SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") dated _______________,
____, is made between The Exploration Company of Louisiana, Inc.
("Grantor") and ____________________ ("Lender"), who agree as
follows:
Recitals
1. XCL Land, Ltd. ("XCL Land") is or will be indebted
unto the Lender for loans made or to be made and evidenced by
certain notes, including, but not limited to that certain
Promissory Note by XCL Land payable to the order of Lender dated
of even date herewith (the "Note").
2. The making of such loans will be of substantial
benefit to the Grantor, and, consequently, in order to secure the
full and punctual payment and performance of the Indebtedness as
defined herein, the Grantor has agreed to execute and deliver
this Agreement and to pledge, deliver and grant a continuing
security interest in and to the Collateral (as hereafter
defined).
AGREEMENT
NOW, THEREFORE, in consideration of the premises, the
Grantor and the Lender agree as follows:
Section 2. Definitions.
1. The terms "Agreement," "Grantor," "Lender,"
"Note," and "XCL Land" shall have the meanings indicated above.
2. As used in this Agreement, the following terms
shall have the following meaning:
"Event of Default" shall have the meaning defined in
the Note.
"General Intangibles" has the meaning given to it in
the UCC.
"Lien" shall mean any interest in property securing an
obligation owed to, or a claim by, a Person other than the owner
of the property, whether such interest is based on jurisprudence,
statute or contract, and including but not limited to the lien or
security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term "Lien"
shall include reservations, exceptions, encroachments, easements,
servitudes, usufructs, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances
affecting property. For the purposes of this Agreement, the
Grantor shall be deemed to be the owner of any property which it
has accrued or holds subject to a conditional sale agreement,
financing lease or other arrangement pursuant to which title to
the property has been retained by or vested in some other Person
for security purposes.
"New Funds" means funds advanced to Borrower on or
after November 6, 1998 through the purchase of Units or otherwise
up to the aggregate outstanding principal amount of $6,200,000.
"Permitted Liens" means (i) the Security Interests and
any other Liens created, assumed or existing with respect to the
Collateral in favor of Lender or in favor of any other purchaser
of Units or other provider of New Funds to XCL Land (provided
that the Liens in favor of such other persons do not cause the
percentage stated in Sections 2(A)(1) and 2(A)(2) hereof to be
less than the percentage of total New Funds provided by Lender)
and (ii) any other Liens permitted by Lender in writing to be
created or assumed or to exist with respect the Collateral.
"Person" means any individual, corporation,
partnership, joint venture, association, joint stock company,
trust, unincorporated organization, government or any agency or
political subdivision thereof, or any other form of entity.
"Proceeds" has the meaning giving to it in the UCC.
"Security Interests" means the security interests in
the Collateral and Proceeds granted hereunder in favor of Lender
securing the Indebtedness.
"Subscription Agreement" means that certain
Subscription Agreement dated _______________, ____ by and between
XCL Land, Lender and XCL Ltd. and any subsequent subscription
agreement for additional Units entered into between the same
parties.
"UCC" means the Uniform Commercial Code, Commercial
Laws - Secured Transactions (Louisiana Revised Statutes 10:9-101
through :9-605) in the State of Louisiana, as amended from time
to time; provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection
of the Security Interests in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than
Louisiana, "UCC" means the Uniform Commercial Code as in effect
in such other jurisdiction for purposes of the provisions hereof
relating to such perfection or effect of perfection or
non-perfection.
"Units" has the meaning defined in the Subscription
Agreement.
Section 3. Security Interest.
1. To secure the full and punctual payment and
performance of all present and future amounts, liabilities,
obligations and indebtedness of XCL Land to the Lender,
including, without limitation all promissory notes (including,
but not limited to the Note) heretofore or hereafter executed by
XCL Land, in principal, interest, deferral and delinquency
charges as therein stipulated, whether such amounts, liabilities,
obligations and indebtedness be liquidated or unliquidated, now
existing or hereafter arising (collectively, the "Indebtedness"),
the Grantor hereby pledges, pawns, transfers and grants to the
Lender a continuing security interest in and to all of the
following property of the Grantor, whether now owned or existing
or hereafter acquired or arising (collectively the "Collateral"):
(1) _____% of Grantor's now owned or hereafter
acquired partnership interest (the "Partnership
Interest") (which Partnership Interest is
currently a limited partner interest) in L.M.
Holding Associates, L.P., a Louisiana Partnership
in Commendam (the "Partnership"), which
Partnership was created by that certain Agreement
of Limited Partnership dated May 27, 1991, as
amended by amendments filed with the Louisiana
Secretary of State on February 25, 1993, August
19, 1994, September 1, 1994, October 7, 1994 and
January 8, 1997 (the "Partnership Agreement");
(2) _____% of any and all monies and other
distributions (cash or property), allocations or
payments made or to be made to Grantor pursuant to
the Partnership Agreement or attributable to the
Partnership Interest;
(3) all General Intangibles related in any way to
the collateral described in clauses 1 or 2 above;
and
(4) all Proceeds and products of all or any of the
collateral described in clauses 1-3 above.
2. The security interests are granted as security
only and shall not subject the Lender to, or transfer or in any
way affect or modify, any obligation or liability of the Grantor
with respect to any of the Collateral or any transaction in
connection therewith.
Section 4. Delivery of Collateral if Ever Represented
by Certificates. If the Partnership Interest is ever represented
by a certificate of interest or any similar document, the
Borrower will immediately deliver such certificate or document to
the Lender or to an agent that Lender and all other holders of
security interests in Grantor's Partnership Interest have agreed
shall hold the certificate or document on their behalf.
Section 5. No Liens. Other than financing statements
or other similar or equivalent documents or instruments with
respect to the Security Interests and Permitted Liens, no
financing statement, mortgage, security agreement or similar or
equivalent document or instrument covering all or any part of the
Collateral is on file or of record in any jurisdiction in which
such filing or recording would be effective to perfect a Lien on
such Collateral. No Collateral is in the possession of any
Person (other than Grantor) asserting any claim thereto or
security interest therein, except that Lender or its designee may
have possession of Collateral as contemplated hereby. Except
with respect to Permitted Liens, the Liens granted pursuant to
this Agreement constitute perfected first priority Liens on the
Collateral in favor of the Lender.
Section 6. No Conflict. The Grantor has not performed
any acts or signed any agreements which might prevent the Lender
from enforcing any of the terms of this Agreement or which would
limit the Lender in any such enforcement.
Section 7. Name. The full name of Grantor is as it
appears on page 1 of this Agreement.
Section 8. Federal Taxpayer Number. The federal
taxpayer identification number of Grantor is as follows:
72-1123077.
Section 9. Chief Executive Office. The chief
executive office of Grantor is 110 Rue Jean Lafitte, Lafayette,
Louisiana 70505.
Section 10. Location of Collateral. Grantor will keep
and maintain all books or records relating to any of the
Collateral at its chief executive office.
Section 11. Filing Location. When a UCC financing
statement has been filed in the offices of a Louisiana Clerk of
Court of any parish other than Orleans (or in the case of Orleans
Parish, with the Recorder of Mortgages), the Security Interests
shall constitute perfected security interests in the Collateral
to the extent that a security interest therein may be perfected
by filing pursuant to the UCC, prior to all other Liens except
for the Permitted Liens and rights of others therein to the
extent that such priority is afforded by the UCC.
Section 12. Title. Grantor has good and merchantable
title to the Collateral, free of Liens except Permitted Liens.
Furthermore, Grantor has not heretofore conveyed or agreed to
convey or encumber any Collateral in any way, except in favor of
Lender or other holders of Permitted Liens. Lender understands
and agrees, however, that Grantor has granted a security interest
in all of its Partnership Interest in the Partnership (other than
the percentage of its Partnership Interest covered hereby) to
those persons or entities who have previously purchased Units or
provided other New Funds. Lender further agrees and acknowledges
that in the event that additional Units are sold or additional
New Funds are provided to XCL Land after the date hereof by
persons other than Lender and secured by partnership interests in
L.M. Holding, Lender will immediately upon demand by XCL Land
(one or more times, as appropriate) execute amendments to this
Agreement releasing a percentage of the Grantor's Partnership
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 of
$6,200,000 principal outstanding).
Section 13. Incorporation and Existence. Grantor is a
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has
the corporate power and authority and the legal right to own and
operate the Collateral and to conduct the business in which it is
currently engaged.
Section 14. No Consents or Approvals. Except for
those filings and registrations required to perfect the Liens
created by this Agreement, the Grantor is not required to obtain
any order, consent, approval or authorization of, or required to
make any declaration or filing with, any governmental authority
or any other Person in connection with the execution and delivery
of this Agreement and the granting and perfection of the Security
Interests pursuant to this Agreement.
Section 15. Due Execution; Binding Obligation. This
Agreement has been duly executed and delivered on behalf of the
Grantor, and this Agreement constitutes a legal, valid and
binding obligation of Grantor, enforceable against Grantor in
accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors' rights generally and except as enforceability may be
subject to general principles of equity, whether such principles
are applied in a court of equity or at law.
Section 16. No Conflicts. The execution, delivery and
performance of this Agreement will not (I) result in any
violation of or be in conflict with or constitute a default under
any terms of any agreement, contract, statute, regulation, law or
ordinance; (ii) have a material adverse effect on the Collateral;
(iii) materially adversely affect the ability of Grantor to
perform its obligations under this Agreement or the Note, or
(iv) result in the creation of any Lien upon any of the
properties or revenues of Grantor other than the Liens in favor
of the Lender created pursuant to this Agreement.
Section 17. Voting Rights. Notwithstanding the
security interest granted hereby and whether or not an Event of
Default (as defined in the Note) shall have occurred, the Grantor
shall have the exclusive right to exercise all voting and other
rights under the Partnership Agreement until such time (if and
when) Lender forecloses on the Collateral and becomes the owner
thereof.
Section 18. Notice of Changes. Grantor will not
change its name, corporate identity or taxpayer identification
number in any manner unless it shall have given Lender at least
five (5) days prior written notice thereof.
Section 19. Remedies upon Default.
1. Sale. Upon the occurrence of an Event of
Default, Lender may exercise all rights of a secured party under
the UCC and other applicable law (including the Uniform
Commercial Code as in effect in another applicable jurisdiction)
and, in addition, Lender may, without being required to give any
notice, except as herein provided or as may be required by
mandatory provisions of law, sell the Collateral or any part
thereof at public or private sale, for cash, upon credit or for
future delivery, and at such price or prices as Lender may deem
satisfactory. Lender may be the purchaser of any or all of the
Collateral so sold at any public sale (or, if the Collateral is
of a type customarily sold in a recognized market or is of a type
which is the subject of widely distributed standard price
quotations, at any private sale). Grantor will execute and
deliver such documents and take such other action as Lender deems
necessary or advisable in order that any such sale may be made in
compliance with law. Upon any such sale Lender shall have the
right to deliver, assign and transfer to the purchaser thereof
the Collateral so sold. Each purchaser at any such sale shall
hold the Collateral so sold to it absolutely and free from any
claim or right of whatsoever kind, including any equity or right
of redemption of Grantor which may be waived, and Grantor, to the
extent permitted by law, hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any
law now existing or hereafter adopted. Grantor agrees that ten
(10) days prior written notice of the time and place of any sale
or other intended disposition of any of the Collateral
constitutes "reasonable notification" within the meaning of
Section 9-504(3) of the UCC, except that shorter notice or no
notice shall be reasonable as to any Collateral which is
perishable or threatens to decline speedily in value or is of a
type customarily sold on a recognized market. The notice (if
any) of such sale shall (1) in case of a public sale, state the
time and place fixed for such sale, and (2) in the case of a
private sale, state the day after which such sale may be
consulted. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places
as Lender may fix in the notice or such sale. At any such sale
the Collateral may be sold in one lot as an entirety or in
separate parcels, as Lender may determine. Lender shall not be
obligated to make any such sale pursuant to any such notice.
Lender may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time
by announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the same may
be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so
sold may be retained by Lender until the selling price is paid by
the purchaser thereof, but Lender shall not incur any liability
in case of the failure of such purchaser to take up and pay for
the Collateral so sold and, in case of any such failure, such
Collateral may again be sold upon like notice.
2. Foreclosure. Instead of exercising the power of
sale herein conferred upon it, Lender may proceed by a suit or
suits at law or in equity to foreclose the Security Interests and
sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction. FOR THE
PURPOSES OF LOUISIANA EXECUTORY PROCESS PROCEDURES, GRANTOR DOES
HEREBY CONFESS JUDGMENT IN FAVOR OF LENDER FOR THE FULL AMOUNT OF
THE INDEBTEDNESS. GRANTOR DOES BY THESE PRESENTS CONSENT, AGREE
AND STIPULATE THAT UPON THE OCCURRENCE OF AN EVENT OF DEFAULT IT
SHALL BE LAWFUL FOR LENDER, AND THE GRANTOR DOES HEREBY AUTHORIZE
LENDER, TO CAUSE ALL AND SINGULAR THE COLLATERAL TO BE SEIZED AND
SOLD UNDER EXECUTORY OR ORDINARY PROCESS, AT LENDER'S SOLE
OPTION, WITH OR WITHOUT APPRAISEMENT, APPRAISEMENT BEING HEREBY
EXPRESSLY WAIVED, IN ONE LOT AS AN ENTIRETY OR IN SEPARATE
PARCELS AS LENDER MAY DETERMINE, TO THE HIGHEST BIDDER, AND
OTHERWISE EXERCISE THE RIGHTS, POWERS AND REMEDIES AFFORDED
HEREIN AND UNDER APPLICATION LOUISIANA LAW. ANY AND ALL
DECLARATIONS OF FACT MADE BY AUTHENTIC ACT BEFORE A NOTARY PUBLIC
IN THE PRESENCE OF TWO WITNESSES BY A PERSON DECLARING THAT SUCH
FACTS LIE WITHIN HIS KNOWLEDGE SHALL CONSTITUTE AUTHENTIC
EVIDENCE OF SUCH FACTS FOR THE PURPOSE OF EXECUTORY PROCESS.
GRANTOR HEREBY WAIVES IN FAVOR OF LENDER: (A) THE BENEFIT OF
APPRAISEMENT AS PROVIDED IN LOUISIANA CODE OF CIVIL PROCEDURE
ARTICLES 2332, 2336, 2723 AND 2724, AND ALL OTHER LAWS CONFERRING
THE SAME; (B) THE DEMAND AND THREE DAYS DELAY ACCORDED BY
LOUISIANA CODE OF CIVIL PROCEDURE ARTICLES 2639 AND 2721; (C) THE
NOTICE OF SEIZURE REQUIRED BY LOUISIANA CODE OF CIVIL PROCEDURE
ARTICLES 2293 AND 2721; (D) THE THREE DAYS DELAY PROVIDED BY
LOUISIANA CODE OF CIVIL PROCEDURE ARTICLES 2331 AND 2722; AND
(E) THE BENEFIT OF THE OTHER PROVISIONS OF LOUISIANA CODE OF
CIVIL PROCEDURE ARTICLES 2331, 2722 AND 2723, NOT SPECIFICALLY
MENTIONED ABOVE.
3. Effect of Securities Laws. The Grantor
recognizes that the Lender may be unable to effect a public sale
of all or part of the Collateral by reason of certain
prohibitions contained in the Securities Act of 1933, as amended,
and applicable state securities laws but may be compelled to
resort to one or more private sales to a restricted group of
purchasers who will be obligated to agree, among other things, to
acquire all or a part of the Collateral for their own account,
for investment, and not with a view to the distribution or resale
thereof. If the Lender deems it advisable to do so for the
foregoing or for other reasons, the Lender is authorized to limit
the prospective bidders on or purchasers of any of the Collateral
to such a restricted group of purchasers and may cause to be
placed on certificates for any or all of the Collateral a legend
to the effect that such security has not been registered under
the Securities Act of 1933, as amended, and may not be disposed
of in violation of the provision of said act, and to impose such
other limitations or conditions in connection with any such sale
as the Lender deems necessary or advisable in order to comply
with said act or any other securities or other laws. The Grantor
acknowledges and agrees that any private sale so made may be at
prices and on other terms less favorable to the seller than if
such Collateral were sold at public sale and that the Lender has
no obligation to delay the sale of such Collateral for the period
of time necessary to permit the registration of such Collateral
for public sale under any securities laws. The Grantor agrees
that a private sale or sales made under the foregoing
circumstances shall be deemed to have been made in a commercially
reasonable manner. If any consent, approval, or authorization of
any federal, state, municipal or other governmental department,
agency or authority should be necessary to effectuate any sale or
other disposition of the Collateral, or any partial sale or other
disposition of the Collateral, the Grantor will execute all
applications and other instruments as may be required in
connection with securing any such consent, approval or
authorization and will otherwise use its best efforts to secure
same.
Section 20. Limitation on Duty of Lender. Beyond the
exercise of reasonable care in the custody thereof, the Lender
shall have no duty as to any Collateral in its possession or
control or in the possession or control of any agent or bailee or
any income thereon. The Lender shall be deemed to have exercised
reasonable care in the custody of the Collateral in its
possession if the Collateral is accorded treatment substantially
equal to that which it accords its own property, and shall not be
liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason
of the act or omission of any broker or other agent or bailee
selected by the Lender in good faith. The Lender shall be deemed
to have exercised reasonable care with respect to any of the
Collateral in its possession if the Lender takes such action for
that purpose as the Grantor shall reasonably request in writing;
but no failure to comply with any such request shall, of itself,
be deemed a failure to exercise reasonable care.
Section 21. Appointment of Agent. At any time or
times, in order to comply with any legal requirement in any
jurisdiction, the Lender may appoint a bank or trust company or
one or more other Persons with such power and authority as may be
necessary for the effectual operation of the provisions hereof
and may be specified in the instrument of appointment.
Section 22. Expenses. All sums incurred by the Lender
in enforcing or protecting any of the rights or remedies under
this Agreement, together with interest thereon until paid at the
rate equal the then highest rate of interest charged on the
principal of any of the Indebtedness plus one percent (1%), shall
be additional Indebtedness hereunder and the Grantor agrees to
pay all of the foregoing sums promptly on demand.
Section 23. Termination. Upon the payment in full of
the Indebtedness, this Agreement shall terminate. Upon request of
the Grantor, the Lender shall deliver the remaining Collateral
(if any) to the Grantor. Upon request of Grantor, Lender shall
execute and deliver to Grantor at Grantor's expense such
termination statements as Grantor may reasonably request to
evidence such termination.
Section 24. Notices. Any notice or demand which, by
provision of this Agreement, is required or permitted to be given
or served to the Grantor and the Lender shall be deemed to have
been sufficiently given and served for all purposes if made in
accordance with the Note.
Section 25. Amendment. Neither this Agreement nor any
provisions hereof may be changed, waived, discharged or
terminated orally or in any manner other than by an instrument in
writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
Section 26. Waivers. No course of dealing on the part
of the Lender, its officers, employees, consultants or agents,
nor any failure or delay by the Lender with respect to exercising
any of its rights, powers or privileges under this Agreement
shall operate as a waiver thereof.
Section 27. Cumulative Rights. The rights and
remedies of the Lender under this Agreement shall be cumulative
and the exercise or partial exercise of any such right or remedy
shall not preclude the exercise of any other right or remedy.
Section 28. Titles of Sections. All titles or
headings to sections of this Agreement are only for the
convenience of the parties and shall not be construed to have any
effect or meaning with respect to the other content of such
sections, such other content being controlling as to the
agreement between the parties hereto.
Section 29. Governing Law. This Agreement is a
contract made under and shall be construed in accordance with and
governed by the laws of the United States of America and the
State of Louisiana.
Section 30. Successors and Assigns. All covenants and
agreements made by or on behalf of the Grantor in this Agreement
shall bind Grantor's successors and assigns and shall inure to
the benefit of the Lender and its successors and assigns.
Section 31. Counterparts. This Agreement may be
executed in two or more counterparts, and it shall not be
necessary that the signatures of all parties hereto be contained
on any one counterpart hereof, each counterpart shall be deemed
an original, but all of which when taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Grantor and the Lender have caused
this Agreement to be duly executed as of the date first above
written.
WITNESSES: THE EXPLORATION COMPANY OF
LOUISIANA, INC.
_________________________ By:_______________________________
Name:____________________ Name:___________________________
(Please Print) Title:__________________________
_________________________
Name:____________________
(Please Print)
LENDER:
_________________________ __________________________________
Name:____________________
(Please Print)
_________________________
Name:____________________
(Please Print)