UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report pursuant to Section 13 or 15(d) of the
[X] Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1998
OR
Transition Report Pursuant to Section 13 or 15(d)of
[ ] the Securities Exchange Act of 1934
Commission File No. 1-10669
XCL Ltd.
(Exact name of registrant as specified in its charter)
Delaware 51-0305643
(State of Incorporation) (I.R.S. Employer
Identification Number)
110 Rue Jean Lafitte, 2nd Floor, Lafayette, LA 70508
(Address of principal executive offices) (Zip Code)
318-237-0325
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
22,995,804 shares Common Stock, $.01 par value were
outstanding on November 12, 1998.
<PAGE>
XCL LTD.
TABLE OF CONTENTS
Page
PART I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Index to Exhibits
DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933,
as amended (the "Securities Act") and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
All statements other than statements of historical facts included
in this Quarterly Report, including, without limitation, those
regarding the Company's financial position, business strategy,
budgets, reserve estimates, development and exploitation
opportunities and projects, behind-pipe zones, classification of
reserves, projected financial, operating and reserve data and
plans and objectives of management for future operations, are
forward-looking statements. Although the Company believes that
the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will
prove to have been correct. Important factors that could cause
actual results to differ materially from the Company's
expectations ("Cautionary Statements") are disclosed under
"Certain Risk Factors Relating to the Company and the Oil and Gas
Industry" in the Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, as amended, and elsewhere in the Annual
Report including, without limitation, in conjunction with the
forward-looking statements included in this Quarterly Report.
All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on behalf of the
Company, are expressly qualified in their entirety by the
Cautionary Statements.
<PAGE>
XCL Ltd. and Subsidiaries
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
September 30 December 31
Assets 1998 1997
------ ------------ ------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 4,402 $ 21,952
Cash held in escrow (restricted) 5,250 10,263
Accounts receivable, net 184 101
Refundable deposits -- 1,200
Other 903 451
------ -------
Total current assets 10,739 33,967
------ -------
Property and equipment:
Oil and gas (full cost method):
Proved undeveloped properties,
not being amortized 30,617 21,172
Unevaluated properties 48,462 33,132
------ ------
79,079 54,304
Other 1,425 1,163
------ ------
80,504 55,467
Accumulated depreciation, depletion
and amortization (914) (1,000)
------ ------
79,590 54,467
------ ------
Investments 4,779 4,173
Investment in land 12,200 12,200
Oil and gas properties held for sale 9,072 8,955
Debt issue cost, less amortization 3,902 4,268
Other assets 2,838 1,059
------- -------
Total assets $ 123,120 $ 119,089
======= =======
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued costs $ 557 $ 907
Accrued interest 4,633 1,820
Due to joint venture partner 6,260 4,504
Dividends payable 4,077 1,813
Current maturities of long-term debt 2,074 2,524
------ ------
Total current liabilities 17,601 11,568
------ ------
Long-term debt, net of current maturities 62,920 61,310
Other non-current liabilities 7,311 5,386
Commitments and contingencies (Note 7)
Shareholders' equity:
Preferred stock-$1.00 par value;
authorized 2.4 million shares;
issued shares of 1,225,740 at
September 30, 1998 and
1,196,236 at December 31, 1997-
liquidation preference of
$105 million at September 30, 1998 1,226 1,196
Common stock-$.01 par value;
authorized 500 million shares;
issued shares of 22,991,191 at
September 30, 1998 and
21,710,257 at December 31, 1997 230 217
Common stock held in treasury -
$.01 par value; 69,470
shares at September 30, 1998 and
December 31, 1997 (1) (1)
Additional paid-in capital 305,286 298,588
Accumulated deficit (259,911) (247,154)
Unearned compensation (11,542) (12,021)
------- -------
Total shareholders' equity 35,288 40,825
------- -------
Total liabilities and
shareholders' equity $ 123,120 $ 119,089
======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE>
XCL Ltd. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited)
Costs and operating expenses:
General and administrative $ 2,023 $ 949 $ 4,938 $ 2,511
Other, net 46 27 118 55
----- ----- ------ ------
2,069 976 5,056 2,566
----- ----- ------ ------
Operating loss (2,069) (976) (5,056) (2,566)
----- ----- ------ ------
Other income (expense):
Interest income 146 1,084 864 1,582
Interest expense, net of
amounts capitalized (99) (1,067) (1,951) (2,713)
Other, net 744 542 745 854
----- ----- ----- -----
791 559 (342) (277)
----- ----- ----- -----
Net loss (1,278) (417) (5,398) (2,843)
Preferred stock dividends (2,480) (1,704) (7,359) (5,020)
------ ------ ------ ------
Net loss attributable to
common stock $ (3,758) $(2,121) $(12,757) $(7,863)
====== ====== ====== ======
Net loss per common equivalent
share (basic) $ (.16) $ (.11) $ (.56) $ (.40)
====== ====== ====== =====
Net loss per common equivalent
share (diluted) $ (.16) $ (.11) $ (.56) $ (.40)
====== ===== ====== =====
Weighted average number of common
shares outstanding:
Basic 22,922 19,725 22,723 19,541
====== ====== ====== ======
Diluted 22,922 19,725 22,723 19,541
====== ====== ====== ======
The accompanying notes are an integral part of these financial statements.
<PAGE>
XCL Ltd. and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Additional Total
Preferred Common Treasury Paid-In Accumulated Unearned Shareholders'
Stock Stock Stock Capital Deficit Compensation Equity
--------- ------ -------- --------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 $1,196 $ 217 $ (1) $298,588 $(247,154) $ (12,021) $ 40,825
Net loss -- -- -- -- (5,398) -- (5,398)
Dividends -- -- -- -- (7,359) -- (7,359)
Preferred shares issued 53 -- -- 4,640 -- -- 4,693
Preferred shares converted
to common shares (23) 6 -- 17 -- -- --
Common shares issued -- 1 -- 219 -- -- 220
Exercise of stock purchase
warrants -- 6 -- 1,203 -- -- 1,209
Amortization of unearned
compensation -- -- -- -- -- 479 479
Earned compensation -
stock options -- -- -- 619 -- -- 619
----- ---- ---- ------- -------- ------- ------
Balance, September 30, 1998 $1,226 $ 230 $ (1) $305,286 $ (259,911) $(11,542) $35,288
===== ==== ==== ======= ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
XCL Ltd. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Nine Months Ended
September 30
-----------------
1998 1997
---- ----
(Unaudited)
Cash flows from operating activities:
Net loss $ (5,398) $ (2,843)
------ ------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation, depletion and amortization 78 104
Amortization of discount on senior secured notes 1,610 --
Stock compensation programs 1,490 --
Stock issued for outside professional services 223 --
Change in assets and liabilities:
Accounts receivable (83) (140)
Refundable deposits 1,200 --
Accounts payable and accrued costs (350) 1,166
Accrued interest 2,813 5,480
Other, net (268) (160)
------ ------
Total adjustments 6,713 6,450
------ ------
Net cash provided by operating
activities 1,315 3,607
------ ------
Cash flows from investing activities:
Change in cash held in escrow (restricted) 5,013 (75,000)
Note receivable (362) --
Capital expenditures (23,578) (13,279)
Investments (607) (418)
Proceeds from sale of assets 3 759
------ ------
Net cash used in investing activities (19,531) (87,938)
------ ------
Cash flows from financing activities:
Proceeds from sales of common stock -- 732
Proceeds from senior secured notes -- 75,000
Proceeds from loans -- 6,316
Proceeds from issuance of preferred stock -- 25,000
Proceeds from exercise of common stock
warrants and options 1,209 1,184
Payment of long-term debt (450) (9,455)
Payment of note payable -- (3,100)
Issuance of note receivable -- (100)
Stock/note issuance costs and other (93) (9,014)
------ ------
Net cash provided by financing
activities 666 86,563
------ ------
Net increase (decrease) in cash and cash equivalents (17,550) 2,232
Cash and cash equivalents at beginning of period 21,952 113
------ ------
Cash and cash equivalents at end of period $ 4,402 $ 2,345
======= ======
The accompanying notes are an integral part of these financial statements.
<PAGE>
XCL Ltd. and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
(1) Basis of Presentation
The consolidated financial statements at September 30, 1998,
and for the three months and nine months then ended have been
prepared by the Company, without audit, pursuant to the Rules and
Regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such Rules and Regulations. The Company believes
that the disclosures are adequate to make the information
presented herein not misleading. These consolidated financial
statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, as
amended. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary to
present fairly the financial position of XCL Ltd. and
subsidiaries as of September 30, 1998, and December 31, 1997, and
the results of their operations for the three months and nine
months ended September 30, 1998 and 1997, have been included.
Certain reclassifications have been made to prior period
financial statements to conform to current year presentation.
These reclassifications had no effect on net loss or shareholders
equity. The results of the Company's operations for such interim
periods are not necessarily indicative of the results for the
full year.
Revenues and operating expenses associated with oil and gas
properties held for sale have become insignificant and
accordingly, are recorded in other costs and operating expenses
in the accompanying consolidated statements of operations.
See the discussion in the section entitled "Disclosure
Regarding Forward-Looking Information" herein.
(2) Liquidity and Capital Resources
The Company has only generated minimal annual revenues since
the fourth quarter of 1995, when management made the decision to
focus its attention on operations in China and to sell its other
assets, and has had a loss for each of the last five fiscal
years. The Company's decision to focus on operations in China is
supported by the excellent well test results on the China
properties, however, the Company has not generated any profits
from its operations in China and is in the development stage with
respect to such operations. Although drilling results and well
tests have been excellent, initial production is not expected
until the first half of 1999.
As of September 30, 1998, the Company had an operating cash
balance of $4.4 million and $5.3 million in a restricted escrow
account for payment of interest on the outstanding senior secured
notes through November 1, 1998. These cash balances are not
sufficient to cover the Company's working capital requirements
and capital expenditure obligations on the Zhao Dong and Zhang
Dong Blocks during the remainder of 1998 through 1999. However,
the Company believes that it will be able to obtain the funds
necessary to cover its working capital and capital expenditure
requirements.
Potential sources of funds include the sale and/or
refinancing of domestic oil and gas properties held for sale or
investment in land, project financing, increasing the amount of
senior secured notes, supplier financing, additional equity,
including the exercise of currently outstanding warrants to buy
common stock and joint ventures with other oil companies.
Additionally, the Company has acquired interests in additional
oil and gas exploration and development blocks in China, on which
successful exploration wells have been drilled by the Chinese,
which could enhance the Company's ability to timely obtain
adequate funds for its obligations in China. Based on continuing
discussions with major stockholders, investment bankers,
potential purchasers and other oil companies, the Company
believes that such required funds will be available. However,
there is no assurance such funds will be available and, if
available, on commercially reasonable terms. Any new debt could
require approval of the holders of the Company's senior secured
notes and there is no assurance that such approval could be
obtained.
If funds for the purposes described above are not available,
the Company may be required substantially to curtail its
operations or to sell or surrender all or part of its interests
in China in order to meet its obligations and continue as a going
concern.
The Company is the operator of the Zhang Dong Block and, as
such, is required to cover the costs of initial appraisal
drilling, upgrading production facilities and additional studies
of seismic data. The contract commits the Company to drill at
least one well during the first year. Under the contract, the
Company is entitled to 49% of the production. The Company
estimates that its minimum capital requirements over the next
year to satisfy the terms of the Zhang Dong contract are
approximately $8 million. Funds are expected to come from the
previously mentioned sources.
The Company is not obligated to make any additional capital
payments to its lubricating oil and coalbed methane projects. The
Company believes that both the lubricating oil and coalbed
methane projects will be successful and grow. If successful, the
Company may make additional investments in these businesses, the
timing and amount of which are unknown at this time.
(3) Supplemental Cash Flow Information
There were no income taxes paid during the nine month
periods ended September 30, 1998 and 1997.
Capitalized interest for the three and nine months ended
September 30, 1998 was $3.3 million and $8.8 million,
respectively, as compared to $3.6 million and $6.2 million,
respectively, for the same period in 1997. Interest paid during
the three and nine months ended September 30, 1998 amounted to
$37,000 and $5.8 million, respectively, as compared to $0.1
million and $0.3 million, respectively, for the same periods in
1997.
On November 2, 1998, $5.4 million was paid to the holders of
the Notes with respect to interest on the Senior Secured Notes
for the interest period of May 1, 1998 through November 1, 1998.
(4) Debt
Long-term debt consists of the following (000's):
September 30 December 31
1998 1997
------------ ------------
Senior secured notes, net of
unamortized discount of $12,080
and $13,690, respectively $ 62,920 $ 61,310
Lutcher Moore Group Limited Recourse Debt 2,074 2,524
------ ------
64,994 63,834
Less current maturities:
Lutcher Moore Group Limited Recourse Debt (2,074) (2,524)
------ ------
$ 62,920 $ 61,310
====== ======
Substantially all of the Company's assets collateralize
these borrowings.
(5) Investment in Land
The Lutcher Moore Tract previously included in oil and gas
properties held for sale has been reclassified to investment in
land in the accompanying consolidated balance sheets because the
Company is exploring alternative plans.
(6) Preferred Stock and Common Stock
As of September 30, 1998, the Company had the following
shares of Preferred Stock issued and outstanding:
1998 Dividends (In Thousands)
Liquidation -----------------------------
Shares Value Declared Accrued Total
------ ------------ --------- ------- -----
Amended Series A 1,177,195 $ 100,061,575 $ 3,282 $ 3,961 $ 7,243
Amended Series B 48,545 4,854,500 -- 116 116
--------- ----------- ----- ----- -----
1,225,740 $ 104,916,075 $ 3,282 $ 4,077 $ 7,359
========= =========== ===== ===== =====
Preferred Stock
- ---------------
On November 2, 1998, the Company issued 54,713 shares of
Amended Series A Preferred Stock in payment of dividends.
Common Stock
- ------------
During the three months ended September 30, 1998, the
Company agreed to issue an aggregate of 416,637 shares of Common
Stock, of which 65,622 shares were in respect of a $222,500
obligation, pursuant to the terms of an October 1, 1997 agreement
between the Company and one of its consultants, and 351,015
shares to be issued in connection with the exercise of stock
purchase warrants with the Company receiving approximately
$877,537.
Loss Per Share
- --------------
The following table sets forth the computation of basic and
diluted loss per common share (as adjusted for a one-for-fifteen
reverse stock split effected December 17, 1997).
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
__________________ _________________
1998 1997 1998 1997
Weighted average number of common
shares outstanding (basic): 22,922 19,725 22,723 19,541
Weighted average number of common
shares outstanding (diluted): 22,922 19,725 22,723 19,541
Net loss attributable to
common stock $(3,758) $(2,121) $(12,757) $(7,863)
Basic loss per share $ (.16) $ (.11) $ (.56) $ (.40)
Diluted loss per share $ (.16) $ (.11) $ (.56) $ (.40)
The effect of 35,273,606 and 24,276,261 shares of potential
common stock were anti-dilutive in the nine months ended
September 30, 1998 and 1997, respectively, due to the losses in
both periods.
(7) Commitments, Contingencies and Subsequent Events
Other commitments, contingencies and subsequent events
include:
o The Company acquired the rights to the exploration,
development and production of the Zhao Dong Block by executing a
Production Sharing Agreement (the "Agreement") with CNODC in
February 1993. Under the terms of the Agreement, the Company and
its partner are responsible for all exploration costs. If a
commercial discovery is made, and if CNODC exercises its option
to participate in the development of the field, all development
and operating costs and related oil and gas production will be
shared up to 51 percent by CNODC and the remainder by the
Company and its partner.
The Agreement includes the following additional
principal terms:
The Agreement is basically divided into three periods:
the Exploration period, the Development period and the
Production period. Work to be performed and
expenditures to be incurred during the Exploration
period, which consists of three phases totaling seven
years from May 1, 1993, are the exclusive
responsibility of the Company and its partner as a
group (the "Contractor"). The Contractor's obligations
in the three exploration phases are as follows:
1. During the first three years, the Contractor is
required to drill three wildcat wells, perform
seismic data acquisition and processing and expend
a minimum of $6 million. These obligations have
been met.
2. During the next two years, the Contractor is
required to drill two wildcat wells, perform
seismic data acquisition and processing and expend
a minimum of $4 million (The Contractor has
elected to proceed with the second phase of the
Contract. The seismic data acquisition
requirement and the minimum expenditure
requirement for the second phase has been
satisfied.);
3. During the last two years, the Contractor is required to
drill two wildcat wells and expend a minimum of $4 million.
4. The Production Period for any oil and/or gas
field covered by the Agreement will be 15
consecutive years (each of 12 months), commencing
for each such field on the date of commencement of
commercial production (as determined under the
terms of the Agreement). However, prior to the
Production Period, and during the Development
Period, oil and/or gas may be produced and sold
during a long-term testing period.
The Agreement may be terminated by the Contractor at
the end of each phase of the Exploration period,
without further obligation.
o The Company, through its wholly owned subsidiary XCL-
Cathay Ltd., acquired the rights to appraisal, development and
production of the Zhang Dong Block, in the Bohai Bay shallow
water sea area, by executing a Petroleum Contract (the
"Contract") with China National Petroleum Corporation ("CNPC") in
August 1998. The Company is the Contractor. The Contractor
shall pay all appraisal costs. If CNPC exercises its option to
participate in the development of the field, all development and
operating costs and related oil and gas production will be shared
up to 51 percent by CNODC and the remainder by the Company.
The Contract is basically divided into three periods:
the Appraisal period, the Development period and the
Production period. Work to be performed and
expenditures to be incurred during the Appraisal
period, which consists of three phases totaling five
years from October 1, 1998, are the exclusive
responsibility of the Company. The Contractor's
obligations in the three appraisal phases are as
follows:
1. During the first year, the Contractor is
required to drill one appraisal well, perform
seismic data processing, upgrade the artificial
island and causeway, and expend a minimum of $4
million.
2. During the next two years, the Contractor is
required to drill two appraisal wells, make
additional improvements to the artificial island
if Contractor elects to drill from such facility,
re-evaluate a minimum of three existing wellbores,
formulate a development program for any field
determined to be commercial, and expend a minimum
of $6 million.
4. During the last two years, the Contractor is required to
drill two appraisal wells and expend a minimum of $6 million.
4. The Production Period for any oil and/or gas
field covered by the Agreement will be 20
consecutive years (each of 12 months), commencing
for each such field on the date of commencement of
commercial production (as determined under the
terms of the Contract). However, prior to the
Production Period, and during the Development
Period, oil and/or gas may be produced and sold
during a long-term testing period.
The Contract may be terminated by the Contractor at the
end of either the first or second phase of the
Appraisal period, without further obligation.
o The Company is in dispute over a 1992 tax assessment by the
Louisiana Department of Revenue and Taxation for the years 1987
through 1991 in the approximate amount of $2.5 million. The
Company has also received a proposed assessment from the
Louisiana Department of Revenue and Taxation for income tax years
1991 and 1992, and franchise tax years 1992 through 1996 in the
approximate amount of $3.0 million. The Company has filed written
protests as to these proposed assessments, and will vigorously
contest the asserted deficiencies through the administrative
appeals process and, if necessary, litigation. The Company
believes that adequate provision has been made in the financial
statements for any liability.
o In connection with the Lutcher Moore Tract, payments of
principal and interest on the Seller Notes were past due and in
July 1997, certain of the sellers demanded payment. The maturity
dates have been extended and the notes renewed until November
1999.
o On July 26, 1996, an individual filed three lawsuits against
a wholly owned subsidiary. One suit alleges actual damage of
$580,000 plus additional amounts that could result from an
accounting of a pooled interest. Another seeks legal and related
expenses of $56,473 from an allegation the plaintiff was not
adequately represented before the Texas Railroad Commission. The
third suit seeks a declaratory judgement that a pooling of a 1938
lease and another in 1985 should be declared terminated and
further plaintiffs seek damages in excess of $1 million to effect
environmental restoration. The Company believes these claims are
without merit and intends to vigorously defend itself.
o The Company is subject to other legal proceedings some of
which arise in the ordinary course of its business. In the
opinion of Management, the amount of ultimate liability with
respect to these actions will not materially affect the financial
position or results of operations of the Company.
o The Company is subject to existing United States federal,
state and local laws and regulations and Chinese laws and
regulations governing environmental quality and pollution
control. Although management believes that such operations are in
general compliance with applicable environmental regulations,
risks of substantial costs and liabilities are inherent in oil
and gas operations, and there can be no assurance that
significant costs and liabilities will not be incurred.
(8) XCL-China Ltd.
The following summary financial information of XCL-China
Ltd., a wholly owned subsidiary, reflects its financial position
and its results of operations for the periods presented (in
thousands of dollars):
September 30, December 31,
1998 1997
----------- ------------
A S S E T S
-----------
Current assets $ 219 $ 103
Oil and gas properties (full cost method):
Proved undeveloped properties,
not being amortized 30,617 21,172
Unevaluated properties 48,256 33,132
------ ------
78,873 54,304
------ ------
Other assets 683 834
------ ------
$ 79,775 $ 55,241
====== ======
L I A B I L I T I E S A N D A C C U M U L A T E D D E F I C I T
- ------------------------------------------------------------------
Total current liabilities $ 6,343 $ 4,788
Due to parent 76,062 52,383
Accumulated deficit (2,630) (1,930)
------ ------
$ 79,775 $ 55,241
====== ======
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Costs and operating expenses $ 82 $ 235 $ 700 $ 834
----- ----- ---- ----
Net loss $ (82) $ (235) $ (700) $ (834)
===== ===== ==== ====
<PAGE>
XCL LTD. AND SUBSIDIARIES
September 30, 1998
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Cautionary Statement Pursuant to Safe Harbor Provisions of
the Private Securities Litigation Reform Act of 1995.
This report contains "forward-looking statements" within the
meaning of the federal securities laws. These forward-looking
statements include, among others, statements concerning the
Company's outlook for 1998 and beyond, the Company's expectations
as to funding its capital expenditures and other statements of
expectations, beliefs, future plans and strategies, anticipated
events or trends, and similar expressions concerning matters that
are not historical facts. The forward-looking statements in this
report are subject to risks and uncertainties that could cause
actual results to differ materially from those expressed in or
implied by the statements.
Liquidity, Capital Resources and Management's Plans
- ---------------------------------------------------
Background
----------
The Company's management decided in the fourth quarter of
1995 to focus on the Company's operations in China and to sell
its other assets. The excellent well test results on the Zhao
Dong Block and the Company's reserve assessments support this
decision. The Company has focused on (i) raising funds to meet
capital requirements for Chinese operations, (ii) selling its
other properties and (iii) simplifying its capital structure to
make it easier to raise capital. The Company intends to continue
these activities and to work with Apache and CNODC to refine the
ODP to reduce expenditures and accelerate production. The
Company's only historic revenues have been from the Company's
financing activities and from properties previously sold and
those currently held for sale or investment. The Company is in
the development stage with respect to its operations in China and
has not generated any revenues from operations related to its
properties and interests in China.
The Company has made significant capital expenditures since
acquiring its interest in the Zhao Dong Block in 1992. Despite
incurring losses since 1992, the Company, because of the high
quality of the Zhao Dong Block, has been able to obtain all
required funds for the exploration and development of the Zhao
Dong Block.
On August 20, 1998, the Company entered into a production
sharing contract with CNODC for the 12,000-acre Zhang Dong Block
and on September 15, 1998, the contract was approved by the
Ministry of Foreign Trade and Economic Cooperation of China,
effective October 1, 1998.
Liquidity and Capital Resources
-------------------------------
The Company offered and sold $75 million of Notes and $25
million of equity on May 20, 1997. During 1997 such funds were
used to pay costs of the offering, the Company's 1997 exploration
and development costs and $38 million of debt. At September 30,
1998, the Company had an unrestricted operating cash balance of
$4.4 million and restricted cash held in escrow for the payment
of interest on the Notes of $5.3 million. The Company had net
working capital deficit of $6.9 million. These cash balances are
not sufficient to cover the Company's working capital
requirements and capital expenditure obligations on the Zhao Dong
and Zhang Dong Blocks during the remainder of 1998 and through
1999.
As a result of the Company's decision to focus on China and
sell its U.S. assets, the Company presently has no source of
material revenues. The Company incurred a loss for fiscal 1997 of
$14.0 million and expects to incur a loss in 1998 as well because
production and related cash flow from the Zhao Dong and Zhang
Dong Blocks are not expected until 1999. For the nine months
ended September 30, 1998, the Company had a net loss of $5.4
million.
Management's Plan
-----------------
The Company's unrestricted cash will be required for working
capital and exploration, development and production expenditures
on the Zhao Dong and Zhang Dong Blocks.
With respect to the Zhao Dong Block, CNODC has given written
notice that it will participate as to its full 51% share of the C-
D Field and has urged that production begin as soon as reasonably
practicable. Except for certain exploratory wells on which
Apache has an obligation to pay for the Company's costs, the
Company is required to fund 50% of all exploration expenditures
and 24.5% of all development and production expenditures. The
Company estimates that its share of actual development
expenditures for the C-D Field for the remainder of 1998 will be
approximately $2.0 million. The Company estimates that its share
of unpaid exploration expenses for the remainder of 1998 will be
approximately $5.0 million. The Company estimates that its share
of development expenses for 1999 will be approximately $22
million. The Company estimates its share of exploration expenses
of the remaining two obligatory wells to be drilled in 1999 is
approximately $6.0 million. The Company anticipates that in
addition to the two obligatory exploration wells to be drilled in
1999, additional exploration wells may be drilled during 1999.
The Company presently projects and plans that these funds will be
available from the sale or refinancing of domestic oil and gas
properties held for sale and/or investment in land, project
financing, increasing the amount of senior secured notes,
supplier financing, additional equity, including the exercise of
currently outstanding warrants to buy common stock, joint
ventures with other oil companies and proceeds from production.
Based on continuing discussions with major stockholders,
investment bankers, potential purchasers and other oil companies,
the Company believes that such required funds will be available.
However, there is no assurance that such funds will be available
and, if available, on commercially reasonable terms. Any new
debt could require approval of the holders of the Company's Notes
and there is no assurance that such approval could be obtained.
Due to the successful results of the D-3 and C-4 Wells, the
1998 work program and budget exceed the Company's initial
preliminary projections earlier in 1997. This results from the
necessity of drilling at least one appraisal well offsetting the
C-4 exploratory well and the decision to extend the Contract into
its third exploratory period because of the successful drilling
of the D-3 and C-4 wells. XCL, Apache, and CNODC are working
together to reduce capital costs for the Zhao Dong Block and to
facilitate the commencement of production from the C-4 Well area
into the first half of 1999. This work has already resulted in
reductions of estimated capital costs of approximately $35
million based on a change in the conceptual design, and a
determination that it is possible to commence production from the
C-4 well area in the first half of 1999. It is the Company's
understanding that the Company, Apache and CNODC have now all
agreed to make every effort to achieve initial production in the
first half of 1999. The $28 million estimated to be necessary
for exploration and development in 1999 does not include the
entire cost of accelerating production from the C-4 Well area
into the first part of 1999. The Company estimates this would
require additional expenditures of approximately $960,000, which
the Company believes it can obtain from the sources described
above.
The Company is the operator of the Zhang Dong Block and, as
such, is required to cover the costs of initial appraisal
drilling, upgrading production facilities and additional studies
of seismic data. The contract commits the Company to drill at
least one well during the first year. Under the contract, the
Company is entitled to 49% of the production. The Company
estimates that its minimum capital requirements over the next
year to satisfy the terms of the Zhang Dong contract are
approximately $8 million. Funds are expected to come from the
previously mentioned sources.
Longer term liquidity is dependent upon the Company's future
performance, including commencement of production in China, as
well as continued access to capital markets. In addition, the
Company's efforts to secure additional financing could be
impaired if its Common Stock is delisted from the AMEX.
If funds for the purposes described above are not available,
the Company may be required substantially to curtail its
operations or to sell or surrender all or part of its interest in
the Zhao Dong or the Zhang Dong Blocks and/or its other interests
in China in order to meet its obligations and continue as a going
concern.
The Company is not obligated to make any additional capital
payments to its lubricating oil and coalbed methane projects.
The Company is in discussions with the Chinese about expansion of
their lube oil venture. If these discussions are successfully
concluded, additional capital investments will be required by the
Company; however, at this time it is not known what the extent or
timing for such investments might be. Similarly, if the
Company's coalbed methane project becomes active and is
successful, the Company may make additional investments in that
business. Again, the extent and timing of such investment, if
any, is unknown at this time.
Other General Considerations
- ----------------------------
The Company believes that inflation has had no material
impact on its sales, revenues or income during the reporting
periods. In light of increased oil and gas exploration activity
worldwide, and in the Bohai Bay in particular, increased rates
for equipment and services, and limited rig availability may have
an impact in the future.
The Company is subject to existing domestic and Chinese
federal, state and local laws and regulations governing
environmental quality and pollution control. Although management
believes that such operations are in general compliance with
applicable environmental regulations, risks of substantial costs
and liabilities are inherent in oil and gas operations, and there
can be no assurance that significant costs and liabilities will
not be incurred.
New Accounting Pronouncements
- -----------------------------
In June 1997, the FASB Issued SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information," which
is effective for the Company's year ended December 31, 1998.
This statement establishes standards for reporting of information
about operating segments. The Company will be analyzing SFAS No.
131 during 1998 to determine what, if any, additional disclosures
will be required.
Results of Operations
- ---------------------
During the three and nine month periods ended September 30,
1998, the Company incurred net losses of $1.3 million and $5.4
million, respectively, as compared to net losses of $0.4 million
and $2.8 million, respectively, during the corresponding periods
in 1997.
Revenues and operating expenses associated with oil and gas
properties held for sale have become insignificant and
accordingly, are recorded in other costs and operating expenses
in the accompanying consolidated statements of operations.
Interest expense increased in the third quarter of 1998, as
compared to the corresponding period in 1997, because of
increased debt and interest rates. Also included in interest
expense was amortization of warrant costs and debt issue costs on
the senior secured notes issued in May 1997. Interest
capitalized for the comparable periods in 1998 and 1997 increased
because the oil and gas property base was larger, thus, reducing
interest expense, net of amounts capitalized, for the periods.
Interest income was $0.9 million for the nine months ended
September 30, 1998, as compared to $1.6 million for the same
period in 1997. The reason for this decrease was due to the use
of deposited funds raised in the May 1997 debt and equity
offerings, which funds were released from escrow in October 1997.
Preferred stock dividends were $7.4 million for the nine
months ended September 30, 1998, as compared to $5.0 million for
the same period in 1997. The increase is a result of the
issuance of additional shares in the equity offering concluded in
May 1997. These dividends are required to be paid in additional
shares of preferred stock for the first three years.
As the Company continues to focus its resources on
exploration and development of the Zhao Dong and Zhang Dong
Blocks future oil and gas revenues will initially be directly
related to the degree of drilling success experienced on the Zhao
Dong and Zhang Dong Blocks. The Company does not anticipate
significant increases in its oil and gas production in the short-
term and expects to incur operating losses until such time as
sufficient revenues from the China projects are realized which
exceed operating costs.
General and administrative expenses were $2.0 million and
$4.9 million for the three and nine months ended September 30,
1998, as compared to $0.9 million and $2.5 million during the
same period in 1997. The increase of $2.4 million during the nine
months ended September 30, 1998, compared to the same period in
1997 was the result of increases in non-cash compensation charges
related to stock and appreciation options of $1.5 million
(approved by shareholders in December 1997), $0.4 million in
legal and professional fees, $0.2 million in public company
expenses, $0.1 million in office expenses and $0.2 million in
travel and entertainment. Legal and profession fees increased
because of additional services required and public company
expenses associated with holding two shareholder meetings.
Office expenses increased because of the opening of the Houston,
Texas and Beijing, China offices. Travel and entertainment
increased as a result of increased activity in China.
Year 2000 Compliance
- --------------------
The Company has conducted a review of its computer systems
to identify the systems that could be affected by the "Year 2000"
issue and has upgraded certain of its software to software that
purports to be Year 2000 compliant. The Year 2000 problem is the
result of computer programs being written using two digits
(rather than four) to define the applicable year and equipment
with time-sensitive embedded components. Any of the Company's
programs that have time-sensitive software or equipment that has
time-sensitive embedded components may recognize a date using
"00" as the year 1900 rather than the year 2000. This could
result in a major system failure or miscalculations. Although no
assurance can be given because of the potential wide scale
manifestations of this problem which may affect the Company's
business, the Company presently believes that the Year 2000
problem will not pose significant operational problems for its
computer systems. The Company is not able to estimate the total
costs of undertaking Year 2000 remedial activities, if they will
be required. However, based upon information developed to date,
it believes that the total cost of Year 2000 remediation will not
be material to the Company's cash flow, results of operations or
financial condition.
The Company also may be vulnerable to other companies' Year
2000 issues. The Company's current estimates of the impact of
the Year 2000 problem on its operations and financial results do
not include costs that may be incurred as a result of any
vendors' or customers' failure to become Year 2000 compliant on a
timely basis. The Company intends to initiate formal
communications with all of its significant vendors and customers
with respect to such persons' Year 2000 compliance programs and
status in the fourth quarter of 1998. The Company expects to
complete its Year 2000 review and, if required, remediation
efforts within a time frame that will enable its computer-based
and embedded chip systems to function without significant
disruption in the Year 2000. However, there can be no assurance
that such other companies will achieve Year 2000 compliance or
that any conversions by such companies to become Year 2000
compliant will be compatible with the Company's computer system.
The inability of the Company or any of its principal vendors or
customers to become Year 2000 compliant in a timely manner could
have a material adverse effect on the Company's financial
condition or results of operations.
Subsequent Events
- -----------------
On November 6, 1998, the Company, through its wholly owned
subsidiary, XCL Land, Ltd,, issued an aggregate of 15 units, each
unit comprised of a secured note and warrants to purchase 21,705
shares of Common Stock of the Company in a short term financing
with three lenders. The lenders were granted a security interest
in the partnership interests of XCL Land Ltd. and The Exploration
Company of Louisiana, Inc., in L.M. Holding Associates, L.P., the
owner of the Lutcher Moor Tract. The notes bear interest at 15%
per annum and are payable in 90 days, with the option for two 90-
day extensions, the second of which must be approved by the
lenders. XCL Land Ltd. received $1.5 million in proceeds, of
which $0.7 million was used to pay outstanding indebtedness
associated with the Lutcher Moore Tract and the remaining $0.8
million paid as a dividend to the Company.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.
The Company had no interest in investments subject to market
risk during the period covered by this report.
<PAGE>
XCL LTD. AND SUBSIDIARIES
September 30, 1998
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On January 24, 1997, a subsidiary of the Company filed an
action captioned L.M. Holding Associates, L.P. v. LaRoche
Chemicals, Inc. (23rd Judicial District Court, St. James Parish,
Louisiana, No. 24, 338, Section A). The lawsuit claims that
LaRoche failed to properly maintain its 8" brine line that runs
10 miles across the subsidiary's property in St. James Parish,
Louisiana, discharged brine from this line onto the subsidiary's
property and no longer has the right to operate said line. In
May 1998, the court issued a preliminary injunction enjoining
LaRoche from discharging brine onto the subsidiary's property and
enjoining LaRoche from continued operation of the 8" brine line
without a scientific system for early detection of leaks and
without periodic monitoring of the line. In September 1998, the
court denied the Company's request for a preliminary injunction
to prevent LaRoche from installing a new line on the property.
In October 1998, the Company was granted an injunction to
prohibit LaRoche from conducting operations off the servitude.
The Company is seeking damages and cancellation of LaRoche's
right to operate the brine line. No trial date has been set.
The Company intends to vigorously prosecute the lawsuit.
Other than as disclosed in the Company's Annual Report on
Form 10-K, as amended, there are no material pending legal
proceedings to which the Company or any of its subsidiaries is a
party or to which any of their properties are subject.
Item 2(c). Changes in Securities
o In July 1997, the Company issued stock purchase warrants to
a consultant to acquire 35,000 shares of Common Stock,
exercisable at $3.75 per share, in connection with a consulting
agreement dated June 30, 1998.
o In September 1998, the Company issued 351,015 stock purchase
warrants to an institutional investor at an exercise price of
$2.50 per share, pursuant to a Warrant Exchange Agreement dated
September 16, 1998. Such warrants were immediately exercised and
the Company received $877,538 in proceeds.
o On October 1, 1998, the Company issued 50,000 stock purchase
warrants at an exercise price of $3.75 per share to a former
officer of the Company.
o On November 6, 1998, the Company issued an aggregate of
325,575 stock purchase warrants at an exercise price of $3.50 per
share, in connection with the placement of secured notes of XCL
Land, Ltd., a wholly owned subsidiary of the Company.
These securities were sold within the United States pursuant to
an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act, pursuant to
Section 4(2), Rule 144A and Regulation D under the Securities
Act, in that the securities were offered and sold only to
"accredited investors," or outside the U.S. pursuant to
Regulation S in "offshore transactions" to "non-U.S. Person."
All of the securities bear a restrictive legend and are subject
to restriction on resale or transfer.
Item 3. Defaults Upon Senior Securities.
The Company was not in default in payment of indebtedness
nor in arrears in payment of dividends during the period covered
by this report.
Item 4. Submission of Matters to a Vote of Security-Holders
There were no matters submitted to a vote of holders of the
Common Stock or Preferred Stock of the Company during the period
covered by this report.
Item 5. Other Information
On November 4, 1998, the Company announced that following
successful completion of the C-4-2 appraisal well on the Zhao
Dong Block, production will begin in China early next year on
both its Zhang Dong Block, on which the company is operator and a
49 percent owner, and its Zhao Dong Block, where it is a 24.5
percent owner and Apache Corporation is the operator. With the
completion for production of the C-4-2 well, which tested 2,500
barrels of oil per day from one of six productive zones, XCL and
its partners have drilled eight successful wells on the Zhao Dong
Block with combined test rates, or indicated test rates, of
approximately 55,000 barrels of oil per day.
Zhao Dong Block
- ----------------
On the Zhao Dong Block, the Joint Management Committee,
consisting of representatives from Dagang Oilfield (Group) Ltd.
(Dagang), China National Oil and Gas Exploration and Development
Corporation (CNODC), XCL and Apache, has by a resolution adopted
by all parties on October 28, 1998, agreed to commence production
no later than March 15, 1999, on the C-4-2 well, and to start
completion work for production on the C-4 well no later than
April 1, 1999. This will allow production from these two wells
during the second quarter of 1999.
The accelerated Zhao Dong production schedule is possible because
of results from the drilling of the just-completed C-4-2 well.
The C-4-2 well was drilled to a total true vertical depth of
9,184 feet (2,800 meters), and successfully appraised the C-4
discovery, which tested 15,359 barrels of oil per day and 10.7
million cubic feet of gas per day in October 1997. A new,
deeper zone in the C-4-2, not encountered in the C-4 well, was
drill stem tested and found productive in Permian-age sediments.
This zone flowed up to 2,500 barrels of oil per day from the
Shihezhi formation at 8,960 feet (2,732 meters) with 40-degree
API gravity oil. Three zones in the Oligocene Shahejie Formation,
which tested oil productive in the C-4 discovery well at a
combined rate of 2,668 barrels of oil per day and 5 million cubic
feet of gas per day, were also encountered in the C-4-2 well and
are productive by log and core analysis. Several additional
sands of Miocene and Pliocene ages, which were fault separated
and wet in the C-4 well, are productive in the C-4-2 well by
formation test and log and core analysis. The Miocene sands
tested as high as 4,300 barrels of oil per day in other wells on
the Zhao Dong Block, while Pliocene sands on the Zhao Dong Block
tested as high as 1,400 barrels of oil per day. Test data from
those same zones on the C and D Blocks confirm their productive
capability in the C-4-2 well. The zones were not further tested
in order to maintain the integrity of the casing and insure that
the well could be completed for production.
In addition to starting production from the C-4 and C-4-2 wells,
the possibility of beginning earlier production on the C-D Field
using temporary facilities, before all permanent production
facilities have been completed, is being reviewed.
Zhang Dong Block
- ----------------
After drilling seven wells on the Zhang Dong Block, Dagang
projects proven oil reserves on the Block in excess of the proven
reserves on the Zhao Dong Block. Dagang has already constructed
extensive drilling and production facilities on the Block,
allowing production to start as soon as wells are completed.
XCL and Dagang, beginning next month, will re-enter and side
track six existing wells and begin production. The company also
plans, in 1999 working with Dagang, to drill two to three wells
from the existing causeway, two wells from the existing
artificial island, and one well from a jack-up drilling rig. It
is planned that drilling on the artificial island will continue
at the rate of at least six wells per year during 2000, 2001 and
2002. Each well will be put into production as it is completed,
allowing production to steadily increase throughout the period.
The Zhang Dong Block is the second production sharing contract
awarded to XCL by CNODC by agreement dated August 20, 1998,
effective October 1, 1998.
Marsden W. Miller, Jr., Chairman and Chief Executive Officer,
stated, "During 1999, we will commence production and start
recognizing the considerable value the company has in China. On
the Zhao Dong Block, eight successful wells have been drilled
with combined test rates, or indicated test rates, of
approximately 55,000 barrels of oil per day. The eight wells
successfully tested 19 separate sands with approximately 575 feet
of maximum net pay in six separate geological zones, the
Pliocene, Miocene, Oligocene, Cretaceous, Jurassic and Permian.
Two additional wells were dry holes and another well was drilled
but could not be evaluated or tested because of mechanical
problems. On the Zhang Dong Block, a northwest extension of the
Zhao Dong Block, Dagang has performed extensive 2-D and 3-D
seismic which reveals the existence of a large geologic structure
extending in depth from the shallowest through the deepest of the
formations now proven productive on the Zhao Dong Block. Dagang,
by drilling seven wells, primarily on the flanks of the
structure, has tested the Oligocene zone. Seismic data indicate
that all other geologic zones proven productive on the Zhao Dong
Block are prospective on the Zhang Dong Block."
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-K.
See Index to Exhibits following signature page.
(b) Reports on Form 8-K
A current report on Form 8-K was filed on August 21, 1998,
to report that (1) the Company had begun drilling of the C-5
exploration well on the Zhao Dong Block, and (2) the execution of
the Petroleum Contract by and between the Company's wholly owned
subsidiary, XCL-Cathay Ltd. and China National Petroleum
Corporation for appraisal and development of the Zhang Dong
Block, Bohai Bay shallow water sea area.
A current report on Form 8-K was filed on September 9, 1998,
to report that the Company had begun drilling of the C-4-2
appraisal well on the Zhao Dong Block.
A current report on Form 8-K was filed on September 28,
1998, to report that the Petroleum Contract for appraisal and
development of the Zhang Dong Block had been approved by the
Ministry of Foreign Trade and Economic Cooperation of The
People's Republic of China on September 15, 1998, and would become
effective on October 1, 1998.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
XCL Ltd.
/s/ Marsden W. Miller, Jr.
By: _________________________________
Name: Marsden W. Miller, Jr.
Title: Chairman, Chief Executive Officer and
Principal Financial Officer
Date: November 16, 1998
<PAGE>
INDEX TO EXHIBITS
(a) Exhibits required by Item 601 of Regulation S-K.
2.0 Not applicable
3.1 Amended and Restated Certificate of Incorporation of the
Company. (S)(i)
3.2 Amended and Restated By-Laws of the Company. (A)(i)
4.1 Forms of Common Stock Certificates. (R)(i)
4.2 Form of Warrant dated January 31, 1994 to purchase
2,500,000 shares of Common Stock at an exercise price of
$1.00 per share, subject to adjustment, issued to INCC.
(D)(i)
4.3 Form of Registrar and Stock Transfer Agency Agreement,
effective March 18, 1991, entered into between the Company
and Manufacturers Hanover Trust Company (predecessor to
Chemical Bank), whereby Chemical Bank (now known as
ChaseMellon Shareholder Services) serves as the Company's
Registrar and U.S. Transfer Agent. (E)
4.4 Copy of Warrant Agreement and Stock Purchase Warrant
dated March 1, 1994 to purchase 500,000 shares of Common
Stock at an exercise price of $1.00 per share, subject to
adjustment, issued to EnCap Investments, L.C. (D)(ii)
4.5 Copy of Warrant Agreement and form of Stock Purchase
Warrant dated March 1, 1994 to purchase an aggregate 600,000
shares of Common Stock at an exercise price of $1.00 per
share, subject to adjustment, issued to principals of San
Jacinto Securities, Inc. in connection with its financial
consulting agreement with the Company. (D)(iii)
4.6 Form of Warrant Agreement and Stock Purchase Warrant
dated April 1, 1994, to purchase an aggregate 6,440,000
shares of Common Stock at an exercise price of $1.25 per
share, subject to adjustment, issued to executives of the
Company surrendering all of their rights under their
employment contracts with the Company. (C)(i)
4.7 Form of Warrant Agreement and Stock Purchase Warrant
dated April 1, 1994, to purchase an aggregate 878,900 shares
of Common Stock at an exercise price of $1.25 per share,
subject to adjustment, issued to executives of the Company
in consideration for salary reductions sustained under their
employment contracts with the Company. (C)(ii)
4.8 Form of Warrant Agreement and Stock Purchase Warrant
dated April 1, 1994, to purchase 200,000 shares of Common
Stock at an exercise price of $1.25 per share, subject to
adjustment, issued to Thomas H. Hudson. (C)(iii)
4.9 Form of Warrant Agreement and Stock Purchase Warrant
dated May 25, 1994, to purchase an aggregate 100,000 shares
of Common Stock at an exercise price of $1.25 per share,
subject to adjustment, issued to the holders of Purchase
Notes B, in consideration of amendment to payment terms of
such Notes. (C)(iv)
4.10 Form of Warrant Agreement and Stock Purchase Warrant
dated May 25, 1994, to purchase an aggregate 100,000 shares
of Common Stock at an exercise price of $1.25 per share,
subject to adjustment, issued to the holders of Purchase
Notes B, in consideration for the granting of an option to
further extend payment terms of such Notes. (C)(v)
4.11 Form of Purchase Agreement between the Company and each
of the Purchasers of Units in the Regulation S Unit Offering
conducted by Rauscher Pierce & Clark with closings as
follows:
December 22, 1995 116 Units
March 8, 1996 34 Units
April 23, 1996 30 Units (J)(i)
4.12 Form of Warrant Agreement between the Company and each
of the Purchasers of Units in the Regulation S Unit Offering
conducted by Rauscher Pierce & Clark, as follows:
Closing Date Warrants Exercise Price
December 22, 1995 6,960,000 $.50
March 8, 1996 2,040,000 $.35
April 23, 1996 1,800,000 $.35
(J)(ii)
4.13 Form of Warrant Agreement between the Company and
Rauscher Pierce & Clark in consideration for acting as
placement agent in the Regulation S Units Offering, as
follows:
Closing Date Warrants Exercise Price
December 22, 1995 696,000 $.50
March 8, 1996 204,000 $.35
April 23, 1996 180,000 $.35 (J)(iii)
4.14 Form of a series of Stock Purchase Warrants issued to
Janz Financial Corp. Ltd. dated August 14, 1996, entitling
the holders thereof to purchase up to 3,080,000 shares of
Common Stock at $0.25 per share on or before August 13,
2001. (M)(i)
4.15 Stock Purchase Agreement between the Company and
Provincial Securities Ltd. dated August 16, 1996, whereby
Provincial purchased 1,500,000 shares of Common Stock in a
Regulation S transaction. (M)(ii)
4.16 Stock Purchase Warrant issued to Terrenex Acquisitions
Corp. dated August 16, 1996, entitling the holder thereof to
purchase up to 3,000,000 shares of Common Stock at $0.25 per
share on or before December 31, 1998. (M)(iii)
4.17 Form of a series of Stock Purchase Warrants dated
November 26, 1996, entitling the following holders thereto
to purchase up to 2,666,666 shares of Common Stock at $0.125
per share on or before December 31, 1999:
Warrant Holder Warrants
Opportunity Associates, L.P. 133,333
Kayne Anderson Non-Traditional
Investments, L.P. 666,666
Arbco Associates, L.P 800,000
Offense Group Associates, L.P. 333,333
Foremost Insurance Company 266,667
Nobel Insurance Company 133,333
Evanston Insurance Company 133,333
Topa Insurance Company 200,000 (N)(i)
4.18 Form of a series of Stock Purchase Warrants dated
December 31, 1996 (2,128,000 warrants) and January 8, 1997
(2,040,000 warrants) to purchase up to an aggregate of
4,168,000 shares of Common Stock at $0.125 per share on or
before August 13, 2001. (N)(ii)
4.19 Form of Stock Purchase Warrants dated February 6, 1997,
entitling the following holders to purchase an aggregate of
1,874,467 shares of Common Stock at $0.25 per share on or
before December 31, 1999:
Warrant Holder Warrants
Donald A. and Joanne R. Westerberg 241,660
T. Jerald Hanchey 1,632,807 (N)(iii)
4.20 Form of a series of Stock Purchase Warrants dated April
10, 1997, issued as a part of a unit offered with Unsecured
Notes of XCL-China Ltd., exercisable at $0.01 per share on
or before April 9, 2002, entitling the following holders to
purchase up to an aggregate of 10,092,980 shares of Common
Stock:
Warrant Holder Warrants
Kayne Anderson Offshore L.P. 651,160
Offense Group Associates, L.P. 1,627,900
Kayne Anderson Non-Traditional
Investments, L.P. 1,627,900
Opportunity Associates, L.P. 1,302,320
Arbco Associates, L.P. 1,627,900
J. Edgar Monroe Foundation 325,580
Estate of J. Edgar Monroe 976,740
Boland Machine & Mfg. Co., Inc. 325,580
Construction Specialists, Inc.
d/b/a Con-Spec, Inc. 1,627,900 (N)(iv)
4.21 Form of Purchase Agreement dated May 13, 1997, between
the Company and Jefferies & Company, Inc. (the "Initial
Purchaser") with respect to 75,000 Units each consisting of
$1,000 principal amount of 13.5% Senior Secured Notes due
May 1, 2004, Series A and one warrant to purchase 1,280
shares of the Company's Common Stock with an exercise price
of $0.2063 per share ("Note Warrants"). (O)(i)
4.22 Form of Purchase Agreement dated May 13, 1997, between
the Company and Jefferies & Company, Inc. (the "Initial
Purchaser") with respect to 294,118 Units each consisting of
one share of Amended Series A, Cumulative Convertible
Preferred Stock ("Amended Series A Preferred Stock") and one
warrant to purchase 327 shares of the Company's Common Stock
with an exercise price of $0.2063 per share ("Equity
Warrants"). (O)(ii)
4.23 Form of Warrant Agreement and Warrant Certificate dated
May 20, 1997, between the Company and Jefferies & Company,
Inc., as the Initial Purchaser, with respect to the Note
Warrants. (O)(iii)
4.24 Form of Warrant Agreement and Warrant Certificate dated
May 20, 1997, between the Company and Jefferies & Company,
Inc., as the Initial Purchaser, with respect to the Equity
Warrants. (O)(iv)
4.25 Form of Designation of Amended Series A Preferred Stock
dated May 19, 1997. (O)(v)
4.26 Form of Amended Series A Preferred Stock certificate.
(O)(vi)
4.27 Form of Global Unit Certificate for 75,000 Units
consisting of 13.5% Senior Secured Notes due May 1, 2004 and
Warrants to Purchase Shares of Common Stock. (O)(vii)
4.28 Form of Global Unit Certificate for 293,765 Units
consisting of Amended Series A Preferred Stock and Warrants
to Purchase Shares of Common Stock. (O)(viii)
4.29 Form of Warrant Certificate dated May 20, 1997, issued
to Jefferies & Company, Inc., with respect to 12,755
warrants to purchase shares of Common Stock of the Company
at an exercise price of $0.2063 per share. (O)(ix)
4.30 Form of Stock Purchase Agreement dated effective as of
October 1, 1997, between the Company and William Wang,
whereby the Company issued 800,000 shares of Common Stock to
Mr. Wang, as partial compensation pursuant to a Consulting
Agreement. (Q)(i)
4.31 Form of Stock Purchase Warrants dated effective as of
February 20, 1997, issued to Mr. Patrick B. Collins with
respect to 200,000 warrants to purchase shares of Common
Stock of the Company at an exercise price of $0.25 per
share, issued as partial compensation pursuant to a
Consulting Agreement. (Q)(ii)
4.32 Certificate of Amendment to the Certificate of
Designation of Series F, Cumulative Convertible Preferred
Stock dated January 6, 1998. (R)(ii)
4.33 Form of Stock Purchase Warrants dated January 16, 1998,
issued to Arthur Rosenbloom (6,389), Abby Leigh (12,600) and
Mitch Leigh (134,343) to purchase shares of Common Stock of
the Company at an exercise price of $0.15 per share, on or
before December 31, 2001. (R)(iii)
4.34 Certificate of Designation of Amended Series B,
Cumulative Convertible Preferred Stock dated March 4, 1998.
(R)(iv)
4.35 Correction to Certificate of Designation of Amended
Series B, Cumulative Convertible Preferred Stock dated March
5, 1998. (R)(v)
4.36 Second Correction to Certificate of Designation of
Amended Series B Preferred Stock dated March 19, 1998.
(R)(vi)
4.37 Form of Stock certificate representing shares of Amended
Series B Preferred Stock. (S)(ii)
4.38 Form of Agreement dated March 3, 1998 between the
Company and Arbco Associates, L.P., Kayne Anderson Non-
Traditional Investments, L.P., Offense Group Associates,
L.P. and Opportunity Associates, L.P. for the exchange of
Series B Preferred Stock and associated warrants into
Amended Series B Preferred Stock and warrants. (S)(iii)
4.39 Form of Stock Purchase Warrants dated March 3, 1998
between the Company and the following entities:
Holder Warrants
Arbco Associates, L.P. 85,107
Kayne Anderson Non-Traditional
Investments, L.P. 79,787
Offense Group Associates, L.P. 61,170
Opportunity Associates, L.P. 23,936 (S)(iv)
4.40 Form of Stock Purchase Warrant dated effective as of
June 30, 1998, issued to Mr. Patrick B. Collins with respect
to 17,000 warrants to purchase shares of Common Stock of the
Company at an exercise price of $3.75 per share, issued as
partial compensation pursuant to a Consulting Agreement.
(V)(i)
4.41 Form of Warrant Exchange Agreement and Stock Purchase
Warrant dated September 15, 1998 to purchase an aggregate of
351,015 shares of Common Stock at an exercise price of $2.50
per share, subject to adjustment, issued to Cumberland
Partners in exchange for certain warrants held by Cumberland
Partners. (V)(ii)
4.42 Form of Warrant Agreement dated October 1, 1998 to
purchase 50,000 shares of Common Stock at an exercise price
of $3.75 per share, subject to adjustment, issued to Steven
B. Toon, a former officer of the Company. *
4.43 Form of a series of Stock Purchase Warrants dated
November 6, 1998, issued as a part of a unit offered with
secured Notes of XCL Land Ltd., exercisable at $3.50 per
share on or before November 6, 2003, entitling the following
holders to purchase up to an aggregate of 325,575 shares of
Common Stock:
Warrant Holder Warrants
J. Edgar Monroe Foundation 21,705
Estate of J. Edgar Monroe 151,935
Construction Specialists, Inc.
d/b/a Con-Spec, Inc. 151,935 *
10.1 Contract for Petroleum Exploration, Development and
Production on Zhao Dong Block in Bohai Bay Shallow Water Sea
Area of The People's Republic of China between China
National Oil and Gas Exploration and Development Corporation
and XCL-China Ltd., dated February 10, 1993. (B)
10.2 Form of Net Revenue Interest Assignment dated February
23, 1994, between the Company and the purchasers of the
Company's Series D, Cumulative Convertible Preferred Stock.
(D)(iv)
10.3 Modification Agreement for Petroleum Contract on Zhao
Dong Block in Bohai Bay Shallow Water Sea Area of The
People's Republic of China dated March 11, 1994, between the
Company, China National Oil and Gas Exploration and
Development Corporation and Apache China Corporation LDC.
(D)(v)
10.4 Consulting agreement between the Company and Sir Michael
Palliser dated April 1, 1994. (F)(i)
10.5 Consulting agreement between the Company and Mr. Arthur
W. Hummel, Jr. dated April 1, 1994. (F)(ii)
10.6 Letter of Intent between the Company and CNPC United
Lube Oil Corporation for a joint venture for the manufacture
and sale of lubricating oil dated January 14, 1995. (G)(i)
10.7 Farmout Agreement dated May 10, 1995, between XCL China
Ltd., a wholly owned subsidiary of the Company and Apache
Corporation whereby Apache will acquire an additional
interest in the Zhao Dong Block, Offshore People's Republic
of China. (G)(ii)
10.8 Modification Agreement of Non-Negotiable Promissory
Note and Waiver Agreement between Lutcher & Moore
Cypress Lumber Company and L.M. Holding Associates, L.P.
dated June 15, 1995. (H)(i)
10.9 Third Amendment to Credit Agreement between Lutcher-
Moore Development Corp., Lutcher & Moore Cypress Lumber
Company, The First National Bank of Lake Charles, Mary
Elizabeth Mecom, The Estate of John W. Mecom, The Mary
Elizabeth Mecom Irrevocable Trust, Matilda Gray Stream, The
Opal Gray Trust, Harold H. Stream III, The
Succession of Edward M. Carmouche, Virginia Martin
Carmouche and L.M. Holding Associates, L.P. dated June 15,
1995. (H)(ii)
10.10 Second Amendment to Appointment of Agent for
Collection and Agreement to Application of Funds between
Lutcher-Moore Development Corp., Lutcher & Moore Cypress
Lumber Company, L.M. Holding Associates, L.P. and The
First National Bank of Lake Charles, dated June 15,
1995. (H)(iii)
10.11 Contract of Chinese Foreign Joint Venture dated July
17, 1995, between United Lube Oil Corporation and XCL
China Ltd. for the manufacturing and selling of
lubricating oil and related products. (H)(iv)
10.12 Letter of Intent dated July 17, 1995 between CNPC
United Lube Oil Corporation and XCL Ltd. for discussion of
further projects. (H)(v)
10.13 Copy of Letter Agreement dated March 31, 1995, between
the Company and China National Administration of Coal
Geology for the exploration and development of coal bed
methane in Liao Ling Tiefa and Shanxi Hanchang Mining
Areas. (I)(i)
10.14 Memorandum of Understanding dated December 14, 1995,
between XCL Ltd. and China National Administration of Coal
Geology. (J)(iv)
10.15 Form of Fourth Amendment to Credit Agreement between
Lutcher-Moore Development Corp., Lutcher & Moore Cypress
Lumber Company, The First National Bank of Lake Charles,
Mary Elizabeth Mecom, The Estate of John W. Mecom, The
Mary Elizabeth Mecom Irrevocable Trust, Matilda Gray
Stream, The Opal Gray Trust, Harold H. Stream III, The
Succession of Edward M. Carmouche, Virginia Martin
Carmouche and L.M. Holding Associates, L.P. dated January
16, 1996. (J)(v)
10.16 Form of Third Amendment to Appointment of Agent for
Collection and Agreement to application of Funds between
Lutcher-Moore Development Corp., Lutcher & Moore Cypress
Lumber Company, L.M. Holding Associates, L.P. and The
First National Bank of Lake Charles, dated January 16,
1996. (J)(vi)
10.17 Copy of Purchase and Sale Agreement dated March 8,
1996, between XCL-Texas, Inc. and Tesoro E&P Company, L.P.
for the sale of the Gonzales Gas Unit located in south
Texas. (J)(vii)
10.18 Copy of Limited Waiver between the Company and
Internationale Nederlanden (U.S.) Capital Corporation
dated April 3, 1996. (J)(viii)
10.19 Copy of Purchase and Sale Agreement dated April 22,
1996, between XCL-Texas, Inc. and Dan A. Hughes Company
for the sale of the Lopez Gas Units located in south Texas.
(K)
10.20 Form of Sale of Mineral Servitude dated June 18, 1996,
whereby the Company sold its 75 percent mineral interest in
the Phoenix Lake Tract to the Stream Family Limited Partners
and Virginia Martin Carmouche Gayle. (L)(i)
10.21 Form of Fifth Amendment to Credit Agreement between
Lutcher-Moore Development Corp., Lutcher & Moore Cypress
Lumber Company, The First National Bank of Lake Charles,
Mary Elizabeth Mecom, The Estate of John W. Mecom, The
Mary Elizabeth Mecom Irrevocable Trust, Matilda Gray
Stream, The Opal Gray Trust, Harold H. Stream III, The
Succession of Edward M. Carmouche, Virginia Martin
Carmouche and L.M. Holding Associates, L.P. dated August
8, 1996. (N)(v)
10.22 Form of Assignment and Sale between XCL Acquisitions,
Inc. and purchasers of an interest in certain promissory
notes held by XCL Acquisitions, Inc. as follows:
<TABLE>
Date Purchaser Principal Amount Purchase Price
<C> <C> <C> <C>
November 19, 1996 Opportunity Associates, L.P. $15,627.39 $ 12,499.98
November 19, 1996 Kayne Anderson Non-Traditional
Investments, L.P. $78,126.36 $ 62,499.98
November 19, 1996 Offense Group Associates, L.P. $39,063.18 $ 31,249.99
November 19, 1996 Arbco Associates, L.P. $93,743.14 $ 75,000.04
November 19, 1996 Nobel Insurance Company $15,627.39 $ 12,499.98
November 19, 1996 Evanston Insurance Company $15,627.39 $ 12,499.98
November 19, 1996 Topa Insurance Company $23,435.79 $ 18,750.01
November 19, 1996 Foremost Insurance Company $31,249.48 $ 25,000.04
February 10, 1997 Donald A. and Joanne R.
Westerberg $25,000.00 $ 28,100.00
February 10, 1997 T. Jerald Hanchey $168,915.74 $189,861.29 (N)(vi)
</TABLE>
10.23 Form of Sixth Amendment to Credit Agreement between
Lutcher-Moore Development Corp., Lutcher & Moore Cypress
Lumber Company, The First National Bank of Lake Charles, The
Estate of Mary Elizabeth Mecom, The Estate of John W.
Mecom, The Mary Elizabeth Mecom Irrevocable Trust,
Matilda Gray Stream, The Opal Gray Trust, Harold H.
Stream III, The Succession of Edward M. Carmouche,
Virginia Martin Carmouche and L.M. Holding Associates,
L.P. dated January 28, 1997. (N)(vii)
10.24 Form of Act of Sale between the Company and The
Schumacher Group of Louisiana, Inc. dated March 31, 1997,
wherein the Company sold its office building. (N)(viii)
10.25 Amendment No. 1 to the May 1, 1995 Agreement with
Apache Corp. dated April 3, 1997, effective December 13,
1996. (N)(ix)
10.26 Form of Guaranty dated April 9, 1997 by XCL-China Ltd.
in favor of ING (U.S.) Capital Corporation executed in
connection with the sale of certain Unsecured Notes issued
by XCL-China Ltd. (N)(x)
10.27 Form of First Amendment to Stock Pledge Agreement dated
April 9, 1997, between the Company and ING (U.S.) Capital
Corporation adding XCL Land Ltd. to the Stock Pledge
Agreement dated as of January 31, 1994. (N)(xi)
10.28 Form of Agreement dated April 9, 1997, between ING
(U.S.) Capital Corporation, XCL-China and holders of the
Senior Unsecured Notes, subordinating the Guaranty granted
by XCL-China in favor of ING to the Unsecured Notes.
(N)(xii)
10.29 Form of Forbearance Agreement dated April 9, 1997
between the Company and ING (U.S.) Capital Corporation.
(N)(xiii)
10.30 Form of a series of Unsecured Notes dated April 10,
1997, between the Company and the following entities:
Note Holder Principal Amount
Kayne Anderson Offshore, L.P. $200,000
Offense Group Associates, L.P. $500,000
Kayne Anderson Non-Traditional
Investments, L.P. $500,000
Opportunity Associates, L.P. $400,000
Arbco Associates, L.P. $500,000
J. Edgar Monroe Foundation $100,000
Estate of J. Edgar Monroe
$300,000
Boland Machine & Mfg. Co., Inc. $100,000
Construction Specialists, Inc.
d/b/a Con-Spec, Inc. $500,000 (N)(xiv)
10.31 Form of Subscription Agreement dated April 10, 1997, by
and between XCL-China, Ltd., the Company and the subscribers
of Units, each unit comprised of $100,000 in Unsecured Notes
and 325,580 warrants. (N)(xv)
10.32 Form of Intercompany Subordination Agreement dated
April 10, 1997, between the Company, XCL-Texas, Ltd., XCL
Land Ltd., The Exploration Company of Louisiana, Inc., XCL-
Acquisitions, Inc., XCL-China Coal Methane Ltd., XCL-China
LubeOil Ltd., XCL-China Ltd., and holders of the Unsecured
Notes. (N)(xvi)
10.33 Form of Indenture dated as of May 20, 1997, between the
Company, as Issuer and Fleet National Bank, as Trustee
("Indenture"). (O)(x)
10.34 Form of 13.5% Senior Secured Note due May 1, 2004,
Series A issued May 20, 1997 to Jefferies & Company, Inc. as
the Initial Purchaser (Exhibit A to the Indenture). (O)(xi)
10.35 Form of Pledge Agreement dated as of May 20, 1997,
between the Company and Fleet National Bank, as Trustee
(Exhibit C to the Indenture). (O)(xii)
10.36 Form of Cash Collateral and Disbursement Agreement
dated as of May 20, 1997, between the Company and Fleet
National Bank, as Trustee and Disbursement Agent, and Herman
J. Schellstede & Associates, Inc., as Representative
(Exhibit F to the Indenture). (O)(xiii)
10.37 Form of Intercreditor Agreement dated as of May 20,
1997, between the Company, ING (U.S.) Capital Corporation,
the holders of the Secured Subordinated Notes due April 5,
2000 and Fleet National Bank, as trustee for the holders of
the 13.5% Senior Secured Notes due May 1, 2004 (Exhibit G to
the Indenture). (O)(xiv)
10.38 Registration Rights Agreement dated as of May 20, 1997,
by and between the Company and Jefferies & Company, Inc.
with respect to the 13.5% Senior Secured Notes due May 1,
2004 and 75,000 Common Stock Purchase Warrants (Exhibit H to
the Indenture). (O)(xv)
10.39 Form of Security Agreement, Pledge and Financing
Statement and Perfection Certificate dated as of May 20,
1997, by the Company in favor of Fleet National Bank, as
Trustee (Exhibit I to the Indenture). (O)(xvi)
10.40 Registration Rights Agreement dated as of May 20, 1997,
by and between the Company and Jefferies & Company, Inc.
with respect to the 9.5% Amended Series A Preferred Stock
and Common Stock Purchase Warrants. (O)(xvii)
10.41 Form of Restated Forbearance Agreement dated effective
as of May 20, 1997, between the Company, XCL-Texas, Inc. and
ING (U.S.) Capital Corporation. (O)(xviii)
10.42 Form of Seventh Amendment to Credit Agreement between
Lutcher-Moore Development Corp., Lutcher & Moore Cypress
Lumber Company, The First National Bank of Lake Charles, The
Estate of Mary Elizabeth Mecom, The Estate of John W.
Mecom, The Mary Elizabeth Mecom Irrevocable Trust,
Matilda Gray Stream, The Opal Gray Trust, Harold H.
Stream III, The Succession of Edward M. Carmouche,
Virginia Martin Carmouche and L.M. Holding Associates,
L.P. dated May 8, 1997. (P)(i)
10.43 Form of Eighth Amendment to Credit Agreement between
Lutcher-Moore Development Corp., Lutcher & Moore Cypress
Lumber Company, The First National Bank of Lake Charles, The
Estate of Mary Elizabeth Mecom, The Estate of John W.
Mecom, The Mary Elizabeth Mecom Irrevocable Trust,
Matilda Gray Stream, The Opal Gray Trust, Harold H.
Stream III, The Succession of Edward M. Carmouche,
Virginia Martin Carmouche and L.M. Holding Associates,
L.P. dated July 29, 1997. (P)(ii)
10.44 Form of Consulting Agreement dated February 20, 1997,
between the Company and Mr. Patrick B. Collins, whereby Mr.
Collins performs certain accounting advisory services.
(Q)(ii)
10.45 Form of Consulting Agreement dated effective as of June
1, 1997, between the Company and Mr. R. Thomas Fetters, Jr.,
a director of the Company, whereby Mr. Fetters performs
certain geological consulting services. (Q)(iii)
10.46 Form of Agreement dated October 1, 1997, between the
Company and Mr. William Wang, whereby Mr. Wang performs
certain consulting services with respect to its investments
in China. (Q)(iv)
10.47 Form of Services Agreement dated August 1, 1997,
between the Company and Mr. Benjamin B. Blanchet, an officer
of the Company. (Q)(v)
10.48 Form of Promissory Note dated August 1, 1997, in a
principal amount of $100,000, made by Mr. Benjamin B.
Blanchet in favor of the Company. (Q)(vi)
10.49 Form of Consulting Agreement dated June 15, 1998,
between the Company and Mr. Patrick B. Collins, whereby Mr.
Collins performs certain accounting advisory services.
(V)(iii)
10.50 Amended and Restated Long Term Stock Incentive Plan
effective June 1, 1997. (T)(i)
10.51 Form of Restricted Stock Award Agreement. (V)(iv)
10.52 Form of Nonqualified Stock Option Agreement. (V)(v)
10.53 Appreciation Option for M. W. Miller, Jr. (T)(ii)
10.54 Zhang Dong Petroleum Sharing Contract. (V)(vi)
10.55 Form of a series of secured Notes dated November 6,
1998, between the Company and the following entities:
Note Holder Principal Amount
J. Edgar Monroe Foundation $100,000
Estate of J. Edgar Monroe $700,000
Construction Specialists, Inc.
d/b/a Con-Spec, Inc. $700,000 *
10.56 Form of Subscription Agreement dated November 6, 1998,
by and between XCL Land, Ltd., the Company and the
subscribers of Units, each unit comprised of $100,000 in
secured Notes and 21,705 warrants. *
10.57 Form of Security Agreement dated November 6, 1998, by
and between XCL Land, Ltd. and holders of the secured Notes
of XCL Land, Ltd. dated November 6, 1998. *
10.58 Form of Security Agreement dated November 6, 1998, by
and between The Exploration Company of Louisiana, Inc. and
holders of the secured Notes of XCL Land, Ltd. dated
November 6, 1998. *
99.1 Reserve report dated January 1, 1998, prepared by H.J.
Gruy and Associates, Inc. (U)
99.2 Glossary *
_________________________
*Filed herewith.
(A) Incorporated by reference to the Registration Statement
on Form 8-B filed on July 28, 1988, where it appears as
Exhibits 3(c).
(B) Incorporated by reference to a Registration Statement on
Form S-3 (File No. 33-68552) where it appears as Exhibit
10.1.
(C) Incorporated by reference to Post-Effective Amendment No.
2 to Registration Statement on Form S-3 (File No. 33-68552)
where it appears as: (i) Exhibit 4.29; (ii) Exhibit 4.30;
and (iii) through (v) Exhibits 4.34 through 4.36,
respectively.
(D) Incorporated by reference to Amendment No. 1 to Annual
Report on Form 10-K filed April 15, 1994, where it appears
as: (i) Exhibit 4.32; (ii) Exhibit 4.36; (iii) Exhibit
4.37; (iv) through (v) Exhibit 10.41 through Exhibit 10.47,
respectively; and (v) Exhibit 10.49.
(E) Incorporated by reference to an Annual Report on Form 10-
K for the fiscal year ended December 31, 1990, filed April
1, 1991, where it appears as Exhibit 10.27.
(F) Incorporated by reference to Amendment No. 1 to an Annual
Report on Form 10-K/A No. 1 for the fiscal year ended
December 31, 1994, filed April 17, 1995, where it appears
as: (i) through (ii) Exhibits 10.22 through 10.23,
respectively.
(G) Incorporated by reference to Quarterly Report on Form
10-Q for the quarter ended March 31, 1995, filed May
15, 1995, where it appears as: (i) Exhibit 10.26; and (ii)
Exhibit 10.28.
(H) Incorporated by reference to Quarterly Report on Form
10-Q for the quarter ended June 30, 1995, filed August 14,
1995, where it appears as: (i) through (v) Exhibits 10.29
through 10.33, respectively.
(I) Incorporated by reference to Quarterly Report on Form
10-Q for the quarter ended September 30, 1995, filed
November 13, 1995, where it appears as Exhibit 10.35.
(J) Incorporated by reference to Annual Report on Form 10-K
for the year ended December 31, 1995, filed April 15, 1996,
where it appears as: (i) through (iii) Exhibits 4.28
through 4.30, respectively; and (iv) Exhibit 10.31 and
(v) through (vii) Exhibits 10.33 through 10.36,
respectively.
(K) Incorporated by reference to Quarterly Report on Form 10-
Q for the quarter ended March 31, 1996, filed May 15, 1996,
where it appears as Exhibit 10.37.
(L) Incorporated by reference to Quarterly Report on Form 10-
Q for the quarter ended June 30, 1996, filed August 14,
1996, where it appears as Exhibit 10.38.
(M) Incorporated by reference to Quarterly Report on Form 10-
Q for the quarter ended September 30, 1996, filed November
14, 1996, where it appears as (i) through (iii) Exhibits
4.32 through 4.34.
(N) Incorporated by reference to Annual Report on Form 10-K
for the year ended December 31, 1996, filed April 15, 1997,
where it appears as (i) through (iii) Exhibits 4.35 through
4.38; (iv) Exhibit 4.40; and (v) through (xvi) Exhibits
10.39 through 10.50.
(O) Incorporated by reference to Current Report on Form 8-K
dated May 20, 1997, filed June 3, 1997, where it appears as
(i) through (ix) Exhibits 4.1 through 4.9 and (x) through
(xviii) Exhibits 10.51 through 10.59.
(P) Incorporated by reference to Quarterly Report on Form 10-
Q for the quarter ended June 30, 1997, filed August 14,
1997, where it appears as (i) and (ii) Exhibits 10.60 and
10.61.
(Q) Incorporated by reference to Quarterly Report on Form 10-
Q for the quarter ended September 30, 1997, filed November
14, 1997, where it appears as (i) Exhibit 4.52; and (ii)
through (vi) Exhibits 10.61 through 10.66.
(R) Incorporated by reference to Annual Report on Form 10-K
for the year ended December 31, 1997, filed April 15, 1998,
where it appears as (i) Exhibit 4.1; (ii) through (vi)
Exhibits 4.32 through 4.36, respectively.
(S) Incorporated by reference to Amendment No. 1 to Annual
Report on Form 10-K for the year ended December 31, 1997,
filed April 22, 1998, where it appears as (i) Exhibit 3.1;
and (ii) through (iv) Exhibits 4.37 through 4.39,
respectively.
(T) Incorporated by reference to Proxy Statement dated
November 20, 1997 filed November 6, 1997, where it appears
as (i) Appendix C; and (ii) Appendix D, respectively.
(U) Incorporated by reference to Amendment No. 2 to the Annual
Report on Form 10-K for the year ended December 31, 1997, filed
on October 23, 1998, where it appears as Exhibit 99.1.
(V) Incorporated by reference to Amendment No. 2 to
Registration Statement on Form S-1 filed on October 23,
1998, where it appears as: (i) and (ii) Exhibits 4.40 and
4.41, respectively; (iii) Exhibit 10.49; (iv) and (v)
Exhibits 10.51 and 10.52, respectively; and (vi) Exhibit
10.54.
XCL LTD.
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY OTHER FEDERAL OR STATE SECURITIES OR
BLUE SKY LAWS OF ANY OTHER DOMESTIC OR FOREIGN JURISDICTION. NO
OFFER, SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION (COLLECTIVELY,
A "DISPOSAL") OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY
BE MADE UNLESS (i) REGISTERED UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS OR (ii) XCL LTD. (THE "CO
MPANY") RECEIVES A WRITTEN OPINION OF UNITED STATES LEGAL COUNSEL
IN FORM AND SUBSTANCE SATISFACTORY TO IT TO THE EFFECT THAT SUCH
DISPOSAL IS EXEMPT FROM SUCH REGISTRATION REQUIREMENTS.
No. T-1
WARRANTS TO PURCHASE
COMMON STOCK OF XCL LTD.
Initial Issuance on October 1, 1998
Void after 5:00 p.m. Louisiana Time, October 1, 2001
THIS CERTIFIES THAT, for value received, STEVEN B. TOON, or
registered assigns (the "Holder") is the registered holder of
warrants (the "Warrants") to purchase from XCL Ltd., a Delaware
corporation (the "Company"), at any time or from time to time
beginning on October 1, 1999 and until 5:00 p.m., local time, on
October 1, 2001 (the "Expiration Date"), subject to the condi
tions set forth herein, at the initial exercise price of $3.75
per share (the "Initial Exercise Price"), subject to adjustment
as set forth herein (the "Exercise Price"), up to an aggregate of
FIFTY THOUSAND (50,000) fully paid and non-assessable common
shares, par value $0.15 per share (the "Common Stock"), of the
Company (the "Shares") upon surrender of this amended and
restated warrant certificate (the "Certificate") and payment of
the Exercise Price multiplied by the number of Shares in respect
of which Warrants are then being exercised (the "Purchase Price")
at the principal office of the Company presently located at 110
Rue Jean Lafitte, 2nd Floor, Lafayette, LA 70508, United States
of America.
1. Exercise of Warrants.
(a) The exercise of any Warrants represented by this
Certificate is subject to the conditions set forth below in
paragraph 4, "Compliance with U.S. Securities Laws."
(b) Subject to compliance with all of the conditions set
forth herein, the Holder shall have the right at any time and
from time to time after October 1, 1999 to purchase from the
Company the number of Shares which the Holder may at the time be
entitled to purchase pursuant hereto, upon surrender of this
Certificate to the Company at its principal office, together with
the form of election to purchase attached hereto duly completed
and signed, and upon payment to the Company of the Purchase
Price.
No Warrant may be exercised after 5:00 p.m., local time, on
the Expiration Date, after which time all Warrants evidenced
hereby shall be void.
(c) Payment of the Purchase Price shall be made in cash, by
wire transfer of immediately available funds or by certified
check or banker's draft payable to the order of the Company, or
any combination of the foregoing.
(d) The Warrants represented by this Certificate are
exercisable at the option of the Holder, in whole or in part (but
not as to fractional Shares). Upon the exercise of less than all
of the Warrants evidenced by this Certificate, the Company shall
forthwith issue to the Holder a new certificate of like tenor
representing the number of unexercised Warrants.
(e) Subject to compliance with all of the conditions set
forth herein, upon surrender of this Certificate to the Company
at its principal office, together with the form of election to
purchase attached hereto duly completed and signed, and upon
payment of the Purchase Price, the Company shall cause to be
delivered promptly to or upon the written order of the Holder and
in such name or names as the Holder may designate, a share
certificate or share certificates for the number of whole Shares
purchased upon the exercise of the Warrants. Such share
certificate or share certificates representing the Shares shall
be free of any restrictive legend. The Company shall ensure that
no "stop transfer" or similar instruction or order with respect
to the Shares purchased upon exercise of the Warrants shall be in
effect at ChaseMellon Shareholders Services LLC, IRG plc or any
successor transfer agent for the Common Stock of the Company (the
"Transfer Agent").
2. Elimination of Fractional Interests. The Company shall
not be required to issue certificates representing fractions of
Shares and shall not be required to issue scrip in lieu of
fractional interests. Instead of any fractional Shares that
would otherwise be issuable to the Holder, the Company shall pay
to the Holder a cash adjustment in respect of such fractional
interest in an amount equal to such fractional interest of the
then-current Market Price per share (as defined in Section 7(f)
hereof).
3. Payment of Taxes. The Company will pay all documentary
stamp taxes, if any, attributable to the issuance and delivery of
the Shares upon the exercise of the Warrants; provided, however,
that the Company shall not be required to pay any taxes which may
be payable in respect of any transfer involved in the issuance or
delivery of any Warrant or any Shares in any name other than that
of the Holder, which transfer taxes shall be paid by the Holder,
and until payment of such transfer taxes, if any, the Company
shall not be required to issue such Shares.
4. Compliance with U.S. Securities Laws. The Warrants
have not been, and will not be, registered under the United
States Securities Act of 1933, as amended (the "Securities Act"),
or any other federal or state securities or blue sky laws. No
offer, sale, transfer, pledge or other disposition (collectively,
a "Disposal") of the Warrants represented by this Certificate may
be made unless (i) registered under the Act and any applicable
State securities or blue sky laws or (ii) the Company receives a
written opinion of United States legal counsel in form and
substance satisfactory to it to the effect that such Disposal is
exempt from such registration requirements.
5. Transfer of Warrants.
(a) The Warrants shall be transferable only on the
books of the Company maintained at the Company's principal office
upon delivery of this Certificate with the form of assignment
attached hereto duly completed and signed by the Holder or by its
duly authorized attorney or representative, accompanied by proper
evidence of succession, assignment or authority to transfer. The
Company may, in its discretion, require, as a condition to any
transfer of Warrants, a signature guarantee, which may be
provided by a commercial bank or trust company, by a broker or
dealer which is a member of the National Association of
Securities Dealers, Inc., or by a member of a United States
national securities exchange, The Securities and Futures
Authority Limited in the United Kingdom, or The London Stock
Exchange Limited in London, England. Upon any registration of
transfer, the Company shall deliver a new warrant certificate or
warrant certificates of like tenor and evidencing in the
aggregate a like number of Warrants to the person entitled
thereto in exchange for this Certificate, subject to the
limitations provided herein, without any charge except for any
tax or other governmental charge imposed in connection therewith.
(b) Notwithstanding anything in this Certificate to
the contrary, neither any of the Warrants nor any of the Shares
issuable upon exercise of any of the Warrants shall be
transferable, except upon compliance by the Holder with any
applicable provisions of the Securities Act and any applicable
state securities or blue sky laws.
6. Exchange and Replacement of Warrant
Certificates; Loss or Mutilation of
Warrant Certificates.
(a) This Certificate is exchangeable without cost, upon the
surrender hereof by the Holder at the principal office of the
Company, for new warrant certificates of like tenor and date
representing in the aggregate the right to purchase the same
number of Shares in such denominations as shall be designated by
the Holder at the time of such surrender. Any transfer not made
in such compliance shall be null and void and shall be given no
effect hereunder.
(b) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of this Certificate and, in case of such loss, theft or
destruction, of indemnity and security reasonably satisfactory to
it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this
Certificate, if mutilated, the Company will make and deliver a
new warrant certificate of like tenor, in lieu thereof.
7. Initial Exercise Price; Adjustment of Exercise Price and
Number of Shares.
(a) The Warrants initially are exercisable at the Initial
Exercise Price per Share, subject to adjustment from time to time
as provided herein. No adjustments will be made for cash
dividends, if any, paid to shareholders of record prior to the
date on which the Warrants are exercised.
(b) In case the Company shall at any time after the
date of this Certificate (i) declare a dividend on the shares of
Common Stock payable in shares of Common Stock, or (ii) subdivide
or split up the outstanding shares of Common Stock, the amount of
Shares to be delivered upon exercise of any Warrant will be
appropriately increased so that the Holder will be entitled to
receive the amount of Shares that such Holder would have owned
immediately following such actions had such Warrant been
exercised immediately prior thereto, and the Exercise Price in
effect immediately prior to the record date for such dividend or
the effective date for such subdivision shall be proportionately
decreased, all effective immediately after the record date for
such dividend or the effective date for such subdivision or split
up. Such adjustments shall be made successively whenever any
event listed above shall occur.
(c) In case the Company shall at any time after the
date of this Certificate combine the outstanding shares of Common
Stock into a smaller number of shares the amount of Shares to be
delivered upon exercise of any Warrant will be appropriately
decreased so that the Holder will be entitled to receive the
amount of Shares that such Holder would have owned immediately
following such action had such Warrant been exercised immediately
prior thereto, and the Exercise Price in effect immediately prior
to the record date for such combination shall be proportionately
increased, effective immediately after the record date for such
combination. Such adjustment shall be made successively whenever
any such combinations shall occur.
(d) In the event that the Company shall at any time
after the date of this Certificate (i) issue or sell any shares
of Common Stock (other than the Shares) or securities convertible
or exchangeable into Common Stock to all holders of Common Stock
without consideration or at a price per share (or having a
conversion price per share, if a security convertible into Common
Stock) less than the Market Value per share of Common Stock (as
defined in Section 7(f) hereof), or (ii) issue or sell options,
rights or warrants to subscribe for or purchase Common Stock to
all holders of Common Stock at a price per share less than the
Market Price per share of Common Stock (as defined in Section
7(f) hereof), the Exercise Price to be in effect after the date
of such issuance shall be determined by multiplying the Exercise
Price in effect on the day immediately preceding the relevant
issuance or record date, as the case may be, used in determining
such Market Value or Market Price, by a fraction, the numerator
of which shall be the number of shares of Common Stock
outstanding on such issuance or record date plus the number of
shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so to be issued or to be
offered for subscription or purchase (or the aggregate initial
conversion price of the convertible securities so to be offered)
would purchase at such Market Value or Market Price, as the case
may be, and the denominator of which shall be the number of
shares of Common Stock outstanding on such issuance or record
date plus the number of additional shares of Common Stock to be
issued or to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially
convertible); such adjustment shall become effective immediately
after the close of business on such issuance or record date;
provided, however, that no such adjustment shall be made for the
issuance of (s) options to purchase shares of Common Stock
granted pursuant to the Company's employee stock option plans
approved by shareholders of the Company (and the shares of Common
Stock issuable upon exercise of such options) (provided that
option exercise prices shall not be less than the Market Value of
the Common Stock (as defined in Section 7(f) hereof) on the date
of the grant of such options), (t) the Company's warrants to
purchase shares of Common Stock (and the shares of Common Stock
issuable upon exercise of such warrants), outstanding on the date
hereof, (u) the Company's shares of Amended Series A, Cumulative
Convertible Preferred Stock (and the shares of Common Stock
issuable upon conversion of such Preferred Stock), outstanding on
the date hereof, or (v) the Company's shares of Series B,
Cumulative Preferred Stock (and the shares of Common Stock
issuable in lieu of dividend and redemption payments thereunder),
outstanding on the date hereof. In case such subscription price
may be paid in a consideration, part or all of which shall be in
a form other than cash, the value of such consideration shall be
as determined reasonably and in good faith by the Board of
Directors of the Company. Shares of Common Stock owned by or
held for the account of the Company or any wholly-owned
subsidiary shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively
whenever the date of such issuance is fixed (which date of
issuance shall be the record date for such issuance if a record
date therefor is fixed); and, in the event that such shares or
options, rights or warrants are not so issued, the Exercise Price
shall again be adjusted to be the Exercise Price which would then
be in effect if the date of such issuance had not been fixed.
(e) In case the Company shall make a distribution
to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of its
indebtedness, securities other than Common Stock or assets (other
than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in
Common Stock), the Exercise Price to be in effect after such date
of distribution shall be determined by multiplying the Exercise
Price in effect on the date immediately preceding the record date
for the determination of the shareholders entitled to receive
such distribution by a fraction, the numerator of which shall be
the Market Price per share of Common Stock (as defined in Section
7(f) hereof) on such date, less the then-fair market value (as
determined reasonably and in good faith by the Board of Directors
of the Company of the portion of the assets, securities or
evidences of indebtedness so to be distributed applicable to one
share of Common Stock and the denominator of which shall be such
Market Price per share of Common Stock, such adjustment to be
effective immediately after the distribution resulting in such
adjustment. Such adjustment shall be made successively whenever
a date for such distribution is fixed (which date of distribution
shall be the record date for such distribution if a record date
therefor is fixed); and, if such distribution is not so made, the
Exercise Price shall again be adjusted to be the Exercise Price
which would then be in effect if such date of distribution had
not been fixed.
(f) For the purposes of any computation under this
Section 7, the "Market Price per share" of Common Stock on any
date shall be deemed to be the average of the closing bid price
for the 20 consecutive trading days ending on the record date for
the determination of the shareholders entitled to receive any
rights, dividends or distributions described in this Section 7,
and the "Market Value per share" of Common Stock on any date
shall be deemed to be the closing bid price on the date of the
issuance of the securities for which such computation is being
made, as reported on the principal United States securities
exchange on which the Common Stock is listed or admitted to
trading or if the Common Stock is not then listed on any United
States stock exchange, the average of the closing sales price on
each such day during such 20 day period, in the case of the
Market Price computation, or on such date of issuance, in the
case of the Market Value computation, in the over-the-counter
market as reported by the National Association of Securities
Dealers' Automated Quotation System ("NASDAQ"), or, if not so
reported, the average of the closing bid and asked prices on each
such day during such 20 day period in the case of the Market
Price computation, or on such date of issuance, in the case of
the Market Value computation, as reported in the "pink sheets"
published by the National Quotation Bureau, Inc. or any successor
thereof, or, if not so quoted, the average of the middle market
quotations for such 20 day period in the case of the Market Price
computation, or on such date of issuance, in the case of the
Market Value computation, as reported on the daily official list
of the prices of stock listed on The London Stock Exchange
Limited ("The Stock Exchange Daily Official List"). "Trading
day" means any day on which the Common Stock is available for
trading on the applicable securities exchange or in the
applicable securities market. In the case of Market Price or
Market Value computations based on The Stock Exchange Daily
Official List, the Market Price or Market Value shall be
converted into United States dollars at the then spot market
exchange rate of pounds sterling (UK) into United States dollars
as quoted by Chemical Bank or any successor bank thereto on the
date of determination. If a quotation of such exchange rate is
not so available, the exchange rate shall be the exchange rate of
pounds sterling in United States dollars as quoted in The Wall
Street Journal on the date of determination.
(g) No adjustment in the Exercise Price shall be
required unless such adjustment would require an increase or
decrease of at least 1% in such price; provided that any
adjustments which by reason of this Section 7(g) are not required
to be made shall be carried forward and taken into account in any
subsequent adjustment; provided, further that such adjustment
shall be made in all events (regardless of whether or not the
amount thereof or the cumulative amount thereof amounts to 1% (or
more) upon the happening of one or more of the events specified
in Sections 7(b), (c) or (i). All calculations under this
Section 7 shall be made to the nearest cent.
(h) If at any time, as a result of an adjustment
made pursuant to Section 7(b) or (c) hereof, the Holder of any
Warrant thereafter exercised shall become entitled to receive any
shares of the Company other than shares of Common Stock,
thereafter the number of such other shares so receivable upon
exercise of any Warrant shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Shares
contained in this Section 7, and the provisions of this
Certificate with respect to the Shares shall apply on like terms
to such other shares.
(i) In the case of (l) any capital reorganization
of the Company, or of (2) any reclassification of the shares of
Common Stock (other than a subdivision or combination of
outstanding shares of Common Stock), or (3) any consolidation or
merger of the Company, or (4) the sale, lease or other transfer
of all or substantially all of the properties and assets of the
Company as, or substantially as, an entirety to any other person
or entity, each Warrant shall after such capital reorganization,
reclassification of the shares of Common Stock, consolidation, or
sale be exercisable, upon the terms and conditions specified in
this Certificate, for the number of shares of stock or other
securities or assets to which a holder of the number of Shares
purchasable (immediately prior to the effectiveness of such
capital reorganization, reclassification of shares of Common
Stock, consolidation, or sale) upon exercise of a Warrant would
have been entitled upon such capital reorganization,
reclassification of shares of Common Stock, consolidation, merger
or sale; and in any such case, if necessary, the provisions set
forth in this Section 7 with respect to the rights thereafter of
the Holder shall be appropriately adjusted (as determined
reasonably and in good faith by the Board of Directors of the
Company) so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities or assets thereafter
deliverable on the exercise of a Warrant. The Company shall not
effect any such consolidation or sale, unless prior to or
simultaneously with the consummation thereof, the successor
corporation, partnership or other entity (if other than the
Company) resulting from such consolidation or the corporation,
partnership or other entity purchasing such assets or the
appropriate entity shall assume, by written instrument, the
obligation to deliver to the Holder of each Warrant the shares of
stock, securities or assets to which, in accordance with the
foregoing provisions, such Holder may be entitled and all other
obligations of the Company under this Certificate. For purposes
of this Section 7(i) a merger to which the Company is a party but
in which the Common Stock outstanding immediately prior thereto
is changed into securities of another corporation shall be deemed
a consolidation with such other corporation being the successor
and resulting corporation.
(j) Irrespective of any adjustments in the Exercise
Price or the number or kind of shares purchasable upon the
exercise of the Warrant, Warrant Certificates theretofore or
thereafter issued may continue to express the same Exercise Price
per share and number and kind of Shares as are stated on the
Warrant Certificates initially issuable pursuant to this Warrant.
8. Notices to Warrant Holders. Nothing contained in this
Certificate shall be construed as conferring upon the Holder the
right to vote or to consent or to receive notice as a stockholder
in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights whatsoever
as a stockholder of the Company. If, however, at any time prior
to the exercise or expiration of the Warrants, any of the
following events shall occur:
(i) the holders of shares of the Common Stock shall
be entitled to receive a dividend or distribution
payable otherwise than in cash, or a cash dividend
or distribution payable otherwise than out of
current or retained earnings, as indicated by the
accounting treatment of such dividend or dis
tribution on the books of the Company; or
(ii) the Company shall offer to all the holders
of its Common Stock any additional shares of
capital stock of the Company or securities
convertible into or exchangeable for shares of
capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
(iii) a dissolution, liquidation or winding-up of
the Company (other than in connection with a
consolidation or merger) or a sale of all or sub
stantially all of its property, assets and business
as an entirety shall be approved by the Company's
Board of Directors; or
(iv) there shall be any capital reorganization
or reclassification of the capital stock of the
Company (other than a change in the number of
outstanding shares of Common Stock or a change in
the par value of the Common Stock), or
consolidation or merger of the Company with another
entity;
then, in any one or more of said events, the Company shall give
written notice of such event at least fifteen (15) days prior to
the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled
to such dividend, distribution, convertible or exchangeable secur
ities or subscription rights, options or warrants, or entitled to
vote on such proposed dissolution, liquidation, winding-up or
sale. Such notice shall specify such record date or the date of
closing the transfer books, as the case may be. Failure to give
such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment
of any such dividend or distribution, or the issuance of any
convertible or exchangeable securities or subscription rights,
options or warrants, or any proposed dissolution, liquidation,
winding-up or sale.
9. Reservation and Listing of Securities.
The Company covenants and agrees that at all times during
the period the Warrants are outstanding, the Company shall
reserve and keep available, free from preemptive rights, out of
its authorized and unissued shares of Common Stock or out of its
authorized and issued shares of Common Stock held in its
treasury, solely for the purpose of issuance upon exercise of the
Warrants, such number of Shares as shall be issuable upon the
exercise of the Warrants.
(b) The Company covenants and agrees that, upon
exercise of the Warrants in accordance with their terms and
payment of the Purchase Price, all Shares issued or sold upon
such exercise shall not be subject to the preemptive rights of
any stockholder and when issued and delivered in accordance with
the terms of the Warrants shall be duly and validly issued, fully
paid and non-assessable, and the Holder shall receive good and
valid title to such Shares free and clear from any adverse claim
(as defined in the applicable Uniform Commercial Code), except
such as have been created by the Holder.
(c) As long as the Warrants shall be outstanding,
the Company shall use its reasonable efforts to cause all Shares
issuable upon the exercise of the Warrants to be quoted by or
listed on any national securities exchange or other securities
listing service on which the shares of Common Stock of the
Company are then listed.
10. Survival. All agreements, covenants, representations
and warranties herein shall survive the execution and delivery of
this Certificate and any investigation at any time made by or on
behalf of any party hereto and the exercise, sale and purchase of
the Warrants and the Shares (and any other securities or
properties) issuable on exercise hereof.
11. Remedies. The Company agrees that the remedies at law
of the Holder, in the event of any default or threatened default
by the Company in the performance of or compliance with any of
the terms hereof, may not be adequate and such terms may, in
addition to and not in lieu of any other remedy, be specifically
enforced by a decree of specific performance of any agreement
contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
12. Registered Holder. The Company may deem and treat the
registered Holder hereof as the absolute owner of this
Certificate and the Warrants represented hereby (notwithstanding
any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise of the Warrants, of any
notice, and of any distribution to the Holder hereof, and for all
other purposes, and the Company shall not be affected by any
notice to the contrary.
13. Notices. All notices and other communications from the
Company to the Holder of the Warrants represented by this Certifi
cate shall be in writing and shall be deemed to have been duly
given if and when personally delivered, two (2) business days
after sent by overnight courier or ten (10) days after mailed by
certified, registered or international recorded mail, postage
prepaid and return receipt requested, or when transmitted by
telefax, telex or telegraph and confirmed by sending a similar
mailed writing, if to the Holder, to the last address of such
Holder as it shall appear on the books of the Company maintained
at the Company's principal office or to such other address as the
Holder may have specified to the Company in writing.
14. Headings. The headings contained herein are for
convenience of reference only and are not part of this
Certificate.
Governing Law. This Certificate shall be deemed to be a
contract made under the laws of the State of Delaware and for all
purposes shall be governed by, and construed in accordance with,
the laws of said state, without regard to the conflict of laws
provisions thereof.
IN WITNESS WHEREOF, the Company has caused this Amended and
Restated Warrant Certificate to be duly executed by its duly
authorized officers under its corporate seal.
Dated: October 1, 1998
XCL LTD.
By:
Benjamin B. Blanchet
Executive Vice President
Attest:
Secretary
XCL LTD.
FORM OF ELECTION TO PURCHASE
(To be executed by the registered Holder
if such Holder desires to exercise Warrants)
The undersigned registered Holder hereby irrevocably elects
to exercise the right of purchase represented by this Warrant
Certificate for, and to purchase, Shares hereunder,
and herewith tenders in payment for such Shares cash, a wire
transfer, a certified check or a banker's draft payable to the
order of XCL Ltd. in the amount of , all
in accordance with the terms hereof. The undersigned requests
that a share certificate for such Shares be registered in the
name of and delivered to:
(Please Print Name and Address)
and, if said number of Shares shall not be all the Shares purchas
able hereunder, that a new Warrant Certificate for the balance
remaining of the Shares purchasable hereunder be registered in
the name of the undersigned Warrant Holder or his Assignee as
below indicated and delivered to the address stated below.
DATED:
Name of Warrant Holder:
(Please Print)
Address:
Signature:
Note: The above signature must correspond in all respects
with the name of the Holder as specified on the
face of this Warrant Certificate, without
alteration or enlargement or any change whatsoever,
unless the Warrants represented by this Warrant
Certificate have been assigned.
XCL LTD.
FORM OF ASSIGNMENT
(To be executed by the registered Holder if such Holder
desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers to:
(Please Print Name and Address of Transferee)
Warrants to purchase up to Shares represented by this
Warrant Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
, Attorney, to transfer such Warrants on the books of the
Company, with full power of substitution in the premises. The
undersigned requests that if said number of Shares shall not be
all of the Shares purchasable under this Warrant Certificate that
a new Warrant Certificate for the balance remaining of the Shares
purchasable under this Warrant Certificate be registered in the
name of the undersigned Warrant Holder and delivered to the regis
tered address of said Warrant Holder.
DATED:
Signature of registered Holder:
Note: The above signature must correspond in all respects
with the name of the Holder as specified on the
face of this Warrant Certificate, without
alteration or enlargement or any change whatsoever.
The above signature of the registered Holder must
be guaranteed by a commercial bank or trust
company, by a broker or dealer which is a member of
the National Association of Securities Dealers,
Inc. or by a member of a national securities
exchange, The Securities and Futures Authority
Limited in the United Kingdom or The London Stock
Exchange Limited in London, England. Notarized or
witnessed signatures are not acceptable as
guaranteed signatures.
Signature Guaranteed:
Authorized Officer
Name of Institution
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF
COMMON STOCK ISSUABLE UPON THE EXERCISE THEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER FEDERAL OR STATE SECURITIES OR
BLUE SKY LAWS, AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
THEREFROM. NO OFFER, SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION
(COLLECTIVELY, A "DISPOSAL") OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE OR THE SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE THEREOF MAY BE MADE UNLESS (I) REGISTERED UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY
LAWS OR (II) XCL LTD. RECEIVES A WRITTEN OPINION OF UNITED STATES
LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO IT TO THE
EFFECT THAT SUCH DISPOSAL IS EXEMPT FROM SUCH REGISTRATION
REQUIREMENTS.
WARRANTS TO PURCHASE
COMMON STOCK OF XCL LTD.
Initial Issuance on November 6, 1998
Void after 5:00 p.m. New York Time, November 6, 2003
No. LM-__
THIS CERTIFIES THAT, for value received,
________________________, or registered assigns (the "Holder")
(whose Tax Identification Number is __________) is the registered
holder of warrants (the "Warrants") to purchase from XCL LTD., a
Delaware corporation (the "Company"), at any time or from time to
time beginning on May 7, 1999, and until 5:00 p.m., New York
time, on November 6, 2003 (the "Expiration Date"), subject to the
conditions set forth herein, at the initial exercise price of
U.S. $3.50 per share (the "Initial Exercise Price"), subject to
adjustment as set forth herein (the "Exercise Price"), up to an
aggregate of ______________________________________ (______)
fully paid and non-assessable shares (the "Shares"), par value
$.01 per share (the "Common Stock"), of the Company upon
surrender of this certificate (the "Certificate") and payment of
the Exercise Price multiplied by the number of Shares in respect
of which Warrants are then being exercised (the "Purchase Price")
at the principal office of the Company presently located at 110
Rue Jean Lafitte, 2nd Floor, Lafayette, LA 70508.
1. Exercise of Warrants.
(b) The exercise of any Warrants represented
by this Certificate is subject to the conditions set forth below
in Section 4, "Compliance with Securities Laws."
(c) Subject to compliance with all of the
conditions set forth herein, the Holder shall have the right to
purchase from the Company the number of Shares which the Holder
may at the time be entitled to purchase pursuant hereto, upon
surrender of this Certificate to the Company at its principal
office, together with the form of election to purchase attached
hereto duly completed and signed, and upon payment to the Company
of the Purchase Price; provided, that if the date of such
purchase is not a day on which banking institutions in New York
City are authorized or obligated to do business (a "Business
Day"), then such purchase shall take place before 5:00 p.m. New
York time on the next following Business Day.
(d) No Warrant may be exercised after 5:00
p.m., New York time, on the Expiration Date, at which time all
Warrants evidenced hereby, unless exercised prior thereto, shall
thereafter be null and void and all further rights in respect
thereof under this Certificate shall thereupon cease.
(e) Payment of the Purchase Price shall be
made in United States dollars in cash, by wire transfer or by
certified check or banker's draft payable to the order of the
Company, or any combination of the foregoing.
(f) The Warrants represented by this
Certificate are exercisable at the option of the Holder, in whole
or in part (but not as to fractional Shares). Upon the exercise
of less than all of the Warrants evidenced by this Certificate,
the Company shall forthwith issue to the Holder a new certificate
of like tenor representing the number of unexercised Warrants.
(g) Subject to compliance with all of the
conditions set forth herein, upon surrender of this Certificate
to the Company at its principal office, together with the form of
election to purchase attached hereto duly completed and signed,
and upon payment of the Purchase Price, the Company shall cause
to be delivered promptly to or upon the written order of the
Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of whole Shares
purchased upon the exercise of the Warrants.
2. Elimination of Fractional Interests. The
Company shall not be required to issue certificates representing
fractions of Shares and shall not be required to issue scrip in
lieu of fractional interests. Instead of any such fractional
interest that would otherwise be issuable to such Holder, the
Company shall repurchase such fractional interest in cash in an
amount equal to such fractional interest of the closing bid price
for the Common Stock on The American Stock Exchange, Inc. or any
other principal stock exchange or in the over-the-counter market
or other securities market in which the Common Stock is then
trading on the date of determination (the "Market Price per
Share"); provided, however, the Company shall not be required to
pay any Holder any amount in respect of such fractional interest
which is less than $1.00.
3. Payment of Taxes. The Company will pay all
documentary stamp taxes, if any, attributable to the issuance and
delivery of the Shares upon the exercise of the Warrants;
provided, however, that the Company shall not be required to pay
any taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any Warrant or any Shares
in any name other than that of the Holder, which transfer taxes
shall be paid by the Holder, and until payment of such transfer
taxes, if any, the Company shall not be required to issue such
Shares.
4. Compliance with Securities Laws.
(a) The issuance of the Warrants and the
Shares issuable pursuant thereto (the Warrants and such Shares
being referred to collectively as the "Securities") to the Holder
has not been, and, except as hereinafter set forth in Section 9,
will not be, registered under the Securities Act or any other
domestic or foreign securities or blue sky laws (the Securities
Act and any such other applicable securities or blue sky laws are
hereinafter collectively referred to herein as the "Securities
Laws") in reliance upon exemptions from the registration
requirements thereof; the Holder is acquiring the Securities
solely for its own account for investment and not with a view to,
or for offer or resale in connection with, a distribution thereof
in violation of any Securities Laws. The Securities shall be
held by the Holder unless the sale or transfer thereof is
subsequently registered under applicable Securities Laws or an
exemption from such registration is available at the time of the
proposed sale or transfer thereof. Except as hereinafter set
forth in Section 9, the Company shall be under no obligation to
file a registration statement under the Securities Act covering
the sale or transfer of the Securities or otherwise to register
the Securities for sale under applicable Securities Laws.
(b) Prior to any sale, transfer or other
disposition of any of the Securities (so long as they have not
been registered under the Securities Act as contemplated in
Section 9 hereof or are not otherwise freely transferable under
the Securities Laws), the Holder shall give at least three
business days prior written notice to the Company of its
intention to effect such sale, transfer or other disposition and
to comply in all other respects with this Section 4(b). Each
such notice shall describe the manner and circumstances of the
proposed transfer in sufficient detail to enable counsel to
render the opinions required herein, and, if requested by the
Company, shall be accompanied by an opinion of counsel reasonably
acceptable to the Company (which shall include Holder's in-house
counsel), addressed to the Company and satisfactory in form and
substance to the Company, stating that, in the opinion of such
counsel, such transfer will be a transaction exempt from
registration under the Securities Laws and that all necessary
consents, approvals or authorizations to such transfer have been
obtained. Assuming the receipt by the Company of such
satisfactory opinion, the Holder shall thereupon be entitled to
transfer such Securities in accordance with the terms of the
notice delivered by the Holder to the Company. Each certificate
or other document issued representing the Securities shall bear
an appropriate legend suitably conformed, unless, in the opinion
of the respective counsel for the Holder and the Company, such
legend is not required in order to aid in assuring compliance
with applicable Securities Laws.
(c) The Holder shall not sell any Shares
included in a Registration Statement (as defined in Section 9)
filed by the Company and declared effective by the Securities and
Exchange Commission during the period from the date it receives
notice of the filing of any such Registration Statement by the
Company through the 90th day after the effective date of such
Registration Statement, to the public pursuant to Rules 144 or
144A under the Securities Act or otherwise, without the prior
receipt of the written consent of the Company; provided, however,
that such restriction shall not be applicable to the Holder
unless the Registration Statement relates to an underwritten
public offering of the Company's securities; provided, further,
the Holder shall be bound by the terms of this paragraph in
connection with no more than one registration statement in any
six month period.
(d) In addition to any specific restrictive
legends that may be required by applicable Securities Laws or
agreements to which the Holder may be a party, the Holder shall
be bound by a restrictive legend which may be placed on the
certificates representing the Securities. The Company may place
and instruct any transfer agent for the Securities to place a
stop transfer notation in the stock records in respect of the
certificates representing the Securities, provided that such
securities may be transferred upon compliance with the provisions
of this Section 4 and Section 5 below.
5. Transfer of Warrants.
(a) The Warrants shall be transferable only on
the books of the Company maintained at the Company's principal
office upon delivery of this Certificate with the form of
assignment attached hereto duly completed and signed by the
Holder or by its duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or
authority to transfer. The Company may, in its discretion,
require, as a condition to any transfer of Warrants, a signature
guarantee by a commercial bank or trust company, by a broker or
dealer which is a member of the National Association of
Securities Dealers, Inc. Upon any registration of transfer, the
Company shall deliver a new certificate or certificates of like
tenor and evidencing in the aggregate a like number of Warrants
to the person entitled thereto in exchange for this Certificate,
subject to the limitations provided herein, without any charge
except for any tax or other governmental charge imposed in
connection therewith.
(b) Notwithstanding anything in this
Certificate to the contrary, neither any of the Warrants nor any
of the Shares issuable upon exercise of any of the Warrants shall
be transferable, except upon compliance by the Holder with (i)
the provisions of Sections 4 and 5 hereof, concerning such
transfer as if the Holder were the initial Holder, and (ii) any
applicable provisions of the Securities Act and any applicable
state and foreign securities or blue sky laws. Any transfer not
made in such compliance shall be null and void, and given no
effect hereunder.
6. Exchange and Replacement of Warrant
Certificates; Loss or Mutilation of Warrant Certificates.
(a) This Certificate is exchangeable without
cost, upon the surrender hereof by the Holder at the principal
office of the Company, for new certificates of like tenor and
date representing in the aggregate the right to purchase the same
number of Shares in such denominations as shall be designated by
the Holder at the time of such surrender.
(b) Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Certificate and, in case of such loss, theft
or destruction, of indemnity and security reasonably satisfactory
to it, and reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation
of this Certificate, if mutilated, the Company will make and
deliver a new certificate of like tenor, in lieu thereof.
7. Initial Exercise Price; Adjustment of Number of
Shares.
(a) The Warrants initially are exercisable at the
Initial Exercise Price per Share, subject to adjustment from time
to time as provided herein. No adjustments will be made for cash
dividends, if any, paid to shareholders of record prior to the
date on which the Warrants are exercised.
(b) In case the Company shall at any time after the date
of this Certificate (i) declare a dividend on the shares of
Common Stock payable in shares of Common Stock, or (ii) subdivide
or split up the outstanding shares of Common Stock, the amount of
Shares to be delivered upon exercise of any Warrant will be
appropriately increased so that the Holder will be entitled to
receive the amount of Shares that such Holder would have owned
immediately following such actions had such Warrant been
exercised immediately prior thereto, and the Exercise Price in
effect immediately prior to the record date for such dividend or
the effective date for such subdivision shall be proportionately
decreased, all effective immediately after the record date for
such dividend or the effective date for such subdivision or split
up. Such adjustments shall be made successively whenever any
event listed above shall occur.
(c) In case the Company shall at any time after the date
of this Certificate combine the outstanding shares of Common
Stock into a smaller number of shares the amount of Shares to be
delivered upon exercise of any Warrant will be appropriately
decreased so that the Holder will be entitled to receive the
amount of Shares that such Holder would have owned immediately
following such action had such Warrant been exercised immediately
prior thereto, and the Exercise Price in effect immediately prior
to the record date for such combination shall be proportionately
increased, effective immediately after the record date for such
combination. Such adjustment shall be made successively whenever
any such combinations shall occur.
(d) In the event that the Company shall at any time
after the date of this Certificate (i) issue or sell any shares
of Common Stock (other than the Shares) or securities convertible
or exchangeable into Common Stock to all holders of Common Stock
without consideration or at a price per share (or having a
conversion price per share, if a security convertible into Common
Stock) less than the Market Value per share of Common Stock (as
defined in Section 7(f) hereof), or (ii) issue or sell options,
rights or warrants to subscribe for or purchase Common Stock to
all holders of Common Stock at a price per share less than the
Market Price per share of Common Stock (as defined in Section
7(f) hereof), the Exercise Price to be in effect after the date
of such issuance shall be determined by multiplying the Exercise
Price in effect on the day immediately preceding the relevant
issuance or record date, as the case may be, used in determining
such Market Value or Market Price, by a fraction, the numerator
of which shall be the number of shares of Common Stock
outstanding on such issuance or record date plus the number of
shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so to be issued or to be
offered for subscription or purchase (or the aggregate initial
conversion price of the convertible securities so to be offered)
would purchase at such Market Value or Market Price, as the case
may be, and the denominator of which shall be the number of
shares of Common Stock outstanding on such issuance or record
date plus the number of additional shares of Common Stock to be
issued or to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially
convertible); such adjustment shall become effective immediately
after the close of business on such issuance or record date;
provided, however, that no such adjustment shall be made for the
issuance of (s) options to purchase shares of Common Stock
granted pursuant to the Company's employee stock option plans
approved by shareholders of the Company (and the shares of Common
Stock issuable upon exercise of such options) (provided that
option exercise prices shall not be less than the Market Value of
the Common Stock (as defined in Section 7(f) hereof) on the date
of the grant of such options), (t) the Company's warrants to
purchase shares of Common Stock (and the shares of Common Stock
issuable upon exercise of such warrants), outstanding on the date
hereof, (u) the Company's shares of Amended Series A, Cumulative
Convertible Preferred Stock (and the shares of Common Stock
issuable upon conversion of such Preferred Stock), outstanding on
the date hereof, or (v) the Company's shares of Series B,
Cumulative Preferred Stock (and the shares of Common Stock
issuable in lieu of dividend and redemption payments thereunder),
outstanding on the date hereof. In case such subscription price
may be paid in a consideration, part or all of which shall be in
a form other than cash, the value of such consideration shall be
as determined reasonably and in good faith by the Board of
Directors of the Company. Shares of Common Stock owned by or
held for the account of the Company or any wholly-owned
subsidiary shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively
whenever the date of such issuance is fixed (which date of
issuance shall be the record date for such issuance if a record
date therefor is fixed); and, in the event that such shares or
options, rights or warrants are not so issued, the Exercise Price
shall again be adjusted to be the Exercise Price which would then
be in effect if the date of such issuance had not been fixed.
(e) In case the Company shall make a distribution to all
holders of Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is
the continuing corporation) of evidences of its indebtedness,
securities other than Common Stock or assets (other than cash
dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in Common Stock),
the Exercise Price to be in effect after such date of
distribution shall be determined by multiplying the Exercise
Price in effect on the date immediately preceding the record date
for the determination of the shareholders entitled to receive
such distribution by a fraction, the numerator of which shall be
the Market Price per share of Common Stock (as defined in Section
7(f) hereof) on such date, less the then-fair market value (as
determined reasonably and in good faith by the Board of Directors
of the Company of the portion of the assets, securities or
evidences of indebtedness so to be distributed applicable to one
share of Common Stock and the denominator of which shall be such
Market Price per share of Common Stock, such adjustment to be
effective immediately after the distribution resulting in such
adjustment. Such adjustment shall be made successively whenever
a date for such distribution is fixed (which date of distribution
shall be the record date for such distribution if a record date
therefor is fixed); and, if such distribution is not so made, the
Exercise Price shall again be adjusted to be the Exercise Price
which would then be in effect if such date of distribution had
not been fixed.
(f) For the purposes of any computation under this
Section 7, the "Market Price per share" of Common Stock on any
date shall be deemed to be the average of the closing bid price
for the 20 consecutive trading days ending on the record date for
the determination of the shareholders entitled to receive any
rights, dividends or distributions described in this Section 7,
and the "Market Value per share" of Common Stock on any date
shall be deemed to be the closing bid price on the date of the
issuance of the securities for which such computation is being
made, as reported on the principal United States securities
exchange on which the Common Stock is listed or admitted to
trading or if the Common Stock is not then listed on any United
States stock exchange, the average of the closing sales price on
each such day during such 20 day period, in the case of the
Market Price computation, or on such date of issuance, in the
case of the Market Value computation, in the over-the-counter
market as reported by the National Association of Securities
Dealers' Automated Quotation System ("NASDAQ"), or, if not so
reported, the average of the closing bid and asked prices on each
such day during such 20 day period in the case of the Market
Price computation, or on such date of issuance, in the case of
the Market Value computation, as reported in the "pink sheets"
published by the National Quotation Bureau, Inc. or any successor
thereof, or, if not so quoted, the average of the middle market
quotations for such 20 day period in the case of the Market Price
computation, or on such date of issuance, in the case of the
Market Value computation, as reported on the daily official list
of the prices of stock listed on The London Stock Exchange
Limited ("The Stock Exchange Daily Official List"). "Trading
day" means any day on which the Common Stock is available for
trading on the applicable securities exchange or in the
applicable securities market. In the case of Market Price or
Market Value computations based on The Stock Exchange Daily
Official List, the Market Price or Market Value shall be
converted into United States dollars at the then spot market
exchange rate of pounds sterling (UK) into United States dollars
as quoted by Chemical Bank or any successor bank thereto on the
date of determination. If a quotation of such exchange rate is
not so available, the exchange rate shall be the exchange rate of
pounds sterling in United States dollars as quoted in The Wall
Street Journal on the date of determination.
(g) No adjustment in the Exercise Price shall be
required unless such adjustment would require an increase or
decrease of at least 1% in such price; provided that any
adjustments which by reason of this Section 7(g) are not required
to be made shall be carried forward and taken into account in any
subsequent adjustment; provided, further that such adjustment
shall be made in all events (regardless of whether or not the
amount thereof or the cumulative amount thereof amounts to 1% (or
more) upon the happening of one or more of the events specified
in Sections 7(b), (c) or (i). All calculations under this
Section 7 shall be made to the nearest cent.
(h) If at any time, as a result of an adjustment made
pursuant to Section 7(b) or (c) hereof, the Holder of any Warrant
thereafter exercised shall become entitled to receive any shares
of the Company other than shares of Common Stock, thereafter the
number of such other shares so receivable upon exercise of any
Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Shares contained in this Section
7, and the provisions of this Certificate with respect to the
Shares shall apply on like terms to such other shares.
(i) In the case of (l) any capital reorganization of the
Company, or of (2) any reclassification of the shares of Common
Stock (other than a subdivision or combination of outstanding
shares of Common Stock), or (3) any consolidation or merger of
the Company, or (4) the sale, lease or other transfer of all or
substantially all of the properties and assets of the Company as,
or substantially as, an entirety to any other person or entity,
each Warrant shall after such capital reorganization,
reclassification of the shares of Common Stock, consolidation, or
sale be exercisable, upon the terms and conditions specified in
this Certificate, for the number of shares of stock or other
securities or assets to which a holder of the number of Shares
purchasable (immediately prior to the effectiveness of such
capital reorganization, reclassification of shares of Common
Stock, consolidation, or sale) upon exercise of a Warrant would
have been entitled upon such capital reorganization,
reclassification of shares of Common Stock, consolidation, merger
or sale; and in any such case, if necessary, the provisions set
forth in this Section 7 with respect to the rights thereafter of
the Holder shall be appropriately adjusted (as determined
reasonably and in good faith by the Board of Directors of the
Company) so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities or assets thereafter
deliverable on the exercise of a Warrant. The Company shall not
effect any such consolidation or sale, unless prior to or
simultaneously with the consummation thereof, the successor
corporation, partnership or other entity (if other than the
Company) resulting from such consolidation or the corporation,
partnership or other entity purchasing such assets or the
appropriate entity shall assume, by written instrument, the
obligation to deliver to the Holder of each Warrant the shares of
stock, securities or assets to which, in accordance with the
foregoing provisions, such Holder may be entitled and all other
obligations of the Company under this Certificate. For purposes
of this Section 7(i) a merger to which the Company is a party but
in which the Common Stock outstanding immediately prior thereto
is changed into securities of another corporation shall be deemed
a consolidation with such other corporation being the successor
and resulting corporation.
(j) Irrespective of any adjustments in the Exercise
Price or the number or kind of shares purchasable upon the
exercise of the Warrant, Warrant Certificates theretofore or
thereafter issued may continue to express the same Exercise Price
per share and number and kind of Shares as are stated on the
Warrant Certificates initially issuable pursuant to this Warrant.
8. Required Notices to Warrant Holders. Nothing
contained in this Certificate shall be construed as conferring
upon the Holder the right to vote or to consent or to receive
notice as a shareholder in respect of any meetings of
shareholders for the election of directors or any other matter,
or as having any rights whatsoever as a shareholder of the
Company. If, however, at any time prior to the expiration of the
Warrants or their exercise, any of the following events shall
occur:
(i) the Company shall issue any rights to
subscribe for shares of Common Stock or any other
securities of the Company to all of the shareholders of
the Company; or
(ii) a dissolution, liquidation or winding-up
of the Company (other than in connection with a
consolidation, merger or statutory share exchange) or a
sale of all or substantially all of its property,
assets and business as an entirety shall be approved by
the Company's Board of Directors; or
(iii) there shall be any reclassification or a
change in the kind of the outstanding shares of Common
Stock into different securities (other than a change in
the number of outstanding shares or a change in par
value to no par value, or from no par value to par
value) or consolidation, merger or statutory share
exchange of the Company with another entity;
then, in any one or more of said events, the Company shall give
written notice of such event on or before the date the Company
gives notice to its shareholders of such event. Such notice
shall specify the applicable record date or the date of closing
the transfer books, as the case may be, if any. Failure to give
such notice or any defect therein shall not affect the validity
of any action taken in connection with the event.
9. Registration Rights.
(a) Piggyback Registration. If, at any time
during the five (5) years beginning on the initial issuance date
of the Warrants represented by this Certificate, the Company
proposes to prepare and file any new registration statement under
the Securities Act covering the public sale of Common Stock of
the Company for cash (in any case, other than in connection with
an employee benefit plan, a dividend reinvestment plan or
pursuant to a registration statement on Forms S-4 or S-8 or any
successor form) (collectively, a "Registration Statement"), it
will give written notice by certified or registered mail, at
least thirty (30) days prior to the filing of each such
Registration Statement, to the Holder of its intention to do so.
If the Holder notifies the Company within fifteen (15) days after
receipt of any such notice of such Holder's desire to include in
such proposed Registration Statement any shares of Common Stock
(i) issued or issuable to the Holder upon exercise of the
Holder's Warrants, and (ii) that are owned by the Holder (the
"Registrable Shares") (which notice shall specify the number of
Registrable Shares owned by the Holder and the number intended to
be disposed of by the Holder), the Company shall use reasonable
efforts to include, to the extent possible, in such Registration
Statement the number of Registrable Shares which the Company has
been so requested to register by the Holder, at the Company's
sole cost and expense and at no cost or expense to the Holder,
except that the Holder shall pay (i) all underwriters' broker-
dealers', placement agents' and similar selling discounts,
commissions and fees relating to the Holder's Registrable Shares,
(ii) all registration and filing fees imposed under the
Securities Act, by any stock exchange or under applicable state
securities or blue sky laws based on the Holder's Registrable
Shares, (iii) all transfer, franchise, capital stock and other
taxes, if any applicable to the Holder's Registrable Shares, and
(iv) the costs and expenses of legal counsel, accountants or
other advisors retained by the Holder in excess of $15,000
(collectively, the "Holder's Expenses"), provided that;
(i) anything in this Section 9 to the contrary
notwithstanding, if the Company's securities so
registered for sale are to be distributed in an
underwritten offering and the managing underwriter
shall advise the Company that, in its opinion, the
amount of securities to be offered should be limited in
order to assure a successful offering, the amount of
Registrable Shares to be included in such Registration
Statement shall be so limited and shall be allocated
among the persons selling such securities in the
following order of priority: (A) first to be
registered will be the securities the Company proposes
to sell, (B) next to be registered will be the
securities subject to any demand registration rights
granted by the Company, (C) next to be registered will
be securities subject to any piggyback registration
rights granted by the Company before the initial
issuance date of the Warrants, and (D) next to be
registered will be the Registrable Shares and any other
shares of Common Stock subject to similar piggyback
registration rights granted by the Company in
proportion, as nearly as practicable, to the number of
shares of Common Stock desired and eligible to be sold
by each holder of such shares of Common Stock; and
(ii) anything in this Section 9 to the
contrary notwithstanding, the Company shall not be
required to include any of the Holder's Registrable
Shares in a registration statement if in the written
opinion of legal counsel to the Company upon which
Holder is authorized to rely the securities for which
registration is requested may be sold publicly without
limitation or restriction without registration under
the Securities Act; and
(iii) if the securities or blue sky laws of
any jurisdiction in which the securities so registered
are proposed to be offered would require the Holder's
payment of greater registration expenses than those
otherwise required by this Section 9 and if the Company
shall determine, in good faith, that the offering of
such securities in such jurisdiction is necessary for
the successful consummation of the registered offering,
then the Holder shall either agree to pay the portion
of the registration expenses required by the securities
or blue sky laws of such jurisdiction to be paid by the
Holder or withdraw its request for inclusion of its
Registrable Shares in such registration; and
(iv) notwithstanding the provisions of this
Section 9(a), the Company shall have the right at any
time and for any reason or for no reason after it shall
have given written notice pursuant to this paragraph
(irrespective of whether a written request for
inclusion of any such securities shall have been made)
to elect not to file any such proposed Registration
Statement, or to withdraw the same after the filing but
prior to the effective date thereof and, thereupon,
shall be relieved from its obligation to proceed with
such registration.
If a Holder's Registrable Shares are included in a
Registration Statement, the Holder shall furnish the Company in
writing with such appropriate documents and agreements,
including, without limitation, indemnification and contribution
agreements, as well as such appropriate information in connection
with the sale of such Shares, including, without limitation,
information about the Holder, the Registrable Shares and the
Holder's plan of distribution thereof, and other securities of
the Company owned by the Holder, as the Company shall reasonably
request or as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this
Agreement. In addition, if the offering is underwritten, the
Company shall have the exclusive right to select the underwriter.
The Holder shall execute and deliver all documents reasonably
requested by the Company and/or such underwriter and any other
documents customary in similar offerings, including, without
limitation, underwriting agreements, custody agreements, powers
of attorney, indemnification agreements, and agreements
restricting other sales of securities.
The rights and obligations under Sections 9(a) and
(b) shall terminate at the earlier of (i) five (5) years after
the initial issuance date of the Warrants, or (ii) the date all
of the Holder's Registrable Shares have been transferred by the
Holder, except for transfers in accordance with Section 5(b)
above.
(b) Covenants of the Company with Respect to
Registration. The Company covenants and agrees as follows:
(i) The Company shall pay all costs, fees and
expenses in connection with all Registration Statements
filed pursuant to paragraph (a) above, including,
without limitation, the Company's legal and accounting
fees, printing expenses, filing fees and other
expenses, except that the Holder shall pay all of the
Holder's Expenses (as defined in paragraph (a)).
(ii) The Company will use its reasonable
efforts to qualify or register the Registrable Shares
included in a Registration Statement for offering and
sale under the securities or blue sky laws of such
states of the United States as are reasonably
appropriate to the offering; provided, however, that
the Company shall not be required to (A) qualify or
register the Registrable Shares in any jurisdiction in
which the Company would be required to qualify as a
broker or dealer in securities under the securities or
blue sky laws of such jurisdictions, (B) qualify
generally to do business as a foreign corporation in
any jurisdiction wherein it is not already so
qualified, (C) subject itself to taxation in any such
jurisdiction, or (D) consent to general service of
process in any such jurisdiction.
10. Reservation and Listing of Securities.
(a) The Company covenants and agrees that at
all times during the period the Warrants are exercisable, the
Company shall reserve and keep available, free from preemptive
rights, out of its authorized and unissued shares of Common Stock
or out of its authorized and issued shares of Common Stock held
in its treasury, solely for the purpose of issuance upon exercise
of the Warrants, such number of Shares as shall be issuable upon
the exercise of the Warrants
(b) The Company covenants and agrees that,
upon exercise of the Warrants in accordance with their terms and
payment of the Purchase Price, all Shares issued or sold upon
such exercise shall not be subject to the preemptive rights of
any shareholder and when issued and delivered in accordance with
the terms of the Warrants shall be duly and validly issued, fully
paid and non-assessable, and the Holder shall receive good and
valid record title to such Shares free and clear from any adverse
claim (as defined in the applicable Uniform Commercial Code),
except such as have been created by the Holder.
11. Survival. All agreements, covenants,
representations and warranties herein shall survive the execution
and delivery of this Certificate and any investigation at any
time made by or on behalf of any party hereto and the exercise,
sale and purchase of the Warrants and the Shares (and any other
securities or properties) issuable on exercise hereof.
12. Registered Holder. The Company may deem and
treat the registered Holder hereof as the absolute owner of this
Certificate and the Warrants represented hereby (notwithstanding
any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise of the Warrants, of any
notice, and of any distribution to the Holder hereof, and for all
other purposes, and the Company shall not be affected by any
notice to the contrary.
13. Manner of Notices. All notices and other
communications from the Company to the Holders of the Warrants
represented by this Certificate shall be in writing and shall be
deemed to have been duly given if and when personally delivered,
two (2) business days after being sent by overnight courier or
ten (10) days after mailed by certified, registered or
international recorded mail, postage prepaid and return receipt
requested, or when transmitted by telefax, telex or telegraph and
confirmed by sending a similar mailed writing, if to the Holder,
to the last address of such Holder as it shall appear on the
books of the Company maintained at the Company's principal office
or to such other address as the Holder may have specified to the
Company in writing.
14. Headings. The headings contained herein are
for convenience of reference only and are not part of this
Certificate.
15. Governing Law. This Certificate shall be
deemed to be a contract made under the laws of the State of
Delaware and for all purposes shall be governed by, and construed
in accordance with, the laws of said state, without regard to the
conflict of laws provisions thereof.
IN WITNESS WHEREOF, the Company has caused this
Certificate to be duly executed by its duly authorized officers.
Dated: November 6, 1998
XCL LTD.
By:__________________________________
Name: Marsden W. Miller, Jr.
Title: Chairman
and Chief Executive Officer
Attest:
___________________________
Secretary/Assistant Secretary
XCL LTD.
FORM OF ELECTION TO PURCHASE
(To be executed by the registered Holder
if such Holder desires to exercise Warrants)
The undersigned registered Holder hereby
irrevocably elects to exercise the right of purchase represented
by this Warrant Certificate for, and to purchase, ___________
Shares hereunder, and herewith tenders in payment for such Shares
cash, a wire transfer, a certified check or a banker's draft
payable to the order of XCL LTD. in the amount of
_____________________, all in accordance with the terms hereof.
The undersigned requests that a certificate for such Shares be
registered in the name of and delivered to:
(Please Print Name and Address)
and, if said number of Shares shall not be all the Shares
purchasable hereunder, that a new Warrant Certificate for the
balance remaining of the Shares purchasable hereunder be
registered in the name of the undersigned Warrant Holder or his
Assignee as below indicated and delivered to the address stated
below.
DATED:
Name of Warrant Holder:
(Please Print)
Address:
Signature:
Note: The above signature must correspond in all
respects with the name of the Holder as specified on the face of
this Warrant Certificate, without alteration or enlargement or
any change whatsoever, unless the Warrants represented by this
Warrant Certificate have been assigned.
XCL LTD.
FORM OF ASSIGNMENT
(To be executed by the registered Holder if such Holder
desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns
and transfers to:
______________________________________________________________
(Please Print Name and Address of Transferee)
_________________________________________________________________
_________________________________________________________________
Warrants to purchase up to _______ Shares represented by
this Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint ________ , Attorney, to trans
fer such Warrants on the books of the Company, with full power of
substitution in the premises. The undersigned requests that if
said number of Shares shall not be all of the Shares purchasable
under this Warrant Certificate that a new Warrant Certificate for
the balance remaining of the Shares purchasable under this
Warrant Certificate be registered in the name of the undersigned
Warrant Holder and delivered to the registered address of said
Warrant Holder.
DATED:
Signature of registered Holder:
_________________________________________
Note: The above signature must correspond in all
respects with the name of the Holder as specified on
the face of this Warrant Certificate, without
alteration or enlargement or any change whatsoever. The
above signature of the registered Holder must be
guaranteed by a commercial bank or trust company, by a
broker or dealer which is a member of the National
Association of Securities Dealers, Inc. or by a member
of a national securities exchange, The Securities and
Futures Authority Limited in the United Kingdom or The
London Stock Exchange Limited in London, England.
Notarized or witnessed signatures are not acceptable as
guaranteed signatures.
Signature Guaranteed:
_________________________________________
Authorized Officer
_________________________________________
Name of Institution
PROMISSORY NOTE
$_______________ Date: November 6, 1998
I. PROMISE TO PAY
For value received, the undersigned promises to pay to
the order of __________________________________,
______________________,________________________, _________ _____,
the principal sum of _______________________________
($__________) DOLLARS, together with interest on the principal
sum at the rate of fifteen (15%) percent per annum commencing on
the date that Maker received an executed Subscription Agreement
(as hereinafter defined) from Lender. Interest shall be
calculated on the basis of actual days elapsed over a 365-day
year (366-day year in leap years).
II. DEFINITIONS
The following terms, as used in this Promissory Note,
shall have the meanings set forth below:
1. "Acceleration" shall mean the exercise of
Lender's right to accelerate payment of all principal and
interest due on the Note after complying with the provisions of
Section IV.2.
2. "Debt" shall mean (i) indebtedness for borrowed
money, (ii) obligations evidenced by bonds, debentures, notes or
other similar instruments, (iii) obligations to pay the deferred
purchase price of property or services, (iv) obligations as
lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles,
recorded as capital leases, and (v) obligations under direct or
indirect guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or
obligations of the kinds referred to in clauses (i) through (iv)
above.
3. "Default Notice" means a notice sent by Lender
to Maker upon the occurrence and continuance of an Event of
Default giving rise to an Acceleration which specifies (i) the
nature of the Event of Default that has occurred and is
continuing and (ii) that Lender intends to make an Acceleration
in accordance with the provisions of Section IV.2.
4. "Event of Default" shall have the meaning set
forth in Section IV.1. hereof.
5. "Financing Documents" shall mean this Note and
the other Notes.
6. "Lender" shall mean J. Edgar Monroe Foundation
(1976).
7. "Lien" or "Liens" shall mean any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind,
including, without limitation, the rights of a vendor, lessor or
similar party under any conditional sale agreement or other title
retention agreement or lease substantially equivalent thereto,
and the rights of the holder of any production payment, advance
payment or similar interest.
8. "Lutcher Moore Mitigation Bank Financing" shall
mean a financing in the amount of up to $15 million secured in
full or in part by the Lutcher Moore Tract Wetlands Mitigation
Bank.
9. "Lutcher Moore Tract" shall mean that certain
tract of land located in St. James, Ascension and St. John the
Baptist Parishes, Louisiana, comprising approximately 62,000
acres, owned by XCL Ltd.
10. "Maker" shall mean XCL Land, Ltd., a company
organized under the laws of Delaware.
11. "Note" shall mean this Promissory Note.
12. "Security Documents" shall mean the Security
Agreements each dated as of November 6, 1998 executed by Maker
and The Exploration Company of Louisiana, Inc. and Lender and the
related Louisiana UCC-1 financing statements.
13. "Subscription Agreement" shall mean the
Subscription Agreement dated as of November 6, 1998, executed by
XCL Ltd., Maker and Lender and relating to the purchase of this
Note.
III. TERMS OF PAYMENT
1. Maturity. All principal and interest accrued
and unpaid under this Note is due and payable in full on the
earlier of (a) the third business day after funding of the
Lutcher Moore Mitigation Bank Financing or (b) February 4, 1999
unless extended until May 5, 1999 by Maker at its sole option and
without the need for Lender's consent by sending written notice
to Lender on or before February 1, 1999 that such maturity date
has been extended to May 5, 1999. The maturity of this Note may
be extended for an additional ninety (90) days or until August 3,
1999 with the consent of Lender upon delivery to Lender by Maker
of an additional promissory note substantially on the terms of
this Note, mutatis mutandis, in the principal amount equal to the
then unpaid interest on this Note.
IV. DEFAULT AND REMEDIES IN EVENT OF DEFAULT
1. Events of Default. The term "Event of Default"
shall mean the occurrence of any one of the following events:
(a) The failure of Maker to pay punctually when due
any amount (including, without limitation, principal or interest)
payable with respect to the Note.
(b) Any representation or warranty made by Maker
(or any of its officers) under or in connection with the
Subscription Agreement, or by Maker or the grantor of any lien or
security interest pursuant to any agreement securing or
purporting to secure any of the obligations herein (including,
without limitation, any of the Security Documents), shall prove
to have been incorrect in any material respect on or as of the
date made.
(c) The breach of any term, covenant or agreement
made by Maker hereunder (other than under clause (a), above), or
under any other agreement between Maker and Lender, which breach
is not cured within 30 days after receipt by Maker of notice
thereof.
(d) Maker or any of its subsidiaries shall admit in
writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any case,
proceeding or other action under any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency or relief of debtors, shall be instituted by or
against Maker or any of its subsidiaries seeking to adjudicate it
a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or
composition of its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), such
proceeding shall remain undismissed or unstayed for a period of
thirty (30) days; or Maker or any of its subsidiaries shall take
any corporate action to authorize any of the actions set forth
above in this subsection (d) of Section IV.
(e) Any judgment or order for the payment of money
in excess of $5,000,000 shall be rendered against Maker or any of
its subsidiaries and either (i) enforcement proceedings shall
have been commenced by any creditor upon such judgment or order
that have not been stayed for a period of ten (10) consecutive
days and are not stayed at the time an action to enforce this
Note is commenced, or (ii) there shall be any period of ten (10)
consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect.
(f) Any non-monetary judgment or order shall be
rendered against Maker or any of its subsidiaries that is
reasonably likely to have a material adverse effect on (i) the
business, condition (financial or otherwise), operations,
performance, properties or prospects of Maker and its
subsidiaries, taken as a whole, (ii) the ability of Maker and its
subsidiaries, taken as a whole, to perform its obligations under
this Note or the Notes or under any agreement securing or
purporting to secure the obligations herein to which Maker or any
of its subsidiaries is a party or (iii) the rights and remedies
of Lender or its agent under any agreement securing or purporting
to secure the obligations herein to which Maker or any of its
subsidiaries is a party, and either (x) enforcement proceedings
shall have been commenced by any person or entity upon such
judgment or order that have not been stayed for a period of ten
(10) consecutive days and are not stayed at the time an action to
enforce this Note is commenced, or (y) there shall be any period
of ten (10) consecutive days during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect.
(g) Maker shall create, insure, assume or suffer to
exist any debt other than (i) debt in respect of the Notes;
(ii) debt existing as of the date of the Notes; and
(iii) obligations to any affiliate of Maker that are
contractually subordinated to the indebtedness represented by
the Notes.
2. Acceleration of Maturity. Upon the occurrence
of any Event of Default arising from any condition or
circumstance other than Maker's failure to pay punctually when
due any amount under the Note, Lender may send a Default Notice
to Maker. Upon actual receipt of such Default Notice, Maker
shall have five (5) business days to either cure such Event of
Default or pay in full all principal and interest due under the
Note. If, after five (5) business days have elapsed from actual
receipt of the Default Notice by Maker, Maker has not either
(i) cured such Event of Default or (ii) paid in full all
principal and interest due under the Note, then and only then
shall Lender have the right to make an Acceleration. Upon
Acceleration, the Note, all interest thereon and all other
amounts payable thereon shall become and be forthwith due and
payable, without presentment, demand, protest or further notice
of any kind. The unpaid balance under the Note shall bear
interest as stated herein until paid in full.
V. WAIVER OF DEFENSES
Maker waives presentment for payment, protest, notice
of dishonor, demand, and notice of acceleration. Maker's
liability hereunder shall not be impaired by lack of diligence in
collecting the Note and enforcing any security rights of Lender.
VI. MAXIMUM INTEREST RATE
In no event shall the rate charged hereunder for
interest exceed the maximum rate of interest permitted by
applicable law, and if any circumstances, including acceleration,
prepayment, or demand, would cause the rate of interest hereunder
to exceed such maximum rate, the rate of interest hereunder
automatically shall be reduced to such maximum rate and Lender
shall forgive or refund to Maker any interest above such maximum
rate collected by Lender.
VII. GOVERNING LAW
This Note shall be governed by the substantive laws of
the State of Louisiana, without any effect being given to
principles of conflicts of laws.
VIII. SECURITY
This Note is secured by a security interest in a
percentage of the general and limited partnership interest in
L.M. Holding Associates, L.P., a Louisiana Partnership in
Commendam, granted by Maker and The Exploration Company of
Louisiana, Inc. pursuant to the Security Documents. IT IS
EXPRESSLY UNDERSTOOD AND AGREED BY LENDER THAT THE INDEBTEDNESS
EVIDENCED HEREBY IS INDEBTEDNESS OF MAKER AND NOT INDEBTEDNESS OF
ANY OF ITS AFFILIATES, INCLUDING BUT NOT LIMITED TO XCL LTD. OR
XCL-CHINA LTD., AND LENDER HEREBY EXPRESSLY ACKNOWLEDGES AND
AGREES THAT EXCEPT WITH RESPECT TO THE SECURITY INTERESTS GRANTED
TO IT PURSUANT TO THE SECURITY DOCUMENTS, IT SHALL HAVE NO
RECOURSE AGAINST ANY OF MAKER'S AFFILIATES, INCLUDING BUT NOT
LIMITED TO XCL LTD. OR XCL-CHINA LTD., OR ANY OF THEIR ASSETS AND
THAT LENDER SHALL LOOK SOLELY TO MAKER, ITS ASSETS AND THE
COLLATERAL IN WHICH A SECURITY INTEREST HAS BEEN GRANTED BY THE
SECURITY DOCUMENTS FOR REPAYMENT OF ANY AND ALL AMOUNTS DUE
HEREUNDER.
IX. NOTICE
Whenever this Note requires or permits any consent,
approval, notice, request or demand from one party to another,
the consent, approval, notice, request or demand must be in
writing (including telecopies, telegraphic, telex or cable
communications) and mailed (prepaid postage), telecopied,
telegraphed, telexed, cabled or delivered as follows:
If to Maker:
XCL Land, Ltd.
110 Rue Jean Lafitte
P. O. Box 53775
Lafayette, Louisiana 70505
Attn: Benjamin B. Blanchet
Telecopier: (318) 237-3316
If to Lender:
Or, as to any party, at such other address as shall be designated
by such party in a written notice to the other parties. Unless
otherwise specified herein, all such notices and other
communications, shall, when mailed, telecopied, telegraphed,
telexed or cabled, be effective and deemed delivered and received
when deposited in the mails, telecopied, delivered to the
telegraph company, confirmed by telex answerback or delivered to
the cable company, respectively.
X. HEADINGS
The headings used in this Note are for convenience
only and do not constitute a part of the Note.
XI. RESTRICTIONS ON TRANSFER
THE NOTE REPRESENTED BY THIS INSTRUMENT HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
THE SECURITIES OR BLUE SKY LAWS OF ANY OTHER DOMESTIC OR FOREIGN
JURISDICTION. SUCH NOTE MAY NOT BE SOLD, OFFERED FOR SALE OR
OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH SUCH LAWS AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER. SUCH NOTE IS ALSO
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER CONTAINED HEREIN AND
IN THE SUBSCRIPTION AGREEMENT. A COPY OF SUCH AGREEMENT IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE MAKER AND
WILL BE FURNISHED WITHOUT CHARGE TO ANY HOLDER OF THIS NOTE UPON
WRITTEN REQUEST TO THE SECRETARY OF THE MAKER, AND ALL HOLDERS OF
THE NOTE AGREE TO BE BOUND BY THE PROVISIONS OF SUCH AGREEMENT.
XII. WAIVERS AND AMENDMENTS
All amendments, supplements and modifications to this
Note shall be made only in writing signed by Maker and Lender,
and then any such amendment, supplement, or modification shall be
effective only on the specific instance and for the specific
purpose for which given. No consent to any departure by Maker
from the provisions of this Note shall in any event be effective
unless the same shall be in writing and signed by Lender.
XCL LAND, LTD.
By:________________________________
Name:______________________________
Title:_____________________________
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT dated as of November 6, 1998 by
and between (a) XCL Land, Ltd. ("XCL Land"), a company
organized under the laws of the State of Delaware and a
wholly owned subsidiary of XCL Ltd., (b) XCL Ltd., a
Delaware company and (c) the other parties to this Agreement
named on the signature page hereof (collectively, the
"Subscriber").
XCL Land, XCL Ltd. and the Subscriber, each in reliance
upon the representations, warranties and covenants contained
in this Agreement, agree as follows with respect to the
issuance and sale by XCL Land and the purchase by the
Subscriber of the number of units (the "Units") which the
Subscriber has inserted in Section 13 hereof at the purchase
price set forth by the Subscriber in Section 13 hereof, each
Unit being comprised of (a) $100,000 in principal amount of
a promissory note of XCL Land ("Note"); and (b) 21,705
warrants ("Warrants") to purchase 21,705 shares of XCL
Ltd.'s common stock, par value $.01 per share ("Common
Stock"), at $3.50 per share (subject to adjustment).
1. Sale and Purchase of Units. This Agreement is
being executed and delivered in connection with the sale and
purchase of up to an aggregate of 62 Units (issuable in two
tranches) offered by XCL Land and XCL Ltd. to a limited
number of qualified investors (the "Offering"). By
executing and delivering this Agreement, the Subscriber
hereby irrevocably agrees to subscribe for the number of
Units, and at the purchase price, which the Subscriber has
set forth in Section 13 hereof, subject to the terms and
conditions contained in this Agreement. The purchase and
sale of the Units listed in Section 13 hereof shall take
place at a closing (the "Initial Closing") commencing at
10:00 a.m., Central Daylight Time, on November 6, 1998 at
the offices of Gordon, Arata, McCollam, Duplantis & Eagan,
L.L.P. or on such other date and at such other time and
place as shall be mutually agreed upon by the parties
hereto. The date on which the Initial Closing occurs is
referred to herein as the "Closing Date". The purchase and
sale of such Units shall be subject to the following terms
and conditions.
(1) At closing, the Subscriber shall wire
transfer, or shall cause to be wire transferred, immediately
available United States Funds to Bank One, Louisiana, ABA
Number: 065-400137, Account Number: 711-4432052 for the
account of XCL Land, Ltd. in payment of the purchase price
for the Units. As used herein the term "United States
Funds" shall mean the freely transferable or external
currency of the United States of America.
(2) Payment of the purchase price of the Units
shall be deemed by XCL Land and XCL Ltd. to constitute a
confirmation by the Subscriber of the accuracy and
completeness of its representations and warranties set forth
herein as of the date such payment is made.
(3) Simultaneously with the Subscriber's
subscription payment for the Units, XCL Land shall issue and
deliver, or cause to be issued and delivered to the
Subscriber a promissory note substantially in the form set
forth as Schedule I evidencing the aggregate principal
amount of all Notes subscribed for, and XCL Ltd. shall issue
and deliver, or cause to be issued and delivered, a single
certificate representing the Warrants, in each case
registered in the name of the Subscriber and bearing a
suitably conformed version of the legend set forth in
subsection 4(e) hereof.
(4) XCL Land reserves the unilateral right to
withdraw, cancel or modify the Offering and to reject, in
whole or in part, any subscription for Units, which need not
be accepted in the order received. In the event the
Offering is withdrawn, cancelled or modified, prior to the
issuance of the Units, XCL Land shall notify the Subscriber
and give it the opportunity to cancel its subscription and
shall return to the Subscriber its subscription moneys
(without interest) and the original copies of all
subscription materials.
2. Commitment to Subscribe for Additional Units.
In addition to Subscriber's subscription to the number of
Units set forth in Section 13 hereof, Subscriber hereby
agrees to subscribe for an additional number of Units up to
the number specified in Section 13 on the same terms and
conditions as set forth herein upon written request by XCL
Land at any time before December 31, 1998. The closing of
such transaction shall be held on the date and at the place
reasonably designated by XCL Land.
3. Representations and Warranties by XCL Land and
XCL Ltd. XCL Land and XCL Ltd. hereby represent and warrant
to the Subscriber that, except as set forth in the
Preliminary Prospectus (a copy of which is attached hereto
as Exhibit "A") (the "Preliminary Prospectus") filed by XCL
Ltd. with the Securities and Exchange Commission on October
23, 1998 as part of Amendment No. 2 to a Registration
Statement on Form S-1 registering certain securities of XCL
Ltd. described therein (which the parties hereto acknowledge
is subject to further amendment):
(1) Organization and Good Standing. XCL Land
and XCL Ltd. each is a corporation duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its organization, has corporate power and
authority to carry on its business as now being conducted
and is not required to qualify to do business as a foreign
corporation in any other jurisdiction where the failure so
to qualify would have a material adverse effect on the
business or assets of XCL Land or XCL Ltd. and its
subsidiaries, taken as a whole.
(2) Capitalization. XCL Ltd.'s authorized
capital stock consists of 500,000,000 shares of Common
Stock, par value $0.01 per share of which 22,926,333 shares
of Common Stock were validly issued and outstanding as of
September 30, 1998 excluding 69,471 shares held in treasury,
and are fully paid and non-assessable, and 2,400,000 shares
of preferred stock, par value $1.00 per share, 70,000 of
which have been designated Amended Series B, Cumulative
Converted Preferred Stock with 48,405 of such shares
outstanding as of September 30, 1998 and 2,085,000 of which
have been designated Amended Series A, Cumulative
Convertible Preferred Stock with 1,181,614 of such shares
outstanding as of September 30, 1998. The Warrants, when
executed and delivered on behalf of XCL Ltd. and issued and
sold as set forth in this Agreement and the Warrant
Agreement annexed hereto as Schedule II, will have been duly
executed, issued and delivered and will be valid and legally
binding obligations of XCL Ltd. and the shares of Common
Stock issuable upon exercise of the Warrants ("Warrant
Stock") will, following such exercise in the manner provided
for in the Warrant Agreement, be duly authorized, validly
issued, fully paid and non-assessable.
(3) Corporate Authority. XCL Land and XCL
Ltd. each has full power and authority to enter into this
Agreement, and, as to XCL Ltd., the Warrant Agreement, and
to issue, sell and deliver the Warrants and Warrant Stock
and to incur and perform the obligations provided for herein
and under the Warrant Agreement and, as to XCL Land, the
Notes, which have been or will be duly authorized by all
necessary corporate or other action of XCL Land (as to this
Agreement and the Notes) and XCL Ltd. (as to this Agreement
and the Warrant Agreement). The execution, delivery and
performance of this Agreement, the Warrant Agreement and the
Notes and the issuance and sale of the Warrants, Warrant
Stock and Notes to the Subscriber, in the manner
contemplated by this Agreement, the Warrant Agreement and
the Notes, do not require the approval or consent of the
stockholders of XCL Land or XCL Ltd. or other holders of
securities or indebtedness of XCL Land or XCL Ltd. (other
than as has been obtained), do not violate any provision of
any law of the United States, or the Certificate of
Incorporation or By-Laws of XCL Land or XCL Ltd., or any
material agreement or instrument by which XCL Land or XCL
Ltd., or any of its properties are bound and (except as
contemplated thereunder) will not result in the creation of
any encumbrance or charge upon any asset of XCL Land or XCL
Ltd. This Agreement, the Warrant Agreement, and the Notes
constitute valid and binding obligations of XCL Land or XCL
Ltd. (as appropriate) in accordance with their terms.
(4) Governmental Consents. All consents,
authorizations and approvals (if any) of any governmental
agency or other regulatory body within the United States
required by XCL Land or XCL Ltd. for the execution and
delivery of this Agreement, the Warrant Agreement, and Notes
and the issuance of the Warrants and Notes in the manner
contemplated in the Warrant Agreement and this Agreement,
respectively, and the performance of its obligations
hereunder and thereunder have been or, in the case of
certain state securities regulatory agencies with
jurisdiction, will be obtained.
(5) Financial Statements. Attached as
Exhibits "B" and "C" are the audited financial statements
of XCL Ltd. and its consolidated subsidiaries for the fiscal
year ended December 31, 1997 and the unaudited financial
statements of XCL Ltd. and its consolidated subsidiaries for
the six-month period ended June 30, 1998, respectively.
Such financial statements present fairly the financial
position of XCL Land and XCL Ltd. on the dates and for the
periods specified therein in all material respects.
(6) Absence of Certain Material Changes and
Events. Since June 30, 1998, there has been no material
adverse change in the financial condition, assets,
liabilities or business of XCL Land and its subsidiaries,
taken as a whole or of XCL Ltd. and its subsidiaries, taken
as a whole.
(7) Contracts. Except as set forth in the
Preliminary Prospectus, neither XCL Land nor XCL Ltd. is in
material violation of or in material default under any
material contract to which it is a party or by which it is
bound. To the best of the knowledge of XCL Land and XCL
Ltd., all such contracts are valid and effective in
accordance with their terms and XCL Land and XCL Ltd. know
of no material default by any third party that would
materially impair its ability to perform hereunder or XCL
Land's ability to perform under the Notes.
(8) Litigation. There is no material
litigation, proceeding or investigation of any nature
pending or, to the knowledge of XCL Land or XCL Ltd.,
threatened against or relating to XCL Land or XCL Ltd. or
any of its properties or business. Neither XCL Land nor XCL
Ltd. is subject to any judgment, decree or order of any
court or any other governmental or administrative body or
agency. There is no action pending, or, to the best of XCL
Land's or XCL Ltd.'s knowledge, threatened against XCL Land,
XCL Ltd. or any of their respective subsidiaries which
either (a) involves the transactions contemplated by this
Agreement or (b) is likely to have a material adverse effect
on the ability of XCL Land to perform its obligations under
this Agreement or the Notes or on the ability of XCL Ltd. to
perform its obligations under this Agreement or the Warrant
Agreement.
(9) Absence of Undisclosed Liabilities. To
the best knowledge of XCL Land and XCL Ltd., none of XCL
Land, XCL Ltd. or any of their respective subsidiaries has
any material liabilities or obligations (whether accrued,
absolute, contingent or otherwise) exclusive of those (1)
arising hereunder or under the Warrant Agreement and Notes,
(2) described herein or in the Schedules hereto, (3)
reflected in the financial statements referred to in
paragraph (e) of this Section 3 or the Preliminary
Prospectus or (4) liabilities and obligations arising under
its leases and under contracts relating to the exploration,
operations, production and sales of hydrocarbons from those
leases, which, in the aggregate, are in general conformance
with industry practice and standards.
(10) Preliminary Prospectus. The Preliminary
Prospectus does not contain any untrue statement of a
material fact nor does it omit to state a material fact
necessary in order to make the statements contained therein
not misleading.
(11) Compliance with Laws. Each of XCL Land,
XCL Ltd. and their respective subsidiaries has all required
governmental approvals, authorizations, consents, licenses,
orders, registrations and permits necessary for the
operation of its business as presently conducted and the
absence of which would have a material adverse effect.
(12) Labor Matters.
(1) None of XCL Land, XCL Ltd. or their
respective subsidiaries has entered into any collective
bargaining agreement and, to the best of the knowledge of
XCL Land and XCL Ltd., no labor union or similar
organization or any representative thereof has made any
attempt to organize or represent employees of any of XCL
Land, XCL Ltd. or their respective subsidiaries.
(2) To the best knowledge of XCL Land and
XCL Ltd., there are no controversies pending or threatened
between any of XCL Land, XCL Ltd. or their respective
subsidiaries, on the one hand, and its employees or any
contractor or subcontractor thereof which reasonably would
be expected to have a material adverse effect.
(13) Taxes. Each of XCL Land and XCL Ltd.
have filed all tax returns required to be filed by law and
has paid all taxes shown thereon to be due, including
interest and penalties. Neither XCL Land or XCL Ltd. is a
party to any action or proceeding by any governmental
authority for the assessment or collection of taxes, nor has
any claim for assessment or collection of taxes been
asserted against either XCL Land or XCL Ltd., except for a
pending Louisiana income and franchise tax case described in
the Preliminary Prospectus. There is no audit pending of
any tax return filed by either XCL Land or XCL Ltd. or with
respect to any consolidated group of which either XCL Land
or XCL Ltd. was a member in the applicable year, although
notices of proposed deficiencies are outstanding as
described in the Preliminary Prospectus.
(14) Title to Property. XCL Land, XCL Ltd.
and their respective subsidiaries have good and valid title
to all their plants, structures and equipment and such
plants, structures and equipment are in good operating
condition and repair, except where a defect in title or the
failure of such plants, structures and equipment to be in
such good operating condition and repair would not,
individually or in the aggregate, have a material adverse
effect.
(15) Environmental Matters.
(A) For purposes of this Agreement,
(x) "Environmental Laws" shall mean any
federal, state, local or common law or any foreign law, and
any rules and regulations under any thereof, relating to (I)
releases or threatened releases of Hazardous Substances or
materials containing Hazardous Substances, (II) the
manufacture, handling, transport, import, export, use,
treatment, storage or disposal of Hazardous Substances or
materials containing Hazardous Substances or (III) otherwise
relating to pollution of the environment or the protection
of human health; and
(y) "Hazardous Substances" shall mean (I)
substances which are or which contain substances defined in
or regulated as hazardous under the following federal
statutes and their state counterparts, as well as any
similar foreign statutes and each such statute's
implementing regulations as amended from time to time; the
Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the
Clean Water Act, and Safe Drinking Water Act, the Atomic
Energy Act, the Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Federal
Food, Drug and Cosmetics Act and the Clean Air Act, (II)
petroleum and petroleum products including crude oil and any
fractions thereof, (III) natural gas, synthetic gas and any
mixtures thereof, (IV) radon, (V) any other contaminant and
(VI) any substances with respect to which a federal, state,
local or foreign agency requires environmental
investigation, monitoring, reporting or remediation.
(B) (x) Each of XCL Land and XCL Ltd. have
obtained or caused to have been obtained all material
permits, licenses and other authorizations which are
required under Environmental Laws relating to the oil and
gas properties and leases and other assets of XCL Land and
XCL Ltd. and their respective subsidiaries (collectively,
the "Environmental Assets");
(y) XCL Land, XCL Ltd. and their
respective subsidiaries and the Environmental Assets are in
compliance in all material respects with all Environmental
Laws and all terms and conditions of such permits, licenses
and authorizations; and
(z) None of XCL Land, XCL Ltd. or their
respective subsidiaries has received written notice of (I)
any material claims of present or past non-compliance with
Environmental Laws, (II) any material claims against them
for damages, fines, penalties, environmental investigation
or remediation, or administrative, injunctive or other
relief arising under Environmental Laws or (III) other than
in connection with the LaRoche litigation as described in
the Preliminary Prospectus, any past, present or future
events, conditions, circumstances, activities, practices,
incidents, actions or plans which are reasonably likely to
interfere with or prevent continued compliance, or which are
reasonably likely to give rise to any material liability, or
otherwise form the basis of any material claim, action,
suit, proceeding, hearing or investigation arising under
Environmental Laws.
4. Representations, Warranties and Agreements by
the Subscriber. The Subscriber hereby represents and
warrants to and agrees with XCL Land and XCL Ltd. as
follows:
(1) Preliminary Prospectus. The Subscriber
hereby acknowledges to XCL Land and XCL Ltd. that (i) any
estimates, plans, projections etc. which are incorporated in
the Preliminary Prospectus or which have been furnished to
it with respect to the activities undertaken originally or
to be undertaken by XCL Land or XCL Ltd. are based on
certain assumptions made by XCL Land and XCL Ltd. regarding
such factors as estimated values of the properties, prices
of oil and gas, future revenues, proved, probable and
potential reserve values, degrees of success of disposition
transactions and exploration and development activities and
other factors, (ii) actual experience may vary from such
assumptions, (iii) such estimates, plans and projections may
never be achieved, (iv) the Subscriber has not relied upon
the achievement of any such estimates and projections in
making its investment decision to acquire the Units, (v) the
Subscriber has carefully reviewed the Preliminary Prospectus
and the Exhibits thereto, in particular, the "Risk Factors"
section thereof, and (vi) the Subscriber is aware of the
current conditions existing in the United States and
international oil and gas industry which affect the business
of XCL Land and XCL Ltd.
(2) Independent Investigation. The Subscriber
has relied solely upon the independent investigations made
by it and its representatives in making a decision to
purchase the Units and has a full understanding and
appreciation of the risks inherent in such a speculative
investment. In connection with such investigation, the
Subscriber and its attorneys, accountants and other
representatives and advisers, if any, (i) have been given an
opportunity to ask, and have to the extent the Subscriber
considered necessary, asked questions of, and have received
answers from, officers of XCL Land and XCL Ltd. concerning
the terms of the Offering and the affairs of XCL Land and
XCL Ltd. and its proposed activities and (ii) have been
given or afforded access to all documents, records, books
and additional information which the Subscriber has
requested regarding such matters.
(3) Unregistered Shares. The Subscriber
recognizes that the offer and sale by XCL Land and XCL Ltd.
of the Notes and the Warrants (and Warrant Stock) and the
offer and sale of the Units have not been and (except to
the extent set forth herein and in the Warrant Agreement)
will not be registered under the United States Securities
Act of 1933, as amended (the "Act"), and have not been and
will not be registered under any other applicable domestic
or foreign securities laws (the Act and any such other
applicable securities laws are hereinafter collectively
referred to herein as the "Securities Laws") in reliance
upon exemptions from the registration requirements thereof;
the Subscriber is acquiring the Units and the Notes,
Warrants, and Warrant Stock (collectively referred to herein
as the "Securities") solely for its account for investment
and not with a view to, or for offer or resale in connection
with, a distribution thereof in violation of any Securities
Laws; the investment will not constitute more than one fifth
of the Subscriber's consolidated net worth; and the
Subscriber is either (a) a "qualified institutional buyer"
(as defined in Rule 144A promulgated under the Act) or
(b) an institutional "accredited investor" (as defined in
Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) promulgated
under the Act). The Subscriber hereby covenants and agrees
that it will not sell the Units or any of the Securities
until such time as XCL Ltd. or XCL Land, as applicable, has
effectively registered such securities under the Act or
counsel reasonably acceptable to XCL Ltd. or XCL Land, as
applicable (which shall include in-house counsel) shall have
furnished an opinion, in form and substance reasonably
acceptable to XCL Ltd. or XCL Land, as applicable, to the
effect that the transaction contemplated by Subscriber would
be in compliance with the Act. The Subscriber understands
that the effect of such representation and warranty is that
the Units and Securities must be held unless the sale or
transfer thereof is subsequently registered under the
Securities Laws or an exemption from such registration is
available at the time of any proposed sale or other transfer
thereof. Except to the extent hereinafter set forth and in
the Warrant Agreement neither XCL Land nor XCL Ltd. is under
any obligation either to file a registration statement under
the Act covering the sale or transfer of such securities or
otherwise to register such securities for sale under the
Securities Laws. The Subscriber is familiar with, or has
been advised by its counsel regarding, (i) the applicable
limitations upon the resales of the Units and the
Securities, (ii) the circumstances under which the
Subscriber is required to hold such securities and (iii) the
limitations upon the transfer or other disposition thereof.
The Subscriber is either (a) a "qualified institutional
buyer" (as defined in Rule 144A promulgated under the
Securities Act) or (b) an institutional "accredited
institutional buyer" (as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7) or (a)(8) under the Securities Act). The
Subscriber acknowledges that XCL Land and XCL Ltd. are and
will be relying upon the truth and accuracy of the foregoing
representations and warranties in offering and selling the
Units and the Securities to the Subscriber without first
registering them under the Securities Laws.
(4) Transfer Conditions. Except as to any
Securities that (i) are then effectively registered under
the Act, or (ii) are represented by certificates that, with
the consent of XCL Ltd. or XCL Land, as applicable, no
longer bear restrictive legends and are otherwise freely
tradeable under the Act, prior to any sale, transfer or
other disposition of any of the Subscriber's Units and the
Securities the Subscriber agrees to give at least three days
prior written notice to XCL Ltd. or XCL Land, as applicable,
of its intention to effect such transfer and to comply in
all other respects with this subsection 4(d). Each such
notice shall describe the identity of the transferee and the
manner and circumstances of the proposed transfer in
sufficient detail to enable counsel to render the opinions
required herein, and shall be accompanied by an opinion of
counsel acceptable to XCL Ltd. or XCL Land, as applicable,
addressed to XCL Ltd. or XCL Land, as applicable, and
satisfactory in form and substance to XCL Ltd. or XCL Land,
as applicable, stating that, in the opinion of such counsel,
such transfer will be a transaction exempt from registration
under the Securities Laws and that all consents, approvals
or authorizations to such transfer have been obtained.
Assuming the receipt by XCL Ltd. or XCL Land, as applicable,
of such satisfactory opinion, the Subscriber shall thereupon
be entitled to transfer such shares in accordance with the
terms of the notice delivered by the Subscriber to XCL Ltd.
or XCL Land, as applicable, and this Agreement. Each
certificate or other document issued representing the
Securities shall bear the legend set forth in subsection
4(e) hereof, suitably conformed, unless, in the opinion of
the respective counsel for the Subscriber and XCL Ltd. or
XCL Land, as applicable, such legend is not required in
order to aid in assuring compliance with applicable
Securities Laws.
The Subscriber agrees that it will not sell,
transfer or otherwise dispose of any of its Units or
Securities, and XCL Land and XCL Ltd. will not be required
to recognize any such sale, transfer or disposition, unless
such sale, transfer or disposition complies with this
subsection 4(d).
(5) Restrictive Legends and Stop Order. In
addition to any specific restrictive legends that may be
required by applicable Securities Laws or agreements to
which the Subscriber may be a party, as to any Securities
that are not effectively registered under the Act, the
Subscriber agrees to be bound by a restrictive legend in
substantially the following form which may be placed on the
certificates or other documents representing the Securities:
THE SECURITIES [NOTE] REPRESENTED BY
THIS [INSTRUMENT] [CERTIFICATE] HAVE
[HAS] NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER THE SECURITIES OR BLUE SKY LAWS OF
ANY OTHER DOMESTIC OR FOREIGN
JURISDICTION. SUCH SECURITIES [NOTE]
MAY NOT BE SOLD, OFFERED FOR SALE, OR
OTHERWISE TRANSFERRED EXCEPT IN
COMPLIANCE WITH SUCH LAWS AND THE RULES
AND REGULATIONS PROMULGATED THEREUNDER.
SUCH SECURITIES [NOTE] ARE [IS] ALSO
SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFER CONTAINED IN THAT CERTAIN
SUBSCRIPTION AGREEMENT DATED AS OF
NOVEMBER 6, 1998 BETWEEN THE ISSUER AND
THE INITIAL HOLDER OF THE SECURITIES
[NOTE] NAMED THEREIN. A COPY OF SUCH
AGREEMENT IS AVAILABLE FOR INSPECTION AT
THE PRINCIPAL OFFICE OF THE ISSUER AND
WILL BE FURNISHED WITHOUT CHARGE TO THE
HOLDER THEREOF UPON WRITTEN REQUEST TO
THE SECRETARY OF THE ISSUER AND THE
HOLDER OF THE SECURITIES [NOTE] AGREES
TO BE BOUND THEREBY.
The Subscriber understands and agrees that XCL
Land or XCL Ltd., as applicable, may place and instruct any
transfer agent for the Securities, to place a stop transfer
notation in the records in respect of the certificates
representing such securities, provided that such securities
may be transferred upon compliance with the provisions of
this Section 4.
(6) Notes are Obligations of XCL Land Only.
IT IS EXPRESSLY UNDERSTOOD AND AGREED BY SUBSCRIBER THAT THE
NOTE IS INDEBTEDNESS OF XCL LAND AND NOT INDEBTEDNESS OF ANY
OF ITS AFFILIATES, INCLUDING BUT NOT LIMITED TO XCL LTD. OR
XCL-CHINA LTD., AND SUBSCRIBER HEREBY EXPRESSLY ACKNOWLEDGES
AND AGREES THAT EXCEPT WITH RESPECT TO THE SECURITY
INTERESTS GRANTED TO IT PURSUANT TO THE SECURITY AGREEMENTS
DESCRIBED IN SECTION 6(c)(iii) HEREOF, IT SHALL HAVE NO
RECOURSE AGAINST ANY OF XCL LAND'S AFFILIATES, INCLUDING BUT
NOT LIMITED TO XCL LTD. OR XCL-CHINA LTD., OR ANY OF THEIR
ASSETS AND THAT SUBSCRIBER SHALL LOOK SOLELY TO XCL LAND,
ITS ASSETS AND THE COLLATERAL IN WHICH A SECURITY INTEREST
HAS BEEN GRANTED BY THE SECURITY AGREEMENTS DESCRIBED IN
SECTION 6(c)(iii) HEREOF, FOR REPAYMENT OF ANY AND ALL
AMOUNTS DUE UNDER THE NOTE.
5. Tax Advisor. Subscriber acknowledges that XCL
Land has advised Subscriber that Subscriber should consult
with its own tax advisor as to the possible tax consequences
of original issue discount for federal income tax purposes.
6. Survival of Representations and Warranties. The
representations and warranties of XCL Land and XCL Ltd. set
forth in this Agreement or in any certificate or other
document or instrument furnished to the Subscriber by or on
behalf of XCL Land and XCL Ltd. in connection with the
transactions contemplated hereby, which shall be deemed to
be effective as of the date made, and the representations
and warranties of the Subscriber set forth in Section 4
shall survive the execution, delivery and termination of
this Agreement and the consummation of the transactions
contemplated hereby.
7. Conditions Precedent to Obligations of
Subscriber.
(1) Representations True at Closing;
Performance. The representations and warranties of XCL Land
and XCL Ltd. contained in Section 3 hereof shall be deemed
to have been made again at and as of the Closing Date, and
shall then be true and correct in all material respects, and
XCL Land and XCL Ltd. shall have performed and complied in
all material respects with all agreements and conditions
required by this Agreement to be performed or complied with
by it on or before the Closing Date.
(2) Legal Opinions. The Subscriber shall have
received opinion of counsel, dated the Closing Date, from
Gordon, Arata, McCollam, Duplantis & Eagan, L.L.P., in
substantially the form attached as Exhibit "D".
(3) Units. There shall have been delivered to
the Subscriber the following instruments and documents
evidencing the Units subscribed for by the Subscriber:
(1) a promissory note evidencing the
aggregate principal amount of all Notes so subscribed for;
(2) a certificate representing the
aggregate number of Warrants included as a component of such
Units; and
(3) two fully executed Security
Agreements substantially in the form attached as Exhibit
"E", one executed by XCL Land and one executed by The
Exploration Company of Louisiana, Inc., granting a security
interest in that percentage of such entity's partnership
interest in L.M. Holding Associates, L.P., a Louisiana
Partnership in Commendam, that is equal to the number of
Units subscribed to in Section 13 hereof (and not including
any Units Subscriber has agreed to subscribe to in Section 2
hereof upon the written request of XCL Land) times 3.2258
and two related Louisiana UCC-1 Financing Statements.
(4) No Withdrawal, Cancellation or
Modification. XCL Land or XCL Ltd. shall not have withdrawn,
canceled or modified the Offering, and shall have taken such
action as is contemplated thereby.
(5) Minimum Subscriptions. XCL Land and XCL
Ltd. shall have obtained executed agreements in
substantially the form hereof constituting subscriptions for
such number of Units which, when aggregated with the Units
subscribed for by the Subscriber hereunder, equal at least
31 Units (not including any Units with respect to which
Subscribers have agreed to subscribe to upon the written
request of XCL Land).
(6) Certificates. XCL Land and XCL Ltd. shall
deliver other customary closing certificates.
8. Notices. Any notice, claim, request, demand or
other communication required or permitted to be given under
this Agreement shall be given in writing and shall be deemed
to have been duly given if delivered or mailed, first class
postage prepaid, to the party for whom intended at the
following addresses:
The Subscriber
The address set forth on the signature page hereof
XCL Land
or XCL Ltd.
110 Rue Jean Lafitte
Lafayette, LA 70508
Attn: Benjamin B. Blanchet
or at such other address, as to any party, as such party
shall specify by like notice to the other parties.
9. Covenants of XCL Land and XCL Ltd. XCL Land and
XCL Ltd. hereby covenant and agree that:
(1) XCL Ltd. shall be obligated to register
the Warrant Stock at the time and on the terms and
conditions set forth in Article 9 of the Warrant Agreement.
(2) XCL Land and XCL Ltd. shall issue no more
than 62 Units and shall not issue any securities convertible
into or exchangeable for Units.
10. Rights of Parties to Terminate.
Notwithstanding anything to the contrary set forth herein,
this Agreement and the transactions contemplated hereby may
be terminated:
(1) at any time by the written agreement of
the parties hereto; or
(2) by either XCL Land or the Subscriber, by
written notice to the other, if the Initial Closing shall
not have occurred prior to or on November 30, 1998;
provided, however, that such right to terminate shall not be
available to a party which has breached this Agreement if
such breach shall have prevented such Closing from occurring
prior to or on November 30, 1998.
11. Entire Agreement; etc. This Agreement together
with the Schedules hereto, the Notes, the Warrant Agreement
and the Security Agreement set forth the entire
understanding and agreement between XCL Land, XCL Ltd. and
the Subscriber pertaining to the subject matter hereof and
thereof superseding any and all prior agreements, proposals,
understandings and arrangements among the parties hereto,
all of which shall be deemed terminated, cancelled and of no
further force and effect. No prior or contemporaneous
understanding or agreement shall alter or constitute a
waiver of any term, condition, obligation, covenant,
representation or warranty contained in this Agreement, nor
shall any waiver, understanding or agreement purportedly
amending or waiving any provision hereof be effective unless
and until it shall be reduced to writing and signed by the
parties hereto. Any other agreements pursuant to which a
limited number of qualified investors agree to subscribe for
Units shall be identical in form and content (except as to
the identity of the Subscriber and the number of Units
subscribed for) as this Agreement, and although each such
agreement (including this Agreement) may be executed in
counterparts with each counterpart being deemed an original
and all such counterparts being deemed as one single
instrument, each such agreement shall constitute an
individual, several agreement with XCL Land and XCL Ltd. and
no partnership, joint venture, agency or other relationship,
expressed or implied, shall be created by and among the
Subscriber and other purchasers of the Units. Further, XCL
Land and XCL Ltd. covenant with and warrant each Subscriber
that, until such Subscriber's Note is paid in full, if the
terms of any of the Units or any Subscriber's investment in
the Units (including the Notes and the Warrant Agreements)
are amended either directly or indirectly, then no such
amendment shall be effective until and unless each
Subscriber is offered and either expressly accepts or
rejects the same amendment; and no benefit or inducement for
such amendment will be offered to any Subscriber unless the
same is offered to all Subscribers. The headings in this
Agreement have been inserted for convenience of reference
only and shall not affect the interpretation or enforcement
of any provision hereof. XCL Land and XCL Ltd. further
covenant and agree that it is the intent of the parties to
this Agreement that the Subscriber herein will purchase and
hold the Units on the same terms and conditions as the other
investors in the Units unless said Subscriber explicitly
elects otherwise after being offered the opportunity to so
elect.
12. APPLICABLE LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE FOR ALL PURPOSES WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAW.
13. Special Federal and State Securities Laws
Notices.
(1) The undersigned understands and
acknowledges that:
THE UNITS AND SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
WILL BE ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE SOLD,
OFFERED FOR SALE OR TRANSFERRED FOR VALUE IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION UNDER THE ACT OR AN EXEMPTION
THEREFROM.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST
RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF
THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED
THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
(2) Investors in the following jurisdictions
must review the following legends required by each
jurisdiction and be aware of their contents.
CALIFORNIA SUPPLEMENT
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA DOES NOT RECOMMEND OR ENDORSE THE PURCHASE OF
THESE SECURITIES. IT IS UNLAWFUL TO CONSUMMATE A SALE OR
TRANSFER OF THESE SECURITIES, OR ANY INTEREST THEREIN, OR TO
RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES.
FLORIDA SUPPLEMENT
THE SECURITIES REFERRED TO HEREIN WILL BE SOLD TO,
AND ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPT UNDER
517.061 OF THE FLORIDA SECURITIES ACT. THE SECURITIES HAVE
NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA.
IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE
OF VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE
FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO
THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT OR
WITHIN 3 DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS
COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER.
MARYLAND SUPPLEMENT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (OR
OTHER DOCUMENT) HAVE BEEN ISSUED PURSUANT TO A CLAIM OF
EXEMPTION FROM THE REGISTRATION OR QUALIFICATION PROVISIONS
OF FEDERAL AND STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE
SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
PENNSYLVANIA SUPPLEMENT
UNDER PROVISIONS OF THE PENNSYLVANIA SECURITIES
ACT OF 1972, EACH PENNSYLVANIA RESIDENT SHALL HAVE THE RIGHT
TO WITHDRAW HIS ACCEPTANCE WITHOUT INCURRING ANY LIABILITY
TO THE SELLER, UNDERWRITER (IF ANY), OR ANY PERSON, WITHIN
TWO (2) BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE ISSUER
OF HIS WRITTEN BINDING CONTRACT OF PURCHASE OR IN THE CASE
OF A TRANSACTION IN WHICH THERE IS NO WRITTEN BINDING
CONTRACT OF PURCHASE, WITHIN TWO BUSINESS DAYS AFTER HE
MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING OFFERED.
EACH PENNSYLVANIA RESIDENT WHO SUBSCRIBES FOR THE
SECURITIES BEING OFFERED HEREBY AGREES NOT TO SELL THESE
SECURITIES FOR A PERIOD OF TWELVE MONTHS AFTER THE DATE OF
PURCHASE. UNDER PROVISIONS OF THE PENNSYLVANIA SECURITIES
ACT OF 1972 (THE "1972 ACT"), EACH PENNSYLVANIA RESIDENT
SHALL HAVE THE RIGHT TO WITHDRAW HIS ACCEPTANCE WITHOUT
INCURRING ANY LIABILITY TO THE SELLER, UNDERWRITER (IF ANY)
OR ANY OTHER PERSON, WITHIN TWO BUSINESS DAYS FROM THE DATE
OF RECEIPT BY THE ISSUER OF HIS WRITTEN BINDING CONTRACT OF
PURCHASE OR IN THE CASE OF A TRANSACTION IN WHICH THERE IS
NO WRITTEN BINDING CONTRACT OF PURCHASE, WITHIN TWO BUSINESS
DAYS AFTER HE MAKES THE INITIAL PAYMENT FOR THE SECURITIES
BEING OFFERED. TO ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER
NEED ONLY SEND A LETTER OR TELEGRAM TO THE ISSUER AT THE
ADDRESS SET FORTH HEREIN, INDICATING HIS OR HER INTENTION TO
WITHDRAW. SUCH LETTER OR TELEGRAM SHOULD BE SENT AND
POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED SECOND
BUSINESS DAY. IT IS PRUDENT TO SEND SUCH LETTER BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT IT
IS RECEIVED AND ALSO TO EVIDENCE THE TIME WHEN IT WAS
MAILED. IF THE REQUEST IS MADE ORALLY IN PERSON OR BY
TELEPHONE TO THE ISSUER, A WRITTEN CONFIRMATION THAT THE
REQUEST HAS BEEN RECEIVED SHOULD BE REQUESTED.
14. Subscription. The undersigned hereby
subscribes for the following number of Units:
Number of Units
to be purchased __________
(minimum purchase one Unit)
Total Unit Purchase Price:
U.S. $__________
(Number of Units x $100,000)
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement effective on the date first above
written.
TYPE OF OWNERSHIP
(Check One)
Individual (one signature required)
Joint Tenants with right of survivorship
(each must sign)
Tenants in Common (each must sign)
Tenants by the Entirety (both husband and
wife must sign)
Community Property (one signature required if
interest held in one name, i.e., managing
spouse; signatures of both spouses required
if interest is held in both names)
Corporation (include resolution authorizing
this investment)
Partnership (include partnership agreement)
Trust (include instrument creating the trust)
Estate (include certified copy of letters
testamentary or letters of administration)
Please print here the exact name in which Unit(s)
are to be registered.
INDIVIDUALS ONLY
SIGNATURE PAGE
FOR INDIVIDUAL INVESTORS
(and joint tenants, tenants in common and
tenants by the entirety)
Investor #1 Investor #2
____________________________
Signature Signature
___________________________
Social Security Number Social Security
Number
____________________________
Print or Type Name Print or Type
Name
Residence Address: Residence
Address:
____________________________
____________________________
Telephone No. ______________ Telephone No.
Facsimile No. ______________ Facsimile No.
Executed at: Executed at:
____________________________
City City
____________________________
State State
this ____ day of ___________ this ____ day of
________
_____________________, 199__. _________________,
199__.
Mailing Address (if different)
____________________________________________________________
____________________________________________________________
STATE OF )
:ss.
COUNTY OF )
On this _____ day of __________, in the year 19__,
before me, the undersigned, a Notary Public of said State,
duly commissioned and sworn, personally appeared
, known to me to be the person (or persons) whose name is
(or whose names are) subscribed to the within instrument,
and acknowledged that he (or she or they) executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal the day and year in this
certificate first above written.
[SEAL]
Notary Public in and for said State
My commission expires on , 199 .
SUBSCRIPTION ACCEPTED:
XCL LAND, LTD.
By:____________________________
Name:_______________________
Title:______________________
Date:__________________________
XCL LTD.
By:____________________________
Name:_______________________
Title:______________________
Date:__________________________
CORPORATION ONLY
SIGNATURE PAGE
FOR CORPORATE INVESTORS
____________________________________________________________
Name of Corporation (please print or type)
By:_________________________________________________________
(Signature of authorized agent)
Title:______________________________________________________
Taxpayer Identification
No.:______________________________________
Address of Principal
Corporate Office:
_______________________________________________
____________________________________________________________
___________________________________________________________
Mailing Address,
if different:
___________________________________________________
____________________________________________________________
____________________________________________________________
Telephone Number:
_______________________________________________
Facsimile Number:
_______________________________________________
Attention:
______________________________________________________
Executed at ______________________,
_____________________________
(City) (State)
on this ______ day of ________________, 199__.
STATE OF )
.ss:
COUNTY OF )
On this _____ day of ____________, in the year of
199__, before me, the undersigned, a Notary Public of said
State, duly commissioned and sworn, personally appeared
, known to me to be the _____________________ of the
corporation that executed the within instrument, and
acknowledged to me that the said corporation executed the
same.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year in this
certificate first above written.
[SEAL]
____________________________________________
Notary Public in and for said State
My commission expires on , 199 .
SUBSCRIPTION ACCEPTED:
XCL LAND, LTD.
By:____________________________
Name:_______________________
Title:______________________
Date:__________________________
XCL LTD.
By:____________________________
Name:_______________________
Title:______________________
Date:__________________________
PARTNERSHIPS ONLY
SIGNATURE PAGE
FOR PARTNERSHIP INVESTORS
____________________________________________________________
Name of Partnership (please print or type)
By:
___________________________________________________________
(Signature of authorized agent)
Title:
_________________________________________________________
Taxpayer Identification No.:
____________________________________
Principal Business
Address:
________________________________________________________
____________________________________________________________
____________________________________________________________
Mailing Address,
if different:
__________________________________________________
____________________________________________________________
____________________________________________________________
Telephone Number:
_______________________________________________
Facsimile Number:
_______________________________________________
Attention:
______________________________________________________
Executed at ______________________,
_____________________________
(City) (State)
on this ______ day of ________________, 199__.
STATE OF )
.ss:
COUNTY OF )
On this day of , in the year
of 199_, before me, the undersigned, a Notary Public of said
State, duly commissioned and sworn, personally appeared
, known to me to be (one)/(other number)/(all) of the
partners of the partnership that executed the within
instrument, and acknowledged to me that said partnership
executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal the day and year in this
certificate first above written.
[SEAL]
Notary Public in and for said State
My commission expires on , 199 .
SUBSCRIPTION ACCEPTED:
XCL LAND, LTD.
By:____________________________
Name:_______________________
Title:______________________
Date:__________________________
XCL LTD.
By:____________________________
Name:_______________________
Title:______________________
Date:__________________________
TRUST OR ESTATES ONLY
SIGNATURE PAGE
FOR TRUST OR ESTATE INVESTORS
___________________________________________________________
Name of Trust or Estate (please print or type)
By:
____________________________________________________________
(Signature of authorized agent)
Title:
__________________________________________________________
Taxpayer Identification No.:
____________________________________
Trustee's or Executor's
Address:
________________________________________________________
___________________________________________________________
____________________________________________________________
Mailing Address,
if different:
___________________________________________________
___________________________________________________________
____________________________________________________________
Telephone
Number:________________________________________________
Facsimile Number:
_______________________________________________
Attention:
______________________________________________________
Executed at ______________________,
_____________________________
(City) (State)
on this ______ day of ________________, 199__.
STATE OF )
.ss:
COUNTY OF )
On this day of , in the year
of 199_, before me, the undersigned, a Notary Public of said
State, duly commissioned and sworn, personally appeared
, known to me to be the trustee of the trust or executor or
administrator of estate that executed the within instrument,
and acknowledged to me that the said trust or estate
executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year in this
certificate first above written.
[SEAL]
________________________________________
Notary Public in and for said State
My commission expires on , 199 .
SUBSCRIPTION ACCEPTED:
XCL LAND, LTD.
By:____________________________
Name:_______________________
Title:______________________
Date:__________________________
XCL LTD.
By:____________________________
Name:_______________________
Title:______________________
Date:__________________________
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") dated November 6,
1998, is made between XCL Land, Ltd. ("Borrower") and
____________ ("Lender"), who agree as follows:
Recitals
1. The Borrower is or will be indebted unto the
Lender for loans made or to be made and evidenced by certain
notes, including, but not limited to that certain Promissory
Note by Borrower payable to the order of Lender dated of
even date herewith (the "November 1998 Note").
2. In order to secure the full and punctual payment
and performance of the Indebtedness as defined herein, the
Borrower has agreed to execute and deliver this Agreement
and to pledge, deliver and grant a continuing security
interest in and to the Collateral (as hereafter defined).
AGREEMENT
NOW, THEREFORE, in consideration of the premises, the
Borrower and the Lender agree as follows:
Section 2. Definitions.
1. The terms "Agreement," "Borrower," "Lender"
and "November 1998 Note" shall have the meanings indicated
above.
2. As used in this Agreement, the following
terms shall have the following meaning:
"Event of Default" shall have the meaning defined
in the November 1998 Note.
"General Intangibles" has the meaning given to it
in the UCC.
"Lien" shall mean any interest in property
securing an obligation owed to, or a claim by, a Person
other than the owner of the property, whether such interest
is based on jurisprudence, statute or contract, and
including but not limited to the lien or security interest
arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term
"Lien" shall include reservations, exceptions,
encroachments, easements, servitudes, usufructs, rights-of-
way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting property. For
the purposes of this Agreement, the Borrower shall be deemed
to be the owner of any property which it has accrued or
holds subject to a conditional sale agreement, financing
lease or other arrangement pursuant to which title to the
property has been retained by or vested in some other Person
for security purposes.
"Permitted Liens" means the Security Interests,
and any other Liens in favor of Lender or any other
purchaser of Units (as defined in the Subscription
Agreement) or permitted by Lender in writing to be created
or assumed or to exist with respect the Collateral.
"Person" means any individual, corporation,
partnership, joint venture, association, joint stock
company, trust, unincorporated organization, government or
any agency or political subdivision thereof, or any other
form of entity.
"Proceeds" has the meaning giving to it in the
UCC.
"Security Interests" means the security interests
in the Collateral and Proceeds granted hereunder in favor of
Lender securing the Indebtedness.
"Subscription Agreement" means that certain
Subscription Agreement dated November 6, 1998 by and between
Borrower, Lender and XCL Ltd.
"UCC" means the Uniform Commercial Code,
Commercial Laws - Secured Transactions (Louisiana Revised
Statutes 10:9-101 through :9-605) in the State of Louisiana,
as amended from time to time; provided that if by reason of
mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the Security Interests in
any Collateral is governed by the Uniform Commercial Code as
in effect in a jurisdiction other than Louisiana, "UCC"
means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or
non-perfection.
Section 3. Security Interest.
1. To secure the full and punctual payment and
performance of all present and future amounts, liabilities,
obligations and indebtedness of Borrower to the Lender,
including, without limitation all promissory notes
(including, but not limited to the November 1998 Note)
heretofore or hereafter executed by the Borrower, in
principal, interest, deferral and delinquency charges as
therein stipulated, whether such amounts, liabilities,
obligations and indebtedness be liquidated or unliquidated,
now existing or hereafter arising, the Borrower hereby
pledges, pawns, transfers and grants to the Lender a
continuing security interest in and to all of the following
property of the Borrower, whether now owned or existing or
hereafter acquired or arising (collectively the
"Collateral"):
(1) ____% of Borrower's now owned or hereafter
acquired partnership interest (the
"Partnership Interest") (which Partnership
Interest is currently a general partner
interest) in L.M. Holding Associates, L.P., a
Louisiana Partnership in Commendam (the
"Partnership"), which Partnership was created
by that certain Agreement of Limited
Partnership dated May 27, 1991, as amended by
amendments filed with the Louisiana Secretary
of State on February 25, 1993, August 19,
1994, September 1, 1994, October 7, 1994 and
January 8, 1997 (the "Partnership Agreement")
(2) ____% of any and all monies and other
distributions (cash or property), allocations
or payments made or to be made to Borrower
pursuant to the Partnership Agreement or
attributable to the Partnership Interest
(3) all General Intangibles related in any way
to the collateral described in clauses 1 or 2
above
(4) all Proceeds and products of all or any of
the collateral described in clauses 1-3
above.
2. The security interests are granted as
security only and shall not subject the Lender to, or
transfer or in any way affect or modify, any obligation or
liability of the Borrower with respect to any of the
Collateral or any transaction in connection therewith.
Section 4. Delivery of Collateral if Ever Represented
by Certificates. If the Partnership Interest is ever
represented by a certificate of interest or any similar
document, the Borrower will immediately deliver such
certificate or document to the Lender.
Section 5. No Liens. Other than financing statements
or other similar or equivalent documents or instruments with
respect to the Security Interests and Permitted Liens, no
financing statement, mortgage, security agreement or similar
or equivalent document or instrument covering all or any
part of the Collateral is on file or of record in any
jurisdiction in which such filing or recording would be
effective to perfect a Lien on such Collateral. No
Collateral is in the possession of any Person (other than
Borrower) asserting any claim thereto or security interest
therein, except that Lender or its designee may have
possession of Collateral as contemplated hereby. Except
with respect to Permitted Liens, the Liens granted pursuant
to this Agreement constitute perfected first priority Liens
on the Collateral in favor of the Lender.
Section 6. No Conflict. The Borrower has not
performed any acts or signed any agreements which might
prevent the Lender from enforcing any of the terms of this
Agreement or which would limit the Lender in any such
enforcement.
Section 7. Name. The full name of Borrower is as it
appears on page 1 of this Agreement.
Section 8. Federal Taxpayer Number. The federal
taxpayer identification number of Borrower is as follows:
51-0334575.
Section 9. Chief Executive Office. The chief
executive office of Borrower is 110 Rue Jean Lafitte,
Lafayette, Louisiana 70505.
Section 10. Location of Collateral. Borrower will
keep and maintain all books or records relating to any of
the Collateral at its chief executive office.
Section 11. Filing Location. When a UCC financing
statement has been filed in the offices of a Louisiana Clerk
of Court of any parish other than Orleans (or in the case of
Orleans Parish, with the Recorder of Mortgages), the
Security Interests shall constitute perfected security
interests in the Collateral to the extent that a security
interest therein may be perfected by filing pursuant to the
UCC, prior to all other Liens except for the Permitted Liens
and rights of others therein to the extent that such
priority is afforded by the UCC.
Section 12. Title. Borrower has good and merchantable
title to the Collateral, free of Liens except Permitted
Liens. Furthermore, Borrower has not heretofore conveyed or
agreed to convey or encumber any Collateral in any way,
except in favor of Lender. Lender understands and agrees,
however, that Borrower has granted a security interest in
all of its partnership interests in the Partnership (other
than the percentage of its partnership interest covered
hereby) to the other purchasers of Units (as defined in the
Subscription Agreement).
Section 13. Incorporation and Existence. Borrower is
a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its
organization and has the corporate power and authority and
the legal right to own and operate the Collateral and to
conduct the business in which it is currently engaged.
Section 14. No Consents or Approvals. Except for
those filings and registrations required to perfect the
Liens created by this Agreement, the Borrower is not
required to obtain any order, consent, approval or
authorization of, or required to make any declaration or
filing with, any governmental authority or any other Person
in connection with the execution and delivery of this
Agreement and the granting and perfection of the Security
Interests pursuant to this Agreement.
Section 15. Due Execution; Binding Obligation. This
Agreement has been duly executed and delivered on behalf of
the Borrower, and this Agreement constitutes a legal, valid
and binding obligation of Borrower, enforceable against
Borrower in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally
and except as enforceability may be subject to general
principles of equity, whether such principles are applied in
a court of equity or at law.
Section 16. No Conflicts. The execution, delivery and
performance of this Agreement will not (i) result in any
violation of or be in conflict with or constitute a default
under any terms of any agreement, contract, statute,
regulation, law or ordinance; (ii) have a material adverse
effect on the Collateral; (iii) materially adversely affect
the ability of Borrower to perform its obligations under
this Agreement or the November 1998 Note, or (iv) result in
the creation of any Lien upon any of the properties or
revenues of Borrower other than the Liens in favor of the
Lender created pursuant to this Agreement.
Section 17. Voting Rights. Notwithstanding the
security interest granted hereby and whether or not an Event
of Default (as defined in the November 1998 Note) shall have
occurred, the Borrower shall have the exclusive right to
exercise all voting and other rights under the Partnership
Agreement until such time (if and when) Lender forecloses on
the Collateral and becomes the owner thereof.
Section 18. Notice of Changes. Borrower will not
change its name, corporate identity or taxpayer
identification number in any manner unless it shall have
given Lender at least five (5) days prior written notice
thereof.
Section 19. Remedies upon Default.
1. Sale. Upon the occurrence of an Event of
Default, Lender may exercise all rights of a secured party
under the UCC and other applicable law (including the
Uniform Commercial Code as in effect in another applicable
jurisdiction) and, in addition, Lender may, without being
required to give any notice, except as herein provided or as
may be required by mandatory provisions of law, sell the
Collateral or any part thereof at public or private sale,
for cash, upon credit or for future delivery, and at such
price or prices as Lender may deem satisfactory. Lender may
be the purchaser of any or all of the Collateral so sold at
any public sale (or, if the Collateral is of a type
customarily sold in a recognized market or is of a type
which is the subject of widely distributed standard price
quotations, at any private sale). Borrower will execute and
deliver such documents and take such other action as Lender
deems necessary or advisable in order that any such sale may
be made in compliance with law. Upon any such sale Lender
shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Each purchaser at
any such sale shall hold the Collateral so sold to it
absolutely and free from any claim or right of whatsoever
kind, including any equity or right of redemption of
Borrower which may be waived, and Borrower, to the extent
permitted by law, hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under
any law now existing or hereafter adopted. Borrower agrees
that ten (10) days prior written notice of the time and
place of any sale or other intended disposition of any of
the Collateral constitutes "reasonable notification" within
the meaning of Section 9-504(3) of the UCC, except that
shorter notice or no notice shall be reasonable as to any
Collateral which is perishable or threatens to decline
speedily in value or is of a type customarily sold on a
recognized market. The notice (if any) of such sale shall
(1) in case of a public sale, state the time and place fixed
for such sale, and (2) in the case of a private sale, state
the day after which such sale may be consulted. Any such
public sale shall be held at such time or times within
ordinary business hours and at such place or places as
Lender may fix in the notice or such sale. At any such sale
the Collateral may be sold in one lot as an entirety or in
separate parcels, as Lender may determine. Lender shall not
be obligated to make any such sale pursuant to any such
notice. Lender may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned
from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or
place to which the same may be so adjourned. In case of any
sale of all or any part of the Collateral on credit or for
future delivery, the Collateral so sold may be retained by
Lender until the selling price is paid by the purchaser
thereof, but Lender shall not incur any liability in case of
the failure of such purchaser to take up and pay for the
Collateral so sold and, in case of any such failure, such
Collateral may again be sold upon like notice.
2. Foreclosure. Instead of exercising the
power of sale herein conferred upon it, Lender may proceed
by a suit or suits at law or in equity to foreclose the
Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of
competent jurisdiction. FOR THE PURPOSES OF LOUISIANA
EXECUTORY PROCESS PROCEDURES, BORROWER DOES HEREBY CONFESS
JUDGMENT IN FAVOR OF LENDER FOR THE FULL AMOUNT OF THE
INDEBTEDNESS. BORROWER DOES BY THESE PRESENTS CONSENT,
AGREE AND STIPULATE THAT UPON THE OCCURRENCE OF AN EVENT OF
DEFAULT IT SHALL BE LAWFUL FOR LENDER, AND THE BORROWER DOES
HEREBY AUTHORIZE LENDER, TO CAUSE ALL AND SINGULAR THE
COLLATERAL TO BE SEIZED AND SOLD UNDER EXECUTORY OR ORDINARY
PROCESS, AT LENDER'S SOLE OPTION, WITH OR WITHOUT
APPRAISEMENT, APPRAISEMENT BEING HEREBY EXPRESSLY WAIVED, IN
ONE LOT AS AN ENTIRETY OR IN SEPARATE PARCELS AS LENDER MAY
DETERMINE, TO THE HIGHEST BIDDER, AND OTHERWISE EXERCISE THE
RIGHTS, POWERS AND REMEDIES AFFORDED HEREIN AND UNDER
APPLICATION LOUISIANA LAW. ANY AND ALL DECLARATIONS OF FACT
MADE BY AUTHENTIC ACT BEFORE A NOTARY PUBLIC IN THE PRESENCE
OF TWO WITNESSES BY A PERSON DECLARING THAT SUCH FACTS LIE
WITHIN HIS KNOWLEDGE SHALL CONSTITUTE AUTHENTIC EVIDENCE OF
SUCH FACTS FOR THE PURPOSE OF EXECUTORY PROCESS. BORROWER
HEREBY WAIVES IN FAVOR OF LENDER: (A) THE BENEFIT OF
APPRAISEMENT AS PROVIDED IN LOUISIANA CODE OF CIVIL
PROCEDURE ARTICLES 2332, 2336, 2723 AND 2724, AND ALL OTHER
LAWS CONFERRING THE SAME; (B) THE DEMAND AND THREE DAYS
DELAY ACCORDED BY LOUISIANA CODE OF CIVIL PROCEDURE ARTICLES
2639 AND 2721; (C) THE NOTICE OF SEIZURE REQUIRED BY
LOUISIANA CODE OF CIVIL PROCEDURE ARTICLES 2293 AND 2721;
(D) THE THREE DAYS DELAY PROVIDED BY LOUISIANA CODE OF CIVIL
PROCEDURE ARTICLES 2331 AND 2722; AND (E) THE BENEFIT OF THE
OTHER PROVISIONS OF LOUISIANA CODE OF CIVIL PROCEDURE
ARTICLES 2331, 2722 AND 2723, NOT SPECIFICALLY MENTIONED
ABOVE.
3. Effect of Securities Laws. The Borrower
recognizes that the Lender may be unable to effect a public
sale of all or part of the Collateral by reason of certain
prohibitions contained in the Securities Act of 1933, as
amended, and applicable state securities laws but may be
compelled to resort to one or more private sales to a
restricted group of purchasers who will be obligated to
agree, among other things, to acquire all or a part of the
Collateral for their own account, for investment, and not
with a view to the distribution or resale thereof. If the
Lender deems it advisable to do so for the foregoing or for
other reasons, the Lender is authorized to limit the
prospective bidders on or purchasers of any of the
Collateral to such a restricted group of purchasers and may
cause to be placed on certificates for any or all of the
Collateral a legend to the effect that such security has not
been registered under the Securities Act of 1933, as
amended, and may not be disposed of in violation of the
provision of said act, and to impose such other limitations
or conditions in connection with any such sale as the Lender
deems necessary or advisable in order to comply with said
act or any other securities or other laws. The Borrower
acknowledges and agrees that any private sale so made may be
at prices and on other terms less favorable to the seller
than if such Collateral were sold at public sale and that
the Lender has no obligation to delay the sale of such
Collateral for the period of time necessary to permit the
registration of such Collateral for public sale under any
securities laws. The Borrower agrees that a private sale or
sales made under the foregoing circumstances shall be deemed
to have been made in a commercially reasonable manner. If
any consent, approval, or authorization of any federal,
state, municipal or other governmental department, agency or
authority should be necessary to effectuate any sale or
other disposition of the Collateral, or any partial sale or
other disposition of the Collateral, the Borrower will
execute all applications and other instruments as may be
required in connection with securing any such consent,
approval or authorization and will otherwise use its best
efforts to secure same.
Section 20. Limitation on Duty of Lender. Beyond the
exercise of reasonable care in the custody thereof, the
Lender shall have no duty as to any Collateral in its
possession or control or in the possession or control of any
agent or bailee or any income thereon. The Lender shall be
deemed to have exercised reasonable care in the custody of
the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which it
accords its own property, and shall not be liable or
responsible for any loss or damage to any of the Collateral,
or for any diminution in the value thereof, by reason of the
act or omission of any broker or other agent or bailee
selected by the Lender in good faith. The Lender shall be
deemed to have exercised reasonable care with respect to any
of the Collateral in its possession if the Lender takes such
action for that purpose as the Borrower shall reasonably
request in writing; but no failure to comply with any such
request shall, of itself, be deemed a failure to exercise
reasonable care.
Section 21. Appointment of Agent. At any time or
times, in order to comply with any legal requirement in any
jurisdiction, the Lender may appoint a bank or trust company
or one or more other Persons with such power and authority
as may be necessary for the effectual operation of the
provisions hereof and may be specified in the instrument of
appointment.
Section 22. Expenses. All sums incurred by the Lender
in enforcing or protecting any of the rights or remedies
under this Agreement, together with interest thereon until
paid at the rate equal the then highest rate of interest
charged on the principal of any of the Indebtedness plus one
percent (1%), shall be additional Indebtedness hereunder and
the Borrower agrees to pay all of the foregoing sums
promptly on demand.
Section 23. Termination. Upon the payment in full of
the Indebtedness, this Agreement shall terminate. Upon
request of the Borrower, the Lender shall deliver the
remaining Collateral (if any) to the Borrower. Upon request
of Borrower, Lender shall execute and deliver to Borrower at
Borrower's expense such termination statements as Borrower
may reasonably request to evidence such termination.
Section 24. Notices. Any notice or demand which, by
provision of this Agreement, is required or permitted to be
given or served to the Borrower and the Lender shall be
deemed to have been sufficiently given and served for all
purposes if made in accordance with the November 1998 Note.
Section 25. Amendment. Neither this Agreement nor any
provisions hereof may be changed, waived, discharged or
terminated orally or in any manner other than by an
instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination
is sought.
Section 26. Waivers. No course of dealing on the part
of the Lender, its officers, employees, consultants or
agents, nor any failure or delay by the Lender with respect
to exercising any of its rights, powers or privileges under
this Agreement shall operate as a waiver thereof.
Section 27. Cumulative Rights. The rights and
remedies of the Lender under this Agreement shall be
cumulative and the exercise or partial exercise of any such
right or remedy shall not preclude the exercise of any other
right or remedy.
Section 28. Titles of Sections. All titles or
headings to sections of this Agreement are only for the
convenience of the parties and shall not be construed to
have any effect or meaning with respect to the other content
of such sections, such other content being controlling as to
the agreement between the parties hereto.
Section 29. Governing Law. This Agreement is a
contract made under and shall be construed in accordance
with and governed by the laws of the United States of
America and the State of Louisiana.
Section 30. Successors and Assigns. All covenants and
agreements made by or on behalf of the Borrower in this
Agreement shall bind Borrower's successors and assigns and
shall inure to the benefit of the Lender and its successors
and assigns.
Section 31. Counterparts. This Agreement may be
executed in two or more counterparts, and it shall not be
necessary that the signatures of all parties hereto be
contained on any one counterpart hereof, each counterpart
shall be deemed an original, but all of which when taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Borrower and the Lender have
caused this Agreement to be duly executed as of the date
first above written.
WITNESSES: XCL LAND, LTD.
_________________________ By:___________________________
Name:____________________ Name:________________________
(Please Print) Title:______________________
_________________________
Name:____________________
(Please Print)
LENDER:
_____________________________
_________________________ By:__________________________
Name:____________________ Name:________________________
(Please Print) Title:_____________________
_________________________
Name:____________________
(Please Print)
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") dated November 6,
1998, is made between The Exploration Company of Louisiana,
Inc. ("Grantor") and ____________ ("Lender"), who agree as
follows:
Recitals
1. XCL Land, Ltd. ("XCL Land") is or will be
indebted unto the Lender for loans made or to be made and
evidenced by certain notes, including, but not limited to
that certain Promissory Note by XCL Land payable to the
order of Lender dated of even date herewith (the "November
1998 Note").
2. The making of such loans will be of substantial
benefit to the Grantor, and, consequently, in order to
secure the full and punctual payment and performance of the
Indebtedness as defined herein, the Grantor has agreed to
execute and deliver this Agreement and to pledge, deliver
and grant a continuing security interest in and to the
Collateral (as hereafter defined).
AGREEMENT
NOW, THEREFORE, in consideration of the premises, the
Grantor and the Lender agree as follows:
Section 2. Definitions.
1. The terms "Agreement," "Grantor," "Lender,"
"November 1998 Note," and "XCL Land" shall have the meanings
indicated above.
2. As used in this Agreement, the following
terms shall have the following meaning:
"Event of Default" shall have the meaning defined
in the November 1998 Note.
"General Intangibles" has the meaning given to it
in the UCC.
"Lien" shall mean any interest in property
securing an obligation owed to, or a claim by, a Person
other than the owner of the property, whether such interest
is based on jurisprudence, statute or contract, and
including but not limited to the lien or security interest
arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term
"Lien" shall include reservations, exceptions,
encroachments, easements, servitudes, usufructs, rights-of-
way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting property. For
the purposes of this Agreement, the Grantor shall be deemed
to be the owner of any property which it has accrued or
holds subject to a conditional sale agreement, financing
lease or other arrangement pursuant to which title to the
property has been retained by or vested in some other Person
for security purposes.
"Permitted Liens" means the Security Interests,
and any other Liens in favor of Lender or any other
purchaser of Units (as defined in the Subscription
Agreement) or permitted by Lender in writing to be created
or assumed or to exist with respect the Collateral.
"Person" means any individual, corporation,
partnership, joint venture, association, joint stock
company, trust, unincorporated organization, government or
any agency or political subdivision thereof, or any other
form of entity.
"Proceeds" has the meaning giving to it in the
UCC.
"Security Interests" means the security interests
in the Collateral and Proceeds granted hereunder in favor of
Lender securing the Indebtedness.
"Subscription Agreement" means that certain
Subscription Agreement dated November 6, 1998 by and between
Grantor, Lender and XCL Ltd.
"UCC" means the Uniform Commercial Code,
Commercial Laws - Secured Transactions (Louisiana Revised
Statutes 10:9-101 through :9-605) in the State of Louisiana,
as amended from time to time; provided that if by reason of
mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the Security Interests in
any Collateral is governed by the Uniform Commercial Code as
in effect in a jurisdiction other than Louisiana, "UCC"
means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or
non-perfection.
Section 3. Security Interest.
1. To secure the full and punctual payment and
performance of all present and future amounts, liabilities,
obligations and indebtedness of XCL Land to the Lender,
including, without limitation all promissory notes
(including, but not limited to the November 1998 Note)
heretofore or hereafter executed by XCL Land, in principal,
interest, deferral and delinquency charges as therein
stipulated, whether such amounts, liabilities, obligations
and indebtedness be liquidated or unliquidated, now existing
or hereafter arising, the Grantor hereby pledges, pawns,
transfers and grants to the Lender a continuing security
interest in and to all of the following property of the
Grantor, whether now owned or existing or hereafter acquired
or arising (collectively the "Collateral"):
(1) ____% of Grantor's now owned or hereafter
acquired partnership interest (the "Partnership
Interest") (which Partnership Interest is
currently a limited partner interest) in L.M.
Holding Associates, L.P., a Louisiana Partnership
in Commendam (the "Partnership"), which
Partnership was created by that certain Agreement
of Limited Partnership dated May 27, 1991, as
amended by amendments filed with the Louisiana
Secretary of State on February 25, 1993, August
19, 1994, September 1, 1994, October 7, 1994 and
January 8, 1997 (the "Partnership Agreement")
(2) ____% of any and all monies and other
distributions (cash or property), allocations or
payments made or to be made to Grantor pursuant to
the Partnership Agreement or attributable to the
Partnership Interest
(3) all General Intangibles related in any way to
the collateral described in clauses 1 or 2 above
(4) all Proceeds and products of all or any of the
collateral described in clauses 1-3 above.
2. The security interests are granted as
security only and shall not subject the Lender to, or
transfer or in any way affect or modify, any obligation or
liability of the Grantor with respect to any of the
Collateral or any transaction in connection therewith.
Section 4. Delivery of Collateral if Ever Represented
by Certificates. If the Partnership Interest is ever
represented by a certificate of interest or any similar
document, the Grantor will immediately deliver such
certificate or document to the Lender.
Section 5. No Liens. Other than financing statements
or other similar or equivalent documents or instruments with
respect to the Security Interests and Permitted Liens, no
financing statement, mortgage, security agreement or similar
or equivalent document or instrument covering all or any
part of the Collateral is on file or of record in any
jurisdiction in which such filing or recording would be
effective to perfect a Lien on such Collateral. No
Collateral is in the possession of any Person (other than
Grantor) asserting any claim thereto or security interest
therein, except that Lender or its designee may have
possession of Collateral as contemplated hereby. Except
with respect to Permitted Liens, the Liens granted pursuant
to this Agreement constitute perfected first priority Liens
on the Collateral in favor of the Lender.
Section 6. No Conflict. The Grantor has not performed
any acts or signed any agreements which might prevent the
Lender from enforcing any of the terms of this Agreement or
which would limit the Lender in any such enforcement.
Section 7. Name. The full name of Grantor is as it
appears on page 1 of this Agreement.
Section 8. Federal Taxpayer Number. The federal
taxpayer identification number of Grantor is as follows:
72-1123077.
Section 9. Chief Executive Office. The chief
executive office of Grantor is 110 Rue Jean Lafitte,
Lafayette, Louisiana 70505.
Section 10. Location of Collateral. Grantor will keep
and maintain all books or records relating to any of the
Collateral at its chief executive office.
Section 11. Filing Location. When a UCC financing
statement has been filed in the offices of a Louisiana Clerk
of Court of any parish other than Orleans (or in the case of
Orleans Parish, with the Recorder of Mortgages), the
Security Interests shall constitute perfected security
interests in the Collateral to the extent that a security
interest therein may be perfected by filing pursuant to the
UCC, prior to all other Liens except for the Permitted Liens
and rights of others therein to the extent that such
priority is afforded by the UCC.
Section 12. Title. Grantor has good and merchantable
title to the Collateral, free of Liens except Permitted
Liens. Furthermore, Grantor has not heretofore conveyed or
agreed to convey or encumber any Collateral in any way,
except in favor of Lender. Lender understands and agrees,
however, that Grantor has granted a security interest in all
of its partnership interests in the Partnership (other than
the percentage of its partnership interest covered hereby)
to the other purchasers of Units (as defined in the
Subscription Agreement).
Section 13. Incorporation and Existence. Grantor is a
corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its
organization and has the corporate power and authority and
the legal right to own and operate the Collateral and to
conduct the business in which it is currently engaged.
Section 14. No Consents or Approvals. Except for
those filings and registrations required to perfect the
Liens created by this Agreement, the Grantor is not required
to obtain any order, consent, approval or authorization of,
or required to make any declaration or filing with, any
governmental authority or any other Person in connection
with the execution and delivery of this Agreement and the
granting and perfection of the Security Interests pursuant
to this Agreement.
Section 15. Due Execution; Binding Obligation. This
Agreement has been duly executed and delivered on behalf of
the Grantor, and this Agreement constitutes a legal, valid
and binding obligation of Grantor, enforceable against
Grantor in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally
and except as enforceability may be subject to general
principles of equity, whether such principles are applied in
a court of equity or at law.
Section 16. No Conflicts. The execution, delivery and
performance of this Agreement will not (i) result in any
violation of or be in conflict with or constitute a default
under any terms of any agreement, contract, statute,
regulation, law or ordinance; (ii) have a material adverse
effect on the Collateral; (iii) materially adversely affect
the ability of Grantor to perform its obligations under this
Agreement or the November 1998 Note, or (iv) result in the
creation of any Lien upon any of the properties or revenues
of Grantor other than the Liens in favor of the Lender
created pursuant to this Agreement.
Section 17. Voting Rights. Notwithstanding the
security interest granted hereby and whether or not an Event
of Default (as defined in the November 1998 Note) shall have
occurred, the Grantor shall have the exclusive right to
exercise all voting and other rights under the Partnership
Agreement until such time (if and when) Lender forecloses on
the Collateral and becomes the owner thereof.
Section 18. Notice of Changes. Grantor will not
change its name, corporate identity or taxpayer
identification number in any manner unless it shall have
given Lender at least five (5) days prior written notice
thereof.
Section 19. Remedies upon Default.
1. Sale. Upon the occurrence of an Event of
Default, Lender may exercise all rights of a secured party
under the UCC and other applicable law (including the
Uniform Commercial Code as in effect in another applicable
jurisdiction) and, in addition, Lender may, without being
required to give any notice, except as herein provided or as
may be required by mandatory provisions of law, sell the
Collateral or any part thereof at public or private sale,
for cash, upon credit or for future delivery, and at such
price or prices as Lender may deem satisfactory. Lender may
be the purchaser of any or all of the Collateral so sold at
any public sale (or, if the Collateral is of a type
customarily sold in a recognized market or is of a type
which is the subject of widely distributed standard price
quotations, at any private sale). Grantor will execute and
deliver such documents and take such other action as Lender
deems necessary or advisable in order that any such sale may
be made in compliance with law. Upon any such sale Lender
shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Each purchaser at
any such sale shall hold the Collateral so sold to it
absolutely and free from any claim or right of whatsoever
kind, including any equity or right of redemption of Grantor
which may be waived, and Grantor, to the extent permitted by
law, hereby specifically waives all rights of redemption,
stay or appraisal which it has or may have under any law now
existing or hereafter adopted. Grantor agrees that ten (10)
days prior written notice of the time and place of any sale
or other intended disposition of any of the Collateral
constitutes "reasonable notification" within the meaning of
Section 9-504(3) of the UCC, except that shorter notice or
no notice shall be reasonable as to any Collateral which is
perishable or threatens to decline speedily in value or is
of a type customarily sold on a recognized market. The
notice (if any) of such sale shall (1) in case of a public
sale, state the time and place fixed for such sale, and
(2) in the case of a private sale, state the day after which
such sale may be consulted. Any such public sale shall be
held at such time or times within ordinary business hours
and at such place or places as Lender may fix in the notice
or such sale. At any such sale the Collateral may be sold
in one lot as an entirety or in separate parcels, as Lender
may determine. Lender shall not be obligated to make any
such sale pursuant to any such notice. Lender may, without
notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the same
may be so adjourned. In case of any sale of all or any part
of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by Lender until the
selling price is paid by the purchaser thereof, but Lender
shall not incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold and,
in case of any such failure, such Collateral may again be
sold upon like notice.
2. Foreclosure. Instead of exercising the
power of sale herein conferred upon it, Lender may proceed
by a suit or suits at law or in equity to foreclose the
Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of
competent jurisdiction. FOR THE PURPOSES OF LOUISIANA
EXECUTORY PROCESS PROCEDURES, GRANTOR DOES HEREBY CONFESS
JUDGMENT IN FAVOR OF LENDER FOR THE FULL AMOUNT OF THE
INDEBTEDNESS. GRANTOR DOES BY THESE PRESENTS CONSENT, AGREE
AND STIPULATE THAT UPON THE OCCURRENCE OF AN EVENT OF
DEFAULT IT SHALL BE LAWFUL FOR LENDER, AND THE GRANTOR DOES
HEREBY AUTHORIZE LENDER, TO CAUSE ALL AND SINGULAR THE
COLLATERAL TO BE SEIZED AND SOLD UNDER EXECUTORY OR ORDINARY
PROCESS, AT LENDER'S SOLE OPTION, WITH OR WITHOUT
APPRAISEMENT, APPRAISEMENT BEING HEREBY EXPRESSLY WAIVED, IN
ONE LOT AS AN ENTIRETY OR IN SEPARATE PARCELS AS LENDER MAY
DETERMINE, TO THE HIGHEST BIDDER, AND OTHERWISE EXERCISE THE
RIGHTS, POWERS AND REMEDIES AFFORDED HEREIN AND UNDER
APPLICATION LOUISIANA LAW. ANY AND ALL DECLARATIONS OF FACT
MADE BY AUTHENTIC ACT BEFORE A NOTARY PUBLIC IN THE PRESENCE
OF TWO WITNESSES BY A PERSON DECLARING THAT SUCH FACTS LIE
WITHIN HIS KNOWLEDGE SHALL CONSTITUTE AUTHENTIC EVIDENCE OF
SUCH FACTS FOR THE PURPOSE OF EXECUTORY PROCESS. GRANTOR
HEREBY WAIVES IN FAVOR OF LENDER: (A) THE BENEFIT OF
APPRAISEMENT AS PROVIDED IN LOUISIANA CODE OF CIVIL
PROCEDURE ARTICLES 2332, 2336, 2723 AND 2724, AND ALL OTHER
LAWS CONFERRING THE SAME; (B) THE DEMAND AND THREE DAYS
DELAY ACCORDED BY LOUISIANA CODE OF CIVIL PROCEDURE ARTICLES
2639 AND 2721; (C) THE NOTICE OF SEIZURE REQUIRED BY
LOUISIANA CODE OF CIVIL PROCEDURE ARTICLES 2293 AND 2721;
(D) THE THREE DAYS DELAY PROVIDED BY LOUISIANA CODE OF CIVIL
PROCEDURE ARTICLES 2331 AND 2722; AND (E) THE BENEFIT OF THE
OTHER PROVISIONS OF LOUISIANA CODE OF CIVIL PROCEDURE
ARTICLES 2331, 2722 AND 2723, NOT SPECIFICALLY MENTIONED
ABOVE.
3. Effect of Securities Laws. The Grantor
recognizes that the Lender may be unable to effect a public
sale of all or part of the Collateral by reason of certain
prohibitions contained in the Securities Act of 1933, as
amended, and applicable state securities laws but may be
compelled to resort to one or more private sales to a
restricted group of purchasers who will be obligated to
agree, among other things, to acquire all or a part of the
Collateral for their own account, for investment, and not
with a view to the distribution or resale thereof. If the
Lender deems it advisable to do so for the foregoing or for
other reasons, the Lender is authorized to limit the
prospective bidders on or purchasers of any of the
Collateral to such a restricted group of purchasers and may
cause to be placed on certificates for any or all of the
Collateral a legend to the effect that such security has not
been registered under the Securities Act of 1933, as
amended, and may not be disposed of in violation of the
provision of said act, and to impose such other limitations
or conditions in connection with any such sale as the Lender
deems necessary or advisable in order to comply with said
act or any other securities or other laws. The Grantor
acknowledges and agrees that any private sale so made may be
at prices and on other terms less favorable to the seller
than if such Collateral were sold at public sale and that
the Lender has no obligation to delay the sale of such
Collateral for the period of time necessary to permit the
registration of such Collateral for public sale under any
securities laws. The Grantor agrees that a private sale or
sales made under the foregoing circumstances shall be deemed
to have been made in a commercially reasonable manner. If
any consent, approval, or authorization of any federal,
state, municipal or other governmental department, agency or
authority should be necessary to effectuate any sale or
other disposition of the Collateral, or any partial sale or
other disposition of the Collateral, the Grantor will
execute all applications and other instruments as may be
required in connection with securing any such consent,
approval or authorization and will otherwise use its best
efforts to secure same.
Section 20. Limitation on Duty of Lender. Beyond the
exercise of reasonable care in the custody thereof, the
Lender shall have no duty as to any Collateral in its
possession or control or in the possession or control of any
agent or bailee or any income thereon. The Lender shall be
deemed to have exercised reasonable care in the custody of
the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which it
accords its own property, and shall not be liable or
responsible for any loss or damage to any of the Collateral,
or for any diminution in the value thereof, by reason of the
act or omission of any broker or other agent or bailee
selected by the Lender in good faith. The Lender shall be
deemed to have exercised reasonable care with respect to any
of the Collateral in its possession if the Lender takes such
action for that purpose as the Grantor shall reasonably
request in writing; but no failure to comply with any such
request shall, of itself, be deemed a failure to exercise
reasonable care.
Section 21. Appointment of Agent. At any time or
times, in order to comply with any legal requirement in any
jurisdiction, the Lender may appoint a bank or trust company
or one or more other Persons with such power and authority
as may be necessary for the effectual operation of the
provisions hereof and may be specified in the instrument of
appointment.
Section 22. Expenses. All sums incurred by the Lender
in enforcing or protecting any of the rights or remedies
under this Agreement, together with interest thereon until
paid at the rate equal the then highest rate of interest
charged on the principal of any of the Indebtedness plus one
percent (1%), shall be additional Indebtedness hereunder and
the Grantor agrees to pay all of the foregoing sums promptly
on demand.
Section 23. Termination. Upon the payment in full of
the Indebtedness, this Agreement shall terminate. Upon
request of the Grantor, the Lender shall deliver the
remaining Collateral (if any) to the Grantor. Upon request
of Grantor, Lender shall execute and deliver to Grantor at
Grantor's expense such termination statements as Grantor may
reasonably request to evidence such termination.
Section 24. Notices. Any notice or demand which, by
provision of this Agreement, is required or permitted to be
given or served to the Grantor and the Lender shall be
deemed to have been sufficiently given and served for all
purposes if made in accordance with the November 1998 Note.
Section 25. Amendment. Neither this Agreement nor any
provisions hereof may be changed, waived, discharged or
terminated orally or in any manner other than by an
instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination
is sought.
Section 26. Waivers. No course of dealing on the part
of the Lender, its officers, employees, consultants or
agents, nor any failure or delay by the Lender with respect
to exercising any of its rights, powers or privileges under
this Agreement shall operate as a waiver thereof.
Section 27. Cumulative Rights. The rights and
remedies of the Lender under this Agreement shall be
cumulative and the exercise or partial exercise of any such
right or remedy shall not preclude the exercise of any other
right or remedy.
Section 28. Titles of Sections. All titles or
headings to sections of this Agreement are only for the
convenience of the parties and shall not be construed to
have any effect or meaning with respect to the other content
of such sections, such other content being controlling as to
the agreement between the parties hereto.
Section 29. Governing Law. This Agreement is a
contract made under and shall be construed in accordance
with and governed by the laws of the United States of
America and the State of Louisiana.
Section 30. Successors and Assigns. All covenants and
agreements made by or on behalf of the Grantor in this
Agreement shall bind Grantor's successors and assigns and
shall inure to the benefit of the Lender and its successors
and assigns.
Section 31. Counterparts. This Agreement may be
executed in two or more counterparts, and it shall not be
necessary that the signatures of all parties hereto be
contained on any one counterpart hereof, each counterpart
shall be deemed an original, but all of which when taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Grantor and the Lender have
caused this Agreement to be duly executed as of the date
first above written.
WITNESSES: THE EXPLORATION COMPANY OF LOUISIANA, INC.
_________________________ By:__________________________
Name:____________________ Name:________________________
(Please Print)
Title:_______________________
_________________________
Name:____________________
(Please Print)
LENDER:
_____________________________
________________________
By:__________________________
Name:____________________ Name:________________________
(Please Print)
Title:_______________________
_________________________
Name:____________________
(Please Print)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This scheduled contains summary financial information extracted from the
consolidated financial statements of XCL Ltd. and Subsidiaries for the quarter
ended September 30, 1998, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 9,652
<SECURITIES> 0
<RECEIVABLES> 184
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,739
<PP&E> 80,504
<DEPRECIATION> 914
<TOTAL-ASSETS> 123,120
<CURRENT-LIABILITIES> 17,601
<BONDS> 0
0
1,226
<COMMON> 230
<OTHER-SE> 33,832
<TOTAL-LIABILITY-AND-EQUITY> 123,120
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 5,056
<OTHER-EXPENSES> (1,609)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,951
<INCOME-PRETAX> (5,398)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,398)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,398)
<EPS-PRIMARY> (0.56)
<EPS-DILUTED> (0.56)
</TABLE>
GLOSSARY OF TERMS
The following is a glossary of commonly used terms in
the oil and gas industry which is being provided for ease of
reference and convenience purposes only.
"area of mutual interest" or "AMI" - An agreement by which
parties attempt to describe a geographical area within which
they agree to share certain existing and additional leases
acquired by any of them in the future.
"APO/BPO" - After payout/before payout.
"Btu/MMBtu" - British Thermal Units, a measure of the
heating value of fuel. MMBtu stands for one million Btu.
"Bbls/MBbls" - A Bbl. or barrel is 42 U.S. gallons of crude
oil or condensate measured at 60 degrees Fahrenheit. MBbls
stands for one thousand Bbls.
"carried interest" - A fractional working interest in an oil
and gas lease, the holder of which is carried and has no
liability for a portion or all of the attributable
development and operating costs. The person advancing the
costs is the carrying party; the other is the carried party.
"casing point" - The time when the operator recommends that
a completion attempt be made, or when the well is plugged
and abandoned without a completion attempt being made.
"choke/choke size" - A pipe section having an orifice for
restricting and controlling the flow of oil and gas. Choke
size is the orifice diameter and is commonly expressed in
64ths of an inch.
"continuous drilling" - A lease clause providing that
drilling of another well be commenced within a specified
time after completion of the preceding well. As a general
rule, if this is not done, all undeveloped acreage must be
released.
"development" - The drilling of a well within the productive
area of an oil or gas reservoir, as indicated by reasonable
interpretation of available data, with the object of
completing the well in that reservoir.
"development costs" - Costs incurred to obtain access to
proved reserves and to provide facilities for extracting,
treating, gathering and storing the oil and gas, including
depreciation and applicable operating costs of support
equipment and facilities.
"development well" - A well drilled within the proved area
of an oil or gas reservoir to a depth of a stratigraphic
horizon known to be productive.
"exploration" - Operations conducted in search of
undiscovered oil, gas and/or condensate.
"exploration costs" - Costs incurred in identifying areas
that may warrant examination and in examining specific
areas that are considered to have prospects of containing
oil and gas reserves, including costs of drilling
exploratory wells. Exploration costs may be incurred both
before acquiring the related property and after acquiring
the property.
"exploratory well" - A well drilled to find and produce oil
or gas in an unproved area, to find a new reservoir in a
field previously found to be productive of oil or gas in
another reservoir, or to extend a known reservoir.
"farmout/farmin" - An agreement providing for assignment of
a lease. A typical characteristic of a farmout is the
obligation of the assignee to conduct drilling operations on
the assigned acreage as a pre-requisite to completion of the
assignment. The assignor will usually reserve some type of
interest in the lease. The transaction is characterized as
a farmout to the assignor and farmin to the assignee.
"field" - An area consisting of a single reservoir or
multiple reservoirs all grouped on or related to the same
individual geological structural feature and/or
stratigraphic condition where production of oil, gas and/or
condensate has been established and which has been so
designated by the appropriate regulatory authority.
"gathering facilities" - Pipelines and other facilities used
to collect gas from various wells and bring it by separate
and individual lines to a central point where it is
delivered into a single line.
"gathering gas" - The first taking or the first retaining of
possession of gas for transmission through a pipeline, after
the severance of such gas, and after the passage of such gas
through any separator, drip, trap or meter that may be
located at or near the well. In the case of gas containing
gasoline or liquid hydrocarbons that are removed or
extracted in commercial quantities at a plant by scrubbing,
absorption, compression, or any similar process, the term
means the first taking or the first retaining of possession
of such gas for transmission through a pipeline after such
gas has passed through the outlet of such plant. The act of
collecting gas after it has been brought from the earth.
"gathering line" - Pipes used to transport oil or gas from
the lease to the main pipeline in the area. In the case of
oil, the lines run from the lease tanks to a central pump
station at the beginning of the main pipeline. In the case
of gas, the flow is continuous from the well head to the
ultimate consumer, since gas cannot be stored. Gathering
lines collect gas under fluctuating pressures which are then
regulated by regulating stations before the gas is
introduced into trunk or transmission lines.
"gathering system" - The gathering lines, pumps, auxiliary
tanks (in the case of oil), and other equipment used to move
oil or gas from the well site to the main pipeline for
eventual delivery to the refinery or consumer, as the case
may be. In the case of gas, the gathering system includes
the processing plant (if any) in which the gas is prepared
for the market.
"gross/net" - The term "gross" is used when reference is
made, for example, to the total acreage of a lease. The
term "net" is used when reference is made to the working
interest or net revenue interest in a lease of one
particular leaseholder. The same term may be applied to a
leaseholder's interest in reserves and/or production from a
lease.
"held by production" or "HBP" - A provision in a lease to
the effect that such lease will be kept in force as long as
there is production from the lease in paying quantities.
"lease bonus" - A cash payment by the lessee for the
execution of an oil and gas lease by the mineral owner.
"lease" or "leasehold" - An interest for a specified term in
property allowing for the exploration for and production of
oil, gas and/or condensate.
"log" - A record of the formations penetrated by a well,
from which their depth, thickness, rock properties and (if
possible) contents may be obtained.
"Mcf/MMcf/Bcf" - Mcf stands for one thousand cubic feet of
gas, measured at 60 degrees Fahrenheit and at atmospheric
pressure of 14.7 pounds per square inch. MMcf stands for one
million cubic feet of gas. Bcf stands for one million Mcf.
"net revenue interest" or "NRI" - The share of revenues to
which the holder of a working interest is entitled upon
fulfilling the obligations, after deduction of all
royalties, overriding royalties or similar burdens,
attributable to his working interest.
"operator" - The person or company having the operational
management responsibility for the drilling of or production
from any oil, gas and/or condensate well.
"overriding royalty" - A form of royalty, entitling the
holder to receive a percentage of oil, gas and/or condensate
produced from the wells on a specified lease, or the
revenues arising from the sale thereof, free of all expenses
arising therefrom, save for production taxes. Generally,
the rights accruing to working interest holders are subject
to the rights of overriding royalty holders and any rights
of overriding royalty holders terminate upon cancellation or
reversion of the underlying lease.
"pay" - The geological deposit in which oil, gas and/or
condensate is found in commercial quantities.
"payout" - Generally, that point in time, determined by
agreement, when a person has recouped his investment in the
drilling, development, equipping and operating of a well or
wells.
"permeability" - A measure of the resistance offered by rock
to the movement of fluids through it.
"porosity" - The volume of the pore spaces between mineral
grains as compared to the total rock volume. Porosity is a
measure of the capacity of rock to hold oil, gas and water.
"probable reserves" - The estimated quantities of
commercially recoverable hydrocarbons associated with known
accumulations, which are based on engineering and geological
data similar to those used in the estimates of proved
reserves but, for various reasons, these data lack the
certainty required to classify the reserves as proved. In
some cases, economic or regulatory uncertainties may dictate
the probable classification. Probable reserves are less
certain to be recovered than proved reserves.
"production costs" - Costs incurred to operate and maintain
wells and related equipment and facilities, including
depreciation and applicable operating costs of support
equipment and facilities and other costs of operating and
maintaining those wells and related equipment and
facilities.
"prospect" - One lease comprising, or several leases which
together comprise, a geographical area believed to contain
commercial quantities of oil, gas and/or condensate.
"prospective" - A geographical area or structure believed to
contain commercial quantities of oil, gas and/or condensate.
"proved developed reserves" - Reserves that can be expected
to be recovered through existing wells with existing
equipment and operating methods and those reserves that
exist behind the casing of existing wells when the cost of
making such reserves available for production is relatively
small compared to the cost of a new well.
"proved reserves" or "reserves" - Estimated quantities of
crude oil, natural gas, and natural gas liquids which
geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions,
i.e., prices and costs as of the date the estimate is made.
Prices include consideration of changes in existing prices
provided only by contractual arrangements, but not on
escalations based upon future conditions.
"proved undeveloped reserves" - Reserves that are expected
to be recovered from new wells on undrilled acreage, or from
existing wells where a relatively major expenditure is
required for recompletion. Reserves on undrilled acreage
shall be limited to those drilling units offsetting
productive units that are reasonably certain of production
when drilled. Proved reserves for other undrilled units can
be claimed only where it can be demonstrated with certainty
that there is continuity of production from the existing
productive formation. Under no circumstances should
estimates for proved undeveloped reserves be attributable to
any acreage for which an application of fluid injection or
other improved recovery technique is contemplated, unless
such techniques have been proved effective by actual tests
in the area and in the same reservoir.
"psig" - Pounds per square inch, gauge.
"rental payment" - A sum of money payable to the lessor by
the lessee for the privilege of deferring the commencement
of drilling operations or the commencement of production
during the primary term of the lease.
"reservoir" - A porous and permeable underground formation
containing a natural accumulation of producible oil and/or
gas that is confined by impermeable rock or water barriers
and is individual and separate from other reservoirs.
"sand" - A sedimentary rock consisting mostly of sand
grains.
"shut-in royalty" - A payment made when a gas well, capable
of producing in paying quantities, is shut-in for lack of a
market for the gas.
"structure" - A configuration of subsurface rock formations
considered, on the basis of geological or geographical
interpretation, to be capable of containing a reservoir.
"target depth" - The primary geological formation or depth
identified in an agreement applicable to the relevant well
or wells.
"test well" - An exploratory well.
"tight formation" - A zone of relatively low permeability
and thus low well productivity. Wells in such zones usually
require fracturing or other stimulation. Typically, the
productive capacity of a new well completed in a tight zone
declines rapidly for several months or longer after
completion.
"working interest" or "WI" - An interest in a lease carrying
the obligation to bear a proportion of drilling and
operating costs and the right to receive a proportion of the
production or gross revenues attributable thereto.
"workover" - Remedial operations on a well with the
intention of restoring or increasing production.
