ACCRUED INTEREST THEREON TO THE DATE OF PREPAYMENT.
(B)
MANDATORY PREPAYMENT.
IN THE EVENT THE TOTAL OUTSTANDINGS EVER
EXCEED THE BORROWING BASE AS DETERMINED BY THE BANKS PURSUANT TO SECTION 7
HEREOF (A "BORROWING BASE DEFICIENCY"), BORROWER SHALL, WITHIN THIRTY (30) DAYS
AFTER NOTIFICATION FROM AGENT EITHER (A) BY INSTRUMENTS SATISFACTORY IN FORM AND
SUBSTANCE TO BANKS, PROVIDE THE BANKS WITH ADDITIONAL COLLATERAL WITH VALUE AND
QUALITY SATISFACTORY TO BANKS IN THEIR SOLE DISCRETION IN ORDER TO INCREASE THE
BORROWING BASE BY AN AMOUNT AT LEAST EQUAL TO SUCH EXCESS, OR (B) PREPAY,
WITHOUT PREMIUM OR PENALTY, THE PRINCIPAL AMOUNT OF THE NOTES IN AN AMOUNT AT
LEAST EQUAL TO SUCH EXCESS, OR (C) PREPAY, WITHOUT PREMIUM OR PENALTY, THE
AMOUNT OF SUCH EXCESS IN FIVE (5) EQUAL MONTHLY INSTALLMENTS DUE AND PAYABLE ON
THE LAST BUSINESS DAY OF EACH OF THE NEXT FIVE (5) CONSECUTIVE MONTHS, OR (D)
ELECT TO CONVERT THE ENTIRE PRINCIPAL AMOUNT OF THE NOTES TO A TERM OBLIGATION
WITH MONTHLY INSTALLMENTS OF PRINCIPAL AND INTEREST DUE AND PAYABLE ON THE LAST
BUSINESS DAY OF EACH MONTH FROM THE DATE OF SUCH CONVERSION TO THE MATURITY
DATE, EACH SUCH INSTALLMENT PAYMENT TO BE IN THE AMOUNT OF ACCRUED INTEREST PLUS
AN AMOUNT OF PRINCIPAL EQUAL TO THE GREATER OF (I) 1/36TH OF THE OUTSTANDING
BALANCE ON THE DATE OF CONVERSION OR (II) AN AMOUNT DETERMINED BY DIVIDING THE
PRINCIPAL AMOUNT OUTSTANDING ON THE DATE OF THE CONVERSION BY THE ESTIMATED
ECONOMIC HALF-LIFE OF THE OIL AND GAS PROPERTIES EXPRESSED IN TERMS OF MONTHS,
AS DETERMINED BY THE AGENT IN ITS SOLE AND ABSOLUTE DISCRETION REASONABLY
EXERCISED.
NOTWITHSTANDING ANY OF THE FOREGOING, ALL UNPAID PRINCIPAL AND
INTEREST SHALL BE DUE AND PAYABLE ON THE MATURITY DATE.
PROVIDED, HOWEVER, THAT
IN THE EVENT THE BORROWER ELECTS OPTION (C) ABOVE, THE BORROWING BASE DEFICIENCY
MUST BE CURED AT THE END OF THE INSTALLMENT PERIOD SPECIFIED ABOVE OR THE ENTIRE
OUTSTANDING PRINCIPAL BALANCE DUE ON THE NOTES SHALL IMMEDIATELY CONVERT TO A
TERM LOAN PAYABLE IN ACCORDANCE WITH THE PAYMENT PROVISIONS SET FORTH IN
SUBSECTION (D) ABOVE.
PROVIDED, FURTHER, HOWEVER, THAT DURING THE FIVE (5)
MONTH PREPAYMENT PERIOD SPECIFIED IN SUBSECTION (C) ABOVE, BORROWER MAY ELECT AT
ANY TIME TO CONVERT TO A TERM LOAN PURSUANT TO SUBSECTION (D) ABOVE.
THE
DETERMINATION OF WHETHER BORROWER HAS CURED ANY SUCH
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BORROWING BASE DEFICIENCY AT THE END OF THE INSTALLMENT PERIOD SPECIFIED IN (C)
ABOVE, SHALL BE MADE BY THE BANKS IN THEIR SOLE AND ABSOLUTE DISCRETION BASED
UPON AN UNSCHEDULED BORROWING BASE REDETERMINATION MADE PURSUANT TO SECTION 7(B)
OF THIS AGREEMENT.
10.
REPRESENTATIONS AND WARRANTIES.
IN ORDER TO INDUCE THE BANKS TO
ENTER INTO THIS AGREEMENT, BORROWER HEREBY REPRESENTS AND WARRANTS TO THE BANKS
(WHICH REPRESENTATIONS AND WARRANTIES WILL SURVIVE THE DELIVERY OF THE NOTES)
THAT:
(A)
CREATION AND EXISTENCE.
BORROWER AND GUARANTOR ARE CORPORATIONS
DULY ORGANIZED AND VALIDLY EXISTING IN GOOD STANDING UNDER THE LAWS OF THEIR
STATE OF INCORPORATION AND ARE DULY QUALIFIED AS A FOREIGN CORPORATION