VEHOU05:49653.1
XCL LTD.
13.50% Senior Secured Note due May 1, 2004, Series A
1. Interest.
XCL Ltd., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of the
13.50% Senior Secured Notes due May 1, 2004, Series A (the
"Notes") at a rate of 13.50% per annum (subject to
adjustment). To the extent it is lawful, the Company
promises to pay interest on any interest payment due but
unpaid on such principal amount at a rate of 13.50% per
annum compounded semi-annually.
The Company will pay interest semi-annually on May
1 and November 1 of each year (each, an "Interest Payment
Date"), commencing November 1, 1997. Interest on the Notes
will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from May 20,
1997.
Under certain circumstances, the Company shall be obligated
to pay liquidated damages to the Holders, all as set forth
in Section 2.18 of the Indenture.
2. Method of Payment.
The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are the
registered Holders at the close of business on the Record
Date immediately preceding the Interest Payment Date.
Holders must surrender Notes to a Paying Agent to collect
principal payments. Except as provided below, the Company
shall pay principal and interest in such coin or currency of
the United States of America as at the time of payment shall
be legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Company may pay
principal and interest by wire transfer of Federal funds, or
interest by its check payable in such U.S. Legal Tender.
The Company may deliver any such interest payment to the
Paying Agent or the Company may mail any such interest
payment to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Fleet National Bank (the "Trustee")
will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-Registrar without
notice to the Holders. The Company or any of its
Subsidiaries may, subject to certain exceptions, act as
Paying Agent, Registrar or co-Registrar.
4. Indenture.
The Company issued the Notes under an Indenture,
dated as of May 20, 1997 (the "Indenture"), between the
Company and the Trustee. Capitalized terms herein are used
as defined in the Indenture unless otherwise defined herein.
The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the
TIA, as in effect on the date of the Indenture. The Notes
are subject to all such terms, and Holders of Notes are
referred to the Indenture and said Act for a statement of
them. The Notes are senior obligations of the Company
limited in aggregate principal amount to $75,000,000.
5. Redemption.
Prior to May 1, 2002, the Company may redeem at
its election, within 90 days after completion of any Equity
Offering, with the net proceeds of such Equity Offering, up
to $26,250,000 principal amount of the Notes in cash at the
Redemption Prices (expressed as a percentage of the
principal amount thereof) set forth below, in each case,
including accrued and unpaid interest to the Redemption
Date, if any; provided, however, that at least $48,750,000
aggregate principal amount of all Notes remains outstanding
immediately after giving effect to any such redemption (it
being expressly agreed that for purposes of determining
whether this condition is satisfied, Notes owned by the
Company or any of its Affiliates shall be deemed not to be
outstanding). The Notes may be redeemed at the election of
the Company, as a whole or from time to time in part, at any
time on and after May 1, 2002, at the Redemption Prices
(expressed as a percentage of the principal amount thereof)
set forth below with respect to the indicated Redemption
Date, in each case, together with any accrued but unpaid
interest to the Redemption Date.
If redeemed during
the 12-month period
beginning May 1 Redemption Price
------------------- ----------------
1997...........................113.500%
1998...........................113.500%
1999...........................113.500%
2000...........................113.500%
2001...........................113.500%
2002...........................106.750%
2003 and thereafter............100.000%
The Notes are also subject, in certain
circumstances, to Mandatory Redemption at par on November
30, 1997.
Any redemption will comply with Article Three of
the Indenture.
6. Notice of Redemption.
Notice of redemption will be mailed by first class
mail at least 30 days but not more than 60 days before the
Redemption Date to each Holder of Notes to be redeemed at
his registered address. Notes in denominations larger than
$1,000 may be redeemed in part.
Except as set forth in the Indenture, from and
after any Redemption Date, if monies for the redemption of
the Notes called for redemption shall have been deposited
with the Paying Agent on such Redemption Date the Notes
called for redemption will cease to bear interest and the
only right of the Holders of such Notes will be to receive
payment of the Redemption Price and any accrued and unpaid
interest to the Redemption Date.
7. Denominations; Transfer; Exchange.
The Notes are in registered form, without coupons,
in denominations of $1,000 and integral multiples of $1,000.
A Holder may register the transfer of, or exchange Notes in
accordance with, the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The
Registrar need not register the transfer of or exchange any
Notes selected for redemption.
8. Persons Deemed Owners.
The registered Holder of a Note may be treated as
the owner of it for all purposes.
9. Unclaimed Money.
If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying
Agent(s) will pay the money back to the Company at its
written request. After that, all liability of the Trustee
and such Paying Agent(s) with respect to such money shall
cease.
10. Discharge Prior to Redemption or Maturity.
If the Company at any time deposits into an
irrevocable trust with the Trustee U.S. Legal Tender or
Government Securities sufficient to pay the principal of and
interest on the Notes to redemption or maturity and complies
with the other provisions of the Indenture relating thereto,
the Company will be discharged from certain provisions of
the Indenture and the Notes (including the financial
covenants, but excluding its obligation to pay the principal
of and interest on the Notes).
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or
the Notes may be amended or supplemented with the written
consent of the Holders of at least a majority in aggregate
principal amount of the Notes then outstanding, and any
existing Default or Event of Default or compliance with any
provision may be waived with the consent of the Holders of a
majority in aggregate principal amount of the Notes then
outstanding. Without notice to or consent of any Holder,
the parties thereto may amend or supplement the Indenture or
the Notes to, among other things, cure any ambiguity, defect
or inconsistency, or make any other change that does not
adversely affect the rights of any Holder of a Note.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the
ability of the Company and its Subsidiaries to, among other
things, incur additional Indebtedness or issue Disqualified
Capital Stock, make payments in respect of its Capital
Stock, enter into transactions with Affiliates, incur Liens,
sell assets, change the nature of its business, merge or
consolidate with any other Person and sell, lease, transfer
or otherwise dispose of substantially all of its properties
or assets. The Indenture requires the Company to repurchase
Notes under certain circumstances with the Net Cash Proceeds
of certain Asset Sales. The limitations are subject to a
number of important qualifications and exceptions. The
Company must report to the Trustee on compliance with such
limitations on a quarterly basis.
13. Change of Control.
In the event there shall occur any Change of
Control, each Holder of Notes shall have the right, at such
Holder's option but subject to the limitations and
conditions set forth in the Indenture, to require the
Company to purchase on the Change of Control Payments Date
in the manner specified in the Indenture, all or any part
(in integral multiples of $1,000) of such Holder's Notes at
a Change of Control Purchase Price equal to 101% of the
principal amount thereof, together with accrued and unpaid
interest, if any, to the Change of Control Payment Date.
14. Successors.
When a successor assumes all the obligations of
its predecessor under the Notes and the Indenture, the
predecessor will be released from those obligations.
15. Defaults and Remedies.
If an Event of Default occurs and is continuing,
the Trustee or the Holders of at least 25% in aggregate
principal amount of Notes then outstanding may declare all
the Notes to be due and payable immediately in the manner
and with the effect provided in the Indenture. Holders of
Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations,
Holders of a majority in aggregate principal amount of the
Notes then outstanding may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold
from Holders of Notes notice of any continuing Default or
Event of Default (except a Default in payment of principal,
premium, if any, or interest, including a Default at any
Maturity Date), if it determines that withholding notice is
their interest.
16. No Recourse Against Others.
No stockholder, director, officer, employee or
incorporator, as such, past, present or future, of any
obligor under the Notes or any successor corporation shall
have any liability for any obligation of any obligor under
the Notes or the Indenture or for any claim based on, in
respect of or by reason of, such obligations or their
creation. Each Holder of a Note by accepting a Note waives
and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Notes.
17. Authentication.
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication
on the other side of this Note.
18. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of
a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not
as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
19. CUSIP Numbers.
Pursuant to recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the
Company will cause CUSIP numbers to be printed on the Notes
as a convenience to the Holder of the Notes. No
representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the
other identification numbers printed hereon.
20. Subsidiary Guarantees.
Concurrently with and subject to the release to
the Company of the Collateral subject to the Principal
Account, payment of the principal of, premium, if any, and
interest on the Notes will be unconditionally guaranteed by
XCL-China Ltd., a British Virgin Islands company wholly
owned by the Company ("XCL-China"), and certain future
Restricted Subsidiaries pursuant to and in accordance with
the terms of Article Twelve of the Indenture.
21. Security and Collateral.
Payment of the principal of, premium, if any, and
interest on the Notes is secured by a Security Interest in
the Collateral created by the Security Documents in favor of
the Trustee for the benefit of the Holders.
ASSIGNMENT
I or we assign this Note to:
_______________________
_______________________
________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of
assignee:___________________________
and irrevocably appoint _______________________________
agent to transfer this Note on the books of the Company.
The agent may substitute another to act for him.
Dated:_______________________
Signature:_____________________
(Sign exactly as name appears on the other side of this
Note)
EXCHANGE
I or we assign this Note to:
XCL LTD.
110 Rue Jean Lafitte
Lafayette, LA 70508
I.R.S. Employer Identification No.: 51-0305643
and irrevocably appoint _________________________________
agent to transfer this Note on the books of the Company.
The agent may substitute another to act for him.
Dated:___________________________
Signature:________________________
(Sign exactly as name appears on the other side of this
Note)
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased
by the Company pursuant to Section 4.15 or 4.16 of the
Indenture, check the appropriate box:
[ ] Section 4.15 [ ] Section 4.16
If you want to elect to have only part of this
Note purchased by the Company pursuant to Section 4.15 or
4.16 of the Indenture, as the case may be, state the amount
you want to be purchased:
$________________________
Dated:______________________
Signature:____________________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:
______________________________