WITH A VALUE NOT EXCEEDING, IN THE AGGREGATE FOR THE BORROWER AND ITS
RESTRICTED SUBSIDIARIES TAKEN AS A WHOLE, FIVE PERCENT (5%) OF THE BORROWING
BASE BETWEEN SCHEDULED REDETERMINATIONS AND (VII) WITH THE PRIOR WRITTEN CONSENT
OF REQUIRED LENDERS AND SUBJECT TO SECTION 2.02(D) AND SECTION 2.12(B), THE
BORROWER OR ANY RESTRICTED SUBSIDIARY MAY SELL, TRANSFER, LEASE, EXCHANGE,
ABANDON OR OTHERWISE DISPOSE OF BORROWING BASE PROPERTIES NOT OTHERWISE
PERMITTED PURSUANT TO THE FOREGOING CLAUSE (VI). FOR PURPOSES OF THE FOREGOING
CLAUSE (VI), THE VALUE OF ANY OIL AND GAS INTERESTS INCLUDED IN THE BORROWING
BASE PROPERTIES SHALL BE THE ENGINEERED VALUE OF SUCH OIL AND GAS INTERESTS AND
THE VALUE OF ALL OTHER OIL AND GAS INTERESTS SHALL BE THE VALUE WHICH WOULD BE
ASSIGNED TO SUCH OIL AND GAS INTERESTS USING THE SAME METHODOLOGY, ASSUMPTIONS
AND DISCOUNT RATES USED TO DETERMINE THE ENGINEERED VALUE OF THE BORROWING BASE
PROPERTIES AS OF THE MOST RECENT REDETERMINATION.
IN ADDITION, FOR PURPOSES OF
DETERMINING COMPLIANCE WITH CLAUSE (VI) OF THIS SECTION WITH RESPECT TO ANY
EXCHANGE OF OIL AND GAS INTERESTS, THE VALUE OF SUCH EXCHANGE SHALL BE THE NET
REDUCTION, IF ANY, IN ENGINEERED VALUE REALIZED OR RESULTING FROM SUCH EXCHANGE.
(B)
THE BORROWER WILL NOT, NOR WILL IT PERMIT ANY OF ITS RESTRICTED
SUBSIDIARIES TO, ENGAGE TO ANY MATERIAL EXTENT IN ANY BUSINESS OTHER THAN
BUSINESSES OF THE TYPE CONDUCTED BY THE BORROWER AND ITS RESTRICTED SUBSIDIARIES
ON THE DATE OF EXECUTION OF THIS AGREEMENT AND AFTER GIVING EFFECT TO THE
TRANSACTIONS AND BUSINESSES REASONABLY RELATED THERETO.
SECTION 7.04.
INVESTMENTS, LOANS, ADVANCES, GUARANTEES AND
ACQUISITIONS.
THE BORROWER WILL NOT, NOR WILL IT PERMIT ANY OF ITS RESTRICTED
SUBSIDIARIES TO, PURCHASE, HOLD OR ACQUIRE (INCLUDING PURSUANT TO ANY MERGER
WITH ANY PERSON THAT WAS NOT A WHOLLY OWNED RESTRICTED SUBSIDIARY PRIOR TO SUCH
MERGER) ANY CAPITAL STOCK, EVIDENCES OF INDEBTEDNESS OR OTHER SECURITIES
(INCLUDING ANY OPTION, WARRANT OR OTHER RIGHT TO ACQUIRE ANY OF THE FOREGOING)
OF, MAKE OR PERMIT TO EXIST ANY LOANS OR ADVANCES TO, GUARANTEE ANY INDEBTEDNESS
OF, OR MAKE OR PERMIT TO EXIST ANY INVESTMENT OR ANY OTHER INTEREST IN, ANY
OTHER PERSON, OR PURCHASE OR OTHERWISE ACQUIRE (IN ONE TRANSACTION OR A SERIES
OF TRANSACTIONS) ANY ASSETS OF ANY OTHER PERSON CONSTITUTING A BUSINESS UNIT,
EXCEPT:
(A)
PERMITTED INVESTMENTS;
(B)
INVESTMENTS BY THE BORROWER IN THE EQUITY INTERESTS OF ANY
RESTRICTED SUBSIDIARY;
(C)
INVESTMENTS BY THE BORROWER OR GUARANTOR CONSISTING OF
INTERCOMPANY INDEBTEDNESS PERMITTED UNDER SECTION 7.01(C)
68
(D)
GUARANTEES CONSTITUTING INDEBTEDNESS PERMITTED BY SECTION 7.01;
(E)
INVESTMENTS BY THE BORROWER AND ITS RESTRICTED SUBSIDIARIES THAT
ARE (1) CUSTOMARY IN THE OIL AND GAS BUSINESS, (2) MADE IN THE ORDINARY COURSE
OF THE BORROWER'S OR SUCH RESTRICTED SUBSIDIARY'S BUSINESS, AND (3) MADE IN THE
FORM OF, OR PURSUANT TO, OIL, GAS AND MINERAL LEASES, OPERATING AGREEMENTS,
FARM-IN AGREEMENTS, FARM-OUT AGREEMENTS, DEVELOPMENT AGREEMENTS, UNITIZATION
AGREEMENTS, JOINT BIDDING AGREEMENTS, SERVICES CONTRACTS AND OTHER SIMILAR
AGREEMENTS THAT A REASONABLE AND PRUDENT OIL AND GAS INDUSTRY OWNER OR OPERATOR