THE PRINCIPAL AMOUNT
OWING ON THE NOTE. THE LIABILITY FOR PAYMENT OF PRINCIPAL AND INTEREST EVIDENCED
BY THE NOTE SHALL BE LIMITED TO PRINCIPAL AMOUNTS ACTUALLY ADVANCED AND
OUTSTANDING PURSUANT TO THIS AGREEMENT AND INTEREST ON SUCH AMOUNTS CALCULATED
IN ACCORDANCE WITH THIS AGREEMENT.
2.6
TIME, PLACE, AND METHOD OF PAYMENTS.
ALL
PAYMENTS REQUIRED PURSUANT TO THIS AGREEMENT OR THE NOTE SHALL BE MADE IN LAWFUL
MONEY OF THE UNITED STATES OF AMERICA AND IN IMMEDIATELY AVAILABLE FUNDS, SHALL
BE DEEMED RECEIVED BY THE LENDER ON THE NEXT BUSINESS DAY FOLLOWING RECEIPT IF
SUCH RECEIPT IS AFTER 2:00 P.M., CENTRAL STANDARD OR DAYLIGHT SAVINGS TIME, AS
THE CASE MAY BE, ON ANY BUSINESS DAY, AND SHALL BE MADE AT THE PRINCIPAL OFFICE.
EXCEPT AS PROVIDED TO THE CONTRARY HEREIN, IF THE DUE DATE OF ANY PAYMENT
HEREUNDER OR UNDER THE NOTE WOULD OTHERWISE FALL ON A DAY WHICH IS NOT A
BUSINESS DAY, SUCH DATE SHALL BE EXTENDED TO THE NEXT SUCCEEDING BUSINESS DAY,
AND INTEREST SHALL BE PAYABLE FOR ANY PRINCIPAL SO EXTENDED FOR THE PERIOD OF
SUCH EXTENSION.
15
2.7
BORROWING BASE DETERMINATIONS.
(A)
THE BORROWING BASE AS OF THE CLOSING DATE
IS ACKNOWLEDGED BY THE BORROWERS AND THE LENDER TO BE $3,400,000.
THE AMOUNT OF
THE BORROWING BASE (AS ADJUSTED FROM TIME TO TIME UNDER THE TERMS OF THIS
AGREEMENT) SHALL BE REDUCED BY $125,000 ON THE FIRST DAY OF EACH MONTH BEGINNING
SEPTEMBER 1, 2008 (THE "MONTHLY BORROWING BASE REDUCTION").
(B)
THE BORROWING BASE SHALL BE REDETERMINED
SEMI-ANNUALLY ON EACH MAY 1 AND NOVEMBER 1 OF EACH CALENDAR YEAR BEGINNING
NOVEMBER 1, 2008, ON THE BASIS OF INFORMATION SUPPLIED BY THE BORROWERS IN
COMPLIANCE WITH THE PROVISIONS OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION,
RESERVE REPORTS, AND ALL OTHER INFORMATION AVAILABLE TO THE LENDER. IN ADDITION,
THE LENDER SHALL, IN THE NORMAL COURSE OF BUSINESS FOLLOWING A REQUEST OF THE
BORROWERS, REDETERMINE THE BORROWING BASE ATTRIBUTABLE TO THE BORROWING BASE OIL
AND GAS PROPERTIES; PROVIDED, HOWEVER, THE LENDER SHALL NOT BE OBLIGATED TO
RESPOND TO MORE THAN ONE SUCH REQUEST DURING ANY CALENDAR YEAR, AND IN NO EVENT
SHALL THE LENDER BE REQUIRED TO REDETERMINE THE BORROWING BASE MORE THAN ONCE IN
ANY THREE-MONTH PERIOD, INCLUDING, WITHOUT LIMITATION, EACH SCHEDULED
SEMI-ANNUAL REDETERMINATION PROVIDED FOR ABOVE.
NOTWITHSTANDING THE FOREGOING,
THE LENDER MAY AT ITS DISCRETION REDETERMINE THE BORROWING BASE ATTRIBUTABLE TO
THE BORROWING BASE OIL AND GAS PROPERTIES AND THE AMOUNT BY WHICH THE BORROWING
BASE SHALL BE REDUCED EACH CALENDAR MONTH AS SET FORTH IN SECTION 2.7(A) AT ANY
TIME AND FROM TIME TO TIME.
(C)
UPON EACH DETERMINATION OF THE BORROWING
BASE BY THE LENDER, THE LENDER SHALL NOTIFY THE BORROWER IN WRITING OF SUCH
DETERMINATION, AND THE BORROWING BASE AND THE AMOUNT BY WHICH THE BORROWING BASE
SHALL BE REDUCED OR INCREASED SO COMMUNICATED TO THE BORROWERS SHALL BECOME
EFFECTIVE UPON SUCH WRITTEN NOTIFICATION AND SHALL REMAIN IN EFFECT UNTIL THE
NEXT SUBSEQUENT DETERMINATION OF THE BORROWING BASE AND THE AMOUNT BY WHICH THE