PROMISSORY NOTE
$100,000.00 Date: March 15, 1999
I. PROMISE TO PAY
For value received, the undersigned promises to
pay to the order of ROBERT R. DURKEE, JR., 15 Hedge Lane,
Austin, Texas 78746-3208, the principal sum of ONE HUNDRED
THOUSAND AND NO/100 ($100,000.00) DOLLARS, together with
interest on the principal sum at the rate of fifteen (15%)
percent per annum commencing on the date that Maker received
an executed Subscription Agreement (as hereinafter defined)
from Lender. Interest shall be calculated on the basis of
actual days elapsed over a 365-day year (366-day year in
leap years).
II. DEFINITIONS
The following terms, as used in this Promissory
Note, shall have the meanings set forth below:
1. "Acceleration" shall mean the exercise of
Lender's right to accelerate payment of all principal and
interest due on the Note after complying with the provisions
of Section IV.2.
2. "Debt" shall mean (i) indebtedness for
borrowed money, (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii)
obligations to pay the deferred purchase price of property
or services, (iv) obligations as lessee under leases which
shall have been or should be, in accordance with generally
accepted accounting principles, recorded as capital leases,
and (v) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or
obligations of the kinds referred to in clauses (i) through
(iv) above.
3. "Default Notice" means a notice sent by
Lender to Maker upon the occurrence and continuance of an
Event of Default giving rise to an Acceleration which
specifies (i) the nature of the Event of Default that has
occurred and is continuing and (ii) that Lender intends to
make an Acceleration in accordance with the provisions of
Section IV.2.
4. "Event of Default" shall have the meaning
set forth in Section IV.1. hereof.
5. "Financing Documents" shall mean this Note
and the other Notes.
6. "Lender" shall mean Robert R. Durkee, Jr.
7. "Lien" or "Liens" shall mean any mortgage,
lien, pledge, charge, security interest or encumbrance of
any kind, including, without limitation, the rights of a
vendor, lessor or similar party under any conditional sale
agreement or other title retention agreement or lease
substantially equivalent thereto, and the rights of the
holder of any production payment, advance payment or similar
interest.
8. "Lutcher Moore Mitigation Bank Financing"
shall mean a financing in the amount of up to $15 million
secured in full or in part by the Lutcher Moore Tract
Wetlands Mitigation Bank.
9. "Lutcher Moore Tract" shall mean that
certain tract of land located in St. James, Ascension and
St. John the Baptist Parishes, Louisiana, comprising
approximately 62,000 acres, owned by L.M. Holding
Associates, L.P.
10. "Maker" shall mean XCL Land, Ltd., a
company organized under the laws of Delaware.
11. "Note" shall mean this Promissory Note.
12. "Security Documents" shall mean the
Security Agreements each dated as of March 15, 1999 executed
by Maker and The Exploration Company of Louisiana, Inc. and
Lender, as amended, and the related Louisiana UCC-1
financing statements, as amended.
13. "Subscription Agreement" shall mean the
Subscription Agreement dated as of March 15, 1999, executed
by XCL Ltd., Maker and Lender and relating to the purchase
of this Note.
III. TERMS OF PAYMENT
1. Maturity. All principal and interest
accrued and unpaid under this Note is due and payable in
full on the earlier of (a) the third business day after
funding of the Lutcher Moore Mitigation Bank Financing or
(b) April 29, 1999.
IV. DEFAULT AND REMEDIES IN EVENT OF DEFAULT
1. Events of Default. The term "Event of
Default" shall mean the occurrence of any one of the
following events:
(a) The failure of Maker to pay punctually
when due any amount (including, without limitation,
principal or interest) payable with respect to the Note.
(b) Any representation or warranty made by
Maker (or any of its officers) under or in connection with
the Subscription Agreement, or by Maker or the grantor of
any lien or security interest pursuant to any agreement
securing or purporting to secure any of the obligations
herein (including, without limitation, any of the Security
Documents), shall prove to have been incorrect in any
material respect on or as of the date made.
(c) The breach of any term, covenant or
agreement made by Maker hereunder (other than under clause
(a), above), or under any other agreement between Maker and
Lender, which breach is not cured within 30 days after
receipt by Maker of notice thereof.
(d) Maker or any of its subsidiaries shall
admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of
creditors; or any case, proceeding or other action under any
existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency or relief of
debtors, shall be instituted by or against Maker or any of
its subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief,
or composition of its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted
against it (but not instituted by it), such proceeding shall
remain undismissed or unstayed for a period of thirty (30)
days; or Maker or any of its subsidiaries shall take any
corporate action to authorize any of the actions set forth
above in this subsection (d) of Section IV.
(e) Any judgment or order for the payment of
money in excess of $5,000,000 shall be rendered against
Maker or any of its subsidiaries and either (i) enforcement
proceedings shall have been commenced by any creditor upon
such judgment or order that have not been stayed for a
period of ten (10) consecutive days and are not stayed at
the time an action to enforce this Note is commenced, or
(ii) there shall be any period of ten (10) consecutive days
during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not
be in effect.
(f) Any non-monetary judgment or order shall
be rendered against Maker or any of its subsidiaries that is
reasonably likely to have a material adverse effect on
(i) the business, condition (financial or otherwise),
operations, performance, properties or prospects of Maker
and its subsidiaries, taken as a whole, (ii) the ability of
Maker and its subsidiaries, taken as a whole, to perform its
obligations under this Note or the Notes or under any
agreement securing or purporting to secure the obligations
herein to which Maker or any of its subsidiaries is a party
or (iii) the rights and remedies of Lender or its agent
under any agreement securing or purporting to secure the
obligations herein to which Maker or any of its subsidiaries
is a party, and either (x) enforcement proceedings shall
have been commenced by any person or entity upon such
judgment or order that have not been stayed for a period of
ten (10) consecutive days and are not stayed at the time an
action to enforce this Note is commenced, or (y) there shall
be any period of ten (10) consecutive days during which a
stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect.
(g) Maker shall create, insure, assume or
suffer to exist any debt other than (i) debt in respect of
the Notes; (ii) debt existing as of the date of the Notes;
and (iii) obligations to any affiliate of Maker that are
contractually subordinated to the indebtedness represented
by the Notes.
2. Acceleration of Maturity. Upon the
occurrence of any Event of Default arising from any
condition or circumstance other than Maker's failure to pay
punctually when due any amount under the Note, Lender may
send a Default Notice to Maker. Upon actual receipt of such
Default Notice, Maker shall have five (5) business days to
either cure such Event of Default or pay in full all
principal and interest due under the Note. If, after five
(5) business days have elapsed from actual receipt of the
Default Notice by Maker, Maker has not either (i) cured such
Event of Default or (ii) paid in full all principal and
interest due under the Note, then and only then shall Lender
have the right to make an Acceleration. Upon Acceleration,
the Note, all interest thereon and all other amounts payable
thereon shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of
any kind. The unpaid balance under the Note shall bear
interest as stated herein until paid in full.
V. WAIVER OF DEFENSES
Maker waives presentment for payment, protest,
notice of dishonor, demand, and notice of acceleration.
Maker's liability hereunder shall not be impaired by lack of
diligence in collecting the Note and enforcing any security
rights of Lender.
VI. MAXIMUM INTEREST RATE
In no event shall the rate charged hereunder for
interest exceed the maximum rate of interest permitted by
applicable law, and if any circumstances, including
acceleration, prepayment, or demand, would cause the rate of
interest hereunder to exceed such maximum rate, the rate of
interest hereunder automatically shall be reduced to such
maximum rate and Lender shall forgive or refund to Maker any
interest above such maximum rate collected by Lender.
VII. GOVERNING LAW
This Note shall be governed by the substantive
laws of the State of Louisiana, without any effect being
given to principles of conflicts of laws.
VIII. SECURITY
This Note is secured by a security interest in a
percentage of the general and limited partnership interest
in L.M. Holding Associates, L.P., a Louisiana Partnership in
Commendam, granted by Maker and The Exploration Company of
Louisiana, Inc. pursuant to the Security Documents. IT IS
EXPRESSLY UNDERSTOOD AND AGREED BY LENDER THAT THE
INDEBTEDNESS EVIDENCED HEREBY IS INDEBTEDNESS OF MAKER AND
NOT INDEBTEDNESS OF ANY OF ITS AFFILIATES, INCLUDING BUT NOT
LIMITED TO XCL LTD. OR XCL-CHINA LTD., AND LENDER HEREBY
EXPRESSLY ACKNOWLEDGES AND AGREES THAT EXCEPT WITH RESPECT
TO THE SECURITY INTERESTS GRANTED TO IT PURSUANT TO THE
SECURITY DOCUMENTS, IT SHALL HAVE NO RECOURSE AGAINST ANY OF
MAKER'S AFFILIATES, INCLUDING BUT NOT LIMITED TO XCL LTD. OR
XCL-CHINA LTD., OR ANY OF THEIR ASSETS AND THAT LENDER SHALL
LOOK SOLELY TO MAKER, ITS ASSETS AND THE COLLATERAL IN WHICH
A SECURITY INTEREST HAS BEEN GRANTED BY THE SECURITY
DOCUMENTS FOR REPAYMENT OF ANY AND ALL AMOUNTS DUE
HEREUNDER.
IX. NOTICE
Whenever this Note requires or permits any
consent, approval, notice, request or demand from one party
to another, the consent, approval, notice, request or demand
must be in writing (including telecopies, telegraphic, telex
or cable communications) and mailed (prepaid postage),
telecopied, telegraphed, telexed, cabled or delivered as
follows:
If to Maker:
XCL Land, Ltd.
110 Rue Jean Lafitte
P. O. Box 53775
Lafayette, Louisiana 70505
Attn: Benjamin B. Blanchet
Telecopier: (318) 237-3316
If to Lender:
Robert R. Durkee, Jr.
15 Hedge Lane
Austin, Texas 78746-3208
Or, as to any party, at such other address as shall be
designated by such party in a written notice to the other
parties. Unless otherwise specified herein, all such
notices and other communications, shall, when mailed,
telecopied, telegraphed, telexed or cabled, be effective and
deemed delivered and received when deposited in the mails,
telecopied, delivered to the telegraph company, confirmed by
telex answerback or delivered to the cable company,
respectively.
X. HEADINGS
The headings used in this Note are for
convenience only and do not constitute a part of the Note.
XI. RESTRICTIONS ON TRANSFER
THE NOTE REPRESENTED BY THIS INSTRUMENT HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY
OTHER DOMESTIC OR FOREIGN JURISDICTION. SUCH NOTE MAY NOT
BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED EXCEPT IN
COMPLIANCE WITH SUCH LAWS AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER. SUCH NOTE IS ALSO SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER CONTAINED HEREIN AND IN THE
SUBSCRIPTION AGREEMENT. A COPY OF SUCH AGREEMENT IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE
MAKER AND WILL BE FURNISHED WITHOUT CHARGE TO ANY HOLDER OF
THIS NOTE UPON WRITTEN REQUEST TO THE SECRETARY OF THE
MAKER, AND ALL HOLDERS OF THE NOTE AGREE TO BE BOUND BY THE
PROVISIONS OF SUCH AGREEMENT.
XII. WAIVERS AND AMENDMENTS
All amendments, supplements and modifications to
this Note shall be made only in writing signed by Maker and
Lender, and then any such amendment, supplement, or
modification shall be effective only on the specific
instance and for the specific purpose for which given. No
consent to any departure by Maker from the provisions of
this Note shall in any event be effective unless the same
shall be in writing and signed by Lender.
XCL LAND, LTD.
By:_________________________________
Name:_______________________________
Title:________________________________