WOULD FIND ACCEPTABLE;
(F)
INVESTMENTS CONSISTING OF SWAP AGREEMENTS TO THE EXTENT PERMITTED
UNDER SECTION 7.05; AND
(G)
OTHER INVESTMENTS BY THE BORROWER AND THE RESTRICTED SUBSIDIARIES;
PROVIDED THAT, ON THE DATE ANY SUCH OTHER INVESTMENT IS MADE, THE AMOUNT OF SUCH
INVESTMENT, TOGETHER WITH ALL OTHER INVESTMENTS MADE PURSUANT TO THIS CLAUSE
(G) OF SECTION 7.04 (IN EACH CASE DETERMINED BASED ON THE COST OF SUCH
INVESTMENT) SINCE THE EFFECTIVE DATE, DOES NOT EXCEED IN THE AGGREGATE,
$10,000,000.
SECTION 7.05.
SWAP AGREEMENTS.
THE BORROWER WILL NOT, NOR WILL IT
PERMIT ANY OF ITS RESTRICTED SUBSIDIARIES TO, ENTER INTO OR MAINTAIN ANY SWAP
AGREEMENT, EXCEPT THE EXISTING SWAP AGREEMENTS AND SWAP AGREEMENTS ENTERED INTO
IN THE ORDINARY COURSE OF BUSINESS WITH APPROVED COUNTERPARTIES AND NOT FOR
SPECULATIVE PURPOSES TO (A) HEDGE OR MITIGATE CRUDE OIL AND NATURAL GAS PRICE
RISKS TO WHICH THE BORROWER OR ANY RESTRICTED SUBSIDIARY HAS ACTUAL EXPOSURE,
AND (B) EFFECTIVELY CAP, COLLAR OR EXCHANGE INTEREST RATES (FROM FIXED TO
FLOATING RATES, FROM ONE FLOATING RATE TO ANOTHER FLOATING RATE OR OTHERWISE)
WITH RESPECT TO ANY INTEREST-BEARING LIABILITY OR INVESTMENT OF ANY CREDIT
PARTY; PROVIDED THAT SUCH SWAP AGREEMENTS (AT THE TIME EACH TRANSACTION UNDER
SUCH SWAP AGREEMENT IS ENTERED INTO) WOULD NOT CAUSE THE AGGREGATE NOTIONAL
AMOUNT OF HYDROCARBONS UNDER ALL SWAP AGREEMENTS THEN IN EFFECT (INCLUDING THE
EXISTING SWAP AGREEMENTS TO EXCEED AT ANY TIME (I) EIGHTY PERCENT (80%) OF THE
"FORECASTED PRODUCTION FROM TOTAL PROVED RESERVES" (AS DEFINED BELOW) OF THE
BORROWER AND THE RESTRICTED SUBSIDIARIES FOR EACH OF THE FIRST TWO YEARS OF THE
FORTHCOMING FIVE YEAR PERIOD AND (II) SEVENTY PERCENT (70%) OF THE FORECASTED
PRODUCTION FROM TOTAL PROVED RESERVES OF THE BORROWER AND THE RESTRICTED
SUBSIDIARIES FOR EACH OF THE THIRD, FOURTH AND FIFTH YEARS OF THE FORTHCOMING
FIVE YEAR PERIOD.
AS USED IN THIS SECTION, "FORECASTED PRODUCTION FROM TOTAL
PROVED RESERVES" MEANS THE FORECASTED PRODUCTION OF CRUDE OIL AND NATURAL GAS AS
REFLECTED IN THE MOST RECENT RESERVE REPORT DELIVERED TO THE ADMINISTRATIVE
AGENT PURSUANT TO SECTION 6.01, AFTER GIVING EFFECT TO ANY PRO FORMA ADJUSTMENTS
FOR THE CONSUMMATION OF ANY ACQUISITIONS OR DISPOSITIONS SINCE THE EFFECTIVE
DATE OF SUCH RESERVE REPORT.
ONCE THE BORROWER OR ANY RESTRICTED SUBSIDIARIES
ENTERS INTO A SWAP AGREEMENT OR ANY HEDGE TRANSACTION PURSUANT TO ANY SWAP
AGREEMENT, THE TERMS AND CONDITIONS OF SUCH SWAP AGREEMENT AND SUCH HEDGE
TRANSACTION MAY NOT BE AMENDED OR MODIFIED, NOR MAY SUCH SWAP AGREEMENT OR HEDGE
TRANSACTION BE CANCELLED WITHOUT THE PRIOR WRITTEN CONSENT OF MAJORITY LENDERS.
EACH CREDIT PARTY AND EACH LENDER AGREES AND ACKNOWLEDGES THAT (I) THE EXISTING
SWAP AGREEMENTS ARE SWAP AGREEMENTS PERMITTED UNDER THIS SECTION 7.05, (II) AS
OF THE EFFECTIVE DATE, THE COUNTERPARTY TO EACH EXISTING SWAP AGREEMENT IS A
LENDER COUNTERPARTY, AND (III) THE OBLIGATIONS OF THE CREDIT PARTIES UNDER THE
EXISTING SWAP
69
AGREEMENTS ARE INCLUDED IN THE DEFINED TERM "OBLIGATIONS" AND SUCH OBLIGATIONS
ARE ENTITLED TO THE BENEFITS OF, AND ARE SECURED BY THE LIENS GRANTED UNDER, THE
SECURITY