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, 1997
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
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(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.
302,160,240 shares Common Stock, $.01 par value were
outstanding on November 14, 1997.
XCL LTD.
TABLE OF CONTENTS
PART I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
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 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, 1996 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.
XCL Ltd. and Subsidiaries
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
Pro Forma
September 30 September 30 December 31
Assets 1997 1997 1996
-------- ------------ ------------ -----------
(Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $ 29,808 $ 2,345 $ 113
Cash held in escrow (restricted) 14,625 75,000 --
Accounts receivable, net 163 163 23
Prepaid expenses 292 292 212
--------- --------- --------
Total current assets 44,888 77,800 348
--------- --------- --------
Property and equipment:
Oil and gas (full cost method):
Proved and unproved properties
under development not
being amortized 51,438 49,913 34,305
Land, at cost -- -- 135
Other 1,158 1,158 2,492
--------- --------- --------
52,596 51,071 36,932
Accumulated depreciation,
depletion and amortization (977) (977) (1,491)
--------- --------- --------
51,619 50,094 35,441
--------- --------- --------
Investments 3,501 2,800 2,383
Assets held for sale 21,058 21,058 21,058
Inventory 1,280 1,280 403
Debt issue cost, less amortization 4,734 4,734 --
Other assets 1,657 1,657 1,231
--------- -------- --------
Total assets $ 128,737 $ 159,423 $ 60,864
========= ======== ========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Senior secured notes $ -- $ 75,000 $ --
Other notes payable -- 3,000 --
Accounts payable and accrued costs 10,985 14,392 3,901
Due to joint venture partner 80 80 4,202
Dividends payable 928 928 928
Current maturities of long-term debt 4,521 28,800 38,022
-------- -------- ---------
Total current liabilities 16,514 122,200 47,053
-------- -------- ---------
Long-term debt, net of current maturities 75,000 -- --
-------- -------- ---------
Other non-current liabilities 2,645 2,645 2,770
-------- -------- ---------
Commitments and contingencies (Note 6)
Shareholders' equity:
Preferred stock-$1.00 par value;
authorized 2,400,000 shares;
issued shares of 1,065,991 at
September 30, 1997 and 669,411
at December 31, 1996-liquidation
preference of $87.4 million at
September 30, 1997 1,066 1,066 669
Common stock-$.01 par value;
authorized 500 million shares;
issued shares of 298,780,945 at
September 30, 1997 and 285,754,151
at December 31, 1996 2,988 2,988 2,858
Common stock held in treasury -
$.01 par value; 1,042,065
shares at September 30, 1997
and December 31, 1996 (10) (10) (10)
Additional paid-in capital 254,767 254,767 226,956
Accumulated deficit (224,233) (224,233) (219,432)
--------- -------- --------
Total shareholders' equity 34,578 34,578 11,041
--------- -------- --------
Total liabilities and
shareholders'equity $ 128,737 $ 159,423 $ 60,864
======== ======== ========
The accompanying notes are an integral part of these financial statements.
XCL Ltd. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands, Except Per Share Amounts)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited)
Oil and gas revenues from properties
held for sale $ 52 $ 94 $ 189 $ 1,031
------ ----- ------ -------
Costs and operating expenses:
Operating 60 43 173 280
Depreciation, depletion and
amortization 24 45 104 528
Writedown/loss on sale of other
assets and investments -- 750 -- 2,000
General and administrative 944 862 2,478 2,856
------ ------ ------ ------
1,028 1,700 2,755 5,664
------ ------ ------ ------
Operating loss (976) (1,606) (2,566) (4,633)
------ ------ ------ ------
Other income (expense):
Interest income 1,084 -- 1,582 --
Interest expense, net of amounts
capitalized (1,067) (558) (2,713) (1,765)
Loss on sale of investments -- -- -- (661)
Other, net 542 431 854 623
------ ------ ------ ------
559 (127) (277) (1,803)
------ ------ ------ ------
Net loss (417) (1,733) (2,843) (6,436)
Preferred stock dividends (1,704) (1,343) (5,020) (4,013)
------ ------ ------ -------
Net loss attributable to common stock $(2,121) $(3,076) $(7,863) $(10,449)
====== ====== ====== =======
Net loss per common and common
equivalent share $ (.01) $ (.01) $ (.03) $ (.04)
====== ====== ====== =======
Weighted average number of common
and common equivalent shares
outstanding 295,869 267,542 293,116 262,651
======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
XCL Ltd. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of Dollars)
Nine Months Ended
September 30
-----------------
1997 1996
---- ----
(Unaudited)
Cash flows from operating activities:
Net loss $ (2,843) $ (6,436)
-------- --------
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation, depletion and amortization 104 528
Loss on sale of investments -- 661
Writedown of assets and other investments -- 2,000
Change in assets and liabilities:
Accounts receivable (140) 647
Prepaid expenses (80) (2)
Accounts payable and accrued costs 6,646 2,567
Due to joint venture partner (4,122) --
Other, net (80) 142
------- -------
Total adjustments 2,328 6,543
------- -------
Net cash provided by (used in)
operating activities (515) 107
------- -------
Cash flows from investing activities:
Capital expenditures (9,157) (3,867)
Investments (418) (474)
Proceeds from sale of assets 759 9,151
------- -------
Net cash provided by (used in)
investing activities (8,816) 4,810
------- -------
Cash flows from financing activities:
Proceeds from sales of common stock 732 1,626
Proceeds from loans 81,316 --
Proceeds from sales of treasury stock -- 264
Payment for treasury stock -- (141)
Proceeds from issuance of preferred stock 25,314 282
Proceeds from exercise of common stock
warrants and options 1,184 --
Payment of long-term debt (9,455) (8,348)
Payment of note payable (3,100) --
Issuance of note receivable (100) --
Payment of preferred stock dividends (469) --
Stock issuance costs and other (8,859) (136)
------- ------
Net cash provided by (used in)
financing activities 86,563 (6,453)
------- ------
Net increase (decrease) in cash and cash equivalents 77,232 (1,536)
Cash and cash equivalents at beginning of period 113 1,610
------- -------
Cash and cash equivalents at end of period $ 77,345 $ 74
======= =======
The accompanying notes are an integral part of these financial statements.
XCL Ltd. and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(1) Basis of Presentation
The consolidated financial statements at September 30, 1997,
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, 1996. 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, 1997,
and December 31, 1996, and the results of their operations for
the three months and nine months ended September 30, 1997 and
1996, 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.
The pro forma balance sheet at September 30, 1997 gives
effect to the release of escrow funds on October 15, 1997, and
the concurrent repayment of certain current maturities of long
term debt, additional borrowings, accounts payable and other
accrued liabilities. This transaction had no effect on the
results of operations.
Loss per common and common equivalent share has been
computed by dividing net loss attributable to common stock by the
weighted average number of common and common share equivalents
outstanding.
The amounts of preferred dividends for the three and nine
months ended September 30, 1996 have been restated from amounts
previously reported to include not only declared but also accrued
dividends. Accordingly, the net loss applicable to the common
stock for the three and nine month periods, respectively, were
$(.01) and $(.04) as restated, as compared to a net loss of
$(.01) and $(.03) as previously reported.
See the discussion in the section entitled "Disclosure
Regarding Forward-Looking Information" herein.
(2) Liquidity and Capital Resources
As previously reported, the Company completed a $75 million
debt offering (the "Note Offering") and a $25 million preferred
stock offering (the "Equity Offering") on May 20, 1997
(collectively referred to as the "Offerings"). Under terms of
the trust indenture two cash collateral accounts were established
(reflected in the balance sheet as cash held in escrow), one for
$14.6 million (representing the aggregate amount of interest due
on the Notes through November 1, 1998) and the other for $60.4
million. On October 15, 1997, the $60.4 million (principal
balance) of funds held in the cash collateral account pursuant to
the trust indenture were released. The pro forma balance sheet
at September 30, 1997, reflects the release of these funds and
the concurrent repayment of $17.3 million owed to ING (U.S.)
Capital Corporation ("ING") under its Credit Facility, $7.0
million of Secured Subordinated Debt, $3.0 million of unsecured
notes issued by XCL-China Limited and certain other liabilities.
As a result of these transactions, on a pro forma basis, the
Company had an operating cash balance of $29.8 million. At
September 30, 1997, on a pro forma basis, the Company had working
capital of $28.4 million, including $14.63 million held in escrow
(representing the aggregate amount of interest payable on the $75
million Notes through November 1, 1998) and $4.5 million in
limited recourse debt collateralized by the Lutcher Moore Tract.
At September 30, 1997, the Company had $7.0 million in
accrued interest of which $3.7 million was in respect of the Note
Offering, which will be funded from the funds escrowed for that
purpose. Additionally, the Company has approximately $8.7
million in aggregate of dividends in arrears on its preferred
stock. These dividends will not require payment in cash because
such amount is expected to be satisfied through the issuance of
additional preferred stock.
The Company estimates that most of the available cash will
be used for development of the C-D Field on the Zhao Dong Block.
Additional funds of approximately $13 million are expected from
the sale of the Lutcher Moore Tract (the "Lutcher Moore Tract"),
although there can be no assurance as to the timing and amounts
to be obtained. During 1996, litigation was instituted against
the Company in connection with the remaining domestic oil and gas
property held by the Company, effectively impeding the Company's
ability to consummate a sale by casting doubt as to the Company's
rights to certain leases and demanding damages. Upon resolution
of the litigation the Company will resume its efforts to dispose
of these properties. These transactions will provide partial
funding for the Company to repay the limited recourse debt
secured by the Lutcher Moore Tract, and, combined with projected
cash flow, fund the estimated development expenditures and its
contractual exploration obligations.
The Company will incur a loss for fiscal 1997 and
anticipates incurring losses in fiscal 1998 because production
from the Zhao Dong Block is not expected until late in 1998. If
the Company is successful in additional exploratory drilling on
the Zhao Dong Block, or if the Company is successful in
developing additional oil and gas projects, the Company will need
additional funds for capital expenditures and working capital.
The Company believes that in such events funds will be available
to meet these needs. The exact amounts, source and timing of such
financing is not determinable at this time and there are no
assurances it will be available if needed. In addition, the
Company's efforts to secure additional working capital could be
impaired if its common stock is delisted from the AMEX. See Note
6.
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, including the
ability to issue additional debt and equity securities. Issuance
of debt and equity securities may require consent of the holders
of the Senior Secured Notes due May 1, 2004, and of one or more
classes of the Company's equity securities.
Effective November 10, 1997, the Company has completed the
first step toward simplifying its capital structure with the
amendment for recapitalization and combination of its outstanding
Series A, Cumulative Convertible Preferred Stock and Series E,
Cumulative Convertible Preferred Stock into Amended Series A,
Cumulative Convertible Preferred Stock which, together with the
Amended Series A Preferred Stock issued in the Equity Offering,
constitutes a single class of Amended Series A Preferred Stock.
As a result of this reclassification, the Series A Preferred
Stock listing on the London Stock Exchange has been terminated,
and the Company has no plans to list the Amended Series A
Preferred Stock on the London Stock Exchange. However, pursuant
to the terms of a registration rights agreement between the
Company and certain holders of the Amended Series A Preferred
Stock, the Company intends to register the Amended Series A
Preferred Stock under the U.S. Securities Act of 1933, as
amended. Upon such registration being declared effective, the
Company expects to apply for a listing on the American Stock
Exchange for the Amended Series A Preferred Stock. The Company
is also considering a reverse stock split of its Common Stock.
The reverse stock split of the Common Stock will require approval
of the holders of a majority of the outstanding shares of capital
stock entitled to vote thereon at a special stockholders' meeting
planned for the December, 1997.
In addition to capital commitments to fund the Company's
share of the Zhao Dong Block development, the Company has capital
requirements for its lubricating oil and coalbed methane
projects.
As a result of the substantial capital requirements
described above, and the Company's recurring net losses, the
report of the Company's independent accountants dated April 10,
1997, as of, and for the year ended December 31, 1996, contains
an explanatory paragraph regarding the ability of the Company to
continue as a going concern. In the offering memoranda dated May
20, 1997, for the Note Offering and Equity Offering, it was noted
that the Company's independent accountants indicated that
assuming no adverse conditions occur in respect of the Company's
projected operations, they will issue an unqualified audit report
that does not contain an explanatory paragraph on such
consolidated financial statements.
(3) Supplemental Cash Flow Information
There were no income taxes paid during the nine month
periods ended September 30, 1997 and 1996.
Interest paid during the three month and nine month periods
ended September 30 amounted to approximately $0.1 million and 0.3
million for 1997, and $0.4 million and $1.5 million, respectively
for 1996.
(4) Debt
Long-term debt consists of the following (000's):
Pro Forma
September 30 September 30 December 31
1997 1997 1996
------------ ------------ -----------
13.5% Senior Secured Notes $ 75,000 $ 75,000 $ --
Collateralized credit facility -- 17,279 17,279
Secured Subordinated Debt -- 7,000 15,000
Office building mortgage -- -- 652
-------- -------- -------
75,000 99,279 32,931
Lutcher Moore Group Limited
Recourse Debt 4,521 4,521 5,091
-------- -------- -------
79,521 103,800 38,022
Less current maturities:
13.5% Senior Secured Notes -- (75,000) --
Lutcher Moore Group Limited
Recourse Debt (4,521) (4,521) (5,091)
Collateralized credit facility -- (17,279) (17,279)
Secured Subordinated Debt -- (7,000) (15,000)
Office building mortgage -- -- (652)
-------- -------- --------
$ 75,000 $ -- $ --
======== ======== ========
Substantially all of the Company's assets collateralize
these borrowings. Accounts payable and accrued expenses include
interest accrued at September 30, 1997, of approximately $7.0
million.
Credit Facility
- ---------------
The Company had been in default of interest payments since
October 1, 1996 and principal payments since January 2, 1997 to
ING, resulting in a default under the Credit Facility and, by
virtue of certain cross default provisions, the Secured
Subordinated Debt. On October 15, 1997, the Credit Facility was
repaid in full from proceeds of the Note Offering.
Secured Subordinated Debt
- -------------------------
During April 1993, the Company issued in a private
placement, $15 million of Secured Subordinated Note Units. Each
of these 40 units consisted of a $375,000 note payable, warrants
to acquire 100,000 shares of the Company's Common Stock at $0.90
per share (which were previously issued to a group of banks in a
prior credit facility), a net profits interest in certain
exploration leases and a contractual interest in the net revenues
of XCL-China, under the Contract relating to the Zhao Dong Block.
This borrowing was collateralized by a second mortgage on all the
Company's producing properties and a second lien on the stock of
XCL-China. In accordance with the terms of a forbearance
agreement between the Company and ING, on May 20, 1997, $8.0
million of the Secured Subordinated Debt was repaid, with
proceeds from the Equity Offering, to those institutional
investors who purchased Amended Series A Preferred Stock in the
Equity Offering. On October 15, 1997, the Company repaid the
remaining $7.0 million in principal amount of the Secured
Subordinated Debt Notes from proceeds of the Note Offering.
Lutcher Moore Group Limited Recourse Debt
- -----------------------------------------
In connection with the Lutcher Moore Tract, the Company's
indirect ownership of such tract is subject to a first mortgage,
with a current principal balance of approximately $2.0 million
(the "Mortgage Notes"), and a number of sellers' notes, with an
aggregate current principal balance of approximately $3.0 million
(the "Seller Notes"). During July 1997, upon payment by the
Company of principal and interest in the aggregate amount of
approximately $430,000, the repayment terms of the Mortgage Notes
were extended until January 17, 1998.
Payments of principal and interest on the Seller Notes are
past due and in July 1997, certain of the sellers have demanded
payment. The Company is negotiating an extension of the maturity
dates of the Seller Notes, however, should the Company be
unsuccessful in negotiating further extension, the holders have
recourse only to the property itself, as the Company is not
liable for the debt. The book value of this property is $12.2
million, therefore, if the Company should allow the mortgagees to
repossess the property for nonpayment of the mortgage debt, the
Company would incur a substantial loss.
Office Building Mortgage
- ------------------------
On March 31, 1997, the Company's office building was sold
for $900,000, $750,000 in cash and a note for $150,000. The
mortgage debt on the building in the amount of $652,000 was
repaid in full with interest and prepayment penalties thereon.
The note bears interest at 9.25% and is of a 22 month term.
Contemporaneously with the sale, the Company leased back one
floor of the two story building for a 22 month term, with the
note payments being equal to and offsetting the lease payments.
Senior Secured Notes
- --------------------
On May 20, 1997, the Company sold through Jefferies &
Company, Inc., in an unregistered offering to qualified
institutional buyers and accredited institutional investors (the
"Note Offering") 75,000 Note Units, each consisting of $1,000
principal amount of 13.5% Senior Secured Notes due May 1, 2004
(collectively, the "Notes") and one Common Stock Purchase Warrant
(collectively the "Note Warrants") to purchase 1,280 shares of
the Company's common stock, par value $0.01 per share (the
"Common Stock"), at an exercise price of $0.2063 per share, first
exercisable after May 20, 1998. The Notes and the Note Warrants
were not separately transferable until August 17, 1997.
The Notes were secured by the gross proceeds from the Note
Offering, and were held in a collateral account, with a portion
of the gross proceeds (approximately $14.6 million) segregated
into a separate account (the "Capitalized Interest Account") to
pay interest on the Notes through November 1, 1998. On October
15, 1997, the Company secured the release of the $60.4 million
held in the collateral account, and concurrently pledged the
stock of XCL-China as security for the Notes.
Interest on the Notes is payable semi-annually on May 1 and
November 1, commencing November 1, 1997. The Notes will mature
on May 1, 2004. The Notes are not redeemable at the option of the
Company prior to May 1, 2002, except that the Company may redeem,
at its option prior to May 1, 2002, up to 35% of the original
aggregate principal amount of the Notes, at a redemption price of
113.5% of the aggregate principal amount of the Notes, plus
accrued and unpaid interest, if any, to the date of redemption,
with the net proceeds of any equity offering completed within 90
days prior to such redemption; provided that at least $48.75
million in aggregate principal amount of the Notes remain
outstanding. On or after May 1, 2002, the Notes are redeemable
at the option of the Company, in whole or in part, at an initial
redemption price of 106.75% of the aggregate principal amount of
the Notes until May 1, 2003, and at par thereafter, plus accrued
and unpaid interest, if any, to the date of redemption. Upon the
occurrence of a change of control, the Company will be obligated
to make an offer to purchase all outstanding Notes at a price
equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase.
On November 3, 1997, $4.5 million were released from the
Capitalized Interest Account and paid to the holders of the Notes
with respect to the first interest payment on the Notes.
(5) Preferred Stock and Common Stock
As of September 30, 1997, the Company had the following
shares of Preferred Stock issued and outstanding:
Dividends (In Thousands)
_________________________________________
1997
_____________________
Liquidation In Arrears
Shares Value Declared or Accrued Total 1996
------ --------------- --------- ---------- ------- ------
Series A 641,359 $ 51,805,773 (1) $ -- $ 3,154 $ 3,154 $ 3,337
Series B 44,465 4,446,500 335 -- 335 337
Series E 51,915 5,191,500 294 155 449 339
Series F 22,318 2,231,800 126 67 193 --
Amended Series A 305,934 26,004,390 -- 889 889 --
--------- ----------- ----- ------ ------ ------
1,065,991 $ 89,679,963 $ 755 $ 4,265 $ 5,020 $ 4,013
__________
(1) 50 pounds sterling U.K. per share (U.K. 1 pound
sterling = U.S. $1.6155 at September 30, 1997).
Series A Preferred Stock
- ------------------------
During February 1997, the Company sold 13,458 shares of
Series A Preferred Stock for $157,240. The proceeds were used to
pay the withholding taxes and fractional interests with respect
to the December 31, 1995 dividend payment. In March 1997, the
Company issued an additional 50,137 shares of Series A Preferred
Stock in payment of this dividend, therefore fulfilling its
obligation for such dividend period. The Board of Directors
elected not to declare the dividend payable June 30, 1997.
During March 1997, 39 shares of Series A Preferred Stock
were converted into 819 shares of Common Stock.
Effective November 10, 1997, by consent of in excess of 88
percent of the outstanding shares of Series A Preferred Stock
such series of preferred stock was amended, reclassified and
converted to Amended Series A Preferred Stock. As a consequence
of such consent all dividend arrearages, and accrued and unpaid
dividends were paid in additional shares of Amended Series A
Preferred Stock. This amendment will result in approximately
706,698 shares of Amended Series A Preferred Stock being issued
in respect of such reclassification and payment of accrued
dividends.
Series B Preferred Stock
- ------------------------
During the first quarter of 1997, 1,004,000 shares of Series
B Redemption Stock were sold and the proceeds applied against
accrued dividends. During the second quarter of 1997, 381,000
shares of Series B Redemption Stock were sold, and during July
1997, 1,255,100 shares of Series B Redemption Stock were sold,
with the proceeds applied against redemption of 489 shares of
the Series B Preferred Stock.
In July 1997, the holder of the Company's Series B Preferred
Stock sued the Company and each of its directors with respect to
the alleged failure of the Company to redeem CIDC's Series B
Preferred shares, in accordance with the terms of the Purchase
Agreement and Certificate of Designation. See Note 6
"Commitments, Contingencies and Subsequent Events" regarding this
lawsuit.
Series E Preferred Stock
- ------------------------
In January 1997, the Company issued 2,328 shares of Series E
Preferred Stock in payment of the December 31, 1996 dividend. In
July 1997, the Company issued 2,933 shares of Series E Preferred
Stock in payment of the June 30, 1997 dividend.
Effective November 10, 1997, by consent of in excess of 67
percent of the outstanding shares of Series E Preferred Stock
such series of preferred stock was amended, reclassified and
converted to Amended Series A Preferred Stock. As a consequence
of such consent all accrued and unpaid dividends were paid in
additional shares of Amended Series A Preferred Stock. This
amendment will result in approximately 63,702 shares of Amended
Series A Preferred Stock being issued in respect of such
reclassification and payment of accrued dividends.
Series F Preferred Stock
- ------------------------
In December 1996, XCL authorized the issuance of up to
50,000 shares of a new series of Preferred Stock designated the
Series F, Cumulative Convertible Preferred Stock, $1.00 par value
per share ("Series F Preferred Stock"). During February 1997, the
Company issued a total of 21,057 shares of Series F Preferred
Stock in consideration of $225,000, assignment to the Company of
1,408,125 shares of Common Stock and 2,600,000 warrants to
purchase Common Stock and the release by the purchasers of
certain claims against the Company arising from the Company's
inability to perform under the terms of existing agreements.
Each share of Series F Preferred Stock is convertible, at the
holder's option, into 400 shares of Common Stock. The Series F
Preferred Stock bears a fixed cumulative dividend at the annual
rate of $12 per share, payable semi-annually in cash, or, at the
Company's election, in additional shares of Series F Preferred
Stock, subject to an increase in the event the Company fails to
pay any regularly scheduled dividend.
In July 1997, the Company issued 1,261 shares of Series F
Preferred Stock in payment of the June 30, 1997 dividend.
Amended Series A Preferred Stock
- --------------------------------
On May 20, 1997, the Company sold, in an unregistered
offering to qualified institutional buyers and accredited
institutional investors (the "Equity Offering") 294,118 Equity
Units, each consisting of one share of Amended Series A,
Cumulative Convertible Preferred Stock, par value $1.00 per share
("Amended Series A Preferred Stock"), and one Common Stock
Purchase Warrant (collectively, the "Equity Warrants") to
purchase 327 shares of the Company's Common Stock, at an initial
exercise price of $0.2063 per share, first exercisable until May
20, 1998. The Amended Series A Preferred Stock and Equity
Warrants were separately transferable October 16, 1997.
Each share of Amended Series A Preferred Stock has a
liquidation value of $85.00, plus accrued and unpaid dividends.
Dividends on the Amended Series A Preferred Stock are cumulative
from May 20, 1997 and are payable semi-annually, commencing
November 1, 1997, at an annual rate of $8.075 per share.
Dividends are payable in additional shares of Amended Series A
Preferred Stock (valued at $85.00 per share) through November 1,
2000, and thereafter in cash, or at the election of the Company,
in additional shares of Amended Series A Preferred Stock. The
Amended Series A Preferred Stock is convertible into Common
Stock, at any time after the first anniversary of the issue date,
at the option of the holders thereof, unless previously redeemed,
at an initial conversion price of $0.50 per share of Common Stock
(equivalent to a rate of 170 shares of Common Stock for each
share of Amended Series A Preferred Stock), subject to adjustment
under certain conditions. The Company is entitled to require
conversion of all the outstanding shares of Amended Series A
Preferred Stock, at any time after November 20, 1997 if the
Common Stock shall have traded for 20 trading days during any 30
consecutive trading day period at a market value equal to or
greater than 150% of the prevailing conversion rate.
The Amended Series A Preferred Stock is redeemable at any
time on or after May 1, 2002, in whole or in part, at the option
of the Company initially at a redemption price of $90.00 per
share and thereafter at redemption prices which decrease ratably
annually to $85.00 per share on and after May 1, 2006, plus
accrued and unpaid dividends to the redemption date. The Amended
Series A Preferred Stock is mandatorily redeemable, in whole, on
May 1, 2007, at a redemption price of $85.00 per share, plus
accrued and unpaid dividends to the redemption date, payable in
cash, or at the election of the Company, in Common Stock.
Upon the occurrence of a change in control or certain other
fundamental changes, the conversion price of the Amended Series A
Preferred Stock will be reduced, for a limited period, in certain
circumstances in order to provide holders with loss protection at
a time when the market value of the Common Stock is less than the
then prevailing conversion price.
The Amended Series A Preferred Stock will entitle the holder
thereof to cast the same number of votes as the shares of Common
Stock then issuable upon conversion thereof on any matter subject
to the vote of the holders of the Common Stock. Further, the
holders of the Amended Series A Preferred Stock will be entitled
to vote as a separate class (i) to elect two directors if the
Company is in arrears in payment of three semi-annual dividends,
and (ii) the approval of two-thirds of the then outstanding
Amended Series A Preferred Stock will be required for the
issuance of any class or series of stock ranking prior to the
Amended Series A Preferred Stock, as to dividends, liquidation
rights and for certain amendments to the Company's Certificate of
Incorporation that adversely affect the rights of holders of the
Amended Series A Preferred Stock.
On May 20, 1997, $8.0 million of the Secured Subordinated
Debt was repaid, with proceeds from the Equity Offering, to those
institutional investors who purchased Amended Series A Preferred
Stock in the Equity Offering. Accrued interest through May 20,
1997, totaling approximately $1.0 million, was paid to those
institutional investors by issuance of 11,816 shares of Amended
Series A Preferred Stock and 2,008,720 warrants to purchase
Common Stock.
On November 3, 1997, 12,906 shares of Amended Series A
Preferred Stock were issued in respect of the dividend payable
November 1, 1997, in the amount of $1.1 million.
Effective November 10, 1997, the outstanding shares of
Series A Preferred Stock and Series E Preferred Stock were
amended, to provide for the reclassification and combination of
those series of preferred stock into Amended Series A Preferred
Stock. As a result of this amendment the outstanding shares of
Series A Preferred Stock and Series E Preferred Stock were
converted into approximately 672,631 shares of Amended Series A
Preferred Stock. All dividend arrearages, and accrued and unpaid
dividends on the Series A Preferred Stock and Series E Preferred
Stock will be paid in additional shares of Amended Series A
Preferred Stock upon exchange of old certificates for new
certificates.
Common Stock
- ------------
During the nine months ended September 30, 1997, the Company
issued an aggregate of 11.8 million shares of Common Stock, of
which 8.3 million shares were issued in connection with the
exercise of stock purchase warrants with the Company receiving
approximately $1.3 million; approximately 3.5 million were sold
to raise working capital, generating net proceeds of
approximately $0.7 million; and 819 shares were converted to
Common Stock by a holder of Series A Preferred Stock. Also
during this period, 1.4 million shares of Common Stock were
returned to the Company in partial payment of the purchase price
for shares of Series F Preferred Stock.
(6) 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 with China National Oil and Gas
Exploration and Development Corporation ("CNODC") in February
1993. Under the terms of the Production Sharing 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 Production Sharing Agreement includes the following
additional principal terms:
The Production Sharing 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 Contractor (the Company
and its partner as a group). 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. The Contractor has
drilled two wildcat wells, satisfied the seismic
acquisition and minimum expenditure requirements
and has received an extension allowing the
drilling of the third wildcat well during the
second exploration phase.;
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. (If the Contractor elects
to proceed with the third phase of the Contract,
the minimum expenditure requirement of the third
phase has been satisfied.)
The Production Sharing Agreement may be terminated by
the Contractor at the end of each phase of the
Exploration period, without further obligation.
o The Exchange has, since November 1996, continued to review
the Company's listing eligibility, in that the Company does not
meet certain financial requirements for continued listing. The
Company intends to satisfy the Exchange's concerns regarding the
Company's continuing listing eligibility.
o On April 10, 1997, the Company, through a wholly owned
subsidiary sold $3.1 million of notes and 10.1 million warrants
to purchase a like number of shares of Common Stock of the
Company at $0.01 per share. The proceeds from these notes were
immediately paid to the operator for unpaid cash calls on the
Zhao Dong Block. These notes were repaid in July 1997, from
proceeds of the Equity Offering. In two separate borrowings in
August and September 1997, the same subsidiary reborrowed from
the same lenders an aggregate of $3.0 million to pay Apache for
cash calls. These notes were repaid on October 15, 1997, from
proceeds of the Note Offering.
o The Company has future commitments of $1.0 million
associated with its joint venture contract to enter the
lubricating oil business in China.
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 July 1997, China Investment and Development Corporation
("CIDC"), holders of the Company's Series B, Cumulative Preferred
Stock, $.01 par value per share ("Series B Preferred Stock") sued
the Company and each of its directors in an action entitled China
Investment and Development Corporation vs. XCL Ltd.; Marsden W.
Miller, Jr.; John T. Chandler; David A. Melman; Fred Hofheinz;
Arthur W. Hummel, Jr.; Michael Palliser; and Francis J.
Reinhardt, Jr. (Court of Chancery of the State of Delaware in and
for New Castle County, Civil Action No. 15783-NC). The suit
alleges breach of (i) contract, (ii) corporate charter, (iii)
good faith and fair dealing and (iv) fiduciary duty with respect
to the alleged failure of the Company to redeem CIDC's Series B
Preferred shares for an aggregate claimed redemption price of
$5.0 million, in accordance with the terms of the Purchase
Agreement and Certificate of Designation. In addition, CIDC
alleged that the individual directors tortiouosly interfered with
its contractual relationship with the Company. The Company
believes it has fulfilled its obligations under the Preferred
Stock and that the Preferred Stock is not in default, and
accordingly an answer has been filed on behalf of the Company
denying liability and a motion to dismiss has been filed on
behalf of the directors. The Company has indemnification
obligations to the directors on the claims asserted against the
directors. The Company intends to vigorously defend this action.
The Company is presently in negotiations with CIDC to settle this
action.
o The Zhao Dong F-1 wildcat well was spudded on October 9,
1996, and has been drilled to a total measured depth of 4,378
meters or 3,300 meters true vertical depth. The well encountered
indications of sands, some with hydrocarbon shows, in the primary
objective Shahejie section, but downhole conditions prevented
adequate evaluation with electric logs to determine reservoir
quality and therefore commerciality. An unsuccessful attempt to
sidetrack the original F-1 hole was made. The F-1 was drilled
pursuant to a turnkey drilling contract. In accordance with the
terms of the drilling contract, the turnkey driller has elected
to demobilize the rig and has moved it off location. Apache, as
operator, is now in negotiations with the turnkey driller as to
what is due under that contract. The Company has been carried on
the drilling of this well by Apache and has, therefore, not
incurred any cost in the drilling of this well. An evaluation of
drilling procedures and a re-evaluation of the exploration merit
of redrilling the F-1 well must be made prior to any decision on
how to proceed. The Company is waiting to receive Apache's
recommendation on how to proceed.
o In connection with the Lutcher Moore Tract, payments of
principal and interest on the Seller Notes are past due and in
July 1997, certain of the sellers have demanded payment. The
Company is negotiating an extension of the maturity dates of the
Seller Notes, however, should the Company be unsuccessful in
negotiating further extension, the holders have recourse only to
the property itself, as the Company is not liable for the debt.
The book value of this property is $12.2 million, therefore, if
the Company should allow the mortgagees to repossess the property
for nonpayment of the mortgage debt, the Company would incur a
substantial loss.
o Effective August 1, 1997, the Company entered into a
Services Agreement with an attorney who also serves as an
executive officer of the Company. The Agreement is terminable by
either party at any time without cause. Under the Agreement, the
attorney is engaged to act as counsel to the Company to perform
such services as the Company may request of him in that capacity
from time to time. In general, compensation for services under
the Services Agreement will be at the rate of $175 per hour for
up to 80 hours per month. Also, under the Services Agreement, the
Company has agreed to provide the attorney with office space,
supplies, secretarial assistance, a library allowance,
professional liability insurance, reimbursement for continuing
legal education expenses and bar dues. Under the Services
Agreement the attorney may, except as prohibited by law or the
Louisiana Rules of Professional Responsibility, represent other
clients and engage in business for his own account.
The attorney received from the Company a $100,000 loan
to replace benefits that he forfeited when he withdrew
as a partner of a law firm to become Executive Vice
President of the Company. The loan is to be repaid
over eight years from annual bonus payments equal to
interest, at the rate of 6.25% per annum, plus one-
eighth of the original principal balance to be paid by
the Company each year and shall be forgiven in its
entirety if (i) the Company shall fail to pay timely
any such bonus payment, shall breach the Services
Agreement or shall terminate his employment without
"cause" or (ii) the officer terminates his employment
with "good reason," in either case as such terms are
defined in the note evidencing such loan.
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.
(7) Stock Options
On June 5, 1997, the Board of Directors unanimously approved
amendment and restatement of the 1992 Long Term Stock Incentive
Plan ("1997 LTSIP Restatement"), effective as of June 1, 1997,
which is being submitted for shareholder approval at the
Company's Special Meeting in Lieu of Annual Meeting of
Shareholders scheduled for December, 1997.
Under the 1997 LTSIP Restatement, non-qualified stock
options to purchase an aggregate of 30 million shares of Common
Stock and an aggregate of 170,000 shares of Amended Series A
Preferred Stock were granted to certain executive officers, non-
executive officers and directors of the Company. The option
exercise price for the Common Stock is $0.25 per share and the
option exercise price for the Amended Series A Preferred Stock is
$85.00 per share, each being not less than the fair market value
at the date of grant as determined by the Compensation Committee
of the Board of Directors pursuant to provisions in the 1997
LTSIP Restatement. The closing price on the Exchange for the
Common Stock was $0.21875 per share on June 2, 1997 and the fair
market value of the Amended Series A Preferred Stock, based upon
the last sales price information in the PORTAL Market as supplied
by Jefferies & Company, Inc. was $85.00 per share on June 2,
1997.
Effective June 1, 1997, Restricted Stock Awards for an
aggregate of 20 million shares of Common Stock were granted to
two executive officers. In addition, a Restricted Stock Award
for 20,000 shares of Amended Series A Preferred Stock was granted
to one of those executive officers. The Restricted Stock Awards
are subject to forfeiture under certain conditions if employment
is terminated before specified "lapse dates." The lapse dates,
number of shares and per share fair market value of the Company's
Common Stock or Amended Series A Preferred Stock, as the case may
be, that must be achieved when forfeiture restrictions cease to
become applicable are set out in the following table.
Number of Fair Market Value
Number of Fair Market Value Amended Series A Per Amended Series
Lapse Dates Common Shares Per Common Shares Preferred Shares A Preferred Share
- ----------- ------------- ----------------- ---------------- -------------------
June 1, 1999 2,500,000 $0.3802 4,000 $112.41
June 1, 2000 4,500,000 $0.4372 6,000 $129.27
June 1, 2001 7,000,000 $0.5028 10,000 $170.96
June 1, 2002 6,000,000 $0.5782 -- --
---------- ------
20,000,000 20,000
Subject to shareholder approval and pursuant to the 1997
LTSIP Restatement, the Board has approved an Appreciation Option
for the Chairman of the Board. The Board has determined that the
Appreciation Option to the Chairman is in the best interests of
the Company and its shareholders in order to, and is required to,
retain his services. The Appreciation Option Agreement provides
the Chairman with the right, upon his payment of the Exercise
Price (as defined below) to additional compensation (payable in
cash or in shares of Common Stock or Preferred Stock or a
combination thereof, as elected by the Company) based upon 5% of
the difference between the market capitalization of the Company
as of June 1, 1997 (as defined) and the market capitalization of
the Company as of the date that he exercises the Appreciation
Option (as defined). On June 1, 1997, the aggregate market
capitalization of the Company, as computed in accordance with the
Appreciation Option Agreement, was $161,547,223 million. Upon
exercise of his Option, in the event the Company elects to settle
the Option with shares of Stock, the Chairman must pay the
Company twenty percent (20%) of the amount he is entitled to
receive upon exercise of the Appreciation Option (before any
reduction as hereinafter set forth), or any increment thereof, up
to an aggregate maximum of $5 million (the "Exercise Price") in
cash. In the event the Company elects to settle the Option in
cash, the amount of cash the Chairman will receive will be
reduced by the amount of the Exercise Price. Because the
Chairman's Appreciation Option contemplates compensation
determined with reference to increases in the Company's market
capitalization without restriction, there is no effective limit
on the amount of compensation which may become payable
thereunder. The Chairman may exercise his Appreciation Option as
of any June 1 or December 1 commencing June 1, 2002 upon 45 days
written notice, in whole or in 10% increments. The Appreciation
Option expires on June 1, 2007 and will remain exercisable at any
time prior to such expiration notwithstanding his termination of
employment with the Company unless such employment is terminated
by the Company for "cause" or is terminated by him without "good
reason." In the event of a "change of control of XCL" the
Appreciation Option will become immediately exercisable and the
Company will be obligated to pay the Chairman upon any exercise
of his Appreciation Option at least 40% in cash, of the net
amount payable in respect of such exercise. This obligation may
impede the consummation of a change of control of the Company.
The Company anticipates that the aforementioned awards will
result in a significant non-cash charge to earnings which is
expected to be recognized in the fourth quarter. As a result of
the accounting treatment for such non-cash charge, the Company
does not expect any change to its net worth. As of the date
hereof the amount of such charge is indeterminate.
XCL LTD. AND SUBSIDIARIES
March 31, 1997
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.
- ------------------------------------------------
See the discussion in the section entitled "Disclosure
Regarding Forward-Looking Information" herein.
Liquidity and Capital Resources
- -------------------------------
As previously reported, the Company completed a $75 million
debt offering (the "Note Offering") and a $25 million preferred
stock offering (the "Equity Offering") on May 20, 1997
(collectively referred to as the "Offerings"). Under terms of
the trust indenture two cash collateral accounts were established
(reflected in the balance sheet as cash held in escrow), one for
$14.6 million (representing the aggregate amount of interest due
on the Notes through November 1, 1998) and the other for $60.4
million. On October 15, 1997, the $60.4 million (principal
balance) of funds held in the cash collateral account pursuant to
the trust indenture were released. The pro forma balance sheet
at September 30, 1997, reflects the release of these funds and
the concurrent repayment of $17.3 million owed to ING (U.S.)
Capital Corporation ("ING") under its Credit Facility, $7.0
million of Secured Subordinated Debt, $3.0 million of unsecured
notes issued by XCL-China Limited and certain other liabilities.
As a result of these transactions, on a pro forma basis, the
Company had an operating cash balance of $29.8 million. At
September 30, 1997, on a pro forma basis, the Company had working
capital of $28.4 million, including $14.63 million held in escrow
(representing the aggregate amount of interest payable on the $75
million Notes through November 1, 1998) and $4.5 million in
limited recourse debt collateralized by the Lutcher Moore Tract.
At September 30, 1997, the Company had $7.0 million in
accrued interest of which $3.7 million was in respect of the Note
Offering, which will be funded from the funds escrowed for that
purpose. Additionally, the Company has approximately $8.7
million in aggregate of dividends in arrears on its preferred
stock. These dividends will not require payment in cash because
such amount is expected to be satisfied through the issuance of
additional preferred stock.
The Company estimates that most of the available cash will
be used for development of the C-D Field on the Zhao Dong Block.
Additional funds of approximately $13 million are expected from
the sale of the Lutcher Moore Tract (the "Lutcher Moore Tract"),
although there can be no assurance as to the timing and amounts
to be obtained. During 1996, litigation was instituted against
the Company in connection with the remaining domestic oil and gas
property held by the Company, effectively impeding the Company's
ability to consummate a sale by casting doubt as to the Company's
rights to certain leases and demanding damages. Upon resolution
of the litigation the Company will resume its efforts to dispose
of these properties. These transactions will provide partial
funding for the Company to repay the limited recourse debt
secured by the Lutcher Moore Tract, and, combined with projected
cash flow, fund the estimated development expenditures and its
contractual exploration obligations.
The Company will incur a loss for fiscal 1997 and
anticipates incurring losses in fiscal 1998 because production
from the Zhao Dong Block is not expected until late in 1998. If
the Company is successful in additional exploratory drilling on
the Zhao Dong Block, or if the Company is successful in
developing additional oil and gas projects, the Company will need
additional funds for capital expenditures and working capital.
The Company believes that in such events funds will be available
to meet these needs. The exact amounts, source and timing of such
financing is not determinable at this time and there are no
assurances it will be available if needed. In addition, the
Company's efforts to secure additional working capital could be
impaired if its common stock is delisted from the AMEX. See Note
6.
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, including the
ability to issue additional debt and equity securities. Issuance
of debt and equity securities may require consent of the holders
of the Senior Secured Notes due May 1, 2004, and of one or more
classes of the Company's equity securities.
Effective November 10, 1997, the Company has completed the
first step toward simplifying its capital structure with the
amendment for recapitalization and combination of its outstanding
Series A, Cumulative Convertible Preferred Stock and Series E,
Cumulative Convertible Preferred Stock into Amended Series A,
Cumulative Convertible Preferred Stock which, together with the
Amended Series A Preferred Stock issued in the Equity Offering,
constitutes a single class of Amended Series A Preferred Stock.
As a result of this reclassification, the Series A Preferred
Stock listing on the London Stock Exchange has been terminated,
and the Company has no plans to list the Amended Series A
Preferred Stock on the London Stock Exchange. However, pursuant
to the terms of a registration rights agreement between the
Company and certain holders of the Amended Series A Preferred
Stock, the Company intends to register the Amended Series A
Preferred Stock under the U.S. Securities Act of 1933, as
amended. Upon such registration being declared effective, the
Company expects to apply for a listing on the American Stock
Exchange for the Amended Series A Preferred Stock. The Company
is also considering a reverse stock split of its Common Stock.
The reverse stock split of the Common Stock will require approval
of the holders of a majority of the outstanding shares of capital
stock entitled to vote thereon at a special stockholders' meeting
planned for the December, 1997.
In addition to capital commitments to fund the Company's
share of the Zhao Dong Block development, the Company has capital
requirements for its lubricating oil and coalbed methane
projects.
As a result of the substantial capital requirements
described above, and the Company's recurring net losses, the
report of the Company's independent accountants dated April 10,
1997, as of, and for the year ended December 31, 1996, contains
an explanatory paragraph regarding the ability of the Company to
continue as a going concern. In the offering memoranda dated May
20, 1997, for the Note Offering and Equity Offering, it was noted
that the Company's independent accountants indicated that
assuming no adverse conditions occur in respect of the Company's
projected operations, they will issue an unqualified audit report
that does not contain an explanatory paragraph on such
consolidated financial statements.
Other General Considerations
- ----------------------------
The Company believes that inflation has had no material
impact on the Company's 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 federal, state and local
U.S. 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.
New Accounting Pronouncement
- ----------------------------
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards "SFAS No. 128
Earnings Per Share" effective for financial statements issued for
periods ending after December 15, 1997. The board has also
issued Statement No. 129 "Disclosure of Information About Capital
Structure" also effective the same date. The Company does not
believe the effect of adopting these statements will have a
material impact on the Company.
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards "SFAS No. 130,
Reporting Comprehensive Income" effective for fiscal years
beginning after December 15, 1997. Management believes adoption
of this statement will have a financial statement presentation
impact only and will not have an effect on the Company's
financial position or results of operations.
In June, 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards "SFAS No. 131,
Disclosure about Segments of an Enterprise and Related
Information" effective for financial statements for periods
beginning after December 15, 1997. Management believes adoption
of this statement will have a financial statement disclosure
impact only and will not have an effect on the Company's
financial position or results of operations. This statement need
not be applied to interim financial statements in the initial
year of its application, but comparative information for interim
periods in the initial year of application is to be reported in
financial statements for interim periods in the second year of
application.
Results of Operations
- ---------------------
During the three and nine month periods ended September 30,
1997, the Company incurred net losses of $0.4 million and $2.8
million, respectively, as compared to net losses of $1.7 million
and $6.4 million, respectively, during the corresponding periods
in 1996. The loss in 1996 reflects the effect of a $2.0 million
writedown and $0.7 million loss on sale of the Company's
investments.
Oil and gas revenues for the three and nine month periods
ended September 30, 1997, were $52,000 and $189,000, compared to
$94,000 and $1.0 million during the corresponding period in 1996.
Revenues will continue to decline as the Company completes its
announced program of selling substantially all of its U.S.
producing properties. Interest income increased $1.0 million
during the three month period and $1.6 million during the nine
month period ended September 30, 1997, compared with the same
periods in 1996. The primary reason for these increases was the
interest earned on the $75 million in escrow from the Note
Offering. Interest expense increased in the third quarter of
1997, as compared to the corresponding period in 1996, because of
additional borrowings and higher interest rates.
As the Company continues to focus its resources on
exploration and development of the Zhao Dong Block future oil and
gas revenues will initially be directly related to the degree of
drilling success experienced on the Zhao Dong Block. 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 increased $82,000 during
the three months ended September 30, 1997 as compared to the same
period in 1996 due to additional professional fees and general
increases in office expenses. For the nine months ended
September 30, 1997, general and administrative expenses decreased
$378,000 compared to the same period in 1996. The decrease
during the nine months ended September 10, 1997, compared to the
same period in 1996 was the result of less domestic activity in
that the Company is now focused on development of the China
properties.
XCL LTD. AND SUBSIDIARIES
September 30, 1997
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In July 1997, China Investment and Development Corporation
("CIDC"), holders of the Company's Series B, Cumulative Preferred
Stock, $.01 par value per share ("Series B Preferred Stock") sued
the Company and each of its directors in an action entitled China
Investment and Development Corporation vs. XCL Ltd.; Marsden W.
Miller, Jr.; John T. Chandler; David A. Melman; Fred Hofheinz;
Arthur W. Hummel, Jr.; Michael Palliser; and Francis J.
Reinhardt, Jr. (Court of Chancery of the State of Delaware in and
for New Castle County, Civil Action No. 15783-NC). The suit
alleges breach of (i) contract, (ii) corporate charter, (iii)
good faith and fair dealing and (iv) fiduciary duty with respect
to the alleged failure of the Company to redeem CIDC's Series B
Preferred shares for a claimed aggregate redemption price of $5.0
million, in accordance with the terms of the Purchase Agreement
and Certificate of Designation. In addition, CIDC alleged that
the individual directors tortiouosly interfered with its
contractual relationship with the Company. The Company believes
it has fulfilled the obligations of the Preferred Stock and that
the Preferred Stock is not in default, and accordingly an answer
has been filed on behalf of the Company denying liability and a
motion to dismiss has been filed on behalf of the directors. The
Company has indemnification obligations to the directors on the
claims asserted against the directors. The Company intends to
vigorously defend this action. The Company is presently in
negotiations with CIDC to settle this action.
Other than as disclosed in the Company's Annual Report on
Form 10-K, 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 On July 24, 1997, the Company issued 2,933 shares of Series
E Preferred Stock to the holders thereof in respect of a dividend
payable, pursuant to the terms thereof, in additional shares of
Series E Preferred Stock.
o On July 24, 1997, the Company issued 1,261 shares of Series
F Preferred Stock to the holders thereof in respect of a dividend
payable, pursuant to the terms thereof, in additional shares of
Series F Preferred Stock.
o On November 11, 1997, the Company issued 400,000 shares of
Common Stock and stock purchase warrants to acquire 200,000
shares of Common Stock to a consultant, as compensation pursuant
to an agreement dated effective as of February 20, 1997.
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.
(a) Debt
Until October 15, 1997, the Company had been in default of
interest payments since October 1, 1996 and principal payments
since January 2, 1997 to ING, resulting in a default under the
Credit Facility and, by virtue of certain cross default
provisions, the Secured Subordinated Debt. Under the terms of a
Forbearance Agreement between the Company, XCL-China and ING, ING
agreed that it would not accelerate the maturity of, or commence
any foreclosure procedures to collect, the indebtedness under the
Credit Facility until May 31, 1997. As of May 20, 1997, the
closing date for the Offerings, ING's agreement to forbear was
conditionally extended to November 1, 1997. On October 15, 1997,
the Credit Facility and the Secured Subordinated Notes were
repaid from proceeds of the Note Offering and concurrently the
stock of XCL-China Ltd., the Company's principal operating
subsidiary, was released by ING and pledged as security for the
Notes.
(b) Preferred Stock
Until November 10, 1997, the Company was in default in
payment of dividends on the Series A Preferred Stock. The Series
A Preferred Stock dividend requirements were approximately 2.9
million pounds sterling UK annually (approximately $4.7 million)
and the Company had insufficient liquidity to pay such amounts.
Further, the Credit Facility restricted payment of cash
dividends. On November 7, 1997, the Company received consent
from approximately 88.85% of the holders of its Series A
Preferred Stock to amend the terms of such Preferred Stock to the
terms of the Company's Amended Series A Preferred Stock. In
connection with such amendment proposal the Company paid
approximately $900,000, plus interest thereon, remaining to be
paid with respect to the June 30, 1995 dividend, in additional
shares of Amended Series A Preferred Stock. Pursuant to the
terms of the amendment proposal, the Board of Directors declared
payable, in additional shares of Amended Series A Preferred
Stock, the June 30, 1996, December 31, 1996 and June 30, 1997
dividends, conditional upon consent to the amendment. Further,
all accrued dividends from July 1, 1997 through November 9, 1997
will be paid in additional shares of Amended Series A Preferred
Stock. As a consequence of the approval of the amendment,
effective November 10, 1997, the Series A Preferred Stock was
converted and reclassified into an aggregate of approximately
611,555 shares of Amended Series A Preferred Stock. The Amended
Series A Preferred Stock has not been listed on the London Stock
Exchange, and concurrent with the approval of the amendment, the
listing on the London Stock Exchange for the Series A Preferred
Stock was terminated. Pursuant to the registration rights
agreement between the Company and the holders of the Amended
Series A Preferred Stock, the Company intends to register the
shares of Amended Series A Preferred Stock under the Securities
Act. Upon such registration being declared effective, the
Company expects to apply for a listing on the American Stock
Exchange for the Amended Series A Preferred Stock.
The holders of the Series B Preferred Stock, in a legal
action brought against the Company and its directors, have
alleged that the Company is in default of the terms of the Series
B Preferred Stock. See Part II - Item 1 "Legal Proceedings."
Item 4. Submission of Matters to a Vote of Security-Holders
By Circular dated October 21, 1997, the Company solicited
the written consent of the holders of the Company's Series A
Preferred Stock for approval to amend such series of Preferred
Stock to conform to the terms of the Company's recently issued
Amended Series A Preferred Stock. The amendment proposal also
provided for the payment of accrued and unpaid dividends and
dividend arrearages to be paid in additional shares of Amended
Series A Preferred Stock, upon consent to the amendment. The
amendment further provided that upon consent the Company would
not seek a listing of the Amended Series A Preferred Stock on the
London Stock Exchange, thereby resulting in the loss of the
listing on the London Stock Exchange for the Series A Preferred
Stock. The consent of at least two-thirds of the issued and
outstanding shares of Series A Preferred Stock held of record on
October 10, 1997, was required for approval. The amendment was
approved and became effective on November 10, 1997. A total of
569,838 shares were cast as follows with respect to the
amendment:
Consenting: 569,838
Non-Consenting: Nil
By Circular dated October 21, 1997, the Company solicited
the written consent of the holders of the Company's Series E
Preferred Stock for approval to amend such series of Preferred
Stock to conform to the terms of the Company's recently issued
Amended Series A Preferred Stock. The amendment proposal also
provided for the payment of accrued and unpaid dividends to be
paid in additional shares of Amended Series A Preferred Stock,
upon consent to the amendment. The consent of at least two-
thirds of the issued and outstanding shares of Series E Preferred
Stock held of record on October 10, 1997, was required for
approval. The amendment was approved and became effective on
November 10, 1997. A total of 34,989 shares were cast as follows
with respect to the amendment:
Consenting: 34,989
Non-Consenting: Nil
There were no matters submitted to a vote of holders of the
Common Stock of the Company during the period covered by this
report.
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 September 2, 1997,
to report the sale of 638,000 shares of Common Stock, through the
exercise of stock purchase warrants, pursuant to Regulation S
under the Securities Act.
A current report on Form 8-K was filed on September 24,
1997, to report the issuance, pursuant to Regulation S under the
Securities Act, of 3 million stock purchase warrants as
compensation for services to be performed under a consulting
agreement.
A current report on Form 8-K was filed on October 17, 1997,
to report (i) the test results of the Company's C-4 well on the
Zhao Dong Block, (ii) the release of funds held in escrow from
the May 20, 1997 Note Offering, and (iii) the sale of 360,000
shares of Common Stock, through the exercise of stock purchase
warrants, pursuant to Regulation S under the Securities Act.
A current report on Form 8-K was filed on November 5, 1997,
to report the sale of 1,500,000 shares of Common Stock, through
the exercise of stock purchase warrants and the issuance of an
aggregate of 800,000 shares of Common Stock as compensation to a
resident of Taiwan, all pursuant to Regulation S under the
Securities Act.
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 and Chief Executive
Officer
Date: November 14, 1997
INDEX TO EXHIBITS
(a) Exhibits required by Item 601 of Regulation S-K.
2.0 Not applicable
3(i) Articles of incorporation
3.1 Certificate of Incorporation of the Company dated
December 28, 1987. (A)(i)
3.2 Certificate of Amendment to the Certificate of
Incorporation of the Company dated March 30, 1988.
(A)(ii)
3.3 Certificate of Amendment to the Certificate of
Incorporation of the Company dated June 22, 1990. (B)(i)
3.4 Certificate of Amendment to the Certificate of
Incorporation of the Company dated June 12, 1993. (C)
3.5 Certificate of Amendment to the Certificate of
Incorporation of the Company dated June 8, 1992, whereby
Article Fourth was amended to increase the number of shares
of Common Stock authorized. (D)(i)
3.6 Certificate of Amendment to the Certificate of
Incorporation of the Company dated September 29, 1993,
whereby Article Fourth was amended to increase the number of
shares of Common Stock authorized. (E)(i)
3.7 Certificate of Amendment dated July 1, 1994, whereby
Article Fourth was amended to increase the number of shares
of Common Stock and the name of the Company was changed.
(F)(i)
3.8 Certificate of Amendment dated June 19, 1995, whereby
Article Fourth was amended to increase the number of shares
of Common Stock. (N)(i)
3.9 Certificate of Amendment dated July 30, 1996, whereby
Article Fourth was amended to increase the number of shares
of Common Stock and Preferred Stock. (Q)(i)
3(ii) Amended and Restated Bylaws of the Company as currently
in effect. (A)(iii)
4.0 Instruments defining rights of security holders,
including indentures:
4.1 Form of Common Stock Certificate. (A)(iv)
4.2 Certificate of Designation of Series A, Cumulative
Convertible Preferred Stock. (G)
4.3 Form of Series A, Cumulative Convertible Preferred Stock
Certificate. (B)(ii)
4.4 Certificate of Designation of Series B, Cumulative
Preferred Stock. (H)(i)
4.5 Form of Series B, Cumulative Preferred Stock Certificate.
(H)(ii)
4.6 Form of Class B Warrants issued to China Investment &
Development Co. Ltd. to purchase 2,500,000 shares of Common
Stock at $2.00 per share payable upon redemption of the
Series B, Cumulative Preferred Stock. (H)(iii)
4.7 Form of Amendment to Certificate of Designation of Series
B Preferred Stock dated August 7, 1992. (D)(ii)
4.8 Certificate of Designation of Series C, Cumulative
Convertible Preferred Stock. (E)(ii)
4.9 Copy of Amendment to Certificate of Designation of Series
C Preferred Stock dated February 18, 1994.(I)(i)
4.10 Form of Series C, Cumulative Convertible Preferred Stock
Certificate. (I)(iii)
4.11 Certificate of Designation of Series D, Cumulative
Convertible Preferred Stock. (I)(iv)
4.12 Form of Amendment to Certificate of Designation of
Series D Preferred Stock dated January 24, 1994. (I)(ii)
4.13 Form of Series D, Cumulative Convertible Preferred Stock
Certificate. (E)(v)
4.14 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.
(I)(iii)
4.15 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. (J)
4.16 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. (I)(iv)
4.17 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. (I)(v)
4.18 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. (F)(ii)
4.19 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. (F)(iii)
4.20 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. (F)(iv)
4.21 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. (F)(v)
4.22 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. (F)(vi)
4.23 Form of Amendment to Certificate of Designation of
Series B Preferred Stock dated June 30, 1994. (F)(vii)
4.24 Form of Warrant Agreement and Stock Purchase Warrant
dated January 31, 1995, to purchase 100,000 shares of Common
Stock at an exercise price of $.75 per share, subject to
adjustment, issued to Energy Advisors, Inc. (L)(i)
4.25 Copy of Amendment to Certificate of Designation of
Series A Preferred Stock dated October 31, 1995. (N)(ii)
4.26 Copy of Certificate of Designation of Series E,
Cumulative Convertible Preferred Stock dated November 2,
1995. (N)(iii)
4.27 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 (O)(i)
4.28 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 (O)(ii)
4.29 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 (O)(iii)
4.30 Form of Amendment of Certificate of Designation of
Series A Preferred Stock dated April 11, 1996. (O)(iv)
4.31 Stock Purchase Agreement between the Company and Janz
Financial Corp. Ltd. dated August 14, 1996, whereby clients
of Janz Financial Corp. Ltd. purchased 2,800,000 units
comprised of one shares of Common Stock and one warrant to
purchase one share of Common Stock in a Regulation S
transaction. (P)(i)
4.32 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. (P)(ii)
4.33 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. (P)(iii)
4.34 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. (P)(iv)
4.35 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 (Q)(i)
4.36 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. (Q)(ii)
4.37 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 (Q)(iii)
4.38 Certificate of Designation of Series F, Cumulative
Convertible Preferred Stock, par value $1.00 per share
(Q)(iv)
4.39 Form of Subscription Agreement for Series F, Cumulative
Convertible Preferred Stock with respect to the following
purchases:
Subscriber Shares
Mitch Leigh 18,448
Abby Leigh 1,731
Arthur Rosenbloom 878 (Q)(v)
4.40 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 (Q)(vi)
4.41 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"). (R)(i)
4.42 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"). (R)(ii)
4.43 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. (R)(iii)
4.44 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. (R)(iv)
4.45 Form of Designation of Amended Series A Preferred Stock
dated May 19, 1997. (R)(v)
4.46 Form of Amended Series A Preferred Stock certificate.
(R)(vi)
4.47 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. (R)(vii)
4.48 Form of Global Unit Certificate for 293,765 Units
consisting of Amended Series A Preferred Stock and Warrants
to Purchase Shares of Common Stock. (R)(viii)
4.49 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. (R)(ix)
4.50 Certificate of Amendment to the Certificate of
Designation of Series A, Cumulative Convertible Preferred
Stock, par value $.01 per share dated November 10, 1997 *
4.51 Certificate of Amendment to the Certificate of
Designation of Series E, Cumulative Convertible Preferred
Stock, par value $.01 per share dated November 10, 1997 *
4.52 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. *
4.53 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. *
10.0 - Material Contracts
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. (E)(vi)
10.2 $35,000,000 Credit Agreement dated as of January 31,
1994 between the Company and Internationale Nederlanden
(U.S.) Capital Corporation ("INCC"), as Agent. (I)(vi)
10.3 Copy of Subordination Agreement among the Company, INCC
and the holders of the Secured Notes dated. (I)(vii)
10.4 Form of First Amendment of Secured Subordinated Note
dated January 31, 1994. (I)(viii)
10.5 Form of First Amendment of Limited Recourse Secured
Lease Note dated January 31, 1994. (I)(ix)
10.6 Stock Pledge Agreement dated January 31, 1994, among the
Company and INCC. (I)(x)
10.7 Deed of Trust, Mortgage, Assignment, Security Agreement
and Financing Statement from XCL-Texas, Inc. to INCC dated
January 31, 1994. (I)(xi)
10.8 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.
(I)(xii)
10.9 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.
(I)(xiii)
10.10 Letter Agreement dated May 25, 1994 between the
Company, L.M. Holdings Associates, L.P. and vendors holding
Purchase Note B with respect to the Lutcher Moore Tract.
(E)(vii)
10.11 Letter Agreement dated June 30, 1994 between the
Company, China Investment & Development Co. Ltd. and China
Investment and Development Corporation. (F)(ix)
10.12 Letter Agreement dated July 10, 1994 between the
Company and holders of the Lease Notes. (F)(x)
10.13 Stock Purchase Agreement between the Company and
Provincial Securities Limited dated May 17, 1994. (F)(xi)
10.14 Consulting agreement between the Company and Sir
Michael Palliser dated April 1, 1994. (K)(i)
10.15 Consulting agreement between the Company and Mr. Arthur
W. Hummel, Jr. dated April 1, 1994. (K)(ii)
10.16 Letter Agreement between the Company and Mr. William
Wang dated June 2, 1992, executed effective February 10,
1993. (K)(iii)
10.17 First Amendment to Credit Agreement between the Company
and Internationale Nederlanden (U.S.) Capital Corporation
dated April 13, 1995. (L)(ii)
10.18 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. (L)(iii)
10.19 Purchase and Sale Agreement dated May 10, 1995, between
XCL Land, Ltd., a wholly owned subsidiary of the Company
("Seller") and The Succession of Edward M. Carmouche,
Matilda Gray Stream, Harold H. Stream, III, The Opal Gray
Trust, Matilda Geddings Gray Trust for Harold H. Stream,
III, Matilda Geddings Gray Trust for William Gray Stream,
Matilda Geddings Gray Trust for Sandra Gray Stream, M.G.
Stream Trust for Harold H. Stream, III, M.G. Stream Trust
for William Gray Stream, and M.G. Stream Trust for Sandra
Gray Stream ("Purchasers") whereby the Purchasers will
acquire Seller's fee interest in and to a parcel of
southwestern Louisiana land known as the Phoenix Lake
Tract. (L)(iv)
10.20 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. (L)(v)
10.21 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. (M)(i)
10.22 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. (M)(ii)
10.23 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. (M)(iii)
10.24 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. (M)(iv)
10.25 Letter of Intent dated July 17, 1995 between CNPC
United Lube Oil Corporation and XCL Ltd. for discussion of
further projects. (M)(v)
10.26 Form of Letter Agreement dated June 26, 1995
between the Company and three of its U.S. holders of
Series A Preferred Stock, whereby the following such
holders have agreed to accept Common Stock in respect of
dividends payable December 31, 1994 and June 30, 1995 in the
amounts set forth:
12/31/94 6/30/95
Holder Dividend Dividend Shares
------ -------- -------- -------
Kayne Anderson
Investment Management $627,788.12 $689,238.87 2,225,024
Cumberland Associates $429,056.51 $445,838.59 1,487,294
T. Rowe Price &
Associates, Inc. $159,975.00 $166,232.25 554,543 (M)(vi)
10.27 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. (N)(iv)
10.28 Copy of Second Amendment to Credit Agreement between
the Company and Internationale Nederlanden (U.S.) Capital
Corporation dated effective as of September 29, 1995.
(N)(v)
10.29 Copy of Fee Agreement dated October 26, 1995, between
the Company and EnCap Investments L.C. for past services and
proposed European equity offering. (N)(vi)
10.30 Copy of Engagement Letter dated November 9, 1995,
between the Company and Rauscher Pierce & Clark for a
proposed Unit offering to be conducted in Europe.
(N)(vii)
10.31 Memo of Understanding dated December 14, 1995, between
XCL Ltd. and China National Administration of Coal Geology.
(O)(v)
10.32 Copy of Purchase and Sale Agreement dated December 28,
1995, between XCL Ltd., XCL-Texas, Inc. and Cody Energy
Corporation, for the sale to Cody Energy of the Mestena
Grande Field located in Texas. (O)(vi)
10.33 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. (O)(vii)
10.34 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. (O)(viii)
10.35 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. (O)(ix)
10.36 Copy of Limited Waiver between the Company and
Internationale Nederlanden (U.S.) Capital Corporation
dated April 3, 1996. (O)(x)
10.37 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.
(P)
10.38 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. (Q)(ii)
10.39 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. (Q)(vii)
10.40 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:
Date Purchaser Principal Purchase
Amount Price
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
(Q)(viii)
10.41 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. (Q)(ix)
10.42 Form of Act of Sale between the Company and The
Schumacher Group of Louisiana, Inc. dated March 31, 1997,
where in the Company sold its office building. (Q)(x)
10.43 Amendment No. 1 to the May 1, 1995 Agreement with
Apache Corp. dated April 3, 1997, effective December 13,
1996. (Q)(xi)
10.44 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. (Q)(xii)
10.45 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. (Q)(xiii)
10.46 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.
(Q)(xiv)
10.47 Form of Forbearance Agreement dated April 9, 1997
between the Company and ING (U.S.) Capital Corporation.
(Q)(xv)
10.48 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 (Q)(xvi)
10.49 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. (Q)(xvii)
10.50 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. (Q)(xviii)
10.51 Form of Indenture dated as of May 20, 1997, between the
Company, as Issuer and Fleet National Bank, as Trustee
("Indenture"). (R)(x)
10.52 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). (R)(xi)
10.53 Form of Pledge Agreement dated as of May 20, 1997,
between the Company and Fleet National Bank, as Trustee
(Exhibit C to the Indenture). (R)(xii)
10.54 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). (R)(xiii)
10.55 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). (R)(xiv)
10.56 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). (R)(xv)
10.57 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). (R)(xvi)
10.58 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. (R)(xvii)
10.59 Form of Restated Forbearance Agreement dated effective
as of May 20, 1997, between the Company, XCL-Texas, Inc. and
ING (U.S.) Capital Corporation. (R)(xviii)
10.60 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. (S)(i)
10.61 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. (S)(ii)
10.62 Form of Consulting Agreement dated February 20, 1997,
between the Company and Mr. Patrick B. Collins, whereby Mr.
Collins performs certain accounting advisory services. *
10.63 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. *
10.64 Form of Agreement dated effective October 1, 1997
between the Company and Mr. William Wang, setting forth
compensation for past and future services performed on
behalf of the Company with respect to its projects in China. *
10.65 Form of Services Agreement dated August 1, 1997,
between the Company and Mr. Benjamin B. Blanchet, an officer
of the Company. *
10.66 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. *
11. Not applicable.
15. Not applicable.
18. Not applicable.
19. Not applicable.
22. Not applicable.
23 Not applicable.
24. Not applicable.
27. Financial Data Schedule *
99 Glossary of Terms *
- ------------
* Filed herewith.
(A) Incorporated by reference to the Registration Statement
on Form 8-B filed on July 28, 1988, where it appears as: (i)
through (iii) as Exhibits 3(a) through 3(c), respectively;
and (iv) as Exhibit 4.1.
(B) Incorporated by reference to a Quarterly Report on Form
10-Q filed on August 14, 1990, where it appears as: (i)
Exhibit 3 and (ii) Exhibit 4.4.
(C) Incorporated by reference to an Annual Report on Form 10-
K filed on March 30, 1992, where it appears as Exhibit
(3)(g).
(D) Incorporated by reference to a Quarterly Report on Form
10-Q filed August 14, 1992, where it appears as: (i)
Exhibit 4.25 and (ii) Exhibit 4.28.
(E) Incorporated by reference to a Registration Statement on
Form S-3 (File No. 33-68552) where it appears as: (i)
Exhibit 4.27; (ii) Exhibit 4.14; (iii) Exhibit 4.16; (iv)
Exhibit 4.17; (v) Exhibit 4.19; (vi) Exhibit 10.1; and (vii)
Exhibit 10.6.
(F) 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) through (iii) Exhibits 4.28 through
4.30, respectively; (iv) through (viii) Exhibits 4.34
through 4.38, respectively; and (ix) through (xi) Exhibits
10.8 through 10.10, respectively.
(G) Incorporated by reference to a Current Report on Form 8-K
filed on August 13, 1990, where it appears as Exhibit 4.
(H) Incorporated by reference to Quarterly Report on Form 10Q
filed May 15, 1991, where it appears as: (i) Exhibit 4.1;
(ii) Exhibit 4.2; and (iii) Exhibit 4.5.
(I) Incorporated by reference to Amendment No. 1 to Annual
Report on Form 10-K filed April 15, 1994, where it appears
as: (i) Exhibit 4.35; (ii) Exhibit 4.31; (iii) Exhibit
4.32; (iv) Exhibit 4.36; (v) Exhibit 4.37; (vi) through
(xii) Exhibit 10.41 through Exhibit 10.47, respectively; and
(xii) Exhibit 10.49.
(J) Incorporated by reference to an Annual Report on Form 10K
for the fiscal year ended December 31, 1990, filed April 1,
1991, where it appears as Exhibit 10.27.
(K) 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 (iii) Exhibits 10.22 through 10.24,
respectively.
(L) 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 4.28; and (ii)
through (v) Exhibits 10.25 through 10.28, respectively.
(M) 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 (vi) Exhibits 10.29
through 10.34, respectively.
(N) 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: (i) Exhibit
3.8; (ii) and (iii) Exhibits 4.29 and 4.30, respectively;
and (iv) through (vii) Exhibits 10.35 through 10.38,
respectively.
(O) 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 (iv) Exhibits 4.28
through 4.31, respectively; and (v) through (x)
Exhibits 10.31 through 10.36, respectively.
(P) 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.
(Q) 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 (i) Exhibit 3.9 and (ii) Exhibit
10.38.
(P) 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 (iv) Exhibits 4.31
through 4.34.
(Q) 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 (vi) Exhibits 4.35 through
4.40 and (vii) through (xviii) Exhibits 10.39 through 10.50.
(R) 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.
(S) 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.