SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
XCL LTD.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
XCL LTD.
DEAR SHAREHOLDER:
You are cordially invited to attend the Special Meeting in
Lieu of Annual Meeting of Shareholders of XCL Ltd. to be held at
10:00 a.m., Central Standard Time, on Wednesday, December 17,
1997, in the Acadia Room of the Hotel Acadiana, located at 1801
West Pinhook Road, Lafayette, Louisiana 70508.
The attached materials include the Notice of Special Meeting
in Lieu of Annual Meeting of Shareholders and the Proxy
Statement, which contains information concerning the meeting, the
nominees for election as members of the Board of Directors, a
proposal to amend and restate the Company's Certificate of
Incorporation to effect a one-for-fifteen reverse split of the
Common Stock of the Company, approval of a proposal to amend and
restate the Long Term Stock Incentive Plan, and other relevant
matters.
Management will report on the Company's activities during
the last fiscal year and future plans and prospects of the
Company, and shareholders will have an opportunity to ask
questions about its operations and prospects.
Shareholder interest in the affairs of the Company is
welcomed and encouraged, and it is requested that you please
complete, sign, date, and promptly return your proxy in the
enclosed envelope. Such action will not limit your right to vote
in person if you attend the meeting in person, but will assure
your representation if you cannot attend.
Sincerely,
/s/ Marsden W. Miller, Jr.
MARSDEN W. MILLER, JR.
Chairman of the Board
and Chief Executive Officer
November 20, 1997
XCL LTD.
(a Delaware corporation)
110 Rue Jean Lafitte, 2nd Floor
Lafayette, Louisiana 70508
NOTICE OF SPECIAL MEETING IN LIEU OF ANNUAL MEETING
OF SHAREHOLDERS
To Be Held On December 17, 1997
TO OUR SHAREHOLDERS:
The Special Meeting in Lieu of Annual Meeting of
Shareholders (the "Meeting") of XCL Ltd. (the "Company") will be
held in the Acadia Room of the Hotel Acadiana, located at 1801
West Pinhook Road, Lafayette, Louisiana, on December 17, 1997 at
10:00 a.m., Central Standard Time, to consider and take action on
the following matters:
1. The election of three Class I directors for three-
year terms, each to hold office until the 2000 Annual
Meeting of Shareholders and until a successor shall
have been elected and shall have qualified;
2. To approve the amendment and restatement of the
Company's Certificate of Incorporation to effect a
reverse split of the Company's issued and outstanding
Common Stock on the basis that each fifteen shares then
outstanding will be converted into one share of Common
Stock, par value $.01 per share, with a payment in cash
in lieu of fractional shares to stockholders who
presently own fewer than fifteen shares and certain
other nonsubstantive ministerial changes.
3. To approve the amendment and restatement of the
Company's Long Term Stock Incentive Plan, effective as
of June 1, 1997, and certain grants made thereunder.
4. To approve the award of an Appreciation Option to
M.W. Miller, Jr.
5. The transaction of such other business as may
properly come before the Meeting or any adjournments
thereof.
Only shareholders of record at the close of business on
Monday, November 10, 1997 are entitled to notice of and to vote
at the Meeting.
YOUR PROXY IS IMPORTANT TO ASSURE A QUORUM AT THE MEETING.
WHETHER OR NOT YOU EXPECT TO BE PERSONALLY PRESENT AT THE
MEETING, PLEASE BE SURE THAT THE ENCLOSED PROXY IS PROPERLY
COMPLETED, DATED, SIGNED AND RETURNED WITHOUT DELAY IN THE
ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Lisha C. Falk
LISHA C. FALK
Secretary
November 20, 1997
This document is important and requires your immediate
attention. If you are in any doubt as to the action you should
take, you should consult your stockbroker, bank manager, solicitor,
accountant or other professional advisor immediately.
If you have sold all of your shares of XCL Ltd. after November
10, 1997, the record date of the Meeting, you should hand this
document and accompanying form of proxy to the purchaser or to the
agent through whom the sale was effected for transmission to the
purchaser.
XCL LTD.
(Incorporated with limited liability in the United States of America
under the laws of the State of Delaware)
November 20, 1997
Directors: Principal Executive Office:
- --------- --------------------------
M.W. Miller, Jr.* (Chairman of the Board 110 Rue Jean Lafitte, 2nd Floor
and Chief Executive Officer) Lafayette, Louisiana 70508
J.T. Chandler* USA
David A. Melman*
R. Thomas Fetters, Jr.*
F. Hofheinz*
A.W. Hummel, Jr.*
M. Palliser
F.J. Reinhardt, Jr.*
* U.S. Citizen
PROXY STATEMENT
FOR
SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF SHAREHOLDERS
Solicitation and Voting of Proxies
- ----------------------------------
This Proxy Statement is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of XCL
Ltd. (the "Company") to be voted at the Special Meeting in Lieu of
Annual Meeting of Shareholders (the "Meeting") to be held in the
Acadia Room of the Hotel Acadiana, located at 1801 West Pinhook
Road, Lafayette, Louisiana, on Wednesday, December 17, 1997, at
10:00 a.m., Central Standard Time, and at any adjournment thereof.
The approximate date on which this Proxy Statement and the enclosed
form of proxies are first being sent or given to shareholders of
record is November 20, 1997.
The Board of Directors of the Company has fixed the close of
business on November 10, 1997 as the record date for the
determination of holders of shares of outstanding capital stock
entitled to notice of and to vote at the Meeting. On November 10,
1997, there were outstanding: 301,960,240 shares of common stock,
$.01 par value ("Common Stock") (including 1,042,065 shares held as
treasury stock), the holders of which will be entitled to cast one
vote per share on each matter submitted to a vote at the Meeting;
991,471 shares of Amended Series A, Cumulative Convertible
Preferred Stock, $1.00 par value ("Amended Series A Preferred
Stock"), the holders of which will be entitled to cast one hundred
seventy (170) votes per share on each matter submitted to a vote at
the Meeting; 44,465 shares of Series B, Cumulative Preferred Stock,
$1.00 par value ("Series B Preferred Stock"), the holders of which
will be entitled to cast fifty (50) votes per share on each matter
submitted to a vote at the Meeting; and 22,318 shares of Series F,
Cumulative Convertible Preferred Stock, $1.00 par value ("Series F
Preferred Stock"), the holders of which are not entitled to vote at
the Meeting. The presence, in person or by proxy, of the holders
of issued and outstanding shares of capital stock entitled to cast
an aggregate of 235,845,749 votes at the Meeting will constitute a
quorum for the transaction of business.
Proxies in the accompanying forms which are properly
completed, signed, dated and returned to the Company and not
revoked will be voted in accordance with instructions contained
therein. Shareholders are urged to specify their choices by
marking the appropriate boxes on the enclosed proxy card; if no
choice has been specified, the shares will be voted as recommended
by the Board of Directors. Accordingly, if no choice is specified,
proxies will be voted "FOR" Proposals 1, 2, 3 and 4 set forth in
the accompanying forms of proxy.
Shareholders have 3 choices as to their vote on Proposals 2, 3
and 4 to be voted upon at the Meeting in addition to the election
of directors. Shareholders may vote "FOR" such Proposal or vote
"AGAINST" such Proposal or "ABSTAIN" from voting by checking the
appropriate box. Abstentions and broker non-votes (matters of a non-
routine nature as to which brokers holding shares in street name
have received no instructions from their clients and, accordingly,
do not vote) on Proposal 2 will have the effect of a negative vote
since the amendment of the Certificate of Incorporation requires
the affirmative vote of holders of a majority of the outstanding
shares of voting capital stock entitled to vote on the matter.
Abstentions will be counted in the tabulations of votes and broker
non-votes will not be counted for the purposes of determining
whether Proposals 3 and 4 have been approved since these proposals
require the approval of a majority of the votes entitled to be cast
by the shares of voting capital stock present at the Meeting, in
person or by proxy, and entitled to vote on the matters.
Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction
of business. The Board of Directors hopes that shareholders will
exercise their right to vote rather than abstaining from voting. It
is necessary that proxies be signed, dated and returned for all
such shares to be voted at the Meeting.
Each shareholder who executes the enclosed proxy may revoke it
at any time prior to its being exercised by delivering written
notice to the Secretary of the Company. Mere attendance at the
Meeting will not revoke the proxy, but a shareholder present at the
Meeting, upon notice to the Secretary, may revoke such proxy and
vote in person.
Expenses of Solicitation
- ------------------------
The cost of soliciting proxies will be borne by the Company,
including expenses incurred in connection with the preparation and
mailing of this Proxy Statement and all documents which now
accompany or may hereafter supplement it. The solicitations will
be made in person and by mail. The Company will supply brokers or
persons holding shares of record in their names or in the names of
their nominees for other persons, as beneficial owners, with such
additional copies of proxies and Proxy Statements as may reasonably
be requested in order for such record holders to send one copy to
each beneficial owner, and will, upon request of such record
holders, reimburse them for their reasonable expenses in mailing
such materials.
The Company has retained the services of ChaseMellon
Shareholder Services to solicit proxies on behalf of the Company.
Services to be performed under the engagement will include
consultation with respect to planning and organizing the Meeting,
search and distribution of materials, and solicitation of proxies
from brokers, banks, nominees and other holders. The fee for this
solicitation service is estimated to be approximately $9,500,
depending upon the services performed by the soliciting agent and
will be paid by the Company, as well as reimbursement of out-of-
pocket expenses.
Further, certain directors, officers and employees of the
Company and its financial advisors, not especially employed for
this purpose, may solicit proxies, without additional remuneration
therefor, by mail, telephone, telegraph or personal interview.
Security Ownership of Management
- --------------------------------
The following table sets forth information concerning the
shares of the Company's Common Stock owned beneficially by each
director and nominee for director of the Company and all directors
and officers as a group as of November 10, 1997. As of that date
there were 301,960,240 shares of Common Stock issued and
outstanding, including 1,042,065 shares held as treasury stock.
This table does not include the grants of non-qualified stock
options and restricted stock awards being voted on at this Meeting.
See Proposal 3 herein. The mailing address for all such individuals
is XCL Ltd., 110 Rue Jean Lafitte, 2nd Floor, Lafayette, Louisiana
70508.
Common Stock
--------------------------------
Number Percent
Name of Beneficial Owner of Shares of Class (5)
------------------------ --------- ------------
Marsden W. Miller, Jr............ 9,985,795 (1)(2)(3) 3.24
John T. Chandler................. 3,324,177 (1)(2)(3) 1.10
David A. Melman.................. 2,377,742 (2)(3) 0.78
Benjamin B. Blanchet............. -- (2)(3) --
Fred Hofheinz.................... 100,000 (2) 0.03
Arthur W. Hummel, Jr............. 100,000 (2) 0.03
Sir Michael Palliser............. 100,000 (2) 0.03
Francis J. Reinhardt, Jr......... 652,017 (2)(4) 0.22
R. Thomas Fetters, Jr............ 940,500 (2) 0.31
All directors and officers of the
Company as a group (16 persons).. 19,601,171 (2)(3) 6.51
<FN>
- -------------
(1) Includes 200,000 shares which are subject to an option
granted under agreement dated October 1, 1985 in favor of John
T. Chandler. Such shares are also included in Mr. Chandler's
holding inasmuch as the option is presently exercisable. For
purposes of the total holdings of the group, the shares are
included solely in Mr. Miller's share holdings.
(2) Includes shares of Common Stock which may be acquired
pursuant to options which are exercisable within 60 days.
(3) Includes shares of Common Stock which may be acquired
pursuant to stock purchase warrants exercisable within 60
days.
(4) Includes 100,000 shares of Common Stock owned by Carl H.
Pforzheimer & Co. of which Mr. Reinhardt is a general partner
and 200,000 shares owned by Petroleum and Trading Corporation
of which Mr. Reinhardt is an officer and director. Mr.
Reinhardt disclaims beneficial ownership of the shares owned
by Petroleum and Trading Corporation.
(5) Calculated without taking into account the results of the
Reverse Stock Split (as hereinafter defined). See "Proposal 2
- To Amend and Restate the Company's Certificate of
Incorporation to Effect A Reverse Stock Split."
Security Ownership of Certain Beneficial Owners
- -----------------------------------------------
The following table sets forth as of November 10, 1997, the
individuals or entities known to the Company to own more than
5 percent of the Company's outstanding shares of voting
securities. As of that date there were 301,960,240 shares of
Common Stock, including 1,042,065 shares held as treasury
stock; and 941,471 shares of Amended Series A Preferred Stock
and 44,465 shares of Series B Preferred Stock issued and
outstanding. Except as otherwise indicated, all shares are
owned both of record and beneficially and the Percent of Class
figure does not reflect the results of the Reverse Stock
Split.
Amended Series A Series B
Common Stock (1) Preferred Stock(2) Preferred Stock (3)
---------------- ------------------ -------------------
Name and Address Number of Percent Number of Percent Number of Percent
of Beneficial Owner Shares of Class Shares of Class Shares of Class
------------------- -------- -------- --------- -------- --------- --------
China Investment & Development
Co., Ltd.
16th Floor, No. 563
Chung Hsiao E. Road, Sec. 4
Taipei, Taiwan 18,265,244 (4) 5.75 -- -- 44,465 100
Cumberland Associates
1114 Avenue of the Americas
New York, New York 10036 2,000,000 0.66 187,316 18.89 -- --
KAIM Non-Traditional, L.P.
1800 Avenue of the Stars,
2nd Floor
Los Angeles, California 90026 18,569,965 (5)(6) 5.98 301,463 (7) 30.41 -- --
Mitch Leigh
29 West 57th Street
New York, New York 10019 24,730,000 (8) 7.91 -- -- -- --
<FN>
_______________
(1) This table includes shares of Common Stock issuable upon
conversion of the shares of Amended Series A Preferred
Stock, and Series F Preferred Stock. Each share of Amended
Series A Preferred Stock is convertible into approximately
170 shares of Common Stock. Each share of Series F Preferred
Stock is convertible into approximately 400 shares of Common
Stock. The Series F Preferred Stock is non-voting except in
certain limited circumstances.
(2) The holders of Amended Series A Preferred Stock are
entitled to cast the same number of votes as the shares of
Common Stock then issuable upon conversion thereof
(currently 170 votes) on any matter subject to the vote of
Common Stockholders.
(3) Each share of Series B Preferred Stock is entitled to 50
votes per share.
(4) Includes 3,325,000 shares which are issuable upon
exercise of outstanding Class B Warrants and 14,940,244
shares reserved for redemption of the Series B Preferred
Stock, which may be issued to or sold on behalf of the
holder.
(5) Includes 9,503,845 shares issuable upon the exercise of
outstanding stock purchase warrants exercisable within 60
days.
(6) Includes 281,110 shares owned by Richard A. Kayne, a
director, CEO and President of Kayne Anderson Investment
Management, Inc., the general partner of KAIM Non-
Traditional, L.P. ("KAIM LP"). The shares over which Mr.
Kayne has sole voting and dispositive power are held by him
directly or by accounts for which he serves as trustee or
custodian. The shares over which Mr. Kayne and KAIM LP have
shared voting and dispositive power are held by accounts for
which KAIM LP serves as investment adviser (and, in some
cases as general partner). KAIM LP disclaims beneficial
ownership of these shares, except to the extent that these
shares are held by it or attributable to it by virtue of its
general partner interests in certain limited partnerships
holding such shares. Mr. Kayne disclaims beneficial
ownership of the shares reported, except those shares
attributable to him by virtue of his limited and general
partner interests in such limited partnerships and by virtue
of his indirect interest in the interest of KAIM LP in such
limited partnerships.
(7) Includes 2,127 shares owned by Richard Kayne, a director
CEO and President of Kayne Anderson Investment Management,
Inc., the general partner of KAIM Non-Traditional, L.P.
("KAIM LP") The shares over which Mr. Kayne has sole voting
and dispositive power are held by him directly or by
accounts for which he serves as trustee or custodian. The
shares over which Mr. Kayne and KAIM LP have shared voting
and dispositive power are held by accounts for which KAIM LP
serves as investment adviser (and, in some cases as general
partner). KAIM LP disclaims beneficial ownership of these
shares, except to the extent that these shares are held by
it or attributable to it by virtue of its general partner
interests in certain limited partnerships holding such
shares. Mr. Kayne disclaims beneficial ownership of the
shares reported, except those shares attributable to him by
virtue of his limited and general partner interests in such
limited partnerships and by virtue of his indirect interest
in the interest of KAIM LP in such limited partnerships.
(8) Includes 7,821,600 shares issuable upon conversion of
Series F Preferred Stock; 3,000,000 shares issuable upon the
exercise of outstanding stock purchase warrants exercisable
within 60 days; and 733,600 shares issuable upon conversion
of Series F Preferred Stock owned by Mr. Leigh's wife. Does
not include shares and warrants held in custodial and trust
accounts for Mr. Leigh's minor children, which Mr. Leigh
does not control. Mr. Leigh disclaims beneficial ownership
of all shares held by his wife and minor children.
PROPOSAL 1 - ELECTION OF DIRECTORS
Board of Directors and Committees
- ---------------------------------
Under the Certificate of Incorporation, as amended, and the
Amended and Restated Bylaws of the Company, the Board of
Directors is divided into three classes of directors serving
staggered three-year terms, with one class of directors to be
elected at each annual meeting of shareholders and to hold office
until the end of their term or until their successors have been
elected and qualified. The current Class I directors, whose terms
of office expire at the Meeting are Messrs. David A. Melman, Sir
Michael Palliser and Arthur W. Hummel, Jr., the current Class II
directors are Messrs. Marsden W. Miller, Jr., R. Thomas Fetters,
Jr. and Francis J. Reinhardt, Jr. and the current Class III
directors are Messrs. John T. Chandler and Fred Hofheinz. Mr.
Melman, a Class I director, has elected for personal reasons not
to stand for reelection as a Class I director.
The Board held five meetings in 1996. The average attendance
by directors at these meetings was 97 percent, and all directors
attended 98 percent of the Board and Committee meetings they were
scheduled to attend.
Under Delaware law and the Bylaws, incumbent directors have
the power to fill any vacancies on the Board of Directors,
however occurring, whether by an increase in the number of
directors, death, resignation, retirement, disqualification,
removal from office or otherwise. Any director elected by the
Board to fill a vacancy would hold office for the unexpired term
of the director whose place has been filled; except that a
director elected to fill a newly created directorship resulting
from an increase in the number of directors, whether elected by
the Board or shareholders, would hold office for the remainder of
the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until his
successor is elected and qualified. If the size of the Board is
increased, the additional directors would be apportioned among
the three classes to make all classes as nearly equal as
possible. On June 5, 1997, Mr. Fetters was appointed to fill the
vacancy created by the resignation of Edmund McIlhenny, Jr. as a
Class II director.
Pursuant to the terms of an agreement dated April 17, 1992
between the Company and China Investment & Development Co., Ltd.
("CIDC"), the Company granted to CIDC the right to appoint a
nonvoting observer to the Company's Board of Directors so long as
CIDC owns at least 16,667 shares of Series B Preferred Stock or
their equivalent in Common Stock upon exercise of the Class B
Warrants. CIDC has commenced a legal action against the Company
in respect of its shares of Series B Preferred Stock as described
in greater detail in "Certain Relationships and Related
Transactions" below. The Company is presently in negotiations
with CIDC to settle the action.
There are no arrangements or understandings with any
directors pursuant to which he has been elected a director nor
are there any family relationships among any directors or
executive officers.
The Company has an Executive Committee, whose 1996 members
included Messrs. Miller, Chandler and Melman. The Committee met
twice during 1996 and, subject to certain statutory limitations
on its authority, has all of the powers of the Board of Directors
while the Board is not in session, except the power to declare
dividends, make and alter Bylaws, fill vacancies on the Board or
the Executive Committee, or change the membership of the
Executive Committee. The Company also has a Compensation
Committee whose present members are Messrs. Palliser, Hofheinz,
Hummel and Reinhardt. The Compensation Committee met once in
1996. It is charged with the responsibility of administering and
interpreting the Company's stock option plans; it also recommends
to the Board the compensation of employee-directors, approves the
compensation of other executives and recommends policies dealing
with compensation and personnel engagements. The Company also
has an Audit Committee whose present members are Messrs.
Hofheinz, Hummel, Palliser and Reinhardt. The Audit Committee
met once in 1996. It reviews with the independent auditors the
general scope of audit coverage. Such review includes
consideration of the Company's accounting practices, procedures
and system of internal accounting controls. The Audit Committee
also recommends to the Board the appointment of the Company's
independent auditors engaged by the Company. The Company has no
standing nominating committee, the functions customarily
attributable to such committee being performed by the Board of
Directors as a whole.
Nominees for Directors and Recommendation of the Board
- ------------------------------------------------------
Messrs. Arthur W. Hummel, Jr., Michael Palliser and Benjamin
B. Blanchet, have been nominated by the Board for election as
Class I directors, to hold office for three-year terms expiring
at the 2000 Annual Meeting of Shareholders, and in all cases
until their successors are elected and qualified. Unless
authority to vote for election of directors (or for one or all
nominees) shall have been withheld in the manner provided in the
accompanying proxies, the votes represented by such proxies will
be cast for the election of the nominees set forth herein, or for
one or more substitute nominees recommended by the Board of
Directors in the event that, by reason of contingencies not
presently known to the Board of Directors, one or all nominees
should become unavailable for election. The affirmative vote of
a plurality of the votes cast at the Meeting by shareholders
present in person or by proxy, a quorum being present, is
required for the election of such directors. The Board of
Directors recommends that shareholders vote FOR the nominees for
election as Class I directors.
Biographical Information
- ------------------------
Set forth below is a brief biographical summary of the
nominees for election as directors. Messrs. Arthur W. Hummel, Jr.
and Michael Palliser presently serve as a director.
ARTHUR W. HUMMEL, JR., seventy-seven years old, a director
since April 1994, is the former U.S. Ambassador to the People's
Republic of China during the period 1981 to 1985. He has been
active in consulting with firms doing business in East Asia, and
participating in academic and scholarly conferences in the U.S.
and in the East Asia region since his retirement, after thirty
five years of service, from the State Department in 1985. He is a
member and trustee of many academic, business, and philanthropic
organizations involved in international affairs.
Mr. Hummel was born in China. After education in the U.S.
he returned to China prior to Pearl Harbor. After internment by
the Japanese for approximately two years, he escaped and fought
for approximately three years with Chinese guerrillas behind the
Japanese lines in north China until the end of the war.
He obtained an M.A. (Phi Beta Kappa) in Chinese studies from
the University of Chicago in 1949, and joined the State
Department in 1950. His early foreign assignments include Hong
Kong, Japan and Burma. He was Deputy Director of the Voice of
America in 1961-1963; Deputy Chief of Mission of the American
Embassy in Taiwan, 1965-1968; Ambassador to Burma, 1968-1970;
Ambassador to Ethiopia, 1975-1976; Ambassador to Pakistan, 1977-
1981; and Ambassador to the People's Republic of China, 1981-
1985. He was Assistant Secretary of State for East Asia, 1976-
1977. He has received numerous professional awards from within
and outside the Government.
SIR MICHAEL PALLISER, seventy-five years old, a director
since April 1994, was Chairman of Samuel Montagu & Co. Limited
from 1984 to 1993, the London merchant bank which was owned by
Midland Bank, of which he was Deputy Chairman from 1987 to 1991,
and which is now part of the Hong Kong & Shanghai Banking
Corporation. He was Vice Chairman of Samuel Montagu from 1993 to
1996. Mr. Palliser is a former Director of Shell, BAT Industries,
Bookers, Eagle Star, and United Biscuits.
In 1947, he joined the British Diplomatic Service and served
in a variety of overseas and Foreign Office posts before becoming
head of the Planning Staff in 1964-1966, Private Secretary to the
Prime Minister, 1966-1969, Minister in the British Embassy in
Paris, 1969-1971, and the British Ambassador and Permanent
Representative to the European Communities in Brussels from 1971-
1975. He was, from 1975 until his retirement in 1982, Permanent
Under-Secretary of State in the Foreign and Commonwealth Office,
and Head of the Diplomatic Service. From April to July 1982, he
was a special adviser to the Prime Minister in the Cabinet Office
during the Falklands War. He was appointed a Member of the Privy
Council in 1983. Mr. Palliser, until December 31, 1995 was
President of the China-Britain Trade Group and a director of the
UK-Japan 2000 Group, and until February 29, 1996, was Deputy
Chairman of British Invisibles. Mr. Palliser currently is a
member of the Trilateral Commission, a director of the Royal
National Theatre, and Chairman of the Major Projects Association,
designed to assist in and for the handling of major industrial
projects.
Sir Michael Palliser was educated at Wellington College and
Merton College, Oxford. He saw wartime service in the British
Army with the Coldstream Guards.
BENJAMIN B. BLANCHET, forty-four years old, is Executive
Vice President of the Company. Prior to joining the Company in
August 1997, and since 1983, he was a partner in the law firm of
Gordon, Arata, McCollam & Duplantis, L.L.P. in its Lafayette,
Louisiana office. During that time, he practiced in the areas of
commercial litigation, corporate mergers and acquisitions, oil
and gas transactions, secured financings, securities, tax and
international law matters. Since 1985, he has provided
substantial legal services to the Company, and has been the
Company's lead attorney in China. During that period, Mr.
Blanchet's activities in the Company's China operations have
become more oriented to management responsibilities than legal
ones. He served on the Management Committee of Gordon, Arata,
McCollam & Duplantis, L.L.P. from 1991 to 1997 and as the
Managing Partner of the firm for four years from 1992 through
1995. He practiced law with the firm of Monroe & Lemann in New
Orleans from 1978 through 1983. He is a member of the Louisiana
Bar and admitted to practice before the United States Tax Court.
Mr. Blanchet holds a B.A. degree, with highest distinction, from
the University of Southwestern Louisiana and a J.D., cum laude,
from Harvard Law School.
The following pages contain biographical information
concerning the directors whose terms of office will not expire in
1977.
MARSDEN W. MILLER, JR., fifty-six years old, Chairman, has
been Chief Executive Officer and a director since the Company's
incorporation in 1981. He has engaged in the independent domestic
and international oil business since 1964 on an individual basis,
as a stockholder and officer in several companies and as a
practicing attorney. In addition to the U.S. and China, he has
been involved in various aspects of the oil business in Southeast
Asia, Africa, Europe, South America, several former Soviet
Republics and Canada. Mr. Miller graduated from Louisiana State
University in 1964.
JOHN T. CHANDLER, sixty-five years old, is President of the
Company and Chairman and Chief Executive Officer of XCL-China
Ltd., a wholly owned subsidiary of the Company responsible for
the Company's operations in the PRC. He joined the Company in
June 1982, becoming a director in May 1983. From 1976 until he
joined the Company, he was the Managing Partner of the Oil and
Gas Group of GSA Equity, Inc., New York and director of Executive
Monetary Management, Inc., the parent company of GSA Equity, Inc.
From 1972 to 1976, he was director and Vice President of
Exploration and Production of Westrans Petroleum, Inc. and a
director of a number of its subsidiaries. During 1971 and 1972,
he was a petroleum consultant and manager of the oil department
of Den Norske Creditbank in Oslo, Norway. Mr. Chandler was Vice
President and Manager of the Petroleum Department of the Deposit
Guaranty National Bank in Jackson, Mississippi from 1969 to
August 1971 and, from 1967 to February 1969, was a petroleum
engineer first for First National City Bank and then The Bank of
New York. From March 1963 to July 1967, he was employed by
Ashland Oil and Refining Company as a petroleum engineer. From
1959 to 1963, he held the same position with United Producing
Company, Inc., which was acquired by Ashland Oil.
Mr. Chandler graduated from the Colorado School of Mines
with a Professional degree in petroleum engineering and is a
Registered Professional Engineer in the States of Colorado and
Texas, a member of the Society of Petroleum Evaluation Engineers
and a member of AIME.
FRED HOFHEINZ, fifty-nine years old, is an attorney at law
in Houston, Texas. From 1984 to 1987, he served as President of
Energy Assets International Corporation, a fund management
company, now a subsidiary of Torch Energy Advisors, then served
as a consultant to Torch Energy Advisors until 1989. Mr. Hofheinz
also served as the Mayor of Houston, Texas from 1974 to 1978. He,
along with his family, developed the Astrodome in Houston, and
owned the Houston Astros baseball team until 1974. He is founder
and director of United Kiev Resources, Inc., an oil and gas
production company operating in the Republic of the Ukraine in
the name of its wholly owned subsidiary, Carpatsky Petroleum
Company. Mr. Hofheinz earned a Ph.D. degree in Economics from
the University of Texas and his law degree from the University of
Houston. He has been a director since March 21, 1991.
FRANCIS J. REINHARDT, JR., sixty-seven years old, is a
partner in the New York investment banking firm of Carl H.
Pforzheimer & Co. Mr. Reinhardt has been a partner in the firm
for 30 years and has held various positions, specializing in
independent oil and gas securities, mergers and acquisitions,
placements participation and institutional sales since 1956. Mr.
Reinhardt holds a B.S. degree from Seton Hall University and
received his M.B.A. from New York University. Mr. Reinhardt is a
member of the New York Society of Security Analysts, is a member
of and has previously served as president of the Oil Analysts
Group of New York, is a member and past president of the
National Association of Petroleum Investment Analysts and is a
member of the Petroleum Exploration Society of New York. Mr.
Reinhardt also serves as a director of Mallon Resources
Corporation, a NASDAQ traded petroleum and mining company, as
well as several privately held companies. Mr. Reinhardt has been
a director since December 11, 1992.
R. THOMAS FETTERS, JR., fifty-eight years old is an
independent oil and gas consultant. He has over 25 years of
exploration, production and management experience, both domestic
and foreign. From 1995 to 1997 Mr. Fetters was Senior Vice
President of Exploration of National Energy Group, Inc., Dallas,
Texas, and from February 1990, until September 1995, he was Vice
President of Exploration of XCL Ltd., and President of XCL-China,
Ltd. During 1989, until joining the Company, he served as
Chairman and Chief Executive Officer of Independent Energy
Corporation. From 1984 to 1989, he served as President and Chief
Executive Officer of CNG Producing Company in New Orleans,
Louisiana, and from 1983 to 1984 as General manager of the
Planning and Technology Division of Consolidated Natural Gas
Service Co. in Pittsburgh, Pennsylvania. From 1966 to 1983, he
served in various positions, from Geologist to Exploration
Manager, with several divisions of Exxon, primarily in the Gulf
Coast region of the U.S. and internationally, in Malaysia and
Australia. Mr. Fetters holds B.S. and M.S. degrees in geology
from the University of Tennessee.
Executive Management
- --------------------
Set forth below are brief biographical summaries of members of
executive management who do not serve as directors of the Company.
DANNY M. DOBBS, fifty-two years old, is the Executive Vice
President and Chief Operating Officer of the Company. Mr. Dobbs
previously served as Vice President-Exploration of XCL
Exploration & Production, Inc., a wholly owned subsidiary of the
Company, having joined the Company in 1985 as Senior Exploration
Geologist. From 1981 to 1985 Mr. Dobbs was a consulting
geologist. From 1976 to 1981, he held the position of Exploration
Geologist in the South Louisiana District for Edwin L. Cox in
Lafayette, Louisiana. He served in various geologic positions
with Texaco, Inc. from 1971 to 1976 where his experience
encompassed management, structural and stratigraphic mapping,
coordination of seismic programs and budget evaluation and
preparation. Mr. Dobbs holds B.S. and M.S. degrees in geology
from the University of Alabama, Tuscaloosa, Alabama.
STEVEN B. TOON, forty-nine years old, is Chief Financial
Officer of the Company since October 6, 1997. Prior to joining
the Company, Mr. Toon provided consulting services to the Company
beginning in June 1997. Since 1995 he has been engaged in private
consulting/CPA practice with various clients in the energy and
services sectors in Houston. During the last six months of 1994,
he served as Chief Financial Officer of Xavier Mines,Ltd. He was
Chief Financial Officer of Lend Lease Trucks, Inc. prior to the
sale of its assets to Ryder System Inc. in mid-1994. From 1977
until 1992, Mr. Toon served as Vice President Finance and
Treasurer of United Energy Resources, Inc. and United Gas Pipe
Line Company. From 1971 to 1977, he was a Vice President in Bank
of America's World Banking Division. Mr. Toon holds a B.B.A.
degree from the University of Houston, an M.B.A. degree from
California State University, Fullerton and is a certified public
accountant
RICHARD K. KENNEDY, forty-three years old, is Vice President
of Engineering and is responsible for certain engineering aspects
of the Company's oil and gas operations. From 1987, until he
joined the Company in 1989, he was an operations engineer for
Wintershall Corporation. From 1981 to 1986 he was with Borden
Energy, originally as a petroleum engineer and later as regional
operations manager. From 1979 to 1981, Mr. Kennedy was employed
with Marathon Oil Company as a reservoir engineer, then as a
drilling engineer. He was employed with Shell Oil Company as a
petroleum engineer and reservoir engineer from 1977 to 1979. Mr.
Kennedy graduated from Louisiana Tech University with a B.S.
degree in petroleum engineering. He is a registered professional
engineer in the State of Louisiana and a member of the Society of
Petroleum Engineers.
HERBERT F. HAMILTON, sixty-one years old, is Vice President
Operations of XCL-China Ltd., having joined the Company in 1995.
Mr. Hamilton has more than 30 years of experience in the fields
of engineering, construction, construction management and
consulting on heavy civil works, offshore platforms, submarine
pipelines and construction equipment in over 35 countries. From
1990 to 1993, Mr. Hamilton served as Senior Project Manager for
Earl and Wright in Houston, Texas. From 1993 to 1994, he served
as President and a consultant to Planterra, Inc. in Houston,
Texas and from 1994 until joining the Company, he was an
independent consultant. Mr. Hamilton is a Registered
Professional Engineer and holds a B.S. in Architectural
Engineering from the University of Texas at Austin.
Compliance with Section 16(a) Filing Requirements
- -------------------------------------------------
To the Company's knowledge, instances of failure to file
reports with respect to reportable transactions during the year
ended December 31, 1996, as required by Section 16(a) of the
Exchange Act are as follows:
Reports Number of Known Failure Number
Reporting Person Filed Late Transactions to File Form Transactions
- ---------------- ---------- ------------ ------------ ------------
M. W. Miller, Jr. Form 4 7 - -
All other reporting persons who are officers or directors of
the Company have provided the Company with written
representations that no Form 5 filing was required in that all
reportable transactions were timely filed on the appropriate
forms.
Executive Compensation
- ----------------------
The following table sets forth information regarding the
total compensation of the Chief Executive Officer and each of the
four most highly compensated executive officers of the Company at
the end of 1996, as well as the total compensation paid to each
such individual for the Company's two previous fiscal years.
Each of the named individuals has held his/her respective office
throughout the entire fiscal year.
<CAPTION.
Summary Compensation Table
Long Term Compensation
---------------------------------------
Annual Compensation Awards Payouts
---------------------------------- -------------------- ------------------
(1) (2) (3) (4) (5)
Other Restricted
Name and Annual Stock Options/ LTIP All Other
Principal Salary Bonus Compen- Awards SARs Payout Compen-
Position Year ($) ($) sation ($) ($) (#) ($) sation ($)
- --------------------- ---- ------ ----- ---------- -------- ------- ------ -----------
Marsden W. Miller, Jr. 1996 150,000 - - - - - -
Chairman and 1995 150,000 - - - - - -
Chief Executive Officer 1994 150,000 - - - 1,625,000 - -
1,875,000
525,000
John T. Chandler (6)(7) 1996 150,000 - - - - - -
President; Chairman and 1995 150,000 - - - 120,000 - -
Chief Executive Officer 1994 150,000 - - - 470,000 - -
of XCL-China, Ltd. 1,025,000
100,000
David A. Melman (8) 1996 150,000 - - - - - -
Executive Vice President, 1995 150,000 - - - 300,000 - -
General Counsel and 1994 150,000 - - - 470,000 - -
and Secretary 1,025,000
100,000
Danny M. Dobbs (9) 1996 135,000 - - - 97,000 - -
Executive Vice President 1995 116,250 - - - - - -
and Chief Operations 1994 110,000 - - - 148,000 - -
Officer
Herbert F. Hamilton (10) 1996 144,000 - - - - - -
Executive Vice President 1995 98,800 - - - 200,000 - -
Operations, XCL-China 1994 - - - - - - -
<FN>
___________
(1) Prior to April 1, 1994, each executive was employed under
an agreement with the Company which provided that if his/her
employment was terminated prior to the agreement's
termination under certain circumstances he/she would receive
compensation for 30 months. Such employment agreements were
surrendered, effective April 1, 1994, in exchange for stock
purchase warrants (see "Employment Agreements; Termination
of Employment and Change-in-Control Arrangements" below).
(2) Effective March 30, 1994, the Management Incentive Plan
was terminated.
(3) Excludes the cost to the Company of other compensation
that, with respect to any above named individual, does not
exceed the lesser of $50,000 or 10 percent of such
individual's salary and bonus.
(4) Although the Company's Long Term Stock Incentive Plan
permits grants of restricted stock and stock appreciation
rights, no grants of those incentive awards have been made
prior to 1997. See Proposal 3 - "Awards to Management"
below.
(5) The first amount represents awards of stock options
granted under the Company's Long Term Stock Incentive Plan.
The second amount represents the number of five-year stock
purchase warrants, received upon surrender of an employment
agreement with the Company, determined based upon a formula
whereby each of the individuals were to be offered a
warrant, based upon the length of time of employment with
the Company, for a maximum of two shares of Common Stock for
each dollar of compensation remaining to be paid to such
individual under his or her agreement (based upon the
product of his or her highest monthly base salary and the
number of months remaining under his or her contract), at an
exercise price of $1.25 per share. The third number
represents five-year stock purchase warrants, received for
each dollar of salary reduction for the 15-month period
commencing January 1, 1993 through March 31, 1994,
determined based on the same formula and at the same
exercise price used in the granting of warrants upon
surrender of the employment agreements. (See "Employment
Agreements; Termination of Employment and Change-in-Control
Arrangements" below.) See also Proposal 3 - "Awards to
Management" below.
(6) XCL-China Ltd. is a wholly owned subsidiary of the
Company which manages the Company's operations in China.
(7) Mr. Chandler was granted 120,000 options to replace
options granted in 1984 which expired unexercised in
December 1994. See also Proposal 3 - "Awards to Management"
below.
(8) Mr. Melman was granted 120,000 options to replace
options granted in 1984 which expired unexercised in
December 1994, and 180,000 options to replace options
granted in 1985 which expired unexercised in March 1995.
See also Proposal 3 - "Awards to Management" below.
(9) Mr. Dobbs was granted 97,000 options to replace options
granted in 1985 which expired unexercised in December 1995.
See also Proposal 3 - "Awards to Management" below.
(10) Mr. Hamilton commenced employment with the Company on
April 24, 1995. As part of his employment package he was
awarded 200,000 options.
Stock Options
- -------------
The Company currently maintains three stock option plans
which were adopted by shareholders at various times commencing in
1985. All of the plans are administered by the Compensation
Committee and provide for the granting of options to purchase
shares of Common Stock to key employees and directors of the
Company, and certain other persons who are not employees of the
Company but who from time to time provide substantial advice or
other assistance or services to the Company.
The most recent stock option plan was adopted on June 2,
1992 by shareholders who approved the Long Term Stock Incentive
Plan ("1992 LTSIP"). The 1992 LTSIP was adopted with the view of
conforming the Company's plans to certain regulatory changes
adopted by the SEC and affording holders of previously granted
options the opportunity to exchange their options for equivalent
options under the 1992 LTSIP. By action of the Board of
Directors, effective June 1, 1997, the 1992 LTSIP was amended and
restated, subject to approval by the shareholders. See "Proposal
3 - Approval of Long Term Stock Incentive Plan as Amended and
Restated Effective as of June 1, 1997" below, for details of the
proposed amendments to the Company's LTSIP being voted on at this
Meeting and certain grants of incentive awards in 1997 to certain
members of management made thereunder.
The 1992 LTSIP authorizes the Compensation Committee to
grant stock options intended to qualify as "incentive stock
options" under Section 422 of the Internal Revenue Code of 1986,
as amended ("ISOs"), options which do not qualify under such tax
provision ("NSOs"), "ROs" (i.e., the granting of additional
options, where an employee exercises an option with previously
owned stock, covering the number of shares tendered as part of
the exercise price), "RSAs" (i.e., stock awarded to an employee
that is subject to forfeiture in the event of a premature
termination of employment, failure of the Company to meet certain
performance objectives or other conditions), "PUs" (i.e., share-
denominated units credited to the employee's account for delivery
or cash-out at some future date based upon performance criteria
to be determined by the Compensation Committee) and "tax
withholding" (i.e., where the employee has the option of having
the Company withhold shares on exercise of an award to satisfy
tax withholding requirements).
The 1992 LTSIP also formally incorporates resolutions
previously adopted by the Board regarding one-time grants of NSOs
covering 100,000 shares to each new nonemployee director upon his
taking office.
The Compensation Committee develops administration
guidelines from time to time which define specific eligibility
criteria, the types of awards to be employed, and the value of
such awards. Specific terms of each award, including minimum
performance criteria which must be met to receive payment, are
provided in individual award agreements granted each award
recipient. Key employees and other individuals who the Committee
deems may provide a valuable contribution to the success of the
Company and its affiliates will be eligible to participate under
the Plan. Award agreements generally contain change-in-control
provisions.
Under the 1992 LTSIP, the Compensation Committee determines
the option price of all NSOs and ISOs; provided, however, in the
case of ISOs, the option price shall not be less than the fair
market value of the Common Stock on the date of grant. Such
"fair market value" is the average of the high and low prices of
a share of Common Stock traded on the relevant date, as reported
on the American Stock Exchange, or other national securities
exchange or an automated quotation system.
On July 1, 1994, the shareholders approved amendments to the
1992 LTSIP to increase the number of shares reserved for issuance
under the Plan by an additional 1,500,000 shares to an aggregate
of 16.5 million and corresponding amendment to the Plan
increasing the limitation on the total number of shares subject
to options that can be granted to directors to 13,200,000 of
which 3,300,000 shares may be granted to nonemployee directors.
At the same time, shareholders ratified the conditional grant of
options to acquire 3,076,500 shares, made by the Board of
Directors on March 30, 1994, to various executive officers and
directors. In 1994, additional options totaling 1,820,183 were
awarded to nonexecutive officers, employees and consultants of
the Company.
See Proposal 3, for details of the proposed amendments to
the Company's 1992 LTSIP being voted on at this Meeting.
The closing price of the Company's Common Stock on the
American Stock Exchange, Inc. (the "Exchange") on November 10,
1997 was $0.5625 per share.
The following tables set forth, for those persons named in
the "Summary Compensation Table" information on stock options
granted during 1996 and all stock options outstanding as of
December 31, 1996. See Proposal 3 - "Awards to Management" for
details regarding certain awards to members of management,
including the individuals listed below, made pursuant to the 1997
LTSIP Restatement (as hereinafter defined), subject to
shareholder approval, none of which are reflected in the
following tables.
Option/SAR Grants in Last Fiscal Year
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
--------------------------------------------- ---------------------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Options/
SARs
Granted to
Options/ Employees in Exercise or
SARs Fiscal Base Price Expiration
Name Granted Year (3) ($/Share) Date 0% ($) 5% ($) 10% ($)
---- ------- ------------ ----------- ---------- -------- -------- ---------
M.W. Miller, Jr - 0% - - - - -
J.T. Chandler - 0% - - - - -
D.A. Melman - 0% - - - - -
D.M. Dobbs 97,000(1) 40% $1.25 4/10/06 (90,937.50) (71,874.13) (42,627.18)
H.F. Hamilton - 0% - - - - -
<FN>
__________________
(1) Mr. Dobbs was granted 97,000 options to replace options
granted in 1985 which expired unexercised in December 1995.
Aggregated Option/SAR Exercises In Last Fiscal Year
and Fiscal Year-End Option/SAR Values
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Shares Underlying Unexercised in-the-Money
Acquired Options/SARs at Options/SARs at
on Value Fiscal Year-End (#) Fiscal Year End (#)
Exercise Realized --------------------------- --------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
Marsden W. Miller, Jr. - - 5,025,000 (1) - - -
- - 2,400,000 (2) - - -
John T. Chandler - - 1,130,000 (1) - - -
- - 1,125,000 (2) - - -
David A. Melman (4) - - 1,130,000 (1) - - -
- - 1,125,000 (2) - - -
Danny M. Dobbs - - 336,333 (1) 64,667 - -
- - 582,000 (2) - - -
Herbert F. Hamilton - - 133,333 (1) 66,667 - -
<FN>
___________
(1) Represents options exercisable under the Company's Stock
Option Plans at December 31, 1996.
(2) Represents the aggregate number of five-year stock
purchase warrants, received (a) upon surrender of an
employment agreement with the Company, determined based upon
a formula whereby each of the individuals were to be offered
a warrant, based upon the length of time of employment the
Company, for a maximum of two shares of Common Stock for
each dollar of compensation remaining to be paid to such
individual under his or her agreement (based upon the
product of his or her highest monthly base salary and the
number of months remaining under his or her contract), at an
exercise price of $1.25 per share, and (b) for each dollar
of salary reduction for the 15-month period commencing
January 1, 1993 through March 31, 1994, determined based on
the same formula and at the same exercise price used in the
granting of warrants upon surrender of the employment
agreements. (See "Employment Agreements; Termination of
Employment and Change-in-Control Arrangements" below.)
(3) At December 31, 1996, the Company's Common Stock price
was lower than the option exercise prices.
(4) Mr. Melman is not standing for reelection as a director
of the Company.
These options were all awarded under the Company's Stock
Option Plans described above. See Proposal 3 - "Awards to
Management" for descriptions of grants made in 1997 pursuant to
the 1997 LTSIP Restatement (as hereinafter defined).
Section 401(k) Plan
- -------------------
In 1989, the Company adopted an employee benefit plan under
Section 401(k) of the Internal Revenue Code for the benefit of
employees meeting certain eligibility requirements. The Company
has obtained a favorable determination from the Internal Revenue
Service regarding the tax-favored status of the 401(k) plan.
Employees can contribute up to 10 percent of their compensation.
The Company, at its discretion and subject to certain
limitations, may contribute up to 75 percent of the contributions
of each participant. The Company has not made contributions to
the 401(k) plan since December 31, 1991.
Compensation of Directors and Other Arrangements
- ------------------------------------------------
The Company reimburses its directors for their travel and
lodging expenses incurred in attending meetings of the Board of
Directors. Effective January 1, 1990, directors (other than
Messrs. Hummel and Palliser and those directors who are officers
of the Company) are being paid an annual retainer of $18,000 plus
a fee of $1,000 for each Board meeting attended. In addition,
such directors were paid a fee of $1,000 for each committee
meeting attended.
In April 1994, the Company entered into separate consulting
agreements with Messrs. Hummel and Palliser, upon their becoming
directors. Each of the agreements is terminable by each of the
parties thereto upon written notice and provides that the
individuals will render consulting services to the Company in
their respective areas of expertise. Pursuant to the terms of
the agreements, both directors are entitled to receive
compensation at the rate of $50,000 per annum, which includes the
compensation they would otherwise be entitled to receive as
directors and for attending meetings of the Board. In addition,
pursuant to the terms of the 1992 LTSIP, Messrs. Hummel,
Palliser, Reinhardt and Hofheinz, each a non-employee director,
were granted stock options for 100,000 shares of Common Stock
exercisable at prices ranging from $1.25 to $2.106 per share at
such time as they became directors.
In June 1997, the Company entered into a consulting
agreement with Mr. Fetters, a director of the Company. The
agreement is for a one year term ending July 31, 1998, thereafter
to continue on a month to month basis. The agreement may be
terminated by either party on thirty days written notice.
Pursuant to the terms of the agreement Mr. Fetters is to consult
with the Company on all aspects of the Company's exploration,
development and production projects. For his services Mr.
Fetters is to receive $30,000 per annum, which is in addition to
the compensation he receives as a director for attending meetings
of the Board. In addition to the above compensation Mr. Fetters
is entitled to receive a finder's fee on certain specifically
identified projects.
Effective June 1, 1997, each of Messrs. Melman, Hummel,
Palliser, Reinhardt, Hofheinz and Fetters were granted
nonqualified stock options to purchase 1,000,000 shares of Common
Stock exercisable at $0.25 per share under the 1997 LTSIP
Restatement, subject to shareholder approval of such plan. See
Proposal 3 herein.
Benjamin B. Blanchet, in his capacity as Executive Vice
President, is entitled to a salary of $80,000 per year for up to
80 hours per month of services.
Effective August 1, 1997, the Company entered into a
Services Agreement with Mr. Blanchet. The Agreement is
terminable by either party at any time without cause. Under the
Agreement, Mr. Blanchet is engaged to act as counsel to the
Company to perform 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 Mr.
Blanchet with office space, supplies, secretarial assistance, a
library allowance, professional liability insurance,
reimbursement for continuing legal education expenses and bar
dues. Under the Services Agreement, Mr. Blanchet may, except as
prohibited by law or the Louisiana Rules of Professional
Responsibility, represent other clients and engage in business
for his own account.
In connection with his employment by the Company, Mr.
Blanchet received from the Company a $100,000 loan to replace
benefits that he forfeited when he withdrew as a partner of
Gordon, Arata, McCollam & Duplantis, L.L.P. to become Executive
Vice President of the Company. The loan is to be repaid over
eight years from annual bonus payments equal to interest, at the
rate of 6.5% per annum, plus one-eighth of the original principal
balance to be paid by the Company to Mr. Blanchet each year and
shall be forgiven in its entirety if (i) the Company shall fail
to pay timely any such bonus payment, shall breach the Services
Agreement or shall terminate his employment without "cause" or
(ii) Mr. Blanchet terminates his employment with "good reason,"
in either case as such terms are defined in the note evidencing
such loan.
During 1996 all regular employees were provided health
insurance, a portion of the premium for which is paid by the
Company, and life and disability insurance based upon a factor of
the employee's base salary.
Employment Agreements; Termination of Employment and
Change-in-Control Arrangements
- -----------------------------------------------------
Effective April 1, 1994, Messrs. M.W. Miller, Jr., J.T.
Chandler, D.A. Melman and D.M. Dobbs, in their capacities as
executive and administrative officers of the Company and its
various subsidiaries, agreed to surrender their employment
agreements in consideration of the issuance of five-year warrants
to purchase Common Stock at an exercise price of $1.25 per share,
subject to customary anti-dilution adjustments. The number of
warrants issued to such individuals was determined based upon a
formula whereby each of the individuals was offered a warrant to
purchase, based upon the length of time of employment with the
Company, a maximum of two shares of Common Stock for each dollar
of compensation remaining to be paid to such individual under his
or her agreement (based upon the product of his or her highest
monthly base salary and the number of months remaining under his
or her agreement). Accordingly, Mr. Miller received warrants to
purchase 1,875,000 shares; Mr. Chandler, 1,025,000 shares; Mr.
Melman, 1,025,000 shares and Mr. Dobbs, 575,000 shares.
Effective January 1, 1989, the Company adopted a policy
addressing severance upon separation from the Company. Under
this policy benefits due upon a "change-in-control" as therein
defined, range from three months salary for employees with less
than one year of service to 24 months salary for employees with
more than 10 years of service.
Report on Repricing of Options/SARs
- ------------------------------------
During the fiscal year ended December 31, 1996, there were
no repricings of stock options awarded to any of the named
executive officers.
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
For the year ended December 31, 1996, the following
nonexecutive directors of the Company, served as members of the
Compensation Committee of the Board of Directors: Messrs. M.
Palliser (Chairman), A.W. Hummel, Jr., F. Hofheinz and F.J.
Reinhardt, Jr. None of the members of the Compensation Committee
were formerly, nor are any members currently, officers or
employees of the Company or any of its subsidiaries.
Compensation Committee Report on Executive Compensation
-------------------------------------------------------
The Compensation Committee of the Board of Directors
("Committee") establishes the general compensation policies of
the Company, establishes the compensation plans and specific
compensation levels for executive officers and certain other
managers, and administers the Stock Option Plans and Long Term
Stock Incentive Plan. The Committee currently consists of four
independent, non-employee directors: Messrs. Fred Hofheinz, who
serves as Chairman, Michael Palliser, Arthur W. Hummel, Jr. and
Francis J. Reinhardt, Jr.
Compensation Policies and Philosophy
- ------------------------------------
The Committee has determined that the compensation program
of the Company should not only be adequate to attract, motivate
and retain executives, key employees and other individuals who
the Company believes may make significant contribution to the
Company's results, but should also be linked to the value
delivered to shareholders as reflected in the price of the
Company's Common Stock.
The Committee believes that the cash compensation of
executive officers, as well as other key employees, should be
competitive with other similarly situated companies while, within
the Company, being fair and discriminating on the basis of
personal performance. In general, in establishing total cash
compensation for its executives, the Committee has taken into
account the median cash compensation of executives employed by
competitors including some of the companies reflected in the peer
group identified in the Performance Graph found on page 20, which
the Committee believes represent the Company's most direct
competition for executive talent. The Committee receives
recommendations from management as to executive compensation and,
in light of the Company's performance and the economic conditions
facing the Company, determines appropriate compensation levels
for recommendation to the Board of Directors. The Committee does
not assign relative weights to individual factors and criteria
used in determining executive compensation and does not use
quantifiable targets in determining compensation. For 1996, the
Company did not retain the services of a compensation consulting
firm.
Awards of stock options are intended both to retain
executives, key employees and other individuals who the Company
believes may make significant contributions to the Company's
results and to motivate them to improve long-term stock market
performance. Generally, options are granted at or above the
prevailing market price and will have value only if the price of
the Company's Common Stock increases. Generally, options have a
term of 10 years and vest one-third six months after grant, one-
third one year after grant and the remaining one-third two years
after grant.
Effective January 1, 1994, Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code") generally denies a
tax deduction to any publicly held corporation for compensation
that exceeds $1 million paid to certain senior executives in a
taxable year, subject to an exception for "performance-based
compensation" as defined in the Code and subject to certain
transition provisions. Gains on the exercise of nonqualified
stock options granted through December 31, 1994, will be tax
deductible under the transition rules. Restricted stock awards
by definition granted after February 17, 1993, are not
deductible. At present the Committee does not intend to recommend
amendment to the Stock Option Plans to meet the restrictive
requirements of the Code.
The Committee believes that annual incentive awards should
be commensurate with performance. It further believes that in
order to meet this objective it needs to have the ability to
exercise its judgment or discretion to evaluate performance
against qualitative criteria. It is the Committee's opinion that
the benefits to the Company of the use of a qualitative approach
to the compensation of senior executives such as the Chairman
outweigh the nonmaterial loss of a portion of the deductions
associated with that compensation.
On March 20, 1997, the Committee reviewed the Company's 1996
financial results and 1996 nonfinancial goals and determined to
await further developments in the Company's intended financing
program prior to assessing management's accomplishments.
Company Performance and Chief Executive Officer Compensation
- ------------------------------------------------------------
The Committee, in connection with determining the
appropriate compensation for Marsden W. Miller, Jr. as Chief
Executive Officer ("CEO"), took into account the financial
condition of the Company, including its liquidity requirements.
It determined that the CEO had been successful in disposing of
assets and raising capital throughout the year. However, taking
into consideration the current cash position and near-term
requirements, the Committee determined that cash was unavailable
for either salary increase or bonus.
Compensation of Other Executive Officers
- ----------------------------------------
The Committee, in consultation with the CEO, applied the
information and other factors outlined above in reviewing and
approving the compensation of the Company's other executive
officers.
March 20, 1997 COMPENSATION COMMITTEE
Fred Hofheinz , Chairman
Arthur W. Hummel
Michael Palliser
Francis J. Reinhardt, Jr.
Subsequent Compensation Adjustments
- ------------------------------------
Since the date of the Compensation Committee Report, the
Company circumstances have improved as a result of the successful
drilling results on the Zhao Dong Block in the Bohai Bay in China
during the last three and one-half years, the fact that the
Company has been informed that it will be offered additional
exploration and development contracts in China, and the
successful placement in May, 1997 of $100 million of Preferred
Stock and Senior Secured Notes, the proceeds of which will now
permit the Company to commence achieving its objectives in China.
In recognition of the efforts and sacrifices of management that
have enabled the Company to achieve such results, and the need to
retain existing management, all as described in greater detail in
"Proposal 3 - Approval of Long Term Stock Incentive Plan as
Amended and Restated Effective June 1, 1997," the Compensation
Committee and Board of Directors have reassessed the need for
adjusting management's compensation to provide for additional
incentives to management. As a result of this reassessment, the
Board of Directors has adopted certain amendments to the 1992
LTSIP and has made certain equity based incentive awards, all as
described in greater detail in "Proposal 3 - Approval of Long
Term Stock Incentive Plan as Amended and Restated Effective June
1, 1997" and "Proposal 4 - Approval of Appreciation Option for
M.W. Miller, Jr." All such awards are subject to the receipt of
approval thereof by shareholders.
Shareholder Return Performance Presentation
- -------------------------------------------
Set forth below is a line graph comparing the percentage
change in the cumulative total shareholder return on the
Company's Common Stock against the AMEX Market Value Index for
the years 1992 through 1996, with a peer group selected by the
Company for the past five fiscal years. The peer group consists
of the same independent oil and gas exploration and production
companies used in last year's comparison, with the exception of
DeKalb Energy Company which was acquired by Apache Corporation,
namely: Alta Energy Corporation; Amerac Energy Corporation
(formerly Wolverine Exploration Company); American Exploration
Company; Bellwether Exploration Company; Brock Exploration
Corporation; Tom Brown, Inc.; Caspen Oil, Inc.; Cobb Resources
Corporation; Coda Energy, Inc.; Comstock Resources, Inc.; Crystal
Oil Company; Edisto Resources Company; Energen Corporation;
Chemfirst Inc. (formerly First Mississippi Corporation); Forest
Oil Corporation; Geodyne Resources, Inc.; Global Natural
Resources, Inc.; Goodrich Petroleum Corporation (formerly Patrick
Petroleum Company); Hallador Pete Company; Hondo Oil & Gas
Company; Kelley Oil & Gas Partners; Magellan Petroleum
Corporation; Maynard Oil Company; McFarland Energy, Inc.; MSR
Exploration Limited; Numac Energy, Inc.; Pacific Enterprises;
Penn Virginia Corporation; Plains Resources, Inc.; Presidio Oil;
Wainoco Oil Corporation; Wichita River Oil; and Wiser Oil
Company. The relevant information with respect to the peer group
was furnished by Standard & Poors Compustat Service. The graph
assumes that the value of the investment in the Company's Common
Stock and the peer group stocks were $100 on January 1, 1991 and
that all dividends were reinvested.
[GRAPH]
1992 Return 1993 Return 1994 Return 1995 Return 1996 Return
----------- ----------- ----------- ----------- -----------
XCL 200.00 100.00 144.44 66.67 33.33
Peer Group 80.38 97.96 97.65 123.35 147.19
AMEX 101.06 120.78 109.84 138.77 147.65
Certain Relationships and Related Transactions
- ----------------------------------------------
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 Stock 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 and CIDC are presently
in negotiations to settle this action.
See "Compensation of Directors and Other Arrangements" above
for a discussion of certain compensatory and other arrangements
entered into by the Company with certain directors or a nominee
for director (who is also an officer) of the Company.
As a matter of policy the Company approves all transactions
involving insiders through the majority vote of disinterested
directors.
PROPOSAL 2 -- TO AMEND AND RESTATE THE COMPANY'S CERTIFICATE OF
INCORPORATION TO EFFECT A REVERSE STOCK SPLIT
The Board of Directors has approved an amendment to the
Company's Certificate of Incorporation as set forth in Appendix A
hereto to effect a one for fifteen reverse stock split of the
Company's outstanding shares of Common Stock (the "Reverse Stock
Split") and has directed that the amendment be submitted to the
Company's stockholders for consideration and action.
Concurrently, the Board also approved a proposal to restate the
Company's Certificate of Incorporation and include the Reverse
Stock Split in such Restated Certificate of Incorporation as
permitted by Section 245(b) of the Delaware General Corporation
Law ("DGCL"). The effect of such restatement will be to
incorporate the amendment into a single instrument which will
also integrate all of the provisions of the Company's Certificate
of Incorporation which are in effect and are operative as of the
date hereof as a result of there having been filed with the
Secretary of State of Delaware ("Secretary of State") one or more
certificates, amendments or other instruments as permitted or
required by the DGCL. The full text of the Amended and Restated
Certificate of Incorporation, including the Reverse Stock Split,
is attached as Appendix B to this Proxy Statement (the "Restated
Certificate of Incorporation"). The Board of Directors
recommends a vote "FOR" such amendment and restatement of the
Certificate of Incorporation.
If the Reverse Stock Split is approved by stockholders, the
Board of Directors will effect the Reverse Stock Split, without
further shareholder action. The Reverse Stock Split would become
effective on the date (the "Effective Date") on which the
Restated Certificate of Incorporation is filed with the Secretary
of State. The procedures for consummation of the Reverse Stock
Split are set forth in "Recapitalization and Conversion
Procedures" below and in Appendix A hereto.
Vote Required
- -------------
The approval of the Reverse Stock Split and the Restated
Certificate of Incorporation requires the affirmative vote of a
majority of the votes entitled to be cast by the outstanding
shares of voting capital stock entitled to vote on the matter
with abstentions and broker non-votes being counted as negative
votes.
Purposes and Effects of the Reverse Stock Split
- -----------------------------------------------
The principal purpose of the Reverse Stock Split is to
increase the marketability of the Company's Common Stock by
increasing the trading price of Common Stock to levels more
acceptable to institutional and other investors. The Board of
Directors believes that to achieve the Company's objectives in
China it is essential that the Common Stock of the Company has
better marketability and trades at a higher price.
One effect of the Reverse Stock Split is to increase the
number of shares of Common Stock available for issuance on
conversion of the issued shares of the Company's Amended Series A
Preferred Stock and on exercise of outstanding Common Stock
purchase warrants without increasing the authorized Common Stock,
and, simultaneously, increasing the marketability of the Common
Stock. As of November 10, 1997, the Company had 4,662,647 shares
(including 1,042,065 shares held as treasury stock) of authorized
but unissued and unreserved shares of Common Stock available for
issuance upon conversion of all the issued shares of Amended
Series A Preferred Stock and upon exercise of all outstanding
warrants to purchase Common Stock. Such number of shares are
insufficient to permit such conversion and exercise to the full
extent required by the terms of such securities. As described
below, failure to provide a sufficient number of available
authorized but unissued shares of Common Stock by May 20, 1998,
may entail certain disadvantageous consequences to Common
Stockholders. See "Certain Considerations" below. In addition,
if the amendment and restatement of the Company's 1992 LTSIP as
described in Proposal 3, below, is approved by the shareholders
the existing, authorized but unissued and unreserved shares of
stock are insufficient to permit effectuation of existing grants
under that plan.
Consummation of the Reverse Stock Split will not alter the
number of authorized shares of Common Stock, currently
500,000,000 shares. Proportionate voting rights and other rights
of stockholders will not be altered by the Reverse Stock Split,
except for the limited occasion where a small shareholder may own
only a fractional interest after the Reverse Stock Split, in
which event the small shareholder will be paid for the fractional
interest and will cease to be a holder of the Company's Common
Stock. Consummation of the Reverse Stock Split will have no
material federal tax consequences to stockholders.
The Common Stock is listed for trading on the Exchange. On
the Record Date, the reported closing price of the Common Stock
was $0.5625 per share.
The Board believes that a decrease in the number of shares
of Common Stock outstanding without any material alteration of
the proportionate economic interest in the Company represented by
individual shareholdings may increase the trading price of such
shares to a price more appropriate for an Exchange-listed
security, although no assurance can be given that the market
price of the Common Stock will rise in proportion to the
reduction in the number of outstanding shares resulting from the
Reverse Stock Split or that it will remain at such level.
Additionally, although the Company has not yet experienced
identifiable problems in the marketability and liquidity of its
Common Stock, the Board believes that the current per share price
of the Common Stock limits the effective marketability of the
Common Stock because of the reluctance of many brokerage firms
and institutional investors to recommend lower-priced stocks to
their clients or to hold them in their own portfolios. Certain
policies and practices of the securities industry tend to
discourage individual brokers within those firms from dealing in
lower-priced stocks. Some of those policies and practices
involve time-consuming procedures that make the handling of lower
priced stocks economically unattractive. The brokerage
commission on a sale of lower-priced stock usually represents a
higher percentage of the sale price than the brokerage commission
on a higher-priced issue. Any reduction in brokerage commissions
resulting from a Reverse Stock Split may be offset, however, in
whole or in part, by increased brokerage commissions required to
be paid by stockholders selling "odd lots" created by such
Reverse Stock Split.
The par value of the Common Stock will remain at $.01
following the Reverse Stock Split, and the number of shares of
Common Stock outstanding will be reduced. As a consequence, the
aggregate par value of the outstanding Common Stock will be
reduced, while the aggregate capital in excess of par value
attributable to the outstanding Common Stock for statutory and
accounting purposes will be correspondingly increased. The
resolution approving the Reverse Stock Split provides that this
increase in capital in excess of par value will be treated as
capital for statutory purposes. The conversion ratios of any
shares of outstanding stock having a conversion or redemption
feature and the exercise price of outstanding stock options and
warrants would be correspondingly adjusted upon consummation of
the Reverse Stock Split.
The Company has authorized capital stock of 502,400,000
shares, consisting of 500,000,000 shares of Common Stock and
2,400,000 shares of Preferred Stock. As of November 10, 1997,
the number of issued and outstanding shares of Common Stock was
301,960,240, including 1,042,065 shares held as treasury stock
and 1,058,254 shares of Preferred Stock were issued and
outstanding. Based upon the Company's best estimates, the number
of issued and outstanding shares of Common Stock will be reduced
from 301,960,240 to 20,130,682 as a result of the Reverse Stock
Split. As a result of the Reverse Split the number of
stockholders of record is not expected to be significantly
reduced, since a minimal number of shareholders of record own
fewer than fifteen shares.
The Board of Directors has authority to cause authorized but
unissued shares of Common Stock to be issued for any proper
corporate purpose without further action by stockholders. The
Company has no arrangements, agreements, understandings or plans
at the present time for the issuance or use of the authorized but
unissued shares of Common Stock except in connection with the
exercise or conversion of outstanding securities or pursuant to
employee benefit plans. The Board of Directors does not intend
to issue any Common Stock except on terms which the Board deems
to be in the best interests of the Company and its then existing
stockholders. Any future issuance of Common Stock will be
subject to the rights of holders of any preferred stock which are
outstanding and which the Company may issue in the future and,
under certain circumstances, may require the approval of Common
Stockholders under applicable Exchange rules.
The issuance of additional shares of Common Stock may have a
dilutive effect on earnings per share and, for persons who do not
purchase additional shares to maintain their pro rata interest in
the Company, on such stockholders' percentage voting power. Upon
issuance, such shares will have the same rights as the
outstanding shares of Common Stock. Holders of Common Stock have
no preemptive rights. Although the Company has no present
intention to issue shares of Common Stock in the future in order
to make acquisition of control of the Company more difficult,
future issuances of Common Stock could have that effect. For
example, the acquisition of shares of the Company's Common Stock
by an entity in order to acquire control of the Company might be
discouraged through the public or private issuance of additional
shares of Common Stock to persons who might side with the Board.
The Board of Directors is authorized to issue shares of
Preferred Stock in one or more series ("Serial Preferred Stock")
and to fix the rights, preferences, privileges and restrictions,
including dividend rights, conversion rights, voting rights and
terms of redemption, redemption price or prices, liquidation
preferences and the number of shares constituting any series or
the designation of such series, without any further vote or
action by the stockholders. The issuance of Serial Preferred
Stock may have the effect of delaying, deferring, or preventing a
change in control of the Company without further action by the
stockholders. The issuance of Serial Preferred Stock with voting
and conversion rights may adversely effect the voting power of
the holders of Common Stock, including the loss of voting control
to others. Currently, the Company has 2,400,000 shares of Serial
Preferred Stock authorized consisting of 2,085,000 shares of
Amended Series A Preferred Stock of which 991,471 shares are
outstanding; 50,000 shares of Series B Preferred Stock of which
44,465 shares are outstanding and 50,000 shares of Series F
Preferred Stock of which 22,318 shares are outstanding.
Recapitalization and Conversion Procedures
- ------------------------------------------
At the Effective Date, each share of the Common Stock issued
and outstanding immediately prior thereto (the "Old Common
Stock"), will be reclassified as and changed into the appropriate
fraction of a share of the Company's Common Stock, par value $.01
(the "New Common Stock"), subject to the treatment of fractional
share interests as described below. Shortly, after the Effective
Date, the Company will send transmittal forms to the holders of
the Old Common Stock to be used in forwarding their certificates
formerly representing shares of Old Common Stock for surrender
and exchange for certificates representing whole shares of New
Common Stock and cash payments in lieu of any fractional share
entitlements. Failure to exchange such certificates within one
year after the Effective Date, will result in the forfeiture to
the Company of any right to receive dividends and any cash
payments in respect of any fractional shares.
No certificates or script representing fractional share
interests in the New Common Stock will be issued, and no such
fractional share interest will entitle the holder thereof to
vote, or to any rights as a stockholder of the Company. In lieu
of any such fractional share interests, each holder of Old Common
Stock who would otherwise be entitled to receive a fractional
share of New Common Stock will, at the discretion of the Board,
either be (i) paid cash by the Company upon surrender of
certificates formerly representing Old Common Stock held by such
holder in an amount equal to the product of such fraction
multiplied by the closing price of the Old Common Stock on the
Exchange on the Effective Date (or in the event that Common Stock
is not so traded on the Effective Date, such closing price on the
next preceding day on which such stock is traded on the
Exchange); or, alternatively, (ii) the Company will make
arrangements with, and provide assistance to, a third party who
shall pool said fractional share interests, sell the same, and
return appropriate payment to the holders of fractional share
interests in the amount described in (i) above.
Other Changes
- -------------
The approval of Proposal 2 will also result in the amendment
and restatement of the Certificate of Incorporation in its
entirety to reflect the foregoing substantial changes as well as
several nonsubstantive, ministerial, changes as contained in
Restated Certificate of Incorporation attached hereto as Appendix
B. These changes: eliminate four other series of Serial
Preferred Stock (i.e., the Series A, Cumulative Convertible
Preferred Stock; Series C, Cumulative Convertible Preferred
Stock; Series D, Cumulative, Convertible Preferred Stock and
Series E, Cumulative Convertible Preferred Stock), which had been
previously designated and issued in specific capitalization
transactions and are no longer outstanding (having been either
converted, redeemed or recapitalized) or required for any
proposed transaction or capitalization needs of the Company; make
conforming changes to the terms of the Amended Series A Preferred
Stock to reflect the elimination of such other series of Serial
Preferred Stock; eliminate the name and address of the original
incorporator of the Company; reflect the fact that the name of
the Company has been previously changed from The Exploration
Company of Louisiana, Inc. to XCL Ltd. and that the Certificate
of Incorporation has been amended and restated and to renumber
certain Articles.
Certain Considerations
- ----------------------
As described below, the failure to approve Proposal 2 and,
thereby, to provide a sufficient number of available but unissued
shares of Common Stock, may result in certain adverse
consequences to the Company's shareholders.
In connection with a series of privately placed debt and
equity financings concluded by the Company on May 20, 1997 in
which the Company raised $100 million in gross sales proceeds in
order to pay certain existing secured indebtedness, to fund the
Company's China operations and for general working capital
purposes, the Company issued an aggregate of 384,124 Common Stock
purchase warrants ("Warrants") exercisable for an aggregate of
211,384,266 shares of Common Stock (before adjustment to reflect
the Reverse Stock Split). The Company currently has an
insufficient number of shares of Common Stock available for
issuance upon exercise of the Warrants. Failure to secure and to
reserve a sufficient number of shares of Common Stock to permit
exercise of all the Warrants by May 20, 1998 shall automatically
convert each such Warrant into a warrant to purchase one share of
Amended Series A Preferred Stock (or an aggregate of 384,124
shares) at an exercise price of $34.00 per share. Some of the
Warrant holders also hold Amended Series A Preferred Stock and
shares of Common Stock. Since the Amended Series A Preferred
Stock has a liquidation value of $85.00 per share and would rank
senior to the Common Stock in connection with the distribution of
dividends and upon dissolution, liquidation and winding up of the
Company as well as having certain other preferential rights,
Common Stockholders may be disadvantaged if such Warrants were to
be exercised for such Amended Series A Preferred Shares.
Approval of the Reverse Stock Split will provide a sufficient
number of shares of Common Stock to permit the exercise of all
the Warrants thereby eliminating such contingency.
Effective November 10, 1997, the Company recapitalized its
outstanding shares of Series A, Preferred Stock and Series E
Preferred Stock and converted them into an aggregate of 672,631
shares of Amended Series A Preferred Stock. Each such Amended
Series A Preferred Share is currently convertible at any time on
or after May 20, 1998 into 170 shares of Common Stock. The
Company currently does not have a sufficient number of shares of
Common Stock available to permit conversion of all such issued
shares of Amended Series A Preferred Stock. Each Amended Series
A Preferred Share is entitled to cast the same number of votes at
the Meeting on the Reverse Stock Split as the number of shares of
Common Stock issuable upon conversion thereof as of the Record
Date for the Meeting (currently 170 votes). It can be
anticipated that the Amended Series A Preferred Stockholders will
vote in favor of the Reverse Stock Split.
The Common Stock is currently listed on the Exchange and is
registered under Section 12(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and as a result, the
Company is subject to the periodic reporting and other
requirements of the Exchange Act. The Reverse Stock Split will
not affect the registration of the Common Stock under the
Exchange Act or its listing on the Exchange and the Company has
no present intention of terminating the registration under the
Exchange Act or relinquishing such listing on the Exchange in
order to become a "private" company.
The Exchange has, since November 1996, continued to review
the Company's listing eligibility, in that the Company does not
currently meet certain financial requirements for continued
listing. The Company intends to satisfy the Exchange's concerns
regarding the Company's continuing listing eligibility.
Federal Income Tax Consequences of the Proposed Reverse Stock Split
- -----------------------------------------------------------------------
The following discussion describes certain federal income
tax consequences of the Reverse Stock Split to stockholders of
the Company who are citizens or residents of the United States,
and who are not dealers with respect to the Common Stock. The
actual consequences for each stockholder will be governed by the
specific facts and circumstances pertaining to his acquisition
and ownership of the Common Stock. Thus, the Company makes no
representations or warranties concerning the tax consequences for
any of its stockholders and recommends that each stockholder
consult with his tax advisor concerning the tax consequences
(including federal, state, local and foreign income or other tax
consequences) of the Reverse Stock Split. The Company has not
sought and will not seek an opinion of counsel or a ruling from
the Internal Revenue Service regarding the federal income tax
consequences of the Reverse Stock Split. However, the Company
believes that the Reverse Stock Split will be a
"recapitalization" for purposes of Section 368(a)(1)(E) of the
Code, which should have the following federal income tax
consequences for the stockholders and the Company:
1. A stockholder will not recognize gain or loss with
respect to the New Common Stock received in exchange
for the Old Common Stock. The adjusted basis and
holder period of the shares of New Common Stock
received will be the same as the adjusted basis and
holding period of the Old Common Stock surrendered.
2. To the extent that a stockholder receives a payment
from the Company of cash in lieu of fractional shares,
that payment will be treated as made in redemption of
the fractional shares. Due to the Company's lack of
current or accumulated earnings and profits, this
redemption should result in capital gain or loss to the
stockholders in an amount equal to the difference
between the cash received and the adjusted basis of the
fractional shares. If the Company makes arrangements
with a third party to pool the fractional shares and
sell them, stockholders will be treated as if they had
received the fractional shares and sold them.
3. A stockholder who owns fewer than fifteen shares of
Common Stock immediately prior to the Reverse Stock
Split, and who therefore receives only cash in lieu of
a fractional share as a result of the Reverse Stock
Split, generally will be treated as having sold the
fractional shares of Common Stock and will recognize
capital gain or loss in an amount equal to the
difference between the cash received and the adjusted
basis of the fractional share.
4. The Company will not recognize any gain or loss as a
result of the Reverse Stock Split.
Vote Required for Approval
- --------------------------
The Board of Directors recommends that shareholders vote FOR
Proposal 2. The affirmative vote of the holders of a majority of
the votes entitled to be cast by the holders of Common Stock,
Amended Series A Preferred Stock, and Series B Preferred Stock
outstanding and entitled to vote at the Meeting, voting together
as a single class, is required to approve this proposal.
Consequently, any shares not voted (whether by abstention or
broker non-votes) have the same effect as votes against Proposal
2. Unless otherwise instructed the proxies will be voted "FOR"
approval of the proposal.
PROPOSAL 3 - APPROVAL OF LONG TERM STOCK INCENTIVE PLAN
AS AMENDED AND RESTATED EFFECTIVE AS OF JUNE 1, 1997
As described under "PROPOSAL NO. 1-ELECTION OF DIRECTORS
- -Options to Management" above, the Company presently maintains
the 1992 LTSIP, previously approved by shareholders, which was
initially effective on June 2, 1992, for employees and certain
other individuals connected with the Company or its affiliates,
pursuant to which options to purchase 10,195,073 shares of Common
Stock are outstanding, leaving only 6,304,927 shares available
for stock option grants. The 1992 LTSIP did not contemplate the
grant of stock options to purchase shares of any issue of the
Company's Serial Preferred Stock or the grant of Appreciation
Options.
On June 5, 1997, the Board of Directors unanimously approved
amendment and restatement of the 1992 LTSIP, effective as of
June 1, 1997 (hereinafter the "1997 LTSIP Restatement"), a copy
of which is attached hereto as Appendix C. The Board determined
that the 1997 LTSIP Restatement was in the best interest of the
Company and its shareholders for the following reasons:
1. The Company now has the opportunity to achieve its
objective of becoming a leading and significant participant in
the development of China's oil and gas industry. The principal
facts relied upon for that opinion include the fact that drilling
on the Zhao Dong Block in the Bohai Bay in China during the last
three and one-half years has resulted in the development of
sufficient proven reserves to justify development and production,
the fact that it has been indicated that the Company will be
offered additional, attractive properties in China, and the fact
of the completion of a $100 million offering of Preferred Stock
and Senior Secured Notes in May, 1997. Furthermore, this opinion
has been reinforced by statements made to the Board by various
top officials in China's oil industry. The underlying reasons for
the existence of these facts include (i) the relationships in
China which have been established by the executives and employees
of the Company during the last seven years, (ii) the ability of
the executives and employees to negotiate and obtain the first
onshore Production Sharing Contract in China which allowed the
Company to explore and develop the Zhao Dong Block, (iii) the
ability of the executives and other employees, under very
difficult circumstances, to obtain funds to conduct exploration
activities on the Zhao Dong Block up to this point and, now,
funds for development of the first discovery on the Zhao Dong
Block, and (iv) the ability developed during the last seven years
by the executives and employees to negotiate and obtain
additional oil and gas exploration and development contracts in
China.
2. Although the Company is now in the position to
achieve its objectives in China, in the Board's judgment the
objectives cannot be achieved without the continued employment of
the Company's present executives and employees. Completion of
development of the Zhao Dong Block, achieving profitable
production and obtaining additional properties in China will
require reliance on the long-term relationships developed between
the Company's management and employees and Chinese oil officials
and personnel, as well as management's knowledge of the manner of
conducting business in China.
3. During the last several years, the Company has been
strained financially because of the demands for funds for
operations in China. Management has made personal financial
sacrifices to ensure that the Company could retain its interest
in China, including foregoing competitive salaries and, on
occasion, not receiving timely payment of salaries. Members of
management have received offers from other groups to leave the
Company and join such groups, but have declined such offers
because of management's belief in the ultimate success of the
Company's efforts in China and management's dedication to the
Company's objectives in China.
4. In order to retain present management, and in order
to compensate management for what it has achieved in China to
this point, the Company must ensure that present management has a
significant ownership in the equity of the Company.
5. The 1997 LTSIP Restatement would assist the Company
in retaining present management and in employing and retaining
qualified and competent personnel and would encourage valuable
contributions by such personnel to the success of the Company by
providing additional incentives to those employees and others who
contribute significantly to the successful and profitable
operations of the Company and its affiliates. The Board believes
that this purpose will be furthered through the granting of
awards ("Awards"), as authorized under the 1997 LTSIP
Restatement, so that such individuals will be encouraged and
enabled to acquire a substantial personal interest in the Company
and its affiliates.
Nature of Awards. The 1997 LTSIP Restatement makes
available to the Compensation Committee the power to grant
certain awards to acquire shares of the Company's Serial
Preferred Stock, par value $1.00 per share ("Preferred Stock") as
well as shares of Common Stock. In common with the 1992 LTSIP,
the 1997 LTSIP Restatement makes available to the Compensation
Committee a number of incentive devices in addition to Incentive
Stock Options ("ISOs") (which are not available with respect to
Preferred Stock) and Nonqualified Stock Options ("NSOs"),
including reload options ("ROs") (which are not available with
respect to Preferred Stock), restricted stock awards ("RSAs"),
and performance units ("PUs") or appreciation options ("AOs")
(which were not authorized under the 1992 LTSIP), each of which
is described below and in the 1997 LTSIP Restatement. NSOs to
acquire Preferred Stock, a new feature, may include an accrued
dividend feature (see Federal Income Tax Effects below). The
Board believes that these award alternatives will enable the
Committee to tailor the type of compensation to be granted to key
personnel to meet both the Company's and such employee's
requirements in the most efficient manner possible.
Number of Awards. For Common Stock Awards, the 1997
LTSIP Restatement authorizes an aggregate of 60 million shares of
Common Stock for issuance pursuant to awards granted thereunder,
including grants to non-employee directors. For Preferred Stock
Awards, the 1997 LTSIP Restatement authorizes an aggregate of
200,000 shares of the Company's Amended Series A Preferred Stock,
or any other series of Preferred Stock of the Company as
designated by the Committee with respect to an Award.
Description of Awards. As set forth above, and in common
with the 1992 LTSIP previously approved by shareholders, the 1997
LTSIP Restatement authorizes the Compensation Committee to grant
NSOs, ISOs, ROs (i.e., the granting of additional options, where
an employee exercises an option with previously owned stock,
covering the number of shares tendered as part of the exercise
price), RSAs (i.e., stock awarded to an employee that is subject
to forfeiture in the event of a premature termination of
employment, failure of the Company to meet certain performance
objectives or other conditions), PUs (i.e., share-denominated
units credited to the employee's account for delivery or cash-out
at some future date based upon performance criteria to be
determined by the Compensation Committee), and "tax-withholding"
(i.e., where the employee has the option of having the Company
withhold shares on exercise of an award to satisfy tax
withholding requirements). AOs (i.e., share or other Company-
related business criteria appreciation measurement awards for
payments based upon appreciation in shares or other criteria
determined by the Compensation Committee) are a new feature added
to the 1992 LTSIP.
Outside Director Awards. The 1997 LTSIP Restatement also
authorizes the Board to grant Awards to non-employee directors
and to set the terms and conditions of such Awards, without the
restrictions previously set forth in the 1992 LTSIP which were
required by certain federal securities law rules since abolished.
Administration of Plan. In keeping with the provisions of
the 1992 LTSIP, the Compensation Committee will develop
administration guidelines from time to time which will define
specific eligibility criteria, the types of awards to be
employed, whether such awards relate to Common Stock or Preferred
Stock, and the value of such awards. Specific terms of each
Award will be provided in individual Award agreements granted
each Award recipient. Key employees and other individuals who
the Committee deems may provide a valuable contribution to the
success of the Company and its affiliates will be eligible to
participate under the Plan. The Committee may establish
different general Award eligibility criteria for Awards involving
Preferred Stock which may require a higher level of management
responsibility and authority.
Change of Control Provisions. The 1997 LTSIP Restatement
contains the same change-in-control provisions as did the 1992
LTSIP except that the threshold for determining if a "change of
control of XCL" has occurred as a result of a person or entity
acquiring Company stock has been lowered from 30% to 20%
(disregarding the acquisition of such stock by certain existing
shareholders of the Company). The 1997 LTSIP Restatement retains
the 1992 LTSIP's provisions pursuant to which a "change of
control of XCL" will be deemed to occur as a result of certain
contested Board of Director elections. If a "change of control
of XCL" occurs pursuant to the provisions described above, ISOs
and NSOs then outstanding will become exercisable in full, the
forfeiture restrictions on any RSAs to the extent then applicable
will lapse and amounts payable with respect to PUs and AOs then
outstanding will become payable in full. Also, under certain
Awards made under the 1997 LTSIP Restatement (see discussion
below) the occurrence of a "change of control of XCL" could
obligate the Company with respect to making payments with respect
to Awards in cash rather than in kind or in obligating the
Company to repurchase individuals shares of Common Stock or
Preferred Stock received under certain 1997 LTSIP Restatement
Awards. Under certain circumstances which are unforeseen at this
time, the existence of the change of control protections for
individuals receiving Awards under the 1997 LTSIP Restatement and
resulting obligations to the Company may impede the consummation
of a change of control of the Company.
Option Exercise Price. Under the 1997 LTSIP Restatement,
the Compensation Committee shall determine the option price of
all NSOs and ISOs; provided, however, in the case of ISOs, the
option price shall not be less than the fair market value of the
Common Stock on the date of grant. Such "fair market value" is
the average of the high and low prices of a share of Common or
Preferred Stock traded on the relevant date, as reported on the
Exchange, or other national securities exchange, or an automated
quotation system, or pursuant to a good faith determination by
the Board of Directors, if not so traded in a public market.
Awards to Management
- --------------------
The Board made certain Awards under the 1997 LTSIP
Restatement on June 5,1997. These Awards are subject to approval
by the shareholders of the Company of the 1997 LTSIP Restatement.
If such shareholder approval is not obtained, these Awards will
be null and void.
Set forth below is summary information in tabular form
regarding the grant of RSAs and NSOs pursuant to the 1997 LTSIP
Restatement. The information set forth in column headed "Number
of Units" has not been adjusted to reflect the proposed Reverse
Stock Split. See Proposal 2 herein. The closing price on the
Exchange for the Common Stock was $0.21875 on June 2, 1997, and
the fair market value of the Amended Series A Preferred Stock,
based upon last sales price information in the Private Offering,
Resales and Trading through Automated Linkage ("PORTAL") Market
of the National Association of Securities Dealers, Inc. as
supplied by Jefferies & Company, Inc. was $85.00 on June 2, 1997.
Mr. Miller's Appreciation Option is not included because of the
indeterminate nature of the Award. See Proposal 4.
Long Term Stock Incentive Plan as Amended and Restated Effective June 1, 1997
Name and Position Grant Type Number of Units (a)
----------------- ---------- -------------------
Marsden W. Miller, Jr., RSA - Common Stock (b) 15,000,000
Chairman and Chief NSO - Amended Series A Preferred Stock (c) 110,000
Executive Officer
John T. Chandler, President RSA - Common Stock (d) 5,000,000
RSA - Amended Series A Preferred Stock (d) 20,000
NSO - Common Stock (e) 2,000,000
NSO - Amended Series A Preferred Stock (f) 5,000
Danny M. Dobbs, Executive Vice NSO - Common Stock (g) 6,000,000
President and Chief NSO - Amended Series A Preferred Stock (h) 25,000
Operating Officer
Benjamin B. Blanchet, NSO - Common Stock (i) 6,000,000
Executive Vice President NSO - Amended Series A Preferred Stock (j) 25,000
Steven B. Toon, NSO - Common Stock (k) 6,000,000
Chief Financial Officer
Executive Group RSA - Common Stock (b) (d) 20,000,000
RSA - Amended Series A Preferred Stock (d) 20,000
NSO - Amended Series A Preferred Stock (f)(h)(j) 165,000
NSO - Common Stock (e) (g) (i) (k) 20,000,000
Non-Executive Director Group NSO - Common Stock (l) 6,000,000
Non-Executive Officer Employee
Group NSO - Common Stock (i) 4,000,000
NSO - Amended Series A Preferred Stock (m) 5,000
<FN>
_____________________
(a) The Awards do not take into account the results of
the Reverse Stock Split. See Proposal 2 herein.
(b) Effective June 1, 1997, M. W. Miller, Jr. was
granted an RSA for 15,000,000 shares of Common Stock. These
shares are subject to forfeiture if Mr. Miller's employment with
the Company terminates other than by reason of disability, death
or involuntary termination without cause prior to the specified
"lapse dates." The "lapse dates" (i.e., the dates as of which
forfeiture restrictions ceases to become applicable with respect
to shares under the RSA are June 1, 1999, June 1, 2000, June 1,
2001 and June 1, 2002 as to, respectively, 1,500,000 shares,
3,000,000 shares, 4,500,000 shares and 6,000,000 shares, provided
that the then per share fair market value of the Company's Common
Stock as of such dates is, respectively, $0.3802, $0.4372,
$0.5028 and $0.5782. In addition, the forfeiture penalties (to
the extent they have not theretofore lapsed) will lapse in full
on June 1, 2007 if Mr. Miller is employed by the Company on such
date. Pursuant to a "catch-up" provision, the potential
forfeiture penalties will also lapse if the Company's Common
Stock was not equal to or greater than the Fair Market Value
specified above but thereafter reaches at a relevant forfeiture
penalty lapse date the Fair Market Value designated for such date
as described above. The forfeiture penalties will also lapse
upon Mr. Miller's termination of employment by reason of death,
disability, involuntary termination without cause or voluntary
termination for good reason.
(c) Effective June 1, 1997, M. W. Miller, Jr. was
granted a NSO to purchase 110,000 shares of Amended Series A
Preferred Stock for an option exercise price of $85.00 per share
(aggregate purchase price of $9,350,000). Such NSO is
exercisable as follows: as to 27,500 shares on June 1, 2000; as
to 66,000 shares on June 1, 2001 and as to 16,500 shares on June
1, 2002. Mr. Miller's NSO will expire on June 1, 2007 or, if
earlier, the date his employment is terminated by the Company for
cause or the date he voluntarily terminates his employment
without good reason.
(d) Effective June 1, 1997, John T. Chandler was granted
an RSA for 5,000,000 shares of Common Stock and 20,000 shares of
Amended Series A Preferred Stock. These shares are subject to
forfeiture if Mr. Chandler's employment with the Company
terminates other than by reason of disability, death or
involuntary termination without cause prior to the specified
"lapse dates." The "lapse dates" (i.e., the dates as of which
forfeiture restrictions ceases to become applicable with respect
to shares under the RSA are June 1, 1999 as to 1,000,000 shares
of Common Stock and 4,000 shares of Amended Series A Preferred
Stock, June 1, 2000 as to 1,500,000 shares of Common Stock and
6,000 shares of Amended Series A Preferred Stock, June 1, 2001 as
to 2,500,000 shares of Common Stock and 10,000 shares of Amended
Series A Preferred Stock, provided that the then per share fair
market value as of such dates is, $0.3802, $0.4372 and $0.5028
with respect to the Common Stock and $112.41, $129.27 and $170.96
with respect to the Amended Series A Preferred Stock. In
addition, the forfeiture penalties (to the extent they have not
theretofore lapsed) will lapse in full on June 1, 2007 if Mr.
Chandler is employed by the Company on such date. Pursuant to a
"catch-up" provision, the potential forfeiture penalties will
also lapse if the Company's Common Stock was not equal to or
greater than the Fair Market Value specified above but thereafter
reaches at a relevant forfeiture penalty lapse date the Fair
Market Value designated for such date as described above. The
forfeiture penalties will also lapse upon Mr. Chandler's
termination of employment by reason of death, disability,
involuntary termination without cause or voluntary termination
for good reason.
(e) Effective June 1, 1997, John T. Chandler was granted
an NSO to purchase 2,000,000 shares of Common Stock for an option
exercise price of $0.25 per share (aggregate purchase price of
$500,000). Such NSO is exercisable as follows: as to 666,666
shares on June 1, 1999; as to 666,667 shares on June 1, 2000 and
as to 666,667 shares on June 1, 2001. Mr. Chandler' NSO will
expire on June 1, 2007 or, if earlier, the date his employment is
terminated by the Company for cause or the date he voluntarily
terminates his employment without good reason.
(f) Effective June 1, 1997, John T. Chandler was granted
an NSO to purchase 5,000 shares of Amended Series A Preferred
Stock for an option exercise price of $85.00 per share (aggregate
purchase price of $425,000). Such NSO is exercisable as follows:
as to 1,250 shares on June 1, 2000; as to 1,750 shares on June 1,
2001 and as to 2,000 shares on June 1, 2002. Mr. Chandler' NSO
will expire on June 1, 2007 or, if earlier, the date his
employment is terminated by the Company for cause or the date he
voluntarily terminates his employment without good reason.
(g) Effective June 1, 1997, Danny M. Dobbs was granted
an NSO to purchase 6,000,000 shares of Common Stock for an option
exercise price of $0.25 per share (aggregate purchase price of
$1,500,000). Such NSO is exercisable as follows: as to
2,000,000 shares on June 1, 1999; as to 2,000,000 shares on June
1, 2000 and as to 2,000,000 shares on June 1, 2001. Mr. Dobbs'
NSO will expire on June 1, 2007 or, if earlier, the date his
employment is terminated by the Company for cause or the date he
voluntarily terminates his employment without good reason.
(h) Effective June 1, 1997, Danny M. Dobbs was granted
an NSO to purchase 25,000 shares of Amended Series A Preferred
Stock for an option exercise price of $85.00 per share (aggregate
purchase price of $2,125,000). Such NSO is exercisable as
follows: as to 6,250 shares on June 1, 2000; as to 8,750 shares
on June 1, 2001 and as to 10,000 shares on June 1, 2002. Mr.
Dobbs' NSO will expire on June 1, 2007 or, if earlier, the date
his employment is terminated by the Company for cause or the date
he voluntarily terminates his employment without good reason.
(i) Effective August 1, 1997, Benjamin B. Blanchet was
granted an NSO to purchase 6,000,000 shares of Common Stock for
an option exercise price of $0.25 per share (aggregate purchase
price of $1,500,000). Such NSO is exercisable as follows: as to
2,000,000 shares on August 1, 1999; as to 2,000,000 shares on
August 1, 2000 and as to 2,000,000 shares on August 1, 2001. Mr.
Blanchet's NSO will expire on August 1, 2007 or, if earlier, the
date his employment is terminated by the Company for cause or the
date he voluntarily terminates his employment without good
reason. This grant was approved at the June 5, 1997 Board
meeting, subject to Mr. Blanchet's joining the Company. Mr.
Blanchet joined the Company on August 1, 1997, and became
Executive Vice President of the Company on October 27, 1997.
(j) Effective August 1, 1997, Benjamin B. Blanchet was
granted an NSO to purchase 25,000 shares of Amended Series A
Preferred Stock for an option exercise price of $85.00 per share
(aggregate purchase price of $2,125,000). Such NSO is
exercisable as follows: as to 6,250 shares on August 1, 2000; as
to 8,750 shares on August 1, 2001 and as to 10,000 shares on
August 1, 2002. Mr. Blanchet's NSO will expire on August 1, 2007
or, if earlier, the date his employment is terminated by the
Company for cause or the date he voluntarily terminates his
employment without good reason. This grant was approved at the
June 5, 1997 Board meeting, subject to Mr. Blanchet's joining the
Company. Mr. Blanchet joined the Company on August 1, 1997, and
became Executive Vice President of the Company on October 27,
1997.
(k) Effective October 6, 1997, Steven B. Toon was
granted an NSO to purchase 6,000,000 shares of Common Stock for
an option exercise price of $0.25 per share (aggregate purchase
price of $1,500,000). Such NSO is exercisable as follows: as to
2,000,000 shares on October 6, 1999; as to 2,000,000 shares on
October 6, 2000 and as to 2,000,000 shares on October 6, 2001.
Mr. Toon's NSO will expire on October 6, 2007 or, if earlier, the
date his employment is terminated by the Company for cause or the
date he voluntarily terminates his employment without good
reason. This grant was approved at the June 5, 1997 Board
meeting, subject to Mr. Toon's joining the Company. Mr. Toon
joined the Company on October 6, 1997, and became the Chief
Financial Officer of the Company on October 27, 1997.
(l) Effective June 1, 1997, each of Messrs. Hummel,
Palliser, Melman, Reinhardt, Hofheinz and Fetters, directors,
were each granted an NSO to purchase 1,000,000 shares of Common
Stock at an option exercise price of $0.25 per share (aggregate
purchase price to each grantee of $250,000), exercisable as
follows: 250,000 shares on June 1, 1998; 250,000 shares on June
1, 1999, and 500,000 shares on June 1, 2000. These NSOs will
expire on June 1, 2007.
(m) Effective June 1, 1997, Mr. Richard Kennedy, a Vice
President, was granted an NSO to purchase 4,000,000 shares of
Common Stock at an exercise price of $0.25 per share (aggregate
purchase price of $1,000,000), and an NSO to purchase 5,000
shares of Amended Series A Preferred Stock at an exercise price
of $85.00 per share (aggregate purchase price of $425,000). Such
Common Stock NSO is exercisable as follows: as to 1,333,333
shares on June 1, 1999; as to 1,333,333 shares on June 1, 2000
and as to 1,333,334 shares on June 1, 2001. Mr. Kennedy's NSO
will expire on June 1, 2007 or, if earlier, the date his
employment is terminated by the Company for cause or the date he
voluntarily terminates his employment without good reason. Such
Amended Series A Preferred Stock NSOs are exercisable as follows:
as to 1,250 shares on June 1, 2000; as to 1,750 shares on June 1,
2001 and as to 3,000 shares on June 1, 2002. Mr. Kennedy's NSOs
will expire on August 1, 2007 or, if earlier, the date his
employment is terminated by the Company for cause or the date he
voluntarily terminates his employment without good reason.
Effective June 1, 1997, M. W. Miller, Jr. was granted an
Appreciation Option with respect to appreciation in the Company's
total market capitalization (as defined) from and after June 1,
1997. See "Proposal 4 - Approval of Appreciation Option for M.W.
Miller, Jr." below for a more detailed discussion of such grant
(which is subject to and conditioned upon a specific vote of
approval by the shareholders of the Company.)
Accounting Effect
- -----------------
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 not determinable.
Federal Income Tax Effects
- --------------------------
The following is a general summary of the principle federal
income tax effects under current law to award recipients and to
the Company in connection with the various awards which may be
granted under the 1997 LTSIP Restatement. These descriptions do
not purport to cover all of the potential tax consequences with
respect to such awards.
(i) An NSO (including for this purpose an RO relating to
Common Stock) is a right to purchase a specified number of shares
of Common Stock or Preferred Stock at a fixed option price over a
specified period of time. In the case of an NSO to purchase
shares of Preferred Stock, the specified number of shares
acquirable upon exercise thereof may, as determined by the
Committee and specified in the agreement evidencing the NSO, be
increased (without a corresponding increase in the aggregate
option price) to include a number of shares based upon dividends
which would have been received by the optionee if he had owned
outright the shares he is acquiring upon exercise of the NSO
between the date of its grant and the date of such exercise. An
optionee will realize no income for federal income tax purposes
upon the grant of an NSO under the 1997 LTSIP Restatement, but
will recognize income upon the exercise of the NSO in an amount
equal to the excess of the fair market value of the shares
received upon exercise (including dividend accrual shares of
Preferred Stock in the case of an NSO to acquire shares of
Preferred Stock) over the aggregate amount paid to acquire such
shares. Subject to certain limitations imposed by Section 162(m)
of the Code (see discussion below), the Company will be entitled
to a deduction for federal income tax purposes in the same year
as, and in an amount equal to, the income recognized by the
optionee. The optionee's adjusted basis for the shares of Common
Stock or Preferred Stock received upon exercise will be the fair
market value of such shares as of the date of exercise.
(ii) An ISO is a right to purchase at a fixed option
price, over a period not to exceed ten years, a specified number
of shares of Common Stock (an ISO may not be granted to purchase
shares of Preferred Stock), that complies with Section 422 of the
Code. An optionee who receives an ISO under the 1997 LTSIP
Restatement will recognize no income for federal income tax
purposes upon either the grant or the exercise of such ISO.
Income will be taxable to the optionee upon the sale of the
shares acquired. In general, the adjusted basis for the shares
of Common Stock received upon exercise will be the option price
paid with respect to such shares. The Company will not be
entitled to a deduction upon the exercise of an ISO. However, if
the shares are sold within a period of one year from the date of
exercise, the optionee will recognize compensation income in an
amount equal to the lesser of the excess of the fair market value
on the date of exercise over the option exercise price, or the
excess of the price received upon sale over the option exercise
price, and the Company would be entitled to a corresponding
deduction, subject to the limitations imposed under Section
162(m) of the Code (see discussion below). The amount by which
the fair market value of the shares of Common Stock received upon
the exercise of an ISO exceeds the exercise price is an item of
tax adjustment under the Code and is therefore included in
alternative minimum taxable income.
(iii) An RSA is Common Stock or Preferred Stock that is
transferred subject to a risk of forfeiture under certain
circumstances and restrictions on transfer of ownership. RSAs
may be made with or without cash payment by the employee. An
individual who receives a grant of restricted stock who does not
elect to be taxed at the time of grant will not recognize income
upon an award of shares of Common Stock or Preferred Stock, and
the Company will not be entitled to a deduction until the
termination of the restrictions. Upon such termination, the
individual will recognize ordinary income in an amount equal to
the fair market value of the Common Stock or Preferred Stock at
that time (less any amount paid by the employee for such shares),
and the Company will be entitled to a deduction in the same
amount, subject to the limitations imposed under Section 162(m)
of the Code (see discussion below). However, the individual may
elect to recognize ordinary income in the year the restricted
stock award is granted in an amount equal to the fair market
value of the shares of Common Stock or Preferred Stock subject to
such award at that time, determined without regard to the
restrictions. In that event, the Company will be entitled to a
deduction in such year and in the same amount. Any gain or loss
recognized by the employee upon subsequent disposition of the
stock will be capital in nature.
(iv) A PU or AO is a promise by the Company to make
payment contingent upon the achievement of one or more
performance targets. Amounts payable in respect of PUs or AOs
are payable in cash, in shares of Common Stock, in shares of
Preferred Stock or in a combination of cash and Common Stock
and/or Preferred Stock. For PUs or AOs, any cash plus the fair
market value of any Common Stock and/or Preferred Stock received
as payment under the 1997 LTSIP Restatement over any amounts paid
to exercise an AO will be considered ordinary income to the
recipient in the year in which paid, and the Company will be
entitled to a deduction in the same year and in the same amount,
subject to the limitations imposed under Section 162(m) of the
Code (see discussion below).
Section 162(m) of the Code limits deductibility of certain
compensation for the Company's Chief Executive Officer and the
additional four executive officers of the Company who are highest
paid and employed at year end to $1 million per year unless
certain conditions are met which result in compensation being
characterized as "performance-based" compensation. Awards under
the Plan will not satisfy the conditions necessary to cause the
compensation earned under them to qualify as "performance-based"
compensation which is not subject to the deductibility limit of
Section 162(m) of the Code. It is the position of the Board of
Directors that the mechanistic approach necessary in the design
of incentive compensation in order to satisfy the criteria under
Section 162(m) of the Code for compensation to be "performance
based" would unnecessarily compromise the best interests of the
Company and its shareholders.
Certain provisions in the Plan may afford the recipient of
an Award under the Plan with special protections or payments
which are contingent upon a change in the ownership or effective
control of the Company or in the ownership of a substantial
portion of the Company's assets. To the extent triggered by the
occurrence of any such event, these special protections or
payments may constitute "parachute payments" which, when
aggregated with other "parachute payments" received by the
recipient could result in the recipient receiving "excess
parachute payments". The Company would not be allowed a
deduction for any such "excess parachute payments" and the
recipient of such "excess parachute payments" would be subject to
a nondeductible 20% excise tax upon such payments in addition to
income tax otherwise owed with respect to such payments.
The foregoing summary of the proposed 1997 LTSIP Restatement
is qualified in its entirety by reference to the specific
provisions of the 1997 LTSIP Restatement the full text of which
is set forth as Appendix C hereto. The 1997 LTSIP Restatement
does not extend the term of the 1992 LTSIP and, therefore, the
1997 LTSIP Restatement will terminate (and no further awards
thereunder will be granted after) June 2, 2002. The fair market
value of the Company's Common Stock, computed as the average of
the high and low sale prices for each, as reported on the
Exchange on November 10, 1997, was $0.5625 per share. In view of
the fact that there is no public market for the Amended Series A
Preferred Stock, the fair market value of the Amended Series A
Preferred Stock on November 10, 1997, determined in good faith by
the Board of Directors based upon the last bid price of the
Amended Series A Preferred Stock in the PORTAL Market, as
reported to the Company by Jefferies & Company, Inc., was $80.00
per share.
Vote Required for Approval
- --------------------------
The Board of Directors recommends that shareholders vote FOR
Proposal 3. The affirmative vote of a majority of the votes cast
by shareholders present or represented by proxy and entitled to
vote at the Meeting, a quorum being present, is required to
approve this proposal. Unless otherwise instructed the proxies
will be voted "FOR" approval of the proposal.
PROPOSAL 4 - APPROVAL OF APPRECIATION OPTION FOR M.W. MILLER, JR.
Subject to shareholder approval and pursuant to the 1997
LTSIP Restatement (see Proposal 3 above), the Board has approved
an Appreciation Option for M. W. Miller, Jr. A copy of the
Appreciation Option Agreement is attached hereto as Appendix D.
The Board has determined that the Appreciation Option to M. W.
Miller, Jr. is in the best interests of the Company and its
shareholders in order to, and is required to, retain the services
of Mr. Miller, who has been instrumental in developing the
Company's China activities and in successfully concluding the
Company's recent $100 million financing. The Appreciation Option
would also provide Mr. Miller with additional incentive to
increase the value of the Company based upon its market
capitalization thereby directly benefiting the shareholders of
the Company by increasing the value of their investments in the
Company.
The Appreciation Option Agreement provides Mr. Miller with
the right, upon his payment of the Exercise Price (as defined
below) to additional compensation (payable in cash or in shares
of Common Stock or Preferred Stock or a combination thereof, as
elected by the Company) based upon 5% of the difference between
the market capitalization of the Company as of June 1, 1997 and
the market capitalization of the Company as of the date that Mr.
Miller exercises the Appreciation Option. For purposes of the
Appreciation Option, the Company's market capitalization is the
total fair market value of the Company's outstanding shares of
Common Stock, Preferred Stock and outstanding options and
warrants. In general, fair market value is determined based on
the trading price of marketable securities and by the Board of
Directors as to the fair market value for securities for which
there is no ready market. Fair market value as of the date of
exercise of the Option is based on the average fair market value
of the 30-day period immediately preceding the date of the
Appreciation Option exercise. On June 1, 1997, the aggregate
market capitalization of the Company was $161,547,223 million.
Upon exercise of his Option, in the event the Company elects to
settle the Option with shares of Stock, Mr. Miller must pay the
Company twenty percent (20%) of the amount he is entitled to
receive upon exercise of the Appreciation Option (before any
reduction as hereinafter set forth), or any increment thereof, up
to an aggregate maximum of $5 million (the "Exercise Price") in
cash. In the event the Company elects to settle the Option in
cash, the amount of cash Mr. Miller will receive will be reduced
by the amount of the Exercise Price. Because Mr. Miller's
Appreciation Option contemplates compensation determined with
reference to increases in the Company's market capitalization
without restriction, there is no effective limit on the amount of
compensation which may become payable thereunder. Mr. Miller may
exercise his Appreciation Option as of any June 1 or December 1
commencing June 1, 2002 upon 45 days written notice, in whole or
in 10% increments. In the event that Mr. Miller exercises his
Appreciation Option for less than the total amount available
thereunder, the percentage increment as to which it is exercised
will cease to be available to create additional compensation
opportunity for Mr. Miller based upon appreciation thereafter in
the Company's market capitalization. Mr. Miller's Appreciation
Option expires on June 1, 2007 and will remain exercisable at any
time prior to such expiration notwithstanding his termination of
employment with the Company unless such employment is terminated
by the Company for "cause" or is terminated by Mr. Miller without
"good reason." In keeping with the provisions of the 1997 LTSIP
Restatement discussed in Proposal 3 - "Change of Control
Provisions," 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 Mr. Miller upon any exercise of
his Appreciation Option at least 40% of the net amount payable in
respect of such exercise in cash. This obligation may impede the
consummation of a change of control of the Company.
Accounting Effect
- -----------------
The Company anticipates that the aforementioned Award 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 not determinable.
Federal Income Tax Effects
- --------------------------
The following is a general summary of the principal federal
income tax effects of Mr. Miller's Appreciation Option. Such
description does not purport to cover all potential tax
consequences thereof. Mr. Miller will not recognize any taxable
compensation as a result of his Appreciation Option until his
exercise of such Appreciation Option, in whole or in part. Upon
such exercise, Mr. Miller shall recognize compensation income
taxable at ordinary income rates equal to the net cash he
receives (i.e., the cash received less exercise price owed
allocable to such cash) and the excess of the fair market value
of the Common Stock and/or Preferred Stock he receives over the
exercise price he paid which is allocable to such stock upon such
exercise. Subject to certain limitations imposed by Section
162(m) of the Code (see discussion below), the Company will be
entitled to a deduction for federal income tax purposes in the
same year as, and in an amount equal to, the income recognized by
Mr. Miller in connection with such exercise. In the event that
Mr. Miller receives shares of Common Stock and/or Preferred Stock
upon exercise of his Appreciation Option, his basis in such
shares will be equal to their fair market value as of the date of
his receipt thereof. Because Mr. Miller is the Chief Executive
Officer of the Company, Section 162(m) of the Code limits
deductibility of certain compensation paid to him to one million
dollars per year unless certain conditions are met which result
in such compensation being characterized as "performance based"
compensation. The amount of taxable income generated as a result
of Mr. Miller's exercise of the Appreciation Option will
constitute compensation for purposes of Section 162(m) of the
Code but will not satisfy the conditions necessary to cause such
compensation to qualify as "performance based" compensation which
is not subject to the deductibility limit of Section 162(m) of
the Code. It is the position of the Company that the incentive
created by the Agreement for Mr. Miller to maximize the value of
the Appreciation Option of the Company's market capitalization is
such that the Appreciation Option is in the best interests of the
Company and its shareholders notwithstanding the loss pursuant to
Code Section 162(m) of a deduction for compensation which may be
earned by Mr. Miller for federal income tax purposes pursuant to
the Appreciation Option.
Vote Required for Approval
- --------------------------
The Board of Directors recommends that shareholders vote FOR
Proposal 4. The affirmative vote of a majority of the votes cast
by shareholders present or represented by proxy and entitled to
vote at the Meeting, a quorum being present, is required to
approve this proposal. Unless otherwise instructed the proxies
will be voted "FOR" approval of the proposal.
INDEPENDENT AUDITORS
The Board of Directors of the Company, upon the
recommendation of the Audit Committee, appointed the firm of
Coopers & Lybrand to serve as independent accountants of the
Company for the fiscal year ending December 31, 1997. Coopers &
Lybrand has served as independent accountants of the Company
since its inception and is considered by management of the
Company to be well qualified. The Company has been advised by
that firm that neither it nor any member thereof has any
financial interest, direct or indirect, in the Company or any of
its subsidiaries in any capacity.
One or more representatives of Coopers & Lybrand will be
present at the Meeting, will have an opportunity to make a
statement if he or she desires to do so and will be available to
respond to appropriate questions.
SHAREHOLDERS' PROPOSALS FOR
1998 ANNUAL MEETING OF SHAREHOLDERS
Pursuant to Rule 14a-8(a)(3)(i) promulgated by the U.S.
Securities and Exchange Commission, proposals of shareholders
intended to be presented at the 1998 Annual Meeting of
Shareholders must be received by the Company a reasonable time
prior to the solicitation of proxies for such meeting to be
eligible for inclusion in the Company's proxy statement and proxy
relating to that meeting. Assuming the 1998 Annual Meeting of
Shareholders is held on May 19, 1998, as provided in the Bylaws,
proposals of shareholders intended to be presented at that
meeting should be received by the Company prior to January 20,
1998.
OTHER BUSINESS
The Board of Directors of the Company knows of no other
matters to come before the Meeting, other than those set forth
herein and in the accompanying Notice of Special Meeting in Lieu
of Annual Meeting of Shareholders. However, if any other matters
should properly come before the Meeting, it is the intention of
the persons named in the accompanying proxies to vote such
proxies as in their discretion they may deem advisable.
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended
December 31, 1996, has been mailed to shareholders on or about
May 15, 1997. The Annual Report does not form any part of the
material for solicitation of proxies.
ADDITIONAL INFORMATION
The form of proxy and Proxy Statement have been approved by
the Board of Directors and are being mailed and delivered to
shareholders by its authority.
Yours sincerely,
/s/ Marsden W. Miller, Jr.
MARSDEN W. MILLER, JR.
Chairman and Chief Executive Officer
November 20, 1997
APPENDIX A
On October 27, 1997, the Board of Directors of the Company
unanimously adopted the following resolutions:
RESOLVED: that Article FOURTH of the Certificate of
Incorporation be amended and restated by adding the following
provisions thereto:
" Simultaneously with the effective date of this
Restated Certificate of Incorporation (the "Effective
Date"), each share of Common Stock, par value $.01 per
share, issued and outstanding immediately prior to the
Effective Date (the "Old Common Stock") shall automatically
and without any action on the part of the holder thereof be
reclassified as and changed into one-fifteenth (1/15) of a
share of the Corporation's Common Stock, par value $.01 per
share (the "New Common Stock"), subject to the treatment of
fractional share interests as described below. Each holder
of a certificate or certificates which immediately prior to
the Effective Date represented outstanding shares of Old
Common Stock (the "Old Certificates", whether one or more)
shall be entitled to receive upon surrender of such Old
Certificates to the Corporation's Transfer Agent, or an
Exchange Agent appointed by the Corporation, for
cancellation, a certificate or certificates (the "New
Certificates", whether one or more) representing the number
of whole shares of the New Common Stock into which and for
which the shares of the Old Common Stock formerly
represented by such Old Certificates so surrendered, are
reclassified under the terms hereof. From and after the
Effective Date, Old Certificates shall represent only the
right to receive New Certificates (and, where applicable,
cash in lieu of fractional shares, as provided below)
pursuant to the provisions hereof. No certificates or scrip
representing fractional share interests in New Common Stock
will be issued, and no such fractional share interest will
entitle the holder thereof to vote, or to any rights of a
shareholder of the Corporation. A holder of Old Certificates
shall receive, in lieu of any fraction of a share of New
Common Stock to which the holder would otherwise be
entitled, a cash payment therefor on the basis of the
closing price of the Old Common Stock on the American Stock
Exchange, Inc. on the Effective Date, as reported on the
composite tape of the American Stock Exchange, Inc. (or in
the event the Corporation's Common Stock is not so traded on
the Effective Date, such closing price on the next preceding
day on which such stock was traded on the American Stock
Exchange, Inc.). The Corporation may retain a third party to
collect and pool fractional share interests, sell the same,
and return payment to the holders of the interests. If more
than one Old Certificate shall be surrendered at one time
for the account of the same stockholder, the number of full
shares of New Common Stock for which New Certificates shall
be issued shall be computed on the basis of the aggregate
number of shares represented by the Old Certificates so
surrendered. In the event that the Corporation's Transfer
Agent or Exchange Agent determines that a holder of Old
Certificates has not tendered all his certificates for
exchange, the Transfer Agent or Exchange Agent shall carry
forward any fractional share until all certificates of that
holder have been presented for exchange such that payment
for fractional shares to any one person shall not exceed the
value of one share. If any New Certificate is to be issued
in a name other than that in which the Old Certificates
surrendered for exchange are issued, the Old Certificates so
surrendered shall be properly endorsed and otherwise in
proper form for transfer, and the person or persons
requesting such exchange shall affix any requisite stock
transfer tax stamps to the Old Certificates surrendered, to
provide funds for their purchase, or establish to the
satisfaction of the Transfer Agent or the Exchange Agent
that such taxes are not payable."
;and it was further
RESOLVED: that any share of New Common Stock to be issued in
exchange for shares of Old Common Stock and any cash to be paid
in lieu of fractional share interests in New Common Stock shall
revert in full ownership to the Company one year after the
Effective Date if such shares and cash are not claimed by the
persons entitled thereto; and it was further
RESOLVED: that the shares of New Common Stock to be issued
in exchange for shares of Old Common Stock shall, upon such
issuance, be deemed to have been duly authorized and will be
fully paid, validly issued and nonassessable; and it was further
RESOLVED: that the appropriate officers of the Company be,
and they hereby are authorized and directed to adjust the capital
accounts of the Company to transfer an amount from capital to
surplus to cover the aggregate decrease in the par value of the
issued shares of New Common Stock in light of the adoption of the
foregoing resolutions; and it was further
RESOLVED: that the Certificate of Incorporation of the
Corporation be amended to reflect the aforementioned amendment to
Article FOURTH and restated in accordance with Section 245(b) of
the Delaware General Corporation Law to read in its entirety as
provided in Appendix B attached hereto and that such Certificate
of Incorporation, as so amended and restated (the "Restated
Certificate of Incorporation"), be submitted to the stockholders
of the Corporation for their approval; and it was further
RESOLVED: that the appropriate officers of the Corporation
are hereby authorized and directed to do all things and to
prepare, execute, deliver, file, record and affix the Corporate
seal to all agreements, documents and other instruments, their
execution thereof to be conclusive evidence of their approval
thereof and their authority so to do, including, without
limitation, subject to the receipt of the requisite approval of
the stockholders, the Restated Certificate of Incorporation,
which in their sole judgement are deemed necessary or advisable
to implement the foregoing resolutions.
APPENDIX B
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
XCL LTD.
1. The name of the corporation (which is hereinafter referred
to as the "Corporation") is XCL LTD.
2. The original Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on December 30, 1987,
under the name The Exploration Company of Louisiana, inc. (the
"Original Certificate").
3. This Amended and Restated Certificate of Incorporation has
been duly proposed by resolutions adopted and declared advisable
by the Board of Directors of the Corporation, duly adopted by the
stockholders of the Corporation at a meeting duly called and
held, and duly executed and acknowledged by the officers of the
Corporation in accordance with the provisions of Sections 103,
242 and 245 of the General Corporation Law of the State of
Delaware and, restates, integrates and further amends the
provisions of the Original Certificate and, upon filing with the
Secretary of State in accordance with Section 103, shall
thenceforth supersede the Original Certificate as amended by all
amendments filed subsequent thereto prior to the date hereof and
shall, as it may thereafter be amended in accordance with its
terms and applicable law, be the Amended and Restated Certificate
of Incorporation of the Corporation.
4. The text of the Original Certificate, as amended, is hereby
amended and restated to read in its entirety as follows:
FIRST: The name of this corporation (the
"Corporation") is XCL Ltd.
SECOND: The address of the Corporation's registered
office in the State of Delaware is 1105 North Market Street,
Suite 1300, in the City of Wilmington, County of New Castle.
THIRD: The nature of the business and the purposes to be
conducted, promoted and carried on are:
To engage in any lawful act or activity for which
corporations may be organized under the Delaware
General Corporation Law, either for its own account, or
for the account of others as agent, and either as agent
or principal, to enter upon or engage in any kind of
business of any nature whatsoever, which corporations
organized under the Delaware General Corporation Law
may engage; to the extent not prohibited thereby, to
enter upon and engage in any kind of business of any
nature whatsoever and to acquire real property and
personal property in any other state of the United
States of America, any foreign nation, and any
territory of any country to the extent permitted by the
laws of such other state, nation or territory.
FOURTH: A. The total number of shares and the par
value, if any, of each class of stock which the Corporation is
authorized to issue shall be 2,400,000 shares of "Preferred
Stock," par value $1.00 per share, and 500,000,000 shares of
"Common Stock," par value of $0.01 per share. Simultaneously with
the effective date of this Restated Certificate of Incorporation
(the "Effective Date"), each share of Common Stock, par value
$.01 per share, issued and outstanding immediately prior to the
Effective Date (the "Old Common Stock") shall automatically and
without any action on the part of the holder thereof be
reclassified as and changed into one-fifteenth (1/15) of a share
of the Corporation's Common Stock, par value $.01 per share (the
"New Common Stock"), subject to the treatment of fractional share
interests as described below. Each holder of a certificate or
certificates which immediately prior to the Effective Date
represented outstanding shares of Old Common Stock (the "Old
Certificates", whether one or more) shall be entitled to receive
upon surrender of such Old Certificates to the Corporation's
Transfer Agent, or an Exchange Agent appointed by the
Corporation, for cancellation, a certificate or certificates (the
"New Certificates", whether one or more) representing the number
of whole shares of the New Common Stock into which and for which
the shares of the Old Common Stock formerly represented by such
Old Certificates so surrendered, are reclassified under the terms
hereof. From and after the Effective Date, Old Certificates shall
represent only the right to receive New Certificates (and, where
applicable, cash in lieu of fractional shares, as provided below)
pursuant to the provisions hereof. No certificates or scrip
representing fractional share interests in New Common Stock will
be issued, and no such fractional share interest will entitle the
holder thereof to vote, or to any rights of a shareholder of the
Corporation. A holder of Old Certificates shall receive, in lieu
of any fraction of a share of New Common Stock to which the
holder would otherwise be entitled, a cash payment therefor on
the basis of the closing price of the Old Common Stock on the
American Stock Exchange, Inc. on the Effective Date, as reported
on the composite tape of the American Stock Exchange, Inc. (or in
the event the Corporation's Common Stock is not so traded on the
Effective Date, such closing price on the next preceding day on
which such stock was traded on the American Stock Exchange,
Inc.). The Corporation may retain a third party to collect and
pool fractional share interests, sell the same, and return
payment to the holders of the interests. If more than one Old
Certificate shall be surrendered at one time for the account of
the same stockholder, the number of full shares of New Common
Stock for which New Certificates shall be issued shall be
computed on the basis of the aggregate number of shares
represented by the Old Certificates so surrendered. In the event
that the Corporation's Transfer Agent or Exchange Agent
determines that a holder of Old Certificates has not tendered all
his certificates for exchange, the Transfer Agent or Exchange
Agent shall carry forward any fractional share until all
certificates of that holder have been presented for exchange such
that payment for fractional shares to any one person shall not
exceed the value of one share. If any New Certificate is to be
issued in a name other than that in which the Old Certificates
surrendered for exchange are issued, the Old Certificates so
surrendered shall be properly endorsed and otherwise in proper
form for transfer, and the person or persons requesting such
exchange shall affix any requisite stock transfer tax stamps to
the Old Certificates surrendered, to provide funds for their
purchase, or establish to the satisfaction of the Transfer Agent
or the Exchange Agent that such taxes are not payable. The Board
of Directors be and hereby is authorized to issue all or any part
of the unissued shares of Preferred Stock and Common Stock thus
authorized without further action by the stockholders, unless
such action is required by law or by the rules of any stock
exchange on which the Corporation's securities are then listed.
The number of shares of the Preferred Stock initially authorized
to be issued as Amended Series A, Cumulative Convertible
Preferred Stock, Series B, Cumulative Preferred Stock and Series
F, Cumulative Convertible Preferred Stock and the relative rights
and preferences of such shares are set forth in Paragraphs B, C
and D, of this Article FOURTH. Authority is hereby expressly
vested in the board of directors to increase the number of
authorized shares of such series of Preferred Stock and to divide
the Preferred Stock into additional series and, within the
limitations imposed by applicable law, to fix and determine the
relative rights and preferences of the shares of any series so
established by resolution of the board of directors and to
provide for the issuance thereof. Each series shall be so
designated as to distinguish the shares thereof from the shares
of all other series and classes. All shares of Preferred Stock
shall be identical except as to the following relative rights and
preferences, as to which there may be variations between
different series:
(1) the rate of dividend;
(2) the price at and the terms and conditions on which
shares may be redeemed or otherwise purchased;
(3) the amount payable upon shares in the event of
dissolution of the Corporation;
(4) sinking fund provisions for the redemption or
purchase of shares;
(5) the terms and conditions on which the shares may be
converted, if the shares of a series are issued with the
privilege of conversion;
(6) voting rights; and
(7) such other preferences and relative, participating,
optional or other special rights, and qualifications, limitations
or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issue of such stock
adopted by the Board of Directors.
B. The Corporation shall have the authority to issue up
to 2,085,000 shares of Preferred Stock, which shall be designated
Amended Series A, Cumulative Convertible Preferred Stock (the
"Amended Series A Preferred Stock"), each share of Amended Series
A Preferred Stock being identical with each other share of
Amended Series A Preferred Stock and all shares of Amended Series
A Preferred Stock having the following characteristics, rights
and preferences:
Section 1. Designation; Number of Shares. The shares of
the series authorized by this resolution shall be designated as
Amended Series A, Cumulative Convertible Preferred Stock (the
"Convertible Preferred Stock" or "Amended Series A Preferred
Stock"). The number of shares initially constituting such series
shall be limited to Two Million Eighty Five Thousand (2,085,000).
Such number of shares may be decreased, at any time and from time
to time, by resolution of the Board of Directors; provided,
however, that no decrease shall reduce the number of shares of
Convertible Preferred Stock to a number less than the number of
shares then outstanding. The liquidation value of the
Convertible Preferred Stock shall be $85.00.
Section 2. Dividends.
(a) Amount. The holders of Convertible Preferred Stock
shall be entitled to receive, when, as and if declared by the
Board of Directors, out of funds legally available for the
payment of dividends, dividends at the rate of $8.075 per share
per annum, and no more, payable semi-annually, on May 1, and
November 1 in each year, commencing November 1, 1997, except that
if such date is not a business day then such dividend shall be
payable on the next succeeding business day (the "Dividend
Payment Date" or "Dividend Payment Dates") (as used herein, the
term "business day" shall mean any day except a Saturday, Sunday
or day on which banking institutions are authorized or required
by law to close in New York City or in the City of Lafayette,
Louisiana). Such dividends shall be cumulative (whether or not
declared) and shall accrue, without interest, from the first day
in which such dividend may be payable as provided herein, except
that with respect to the first semi-annual dividend, such
dividend shall accrue from the date of issuance of such shares of
Convertible Preferred Stock (the "Issue Date"). Dividends shall
be payable to holders of record as they appear on the share
transfer records of the Corporation on such record dates as may
be fixed by the Board of Directors, not more than sixty (60) days
nor less than ten (10) days preceding such Dividend Payment Date.
Dividends in arrears may be declared and paid at any time,
without reference to any regular Dividend Payment Date, to
holders of record on such date, not more than sixty (60) days
preceding the payment date thereof, as may be fixed by the Board
of Directors of the Corporation. The amount of dividends payable
on shares of Convertible Preferred Stock for each full semi-
annual dividend period (the "Semi-Annual Dividend"), shall be
computed by dividing by two the annual rate per share set forth
in this subsection (a). During the period commencing on the
Issue Date to and including the Dividend Payment Date on
November 1, 2000, dividends shall be paid in additional fully
paid and nonassessable shares of Convertible Preferred Stock (the
"Preferred Dividend Stock"), and, thereafter, dividends shall be
paid in cash, or, at the sole election of the Corporation, in
shares of Preferred Dividend Stock. The amount of Preferred
Dividend Stock payable on the Convertible Preferred Stock for
each semi-annual dividend period shall be computed by dividing
the amount of the full Semi-Annual Dividend by eighty-five (85).
No fractional shares of Preferred Dividend Stock shall be issued
by the Corporation. Instead of any fractional share of Preferred
Dividend Stock that would otherwise be issuable to a holder by
way of a dividend on the Convertible Preferred Stock, the
Corporation shall either (i) pay a cash adjustment in respect of
such fractional share in an amount equal to the same fraction of
$85.00 computed to the nearest whole cent or (ii) aggregate all
such fractional shares into a whole number of shares and sell
such aggregated fractional shares on behalf of the holders
entitled thereto in a public or private sale and distribute the
net cash proceeds from the sale thereof to such holders pro rata.
If the Corporation shall elect so to aggregate and sell such
fractional shares, it shall endeavor to use its best efforts to
secure the best available sales price for such shares but shall
not be obligated to secure the highest price obtainable for such
shares. The amount of Preferred Dividend Stock issuable to a
holder by way of a dividend shall be computed on the basis of the
aggregate number of shares of Convertible Preferred Stock
registered in such holder's name on the record date fixed for the
payment of such dividend. Dividends payable on the Convertible
Preferred Stock for any period less than a full semi-annual
period shall be computed on the basis of a 360-day year of twelve
30-day months.
(b) Priority. If dividends upon any shares of
Convertible Preferred Stock, or any other outstanding class or
series of Stock of the Corporation ranking on a parity with the
Convertible Preferred Stock as to dividends, are in arrears, all
dividends or other distributions declared upon each class or
series of such Stock (other than dividends paid in Stock of the
Corporation ranking junior to the Convertible Preferred Stock as
to dividends and upon liquidation, dissolution or winding up) may
only be declared pro rata so that in all cases the amount of
dividends or other distributions declared per share on the
Convertible Preferred Stock and such class or series bear to each
other the same ratio that the accrued and unpaid dividends per
share on the shares of the Convertible Preferred Stock and such
class or series bear to each other. Except as set forth above,
if dividends upon any shares of Convertible Preferred Stock are
in arrears: (i) no dividends (in cash, Stock or other property)
may be paid, declared or set aside for payment or any other
distribution made on any Stock of the Corporation ranking junior
to the Convertible Preferred Stock as to dividends (other than
dividends or distributions in Stock of the Corporation ranking
junior to the Convertible Preferred Stock as to dividends and
upon liquidation, dissolution or winding up) and upon
liquidation, dissolution or winding up; and (ii) no Stock of the
Corporation ranking junior to or on a parity with the Convertible
Preferred Stock as to dividends may be redeemed, purchased or
otherwise acquired by the Corporation, except by conversion of
such Stock into, or exchange of such Stock for, Stock of the
Corporation ranking junior to the Convertible Preferred Stock as
to dividends and upon liquidation, dissolution or winding up.
(c) No Interest. No interest, sum of money in lieu of
interest, or other property or securities shall be payable in
respect of any dividend payment or payments which are accrued but
unpaid. Dividends paid on shares of Convertible Preferred Stock
in an amount less than the total amount of such dividends at the
time accumulated and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the
time outstanding.
Section 3. Conversion Privilege.
(a) Right of Conversion. At any time on or after
May 20, 1998 (the "Conversion Date"), each share of Convertible
Preferred Stock shall be convertible at the option of the holder
thereof into fully paid and nonassessable shares of Common Stock
("Conversion Stock"), at a conversion rate per full share of
Convertible Preferred Stock determined by dividing $85.00 by the
conversion price per share of Common Stock in effect on the date
such share is surrendered for conversion, or into such additional
or other securities, cash or property and at such other rates as
required in accordance with the provisions of this Section 3,
except that if shares have been called for redemption, the
conversion right will terminate as to the shares called for
redemption at 5:00 p.m. New York City time, on the business day
prior to the date fixed for such redemption. For purposes of
this resolution, the "conversion price" per share of Convertible
Preferred Stock shall initially be $0.50 and shall be adjusted
from time to time in accordance with the provisions of this
Section 3. For purposes of this resolution, the "conversion
rate" per share of Convertible Preferred Stock shall initially be
170 shares of Conversion Stock and shall be adjusted from time to
time in accordance with the provisions of this Section 3. Each
share of Convertible Preferred Stock may be converted in whole or
in part.
(b) Conversion Procedures. Any holder of shares of
Convertible Preferred Stock desiring to convert such shares into
Common Stock shall surrender the certificate or certificates
evidencing such shares of Convertible Preferred Stock at the
office of the transfer agent for the Convertible Preferred Stock,
which certificate or certificates, if the Corporation shall so
require, shall be duly endorsed to the Corporation or in blank,
or accompanied by proper instruments of transfer to the
Corporation or in blank, accompanied by irrevocable written
notice to the Corporation that the holder elects to convert such
shares of Convertible Preferred Stock and specifying the name or
names (with address or addresses) in which a certificate or
certificates evidencing shares of Common Stock are to be issued.
Except as otherwise described in Section 3(i) or in this
paragraph, no payments or adjustments in respect of dividends on
shares of Convertible Preferred Stock surrendered for conversion,
whether paid or unpaid and whether or not in arrears, or on
account of any dividend on the Conversion Stock issued upon
conversion shall be made by the Corporation upon the conversion
of any shares of Convertible Preferred Stock at the option of the
holder, including, without limitation, the special conversion
rights provided in Section 4. The holder of record of shares of
Convertible Preferred Stock on a dividend record date who
surrenders such shares for conversion during the period between
such dividend record date and the corresponding Dividend Payment
Date will be entitled to receive the dividend on such Dividend
Payment Date notwithstanding the conversion of such shares;
provided, however, that unless such shares, prior to such
surrender, had been called for redemption on a redemption date
during the period between such dividend record date and the
Dividend Payment Date, such shares must be accompanied, upon
surrender for conversion, by payment from the holder to the
Corporation of an amount equal to the dividend payable on such
shares on that Dividend Payment Date.
The Corporation shall, as soon as practicable after such
surrender of certificates evidencing shares of Convertible
Preferred Stock accompanied by the written notice and compliance
with any other conditions herein contained, delivered at such
office of such transfer agent to the person for whose account
such shares of Convertible Preferred Stock were so surrendered,
or to the nominee or nominees of such person, certificates
evidencing the number of full shares of Common Stock to which
such person shall be entitled as aforesaid, together with a cash
adjustment in respect of any fraction of a share of Common Stock
as hereinafter provided. Such conversion shall be deemed to have
been made as of the date of such surrender of the shares of
Convertible Preferred Stock to be converted, and the person or
persons entitled to receive the Common Stock deliverable upon
conversion of such Convertible Preferred Stock shall be treated
for all purposes as the record holder or holders of such Common
Stock on such date.
(c) Adjustment of Conversion Price and Conversion Rate.
The conversion price at which a share of Convertible Preferred
Stock is convertible into Common Stock, and the conversion rate
at which shares of Conversion Stock are issuable upon conversion
of Convertible Preferred Stock, shall be subject to adjustment in
certain events including, without duplication, the following:
(i) In case the Corporation shall pay or make a
dividend or other distribution on its Common Stock
exclusively in Common Stock to all holders of its Common
Stock, the conversion price in effect at the opening of
business on the business day following the date fixed for
the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by
multiplying such conversion price by a fraction of which the
numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for
such determination and the denominator shall be the sum of
such number of shares and the total number of shares
constituting or included in such dividend or other
distribution, such reduction to become effective immediately
after the opening of business on the day following the date
fixed for such determination. For the purposes of this
paragraph (i), the number of shares of Common Stock at any
time outstanding shall not include shares held in the
treasury of the Corporation. The Corporation shall not pay
any dividend or make any distribution on shares of Common
Stock held in the treasury of the Corporation.
(ii) In case the Corporation shall pay or make a
dividend or other distribution on its Common Stock
consisting exclusively of, or shall otherwise issue to all
holders of its Common Stock, rights or warrants entitling
the holders thereof to subscribe for or purchase shares of
Common Stock at a price per share less than the Market Price
per share (determined as provided in paragraph (vi) of this
Section 3(c)) of the Common Stock on the date fixed for the
determination of stockholders entitled to receive such
rights or warrants, the conversion price in effect at the
opening of business on the day following the date fixed for
such determination shall be reduced by multiplying such
conversion price by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding at the
close of business on the date fixed for such determination
plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of
shares of Common Stock so offered for subscription or
purchase would purchase at such Market Price and the
denominator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for
such determination plus the number of shares of Common Stock
so offered for subscription or purchase, such reduction to
become effective immediately after the opening of business
on the day following the date fixed for such determination.
In case any rights or warrants referred to in this paragraph
(ii) in respect of which an adjustment shall have been made
shall expire unexercised, the conversion price shall be
readjusted at the time of such expiration to the conversion
price that would have been in effect if no adjustment had
been made on account of the distribution or issuance of such
expired rights or warrants.
(iii) In case outstanding shares of Common Stock
shall be subdivided into a greater number of shares of
Common Stock, the conversion price in effect at the opening
of business on the day following the day upon which such
subdivision becomes effective shall be proportionately
reduced, and conversely, in case outstanding shares of
Common Stock shall each be combined into a smaller number of
shares of Common Stock, the conversion price in effect at
the opening of business on the day following the day upon
which such combination becomes effective shall be
proportionately increased, such reduction or increase, as
the case may be, to become effective immediately after the
opening of business on the day following the day upon which
such subdivision or combination becomes effective.
(iv) Subject to the last sentence of this paragraph
(iv), in case the Corporation shall, by dividend or
otherwise, distribute to all holders of its Common Stock
evidences of its indebtedness, shares of any class or series
of capital stock, cash or assets (including securities, but
excluding any rights or warrants referred to in
paragraph (ii) of this Section 3(c), any dividend or
distribution paid exclusively in cash and any dividend or
distribution referred to in paragraph (i) of this
Section 3(c)), the conversion price in effect on the day
following the date fixed for the payment of such
distribution (the date fixed for payment being referred to
as the "Reference Date") shall be reduced by multiplying
such conversion price by a fraction of which the numerator
shall be the Market Price per share (determined as provided
in paragraph (vi) of this Section 3(c)) of the Common Stock
on the Reference Date less the fair market value (as
determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a
resolution of the Board of Directors) on the Reference Date
of the portion of the evidences of indebtedness, shares of
capital stock, cash and assets so distributed applicable to
one share of Common Stock, and the denominator shall be such
Market Price per share of the Common Stock, such reduction
to become effective immediately prior to the opening of
business on the day following the Reference Date. If the
Board of Directors determines the fair market value of any
distribution for purposes of this paragraph (iv) by
reference to the actual or when issued trading market for
any securities comprising such distribution, it must in
doing so consider the prices in such market over the same
period used in computing the Market Price per share of
Common Stock pursuant to paragraph (vi) of this
Section 3(c). For purposes of this paragraph (iv), any
dividend or distribution that includes shares of Common
Stock or rights or warrants to subscribe for or purchase
shares of Common Stock shall be deemed to be (A) a dividend
or distribution of the evidences of indebtedness, cash,
assets or shares of capital stock other than such shares of
Common Stock or rights or warrants (making any conversion
price reduction required by this paragraph (iv)) immediately
followed by (B) a dividend or distribution of such shares of
Common Stock or such rights or warrants (making any further
conversion price reduction required by paragraph (i) or (ii)
of this Section 3(c)), except (1) the Reference Date of such
dividend or distribution as defined in this paragraph (iv)
shall be substituted as "the date fixed for the
determination of stockholders entitled to receive such
dividend or other distribution," "the date fixed for the
determination of stockholders entitled to receive such
rights or warrants" and "the date fixed for such
determination" within the meaning of paragraphs (i) and (ii)
of this Section 3(c) and (2) any shares of Common Stock
included in such dividend or distribution shall not be
deemed "outstanding at the close of business on the date
fixed for such determination" within the meaning of
paragraph (i) of this Section 3(c).
(v) In case the Corporation shall pay or make a
dividend or other distribution on its Common Stock in cash
(excluding (A) cash that is part of a distribution referred
to in paragraph (iv) above and (B) in the case of any
quarterly cash dividend on the Common Stock, the portion
thereof that does not exceed the per share amount of the
next preceding quarterly cash dividend on the Common Stock
(as adjusted to appropriately reflect any of the events
referred to in paragraphs (i), (ii), (iii), (iv) and (v) of
this Section 3(c)), or all of such quarterly cash dividend
if the amount thereof per share of Common Stock multiplied
by four does not exceed 15% of the Market Price per share
(determined as provided in paragraph (vi) of this
Section 3(c)) of the Common Stock as of the trading day next
preceding the date of declaration of such dividend, the
conversion price in effect immediately prior to the opening
of business on the day following the date fixed for the
payment for such distribution shall be reduced by
multiplying such conversion price by a fraction of which the
numerator shall be the Market Price per share (determined as
provided in paragraph (vi) of this Section 3(c)) of the
Common Stock on the date fixed for the payment of such
distribution less the amount of cash so distributed and not
excluded as provided above applicable to one share of Common
Stock, and the denominator of which shall be such Market
Price per share of the Common Stock, such reduction to
become effective immediately prior to the opening of
business on the day following the date fixed for the payment
of such distribution.
(vi) For the purpose of any computation under
paragraph (ii), (iii), (iv) or (v) of this Section 3(c) or
Section 3(d), the Market Price per share of Common Stock on
any date shall be deemed to be the average of the Market
Prices for the five consecutive trading days ending with and
including the date in question; provided, however, that
(A) if the "ex" date (as hereinafter defined) for any event
(other than the issuance or distribution requiring such
computation) that requires an adjustment to the conversion
price pursuant to paragraph (i), (ii), (iii), (iv) or (v)
above ("Other Event") occurs after the fifth trading day
prior to the date in question and prior to the "ex" date for
the issuance or distribution requiring such computation (the
"Current Event"), the Market Price for each trading day
prior to the "ex" date for such Other Event shall be
adjusted by multiplying such Market Price by the same
fraction by which the conversion price is so required to be
adjusted as a result of such Other Event, (B) if the "ex"
date for any Other Event occurs after the "ex" date for the
Current Event and on or prior to the date in question, the
Market Price for each trading day on and after the "ex" date
for such Other Event shall be adjusted by multiplying such
Market Price by the reciprocal of the fraction by which the
conversion price is so required to be adjusted as a result
of such Other Event, (C) if the "ex" date for any Other
Event occurs on the "ex" date for the Current Event, one of
those events shall be deemed for purposes of clauses (A) and
(B) of this proviso to have an "ex" date occurring prior to
the "ex" date for the other event, and (D) if the "ex" date
for the Current Event is on or prior to the date in
question, after taking into account any adjustment required
pursuant to clause (B) of this proviso, the Market Price for
each trading day on or after such "ex" date shall be
adjusted by adding thereto the amount of any cash and the
fair market value on the date in question (as determined in
good faith by the Board of Directors in a manner consistent
with any determination of such value for purposes of
paragraph (iv) or (v) of this Section 3(c), whose
determination shall be conclusive and described in a
resolution of the Board of Directors) of the portion of the
rights, warrants, evidences of indebtedness, shares of
capital stock or assets being distributed applicable to one
share of Common Stock. For purposes of this paragraph, the
term "ex" date, (1) when used with respect to any issuance
or distribution, means the first date on which the Common
Stock trades regular way on the relevant exchanges or in the
relevant market from which the Market Price was obtained
without the right to receive such issuance or distribution
and (2) when used with respect to any subdivision or
combination of shares of Common Stock, means the first date
on which the Common Stock trades regular way on such
exchange or in such market after the time at which such
subdivision or combination becomes effective. As used in
this Section 3(c) or in Section 3(d), the term "Market
Price" of the Common Stock for any day means the last
reported sale price, regular way, on such day, or, if no
sale takes place on such day, the average of the reported
closing bid and asked prices on such day, regular way, in
either case reported on the American Stock Exchange ("AMEX")
Consolidated Transaction Tape, or, if the Common Stock is
not listed or admitted to trading on the AMEX on such day,
on the principal national securities exchange on which the
Common Stock is listed or admitted to trading, if the Common
Stock is listed on a national securities exchange, or the
National Market Tier of The Nasdaq Stock Market ("Nasdaq
NMS") or, if not listed or admitted to trading on such
quotation system, on the principal quotation system on which
the Common Stock may be listed or admitted to trading or
quoted or, if not listed or admitted to trading or quoted on
any national securities exchange or quotation system, the
average of the closing bid and asked prices of the Common
Stock in the over-the-counter market on the day in question
as reported by the National Quotation Bureau Incorporated,
or similar generally accepted reporting service, or, if not
so available in such manner, as furnished by any AMEX member
firm selected from time to time by the Board of Directors of
the Corporation for that purpose or, if not so available in
such manner, as otherwise determined in good faith by the
Board of Directors of the Corporation.
(vii) No adjustment in the conversion price shall
be required unless such adjustment would require an increase
or decrease of at least 1% in the conversion price;
provided, however, that any adjustments which by reason of
this paragraph (vii) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment.
(viii) Whenever the conversion price is adjusted as
herein provided:
(A) the Corporation shall make an appropriate
corresponding proportional adjustment to the conversion
rate which shall become effective when the adjustment
to the conversion price becomes effective;
(B) the Corporation shall compute the adjusted
conversion price and conversion rate and shall prepare
a certificate signed by a Vice President or the
Treasurer of the Corporation setting forth the adjusted
conversion price and conversion rate and showing in
reasonable detail the facts upon which such adjustments
are based, and such certificate shall forthwith be
filed with the transfer agent for the Convertible
Preferred Stock; and
(C) as soon as practicable after the
adjustments, the Corporation shall mail to all record
holders of Convertible Preferred Stock at their last
addresses as they shall appear in stock transfer books
of the Corporation a notice stating that the conversion
price and conversion rate have been adjusted and
setting forth the adjusted conversion price and
conversion rate.
(ix) The Corporation from time to time may reduce
the conversion price or increase the conversion rate by any
amount for any period of time if the period is at least
twenty (20) days and the Board of Directors has made a
determination that such reduction (or increase) would be in
the best interest of the Corporation, which determination
shall be conclusive. Whenever the conversion price is
reduced (or the conversion rate increased) pursuant to the
preceding sentence, the Corporation shall mail to the record
holders of Convertible Preferred Stock a notice of the
reduction (or increase) at least fifteen (15) days prior to
the date the reduced conversion price (or increased
conversion rate) takes effect, and such notice shall state
the reduced conversion price (or increased conversion rate)
and the period it will be in effect.
(d) No Fractional Shares. No fractional shares of
Common Stock shall be issued upon conversion of the Convertible
Preferred Stock. If more than one certificate evidencing shares
of Convertible Preferred Stock shall be surrendered for
conversion at such time by the holder, the number of full shares
issuable upon conversion thereof shall be computed on the basis
of the aggregate number of shares of Convertible Preferred Stock
so surrendered. Instead of any fractional share of Common Stock
that would otherwise be issuable to a holder upon conversion of
any shares of Convertible Preferred Stock, the Corporation shall
either (i) pay a cash adjustment in respect of such fractional
share in an amount equal to the same fraction of the Market Price
for the shares of Common Stock as of the day of such conversion
or (ii) aggregate all such fractional shares into a whole number
of shares and sell such aggregated fractional shares on behalf of
the holders entitled thereto in a public or private sale and
distribute the net cash proceeds from the sale thereof to such
holders pro rata. If the Corporation should so elect so to
aggregate and sell such fractional shares, it shall endeavor to
use its best efforts to secure the best available sales price for
such shares but shall not be obligated to secure the highest
price obtainable for such shares.
(e) Reclassification, Consolidation, Merger or Sale of
Assets. In the event that the Corporation shall be a party to
any transaction pursuant to which the Common Stock is converted
into the right to receive other securities, cash or other
property (including without limitation any recapitalization or
reclassification of the Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination of the
Common Stock), any consolidation of the Corporation with, or
merger of the Corporation into, any other person, any merger or
another person into the Corporation (other than a merger which
does not result in a reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock), any sale or
transfer of all or substantially all of the assets of the
Corporation or any share exchange), then lawful provisions shall
be made as part of the terms of such transaction whereby the
holder of each share of Convertible Preferred Stock then
outstanding shall have the right thereafter to convert such share
only into the kind and amount of securities, cash and other
property receivable upon such transaction by a holder of the
number of shares of Common Stock into which such share might have
been converted immediately prior to such transaction provided,
however, that if the holders of Common Stock were entitled by the
terms of the transaction to make an election to receive
securities, cash or property, or any combination of the
foregoing, lawful provision shall be made as part of the terms of
such transaction whereby the holder of each share of Convertible
Preferred Stock then outstanding shall have the right thereafter
to convert such share only into the kind and amount of
securities, cash or other property receivable upon such
transaction by a holder of the number of shares of Common Stock
who made one of the elections provided for in such transaction
(as determined by the Board of Directors, whose determination
shall be conclusive) into which such share might have been
converted immediately prior to such transaction. The Corporation
or the person formed by such consolidation or resulting from such
merger or which acquires such shares or which acquires the
Corporation's shares, as the case may be, shall make provisions
in its certificate or articles of incorporation or other
constituting document to establish such right. Such certificate
or articles of incorporation or other constituting document shall
provide for adjustments which, for events subsequent to the
effective date of such certificate or articles of incorporation
or other constituting document, shall be as nearly equivalent as
may be practicable to the adjustments provided for in this
Section 3. The above provisions shall similarly apply to
successive transactions of the foregoing type.
(f) Reservation of Shares; Etc. The Corporation shall
at all times reserve and keep available, free from preemptive
rights out of its authorized and unissued Common Stock and/or
Common Stock held in treasury, solely for the purpose of
effecting the conversion of the Convertible Preferred Stock, such
number of shares of its Common Stock as shall from time to time
be sufficient to effect the conversion of all shares of
Convertible Preferred Stock from time to time outstanding. The
Corporation shall from time to time, in accordance with the laws
of the State of Delaware, in good faith and as expeditiously as
possible, endeavor to cause the authorized number of shares of
Common Stock to be increased (or combine or repurchase its
outstanding shares of Common Stock) if at any time the number of
shares of authorized and unissued Common Stock and/or Common
Stock held in treasury, shall not be sufficient to permit the
conversion of all the then outstanding shares of Convertible
Preferred Stock.
If any shares of Common Stock required to be reserved for
the purposes of conversion of the Convertible Preferred Stock
hereunder require registration with or approval of any
governmental authority under any Federal or State law before such
shares may be issued upon conversion, the Corporation will in
good faith and as expeditiously as possible endeavor to cause
such shares to be duly registered or approved as the case may be.
If the Common Stock is listed on any national securities
exchange, the Corporation will, if permitted by the rules of such
exchange, list and keep listed on such exchange, upon official
notice of issuance, all shares of Common Stock issuable upon
conversion of the Convertible Preferred Stock, for so long as the
Common Stock continues to be so listed.
(g) Prior Notice of Certain Events. In case:
(i) the Corporation shall (A) declare any
dividend (or any other distribution) on its Common
Stock, other than (1) a dividend payable in shares of
Common Stock or (2) a dividend payable in cash out of
its retained earnings other than any special or
nonrecurring or other extraordinary dividend or
(B) declare or authorize a redemption or repurchase of
in excess of 10% of the then outstanding shares of
Common Stock; or
(ii) the Corporation shall authorize the
granting to all holders of Common Stock of rights or
warrants to subscribe for or purchase any shares of
stock of any class or series or of any other rights or
warrants; or
(iii) of any reclassification of Common Stock
(other than a subdivision or combination of the
outstanding Common Stock, or a change in par value, or
from par value to no par value, or from no par value to
par value), or of any consolidation or merger to which
the Corporation is party and for which approval of any
stockholders of the Corporation shall be required, or
of the sale or transfer of all or substantially all of
the assets of the Corporation or of any share exchange
whereby the Corporation is converted into other
securities, cash or other property; or
(iv) of the voluntary or involuntary
dissolution, liquidation or winding up of the
Corporation;
then the Corporation shall cause to be filed with the transfer
agent for the Convertible Preferred Stock, and shall cause to be
mailed to all holders of record of the Convertible Preferred
Stock at their last addresses as they shall appear upon the stock
transfer books of the Corporation, at least fifteen (15) days
prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record (if
any) is to be taken for the purpose of such dividend,
distribution, redemption, repurchase, or grant of rights or
warrants or, if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to such
dividend, distribution, redemption, repurchase, rights or
warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share
exchange, dissolution, liquidation or winding up is expected to
become effective and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock, for securities, cash or other
property deliverable upon such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation
or winding up (but no failure to mail such notice or any defect
therein or in the mailing thereof shall affect the validity of
the corporate action required to be specified in such notice).
(h) Certain Additional Rights. In case the Corporation
shall, by dividend or otherwise, declare or make a distribution
on its Common Stock referred to in Section 3(c)(iv) or 3(c)(v)
(including, without limitation, dividends or distribution
referred to in the last sentence of Section 3(c)(iv)), the holder
of each share of Convertible Preferred Stock upon the conversion
thereof subsequent to the close of business on the date fixed for
the determination of stockholders entitled to receive such
distribution and prior to the effectiveness of the conversion
price adjustment in respect of such distribution, shall be
entitled to receive for each share of Common Stock into which
such share of Convertible Preferred Stock is converted, the
portion of the shares of Common Stock, rights, warrants,
evidences of indebtedness, shares of capital stock, cash and
assets as distributed applicable to one share of Common Stock;
provided, however, that at the election of the Corporation (whose
election shall be evidenced by a resolution of the Board of
Directors) with respect to all holders so converting, the
Corporation may, in lieu of distributing to such holder any
portion of such distribution not consisting of cash or securities
of the Corporation, pay such holder an amount in cash equal to
the fair market value thereof (as determined in good faith by the
Board of Directors, which determination shall be conclusive). If
any conversion of a share of Convertible Preferred Stock
described in the immediately preceding sentence occurs prior to
the payment date for a distribution to holders of Common Stock
which the holder of the share of Convertible Preferred Stock so
converted is entitled to receive in accordance with the
immediately preceding sentence, the Corporation may elect (such
election to be evidenced by a resolution of the Board of
Directors) to distribute to such holder a due bill for the shares
of Common Stock, rights, warrants, evidences of indebtedness,
shares of capital stock, cash or assets to which such holder is
so entitled, provided that such due bill (a) meets any applicable
requirements of the principal national securities exchange or
other market on which the Common Stock is then traded and
(b) requires payment or delivery of such shares of Common Stock,
rights, warrants, evidences of indebtedness, shares of capital
stock, cash or assets no later than the date of payment or
delivery thereof to holders of shares of Common Stock receiving
such distribution.
(i) Mandatory Conversion Right.
(i) At any time after November 20, 1997, and
provided that the Corporation is current in the payment of
dividends on the Convertible Preferred Stock to the
Mandatory Conversion Date, the Corporation may, at its
option, require the conversion of all the outstanding shares
of Convertible Preferred Stock. The Corporation may
exercise this option only if for twenty (20) trading days
within any period of thirty (30) consecutive trading days,
including the last trading day of such period, the Current
Market Price (as defined in subparagraph (iii) below) of the
Common Stock equals or exceeds 150% of the current
conversion price of the Convertible Preferred Stock, such
conversion price to be subject to adjustments in the same
manner and for the same events as the conversion price in
Section 3. In order to exercise its mandatory conversion
option, the Corporation must issue a press release for
publication on the Dow Jones News Service, Reuters,
Bloomberg, or other widely disseminated publicly available
financial news service, announcing the effective date of the
mandatory conversion of the Convertible Preferred Stock (the
"Mandatory Conversion Date") prior to the opening of
business on the second trading day after any period in which
the condition in the preceding sentence has been met, but in
no event prior to November 20, 1997. The press release
shall announce the Mandatory Conversion Date and provide the
current conversion price, current conversion rate and
Current Market Price of the Common Stock, in each case as of
the close of business on the trading day next preceding the
date of the press release. Effective on the Mandatory
Conversion Date, all of the issued and outstanding shares of
Convertible Preferred Stock shall be converted into fully
paid and non-assessable shares of Common Stock at such
current conversion price and current conversion rate set
forth in such press release in the manner provided in this
Section 3. Effective as of the close of business on the
Mandatory Conversion Date, the shares of Convertible
Preferred Stock shall no longer be deemed to be issued and
outstanding and certificates evidencing such Stock shall
solely evidence the right to receive the shares of Common
Stock issuable in such conversion.
(ii) Notice of the exercise of the Mandatory
Conversion Right will be given by first-class mail to the
record holders of the Convertible Preferred Stock not more
than four (4) business days after the Corporation issues the
press release. The Mandatory Conversion Date will be a date
selected by the Corporation not less than thirty (30) nor
more than sixty (60) days after the date on which the
Corporation issues the press release announcing its
intention to exercise its Mandatory Conversion Right.
(iii) The term "Current Market Price' of the Common
Stock for any day means the reported closing bid price,
regular way, on such day, as reported on the AMEX, or, if
the Common Stock is not listed or admitted to trading on the
AMEX on such day, on the principal national securities
exchange on which the Common Stock is listed or admitted to
trading, if the Common Stock is listed on a national
securities exchange, or the Nasdaq NMS or, if the Common
Stock is not quoted or admitted to trading on such
quotations system, on the principal quotation system in
which the Common Stock may be listed or admitted to trading
or quoted or, if not listed or admitted to trading or quoted
on any national securities exchange or quotation system, the
average of the closing bid and asked prices of the Common
Stock in the over-the-counter market on the day in question
as reported by the National Quotation Bureau Incorporated,
or similar generally accepted reporting service, or, if not
so available in such manner, as furnished by any AMEX member
firm selected from time to time by the Board of Directors of
the Corporation for that purpose or, if not so available in
such manner, as otherwise determined in good faith by the
Board of Directors of the Corporation, which determination
shall be conclusive.
Section 4. Special Conversion Rights.
(a) Change of Control. Upon the occurrence of a Change
of Control (as defined in Section 4(e)) with respect to the
Corporation, each holder of Convertible Preferred Stock shall
have the right, at the holder's option, for a period of thirty
(30) days after the mailing of a notice by the Corporation that a
Change of Control has occurred, to convert all, but not less than
all, of such holder's Convertible Preferred Stock into Common
Stock of the Corporation at an adjusted conversion price per
share equal to the Special Conversion Price (as defined in
Section 4(e)). The Corporation may, at its option, in lieu of
providing Common Stock upon any such special conversion, provide
the holder with cash equal to the Market Value (as defined in
Section 4(e)) of the Common Stock multiplied by the number of
shares of Common Stock into which such Convertible Preferred
Stock would have been convertible immediately prior to such
Change of Control at an adjusted conversion price equal to the
Special Conversion Price. The special conversion right arising
upon a Change of Control shall only be applicable with respect to
the first Change of Control that occurs after the first date of
issuance of any Convertible Preferred Stock. Convertible
Preferred Stock which becomes convertible pursuant to a special
conversion right shall, unless so converted, remain convertible
pursuant to Section 3 at the conversion price and conversion rate
in effect immediately before the effective date of the Change of
Control, subject to subsequent adjustment as provided in
Section 3(c).
(b) Fundamental Change. Upon the occurrence of a
Fundamental Change (as defined in Section 4(e)) with respect to
the Corporation, each holder of Convertible Preferred Stock shall
have a special conversion right, at the holder's option, for a
period of thirty (30) days after the mailing of a notice by the
Corporation that a Fundamental Change has occurred, to convert
all, but not less than all, of such holder's Convertible
Preferred Stock into the kind and amount of cash, securities,
property or other assets receivable upon such Fundamental Change
by a holder of the number of shares of Common Stock into which
such Convertible Preferred Stock would have been convertible
immediately prior to such Fundamental Change at an adjusted
conversion price equal to the Special Conversion Price. The
Corporation or a successor corporation, as the case may be, may,
at its option and in lieu of providing the consideration as
required above upon such conversion, provide the holder with cash
equal to the Market Value of the Common Stock multiplied by the
number of shares of Common Stock into which such Convertible
Preferred Stock would have been convertible immediately prior to
such Fundamental Change at an adjusted conversion price equal to
the Special Conversion Price.
(c) Notice. Upon the occurrence of a Change of Control
or a Fundamental Change with respect to the Corporation, within
thirty (30) days after such occurrence, the Corporation shall
mail to each holder of Convertible Preferred Stock a notice of
such occurrence (the "Special Conversion Notice") setting forth
the following:
(i) the event constituting the Change of Control or
Fundamental Change;
(ii) the date upon which the applicable special
conversion right will terminate;
(iii) the Special Conversion Price;
(iv) the conversion price and conversion rate then
in effect under Section 3 and the continuing conversion
rights, if any, under Section 3;
(v) the name and address of the paying agent and
conversion agent;
(vi) that holders who want to convert Convertible
Preferred Stock must satisfy the requirements of
Section 4(d) and must exercise such conversion right within
the thirty (30)-day period after the mailing of such notice
by the Corporation;
(vii) that exercise of such conversion right shall
be irrevocable and no dividends on the Convertible Preferred
Stock (or portions thereof) tendered for conversion shall
accrue from and after the conversion date; and
(viii) that the Corporation (or a successor
corporation, if applicable) may, at its option, elect to pay
cash (specifying the amount thereof per share) for all
Convertible Preferred Stock tendered for conversion.
(d) Exercise Procedures. A holder of Convertible
Preferred Stock must exercise the special conversion right within
the thirty (30)-day period after the mailing of the Special
Conversion Notice or such special conversion right shall expire.
Such right must be exercised in accordance with Section 3(b) to
the extent the procedures in Section 3(b) are consistent with the
special provisions of this Section 4. Exercise of such
conversion right shall be irrevocable and no payments or
adjustments in respect of dividends on shares of Convertible
Preferred Stock surrendered for conversion, whether paid or
unpaid and whether or not in arrears shall be made by the
Corporation upon exercise of such conversion right. The
conversion date with respect to the exercise of a special
conversion right arising upon a Change of Control or Fundamental
Change shall be the thirtieth (30th) day after the mailing of the
Special Conversion Notice.
Convertible Preferred Stock which becomes convertible
pursuant to a special conversion right shall, unless converted,
remain convertible pursuant to Section 3 into the kind and amount
of cash, securities, property or other assets that the holders of
the Convertible Preferred Stock would have owned immediately
after the Fundamental Change if the holders had converted the
Convertible Preferred Stock immediately before the effective date
of the Fundamental Change, subject to subsequent adjustment under
the provisions contemplated by Section 3(c), if applicable.
(e) Definitions. The following definitions shall apply
to terms used in this Section 4:
(i) A "Change of Control" with respect to the
Corporation shall be deemed to have occurred at the first
time after the Issue Date that any person (within the
meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange
Act)), including a group (within the meaning of Rule 13d-5
under the Exchange Act), together with any of its Affiliates
or Associates (as defined below), files or becomes obligated
to file a report (or any amendment or supplement thereto) on
Schedule 13D or 14D-1 pursuant to the Exchange Act,
disclosing that such person has become the beneficial owner
of either (A) 50% or more of the shares of Common Stock of
the Corporation then outstanding or (B) securities
representing 50% or more of the combined voting power of the
Voting Stock (as defined below) of the Corporation then
outstanding; provided a Change of Control shall not be
deemed to have occurred with respect to any transaction that
constitutes a Fundamental Change. As used herein, a person
shall be deemed to have "beneficial ownership" with respect
to, and shall be deemed to "beneficially own," any
securities of the Corporation in accordance with Section 13
of the Exchange Act and the rules and regulations (including
Rule 13d-3, Rule 13d-5 and any successor rules) promulgated
by the Securities and Exchange Commission thereunder;
provided that a person shall be deemed to have beneficial
ownership of all securities that any such person has a right
to acquire whether such right is exercisable immediately or
only after the passage of time and without regard to the
sixty (60)-day limitation referred to in Rule 13d-3 and,
provided further, that a beneficial owner of Convertible
Preferred Stock shall not be deemed to beneficially own the
Common Stock into which such Convertible Preferred Stock is
convertible solely by reason of ownership of the Convertible
Preferred Stock. An "Affiliate" of a specified person is a
person that directly or indirectly controls, or is
controlled by or is under common control with, the person
specified. An "Associate" of a person means (i) any
corporation or organization, other than the Corporation or
any subsidiary of the Corporation, of which the person is an
officer or partner or is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity
securities; (ii) any trust or estate in which the person has
a substantial beneficial interest or as to which the person
serves as trustee or in a similar fiduciary capacity; and
(iii) any relative or spouse of the person or any relative
of the spouse, who has the same home as the person or who is
a director or officer of the person or any of its parents or
subsidiaries.
(ii) "Exchange Act" means the Securities Exchange
Act of 1934, as amended, and as in effect on the date
hereof.
(iii) A "Fundamental Change" with respect to the
Corporation means (A) the occurrence of any transaction or
event in connection with which all or substantially all of
the Common Stock of the Corporation shall be exchanged for,
converted into, acquired for or constitute solely the right
to receive cash, securities, property or other assets
(whether by means of an exchange offer, liquidation, tender
offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) or (B) the conveyance, sale,
lease, assignment, transfer or other disposal of all or
substantially all of the Corporation's property, business or
assets; provided, however, that a Fundamental Change shall
not be deemed to have occurred with respect to either of the
following transactions or events: (1) any transaction or
event in which more than 50% (by value as determined in good
faith by the Board of Directors) of the consideration
received by holders of Common Stock consists of Marketable
Stock (as defined below); or (2) any consolidation or merger
of the Corporation immediately prior to such transaction
own, directly or indirectly, (x) 50% or more of the common
stock of the surviving corporation (or of the ultimate
parent of such surviving corporation) outstanding at the
time immediately after such consolidation or merger and (y)
securities representing 50% or more of the combined voting
power of the surviving corporation's Voting Stock (or for
the Voting Stock of the ultimate parent of such surviving
corporation) outstanding at such time. The phrase "all or
substantially all" as used in this definition in reference
to the Common Stock shall mean 66% or more of the aggregate
outstanding amount of Common Stock.
(iv) "Voting Stock" means, with respect to any
person, capital stock of such person having general voting
power under ordinary circumstances to elect at least a
majority of the board of directors, managers or trustees of
such person (irrespective of whether or not at the time
capital stock of any other class or classes shall have or
might have voting power by reason of the happening of any
contingency).
(v) The "Special Conversion Price" shall mean the
lesser of the Market Value of the Common Stock and the
prevailing conversion price.
(vi) The "Market Value" of the Common Stock or any
other Marketable Stock shall be the average of the last
reported sales prices of the Common Stock or such other
Marketable Stock, as the case may be, for the five business
days ending on the last business day preceding the date of
the Change of Control or Fundamental Change; provided,
however, that if the Marketable Stock is not traded on any
national securities exchange or similar quotation system as
described in the definition of "Marketable Stock" during
such period, then the Market Value of such Marketable Stock
shall be the average of the last reported sales prices per
share of such Marketable Stock during the first five
business days commencing with the first day after the date
on which such Marketable Stock was first distributed to the
general public and traded on the New York Stock Exchange
("NYSE"), the AMEX, the Nasdaq NMS or any similar system of
automated dissemination of quotations of securities prices
in the United States.
(vii) "Marketable Stock" shall mean Common Stock or
common stock of any corporation that is the successor to all
or substantially all of the business or assets of the
corporation as a result of a Fundamental Change (or of the
ultimate parent of such successor), which is (or will, upon
distribution thereof, be) listed or quoted on the NYSE, the
AMEX, the Nasdaq NMS or any similar system of automated
dissemination of quotations of securities prices in the
United States.
Section 5. General Class and Series Voting Rights. The
Convertible Preferred Stock shall have the following voting
rights in addition to (i) any special voting rights specifically
required by the laws of the State of Delaware,(ii) as are
provided in Section 6 and (iii) as provided by the provisions of
this Restated Certificate of Incorporation of the Corporation:
(a) So long as any shares of Convertible Preferred Stock
remain outstanding, the holders of Convertible Preferred Stock
will be entitled to receive notice of any meeting of, and
solicitation of any consent from the holders of Common Stock and
to vote with the holders of Common Stock on, and to consent to
all matters on which the holders of Common Stock are entitled to
vote or consent to, respectively. Each share of Convertible
Preferred Stock shall be entitled to cast the same number of
votes as the full number of shares of Common Stock that are then
issuable upon conversion thereof.
(b) So long as any shares of Convertible Preferred Stock
remain outstanding, the vote or consent of the holders of at
least two-thirds of the shares of Convertible Preferred Stock
outstanding at the time (voting separately as a class) given in
person or by proxy, either in writing or at any special or annual
meeting called for the purpose, shall be necessary to permit,
effect or validate any one or more of the following:
(i) The authorization, creation or issuance, or any
increase in the authorized or issued amount, of any class or
series of stock (including any class or series of preferred
stock) ranking prior (as that term is hereinafter defined in
this Section 5) to the Convertible Preferred Stock; or
(ii) The amendment, alteration or repeal, whether
by merger, consolidation or otherwise, of any of the
provisions of this Restated Certificate of Incorporation or
of these resolutions which would alter, change or repeal the
powers, preferences, or special rights of the shares of the
Convertible Preferred Stock so as to affect them adversely.
(c) The foregoing voting provisions shall not apply if,
at or prior to the time when the act with respect to which such
vote would otherwise be required shall be effected, all
outstanding shares of Convertible Preferred Stock shall have been
redeemed or sufficient funds and/or shares of Common Stock shall
have been deposited in trust to effect such redemption.
(d) For purposes of this resolution, any class or series
of stock of the Corporation shall be deemed to rank:
(i) prior to the Convertible Preferred Stock as to
dividends or as to distribution of assets upon liquidation,
dissolution or winding up, if the holders of such class or
series shall be entitled to the receipt of dividends or
amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in preference or priority to
the holders of Convertible Preferred Stock;
(ii) on a parity with the Convertible Preferred
Stock as to dividends or as to distribution of assets upon
liquidation, dissolution or winding up, whether or not the
dividend rates, dividend payment dates, or redemption or
liquidation prices per share thereof shall be different from
those of the Convertible Preferred Stock, if the holders of
such class or series of stock and the Convertible Preferred
Stock shall be entitled to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in proportion to their
respective dividend rates or liquidation prices, without
preference or priority one over the other as of the date of
adoption of this resolution. The Series Band Series F
Preferred Stock are on a parity with the Convertible
Preferred Stock as to dividends and as to distribution of
assets upon liquidation, dissolution or winding up; and
(iii) junior to the Convertible Preferred Stock as
to dividends or as to distribution of assets upon
liquidation, dissolution or winding up, if such class or
series shall be Common Stock or if the holders of the
Convertible Preferred Stock shall be entitled to the receipt
of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference
or priority to the holders of shares of such class or
series.
Section 6. Default Voting Rights.
(a) Election of Directors. Whenever, at any time or
times, dividends payable on the shares of Convertible Preferred
Stock shall be in arrears in an amount equal to at least three
semi-annual dividends (whether or not consecutive and whether
payable in cash or shares of Convertible Preferred Stock), the
holders of the outstanding shares of Convertible Preferred Stock
shall have the exclusive right (voting separately as a class) to
elect two directors of the Corporation.
(b) Vote Per Share. At elections for such directors,
each holder of Convertible Preferred Stock shall be entitled to
one vote for each share of Convertible Preferred Stock held.
Upon the vesting of such right with the holders of Convertible
Preferred Stock, the maximum authorized number of members of the
Board of Directors shall automatically be increased by two, which
shall be of the class or classes selected by the Corporation's
Board of Directors which has the least number of director
positions then currently filled, and the two vacancies so created
shall be filled by vote of the holders of the outstanding shares
of Convertible Preferred Stock as hereinafter set forth. The
right of the holders of Convertible Preferred Stock, voting
separately as a class to elect members of the Board of Directors
of the Corporation shall continue until such time as all
dividends accrued and unpaid on the Convertible Preferred Stock
shall have been paid or declared and funds set aside to provide
for payment in full, at which time such right shall terminate,
except as herein or by law expressly provided, subject to
revesting in the event of each and every subsequent default of
the character above mentioned, and the term of office of all
directors so elected shall terminate also.
(c) Meetings. Whenever the voting right described in
subsection (a) above shall have vested in the holders of the
Convertible Preferred Stock, the right may be exercised initially
either at a special meeting of the holders of the Convertible
Preferred Stock called as hereinafter provided, or at any annual
meeting of stockholders held for the purpose of electing
directors, and thereafter at each successive annual meeting.
(d) Call of Meeting. At any time when the voting right
described in subsection (a) above shall have vested in the
holders of the Convertible Preferred Stock, and if the right
shall not already have been initially exercised, a proper officer
of the Corporation shall, upon the written request of the holders
of record of 10% in number of the shares of the Convertible
Preferred Stock then outstanding, addressed to the Secretary of
the Corporation, call a special meeting of the holders of the
Convertible Preferred Stock for the purpose of electing
directors. Such meeting shall be held at the earliest
practicable date upon the notice required for annual meetings of
stockholders at the place for holding of annual meetings of
stockholders of the Corporation, or, if none, at a place
designated by the Secretary of the Corporation. If the meeting
shall not be called by the proper officers of the Corporation
within thirty (30) days after the personal service of such
written request upon the Secretary of the Corporation, or within
thirty (30) days after mailing it within the United States of
America, by registered mail, addressed to the Secretary of the
Corporation at its principal office (such mailing to be evidenced
by the registry receipt issued by the postal authorities), then
the holders of record of 10% in number of the shares of the
Convertible Preferred Stock then outstanding may designate in
writing one of their members to call such meeting at the expense
of the Corporation, and such meeting may be called by such person
so designated upon the notice required for annual meetings of
stockholders and shall be held at the same place as is elsewhere
provided for in this subsection (d). Any holder of the
Convertible Preferred Stock shall have access to the share
transfer books of the Corporation as permitted under the Delaware
General Corporation Law for the purpose of causing a meeting of
the stockholders to be called pursuant to the provisions of this
subsection (d). Notwithstanding the provisions of this
subsection (d), however, no such special meeting shall be held
during a period within sixty (60) days immediately preceding the
date fixed for the next annual meeting of stockholders.
(e) Quorum. At any meeting held for the purpose of
electing directors at which the holders of the Convertible
Preferred Stock shall have the right to elect directors as
provided herein, the presence in person or by proxy of the
holders of 50% of the then outstanding shares of the Convertible
Preferred Stock shall be required and be sufficient to constitute
a quorum of the holders of the Convertible Preferred Stock for
the election of directors. At any such meeting or adjournment
thereof (i) the absence of a quorum of the holders of the
Convertible Preferred Stock shall not prevent the election of
directors other than those to be elected by the holders of the
Convertible Preferred Stock and the absence of a quorum or
quorums of the holders of other classes or series of capital
stock entitled to elect such other directors shall not prevent
the election of directors to be elected by the holders of the
Convertible Preferred Stock and (ii) in the absence of a quorum
of the holders of the Convertible Preferred Stock, a majority of
the holders present in person or by proxy of the Convertible
Preferred Stock shall have the power to adjourn the meeting, or
appropriate portion thereof for the election of directors which
the holders of the Convertible Preferred Stock are entitled to
elect, from time to time, without notice other than announcement
at the meeting, until a quorum shall be present. The Chairman of
the Board or the President of the Corporation shall preside at
any such meeting.
(f) Term. Each director elected by the holders of
shares of Convertible Preferred Stock shall continue to serve as
a director until such time as all dividends accrued and unpaid on
the Convertible Preferred Stock shall have been paid or declared
and funds set aside to provide for payment in full, at which time
the term of office of all persons elected as directors by the
holders of shares of Convertible Preferred Stock shall forthwith
terminate and the number of members of the Board of Directors of
the Corporation shall be reduced accordingly. Whenever the term
of office of the directors elected by the holders of Convertible
Preferred Stock voting as a class shall end and the special
voting powers vested in the holders of Convertible Preferred
Stock as provided in this Section 6 shall have expired, the
number of directors shall be such number as may be provided for
in the By-Laws irrespective of any increase made pursuant to the
provisions of this Section 6.
Section 7. Redemption Rights.
(a) Optional Redemption. The Corporation may at its
option, at any time on or after May 1, 2002, in the years
indicated below, redeem (an "Optional Redemption") all, or any
number less than all, of the outstanding shares of Convertible
Preferred Stock, provided, that the Convertible Preferred Stock
may not be redeemed, in whole or in part, prior to May 1, 2002.
All optional redemptions of shares of Convertible Preferred Stock
shall be effected during the twelve (12) month period beginning
on May 1 of the year indicated at the applicable redemption
prices set forth below:
Year Redemption Price Per Share
---- --------------------------
2002 $ 90.00
2003 88.33
2004 86.67
2005 85.00
and thereafter at $85.00 per share, plus, in each case, an amount
equal to all dividends (whether or not declared) accrued and
unpaid on such share of Convertible Preferred Stock to the date
fixed for redemption (the price from time to time to redeem the
Convertible Preferred Stock excluding any dividends (whether or
not declared) accrued and unpaid, is referred to herein as the
"Redemption Price").
(b) Mandatory Redemption. Each issued and outstanding
share of Convertible Preferred Stock shall be redeemed on May 1,
2007, or the next succeeding business day (the "Mandatory
Redemption") at a Redemption Price of $85.00 per share, plus all
dividends (whether or not declared) accrued and unpaid on such
share of Convertible Preferred Stock to the date fixed for
redemption, payable in cash or, at the election of the
Corporation, in shares of Common Stock ("Redemption Stock").
(c) Accrued Dividends. The Corporation may not
purchase, redeem or otherwise acquire for value any shares of
Convertible Preferred Stock or shares of any other series of
Preferred Stock then outstanding ranking on a parity with or
junior to the Convertible Preferred Stock unless all accrued
dividends on all shares of Convertible Preferred Stock then
outstanding shall have been paid or declared and a sum of cash
(or shares of Preferred Dividend Stock) sufficient for the
payment thereof set apart. No sinking fund shall be established
for the Convertible Preferred Stock.
(d) Mandatory Redemption Price Paid in Common Stock.
The Corporation may pay the Redemption Price for Convertible
Preferred Stock called for Mandatory Redemption pursuant to
Section 7(b) by issuing, for each full share of Convertible
Preferred Stock being redeemed, to the holder thereof, such
number of shares of Redemption Stock equal to the value of the
Market Price averaged over the twenty (20) trading days preceding
the date of notice of redemption provided for in Section 7(e).
All such shares of Redemption Stock shall be duly authorized,
validly issued, fully paid and non-assessable. The Corporation
will not issue any fractional shares or script representing
fractional shares of Common Stock upon such redemption of the
Convertible Preferred Stock and, in lieu thereof, will either (i)
pay a cash adjustment based on the Market Price of the Common
Stock as of the last trading day prior to the Redemption Date (as
hereinafter defined) or (ii) aggregate and sell all such
fractional shares and distribute the proceeds to holders as
provided in Section 3(d).
For purpose of this Section 7(d), "Common Stock" shall mean
the Common Stock of the Corporation or any other cash, securities
or property that the holder of Convertible Preferred Stock is
entitled to receive upon conversion of the Convertible Preferred
Stock pursuant to Section 3(c).
(e) Notice of Redemption. Notice of any proposed
Optional or Mandatory Redemption of shares of Convertible
Preferred Stock shall be mailed to each record holder of the
shares of Convertible Preferred Stock to be redeemed at least
thirty (30) but not more than sixty (60) days prior to the date
fixed for such redemption (herein referred to as the "Redemption
Date"). Each such notice shall set forth the following:
(i) the Redemption Date;
(ii) the Redemption Price per share;
(iii) the place for payment and for delivering the
stock certificate(s) and transfer instrument(s) in order to
receive the Redemption Price;
(iv) the shares of Convertible Preferred Stock to
be redeemed;
(v) the then effective conversion price and
conversion rate;
(vi) the Market Price of the Common Stock on the
last trading day prior to the date of the notice;
(vii) whether the Corporation will pay the
Redemption Price of the Convertible Preferred Stock to be
redeemed by issuing shares of Common Stock as provided in
subsection (d) above and, if so, the average of the Market
Prices over the twenty (20) trading days preceding the date
of the notice; and
(viii) that the right of holders of shares of
Convertible Preferred Stock being redeemed to exercise their
conversion right shall terminate as to such shares at the
close of business on the date fixed for redemption (provided
that no default by the Corporation in the payment of the
applicable Redemption Price (including any accrued and
unpaid dividends) shall have occurred and be continuing).
Any notice mailed in such manner shall be conclusively
deemed to have been duly given regardless of whether such notice
is in fact received. If less than all the outstanding shares of
Convertible Preferred Stock are to be redeemed, the Corporation
will select those to be redeemed ratably or by lot in a manner
determined by the Board of Directors. In order to facilitate the
redemption of the Convertible Preferred Stock, the Board of
Directors may fix a record date for determination of holders of
Convertible Preferred Stock to be redeemed, which shall not be
more than thirty (30) days prior to the Redemption Date with
respect thereto.
The holder of any shares of Convertible Preferred Stock
redeemed pursuant to this Section 7 upon any exercise of the
Corporation's redemption right shall not be entitled to receive
payment of the Redemption Price for such shares until such holder
shall cause to be delivered to the place specified in the notice
given with respect to such redemption (i) the certificate(s)
representing such share of Convertible Preferred Stock and
(ii) transfer instrument(s) sufficient to transfer such shares of
Convertible Preferred Stock to the Corporation free of any
adverse interest. No interest shall accrue on the Redemption
Price of any share of Convertible Preferred Stock after the
Redemption Date.
At the close of business on the Redemption Date for any
share of Convertible Preferred Stock, such share shall (provided
the Redemption Price (including any accrued and unpaid dividends
to the Redemption Date) of such shares has been paid or properly
provided for) be deemed to cease to be outstanding and all rights
of any person other than the Corporation in such share shall be
extinguished on the Redemption Date for such share (including all
rights to receive future dividends with respect to such share)
except for the right to receive the Redemption Price (including
any accrued and unpaid dividends to the Redemption Date), without
interest, for such share in accordance with the provisions of
this Section 7, subject to applicable escheat laws.
In the event that any shares of Convertible Preferred Stock
shall be converted into Common Stock prior to the Redemption Date
pursuant to Section 3 or 4, then (i) the Corporation shall not
have the right to redeem such shares and (ii) any funds,
securities or other property which shall have been deposited for
the payment of the Redemption Price for such shares shall be
returned to the Corporation immediately after such conversion
(subject to declared dividends payable to holders of shares of
Convertible Preferred Stock on the record date for such dividends
being so payable, to the extent set forth in Section 3 hereof;
regardless of whether such shares are converted subsequent to
such record date and prior to the related Dividend Payment Date)
and any shares of Common Stock reserved for issuance upon
redemption of such converted shares need no longer be so
reserved.
Notwithstanding the foregoing provisions of this Section 7,
and subject to the provisions of Section 2 hereof; if a dividend
upon any shares of Convertible Preferred Stock is past due,
(i) no share of the Convertible Preferred Stock may be redeemed,
except by means of a redemption pursuant to which all outstanding
shares of the Convertible Preferred Stock are simultaneously
redeemed and all accrued dividends paid and (ii) the Corporation
shall not purchase or otherwise acquire any shares of the
Convertible Preferred Stock, except pursuant to a purchase or
exchange offer made on the same terms to all holders of the
Convertible Preferred Stock.
Section 8. Rank; Liquidation. Upon any voluntary or
involuntary dissolution, liquidation or winding up of the
Corporation (for the purposes of this Section 8, a
"Liquidation"), after payment or provision for payment of the
debts and other liabilities of the Corporation, the holders of
Convertible Preferred Stock shall be entitled to be paid out of
the assets of the Corporation available for distribution to its
stockholders, an amount equal to $85.00 per share of Convertible
Preferred Stock then held by such stockholder, plus all dividends
(whether or not declared or due) accrued and unpaid on such share
to the date fixed for the distribution of assets of the
Corporation to the holders of Convertible Preferred Stock. The
shares of Convertible Preferred Stock shall rank prior to the
shares of Common Stock and any other class or series of stock of
the Corporation ranking junior to the Convertible Preferred
Stock, so that the holders of the Convertible Preferred Stock
shall receive the full amount to which they shall be entitled
before any distribution of assets shall be made to the holders of
the Common Stock or the holders of any other stock that ranks
junior to the Convertible Preferred Stock in respect of
distributions upon the Liquidation of the Corporation.
If upon any Liquidation of the Corporation, the assets
available for distribution to the holders of Convertible
Preferred Stock and any other stock of the Corporation ranking on
a parity with the Convertible Preferred Stock upon Liquidation
which shall then be outstanding (hereinafter in this paragraph
called the "Total Amount Available") shall be insufficient to pay
the holders of all outstanding shares of Convertible Preferred
Stock and all other such parity stock the full amounts (including
all dividends accrued and unpaid) to which they shall be entitled
by reason of such Liquidation of the Corporation, then there
shall be paid to the holders of the Convertible Preferred Stock
in connection with such Liquidation of the Corporation, an amount
equal to the product derived by multiplying the Total Amount
Available times a fraction, the numerator of which shall be the
full amount to which the holders of the Convertible Preferred
Stock shall be entitled under the terms of the preceding
paragraph by reason of such Liquidation of the Corporation and
the denominator of which shall be the total amount which would
have been distributed by reason of such Liquidation of the
Corporation with respect to the Convertible Preferred Stock and
all other stock ranking on a parity with the Convertible
Preferred Stock upon Liquidation then outstanding had the
Corporation possessed sufficient assets to pay the maximum amount
which the holders of all such stock would be entitled to receive
in connection with such Liquidation of the Corporation.
The voluntary sale, conveyance, lease, exchange or transfer
of all or substantially all of the property or assets of the
Corporation, or the merger or consolidation of the Corporation
into or with any other corporation, or the merger of any other
corporation into the Corporation, or any purchase or redemption
of some or all of the shares of any class or series of stock of
the Corporation, shall not be deemed to be a Liquidation of the
Corporation for the purposes of this Section 8 (unless in
connection therewith the Liquidation of the Corporation is
specifically approved).
The holder of any shares of Convertible Preferred Stock
shall not be entitled to receive any payment owed for such shares
under this Section 8 until such holder shall cause to be
delivered to the Corporation (i) the certificate(s) representing
such shares of Convertible Preferred Stock and (ii) transfer
instrument(s) satisfactory to the Corporation and sufficient to
transfer such shares of Convertible Preferred Stock to the
Corporation free of any adverse interest. No interest shall
accrue on any payment upon Liquidation after the due date
thereof.
After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of shares of
the Convertible Preferred Stock will not be entitled to any
further participation in any distribution of assets by the
Corporation.
Section 9. Payments. The Corporation may provide funds
for any payment of the Redemption Price for any shares of
Convertible Preferred Stock or any amount distributable with
respect to any Convertible Preferred Stock under Sections 7 and 8
hereof by depositing such funds with a bank or trust company
selected by the Corporation having a net worth of at least
$50,000,000, in trust for the benefit of the holders of such
shares of Convertible Preferred Stock under arrangements
providing irrevocably for payment upon satisfaction of any
conditions to such payments by the holders of such shares of
Convertible Preferred Stock which shall reasonably be required by
the Corporation. The Corporation shall be entitled to make any
deposit of funds contemplated by this Section 9 under
arrangements designed to permit such funds to generate interest
or other income for the Corporation, and the Corporation shall be
entitled to receive all interest and other income earned by any
funds while they shall be deposited as contemplated by this
Section 9, provided that the Corporation shall maintain on
deposit funds sufficient to satisfy all payments which the
deposit arrangement shall require to be paid by the Corporation.
Any payment which may be owed for the payment of the
Redemption Price for any shares of Convertible Preferred Stock
pursuant to Section 7 or the payment of any amount distributable
with respect to any shares of Convertible Preferred Stock under
Section 8 shall be deemed to have been "paid or properly provided
for" upon the earlier to occur of: (i) the date upon which such
funds sufficient to make such payment shall be deposited in a
manner contemplated by the preceding paragraph or (ii) the date
upon which a check payable to the person entitled to receive such
payment shall be delivered to such person or mailed to such
person at either the address of such person then appearing on the
books of the Corporation or such other address as the Corporation
shall deem reasonable or (iii) in the case of a Mandatory
Redemption the Corporation shall have deposited a sufficient
amount of shares of Common Stock to pay the Redemption Price as
provided in Section 7(e).
Subject to applicable escheat laws, if the conditions
precedent to the disbursement of any funds deposited by the
Corporation pursuant to this Section 9 shall not have been
satisfied within six (6) months after the establishment of the
trust for such funds (or shares), then (i) such funds (or shares)
shall be returned to the Corporation upon its request; (ii) after
such return, such funds (or shares) shall be free of any trust
which shall have been impressed upon them; (iii) the person
entitled to this payment for which such funds (or shares) shall
have been originally intended shall have the right to look only
to the Corporation for such payment, subject to applicable
escheat laws; and (iv) the trustee which shall have held such
funds (or shares) shall be relieved of any responsibility for
such funds (or shares) upon the return of such funds (or shares)
to the Corporation.
Section 10. Status of Reacquired Shares. Shares of
Convertible Preferred Stock issued and reacquired by the
Corporation (including, without limitation, shares of Convertible
Preferred Stock which have been redeemed pursuant to the terms of
Section 7 hereof and shares of Convertible Preferred Stock which
have been converted into shares of Common Stock) shall have the
status of authorized and unissued shares of preferred stock,
undesignated as to series, subject to later issuance.
Section 11. Preemptive Rights. The Convertible
Preferred Stock is not entitled to any preemptive or subscription
rights in respect of any securities of the Corporation.
Section 12. Miscellaneous.
(a) Transfer Taxes. The Corporation shall pay any and
all stock transfer and documentary stamp taxes that may be
payable in respect of any original issuance and delivery of
shares of Convertible Preferred Stock or shares of Common Stock
or Preferred Dividend Stock or Redemption Stock or other
securities issued on account of Convertible Preferred Stock
pursuant hereto or certificates or instruments evidencing such
shares or securities. The Corporation shall not, however, be
required to pay any such tax which may be payable in respect of
any transfer involved in the issuance or delivery of shares of
Convertible Preferred Stock or Common Stock or other securities
in a name other than that in which the shares of Convertible
Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered, or in respect
of any payment to any person with respect to any such shares or
securities other than a payment to the registered holder thereof;
and shall not be required to make any such issuance, delivery or
payment unless and until the person otherwise entitled to such
issuance, delivery or payment has paid to the Corporation the
amount of any such tax or has established, to the satisfaction of
the Corporation, that such tax has been paid or is not payable.
(b) Failure to Designate Stockholder or Payee. In the
event that a holder of shares of Convertible Preferred Stock
shall not by written notice designate the name in which shares of
Common Stock to be issued upon conversion or Preferred Dividend
Stock to be issued as a dividend or Redemption Stock to be issued
upon redemption of such shares, should be registered or to whom
payment upon redemption of shares of Convertible Preferred Stock
should be made or the address to which the certificates or
instruments evidencing such shares or such payment should be
sent, the Corporation shall be entitled to register such shares
and make such payment in the name of the holder of such
Convertible Preferred Stock as shown on the records of the
Corporation and to send the certificates or instruments
evidencing such shares or such payment, to the address of such
holder shown on the records of the Corporation.
(c) Registrar and Transfer Agent. The Corporation may
appoint, and from time to time discharge and change, the
registrar and transfer agent for the Convertible Preferred Stock.
The initial registrar and transfer agent for the Convertible
Preferred Stock shall be the Corporation.
(d) Severability. Whenever possible, each provision
hereof shall be interpreted in such a manner as to be effective
and valid under applicable law, but if any provision hereof is
held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court
of competent jurisdiction should determine that a provision
hereof would be valid or enforceable if a period of time were
extended or shortened or a particular percentage were increased
or decreased, then such court may make such change as shall be
necessary to render the provision in question effective and valid
under applicable law.
C. The Corporation shall have the authority to issue up
to 50,000 shares of Preferred Stock designated Series B,
Cumulative Preferred Stock (the "Series B Preferred Stock"), each
share of Series B Preferred Stock being identical with each other
share of Series B Preferred Stock and all shares of Series B
Preferred Stock having the following characteristics, rights and
preferences:
Paragraph 1. Designation and Amount.
The shares of this series of Preferred Stock shall be
designated as Series B, Cumulative Preferred Stock, par
value of $1.00 per share ("Series B Preferred Stock"), and
the number of shares constituting such series shall be
50,000.
Paragraph 2. Definitions.
The following terms, not defined elsewhere herein,
shall have the following meanings:
"The American Stock Exchange" means the American Stock
Exchange, Inc.
"Board of Directors" means the Board of Directors of
the Company as may be constituted from time to time.
"Business Day" means any day (other than a Saturday,
Sunday or public holiday in the Borough of Manhattan, City
of New York, New York) on which banking institutions in New
York City are not authorized or obligated by law or
executive order to close.
"Common Stock" means the shares of common stock, par
value $.01 per share, of the Company.
"Company" or "XCL" means The Exploration Company of
Louisiana, Inc., a Delaware corporation.
"Convertible Loan Notes" means the 8% Subordinated
Convertible Notes of the Company.
"Directors" means the directors of the Company.
"Dividend Stock" means the shares of Common Stock paid
to holders of Series B Preferred Stock in lieu of a cash
dividend as provided in Section 3(b) hereof.
"$" means Dollars.
"Dollars" means the freely transferable currency of the
USA.
"Redemption Stock" means the shares of Common Stock
that may be issuable by the Company upon redemption of the
Series B Preferred Stock as hereinafter provided.
"Shareholders" means the holders of the Common Stock.
"Stock Option Plans" means the Incentive and (non-
qualified) Stock Option Plans adopted by the Company for
employees and certain other individuals rendering services
to the Company.
"The London Stock Exchange" means The International
Stock Exchange of the United Kingdom and the Republic Of
Ireland Limited.
"The New York Stock Exchange" means The New York Stock
Exchange. Inc.
"Transfer Agent" means the transfer agent for the
Series B Preferred Stock from time to time obtaining.
"UK" and" "United Kingdom" means the United Kingdom of
Great Britain and Northern Ireland.
"USA" and "US" means the United States of America.
Paragraph 3. Dividends and Distributions.
(a) Each share of Series B Preferred Stock shall
entitle the record holder to receive, out of funds legally
available therefor, when, as and if declared by the Board of
Directors, dividends in cash at the annual rate of $10.00
per share, which shall be payable in arrears in equal semi-
annual installments on June 30th and December 31st, or in
the event any such date is a Saturday, Sunday or public
holiday in the Borough of Manhattan, the City of New York,
New York, on the first Business Day following such date
(hereinafter a "Dividend Payment Date") in each year,
provided, however, that the dividend payable on the first
such Dividend Payment Date occurring after December 31, 1990
shall be equal to the product obtained by multiplying $5.00
by a fraction, the denominator of which shall be 182 and the
numerator of which shall be the number of days expired in
the period between the date of issuance of the first share
of Series B Preferred Stock (the "Issuance Date") and such
first Dividend Payment Date (inclusive of both such dates);
provided, however, that if as of the tenth Business Day
prior to any such Dividend Payment date the Board of
Directors has neither (i) declared a cash dividend of $10.00
per share nor (ii) delivered written notice of the Company's
election to pay a dividend hereunder in kind in shares of
Common Stock, the Company shall, to the extent legally and
contractually permitted, declare a dividend and use its best
efforts to pay such dividend in shares of Common Stock as
set forth in sub-paragraph 3(b).
(b) The Company may, at its option exercised by
written notice to the holders of the Series B Preferred
Stock given at least ten (10) Business Days prior to the
Dividend Payment Date, elect to pay any dividend due and
payable hereunder, and the Company shall to the extent
required by sub-paragraph 3(a), in kind in shares of Common
Stock in-lieu of a dividend payment in cash. The amount of
shares of Dividend Stock issuable to each holder of Series B
Preferred Stock pursuant to this sub-paragraph 3(b) on each
such Dividend Payment Date shall equal $6.00 divided by the
lowest average Closing Price per share of the Common Stock
as calculated for the last 5, 10 and 30 Trading Days (the
"Trading Periods") preceding such Dividend Payment Date
multiplied by the total number of shares of Series B
Preferred Stock registered in the name of each such holder
of the Series B Preferred Stock on the record date for the
payment of the dividend. As used herein, the term "Closing
Price" of a security on any day shall mean the last sales
price, regular way, per share of such security on such day
as reported in the principal consolidated reporting system
with respect to such security listed on The American Stock
Exchange or The New York Stock Exchange or, if the shares of
such security are not listed or admitted to trading on The
American Stock Exchange or The New York Stock Exchange, the
middle market quotations for the shares of such security
(derived from The London Stock Exchange Daily Official List)
listed or admitted to trading on The London Stock Exchange,
or if the shares of such security are not listed or admitted
to trading on The London Stock Exchange, the last sales
price as reported in the National Market System ("NMS") of
the National Association of Securities Dealers, Inc.'s
Automated Quotation System ("NASDAQ"), or if the shares of
such security are not listed or admitted to trading in NMS,
the average of the high bid and low asked prices in the over-
the-counter market as reported by NASDAQ, or if the bid and
asked prices on each such day shall not have been reported
through NASDAQ, the average of the bid and asked prices for
such day as furnished by any New York Stock Exchange member
firm regularly making a market in such security selected for
such purpose by the Board of Directors or a committee
thereof on each Trading Day during such Trading Periods.
The term "Trading Day" shall mean a day on which the market
used for calculating the Closing Price is open for the
transaction of business or, if the shares of such security
are not so listed or admitted to trading, a Business Day.
In any of such alternate cases when such security is not
traded in prices expressed in Dollars, such Closing Price
shall be converted into Dollars at the spot market exchange
rate of pounds sterling (UK) into Dollars as quoted by
Manufacturers Hanover Trust Company on the date of
determination. Fractions of Common Stock arising in respect
of the payment of any dividend in shares of Dividend Stock
shall not be issued to the holders of Series B Preferred
Stock; instead they shall be aggregated and sold in the
market on behalf of such holders at the best price
reasonably obtainable and the net proceeds of sale shall be
distributed pro rata among such holders unless in respect of
any holding of the relevant shares the amount to be
distributed would be less than $2.00 in which case such
amount shall not be distributed but shall be retained for
the benefit of the Company. For the purpose of implementing
the provision in the immediately preceding sentence the
Board of Directors may appoint a person to execute transfers
on behalf of persons otherwise entitled to any such
fractions and generally may make all arrangements which
appear to them necessary or appropriate for the settlement
and disposal of fractional entitlements. Within fifteen
(15) Business Days after each Dividend Payment Date on which
the Company has elected. by written notice to each holder of
shares of Series B Preferred Stock, to pay the dividend due
thereon in shares of Dividend Stock, each holder of Series B
Preferred Stock shall have the right to notify the Company
of its election to have the Company sell its shares of
Dividend Stock on behalf of such holder. As soon as
practicable after receipt of such holder's written election
so to sell such shares the Company shall use its best
efforts to sell such Dividend Shares in the market or in one
or more private transactions, without commission or any
other remuneration payable to the Company, at the best price
reasonably obtainable for shares of Common Stock, either
directly or through one or more brokers or other agents
selected by the Company. The Company may, but shall not be
required to purchase such shares of Dividend Stock at such
price. While the Company shall seek to obtain the best
price for such shares it shall not be required to obtain the
highest possible price; provided, however, in the event the
amount of the net proceeds of sales paid to such holder from
the sale of the Dividend Stock (after payment of all sales
commissions or fees but before payment of any transfer,
stamp, documentary or income taxes) is less than $5.50 per
share of Series B Preferred Stock, the Company shall pay
such holder the difference in cash. Within ten (10)
Business Days after receipt of such holder's written
election to sell its shares of Dividend Stock, the Company
will sell such stock and pay the holders of the Preferred
Stock the net proceeds of such sale and any amount payable
under the preceding sentence.
(c) Dividends shall be cumulative, whether or not
earned and whether or not surplus shall be available
therefor and shall commence to accrue and accumulate from
day to day from the Issuance Date. Such accumulation shall
include, if not paid, the dividend payable on such Dividend
Payment Date. Accrued but unpaid dividends shall not bear
interest. Such dividends shall be declared and set apart or
paid before any dividends (other than dividends payable in
Common Stock) shall be paid on the Common Stock. No
dividend shall be paid upon or set apart for shares of any
other class of stock of XCL (other than shares of preference
stock ranking pari passu with the Series B Preferred Stock)
until all dividend arrears on the Series B Preferred Stock
shall be fully paid. The shares of Series B Preferred Stock
shall rank pari passu with the shares of the U.K. Preferred
Stock with respect to the payment of dividends.
(d) Dividends paid on the shares of Series B Preferred
Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares
shall be allocated pro-rata on a share-by-share basis among
all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of
holders of Series B Preferred Stock entitled to receive
payment of a dividend declared thereon, which record date
shall be no more than sixty days prior to the date fixed for
the payment thereof.
Paragraph 4. Dissolution, Liquidation or Winding Up.
In the event of any dissolution, liquidation or winding
up of the affairs of XCL, after payment or provision for
payment of the debts and other liabilities of XCL, the
registered holders of Series B Preferred Stock shall be
entitled to share on a pro rata basis with the shares of
U.K. Preferred Stock and all other series of XCL's
preference stock ranking on a parity with the Series B
Preferred Stock in respect of distributions upon
dissolution, liquidation or winding up of the Company and to
receive, out of the net assets of XCL, $100.00 per share,
plus an amount equal to all the dividend arrears on each
such share up to the date fixed for distribution and no
more, before distribution shall be made to the holders of
the Common Stock or any other shares ranking junior to the
Series B Preferred Stock in respect of distributions upon
dissolution, liquidation or winding up of the Company.
Neither the merger or consolidation of XCL, nor the sale,
lease or conveyance of all or a part of its assets, shall be
deemed to be a dissolution, liquidation or winding up of the
affairs of XCL within the meaning of this Paragraph 4.
Paragraph 5. Redemption.
The Series B Preferred Stock shall be redeemable at the
redemption price specified below and on the following terms
and conditions:
(a) Series B Preferred Stock is redeemable at the
option of the holder at any time after May 13, 1994
("Optional Redemption"), at $100.00 per share plus an amount
equal to the accrued and unpaid dividends thereon to the
Redemption Date (as hereinafter defined), whether or not
earned and whether or not surplus is available therefor,
payable out of funds legally available therefor. In order
to exercise an Optional Redemption, such holder must give
written notice of such redemption to the Company ninety (90)
calendar days prior to the redemption date ("Redemption
Date"). In the event funds are legally available to redeem
only a portion of the Series B Preferred Stock outstanding,
such funds shall be applied to redemption to the extent
available and the shares to be redeemed shall be selected by
lot as determined by the Board of Directors and the
remainder of the shares to be redeemed shall be promptly
redeemed as funds become legally available. Each holder so
electing to have the Company redeem its shares of Series B
Preferred Stock shall elect such redemption with respect to
at least 5,000 such shares registered in its name on the
Redemption Date; provided, however, that a holder of less
than 16,667 shares of Series B Preferred Stock so electing
to have the Company redeem any of its shares of Series B
Preferred Stock shall elect such redemption with respect to
all such shares registered in its name on the Redemption
Date.
(b) In the event of an Optional Redemption, the
Company may elect, at its option, to pay the redemption
price by issuing shares of Redemption Stock to those holders
of Series B Preferred Stock who have elected to redeem their
shares of Series B Preferred Stock, provided the Company's
Common Stock is then listed on The American Stock Exchange.
The New York Stock Exchange or The London Stock Exchange or
is admitted to trading in NASDAQ National Market. In the
event the Company elects to pay the redemption price in
shares of Redemption Stock, the Company shall advise the
holders by written notice within thirty (30) calendar days
after receipt of written notice of such holders' election to
redeem shares of Series B Preferred Stock. The number of
shares of Redemption Stock so to be issued to such holders
shall equal the product of the number of shares of Series B
Preferred Stock registered in the name of each such holder,
multiplied by the quotient obtained by dividing the sum of
$100.00 plus an amount equal to the accrued and unpaid
dividends on each share of Series B Preferred Stock to the
Redemption Date by the lowest average Closing Price per
share of the Common Stock as calculated for the last 5, 10
and 30 Trading Days preceding the Redemption Date. Issuance
and delivery of the Redemption Stock to such holders shall
be effected by the Company or the Redemption Agent (as
hereinafter defined) in the same manner and to the same
effect as the payment of the redemption price in cash in
accordance with the procedures set forth in sub-paragraph
5(d) below. In the event the Company has notified a
redeeming holder of its election to pay the redemption price
in Redemption Stock, within fifteen (15) Business Days after
receipt of such notice, such holder of Series B Preferred
Stock shall have the right to notify the Company of its
election to have the Company sell its shares of Redemption
Stock on behalf of such holder. As soon as practicable
after receipt of such holder's written election so to sell
such shares the Company shall use its best efforts to sell
such Redemption Stock in the market or in one or more
private transactions, without commission or any other
remuneration payable to the Company, at the best price
reasonably obtainable for shares of Common Stock, either
directly or through one or more brokers or other agents
selected by the Company. The Company may, but shall not be
required to purchase such shares of Redemption Stock at such
price. While the Company shall seek to obtain the best
price for such shares it shall not be required to obtain the
highest possible price; provided, however, in the event the
amount of the net proceeds of sales paid to such holder from
the sale of the Redemption Stock (after payment of all sales
commissions or fees but before payment of any transfer,
stamp, documentary or income taxes) is less than $100.00 per
share of Series B Preferred Stock (the difference being
herein referred to as the "Deficit Amount"), the Company
shall issue to such holder additional shares of Common Stock
(the "Additional Stock") in an amount equal in value to the
Deficit Amount computed, to the nearest whole share of
Common Stock, by dividing the Deficit Amount by the last
sales price per share at which the Redemption Stock was sold
as hereinabove provided. Within ten (10) Business Days
after receipt of such holders' written election to sell its
shares of Redemption Stock, the Company will sell such
shares, pay such holder the net proceeds of such sale and
issue to such holder the amount of shares of Additional
Stock, if any, required to be issued under the preceding
sentence. Within fifteen (15) Business Days after the
issuance of shares of Additional Stock to such holder, such
holder shall have the right to notify the Company of its
election to have the Company sell its shares of Additional
Stock on behalf of such holder. Within ten (10) Business
Days after receipt of such holders' written election to sell
its shares of Additional Stock, the Company will sell such
shares and pay such holder the net proceeds of such sale.
If the net proceeds of such sale of Additional Stock are
less than the Deficit Amount (the difference being herein
referred to as the "New Deficit Amount"), the Company shall
issue to such holder additional shares of Common Stock (the
"New Additional Stock") in an amount equal in value to the
New Deficit Amount computed to the nearest whole share of
Common Stock, by dividing the New Deficit Amount by the last
sales price per share at which the Additional Stock was sold
as hereinabove provided. Within ten (10) Business Days
after the issuance to such holder of the amount of shares of
New Additional Stock, if any, required to be issued under
the preceding sentence, the Company will sell such shares
and pay such holder the net proceeds of such sale. The
Company shall continue to issue to such holder additional
shares of Common Stock, sell such shares on such holder's
behalf and pay such holder the net proceeds of such sale or
sales on the same terms as hereinabove provided with respect
to the New Additional Stock until such holder has received
from the Company aggregate net proceeds of not less than
$100.00 per share of Series B Preferred Stock. The Company
shall use its best efforts to sell all such Additional
Stock, New Additional Stock and such other additional shares
of Common Stock on behalf of the Holder in the same manner
contemplated for sales of the Redemption Stock, as
hereinabove provided.
(c) Shares of Series B Preferred Stock shall be
automatically redeemed upon the exercise, in full or in
part, in accordance with the Warrant Agreement dated as of
March 27, 1991, between the Company and China Investment &
Development Co., Ltd. ("CIDC-ROC"), of the Class B Warrants
(the "Class B Warrants") issued pursuant to the Securities
Purchase Agreement, dated as of March 27, 1991 between the
Company, China Investment and Development Corporation and
CIDC-ROC, to the extent that the Class B Warrants are
exercised ("Automatic Redemption"). The number of shares of
Series B Preferred Stock which shall be automatically
redeemed upon partial exercise of the Class B Warrants shall
be calculated by dividing the product of the number of Class
B Warrants exercised and the Class B Exercise Price (as
defined in the Warrant Agreement) by $100.00, to the nearest
whole share of Series B Preferred Stock. The particular
shares of Series B Preferred Stock which shall be
automatically redeemed upon any partial exercise of the
Class B Warrants shall be selected by the Board of Directors
of the Company by lottery. The redemption price payable
upon Automatic Redemption of the Series B Preferred Stock
shall not be payable by issuing shares of Redemption Stock
but shall be paid in cash in accordance with the provisions
of sub-paragraph 5(d); provided, however, in no event shall
such redemption price exceed the amount actually collected
by the Company upon exercise of the Class B Warrants.
(d) If a holder of record submits to the Company, on
or prior to a Redemption Date, the certificate or
certificates for the Series B Preferred Stock to be
redeemed, with the redemption notice thereon appropriately
completed, the redemption price shall be payable as soon as
practicable thereafter, but in any event no later than the
earlier of (i) ten (10) Business Days after receipt of such
certificate or certificates or (ii) in the event of an
Automatic Redemption the date of the receipt and collection
of the Class B Exercise Price of the Class B Warrants being
exercised. The Company may deposit the aggregate redemption
price in trust with a bank or trust company (in good
standing, organized under the laws of the United States of
America or of the State of New York, doing business in the
Borough of Manhattan, City of New York, New York, and having
capital surplus and undivided profits aggregating at least
$25,000,000) as the "Redemption Agent", for payment to the
holders so the shares so to be redeemed, upon surrender (and
endorsement, if required by the Board of Directors) of the
certificates for such shares. Upon a Redemption Date
(unless the Company shall fail to make payment or deposit of
the redemption price as above set forth), each holder of the
shares of Series B Preferred Stock so to be redeemed shall
cease to be a shareholder with respect to such shares and
shall have no interest in, or claim against, the Company and
shall have no voting or other rights with respect to such
shares, except the right to receive the moneys payable upon
such redemption from such bank or trust company, or from the
Company, without interest thereon, upon surrender (and
endorsement if required by the Board of Directors) of the
certificates; and the shares represented thereby shall no
longer be deemed to be outstanding. In the event the holder
of any shares of Series B Preferred Stock shall not, within
six years after such deposit claim the amount deposited as
above stated for the redemption thereof, the depositary
shall, upon demand, pay over to the Company such unclaimed
amount so deposited, and the depositary shall thereupon be
relieved of all responsibility therefor to such holder.
(e) In the event of an Automatic Redemption, the
dividend on the Series B Preferred Stock as redeemed shall
accrue up to the fixed Dividend Payment Date last preceding
the relevant redemption date but shall cease to accrue
thereafter in respect of shares of Series B Preferred Stock
being redeemed.
(f) Any dividend arrears on the Series B Preferred
Stock tendered to the Company upon exercise of the Class B
Warrants as therein provided shall be payable in full to the
respective last holders of record of the shares of Series B
Preferred Stock so tendered to the Company (notwithstanding
any subsequent transfer of the shares of Common Stock issued
upon exercise of the Class B Warrants), pro rata with
payment of corresponding dividend arrears on the Series B
Preferred Stock remaining outstanding.
Paragraph 6. Voting Rights.
Except as may be otherwise provided herein or in this
Restated Certificate of Incorporation of XCL, as amended
from time to time with the consent of the holders of Series
B Preferred Stock, provided such consent is required to be
obtained hereunder, or as required by applicable law:
(a) The Series B Preferred Stock shall vote together
with the Common Stock of the Company as a single class on
all actions to be taken by the stockholders of the Company.
Each share of Series B Preferred Stock shall entitle the
holder thereof to cast 50 votes on all matters on which the
Series B Preferred Stock shall vote with the Common Stock.
No adjustment shall be made in the voting rights per share
of the Series B Preferred Stock on any matters (including,
without limitation, the voting rights set forth in this
Section 6 and in Sections 7 and 8 hereof) upon any increase
or decrease in the number of shares outstanding of any class
of stock which is also entitled to vote on such matters;
(b) The Series B Preferred Stock shall vote as a
separate class on any resolution proposed for adoption by
the stockholders of the Company which seeks to amend, alter
or repeal, the provisions of XCL's Restated Certificate of
Incorporation or of the resolutions contained in the
Certificate of Designation of the Series B Preferred Stock
designating the Series B Preferred Stock and the preferences
and privileges, relative, participating, optional or other
special rights and qualifications, limitations and
restrictions thereof, so as to adversely affect any right,
preference, privilege or voting power of the Series B
Preferred Stock or the holders thereof; provided, however,
that any increase in the amount of the issued Series B
Preferred Stock or the creation and issue of other series of
preference stock (whether or not denominated in Dollars), or
any increase in the amount of authorized shares of Series B
Preferred Stock, in each case either being Parity Stock (as
defined below) or junior to the Series B Preferred Stock
with respect to the payment of dividends and the
distribution of assets upon dissolution, liquidation or
winding up and with or without similar voting rights will
not be deemed to affect adversely such rights, preferences,
privileges or voting powers of the Series B Preferred Stock;
(c) Except in the event that arrangements are or have
been offered to the holders of the Series B Preferred Stock
which ensure that the rights of such holders would not be
prejudiced, XCL will ensure that no plan of compromise or
arrangement affecting the Common Stock shall become
effective unless the holders of the Series B Preferred Stock
shall be parties to the plan and unless the plan shall be
approved by the holders of at least two thirds of the then
issued and outstanding shares of Series B Preferred Stock,
voting as a class together with all other series of
preference stock ranking on a parity with the Series B
Preferred Stock as to the right to receive any dividends and
any payment or distribution of assets upon dissolution,
liquidation or winding up (herein referred to as "Parity
Stock"). The U.K. Preferred Stock shall be deemed Parity
Stock for all purposes herein;
(d) In the case of a vote on a resolution regarding
(i) the capital reorganization, dissolution or liquidation
of XCL; or (ii) any matter for which the consent of the
holders of Series B Preferred Stock is sought in accordance
with the provisions of sub-paragraphs 6(b) or 6(c) or
Paragraphs 7 or 8 hereof; every record holder of Series B
Preferred Stock who is present at that meeting in person or
by proxy shall be entitled to cast one (1) vote for each
share of Series B Preferred Stock registered in its name
(voting (A) as a separate class with respect to the matters
set forth in sub-paragraph 6(b) and (B) together with all
other Parity, Stock with respect to the matters set forth in
sub-paragraphs 6(c) and 6(d)(i) and Paragraphs 7 and 8) and
the decision of at least two thirds of the votes cast at the
meeting by such holders (as to any matters set forth in
clause (A) above) and such, holders and the holders of any
Parity Stock (as to any matters set forth in clause (B)
above) shall be determinative of the matter so long as a
quorum (as defined in sub-paragraph 6(e) below) is present;
provided that in the case of sub-paragraph 6(d)(ii) above
such consent may be sought without a meeting and shall be
deemed to be granted upon the receipt of the written consent
of at least two thirds of the then issued and outstanding
shares of stock entitled to vote on such matter as a class.
(e) At each meeting of stockholders at which the
holders of the Series B Preferred Stock shall have the right
to vote as a separate class or together with any other class
of stock, the presence in person or by proxy of the holders
of record of a majority of the total number of shares of
stock entitled to vote as a single class then outstanding
shall be necessary and sufficient to constitute a quorum of
such class for the transaction of business by such
stockholders as a class. At any such meeting or adjournment
thereof:
(i) the absence of a quorum of the holders of the
Series B Preferred Stock shall not prevent the election
of Directors or the transaction of business other than
the transaction of business with respect to which the
holders of the Series B Preferred Stock are entitled to
vote as a separate class and the absence of a quorum of
the holders of any other class of stock for the election
of Directors or the conduct of such other business shall
not prevent the conduct of business on which the Series B
Preferred Stock is entitled to vote as a separate class,
and
(ii) in the absence of any such quorum, the holders
present in person or by proxy of the class or classes
which lack a quorum shall have the power to adjourn (for
a period of up to 30 days) the meeting for the election
of Directors which they are entitled to elect from time
to time, or for the conduct of such business, without
notice other than announcement at the meeting until a
quorum shall be present.
Paragraph 7. Further Issues: Par Value.
So long as any shares of Series B Preferred Stock
remain outstanding, XCL will not without the affirmative
vote or consent of the holders of the Series B Preferred
Stock and any Parity Stock, in each case outstanding at the
time, given in person or by proxy, either in writing or at a
meeting, (i) authorize, create or issue, or increase the
authorized or issued amount, of any class or series of stock
ranking senior to the Series B Preferred Stock with respect
to payment of dividends or distribution of assets on
dissolution, liquidation or winding up or which may be
convertible into any class of shares ranking as regards
participation in dividends or the distribution of assets on
dissolution, liquidation or winding up senior to the Series
B Preferred Stock; or (ii) increase or decrease the par
value of the Common Stock.
Paragraph 8. Other Matters.
So long as any Series B Preferred Stock remains issued
and outstanding then:
(a) except as authorized by the adoption of an
appropriate resolution by the affirmative vote or consent of
the holders of the Series B Preferred Stock and any Parity
Stock in accordance with sub-paragraph 6(d):
(i) XCL will cause the Group (as defined below) not
to directly engage or become materially interested in any
business, other than in oil and gas exploration,
development and production, including the operation of
processing plants and gas gathering systems and
pipelines, but excluding any downstream activities such
as petroleum refining or retailing of refined products
unless such retailing is incidental to a permitted
activity;
(ii) XCL will not purchase any of its own
outstanding shares of Common Stock otherwise than (A) in
accordance with XCL's Stock Option Plans to the extent
Common Stock is used to satisfy the exercise stock
options granted thereunder; or (B) pursuant to a
resolution of the Shareholders adopted at an
Extraordinary General Meeting held on December 4, 1987;
and
(iii) XCL shall cause the Group not to incur
Indebtedness which shall exceed in aggregate principal
amount an amount equal to 200 percent of the amount of
Shareholders' Equity of the Group as reported in XCL's
Latest Consolidated Balance Sheet.
For the purposes of sub-paragraph (iii) above:
(A) "Indebtedness" means all borrowed moneys and
shall be deemed to include to the extent not otherwise
taken into account:
(1) the principal amount raised in respect of
loans or acceptances by any bank or accepting house
under any loan facility or acceptance credit opened on
behalf of and in favor of XCL and any corporation a
majority of whose shares of voting securities are owned
by XCL (a "Subsidiary");
(2) the principal amount of any debentures
(secured or unsecured) of XCL or any Subsidiary; and
(3) the principal amount for which XCL is
liable as a guarantor of, or surety for the obligations
of a third party;
But shall not include, as determined in accordance with
generally accepted U.S. accounting principles:
(1) intra-Group debt;
(2) the amount of all consolidated current
liabilities of XCL and its Subsidiaries incurred in the
ordinary course of business, other than for current
maturities of long term debt and other than short term
borrowings;
(3) deferred revenues; and
(4) deferred U.S. taxes.,
(B) "Shareholders' Equity" means the aggregate
amount appearing as shareholders' equity in the
applicable Latest Consolidated Balance Sheet as
determined in accordance with generally accepted US
accounting principles;
(C) "Latest Consolidated Balance Sheet" means at
any date the then latest published consolidated balance
sheet of the Group prepared in accordance with generally
accepted US accounting principles and which has been
audited and has been reported on by XCL's auditors for
the time being.
(D) "the Group" means XCL and its Subsidiaries
from time to time.
(b) XCL shall concurrently send a copy of every
report and financial statement sent to its Shareholders to
every holder of Series B Preferred Stock.
Paragraph 9. Reacquired Shares.
Any shares of the Series B Preferred Stock redeemed or
purchased or otherwise acquired by the Company in any manner
whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Series
B Preferred Stock, par value $1.00, and may be reissued as
Series B Preferred Stock or part of a new series of
preference stock to be created by resolution or resolutions
of the Board of Directors, subject to the conditions or
restrictions on issuance set forth herein.
Paragraph 10. Miscellaneous.
(a) All notices referred to herein shall be in
writing, and all notices hereunder shall be deemed to have
been given upon the earlier of receipt thereof or three (3)
Business Days after the mailing thereof if sent by
registered or certified mail (unless first-class mail shall
be specifically permitted for such notice under the terms
hereof) with postage prepaid, addressed: (i) if to the
Company, to its office as specified in its most recent
Annual Report on Form 10-K (or any successor report or form)
or to the Transfer Agent or other agent of the Company
designated as permitted thereby or (ii) if to any holder of
the Series B Preferred Stock or Common Stock, as the case
may be, to such holder at the address of such holder as
listed in the stock record books of the Company (which may
include the records of any Transfer Agent for the Series B
Preferred Stock or Common Stock, as the case may be) or
(iii) to such other address as the Company or any such
holder, as the case may be, shall have designated by notice
similarly given.
(b) A copy of any notice given hereunder to any holder
of Series B Preferred Stock shall be provided to Shearman &
Sterling, 555 California Street, San Francisco, CA 94104,
Attention: William M. Kelly, Esq. unless otherwise
requested in writing by any such holder.
(c) The Company shall pay any and all stock transfer
and documentary stamp taxes that may be payable in respect
of any original issuance or delivery of shares of Series B
Preferred Stock or shares of Common Stock or other
securities issued on account of Series B Preferred Stock
pursuant hereto or certificates representing such shares or
securities. The Company shall not, however, be required to
pay any such tax which may be payable in respect of any
transfer involved in the issuance or delivery of shares of
Series B Preferred Stock or Common Stock or other securities
in a name other than that in which the shares of Series B
Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered
(including, without limitation, any sales or transfers of
Dividend and Redemption Stock arranged by the Company on
behalf of a holder of Series B Preferred Stock), or in
respect of any payment to any person with respect to any
such shares or securities other than a payment to the
registered holder thereof, and shall not be required to make
any such issuance, delivery or payment unless and until the
person otherwise entitled to such issuance, delivery or
payment has made arrangements satisfactory to the Transfer
Agent for the payment to the Company of the amount of any
such tax or has established, to the satisfaction of the
Company, that such tax has been paid or is not payable.
Until after the third anniversary of the Issuance Date
neither the Company nor the Transfer Agent shall be required
to recognize or record on the books and records of the
Company or the Transfer Agent any transfer of any shares of
Series B Preferred Stock to a person who is not a citizen or
resident of the United States of America without the prior
written consent of the Company to such transfer, which
consent shall not be unreasonably withheld, and the Company
shall be entitled to request and receive reasonable proof of
the citizenship or residency of any such proposed transferee
before authorizing the transfer of such shares of Series B
Preferred Stock.
(d) In the event that a holder of shares of Series B
Preferred Stock shall not by written notice designate to
whom payment upon redemption of shares of Series B Preferred
Stock should be made or the address to which the such
payment, should be sent, the Company shall be entitled to
make such payment, in the name of the holder of such Series
B Preferred Stock as shown on the records of the Company and
to send such payment, to the address of such holder shown on
the records of the Company.
(e) Unless otherwise provided in this Restated
Certificate of Incorporation of the Company, all payments in
the form of dividends, distributions on voluntary or
involuntary dissolution, liquidation or winding-up or
otherwise made Upon the shares of Series B Preferred Stock
and any other stock ranking on a parity with the Series B
Preferred Stock with respect to such dividend or
distribution shall be made pro rata, so that amounts paid
per share on the Series B Preferred Stock and such other
stock shall in all cases bear to each other the same ratio
that the required dividend distributions or payments, as the
case may be, then payable per share on the shares of the
Series B Preferred Stock and such other stock bear to each
other.
(f) The Company may appoint, and from time to time
discharge and change, the Transfer Agent for the Series B
Preferred Stock. Upon any such appointment or discharge of
a Transfer Agent, the Company shall send notice thereof by
first-class mail, postage prepaid, to each holder of record
of Series B Preferred, Stock. The initial Transfer Agent
for the Series B Preferred Stock shall be the Company.
D. The Corporation shall have the authority to issue up
to 50,000 shares of Preferred Stock, which shall be designated
Series F, Cumulative Convertible Preferred Stock (the "Series F
Preferred Stock"), each share of Series F Preferred Stock being
identical with each other share of Series F Preferred Stock and
all shares of Series F Preferred Stock having the following
characteristics, rights and preferences:
Paragraph 1. Designation and Amount. The shares of
this series of Preferred Stock, par value $1.00 per share
("Preferred Stock"), shall be designated as Series F, Cumulative
Convertible Preferred Stock, par value of $1.00 per share
("Series F Preferred Stock"), and the number of shares
constituting such series shall be 50,000.
Paragraph 2. Definitions and Rules of Construction.
(a) The following terms, not defined elsewhere herein,
shall have the following meanings:
"The American Stock Exchange" means the American Stock
Exchange, Inc.
"Amended Series A Preferred Stock" means the shares of
the Company's Amended Series A, Cumulative Convertible Preferred
Stock, par value $1.00 per share.
"Board of Directors" means the Board of Directors of
the Company as may be constituted from time to time.
"Business Day" means any day (other than a Saturday,
Sunday or public holiday in the Borough of Manhattan, City of New
York, New York) on which banking institutions in New York City
are not authorized or obligated by law or executive order to
close.
"Closing Price" of a security on any day means the last
sales price, regular way, per share of such security on such day
as reported in the principal consolidated reporting system with
respect to such security listed on the principal US stock
exchange on which such security was listed for trading or, if the
shares of such security are not listed or admitted to trading on
a US stock exchange, the middle market quotations for the shares
of such security (derived from The London Stock Exchange Daily
Official List) listed or admitted to trading on The London Stock
Exchange Limited, or if the shares of such security are not
listed or admitted to trading on The London Stock Exchange, the
last sales price as reported, in the National Market System
("NMS") of the National Association of Securities Dealers Inc.
Automated Quotation System ("NASDAQ"), or if the shares of such
security are not listed or admitted to trading in NMS, the
average of the high bid and low asked prices in the over-the-
counter market as reported by NASDAQ, or if the bid and asked
prices on each such day shall not have been reported through
NASDAQ, the average of the bid and asked prices for such day as
furnished by any American Stock Exchange member firm regularly
making a market in such security selected for such purpose by the
Board of Directors or a committee thereof on each Trading Day. In
any of such alternate cases when such security is not traded in
prices expressed in Dollars, such Closing Price shall be
converted into Dollars at the then spot market exchange rate of
pounds sterling (UK) into Dollars as quoted by Chase Manhattan
Bank, N.A. on the date of determination.
"Common Stock" means the shares of common stock, par
value $.01 per share, of the Company.
"Company" means XCL Ltd., a Delaware corporation.
"Conversion Commencement Date" means six months after
the initial Issuance Date.
"Conversion Stock" means the shares of Common Stock
issuable upon conversion of the Series F Preferred Stock in
accordance with Paragraph 6.
"Directors" means the directors of the Company.
"Dividend Stock" means the shares of Series F
Preferred Stock paid to holders of Series F Preferred Stock in
lieu of a cash dividend.
"$" means Dollars.
"Dollars" means the freely transferable currency of
the USA.
"Forced Conversion Date" means that date on which the
shares of Common Stock have traded at or in excess of $0.50 per
share for 30 consecutive Trading Days.
"Parity Stock" means all other series of preference
stock ranking on a parity with the Series F Preferred Stock as to
the right to receive any dividends and any payment or
distribution of assets upon dissolution, liquidation or winding
up of the Company. The Amended Series A and Series B Preferred
Stock shall be deemed Parity Stock for all purposes herein.
"Securities Act" means the Securities Act of 1933, as
amended.
"Series B Preferred Stock" means the shares of the
Company's Series B, Cumulative Preferred Stock, par value $1.00
per share.
"Shareholders" means the holders of the Common Stock.
"Stock Option Plans" means the employee stock option
plans adopted by the Company and approved by Shareholders, in
effect from time to time, for employees and certain other
individuals rendering services to the Company.
"The London Stock Exchange" means The London Stock
Exchange Limited.
"Trading Day" shall mean a day on which the market
used for calculating the Closing Price is open for the
transaction of business or, if the shares of such security are
not so listed or admitted to trading, a Business Day.
"Transfer Agent" means the transfer agent for the
Series F Preferred Stock from time to time obtaining.
"UK" and "United Kingdom" mean the United Kingdom of
Great Britain and Northern Ireland.
"USA" and "US" means the United States of America.
"Warrants" means an aggregate of 45,491,863 issued and
outstanding and to be issued warrants to purchase Common Stock.
(b) References herein to Paragraphs and
subparagraphs are to paragraphs and subparagraphs of this
Designation of the Series F Preferred Stock ("Designation")
unless otherwise indicated. The words "hereof", "herein",
"hereunder" and comparable terms refer to the entirety of this
Designation and not to any particular Paragraph or other
subdivision hereof. Words in the singular include the plural and
in the plural include the singular. Words in the neuter gender
shall include the masculine and feminine and vice versa. The word
"or" is not exclusive. The word "including" shall be deemed to
mean "including, without limitation." The Paragraph headings
contained in this Designation are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Designation.
Paragraph 3. Dividends and Distributions.
(a) Each share of Series F Preferred Stock shall
entitle the record holder to receive, out of funds legally
available therefor, when, as and if declared by the Board of
Directors, dividends in cash at the annual rate of $12.00 per
share, which shall be payable in arrears in equal semi-annual
installments on June 30th and December 31st, or in the event any
such date is a Saturday, Sunday or public holiday in the Borough
of Manhattan, in the City of New York, New York, on the first
Business Day following such date (hereinafter a "Dividend Payment
Date") in each year, provided, however, that the dividend payable
on the first such Dividend Payment Date shall be equal to the
product obtained by multiplying $6.00 by a fraction, the
denominator of which shall be 182 and the numerator of which
shall be the number of days expired in the period between the
date of issuance of the share of Series F Preferred Stock (the
"Issuance Date") and such first Dividend Payment Date (inclusive
of both such dates).
(b) The Company may, at its option exercised by
written notice to the holders of the Series F Preferred Stock
given at least ten (10) Business Days prior to the Dividend
Payment Date, elect to pay any dividend due and payable
hereunder, in kind in additional shares of Series F Preferred
Stock in lieu of a dividend payment in cash. The amount of shares
of Dividend Stock issuable to each holder of Series F Preferred
Stock pursuant to this subparagraph 3(b) on each such Dividend
Payment Date shall equal .06 share of Series F Preferred Stock
for each share of Series F Preferred Stock registered in the name
of each such holder of the Series F Preferred Stock on the record
date for the payment of the dividend. Fractional shares of Series
F Preferred Stock arising in respect of the payment of any
dividend in shares of Dividend Stock shall not be issued to the
holders of Series F Preferred Stock.
(c) Dividends shall be cumulative, whether or not
earned and whether or not surplus shall be available therefor and
shall commence to accrue and accumulate from day to day from the
Issuance Date. Such accumulation shall include, if not paid, the
dividend payable on each Dividend Payment. Accrued but unpaid
dividends shall not bear interest. Such dividends shall be
declared and set apart or paid before any dividends (other than
dividends payable in Common Stock or any other series or class of
the Company's stock hereafter issued which ranks junior as to
dividends and as to distributions upon the dissolution,
liquidation or winding up of the Company to the Series F
Preferred Stock, such junior securities being hereinafter
referred to as "Junior Securities") shall be paid on the Common
Stock or such other series or class of Junior Securities. No cash
dividend shall be paid upon or set apart for shares of any other
class of stock of the Company (other than shares of preference
stock ranking pari passu with the Series F Preferred Stock in
respect of the payment of dividends) until all dividend arrears
on the Series F Preferred Stock shall be fully paid. The shares
of Series F Preferred Stock shall rank pari passu with the shares
of the Amended Series A Preferred Stock and Series B Preferred
Stock with respect to the payment of dividends.
(d) Dividends paid on the shares of Series F
Preferred stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
allocated pro-rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of Series F
Preferred Stock entitled to receive payment of a dividend
declared thereon, which record date shall be no more than sixty
days prior to the date fixed for payment thereof.
(e) In the event the Company fails to declare and
pay any dividend on a Dividend Payment Date (the "Defaulted
Date"), the dividend rate on the outstanding shares of Series F
Preferred Stock in effect on the Defaulted Date shall be
increased effective such Date so that the aggregate dividend
payable on the next succeeding Dividend Payment Date shall equal
the dividend that would have been paid on all then outstanding
shares of Series F Preferred Stock had the Company declared and
paid the dividend on the Defaulted Date in Dividend Stock. Upon
payment of all such dividend arrearages in cash or with shares of
Dividend Stock (or some combination of both), the dividend rate
shall revert to the dividend rate in effect on the initial
Defaulted Date. The Company shall notify all holders of Series
F Preferred Stock in writing at least fifteen (15) days prior to
the payment by the Company of any dividend arrearages in cash, in
which case such holders may elect to receive such dividend
arrearage payment in shares of Dividend Stock (computed based
upon the annual cash dividend rate then applicable divided by
100) in lieu of such cash payment by notice in writing delivered
to the Company within five (5) days after receipt of the
Company's dividend payment notice, provided that such notice is
received by the Company from the holders of at least a majority
of the outstanding shares of Series F Preferred Stock.
Paragraph 4. Dissolution. Liquidation or Winding Up.
In the event of any dissolution, liquidation or
winding up of the affairs of the Company, after payment or
provision for payment of the debts and other liabilities of the
Company, the registered holders of Series F Preferred Stock shall
be entitled to share on a pro rata basis with the holders of
shares of Amended Series A Preferred Stock and Series B Preferred
Stock and all other series of the Company's preference stock
ranking on a parity with the Series F Preferred Stock in respect
of distributions upon dissolution, liquidation or winding up of
the Company and to receive, out of the net assets of the Company,
$100.00 per share, plus an amount equal to all the dividend
arrears on each such share up to the date fixed for distribution
and no more, before distribution shall be made to the holders of
the Common Stock or any Junior Securities. Neither the merger or
consolidation of the Company, nor the sale, lease or conveyance
of all or a part of its assets, shall be deemed to be a
dissolution, liquidation or winding up of the affairs of the
Company within the meaning of this Paragraph 4.
Paragraph 5. Redemption.
(a) The Series F Preferred Stock shall be
redeemable at the election of the Company, in whole or in part at
any time and from time to time, at a redemption price
("Redemption Price") of $100.00 per share, in each case plus all
accrued and unpaid dividends to and including the redemption
date. The Company shall notify each holder of record of shares
of Series F Preferred Stock in writing (the "Redemption Notice")
mailed by first class mail, postage prepaid, at least twenty (20)
days and not more than sixty (60) days prior to the date fixed by
the Company for redemption, mailed to his address as the same
shall appear on the books of the Company. The Redemption Notice
shall state the redemption date, the Redemption Price and the
place and manner of payment thereof. If less than all of the
outstanding shares of Series F Preferred Stock are to be
redeemed, the Company shall select those shares to be redeemed
pro rata or by lot or in such other manner as the Board of
Directors may determine.
(b) The Company may deposit the aggregate
Redemption Price in trust with a bank or trust company (in good
standing, organized under the laws of the United States of
America or of the State of New York, doing business in the
Borough of Manhattan, in the City of New York, New York, and
having capital surplus and undivided profits aggregating at least
$25,000,000) as "Redemption Agent", for payment to the holders of
the shares so to be redeemed, upon surrender (and endorsement, if
required by the Board of Directors) of the certificates for such
shares. At the close of business on a redemption date (unless the
Company shall fail to make payment or deposit of the Redemption
Price as above set forth), dividends shall cease to accrue on the
shares of Series F Preferred Stock called for redemption (except
on any such shares of Series F Preferred Stock in respect of
which, upon due presentation of the certificate(s) relating
thereto, payment of the money due at such redemption shall be
refused in which case the dividend shall be deemed to have
continued and shall continue to accrue from the relevant date of
redemption to the date of payment); each holder of the shares of
Series F Preferred Stock so to be redeemed shall cease to be a
shareholder with respect to such shares and shall have no
interest in, or claim against, the Company and shall have no
voting or other rights with respect to such shares, except the
right to receive the moneys payable upon such redemption from
such bank or trust company, or from the Company, without interest
thereon, upon surrender (and endorsement if required by the Board
of Directors) of the certificates; and the shares represented
thereby shall no longer be deemed to be outstanding. In the case
of a call for redemption by the Company pursuant to subparagraph
5(a) above, the right of conversion shall cease and terminate as
to the shares designated for redemption on the close of business
on the third Business Day preceding the redemption date unless
default shall be made in the payment of the Redemption Price. In
the event the holder of any shares of Series F Preferred Stock
shall not, within six years after such deposit, claim the amount
deposited as above stated for the redemption thereof, the
depositary shall, upon demand, pay over to the Company such
unclaimed amount so deposited, and the depositary shall thereupon
be relieved of all responsibility therefor to such holder.
(c) So long as any shares of Series F Preferred
Stock are outstanding, the Company shall not redeem, purchase or
otherwise acquire, or permit any subsidiary to purchase or
otherwise acquire, any shares of Common Stock or any Junior
Securities if at the time of making such redemption, purchase or
acquisition the Company shall be in default with respect to any
dividend payable on, or any obligation to purchase shares of,
Series F Preferred Stock; provided, however, that,
notwithstanding the foregoing the Company may at any time redeem,
purchase or otherwise acquire shares of Common Stock or any
Junior Securities in exchange for, or out of the net cash
proceeds from the sale of, Common Stock or other shares of Junior
Securities. If in any case the amounts payable with respect to
the Company's obligation to retire shares of Preferred Stock are
not paid in full in the case of all series with respect to which
such obligations exist, the number of shares of the various
series to be retired shall be in proportion to the respective
amounts which would be payable on account of such obligations if
all amounts payable were discharged in full. Any dividend arrears
on the Series F Preferred Stock tendered to the Company shall be
payable in full to the respective last holders of record of the
shares of Series F Preferred Stock so tendered to the Company pro
rata with payment of corresponding dividend arrears on the Series
F Preferred Stock remaining outstanding.
Paragraph 6. Conversion.
(a) Subject as hereinafter provided. at any time
after the Conversion Commencement Date at the option of the
record holder of the Series F Preferred Stock, the Series F
Preferred Stock shall be convertible, in whole or in part, at the
office of the Transfer Agent into fully paid and nonassessable
shares of Common Stock at a rate (the "Conversion Rate") per
share of Series F Preferred Stock equal to that number of shares
of Common Stock as shall equal the quotient of $100 divided by
$.25 (the "Conversion Price") (subject in any case to adjustment
as hereinafter provided in Paragraph 7), provided that if a
Conversion Notice (as hereinafter defined in subparagraph 6(c)
below) is given in respect of only a part of a holding of Series
F Preferred Stock so that there would remain following conversion
three or fewer such shares in that holding, all the Series F
Preferred Stock in the holding shall be converted notwithstanding
the figure inserted in the Conversion Notice.
(b) For the purposes of the provisions hereof, a
"Conversion Date" shall be the date falling 90 days after the
date of the Conversion Notice (or such sooner date as the Company
may notify the converting holder of Series F Preferred Stock in
writing) and provided always that if any Conversion Date would
otherwise fall on a day which is not a Business Day such
Conversion Date shall be the first Business Day following such
date.
(c) The right to convert shall be exercisable at any
time and from time to time after the Conversion Commencement Date
by completing the notice of conversion endorsed on the share
certificate relating to the Series F Preferred Stock to be
converted or a notice in such other form as may from time to time
be prescribed by the Board of Directors in lieu thereof (any such
notice being herein called a "Conversion Notice") and delivering
the same to the Transfer Agent together with such other evidence
(if any) as the Board of Directors may reasonably require to
prove title of the person exercising such right to convert. The
Conversion Notice shall be deemed dated as of the date of receipt
thereof by the Transfer Agent. A Conversion Notice once given may
not be withdrawn without the consent in writing of the Company.
(d) On conversion the dividend on the Series F
Preferred Stock so converted shall cease to accrue with effect
from the close of business on the date preceding the Conversion
Date. The Common Stock issued on such conversion shall entitle
the holder to all dividends and other distributions payable on
the Common Stock by reference to a record date after the
applicable Conversion Date.
(e) Any dividend arrears on the Series F Preferred
Stock surrendered for conversion shall be payable in full to the
respective last holders of record of the shares of Series F
Preferred Stock surrendered for conversion (notwithstanding any
subsequent transfer of the shares of Common Stock into which such
shares have been converted), pro rata with payment of
corresponding dividend arrears on the Series F Preferred Stock
remaining outstanding.
(f) Conversion shall be deemed to have been
effected on the Conversion Date, and the holder shall as of the
close of business on such date have the full rights of the Common
Stock resulting from such conversion.
(g) On the Conversion Date all shares of Series F
Preferred Stock in respect of which a Conversion Notice has been
delivered ("relevant shares") shall be converted into shares of
Common Stock at the Conversion Rate. Upon issuance of the Common
Stock, the relevant shares shall be retired and cancelled. Within
30 days after the Conversion Date, the Company shall, or shall
cause, the forwarding to each holder of the relevant shares, at
his own risk, free of charge, a definitive certificate for the
appropriate number of fully paid shares of Common Stock and a new
certificate for any unconverted Series F Preferred Stock
comprised in the certificate(s) surrendered by him.
(h) Fractions of Common Stock arising on
conversion shall not be issued to the holders of the relevant
shares otherwise entitled thereto but (if arrangements can be so
made) such fractions shall be aggregated and sold in the market
on behalf of such holders at the best price reasonably obtainable
and the net proceeds of sale shall be distributed pro rata among
such holders unless in respect of any holding of the relevant
shares the amount to be distributed would be less than $2.00 in
which case such amount shall not be distributed but shall be
retained for the benefit of the Company. For the purpose of
implementing the provisions of this subparagraph (h), the Board
of Directors may appoint a person to execute transfers on behalf
of persons otherwise entitled to any such fractions and generally
may make all arrangements which appear to the Board necessary or
appropriate for the settlement and disposal of fractional
entitlements.
(i) In case of the voluntary dissolution,
liquidation or winding up of the Company, all conversion rights
relating to the Series F Preferred Stock shall terminate 45 days
after the mailing of a notice of such action to all record
holders of Series F Preferred Stock; provided that such date of
termination of conversion rights shall be not more than sixty
(60) days nor less than twenty (20) days prior to the date on
which such dissolution is to become effective or such liquidation
or winding up is to commence. Any such notice shall call
attention to the date of such termination of the conversion
rights, the per share amount payable on the Common Stock, the per
share amount payable on the Series F Preferred Stock held by such
holder in connection with such action (in each case, if then
known, or a reasonable estimate if such amount is not known with
any reasonable degree of certainty), and the then current
Conversion Rate of the Series F Preferred Stock held by such
holder of record.
(j) At any time after the Forced Conversion Date,
or any time after at least seventy five percent (75%) of the
aggregate number of shares of Series F Preferred Stock originally
issued on the Issuance Date have been purchased or redeemed by
the Company or converted into Common Stock by the holders
thereof, the Company may, at its option, cause the conversion of
all the remaining issued and outstanding shares of the Series F
Preferred Stock at the Conversion Rate upon at least 45 days
written notice to all holders of record.
(k) The Company shall use its best efforts to
ensure that the shares of Conversion Stock are listed on all the
principal stock exchanges on which the Company's Common Stock is
listed for trading.
Paragraph 7. Adjustments of Conversion Rate.
The Conversion Rate for the Series F Preferred Stock
shall be subject to adjustment from time to time as follows:
(a) If the Company shall at any time or from time to
time pay a dividend or other distribution on its outstanding
shares of Common Stock in shares of Common Stock, subdivide its
outstanding shares of Common Stock into a larger number of shares
or combine its outstanding shares of Common Stock into a smaller
number of shares, the Conversion Rate in effect immediately prior
to the record date for such dividend or the effective date for
such subdivision or combination shall be adjusted so that each
share of Series F Preferred Stock shall thereafter be convertible
into the number of shares of Common Stock which the holder of a
share of Series F Preferred Stock would have been entitled to
receive after the happening of any of the events described above
had such share been converted immediately prior to the happening
of such event. An adjustment made pursuant to this subparagraph
(a) shall become effective immediately after the close of
business on such a record date in the case of a dividend and
shall become effective on the close of business on the day
immediately prior to the effective date in the case of a
subdivision or combination.
(b) If the Company shall issue rights or warrants
to all holders of Common Stock (expiring within 45 days after the
record date for determining stockholders entitled to receive
them) for the purpose of entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than
the average of the Closing Prices per share for the 30
consecutive Trading Days ending on the record date for the
determination of the stockholders entitled to receive such rights
or warrants, then at the discretion of the Board of Directors,
either (i) the Company shall make a like issue at the same time
to each holder of the Series F Preferred Stock as if his
conversion rights had been exercisable in full on the record date
for such issue on the basis of the Conversion Rate; or (ii) the
number of shares of Common Stock into which each share of the
Series F Preferred Stock shall thereafter be convertible shall be
adjusted by multiplying the number of shares of Common Stock into
which each share of Series F Preferred Stock was convertible on
the day immediately preceding such record date by a fraction the
numerator of which shall be the sum of the number of shares of
Common Stock outstanding on such record date and the number of
additional shares of Common Stock so offered for subscription or
purchase, and the denominator of which shall be the sum of the
number of shares of Common Stock outstanding on such record date
and the number of shares of Common Stock which the aggregate
offering price of the total number of shares so offered would
purchase at such average of the Closing Prices for such 30
Trading Days. Such adjustment shall become effective immediately
after the close of business on such record date. Notwithstanding
anything in the foregoing to the contrary, no such issue or
adjustment shall be made in respect of the shares of Common Stock
issuable upon exercise of the Warrants, any stock options granted
pursuant to the Company's Stock Option Plans approved by
Shareholders (provided that option exercise price shall not be
less than the market value of the Common Stock on the date of
grant of the options), the Amended Series A Preferred Stock and
the shares of Amended Series A Preferred Stock issuable as
dividends on, or the shares of Common Stock issuable upon
conversion of the Amended Series A Preferred Stock, and the
Series B Preferred Stock and the shares of Common Stock issuable
as dividends on or upon redemption of the Series B Preferred
Stock.
(c) If any offer or invitation by way of rights or
otherwise (not being an offer or invitation to which the
provisions of subparagraph 7(b) apply) is made to all the
Shareholders by the Company, the Company shall make or, so far as
it is able, cause that there be made a like offer at the same
time to each holder of Series F Preferred Stock as if his
conversion rights had been exercisable on and had been exercised
in full on the record date for such offer or invitation on the
basis of the Conversion Rate.
(d) If the Company shall distribute to all holders
of Common Stock any assets (other than any ordinary dividend
payable solely in cash in an amount not excessive in comparison
to its current earnings), any rights to subscribe for securities
(other than those referred to in sub-paragraph 7(b) above) or any
evidence of indebtedness or other securities (other than Common
Stock or Junior Securities), then in each such case the number of
shares of Common Stock into which each share of Series F
Preferred Stock shall thereafter be convertible shall be adjusted
by multiplying the number of shares of Common Stock into which
each share of Series F Preferred Stock was convertible on the
date immediately preceding the record date for the determination
of the stockholders entitled to receive such distribution by a
fraction the numerator of which shall be the average of the
Closing Prices per share of Common Stock for the thirty (30)
consecutive Trading Days ending on such record date and the
denominator of which shall be such average of the Closing Prices
per share less the then fair market value (as determined in a
resolution adopted by the Board and reviewed and approved by the
Company's auditors for the time being) of the portion of the
assets or evidences of indebtedness or securities so distributed
or of such subscription rights applicable to one share of Common
Stock. Such adjustment shall become effective immediately after
the close of business on such record date.
(e) Whenever the Conversion Rate is adjusted as
herein provided, the Company shall forthwith file with the
Transfer Agent a certificate stating the adjusted Conversion Rate
determined as provided in this Paragraph 7. Such certificate
shall show in detail the facts requiring such adjustment. The
calculation of such adjustment shall have been reviewed and
approved by the Company's auditors for the time being. Whenever
the Conversion Rate is adjusted, the Company will forthwith cause
a notice stating the adjustment and the resulting Conversion Rate
to be mailed to the respective holders of record of Series F
Preferred Stock.
(f) In case of any capital reorganization or any
reclassification of the capital stock of the Company or in case
of the consolidation or merger of the Company with another
corporation or in case of any sale or conveyance of all or
substantially all of the property of the Company, each share of
Series F Preferred Stock shall thereafter be convertible into the
number of shares of stock or other securities or property
receivable upon such capital reorganization, reclassification of
capital stock, consolidation, merger, sale or conveyance, as the
case may be, by a holder of the number of shares of Common Stock
into which such share of Series F Preferred Stock was convertible
immediately prior to such capital reorganization,
reclassification of capital stock, consolidation, merger, sale or
conveyance; and, in any case, appropriate adjustment (as
determined by the Board of Directors and reviewed and approved by
the Company's auditors for the time being) shall be made in the
application of the provisions herein set forth with respect to
rights and interests thereafter of the holders of the Series F
Preferred Stock, to the end that provisions set forth herein
(including the specified changes in and other adjustment of the
Conversion Rate) shall thereafter be applicable, as near as
reasonably may be, in relation to any shares of stock or other
securities or other property thereafter deliverable upon the
conversion of the Series F Preferred Stock.
(g) No adjustment shall be made hereunder unless
by reason of the happening of any one or more of the events
herein specified, the Conversion Rate then in effect would be
changed by 1 % or more, but any adjustment of less than 1% that
would otherwise be required to be made shall be carried forward
and shall be made at the time of and together with any subsequent
adjustment which, together with any adjustment or adjustments so
carried forward, amounts to 1 % or more, provided that such
adjustment shall be made in any case (regardless of whether or
not the amount thereof or the cumulative amount thereof amounts
to 1% or more) upon the happening of one or more of the events
specified in subparagraph (f) of this Paragraph 7.
Paragraph 8. Voting Rights.
Except as may be otherwise provided herein or in this
Restated Certificate of Incorporation of the Company, as amended
from time to time with the consent of the holders of Series F
Preferred Stock, provided such consent is required to be obtained
hereunder or as required by applicable law:
(a) the Series F Preferred Stock shares shall not
entitle the holders thereof to receive notice of or attend or
vote at any meeting of stockholders except in the following
circumstances:
(i) The Series F Preferred Stock shall vote as
a separate class on any resolution proposed for
adoption by the stockholders of the Company which seeks
to amend, alter or repeal, the provisions of the
Company's Restated Certificate of Incorporation or of
the resolutions contained in the Certificate of
Designation of the Series F Preferred Stock designating
the Series F Preferred Stock and the preferences and
privileges, relative, participating, optional or other
special rights and qualifications, limitations and
restrictions thereof, so as to adversely affect any
right, preference, privilege or voting power of the
Series F Preferred Stock or the holders thereof;
provided, however, that any increase in the amount of
the issued Series F Preferred Stock or the creation and
issue of any other series of preference stock (whether
or not denominated in Dollars, or any increase in the
amount of authorized shares of Series F Preferred
Stock, in each case either being Parity Stock or Junior
Securities and with or without similar voting rights)
will not be deemed to affect adversely such rights,
preferences, privileges or voting powers of the Series
F Preferred Stock;
(ii) Except in the event that arrangements are
or have been offered to the holders of the Series F
Preferred Stock which ensure that the rights of such
holders would not be prejudiced, the Company will
ensure that no plan of compromise or arrangement
affecting the Common Stock shall become effective
unless the holders of the Series F Preferred Stock
shall be parties to the plan and unless the plan shall
be approved by the holders of at least a majority of
the then issued and outstanding shares of Series F
Preferred Stock, voting as a class together with all
other Parity Stock;
(iii) In the case of a vote on a resolution
regarding (A) the capital reorganization, dissolution
or liquidation of the Company; or (B) any matter for
which the consent of the holders of Series F Preferred
Stock is sought in accordance with the provisions of
subparagraphs 8(a)(i) and 8(a)(ii) and Paragraphs 9 or
10; every record holder of Series F Stock who is
present at that meeting in person or by proxy shall be
entitled to cast one (1) vote for each share of Series
F Preferred Stock registered in his name (voting (1)
as a separate class with respect to the matters set
forth in subparagraph 8(a)(i) and (2) together with
all other Parity Stock with respect to the matters set
forth in subparagraphs 8(a)(ii) and 8(a)(iii)(1) and
Paragraphs 9 and 10) and the decision of at least two
thirds of the outstanding shares of Series F Preferred
Stock (as to any matters set forth in clause (A)
above) and a majority of the outstanding shares of
Series F Preferred Stock and any Parity Stock, voting
separately as a class (as to any matters set forth in
clause (B) above) shall be determinative of the matter
so long as a quorum (as defined in subparagraph 8(b)
below) is present; or
(iv) if at the date of the notice convening a
meeting of Shareholders the dividend on the Series F
Preferred Stock has not been paid in an aggregate
amount equal to at least two (2) consecutive semi-
annual dividends on such shares, the number of
Directors of the Company will be increased by two and a
majority of votes cast by the holders of the Series F
Preferred Stock together with the holders of Parity
Stock on which like voting rights have been conferred
and are exercisable, present in person or by proxy at
such meeting, will be entitled to elect such two
additional Directors to the Board of Directors, with
each holder being entitled to cast one vote for each
share of Series F Preferred Stock registered in his
name. The right to elect such Directors and the term of
office of all such Directors so elected shall terminate
when all such accrued and unpaid dividends are paid in
full or set apart for payment subject to such right
being reinstated in the case of fixture unpaid
dividends as hereinabove provided. In case any vacancy
shall occur among the Directors elected by the holders
of Series F Preferred Stock and Parity Stock as herein
provided, such vacancy may be filled for the unexpired
portion of the term by vote of the remaining Director
elected by such stockholders, or such Director's
successor in office or by the vote of such stockholders
given at a special meeting of such stockholders called
for such purpose.
(b) At each meeting of stockholders at which the
holders of the Series F Preferred Stock shall have the right to
vote as a separate class or together with any other class of
stock the presence in person or by proxy of the holders of record
of a majority of the total number of shares of stock entitled to
vote as a single class then outstanding shall be necessary and
sufficient to constitute a quorum of such class for the
transaction of business by such stockholders as a class. At any
such meeting or adjournment thereof,
(i) the absence of a quorum of the holders of the
Series F Preferred Stock shall not prevent the election
of Directors or the transaction of business other than
the transaction of business with respect to which the
holders of the Series F Preferred Stock are entitled to
vote as a separate class and the absence of a quorum of
the holders of any other class of stock for the
election of Directors or the conduct of such other
business shall not prevent the conduct of business on
which the Series F Preferred Stock is entitled to vote
as a separate class, and
(ii) in the absence of any such quorum, the
holders present in person or by proxy of the class or
classes which lack a quorum shall have the power to
adjourn (for a period of up to 30 days) the meeting for
the election of Directors which they are entitled to
elect from time to time, or for the conduct of such
business, without notice other than announcement at the
meeting, until a quorum shall be present.
(c) Any action required or permitted to be taken by
the holders of Series F Preferred Stock pursuant to this
Paragraph 8 or Paragraphs 9 or 10, voting either separately as a
class or together with all Parity Stock at any annual or special
meeting of stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by
the holders of such stock having not less than the minimum number
of votes that would be necessary to authorize such action to be
taken at a meeting at which all such shares entitled to vote
thereon were present and voted.
Paragraph 9. Further Issues; Par Value.
So long as any shares of Series F Preferred Stock
remain outstanding, the Company shall not without the affirmative
vote or consent of the holders of the Series F Preferred Stock
and any Parity Stock, in each case outstanding at the time, given
in person or by proxy, either in writing or at a meeting, (i)
authorize, create or issue, or increase the authorized or issued
amount, of any class or series of stock ranking senior to the
Series F Preferred Stock with respect to payment of dividends or
distribution of assets on dissolution, liquidation or winding up
or which may be convertible into any class of shares ranking as
regards participation in dividends or the distribution of assets
on dissolution, liquidation or winding up senior to the Series F
Preferred Stock; or (ii) increase or decrease the par value of
the Common Stock. The holders of Series F Preferred Stock shall
not be entitled to any preemptive rights with respect to any
further issuances of securities by the Company.
Paragraph 10. Other Matters.
So long as any Series F Preferred Stock remains issued
and outstanding then:
(a) except as authorized by the adoption of an
appropriate resolution by the affirmative vote or consent of the
holders of a majority of the outstanding shares of the Series F
Preferred Stock and any Parity Stock, voting or consenting
separately as a class, the Company shall not:
(i) sell, lease or convey all or substantially
all of the assets of the Company; or
(ii) approve any merger, consolidation or
compulsory share exchange to which the Company is a
party, unless (1) the terms of such merger,
consolidation or compulsory share exchange do not
provide for a change in the terms of the Series F
Preferred Stock and (2) the Series F Preferred Stock is
on a parity with or prior to (in respect of dividends
and upon liquidation, dissolution or winding up) any
other class or series of capital stock authorized by
the surviving corporation, other than any class or
series of stock of the Company ranking senior to the
Series F Preferred Stock either as to dividends or upon
liquidation, dissolution or winding up of the Company
and previously authorized with the consent of the
holders of the Series F Preferred Stock (or other than
any capital stock into which such prior stock is
converted as a result of such merger, consolidation or
compulsory share exchange).
(b) the Company shall concurrently send a copy of
every communication or other information, including annual
reports and proxy materials, sent to its Shareholders to every
holder of Series F Preferred Stock.
Paragraph 11. Reacquired Shares.
Any shares of the Series F Preferred Stock redeemed or
purchased or otherwise acquired by the Company in any manner
whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Series F
Preferred Stock, and may be reissued as Series F Preferred Stock
or part of a new series of preference stock to be created by
resolution or resolutions of the Board of Directors, subject to
the conditions or restrictions on issuance set forth herein.
Paragraph 12. Miscellaneous.
(a) All notices referred to herein shall be in writing,
and all notices hereunder shall be deemed to have been given upon
the earlier of receipt thereof or three (3) Business Days after
the mailing thereof if sent by registered or certified mail
(unless first-class mail shall be specifically permitted for such
notice under the terms hereof) with postage prepaid, addressed:
(i) if to the Company, to its office as specified in its most
recent Annual Report on Form 10-K (or any successor report or
form) or to the Transfer Agent or other agent of the Company
designated as permitted hereby or (ii) if to any holder of the
Series F Preferred Stock or Common Stock, as the case may be, to
such holder at the address of such holder as listed in the stock
record books of the Company (which may include the records of any
Transfer Agent for the Series F Preferred Stock or Common Stock,
as the case may be) or (iii) to such other address as the Company
or any such holder, as the case may be, shall have designated by
notice similarly given.
(b) The Company shall pay any and all stock
transfer and documentary stamp taxes that may be payable in
respect of any original issuance or delivery of shares of Series
F Preferred Stock or shares of Common Stock or other securities
issued on account of Series F Preferred Stock pursuant hereto or
certificates representing such shares or securities. The Company
shall not, however, be required to pay any such tax which may be
payable in respect of any transfer involved in the issuance or
delivery of shares of Series F Preferred Stock or Common Stock or
other securities in a name other than that in which the shares of
Series F Preferred Stock with respect to which such shares or
other securities are issued or delivered were registered, or in
respect of any payment to any person with respect to any such
shares or securities other than a payment to the registered
holder thereof and shall not be required to make any such
issuance, delivery or payment unless and until the person
otherwise entitled to such issuance, delivery or payment has made
arrangements satisfactory to the Transfer Agent for the payment
to the Company of the amount of any such tax or has established,
to the satisfaction of the Company, that such tax has been paid
or is not payable.
(d) In the event that a holder of shares of Series
F Preferred Stock shall not by written notice designate to whom
payment upon redemption of shares of Series F Preferred Stock
should be made or the address to which such payment should be
sent, the Company shall be entitled to make such payment, in the
name of the holder of such Series F Preferred Stock as shown on
the records of the Company, and to send such payment, to the
address of such holder shown on the records of the Company.
(e) Unless otherwise provided in this Restated
Certificate of Incorporation of the Company, all payments in the
form of dividends, distributions on voluntary or involuntary
dissolution, liquidation or winding-up or otherwise made upon the
shares of Series F Preferred Stock and any other stock ranking on
a parity with the Series F Preferred Stock with respect to such
dividend or distribution shall be made pro rata, so that amounts
paid per share on the Series F Preferred Stock and such other
stock shall in all cases bear to each other the same ratio that
the required dividends, distributions or payments, as the case
may be, then payable per share on the shares of the Series F
Preferred Stock and such other stock bear to each other.
(f) The Company may appoint, and from time to time
discharge and change, the Transfer Agent for the Series F
Preferred Stock. Upon any such appointment or discharge of a
Transfer Agent, the Company shall send notice thereof by first-
class mail, postage prepaid, to each holder of record of Series F
Preferred Stock. The initial Transfer Agent for the Series F
Preferred Stock shall be the Company.
(g) The Company covenants that it will at all
times on and after the Conversion Commencement Date reserve and
keep available out of its authorized Common Stock and/or shares
of its Common Stock then owned or held by or for the account of
the Company, solely for the purpose of delivery upon conversion
of the Series F Preferred Stock as herein provided, such number
of shares of Common Stock as shall then be deliverable upon
conversion of all shares of Series F Preferred Stock from time to
time outstanding.
FIFTH: A. Unless and until otherwise provided in the
Bylaws, all of the corporate powers of this Corporation shall be
vested in, and managed by, a board of not less than 3 nor more
than 15 directors, except that when all of the outstanding shares
are held of record by fewer than 3 stockholders, then there need
be only as many directors as there are stockholders, but this
shall not prevent a greater number of directors as
aforementioned.
B. The board of directors shall be and is divided into
three classes: Class I, Class II and Class III, which shall be
as nearly equal in number as possible. Each director shall serve
for a term ending on the date of the third annual meeting of
stockholders following the annual meeting at which the director
was elected. Notwithstanding the foregoing provisions in this
Article FIFTH, each director shall serve until his successor is
duly elected and qualified or until his death, resignation or
removal.
C. The number of directors may be increased or decreased
within the limits above provided by a majority vote of the
directors. In the event of any increase or decrease in the
authorized number of directors, the newly created or eliminated
directorships resulting from such increase or decrease shall be
apportioned by the board of directors among the three classes of
directors so as to maintain such classes as nearly equal as
possible. No decrease in the number of directors constituting
the board of directors shall shorten the term of any incumbent
director.
D. Newly created directorships resulting from any
increase in the number of directors and any vacancies on the
board of directors resulting from death, resignation,
disqualification, removal or other cause shall be filled by the
affirmative vote of a majority of the remaining directors then in
office (and not by stockholders), even though less than a quorum
of the board of directors. Any director elected in accordance
with the preceding sentence shall hold office for the remainder
of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such
director's successor shall have been elected and qualified.
E. No director may be removed from office without cause,
except upon the affirmative vote of the holders of not less than
sixty-seven percent (67%) of the outstanding shares of stock of
the Corporation then entitled to vote generally in the election
of directors, voting together as a single class. Any amendment,
change or repeal of this Article FIFTH, or any other amendment to
this Restated Certificate of Incorporation that will have the
effect of permitting circumvention of or modifying this Article
FIFTH, shall require the favorable vote, at a stockholders'
meeting, of the holders of at least sixty-seven percent (67%) of
the outstanding shares of stock of the Corporation then entitled
to vote generally in the election of directors, voting together
as a single class.
SIXTH: A. The board of directors shall have authority
to adopt, amend or repeal Bylaws, including the right to adopt,
amend or repeal Bylaws fixing their qualifications, or fixing or
increasing their compensation, subject to the ratification of the
action taken by the board so to adopt, amend or repeal any such
Bylaws by the stockholders at the next regularly scheduled annual
meeting of stockholders or at a special meeting of stockholders.
Pending such ratification by the stockholders, such action taken
by the board of directors shall be presumed to have been
authorized by the stockholders.
B. The board shall further have authority to exercise
all such powers and to do all such other lawful acts and things
which the Corporation or its stockholders might do, unless
prohibited from doing so by applicable laws, by this Restated
Certificate of Incorporation or by the Bylaws of the Corporation.
SEVENTH: A. For the purposes of this Article SEVENTH:
(1) A "person" shall mean any individual, firm,
corporation, partnership, trust or other entity.
(2) "Net Assets" shall mean the difference between
the aggregate amount of all assets and the aggregate amount
of all liabilities of the Corporation as they appear on the
Corporation's most recent audited financial statements.
(3) "Voting Stock" means then outstanding shares of
stock of all classes and series of the Corporation entitled
to vote in the election of directors.
(4) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations under the Securities
Exchange Act of 1934, as in effect on September 1, 1987.
(5) "Subsidiary" means any corporation of which
more than a majority of any class of equity security is
owned, directly or indirectly, by the Corporation; provided,
however, that for purposes of the definition of Interested
Stockholder set forth in Paragraph A(7) of this Article
EIGHTH, the term "Subsidiary" shall mean only a corporation
of which a majority of each class of equity security is
owned by the Corporation, by a Subsidiary, or by the
Corporation and one or more Subsidiaries.
(6) A person shall be a "Beneficial Owner" of any
Voting Stock:
(A) which such person or any of its Affiliates
or Associates beneficially owns, directly or indirectly;
or
(B) which such person or any of its Affiliates
or Associates has (i) the right to acquire (whether such
right is exercisable immediately or only after the
passage of time), pursuant to any agreement, arrangement
or understanding or upon the exercise Of conversion
rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote or to direct the
vote pursuant to any agreement, arrangement or
understanding; or
(C) which is beneficially owned, directly or
indirectly, by any other person with which such person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of
Voting Stock.
(7) "Interested Stockholder" shall mean any person
(other than the Corporation or any Subsidiary) who or which:
(A) is the Beneficial Owner, directly or
indirectly, of more than 20% of the combined voting power
of the then outstanding Voting Stock; or
(B) is an Affiliate of the Corporation and at
any time within the two-year period immediately prior to
the date in question was the Beneficial Owner, directly
or indirectly, of 20% or. more of the combined voting
power of the then outstanding Voting Stock; or
(C) is an assignee of or has otherwise succeeded
to any shares of Voting Stock which were at any time
within the two-year period immediately prior to the date
in question beneficially owned by any Interested
Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or series of
transactions not involving a public offering within the
meaning of the Securities Act of 1933.
(8) "Disinterested Director" means any member of
the board of directors of the Corporation who is
unaffiliated with, and not a nominee of, the Interested
Stockholder and was a member of the board of directors prior
to the time that the Interested Stockholder became an
Interested Stockholder and any successor of a Disinterested
Director who is unaffiliated with, and not a nominee of, the
Interested Stockholder and who is recommended to succeed a
Disinterested Director by a majority of Disinterested
Directors then on the board of directors.
(9) "Fair Market Value" means:
(A) in the case of stock, the highest closing
sale price during the 30-day period immediately preceding
the date in question of a share of such stock on the
Composite Tape for New York Stock Exchange-Listed Stocks,
or, if such stock is not quoted on such Composite Tape,
on the New York Stock Exchange, or, if such stock is not
listed on such Exchange, on the principal United States
securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or,
if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to a share of
such stock during the 30-day period preceding the date in
question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any system
then in use, or if no such quotations are available, the
fair market value on the date in question of a share of
such stock as determined by a majority of the
Disinterested Directors in good faith; and
(B) in the case of stock of any class of
securities not traded on any securities exchange or in
the over-the-counter-market or in the case of property
other than cash or stock, the fair market value of such
securities or property on the date in question as
determined by a majority of the Disinterested Directors
in good faith.
(10) "Business Combination" means any transaction
which is referred to in any one or more of Paragraphs B(1)
through (5) below.
(11) In the event of any Business Combination in
which the Corporation survives, the phrase "consideration to
be received as used in Paragraphs C(2)(A) and (B) shall
include the shares of Common Stock and/or the shares of any
other class of outstanding Voting Stock retained by the
holders of such shares.
(12) For the purposes of determining whether a
person is an Interested Stockholder pursuant to Paragraph
A(7), the number of shares of Voting Stock deemed to be
outstanding shall include shares deemed owned through
application of Paragraph A(6)(B)(i) but shall not include
any other shares of Voting Stock which may be issuable to
other persons pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
B. In addition to any affirmative vote required by law
or any other Article of this Restated Certificate of
Incorporation, and except as otherwise expressly provided in
Paragraph C of this Article SEVENTH:
(1) any merger or consolidation of the Corporation
or any Subsidiary with (i) any Interested Stockholder or
(ii) any other corporation (whether or not itself an
Interested Stockholder) which is, or after such merger or
consolidation would be, an Affiliate or Associate of an
Interested Stockholder; or
(2) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a
series of transactions) to or with any Interested
Stockholder or any Affiliate or Associate of any Interested
Stockholder of any assets of the Corporation, or of any
Subsidiary, having an aggregate Fair Market Value equal to
ten percent (10%) or more of the Net Assets of the
Corporation; or
(3) the issuance or transfer by the Corporation or
any Subsidiary (in one transaction or a series of
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder in exchange for
cash, securities or other property (or a combination
thereof) having an aggregate Fair Market Value equal to ten
percent (10%) or more of the Net Assets of the Corporation,
other than the issuance of securities by the Corporation or
any Subsidiary upon the conversion of convertible securities
of the Corporation or any Subsidiary which were not acquired
from the Corporation or any Subsidiary by any Interested
Stockholder or any Affiliate or Associate of any Interested
Stockholder; or
(4) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or
on behalf of an Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder; or
(5) any reclassification of securities (including
any reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding stock of any class of equity or
convertible securities of the Corporation or any Subsidiary
directly or indirectly owned by any Interested Stockholder
or any Affiliate or Associate of any Interested Stockholder;
shall require the affirmative vote of the holders of at least (i)
67% of the then outstanding shares of Voting Stock, and (ii) a
majority of the then outstanding shares of Voting Stock held by
persons who are not Interested Stockholders or Affiliates or
Associates of Interested Stockholders; provided, however, that
the majority vote requirement of this clause (ii) shall not be
applicable if the Business Combination is approved by the
affirmative vote of the holders of not less than 80% of the then
outstanding shares of Voting Stock. The foregoing affirmative
vote requirements are hereinafter referred to as the "Special
Vote Requirement." The Special Vote Requirement shall be
applicable notwithstanding the fact that no vote may be required,
or that a lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise.
C. The provisions of Paragraph B shall not be applicable
to any particular Business Combination, and such Business
Combination shall require only such affirmative vote as is
required by law and any other Article of this Restated
Certificate of Incorporation, if all of the conditions specified
in either of the following Paragraphs (1) and (2) are met:
(1) Approval by Disinterested Directors. The
Business Combination shall have been approved by a majority
of the Disinterested Directors.
(2) Price and Procedural Requirements. All of the
following conditions shall have been met:
(A) The aggregate amount of the cash and the
Fair Market Value, as of the date of the consummation of
the Business Combination, of consideration other than
cash to be received per share by holders of Common Stock
or any series of Preferred Stock of the Corporation in
such Business Combination shall be at-least equal to the
higher of (i) the highest price paid for any share
(including brokerage commissions, transfer taxes and
soliciting dealers' fees) of such class or series of
stock by any person who is an Interested Stockholder, or
by any of his Affiliates or Associates, within the two-
year period immediately prior to the time of the first
public announcement of the proposed Business Combination
(the "Announcement Date") or in the transaction in which
such person became an Interested Stockholder, whichever
price is the higher; or (ii) the Fair Market Value per
share of such class or series of stock on the
Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (the
"Determination Date"), whichever is higher; provided
however, that if the Interested Stockholder has not
previously paid for shares of series of Preferred Stock
or if the highest preferential amount per share of a
series of Preferred Stock to which the holders thereof
would be entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
affairs of the Corporation (regardless of whether the
Business Combination to be consummated constitutes such
an event) is greater than such aggregate amount, holders
of such series of Preferred Stock shall receive an amount
for each such share at least equal to the highest
preferential amount applicable to such series of
Preferred Stock. The provisions of this Paragraph
C(2)(A) shall be required to be met with respect to every
class or series of Preferred Stock, whether or not the
Interested Stockholder has previously become the
Beneficial Owner of any shares of a particular class or
series of Preferred Stock prior to proposing the Business
Combination. The price paid for any share of any such
class or series of stock shall be the amount of cash plus
the Fair Market Value of any consideration to be received
therefor, determined at the time of payment thereof.
(B) The consideration to be received by holders of
a particular class of outstanding Voting Stock shall be
in cash or in the same form as the Interested Stockholder
has previously paid for shares of such class of Voting
Stock. If the Interested Stockholder has paid for shares
of any class of Voting Stock with varying forms of
consideration, the form of consideration for such class
of Voting Stock shall be either cash or the form of
consideration used to acquire the largest number of
shares of such class of Voting Stock previously acquired
by it. The prices determined in accordance with
Paragraph C(2)(A) above shall be subject to an
appropriate adjustment in the event of any stock
dividend, stock split, subdivision, combination of shares
or similar event.
(C) After such Interested Stockholder has become an
Interested Stockholder and through to the date of
consummation of such Business Combination: (i) there
shall have been (1) no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary
to reflect any subdivision of the Common Stock), except
as approved by a majority of the Disinterested Directors,
and (2) no failure to increase such annual rate of
dividends as necessary to reflect any reclassification
(including any reverse stock split), recapitalization,
reorganization or any similar transaction which has the
effect of reducing the number of outstanding shares of
the Common Stock, unless the failure so to increase such
annual rate is approved by a majority of the
Disinterested Directors; and (ii) such Interested
Stockholder shall not have become the beneficial owner of
any additional shares of Voting Stock except as part of
the transaction which results in such Interested
Stockholder becoming an Interested Stockholder.
(D) After such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall
not have received the benefit, directly or indirectly
(except proportionately as a stockholder), of any loans,
advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages
provided by the Corporation, whether in anticipation of
or in connection with such Business Combination or
otherwise.
(E) A proxy or information statement describing
the proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934 and
the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations)
shall be mailed to all stockholders of the Corporation at
least 30 days prior to the consummation of such Business
Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such Act
or subsequent provisions).
D. The majority of the Disinterested Directors of
the Corporation shall have the power and duty to determine
for the purpose of this Article SEVENTH, on the basis of
information known to them after reasonable inquiry, all
facts necessary to determine the applicability of the
various provisions of this Article SEVENTH, including, (i)
whether a person is an Interested Stockholder, (ii) the
number of shares of Voting Stock of which any person is the
Beneficial Owner, (iii) whether a person is an Affiliate or
Associate of another, (iv) whether the requirements of
Paragraph B(2) have been met with respect to any Business
Combination, and (v) whether the assets which are the
subject of any Business Combination have, or the
consideration to be received for the issuance or transfer of
securities by the Corporation or any Subsidiary in any
Business Combination has, an aggregate Fair Market Value
equal to ten percent (10%) or more of the Net Assets of the
Corporation; and the good faith determination of a majority
of the Disinterested Directors shall be conclusive and
binding for all purposes of this Article SEVENTH.
E. Nothing contained in this Article SEVENTH shall
be construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
F. Notwithstanding any other-provisions of this
Restated Certificate of Incorporation or the Bylaws of the
Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, this Certificate of
Incorporation or the Bylaws of the Corporation), any
proposal to amend or repeal, or adopt any provisions
inconsistent with, this Article SEVENTH of this Restated
Certificate of Incorporation shall be approved by the
affirmative vote of at least (1) 67% of the then outstanding
shares of Voting Stock and (2) a majority of the then
outstanding shares of Voting Stock held by persons who are
not Interested Stockholders or Affiliates or Associates of
Interested Stockholders, provided that the majority vote
requirement of this clause (2) shall not be applicable if
the proposal is approved by the affirmative vote of not less
than 80% of the then outstanding shares of Voting Stock.
EIGHTH: A. No director of the Corporation shall be
personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal
benefit.
B. (1) Each person who was or is made a party or is
threatened to be made a party to or involved in any action suit
or proceeding whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact
that he or she is or was a director, officer or employee of the
Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit
plan, whether the basis of such proceeding is alleged action in
an official capacity as a director, officer, employee or agent or
in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be
amended (but in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide
broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys fees, judgments,
fines, including excise taxes with respect to an employee benefit
plan, or penalties and amounts paid in settlement) reasonably
incurred or suffered by such person in connection therewith and
such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors and administrators;
provided, however, that, except as provided in paragraph (2)
hereof, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part hereof)
initiated by such person only if such proceeding (or part
thereof) was authorized by the board of directors of the
Corporation. The right to indemnification conferred in this
paragraph (1) of Paragraph B shall include the right to be paid
by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided,
however, that if the Delaware General Corporation Law requires,
the payment of such expenses incurred by a director or officer in
his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such person
while a director or officer, including, without limitation,
service to an employee benefit plan) in advance of the final
disposition of a proceeding shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director of officer is not
entitled to be indemnified under this Paragraph B or otherwise.
(2) If a claim under paragraph (1) of this Paragraph B is
not paid in full by the Corporation within thirty (30) days after
written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is
required, has been tendered to the Corporation) that the claimant
has not met the standards of conduct which make it permissible
under the Delaware General Corporation Law for the Corporation to
indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its board of directors,
independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set
forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its board of
directors, independent legal counsel, or its stockholders) that
the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(3) The right to indemnification and the payment of
expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Paragraph B shall not be
exclusive of any right which any person may have or hereafter
acquire under any statute, provision of the Restated Certificate
of Incorporation, Bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
(4) The Corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint
venture, trust or other enterprise, including an employee benefit
plan, against any such expense, liability or loss, whether or not
the Corporation would have the power to indemnify such person
against such expense, liability or loss under the Delaware
General Corporation Law.
(5) Upon resolution passed by the board of directors,
the Corporation may establish a trust or other designated
account, grant a security interest or use other means (including,
without limitation, a letter of credit) to ensure the payment of
certain of its obligations arising under this Article EIGHTH.
(6) If any part of this Article EIGHTH shall be found,
in any action, suit or proceeding or appeal therefrom or in any
other circumstances or as to any particular officer, director or
employee to be unenforceable, ineffective or invalid for any
reason, the enforceability, effect and validity of the remaining
parts or of such parts in other circumstances shall not be
affected, except as otherwise required by applicable law.
NINTH: A. The annual meeting of the stockholders for the
election of directors shall be held at the principal office of
the Corporation, unless and until otherwise provided in the
Bylaws.
B. Elections of directors need not be by ballot unless
the Bylaws of the Corporation shall so provide.
C. Unless authorized by a majority of the Disinterested
Directors (as defined in Article SEVENTH), no action required to
be taken at any annual or special meeting of stockholders of the
Corporation may be taken without a meeting, and the power of
stockholders to consent in writing, without a meeting, to the
taking of any action is specifically denied. In the event a
majority of the Disinterested Directors authorizes the
Corporation to take action upon such written consent, the consent
in writing to such action signed by stockholders holding at least
that proportion of the total voting power on the question which
is required by law or this Restated Certificate of Incorporation
shall be sufficient for the purpose, without the necessity for a
meeting of the stockholders. In order that the Corporation may
determine the stockholders entitled to consent to corporate
action in writing without a meeting, the board of directors may
fix a record date by majority vote, which record date shall not
precede the date upon which the resolution fixing the record date
is adopted by the board of directors, and which date shall not be
more than ten days after the date upon which the resolution
fixing the record date is adopted by the board of directors. Any
amendment, change or repeal of this Paragraph C of Article NINTH,
or any other amendment of this Restated Certificate of
Incorporation that will have the effect of permitting
circumvention of or modifying this Paragraph of Article NINTH,
shall require the favorable vote, at a stockholders' meeting, of
the holders of at least sixty-seven percent (67%) of the
outstanding shares of stock of the Corporation then entitled to
vote generally in the election of directors, voting together as a
single class.
TENTH: A. The Corporation may purchase or redeem its
own shares in the manner and on the conditions permitted and
provided in Section 160 of the Delaware General Corporation Law
or other applicable law, and as may be authorized by the board of
directors. Shares so purchased shall be considered treasury
shares, and may be reissued and disposed of as authorized by law,
or may be canceled and the capital stock reduced, as the board of
directors may, from time to time, determine in accordance with
law.
B. The Corporation may issue convertible securities and
rights to convert shares or obligations of the Corporation into
shares of any authorized class of stock, and the right or option
to purchase shares of any authorized class of stock, in the
manner and on the conditions permitted and provided in Sections
151 and 157 of the Delaware General Corporation Law or other
applicable law, and as may be authorized by the board of
directors.
C. The board of directors shall have such power and
authority with respect to capital, surplus and dividends,
including allocation, increase, reduction, utilization,
distribution and payment, as is permitted and provided in
Sections 154, 170 and 244 of the Delaware General Corporation Law
or other applicable law.
ELEVENTH: Except as otherwise expressly provided in this
Restated Certificate of Incorporation, amendments to this
Restated Certificate of Incorporation, including any change in
the right of holders of stock of any class and any increase or
reduction of capital stock, shall require the affirmative vote of
the holders of a majority of the outstanding stock entitled to
vote thereon and a majority of the outstanding shares of stock of
each class entitled to vote thereon as a class in accordance with
the provisions of Section 242 of the Delaware General Corporation
Law.
TWELFTH: Except as may be otherwise required by
applicable law, the sale and any other transfer of fully paid
stock in the Corporation shall be free from any restrictions or
all liens imposed by the Corporation.
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been signed this ____ day of December, 1997.
XCL LTD.
_____________________
Marsden W. Miller, Jr.
Chairman and
Chief Executive Officer
[SEAL]
ATTEST:
________________________________
Lisha C. Falk, Secretary
STATE OF LOUISIANA
PARISH OF LAFAYETTE
BE IT REMEMBERED that on this _____ day of December 1997,
personally came before me, a Notary Public for the State of
Louisiana, Parish of Lafayette, Marsden W. Miller, Jr., who
acknowledged himself to be the Chairman of the Board and Chief
Executive Officer of XCL Ltd., a Delaware corporation, an that
he, as such Chairman of the Board and Chief Executive Officer,
being authorized so to do, executed the foregoing Amended and
Restated Certificate of Incorporation, and acknowledged the same
to be his act and deed and the act and deed of the corporation,
and that the facts therein stated are true.
GIVEN under my hand and seal of office the day and year
aforesaid.
________________________
Notary Public
My Commission Expires:
_________________________
APPENDIX C
XCL LTD.
LONG-TERM STOCK INCENTIVE PLAN
AS AMENDED AND RESTATED EFFECTIVE AS OF JUNE 1, 1997
1. Purpose.
(a) The purpose of the XCL Ltd. Long-Term Stock
Incentive Plan (the "Plan") is to promote the interests of XCL
Ltd. ("XCL") and its shareholders by strengthening the ability of
the Company (as hereinafter defined) to attract and retain
directors, officers and key employees, and certain other
individuals who the Company deems can render a valuable
contribution to the direction and success of the Company's
efforts by helping create an entrepreneurial environment in which
such individuals are encouraged to maximize shareholder value.
The Plan permits the granting of Incentive Stock Options,
Nonqualified Stock Options, Reload Options, Restricted Stock and
Performance Units or Appreciation Grants, all as hereinafter
defined.
(b) The Plan as set forth herein constitutes an
amendment and restatement, effective as of the date of adoption
of this amendment and restatement by the Board, of the Plan as
previously adopted by the Company, and shall supersede and
replace in its entirety such prior plan with respect to Awards
granted under the Plan from and after June 1, 1997; the
provisions of the Plan as in effect prior to June 1, 1997 shall
control as to Awards granted under the Plan prior to such date.
2. Definitions; Construction.
(a) As used in the Plan the defined terms "Plan" and
"XCL" shall have the meanings ascribed to them above and the
following defined terms shall have the following meanings:
(i) "Affiliates" shall mean any parent corporation
or subsidiary corporation of XCL as defined in Sections
425(e) and (f) of the Code, as the same may be in effect
from time to time.
(ii) "Agreement" shall mean an agreement between
the Company and a participant setting forth the terms and
conditions of an Award.
(iii) "Award" shall mean an Incentive Stock Option,
Nonqualified Stock Option, Reload Option, Restricted Stock,
Performance Unit or Appreciation Grant as described in and
granted under the Plan.
(iv) "Board" shall mean the Board of Directors of
XCL.
(v) "Code" shall mean the Internal Revenue Code of
1986, as amended.
(vi) "Committee" shall mean the Compensation
Advisory Committee of the Board, as the same may be
constituted from time to time.
(vii) "Common Stock" shall mean shares of capital
stock of XCL designated as "Common Stock" pursuant to XCL's
Certificate of Incorporation.
(viii) "Company" shall mean XCL and its Affiliates.
(ix) "Directors" shall mean the members of the
Company's Board.
(x) "Fair Market Value" on any Trading Day shall
mean the last sales price, regular way, per share of Stock
on such day as reported in the principal consolidated
reporting system with respect to Stock listed on the
principal United States securities exchange on which Stock
is listed or admitted to trading, or if Stock is not then
listed on any United States stock exchange, the last sales
price reported on each such day in the National Market
System of the National Association of Securities Dealers'
Automated Quotation System ("NASDAQ"), or, if not so
reported, the average of the bid and asked prices on each
such day as reported in the "pink sheets" published by the
National Quotation Bureau, Inc. or any successor thereof,
or, if not so reported, the average of the middle market
quotations on each such day as reported on The Stock
Exchange Daily Official List or any other stock exchange on
which Stock is traded and, if not so reported, then as
determined in good faith by the Board. The term "Trading
Day" shall mean a day on which the market used for
calculating the last sales price of Stock is open for the
transaction of business, or, if shares of Stock are not so
listed or admitted to trading, a business day.
(xi) "Incentive Stock Option" shall mean an option
granted pursuant to the provisions of this Plan which meets
the requirements of Section 422 of the Code, as the same may
be in effect from time to time.
(xii) "Non-employee Director" shall mean any member
of the Board who is not also an employee of the Company.
(xiii) "Nonqualified Stock Option" shall mean any
option granted pursuant to the provisions of the Plan which
is not an Incentive Stock Option.
(xiv) "Performance Unit" or "Appreciation Grant"
shall mean a grant described in Section 8.
(xv) "Preferred Stock" shall mean shares of the
Amended Series A, Cumulative Convertible Preferred Stock of
the Company, $1.00 par value or any other series of
preferred stock of the Company as designated by the
Committee with respect to an Award.
(xvi) "Reload Option" shall mean any Nonqualified
Stock Option granted pursuant to the provisions of Section
6(j).
(xvii) "Restricted Stock" shall mean any Stock
delivered subject to the restrictions set forth in Section
7.
(xviii) "Stock" shall mean Common Stock, Preferred
Stock, or a combination of both, as determined in the
discretion of the Committee at the time an Award is granted
pursuant to the provisions of this Plan.
(xix) "Stockholder employee" shall mean any
employee owning Stock (using the attribution rules of
Section 425(d) of the Code, as the same may be in effect
from time to time) possessing more than 10% of the total
combined voting power of all classes of Stock of XCL or any
of its Affiliates.
(b) References in the Plan to Sections are to Sections
of the Plan unless otherwise indicated. The words "hereof",
"herein", "hereunder" and comparable terms refer to the entirety
of the Plan and not to any particular Section or other
subdivision hereof. Words in the singular include the plural and
vice versa. Words in the masculine gender shall include the
feminine and neuter and vice versa. The word "or" is not
exclusive. The word "including" shall be deemed to mean
"including, without limitation". The Section headings contained
herein are for reference purposes only and shall not affect in
any way the meaning or interpretation of the Plan.
3. Stock Available under Plan. Subject to adjustment as
provided in Section 9, the total number of shares of Common Stock
with respect to which Awards may be granted may equal but shall
not exceed 60 million shares of Common Stock. For purposes of
computing the number of shares of Common Stock available for
Awards at any time, there shall be debited against the total
number of shares (i) the number of shares of Common Stock
issuable upon exercise of any options, (ii) the number of shares
of Common Stock which is Awarded as Restricted Stock, and (iii)
the maximum number of shares of Common Stock that may be issued
under Performance Units. Any shares of Common Stock represented
by Awards which are canceled, forfeited, terminated or expire
unexercised shall again be available for grants and issuance
under the Plan. Subject to adjustment as provided in Section 9,
the total number of shares of Preferred Stock with respect to
which Awards may be granted may equal but shall not exceed
200,000 shares of Preferred Stock. For purposes of computing the
number of shares of Preferred Stock available for Awards at any
time, there shall be debited against the total number of shares
(i) the number of shares of Preferred Stock issuable upon
exercise of any such options, (ii) the number of shares of
Preferred Stock which is Awarded as Restricted Stock, and (iii)
the maximum number of shares of Preferred Stock that may be
issued under Performance Units. Any shares of Preferred Stock
represented by Awards which are canceled, forfeited, terminated
or expire unexercised shall again be available for grants and
issuance under the Plan.
4. Participants. Persons eligible for Awards under the
Plan shall be limited to such key employees of the Company
(including Directors) who have substantial responsibility in the
direction and management of the Company, Non-employee Directors
and other individuals who, while not employees of the Company,
are identified by the Committee or the Board as persons who can
render a valuable contribution to the direction and success of
the Company's efforts. Except in the case of Non-employee
Directors, the Committee shall have the sole discretion to select
those persons eligible for Awards. Non-employee Directors shall
be eligible to participate in the Plan as provided in Section 5.
5. Non-employee Director Awards. Awards other than
Incentive Stock Options may be granted to Non-employee Directors.
Any Award to a Non-employee Director shall be made by the
remaining Directors. A Non-employee Director shall not act with
respect to any Award made to himself. With respect to Awards to
Non-employee Directors, the Directors shall have all of the
powers that the Committee has under the Plan with respect to
Awards to employees of the Company.
6. Terms and Conditions of Options. Options granted
pursuant to the Plan shall be evidenced by Agreements in such
form, not inconsistent with the Plan, as the Committee shall
determine. The following terms and conditions shall apply to all
Incentive Stock Options, Nonqualified Stock Options and Reload
Options:
(a) Option Shares. The Committee shall determine
whether a Nonqualified Stock Option shall be an Option to
purchase shares of Common Stock or an Option to purchase
shares of Preferred Stock. Incentive Stock Options shall
only give the optionee the option to purchase shares of
Common Stock.
(b) Option Price. The Committee shall determine
the option price of all Nonqualified Stock Options and all
Incentive Stock Options; provided, however, in the case of
Incentive Stock Options, the option price shall not be less
than the Fair Market Value of the Stock on the date the
option is granted and, provided, further, that in the case
of an individual who is a Stockholder employee on the date
of grant, the option price of an Incentive Stock Option
shall be at least 110% of the then Fair Market Value of the
Stock.
(c) Option Term. The Committee shall determine the
expiration date of a Nonqualified Stock Option and an
Incentive Stock Option; provided, however, in the case of
Incentive Stock Options, the term shall expire no later than
one day prior to the end of ten years from the date the
option was granted, and, provided, further, that Incentive
Stock Options granted to employees who are Stockholder
employees on the date of grant shall expire no later than
one day prior to the end of five years from the date of
grant. Options may terminate earlier as provided herein.
(d) Exercise of Options. The Committee shall
determine when Incentive Stock Options and Nonqualified
Stock Options are exercisable, in whole or in part,
provided, however, that except as expressly set forth herein
to the contrary under no circumstances will an option be
exercisable within 6 months (or such greater or lesser
period prescribed or permitted by any applicable rule
promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including without limitation
Rule 16(b)-3, as in effect from time to time), from its date
of grant.
(e) Manner of Exercise. Upon exercise of an Option,
shares of Stock shall be paid for as described in the Agreement
evidencing the Option. The provisions of Option granted under
the Plan need not be the same with respect to the manner of
exercise. Specifically, an Option may permit payment for shares
of Stock upon its exercise in full with one or more of any of (i)
cash (including a certified or official bank check or the
equivalent acceptable to XCL), (ii) the equivalent Fair Market
Value of shares of Stock, properly endorsed, (iii) the equivalent
fair market value of any other property acceptable to XCL, or
(iv) any combination of (i), (ii), or (iii). Options may be
exercised by written notice to XCL in the manner provided in the
applicable Agreement. In the event the Stock issuable upon
exercise of an option is not registered under the Securities Act
of 1933, as amended (the "Securities Act"), then XCL will require
that the registered owner deliver an investment representation in
the form acceptable to XCL and its counsel and XCL will place a
legend on the certificate for such Stock restricting the transfer
of the same.
(f) Limitation on Amount. In the case of Incentive
Stock Options only, no employee may be granted Incentive
Stock Options to the extent the aggregate Fair Market Value
(as of the date of grant) of the Stock subject to Incentive
Stock Options that are first exercisable during any calendar
year exceeds $100,000.
(g) Non-Transferability. All options granted under
this Plan shall be non-assignable and non-transferable
otherwise than by will or by the laws of descent and
distribution. During the lifetime of the optionee, the
option is exercisable only by him, or, in the case of his
incapacity, by his legal representative.
(h) Termination of Employment. In the case of
Nonqualified Stock Options, the Committee shall determine
the applicable provisions of such Options in the event of an
Optionee's death, disability and termination of employment.
In the case of Incentive Stock Options, (i) on termination
of an optionee's employment with the Company other than by
reason of death or disability, the optionee shall have the
right to exercise his then outstanding Incentive Stock
Options within three months of such termination to the
extent he was entitled to exercise the same immediately
prior to termination; and (ii) on termination of employment
by reason of death or disability (within the meaning of
Section 22(e)(3) of the Code, as the same may be in effect
from time to time), the optionee, his estate, personal
representative, or beneficiary shall have the right to
exercise his then outstanding Incentive Stock Options at any
time within twelve months from the date of death or
termination of employment by reason of disability for the
full number of shares subject to Incentive Stock Options at
the date of termination of employment by reason of death or
disability, irrespective of any vesting provisions except as
provided in the first sentence of Section 6(c) above.
(i) Time of Grant. The grant of an option shall
occur as of the date or time when the Company completes the
corporate action constituting an offer of Stock for sale to
an optionee.
(j) Reload Options. In the event an optionee exercises
a Nonqualified Stock Option to purchase shares of Common Stock by
payment of all or a portion of the exercise price with shares of
Stock which the optionee has owned for at least six months, the
optionee may receive a Reload Option in the form a new
Nonqualified Stock Option to purchase a number of shares of
Common Stock equal to the number of shares of Common Stock used
in payment of the exercise price of the original option. No
Reload Options shall be granted in connection with the exercise
of any Nonqualified Stock Option to purchase shares of Preferred
Stock.
(k) No Stockholder Rights. Nothing contained in
the Plan or in any Agreement shall be construed to confer
upon the holder of an option the right to vote or to receive
dividends (except in the case of Options on Preferred Stock
as provided in Section 6(m) below) or subscription rights,
or to consent or to receive notice as a stockholder in
respect of the meetings of stockholders of XCL or the
election of directors of XCL or any other matter, or any
other rights whatsoever as a stockholder of XCL.
(l) No Fractional Shares. XCL shall not be
required to issue fractional shares of Stock upon exercise
of any options.
(m) Dividend Accruals. A Nonqualified Stock Option
to purchase shares of Preferred Stock may, as determined by
the Committee, include a provision pursuant to which the
number of shares of Preferred Stock acquirable upon exercise
of such Option shall be increased (without increase in the
Option price) by a number of shares of Preferred Stock equal
to the dividends that would have been received by the
Optionee (i) had the Optionee owned the shares of Preferred
Stock as to which the Nonqualified Stock Option is being
exercised from the date of grant of such Option to the date
of such exercise and (ii) assuming the Company had declared
and paid in kind all regularly scheduled dividends as
provided under such Preferred Stock.
7. Restricted Stock. Except as otherwise provided
herein, the Committee shall have the sole discretion to determine
the restrictions that shall apply to each Award of Restricted
Stock hereunder (including, without limitation, the time and
manner of vesting, provisions applicable on death, disability or
other termination of employment, conditions of forfeiture and
whether any consideration should be paid by the grantee). Any
such restrictions shall be embodied in the applicable Agreement
and in a legend placed on the certificate for Restricted Stock.
As soon as practicable following a grant of Restricted Stock, XCL
shall transfer to the name of the grantee any and all Awarded
shares. A certificate or certificates for all shares of
Restricted Stock registered in the name of a grantee shall be
promptly drawn and held for the grantee by XCL. The grantee
shall thereupon be a stockholder and shall have all the rights of
a stockholder with respect to such shares, including the right to
vote and receive all dividends or other distributions made or
paid with respect to such shares. As the restrictions described
below are released, a certificate (without the legend described
above but with an appropriate restrictive legend setting forth
transfer restrictions under the Securities Act) for the number of
shares with respect to which restrictions have been released will
be delivered to the grantee as soon as practicable. Any new,
additional or different securities, cash or other property the
grantee may become entitled to receive shall be subject to the
same restrictions applicable to the Restricted Stock with respect
to which such new, additional or different securities or property
are received. Shares of Restricted Stock may not be sold,
exchanged, transferred, pledged, hypothecated, or otherwise
disposed of until such time as the stated restrictions lapse.
8. Performance Units or Appreciation Grants. The
Committee may grant Performance Units or Appreciation Grants
entitling the holder to receive a fixed or variable number of
share-denominated units subject to such conditions of vesting and
time of payment as the Committee may determine and as set forth
in the applicable Agreement in case of Performance Units or
entitling the holder to receive compensation based upon
appreciation measured by Common Stock, Preferred Stock or such
other market-based criteria relating to the Company or its
business as the Committee may establish and subject to such
conditions of vesting and time of payment as the Committee may
determine and set forth in the applicable Agreement in the case
of Appreciation Grants. Payments in respect of Performance Units
or Appreciation Grants may be paid in cash, in Stock, or in a
combination of cash and Stock, as the Committee shall determine.
Such payments in respect of Performance Units or Appreciation
Grants shall represent an unsecured and unfunded promise to pay
such amounts and the holder shall have no rights other than as a
general creditor of the Company. Performance Units or
Appreciation Grants may not be sold, exchanged, transferred,
pledged, hypothecated or otherwise disposed of except as provided
in the applicable Agreement.
9. Recapitalization or Reorganization.
(a) The aggregate number of shares of Stock for which
Awards may be granted under the Plan, the number of shares
covered by outstanding Awards and the exercise price per share
for each outstanding option, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of
Stock resulting from the subdivision or consolidation of all
outstanding shares, or the payment of a Stock dividend on all
outstanding shares of Stock after the effective date of the Plan,
or other increase or decrease in such shares effected without
receipt of consideration by XCL; provided, however, that any
adjustment to Awards resulting in the right to receive fractional
shares shall be eliminated. The provisions of this Section 9
shall be applied separately with respect to shares of Common
Stock and shares of Preferred Stock.
(b) If XCL shall at any time merge or consolidate with
or into another corporation, the holder of each Award will
thereafter receive, upon exercise or transfer of shares, the
securities or property to which a holder of an equivalent number
of shares of Stock would have been entitled upon such merger or
consolidation, and XCL shall take such steps in connection with
such merger or consolidation as may be necessary to assure that
the provisions of this Plan shall thereafter be applicable, as
nearly as reasonably may be, in relation to any securities or
property thereafter deliverable. A sale of all or substantially
all of the assets of XCL for a consideration (apart from the
assumption of obligations) consisting primarily of securities
shall be deemed a merger or consolidation for the foregoing
purposes.
10. Change in Control. Notwithstanding any provision in
the Plan to the contrary, but subject to the first sentence of
Section 6(c) hereof, (i) each option granted under the Plan shall
become immediately exercisable in whole or in part, at the
election of the optionee, (ii) the restrictions applicable to
each share of Restricted Stock shall immediately lapse, and (iii)
payment in respect of Performance Units or Appreciation Grants
shall be immediately due upon the occurrence of an event which
constitutes a change in control of XCL. For purposes of this
Section 10, a "change in control of XCL" shall mean a change in
control of a nature that would be required to be reported in
response to Item 5(f) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act; provided that, without
limitation, such a change in control shall be deemed to have
occurred if:
(A) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than XCL or any
person who on the effective date the Plan (as hereinafter
provided in Section 13) is an officer or director of XCL, is
or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act, as such Rule is in effect from time
to time), directly or indirectly, of securities of XCL
representing 20% or more of the combined voting power of
XCL's then outstanding securities, unless such person owns,
directly or indirectly, as of such effective date of the
Plan, more than 25% of the combined voting power of XCL's
then outstanding securities, in which case, if any such
person (a "Major Stockholder") becomes the beneficial owner,
directly or indirectly, of 33% or more of the combined
voting power of XCL's then outstanding securities; provided,
further, however, that acquisition of 33% or more of such
combined voting power shall not constitute a "change in
control of XCL" if (1) such combined voting power does not
exceed 37-1/2% or more of the combined voting power of XCL's
then outstanding securities, and (2) either (i) to the
extent any such increase in a Major Stockholder's beneficial
ownership results from a redemption of purchase by XCL of
its securities, or (ii) if the Board, by vote of two-thirds
(2/3) of the full Board, in good faith, determines
(hereinafter referred to as a "Determination") both (X) that
such acquisition does not constitute, in fact, a change in
control of XCL, and (Y) that such Major Stockholder does not
and cannot then control XCL; and
(B) during any period of two consecutive years
prior to the date of such Determination, individuals who at
the beginning of such period constituted the Board cease for
any reason to constitute at least a majority thereof, unless
the election of each Director who was not a Director at the
beginning of such period has been approved in advance by
Directors representing at least two-thirds (2/3) of the
Directors then in office who were Directors at the beginning
of the period.
11. Administration.
(a) The Plan shall be administered by the Committee or,
in the case of Awards to Non-employee Directors, by the remaining
Directors. The Committee shall be comprised solely of two (2) or
more disinterested Directors constituted so as to permit the Plan
to comply with Rule 16b-3, as currently in effect or as
hereinafter modified or amended ("Rule 16b-3"), promulgated under
the Exchange Act. The Board may from time to time remove members
from or add members to the Committee. Vacancies in the
Committee, however caused, shall be filled by the Board. The
Committee shall select one of its members chairman and shall hold
meetings at such time and places as it may determine. The
Committee may appoint a secretary and, subject to the provisions
of the Plan and to policies determined by the Board, may make
such rules and regulations for the conduct of its business as it
shall deem advisable. A majority of the Committee shall
constitute a quorum. All action of the Committee shall be taken
by a majority of its members. Any action may be taken by a
written instrument signed by at least a majority of the members
or at a meeting conducted by means of telephone or similar
communications equipment pursuant to which all persons
participating in the meeting can hear each other, and action so
taken shall be as fully effective as if it had been taken at a
meeting duly called and held.
(b) Subject to the express terms and conditions of the
Plan, the Committee or, if applicable, the Directors shall have
full power to make Awards, to construe or interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it
and to make all other determinations necessary or advisable for
its administration.
(c) Except as otherwise provided herein, the Committee
or, if applicable, the Directors may determine which persons
shall be granted Awards, the number of shares subject to Awards,
the time at which Awards shall vest and the terms of the Awards.
In making such determinations, the Committee or, if applicable,
the Directors may take into consideration the anticipated value
to XCL of the services rendered by such individuals, their
present and potential contributions to XCL's success and such
other factors as the Committee in its discretion shall deem
relevant. All decisions made by the Committee or, if applicable,
the Directors in selecting the optionees, in establishing the
number of shares which may be issued under each Award and in
construing the provisions of the Plan shall be final.
(d) The Committee shall report to the Board the names of
persons granted Awards, the number of shares involved, and the
terms and conditions of each Award.
(e) No member of the Board or of the Committee shall be
liable for any action or determination made in good faith with
respect to the Plan or any option or Award and service on the
Committee shall constitute service as a director, entitling such
Committee member to indemnification and reimbursement for such
service to the same extent as for service rendered as a director.
12. Tax Withholding. The Committee may require any
person entitled to receive payment in respect of an Award to
remit to the Company, prior to such payment, an amount sufficient
to satisfy any Federal, state or local tax withholding
requirements. The Committee shall also have the exclusive right
to permit an individual to satisfy, in whole or in part, such
obligation to remit taxes by directing the Company to withhold
shares of Stock that would otherwise be received by such
individual, pursuant to such rules as the Committee may determine
from time to time in compliance with the provisions of Rule
16b-3(e) promulgated under the Exchange Act, as such Rule or any
other comparable Rule may be in effect from time to time.
13. Effective Date and Termination. The effective date
of the prior plan as approved by the shareholders of XCL was June
2, 1992. The effective date of this amended and restated Plan
shall be June 1, 1997 provided that it is approved by the
shareholders of XCL within twelve months of such date.
Specifically, Options granted under the Plan shall not be
exercisable unless and until such approval is obtained. This Plan
shall terminate on June 2, 2002, but the Board of Directors may
terminate the Plan at any time prior thereto. Termination of the
Plan shall not alter or impair, without the consent of the
optionee or grantee, any of his rights or obligations and any
Award made under the Plan.
14. Amendments. The Board may from time to time alter,
amend, suspend or discontinue the Plan; provided, however, that
no such action of the Board may alter the provisions of the Plan
so as to alter any outstanding Awards to the detriment of the
optionee or grantee without his consent, and, no amendment to the
Plan shall be made without stockholder approval which shall (i)
increase (except as provided in Section 9) the total number of
shares reserved for issuance pursuant to the Plan; (ii) change
the class of individuals entitled to participate under the Plan;
or (iii) withdraw the administration of the Plan from a committee
consisting of at least two "disinterested persons" (as defined in
Section 11(a)). The Committee may, from time to time, alter,
amend, cancel or terminate any outstanding Award, in any manner
not inconsistent with the Plan; provided, however, that no such
action of the Committee may alter, amend, cancel or terminate an
Award to the detriment of the optionee or grantee without his
consent. The Plan may not be amended more than once every six
months except to comport with changes to the Code, the Employee
Retirement Income Security Act, the Exchange Act, or the rules
and regulations thereunder. Notwithstanding anything in the Plan
to the contrary, the Board shall have the power to amend the Plan
to conform the Plan to all applicable requirements of law.
15. No Right to Employment. No person shall have any
claim or right to receive grants of Awards under the Plan.
Neither the Plan, the grant of Awards under the Plan, nor any
action taken or omitted to be taken under the Plan shall be
deemed to create or confer on any employee any right to be
retained in the employ of the Company or to interfere with or to
limit in any way the right of the Company to terminate the
employment of such individual at any time.
16. Registration. Although there shall be no obligation
or duty for XCL to register under the Securities Act or any state
securities law at any time the Awards that may be granted
hereunder or the Stock that may be issuable upon grant or
exercise of such Awards, XCL shall make commercially reasonable
efforts to do so. XCL shall not be required to issue or deliver
any shares of Stock prior to completion of such registration or
other qualification of such shares under any state or Federal
law, rule or regulation if XCL shall determine that issuance or
delivery will hinder such registration or qualification to be
necessary or desirable.
APPENDIX D
XCL LTD. APPRECIATION GRANT AGREEMENT
XCL Ltd., a Delaware corporation (the "Company" or "XCL"),
as of this 1st day of June, 1997, hereby irrevocably grants to M.
W. Miller, Jr. ("Executive") in consideration of services
rendered and to be rendered by the Executive, the right to
receive certain compensation from time to time upon exercise of
this appreciation grant (the "Appreciation Grant") based upon the
then-appreciation amount ("Appreciation Amount") as described
hereunder pursuant to the Company's Long-Term Stock Incentive
Plan (as amended and restated effective June 1, 1997) (the
"Plan") on or before June 1, 2007 (the "Expiration Date") as of
which date this Appreciation Grant expires, subject however to
the following terms and conditions:
1. Appreciation Amount. As of any time of exercise by
Executive, the total then-Appreciation Amount will be an amount
equal to 5% of the positive difference, if any, between the
market capitalization of XCL as of June 1, 1997 and the market
capitalization of XCL as of such time of exercise, reduced in
each case by a percentage equal to the total percentages as to
which Executive has previously exercised this Appreciation Grant.
For purposes of the foregoing provision, the market
capitalization of XCL as of any date shall be the aggregate total
of : the total number of outstanding shares of XCL's Common
Stock as of such date, the total number of outstanding shares of
any issue of Preferred Stock issued by XCL as of such date, the
total number of outstanding options and warrants to acquire
(whether by purchase, conversion or otherwise) XCL securities
issued by XCL as of such date; multiplied, in the case of shares
of XCL's Common Stock or XCL's Preferred Stock, by the per share
average of the Fair Market Value of such shares for the 30-day
period immediately preceding such date of exercise and in the
case of options or warrants by the per unit fair market value of
such options or warrants as of such date as determined by the
Board of Directors of the Company.
2. Time and Rules of Exercise. Executive may exercise
this Appreciation Grant, in whole or in 10% increments, as of
each June 1 or December 1 from and after June 1, 2002 by giving
45 days advance written notice of such exercise to the Company
and of the percentage of the Appreciation Grant as to which the
Appreciation Grant is to be exercised. Upon each exercise of the
Appreciation Grant, Executive must tender to the Company a
payment equal to twenty percent (20%) of the Appreciation Amount
payable to him upon such exercise (which payment shall be deemed
made and netted against such Appreciation Amount in the case of
payment to him of the Appreciation Amount in cash; provided,
however, that Executive shall cease to have an obligation to pay
any exercise price to the Company as consideration for exercise
of the Appreciation Grant after he has paid an aggregate of five
million dollars in the exercise of the Appreciation Grant. From
and after the date he has paid an aggregate of five million
dollars to the Company in exercise of the Appreciation Grant,
Executive shall not be required to tender any further
consideration to the Company as a condition to exercise of this
Appreciation Grant. Within 10 days after receipt of notice from
Executive of Executive's election to exercise this Appreciation
Grant in whole or in part provided that it has by such time
received from Executive any exercise price owed in consideration
of such exercise, the Company shall tender to Executive a
compensation payment equal to the percentage of the then-total
Appreciation Amount (or applicable net amount in the case of cash
payment thereof) as to which the Appreciation Grant is being
exercised. Such compensation payment shall be paid, as elected
by the Company, in cash or in shares of Common Stock or a
combination thereof. In the event that Executive exercises this
Appreciation Grant as to less than the entire amount of the then-
total Appreciation Amount, the percentage as to which Executive
exercises this Appreciation Grant shall be canceled and shall no
longer be available for payment of compensation based upon
appreciation thereafter in the Company's market capitalization.
3. Mergers, Consolidations, Etc. If the Company shall
at any time merge or consolidate with or into another
corporation, Executive will thereafter receive, upon the exercise
of this Appreciation Grant at the election of the Company either
cash or the securities or property which a holder of the
Company's Stock would be entitled to receive upon such merger or
consolidation, and the Company shall take such steps in
connection with such merger or consolidation as may be necessary
to assure that provisions of this Appreciation Grant shall
thereafter be applicable, as nearly as reasonably may be, in
relation to any securities or property thereafter deliverable in
connection with any such merger or consolidation. A sale of all
or substantially all of the assets of the Company for a
consideration (apart from the assumption of obligations)
constituted primarily of securities shall be deemed a merger or
consolidation for the foregoing purposes. In the event of the
proposed dissolution, liquidation or reorganization of the
Company, other than pursuant to a merger or consolidation as
hereinabove provided, this Appreciation Grant shall terminate as
of a date to be fixed by the Company's Compensation Advisory
Committee; provided that not less than 120 days (or such shorter
period as shall elapse between the date the Board of Directors
shall decide upon a dissolution, liquidation or reorganization
and the effective date of such dissolution, liquidation or
reorganization) prior written notice shall be given to Executive
and Executive shall have the right, during such period to
exercise this Appreciation Grant as to all or any part of the
then Appreciation Amount covered thereby, including Shares as to
which this Appreciation Grant would not otherwise be exercisable.
4. Expiration.
(a) This Appreciation Grant shall expire and become null
and void at 5:00 p.m. Lafayette, Louisiana time, on the
Expiration Date or, if earlier, the date Executive's employment
with the Company is terminated by the Company for "cause" or by
Executive without "good reason". This Appreciation Grant shall
not terminate upon the Executive's termination of employment with
the Company for any reason other than termination of such
employment by the Company for "cause" or termination of such
employment by Executive without "good reason". For purposes of
this agreement, the term "cause" shall mean Executive's (i)
engagement in gross negligence or willful misconduct in the
performance of his duties with respect to the Company and any of
its affiliates, (ii) conviction of a felony or misdemeanor, (iii)
refusal without proper legal reason to perform his duties and
responsibilities to the Company or any of its affiliates or (iv)
breach of any provision of a written employment agreement;
provided, however, that if Executive's employment with the
Company is subject to and governed by the terms of a written
employment contract as of the date of Executive's termination of
employment, the term "cause" for purposes of this agreement shall
include only those events or circumstances which, pursuant to the
terms of such employment agreement, enable the Company to
terminate Executive's employment without liability to Executive
(whether in the nature of breach of contract damages, liquidated
damages, punitive damages, compensatory damages or otherwise).
For purposes of this Agreement, the term "good reason" shall mean
(i) the removal of Executive as Chief Executive Officer of the
Company, (ii) a reduction in Executive's annual base salary by
more than 10% unless such reduction was pursuant to a Company-
wide cost reduction program pursuant to which all Company
employees were treated substantially equally, (iii) a breach by
the Company of any obligation owed to Executive under any written
agreement between Executive and the Company with respect to
Executive's employment with, or benefits from, the Company or any
of its affiliates), or (iv) death or total disability of
Executive.
(b) Notwithstanding any provision in this Appreciation
Grant or the Plan to the contrary, this Appreciation Grant shall
become immediately exercisable in whole or in part, at the
election of Executive, upon the occurrence of an event which
constitutes a change of control of XCL. For purposes of this
Paragraph (b), a "change in control of XCL" shall mean a change
in control of a nature that would be required to be reported in
response to Item 5(f) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act; provided that, without
limitation, such a change in control shall be deemed to have
occurred if (Y) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than XCL or any
person who on the date the Plan is amended is a director or
officer of XCL is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of XCL representing 20% or more of the combined voting
power of XCL's then outstanding securities, unless such person
owns, directly or indirectly, as of the date the Plan is amended,
more than 25% of the combined voting power of XCL's then
outstanding securities, in which case, if any such person (a
"Major Stockholder") becomes the beneficial owner, directly or
indirectly, of 33% or more of the combined voting power of XCL's
then outstanding securities; provided, further, however, that
acquisition of 33% or more of such combined voting power shall
not constitute a "change in control of XCL" if (1) such combined
voting power does not exceed 37-1/2% or more of the combined
voting power of XCL's then outstanding securities, and (2) either
(i) to the extent any such increase in a Major Stockholder's
beneficial ownership results from a redemption or purchase by XCL
of its securities, or (ii) if the Board, by vote of two-thirds
(2/3) of the full Board, in good faith, determines (hereinafter
referred to as a "Determination") both (A) that such acquisition
does not constitute, in fact, a change in the control of XCL and
(B) that such Major Stockholder does not and cannot then control
XCL or (Z) during any period of two consecutive years prior to
the date of such Determination, individuals who at the beginning
of such period constituted the Board cease for any reason to
constitute at least a majority thereof, unless the election of
each director who was not a director at the beginning of such
period has been approved in advance by directors representing at
least two-thirds of the directors then in office who were
directors at the beginning of the period. Further
notwithstanding any provision in this Appreciation Grant and the
Plan to the contrary, from and after the occurrence of a "change
of control of XCL", the Company shall pay to Executive upon any
exercise of this Appreciation Grant at least 40% of the net
amount payable in respect of such exercise in cash.
5. Transferability. This Appreciation Grant is granted
in recognition of personal services of the Executive to the
Company or its affiliates and is not assignable or transferable
other than by will or by the laws of descent and distribution.
During the lifetime of the Executive, this Appreciation Grant may
be exercisable only by him.
6. Subject to Plan. This Appreciation Grant has been
issued under the Plan and is specifically subject to and
conditioned upon approval by the stockholders of the Company of
(i) the June 1, 1997 amendment and restatement of the Plan and
(ii) separately, this Appreciation Grant and shall be null and
void ab initio if either of such approvals are not obtained. In
addition to the provisions hereof, this Appreciation Grant will
be subject to the power under the Plan of the Company's
Compensation Advisory Committee and Board of Directors to make
interpretations of the Plan, and to make determinations and take
other actions with respect to the Plan; provided, however, that
if any such interpretations, determinations, or other actions
shall conflict with any of the provisions of this Agreement, the
provisions hereof shall control. By acceptance hereof, Executive
acknowledges receipt of a copy of the Plan and recognizes and
agrees that determinations, interpretations or other actions
respecting the Plan may be made by a majority of the Board of
Directors or by the Compensation Advisory Committee.
7. Status of Shares of Common Stock. Executive agrees
that (i) any shares of Common Stock acquired upon exercise of
this Appreciation Grant will not be sold or otherwise disposed of
in any manner which would constitute a violation of any
applicable federal or state securities laws, (ii) the
certificates representing such shares of Common Stock shall bear
such legend or legends as the Committee deems appropriate to
assure compliance with applicable securities laws, (iii) the
Company may refuse to register the transfer of the shares of
Common Stock on the stock transfer records of the Company if such
proposed transfer would constitute a violation of any applicable
securities laws, and (iv) the Company may give related
instructions to its transfer agent, if any, to stop registration
of the transfer of shares of Common Stock.
8. Securities Laws. Executive acknowledges that he has
been informed of, or is otherwise familiar with, the nature and
the limitations imposed by the Securities Act of 1933, as amended
(the "Act"), the Exchange Act, state securities or Blue Sky laws,
and the rules and regulations thereunder (in particular, Rule
144, promulgated under the Act and Section 16 of the Exchange
Act, and Rule 16b-3 promulgated thereunder), concerning the
shares which may be issued upon exercise of this Appreciation
Grant and agrees to be bound by the restrictions embodied in such
Act, the Exchange Act, state securities or Blue Sky laws, and all
the rules and regulations promulgated thereunder.
9. The Company's Right to Terminate Employment. Nothing
contained in this Agreement shall confer upon Executive the right
to employment by the Company or any of its Affiliates.
10. Withholding. Executive hereby agrees that he will
make such arrangements as the Company deems necessary to
discharge any federal, state or local employment or withholding
taxes imposed upon the Company in respect of this Appreciation
Grant.
11. Entire Agreement. This Agreement contains the
entire agreement of the parties relative to the subject matter
hereof, superseding and terminating all prior agreements or under
standings, whether oral or written, between the parties hereto
relative to the subject hereof, and this Agreement may not be
extended, amended, modified or supplemented without written
consent of the parties hereto.
12. Governing Law. This Agreement and all amendments or
changes relating hereto shall be deemed to have been entered into
pursuant to, and shall be governed by, the laws of the State of
Delaware.
13. Notices. Notices given pursuant hereto shall be
registered or certified mail and shall be deemed delivered four
(4) days after deposit in the United States mail, postage
prepaid, addressed as follows:
If to the Company:
c/o XCL Ltd.
110 Rue Jean Lafitte
Lafayette, Louisiana 70508
If to Executive, to the address below Executive's
signature.
IN WITNESS WHEREOF, this Agreement is executed as of the
____day of ___________, 19___.
Attest XCL LTD.
By:-------------------------- By:-----------------------
Name:------------------------ Name:---------------------
Title:----------------------- Title:--------------------
The undersigned Executive hereby accepts the foregoing
Appreciation Grant Agreement dated as of 1st day of June, 1997
(the "Date of Grant"), and the undertakings on his part contained
therein, and agrees to all of the terms and conditions thereof.
By-------------------------------
EXECUTIVE
Address:------------------------------
------------------------------
XCL LTD.
(a Delaware corporation)
COMMON STOCK PROXY
FOR THE SPECIAL MEETING IN LIEU OF ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD DECEMBER 17, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Marsden W. Miller, Jr. and
Benjamin B. Blanchet, and either of them, attorneys and proxies,
with full power of substitution, and authorizes them to vote all
shares of Common Stock, $.01 par value ("Common Stock") of XCL
Ltd. (the "Company") held of record by the undersigned on
November 10, 1997, at the Special Meeting in Lieu of Annual
Meeting of Shareholders to be held in the Acadia Room of the
Hotel Acadiana, located at 1801 West Pinhook Road, Lafayette,
Louisiana, Wednesday, December 17, 1997 at 10:00 AM, Central
Standard Time, and any adjournments thereof, on the matters set
forth on the reverse side.
THE MATTERS TO BE VOTED UPON, THE INSTRUCTIONS AND
A SPACE FOR YOUR VOTE AND SIGNATURE
ARE SET FORTH ON THE REVERSE SIDE.
PLEASE VOTE, SIGN AND RETURN PROMPTLY.
If this proxy is properly executed, the shares of Common Stock
represented thereby will be voted for items 1, 2, 3 and 4 in
accordance with the instructions on this proxy. If no
instructions are given, such shares will be voted FOR the
election of all nominees for director, FOR approval of the
amendment and restatement of the Company's Certificate of
Incorporation, FOR approval of the 1997 LTSIP Restatement, FOR
approval of the award of the Appreciation Option to Mr. Miller
and in the discretion of the proxies upon any other matter which
may properly come before the meeting.
Proposal 1. The election of three (3) directors to be
designated as Class I directors to serve a three-year
term until the 2000 Annual Meeting of Shareholders, to
wit: Arthur W. Hummel, Jr., Michael Palliser and
Benjamin B. Blanchet.
[ ] FOR ALL NOMINEES
[ ] WITHHOLD FOR ALL NOMINEES
TO WITHHOLD VOTE on any nominee write the nominee's
name in the space below.
_______________________________________________________
Proposal 2. The approval of an amendment and restatement of
the Certificate of Incorporation to provide for a one-
for-fifteen reverse split of the issued Common Stock
and certain nonsubstantive ministerial changes.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3. The approval of amendment and restatement of the
Company's Long Term Stock Incentive Plan, effective as
of June 1, 1997, and certain grants made thereunder.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 4. The approval of an award of an Appreciation
Option to M.W. Miller, Jr.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 5. In their discretion, to vote upon such other
business as may properly come before the meeting.
Receipt is acknowledged of the Proxy Statement dated November 20,
1997.
THIS PROXY MUST BE SIGNED AS NAME APPEARS HEREON. Executors,
administrators, trustees, etc., should give full title as such.
If the signer is a corporation, please sign full corporate name
by a duly authorized officer.
___________________________________
DATE
___________________________________
SIGNATURE
___________________________________
SIGNATURE
I plan to attend the Special Meeting in Lieu of Annual Meeting
of Shareholders:
Yes [ ] No [ ]
XCL LTD.
(a Delaware corporation)
AMENDED SERIES A PREFERRED
STOCK PROXY
FOR THE SPECIAL MEETING IN LIEU OF ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD DECEMBER 17, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Marsden W. Miller, Jr. and
Benjamin B. Blanchet, and either of them, attorneys and proxies,
with full power of substitution, and authorizes them to vote all
shares of Amended Series A, Cumulative Convertible Preferred
Stock, $1.00 par value ("Amended Series A Preferred Stock") of
XCL Ltd. (the "Company") held of record by the undersigned on
November 10, 1997, at the Special Meeting in Lieu of Annual
Meeting of Shareholders to be held in the Acadia Room of the
Hotel Acadiana, located at 1801 West Pinhook Road, Lafayette,
Louisiana, Wednesday, December 17, 1997 at 10:00 AM, Central
Standard Time, and any adjournments thereof, on the matters set
forth on the reverse side.
THE MATTERS TO BE VOTED UPON, THE INSTRUCTIONS AND
A SPACE FOR YOUR VOTE AND SIGNATURE
ARE SET FORTH ON THE REVERSE SIDE.
PLEASE VOTE, SIGN AND RETURN PROMPTLY.
If this proxy is properly executed, the shares of Amended Series
A Preferred Stock represented thereby will be voted for items 1,
2, 3 and 4 in accordance with the instructions on this proxy. If
no instructions are given, such shares will be voted FOR the
election of all nominees for director, FOR approval of the
amendment and restatement the Company's Certificate of
Incorporation, FOR approval of the 1997 LTSIP Restatement, and
FOR approval of the award of the Appreciation Option to Mr.
Miller and in the discretion of the proxies upon any other matter
which may properly come before the meeting.
Proposal 1. The election of three (3) directors to be
designated as Class I directors to serve a three-year
term until the 2000 Annual Meeting of Shareholders, to
wit: Arthur W. Hummel, Jr., Michael Palliser and
Benjamin B. Blanchet.
[ ] FOR ALL NOMINEES
[ ] WITHHOLD FOR ALL NOMINEES
TO WITHHOLD VOTE on any nominee write the nominee's
name in the space below.
_______________________________________________________
Proposal 2. The approval of an amendment and restatement of
the Certificate of Incorporation to provide for a one-
for-fifteen reverse split of the issued Common Stock
and certain nonsubstantive ministerial changes.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3. The approval of amendment and restatement of the
Company's Long Term Stock Incentive Plan, effective as
of June 1, 1997, and certain grants made thereunder.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 4. The approval of an award of an Appreciation
Option to M.W. Miller, Jr.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 5. In their discretion, to vote upon such other
business as may properly come before the meeting.
Receipt is acknowledged of the Proxy Statement dated November 20,
1997.
THIS PROXY MUST BE SIGNED AS NAME APPEARS HEREON. Executors,
administrators, trustees, etc., should give full title as such.
If the signer is a corporation, please sign full corporate name
by a duly authorized officer.
___________________________________
DATE
___________________________________
SIGNATURE
___________________________________
SIGNATURE
I plan to attend the Special Meeting in Lieu of Annual Meeting
of Shareholders:
Yes [ ] No [ ]
XCL LTD.
(a Delaware corporation)
SERIES B PREFERRED
STOCK PROXY
FOR THE SPECIAL MEETING IN LIEU OF ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD DECEMBER 17, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Marsden W. Miller, Jr. and
Benjamin B. Blanchet, and either of them, attorneys and proxies,
with full power of substitution, and authorizes them to vote all
shares of Series B, Cumulative Preferred Stock, $1.00 par value
("Series B Preferred Stock") of XCL Ltd. (the "Company") held of
record by the undersigned on November 10, 1997, at the Special
Meeting in Lieu of Annual Meeting of Shareholders to be held in
the Acadia Room of the Hotel Acadiana, located at 1801 West
Pinhook Road, Lafayette, Louisiana, Wednesday, December 17, 1997
at 10:00 AM, Central Standard Time, and any adjournments thereof,
on the matters set forth on the reverse side.
THE MATTERS TO BE VOTED UPON, THE INSTRUCTIONS AND
A SPACE FOR YOUR VOTE AND SIGNATURE
ARE SET FORTH ON THE REVERSE SIDE.
PLEASE VOTE, SIGN AND RETURN PROMPTLY.
If this proxy is properly executed, the shares of Series B
Preferred Stock represented thereby will be voted for items 1,
2, 3 and 4 in accordance with the instructions on this proxy. If
no instructions are given, such shares will be voted FOR the
election of all nominees for director, FOR approval of the
amendment and restatement of the Company's Certificate of
Incorporation, FOR approval of the 1997 LTSIP Restatement, and
FOR approval of the award of the Appreciation Option to Mr.
Miller and in the discretion of the proxies upon any other matter
which may properly come before the meeting.
Proposal 1. The election of three (3) directors to be
designated as Class I directors to serve a three-year
term until the 2000 Annual Meeting of Shareholders, to
wit: Arthur W. Hummel, Jr., Michael Palliser and
Benjamin B. Blanchet.
[ ] FOR ALL NOMINEES
[ ] WITHHOLD FOR ALL NOMINEES
TO WITHHOLD VOTE on any nominee write the nominee's
name in the space below.
_______________________________________________________
Proposal 2. The approval of an amendment and restatement of
the Certificate of Incorporation to provide for a one-
for-fifteen reverse split of the issued Common Stock
and certain nonsubstantive ministerial changes.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3. The approval of amendment and restatement of the
Company's Long Term Stock Incentive Plan, effective as
of June 1, 1997, and certain grants made thereunder.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 4. The approval of an award of an Appreciation
Option to M.W. Miller, Jr.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 5. In their discretion, to vote upon such other
business as may properly come before the meeting.
Receipt is acknowledged of the Proxy Statement dated November 20,
1997.
THIS PROXY MUST BE SIGNED AS NAME APPEARS HEREON. Executors,
administrators, trustees, etc., should give full title as such.
If the signer is a corporation, please sign full corporate name
by a duly authorized officer.
___________________________________
DATE
___________________________________
SIGNATURE
___________________________________
SIGNATURE
I plan to attend the Special Meeting in Lieu of Annual Meeting
of Shareholders:
Yes [ ] No [ ]