PROMISSORY NOTE
$__________ Date: _______________, ____
I. PROMISE TO PAY
For value received, the undersigned promises to pay to
the order of ____________________,
______________________________, the principal sum of
____________________ AND NO/100 ($__________) 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 ____________________.
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 _______________, ____, 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 _______________, ____,
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) _______________,
____ [90 days after date of note] unless extended until
_______________, ____ [90 additional days after date of note] by
Maker at its sole option and without the need for Lender's
consent by sending written notice to Lender on or before
_______________, ____ [two days prior to initial due date] that
such maturity date has been extended to _______________, ____.
The maturity of this Note may be extended for an additional
ninety (90) days or until _______________, ____ with the consent
of Lender upon delivery to Lender by Maker of an additional
promissory note substantially on the terms of this Note, mutatis
mutandis, in the principal amount equal to the then unpaid
interest on this Note.
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:
____________________
____________________
____________________
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:_____________________________