SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") dated March 15,
1999, is made between XCL Land, Ltd. ("Borrower") and Xxxxxx
X. Xxxxxx, Xx. ("Lender"), who agree as follows:
Recitals
A. The Borrower is or will be indebted unto
the Lender for a loan made or to be made and evidenced by
that certain Promissory Note by Borrower payable to the
order of Lender dated of even date herewith (the "Note").
B. In order to secure the full and punctual
payment and performance of the Indebtedness as defined
herein, the Borrower 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
Borrower and the Lender agree as follows:
Section 1. Definitions.
A. The terms "Agreement," "Borrower," "Lender"
and "Note" shall have the meanings indicated above.
B. 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 Borrower 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 Borrower 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 March 15, 1999 by and between
Borrower, Lender and XCL Ltd. and any subsequent
subscription agreements 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 2. Security Interest.
A. To secure the full and punctual payment and
performance of the Note in principal, interest, deferral and
delinquency charges as therein stipulated (collectively, the
"Indebtedness"), the Borrower hereby pledges, pawns,
transfers and grants to the Lender a continuing security
interest in and to all of the following property of the
Borrower, whether now owned or existing or hereafter
acquired or arising (collectively the "Collateral"):
(1) 1.6% of Borrower's now owned or hereafter
acquired partnership interest (the "Partnership Interest")
(which Partnership Interest is currently a general partner
interest) in X.X. 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) 1.6% of any and all monies and other
distributions (cash or property), allocations or payments
made or to be made to Borrower 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.
B. 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 Borrower with respect to any of the
Collateral or any transaction in connection therewith.
Section 3. 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
Borrower's Partnership Interest have agreed shall hold the
certificate or document on their behalf.
Section 4. 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
Borrower) 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 5. No Conflict. The Borrower 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 6. Name. The full name of Borrower is as it
appears on page 1 of this Agreement.
Section 7. Federal Taxpayer Number. The federal
taxpayer identification number of Borrower is as follows:
00-0000000.
Section 8. Chief Executive Office. The chief
executive office of Borrower is 000 Xxx Xxxx Xxxxxxx,
Xxxxxxxxx, Xxxxxxxxx 00000.
Section 9. Location of Collateral. Borrower will keep
and maintain all books or records relating to any of the
Collateral at its chief executive office.
Section 10. 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 11. Title. Borrower has good and merchantable
title to the Collateral, free of Liens except Permitted
Liens. Furthermore, Borrower 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.
Section 12. Incorporation and Existence. Borrower 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 13. No Consents or Approvals. Except for
those filings and registrations required to perfect the
Liens created by this Agreement, the Borrower 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 14. Due Execution; Binding Obligation. This
Agreement has been duly executed and delivered on behalf of
the Borrower, and this Agreement constitutes a legal, valid
and binding obligation of Borrower, enforceable against
Borrower 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 15. 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 Borrower 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
Borrower other than the Liens in favor of the Lender created
pursuant to this Agreement.
Section 16. 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
Borrower 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 17. Notice of Changes. Borrower 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 18. Remedies upon Default.
A. 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). Borrower 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
Borrower which may be waived, and Borrower, 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. Borrower 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.
B. 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, BORROWER DOES HEREBY CONFESS
JUDGMENT IN FAVOR OF LENDER FOR THE FULL AMOUNT OF THE
INDEBTEDNESS. BORROWER 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 BORROWER 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. BORROWER
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.
C. Effect of Securities Laws. The Borrower
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 Borrower
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 Borrower 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 Borrower 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 19. 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 Borrower 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 20. 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 21. 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 Borrower agrees to pay all of the foregoing sums
promptly on demand.
Section 22. Termination. Upon the payment in full of
the Indebtedness, this Agreement shall terminate. Upon
request of the Borrower, the Lender shall deliver the
remaining Collateral (if any) to the Borrower. Upon request
of Borrower, Lender shall execute and deliver to Borrower at
Borrower's expense such termination statements as Borrower
may reasonably request to evidence such termination.
Section 23. Notices. Any notice or demand which, by
provision of this Agreement, is required or permitted to be
given or served to the Borrower and the Lender shall be
deemed to have been sufficiently given and served for all
purposes if made in accordance with the Note.
Section 24. 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 25. 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 26. 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 27. 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 28. 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 29. Successors and Assigns. All covenants and
agreements made by or on behalf of the Borrower in this
Agreement shall bind Borrower's successors and assigns and
shall inure to the benefit of the Lender and its successors
and assigns.
Section 30. 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 Borrower and the Lender have
caused this Agreement to be duly executed as of the date
first above written.
WITNESSES: XCL LAND, LTD.
_________________________ By:_____________________________
Name:____________________ Name:___________________________
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Title:__________________________
_________________________
Name:____________________
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LENDER:
_________________________ ______________________________
Name:____________________ Xxxxxx X. Xxxxxx, Xx.
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_________________________
Name:____________________
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