SECURITY AGREEMENT

     THIS SECURITY AGREEMENT ("Agreement") dated _______________,
____,   is   made   between  XCL  Land,  Ltd.  ("Borrower")   and
____________________ ("Lender"), who agree as follows:

     Recitals

     1.      The  Borrower 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
Borrower  payable  to  the order of Lender  dated  of  even  date
herewith (the "Note").

     2.      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 2.       Definitions.

          1.      The terms "Agreement," "Borrower," "Lender" and
"Note" 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
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  (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
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 3.       Security Interest.

          1.      To  secure  the full and punctual  payment  and
performance  of  all  present  and future  amounts,  liabilities,
obligations   and  indebtedness  of  Borrower  to   the   Lender,
including,  without limitation all promissory  notes  (including,
but not limited to the Note) heretofore or hereafter executed  by
the  Borrower,  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  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)      _____%  of  Borrower's now owned or  hereafter
               acquired  partnership interest  (the  "Partnership
               Interest")   (which   Partnership   Interest    is
               currently  a  general 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 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.

          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 Borrower
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 Borrower'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  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   6.        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 7.       Name.  The full name of Borrower is  as  it
appears on page 1 of this Agreement.
     
     Section  8.        Federal  Taxpayer  Number.   The  federal
taxpayer   identification  number  of  Borrower  is  as  follows:
51-0334575.

     Section   9.        Chief  Executive  Office.    The   chief
executive  office of Borrower is 110 Rue Jean Lafitte, Lafayette,
Louisiana 70505.

     Section  10.        Location of Collateral.   Borrower  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.  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.  Lender understands
and  agrees,  however,  that  Borrower  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 Borrower  after
the  date  hereof  by persons other than Lender  and  secured  by
partnership  interests in L.M. Holding, Lender  will  immediately
upon  demand  by  Borrower (one or more  times,  as  appropriate)
execute  amendments to this Agreement releasing a  percentage  of
the  Borrower'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.  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  14.        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  15.       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 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  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   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
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  18.        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 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).  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.

          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, 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.

          3.       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 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 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  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 Borrower 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  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  24.       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 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 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  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 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:__________________________
        (Please Print)          Title:_________________________


_________________________
Name:____________________
        (Please Print)
                              LENDER:

                              


_________________________     _________________________
Name:____________________
        (Please Print)


_________________________
Name:____________________
        (Please Print)