September 15, 1998
XCL Ltd.
110 Rue Jean Lafitte, 2nd Floor
Lafayette, LA 70508
Ladies and Gentlemen:
In connection with the proposed exchange (the "Exchange") of
warrants, each dated May 20, 1998 (the "Old Warrants"), to
purchase an aggregate of 351,015 shares of the common stock, par
value $.01 per share ("Common Stock"), of XCL Ltd. (the
"Company") for one new warrant to purchase an aggregate of
351,015 shares of Common Stock (the "Warrant Shares") at an
exercise price of $2.50 per share, subject to adjustment (the
"Exercise Price"), which expires on September 30, 1998, in
substantially the form attached hereto as Exhibit A (the "New
Warrant", and together with the Warrant Shares, the
"Securities"), we confirm that:
1. We have received a copy of the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1997; the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1998 and the
Preliminary Prospectus dated May 8, 1998 as filed with
the Securities and Exchange Commission (the "SEC") as
part of the Registration Statement on Form S-1 (File
No. 333-51937) (the "Preliminary Prospectus") (which
Preliminary Prospectus is subject to SEC comment and
amendment) and such other information as we deem
necessary in order to make our investment decision to
participate in the Exchange and to acquire the
Securities. We acknowledge that we have read and
agreed to the matters stated in the sections entitled
"Disclosure Regarding Forward Looking Information",
"Risk Factors" and "Selling Security Holders" of such
Preliminary Prospectus which are incorporated by
reference herein and that we are aware of the high
degree of risk attendant to an investment in the
Securities. We have had the opportunity to ask
questions and receive answers from the management of
the Company concerning the terms and conditions of the
Exchange and the Securities and the Company, its
business, financial condition and prospects and to
obtain any additional information which the Company
possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy of the
information that has been furnished to us.
2. We understand that any subsequent transfer of the
Securities is subject to certain restrictions and
conditions set forth in the New Warrant and the
undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Securities except in
compliance with, such restrictions and conditions and
the Securities Act of 1933, as amended (the "Securities
Act") and all applicable State securities laws and the
rules and regulations promulgated thereunder,
including, without limitation, Regulation M promulgated
under the Securities Act.
3. We understand that the Exchange and the issuance of
the Securities have not been registered under the
Securities Act, and that the Securities may not be
offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except as
permitted in the following sentence. We agree, on our
own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should
sell any Securities, we will do so only (i) to the
Company or any subsidiary thereof, (ii) inside the
United States in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) that,
prior to such transfer furnishes (or has furnished on
its behalf by a U.S. broker-dealer) to the Warrant
Agent (as defined in the New Warrant) if other than the
Company, and to the Company, a signed letter containing
certain representations, warranties and agreements
relating to the restrictions on transfer of the
Securities (the form of which letter can be obtained
from the Company), (iii) outside the United States in
accordance with Rule 904 of Regulation S promulgated
under the Securities Act, (iv) pursuant to an exemption
from registration provided by Rule 144 under the
Securities Act (if available), or (v) pursuant to an
effective registration statement under the Securities
Act, and we further agree to provide to any person
purchasing any of the Securities from us a notice
advising such purchaser that resales of the Securities
are restricted as stated herein and in the New Warrant.
4. We understand that, on any proposed resale of the
Securities, and on any proposed exercise of the New
Warrant by a "foreign person", we (or such foreign
person) will be required to furnish to the Company and
the Warrant Agent (if other than the Company), such
certifications, legal opinions and other information as
they may reasonably require to confirm that the
proposed sale or exercise complies with the foregoing
restrictions. We further understand that the Securities
acquired by us will bear a legend to the foregoing
effect.
5. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act) and have such
knowledge and experience in financial and business
matters as to be capable of evaluating the merits and
risks of our investment in the Securities, and we and
any accounts for which we are acting are each able to
bear the economic risk of our or their investment, as
the case may be.
6. We are acquiring the Securities for our account or
for one or more accounts (each of which is an
institutional "accredited investor") as to each of
which we exercise sole investment discretion.
7. We acknowledge and agree that the New Warrant will be
issued against delivery of the Old Warrants (or
evidence satisfactory to the Company of their
guaranteed delivery) free and clear of all liens,
charges and encumbrances. We acknowledge and agree that
any income tax consequences attributable to the
Exchange and the acquisition of the Securities shall be
borne by the acquirer of the Securities. We represent
and warrant to the Company that no broker-dealer or
other third party has been retained to act as agent for
or represent the undersigned in connection with the
Exchange and that no commission or other remuneration
is being paid or given, or is required to be paid or
given, directly or indirectly, in connection with the
Exchange. We agree, and each subsequent holder of the
New Warrant will agree to execute and deliver to the
Company all such further notices, documentation and
certifications as may be required to be filed under
applicable securities and Federal and State income tax
laws, rules and regulations relating or attributable to
the Exchange, the issuance of the Securities or as the
Company may reasonably request
8. The Company hereby represents, warrants and agrees
with you as follows: (i) in the event that on or prior
to March 15, 1999 the Company makes an offer to the
holders of warrants of the same class or issue as the
Old Warrants to either (x) exchange their warrants for
new warrants with an exercise price which is lower than
the Exercise Price of the New Warrant or (y) reduce the
exercise price of their warrants, or increase the
number of shares subject to such warrants, or both,
either by amendment of the terms of such warrants or
pursuant to the unilateral powers granted the Company
under the terms of such warrants, resulting in such
warrant holders being offered the right to acquire
shares of Common Stock at an effective price per share
below the Exercise Price of the New Warrant, then the
Company shall offer the holder of the New Warrant the
right to acquire that number of shares of Common Stock
at a purchase price of $.01 per share which would
result in an effective reduction in the Exercise Price
of the New Warrant so that it equals such reduced
effective exercise price offered such other warrant
holders; and (ii) the Warrant Shares shall be
considered "Registrable Securities", for purposes of
that certain Registration Rights Agreement dated May
20, 1997 (the benefits of which the Company hereby
agrees to extend to the holder of the New Warrant),
which the Company hereby agrees to include in the
Registration Statement on Form S-1 referred to in
paragraph 1 above pursuant to the "Piggy-Back
Registration Rights" provisions of Section 8(a) of
such Agreement which are incorporated by reference
herein.
You, the Warrant Agent and others are entitled to rely upon
this letter and are irrevocably authorized to produce this letter
or a copy hereof to any interested party in any administrative or
legal proceeding or official inquiry with respect to the matters
covered hereby.
Very truly yours,
CUMBERLAND PARTNERS
By:________________________________
Name:___________________________
Title:____________________________
XCL LTD. HEREBY AFFIRMS
THE REPRESENTATIONS,
WARRANTIES AND AGREEMENTS
SET FORTH IN PARAGRAPH 8, ABOVE.
XCL LTD.
BY:___________________________
ITS: Executive Vice President
DATE: September 16, 1998
EXHIBIT A
XCL LTD.
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANTS (THE
"SHARES") HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECUR
ITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY OTHER SEC
URITIES OR BLUE SKY LAWS OF ANY OTHER DOMESTIC OR FOREIGN
JURISDICTION. NO OFFER, SALE, TRANSFER, PLEDGE OR OTHER
DISPOSITION (COLLECTIVELY, A "DISPOSAL") OF THE WARRANTS
REPRESENTED BY THIS CERTIFICATE AND THE SHARES MAY BE MADE UNLESS
(i) REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
OR BLUE SKY LAWS OR (ii) XCL LTD. (THE "COMPANY") RECEIVES A
WRITTEN OPINION OF UNITED STATES LEGAL COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO IT TO THE EFFECT THAT SUCH DISPOSAL IS
EXEMPT FROM SUCH REGISTRATION REQUIREMENTS.
No.
WARRANTS TO PURCHASE
COMMON STOCK OF XCL LTD.
Initial Issuance on September 15, 1998
Void after 5:00 p.m. New York Time, September 30, 1998
THIS CERTIFIES THAT, for value received, Cumberland Partners
or registered assigns (the "Holder") is the registered holder of
warrants (the "Warrants") to purchase from XCL Ltd., a Delaware
corporation (the "Company"), at any time or from time to time
beginning on September 15, 1998 and until 5:00 p.m., New York
time, on September 30, 1998 (the "Expiration Date"), subject to
the conditions set forth herein, at the initial exercise price of
$2.50 per share (the "Initial Exercise Price"), subject to adjust
ment as set forth herein (the "Exercise Price"), up to an aggre
gate of Three Hundred Fifty One Thousand Fifteen (351,015) fully
paid and non-assessable common shares, par value $0.01 per share
(the "Common Stock"), of the Company (the "Shares", and together
with the Warrants, the "Securities") upon surrender of this
warrant certificate (the "Certificate") and payment of the
Exercise Price multiplied by the number of Shares in respect of
which Warrants are then being exercised (the "Purchase Price") at
the principal office of the Company presently located at 110 Rue
Jean Lafitte, Lafayette, LA 70508, United States of America.
1. Exercise of Warrants.
(a) The exercise of any Warrants represented by
this Certificate is subject to the conditions set forth below in
Section 3, "Compliance with Securities Laws."
(b) Subject to compliance with all of the
conditions set forth herein, the Holder shall have the right at
any time and from time to time after September 15, 1998 to pur
chase from the Company the number of Shares which the Holder may
at the time be entitled to purchase pursuant hereto, upon
surrender of this Certificate to the Company at its principal
office, together with the form of election to purchase attached
hereto duly completed and signed, and upon payment to the Company
of the Purchase Price.
No Warrant may be exercised after 5:00 p.m., New York time,
on the Expiration Date, after which time all Warrants evidenced
hereby shall be void.
(c) Payment of the Purchase Price shall be made in
cash, by wire transfer of immediately available funds or by
certified check or banker's draft payable to the order of the Com
pany, or any combination of the foregoing.
(d) The Warrants represented by this Certificate are
exercisable at the option of the Holder, in whole or in part (but
not as to fractional Shares). Upon the exercise of less than all
of the Warrants evidenced by this Certificate, the Company shall
forthwith issue to the Holder a new certificate of like tenor
representing the number of unexercised Warrants.
(e) Subject to compliance with all of the
conditions set forth herein, upon surrender of this Certificate
to the Company at its principal office, together with the form of
election to purchase attached hereto duly completed and signed,
and upon payment of the Purchase Price, the Company shall cause
to be delivered promptly to or upon the written order of the
Holder and in such name or names as the Holder may designate, a
share certificate or share certificates for the number of whole
Shares purchased upon the exercise of the Warrants. Such share
certificate or share certificates representing the Shares shall
be free of any restrictive legend. The Company shall ensure that
no "stop transfer" or similar instruction or order with respect
to the Shares purchased upon exercise of the Warrants shall be in
effect at ChaseMellon Shareholders Services, IRG Plc or any suc
cessor transfer agent for the Common Stock of the Company (the
"Transfer Agent").
2. Payment of Taxes. The Company will pay all documen
tary stamp taxes, if any, attributable to the issuance and
delivery of the Securities; provided, however, that the Company
shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of
any Securities or any Shares in any name other than that of the
Holder, which transfer taxes shall be paid by the Holder, and
until payment of such transfer taxes, if any, the Company shall
not be required to issue such Securities.
3. Compliance with Securities Laws. The Securities
have not been, and are not required to be, registered under the
United States Securities Act of 1933, as amended (the "Act"), or
any other securities or blue sky laws of any other domestic or
foreign jurisdiction (collectively, the "Securities Laws"). No
offer, sale, transfer, pledge or other disposition (collectively,
a "Disposal") of the Securities may be made unless (i) registered
under the Act and any other applicable Securities Laws or (ii)
the Company receives a written opinion of United States legal
counsel in form and substance satisfactory to it to the effect
that such Disposal is exempt from such registration requirements.
4. Transfer of Warrants.
(a) The Warrants shall be transferable only on
the books of the Company maintained at the Company's principal
office upon delivery of this Certificate with the form of
assignment attached hereto duly completed and signed by the
Holder or by its duly authorized attorney or representative,
accompanied by proper evidence of succession, assignment or
authority to transfer. The Company may, in its discretion,
require, as a condition to any transfer of Warrants, a signature
guarantee, which may be provided by a commercial bank or trust
company, by a broker or dealer which is a member of the National
Association of Securities Dealers, Inc., or by a member of a
United States national securities exchange, The Securities and
Futures Authority Limited in the United Kingdom, or The London
Stock Exchange Limited in London, England. Upon any registration
of transfer, the Company shall deliver a new warrant certificate
or warrant certificates of like tenor and evidencing in the
aggregate a like number of Warrants to the person entitled
thereto in exchange for this Certificate, subject to the
limitations provided herein, without any charge except for any
tax or other governmental charge imposed in connection therewith.
(b) Notwithstanding anything in this
Certificate to the contrary, neither any of the Warrants nor any
of the Shares issuable upon exercise of any of the Warrants shall
be transferable, except upon compliance by the Holder with any
applicable provisions of the Act and any other applicable
Securities Laws.
5. Exchange and Replacement of Warrant
Certificates; Loss or Mutilation of
Warrant Certificates.
(a) This Certificate is exchangeable without cost,
upon the surrender hereof by the Holder at the principal office
of the Company, for new warrant certificates of like tenor and
date representing in the aggregate the right to purchase the same
number of Shares in such denominations as shall be designated by
the Holder at the time of such surrender. Any transfer not made
in such compliance shall be null and void and shall be given no
effect hereunder.
(b) Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Certificate and, in case of such loss, theft
or destruction, of indemnity and security reasonably satisfactory
to it, and reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation
of this Certificate, if mutilated, the Company will make and
deliver a new warrant certificate of like tenor, in lieu thereof.
6. Adjustment of Exercise Price and Number of
Shares Issuable.
The number and kind of Shares purchasable upon the exercise
of each Warrant and the Exercise Price shall be subject to
adjustment from time to time as follows:
(a) Stock Splits, Combinations, etc. In case
the Company shall hereafter (A) pay a dividend or make a
distribution on its Common Stock in shares of its capital
stock (whether shares of Common Stock or of capital stock of
any other class), (B) subdivide its outstanding shares of
Common Stock or (C) combine its outstanding shares of Common
Stock into a smaller number of shares, the (a) number of
Shares purchasable upon exercise of each Warrant immediately
prior thereto shall be adjusted so that the holder of any
Warrant thereafter exercised shall be entitled to receive
the number of Shares which such holder would have owned
immediately following such action had such Warrant been
exercised immediately prior thereto, and (b) the Exercise
Price shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, the
numerator of which shall be the number of Shares purchasable
upon the exercise of each Warrant immediately prior to such
adjustment, and the denominator of which shall be the number
of Shares purchasable immediately thereafter. An adjustment
made pursuant to this Section 6(a) shall become effective
immediately after the record date in the case of a dividend
and shall become effective immediately after the effective
date in the case of a subdivision, combination or
reclassification. If, as a result of an adjustment made
pursuant to this Section 6(a), the holder of any Warrant
thereafter exercised shall become entitled to receive shares
of two or more classes of capital stock of the Company, the
Board of Directors of the Company (whose determination shall
be conclusive) shall determine the allocation of the
adjusted Exercise Price between or among shares of such
classes of capital stock.
(b) Reclassification, Combinations, Mergers,
etc. In case of any reclassification or change of
outstanding shares of Common Stock (other than as set forth
in paragraph (a) above and other than a change in par value,
or from par value to no par value, or from no par value to
par value), or in case of any consolidation or merger of the
Company with or into another corporation or other entity
(other than a merger in which the Company is the continuing
corporation and which does not result in any
reclassification or change of the then outstanding shares of
Common Stock or other capital stock of the Company (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)) or in case of any sale or
conveyance to another corporation or other entity of all or
substantially all of the assets of the Company, then, as a
condition of such reclassification, change, consolidation,
merger, sale or conveyance, the Company or such a successor
or purchasing corporation or other entity, as the case may
be, shall forthwith make lawful and adequate provision
whereby the holder of such Warrant then outstanding shall
have the right thereafter to receive on exercise of such
Warrant the kind and amount of shares of stock and other
securities and property receivable upon such
reclassification, change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common
Stock issuable upon exercise of such Warrant immediately
prior to such reclassification, change, consolidation,
merger, sale or conveyance and enter into a warrant
amendment so providing. Such provisions shall include
provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided
for in this Section 6. If the issuer of securities
deliverable upon exercise of Warrants under the supplemental
warrant agreement is an affiliate of the formed, surviving
or transferee corporation or other entity, that issuer shall
join in the supplemental warrant agreement. The above
provisions of this Section 6 (b) shall similarly apply to
successive reclassifications and changes of shares of Common
Stock and to successive consolidations, mergers, sales or
conveyances.
In case of any such reclassification, merger,
consolidation or disposition of assets, the successor or
acquiring corporation or other entity (if other than the
Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by
the Company and all the obligations and liabilities
hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of
Directors of the Company) in order to provide for
adjustments of shares of the Common Stock for which each
Warrant is exercisable, which shall be as nearly equivalent
as practicable to the adjustments provided for in this
Section 6. The foregoing provisions of this Section 6(b)
shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or dispositions
of assets.
(c) Issuance of Options or Convertible
Securities. In the event the Company shall, at any time or
from time to time after the date hereof, issue, sell,
distribute or otherwise grant in any manner (including by
assumption) to all holders of the Common Stock any rights to
subscribe for or to purchase, or any warrants or options for
the purchase of, Common Stock or any stock or securities
convertible into or exchangeable for Common Stock (any such
rights, warrants or options being herein called "Options"
and any such convertible or exchangeable stock or securities
being herein called "Convertible Securities") or any
Convertible Securities (other than upon exercise of any
Option), whether or not such Options or the rights to
convert or exchange such Convertible Securities are
immediately exercisable, and the price per share at which
Common Stock is issuable upon the exercise of such Options
or upon the conversion or exchange of such Convertible
Securities (determined by dividing (i) the aggregate amount,
if any, received or receivable by the Company as
consideration for the issuance, sale, distribution or
granting of such Options or any such Convertible Security,
plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the
exercise of all such Options or upon conversion or exchange
of all such Convertible Securities, plus, in the case of
Options to acquire Convertible Securities, the minimum
aggregate amount of additional consideration, if any,
payable upon the conversion or exchange of all such
Convertible Securities, by (ii) the total maximum number of
shares of Common Stock issuable upon the exercise of all
such Options or upon the conversion or exchange of all such
Convertible Securities or upon the conversion or exchange of
all Convertible Securities issuable upon the exercise of all
Options) shall be less than the current Market Price per
Share of Common Stock (determined pursuant to Section 6(f))
on the record date for the issuance, sale, distribution or
granting of such Options (any such event being herein called
a "Distribution") then, effective upon such Distribution,
the Exercise Price shall be reduced to the price (calculated
to the nearest 1/1,000 of one cent) determined by
multiplying the Exercise Price in effect immediately prior
to such Distribution by a fraction, the numerator of which
shall be the sum of (i) the number of shares of Common Stock
outstanding (exclusive of any treasury shares) immediately
prior to such Distribution multiplied by the current Market
Price per Share of Common Stock (determined pursuant to
Section 6(f)) on the date of such Distribution plus (ii) the
consideration, if any, received by the Company upon such
Distribution, and the denominator of which shall be the
product of (A) the total number of shares of Common Stock
outstanding (exclusive of any treasury shares) immediately
after such Distribution multiplied by (B) the current Market
Price per Share of Common Stock (determined pursuant to
Section 6(f)) on the record date for such Distribution. For
purposes of the foregoing, the total maximum number of
shares of Common Stock issuable upon exercise of all such
Options or upon the conversion or exchange of all such
Convertible Securities or upon the conversion or exchange of
the total maximum amount of the Convertible Securities
issuable upon the exercise of all such Options shall be
deemed to have been issued as of the date of such
Distribution and thereafter shall be deemed to be
outstanding and the Company shall be deemed to have received
as consideration therefor such price per share, determined
as provided above. Except as provided in Sections 6(i) and
(j) below, no additional adjustment of the Exercise Price
shall be made upon the actual exercise of such Options or
upon conversion or exchange of the Convertible Securities or
upon the conversion or exchange of the Convertible
Securities issuable upon the exercise of such Options.
Notwithstanding anything in this Section 6 to the contrary,
neither the payment of dividends on any shares of Amended
Series A Preferred Stock in additional shares of Amended
Series A Preferred Stock, nor the issuance of shares of
Common Stock on conversion of the Amended Series A Preferred
Stock, nor the issuance of shares of Common Stock in payment
of any dividends due on any shares of Preferred Stock of the
Company outstanding on the Issue Date, nor on redemption of
any such shares, nor in payment of any interest due under
the Company's Secured Subordinated Notes, nor upon exercise
of any options granted to management pursuant to an employee
benefit plan approved by stockholders of the Company, nor
upon the exercise of any outstanding Warrants (including
Warrants issued in the Concurrent Debt Offering (as defined
below)), shall require any adjustment to either the Exercise
Price of the Warrants or the number of shares issuable upon
exercise of the Warrants.
(d) Dividends and Distributions. In the event
the Company shall, at any time or from time to time after
the date hereof, distribute to all the holders of Common
Stock any dividends or other distribution of cash, evidences
of its indebtedness, other securities or other properties or
assets (in each case other than (i) dividends payable in
Common Stock, Options or Convertible Securities and (ii) any
cash dividend from current or retained earnings), or any
options, warrants or other rights to subscribe for or
purchase any of the foregoing, then (A) the Exercise Price
shall be decreased to a price determined by multiplying the
Exercise Price then in effect by a fraction, the numerator
of which shall be the current Market Price per Share of
Common Stock (determined pursuant to Section 6(f)) on the
record date for such distribution less the sum of (X) the
cash portion, if any, of such distribution per share of
Common Stock outstanding (exclusive of any treasury shares)
on the record date for such distribution plus (Y) the then
fair market value (as determined in good faith by the Board
of Directors of the Company) per share of Common Stock
outstanding (exclusive of any treasury shares) on the record
date for such distribution of that portion, if any, of such
distribution consisting of evidences of indebtedness, other
securities, properties, assets (other than cash), options,
warrants or subscription or purchase rights, and the
denominator of which shall be such current market price per
share of Common Stock and (B) the number of Shares
purchasable upon the exercise of each Warrant shall be
increased to a number determined by multiplying the number
of shares of Common Stock so purchasable immediately prior
to the record date for such distribution by a fraction, the
numerator of which shall be the Exercise Price in effect
immediately prior to the adjustment required by clause (A)
of this sentence and the denominator of which shall be the
Exercise Price in effect immediately after such adjustment.
The adjustments required by this Section 6(d) shall be made
whenever any such distribution occurs retroactive to the
record date for the determination of stockholders entitled
to receive such distribution.
(e) Self-Tenders. In case of the consummation
of a tender or exchange offer (other than an odd-lot tender
offer) made by the Company or any subsidiary of the Company
for all or any portion of the Common Stock to the extent
that the cash and value of any other consideration included
in such payment per share of Common Stock exceeds the first
reported sales price per share of Common Stock on the
trading day next succeeding the last time tenders or
exchanges may be made pursuant to the tender or exchange
offer (the "Expiration Time"), the Exercise Price shall be
reduced so that the same shall equal the price determined by
multiplying the Exercise Price in effect immediately prior
to the Expiration Time by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) at the
Expiration Time multiplied by the first reported sales price
of the Common Stock on the trading day next succeeding the
Expiration Time, and the denominator of which shall be the
sum of (A) the fair market value (determined by the Board of
Directors of the Company, whose determination shall be
conclusive and described in a resolution of the Board of
Directors) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of
all shares validly tendered or exchanged and not withdrawn
as of the Expiration Time (the shares deemed so accepted, up
to any such maximum, being referred to as the "Purchased
Shares") and (B) the product of the number of shares of
Common Stock outstanding (less any Purchased Shares) on the
Expiration Time and the first reported sales price of the
Common Stock on the trading day next succeeding the
Expiration Time, such reduction to become effective
immediately prior to the opening of business on the day
following the Expiration Time.
(f) Current Market Price. For the purpose of
any computation of current market price, the current "Market
Price per Share of Common Stock" at any date shall be (x)
for purposes of Section 7 herein (dealing with fractional
interests), the closing price on the trading day immediately
prior to the exercise of the applicable Warrant and (y) in
all other cases, the average of the daily closing prices for
the shorter of (i) the 20 consecutive trading days ending on
the last full trading day on the exchange or market
specified in the second succeeding sentence prior to the
Time of Determination (as defined below) and (ii) the period
commencing on the date next succeeding the first public
announcement of the issuance, sale, distribution or granting
in question through such last full trading day prior to the
Time of Determination. The term "Time of Determination" as
used herein shall be the time and date of the earlier to
occur of (A) the date as of which the current market price
is to be computed and (B) the last full trading day on such
exchange or market before the commencement of "ex-dividend"
trading in the Common Stock relating to the event giving
rise to the adjustment required by paragraph (a), (b), (c)
or (d). The closing price for any day shall be the last
reported sale price regular way or, in case no such reported
sale takes place on such day, the average of the closing bid
and asked prices regular way for such day, in each case (1)
on the principal national securities exchange on which the
shares of Common Stock are listed or to which such shares
are admitted to trading or (2) if the Common Stock is not
listed or admitted to trading on a national securities
exchange, in the over-the-counter market as reported by the
Nasdaq NMS or any comparable system or (3) if the Common
Stock is not listed on the Nasdaq NMS or a comparable
system, as furnished by two members of the American Stock
Exchange, Inc. selected from time to time in good faith by
the Board of Directors of the Company for that purpose. In
the absence of all of the foregoing, or if for any other
reason the current Market Price per Share cannot be
determined pursuant to the foregoing provisions of this
Section 6(f), the current Market Price per Share shall be
the fair market value thereof as determined in good faith by
the Board of Directors of the Company.
(g) Certain Distributions. If the Company
shall pay a dividend or make any other distribution payable
in Options or Convertible Securities, then, for purposes of
paragraph (c) above, such Options or Convertible Securities
shall be deemed to have been issued or sold without
consideration.
(h) Consideration Received. If any shares of
Common Stock, Options or Convertible Securities shall be
issued, sold or distributed for a consideration other than
cash, the amount of the consideration other than cash
received by the Company in respect thereof shall be deemed
to be the then fair market value of such consideration (as
determined in good faith by the Board of Directors of the
Company). If any Options shall be issued in connection with
the issuance and sale of other securities of the Company,
together comprising one integral transaction in which no
specific consideration is allocated to such Options by the
parties thereto, such Options shall be deemed to have been
issued without consideration; provided, however, that if
such Options have an exercise price equal to or greater than
the current Market Price per Share of the Common Stock on
the date of issuance of such Options, then such Options
shall be deemed to have been issued for consideration equal
to such exercise price.
(i) Deferral of Certain Adjustments. No
adjustment to the Exercise Price (including the related
adjustment to the number of Shares purchasable upon the
exercise of each Warrant) shall be required hereunder unless
such adjustment, together with other adjustments carried
forward as provided below, would result in an increase or
decrease of at least one percent (1%) of the Exercise Price;
provided, however, that any adjustments which by reason of
this paragraph (i) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment. No adjustment need be made for a change in the
par value of the Common Stock. All calculations under this
Section 6 shall be made to the nearest 1/1,000 of one cent
or to the nearest l/1,000th of a Share, as the case may be.
(j) Changes in Options and Convertible
Securities. If the exercise price provided for in any
Options referred to in Section 6(c) above, the additional
consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in
Section 6(c) above, or the rate at which any Convertible
Securities referred to in Section 6(c) above are convertible
into or exchangeable for Common Stock shall change at any
time (other than under or by reason of provisions designed
to protect against dilution upon an event which results in a
related adjustment pursuant to this Section 6), the Exercise
Price then in effect and the number of Shares purchasable
upon the exercise of each Warrant shall forthwith be
readjusted (effective only with respect to any exercise of
any Warrant after such readjustment) to the Exercise Price
and number of Shares so purchasable that would then be in
effect had the adjustment made upon the issuance, sale,
distribution or granting of such Options or Convertible
Securities been made based upon such changed purchase price,
additional consideration or conversion rate, as the case may
be, but only with respect to such Options and Convertible
Securities as then remain outstanding.
(k) Expiration of Options and Convertible
Securities. If, at any time after any adjustment to the
number of Shares purchasable upon the exercise of each
Warrant shall have been made pursuant to Sections 6(c) or
(j) above or this Section 6(k), any Options or Convertible
Securities shall have expired unexercised, the number of
such Shares so purchasable shall, upon such Expiration, be
readjusted and shall thereafter be such as they would have
been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (i)
the only shares of Common Stock deemed to have been issued
in connection with such Options or Convertible Securities
were the shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or Convertible
Securities and (ii) such shares of Common Stock, if any,
were issued or sold for the consideration actually received
by the Company upon such exercise plus the aggregate
consideration, if any, actually received by the Company for
the issuance, sale, distribution or granting of all such
Options or Convertible Securities, whether or not exercised;
provided, however, that no such readjustment shall have the
effect of decreasing the number of such shares so
purchasable by an amount (calculated by adjusting such
decrease to account for all other adjustments made pursuant
to this Section 6 following the date of the original
adjustment referred to above) in excess of the amount of the
adjustment initially made in respect of the issuance, sale,
distribution or granting of such Options or Convertible
Securities.
(l) Other Adjustments. In the event that at
any time, as a result of an adjustment made pursuant to this
Section 6, holders of Warrants shall become entitled to
receive any securities of the Company other than shares of
Common Stock, including shares of Amended Series A Preferred
Stock as provided in Section 6(o) below, thereafter the
number of such other securities so receivable upon exercise
of each Warrant and the Exercise Price applicable to such
exercise shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the Shares of Common Stock
contained in this Section 6.
(m) Other Action Affecting Common Stock. In
case at any time or from time to time the Company shall take
any action in respect of its outstanding shares of Common
Stock, then the number of Shares for which each Warrant is
exercisable shall be adjusted in such manner as may be
equitable in the circumstances. If the Company shall at any
time and from time to time issue or sell (i) any shares of
any class of common stock other than Common Stock, (ii) any
evidences of its indebtedness, shares of stock or other
securities which are convertible into or exchangeable for
such shares of common stock, with or without the payment of
additional consideration in cash or property, or (iii) any
warrants or other rights to subscribe for or purchase any
such shares of common stock or any such evidences, shares of
stock or other securities referred to in (ii) above, then in
each such case such issuance shall be deemed to be of, or in
respect of, Common Stock for purposes of this Section 6;
provided, however, that, without limiting the generality of
the foregoing, if the Company shall take a record of the
holders of its Common Stock for the purpose of entitling
them to receive a dividend payable in, or other distribution
of, common stock other than Common Stock, including shares
of non-voting common stock, then the number of Shares for
which each Warrant is exercisable immediately after the
occurrence of any such event shall be adjusted to equal the
aggregate number of shares of such common stock and of
Common Stock which a record holder of the same number of
Shares for which each Warrant is exercisable immediately
prior to the occurrence of such event would own or be
entitled to receive after the happening of such event.
(n) Statement of Warrant Certificates.
Irrespective of any adjustment in the number or kind of
Shares issuable upon the exercise of each Warrant or the
Exercise Price, Warrant Certificates theretofore or
thereafter issued shall continue to express the same number
and kind of Shares and Exercise Price as are stated in the
Warrant Certificates initially issuable pursuant to this
Agreement.
(o) Increased Shares or Reduced Exercise Price.
From time to time, the Company may, for a period of not less than
20 days, in its discretion, increase the number of Shares
purchasable upon the exercise of this Warrant, without making any
adjustment to the Exercise Price, or reduce the Exercise Price,
without making any adjustment to the number of Shares purchasable
upon the exercise of this Warrant. The Company hereby represents,
warrants and agrees with you as follows: (i) in the event that on
or prior to the expiration of this Warrant the Company makes an
offer to the holders of warrants dated May 20, 1997 issued
pursuant to a Warrant Agreement dated such date ("Old Warrants")
to either (x) exchange their Old Warrants for new warrants with
an exercise price which is lower than the Exercise Price of this
Warrant or (y) reduce the exercise price of the Old Warrants, or
increase the number of shares subject to such Warrants, or both,
either by amendment of the terms of such Warrants or pursuant to
the unilateral powers granted the Company under the terms of such
Warrants, resulting in such Warrant holders being offered the
right to acquire shares of Common Stock at an effective price per
share below the Exercise Price of this Warrant, then the Company
shall offer the holder of this Warrant the right to acquire that
number of shares of Common Stock at a purchase price of $.01 per
share which would result in an effective reduction in the
Exercise Price of this Warrant so that it equals such reduced
effective exercise price offered such holders of Old Warrants;
and (ii) the Warrant Shares shall be considered "Registrable
Securities", for purposes of that certain Registration Rights
Agreement dated May 20, 1997 (the benefits of which the Company
hereby agrees to extend to the holder of this Warrant), which the
Company hereby agrees to include in the Registration Statement on
Form S-1 filed by the Company with the Securities and Exchange
Commission on May 8, 1998 (File No. 333-51937) pursuant to the
"Piggy-Back Registration Rights" provisions of Section 8(a) of
such Agreement which are incorporated by reference herein.
7. Fractional Interest. The Company shall not
be required to issue fractional shares of Common Stock on the
exercise of Warrants. If more than one Warrant shall be
presented for exercise in full at the same time by the same
holder, the number of full shares of Common Stock which shall be
issuable upon such exercise shall be computed on the basis of the
aggregate number of shares of Common Stock acquirable on exercise
of the Warrants so presented. If any fraction of a share of
Common Stock would, except for the provisions of this Section 7,
be issuable on the exercise of any Warrant, the Company shall
either (i) pay an amount in cash calculated by the Company to
equal the then current Market Price per Share (determined
pursuant to Section 6(f)) multiplied by such fraction 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. While the Company
will endeavor to use its best efforts to secure the best
available sales price for such aggregated fractional shares, such
price shall not necessarily be the highest price obtainable for
such shares. Holders of Warrants, by their acceptances of this
Warrant Certificate, expressly waive any and all rights to
receive any fraction of a share of Common Stock or a stock
certificate or scrip representing a fraction of a share of Common
Stock.
8. Notices to Warrant Holders. Nothing contained
in this Certificate shall be construed as conferring upon the
Holder the right to vote or to consent or to receive notice as a
stockholder in respect of any meetings of stockholders for the
election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however,
at any time prior to the exercise or expiration of the Warrants,
any of the following events shall occur:
(i) the holders of shares of the Common Stock shall
be entitled to receive a dividend or distribution
payable otherwise than in cash, or a cash dividend
or distribution payable otherwise than out of
current or retained earnings, as indicated by the
accounting treatment of such dividend or dis
tribution on the books of the Company; or
(ii) the Company shall offer to all the holders of
its Common Stock any additional shares of capital
stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the
Company, or any option, right or warrant to sub
scribe therefor; or
(iii) a dissolution, liquidation or winding-up of
the Company (other than in connection with a
consolidation or merger) or a sale of all or sub
stantially all of its property, assets and business
as an entirety shall be approved by the Company's
Board of Directors; or
(iv) there shall be any capital reorganization or
reclassification of the capital stock of the
Company (other than a change in the number of
outstanding shares of Common Stock or a change in
the par value of the Common Stock), or
consolidation or merger of the Company with another
entity;
then, in any one or more of said events, the Company shall give
written notice of such event at least fifteen (15) days prior to
the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled
to such dividend, distribution, convertible or exchangeable secur
ities or subscription rights, options or warrants, or entitled to
vote on such proposed dissolution, liquidation, winding-up or
sale. Such notice shall specify such record date or the date of
closing the transfer books, as the case may be. Failure to give
such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment
of any such dividend or distribution, or the issuance of any
convertible or exchangeable securities or subscription rights,
options or warrants, or any proposed dissolution, liquidation,
winding-up or sale.
9. Reservation and Listing of Securities.
The Company covenants and agrees that at all times during
the period after September 15, 1998, the Company shall reserve
and keep available, free from preemptive rights, out of its auth
orized and unissued shares of Common Stock or out of its
authorized and issued shares of Common Stock held in its
treasury, solely for the purpose of issuance upon exercise of the
Warrants, such number of Shares as shall be issuable upon the
exercise of the Warrants.
(b) The Company covenants and agrees that, upon
exercise of the Warrants in accordance with their terms and
payment of the Purchase Price, all Shares issued or sold upon
such exercise shall not be subject to the preemptive rights of
any stockholder and when issued and delivered in accordance with
the terms of the Warrants shall be duly and validly issued, fully
paid and non-assessable, and the Holder shall receive good and
valid title to such Shares free and clear from any adverse claim
(as defined in the applicable Uniform Commercial Code), except
such as have been created by the Holder.
(c) As long as the Warrants shall be outstanding,
the Company shall use its reasonable efforts to cause all Shares
issuable upon the exercise of the Warrants to be quoted by or
listed on any national securities exchange or other securities
listing service on which the shares of Common Stock of the
Company are then listed.
10. Survival. All agreements, covenants,
representations and warranties herein shall survive the execution
and delivery of this Certificate and any investigation at any
time made by or on behalf of any party hereto and the exercise,
sale and purchase of the Warrants and the Shares (and any other
securities or properties) issuable on exercise hereof.
11. Remedies. The Company agrees that the remedies
at law of the Holder, in the event of any default or threatened
default by the Company in the performance of or compliance with
any of the terms hereof, may not be adequate and such terms may,
in addition to and not in lieu of any other remedy, be
specifically enforced by a decree of specific performance of any
agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.
12. Registered Holder. The Company may deem and
treat the registered Holder hereof as the absolute owner of this
Certificate and the Warrants represented hereby (notwithstanding
any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise of the Warrants, of any
notice, and of any distribution to the Holder hereof, and for all
other purposes, and the Company shall not be affected by any
notice to the contrary.
13. Notices. All notices and other communications
from the Company to the Holder of the Warrants represented by
this Certificate shall be in writing and shall be deemed to have
been duly given if and when personally delivered, two (2)
business days after sent by overnight courier or ten (10) days
after mailed by certified, registered or international recorded
mail, postage prepaid and return receipt requested, or when
transmitted by telefax, telex or telegraph and confirmed by
sending a similar mailed writing, if to the Holder, to the last
address of such Holder as it shall appear on the books of the
Company maintained at the Company's principal office or to such
other address as the Holder may have specified to the Company in
writing.
14. Headings. The headings contained herein are
for convenience of reference only and are not part of this
Certificate.
15. Governing Law. This Certificate shall be
deemed to be a contract made under the laws of the State of
Delaware and for all purposes shall be governed by, and construed
in accordance with, the laws of said state, without regard to the
conflict of laws provisions thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant Certifi
cate to be duly executed by its duly authorized officers under
its corporate seal.
Dated: September 15, 1998
XCL LTD.
By:_____________________________
Name:______________________
Title:_____________________
Attest:
Corporate Secretary
XCL LTD.
FORM OF ELECTION TO PURCHASE
(To be executed by the registered Holder
if such Holder desires to exercise Warrants)
The undersigned registered Holder hereby irrevocably
elects to exercise the right of purchase represented by this
Warrant Certificate for, and to purchase,
Shares hereunder, and herewith tenders in payment for such
Shares cash, a wire transfer, a certified check or a bank
er's draft payable to the order of XCL Ltd. in the amount of
, all in accordance with the terms hereof. The undersigned
requests that a share certificate for such Shares be
registered in the name of and delivered to:
(Please Print Name and Address)
and, if said number of Shares shall not be all the Shares
purchasable hereunder, that a new Warrant Certificate for
the balance remaining of the Shares purchasable hereunder be
registered in the name of the undersigned Warrant Holder or
his Assignee as below indicated and delivered to the address
stated below.
DATED:
Name of Warrant Holder:
(Please Print)
Address:
Signature:
Note: The above signature must correspond in all
respects with the name of the Holder as
specified on the face of this Warrant Certifi
cate, without alteration or enlargement or any
change whatsoever, unless the Warrants
represented by this Warrant Certificate have
been assigned.
XCL LTD.
FORM OF ASSIGNMENT
(To be executed by the registered Holder if such Holder
desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers to:
(Please Print Name and Address of Transferee)
Warrants to purchase up to Shares represented by
this Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint , Attorney, to trans
fer such Warrants on the books of the Company, with full
power of substitution in the premises. The undersigned
requests that if said number of Shares shall not be all of
the Shares purchasable under this Warrant Certificate that a
new Warrant Certificate for the balance remaining of the
Shares purchasable under this Warrant Certificate be regis
tered in the name of the undersigned Warrant Holder and
delivered to the registered address of said Warrant Holder.
DATED:
Signature of registered Holder:
Note: The above signature must correspond in all
respects with the name of the Holder as
specified on the face of this Warrant
Certificate, without alteration or enlargement
or any change whatsoever. The above signature
of the registered Holder must be guaranteed by
a commercial bank or trust company, by a
broker or dealer which is a member of the
National Association of Securities Dealers,
Inc. or by a member of a national securities
exchange, The Securities and Futures Authority
Limited in the United Kingdom or The London
Stock Exchange Limited in London, England.
Notarized or witnessed signatures are not
acceptable as guaranteed signatures.
Signature Guaranteed:
Authorized Officer
Name of Institution