Common use of Subsequent Determinations of Borrowing Base Clause in Contracts

Subsequent Determinations of Borrowing Base. Subsequent determinations of the Borrowing Base shall be made by the Lenders semi-annually on April 1 and October 1 of each year beginning October 1, 2004 or as Unscheduled Redeterminations. By March 1 each year, beginning March 1, 2005, Borrowers shall furnish to the Lenders an engineering report in form and substance reasonably satisfactory to Agent prepared by an independent petroleum engineering firm acceptable to Agent, said engineering report to utilize economic and pricing parameters used by the Agent as established from time to time, together with such other information, reports and data concerning the value of the Oil and Gas Properties as Agent shall deem reasonably necessary to determine the value of such Oil and Gas Properties. By September 1 of each year beginning September 1, 2004, or within thirty (30) days after either (i) receipt of notice from Agent that the Lenders require an Unscheduled Redetermination, or (ii) Borrowers give notice to Agent of its desire to have an Unscheduled Redetermination performed, in each case Borrowers shall furnish to the Lenders an engineering report in form and substance reasonably satisfactory to Agent, said engineering report to utilize economic and pricing parameters used by the Agent as established from to time, together with such other information, reports and data concerning the value of such Oil and Gas Properties. Agent shall by written notice to Borrowers no later than April 1 and October 1 of each year, or within a reasonable time thereafter (herein called the "Determination Date"), notify Borrowers of the designation by the Lenders of the new Borrowing Base for the period beginning on such Determination Date and continuing until, but not including, the next Determination Date. If an Unscheduled Redetermination is to be made by the Lenders, the Agent shall notify Borrowers within a reasonable time after receipt of all requested information of the new Borrowing Base, and such new Borrowing Base shall continue until the next Determination Date. If Borrowers do not furnish all such information, reports and data by any date specified in this Section 7(b), unless such failure is reasonably determined by the Agent to be of no fault of Borrowers, the Lenders nonetheless designate the Borrowing Base at any amounts which the Lenders in their reasonable discretion determine and redesignate the Borrowing Base from time to time thereafter until the Lenders receive all such information, reports and data, whereupon the Lenders shall designate a new Borrowing Base, as described above. The procedure for determining the Borrowing Base at each redetermination shall be that the Agent shall determine the Borrowing Base and submit the same to the Lenders. Increases in the Borrowing Base will require approval of all Lenders, but other reaffirmation or changes in the Borrowing Base will be subject to the approval of Super Majority Lenders. If any redetermined Borrowing Base is not approved by Super Majority Lenders within twenty (20) days after submission to the Lenders by Agent of the proposed amount, the Agent shall notify each of the Lenders that the proposed Borrowing Base has not been approved and each Lender will submit within ten (10) days thereafter its proposed Borrowing Base. The redetermined Borrowing Base shall be then determined (in all cases except those involving an increase of the Borrowing Base which requires approval of all Lenders) based upon the weighted arithmetic average of the proposed amounts submitted by each Lender, said proposals to be weighted according to each Lender's Commitment. Each Lender shall determine the amount of the Borrowing Base based upon the loan collateral value which such Lender in its sole discretion (using such methodology, assumptions and discount rates as such Lender customarily uses in assigning collateral value to oil and gas properties, oil and gas gathering systems, gas processing and plant operations) assigns to such Oil and Gas Properties of Borrowers and the Guarantors at the time in question and based upon such other credit factors consistently applied (including, without limitation, the assets, liabilities, cash flow, business, properties, prospects, management and ownership of Borrowers and their affiliates) as such Lender customarily considers in evaluating similar oil and gas credits. If at any time any of the Oil and Gas Properties are sold, the Borrowing Base then in effect shall automatically be reduced by a sum equal to the amount of prepayment, if any, required to be made pursuant to Section 12(r). It is expressly understood that the Lenders have no obligation to designate the Borrowing Base at any particular amounts, except in the exercise of their discretion, whether in relation to the Commitments or otherwise; provided, however, that the Lenders shall not have the obligation to designate a Borrowing Base in an amount in excess of the Commitment.

Subsequent Determinations of Borrowing Base. Subsequent determinations of the Borrowing Base shall be made by the Lenders semi-annually on April 1 and October 1 of each year beginning October 1, 2004 1998 or as Unscheduled Redeterminations. By In connection with, and as of, each determination of the Borrowing Base, the Banks shall also redetermine the Monthly Commitment Reduction. The Borrower shall furnish to the Banks as soon as possible but in any event no later than March 1 of each year, beginning March 1, 20051999, Borrowers with an Engineering Report in form and substance satisfactory to the Agent prepared by an independent petroleum engineering acceptable to Agent covering the Oil and Gas Properties utilizing economic and pricing parameters used by Agent as established from time to time, together with such other information concerning the value of the Oil and Gas Properties as the Agent shall deem necessary to determine the value of the Oil and Gas Properties. By September 1 of each year, or within thirty (30) days after either (i) receipt of notice from Agent that the Banks require an Unscheduled Redetermination, or (ii) the Borrower give notice to Agent of their desire to have an Unscheduled Redetermination performed, the Borrower shall furnish to the Lenders Banks an engineering report in form and substance reasonably satisfactory to Agent prepared by an independent petroleum Borrower's in-house engineering firm acceptable to Agent, said engineering report to utilize staff valuing the Oil and Gas Properties utilizing economic and pricing parameters used by the Agent as established from time to time, together with such other information, reports and data concerning the value of the Oil and Gas Properties as Agent shall deem reasonably necessary to determine the value of such Oil and Gas Properties. By September 1 of each year beginning September 1, 2004, or within thirty (30) days after either (i) receipt of notice from Agent that the Lenders require an Unscheduled Redetermination, or (ii) Borrowers give notice to Agent of its desire to have an Unscheduled Redetermination performed, in each case Borrowers shall furnish to the Lenders an engineering report in form and substance reasonably satisfactory to Agent, said engineering report to utilize economic and pricing parameters used by the Agent as established from to time, together with such other information, reports and data concerning the value of such Oil and Gas Properties. Agent shall by written notice to Borrowers the Borrower no later than April 1 and October 1 of each year, or within a reasonable time thereafter (herein called the "Determination Date"), notify Borrowers the Borrower of the designation by the Lenders Banks of the new Borrowing Base and Monthly Commitment Reduction for the period beginning on such Determination Date and continuing until, but not including, the next Determination Date. If an Unscheduled Redetermination is to be made by the LendersBanks, the Agent shall notify Borrowers the Borrower within a reasonable time after receipt of all requested information of the new Borrowing BaseBase and Monthly Commitment Reduction, and such new Borrowing Base and Monthly Commitment Reduction shall continue until the next Determination Date. If Borrowers do the Borrower does not furnish all such information, reports and data by any date specified in this Section 7(b), unless such failure is reasonably determined by the Agent to be of no fault of Borrowersthe Borrower, the Lenders Banks may nonetheless designate the Borrowing Base and Monthly Commitment Reduction at any amounts which the Lenders Banks in their reasonable discretion determine and may redesignate the Borrowing Base and Monthly Commitment Reduction from time to time thereafter until the Lenders Banks receive all such information, reports and data, whereupon the Lenders Banks shall designate a new Borrowing Base, Base and Monthly Commitment Reduction as described above. The procedure for determining the Borrowing Base at each redetermination shall be that the Agent shall determine the Borrowing Base and submit the same to the Lenders. Increases in the Borrowing Base will require approval of all Lenders, but other reaffirmation or changes in the Borrowing Base will be subject to the approval of Super Majority Lenders. If any redetermined Borrowing Base is not approved by Super Majority Lenders within twenty (20) days after submission to the Lenders by Agent of the proposed amount, the Agent shall notify each of the Lenders that the proposed Borrowing Base has not been approved and each Lender will submit within ten (10) days thereafter its proposed Borrowing Base. The redetermined Borrowing Base shall be then determined (in all cases except those involving an increase of the Borrowing Base which requires approval of all Lenders) based upon the weighted arithmetic average of the proposed amounts submitted by each Lender, said proposals to be weighted according to each Lender's Commitment. Each Lender Bank shall determine the amount of the Borrowing Base and Monthly Commitment Reduction based upon the loan collateral value which such Lender Bank in its sole discretion (using such methodology, assumptions and discount discounts rates as such Lender Bank customarily uses in assigning collateral value to oil and gas properties, oil and gas gathering systems, gas processing and plant operations) assigns to such Oil and Gas Properties of Borrowers and the Guarantors Borrower at the time in question and based upon such other credit factors consistently applied (including, without limitation, the assets, liabilities, cash flow, business, properties, prospects, management and ownership of Borrowers the Borrower and their its affiliates) as such Lender Bank customarily considers in evaluating similar oil and gas credits, but such Bank in its discretion shall not be required to give any additional positive value to any Oil and Gas Property over the current economic and pricing parameters used by such Bank for such Determination Date which additional value is derived directly from a hedging, forward sale or swap agreement covering such Oil and Gas Property as of the date of such determination. All determinations or Unscheduled Redeterminations of the Borrowing Base and the Monthly Commitment Reduction require the approval of Majority Banks; provided, however, that notwithstanding anything to the contrary herein, the amount of the Borrowing Base may not be increased, nor may the Monthly Commitment Reduction be reduced, without the approval of all Banks. If the Banks cannot otherwise agree on the Borrowing Base or the Monthly Commitment Reduction, each Bank shall submit in writing to the Agent its proposed Borrowing Base and Monthly Commitment Reduction and the Borrowing Base and Monthly Commitment Reduction shall be set on the basis of the lowest Borrowing Base and the highest Monthly Commitment Reduction proposed by any Bank. If at any time any of the Oil and Gas Properties are sold, the Borrowing Base then in effect shall automatically be reduced by a sum equal to the amount of prepayment, if any, prepayment required to be made pursuant to Section 12(r)) hereof. The Borrowing Base shall be additionally reduced from time to time pursuant to the provisions of Sections 2(e) and 2(f) hereof. It is expressly understood that the Lenders Banks have no obligation to designate the Borrowing Base or the Monthly Commitment Reduction at any particular amounts, except in the exercise of their discretion, whether in relation to the Commitments Revolving Commitment or otherwise; provided. Provided, however, that the Lenders Banks shall not have the obligation to designate a Borrowing Base in an amount in excess of the CommitmentRevolving Commitment or its legal or internal lending limits. Provided, however, that in no event shall the Borrowing Base ever exceed 10% of the Adjusted Consolidated Tangible Net Assets.