ACKNOWLEDGMENT AND AGREEMENT REGARDING SECURITY INTEREST
ACKNOWLEDGMENT AND AGREEMENT REGARDING SECURITY
INTEREST dated as of January 15, 1999 by J. Edgar Monroe
Foundation (1976) (the "Foundation").
1. This Agreement is being executed and delivered
in connection with the sale and purchase of up to an aggregate of
62 units (the "Units"), each Unit being comprised of (a)
$100,000 in principal amount of a promissory note of XCL Land,
Ltd. ("Note") and (b) 21,705 warrants ("Warrants") to purchase
21,705 shares of XCL Ltd.'s common stock, par value $.01 per
share ("Common Stock") (issuable in one or more tranches) offered
by XCL Land, Ltd. and XCL Ltd. to a limited number of qualified
investors (the "Offering"). Half Units may be purchased pursuant
to the Offering.
2. Pursuant to Subscription Agreements dated as of
November 6, 1998 by and between XCL Land, Ltd., XCL Ltd. and the
Foundation, Estate of J. Edgar Monroe (the "Estate") and
Construction Specialists, Inc. d/b/a Con-Spec., Inc.
("Contractor") (collectively, the "November 1998 Subscription
Agreements"), the Foundation subscribed for and received one (1)
Unit and the Estate and Construction each subscribed for and
received seven (7) Units (the "Initial Units"). Pursuant to the
November 1998 Subscription Agreements, the Units had an exercise
price for the Warrants of $3.50 per share. Pursuant to that
certain Warrant Amendment Agreement by and among XCL Ltd., the
Estate, Foundation and Construction dated of even date herewith
(the "Warrant Amendment"), XCL Ltd. has agreed, in connection
with the subscription for an additional 2.5 Units by each of the
Estate and Construction on the date hereof, to reduce the
exercise price of the warrants issued as part of the Initial
Units to $2.00 per share.
3. In consideration of XCL Ltd.'s execution of the
Warrant Amendment to amend the Warrants issued to the Foundation
as part of the Initial Units even though the Foundation is not
subscribing for any additional Units at this time, the Foundation
hereby acknowledges that pursuant to the Security Agreements
granted in its favor in connection with the November 1998
Subscription Agreements, each of XCL Land, Ltd. ("XCL Land") and
The Exploration Company of Louisiana, Inc. ("TECLI") granted a
security interest in favor of the Foundation in and to 3.2258% of
each entity's partnership interest in L.M. Holding Associates,
L.P. ("L.M. Holding"). It was the intention of the parties that
those persons or entities providing new funds to XCL Land on or
after November 6, 1998, up to the aggregate outstanding principal
amount of $6,200,000 (the "New Funds") would hold security
interests in 100% of the partnership interest of XCL Land and
TECLI in L.M. Holding, such security interests to be allocated
pro rata among the providers of New Funds. The Foundation
further acknowledges that its security interest will change from
time to time as it or others purchase additional Units or provide
other New Funds (but only up to $6,200,000 principal outstanding)
to XCL Land. The Foundation acknowledges and agrees that through
March 19, 1999, a total of 22 Units are outstanding and $100,000
in New Funds other than those provided in connection with the
sale of such Units have been provided to XCL Land; as of such
date, the Foundation has a security interest in that percentage
of the partnership interests in L.M. Holding that is equal to the
percentage of the New Funds actually advanced at this time
($2,300,000) that the Foundation's aggregate Unit purchase price
of $100,000 represents; and in the event that additional Units
are sold or additional New Funds are provided to XCL Land by
persons other than the Foundation and secured by partnership
interests in L.M. Holding, the Foundation will immediately upon
demand by XCL Land execute (one or more times, as appropriate)
amendments to each of the Security Agreements releasing a
percentage of the partnership interest of L.M. Holding in which
it has a security interest sufficient to allocate the security
interests in the partnership interest of L.M. Holding among the
Unit holders or other providers of New Funds on a proportionate
basis (provided that no reduction in such security interest need
be made with respect to amounts of New Funds in excess of an
aggregate outstanding principal amount of $6,200,000).
IN WITNESS WHEREOF, the Foundation has executed this
Agreement effective on the date first above written.
J. EDGAR MONROE FOUNDATION (1976)
By:________________________________
Robert J. Monroe, President
STATE OF LOUISIANA
PARISH OF ORLEANS
On this _____ day of January, 1999, before me, the
undersigned, a Notary Public of said State, duly commissioned and
sworn, personally appeared ROBERT J. MONROE, known to me to be
the President of the corporation that executed the within
instrument, and acknowledged to me that the said corporation
executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal the day and year in this certificate
first above written.
___________________________________
NOTARY PUBLIC