BORROWING BASE SHALL BE REDUCED.
EACH TIME THE BORROWING BASE IS REDETERMINED
BY LENDER, THE MONTHLY BORROWING BASE REDUCTION SHALL ALSO BE REDETERMINED.
(D)
THE BORROWING BASE SHALL REPRESENT THE
DETERMINATION BY THE LENDER, IN ACCORDANCE WITH THE APPLICABLE DEFINITIONS AND
PROVISIONS HEREIN CONTAINED AND ITS CUSTOMARY LENDING PRACTICES FOR LOANS OF
THIS NATURE, OF THE VALUE, FOR LOAN PURPOSES, OF THE BORROWING BASE OIL AND GAS
PROPERTIES, SUBJECT, IN THE CASE OF ANY INCREASE IN THE BORROWING BASE, TO THE
CREDIT APPROVAL PROCESS OF THE LENDER.
FURTHERMORE, THE BORROWERS ACKNOWLEDGE
THAT THE DETERMINATION OF THE BORROWING BASE CONTAINS AN EQUITY CUSHION, WHICH
IS ACKNOWLEDGED BY THE BORROWERS TO BE ESSENTIAL FOR THE ADEQUATE PROTECTION OF
THE LENDER.
2.8
MANDATORY PREPAYMENTS.
(A)
IF AT ANY TIME THE LOAN BALANCE EXCEEDS THE
BORROWING BASE THEN IN EFFECT, THE BORROWERS SHALL, WITHIN 30 DAYS OF NOTICE
FROM THE LENDER OF SUCH OCCURRENCE, (I) PREPAY, OR MAKE ARRANGEMENTS ACCEPTABLE
TO THE LENDER FOR THE PREPAYMENT OF, THE AMOUNT OF SUCH EXCESS FOR APPLICATION
ON THE LOAN BALANCE, (II) PROVIDE ADDITIONAL
16
COLLATERAL, OF CHARACTER AND VALUE SATISFACTORY TO THE LENDER IN ITS SOLE
DISCRETION, TO SECURE THE OBLIGATIONS BY THE EXECUTION AND DELIVERY TO THE
LENDER OF SECURITY INSTRUMENTS IN FORM AND SUBSTANCE SATISFACTORY TO THE LENDER,
OR (III) EFFECT ANY COMBINATION OF THE ALTERNATIVES DESCRIBED IN CLAUSES (I) AND
(II) OF THIS SECTION AND ACCEPTABLE TO THE LENDER IN ITS SOLE DISCRETION.
IN
THE EVENT THAT A MANDATORY PREPAYMENT IS REQUIRED UNDER THIS SECTION AND THE
LOAN BALANCE IS LESS THAN THE AMOUNT REQUIRED TO BE PREPAID, THE BORROWERS SHALL
REPAY THE ENTIRE LOAN BALANCE AND, IN ACCORDANCE WITH THE PROVISIONS OF THE
RELEVANT LETTER OF CREDIT APPLICATIONS EXECUTED BY THE BORROWER OR OTHERWISE TO
THE SATISFACTION OF THE LENDER, DEPOSIT WITH THE LENDER, AS ADDITIONAL
COLLATERAL SECURING THE OBLIGATIONS, AN AMOUNT OF CASH, IN IMMEDIATELY AVAILABLE
FUNDS, EQUAL TO THE L/C EXPOSURE MINUS THE BORROWING BASE.
THE CASH DEPOSITED
WITH THE LENDER IN SATISFACTION OF THE REQUIREMENT PROVIDED IN THIS SECTION MAY
BE INVESTED, AT THE SOLE DISCRETION OF THE LENDER AND THEN ONLY AT THE EXPRESS
DIRECTION OF THE BORROWERS AS TO INVESTMENT VEHICLE AND MATURITY (WHICH SHALL BE
NO LATER THAN THE LATEST EXPIRY DATE OF ANY THEN OUTSTANDING LETTER OF CREDIT),
FOR THE ACCOUNT OF THE BORROWERS IN CASH OR CASH EQUIVALENT INVESTMENTS OFFERED
BY OR THROUGH THE LENDER.
(B)
IN ADDITION TO THE FOREGOING, THE BORROWERS
SHALL IMMEDIATELY PREPAY THE PRINCIPAL OF THE NOTE IN AN AMOUNT EQUAL TO:
(I)
100% OF NET PROCEEDS FROM THE
DISPOSITION OF ANY ASSET, EXCLUDING SALES PERMITTED UNDER THIS AGREEMENT;
(II)
100% OF INSURANCE PROCEEDS IN EXCESS OF
$50,000 PER OCCURRENCE IN RESPECT OF ANY INSURANCE POLICY REQUIRED TO BE
MAINTAINED BY THE BORROWER UNDER THE TERMS OF THIS AGREEMENT UNLESS BORROWER
REINVESTS SUCH PROCEEDS WITHIN NINETY (90) DAYS OF ANY INSURABLE LOSS TO REPLACE
THE LOST OR DAMAGED ASSETS;
(III)
50% OF THE NET PROCEEDS FROM THE SALE OR