UNSECURED NOTE
$___________ Date: April ___, 1997
I. PROMISE TO PAY
For value received, the undersigned promises to pay to
the order of [NAME AND ADDRESS] ___________________________
_________________________, the principal sum of
_______________ ____________________ ($_____________)
DOLLARS, together with interest on the principal sum at the
rate of fourteen (14%) 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 Unsecured Note,
shall have the meanings set forth below:
1. "Acceleration" shall mean the exercise of ▇▇▇▇▇▇'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. "Jefferies Offering" shall mean the offering of
Units consisting of Senior Secured Discount Notes and Common
Stock Purchase Warrants of XCL Ltd. with Jefferies &
Company, Inc. as the initial purchaser currently
contemplated by XCL Ltd. to close prior to April 30, 1997.
7. "Lender" shall mean _______________________.
8. "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.
9. "▇▇▇▇▇▇▇ ▇▇▇▇▇ Tract" shall mean that certain tract
of land located in St. ▇▇▇▇▇, Ascension and St. ▇▇▇▇ the
Baptist Parishes, Louisiana, comprising approximately 62,000
acres, owned by XCL Ltd.
10. "Maker" shall mean XCL China Ltd., a company
organized under the laws of the British Virgin Islands, and
a wholly owned subsidiary of XCL Ltd., a Delaware
corporation.
11. "NASDAQ" shall mean the National Association of
Securities Dealers' Automated Quotation System.
12. "Note" shall mean this Unsecured Note.
13. "Subscription Agreement" shall mean the
Subscription Agreement dated as of April ____, 1997,
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
earliest of (a) the third business day after funding of the
Jefferies Offering, (b) sale of the ▇▇▇▇▇▇▇ ▇▇▇▇▇ Tract, or
(c) July 10, 1997. At maturity this Note may be renewed for
additional 60 day terms 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 convey, sell, lease, assign, transfer
or otherwise dispose of any of its interest in the Contract
for Petroleum Exploration, Development and Production on
▇▇▇▇ ▇▇▇▇ Block in Bohai Bay Shallow Water Sea Area of The
People's Republic of China between China National Oil and
Gas Exploration and Development Corporation and XCL-China,
Ltd., executed February 10, 1993 (the "Production Sharing
Contract").
(h) Maker shall create, insure, assume or suffer to
exist any debt other than (i) debt in respect of the Notes;
(ii) obligations under the Production Sharing Contract;
(iii) obligations to Apache China Corporation-LDC for
operations with respect to the Production Sharing Contract,
(iv) obligations to any affiliate of Maker that are
contractually subordinated to the indebtedness represented
by the Notes and (v) the guaranty by Maker of obligations
under the Credit Agreement dated as of January 31, 1994 by
and between XCL-Texas, Inc., The Exploration Company of
Louisiana, Inc. and ING (U.S.) Capital Corporation and
certain lenders, provided that such guaranty is
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 unsecured.
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-China Ltd.
c/o XCL Ltd.
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇. ▇. Box 53775
Lafayette, Louisiana 70505
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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 ▇▇▇▇▇▇.
XCL-CHINA LTD.
By:_____________________
