CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is entered into as of
May 1, 2000, by and between XCL Ltd., a Delaware corporation and
its subsidiaries or affiliates (the "Company"), and David A.
Melman & Associates, LLC, a Texas limited liability company
("Consultant").
WITNESSETH:
WHEREAS, the Company desires to acquire or merge with other
businesses, enter into investment banking relationships and
enhance shareholder value through the sale or restructuring of
its business, recapitalizations, reorganizations and placement of
common stock, preferred stock, and/or debt instruments (the
"Company Objectives");
WHEREAS, the Company recognizes that the Consultant can
contribute to finding, analyzing, structuring, negotiating and
financing business sales and/or acquisitions, joint ventures,
alliances and other desirable projects, which contribution is of
great value to the Company and its shareholders;
WHEREAS, the Company believes it to be important to the Company
Objectives and to the Company's general interest to retain
Consultant as a consultant to the Company and have Consultant
available to the Company for consulting services in the manner
and subject to the terms, covenants, and conditions set forth
herein;
WHEREAS, in order to accomplish the foregoing, the Company and
Consultant desire to enter into this Agreement, effective as of
May 1, 2000 ("Effective Date"), to provide certain assurances as
set forth herein.
NOW, THEREFORE, in view of the foregoing and in consideration of
the premises and mutual representations, warranties, covenants
and promises contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Retention. The Company hereby retains the Consultant
during the Consulting Period (as defined in Section 2 below), and
Consultant hereby agrees to be so retained by the Company, all
subject to the terms and provisions of this Agreement.
2. Consulting Period. The Consulting Period shall commence
on the Effective Date and terminate no earlier than forty-eight
months after the Effective Date. After such date, either party
may terminate this agreement upon at least 90 days written
notice.
3. Duties of Consultant; Independent Contractor.
Duties. During the Consulting Period, the Consultant shall use
its reasonable and best efforts to perform those actions and
responsibilities necessary to (i) resolve matters involving XCL
China Ltd., (ii) dispose of non-core assets, (iii) identify,
analyze, structure and/or negotiate business sales and/or
acquisitions, including without limitation, merger agreements,
stock purchase agreements, and any agreements relating to
financing and/or the placement of debt or equity securities of
the Company, (iv) assist the Company in its corporate strategies,
and (v) assist the Company in the implementation of its business
plan, in each case as requested by the Company (the "Services").
The Company shall provide all necessary financing required in
order to purchase businesses approved by the Company, including
cash or freely tradable or restricted securities. Consultant
shall render such Services diligently and to the best of its
ability.
Independent Contractor. The parties hereto hereby agree that in
performing the Services the Consultant shall be acting as an
independent contractor and shall be solely responsible for the
manner in which, and by whom the Services shall be performed. In
that connection, Consultant shall be solely responsible for the
payment of all its ordinary and necessary business expenses
(other than those reimbursable expenses set forth in Section 5(a)
(ii) herein). Neither party hereto shall make any
representations, warranties or other agreements on behalf of the
other party hereto nor shall either party hereto be entitled to
bind the other party hereto nor shall any agency, fiduciary,
partnership or join venture relationship be created by virtue of
this Agreement.
4. Other Activities of Consultant. The Company recognizes
that Consultant shall perform only those services that are
reasonably required to accomplish the goals and objectives set
forth herein, and that Consultant shall provide services to other
businesses and entities other than the Company. Consultant shall
be free to directly or indirectly own, manage, operate, join,
purchase, organize or take preparatory steps for the organization
of, build, control, finance, acquire, lease or invest or
participate in the ownership, management, operation, control or
financing of, or be connected as an officer, director, employee,
partner, principal, manager, agent, representative, associate,
consultant, investor, advisor or otherwise with (collectively, be
"Affiliated" with), any business or enterprise, or permit its
name or any part thereof to be used in connection with any
business or enterprise, engaged in any business, including but
not limited to, any business that is substantially similar to or
otherwise competitive with the Company. Consultant may be
Affiliated with any entity which may provide services to or
engage in a transaction with the Company and Consultant may share
in any compensation or interest which such other entity may earn,
receive or retain in connection with the provision of such
services or such transaction. Provided the Consultant discloses
such relationship to the Company prior to engaging in any such
transaction, the Company hereby waives any conflict of interest
that may arise from a relationship between Consultant and any
entity which Consultant is Affiliated with. This Agreement may
not be assigned by Consultant except to an entity Affiliated with
Consultant.
5. Compensation. In consideration for Consultant entering
into this Agreement, the Company shall compensate Consultant as
follows:
Warrant. The Company shall issue to Consultant a three year
warrant ("Warrant") to purchase that number of shares ("Warrant
Shares") equal to five percent (5%) of the number of shares of
Common Stock (as hereinafter defined) issued and outstanding on
the Effective Date at an exercise price equal to the Bid Price
(as hereinafter defined) for the Common Stock on the Effective
Date, subject to adjustment for customary anti-dilution events.
The Warrant shall contain "cashless" exercise provisions and the
Warrant Shares shall be entitled to piggy-back registration
rights.
Monthly Fees and Benefits:
i. Retainer. The Company shall pay to Consultant a non-
refundable, non-accountable monthly retainer of $15,000.
ii. Expenses. The Company shall pay all expenses incurred
with respect to the Consultant's travel (including business class
travel for international flights), meals and entertainment and
other customary and reasonable expenses incurred on the Company's
behalf during the Consulting Period by the Consultant for
business purposes related to or in furtherance of the goals and
objectives of the Company and/or the provision of the Services
(collectively, "Company Purposes"). The Company shall pay such
expenses upon submission by the Consultant of monthly expense
reorts attaching thereto bills, receipts and/or vouchers, by
direct reimbursement to the Consultant.
Fees for Acquisition Opportunities. The Company shall pay to the
Consultant a fee to be agreed between Company and Consultant, on
a case by case basis, but in any event not less than five percent
(5%) of the total aggregate consideration paid for any
acquisition by the Company of any business, corporation or
division (a "Target"), including, but not limited to,
acquisitions by stock purchase agreement, merger agreement, plan
of reorganization or asset purchase agreement, which fee shall be
due upon closing of the transaction. For purposes hereof, the
total aggregate consideration paid shall include all cash and
stock paid to the seller or sellers of a Target upon closing of
the transaction in addition to any contingent payments to the
seller or sellers, including without limitation, earnouts, as if
all performance targets are met, as well as any debts or
liabilities assumed by the Company, including without limitation
any debts for which the Company issues a guarantee. In addition,
Consultant shall also be entitled to a financing fee equal to two
and one half percent (2.5%) of any (A) placement or conversion of
(B) debt or equity securities of the Company, including without
limitation, promissory notes, debentures, convertible debt,
Common Stock or preferred stock, or any other securities owned by
the Company, including without limitation securities of other
corporations. Notwithstanding the foregoing, no fees shall be
payable to Consultant unless either (i) Consultant introduces to
the Company a party involved in any of the above described
transactions (i.e. a purchaser, seller, lender or investor), or
(ii) Consultant, at the request of the Company, provides advisory
or other consulting services in connection with the transaction,
and such transaction is consummated.
Third Party Commissions. Consultant and/or its Affiliates shall
be entitled to share in any fees or commissions payable by third
parties on any transaction contemplated herein, including, but
not limited to, any fees payable to Consultant by a third party
lender, financing partner, or other party, or a seller of a
corporation or business, including, without limitation,
investment banking fees or commissions, business brokerage fees
or commissions, finders fees, or any other fee payable by a third
party to Consultant for any reason including the identification
of the Company as a potential purchaser or seller of such
corporation or business (a "Transaction Commission"). Provided
the Consultant discloses the same prior to the completion of any
such transaction, the Company hereby waives any conflict of
interest that may arise due to any transaction wherein Consultant
receives such a Transaction Commission, including, but not
limited to, any conflict of interest which may arise as a result
of the dual representation by Consultant of the seller or
purchaser of a corporation or business on the one hand, and the
Company on the other.
e Fees Paid in Common Stock. The Company, at its option, may
pay fees due under paragraph (b) of this Section 5 by issuance of
Restricted Common Stock or freely tradeable, registered Common
Stock. Restricted Common Stock shall be issued at a rate equal
to sixty percent (60%) of the Bid Price on the day prior to the
closing date of a transaction which entitles the Consultant to
receive such fees. Freely tradeable, registered Common Stock,
pursuant to an effective and current registration statement,
shall be issued at the rate equal to eighty percent (80%) of the
Bid Price on the day prior to the closing date of a transaction
which entitles the Consultant to receive such fees. As used
herein, "Restricted Common Stock" shall mean Common Stock of the
Company issued without registration under the Securities Act of
1933, as amended, or which is otherwise subject to lock-ups or
other restrictions on disposition, "Common Stock" shall mean
currently authorized shares of common stock, par value $.01 per
share, of the Company or other security issued and outstanding at
any time or from time to time with equivalent dividend and voting
rights, and "Bid Price" shall mean the average of the high and
low bid prices for the Company's Common Stock in the principal
market for the Company's Common Stock on the determination date.
All fees payable hereunder shall be paid within seven business
days following the date upon which Consultant submits a written
statement setting forth the amounts due and payable to
Consultant.
6. Termination. Subject to the cure provisions contained
herein, the Company may terminate the Consulting Period upon
written notice for Cause at any time. Cause shall mean that
during the Consulting Period, the Consultant engaged in gross and
willful misconduct that is materially and significantly injurious
to the Company, and, after written notice of such conduct,
Consultant has failed to cease such conduct within not less than
30 days. Any termination pursuant to this section shall be
communicated by written Notice of Intended Termination. For
purposes of this Agreement, a "Notice of Intended Termination"
shall mean a notice which shall clearly state the specific
termination provision in this Agreement relied upon and shall set
forth in reasonable and specific detail the facts and
circumstances claimed to provide a basis for termination of the
Consulting Period. No Notice of Intended Termination shall be
valid unless it is signed by a the entire board of directors of
the Company (the "Board").
a. Not less than 15 days after receipt of the Notice of
Intended Termination, Consultant shall have the opportunity to a
full, complete and fair hearing in the presence of the entire
Board. Not less than 10 days prior to the hearing, the Board
shall present to Consultant its reasons for the termination,
including the specific actions, inactions, omissions or other
facts relied upon by the Board in making its determination that
Consultant has engaged in gross and willful misconduct and that
the Company has the right to terminate this Agreement for Cause.
Consultant shall have the right to rebut any evidence or
allegations of wrongdoing at the hearing and shall have the right
to be represented by counsel of Consultant's choice at such
hearing. After such hearing, should the Board determine that
this Agreement may properly be terminated for Cause, it shall
issue a written Final Notice of Termination to Consultant, signed
by all members of the Board, setting forth in detail the specific
facts, conclusions and findings of the Board in determining that
Cause exists for the termination of this Agreement. The Final
Notice of Termination shall contain an effective termination
date, which effective termination date shall be no less than
thirty (30) days from the date of the Final Notice of
Termination.
b. In the event the Company terminates this Agreement without
Cause as defined herein, and/or does not fully comply with the
termination and hearing procedures specified in paragraph 7(a)
herein, then the Company shall pay to Consultant, as liquidated
damages, the total value of all fees and other compensation paid
or payable to Consultant over the twelve months prior to the date
of the Notice of Intended Termination.
7. Notice. Any notice required, permitted or desired to be
given pursuant to any of the provisions of this Agreement shall
be deemed to have been sufficiently given or served for all
purposes if delivered in person or sent by certified mail, return
receipt requested, postage and fees prepaid, or by national
overnight delivery prepaid service to the parties at their
addresses set forth below. Any party hereto may at any time and
from time to time hereafter change the address to which notice
shall be sent hereunder by notice to the other party given under
this paragraph. The date of the giving of any notice sent by
mail shall be the day two days after the posting of the mail,
except that notice of an address change shall be deemed given
when received. The addresses of the parties are as follows:
TO CONSULTANT:
DAVID A. MELMAN & ASSOCIATES, LLC
6671 Southwest Freeway, Suite 303
Houston, TX 77074-2284
Attn: David A. Melman
Telephone: (713) 981-9595
Facsimile: (713) 981-8670
TO THE COMPANY:
XCL LTD.
Petroleum Tower
Suite 400
3639 Ambassador Caffery Parkway
Lafayette, LA 70503
Telephone: (318) 989-0449
Facsimile: (318) 989-8153
Attention: Chief Executive Officer
8. Waiver. No course of dealing nor any delay on the part of
either party in exercising any rights hereunder will operate as a
waiver of any rights of such party. No waiver of any default or
breach of this Agreement or application of any term, covenant or
provision hereof shall be deemed a continuing waiver or a waiver
of any other breach or default or the waiver of any other
application of any term, covenant or provision.
9. Definition of "Reasonable and Best Efforts." Reasonable
and best efforts shall not include the payment of any non-
reimbursable out-of-pocket costs or other payments by Consultant.
Consultant shall not guarantee, make any representation
concerning (which representation would survive the closing of any
escrow or other transaction) or warrant (i) the condition,
performance, value, or profitability of any business purchased,
sold by, or otherwise considered for purchase by the Company;
(ii) the validity or authorization of any capital stock
purchased, sold by, or otherwise considered for purchase by the
Company; (iii) the market value of any capital stock, business or
assets purchased, sold by, or otherwise considered for purchase
by the Company; (iv) the ability to finance, refinance or
otherwise mortgage or encumber any business or corporation
purchased, sold by, or otherwise considered for purchase by the
Company; or (v) that Consultant will find or present any business
or corporation which the Company will consider, approve or
ultimately purchase or be able to purchase; or (vi) the
covenants, representations or warranties of any party to any
stock purchase, asset purchase, merger or other agreement entered
into by the Company with any third party.
10. Successors; Binding Agreements. Prior to the
effectiveness of any succession (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company,
the Company will require the successor to expressly assume and
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had occurred. As used in this Agreement,
"Company" shall mean the Company as defined above and any
successor to its business and/or assets which executes and
delivers the Agreement provided for in this Section 10 or which
otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law or otherwise.
11. Survival of Terms. Notwithstanding the termination of
this Agreement for whatever reason, the provisions hereof shall
survive such termination, unless the context requires otherwise.
12. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the
same instrument. Any signature by facsimile shall be valid and
binding as if an original signature were delivered.
13. Captions. The caption headings in this Agreement are for
convenience of reference only and are not intended and shall not
be construed as having any substantive effect.
14. Governing Law. This Agreement shall be governed,
interpreted and construed in accordance with the laws of the
state of Texas applicable to agreements entered into and to be
performed entirely therein. Any suit, action or proceeding with
respect to this Agreement shall be brought exclusively in the
state courts of the state of Texas or in the federal courts of
the United States which are located in Houston, Texas. The
parties hereto hereby agree to submit to the jurisdiction and
venue of such courts for the purposes hereof. Each party agrees
that, to the extent permitted by law, the losing party in a suit,
action or proceeding in connection herewith shall pay the
prevailing party its reasonable attorneys' fees incurred in
connection therewith.
15. Entire Agreement/Modifications. This Agreement
constitutes the entire agreement between the parties and
supersedes all prior understandings and agreements, whether oral
or written, regarding Consultant's retention by the Company;
provided, however, that all fees previously earned and/or paid to
Consultant under prior agreements shall be deemed earned, and
shall be in addition to any fees payable hereunder. This
Agreement shall not be altered or modified except in writing,
duly executed by the parties hereto.
16. Warranty. The Company and Consultant each hereby warrant
and agree that each is free to enter into this Agreement, that
the parties signing below are duly authorized and directed to
execute this agreement, and that this Agreement is a valid,
binding and enforceable against the parties hereto.
17. Severability. If any term, covenant or provision, or any
part thereof, is found by any court of competent jurisdiction to
be invalid, illegal or unenforceable in any respect, the same
shall not affect the remainder of such term, covenant or
provision, any other terms, covenants or provisions or any
subsequent application of such term, covenant or provision which
shall be given the maximum effect possible without regard to the
invalid, illegal or unenforceable term, covenant or provision, or
portion thereof. In lieu of any such invalid, illegal or
unenforceable provision, the parties hereto intend that there
shall be added as part of this Agreement a term, covenant or
provision as similar in terms to such invalid, illegal or
unenforceable term, covenant of provision, or part thereof, as
may be possible and be valid, legal and enforceable.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the day and year first above
written.
XCL LTD.
By:_________________________
Danny Dobbs
President
DAVID A. MELMAN & ASSOCIATES, LLC
By:________________________
David A. Melman
APPROVED AND ACCEPTED
AS OF THE DATE FIRST ABOVE
WRITTEN
______________________________
Frank Reinhardt, Jr.
______________________________
Arthur Hummel, Jr.
______________________________
R. T. Fetters, Jr.