1,224,244 shares, respectively. Currently, the
2,400,000 shares of authorized Serial Preferred Stock consist of
2,085,000 shares of Amended Series A Preferred Stock of which
1,177,159 shares are outstanding, and 70,000 shares of Amended
Series B Preferred Stock of which 47,085 shares are outstanding.
Elimination of Ratification of Bylaw Amendments
-----------------------------------------------
The Certificate Amendment would also amend the provisions of
Section A of Article SIXTH of the Certificate of Incorporation to
eliminate the requirement that Bylaw amendments adopted by the
Board of Directors be ratified by the stockholders at the next
regularly scheduled annual meeting of stockholders or at a
special meeting of stockholders. The Certificate Amendment does
not, however, limit the right of stockholders granted under
Delaware law to make additional Bylaws or to alter or repeal any
Bylaws adopted by the Board of Directors or by the stockholders.
The proposed amendment will be submitted to the stockholders
for approval at the Meeting in substantially the following form:
Section A of Article SIXTH of the Certificate of
Incorporation shall be amended to read in its entirety
as follows:
"The board of directors shall have authority to make,
adopt, alter, amend and repeal from time to time Bylaws
of the Corporation, including, without limitation, the
right to make, adopt, amend or repeal Bylaws fixing
their qualifications, or fixing or increasing their
compensation, subject to the right of stockholders
entitled to vote with respect thereto, at any duly
convened annual or special meeting of stockholders, to
adopt additional Bylaws and to alter, amend and repeal
Bylaws made by the board of directors, in either case
by affirmative vote of the holders of not less than a
majority of the outstanding shares of stock entitled to
vote with respect thereto."
Purpose of the Amendment
------------------------
The Board of Directors is of the opinion that this change is
necessary because under the existing provisions of the
Certificate of Incorporation (and the Bylaws), the Board is
required to seek stockholder ratification of Bylaw amendments.
The time and expense associated with the solicitation of such
stockholder approval is often not justified by the proposed
amendments which may deal with the elimination of unnecessarily
burdensome provisions or technical adjustments to the day-to-day
operations of the Company, such as the change in the Bylaws
regarding the date of the Annual Meeting of Shareholders proposed
in Proposal 3 herein. If the proposed Amendment is approved (and
the corresponding amendment to the Bylaws set forth in Proposal 3
is also approved) the Board of Directors may, in the future and
if circumstances warrant it, consider making further amendments
to Bylaws which, in its view, eliminate provisions which are
superfluous or are unsuitable for a public company, are no longer
required by statute, or unduly restrict the ability of officers
and directors of the Company to conduct day-to-day operations or,
which are otherwise required or advisable to provide for the
continued orderly conduct of Company business. Except for the
proposed amendment set forth in Proposal 3 herein, the Board is
not considering any other amendments to the Bylaws at this time.
Vote Required for Approval
- --------------------------
The Board of Directors recommends a vote "FOR" Proposal 2.
The approval of the Amendment to the Certificate of Incorporation
requires the affirmative vote of a majority of the votes entitled
to be cast by the outstanding shares of voting capital stock
entitled to vote on the matter with abstentions and broker non-
votes being counted as negative votes.
PROPOSAL 3 - APPROVAL OF AMENDMENT TO
THE COMPANY'S BYLAWS
On December 17, 1997, the Board of Directors approved an
amendment (the "Bylaw Amendment") to the Company's Bylaws to (i)
change the month in which the Company holds its annual meeting of
shareholders and (ii) to make the same change eliminating the
requirement that Bylaw amendments adopted by the Board be
ratified by the stockholders as described in Proposal 2 above,
and the Board directed that the Bylaw Amendment be submitted to
the Company's stockholders for ratification.
Change in the Meeting Date
--------------------------
The amendment to Section 2.2 of Article II of the Company's
Bylaws reads in its entirety as follows:
"The annual meeting of stockholders for the
election of directors, and the transaction of other
business, shall be held at 10:00 a.m. on the third
Tuesday of June each year."
Purpose of the Amendment
------------------------
The change in the month in which the Company holds its
annual meeting of shareholders is being made to coincide with the
regularly scheduled quarterly meeting of the Board of Directors,
normally held in June of each year. Since 1990 the Company's
annual meeting of shareholders has been held in June or later.
Elimination of Ratification of Bylaw Amendments
-----------------------------------------------
The Bylaw Amendment would also amend the provisions of
Section 9.1 of Article IX of the Bylaws to adopt the identical
provision set forth in the proposed amendment to the
corresponding provision in the Certificate of Incorporation
described in Proposal 2 eliminating the requirement that the
Company must seek ratification by stockholders of amendments to
the Bylaws adopted by the Board of Directors.
The proposed amendment will be submitted to the stockholders
for approval at the Meeting in substantially the following form:
Section 9.1 of Article IX of the Bylaws shall be
amended to read in its entirety as follows:
"The board of directors shall have authority to make,
adopt, alter, amend and repeal from time to time Bylaws
of the Corporation, including, without limitation, the
right to make, adopt, amend or repeal Bylaws fixing
their qualifications, or fixing or increasing their
compensation, subject to the right of stockholders
entitled to vote with respect thereto, at any duly
convened annual or special meeting of stockholders, to
adopt additional Bylaws and to alter, amend and repeal
Bylaws made by the board of directors, in either case
by affirmative vote of the holders of not less than a
majority of the outstanding shares of stock entitled to
vote with respect thereto."
Purpose of the Amendment
------------------------
The purpose for this amendment to the Bylaws is discussed in
detail in the subsection entitled "Purpose for the Amendment"
under the section entitled "Elimination of Ratification of Bylaw
Amendments" described in Proposal 2 above.
Vote Required for Approval
- --------------------------
The Board of Directors recommends that shareholders vote FOR
Proposal 3. The affirmative vote of a majority of the votes cast
by shareholders present or represented by proxy and entitled to
vote at the Meeting, a quorum being present, is required to
approve this proposal. Unless otherwise instructed the proxies
will be voted "FOR" approval of the proposal.
INDEPENDENT AUDITORS
The Board of Directors of the Company, upon the
recommendation of the Audit Committee, appointed the firm of
Coopers & Lybrand to serve as independent accountants of the
Company for the fiscal year ending December 31, 1998. Coopers &
Lybrand has served as independent accountants of the Company
since its inception and is considered by management of the
Company to be well qualified. The Company has been advised by
that firm that neither it nor any member thereof has any
financial interest, direct or indirect, in the Company or any of
its subsidiaries in any capacity.
One or more representatives of Coopers & Lybrand will be
present at the Meeting, will have an opportunity to make a
statement if he or she desires to do so and will be available to
respond to appropriate questions.
SHAREHOLDERS' PROPOSALS FOR
1999 ANNUAL MEETING OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the
1999 Annual Meeting of Shareholders must be received by the
Company prior to January 20, 1999, to be eligible for inclusion
in the Company's proxy statement and proxy relating to that
meeting assuming the 1999 Annual Meeting of Shareholders is held
on June 15, 1999, as provided in the Bylaws, as proposed to be
amended.
OTHER BUSINESS
The Board of Directors of the Company knows of no other
matters to come before the Meeting, other than those set forth
herein and in the accompanying Notice of Annual Meeting of
Shareholders. However, if any other matters should properly come
before the Meeting, it is the intention of the persons named in
the accompanying proxies to vote such proxies as in their
discretion they may deem advisable.
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended
December 31, 1997, is being mailed to shareholders on or about
June 3, 1998. The Annual Report does not form any part of the
material for solicitation of proxies.
Yours sincerely,
/s/ Marsden W. Miller, Jr.
MARSDEN W. MILLER, JR.
Chairman and Chief Executive Officer
June 3, 1998
<PAGE>
XCL LTD.
(a Delaware corporation)
COMMON STOCK PROXY
FOR THE ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD JUNE 30, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Marsden W. Miller, Jr. and
Benjamin B. Blanchet, and either of them, attorneys and proxies,
with full power of substitution, and authorizes them to vote all
shares of Common Stock, $.01 par value ("Common Stock") of XCL
Ltd. (the "Company") held of record by the undersigned on May 18,
1998, at the Annual Meeting of Shareholders to be held in The
Monterey Room of the Hyatt Regency Houston at George Bush
Intercontinental Airport, located at 15747 JFK Boulevard,
Houston, Texas, Tuesday, June 30, 1998 at 10:00 AM, Central
Daylight Savings Time, and any adjournments thereof, on the
matters set forth on the reverse side.
THE MATTERS TO BE VOTED UPON, THE INSTRUCTIONS AND
A SPACE FOR YOUR VOTE AND SIGNATURE
ARE SET FORTH ON THE REVERSE SIDE.
PLEASE VOTE, SIGN AND RETURN PROMPTLY.
If this proxy is properly executed, the shares of Common Stock
represented thereby will be voted for items 1, 2 and 3 in
accordance with the instructions on this proxy. If no
instructions are given, such shares will be voted FOR the
election of all nominees for director, FOR approval of the
amendments to the Company's Certificate of Incorporation, FOR
ratification of the Board's amendments to the Company's Bylaws
and in the discretion of the proxies upon any other matter which
may properly come before the meeting.
Proposal 1. The election of three (3) directors to be
designated as Class II directors to serve a three-year
term until the 2001 Annual Meeting of Shareholders,
towit: Marsden W. Miller, Jr., R. Thomas Fetters, Jr.
and Francis J. Reinhardt, Jr. and until their
successors have been elected and qualified.
[ ] FOR ALL NOMINEES
[ ] WITHHOLD FOR ALL NOMINEES
TO WITHHOLD VOTE on any nominee write the nominee's
name in the space below.
_______________________________________________________
Proposal 2. The approval of amendments to the Certificate of
Incorporation (A) to eliminate the requirement that (i)
holders of Common Stock vote on amendments affecting
the Company's currently outstanding Serial Preferred
Stock and (ii) stockholders ratify Bylaw amendments
adopted by the Board of Directors and (B) to require
the approval of at least a majority of the outstanding
shares of Amended Series A Preferred Stock for the
creation of a class of Preferred Stock equal in
preference to the Amended Series A Preferred Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3. The ratification of the Board's amendments to the
Company's Bylaws (i) changing the month in which the
Annual Meeting of Shareholders is held and (ii)
eliminating the requirement that stockholders ratify
Bylaw amendments adopted by the Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 4. In their discretion, to vote upon such other
business as may properly come before the meeting.
Receipt is acknowledged of the Proxy Statement dated June 3,
1998.
THIS PROXY MUST BE SIGNED AS NAME APPEARS HEREON. Executors,
administrators, trustees, etc., should give full title as such.
If the signer is a corporation, please sign full corporate name
by a duly authorized officer.
___________________________________
DATE
___________________________________
SIGNATURE
___________________________________
SIGNATURE
I plan to attend the Annual Meeting of Shareholders:
Yes [ ] No [ ]
<PAGE>
XCL LTD.
(a Delaware corporation)
AMENDED SERIES A, CUMULATIVE CONVERTIBLE
PREFERRED STOCK PROXY
FOR THE ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD JUNE 30, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Marsden W. Miller, Jr. and
Benjamin B. Blanchet, and either of them, attorneys and proxies,
with full power of substitution, and authorizes them to vote all
shares of Amended Series A, Cumulative Convertible Preferred
Stock, $1.00 par value ("Amended Series A Preferred Stock") of
XCL Ltd. (the "Company") held of record by the undersigned on May
18, 1998, at the Annual Meeting of Shareholders to be held in The
Monterey Room of the Hyatt Regency Houston at George Bush
Intercontinental Airport, located at 15747 JFK Boulevard,
Houston, Texas, Tuesday, June 30, 1998 at 10:00 AM, Central
Daylight Savings Time, and any adjournments thereof, on the
matters set forth on the reverse side.
THE MATTERS TO BE VOTED UPON, THE INSTRUCTIONS AND
A SPACE FOR YOUR VOTE AND SIGNATURE
ARE SET FORTH ON THE REVERSE SIDE.
PLEASE VOTE, SIGN AND RETURN PROMPTLY.
If this proxy is properly executed, the shares of Amended Series
A Preferred Stock represented thereby will be voted for items 1,
2 and 3 in accordance with the instructions on this proxy. If no
instructions are given, such shares will be voted FOR the
election of all nominees for director, FOR approval of the
amendments to the Company's Certificate of Incorporation, FOR
ratification of the Board's amendments to the Company's Bylaws
and in the discretion of the proxies upon any other matter which
may properly come before the meeting.
Proposal 1. The election of three (3) directors to be
designated as Class II directors to serve a three-year
term until the 2001 Annual Meeting of Shareholders,
towit: Marsden W. Miller, Jr., R. Thomas Fetters, Jr.
and Francis J. Reinhardt, Jr. and until their
successors have been elected and qualified.
[ ] FOR ALL NOMINEES
[ ] WITHHOLD FOR ALL NOMINEES
TO WITHHOLD VOTE on any nominee write the nominee's
name in the space below.
_______________________________________________________
Proposal 2. The approval of amendments to the Certificate of
Incorporation (A) to eliminate the requirement that (i)
holders of Common Stock vote on amendments affecting
the Company's currently outstanding Serial Preferred
Stock and (ii) stockholders ratify Bylaw amendments
adopted by the Board of Directors and (B) to require
the approval of at least a majority of the outstanding
shares of Amended Series A Preferred Stock for the
creation of a class of Preferred Stock equal in
preference to the Amended Series A Preferred Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3. The ratification of the Board's amendments to the
Company's Bylaws (i) changing the month in which the
Annual Meeting of Shareholders is held and (ii)
eliminating the requirement that stockholders ratify
Bylaw amendments adopted by the Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 4. In their discretion, to vote upon such other
business as may properly come before the meeting.
Receipt is acknowledged of the Proxy Statement dated June 3,
1998.
THIS PROXY MUST BE SIGNED AS NAME APPEARS HEREON. Executors,
administrators, trustees, etc., should give full title as such.
If the signer is a corporation, please sign full corporate name
by a duly authorized officer.
___________________________________
DATE
___________________________________
SIGNATURE
___________________________________
SIGNATURE
I plan to attend the Annual Meeting of Shareholders:
Yes [ ] No [ ]
<PAGE>
XCL LTD.
(a Delaware corporation)
AMENDED SERIES B, CUMULATIVE CONVERTIBLE
PREFERRED STOCK PROXY
FOR THE ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD JUNE 30, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Marsden W. Miller, Jr. and
Benjamin B. Blanchet, and either of them, attorneys and proxies,
with full power of substitution, and authorizes them to vote all
shares of Amended Series B, Cumulative Convertible Preferred
Stock, $1.00 par value ("Amended Series B Preferred Stock") of
XCL Ltd. (the "Company") held of record by the undersigned on May
18, 1998, at the Annual Meeting of Shareholders to be held in The
Monterey Room of the Hyatt Regency Houston at George Bush
Intercontinental Airport, located at 15747 JFK Boulevard,
Houston, Texas, Tuesday, June 30, 1998 at 10:00 AM, Central
Daylight Savings Time, and any adjournments thereof, on the
matters set forth on the reverse side.
THE MATTERS TO BE VOTED UPON, THE INSTRUCTIONS AND
A SPACE FOR YOUR VOTE AND SIGNATURE
ARE SET FORTH ON THE REVERSE SIDE.
PLEASE VOTE, SIGN AND RETURN PROMPTLY.
If this proxy is properly executed, the shares of Amended Series
B Preferred Stock represented thereby will be voted for items 1,
2 and 3 in accordance with the instructions on this proxy. If no
instructions are given, such shares will be voted FOR the
election of all nominees for director, FOR approval of the
amendments to the Company's Certificate of Incorporation, FOR
ratification of the Board's amendments to the Company's Bylaws
and in the discretion of the proxies upon any other matter which
may properly come before the meeting.
Proposal 1. The election of three (3) directors to be
designated as Class II directors to serve a three-year
term until the 2001 Annual Meeting of Shareholders,
towit: Marsden W. Miller, Jr., R. Thomas Fetters, Jr.
and Francis J. Reinhardt, Jr. and until their
successors have been elected and qualified.
[ ] FOR ALL NOMINEES
[ ] WITHHOLD FOR ALL NOMINEES
TO WITHHOLD VOTE on any nominee write the nominee's
name in the space below.
_______________________________________________________
Proposal 2. The approval of amendments to the Certificate of
Incorporation (A) to eliminate the requirement that (i)
holders of Common Stock vote on amendments affecting
the Company's currently outstanding Serial Preferred
Stock and (ii) stockholders ratify Bylaw amendments
adopted by the Board of Directors and (B) to require
the approval of at least a majority of the outstanding
shares of Amended Series A Preferred Stock for the
creation of a class of Preferred Stock equal in
preference to the Amended Series A Preferred Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3. The ratification of the Board's amendments to the
Company's Bylaws (i) changing the month in which the
Annual Meeting of Shareholders is held and (ii)
eliminating the requirement that stockholders ratify
Bylaw amendments adopted by the Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 4. In their discretion, to vote upon such other
business as may properly come before the meeting.
Receipt is acknowledged of the Proxy Statement dated June 3,
1998.
THIS PROXY MUST BE SIGNED AS NAME APPEARS HEREON. Executors,
administrators, trustees, etc., should give full title as such.
If the signer is a corporation, please sign full corporate name
by a duly authorized officer.
___________________________________
DATE
___________________________________
SIGNATURE
___________________________________
SIGNATURE
I plan to attend the Annual Meeting of Shareholders:
Yes [ ] No [ ]