Document:

Exhibit 4.1

 

DENVER PARENT CORPORATION

 

AND

 

 

U.S. BANK NATIONAL ASSOCIATION,
 AS TRUSTEE

 

 

12.25% / 13.00% Senior PIK Toggle Notes due 2018

 

 

INDENTURE

Dated as of August 15, 2013

 

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
ARTICLE I Definitions   and Incorporation by Reference
    	
 
    	
1
    
	
 
    	
 
    	
 
    
	
Section 1.1 
    	
Definitions 
    	
 
    	
1
    
	
Section 1.2 
    	
Other Definitions
    	
 
    	
32
    
	
Section 1.3 
    	
Incorporation by Reference of Trust Indenture Act
    	
 
    	
34
    
	
Section 1.4 
    	
Rules of Construction
    	
 
    	
34
    
	
 
    	
 
    	
 
    
	
ARTICLE II The Notes
    	
 
    	
35
    
	
 
    	
 
    	
 
    
	
Section 2.1 
    	
Form, Dating and Terms
    	
 
    	
35
    
	
Section 2.2 
    	
Execution and   Authentication
    	
 
    	
40
    
	
Section 2.3 
    	
Registrar and Paying Agent
    	
 
    	
41
    
	
Section 2.4 
    	
Paying Agent to Hold Money   in Trust
    	
 
    	
42
    
	
Section 2.5 
    	
Holder Lists
    	
 
    	
42
    
	
Section 2.6 
    	
Transfer and Exchange
    	
 
    	
42
    
	
Section 2.7 
    	
Form of Certificates   to be Delivered in Connection with Certain Transfers
    	
 
    	
45
    
	
Section 2.8 
    	
Mutilated, Destroyed, Lost   or Wrongfully Taken Notes
    	
 
    	
47
    
	
Section 2.9 
    	
Outstanding Notes
    	
 
    	
48
    
	
Section 2.10 
    	
Cancellation
    	
 
    	
48
    
	
Section 2.11 
    	
Payment of Interest;   Defaulted Interest
    	
 
    	
48
    
	
Section 2.12 
    	
Computation of Interest
    	
 
    	
50
    
	
Section 2.13 
    	
CUSIP Numbers
    	
 
    	
50
    
	
 
    	
 
    	
 
    
	
ARTICLE III Covenants
    	
 
    	
50
    
	
 
    	
 
    	
 
    
	
Section 3.1 
    	
Payment of Notes
    	
 
    	
50
    
	
Section 3.2 
    	
Reports
    	
 
    	
51
    
	
Section 3.3 
    	
Incurrence of Indebtedness   and Issuance of Preferred Stock
    	
 
    	
52
    
	
Section 3.4 
    	
Restricted Payments
    	
 
    	
56
    
	
Section 3.5 
    	
Liens
    	
 
    	
60
    
	
Section 3.6 
    	
Dividend and Other Payment   Restrictions Affecting Subsidiaries
    	
 
    	
60
    
	
Section 3.7 
    	
Assets Sales
    	
 
    	
62
    
	
Section 3.8 
    	
Transactions with   Affiliates
    	
 
    	
65
    
	
Section 3.9 
    	
Change of Control
    	
 
    	
66
    
	
Section 3.10 
    	
Future Note Guarantees
    	
 
    	
68
    
	
Section 3.11 
    	
Business Activities
    	
 
    	
69
    
	
Section 3.12 
    	
Designation of Restricted   and Unrestricted Subsidiaries
    	
 
    	
69
    
	
Section 3.13 
    	
Maintenance of Office or   Agency
    	
 
    	
69
    
	
Section 3.14 
    	
Corporate Existence
    	
 
    	
70
    
	
Section 3.15 
    	
Payment of Taxes and Other   Claims
    	
 
    	
70
    
	
Section 3.16 
    	
Compliance Certificate
    	
 
    	
70
    
	
Section 3.17 
    	
Further Instruments and   Acts
    	
 
    	
71
    
	
Section 3.18 
    	
Statement by Officers as   to Default
    	
 
    	
71
    
	
Section 3.19 
    	
Payments for Consent
    	
 
    	
71
    
	
Section 3.20 
    	
Covenant Suspension
    	
 
    	
71
    

 

i

 

	
ARTICLE IV Successor   Company
    	
 
    	
72
    
	
 
    	
 
    	
 
    
	
Section 4.1 
    	
Merger, Consolidation or   Sale of Assets
    	
 
    	
72
    
	
 
    	
 
    	
 
    
	
ARTICLE V Redemption   of Notes
    	
 
    	
73
    
	
 
    	
 
    	
 
    
	
Section 5.1 
    	
Optional Redemption
    	
 
    	
73
    
	
Section 5.2 
    	
Applicability of Article
    	
 
    	
74
    
	
Section 5.3 
    	
Election to Redeem; Notice   to Trustee
    	
 
    	
74
    
	
Section 5.4 
    	
Selection by Trustee of   Notes to Be Redeemed
    	
 
    	
74
    
	
Section 5.5 
    	
Notice of Redemption
    	
 
    	
75
    
	
Section 5.6 
    	
Deposit of Redemption   Price
    	
 
    	
76
    
	
Section 5.7 
    	
Notes Payable on   Redemption Date
    	
 
    	
76
    
	
Section 5.8 
    	
Notes Redeemed in Part
    	
 
    	
76
    
	
 
    	
 
    	
 
    
	
ARTICLE VI Defaults   and Remedies
    	
 
    	
77
    
	
 
    	
 
    	
 
    
	
Section 6.1 
    	
Events of Default
    	
 
    	
77
    
	
Section 6.2 
    	
Acceleration
    	
 
    	
79
    
	
Section 6.3 
    	
Other Remedies
    	
 
    	
80
    
	
Section 6.4 
    	
Waiver of Past Defaults
    	
 
    	
80
    
	
Section 6.5 
    	
Control by Majority
    	
 
    	
80
    
	
Section 6.6 
    	
Limitation on Suits
    	
 
    	
80
    
	
Section 6.7 
    	
Rights of Holders to   Receive Payment
    	
 
    	
81
    
	
Section 6.8 
    	
Collection Suit by Trustee
    	
 
    	
81
    
	
Section 6.9 
    	
Trustee May File   Proofs of Claim
    	
 
    	
81
    
	
Section 6.10 
    	
Priorities
    	
 
    	
82
    
	
Section 6.11 
    	
Undertaking for Costs
    	
 
    	
82
    
	
Section 6.12 
    	
Waiver of Stay, Extension   and Usury Laws
    	
 
    	
82
    
	
 
    	
 
    	
 
    
	
ARTICLE VII Trustee
    	
 
    	
83
    
	
 
    	
 
    	
 
    
	
Section 7.1 
    	
Duties of Trustee
    	
 
    	
83
    
	
Section 7.2 
    	
Rights of Trustee
    	
 
    	
84
    
	
Section 7.3 
    	
Individual Rights of   Trustee
    	
 
    	
85
    
	
Section 7.4 
    	
Trustee’s Disclaimer
    	
 
    	
85
    
	
Section 7.5 
    	
Notice of Defaults
    	
 
    	
86
    
	
Section 7.6 
    	
Reports by Trustee to   Holders
    	
 
    	
86
    
	
Section 7.7 
    	
Compensation and Indemnity
    	
 
    	
86
    
	
Section 7.8 
    	
Replacement of Trustee
    	
 
    	
87
    
	
Section 7.9 
    	
Successor Trustee by   Merger
    	
 
    	
88
    
	
Section 7.10 
    	
Eligibility;   Disqualification
    	
 
    	
88
    
	
Section 7.11 
    	
Preferential Collection of   Claims Against Company
    	
 
    	
88
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII Legal   Defeasance and Covenant Defeasance
    	
 
    	
88
    
	
 
    	
 
    	
 
    
	
Section 8.1 
    	
Option to Effect Legal   Defeasance or Covenant Defeasance
    	
 
    	
88
    
	
Section 8.2 
    	
Legal Defeasance and   Discharge
    	
 
    	
88
    
	
Section 8.3 
    	
Covenant Defeasance
    	
 
    	
89
    
	
Section 8.4 
    	
Conditions to Legal or   Covenant Defeasance
    	
 
    	
90
    

 

ii

 

	
Section 8.5 
    	
Deposited Cash and   Government Securities to be Held in Trust; Other Miscellaneous Provisions
    	
 
    	
91
    
	
Section 8.6 
    	
Repayment to Company
    	
 
    	
91
    
	
Section 8.7 
    	
Reinstatement
    	
 
    	
92
    
	
 
    	
 
    	
 
    
	
ARTICLE IX Amendments
    	
 
    	
92
    
	
 
    	
 
    	
 
    
	
Section 9.1 
    	
Without Consent of Holders
    	
 
    	
92
    
	
Section 9.2 
    	
With Consent of Holders
    	
 
    	
93
    
	
Section 9.3 
    	
Compliance with Trust   Indenture Act
    	
 
    	
94
    
	
Section 9.4 
    	
Revocation and Effect of   Consents and Waivers
    	
 
    	
94
    
	
Section 9.5 
    	
Notation on or Exchange of   Notes
    	
 
    	
95
    
	
Section 9.6 
    	
Trustee To Sign Amendments
    	
 
    	
95
    
	
 
    	
 
    	
 
    
	
ARTICLE X Note   Guarantee
    	
 
    	
95
    
	
 
    	
 
    	
 
    
	
Section 10.1 
    	
Note Guarantee
    	
 
    	
95
    
	
Section 10.2 
    	
Limitation on Liability;   Termination, Release and Discharge
    	
 
    	
97
    
	
Section 10.3 
    	
Limitation of Guarantors’   Liability
    	
 
    	
98
    
	
Section 10.4 
    	
Contribution
    	
 
    	
98
    
	
 
    	
 
    	
 
    
	
ARTICLE XI   Satisfaction and Discharge
    	
 
    	
98
    
	
 
    	
 
    	
 
    
	
Section 11.1 
    	
Satisfaction and Discharge
    	
 
    	
98
    
	
 
    	
 
    	
 
    
	
ARTICLE XII   Miscellaneous
    	
 
    	
99
    
	
 
    	
 
    	
 
    
	
Section 12.1 
    	
Trust Indenture Act   Controls
    	
 
    	
99
    
	
Section 12.2 
    	
Notices
    	
 
    	
99
    
	
Section 12.3 
    	
Communication by Holders   with other Holders
    	
 
    	
100
    
	
Section 12.4 
    	
Certificate and Opinion as   to Conditions Precedent
    	
 
    	
100
    
	
Section 12.5 
    	
Statements Required in   Certificate or Opinion
    	
 
    	
101
    
	
Section 12.6 
    	
When Notes Disregarded
    	
 
    	
101
    
	
Section 12.7 
    	
Rules by Trustee,   Paying Agent and Registrar
    	
 
    	
101
    
	
Section 12.8 
    	
Legal Holidays
    	
 
    	
101
    
	
Section 12.9 
    	
GOVERNING LAW
    	
 
    	
102
    
	
Section 12.10 
    	
No Recourse Against Others
    	
 
    	
102
    
	
Section 12.11 
    	
Successors
    	
 
    	
102
    
	
Section 12.12 
    	
Multiple Originals
    	
 
    	
102
    
	
Section 12.13 
    	
Qualification of Indenture
    	
 
    	
102
    
	
Section 12.14 
    	
Severability
    	
 
    	
102
    
	
Section 12.15 
    	
No Adverse Interpretation   of Other Agreements
    	
 
    	
102
    
	
Section 12.16 
    	
Table of Contents;   Headings
    	
 
    	
102
    

 

EXHIBIT A     Form of the Note

EXHIBIT B     Form of the Exchange Note 

EXHIBIT C     Form of Note Guarantee

 

iii

 

CROSS-REFERENCE TABLE

 

	
TIA
   Section
    	
 
    	
Indenture
   Section
    
	
 
    	
 
    	
 
    
	
310(a)(1)
    	
 
    	
7.10
    
	
(a)(2)
    	
 
    	
7.10
    
	
(a)(3)
    	
 
    	
N.A.
    
	
(a)(4)
    	
 
    	
N.A.
    
	
(b)
    	
 
    	
7.8; 7.10
    
	
(c)
    	
 
    	
N.A.
    
	
311(a)
    	
 
    	
7.11
    
	
(b)
    	
 
    	
7.11
    
	
(c)
    	
 
    	
N.A.
    
	
312(a)
    	
 
    	
2.5
    
	
(b)
    	
 
    	
12.3
    
	
(c)
    	
 
    	
12.3
    
	
313(a)
    	
 
    	
7.6
    
	
(b)(1)
    	
 
    	
7.6
    
	
(b)(2)
    	
 
    	
7.6
    
	
(c)
    	
 
    	
7.6
    
	
(d)
    	
 
    	
7.6
    
	
314(a)
    	
 
    	
3.2; 12.2
    
	
(b)
    	
 
    	
N.A.
    
	
(c)(1)
    	
 
    	
11.4
    
	
(c)(2)
    	
 
    	
11.4
    
	
(c)(3)
    	
 
    	
N.A.
    
	
(d)
    	
 
    	
N.A.
    
	
(e)
    	
 
    	
12.5
    
	
315(a)
    	
 
    	
7.1
    
	
(b)
    	
 
    	
7.5; 12.2
    
	
(c)
    	
 
    	
7.1
    
	
(d)
    	
 
    	
7.1
    
	
(e)
    	
 
    	
6.11
    
	
316(a)(last sentence)
    	
 
    	
12.6
    
	
(a)(1)(A)
    	
 
    	
6.5
    
	
(a)(1)(B)
    	
 
    	
6.4
    
	
(a)(2)
    	
 
    	
N.A.
    
	
(b)
    	
 
    	
6.7
    
	
317(a)(1)
    	
 
    	
6.8
    
	
(a)(2)
    	
 
    	
6.9
    
	
(b)
    	
 
    	
2.4
    
	
318(a)
    	
 
    	
12.1
    

 

N.A. means Not Applicable.

 

Note:   This Cross-Reference Table shall not, for any purpose, be deemed to be part of this Indenture.

 

iv

 

INDENTURE dated as of August 15, 2013, among DENVER PARENT CORPORATION, a Delaware corporation (the “Company”) and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as trustee (the “Trustee”).

 

Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of (i) the Company’s 12.25% / 13.00% Senior PIK Toggle Notes due 2018, issued on the date hereof (the “Initial Notes”), (ii) if and when issued, additional 12.25% / 13.00% Senior PIK Toggle Notes due 2018 issued in connection with a PIK Payment (as defined below) in respect of 12.25% / 13.00% Senior PIK Toggle Notes due 2018 (the “PIK  Notes”), (iii) if and when issued, an unlimited principal amount of additional 12.25% / 13.00% Senior PIK Toggle Notes due 2018 in a non-registered offering or in a registered offering of the Company that may be offered from time to time subsequent to the Issue Date (the “Additional Notes,” which term excludes, for the avoidance of doubt, PIK Notes issued in a PIK Payment (as defined below), and (iv) if and when issued, the Company’s 12.25% / 13.00% Senior PIK Toggle Notes due 2018 that may be issued from time to time in exchange for Initial Notes, PIK Notes or any Additional Notes in an offer registered under the Securities Act as provided in the Registration Rights Agreement (as defined below) (the “Exchange Notes,” and together with the Initial Notes, PIK Notes and Additional Notes, the “Notes”).

 

ARTICLE I

 

Definitions and Incorporation by Reference  

 

Section 1.1                                    Definitions.

 

“Acquired Debt” means, with respect to any specified Person:

 

(1)                                 Indebtedness of any other Person existing at the time such other Person was merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and

 

(2)                                 Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

 

“Additional Assets” means:

 

(1)                                 any assets used or useful in the Oil and Gas Business;

 

(2)                                 the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or

 

(3)                                 Capital Stock constituting a minority in any Person that at such time is a Restricted Subsidiary;

 

provided, however, that any such Restricted Subsidiary described in clause (2) or (3) is primarily engaged in the Oil and Gas Business.

 

1

 

“Additional Interest” has the meaning set forth in the Registration Rights Agreement. The Trustee shall be under no obligation to determine or calculate the Additional Interest, whether the Additional Interest is due and payable, or to give notice with respect thereto. The Trustee may conclusively assume, in the absence of written notice to the contrary from the Company or a Holder or Holders of Notes, that no Additional Interest is due and payable.

 

“Additional Notes” has the meaning ascribed to it in the second introductory paragraph of this Indenture.

 

“Adjusted Consolidated Net Tangible Assets” means (without duplication), as of the date of determination, the remainder of:

 

(1)                                 the sum of:

 

(a)                                 discounted future net revenues from proved oil and gas reserves of the Company and its Restricted Subsidiaries calculated in accordance with Commission guidelines before any provincial, territorial, state, federal or foreign income taxes, as estimated by the Company in a reserve report prepared as of the first day of the fiscal year following the fiscal year for which audited financial statements are available and giving effect to applicable commodity Hedging Obligations, as increased by, as of the date of determination, the estimated discounted future net revenues from

 

(i)                                     estimated proved oil and gas reserves acquired since such year end, which reserves were not reflected in such year end reserve report, and

 

(ii)                                  estimated oil and gas reserves attributable to upward revisions of estimates of proved oil and gas reserves since such year end (including previously estimated development costs incurred during the period and the accretion of discount since the prior year end) due to exploration, development or exploitation activities,

 

in each case calculated in accordance with Commission guidelines (utilizing the prices utilized in such year-end reserve reports), and decreased by, as of the date of determination, the estimated discounted future net revenue attributable to:

 

(iii)                               estimated proved oil and gas reserves produced or disposed of since such year end, and

 

(iv)                              estimated oil and gas reserves attributable to downward revisions of estimates of proved oil and gas reserves since such year end due to changes in geological conditions or other factors which would, in accordance with standard industry practice, cause such revisions,

 

in each case calculated on a pre-tax basis and substantially in accordance with Commission guidelines, in each case as estimated by the Company’s petroleum engineers or any independent petroleum engineers engaged by the Company for that purpose; provided, however, that, in the case of each of the determinations

 

2

 

made pursuant to clauses (i) through (iv), such increases and decreases shall be as estimated by the Company’s engineers;

 

(b)                                 the capitalized costs that are attributable to oil and gas properties of the Company and its Restricted Subsidiaries to which no proved oil and gas reserves are attributable, based on the Company’s books and records as of a date no earlier than the date of the Company’s latest available annual or quarterly financial statements;

 

(c)                                  the Net Working Capital on a date no earlier than the date of the Company’s latest annual or quarterly financial statements; and

 

(d)                                 the greater of:

 

(i)                                the net book value of other tangible assets of the Company and its Restricted Subsidiaries, as of a date no earlier than the date of the Company’s latest annual or quarterly financial statements, and

 

(ii)                             the appraised value, as estimated by independent appraisers, of other tangible assets of the Company and its Restricted Subsidiaries, as of a date no earlier than the date of the Company’s latest audited financial statements (provided that the Company shall not be required to obtain such appraisal solely for the purpose of determining this value); minus

 

(2)                                 the sum of:

 

(a)                                 Minority Interests;

 

(b)                                 any net gas balancing liabilities of the Company and its Restricted Subsidiaries reflected in the Company’s latest audited financial statements;

 

(c)                                  to the extent included in (1)(a) above, the discounted future net revenues, calculated in accordance with Commission guidelines (utilizing the prices utilized in the Company’s year end reserve report), attributable to reserves which are required to be delivered to third parties to fully satisfy the obligations of the Company and its Restricted Subsidiaries with respect to Volumetric Production Payments (determined, if applicable, using the schedules specified with respect thereto); and

 

(d)                                 the discounted future net revenues, calculated in accordance with Commission guidelines, attributable to reserves subject to Dollar-Denominated Production Payments which, based on the estimates of production and price assumptions included in determining the discounted future net revenues specified in (a)(i) above, would be necessary to fully satisfy the payment obligations of the Company and its Subsidiaries with respect to Dollar-Denominated Production Payments (determined, if applicable, using the schedules specified with respect thereto).

 

If the Company changes its method of accounting from the full cost method to the successful efforts or a similar method of accounting, “Adjusted Consolidated Net Tangible

 

3

 

Assets” will continue to be calculated as if the Company were still using the full cost method of accounting.

 

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control,” as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” have correlative meanings.

 

“Asset Sale” means:

 

(1)                            the sale, lease, conveyance or other disposition of any properties or assets (including by way of a Production Payment or sale and leaseback transaction); provided that the disposition of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by Sections 3.9 and/or 4.1 and not by Section 3.7; and

 

(2)                            the issuance of Equity Interests in any of the Company’s Restricted Subsidiaries or the sale of Equity Interests in any of its Restricted Subsidiaries.

 

Notwithstanding the preceding, the following items will not be deemed to be Asset Sales:

 

(3)                            any single transaction or series of related transactions that involves properties or assets having a Fair Market Value of less than $10,000,000;

 

(4)                            a transfer of assets between or among any of the Company and its Restricted Subsidiaries;

 

(5)                            an issuance or sale of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary;

 

(6)                            a disposition of Hydrocarbons or mineral products inventory in the ordinary course of business;

 

(7)                            a disposition of obsolete or worn out equipment or equipment that is no longer useful in the conduct of the business of the Company and its Restricted Subsidiaries and that is disposed of in each case in the ordinary course of business;

 

(8)                            dispositions of past due accounts and notes receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof;

 

(9)                            the licensing or sublicensing of intellectual property or other general intangibles and licenses, leases or subleases of other property in the ordinary course of business and which do not materially interfere with the business of the Company and its Restricted Subsidiaries;

 

4

 

(10)                     [RESERVED];

 

(11)                     the farm-out, lease or sublease of developed or undeveloped crude oil or natural gas properties owned or held by the Company or such Restricted Subsidiary in exchange for crude oil and natural gas properties owned or held by another Person;

 

(12)                     the sale or other disposition of cash or Cash Equivalents;

 

(13)                     a Restricted Payment that is permitted by Section 3.4 or is a Permitted Investment;

 

(14)                     any trade or exchange by the Company or any Restricted Subsidiary of oil and gas properties or other properties or assets for oil and gas properties or other properties or assets owned or held by another Person, provided that the Fair Market Value of the properties or assets traded or exchanged by the Company or such Restricted Subsidiary (together with any cash) is reasonably equivalent to the Fair Market Value of the properties or assets (together with any cash) to be received by the Company or such Restricted Subsidiary; and provided further, that any net cash received must be applied in accordance with Section 3.7; and provided further that, after giving pro forma effect to such trade or exchange and the application of any net cash received, the Company would be permitted to incur at least $1.00 of Indebtedness pursuant to the Debt to Assets Ratio test set forth in clause (i) of Section 3.3(a);

 

(15)                     the creation or perfection of a Lien (but not the sale or other disposition of the properties or assets subject to such Lien); and

 

(16)                     a surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind.

 

“Attributable Debt” in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP.

 

“Bankruptcy Law” means Title 11, United States Code or any similar Federal or state law for the relief of debtors.

 

“Beneficial Owner” has the meaning given to such term in Rule 13d-3 and Rule 1 3d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 12(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms “Beneficially Owns” and “Beneficially Owned” have correlative meanings.

 

“Board of Directors” means:

 

5

 

(1)                            with respect to a corporation, the board of directors of the corporation;

 

(2)                            with respect to a partnership, the board of directors of the general partner of the partnership; and

 

(3)                            with respect to any other Person, the board or committee of such Person serving a similar function.

 

“Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the applicable Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.

 

“Business Day” means each day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York, Denver, Colorado or St. Paul, Minnesota or another place of payment for the Notes are authorized or required by law to close.

 

“Capital Lease Obligations” means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP as in effect at the Issue Date, and the amount of Indebtedness represented by such obligation will be the capitalized amount of such obligation at the time any determination thereof is to be made as determined in accordance with GAAP as in effect at the Issue Date, and the Stated Maturity thereof will be the date of the last payment of rent or any other amount due under such lease prior to the first date such lease may be terminated without penalty.

 

“Capital Stock” means:

 

(1)                            in the case of a corporation, corporate stock;

 

(2)                            in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

 

(3)                            in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

 

(4)                            any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

 

“Cash Equivalents” means:

 

(1)                            United States dollars;

 

(2)                            securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than six months from the date of acquisition;

 

6

 

(3)                            certificates of deposit and Eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers’ acceptances with maturities not exceeding six months and overnight bank deposits, in each case, with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500,000,000 and a Thomson Bank Watch Rating of “B” or better;

 

(4)                            repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;

 

(5)                            commercial paper having the highest rating obtainable from Moody’s or S&P and in each case maturing within six months after the date of acquisition; and

 

(6)                            money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition.

 

“Change of Control” means the occurrence of any of the following:

 

(1)                            any “person” or “group” of related persons (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than Permitted Holders, is or becomes the Beneficial Owner, directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company (or its successor by merger, consolidation or purchase of all or substantially all of its assets) (for the purposes of this clause, such person or group shall be deemed to Beneficially Own any Voting Stock of the Company held by an entity, if such person or group “Beneficially Owns”, directly or indirectly, more than 50% of the voting power of the Voting Stock of such entity);

 

(2)                            the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than an entity the majority of the Voting Stock of which is owned by a Permitted Holder;

 

(3)                            the adoption of a plan or proposal for the liquidation or dissolution of the Company; or

 

(4)                            the Company ceases to beneficially own (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision) directly 100% of the issued and outstanding Capital Stock of Venoco other than as a result of a transaction that complies with Section 4.1.

 

“Commission” or “SEC” means the Securities and Exchange Commission.

 

“Company” has the meaning ascribed to it in the first introductory paragraph of this Indenture.

 

“Consolidated Cash Flow” means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus:

 

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(1)                            an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing such Consolidated Net Income; plus

 

(2)                            provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus

 

(3)                            consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (excluding any interest attributable to Dollar-Denominated Production Payments but including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings), and net of the effect of all payments made or received pursuant to Hedging Obligations, to the extent that any such expense was deducted in computing such Consolidated Net Income; plus

 

(4)                            depreciation, depletion and amortization (including amortization of intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period), impairment and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, depletion and amortization, impairment and other non-cash expenses were deducted in computing such Consolidated Net Income; plus

 

(5)                            unrealized non-cash losses resulting from foreign currency balance sheet adjustments required by GAAP to the extent such losses were deducted in computing such Consolidated Net Income; minus

 

(6)                            non-cash items increasing such Consolidated Net Income for such period, other than items that were accrued in the ordinary course of business (to the extent included in determining Consolidated Net Income); and minus

 

(7)                            the sum of (x) the amount of deferred revenues that are amortized during such period and are attributable to reserves that are subject to Volumetric Production Payments and (y) amounts recorded in accordance with GAAP as repayments of principal and interest pursuant to Dollar- Denominated Production Payments,

 

in each case, on a consolidated basis and determined in accordance with GAAP.

 

“Consolidated Leverage Ratio” means, with respect to any specified Person at any time of determination, the ratio of the Consolidated Total Debt of such Person at such time to the Consolidated Cash Flow of such Person for the most recently ended four consecutive fiscal quarters for which internal financial statements are available.

 

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“Consolidated Net Income” means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that:

 

(1)                            the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting will be included, but only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person;

 

(2)                            the Net Income of any Restricted Subsidiary will be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, partners or members;

 

(3)                            the cumulative effect of a change in accounting principles will be excluded;

 

(4)                            income resulting from transfers of assets (other than cash) between such Person or any of its Restricted Subsidiaries, on the one hand, and an Unrestricted Subsidiary, on the other hand, will be excluded;

 

(5)                            any gain (loss) realized upon the sale or other disposition of any property, plant or equipment of such Person or its consolidated Restricted Subsidiaries (including pursuant to any sale and leaseback transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain (loss) realized upon the sale or other disposition of any Capital Stock of any Person will be excluded;

 

(6)                            any extraordinary gain or loss will be excluded;

 

(7)                            any asset impairment writedowns on Oil and Gas Properties under GAAP or Commission guidelines will be excluded; and

 

(8)                            any unrealized non-cash gains or losses or charges in respect of hedge or non-hedge derivatives (including those resulting from the application of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 815) will be excluded.

 

In addition, notwithstanding the preceding, for the purposes of Section 3.4 only, there shall be excluded from Consolidated Net Income any nonrecurring charges relating to any premium or penalty paid, write-off of deferred finance costs or other charges in connection with redeeming or retiring any Indebtedness prior to its Stated Maturity.

 

“Consolidated Total Debt” means, with respect to any Person, as of any date, the consolidated Indebtedness of such Person and its Restricted Subsidiaries.

 

“continuing” means, with respect to any Default or Event of Default, that such Default or Event of Default has not been cured or waived.

 

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“Credit Agreement” means that certain Fifth Amended and Restated Credit Agreement, dated as of October 3, 2012, among Venoco, the guarantors parties thereto, the lenders parties thereto, Citibank, N.A., as Administrative Agent, Citigroup Global Markets, Inc., as Arranger, The Bank of Nova Scotia, as Syndication Agent, and KeyBank National Association, as Documentation Agent, providing for revolving credit borrowings, including any related notes, Guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, restated, modified, renewed, refunded, replaced or refinanced (including through capital markets transactions) from time to time.

 

“Credit Facilities” means, (i) the Credit Agreement and (ii) one or more other debt facilities or commercial paper facilities, in case of clause (ii) with banks or other institutional lenders or institutional investors providing for revolving credit loans, term loans, capital market financings, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, as provided for in one or more agreements or instruments, in each case as amended, restated, modified, supplemented, increased, renewed, refunded, replaced (including replacement after the termination of such credit facility), supplemented, restructured or refinanced (including through capital markets transactions) in whole or in part from time to time in one or more agreements or instruments.

 

“Custodian” means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.

 

“Customary Recourse Exceptions” means, with respect to any Non-Recourse Debt of an Unrestricted Subsidiary, exclusions from the exculpation provisions with respect to such Non-Recourse Debt for the voluntary bankruptcy of such Unrestricted Subsidiary, fraud, misapplication of cash, environmental claims, waste, willful destruction and other circumstances customarily excluded by lenders from exculpation provisions or included in separate indemnification agreements in non-recourse financings.

 

“Debt to Assets Ratio” means, with respect to any specified Person as of any date, the ratio of (a) the sum of (i) the aggregate principal amount of all Specified Indebtedness of such Person and its Restricted Subsidiaries outstanding as of such date and (ii) the aggregate amount of all Disqualified Stock (determined as provided in the last sentence of the definition of “Disqualified Stock” below) of such Person and its Restricted Subsidiaries outstanding as of such date, to (b) Adjusted Consolidated Net Tangible Assets determined as of such date.

 

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

 

“Definitive Note” means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.1 hereof, in the form of Exhibit A hereto except that such Note shall not bear the Global Note legend specified in Section 2.1(d)(ii).

 

“Designated Non-cash Consideration” means the Fair Market Value of non-cash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Sale that is so designated as “Designated Non-cash Consideration” pursuant to an

 

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Officer’s Certificate, setting forth the basis of such valuation, less the amount of cash or Cash Equivalents received in connection with a subsequent sale of such Designated Non-cash Consideration.

 

“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase or redeem such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 3.4. The amount of Disqualified Stock deemed to be outstanding at any time for purposes of this Indenture will be the maximum amount that the Company and its Restricted Subsidiaries may become obligated to pay upon the maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock, exclusive of accrued dividends other than accrued dividends that are more than 30 days past due.

 

“Distribution Compliance Period” means the 40-day restricted period as defined in Regulation S.

 

“Dollar-Denominated Production Payments” means production payment obligations recorded as liabilities in accordance with GAAP, together with all undertakings and obligations in connection therewith.

 

“Domestic Subsidiary” means any Restricted Subsidiary of the Company other than a Foreign Subsidiary.

 

“DTC” means The Depository Trust Company, its nominees and their respective successors and assigns, or such other depositary institution hereinafter appointed by the Company.

 

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

 

“Equity Offering” means any public or private sale of Capital Stock (other than Disqualified Stock and the sale of Capital Stock upon the exercise of options and other rights under the Company’s equity incentive plans) made for cash on a primary basis by the Company after the date of this Indenture.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Exchange Notes” has the meaning ascribed to it in the second introductory paragraph of this Indenture.

 

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“Existing Indebtedness” means the aggregate principal amount of Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness incurred under clauses (i), (iii) and (vi) of Section 3.3(b)) in existence on the date of this Indenture, until such amounts are repaid.

 

“Existing Venoco Indentures” means, collectively, (1) the Venoco 8.875% Notes Indenture and (2) the Venoco 11.50% Notes Indenture.

 

“Fair Market Value” means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving distress or necessity of either party, determined in good faith by the Board of Directors of the Company in the case of amounts of $10,000,000 or more and otherwise by an officer of the Company (unless otherwise provided in this Indenture).

 

“Fixed Charge Coverage Ratio” means with respect to any specified Person for any four-quarter reference period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period; provided, however, that:

 

(1)                                 if the specified Person or any of its Restricted Subsidiaries:

 

(a)                                 has incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Fixed Charge Coverage Ratio is an incurrence of Indebtedness, Consolidated Cash Flow and Fixed Charges (taking into account any interest rate agreements applicable to such Indebtedness) for such period will be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been incurred on the first day of such period (except that in making such computation, the amount of Indebtedness under any revolving credit facility outstanding on the date of such calculation will be computed based on (i) the average daily balance of such Indebtedness during such four fiscal quarters or such shorter period for which such facility was outstanding or (ii) if such facility was created after the end of such four fiscal quarters, the average daily balance of such Indebtedness during the period from the date of creation of such facility to the date of such calculation) and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period; or

 

(b)                                 has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of the period that is no longer outstanding on such date of determination or if the transaction giving rise to the need to calculate the Fixed Charge Coverage Ratio involves a discharge of Indebtedness (in each case other than Indebtedness incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and the related commitment terminated), Consolidated Cash Flow and Fixed Charges for such period will be calculated after giving effect on a pro forma basis to such discharge of such Indebtedness, including with the proceeds of such new Indebtedness, as if such discharge had occurred on the first day of such period;

 

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(2)                                 if since the beginning of such period the specified Person or any of its Restricted Subsidiaries will have made any Asset Sale or if the transaction giving rise to the need to calculate the Fixed Charge Coverage Ratio is an Asset Sale:

 

(a)                                 the Consolidated Cash Flow for such period will be reduced by an amount equal to the Consolidated Cash Flow (if positive) directly attributable to the assets which are the subject of such Asset Sale for such period or increased by an amount equal to the Consolidated Cash Flow (if negative) directly attributable thereto for such period; and

 

(b)                                 Fixed Charges for such period will be reduced by an amount equal to the Fixed Charges directly attributable to any Indebtedness of the specified Person or any of its Restricted Subsidiaries repaid, repurchased, defeased or otherwise discharged with respect to the specified Person and its continuing Restricted Subsidiaries in connection with such Asset Sale for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Fixed Charges for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the specified Person and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale);

 

(3)                                 if since the beginning of such period the specified Person or any of its Restricted Subsidiaries (by merger or otherwise) will have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary or is merged with or into the specified Person) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, including a single asset or all or substantially all of an operating unit, division or line of business, Consolidated Cash Flow and Fixed Charges for such period will be calculated after giving pro forma effect thereto (including the incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period; and

 

(4)                                 if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary of the specified Person or was merged with or into the specified Person or any of its Restricted Subsidiaries since the beginning of such period) will have made any Asset Sale or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (2) or (3) above if made by the specified Person or any of its Restricted Subsidiaries during such period, Consolidated Cash Flow and Fixed Charges for such period will be calculated after giving pro forma effect thereto as if such Asset Sale or Investment or acquisition of assets occurred on the first day of such period.

 

For purposes of this definition, whenever pro forma effect is to be given to any calculation under this definition, the pro forma calculations will be determined in the reasonable judgment of a responsible financial or accounting officer of the Company (including pro forma expense and cost reductions and any pro forma expense and cost reductions that have occurred or are reasonably expected to occur, in the reasonable judgment of the chief financial officer of the Company (regardless of whether those cost savings or operating improvements could then be reflected in pro forma financial statements in accordance with Regulation S-X promulgated under the Securities Act or any regulation or policy of the Commission related thereto)). If any

 

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Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness will be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any interest rate agreement applicable to such Indebtedness if such interest rate agreement has a remaining term in excess of 12 months).

 

“Fixed Charges” means, with respect to any specified Person for any period, the sum, without duplication, of:

 

(1)                            the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (excluding any interest attributable to Dollar-Denominated Production Payments but including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings), and net of the effect of all payments made or received pursuant to Hedging Obligations; plus

 

(2)                            the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period; plus

 

(3)                            any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon; plus

 

(4)                            all dividends, whether paid or accrued and whether or not in cash, on any series of Preferred Stock of such Person or any of its Restricted Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company; plus

 

(5)                            the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness incurred by such plan or trust; provided, however, that there will be excluded therefrom any such interest expense of any Unrestricted Subsidiary to the extent the related Indebtedness is not Guaranteed or paid by the Company or any Restricted Subsidiary;

 

in each case, on a consolidated basis and in accordance with GAAP.

 

“Foreign Subsidiary” means any Restricted Subsidiary of the Company that was not formed under the laws of the United States or any state of the United States or the District of Columbia and that conducts substantially all of its operations outside the United States.

 

“GAAP” means generally accepted accounting principles in the United States, which are in effect from time to time (except as otherwise specified), including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting

 

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Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations based on GAAP contained in the Indenture will be computed in conformity with GAAP.

 

“Government Securities” means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which obligations or guarantee the full faith and credit of the United States of America is pledged.

 

“Guarantee” a guarantee, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness and any obligation, direct or indirect, contingent or otherwise, of such Person:

 

(1)                            to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise); or

 

(2)                            entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part);

 

provided, however, that the term “Guarantee” will not include endorsements for collection or deposit in the ordinary course of business. When used as a verb, “guarantee” has a correlative meaning.

 

“Guarantors” means any Restricted Subsidiary of the Company that becomes a Guarantor in accordance with the provisions of this Indenture, and its respective successors and assigns, in each case, until the Note Guarantee of such Person has been released in accordance with the provisions of this Indenture.

 

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person incurred in the normal course of business and consistent with past practices and not for speculative purposes under:

 

(1)                            interest rate swap agreements, interest rate cap agreements and interest rate collar agreements entered into with one or more financial institutions and designed to protect the Person or any of its Restricted Subsidiaries entering into the agreement against fluctuations in interest rates with respect to Indebtedness incurred and not for purposes of speculation;

 

(2)                            foreign exchange contracts and currency protection agreements entered into with one or more financial institutions and designed to protect the Person or any of its Restricted Subsidiaries entering into the agreement against fluctuations in currency exchanges rates with respect to Indebtedness incurred and not for purposes of speculation;

 

(3)                            any commodity futures contract, commodity option or other similar agreement or arrangement designed to protect against fluctuations in the price of oil, natural gas

 

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or other commodities used, produced, processed or sold by that Person or any of its Restricted Subsidiaries at the time; and

 

(4)           other agreements or arrangements designed to protect such Person or any of its Restricted Subsidiaries against fluctuations in interest rates, commodity prices or currency exchange rates.

 

“Holder” means a Person in whose name a Note is registered.

 

“Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all constituents, elements or compounds thereof and products refined or processed therefrom.

 

“Indebtedness” means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent:

 

(1)           in respect of borrowed money;

 

(2)           evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);

 

(3)           in respect of bankers’ acceptances;

 

(4)           representing Capital Lease Obligations and all Attributable Debt;

 

(5)           representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or

 

(6)           representing any Hedging Obligations,

 

if and to the extent any of the preceding items (other than Attributable Debt, letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person (including, with respect to any Production Payment, any warranties or Guarantees of production or payment by such Person with respect to such Production Payment, but excluding other contractual obligations of such Person with respect to such Production Payment). Subject to the preceding sentence, neither Dollar-Denominated Production Payments nor Volumetric Production Payments shall be deemed to be Indebtedness.

 

The amount of any Indebtedness outstanding as of any date will be:

 

(1)           the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount;

 

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(2)           in the case of any Hedging Obligation, the termination value of the agreement or arrangement giving rise to such Hedging Obligation that would be payable by such Person at such date; and

 

(3)           the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness.

 

The amount of Indebtedness of any Person at any date will be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date.

 

In addition, “Indebtedness” of any Person shall include Indebtedness described in the preceding paragraph that would not appear as a liability on the balance sheet of such Person if:

 

(1)           such Indebtedness is the obligation of a partnership or joint venture that is not a Restricted Subsidiary (a “Joint Venture”);

 

(2)           such Person or a Restricted Subsidiary of such Person is a general partner of the Joint Venture (a “General Partner”); and

 

(3)           there is recourse, by contract or operation of law, with respect to the payment of such Indebtedness to property or assets of such Person or a Restricted Subsidiary of such Person; and then such Indebtedness shall be included in an amount not to exceed:

 

(a)           the lesser of (i) the net assets of the General Partner and (ii) the amount of such obligations to the extent that there is recourse, by contract or operation of law, to the property or assets of such Person or a Restricted Subsidiary of such Person; or

 

(b)           if less than the amount determined pursuant to clause (a) immediately above, the actual amount of such Indebtedness that is recourse to such Person or a Restricted Subsidiary of such Person, if the Indebtedness is evidenced by a writing and is for a determinable amount and the related interest expense shall be included in Fixed Charges to the extent actually paid by such Person or its Restricted Subsidiaries.

 

Notwithstanding the preceding, “Indebtedness” of a Person shall not include:

 

(1)           any indebtedness that has been defeased in accordance with GAAP or defeased pursuant to the deposit of cash or Cash Equivalents (in an amount sufficient to satisfy all such indebtedness obligations at maturity or redemption, as applicable, and all payments of interest and premium, if any) in a trust or account created or pledged for the sole benefit of the holders of such indebtedness, and subject to no other Liens;

 

(2)           any obligation of such Person in respect of a farm-in agreement or similar arrangement whereby such Person agrees to pay all or a share of the drilling, completion or other expenses of an exploratory or development well (which agreement may be subject to a maximum

 

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payment obligation, after which expenses are shared in accordance with the working or participation interest therein or in accordance with the agreement of the parties) or perform the drilling, completion or other operation on such well in exchange for an ownership interest in an oil or gas property; and

 

(3)           any repayment or reimbursement obligation of such Person or any of its Restricted Subsidiaries with respect to Customary Recourse Exceptions, unless and until an event or circumstance occurs that triggers the Person’s or such Restricted Subsidiary’s direct repayment or reimbursement obligation (as opposed to contingent or performance obligations) to the lender or other Person to whom such obligation is actually owed, in which case the amount of such direct payment or reimbursement obligation shall constitute Indebtedness.

 

“Indenture” means this Indenture as amended or supplemented from time to time.

 

“Initial Notes” has the meaning ascribed to it in the second introductory paragraph of this Indenture.

 

“Interest Payment Date” means February 15 and August 15 of each year.

 

“Interest Period” means the period commencing on and including an Interest Payment Date and ending on and including the day immediately preceding the next succeeding Interest Payment Date, with the exception that the first Interest Period shall commence on and include the Issue Date and end on and include the day immediately preceding the first scheduled Interest Payment Date.

 

“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB- (or the equivalent) by S&P (or, if either such entity ceases to rate the Notes for reasons outside of the control of the Company, the equivalent investment grade credit rating from any other “nationally recognized statistical rating organization” within the meaning of Section 3(a)(62) of the Exchange Act selected by the Company as a replacement agency).

 

“Investments” means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP; provided that endorsements of negotiable instruments and documents in the ordinary course of business shall in each case not be deemed to be an Investment.

 

For purposes of Section 3.4:

 

(1)           “Investment” will include the portion (proportionate to the Company’s Equity Interest in a Restricted Subsidiary to be designated as an Unrestricted Subsidiary) of the Fair Market Value of the net assets of such Restricted Subsidiary of the Company at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary; provided, however, that

 

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upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company will be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive) equal to (a) the Company’s “Investment” in such Subsidiary at the time of such redesignation less (b) the portion (proportionate to the Company’s Equity Interest in such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time that such Subsidiary is so re-designated a Restricted Subsidiary; and

 

(2)           any property transferred to or from an Unrestricted Subsidiary will be valued at its Fair Market Value at the time of such transfer.

 

If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Voting Stock of any Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such entity is no longer a Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Capital Stock of such Subsidiary not sold or disposed of.

 

“Issue Date” means August 15, 2013.

 

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction other than a precautionary financing statement not intended as a security agreement.

 

“Make Whole Premium” means, with respect to a Note at any time, the excess, if any, of (a) the present value at such time of (i) the redemption price of such Note at August 15, 2015 as set forth in Section 5.1(a) hereof, expressed in dollars, plus (ii) any required interest payments due on such Note through August 15, 2015 (except for accrued and unpaid interest to the Redemption Date), computed using a discount rate equal to the Treasury Rate plus 50 basis points, discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months), over (b) the principal amount of such Note.

 

“Minority Interest” means the percentage interest represented by any shares of stock of any class of Capital Stock of a Restricted Subsidiary of the Company that are not owned by the Company or a Restricted Subsidiary of the Company.

 

“Moody’s” means Moody’s Investors Service, Inc., or any successor to the rating agency business thereof.

 

“Net Cash Proceeds”, with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys’ fees, accountants’ fees, underwriters’ or placement agents’ fees, listing fees, discounts or commissions and brokerage, consultant and other fees and charges actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result of such issuance or sale (after taking into account any available tax credits or deductions and any tax sharing arrangements).

 

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“Net Income” means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends, excluding, however:

 

(1)           any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with: (a) any Asset Sale; or (b) the disposition of any securities by such Person or any of its Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Subsidiaries; and

 

(2)           any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss).

 

“Net Proceeds” means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of:

 

(1)           all legal, accounting, investment banking, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP (after taking into account any available tax credits or deductions and any tax sharing agreements), as a consequence of such Asset Sale;

 

(2)           all payments made on any Indebtedness which is secured by any assets subject to such Asset Sale, in accordance with the terms of any Lien upon such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale, or by applicable law be repaid out of the proceeds from such Asset Sale;

 

(3)           all distributions and other payments required to be made to holders of Minority Interests in Subsidiaries or joint ventures as a result of such Asset Sale; and

 

(4)           the deduction of appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Sale and retained by the Company or any Restricted Subsidiary after such Asset Sale.

 

“Net Working Capital” means (a) all current assets of the Company and its Restricted Subsidiaries except current assets from commodity price risk management activities arising in the ordinary course of business, less (b) all current liabilities of the Company and its Restricted Subsidiaries, except current liabilities included in Indebtedness and any current liabilities from commodity price risk management activities arising in the ordinary course of business, in each case as set forth in the consolidated financial statements of the Company prepared in accordance with GAAP.

 

“Non-Recourse Debt” means Indebtedness:

 

(1)           as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that

 

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would constitute Indebtedness) or (b) is directly or indirectly liable as a guarantor or otherwise, except for Customary Recourse Exceptions;

 

(2)           no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Notes) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its Stated Maturity; and

 

(3)           as to which the lenders will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries (other than the Equity Interests of an Unrestricted Subsidiary, except for Customary Recourse Exceptions).

 

“Non-U.S. Person” means a person who is not a U.S. person, as defined in Regulation S.

 

“Notes” has the meaning ascribed to it in the second introductory paragraph of this Indenture.

 

“Note Guarantee” means any Guarantee by a Guarantor of the Company’s payment Obligations, under the Indenture and on the Notes.

 

“Note Register” means the register of Notes, maintained by the Registrar, pursuant to Section 2.3.

 

“Obligations” means any principal, premium, if any, interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization, whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages, Guarantees, and other liabilities or amounts payable under the documentation governing any Indebtedness or in respect thereto.

 

“Officer” means the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer or the Secretary of the Company.

 

“Officers’ Certificate” means a certificate signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company.

 

“Oil and Gas Business” means:

 

(1)           the acquisition, exploration, development, operation and disposition of interests in oil, natural gas and other Hydrocarbon properties;

 

(2)           the gathering, marketing, treating, processing (but not refining), storage, selling and transporting (including the ownership and operation of common carrier pipelines) of any production from those interests; and

 

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(3)           any activity necessary, appropriate or incidental to the activities described above.

 

“Opinion of Counsel” means a written opinion from legal counsel reasonably acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee.

 

“Permitted Acquired Debt” means Indebtedness constituting Acquired Debt that was not incurred in connection with, or in contemplation of, the transaction that resulted in such Indebtedness becoming Acquired Debt; provided that, at the time of such transaction, after giving pro forma effect thereto, either:

 

(1)           the Company would have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Debt to Assets Ratio test set forth in clause (i) of Section  3.3(a), or

 

(2)           the Debt to Assets Ratio of the Company would be equal to or less than the Debt to Assets Ratio of the Company immediately before such transaction.

 

“Permitted Business Investment” means Investments made in the ordinary course of, and of a nature that is or shall have become customary in, the Oil and Gas Business, including through agreements, transactions, interests or arrangements that permit one to share risk or costs, comply with regulatory requirements regarding local ownership or satisfy other objectives customarily achieved through the conduct of the Oil and Gas Business jointly with third parties, including without limitation:

 

(1)           direct or indirect ownership of crude oil, natural gas, other related Hydrocarbon and mineral properties or any interest therein or gathering, transportation, processing, storage or related systems; and

 

(2)           the entry into operating agreements, joint ventures, processing agreements, working interests, royalty interests, mineral leases, farm-in agreements, farm-out agreements, development agreements, production sharing agreements, area of mutual interest agreements, contracts for the sale, transportation or exchange of crude oil and natural gas and related Hydrocarbons and minerals, unitization agreements, pooling arrangements, joint bidding agreements, service contracts, partnership agreements (whether general or limited), or other similar or customary agreements, transactions, properties, interests or arrangements and Investments and expenditures in connection therewith or pursuant thereto, in each case made or entered into in the ordinary course of the Oil and Gas Business, excluding, however, Investments in corporations and publicly traded limited partnerships.

 

“Permitted Holders” means:

 

(1)           Timothy M. Marquez and Bernadette B. Marquez, individually or as Trustees of the Marquez Trust dated February 26, 2002;

 

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(2)           any beneficiary of the Marquez Trust dated February 26, 2002 or any Person who is of lineal or collateral consanguinity to Timothy M. Marquez or Bernadette B. Marquez; and

 

(3)           entities 80% or more of the Voting Stock of which is directly or indirectly owned by any of the preceding Persons, but only for so long as such Persons directly or indirectly own 80% or more of the Voting Stock of such entities.

 

“Permitted Investment” means an Investment by the Company or any Restricted Subsidiary in:

 

(1)           a Restricted Subsidiary or a Person which will, upon the making of such Investment, become a Restricted Subsidiary;

 

(2)           another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary;

 

(3)           cash and Cash Equivalents;

 

(4)           receivables owing to the Company or any Restricted Subsidiary created or acquired in the ordinary course of business;

 

(5)           payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business;

 

(6)           stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of a debtor;

 

(7)           any acquisition of assets solely in exchange for the issuance of Capital Stock (other than Disqualified Stock) of the Company;

 

(8)           Investments made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 3.7;

 

(9)           Investments in existence on the Issue Date and any renewal or replacement thereof on terms and conditions not materially less favorable than that being renewed or replaced;

 

(10)         Hedging Obligations permitted to be incurred in compliance with Section 3.3;

 

(11)         any Investment by the Company or any of its Restricted Subsidiaries, together with all other outstanding Investments pursuant to this clause (11), having an aggregate Fair Market Value on the date such Investment was made and without giving effect to any

 

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subsequent change in value, in an amount not to exceed as of the date of such incurrence, the greater of (i) $10,000,000 and (ii) 21/2% of Adjusted Consolidated Net Tangible Assets;

 

(12)         Guarantees issued in accordance with Section 3.3;

 

(13)         prepaid expenses, surety and performance bonds and lease, tax, utilities, workers’ compensation, performance and similar deposits made in the ordinary course of business;

 

(14)         Investments owned by a Person if and when it is acquired by the Company and becomes a Restricted Subsidiary; provided, however, that such Investments are not made in contemplation of such acquisition;

 

(15)         Permitted Business Investments;

 

(16)         Investments in any units of any oil and gas royalty trust;

 

(17)         advances by the Company or any Restricted Subsidiary to any of its full-time employees for housing loans and for the payment of relocation expenses which do not exceed $2,000,000 at any time outstanding in the aggregate to all employees of the Company and its Restricted Subsidiaries; and

 

(18)         Investments made as a result of the receipt of non-cash consideration from a sale of assets that was made pursuant to and in compliance with clause (12) of the proviso of the definition of “Asset Sale.”

 

“Permitted Liens” means, with respect to any Person:

 

(1)           Liens securing Indebtedness incurred under clauses (i) and (xiii) of Section 3.3(b) and other related obligations of the Company and the Restricted Subsidiaries under Credit Facilities;

 

(2)           pledges or deposits by such Person under workmen’s compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or United States government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import or customs duties or for the payment of rent, in each case incurred in the ordinary course of business;

 

(3)           Liens imposed by law, including carriers’, warehousemen’s and mechanics’ Liens, in each case for sums not yet due or being contested in good faith by appropriate proceedings if a reserve or other appropriate provisions, if any, as shall be required by GAAP shall have been made in respect thereof;

 

(4)           Liens for taxes, assessments or other governmental charges not yet subject to penalties for nonpayment or which are being contested in good faith by appropriate

 

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proceedings, provided that appropriate reserves required pursuant to GAAP have been made in respect thereof;

 

(5)           Liens in favor of the issuers of surety or performance bonds or letters of credit or bankers’ acceptances issued pursuant to the request of and for the account of such Person in the ordinary course of its business, except to the extent that that such letters of credit relate to trade payables and such obligations are not satisfied within 5 Business Days of such incurrence;

 

(6)           encumbrances, easements or reservations of, or rights of others for, licenses, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership or lease of its properties which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;

 

(7)           Liens securing Hedging Obligations of the Company and its Restricted Subsidiaries;

 

(8)           leases and subleases of real property which do not materially interfere with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries;

 

(9)           judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment have not been finally terminated or the period within which such proceedings may be initiated has not expired;

 

(10)         Liens for the purpose of securing the payment of all or a part of the purchase price of, or Capitalized Lease Obligations with respect to, or the repair, improvement or construction cost of, assets or property acquired or repaired, improved or constructed in the ordinary course of business; provided that:

 

(a)           the aggregate principal amount of Indebtedness secured by such Liens is otherwise permitted to be incurred under this Indenture and does not exceed the cost of the assets or property so acquired or repaired, improved or constructed plus fees and expenses in connection therewith; and

 

(b)           such Liens are created within 180 days of repair, improvement, construction or acquisition of such assets or property and do not encumber any other assets or property of the Company or any Restricted Subsidiary other than such assets or property and assets affixed or appurtenant thereto (including improvements);

 

(11)         Liens arising solely by virtue of any statutory or common law provisions relating to banker’s Liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained or deposited with a depositary institution; provided that:

 

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(a)                                 such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Company in excess of those set forth by regulations promulgated by the Federal Reserve Board; and

 

(b)                                 such deposit account is not intended by the Company or any Restricted Subsidiary to provide collateral to the depositary institution;

 

(12)                          Liens arising from Uniform Commercial Code financing statement filings regarding operating leases entered into by the Company and its Restricted Subsidiaries in the ordinary course of business;

 

(13)                          Liens not otherwise described in item (1) above existing on the Issue Date;

 

(14)                          Liens on property at the time the Company acquired the property, including any acquisition by means of a merger or consolidation with or into the Company; provided, however, that such Liens are not created, incurred or assumed in connection with, or in contemplation of, such acquisition; provided further, however, that such Liens may not extend to any other property owned by the Company or any Restricted Subsidiary;

 

(15)                          Liens on property or shares of stock of a Person at the time such Person becomes a Restricted Subsidiary; provided, however, that such Liens are not created, incurred or assumed in connection with, or in contemplation of, such other Person becoming a Restricted Subsidiary; provided further, however, that such Liens may not extend to any other property owned by the Company or any Restricted Subsidiary;

 

(16)                          Liens securing Indebtedness or other obligations of a Restricted Subsidiary owing to the Company or a Guarantor;

 

(17)                          Liens securing the Notes, the Note Guarantees and other Obligations arising under this Indenture;

 

(18)                          Liens securing Permitted Refinancing Indebtedness of the Company or a Restricted Subsidiary incurred to refinance Indebtedness of the Company or a Restricted Subsidiary that was previously so secured; provided that any such Lien is limited to all or part of the same property or assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that secured (or, under the written arrangements under which the original Lien arose, could secure) the Indebtedness being refinanced or is in respect of property or assets that is the security for a Permitted Lien hereunder;

 

(19)                          Liens in respect of Production Payments and Reserve Sales;

 

(20)                          Liens on pipelines and pipeline facilities that arise by operation of law;

 

(21)                          farmout, carried working interest, joint operating, unitization, royalty, sales and similar agreements relating to the exploration or development of, or production from, oil and gas properties entered into in the ordinary course of business;

 

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(22)                          Liens reserved in oil and gas mineral leases for bonus or rental payments and for compliance with the terms of such leases;

 

(23)                          Liens encumbering assets under construction arising from progress or partial payments by a customer of the Company or its Restricted Subsidiaries relating to such assets;

 

(24)                          Liens arising under this Indenture in favor of the Trustee for its own benefit and similar Liens in favor of other trustees, agents and representatives arising under instruments governing Indebtedness permitted to be incurred under this Indenture, provided, however, that such Liens are solely for the benefit of the trustees, agents or representatives in their capacities as such and not for the benefit of the holders of the Indebtedness; and

 

(25)                          additional Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to obligations that do not exceed $10,000,000 at any one time outstanding.

 

“Permitted Refinancing Indebtedness” means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that:

 

(1)                                 the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest on the Indebtedness and the amount of all expenses and premiums incurred in connection therewith);

 

(2)                                 such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;

 

(3)                                 if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes or the Note Guarantees, such Permitted Refinancing Indebtedness is subordinated in right of payment to the Notes or the Note Guarantees on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and

 

(4)                                 such Indebtedness is not incurred by a Restricted Subsidiary of the Company if the Company is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; provided, however, that a Restricted Subsidiary that is also a Guarantor may Guarantee Permitted Refinancing Indebtedness incurred by the Company, whether or not such Restricted Subsidiary was an obligor or guarantor of the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded.

 

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Notwithstanding the preceding, any Indebtedness incurred under Credit Facilities pursuant to Section 3.3 shall be subject only to the refinancing provision in the definition of Credit Facilities and not pursuant to the requirements set forth in the definition of Permitted Refinancing Indebtedness.

 

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

 

“PIK Notes” has the meaning ascribed to it in the second introductory paragraph of this Indenture.

 

“Preferred Stock”, as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.

 

“Production Payments” means, collectively, Dollar-Denominated Production Payments and Volumetric Production Payments.

 

“Production Payments and Reserve Sales” means the grant or transfer by the Company or a Restricted Subsidiary of the Company to any Person of a royalty, overriding royalty, net profits interest, production payment (whether volumetric or dollar denominated), partnership or other interest in oil and gas properties, reserves or the right to receive all or a portion of the production or the proceeds from the sale of production attributable to such properties, including any such grants or transfers pursuant to incentive compensation programs on terms that are reasonably customary in the oil and gas business for geologists, geophysicists and other providers of technical services to the Company or a Subsidiary of the Company.

 

“Rating Agencies” means Moody’s and S&P.

 

“Record Date” means, for the interest or Additional Interest, if any, payable on any applicable Interest Payment Date, February 1 or August 1 next preceding such Interest Payment Date.

 

“Redemption Date” when used with respect to any Note to be redeemed, in whole or in part, means the date fixed for such redemption by or pursuant to this Indenture.

 

“Refinancing Transaction” means the redemption or repurchase by the Company of up to all of its outstanding senior secured notes and by Venoco of up to all of the Venoco 11.50% Notes.

 

“Registered Exchange Offer” has the meaning set forth for such term in the Registration Rights Agreement.

 

“Registration Rights Agreement” means that certain exchange and registration rights agreement dated as of the date of this Indenture by and between the Company, the

 

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Guarantors and the initial purchasers set forth therein and future registration rights agreements with respect to Additional Notes.

 

“Restricted Investment” means an Investment other than a Permitted Investment.

 

“Restricted Notes” means Notes bearing the Private Placement Legend.

 

“Restricted Subsidiary” of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.

 

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw- Hill Companies, Inc., or any successor to the rating agency business thereof.

 

“sale and leaseback transaction” means an arrangement relating to property now owned or hereafter acquired whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or a Restricted Subsidiary leases it from such Person.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Senior Debt” means:

 

(1)                                 all Indebtedness of the Company or any Restricted Subsidiary outstanding under Credit Facilities and all Hedging Obligations with respect thereto;

 

(2)                                 any other Indebtedness of the Company or any Restricted Subsidiary permitted to be incurred under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the Notes or any Note Guarantee; and

 

(3)                                 all Obligations with respect to the items listed in the preceding clauses (1) and (2).

 

Notwithstanding anything to the contrary in the preceding sentence, Senior Debt will not include:

 

(a)                                 any intercompany Indebtedness of the Company or any of its Subsidiaries to the Company or any of its Affiliates; or

 

(b)                                 any Indebtedness that is incurred in violation of this Indenture.

 

For the avoidance of doubt, “Senior Debt” will not include any trade payables or taxes owed or owing by the Company or any Guarantor.

 

“Significant Subsidiary” means any Subsidiary that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of this Indenture.

 

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“Specified Indebtedness” means, with respect to any Person all Indebtedness of such Person and its Restricted Subsidiaries other than Indebtedness incurred pursuant to any of clauses (vi) through (xii) of Section 3.3(b).

 

“Stated Maturity” means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the documentation governing such Indebtedness, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date scheduled for the payment thereof.

 

“Subordinated Obligation” means any Indebtedness of the Company (whether outstanding on the Issue Date or thereafter incurred) which is subordinate or junior in right of payment to the Notes pursuant to a written agreement or any Indebtedness of a Guarantor (whether outstanding on the Issue Date or thereafter incurred) which is subordinate or junior in right of payment to the Note Guarantee pursuant to a written agreement, as the case may be.

 

“Subsidiary” of any Person means any corporation, association, partnership, joint venture, limited liability company or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership and joint venture interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (1) such Person, (2) such Person and one or more Subsidiaries of such Person or (3) one or more Subsidiaries of such Person. Unless otherwise specified herein, each reference to a Subsidiary will refer to a Subsidiary of the Company.

 

“TIA” or “Trust Indenture Act” means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb), as in effect on the Issue Date.

 

“Treasury Rate” means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) which has become publicly available at least two Business Days prior to the date fixed for redemption (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the Redemption Date to August 15, 2015; provided, however, that if such period is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Company shall obtain the Treasury Rate by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the Redemption Date to August 15, 2015 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. The Company will (a) calculate the Treasury Rate on the second Business Day preceding the applicable Redemption Date and (b) prior to such Redemption Date file with the Trustee an Officers’ Certificate setting forth the Make Whole Premium and the Treasury Rate and showing the calculation of each in reasonable detail.

 

“Trustee” means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor.

 

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“Trust Officer” shall mean, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person’s knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

 

“Unrestricted Subsidiary” means:

 

(1)                                 any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of the Company in the manner provided below; and

 

(2)                                 any Subsidiary of an Unrestricted Subsidiary.

 

The Board of Directors of the Company may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary or a Person becoming a Subsidiary through merger or consolidation or Investment therein) to be an Unrestricted Subsidiary only if:

 

(1)                                 such Subsidiary or any of its Subsidiaries does not own any Capital Stock or Indebtedness of or have any Investment in, or own or hold any Lien on any property of, any other Subsidiary of the Company which is not a Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted Subsidiary;

 

(2)                                 all the Indebtedness of such Subsidiary and its Subsidiaries shall, at the date of designation, and will at all times thereafter, consist of Non-Recourse Debt;

 

(3)                                 such designation and the Investment of the Company in such Subsidiary complies with Section 3.4;

 

(4)                                 such Subsidiary, either alone or in the aggregate with all other Unrestricted Subsidiaries, does not operate, directly or indirectly, all or substantially all of the business of the Company and its Subsidiaries taken as a whole;

 

(5)                                 such Subsidiary is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation:

 

(a)                                 to subscribe for additional Capital Stock of such Person; or

 

(b)                                 to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results; and

 

(6)                                 on the date such Subsidiary is designated an Unrestricted Subsidiary, such Subsidiary is not a party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary with terms substantially less favorable to the Company than those that might have been obtained from Persons who are not Affiliates of the Company.

 

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Any such designation by the Board of Directors of the Company shall be evidenced for purposes of this Indenture by filing with the Trustee a Board Resolution giving effect to such designation and an Officers’ Certificate certifying that such designation complies with the foregoing conditions. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred as of such date.

 

The Board of Directors of the Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof and the Company could incur at least $1.00 of additional Indebtedness under Section 3.3(a) on a pro forma basis taking into account such designation.

 

“Venoco” means Venoco, Inc., a Delaware corporation.

 

“Venoco 8.875% Notes” means $500,000,000 principal amount of Venoco’s 8.875% Senior Notes due 2019 outstanding on the Issue Date.

 

“Venoco 8.875% Notes Indenture” means that certain indenture, dated as of February 15, 2011, with respect to the Venoco 8.875% Notes.

 

“Venoco 11.50% Notes” means $150,000,000 principal amount of Venoco’s 11.50% Senior Notes due 2017 outstanding immediately prior to the Issue Date.

 

“Venoco 11.50% Notes Indenture” means that certain indenture, dated as of October 7, 2009, with respect to the Venoco 11.50% Notes.

 

“Volumetric Production Payments” means production payment obligations recorded as deferred revenue in accordance with GAAP, together with all related undertakings and obligations.

 

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled (without regard to the occurrence of any contingency) to vote in the election of the Board of Directors of such Person.

 

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing:

 

(1)                                 the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by

 

(2)                                 the then outstanding principal amount of such Indebtedness.

 

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Section 1.2                                    Other Definitions.

 

	
Term
    	
 
    	
Defined in
   Section
    
	
“Affiliate Transaction”
    	
 
    	
3.8(a)
    
	
“Agent Members”
    	
 
    	
2.1 (e)(iii)
    
	
“Alternate Offer”
    	
 
    	
3.9
    
	
“Applicable Amount”
    	
 
    	
Exhibit A
    
	
“Asset Sale Offer”
    	
 
    	
3.7(d)
    
	
“Asset Sale Offer Amount”
    	
 
    	
3.7(e)
    
	
“Asset Sale Offer Period”
    	
 
    	
3.7(e)
    
	
“Asset Sale Payment Date”
    	
 
    	
3.7(e)
    
	
“Authenticating Agent”
    	
 
    	
2.2
    
	
“Cash Interest”
    	
 
    	
Exhibit A
    
	
“Certificate of Destruction”
    	
 
    	
2.10
    
	
“Change of Control Offer”
    	
 
    	
3.9
    
	
“Change of Control Payment”
    	
 
    	
3.9
    
	
“Change of Control Purchase Date”
    	
 
    	
3.9
    
	
“Change of Control Settlement Date”
    	
 
    	
3.9
    
	
“Clearstream”
    	
 
    	
2.1(b)
    
	
“Company Order”
    	
 
    	
2.2
    
	
“Corporate Trust Office”
    	
 
    	
3.13
    
	
“Covenant Defeasance”
    	
 
    	
8.3
    
	
“Defaulted Interest”
    	
 
    	
2.11
    
	
“Determination Date”
    	
 
    	
Exhibit A
    
	
“Euroclear”
    	
 
    	
2.1(b)
    
	
“Event of Default”
    	
 
    	
6.1
    
	
“Excess Proceeds”
    	
 
    	
3.7(d)
    
	
“Funding Guarantor”
    	
 
    	
10.4
    
	
“General Partner”
    	
 
    	
1.1 (definition of “Indebtedness”)
    
	
“Global Notes”
    	
 
    	
2.1(b)
    
	
“incur”
    	
 
    	
3.3(a)
    
	
“Joint Venture”
    	
 
    	
1.1 (definition of “Indebtedness”)
    
	
“Legal Defeasance”
    	
 
    	
8.2
    
	
“Payment Default”
    	
 
    	
6.1 (f)(i)
    
	
“Paying Agent”
    	
 
    	
2.3
    
	
“Permitted Debt”
    	
 
    	
3.3(b)
    
	
“PIK Interest”
    	
 
    	
Exhibit A
    
	
“PIK Payment”
    	
 
    	
2.1(a)
    

 

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Term
    	
 
    	
Defined in
   Section
    
	
“Private Placement Legend”
    	
 
    	
2.1 (d)(i)
    
	
“protected purchaser”
    	
 
    	
2.8
    
	
“QIB”
    	
 
    	
2.1(b)
    
	
“Registrar”
    	
 
    	
2.3
    
	
“Regulation S”
    	
 
    	
2.1(b)
    
	
“Regulation S Global Note”
    	
 
    	
2.1(b)
    
	
“Regulation S Notes”
    	
 
    	
2.1(b)
    
	
“Reinstatement Date”
    	
 
    	
3.20
    
	
“Resale Restriction Termination Date”
    	
 
    	
2.6(a)
    
	
“Restricted Payments”
    	
 
    	
3.4(a)
    
	
“Rule 144A”
    	
 
    	
2.1(b)
    
	
“Rule 144A Global Note”
    	
 
    	
2.1(b)
    
	
“Rule 144A Notes”
    	
 
    	
2.1(b)
    
	
“Special Interest Payment Date”
    	
 
    	
2.11(a)
    
	
“Successor Company”
    	
 
    	
4.1(a)
    
	
“Suspended Covenants”
    	
 
    	
3.20
    

 

Section 1.3                                    Incorporation by Reference of Trust Indenture Act. This Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings:

 

“Commission” means the SEC.

 

“indenture securities” means the Notes.

 

“indenture security holder” means a Holder of a Note.

 

“indenture to be qualified” means this Indenture.

 

“indenture trustee” or “institutional trustee” means the Trustee.

 

“obligor” on the Notes means the Company, the Guarantors and any other obligor on the Notes.

 

All other TIA terms used in this Indenture that are defined by the TIA, defined in the TIA by reference to another statute or defined by Commission’s Rule have the meanings assigned to them by such definitions.

 

Section 1.4                                    Rules of Construction. Unless the context otherwise requires:

 

(1)                                 a term has the meaning assigned to it;

 

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(2)                                 an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

 

(3)                                 “or” is not exclusive;

 

(4)                                 “including” means including without limitation;

 

(5)                                 words in the singular include the plural and words in the plural include the singular;

 

(6)                                 the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the Company dated such date prepared in accordance with GAAP;

 

(7)                                 references to “Notes” or “principal amount” of Notes include any increase in the principal amount of outstanding Notes as a result of a PIK Payment; and

 

(8)                                 the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, in each case, at the date of determination, whichever is greater.

 

ARTICLE II

 

The Notes

 

Section 2.1                                    Form, Dating and Terms.

 

(a)              The aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is unlimited. The Initial Notes issued on the date hereof will be in an aggregate principal amount of $255,000,000. In connection with the payment of PIK Interest in respect of the Notes, the Company may, as provided in the Notes, without the consent of the Holders and without regard to any restrictions or limitations set forth in Section 3.3, increase the outstanding principal amount of the Notes or issue PIK Notes under this Indenture on the same terms and conditions as the Initial Notes (in each case, a “PIK  Payment”). In addition, the Company may issue, from time to time in accordance with the provisions of this Indenture, including Section 3.3, Additional Notes and Exchange Notes. Furthermore, Notes may be authenticated and delivered upon registration or transfer, or in lieu of, other Notes pursuant to Section 2.6, 2.8, 2.9, 5.8 or 9.5 or in connection with an Asset Sale Offer pursuant to Section 3.7 or a Change of Control Offer pursuant to Section 3.9.

 

With respect to any Additional Notes, the Company shall set forth in a Board Resolution and an Officer’s Certificate, the following information:

 

(1)                                 the aggregate principal amount of such Additional Notes to be authenticated and delivered pursuant to this Indenture;

 

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(2)                                      the issue price and the issue date of such Additional Notes, including the date from which interest shall accrue; and

 

(3)                                      whether such Additional Notes shall be Restricted Notes issued in the form of Exhibit A hereto and/or shall be issued in the form of Exhibit B hereto.

 

The Initial Notes, the PIK Notes, the Additional Notes, the Exchange Notes shall be considered collectively as a single class for all purposes of this Indenture. Holders of the Initial Notes, the PIK Notes, the Additional Notes and the Exchange Notes will vote and consent together on all matters to which such Holders are entitled to vote or consent as one class, and none of the Holders of the Initial Notes, the PIK Notes, the Additional Notes or the Exchange Notes shall have the right to vote or consent as a separate class on any matter to which such Holders are entitled to vote or consent.

 

(b) The Initial Notes are being offered and sold by the Company pursuant to a Purchase Agreement, dated August 9, 2013, among the Company, Citigroup Capital Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the initial purchasers named therein. The Initial Notes and any Additional Notes (if issued as Restricted Notes) (the “Additional Restricted Notes”) will be resold initially only to (A) qualified institutional buyers (as defined in Rule 144A under the Securities Act (“Rule 144A”)) in reliance on Rule 144A (“QIBs”) and (B) Persons other than U.S. Persons (as defined in Regulation S under the Securities Act (“Regulation S”)) in reliance on Regulation S. Such Initial Notes and Additional Restricted Notes thereafter be transferred to, among others, QIBs and purchasers in reliance on Regulation S in accordance with the procedure described herein.

 

Initial Notes and Additional Restricted Notes offered and sold to qualified institutional buyers in the United States of America in reliance on Rule 144A (the “Rule 144A  Notes”) shall be issued in the form of a permanent global Note, without interest coupons, substantially in the form of Exhibit A, which is hereby incorporated by reference and made a part of this Indenture, including appropriate legends as set forth in Section 2.1(d) (the “Rule  144A Global Note”), deposited with the Trustee, as custodian for DTC or its nominee (the “Securities Custodian”), duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Rule 144A Global Note may be represented by more than one certificate, if so required by DTC’s rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of the Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as Securities Custodian, as hereinafter provided.

 

Initial Notes and Additional Notes offered and sold outside the United States of America (the “Regulation S Notes”) in reliance on Regulation S shall be issued in the form of a permanent global Note, without interest coupons, substantially in the form of Exhibit A, including appropriate legends as set forth in Section 2.1(d) (the “Regulation S Global Note”) deposited with the Trustee as Securities Custodian, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Regulation S Global Note may be represented by more than one certificate, if so required by DTC’s rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of the Regulation S Global Note may from time to time be increased or decreased by

 

36

 

adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as hereinafter provided.

 

Exchange Notes exchanged for interests in the Rule 144A Notes and the Regulation S Notes will be issued in the form of a permanent global Note, without interest coupons, substantially in the form of Exhibit B, which is hereby incorporated by reference and made a part of this Indenture, deposited with the Trustee as hereinafter provided, including the appropriate legend set forth in Section 2.1(d) (the “Exchange Global Note”). The Exchange Global Note may be represented by more than one certificate, if so required by DTC’s rules regarding the maximum principal amount to be represented by a single certificate.

 

The Rule 144A Global Note, the Regulation S Global Note and the Exchange Global Note are sometimes collectively herein referred to as the “Global Notes.”

 

If a Holder has given wire transfer instructions to the Company, the Company will, or if the Company is not then the Paying Agent, the Company will cause the Paying Agent to, pay all principal, Cash Interest, Additional Interest, if any, and premium, if any, on that Holder’s Notes in accordance with the instructions; all other payments of the principal of (and premium, if any), Cash Interest and Additional Interest, if any, on the Notes shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose pursuant to Section 2.3; provided, however, that, at the option of the Company, each installment of Cash Interest and Additional Interest, if any, may be paid by check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Note Register. Payments in respect of Notes represented by a Global Note (including principal, premium and Cash Interest and Additional Interest, if any) will be made by wire transfer of immediately available funds to the accounts specified by DTC.

 

The Notes may have notations, legends or endorsements required by law, stock exchange Rule or usage, in addition to those set forth on Exhibit A and Exhibit B and in Section 2.1(d). The Company shall approve the forms of the Notes and any notation, endorsement or legend on them. Each Note shall be dated the date of its authentication. The terms of the Notes set forth in Exhibit A and Exhibit B are part of the terms of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to be bound by such terms.

 

(c)                    Denominations. The Notes (other than any PIK Notes, which may be issued in minimum denominations of $1.00 and integral multiples thereof and any increase in the principal amount of Notes as a result of a PIK Payment) shall be issuable only in fully registered form, without coupons, and only in denominations of $2,000 and any integral multiple of $1,000 in excess of $2,000. PIK Payments will be made in denominations of $1.00 and integral multiples thereof.

 

(d)                   Legends. Unless and until (i) an Initial Note, a PIK Note or an Additional Restricted Note is sold under an effective registration statement or (ii) an Initial Note, a PIK Note or an Additional Restricted Note is exchanged for an Exchange Note in connection with

 

37

 

an effective registration statement, in each case pursuant to the Registration Rights Agreement or a similar agreement,

 

(i)                                          the Initial Note, PIK Note or Additional Restricted Note, as the case may be, shall bear the following legend (the “Private Placement Legend”) on the face thereof:

 

THE NOTES AND NOTE GUARANTEES (IF ANY) EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501 OF REGULATION D UNDER THE SECURITIES ACT IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.

 

(ii)                                       [Reserved]

 

(iii)                                    The Global Notes, whether or not an Initial Note, shall bear the following legend on the face thereof:

 

“UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

38

 

TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.”

 

(e)                    Book-Entry Provisions.

 

(i)                                     This Section 2.1(e) shall apply only to Global Notes deposited with the Trustee, as custodian for DTC.

 

(ii)                                  Each Global Note initially shall (x) be registered in the name of DTC for such Global Note or the nominee of DTC, (y) be delivered to the Trustee as custodian for DTC and (z) bear legends as set forth in Section 2.1(d).

 

(iii)                               Members of, or participants in, DTC (“Agent Members”) shall have no rights under this Indenture with respect to any Global Note held on their behalf by DTC or by the Trustee as the custodian of DTC or under such Global Note, and DTC may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by DTC or impair, as between DTC and its Agent Members, the operation of customary practices of DTC governing the exercise of the rights of a Holder of a beneficial interest in any Global Note.

 

(iv)                              In connection with any transfer of a portion of the beneficial interest in a Global Note pursuant to subsection (f) of this Section 2.1 to beneficial owners who are required to hold Definitive Notes, the Securities Custodian shall reflect on its books and records the date and a decrease in the principal amount of such Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Definitive Notes of like tenor and amount.

 

(v)                                 In connection with the transfer of an entire Global Note to beneficial owners pursuant to subsection (f) of this Section 2.1, such Global Note shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by DTC in exchange for its beneficial interest in such Global Note, an equal aggregate principal amount of Definitive Notes of authorized denominations.

 

(vi)                              The registered Holder of a Global Note may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.

 

39

 

(f)                Definitive Notes.

 

(i)                                          Except as provided below, owners of beneficial interests in Global Notes will not be entitled to receive Definitive Notes. If required to do so pursuant to any applicable law or regulation, beneficial owners may obtain Definitive Notes in exchange for their beneficial interests in a Global Note upon written request in accordance with DTC’s and the Registrar’s procedures. In addition, Definitive Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in a Global Note if (a) DTC notifies the Company that it is unwilling or unable to continue as depositary for such Global Note or DTC ceases to be a clearing agency registered under the Exchange Act, at a time when DTC is required to be so registered in order to act as depositary, and in each case a successor depositary is not appointed by the Company within 90 days of such notice or (b) an Event of Default has occurred and is continuing and the Trustee has received a request from DTC.

 

(ii)                                       Any Definitive Note delivered in exchange for an interest in a Global Note pursuant to Section 2.1 (e)(iv) or (v) shall, except as otherwise provided by Section 2.6(c), bear the Private Placement Legend set forth in Section 2.1(d).

 

(iii)                                    In connection with the exchange of a portion of a Definitive Note for a beneficial interest in a Global Note, the Trustee shall cancel such Definitive Note, and the Company shall execute, and the Trustee shall authenticate and deliver, to the transferring Holder a new Definitive Note representing the principal amount not so transferred.

 

Section 2.2                                    Execution and Authentication. One Officer of the Company shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless, after giving effect to any exchange of Initial Notes for Exchange Notes.

 

A Note shall not be valid until an authorized signatory of the Trustee manually authenticates the Note. The signature of the Trustee on a Note shall be conclusive evidence that such Note has been duly and validly authenticated and issued under this Indenture. A Note shall be dated the date of its authentication.

 

At any time and from time to time after the execution and delivery of this Indenture, the Trustee shall authenticate and make available for delivery: (1) Initial Notes for original issue on the Issue Date in an aggregate principal amount of $255,000,000, (2) from time to time PIK Notes for issue in connection with a PIK Payment, (3) Additional Notes for original issue and (4) Exchange Notes for issue only in an exchange offer pursuant to the Registration Rights Agreement, and only in exchange for Initial Notes, PIK Notes or Additional Notes of an equal principal amount, in each case upon a written order of the Company signed by two Officers of the Company or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company (the “Company Order”). Such Company Order shall specify the amount of the Notes to be authenticated (including whether such Notes shall be PIK Notes) and

 

40

 

the date on which the original issue of Notes is to be authenticated and whether the Notes are to be Initial Notes, PIK Notes, Additional Notes or Exchange Notes.

 

The Trustee may appoint an agent (the “Authenticating Agent”) reasonably acceptable to the Company to authenticate the Notes. Unless limited by the terms of such appointment, any such Authenticating Agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by the Authenticating Agent.

 

In case the Company or any Guarantor, pursuant to Article IV or Section 10.2, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which any Company or any Guarantor shall have been merged, or the Person which shall have received a conveyance, transfer, lease or other disposition as aforesaid, shall have executed an indenture supplemental hereto with the Trustee pursuant to Article IV, any of the Notes authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Notes executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Notes surrendered for such exchange and of like principal amount; and the Trustee, upon Company Order of the successor Person, shall authenticate and deliver Notes as specified in such order for the purpose of such exchange. If Notes shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section 2.2 in exchange or substitution for or upon registration of transfer of any Notes, such successor Person, at the option of the Holders but without expense to them, shall provide for the exchange of all Notes at the time outstanding for Notes authenticated and delivered in such new name.

 

Section 2.3                                    Registrar and Paying Agent. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange (the “Registrar”) and an office or agency where Notes may be presented for payment (the “Paying Agent”). The Company shall cause each of the Registrar and the Paying Agent to maintain an office or agency in the Borough of Manhattan, The City of New York. The Registrar shall keep a register of the Notes and of their transfer and exchange (the “Note Register”). The Company may have one or more co-registrars and one or more additional paying agents. The term “Paying Agent” includes any additional paying agent.

 

The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of each such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.7. The Company or any of its Restricted Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent.

 

41

 

The Company initially appoints the Trustee as Registrar and Paying Agent for the Notes.

 

Section 2.4                                    Paying Agent to Hold Money in Trust. By no later than 11:00 a.m. (New York City time) on the date on which any principal of, premium, if any, on or Cash Interest and Additional Interest, if any, on, any Note is due and payable, the Company shall deposit with the Paying Agent a sum sufficient in immediately available funds to pay such principal, premium, Cash Interest and Additional Interest, if any, when due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that such Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all money held by such Paying Agent for the payment of principal of, or premium, if any, on, and Cash Interest and Additional Interest, if any, on, the Notes and shall notify the Trustee in writing of any default by the Company or any Guarantor in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent (other than the Trustee) to pay all money held by it to the Trustee and to account for any funds disbursed by such Paying Agent. Upon complying with this Section 2.4, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money delivered to the Trustee. Upon any bankruptcy, reorganization or similar proceeding with respect to the Company, the Trustee shall serve as Paying Agent for the Notes.

 

Section 2.5                                    Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, or to the extent otherwise required under the TIA, the Company shall furnish to the Trustee, in writing at least five Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders.

 

Section 2.6                                    Transfer and Exchange.

 

(a) The following provisions shall apply with respect to any proposed transfer of a Rule 144A Note prior to the date which is one year after the later of the date of its original issue and the last date on which the Company or any Affiliate of the Company was the owner of such Notes (or any predecessor thereto) (the “Resale Restriction Termination Date”):

 

(i)                                     a transfer of a Rule 144A Note or a beneficial interest therein to a QIB shall be made upon the representation of the transferee in the form as set forth on the reverse of the Note that it is purchasing for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; and

 

42

 

(ii)                                  a transfer of a Rule 144A Note or a beneficial interest therein to a Non-U.S. Person shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.7(a) from the proposed transferor and, if requested by the Company or the Trustee, the delivery of an Opinion of Counsel, certification and/or other information satisfactory to each of them.

 

(b)              The following provisions shall apply with respect to any proposed transfer of a Regulation S Note prior to the expiration of the Distribution Compliance Period:

 

(i)                                a transfer of a Regulation S Note or a beneficial interest therein to a QIB shall be made upon: (A) the delivery by the transferor of a written certificate substantially in the form set forth in Section 2.7(b); and (B) the representation of the transferee, in the form of assignment on the reverse of the certificate, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; and

 

(ii)                             a transfer of a Regulation S Note or a beneficial interest therein to a Non-U.S. Person shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.7(a) from the proposed transferor and, if requested by the Company or the Trustee, receipt by the Trustee or its agent of an Opinion of Counsel, certification and/or other information satisfactory to each of them.

 

After the expiration of the Distribution Compliance Period, interests in the Regulation S Note may be transferred without requiring the certification set forth in Section 2.7 or any additional certification.

 

(c)               Private Placement Legend. Upon the transfer, exchange or replacement of Notes not bearing a Private Placement Legend, the Registrar shall deliver Notes that do not bear a Private Placement Legend unless such transferee is an affiliate (as defined in Rule 144) of the Company. Upon the transfer, exchange or replacement of Notes bearing a Private Placement Legend, the Registrar shall deliver only Notes that bear a Private Placement Legend unless there is delivered to the Registrar an Opinion of Counsel to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act.

 

(d)              The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.1 or this Section 2.6. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable prior written notice to the Registrar.

 

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(e)                    Obligations with Respect to Transfers and Exchanges of Notes

 

(i)                                     To permit registrations of transfers and exchanges, the Company shall, subject to the other terms and conditions of this Article II, execute, and the Trustee shall authenticate, Definitive Notes and Global Notes at the Registrar’s or co-registrar’s request.

 

(ii)                                  No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charges payable upon exchange or transfer pursuant to Sections 3.7, 3.9, 5.8 or 9.5).

 

(iii)                               The Registrar or co-registrar shall not be required to register the transfer or exchange of (i) any Notes selected for redemption (except in the case of Notes to be redeemed in part, the portion of the Note not to be redeemed) or (ii) any Notes for a period beginning 15 days before a selection of Notes to be redeemed.

 

(iv)                              Prior to the due presentation for registration of transfer of any Note, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of, premium, if any, on and interest and Additional Interest, if any, on, such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary.

 

(v)                                 Any Definitive Note delivered in exchange for an interest in a Global Note pursuant to Section 2.1(e) shall, except as otherwise provided by Section 2.6(c), bear the Private Placement Legend set forth in Section 2.1(d).

 

(vi)                              All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange.

 

(f)                     No Obligation of the Trustee.

 

(i)                                     The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Note, a member of, or a participant in, DTC or other Person with respect to the accuracy of the records of DTC or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other Person (other than DTC) of any notice (including any notice of redemption) or the payment of any amount or delivery of any Notes (or other Note or property) under or with respect to such Notes. All notices and communications to be given to the Holders and all payments to be made to Holders in respect of the Notes shall be given or made only to or upon the order of the registered Holders (which shall be DTC or its nominee in the case of a Global Note). The rights of beneficial owners in any Global Note shall be exercised only through DTC

 

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subject to the applicable rules and procedures of DTC. The Trustee may rely and shall be fully protected in relying upon information furnished by DTC with respect to its members, participants and any beneficial owners.

 

(ii)                                  The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among DTC participants, members or beneficial owners in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

 

Section        2.7          Form of Certificates to be Delivered in Connection with Certain Transfers.

 

(a)

 

[Date]

Denver Parent Corporation
 c/o U.S. Bank National
      Association, as Trustee
 950 17th Street, 12th Floor
 Denver, Colorado 80202
 Attention: Global Corporate Trust Services

 

Re:        Denver Parent Corporation

12.25% / 13.00% Senior PIK Toggle Notes due 2018 (the “Notes”)

 

Ladies and Gentlemen:

 

In connection with our proposed sale of $                   aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the United States Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, we represent that:

 

(i)                                the offer of the Notes was not made to a person in the United States;

 

(ii)                             either (1) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States or (2) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States;

 

(iii)                          no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903 or Rule 904 of Regulation S, as applicable;

 

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(iv)                         the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and

 

(v)                            we have advised the transferee of the transfer restrictions applicable to the Notes.

 

In addition, if the sale is made during the Distribution Compliance Period, we confirm that the interest sold will be held immediately thereafter through the Euroclear System or Clearstream Banking.

 

You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S.

 

	
Very truly yours,
    	
 
    
	
 
    	
 
    
	
[Name of Transferor]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Authorized Signature
    	
 
    
			

 

(b)

 

[Date]

Denver Parent Corporation.
 c/o U.S. Bank National
      Association, as Trustee
 950 17th Street, 12th Floor
 Denver, Colorado 80202
 Attention: Global Corporate Trust Services

 

Re:        Denver Parent Corporation

12.25% / 13.00% Senior PIK Toggle Notes due 2018 (the “Notes”)

 

Ladies and Gentlemen:

 

This Certificate relates to $                                               principal amount of the above captioned Notes held in definitive form (the “Securities”) by                     (the “Transferor”).

 

The Transferor has requested the Trustee by written order to exchange or register the transfer of a Security or Securities.

 

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In connection with such request and in respect of each such Security, the Transferor does hereby certify that such Security is being transferred to person whom the Transferor reasonably believes to be a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act), in reliance on Rule 144A under the Securities Act and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction, that is purchasing for its own account or for the account of another qualified institutional buyer, in each case to whom notice is given that the transfer is being made in reliance on Rule 144A.

 

	
Very truly yours,
    	
 
    
	
 
    	
 
    
	
[Name of Transferor]
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Authorized Signature
    	
 
    
			

 

Section 2.8 Mutilated, Destroyed, Lost or Wrongfully Taken Notes. If a mutilated Note is surrendered to the Registrar or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Note if the requirements of Section 8-405 of the Uniform Commercial Code are met, such that the Holder (a) satisfies the Company or the Trustee within a reasonable time after such Holder has notice of such loss, destruction or wrongful taking and the Registrar does not register a transfer prior to receiving such notification, (b) makes such request to the Company or Trustee prior to the Note being acquired by a protected purchaser as defined in Section 8-303 of the Uniform Commercial Code (a “protected purchaser”) and (c) satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Note is replaced, and, in the absence of notice to the Company or the Trustee that such Note has been acquired by a protected purchaser, the Company shall execute and, upon a Company Order, the Trustee shall authenticate and make available for delivery, in exchange for any such mutilated Note or in lieu of any such destroyed, lost or wrongfully taken Note, a new Note of like tenor and principal amount, bearing a number not contemporaneously outstanding.

 

In case any such mutilated, destroyed, lost or wrongfully taken Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note.

 

Upon the issuance of any new Note under this Section 2.8, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) in connection therewith.

 

Every new Note issued pursuant to this Section 2.8 in lieu of any mutilated, destroyed, lost or wrongfully taken Note shall constitute an original additional contractual obligation of the Company, any Guarantor (if applicable) and any other obligor upon the Notes,

 

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whether or not the mutilated, destroyed, lost or wrongfully taken Note shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.

 

The provisions of this Section 2.8 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or wrongfully taken Notes.

 

Section 2.9 Outstanding Notes. Notes outstanding at any time are all Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section 2.9 as not outstanding. A Note ceases to be outstanding in the event the Company or a Subsidiary of the Company holds the Note, provided, however, that (i) for purposes of determining which are outstanding for consent or voting purposes hereunder, the provisions of Section 12.6 shall apply and (ii) in determining whether the Trustee shall be protected in making a determination whether the Holders of the requisite principal amount of outstanding Notes are present at a meeting of Holders of Notes for quorum purposes or have consented to or voted in favor of any request, demand, authorization, direction, notice, consent, waiver, amendment or modification hereunder, or relying upon any such quorum, consent or vote, only Notes which a Trust Officer of the Trustee actually knows to be held by the Company or an Affiliate of the Company shall not be considered outstanding.

 

If a Note is replaced pursuant to Section 2.8, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Note is held by a protected purchaser.

 

If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a Redemption Date or maturity date money sufficient to pay all principal, premium, if any, and interest and Additional Interest, if any, payable on that date with respect to the Notes (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Holders on that date pursuant to the terms of this Indenture, then on and after that date such Notes (or portions thereof) cease to be outstanding and interest on them ceases to accrue.

 

Section 2.10 Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment or cancellation and destroy such Notes in accordance with its internal policies, including delivery of a certificate (a “Certificate of Destruction”) to the Company describing such Notes disposed (subject to the record retention requirements of the Exchange Act). The Company may not issue new Notes to replace Notes it has paid or delivered to the Trustee for cancellation for any reason other than in connection with a transfer or exchange.

 

Section 2.11 Payment of Interest; Defaulted Interest. Interest and Additional Interest, if any, on any Note which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Note (or one or more predecessor Notes) is registered at the close of business on the regular Record Date for such

 

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interest at the office or agency of the Company maintained for such purpose pursuant to Section 2.3.

 

PIK Interest on the Notes will be payable (A) with respect to Notes represented by one or more Global Notes on the relevant Record Date by increasing the principal amount of the outstanding Global Note by an amount equal to the amount of PIK Interest for the applicable Interest Period (rounded up to the nearest whole dollar) and (B) with respect to Notes represented by Definitive Notes, by issuing PIK Notes in certificated form in an aggregate principal amount equal to the amount of PIK Interest for the applicable Interest Period (rounded up to the nearest whole dollar). On any Interest Payment Date on which the Company pays PIK Interest with respect to a Global Note, the Trustee shall increase the principal amount of such Global Note by an amount equal to the amount of PIK Interest for the applicable Interest Period (rounded up to the nearest whole dollar) on the principal amount of such Global Note as of the relevant Record Date for such Interest Payment Date, to the credit of the Holders on such Record Date and an adjustment shall be made on the books and records of the Registrar with respect to such Global Note to reflect such increase. On any Interest Payment Date on which the Company makes a PIK Payment be issuing PIK Notes in certificated form, the Trustee will, upon a Company Order, authenticate and deliver such PIK Notes in certificated form for original issuance to the Holders on the relevant Record Date, as shown by the records of the register of Holders.

 

Any interest and Additional Interest, if any, on any Note which is payable, but is not paid when the same becomes due and payable and such nonpayment continues for a period of 30 days shall forthwith cease to be payable to the Holder on the regular Record Date, and such defaulted interest and (to the extent lawful) interest on such defaulted interest at the rate borne by the Notes (such defaulted interest and interest thereon herein collectively called “Defaulted Interest”) shall be paid by the Company, at its election in each case, as provided in clause (a) or (b) below:

 

(a)                                 The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Notes (or their respective predecessor Notes) are registered at the close of business on a Special Record Date (as defined below) for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date (not less than 30 days after such notice) of the proposed payment (the “Special Interest Payment Date”), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a record date (the “Special Record Date”) for the payment of such Defaulted Interest, which date shall be not more than 15 days and not less than 10 days prior to the Special Interest Payment Date and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date, and in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date and Special Interest Payment Date therefor to be given in the manner provided for in Section 12.2, not less than 10 days prior to such Special Record Date.

 

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Notice of the proposed payment of such Defaulted Interest and the Special Record Date and Special Interest Payment Date therefor having been so given, such Defaulted Interest shall be paid on the Special Interest Payment Date to the Persons in whose names the Notes (or their respective predecessor Notes) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (b).

 

(b)                            The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.

 

Subject to the foregoing provisions of this Section 2.11, each Note delivered under this Indenture upon registration of, transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest and Additional Interest, if any, each as accrued and unpaid, and to accrue, which were carried by such other Note.

 

Section        2.12 Computation of Interest. Interest on the Notes shall be computed on the basis of a 360 day year of twelve 30 day months.

 

Section        2.13 CUSIP Numbers. The Company in issuing the Notes may use “CUSIP” numbers (if then generally in use) and, if so, the Trustee shall use “CUSIP” numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such CUSIP numbers. The Company shall promptly notify the Trustee in writing of any change in the CUSIP numbers.

 

ARTICLE III
  Covenants

 

Section 3.1 Payment of Notes. The Company shall promptly pay the principal of, premium, if any, on, and interest and Additional Interest, if any, on, the Notes on the dates and in the manner provided in the Notes and in this Indenture. Principal, premium, if any, interest and Additional Interest, if any, shall be considered paid on the date due if on such date the (i) Trustee or the Paying Agent holds in accordance with this Indenture immediately available funds sufficient to pay all principal, premium, interest and Additional Interest, if any, then due and the Trustee or Paying Agent, as the case may be, is not prohibited from paying money to the Holders on that date pursuant to the terms of this Indenture or (ii) in the case of a PIK Payment, the Company has delivered to the Trustee the documentation necessary to increase the principal amount of the Global Notes to pay PIK Interest or to issue the PIK Notes.

 

The Company shall pay interest on overdue principal at the rate specified therefor in the Notes, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.

 

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Notwithstanding anything to the contrary contained in this Indenture, the Company may, to the extent it is required to do so by law, deduct or withhold income or other similar taxes imposed by the United States of America from principal or interest payments hereunder.

 

Section 3.2                                    Reports. Whether or not required by the Commission, so long as any Notes are outstanding, the Company will file with the Commission for public availability within the time periods specified in the Commission’s rules and regulations (unless the Commission will not accept such a filing), and the Company will furnish to the Trustee and, upon its request, to any of the Holders of Notes, within five Business Days of filing, or attempting to file, the same with the Commission:

 

(a)              beginning with the quarter ending September 30, 2013, all quarterly and annual financial and other information with respect to the Company and its Subsidiaries that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to the annual information only, a report on the annual financial statements by the Company’s certified independent accountants; and

 

(b)         all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports; provided, however, that if the Company ceases to be subject to the reporting requirements under Section 13(a) or 15(d) of the Exchange Act, such information and reports may exclude any certifications, reports or other information required to be a part of, or filed with, such reports pursuant to the provisions of the Sarbanes Oxley Act of 2002 or the rules and regulations of the Commission thereunder. The availability of any of the foregoing information or reports described in this Section 3.2 on the Commission’s website shall be deemed to satisfy the foregoing delivery requirements.

 

The quarterly and annual financial information required by the preceding paragraph will include or be accompanied by a disclosure of Adjusted Consolidated Net Tangible Assets determined as of the last day of the applicable quarter or year. If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraph will include or be accompanied by a reasonably detailed presentation of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company.

 

Any and all Defaults or Events of Default arising from a failure to file with the Commission or furnish in a timely manner any information required by this Section 3.2 shall be deemed cured (and the Company shall be deemed to be in compliance with this Section 3.2) upon filing or furnishing such information as contemplated by this Section 3.2 (but without regard to the date on which such information is so filed or furnished); provided that such cure shall not otherwise affect the rights of the Holders under Article VI if the principal of, premium, if any, on, and interest on, the Notes have been accelerated in accordance with the terms of this Indenture and such acceleration has not been rescinded or cancelled prior to such cure.

 

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In addition, the Company will make available all of the information and reports referred to in the second preceding paragraph and make such information available to securities analysts and prospective investors upon request. The Company will also furnish to Holders, securities analysts and prospective investors upon request the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Notes are not freely transferable under the Securities Act.

 

Section 3.3                                    Incurrence of Indebtedness and Issuance of Preferred Stock.

 

(a)              The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, “incur”) any Indebtedness (including Acquired Debt), the Company will not, and will not permit any of its Restricted Subsidiaries to, issue any Disqualified Stock, and the Company will not permit any of its Restricted Subsidiaries to issue any other shares of Preferred Stock; provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, and any of its Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock or other shares of Preferred Stock, if (i) in the case of the incurrence of Indebtedness or issuance of Disqualified Stock by the Company or any Restricted Subsidiary of the Company, as of the date of such incurrence or issuance and after giving effect thereto and to the application of proceeds therefrom, the Company’s Debt to Assets Ratio would not exceed 0.8 to 1.0, (ii) in the case of the incurrence of Indebtedness or issuance of Disqualified Stock by Venoco or any Restricted Subsidiary of Venoco, in addition to compliance with clause (i) above, as of the date of such incurrence or issuance and after giving effect thereto and to the application of proceeds therefrom, Venoco’s Debt to Assets Ratio would not exceed 0.6 to 1.0, and (iii) in the case of the issuance of shares of Preferred Stock (other than Disqualified Stock) by any Restricted Subsidiary of the Company, the Company’s Fixed Charge Coverage Ratio for its most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such shares of Preferred Stock are issued would have been at least 2.0 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the shares of Preferred Stock had been issued at the beginning of such four-quarter period.

 

(b)              Section 3.3(a) will not prohibit the incurrence of the items of Indebtedness described in any of the following clauses (collectively, “Permitted Debt”); provided that compliance with the Debt to Assets Ratio test in clause (ii) of Section 3.3(a) shall be required for the incurrence by Venoco or any of its Restricted Subsidiaries of Indebtedness described under clauses (iv) and (xiv):

 

(i)                                     the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness (including letters of credit) under one or more Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) not to exceed an amount equal to the greater of (a) $250,000,000 or (b) 30% of Adjusted

 

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Consolidated Net Tangible Assets determined as of the date of the incurrence of such Indebtedness;

 

(ii)                                  the incurrence by the Company or any of its Restricted Subsidiaries of the Existing Indebtedness;

 

(iii)                               the incurrence by the Company of Indebtedness represented by the Notes to be issued on the date of this Indenture, the Exchange Notes or any PIK Notes issued or any increase in the principal amount of the Notes from time to time in respect of any PIK Payment in accordance with the terms of this Indenture;

 

(iv)                              the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (iv), not to exceed $20,000,000 at any time outstanding;

 

(v)                                 the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under Section 3.3(a)  hereof or clause (ii), (iii), (iv) or (xiv) of this Section 3.3(b) or this clause (v);

 

(vi)                              the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that:

 

(A)                               if the Company is the obligor on such Indebtedness and a Guarantor is not the obligee, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, or if a Guarantor is the obligor on such Indebtedness and neither the Company nor another Guarantor is the obligee, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Note Guarantee of such Guarantor; and

 

(B)                               (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary of the Company and (ii) any sale or other transfer of any such Indebtedness to a Person that is neither the Company nor a Restricted Subsidiary of the Company will be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (vi);

 

(vii)                           the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations;

 

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(viii)                   the Guarantee by the Company or any of the Restricted Subsidiaries of Indebtedness of the Company or any Guarantor that was permitted to be incurred pursuant to Section 3.3(a) or pursuant to clause (i), (iii), (iv), (vi), (vii), (ix), (xi), (xii), (xiii) or (xiv) of this Section 3.3(b) or pursuant to clause (v) of this Section 3.3(b) to the extent that the Permitted Refinancing Indebtedness incurred thereunder directly or indirectly refinances Indebtedness incurred pursuant to Section 3.3(a) or pursuant to clause (ii) or (iii) of this Section 3.3(b);

 

(ix)                         the incurrence by the Company or any of its Restricted Subsidiaries of obligations relating to net gas balancing positions arising in the ordinary course of business and consistent with past practice;

 

(x)                            the incurrence by the Company’s Unrestricted Subsidiaries of Non-Recourse Debt, provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event will be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company that was not permitted by this clause (x);

 

(xi)                         the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness in respect of bid, performance, surety and similar bonds issued for the account of the Company and any of its Restricted Subsidiaries in the ordinary course of business, including Guarantees and obligations of the Company and any of its Restricted Subsidiaries with respect to letters of credit supporting such obligations (in each case, other than an obligation for money borrowed);

 

(xii)                      the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness arising from agreements of the Company or any of its Restricted Subsidiaries providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or Capital Stock of a Subsidiary, provided that the maximum aggregate liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Company and its Restricted Subsidiaries in connection with such disposition;

 

(xiii)                   the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (xiii), not to exceed the greater of $20,000,000 and 5% of Adjusted Consolidated Net Tangible Assets determined as of the date of the incurrence of such Indebtedness; and

 

(xiv)                  the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Acquired Debt.

 

For purposes of determining compliance with this Section 3.3, in the event that an item of Indebtedness (including Acquired Debt) meets the criteria of more than one of the

 

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categories of Permitted Debt described in clauses (i) through (xiv) of Section 3.3(b) above, or is entitled to be incurred pursuant to Section 3.3(a) above, the Company will be permitted to divide and classify (or later divide, classify, re-divide or reclassify in whole or in part in its sole discretion) such item of Indebtedness in any manner that complies with this covenant; provided that all Indebtedness outstanding on the Issue Date under the Credit Agreement shall be deemed incurred under clause (b)(i) above and not under clause (a) or clause (b)(ii) above.

 

The accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness (including any PIK Payment) with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 3.3. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof in the case of any Indebtedness issued with original issue discount and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness.

 

In addition, the Company will not permit any of its Unrestricted Subsidiaries to incur any Indebtedness or issue any shares of Disqualified Stock, other than Non-Recourse Debt. If at any time an Unrestricted Subsidiary becomes a Restricted Subsidiary, any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under this Section 3.3, the Company shall be in Default of this Section 3.3).

 

For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term Indebtedness, or first committed, in the case of revolving credit Indebtedness; provided that if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced (plus all accrued interest on the Indebtedness being refinanced and the amount of all expenses and premiums incurred in connection therewith).

 

Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may incur pursuant to this covenant shall not be deemed to be exceeded solely as a result of fluctuations in the exchange rate of currencies. The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such Permitted Refinancing Indebtedness is denominated that is in effect on the date of such refinancing.

 

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Section 3.4                                    Restricted Payments.

 

(a)              The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:

 

(i)                                     declare or pay any dividend or make any other payment or distribution on account of the Company’s or any of its Restricted Subsidiaries’ Equity Interests (including any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company’s or any of its Restricted Subsidiaries’ Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or payable to the Company or a Restricted Subsidiary of the Company);

 

(ii)                                  purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company;

 

(iii)                               make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is contractually subordinated in right of payment to the Notes or the Note Guarantees (excluding any intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries), except a payment of interest or principal at the Stated Maturity thereof; or

 

(iv)                              make any Restricted Investment (all such payments and other actions set forth in these clauses (i) through (iv) above being collectively referred to as “Restricted Payments”),

 

unless, at the time of and after giving effect to such Restricted Payment:

 

(i)                                     no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment;

 

(ii)                                  at the time of such Restricted Payment and after giving pro forma effect thereto, the Company’s Consolidated Leverage Ratio would have been less than 4.00 to 1.00; and

 

(iii)                               such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of this Indenture (excluding Restricted Payments permitted by clauses (ii), (iii), (vi), (vii), (viii) and (ix) of Section 3.4(b) below), is less than the sum, without duplication, of:

 

(A)                               50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the Issue Date to the end of the Company’s most recently ended fiscal quarter for which internal financial statements are available

 

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at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit); plus

 

(B)                               100% of the aggregate Net Cash Proceeds received by the Company (including the Fair Market Value of any Additional Assets to the extent acquired in consideration of Equity Interests of the Company (other than Disqualified Stock)) since the Issue Date as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) (other than Net Cash Proceeds received from an issuance or sale of such Capital Stock to a Subsidiary of the Company or an employee stock ownership plan, option plan or similar trust to the extent such sale to an employee stock ownership plan, option plan or similar trust is financed by loans from or guaranteed by the Company or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination); plus

 

(C)                               the amount by which Indebtedness of the Company is reduced on the Company’s balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Issue Date of any Indebtedness of the Company convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or other property, distributed by the Company upon such conversion or exchange); plus

 

(D)                               the amount equal to the net reduction in Restricted Investments made by the Company or any of its Restricted Subsidiaries in any Person resulting from:

 

(1)                                 repurchases or redemptions of such Restricted Investments by such Person, proceeds realized upon the sale of such Restricted Investment to a purchaser other than the Company or a Subsidiary, repayments of loans or advances or other transfers of assets (including by way of dividend or distribution) by such Person to the Company or any Restricted Subsidiary of the Company; or

 

(2)                                 the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of “Investment”) not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount in each case under this clause (D) was included in the calculation of the amount of Restricted Payments; provided, however, that no amount will be included under this clause (D) to the extent it is already included in Consolidated Net Income.

 

(b)                       So long as no Default or Event of Default has occurred and is continuing or would be caused thereby, the preceding provisions will not prohibit:

 

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(i)                                     the payment of any dividend or distribution within 60 days after the date of declaration of the dividend or distribution, or the consummation of any redemption after the giving of an irrevocable notice of redemption, if at the date of declaration of the dividend or distribution or the date of the notice of redemption the dividend or distribution payment or redemption payment would have complied with the provisions of this Indenture;

 

(ii)                                  the redemption, repurchase, retirement, defeasance or other acquisition of any Subordinated Obligations of the Company or any Guarantor or of any Equity Interests of the Company in exchange for, or out of the Net Cash Proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan or similar trust to the extent such sale to an employee stock ownership plan or similar trust is financed by loans from or guaranteed by the Company or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination); provided, however, that (a) such purchase or redemption will be excluded in subsequent calculations of the amount of Restricted Payments and (b) the Net Cash Proceeds from such sale will be excluded from clause (iii)(B) of Section 3.4(a);

 

(iii)                               any defeasance, retirement, purchase, redemption or other acquisition of Subordinated Obligations of the Company or any Guarantor, as the case may be, made by exchange for, or out of the proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, Subordinated Obligations of the Company or any Guarantor, as the case may be, that qualify as Permitted Refinancing Indebtedness, provided that the obligors on such new Subordinated Obligations shall not include obligors that were not obligors on the Subordinated Obligations being defeased, retired, repurchased, redeemed or acquired; provided, however, that such defeasance, retirement, purchase, redemption or acquisition will be excluded in subsequent calculations of the amount of Restricted Payments;

 

(iv)                              in the event of a Change of Control, and if no Default shall have occurred and be continuing, the payment, purchase, redemption, defeasance or other acquisition or retirement of Subordinated Obligations of the Company or any Guarantor, in each case, at a purchase price not greater than 101% of the principal amount of such Subordinated Obligations, plus any accrued and unpaid interest therein; provided, however, that prior to such payment, purchase, redemption, defeasance or other acquisition or retirement, the Company (or a third party to the extent permitted by this Indenture) has made a Change of Control Offer with respect to the Notes as a result of such Change of Control and has repurchased all Notes validly tendered and not withdrawn in connection with such Change of Control Offer; provided further, however, that such repurchase and other acquisitions shall be included in the calculation of the amount of Restricted Payments;

 

(v)                                 in the event of an Asset Sale that requires the Company to offer to repurchase Notes pursuant to the covenant described under Section 3.7 hereof, and if no Default shall have occurred and be continuing, the payment, purchase, redemption,

 

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defeasance or other acquisition or retirement of Subordinated Obligations of the Company or any Guarantor, in each case, at a purchase price not greater than 100% of the principal amount (or, if such Subordinated Obligations were issued with original issue discount, 100% of the accreted value) of such Subordinated Obligations, plus any accrued and unpaid interest thereon; provided, however, that prior to such payment, purchase, redemption, defeasance or other acquisition or retirement, the Company has made an Asset Sale Offer with respect to the Notes pursuant to the provisions of the covenant described under Section 3.7 hereof; provided further, however, that such repurchases and other acquisitions shall be included in the calculation of the amount of Restricted Payments);

 

(vi)                                   the payment of any dividend or distribution by a Restricted Subsidiary of the Company to the holders of its Equity Interests on a pro rata basis;

 

(vii)                                the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any current or former director or employee of the Company or any of its Restricted Subsidiaries pursuant to any director or employee equity subscription agreement or plan, employee stock ownership plan, stock option agreement or similar agreement or plan; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $5,000,000 in any twelvemonth period; provided, that such payments will be excluded from any subsequent calculation of the amounts of Restricted Payments; provided further, that such amount in any twelve-month period may be increased in an amount not to exceed (a) the cash proceeds from the issue or sale of Equity Interests (other than Disqualified Stock) to any such officers, directors, employees or consultants that occurs after the Issue Date to the extent proceeds from the issue or sale of such Equity Interests have not otherwise been applied to make Restricted Payments plus (b) the cash proceeds of key man life insurance received by the Company or its Restricted Subsidiaries after the Issue Date;

 

(viii)                        the acquisition of Equity Interests by the Company deemed to occur upon the exercise of stock options or stock appreciation rights by way of cashless exercise or made in lieu of withholding taxes;

 

(ix)                              the payment of cash in lieu of the issuance of fractional shares of Capital Stock in connection with any transaction otherwise permitted under this covenant; and

 

(x)                                 other Restricted Payments in an aggregate amount since the date of this Indenture not to exceed $25,000,000.

 

(c)                                  The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.

 

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Section 3.5                                    Liens. The Company will not, and will not permit any Guarantor to, directly or indirectly, create, incur or permit to exist any Lien (other than Permitted Liens) upon any of its property or assets (whether now owned or hereafter acquired), unless:

 

(a)  in the case of any Lien securing Subordinated Obligations of the Company or a Guarantor, the Notes or Note Guarantee, as applicable, are secured by a Lien on such property or assets on a senior basis to the Subordinated Obligations so secured until such time as such Subordinated Obligations are no longer so secured by that Lien; and

 

(b)  in the case of any other Lien (other than a Permitted Lien) securing Indebtedness, the Notes or Note Guarantees, as applicable, are secured by a Lien on such property or assets on an equal and ratable basis with the Senior Debt so secured until such time as such Senior Debt is no longer so secured by that Lien.

 

Section 3.6                                    Dividend and Other Payment Restrictions Affecting Subsidiaries.

 

(a)  The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:

 

(i)                                       pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or pay any Indebtedness or other obligations owed to the Company or any of its Restricted Subsidiaries;

 

(ii)                                    make loans or advances to the Company or any of its Restricted Subsidiaries; or

 

(iii)                                 transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries.

 

(b)  However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of:

 

(i)                                       agreements governing Existing Indebtedness and Credit Facilities as in effect on the date of this Indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements, provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are not materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of this Indenture;

 

(ii)                                    this Indenture, the Notes and the Note Guarantees;

 

(iii)                                 applicable law, rule, regulation or order;

 

(iv)                                any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the

 

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time of such acquisition, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred;

 

(v)                                   any restriction that restricts in a customary manner the subletting, assignment or transfer of any property, right or asset that is subject to a lease, license or similar contract, or the assignment or transfer of any such lease, license or other similar contract;

 

(vi)                                purchase money obligations for property acquired in the ordinary course of business that impose restrictions on that property of the nature described in clause (iii) of Section 3.6(a) above;

 

(vii)                             any restriction with respect to a Restricted Subsidiary (or any of its property or assets) imposed pursuant to an agreement entered into for the direct or indirect sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary (or the property or assets that are subject to such restriction) pending the closing of such sale or disposition;

 

(viii)                          Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

 

(ix)                                encumbrances or restrictions in instruments evidencing Indebtedness of a Restricted Subsidiary incurred and outstanding on or prior to the date on which such Subsidiary was acquired by the Company; provided, however, that such encumbrances or restrictions are not created, incurred or assumed in connection with, or in contemplation of, such acquisition;

 

(x)                                   Indebtedness permitted under this Indenture containing encumbrances or restrictions that taken as a whole are not materially more restrictive (as determined in good faith by the Board of Directors of the Company) than the encumbrances and restrictions otherwise contained in this Indenture;

 

(xi)                                encumbrances or restrictions contained in Hedging Obligations permitted from time to time under this Indenture;

 

(xii)                             encumbrances securing Indebtedness otherwise permitted to be incurred under the provisions of the covenant described under Section 3.5 that limit the right of the debtor to dispose of the assets subject to such Liens;

 

(xiii)                          provisions with respect to the disposition or distribution of assets or property in joint venture agreements, agreements respecting Permitted Business Investments and other similar agreements entered into in the ordinary course of business; and

 

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(xiv)                         restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business.

 

Section 3.7                                    Assets Sales.

 

(a)  The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:

 

(i)                                       the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of;

 

(ii)                                    at least 75% of the aggregate consideration received by the Company or such Restricted Subsidiary in the Asset Sale and all other Asset Sales since the date of this Indenture is in the form of cash or Cash Equivalents. For purposes of this provision, each of the following will be deemed to be cash:

 

(A)                               any Indebtedness, as shown on the Company’s or such Restricted Subsidiary’s most recent balance sheet, of the Company or any Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Note Guarantee) that is assumed by the transferee of any such assets if and only if the Company or such Subsidiary is released from any further liability pursuant to a novation or indemnity agreement; and

 

(B)                               any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that within 90 days after the Asset Sale are converted by the Company or such Subsidiary into cash, to the extent of the cash received in that conversion; and

 

(C)                               any Designated Non-cash Consideration received by the Company or any of its Restricted Subsidiaries in such Asset Sale; provided that the aggregate Fair Market Value of such Designated Non-cash Consideration, taken together with the Fair Market Value at the time of receipt of all other Designated Non-cash Consideration received pursuant to this clause (C) less the amount of Net Proceeds previously realized in cash from prior Designated Non-cash Consideration is less than 10.0% of Adjusted Consolidated Net Tangible Assets determined as of such date; and

 

(iii)                                 on the date such Asset Sale is consummated, after giving pro forma effect thereto and to the application of the Net Proceeds therefrom, the Company would be permitted to incur at least $1.00 of Indebtedness under the Debt to Assets Ratio test in clause (i) of Section 3.3(a).

 

(b)  Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company or any such Restricted Subsidiary may apply those Net Proceeds at its option to any combination of the following:

 

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(i)                                       to repay Senior Debt; provided, however, that if such Senior Debt includes Senior Debt of the Company other than the Notes, the Company shall redeem Notes, repurchase Notes through open market purchases (to the extent such purchases are at or above 100% of the principal amount thereof) or make an offer (in accordance with the procedures set forth in Section 3.7(d) for an Asset Sale Offer) to repurchase Notes at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest, in each case, on an equal and ratable basis with such other Senior Debt;

 

(ii)                                    to acquire all or substantially all of the properties or assets, or any Capital Stock, of one or more other Persons primarily engaged in the Oil and Gas Business, and, for this purpose, a division or line of business of a Person shall be treated as a separate Person;

 

(iii)                                 to acquire a majority of the Voting Stock of one or more other Persons primarily engaged in the Oil and Gas Business if, after giving effect to any such acquisition of Capital Stock, such Person becomes a Restricted Subsidiary of the Company;

 

(iv)                                to make one or more capital expenditures; or

 

(v)                                   to acquire other assets that are not classified as current assets under GAAP and that are used or useful in the Oil and Gas Business.

 

(c)  Pending the final application of any Net Proceeds, the Company or any such Restricted Subsidiary may invest the Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding Section 3.7(b) will constitute “Excess Proceeds.”

 

(d)  On the 361st day after the receipt of Net Proceeds from an Asset Sale (or, at the Company’s option, any earlier date), if the aggregate amount of Excess Proceeds then exceeds $20,000,000, the Company will make an offer (an “Asset Sale Offer”) to all Holders of Notes, and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets, to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of the principal amount plus accrued and unpaid interest and Additional Interest, if any, to the date of settlement, and will be payable in cash. If the Asset Sale Payment Date is on or after an interest Record Date and on or before the related Interest Payment Date, any accrued and unpaid interest (including Additional Interest, if any) will be paid to the Person in whose name a Note is registered at the close of business on such Record Date, and no additional interest will be payable to Holders who tender Notes pursuant to the Asset Sale Offer. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the Notes to be purchased on a pro rata basis (except that any Notes represented by a Global Note will be

 

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selected by such method as DTC or its nominee or successor may require or, where such nominee or successor is the Trustee, a method that most nearly approximates pro rata selection as the Trustee deems fair and appropriate unless otherwise required by law), based on the amounts tendered (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $2,000, or an integral multiple of $1,000 in excess thereof, will be purchased). Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

 

(e)  The Asset Sale Offer will remain open for a period of 20 Business Days following its commencement, except to the extent that a longer period is required by applicable law (the “Asset Sale Offer Period”). No later than five Business Days after the termination of the Asset Sale Offer Period (the “Asset Sale Payment Date”), the Company will purchase the principal amount of Notes and other pari passu Indebtedness required to be purchased pursuant to this covenant (the “Asset Sale Offer Amount”) or, if less than the Asset Sale Offer Amount has been so validly tendered, all Notes and other pari passu Indebtedness validly tendered in response to the Asset Sale Offer. On or before the Asset Sale Payment Date, the Company will, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Asset Sale Offer Amount of Notes and other pari passu Indebtedness or portions thereof so validly tendered and not properly withdrawn pursuant to the Asset Sale Offer, or if less than the Asset Sale Offer Amount has been validly tendered and not properly withdrawn, all Notes and other pari passu Indebtedness so validly tendered and not properly withdrawn. The Company will deliver to the Trustee an Officers’ Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this covenant; and, in addition, the Company will make such deliveries of all certificates and notes as are required by the agreements governing the other pari passu Indebtedness. The Company or the Paying Agent, as the case may be, will promptly (but in any case not later than five Business Days after the termination of the Asset Sale Offer Period) mail or deliver to each tendering Holder of Notes, an amount equal to the purchase price of the Notes so validly tendered and not properly withdrawn by such Holder and accepted by the Company for purchase, and the Company will promptly issue a new Note, and the Trustee, upon delivery of an Officers’ Certificate from the Company will authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. In addition, the Company will take any and all other actions required by the agreements governing the other pari passu Indebtedness. Any Note not so accepted will be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Asset Sale Offer on or as soon as practicable after the Asset Sale Payment Date.

 

(f)  The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions hereunder, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions hereunder by virtue of such conflict.

 

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(g)  The Trustee shall be under no obligation to ascertain the occurrence of an Asset Sale, or to determine or calculate Excess Proceeds, the Asset Sale Offer Period, the Asset Sale Payment Date or the Asset Sale Offer Amount, or give any notice with respect thereto. The Trustee may conclusively assume, in the absence of written notice to the contrary from the Company or a Holder or Holders of Notes, that no Asset Sale has occurred.

 

Section 3.8                                    Transactions with Affiliates.

 

(a)  The Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate (each, an “Affiliate Transaction”), unless:

 

(i)                                     the Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person or, if in the good faith judgment of the Board of Directors of the Company, no comparable transaction is available with which to compare such Affiliate Transaction, such Affiliate Transaction is otherwise fair to the Company or the relevant Restricted Subsidiary from a financial point of view; and

 

(ii)                                  the Company delivers to the Trustee:

 

(A)                               with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10,000,000 but no greater than $25,000,000, an Officers’ Certificate certifying that such Affiliate Transaction or series of Affiliate Transactions complies with this covenant; and

 

(B)                               with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $25,000,000 (but excluding any Affiliate Transaction or series of related Affiliate Transactions between or among the Company, Venoco or any of its Restricted Subsidiaries and any Person with a class of Capital Stock listed or admitted to trading on any national securities exchange or quoted on the NASDAQ Stock Market), a written opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing.

 

(b)  The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of Section 3.8(a) above:

 

(i)                                     any Restricted Payment permitted to be made pursuant to Section 3.4;

 

(ii)                                  any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements,

 

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stock options and stock ownership plans and other reasonable fees, benefits and indemnities paid or entered into by the Company or its Restricted Subsidiaries in the ordinary course of business to or with officers, directors or employees of the Company and its Restricted Subsidiaries;

 

(iii)                               loans or advances to employees in the ordinary course of business of the Company or any of its Restricted Subsidiaries in an aggregate principal amount at any one time outstanding not to exceed $2,000,000;

 

(iv)                              any transaction between the Company and one or more Restricted Subsidiaries or between or among Restricted Subsidiaries;

 

(v)                                 the payment of reasonable and customary fees, or compensation paid for and indemnity or liability insurance provided on behalf of, officers, directors or employees of the Company or any Restricted Subsidiary of the Company;

 

(vi)                              any reasonable employment or severance agreement or other employee compensation agreement, arrangement or plan, or any amendment thereto, entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business;

 

(vii)                           the performance of obligations of the Company or any of its Restricted Subsidiaries under the terms of any written agreement to which the Company or any of its Restricted Subsidiaries is a party on the Issue Date, as these agreements may be amended, modified or supplemented from time to time; provided, however, that any future amendment, modification or supplement entered into after the Issue Date will be permitted to the extent that its terms do not materially and adversely affect the rights of any Holders of the Notes (as determined in good faith by the Board of Directors of the Company) as compared to the terms of the agreements in effect on the Issue Date;

 

(viii)                        any issuance or sale of Equity Interests (other than Disqualified Stock) of the Company for cash or Cash Equivalents to, or receipt of capital contribution in the form of cash or Cash Equivalents from, Affiliates (or a Person that thereby becomes an Affiliate) of the Company;

 

(ix)                              transactions between the Company and any Person, a director of which is also a director of the Company, and such common director is the sole cause for such other Person to be deemed an Affiliate of the Company; provided, however, that such director abstains from voting as a director of the Company on any matter involving such other Person; and

 

(x)                                 advances to or reimbursement of employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of business.

 

Section 3.9                                    Change of Control. If a Change of Control occurs, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess of $2,000, or if a PIK Payment has been made, in

 

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minimum denominations of $1.00 and any integral multiple of $1.00 in excess thereof in respect of PIK Notes) of that Holder’s Notes at a purchase price in cash equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Additional Interest, if any, on the Notes repurchased, to the date of settlement, subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date that is on or prior to the Change of Control Settlement Date.

 

Within 30 days following any Change of Control, the Company will mail a notice (the “Change of Control Offer”) to each registered Holder with a copy to the Trustee stating:

 

(i)                                     that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holder’s Notes at a purchase price in cash equal to 101% of the principal amount of such Notes plus accrued and unpaid interest and Additional Interest, if any, to the date of settlement (the “Change of Control Settlement Date”) (subject to the right of Holders of record on a Record Date to receive interest on the relevant Interest Payment Date that is on or prior to the Change of Control Settlement Date) (the “Change of Control Payment”);

 

(ii)                                  the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the “Change of Control Purchase Date”); and

 

(iii)                               the procedures determined by the Company, consistent with this Indenture, that a Holder must follow in order to have its Notes purchased.

 

On the Change of Control Purchase Date, the Company will, to the extent lawful, accept for payment all Notes or portions of Notes (equal to $2,000 or an integral multiple of $1,000 in excess of $2,000, or if a PIK Payment has been made, in minimum denominations of $1.00 and any integral multiple of $1.00 in excess thereof in respect of PIK Notes) properly tendered pursuant to the Change of Control Offer. Promptly thereafter on the Change of Control Settlement Date, the Company will:

 

(i)                                deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and

 

(ii)                             deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.

 

On the Change of Control Settlement Date, the Paying Agent will mail to each Holder of Notes properly tendered the Change of Control Payment for such Notes, and the Trustee will authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $2,000 or an integral multiple of $1,000 in excess of $2,000 (or, if a PIK Payment has been made, in minimum denominations of $1.00 or an integral multiple of $1.00 in excess thereof in respect of PIK Notes). The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Purchase Date.

 

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If the Change of Control Settlement Date is on or after an interest Record Date and on or before the related Interest Payment Date, any accrued and unpaid interest and Additional Interest, if any, will be paid to the Person in whose name a Note is registered at the close of business on such Record Date, and no additional interest will be payable to Holders who tender pursuant to the Change of Control Offer.

 

A Change of Control Offer may be made in advance of a Change of Control, and conditioned upon the occurrence of such Change of Control, if a definitive agreement is in place for such Change of Control at the time of the making of the Change of Control Offer.

 

The Company will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the time and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer, (2) notice of redemption of all outstanding Notes has been given pursuant to Section 5.1, unless and until there is a Default in payment of the applicable redemption price, or (3) in connection with or in contemplation of any Change of Control, the Company has made an offer to purchase (an “Alternate Offer”) any and all Notes validly tendered at a cash price equal to or higher than the Change of Control Payment and has purchased all Notes properly tendered in accordance with the terms of the Alternate Offer. Notwithstanding anything to the contrary contained in this Indenture, a Change of Control Offer or Alternate Offer may be made in advance of a Change of Control, conditioned upon the consummation of such Change of Control, if a definitive agreement is in place for the Change of Control at the time the Change of Control Offer or Alternate Offer is made.

 

The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this Section 3.9. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations described in this Indenture by virtue of the conflict.

 

The Trustee shall be under no obligation to ascertain the occurrence of a Change of Control or to give notice with respect thereto. The Trustee may conclusively assume, in the absence of written notice to the contrary from the Company, or a Holder or Holders of Notes, that no Change of Control has occurred.

 

Section 3.10                             Future Note Guarantees. The Company will not permit any of its existing or future Restricted Subsidiaries (other than any Foreign Subsidiary and other than Ellwood Pipeline, Inc. (if and so long as Ellwood Pipeline, Inc. constitutes a crude oil common carrier prohibited from guaranteeing an affiliate shipper’s debt)), to guarantee the payment of or otherwise become obligated with respect to any other Indebtedness (other than Indebtedness and letters of credit under the Credit Agreement and the Existing Venoco Indentures) of the Company or any Guarantor unless such Restricted Subsidiary executes a supplemental indenture substantially in the form of Exhibit C hereto providing for the Guarantee of the payment of the Notes by such Restricted Subsidiary, which Note Guarantee will be senior to or pari passu with such Restricted Subsidiary’s Guarantee of such other Indebtedness and delivers such

 

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supplemental indenture and an Opinion of Counsel, stating that such supplemental indenture complies with this Indenture, within 30 days after the date on which such Restricted Subsidiary guaranteed such other Indebtedness.

 

Section 3.11                             Business Activities. The Company will not, and will not permit any Restricted Subsidiary to, engage in any business other than the Oil and Gas Business, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole.

 

Section 3.12                             Designation of Restricted and Unrestricted Subsidiaries. The Board of Directors of the Company may designate any Restricted Subsidiary of the Company to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary of the Company is designated as an Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary properly designated will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the first paragraph of the covenant described above in Section 3.4(a) or represent Permitted Investments, as determined by the Company. That designation will only be permitted if the Investment would be permitted at that time and if the Subsidiary so designated otherwise meets the definition of an Unrestricted Subsidiary.

 

Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with the Trustee a certified copy of a Board Resolution giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the preceding conditions and was permitted by Section 3.4 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 3.3, the Company will be in Default of Section 3.3.

 

The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the Company; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation will only be permitted if (1) such Indebtedness is permitted under the covenant described above in Section 3.3, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (2) no Default or Event of Default would be in existence following such designation.

 

Section 3.13                             Maintenance of Office or Agency. The Company will maintain in The City of New York, an office or agency where the Notes may be presented or surrendered for payment, where, if applicable, the Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The principal corporate trust office of the Trustee, or if the Trustee’s principal corporate trust office is not located in The City of New York, any other office or agency maintained by the Trustee in The City of New York (the “Corporate Trust Office”),

 

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shall be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands.

 

The Company may also from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency.

 

Section 3.14                             Corporate Existence. Subject to Article IV and Section 10.2, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and that of each Restricted Subsidiary and the corporate rights (charter and statutory) licenses and franchises of the Company and each Restricted Subsidiary; provided, however, that the Company shall not be required to preserve any such existence (except the Company), right, license or franchise if the Board of Directors of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and each of its Restricted Subsidiaries, taken as a whole, and that the loss thereof would not have a material adverse effect on the ability of the Company to perform its obligations under the Notes or this Indenture, provided further, that the Company and the Guarantors (if any) may merge in accordance with Sections 4.1 and 10.2.

 

Section 3.15                             Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all material taxes, assessments and governmental charges levied or imposed upon the Company or any Restricted Subsidiary or upon the income, profits or property of the Company or any Restricted Subsidiary and (ii) all lawful claims for labor, materials and supplies, which, if unpaid, might by law become a material liability or lien upon the property of the Company or any Restricted Subsidiary, except for any Lien permitted to be incurred pursuant to subsections (3) and (4) of the definition of “Permitted Liens”; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which appropriate reserves, if necessary (in the good faith judgment of management of the Company), are being maintained in accordance with GAAP or where the failure to pay or discharge the same would not have a material adverse effect on the ability of the Company to perform its obligations under the Notes or this Indenture.

 

Section 3.16                             Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers’ Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default or Event of Default and whether or not the

 

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signers know of any Default or Event of Default that existed at the end of such period and is continuing. If they do, the certificate shall describe the Default or Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with TIA § 314(a)(4).

 

Section 3.17                             Further Instruments and Acts. Upon the reasonable request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.

 

Section 3.18                             Statement by Officers as to Default. The Company shall deliver to the Trustee, as soon as possible and in any event within 5 Business Days after the Company becomes aware of the occurrence of any Event of Default or Default an Officers’ Certificate setting forth the details of such Event of Default or Default and the action which the Company is taking or proposes to take in respect thereof.

 

Section 3.19                             Payments for Consent. Neither the Company nor any of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Beneficial Owner or Holder of any Notes for or as an inducement to any consent to any waiver, supplement or amendment of any terms or provisions of this Indenture or the Notes, unless such consideration is offered to be paid or agreed to be paid to all Beneficial Owners and Holders of the Notes which so consent in the time frame set forth in solicitation documents relating to such consent.

 

Section 3.20                             Covenant Suspension

 

If on any date following the Issue Date:

 

(i)                                     the Notes are assigned an Investment Grade Rating by both Rating Agencies and

 

(ii)                                  no Default or Event of Default has occurred and is continuing under this Indenture,

 

then, upon the Company’s delivery of notice of such events to the Trustee, the covenants under Sections 3.3, 3.4, 3.6, 3.7, 3.8, 3.11, 3.12, and clause (d) of Section 4.1 hereof will be suspended (collectively the “Suspended Covenants”).

 

During any period that the foregoing covenants have been suspended, the Company may not designate any of its Subsidiaries as Unrestricted Subsidiaries pursuant to the definition of Unrestricted Subsidiary.

 

Notwithstanding the foregoing, if either of the Rating Agencies withdraws its ratings or downgrades the ratings assigned to the Notes below the Investment Grade Ratings so that the Notes do not have an Investment Grade Rating from both Rating Agencies, the Company and its Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants, subject to the terms, conditions and obligations set forth herein (each such date of reinstatement being the “Reinstatement Date”). Compliance with the Suspended Covenants with respect to

 

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Restricted Payments made after the Reinstatement Date will be calculated in accordance with the terms of Section 3.4 as though such covenants had been in effect during the period since the Issue Date.

 

ARTICLE IV

 

Successor Company

 

Section 4.1                                    Merger, Consolidation or Sale of Assets. The Company may not, directly or indirectly: (i) consolidate or merge with or into another Person (whether or not the Company is the surviving Person) or continue in another jurisdiction; or (ii) sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the properties or assets of the Company, in one or more related transactions, to another Person, unless:

 

(a)              either: (i) the Company is the surviving Person; or (ii) the Person (the “Successor Company”) formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition has been made is organized or existing under the laws of the United States, any state of the United States or the District of Columbia; provided that if the Person is a partnership or limited liability company, a corporation wholly owned by such Person organized or existing under the laws of the United States, any state of the United States or the District of Columbia that does not and will not have any material assets or operations shall promptly thereafter become a co-issuer of the Notes pursuant to a supplemental indenture;

 

(b)              the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, lease, conveyance or other disposition has been made assumes all the obligations of the Company under the Notes, this Indenture and the Registration Rights Agreement pursuant to a supplemental indenture reasonably satisfactory to the Trustee;

 

(c)               immediately after such transaction no Default or Event of Default exists;

 

(d)              either:

 

(i)                                     the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition has been made, will, on the date of such transaction after giving pro forma effect thereto and to any related financing transactions, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Debt to Assets Ratio test set forth in clause (i) of Section 3.3(a); or

 

(ii)                                  immediately after giving effect to such transaction and any related financing transactions on a pro forma basis, the Debt to Assets Ratio of the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition has been made, will be equal to or less than the Debt to Assets Ratio of the Company immediately before such transactions; and

 

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(e)               the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or disposition and such supplemental indenture (if any) comply with this Indenture.

 

For purposes of this covenant, the sale, lease, conveyance, assignment, transfer, or other disposition of all or substantially all of the properties and assets of one or more Subsidiaries of the Company, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the assets of the Company.

 

Notwithstanding the preceding clauses (c) and (d) of this Section 4.1, (x) any Restricted Subsidiary of the Company may consolidate with, merge into or transfer all or part of its properties and assets to the Company or any Guarantor, and (y) the Company may merge with an Affiliate solely for the purpose of reincorporating or reorganizing the Company in another jurisdiction to realize tax or other benefits.

 

The Successor Company will succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, but, in the case of a lease of all or substantially all its assets, the Company will not be released from the obligation to pay the principal of, premium, if any, on and interest and Additional Interest, if any, on, the Notes.

 

ARTICLE V

 

Redemption of Notes

 

Section 5.1                                    Optional Redemption. Except as described below, the Notes will not be redeemable at the Company’s option prior to August 15, 2015.

 

(a)                                 On and after August 15, 2015, the Company may redeem all or any part of the Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and Additional Interest, if any, on the Notes redeemed to the applicable Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date), if redeemed during the twelve-month period beginning on August 15 of the years indicated below:

 

	
Year
    	
 
    	
Percentage
    	
 
    
	
2015
    	
 
    	
106.125
    	
%
    
	
2016
    	
 
    	
103.063
    	
%
    
	
2017 and thereafter
    	
 
    	
100.000
    	
%
    

 

(b)              Prior to August 15, 2015, the Company may redeem all or part of the Notes issued hereunder at a redemption price equal to the sum of:

 

(i)                                     the principal amount thereof; and

 

(ii)                                  the Make Whole Premium at the Redemption Date,

 

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plus accrued and unpaid interest and Additional Interest, if any, on the Notes redeemed to the applicable Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date).

 

(c)          The notice of redemption with respect to the foregoing redemption need not set forth the Make Whole Premium but only the manner of calculation thereof. The Company will notify the Trustee of the Make Whole Premium with respect to any redemption promptly after the calculation, and the Trustee shall not be responsible for such calculation.

 

(d)         At any time prior to August 15, 2015, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued hereunder at a redemption price of 112.25% of the principal amount, plus accrued and unpaid interest and Additional Interest, if any, to the Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date), with the net cash proceeds of one or more Equity Offerings, provided that:

 

(i)                                     at least 65% of the aggregate principal amount of Notes issued hereunder remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and

 

(ii)                                  such redemption occurs within 90 days of the date of the closing of such Equity Offering.

 

Section 5.2                                    Applicability of Article. Redemption of Notes at the election of the Company or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article V.

 

Section 5.3                                    Election to Redeem; Notice to Trustee. The election of the Company to redeem any Notes pursuant to Section 5.1 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 45 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee in the sole discretion of the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Notes to be redeemed and shall deliver to the Trustee such documentation and records as shall enable the Trustee to select the Notes to be redeemed pursuant to Section 5.4.

 

Section 5.4                                    Selection by Trustee of Notes to Be Redeemed. If fewer than all of the Notes are to be redeemed at any time, the Trustee will select Notes for redemption as follows:

 

(a)              if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or

 

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(b)              if the Notes are not listed on any national securities exchange, on a pro rata basis (or, in the case of Global Notes, the Trustee will select Notes for redemption based on DTC’s method that most nearly approximates a pro rata selection).

 

Section 5.5                                    Notice of Redemption. Notice of redemption shall be given in the manner provided for in Section 12.2 not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Notes to be redeemed, except that redemption notices may be mailed more than 60 days prior to a Redemption Date if such notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture. Notices of redemption may not be conditional. The Trustee shall give notice of redemption in the Company’s name and at the Company’s expense; provided, however, that the Company shall deliver to the Trustee, at least 45 days prior to the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee in the sole discretion of the Trustee), an Officers’ Certificate requesting that the Trustee give such notice at the Company’s expense and setting forth the information to be stated in such notice as provided in the following items.

 

All notices of redemption shall state:

 

(a)         the Redemption Date;

 

(b)         the redemption price and the amount of accrued interest and Additional Interest, if any, to the Redemption Date payable as provided in Section 5.7;

 

(c)          if less than all outstanding Notes are to be redeemed, the identification of the particular Notes (or portion thereof) to be redeemed, as well as the aggregate principal amount of Notes to be redeemed and the aggregate principal amount of Notes to be outstanding after such partial redemption;

 

(d)         in case any Note is to be redeemed in part only, the notice which relates to such Note shall state that on and after the Redemption Date, upon surrender of such Note, the Holder will receive, without charge, a new Note or Notes of authorized denominations for the principal amount thereof remaining unredeemed;

 

(e)          that on the Redemption Date the redemption price (and accrued interest, if any, to the Redemption Date payable as provided in Section 5.7) will become due and payable upon each such Note, or the portion thereof, to be redeemed, and, unless the Company defaults in making the redemption payment, that interest and Additional Interest, if any, on Notes (or the portions thereof) called for redemption will cease to accrue on and after said date;

 

(f)           the place or places where such Notes are to be surrendered for payment of the Redemption Price and accrued interest, if any;

 

(g)          the name and address of the Paying Agent; 

 

(h)         that Notes called for redemption (other than a Global Note) must be surrendered to the Paying Agent to collect the redemption price;

 

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(i)                                     the CUSIP number, and that no representation is made as to the accuracy or correctness of the CUSIP number, if any, listed in such notice or printed on the Notes; and

 

(j)                                    the section of this Indenture and the paragraph of the Notes pursuant to which the Notes are to be redeemed.

 

Any notice of redemption pursuant to this Indenture may not be subject to the satisfaction of any conditions.

 

Section 5.6                                    Deposit of Redemption Price. Not later than 11:00 a.m. New York time on the Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 2.4) an amount of money sufficient to pay the redemption price of, and accrued interest and Additional Interest, if any, on, all the Notes which are to be redeemed on that date.

 

Section 5.7                                    Notes Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the redemption price therein specified (together with accrued and unpaid interest and Additional Interest, if any, to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the redemption price and accrued interest and Additional Interest, if any) such Notes shall cease to bear interest and Additional Interest, if any. Upon surrender of any such Note for redemption in accordance with said notice, such Note shall be paid by the Company at the redemption price, together with accrued and unpaid interest and Additional Interest, if any, to the Redemption Date (subject to the rights of Holders of record on the relevant Record Date to receive interest and Additional Interest, if any, due on an Interest Payment Date that is on or prior to the Redemption Date).

 

If any Note called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest and Additional Interest, if any, from the Redemption Date at the rate borne by the Notes.

 

Section 5.8                                    Notes Redeemed in Part. Any Note which is to be redeemed only in part (pursuant to the provisions of this Article V) shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 3.13 (with, if the Company or the Trustee so require, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder’s attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Note at the expense of the Company, a new Note or Notes, of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Note so surrendered, provided that each such new Note will be in a principal amount of $2,000 or integral multiple of $1,000 in excess of $2,000 (or if a PIK Payment has been made, in minimum denominations of $1.00 and any integral multiple of $1.00 in excess thereof). No Notes of $2,000 or less (or if a PIK Payment has been made, in minimum denominations of $1.00 and any integral multiple of $1.00 in excess thereof) may be redeemed in

 

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part. While the Notes are registered in a nominee name with DTC, presentation of Notes is not required for a partial redemption.

 

ARTICLE VI

 

Defaults and Remedies

 

Section 6.1                                    Events of Default. Each of the following is an “Event of Default”:

 

(a)  default in any payment of interest or Additional Interest, if any, on any Note under this Indenture when due, continued for 30 days;

 

(b)  default in the payment of principal of or premium, if any, on any Note under this Indenture when due at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise;

 

(c)  failure by the Company to comply for 30 days with the provisions of Sections 3.3 or 3.4 hereof;

 

(d)  failure by the Company to comply with the provisions of Sections 3.7, 3.9 or 4.1 hereof;

 

(e)  (i) failure by the Company to comply with the provisions of Section 3.2 for 180 days; or (ii) failure by the Company for 60 days after notice to comply with any of the other agreements in this Indenture;

 

(f)  default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is Guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists, or is created after the date of this Indenture, if that default:

 

(i)             is caused by a failure to pay principal of, or interest, Additional Interest or premium, if any, on, such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (a “Payment Default”); or

 

(ii)          results in the acceleration of such Indebtedness prior to its Stated Maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $20,000,000 or more; provided, however, that if, prior to any acceleration of the Notes, (a) any such Payment Default is cured or waived, (b) any such acceleration is rescinded, or (c) such Indebtedness is repaid during the 10 Business Day period commencing upon the end of any applicable grace period for such Payment Default or the occurrence of such acceleration, as the case may be, any Default or Event of Default (but not any acceleration of the Notes) caused by such Payment Default or acceleration shall be automatically

 

77

 

rescinded, so long as such rescission does not conflict with any judgment, decree or applicable law;

 

(g)                                  failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $20,000,000 (net of any amounts with respect to which a reputable creditworthy insurance company has acknowledged liability in writing), which judgments are not paid, discharged or stayed (including a stay pending appeal) for a period of 60 days after the date of such final judgment (or, if later, the date when payment is due pursuant to such judgment);

 

(h)                                 except as permitted by this Indenture, any Note Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Note Guarantee; and

 

(i)                                     (i) the Company or any Significant Subsidiary or a group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Company and its Restricted Subsidiaries), would constitute a Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law:

 

(A)                               commences a voluntary case or proceeding;

 

(B)                               consents to the entry of a judgment, decree or order for relief against it in an involuntary case or proceeding;

 

(C)                               consents to the appointment of a Custodian of it or for any substantial part of its property;

 

(D)                               makes a general assignment for the benefit of its creditors; or

 

(E)                                consents to or acquiesces in the institution of a bankruptcy or an insolvency proceeding against it;

 

or takes any comparable action under any foreign laws relating to insolvency; or

 

(ii)                                  a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

 

(A)                               is for relief against the Company or any Significant Subsidiary or a group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Company and its Restricted Subsidiaries), would constitute a Significant Subsidiary in an involuntary case;

 

(B)                               appoints a Custodian of the Company or any Significant Subsidiary or a group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Company and its Restricted

 

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Subsidiaries), would constitute a Significant Subsidiary or for any substantial part of its Property; or

 

(C)                               orders the winding up or liquidation of the Company or any Significant Subsidiary or a group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Company and its Restricted Subsidiaries) would constitute a Significant Subsidiary;

 

or any similar relief is granted under any foreign laws and the order, decree or relief remains unstayed and in effect for 60 days.

 

However, a Default under clause (e) of this Section 6.1 will not constitute an Event of Default until the Trustee or the Holders of 25% in aggregate principal amount of the outstanding Notes notify the Company, and the Trustee in the case of a notice given by the Holders, of the Default and the Company does not cure such Default within the time specified in clause (e) of this Section 6.1 after receipt of such notice.

 

The Trustee shall not be deemed to have notice of any Default or Event of Default unless a responsible officer of the Trustee has actual knowledge thereof or unless written notice of such event is sent to the Trustee in accordance with Section 12.2, and such notice references the Notes.

 

Section 6.2                                    Acceleration. If any Event of Default (other than those of the type described in clause (i) of Section 6.1) occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of outstanding Notes may declare the principal of all the Notes, together with all accrued and unpaid interest and Additional Interest, if any, and premium, if any, to be due and payable immediately by notice in writing to the Company and the Trustee specifying the respective Event of Default and that such notice is a notice of acceleration, and the same shall become immediately due and payable.

 

In the case of an Event of Default specified in clause (i) of Section 6.1 hereof, all outstanding Notes shall become due and payable immediately without further action or notice by the Trustee or the Holders. Holders may not enforce this Indenture or the Notes except as provided in this Indenture.

 

At any time after a declaration of acceleration with respect to the Notes, the Holders of a majority in principal amount of the Notes then outstanding (by notice to the Trustee) may rescind and cancel such declaration and its consequences if:

 

(a)         the rescission would not conflict with any judgment or decree of a court of competent jurisdiction;

 

(b)         all existing Defaults and Events of Default have been cured or waived except nonpayment of principal of or interest on the Notes that has become due solely by reason of such declaration of acceleration;

 

(c)          to the extent the payment of such interest is lawful, interest (at the same rate specified in the Notes) on overdue installments of interest and Additional Interest, if any,

 

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and overdue payments of principal which has become due otherwise than by such declaration of acceleration has been paid;

 

(d)         the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its reasonable expenses, disbursements and advances; and

 

(e)          in the event of the cure or waiver of an Event of Default of the type described in clause (i) of Section 6.1, the Trustee has received an Officers’ Certificate and Opinion of Counsel that such Event of Default has been cured or waived.

 

Section 6.3                                    Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of (or premium, if any) or interest or Additional Interest, if any, on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

 

The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative.

 

Section 6.4                                    Waiver of Past Defaults. The Holders of a majority in principal amount of the then outstanding Notes by notice to the Trustee may (a) waive, by their consent (including, without limitation consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), an existing Default or Event of Default and its consequences or compliance with any provisions except (i) a Default or Event of Default in the payment of the principal of, or premium, if any, or interest or Additional Interest, if any, on a Note or (ii) a Default or Event of Default in respect of a provision that under Section 9.2 cannot be amended without the consent of each Holder affected and (b) rescind any such acceleration with respect to the Notes and its consequences if rescission would not conflict with any judgment or decree of a court of competent jurisdiction. When a Default or Event of Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any consequent right.

 

Section 6.5                                    Control by Majority. The Holders of a majority in principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Sections 7.1 and 7.2, that the Trustee determines is unduly prejudicial to the rights of the other Holders or would involve the Trustee in personal liability. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action.

 

Section 6.6                                    Limitation on Suits. Subject to Section 6.7, a Holder may not pursue any remedy with respect to this Indenture or the Notes unless:

 

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(a)  such Holder has previously given to the Trustee written notice stating that an Event of Default is continuing;

 

(b)  Holders of at least 25% in principal amount of the outstanding Notes have requested that the Trustee pursue the remedy;

 

(c)  such Holders have offered to the Trustee reasonable security or indemnity against any loss, liability or expense;

 

(d)  the Trustee has not complied with such request within 60 days after receipt of the request and the offer of security or indemnity; and

 

(e)  the Holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction that, in the opinion of the Trustee, is inconsistent with such request within such 60 day period.

 

A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder.

 

Section 6.7                                    Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture (including, without limitation, Section 6.6), the right of any Holder to receive payment of principal of, premium (if any) or interest or Additional Interest, if any, when due on the Notes held by such Holder, on or after the respective due dates expressed in the Notes, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

 

Section 6.8                                    Collection Suit by Trustee. If an Event of Default specified in clauses (a) or (b) of Section 6.1 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.7.

 

Section 6.9                                    Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders allowed in any judicial proceedings relative to the Company, its Subsidiaries or its or their respective creditors or properties and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.7. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization

 

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or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

 

Section 6.10                             Priorities. If the Trustee collects any money or property pursuant to this Article VI, it shall pay out the money or property in the following order:

 

FIRST: to the Trustee for amounts due under Section 7.7;

 

SECOND: to Holders for amounts due and unpaid on the Notes for principal, premium, if any, and interest and Additional Interest, if any, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, and interest and Additional Interest, if any, respectively; and

 

THIRD: to the Company or the Guarantors or to such other party as a court of competent jurisdiction may direct.

 

The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. At least 15 days before such record date, the Company shall mail to each Holder and the Trustee a notice that states the record date, the payment date and amount to be paid.

 

Section 6.11                             Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by the Company, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10% in outstanding principal amount of the Notes.

 

Section 6.12                             Waiver of Stay, Extension and Usury Laws. Each of the Company and the Guarantors covenant (to the extent permitted by applicable law) that it will not at any time insist upon, plead or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the Company or any Guarantor from paying all of any portion of the principal of (premium, if any, on) or interest and Additional Interest, if any, on the Notes as contemplated herein, or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) each of the Company and the Guarantors hereby expressly waive all benefit or advantage of any such law, and covenants that they will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

 

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ARTICLE VII

 

Trustee

 

Section 7.1                                    Duties of Trustee.

 

(a)         If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs; provided that if an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise the rights or powers under this Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee indemnity or security against loss, liability or expense satisfactory to the Trustee in its sole discretion.

 

(b)         Except during the continuance of an Event of Default:

 

(i)                                     the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

 

(ii)                                  in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates, opinions or orders furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall examine such certificates and opinions to determine whether or not they conform on their face to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

 

(c)          The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

 

(i)                                     this paragraph does not limit the effect of paragraph (b) of this Section 7.1;

 

(ii)                                  the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

 

(iii)                               the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5.

 

(d)         Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.1.

 

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(e)  The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company.

 

(f)  Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

 

(g)  No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

 

(h)  Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.1 and to the provisions of the TIA.

 

(i)  Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company.

 

(j)  The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity satisfactory to it against the costs, expenses (including reasonable attorneys’ fees and expenses) and liabilities that might be incurred by it in compliance with such request or direction.

 

Section 7.2                                    Rights of Trustee. Subject to Section 7.1:

 

(a)  The Trustee may conclusively rely on any document (whether in its original or facsimile form) reasonably believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document.

 

(b)  Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate and/or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on an Officers’ Certificate or Opinion of Counsel.

 

(c)  The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

 

(d)  The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers, unless the Trustee’s conduct constitutes willful misconduct or negligence.

 

(e)  The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect of any action taken,

 

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omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.

 

(f)  The Trustee is not required to make any inquiry or investigation into facts or matters stated in any document but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit and, if the Trustee determines to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company.

 

(g)  The Trustee is not required to take notice or shall not be deemed to have notice of any Default or Event of Default hereunder, unless a Trust Officer of the Trustee has actual knowledge thereof or has received notice in writing of such Default or Event of Default from the Company or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, and in the absence of any such notice, the Trustee may conclusively assume that no such Default or Event of Default exists.

 

(h)  The Trustee is not required to give any bond or surety with respect to the performance of its duties or the exercise of its powers under this Indenture.

 

(i)  In the event the Trustee receives inconsistent or conflicting requests and indemnity from two or more groups of Holders of Notes, each representing less than the aggregate principal amount of Notes outstanding required to take any action thereunder, the Trustee, in its sole discretion may determine what action, if any, shall be taken.

 

(j)  The Trustee’s immunities and protections from liability and its right to indemnification in connection with the performance of its duties under this Indenture shall extend to the Trustee’s officers, directors, agents, attorneys and employees. Such immunities and protections and right to indemnification, together with the Trustee’s right to compensation, shall survive the Trustee’s resignation or removal, the discharge of this Indenture and final payments of the Notes.

 

(k)  The permissive right of the Trustee to take actions permitted by this Indenture shall not be construed as an obligation or duty to do so.

 

Section 7.3                                    Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.

 

Section 7.4                                    Trustee’s Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company’s use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Trustee’s certificate of authentication.

 

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Section 7.5                                    Notice of Defaults. If a Default or Event of Default occurs and is continuing and if a Trust Officer has actual knowledge thereof, the Trustee shall mail to each Holder notice of the Default or Event of Default within 90 days after it. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest or Additional Interest, if any, on any Note, the Trustee may withhold the notice if and so long as a committee of its officers in good faith determines that withholding the notice is in the interests of Holders.

 

Section 7.6                                    Reports by Trustee to Holders. As promptly as practicable after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as the Notes remain outstanding, the Trustee shall mail to each Holder a brief report dated as of such reporting date that complies with TIA § 313(a). The Trustee also shall comply with TIA § 313(b). The Trustee shall also transmit by mail all reports required by TIA § 313(c).

 

A copy of each report at the time of its mailing to Holders shall be filed with the Commission and each stock exchange (if any) on which the Notes are listed. The Company agrees to notify promptly the Trustee whenever the Notes become listed on any stock exchange and of any delisting thereof.

 

Section 7.7                                    Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder as the Company and the Trustee shall from time to time agree in writing. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, costs of preparing and reviewing reports, certificates and other documents, costs of preparation and mailing of notices to Holders and costs of engaging agents in connection with determining and calculating Reference Treasury Dealer Quotations, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee’s agents, counsel, accountants and experts. The Company shall indemnify the Trustee against any and all loss, liability, damages, claims or expense (including reasonable attorneys’ fees and expenses) incurred by it without negligence or willful misconduct on its part in connection with the administration of this trust and the performance of its duties hereunder, including the costs and expenses of enforcing this Indenture (including this Section 7.7) and of defending itself against any claims (whether asserted by any Holder, the Company or otherwise). The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall provide reasonable cooperation at the Company’s expense in the defense. The Trustee may have separate counsel and the Company shall pay the fees and expenses of such counsel; provided that the Company shall not be required to pay such fees and expenses if it assumes the Trustee’s defense with counsel reasonably satisfactory to the Trustee, and, in the reasonable judgment of outside or internal counsel to the Trustee, there is no conflict of interest between the Company and the Trustee in connection with such defense. The Company shall not be under any obligation to pay for any written settlement without its consent, which consent shall not be unreasonably delayed, conditioned or withheld. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee’s own willful misconduct or negligence.

 

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To secure the Company’s payment obligations in this Section 7.7, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of, interest and Additional Interest, if any, on particular Notes.

 

The Company’s payment obligations pursuant to this Section 7.7 shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in clause (i) of Section 6.1 with respect to the Company, the expenses are intended to constitute expenses of administration under any Bankruptcy Law.

 

Section 7.8                                    Replacement of Trustee. The Trustee may resign at any time by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if:

 

(a)         the Trustee fails to comply with Section 7.10;

 

(b)         the Trustee is adjudged bankrupt or insolvent;

 

(c)          a receiver or other public officer takes charge of the Trustee or its property; or

 

(d)         the Trustee otherwise becomes incapable of acting.

 

If the Trustee resigns or is removed by the Company or by the Holders of a majority in principal amount of the then outstanding Notes and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of the Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee.

 

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the Lien provided for in Section 7.7.

 

If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of at least 10% in principal amount of the then outstanding Notes may petition, at the Company’s expense, any court of competent jurisdiction for the appointment of a successor Trustee.

 

If the Trustee fails to comply with Section 7.10, unless the Trustee’s duty to resign is stayed as provided in TIA § 310(b), any Holder who has been a bona fide Holder of a Note for at least six months may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

 

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Notwithstanding the replacement of the Trustee pursuant to this Section 7.8, the Company’s obligations under Section 7.7 shall continue for the benefit of the retiring Trustee.

 

Section 7.9                                    Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee.

 

In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture, any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture.

 

Section 7.10                             Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA § 310(a). The Trustee shall have a combined capital and surplus of at least $100,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA § 310(b); provided, however, that there shall be excluded from the operation of TIA § 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA § 310(b)(1) are met.

 

Section 7.11                             Preferential Collection of Claims Against Company. The Trustee shall comply with TIA § 311(a), excluding any creditor relationship listed in TIA § 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated.

 

ARTICLE VIII

 

Legal Defeasance and Covenant Defeasance

 

Section 8.1                                    Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at its option and at any time, elect to have either Section 8.2 or 8.3 hereof be applied to all outstanding Notes upon compliance with the conditions set forth in this Article VIII.

 

Section 8.2                                    Legal Defeasance and Discharge. Upon the Company’s exercise under Section 8.1 hereof of the option applicable to this Section 8.2, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.4 hereof, be deemed to have been discharged from its Obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, “Legal Defeasance”) and each Guarantor shall be released from all of its Obligations under its Note Guarantee. For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be

 

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“outstanding” only for the purposes of Section 8.5 hereof and the other Sections of this Indenture referred to in clauses (a) through (e) below, and to have satisfied all its other obligations under the Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive, solely from the trust fund described in Sections 8.4 and 8.5 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, interest and Additional Interest, if any, on such Notes when such payments are due, (b) the Company’s and the Guarantors’ Obligations with respect to such Notes under Article II and Sections 3.1 and 3.13 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company’s and the Guarantors’ obligations in connection therewith, (d) the optional redemption provisions of this Indenture, and (e) this Article VIII. If the Company exercises under Section 8.1 hereof the option applicable to this Section 8.2, subject to the satisfaction of the conditions set forth in Section 8.4 hereof, payment of the Notes may not be accelerated because of an Event of Default. Subject to compliance with this Article VIII, the Company may exercise its option under this Section 8.2 notwithstanding the prior exercise of its option under Section 8.3 hereof.

 

Section 8.3                                    Covenant Defeasance. Upon the Company’s exercise under Section 8.1 hereof of the option applicable to this Section 8.3, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.4 hereof, be released from its obligations under the covenants contained in Sections 3.2 through 3.12, 3.14 (other than with respect to the Company’s corporate existence), 3.15, and 3.16 hereof, and the operation of clause (d) of Section 4.1 hereof, with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.4 hereof are satisfied (hereinafter, “Covenant Defeasance”) and each Guarantor shall be released from all of its obligations under its Note Guarantee with respect to such covenants in connection with such outstanding Notes and the Notes shall thereafter be deemed not “outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed “outstanding” for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company and the Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.1 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. If the Company exercises under Section 8.1 hereof the option applicable to this Section 8.3, subject to the satisfaction of the conditions set forth in Section 8.4 hereof, payment of the Notes may not be accelerated because of an Event of Default specified in clauses (c), (d) (with respect to the covenant contained in clause (d) of Section 4.1 hereof), (e) (with respect to Sections 3.2 through 3.12, 3.14 (other than with respect to the Company’s corporate existence), 3.15, and 3.16 hereof), (f), (h) and (i) of such Section 6.1 (but in the case of clause (i) of Section 6.1 hereof, with respect to Significant Subsidiaries only).

 

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Section 8.4                                    Conditions to Legal or Covenant Defeasance. The following shall be the conditions to the application of either Section 8.2 or 8.3 hereof to the outstanding Notes.

 

In order to exercise Legal Defeasance or Covenant Defeasance:

 

(a)         the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars, and non-callable Government Securities, in amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, and interest, Additional Interest, if any, and premium, if any, on the outstanding Notes on the date of fixed maturity or on the applicable Redemption Date, as the case may be, and the Company must specify whether the Notes are being defeased to the date of fixed maturity or to a particular Redemption Date

 

(b)   in the case of Legal Defeasance, the Company shall deliver to the Trustee an Opinion of Counsel confirming that:

 

(i)                                     the Company has received from, or there has been published by, the Internal Revenue Service a ruling; or

 

(ii)                                  since the date of this Indenture, there has been a change in the applicable federal income tax law,

 

in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes shall not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and shall be subject to federal income tax in the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

 

(c)          in the case of Covenant Defeasance, the Company shall deliver to the Trustee an Opinion of Counsel confirming that Holders of the outstanding Notes shall not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and shall be subject to federal income tax in the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

 

(d)         no Default or Event of Default shall have occurred and be continuing with respect to the Notes on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Events of Default pursuant to clause (i) of Section 6.1 hereof are concerned, at any time in the period ending on the 91st day after the date of deposit;

 

(e)          such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;

 

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(f)           the Company shall have delivered to the Trustee an Officers’ Certificate stating that such deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and

 

(g)          the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

 

Section 8.5                                    Deposited Cash and Government Securities to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.6 hereof, all cash and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee), collectively for purposes of this Section 8.5, the “Trustee”) pursuant to Section 8.4 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of all sums due and to become due thereon in respect of principal, premium, if any, interest and Additional Interest, if any, but such cash and securities need not be segregated from other funds except to the extent required by law.

 

The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.4 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.

 

Anything in this Article VIII to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any cash or non-callable Government Securities held by it as provided in Section 8.4 hereof which, in the opinion of a nationally recognized independent registered public accounting firm expressed in a written certification thereof delivered to the Trustee (which may be the certification delivered under clause (a) of Section 8.4 hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

 

Section 8.6                                    Repayment to Company. Any cash or non-callable Government Securities deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, on, or interest or Additional Interest, if any, on, any Note and remaining unclaimed for one year after such principal, premium, if any, or interest or Additional Interest, if any, has become due and payable shall be paid to the Company on its request (unless an abandoned property law designates another Person) or (if then held by the Company) shall be discharged from such trust; and the Holder shall thereafter, as an unsecured creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such cash and securities, and all liability of the Company as Trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in The New York Times and The Wall Street Journal (national edition), notice that such cash and securities remains unclaimed and that, after a date specified therein,

 

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which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such cash and securities then remaining shall be repaid to the Company.

 

Section 8.7                                    Reinstatement. If the Trustee or Paying Agent is unable to apply any cash or non-callable Government Securities in accordance with Section 8.2, 8.3 or 8.5 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.4 hereof until such time as the Trustee or Paying Agent is permitted to apply all such cash and securities in accordance with Section 8.2, 8.3 or 8.5 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, on, or interest or Additional Interest, if any, on, any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders to receive such payment from the cash and securities held by the Trustee or Paying Agent.

 

ARTICLE IX

 

Amendments

 

Section 9.1                                    Without Consent of Holders. The Company, the Guarantors (if any) and the Trustee may amend this Indenture or the Notes without notice to or consent of any Holder:

 

(a)         to cure any ambiguity, defect or inconsistency;

 

(b)         to provide for uncertificated Notes in addition to or in place of certificated Notes;

 

(c)          to provide for the assumption of the Company’s obligations to Holders of Notes in the case of a merger or consolidation or sale of all or substantially all of the Company’s properties or assets;

 

(d)         to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under this Indenture of any Holder, provided that any change to conform this Indenture to an offering memorandum relating to a Registered Exchange Offer of the Notes will not be deemed to adversely affect the legal rights under this Indenture of any Holder;

 

(e)          to secure the Notes or the Note Guarantees pursuant to the requirements of the covenant described in Section 3.5 hereof or otherwise;

 

(f)           to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture;

 

(g)          to add any additional Guarantor or to evidence the release of any Guarantor from its Note Guarantee, in each case as provided in this Indenture;

 

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(h)         to comply with requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act;

 

(i)             to evidence or provide for the acceptance of appointment under this Indenture of a successor trustee; or

 

(j)            in the event that PIK Notes are issued in certificated form, to make appropriate amendments to this Indenture to reflect an appropriate minimum denomination of certificated PIK Notes and establish minimum redemption amounts for certificated PIK Notes.

 

After an amendment under this Indenture becomes effective, the Company is required to mail to the Holders a notice briefly describing such amendment. However, the failure to give such notice to all the Holders, or any defect therein, will not impair or affect the validity of the amendment or supplemental indenture under this Section 9.1.

 

Section 9.2                                    With Consent of Holders. The Company, the Guarantors (if any) and the Trustee may amend or supplement this Indenture or the Notes without notice to any Holder but with the written consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing Default or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes).

 

However, without the consent of each Holder affected, an amendment, supplement or waiver may not (with respect to any Notes held by a non-consenting Holder):

 

(a)         reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

 

(b)         reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption or repurchase of the Notes;

 

(c)          reduce the rate of or change the time for payment of interest on any Note;

 

(d)         waive a Default or Event of Default in the payment of principal of, or interest or premium, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in principal amount of the Notes and a waiver of the payment default that resulted from such acceleration);

 

(e)          make any Note payable in currency other than that stated in the Notes;

 

(f)           make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest or premium, if any, on the Notes;

 

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(g)          make any change in the covenants and definitions used therein described above in Section 3.7, 3.9 and 5.1;

 

(h)         impair the right of any Holder to receive payment of, premium, if any, principal of and interest and Additional Interest, if any, on such Holder’s Notes issued hereunder on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes;

 

(i)             release any Guarantor from any of its obligations under its Note Guarantee or this Indenture, except in accordance with the terms of this Indenture; or

 

(j)            make any change in the preceding amendment, supplement and waiver provisions.

 

It shall not be necessary for the consent of the Holders under this Section 9.2 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. A consent to any amendment or waiver under this Indenture by any Holder of the Notes given in connection with a tender of such Holder’s Notes will not be rendered invalid by such tender.

 

After an amendment under this Section 9.2 becomes effective, the Company shall mail to Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment supplemental indenture or waiver under this Section 9.2.

 

Section 9.3                                    Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall comply with the TIA as then in effect.

 

Section 9.4                                    Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Note shall bind the Holder and every subsequent Holder of that Note or portion of the Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent or waiver is not made on the Note. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder’s Note or portion of the Note if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Holder.

 

For purposes of this Indenture, the written consent of the Holder of a Global Note shall be deemed to include any consent delivered by an Agent Member by electronic means in accordance with the Automated Tender Offer Procedures system or other customary procedures of, and pursuant to authorization by, DTC.

 

The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not

 

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such Persons continue to be Holders after such record date. No such consent shall become valid or effective more than 120 days after such record date.

 

Section 9.5                                    Notation on or Exchange of Notes. If an amendment changes the terms of a Note, the Trustee may require the Holder of the Note to deliver it to the Trustee. The Trustee may place an appropriate notation on the Note regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or to issue a new Note shall not affect the validity of such amendment.

 

Section 9.6                                    Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article IX if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Sections 7.1 and 7.2) shall be fully protected in relying upon an Officers’ Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture.

 

ARTICLE X

 

Note Guarantee

 

Section 10.1                             Note Guarantee. To the extent any Restricted Subsidiary becomes a Guarantor pursuant to Section 3.10, each Guarantor (if any) hereby fully, unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, jointly and severally with each other Guarantor, to each Holder of the Notes and the Trustee the full and punctual payment when due, whether at maturity, by acceleration, by redemption or otherwise, of the principal of, premium, if any, interest and Additional Interest, if any, on the Notes and all other monetary Obligations of the Company under this Indenture. Each Guarantor (if any) further agrees (to the extent permitted by law) that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from it, and that it will remain bound under this Article X notwithstanding any extension or renewal of any Obligation.

 

Each Guarantor (if any) waives presentation to, demand of payment from and protest to the Company of any of the Obligations and also waives notice of protest for nonpayment. Each Guarantor (if any) waives notice of any default under the Notes or the Obligations. The obligations of each Guarantor (if any) hereunder shall not be affected by (a) the failure of any Holder to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Notes or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Notes or any other agreement; (d) the release of any Note held by any Holder or the Trustee for the Obligations or any of them; (e) the failure of any Holder to exercise any right or remedy against any other Guarantor; or (f) any change in the ownership of the Company.

 

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Each Guarantor (if any) further agrees that its Note Guarantee herein constitutes a Guarantee of payment when due (and not a Guarantee of collection) and waives any right to require that any resort be had by any Holder to any Note held for payment of the Obligations.

 

Except as expressly set forth in Article VIII and Section 10.2, the obligations of each Guarantor (if any) hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than payment of the Obligations in full), including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor (if any) herein shall not be discharged or impaired or otherwise affected by the failure of the Trustee or any Holder to assert any claim or demand or to enforce any remedy under this Indenture, the Notes or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of any Guarantor or would otherwise operate as a discharge of such Guarantor as a matter of law or equity.

 

Each Guarantor (if any) further agrees that its Note Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest or Additional Interest, if any, on any of the Obligations is rescinded or must otherwise be restored by any Holder upon the bankruptcy or reorganization of the Company or otherwise.

 

In furtherance of the foregoing and not in limitation of any other right which any Holder has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Company to pay any of the Obligations when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, each Guarantor (if any) hereby promises to and will, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders an amount equal to the sum of (i) the unpaid amount of such Obligations then due and owing and (ii) accrued and unpaid interest on such Obligations then due and owing (but only to the extent not prohibited by law) and except as provided in Section 10.2.

 

Each Guarantor (if any) further agrees that, as between such Guarantor, on the one hand, and the Holders, on the other hand, (x) the maturity of the Obligations Guaranteed hereby may be accelerated as provided in this Indenture for the purposes of its Note Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations Guaranteed hereby and (y) in the event of any such declaration of acceleration of such Obligations, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantor for the purposes of its Note Guarantee.

 

Each Guarantor (if any) also agrees to pay any and all reasonable costs and expenses (including reasonable attorneys’ fees) incurred by the Trustee or the Holders in enforcing any rights under this Section 10.1.

 

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Section 10.2                             Limitation on Liability; Termination, Release and Discharge.

 

(a) The obligations of each Guarantor (if any) hereunder will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor (including, but not limited to, Senior Debt of a Guarantor) and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Note Guarantee or pursuant to its contribution obligations under this Indenture, result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law.

 

(b) Subject to Article IV and Section 3.7, a Guarantor may not sell or otherwise dispose of, in one or more related transactions, all or substantially all of its assets to, or consolidate with or merge into (whether or not such Guarantor is the surviving Person), another Person, other than the Company or another Guarantor, unless:

 

(i)                                          immediately after giving effect to such transaction, or series of related transactions, no Default or Event of Default exists; and

 

(ii)                                       either:

 

(A)                               the Person acquiring the assets in any such sale or disposition or the Person formed by or surviving any such consolidation or merger (if other than the Company or a Guarantor) unconditionally assumes, pursuant to a supplemental indenture substantially in the form specified in this Indenture, all the obligations of that Guarantor under its Note Guarantee and this Indenture; or

 

(B)                               such transaction complies with Section 3.7 hereof.

 

(c) A Guarantor (if any) may consolidate with or merge into or sell or otherwise dispose of all or substantially all of its properties or assets to the Company or another Guarantor without limitation, except to the extent that any such transaction is subject to the provisions of Article IV and Section 3.7.

 

(d)                                           A Note Guarantee by a Guarantor will be automatically released upon:

 

(i)                                          (a) the sale, disposition or other transfer (including through merger or consolidation) of (x) the Capital Stock of such Guarantor following which such Guarantor is no longer a Subsidiary of the Company or (y) all or substantially all the assets of the applicable Guarantor, in each case, to a Person that is not a Subsidiary of the Company if such sale, disposition or other transfer is made in compliance with this Indenture; or (b) the release or discharge of the guarantee by such Restricted Subsidiary of Indebtedness of the Company or a Guarantor that resulted in the obligation to guarantee the Notes;

 

(ii)                                       the designation by the Company of any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary in accordance with the applicable provisions of this Indenture; and

 

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(iii)                                    the payment in full of the Obligations under the Notes and this Indenture or the legal defeasance, covenant defeasance or satisfaction and discharge of this Indenture in accordance with Article VIII and Article XI).

 

Section 10.3                             Limitation of Guarantors’ Liability. Each Guarantor (if any), and by its acceptance hereof each Holder, hereby confirms that it is the intention of all such parties that the Guarantee by such Guarantor pursuant to its Note Guarantee not constitute a fraudulent transfer or conveyance for purposes of the Federal Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law. To effectuate the foregoing intention, the Holders and each Guarantor (if any) hereby irrevocably agree that the obligations of such Guarantor under its Note Guarantee will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities (including, but not limited to, Senior Debt of a Guarantor) of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Note Guarantee or pursuant to Section 10.4 hereof, result in the obligations of such Guarantor under its Note Guarantee not constituting such a fraudulent conveyance or fraudulent transfer. This Section 10.3 is for the benefit of the creditors of each Guarantor.

 

Section 10.4                             Contribution. In order to provide for just and equitable contribution among the Guarantors, the Guarantors (if any) agree that in the event any payment or distribution is made by any Guarantor (a “Funding Guarantor”) under its Note Guarantee, such Funding Guarantor will be entitled to a contribution from each other Guarantor (if any) in a pro rata amount based on the Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by that Funding Guarantor in discharging the Company’s obligations with respect to the Notes or any other Guarantor’s obligations with respect to its Note Guarantee.

 

ARTICLE XI

Satisfaction and Discharge

 

Section 11.1                             Satisfaction and Discharge. This Indenture will be discharged and will cease to be of further effect as to all Notes issued hereunder (except as to surviving rights of registration of transfer or exchange of the Notes and as otherwise specified hereunder), when:

 

(a)              either:

 

(i)                                all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has been deposited in trust and thereafter repaid to the Company, have been delivered to the Trustee for cancellation; or

 

(ii)                             all Notes that have not been delivered to the Trustee for cancellation have become due and payable or will become due and payable within one year by reason of the mailing of a notice of redemption or otherwise and the Company or any Guarantor has irrevocably deposited or caused to be deposited

 

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with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest and Additional Interest, if any, to the date of fixed maturity or redemption;

 

(b)                   no Default or Event of Default has occurred and is continuing on the date of the deposit or will occur as a result of the deposit and the deposit will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;

 

(c)                    the Company or any Guarantor has paid or caused to be paid all sums payable by it hereunder;

 

(d)                   the Company has delivered irrevocable instructions to the Trustee hereunder to apply the deposited money toward the payment of the Notes at fixed maturity or the Redemption Date, as the case may be; and

 

(e)                    the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, which, taken together, state that all conditions precedent under this Indenture relating to the satisfaction and discharge of this Indenture have been complied with.

 

ARTICLE XII

 

Miscellaneous

 

Section 12.1                             Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the provision required by the TIA shall control. Each Guarantor in addition to performing its obligations under its Note Guarantee shall perform such other obligations as may be imposed upon it with respect to this Indenture under the TIA.

 

Section 12.2                             Notices. Any notice or communication shall be in writing and delivered in person, by telecopier or overnight air courier guaranteeing next day delivery or mailed by first-class mail addressed as follows:

 

if to the Company:

 

Denver Parent Corporation
 370 17th Street, Suite 3900
 Denver, Colorado 80202-1370
 Attention: General Counsel

 

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if to the Trustee:

 

U.S. Bank National Association
 950 17th Street, 12th Floor
 Denver, Colorado 80202
 Attention: Global Corporate Trust Services

 

The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

 

Any notice or communication mailed to a registered Holder shall be mailed to the Holder at the Holder’s address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Any notice or communication shall also be mailed to any Person described in TIA § 3.13(c), to the extent required by the TIA.

 

For any DTC-held positions, notice to DTC shall be by electronic means as per DTC standard operating procedures.

 

Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

 

Section 12.3          Communication by Holders with other Holders. Holders may communicate pursuant to TIA § 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA § 312(c).

 

Section 12.4          Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee:

 

(a)      an Officers’ Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

 

(b)      an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

 

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion as to such matters in one or several documents.

 

Any certificate or opinion of an Officer of the Company or any Guarantor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such Officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or

 

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opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, and may state that it is so based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Officer or Officers of the Company or such Guarantor stating that the information with respect to such factual matters known to the Company or such Guarantor, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous.

 

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

 

Section 12.5          Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include:

 

(a)      a statement that the individual making such certificate or opinion has read such covenant or condition;

 

(b)      a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

 

(c)       a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

 

(d)      a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with.

 

Section 12.6          When Notes Disregarded. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Notes outstanding at the time shall be considered in any such determination.

 

Section 12.7            Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by, or a meeting of, Holders. The Registrar and the Paying Agent may make reasonable rules for their functions.

 

Section 12.8          Legal Holidays. A “Legal Holiday” is a Saturday, a Sunday or other day on which commercial banking institutions are authorized or required to be closed in Denver, Colorado or New York, New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular Record Date is a Legal Holiday, the Record Date shall not be affected.

 

101

 

Section 12.9          GOVERNING LAW. THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

Section 12.10       No Recourse Against Others. No director, officer, employee, incorporator or stockholder or other owner of Capital Stock of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, this Indenture or the Note Guarantees, or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability.

 

Section 12.11       Successors. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors.

 

Section 12.12       Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture.

 

Section 12.13       Qualification of Indenture. The Company shall qualify this Indenture under the TIA in accordance with the terms and conditions of the Registration Rights Agreement and shall pay all reasonable costs and expenses (including attorneys’ fees and expenses for the Company, the Trustee and the Holders) incurred in connection therewith, including, but not limited to, costs and expenses of qualification of this Indenture and the Notes and printing this Indenture and the Notes. The Trustee shall be entitled to receive from the Company any such Officers’ Certificates or other documentation as it may reasonably request in connection with any such qualification of this Indenture under the TIA.

 

Section 12.14       Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

Section 12.15        No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or any Subsidiary or any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture or the Note Guarantees.

 

Section 12.16         Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.

 

[Remainder of page intentionally left blank; signature pages follow.]

 

102

 

IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.

 

	
 
    	
DENVER PARENT CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Timothy A. Ficker
    
	
 
    	
Name:
    	
Timothy A. Ficker
    
	
 
    	
Title:
    	
 Chief Financial Officer 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
U.S. BANK NATIONAL ASSOCIATION, as Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Leland Hansen
    
	
 
    	
Name:
    	
Leland Hansen
    
	
 
    	
Title:
    	
V.P
    

 

Signature Page to the Indenture

 

 

EXHIBIT A

 

[FORM OF FACE OF NOTE]

 

[Private Placement Legend]
 [Depositary Legend, if applicable]

 

No. [     ]

Principal Amount $[             ]

CUSIP NO. [             ]

 

Denver Parent Corporation

 

12.25% / 13.00% Senior PIK Toggle Note due 2018

 

Denver Parent Corporation, a Delaware corporation (the “Company”), promises to pay to                      , or registered assigns, the principal sum of [     ] Dollars or such greater or lesser amount as shall be reflected on the books and records of the custodian with respect to the Global Note (as appointed by DTC) (the “Notes Custodian”)(1), on August 15, 2018.

 

Interest Payment Dates: February 15 and August 15

Record Dates: February 1 and August 1

 

Additional provisions of this Note are set forth on the other side of this Note.

 

	
 
    	
DENVER PARENT CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

TRUSTEE’S CERTIFICATE
 OF AUTHENTICATION

 

U.S. Bank National Association,
 as Trustee, certifies that this is
 one of the Notes referred
 to in the Indenture.

	
By:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Authorized Signatory
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Date: August 15, 2013
    	
 
    
				

 

(1) Global Note only.

 

A-1

 

[FORM OF REVERSE SIDE OF NOTE]

 

12.25% / 13.00% Senior PIK Toggle Note due 2018

 

[PIK](2)

 

1.             Interest

 

Denver Parent Corporation. a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to as the “Company”), promises to pay interest on the principal amount of this Note as follows: Interest on the notes will accrue at the rate equal to 12.25% per annum with respect to Cash Interest (as defined below) and 13.00% per annum with respect to any PIK Interest (as defined below).

 

The Company will pay interest semiannually in arrears on February 15 and August 15 of each year with the first payment to be made on [February 15, 2014].(3) Interest on the Notes will accrue from the most recent date to which interest has been paid on the Notes or, if no interest has been paid, from and including August 15, 2013. The Company shall pay interest on overdue principal or premium, if any (plus interest on such interest to the extent lawful), at the rate borne by the Notes to the extent lawful and will pay Additional Interest as provided for in the Registration Rights Agreement. Interest will be computed on the basis of a 360 day year of twelve 30 day months.

 

If the Company pays a portion of the interest on the Notes as Cash Interest and a portion of the interest on the Notes as PIK Interest, such Cash Interest and PIK Interest shall be paid to holders pro rata in accordance with their interests. PIK Interest on the Notes will be payable (A) with respect to Notes represented by one or more Global Notes on the relevant Record Date, by increasing the principal amount of the outstanding Global Note by an amount equal to the amount of PIK Interest for the applicable Interest Period (rounded up to the nearest whole dollar) and (B) with respect to Notes represented by certificated notes, by issuing PIK Notes in certificated form in an aggregate principal amount equal to the amount of PIK Interest for the applicable Interest Period (rounded up to the nearest whole dollar). In the event that the Company is entitled to and elects to pay partial PIK Interest for any Interest Period, each Holder will be entitled to receive Cash Interest in respect of the applicable percentage of the principal amount of the Notes held by such Holder on the relevant Record Date and PIK Interest in respect of the remaining percentage of the principal amount of the Notes held by such Holder on the relevant Record Date. Following an increase in the principal amount of the outstanding Global Notes as a result of a PIK Payment, the Notes will bear interest on such increased principal amount from and after the date of such PIK Payment. Any PIK Notes issued in certificated form will be dated as of the applicable Interest Payment Date and will bear interest from and after such date. All Notes issued pursuant to a PIK Payment will mature on August 15, 2018 and will be governed by, and subject to the terms, provisions and conditions of, the Indenture and shall have the same rights and benefits as the Notes issued on the Issue Date. Any certificated PIK Notes will be issued with the description “PIK” on the face of such PIK Note.

 

(2) Only include in certificated PIK Notes.

(3) With respect to the Initial Notes.

 

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2.             Method of Payment

 

By no later than 11:00 a.m. (New York City time) on the date on which any principal of, premium, if any, or Cash Interest or Additional Interest, if any, on, any Note is due and payable, the Company shall deposit with the Trustee or the Paying Agent money sufficient to pay such principal, premium, if any, Cash Interest and Additional Interest, if any (and if a PIK Payment is being made, deliver the documentation necessary to increase the principal amount of the Notes or to issue PIK Notes). The Company will pay interest (except Defaulted Interest) and Additional Interest, if any, to the Persons who are registered Holders of Notes at the close of business on the February 1 or August 1 next preceding the Interest Payment Date, even if Notes are cancelled, repurchased or redeemed after the Record Date and on or before the Interest Payment Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company will pay principal and Cash Interest and Additional Interest, if any, in money of the United States that at the time of payment is legal tender for payment of public and private debts. If a Holder has given wire transfer instructions to the Company, the Company will, or if the Company is not then the Paying Agent, the Company will cause the Paying Agent to, pay all principal, Cash Interest, Additional Interest, if any, and premium, if any, on that Holder’s Notes in accordance with the instructions; all other payments of the principal of (and premium, if any), Cash Interest and Additional Interest, if any, on the Notes shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose pursuant to Section 2.3 of the Indenture; provided, however, that, at the option of the Company, each installment of Cash Interest and Additional Interest, if any, may be paid by check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Note Register. Payments in respect of Notes represented by a Global Note (including principal, premium, if any, and Cash Interest and Additional Interest, if any) will be made by the transfer of immediately available funds to the accounts specified by The Depository Trust Company.

 

Except as provided in the immediately succeeding sentence and the definition of “Applicable Amount,” interest on the Notes shall be payable entirely in cash (such interest, “Cash Interest”) on the then outstanding principal amount of the Notes. For any Interest Period after the initial Interest Period and other than the Interest Period ending at Stated Maturity of the Notes, if the Applicable Amount (as defined below) as determined on the Determination Date (as defined below) for such Interest Period:

 

(i)        is equal or exceeds 75%, but is less than 100%, of the aggregate amount of Cash Interest that would otherwise be due on the relevant Interest Payment Date, then the Company may, at its option, elect to pay interest on up to 25% of the then outstanding principal amount of the Notes by increasing the principal amount of the outstanding Notes or by issuing PIK Notes in a principal amount equal to such interest (“PIK Interest”), with the remainder paid in cash;

 

(ii)       is equal or exceeds 50%, but is less than 75%, of the aggregate amount of Cash Interest that would otherwise be due on the relevant Interest Payment Date, then the Company may, at its option, elect to pay interest on up to 50% of the then outstanding principal amount of the Notes as PIK Interest, with the remainder paid in cash;

 

(iii)      is equal or exceeds 25%, but is less than 50%, of the aggregate amount of Cash Interest that would otherwise be due on the relevant Interest Payment Date, then the

 

A-3

 

Company may, at its option, elect to pay interest on up to 75% of the then outstanding principal amount of the Notes as PIK Interest, with the remainder paid in cash; or

 

(iv) is less than 25% of the aggregate amount of Cash Interest that would otherwise be due on the relevant Interest Payment Date, then the Company may, at its option, elect to pay interest on up to 100% of the then outstanding principal amount of the Notes as PIK Interest, with any remainder paid in cash.

 

The insufficiency or lack of funds available to the Company to pay Cash Interest as required by the immediately preceding paragraph shall not permit the Company to pay PIK Interest in respect of any Interest Period and the sole right of the Company to elect to pay PIK Interest shall be as (and to the extent) provided in the immediately preceding paragraph.

 

As used herein,

 

(i) “Applicable Amount” shall be the amount equal to the sum (without duplication)

 

of,

(1)(a) the maximum amount of all dividends and distributions by all Restricted Subsidiaries that, as of the applicable Determination Date, would be permitted to be paid in cash to the Company for the purpose of paying Cash Interest after giving (i) pro forma effect to the payment of amounts reserved to be paid or distributed to the Company to pay Cash Interest on the Interest Payment Date immediately following such Determination Date and (ii) effect to all corporate, shareholder or other comparable actions required in order to make such payment, requirements of applicable law and all restrictions on the ability to make such dividends or distributions (to the extent such restrictions are permitted by Section 3.6 of the Indenture (including, without limitation, any restrictions and limitations in the Credit Agreement and the Venoco 8.875% Notes Indenture), net of all taxes attributable solely to such dividend or distribution, if any, and, in each case, without regard to whether any such Restricted Subsidiary shall have any funds available to make any such dividends or distributions, less (b) $10.0 million; and

 

(2)(a) all cash and Cash Equivalents on hand at the Company as of such Determination Date (other than any cash and Cash Equivalents on hand at the Company that has been distributed to the Company and the distribution of which is conditioned upon such cash and Cash Equivalents being utilized for a purpose other than paying Cash Interest (including, without limitation, amounts permitted to be distributed to the Company solely for the purpose of paying taxes attributable to the Company’s consolidated Subsidiaries) as the result of restrictions on the ability to make such dividends or distributions provided such restrictions are otherwise permitted by Section 3.6 of the Indenture (including, without limitation, any restrictions and limitations in the Credit Agreement and the Venoco 8.875% Notes Indenture, all Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Agreement or the Venoco 8.875% Notes Indenture) in existence on the Issue Date or any agreement that amends, modifies, renews, increases, supplements, refunds, replaces or refinances such Indebtedness)) less (b) $10.0 million (which shall in no event be less than $0); provided that there shall be excluded from this clause (ii) any net proceeds from the Notes issued on the Issue Date pending the final application of such proceeds in connection with the Refinancing Transaction and any cash and Cash Equivalents on hand to be used for payment of Cash Interest on the Interest Payment Date next succeeding such Determination Date.

 

A-4

 

If interest on the Notes with respect to an Interest Period will not be paid entirely as Cash Interest, the Applicable Amount shall be calculated by the Company and shall be set forth in an Officer’s Certificate delivered to the Trustee five Business Days prior to the commencement of the relevant Interest Period in which it is to be applied, which Officer’s Certificate shall set forth in reasonable detail the Company’s determination of each component of this definition and in the case of clause (i)(a) identifying in reasonable detail the applicable restriction(s) and the maximum amount of funds that may be paid after giving effect to such restriction. To the extent the Company is required pursuant to the second preceding paragraph and the definition of Applicable Amount to pay Cash Interest for all or any portion of the interest due on any Interest Payment Date, the Company shall and shall cause each of the Restricted Subsidiaries to take all such shareholder, corporate and other actions necessary or appropriate to permit the making of any such dividends or distribution (or loans or advances), provided that any such shareholder, corporate and other actions would not violate applicable law or cause a breach of any applicable contract; and

 

(ii) “Determination Date” shall mean, with respect to each Interest Period, the 15th calendar day immediately prior to the first day of the relevant Interest Period.

 

In the event that the Company shall be entitled to pay PIK Interest for any Interest Period, then the Company shall deliver a notice to the Trustee following the Determination Date but not less than five Business Days prior to the commencement of the relevant Interest Period, which notice shall state the total amount of interest to be paid on such Interest Payment Date and the amount of such interest to be paid as PIK Interest. The Trustee shall promptly deliver a corresponding notice to the Holders. Interest for the first Interest Period commencing on the Issue Date shall be payable entirely in Cash Interest. Interest for the final Interest Period ending at Stated Maturity of the Notes shall be payable entirely in Cash Interest.

 

Notwithstanding anything to the contrary, the payment of accrued interest in connection with any redemption or repurchase of Notes pursuant to Section 3.7, 3.9 or 5.1 of the Indenture shall be made solely in cash.

 

3.             Paying Agent and Registrar

 

Initially, U.S. Bank National Association (the “Trustee”), will act as Trustee, Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice to any Holder of the Notes. The Company or any of the Restricted Subsidiaries may act as Paying Agent, Registrar or co-registrar.

 

4.             Indenture

 

The Company issued the Notes under an Indenture dated as of August 15, 2013 (as it may be amended or supplemented from time to time in accordance with the terms thereof, the “Indenture”), between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the Issue Date (the “Act”). Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The

 

A-5

 

Notes are subject to all terms in the Indenture, and Noteholders are referred to the Indenture and the Act for a statement of those terms.

 

The Notes are general unsecured senior obligations of the Company. The aggregate principal amount of Notes that may be authenticated and delivered under the Indenture is unlimited. The Indenture imposes certain limitations, among other things, on the ability of the Company and the Restricted Subsidiaries to make Investments; incur additional Indebtedness or issue Preferred Stock, create certain Liens; sell assets; enter into agreements that restrict dividends or other payments from the Restricted Subsidiaries; consolidate, merge or transfer all or substantially all of the assets of the Company and its Restricted Subsidiaries; engage in transactions with Affiliates; pay dividends or make other distributions on Capital Stock or subordinated Indebtedness; enter into different lines of business; create Unrestricted Subsidiaries; and enter into sale and leaseback transactions.

 

5.             Redemption

 

Except as set forth below, the Notes will not be redeemable at the option of the Company prior to August 15, 2015. On and after such date, the Notes will be redeemable, at the Company’s option, in whole or in part, at any time upon not less than 30 nor more than 60 days prior notice mailed by first-class mail to each Holder’s registered address, at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest and Additional Interest, if any, thereon, if any, to the Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date) if redeemed during the twelve-month period beginning on August 15 of the years indicated below:

 

	
Period
    	
 
    	
Redemption Price
    	
 
    
	
2015
    	
 
    	
106.125
    	
%
    
	
2016
    	
 
    	
103.063
    	
%
    
	
2017 and thereafter
    	
 
    	
100.000
    	
%
    

 

Prior to August 15, 2015, the Company may redeem all or part of the Notes issued hereunder at a redemption price equal to the sum of:

 

(1)           the principal amount thereof; and

 

(2)           the Make Whole Premium at the Redemption Date,

 

plus accrued and unpaid interest and Additional Interest, if any, on the Notes redeemed to the applicable Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date).

 

The notice of redemption with respect to the foregoing redemption need not set forth the Make Whole Premium but only the manner of calculation thereof. The Company will notify the Trustee of the Make Whole Premium with respect to any redemption promptly after the calculation, and the Trustee shall not be responsible for such calculation.

 

A-6

 

In addition, at any time and from time to time prior to August 15, 2015, the Company may redeem in the aggregate up to 35% of the aggregate principal amount of the Notes (which includes Additional Notes) with the net cash proceeds of one or more Equity Offerings received by the Company at a redemption price (expressed as a percentage of principal amount) of 112.25% of the principal amount plus accrued and unpaid interest and Additional Interest, if any, to the Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date); provided, however, that (1) at least 65% of the aggregate principal amount of the Notes, including any Additional Notes, remains outstanding after each such redemption and (2) each such redemption occurs within 90 days of the date of closing of such Equity Offering.

 

Notice of any redemption upon an Equity Offering may be given prior to the completion of the related Equity Offering, and any such redemption or notice may at the Company’s discretion, be subject to one or more conditions precedent, including completion of the related Equity Offering.

 

If the optional Redemption Date is on or after an interest Record Date and on or before the related Interest Payment Date, the accrued and unpaid interest and Additional Interest, if any, will be paid to the Person in whose name the Note is registered at the close of business on such Record Date, and no additional interest will be payable to Holders whose Notes will be subject to redemption by the Company.

 

In the case of any partial redemption, selection of the Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not listed, then on a pro rata basis (or, in the case of Global Notes, the Trustee will select Notes for redemption based on DTC’s method that most nearly approximates a pro rata selection), although no Notes of $2,000 in original principal amount or less (or if a PIK Payment has been made, in minimum denominations of $1.00 and any integral multiple of $1.00 in excess thereof) will be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the Redemption Date, interest will cease to accrue on Notes or portions thereof called for redemption as long as the Company has deposited with the Paying Agent funds in satisfaction of the applicable redemption price pursuant to the Indenture.

 

6.                                      Repurchase Provisions

 

(a)                                 Upon a Change of Control any Holder of Notes will have the right to cause the Company to repurchase all or any part (in integral multiples of $1,000 except that no Note may be tendered in part if the remaining principal amount would be less than $2,000 (or if a PIK Payment has been made, in minimum denominations of $1.00 and any integral multiple of $1.00 in excess thereof)) of the Notes of such Holder at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the date of repurchase (subject to the right of Holders of record on the relevant Record Date to

 

A-7

 

receive interest due on an Interest Payment Date that is on or prior to the date of repurchase) as provided in, and subject to the terms of, the Indenture.

 

(b)                                 In the event of an Asset Disposition that requires the purchase of Notes pursuant to Section 3.7(d) of the Indenture, the Company will be required to apply such Excess Proceeds to the repayment of the Notes and any pari passu Indebtedness in accordance with the procedures set forth in Section 3.7 of the Indenture.

 

7.                                           Denominations; Transfer; Exchange

 

The Notes (other than any PIK Notes, which may be issued in minimum denominations of $1.00 and integral multiples thereof, and any increase in the principal amount of Notes as a result of a PIK Payment) are in registered form without coupons in denominations of principal amount of $2,000 and whole multiples of $1,000 in excess of $2,000. PIK Payments will be made in denominations of $1.00 and integral multiples thereof. A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer or exchange of (i) any Notes selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) or (ii) any Notes for a period of 15 days before a selection of Notes to be redeemed. No service charge will be made for any registration of transfer, exchange or redemption of Notes, except in certain circumstances for any tax or other governmental charge that may be imposed in connection therewith.

 

8.                                           Persons Deemed Owners

 

The registered Holder of this Note may be treated as the owner of it for all purposes.

 

9.                                           Unclaimed Money

 

If money for the payment of principal or interest remains unclaimed for one year, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.

 

10.                                    Defeasance

 

Subject to certain conditions set forth in the Indenture, the Company at any time may terminate some or all of its obligations under the Notes and the Indenture if the Company deposits with the Trustee money or non-callable Government Securities for the payment of principal, premium, interest and Additional Interest, if any, on the Notes to redemption or maturity, as the case may be.

 

11.                                    Amendment, Waiver

 

Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Notes may be amended with the written consent or electronic consent pursuant to the second paragraph of Section 9.4 of the Indenture, as applicable, of the Holders of at least a majority in principal

 

A-8

 

amount of the then outstanding Notes and (ii) any default (other than with respect to nonpayment or in respect of a provision that cannot be amended without the written consent of each Noteholder affected) or noncompliance with any provision may be waived with the written consent or electronic consent pursuant to the second paragraph of Section 9.4 of the Indenture, as applicable, of the Holders of a majority in principal amount of the then outstanding Notes. Subject to certain exceptions set forth in the Indenture, without the consent of any Noteholder, the Company and the Trustee may amend the Indenture or the Notes to cure any ambiguity, defect or inconsistency, or to comply with Article IV of the Indenture, or to provide for uncertificated Notes in addition to or in place of certificated Notes, or to add guarantees with respect to the Notes, to release a Guarantor in accordance with the Indenture or to secure the Notes, or to provide additional rights or benefits to the Holders of the Notes, or to comply with any requirement of the Commission in connection with qualifying or maintaining the qualification of the Indenture under the Act, or to make any change that does not adversely affect the rights of any Noteholder, or to provide for the issuance of Additional Notes or to evidence or provide for a successor trustee, or in the event that PIK Notes are issued in certificated form, to make appropriate amendments to the Indenture to reflect an appropriate minimum denomination of certificated PIK Notes and establish minimum redemption amounts for certificated PIK Notes.

 

12.                               Defaults and Remedies

 

Under the Indenture, Events of Default include in summary form: (i) default for 30 days in payment of interest or Additional Interest, if any, when due on the Notes; (ii) default in payment of principal or premium, if any, on the Notes at Stated Maturity, upon required repurchase, upon optional redemption pursuant to paragraphs 5 and 6 of the Notes, upon declaration or otherwise; (iii) the failure by the Company to comply with its obligations under Article IV of the Indenture; (iv) failure by the Company to comply for 30 days with any of its obligations under the covenants described under Sections 3.3 or 3.4 of the Indenture; (v) failure to comply with the provisions of Sections 3.7, 3.9 or 4.1 of the Indenture; (vi) the failure by the Company to comply with (a) the provisions of Section 3.2 of the Indenture for 180 days or (b) with its other agreements contained in the Indenture or under the Notes for 60 days after notice (other than those referred to in (i), (ii), (iii), (iv) or (v) above); (vii) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the Issue Date, if that default (a) is caused by a failure to pay principal of, or interest or Additional Interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (“Payment Default”) or (b) results in the acceleration of such Indebtedness prior to its Stated Maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $20,000,000 or more; provided, however, that if, prior to any acceleration of the Notes, (i) any such Payment Default is cured or waived, (ii) any such acceleration is rescinded, or (iii) such Indebtedness is repaid during the 10 business day period commencing upon the end of any applicable grace period for such Payment Default or the occurrence of such acceleration, as the case may be, any Default or Event of Default (but not any acceleration of the Notes) caused by such Payment Default or acceleration shall be automatically rescinded, so long as such rescission does not

 

A-9

 

conflict with any judgment, decree or applicable law; (viii) certain events of bankruptcy, insolvency or reorganization of the Company or a Significant Subsidiary or group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Company and its Restricted Subsidiaries), would constitute a Significant Subsidiary; (ix) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $20,000,000 (net of any amounts with respect to which a reputable creditworthy insurance company has acknowledged liability in writing), which judgments are not paid, discharged or stayed for a period of 60 days or (x) any Note Guarantee shall be held in a judicial proceeding to be not enforceable or valid or shall cease to be in full force and effect or any Guarantor or other Person acting on its behalf shall deny or disaffirm its obligations under its Note Guarantee (except pursuant to the release or termination of any such Note Guarantee in accordance with the Indenture). However, a default under clause (vi) will not constitute an Event of Default until the Trustee or the Holders of at least 25% in aggregate principal amount of the outstanding Notes notify the Company and the Trustee, in the case of a notice given by the Holders, of the default and the Company does not cure such default within the time specified in clause (vi) hereof after receipt of such notice.

 

If an Event of Default occurs and is continuing (other than an Event of Default described in clause (viii) above), the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes may declare all the Notes to be due and payable. Certain events of bankruptcy or insolvency are Events of Default which will result in the Notes being due and payable immediately upon the occurrence of such Events of Default.

 

Noteholders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Notes unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Noteholders notice of any continuing Default or Event of Default (except a Default or Event of Default in payment of principal or interest) if it determines that withholding notice is in their interest.

 

13.                               Trustee Dealings with the Company

 

Subject to certain limitations set forth in the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

 

14.                              No Recourse Against Others

 

No director, officer, employee, incorporator, partner or stockholder of the Company, or any Guarantor, as such, shall have any liability for any obligations of the Company or the Guarantors under the Notes, the Indenture, the Note Guarantees or for any claim based on, in respect of, or by reason of, such obligations of their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.

 

A-10

 

15.                               Authentication

 

This Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent acting on its behalf) manually signs the certificate of authentication on this Note.

 

16.                               Abbreviations

 

Customary abbreviations may be used in the name of a Noteholder or an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the entirety), JT TEN (= joint tenants with rights of survivorship and not as tenants in common), CUST (= custodian) and U/G/M/A (= Uniform Gift to Minors Act).

 

17.                               CUSIP Numbers

 

Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Noteholders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

 

18.                               Governing Law

 

This Note shall be governed by, and construed in accordance with, the laws of the State of New York.

 

The Company will furnish to any Noteholder upon written request and without charge to the Noteholder a copy of the Indenture, which has in it the text of this Note in larger type. Requests may be made to:

 

	
 
    	
Denver Parent Corporation
    
	
 
    	
370 17th Street, Suite 3900
    
	
 
    	
Denver, Colorado 80202-1370
    
	
 
    	
Attention: General Counsel
    

 

A-11

 

ASSIGNMENT FORM

 

	
 
    	
To assign this Note, fill in the form below:
    
	
 
    	
 
    
	
 
    	
I or we assign and transfer this Note to
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
(Print or type assignee’s   name, address and zip code)
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
(Insert assignee’s soc.   sec. or tax I.D. No.)
    	
 
    
	
 
    	
 
    
	
and irrevocably appoint                             agent to transfer this Note on the books of the Company. The agent may   substitute another to act for him.
    

 

	
 
    	
 
    
	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
Your Signature:
    	
 
    
					

 

	
Signature Guarantee:
    	
 
    
	
(Signature must be guaranteed)
    

 

	
 
    	
 
    
	
Sign exactly as your name appears on the other side of this Note.
    	
 
    

 

The signatures) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Commission Rule 17Ad 15.

 

In connection with any transfer or exchange of any of the Notes evidenced by this certificate occurring prior to the date that is one year after the later of the date of original issuance of such Notes and the last date, if any, on which such Notes were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Notes are being:

 

CHECK ONE BOX BELOW:

 

	
1
    	
o
    	
acquired for the   undersigned’s own account, without transfer; or
    
	
 
    	
 
    	
 
    
	
2
    	
o
    	
transferred to   the Company; or
    
	
 
    	
 
    	
 
    
	
3
    	
o
    	
transferred   pursuant to and in compliance with Rule 144A under the Securities Act of   1933, as amended (the “Securities Act”); or
    
	
 
    	
 
    	
 
    
	
4
    	
o
    	
transferred   pursuant to an effective registration statement under the Securities Act; or
    
	
 
    	
 
    	
 
    
	
5
    	
o
    	
transferred   pursuant to and in compliance with Regulation S under the Securities Act; or
    

 

A-12

 

	
6
    	
o
    	
transferred pursuant to another available exemption from the   registration requirements of the Securities Act of 1933.
    

 

Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered Holder thereof; provided, however, that if box (5) or (6) is checked, the Trustee or the Company may require, prior to registering any such transfer of the Notes, in their sole discretion, such legal opinions, certifications and other information as the Trustee or the Company may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act.

 

	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Signature
    
	
Signature Guarantee:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
(Signature must be guaranteed)
    	
Signature
    
	
 
    	
 
    
	
 
    
			

 

The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Commission Rule 17Ad 15.

 

TO BE COMPLETED BY PURCHASER IF (1) OR (3) ABOVE IS CHECKED.

 

The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

 

	
 
    	
 
    
	
Dated:
    	
 
    	
 
    
			

 

A-13

 

OPTION OF HOLDER TO ELECT PURCHASE

 

If you want to elect to have this Note purchased by the Company pursuant to Section 3.7 or Section 3.9 of the Indenture, check either box:

 

	
o
    	
 
    	
 
    	
o
    
	
 
    	
 
    	
 
    	
 
    
	
3.7
    	
 
    	
 
    	
3.9
    

 

If you want to elect to have only part of this Note purchased by the Company pursuant to Section 3.7 or Section 3.9 of the Indenture, state the amount in principal amount (must be $2,000 or an integral multiple of $1,000 in excess of $2,000, or if a PIK payment has been made, in minimum denominations of $1.00 and any integral multiple of $1.00 in excess thereof): $                           

 

	
Date:
    	
 
    	
 
    	
Your Signature
    	
 
    
	
 
    	
(Sign exactly as your name appears on the other side of the Note)
    
	
 
    	
 
    
	
 
    	
 
    
	
Signature Guarantee:
    	
 
    
	
 
    	
(Signature must be guaranteed)
    
						

 

The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Commission Rule 17Ad 15.

 

A-14

 

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE(4)

 

The following increases or decreases in this Global Note have been made:

 

	
Date of
   Exchange
    	
 
    	
Amount of
   decrease in
   Principal
   Amount of
    this
    Global
    Note
    	
 
    	
Amount of
   increase in
   Principal
    Amount of this
    Global Note 
    	
 
    	
PIK Increase
    	
 
    	
Principal
    Amount of
   Global Note
   following such
   decrease or
    increase
    	
 
    	
Signature of
   authorized signatory
   of Trustee or Notes
   Custodian
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

(4) Include only if security is issued in global form.

 

A-15

 

EXHIBIT B

 

[FORM OF FACE OF EXCHANGE NOTE]

 

[Depositary Legend, if applicable]

 

	
No. [          ]
    	
Principal Amount 
    	
$[                 ]
    
	
 
    	
CUSIP NO. 
    	
    [                 ]
    

 

Denver Parent Corporation

12.25% / 13.00% Senior PIK Toggle Note due 2018

 

Denver Parent Corporation, a Delaware corporation (the “Company”), promises to pay to                         , or registered assigns, the principal sum of [                             ] Dollars or such greater or lesser amount as shall be reflected on the books and records of the custodian with respect to the Global Note (as appointed by DTC) (the “Notes Custodian”), on August 15, 2018.

 

	
Interest Payment Dates:  February 15 and August 15 
    
	
Record Dates:    February 1 and August 1
    

 

Additional provisions of this Note are set forth on the other side of this Note.

 

	
 
    	
DENVER PARENT CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

	
TRUSTEE’S CERTIFICATE OF AUTHENTICATION
    
	
 
    
	
U.S. Bank National Association, 
   as Trustee, certifies that this is 
   one of the Notes referred
    
	
to in the Indenture.
    
	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Authorized Signatory
    
	
 
    
	
Date:  August 15, 2013
    

 

B-1

 

[FORM OF REVERSE SIDE OF NOTE]

12.25% / 13.00% Senior PIK Toggle Note due 2018

[PIK](1)

 

1.                                      Interest

 

Denver Parent Corporation. a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to as the “Company”), promises to pay interest on the principal amount of this Note as follows: Interest on the notes will accrue at the rate equal to 12.25% per annum with respect to Cash Interest (as defined below) and 13.00% per annum with respect to any PIK Interest (as defined below).

 

The Company will pay interest semiannually in arrears on February 15 and August 15 of each year with the first payment to be made on [February 15, 2014].(2) Interest on the Notes will accrue from the most recent date to which interest has been paid on the Notes or, if no interest has been paid, from and including August 15, 2013. The Company shall pay interest on overdue principal or premium, if any (plus interest on such interest to the extent lawful), at the rate borne by the Notes to the extent lawful and will pay Additional Interest as provided for in the Registration Rights Agreement. Interest will be computed on the basis of a 360 day year of twelve 30 day months.

 

If the Company pays a portion of the interest on the Notes as Cash Interest and a portion of the interest on the Notes as PIK Interest, such Cash Interest and PIK Interest shall be paid to holders pro rata in accordance with their interests. PIK Interest on the Notes will be payable (A) with respect to Notes represented by one or more Global Notes on the relevant Record Date, by increasing the principal amount of the outstanding Global Note by an amount equal to the amount of PIK Interest for the applicable Interest Period (rounded up to the nearest whole dollar) as provided in writing by the Company to the Trustee and (B) with respect to Notes represented by certificated notes, by issuing PIK Notes in certificated form in an aggregate principal amount equal to the amount of PIK Interest for the applicable Interest Period (rounded up to the nearest whole dollar). In the event that the Company is entitled to and elects to pay partial PIK Interest for any Interest Period, each Holder will be entitled to receive Cash Interest in respect of the applicable percentage of the principal amount of the Notes held by such Holder on the relevant Record Date and PIK Interest in respect of the remaining percentage of the principal amount of the Notes held by such Holder on the relevant Record Date. Following an increase in the principal amount of the outstanding Global Notes as a result of a PIK Payment, the Notes will bear interest on such increased principal amount from and after the date of such PIK Payment. Any PIK Notes issued in certificated form will be dated as of the applicable Interest Payment Date and will bear interest from and after such date. All Notes issued pursuant to a PIK Payment

 

(1) Only include in certificated PIK Notes.

(2) With respect to the Initial Notes.

 

B-2

 

will mature on August 15, 2018 and will be governed by, and subject to the terms, provisions and conditions of, the Indenture and shall have the same rights and benefits as the Notes issued on the Issue Date. Any certificated PIK Notes will be issued with the description “PIK” on the face of such PIK Note.

 

2.                                      Method of Payment

 

By no later than 11:00 a.m. (New York City time) on the date on which any principal of, premium, if any, or Cash Interest or Additional Interest, if any, on, any Note is due and payable, the Company shall deposit with the Trustee or the Paying Agent money sufficient to pay such principal, premium, if any, Cash Interest and Additional Interest, if any (and if a PIK Payment is being made, deliver the documentation necessary to increase the principal amount of the Notes or to issue PIK Notes). The Company will pay interest (except Defaulted Interest) and Additional Interest, if any, to the Persons who are registered Holders of Notes at the close of business on the February 1 or August 1 next preceding the Interest Payment Date, even if Notes are cancelled, repurchased or redeemed after the Record Date and on or before the Interest Payment Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company will pay principal and Cash Interest and Additional Interest, if any, in money of the United States that at the time of payment is legal tender for payment of public and private debts. If a Holder has given wire transfer instructions to the Company, the Company will, or if the Company is not then the Paying Agent, the Company will cause the Paying Agent to, pay all principal, Cash Interest, Additional Interest, if any, and premium, if any, on that Holder’s Notes in accordance with the instructions; all other payments of the principal of (and premium, if any), Cash Interest and Additional Interest, if any, on the Notes shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose pursuant to Section 2.3 of the Indenture; provided, however, that, at the option of the Company, each installment of Cash Interest and Additional Interest, if any, may be paid by check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Note Register. Payments in respect of Notes represented by a Global Note (including principal, premium, if any, and Cash Interest and Additional Interest, if any) will be made by the transfer of immediately available funds to the accounts specified by The Depository Trust Company.

 

Except as provided in the immediately succeeding sentence and the definition of “Applicable Amount,” interest on the Notes shall be payable entirely in cash (such interest, “Cash Interest”) on the then outstanding principal amount of the Notes. For any Interest Period after the initial Interest Period and other than the Interest Period ending at Stated Maturity of the Notes, if the Applicable Amount (as defined below) as determined on the Determination Date (as defined below) for such Interest Period:

 

(i)             is equal or exceeds 75%, but is less than 100%, of the aggregate amount of Cash Interest that would otherwise be due on the relevant Interest Payment Date, then the Company may, at its option, elect to pay interest on up to 25% of the then outstanding principal amount of the Notes by increasing the principal amount of the outstanding Notes or by issuing PIK Notes in a principal amount equal to such interest (“PIK Interest”), with the remainder paid in cash;

 

B-3

 

(ii)          is equal or exceeds 50%, but is less than 75%, of the aggregate amount of Cash Interest that would otherwise be due on the relevant Interest Payment Date, then the Company may, at its option, elect to pay interest on up to 50% of the then outstanding principal amount of the Notes as PIK Interest, with the remainder paid in cash;

 

(iii)       is equal or exceeds 25%, but is less than 50%, of the aggregate amount of Cash Interest that would otherwise be due on the relevant Interest Payment Date, then the Company may, at its option, elect to pay interest on up to 75% of the then outstanding principal amount of the Notes as PIK Interest, with the remainder paid in cash; or

 

(iv)      is less than 25% of the aggregate amount of Cash Interest that would otherwise be due on the relevant Interest Payment Date, then the Company may, at its option, elect to pay interest on up to 100% of the then outstanding principal amount of the Notes as PIK Interest, with any remainder paid in cash.

 

The insufficiency or lack of funds available to the Company to pay Cash Interest as required by the immediately preceding paragraph shall not permit the Company to pay PIK Interest in respect of any Interest Period and the sole right of the Company to elect to pay PIK Interest shall be as (and to the extent) provided in the immediately preceding paragraph.

 

As used herein,

 

(i) “Applicable Amount” shall be the amount equal to the sum (without duplication) of,

 

(1)(a) the maximum amount of all dividends and distributions by all Restricted Subsidiaries that, as of the applicable Determination Date, would be permitted to be paid in cash to the Company for the purpose of paying Cash Interest after giving (i) pro forma effect to the payment of amounts reserved to be paid or distributed to the Company to pay Cash Interest on the Interest Payment Date immediately following such Determination Date and (ii) effect to all corporate, shareholder or other comparable actions required in order to make such payment, requirements of applicable law and all restrictions on the ability to make such dividends or distributions (to the extent such restrictions are permitted by Section 3.6 of the Indenture (including, without limitation, any restrictions and limitations in the Credit Agreement and the Venoco 8.875% Notes Indenture), net of all taxes attributable solely to such dividend or distribution, if any, and, in each case, without regard to whether any such Restricted Subsidiary shall have any funds available to make any such dividends or distributions, less (b) $10.0 million; and

 

(2)(a) all cash and Cash Equivalents on hand at the Company as of such Determination Date (other than any cash and Cash Equivalents on hand at the Company that has been distributed to the Company and the distribution of which is conditioned upon such cash and Cash Equivalents being utilized for a purpose other than paying Cash Interest (including, without limitation, amounts permitted to be distributed to the Company solely for the purpose of paying taxes attributable to the Company’s consolidated Subsidiaries) as the result of restrictions on the ability to make such dividends or distributions provided such restrictions are otherwise permitted by Section 3.6 of the Indenture (including, without limitation, any restrictions and limitations in the Credit Agreement and the Venoco 8.875% Notes Indenture, all Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Agreement or the Venoco 8.875% Notes Indenture) in existence on the Issue Date or any agreement that amends, modifies, renews,

 

B-4

 

increases, supplements, refunds, replaces or refinances such Indebtedness)) less (b) $10.0 million (which shall in no event be less than $0); provided that there shall be excluded from this clause (ii) any net proceeds from the Notes issued on the Issue Date pending the final application of such proceeds in connection with the Refinancing Transaction and any cash and Cash Equivalents on hand to be used for payment of Cash Interest on the Interest Payment Date next succeeding such Determination Date.

 

If interest on the Notes with respect to an Interest Period will not be paid entirely as Cash Interest, the Applicable Amount shall be calculated by the Company and shall be set forth in an Officer’s Certificate delivered to the Trustee five Business Days prior to the commencement of the relevant Interest Period in which it is to be applied, which Officer’s Certificate shall set forth in reasonable detail the Company’s determination of each component of this definition and in the case of clause (i)(a) identifying in reasonable detail the applicable restriction(s) and the maximum amount of funds that may be paid after giving effect to such restriction. To the extent the Company is required pursuant to the second preceding paragraph and the definition of Applicable Amount to pay Cash Interest for all or any portion of the interest due on any Interest Payment Date, the Company shall and shall cause each of the Restricted Subsidiaries to take all such shareholder, corporate and other actions necessary or appropriate to permit the making of any such dividends or distribution (or loans or advances), provided that any such shareholder, corporate and other actions would not violate applicable law or cause a breach of any applicable contract; and

 

(ii) “Determination Date” shall mean, with respect to each Interest Period, the 15th calendar day immediately prior to the first day of the relevant Interest Period.

 

In the event that the Company shall be entitled to pay PIK Interest for any Interest Period, then the Company shall deliver a notice to the Trustee following the Determination Date but not less than five Business Days prior to the commencement of the relevant Interest Period, which notice shall state the total amount of interest to be paid on such Interest Payment Date and the amount of such interest to be paid as PIK Interest. The Trustee shall promptly deliver a corresponding notice to the Holders. Interest for the first Interest Period commencing on the Issue Date shall be payable entirely in Cash Interest. Interest for the final Interest Period ending at Stated Maturity of the Notes shall be payable entirely in Cash Interest.

 

Notwithstanding anything to the contrary, the payment of accrued interest in connection with any redemption or repurchase of Notes pursuant to Section 3.7, 3.9 or 5.1 of the Indenture shall be made solely in cash.

 

3.                                      Paying Agent and Registrar

 

Initially, U.S. Bank National Association (the “Trustee”), will act as Trustee, Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co- registrar without notice to any Holder of the Notes. The Company or any of the Restricted Subsidiaries may act as Paying Agent, Registrar or co-registrar.

 

B-5

 

4.                                 Indenture

 

The Company issued the Notes under an Indenture dated as of August 15, 2013 (as it may be amended or supplemented from time to time in accordance with the terms thereof, the “Indenture”), between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the Issue Date (the “Act”). Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Notes are subject to all terms in the Indenture, and Noteholders are referred to the Indenture and the Act for a statement of those terms.

 

The Notes are general unsecured senior obligations of the Company. The aggregate principal amount of Notes that may be authenticated and delivered under the Indenture is unlimited. The Indenture imposes certain limitations, among other things, on the ability of the Company and the Restricted Subsidiaries to make Investments; incur additional Indebtedness or issue Preferred Stock, create certain Liens; sell assets; enter into agreements that restrict dividends or other payments from the Restricted Subsidiaries; consolidate, merge or transfer all or substantially all of the assets of the Company and its Restricted Subsidiaries; engage in transactions with Affiliates; pay dividends or make other distributions on Capital Stock or subordinated Indebtedness; enter into different lines of business; create Unrestricted Subsidiaries; and enter into sale and leaseback transactions.

 

5.                                 Redemption

 

Except as set forth below, the Notes will not be redeemable at the option of the Company prior to August 15, 2015. On and after such date, the Notes will be redeemable, at the Company’s option, in whole or in part, at any time upon not less than 30 nor more than 60 days prior notice mailed by first-class mail to each Holder’s registered address, at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest and Additional Interest, if any, thereon, if any, to the Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date) if redeemed during the twelve-month period beginning on August 15 of the years indicated below:

 

	
Period
    	
 
    	
Redemption Price
    	
 
    
	
2015
    	
 
    	
106.125
    	
%
    
	
2016
    	
 
    	
103.063
    	
%
    
	
2017 and thereafter
    	
 
    	
100.000
    	
%
    

 

Prior to August 15, 2015, the Company may redeem all or part of the Notes issued hereunder at a redemption price equal to the sum of:

 

(1)                            the principal amount thereof; and

 

(2)                            the Make Whole Premium at the Redemption Date,

 

plus accrued and unpaid interest and Additional Interest, if any, on the Notes redeemed to the applicable Redemption Date (subject to the right of Holders of record on the relevant Record

 

B-6

 

Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date).

 

The notice of redemption with respect to the foregoing redemption need not set forth the Make Whole Premium but only the manner of calculation thereof. The Company will notify the Trustee of the Make Whole Premium with respect to any redemption promptly after the calculation, and the Trustee shall not be responsible for such calculation.

 

In addition, at any time and from time to time prior to August 15, 2015, the Company may redeem in the aggregate up to 35% of the aggregate principal amount of the Notes (which includes Additional Notes) with the net cash proceeds of one or more Equity Offerings received by the Company at a redemption price (expressed as a percentage of principal amount) of 112.25% of the principal amount plus accrued and unpaid interest and Additional Interest, if any, to the Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date); provided, however, that (1) at least 65% of the aggregate principal amount of the Notes, including any Additional Notes, remains outstanding after each such redemption and (2) each such redemption occurs within 90 days of the date of closing of such Equity Offering.

 

Notice of any redemption upon an Equity Offering may be given prior to the completion of the related Equity Offering, and any such redemption or notice may at the Company’s discretion, be subject to one or more conditions precedent, including completion of the related Equity Offering.

 

If the optional Redemption Date is on or after an interest Record Date and on or before the related Interest Payment Date, the accrued and unpaid interest and Additional Interest, if any, will be paid to the Person in whose name the Note is registered at the close of business on such Record Date, and no additional interest will be payable to Holders whose Notes will be subject to redemption by the Company.

 

In the case of any partial redemption, selection of the Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not listed, then on a pro rata basis (or, in the case of Global Notes, the Trustee will select Notes for redemption based on DTC’s method that most nearly approximates a pro rata selection), although no Notes of $2,000 in original principal amount or less (or if a PIK Payment has been made, in minimum denominations of $1.00 and any integral multiple of $1.00 in excess thereof) will be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the Redemption Date, interest will cease to accrue on Notes or portions thereof called for redemption as long as the Company has deposited with the Paying Agent funds in satisfaction of the applicable redemption price pursuant to the Indenture.

 

B-7

 

6.                                      Repurchase Provisions

 

(a)                            Upon a Change of Control any Holder of Notes will have the right to cause the Company to repurchase all or any part (in integral multiples of $1,000 except that no Note may be tendered in part if the remaining principal amount would be less than $2,000 (or if a PIK Payment has been made, in minimum denominations of $1.00 and any integral multiple of $1.00 in excess thereof)) of the Notes of such Holder at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the date of repurchase (subject to the right of Holders of record on the relevant Record Date to receive interest due on an Interest Payment Date that is on or prior to the date of repurchase) as provided in, and subject to the terms of, the Indenture.

 

(b)                            In the event of an Asset Disposition that requires the purchase of Notes pursuant to Section 3.7(d) of the Indenture, the Company will be required to apply such Excess Proceeds to the repayment of the Notes and any pari passu Indebtedness in accordance with the procedures set forth in Section 3.7 of the Indenture.

 

7.                                      Denominations; Transfer; Exchange

 

The Notes (other than any PIK Notes, which may be issued in minimum denominations of $1.00 and integral multiples thereof and any increase in the principal amount of Notes as a result of a PIK Payment) are in registered form without coupons in denominations of principal amount of $2,000 and whole multiples of $1,000 in excess of $2,000. PIK Payments will be made in denominations of $1.00 and integral multiples in excess thereof. A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer or exchange of (i) any Notes selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) or (ii) any Notes for a period of 15 days before a selection of Notes to be redeemed. No service charge will be made for any registration of transfer, exchange or redemption of Notes, except in certain circumstances for any tax or other governmental charge that may be imposed in connection therewith.

 

8.                                      Persons Deemed Owners

 

The registered Holder of this Note may be treated as the owner of it for all purposes.

 

9.                                      Unclaimed Money

 

If money for the payment of principal or interest remains unclaimed for one year, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.

 

10.                               Defeasance

 

Subject to certain conditions set forth in the Indenture, the Company at any time may terminate some or all of its obligations under the Notes and the Indenture if the Company

 

B-8

 

deposits with the Trustee money or non-callable Government Securities for the payment of principal, premium, interest and Additional Interest, if any, on the Notes to redemption or maturity, as the case may be.

 

11.                          Amendment, Waiver

 

Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Notes may be amended with the written consent or electronic consent pursuant to the second paragraph of Section 9.4 of the Indenture, as applicable, of the Holders of at least a majority in principal amount of the then outstanding Notes and (ii) any default (other than with respect to nonpayment or in respect of a provision that cannot be amended without the written consent of each Noteholder affected) or noncompliance with any provision may be waived with the written consent or electronic consent pursuant to the second paragraph of Section 9.4 of the Indenture, as applicable, of the Holders of a majority in principal amount of the then outstanding Notes. Subject to certain exceptions set forth in the Indenture, without the consent of any Noteholder, the Company and the Trustee may amend the Indenture or the Notes to cure any ambiguity, defect or inconsistency, or to comply with Article IV of the Indenture, or to provide for uncertificated Notes in addition to or in place of certificated Notes, or to add guarantees with respect to the Notes, to release a Guarantor in accordance with the Indenture or to secure the Notes, or to provide additional rights or benefits to the Holders of the Notes, or to comply with any requirement of the Commission in connection with qualifying or maintaining the qualification of the Indenture under the Act, or to make any change that does not adversely affect the rights of any Noteholder, or to provide for the issuance of Additional Notes or to evidence or provide for a successor trustee, or in the event that PIK Notes are issued in certificated form, to make appropriate amendments to the Indenture to reflect an appropriate minimum denomination of certificated PIK Notes and establish minimum redemption amounts for certificated PIK Notes.

 

12.                          Defaults and Remedies

 

Under the Indenture, Events of Default include in summary form: (i) default for 30 days in payment of interest or Additional Interest, if any, when due on the Notes; (ii) default in payment of principal or premium, if any, on the Notes at Stated Maturity, upon required repurchase, upon optional redemption pursuant to paragraphs 5 and 6 of the Notes, upon declaration or otherwise; (iii) the failure by the Company to comply with its obligations under Article IV of the Indenture; (iv) failure by the Company to comply for 30 days with any of its obligations under the covenants described under Sections 3.3 or 3.4 of the Indenture; (v) failure to comply with the provisions of Sections 3.7, 3.9 or 4.1 of the Indenture; (vi) the failure by the Company to comply with (a) the provisions of Section 3.2 of the Indenture for 180 days or (b) with its other agreements contained in the Indenture or under the Notes for 60 days after notice (other than those referred to in (i), (ii), (iii), (iv) or (v) above); (vii) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the Issue Date, if that default (a) is caused by a failure to pay principal of, or interest or Additional Interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (“Payment Default”) or (b) results in the acceleration of such Indebtedness

 

B-9

 

prior to its Stated Maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $20,000,000 or more; provided, however, that if, prior to any acceleration of the Notes, (i) any such Payment Default is cured or waived, (ii) any such acceleration is rescinded, or (iii) such Indebtedness is repaid during the 10 business day period commencing upon the end of any applicable grace period for such Payment Default or the occurrence of such acceleration, as the case may be, any Default or Event of Default (but not any acceleration of the Notes) caused by such Payment Default or acceleration shall be automatically rescinded, so long as such rescission does not conflict with any judgment, decree or applicable law; (viii) certain events of bankruptcy, insolvency or reorganization of the Company or a Significant Subsidiary or group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Company and its Restricted Subsidiaries), would constitute a Significant Subsidiary; (ix) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $20,000,000 (net of any amounts with respect to which a reputable creditworthy insurance company has acknowledged liability in writing), which judgments are not paid, discharged or stayed for a period of 60 days or (x) any Note Guarantee shall be held in a judicial proceeding to be not enforceable or valid or shall cease to be in full force and effect or any Guarantor or other Person acting on its behalf shall deny or disaffirm its obligations under its Note Guarantee (except pursuant to the release or termination of any such Note Guarantee in accordance with the Indenture). However, a default under clause (vi) will not constitute an Event of Default until the Trustee or the Holders of at least 25% in aggregate principal amount of the outstanding Notes notify the Company and the Trustee, in the case of a notice given by the Holders, of the default and the Company does not cure such default within the time specified in clause (vi) hereof after receipt of such notice.

 

If an Event of Default occurs and is continuing (other than an Event of Default described in clause (viii) above), the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes may declare all the Notes to be due and payable. Certain events of bankruptcy or insolvency are Events of Default which will result in the Notes being due and payable immediately upon the occurrence of such Events of Default.

 

Noteholders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Notes unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Noteholders notice of any continuing Default or Event of Default (except a Default or Event of Default in payment of principal or interest) if it determines that withholding notice is in their interest.

 

13.                               Trustee Dealings with the Company

 

Subject to certain limitations set forth in the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

 

B-10

 

14.                          No Recourse Against Others

 

No director, officer, employee, incorporator, partner or stockholder of the Company, or any Guarantor, as such, shall have any liability for any obligations of the Company or the Guarantors under the Notes, the Indenture, the Note Guarantees or for any claim based on, in respect of, or by reason of, such obligations of their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.

 

15.                          Authentication

 

This Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent acting on its behalf) manually signs the certificate of authentication on this Note.

 

16.                          Abbreviations

 

Customary abbreviations may be used in the name of a Noteholder or an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the entirety), JT TEN (= joint tenants with rights of survivorship and not as tenants in common), CUST (= custodian) and U/G/M/A (= Uniform Gift to Minors Act).

 

17.                          CUSIP Numbers

 

Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Noteholders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

 

18.                          Governing Law

 

This Note shall be governed by, and construed in accordance with, the laws of the State of New York.

 

The Company will furnish to any Noteholder upon written request and without charge to the Noteholder a copy of the Indenture, which has in it the text of this Note in larger type. Requests may be made to:

 

	
 
    	
Denver Parent Corporation
    
	
 
    	
370 17th Street, Suite 3900
    
	
 
    	
Denver, Colorado 80202-1370
    
	
 
    	
Attention: General Counsel
    

 

B-11

 

ASSIGNMENT FORM

 

	
To assign this Note, fill   in the form below:
    	
 
    
	
 
    	
 
    
	
I or we assign and   transfer this Note to
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
(Print or type assignee’s   name, address and zip code)
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
(Insert assignee’s soc.   sec. or tax I.D. No.)
    	
 
    
	
 
    	
 
    

 

	
and irrevocably appoint                        agent   to transfer this Note on the books of the Company. The agent may substitute   another to act for him.
    
	
 
    
	
 
    
	
 
    
	
Date:
    	
 
    	
  Your Signature:
    	
 
    
	
 
    	
 
    
	
Signature Guarantee:
    	
 
    
	
(Signature must be guaranteed)
    
	
 
    
	
 
    	
 
    
	
Sign exactly as your name appears on the other side of this Note.
    	
 
    
						

 

The signatures) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Commission Rule 17Ad 15.

 

B-12

 

OPTION OF HOLDER TO ELECT PURCHASE

 

If you want to elect to have this Note purchased by the Company pursuant to Section 3.7 or Section 3.9 of the Indenture, check either box:

 

	
o
    	
 
    	
o
    
	
3.7
    	
 
    	
3.9
    

 

If you want to elect to have only part of this Note purchased by the Company pursuant to Section 3.7 or Section 3.9 of the Indenture, state the amount in principal amount (must be $2,000 or an integral multiple of $1,000 in excess of $2,000, or if a PIK payment has been made, in minimum denominations of $1.00 and any integral multiple of $1.00 in excess thereof): $                   

 

	
Date:
    	
 
    	
 
    	
Your Signature
    	
 
    
	
 
    	
 
    	
 
    	
(Sign exactly as your name appears on the other side of the Note)
    

 

 

Signature Guarantee: 

 

(Signature must be guaranteed)

 

The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Commission Rule 17Ad 15.

 

B-13

 

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE 

 

The following increases or decreases in this Global Note have been made:

 

	
Date of
   Exchange
    	
 
    	
Amount of
   decrease in
   Principal
   Amount of
    this
    Global
    Note
    	
 
    	
Amount of
   increase in
   Principal
    Amount of this
   Global Note
    	
 
    	
PIK Increase
    	
 
    	
Principal
    Amount of
   Global Note
   following such
   decrease or
    increase
    	
 
    	
Signature of
   authorized signatory
   of Trustee or Notes
   Custodian
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

B-14

 

EXHIBIT C

FORM OF NOTE GUARANTEE

 

This Supplemental Indenture, dated as of                            (this “Supplemental Indenture” or “Note Guarantee”), among [name of future Guarantor] (the “Guarantor”), Denver Parent Corporation (together with its successors and assigns, the “Company”) and U.S. Bank National Association, as Trustee under the Indenture referred to below.

 

W I T N E S S E T H:

 

WHEREAS, the Company and the Trustee have heretofore executed and delivered an Indenture, dated as of August 15, 2013 (as amended, supplemented, waived or otherwise modified, the “Indenture”), providing for the initial issuance of an aggregate principal amount of $255,000,000 of 12.25% / 13.00% Senior PIK Toggle Notes due 2018 of the Company (the “Notes”);

 

WHEREAS, Section 3.10 of the Indenture provides that the Company is required to cause each Restricted Subsidiary other than a Foreign Subsidiary and other than Ellwood Pipeline, Inc. (if and so long as Ellwood Pipeline, Inc. constitutes a crude oil common carrier prohibited from guaranteeing an affiliate shipper’s debt), to the extent set forth in the Indenture, to execute and deliver to the Trustee a Note Guarantee pursuant to which such Guarantor will unconditionally Guarantee, on a joint and several basis with the other Guarantors, the full and prompt payment of the principal of, premium, interest and Additional Interest, if any, on the Notes on a senior basis; and

 

WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee and the Company are authorized to execute and deliver this Supplemental Indenture to amend the Indenture, without the consent of any Noteholder,

 

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guarantor, the Company and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

 

ARTICLE I

Definitions

 

SECTION 1.1 Defined Terms. As used in this Note Guarantee, terms defined in the Indenture or in the preamble or recital hereto are used herein as therein defined, except that the term “Holders” in this Note Guarantee shall refer to the term “Noteholders” as defined in the Indenture and the Trustee acting on behalf or for the benefit of such Holders. The words “herein,” “hereof’ and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof.

 

C-1

 

ARTICLE II

Agreement to be Bound, Note Guarantee

 

SECTION 2.1 Agreement to be Bound. The Guarantor hereby becomes a party to the Indenture as a Guarantor and as such will have all of the rights and be subject to all of the obligations and agreements of a Guarantor under the Indenture. The Guarantor agrees to be bound by all of the provisions of the Indenture applicable to a Guarantor and to perform all of the obligations and agreements of a Guarantor under the Indenture.

 

SECTION 2.2 Note Guarantee. The Guarantor hereby fully, unconditionally and irrevocably Guarantees, as primary obligor and not merely as surety, jointly and severally with each Guarantor, to each Holder of the Notes and the Trustee, the full and punctual payment when due, whether at maturity, by acceleration, by redemption or otherwise, of the Obligations pursuant to Article X of the Indenture on a senior basis.

 

ARTICLE III

Miscellaneous

 

SECTION 3.1 Notices. All notices and other communications to the Guarantor shall be given as provided in the Indenture to the Guarantor, at its address set forth below, with a copy to the Company as provided in the Indenture for notices to the Company.

 

SECTION 3.2 Parties. Nothing expressed or mentioned herein is intended or shall be construed to give any Person, firm or corporation, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of this Supplemental Indenture or the Indenture or any provision herein or therein contained.

 

SECTION 3.3 Governing Law. This Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York.

 

SECTION 3.4 Severability Clause. In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability.

 

SECTION 3.5 Ratification of Indenture; Supplemental Indenture Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby. The Trustee makes no representation or warranty as to the validity or sufficiency of this Supplemental Indenture.

 

SECTION 3.6 Counterparts. The parties hereto may sign one or more copies of this Supplemental Indenture in counterparts, all of which together shall constitute one and the same agreement.

 

C-2

 

SECTION 3.7 Headings. The headings of the Articles and the sections in this Note Guarantee are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof.

 

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

 

	
 
    	
[GUARANTOR],
   as a Guarantor
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
U.S. BANK NATIONAL ASSOCIATION,
   as Trustee
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
DENVER PARENT CORPORATION
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

C-3Exhibit 10.22

 

Execution Version

 

DENVER PARENT CORPORATION

 

$255,000,000

12.25% / 13.00% Senior PIK Toggle Notes due 2018

 

Purchase Agreement

 

August 9, 2013

 

Citigroup Global Markets Inc.

Merrill Lynch, Pierce, Fenner & Smith Incorporated

 

As Representatives of the Initial Purchasers

c/o Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

 

c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated

One Bryant Park

New York, New York 10036

 

Ladies and Gentlemen:

 

Denver Parent Corporation, a corporation organized under the laws of Delaware (the “Company”), proposes to issue and sell to the several parties named in Schedule I hereto (the “Initial Purchasers”), for whom you (the “Representatives”) are acting as representatives, $255,000,000 aggregate principal amount of its 12.25% / 13.00% Senior PIK Toggle Notes due 2018 (the “Securities”). The Securities will have the benefit of a registration rights agreement (the “Registration Rights Agreement”) to be dated as of the Closing Date (as defined below), between the Company and the Initial Purchasers, pursuant to which the Company will agree to register the Securities under the Securities Act of 1933, as amended (the “Act”) subject to the terms and conditions therein specified. The Securities are to be issued under an indenture (the “Indenture”), to be dated as of the Closing Date, between the Company and U.S. Bank National Association, as trustee (the “Trustee”). To the extent there are no additional parties listed on Schedule I other than you, the term Representatives as used herein shall mean you as the Initial Purchasers, and the terms Representatives and Initial Purchasers shall mean either the singular or plural as the context requires. The use of the neuter in this Agreement shall include the feminine and masculine wherever appropriate. Certain terms used herein are defined in Section 24 hereof.

 

The sale of the Securities to the Initial Purchasers will be made without registration of the Securities under the Act in reliance upon exemptions from the registration requirements of the Act.

 

 

In connection with the sale of the Securities, the Company has prepared a preliminary offering memorandum, dated August 7, 2013 (as amended or supplemented at the date thereof, including any and all exhibits thereto and any information incorporated by reference therein, the “Preliminary Memorandum”), and a final offering memorandum, dated August 9, 2013 (as amended or supplemented, including any and all exhibits thereto and any information incorporated by reference therein, the “Final Memorandum”). Each of the Preliminary Memorandum and the Final Memorandum sets forth certain information concerning the Company and the Securities. The Company hereby confirms that it has authorized the use of the Disclosure Package, the Preliminary Memorandum and the Final Memorandum, and any amendment or supplement thereto, in connection with the offer and sale of the Securities by the Initial Purchasers. Unless stated to the contrary, any references herein to the terms “amend”, “amendment” or “supplement” with respect to the Disclosure Package, the Preliminary Memorandum and the Final Memorandum shall be deemed to refer to and include any information filed under the Exchange Act subsequent to the Execution Time that is incorporated by reference therein.

 

1.      Representations and Warranties. The Company represents and warrants to, and agrees with, each Initial Purchaser as set forth below in this Section 1.

 

(a)   The Preliminary Memorandum, at the date thereof, did not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. At the Execution Time, on the Closing Date and on any settlement date, the Final Memorandum did not and will not (and any amendment or supplement thereto, at the date thereof, at the Closing Date and on any settlement date will not) contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representation or warranty as to the information contained in or omitted from the Preliminary Memorandum or the Final Memorandum, or any amendment or supplement thereto, in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of the Initial Purchasers through the Representatives specifically for inclusion therein, it being understood and agreed that the only such information furnished by or on behalf of any Initial Purchaser consists of the information described as such in Section 8(b) hereof.

 

(b)   As of the Execution Time, (i) the Disclosure Package and (ii) each electronic road show, when taken together as a whole with the Disclosure Package, does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Disclosure Package based upon and in conformity with written information furnished to the Company by any Initial Purchaser through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by or on behalf of any Initial Purchaser consists of the information described as such in Section 8(b) hereof.

 

(c)   None of the Company or its Affiliates, or any person acting on behalf of any of the foregoing has, directly or indirectly, made offers or sales of any security, or solicited

 

2

 

offers to buy, any security under circumstances that would require the registration of the Securities under the Act.

 

(d)   None of the Company or its Affiliates, or any person acting on behalf of any of the foregoing has: (i) engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer or sale of the Securities or (ii) engaged in any directed selling efforts (within the meaning of Regulation S) with respect to the Securities; and each of the Company, its Affiliates and each person acting on behalf of any of the foregoing has complied with the offering restrictions requirement of Regulation S.

 

(e)   The Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the Act.

 

(f)    No registration under the Act of the Securities is required for the offer and sale of the Securities to or by the Initial Purchasers in the manner contemplated herein, in the Disclosure Package and the Final Memorandum.

 

(g)   The Company is not, and after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Disclosure Package and the Final Memorandum will not be, an “investment company” or an entity “controlled” by an “investment company” within the meaning of the Investment Company Act.

 

(h)   The Company has not paid or agreed to pay to any person any compensation for soliciting another to purchase the Securities (except as contemplated in this Agreement).

 

(i)    The Company has not taken, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result, under the Exchange Act or otherwise, in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.

 

(j)    Each of the Company and its subsidiaries has been duly formed and is validly existing as a corporation, limited partnership or limited liability company, as applicable, in good standing under the laws of the jurisdiction in which it is organized or formed, as applicable, with full corporate, limited partnership or limited liability company, as applicable, power and authority, to own or lease, as the case may be, and to operate its properties currently owned or leased or to be owned or leased on the Closing Date and each settlement date and to conduct its business as currently conducted or as to be conducted on the Closing Date and each settlement date, in each case in all material respects as described in the Disclosure Package and the Final Memorandum, and is duly qualified to do business as a foreign corporation, limited partnership or limited liability company, as applicable and is in good standing under the laws of each jurisdiction that requires such qualification except where failure to be so qualified would not have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business (a “Material Adverse Effect”).

 

3

 

(k)   The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, the Registration Rights Agreement and the Indenture.

 

(l)    All the outstanding shares of capital stock or other equity interests of each subsidiary of the Company have been duly authorized and validly issued and are fully paid and nonassessable, and, except as otherwise set forth in the Disclosure Package and the Final Memorandum, all outstanding shares of capital stock or other equity interests of the subsidiaries are owned by the Company either directly or through wholly owned subsidiaries free and clear of any security interest, claim, lien or encumbrance.

 

(m)  The statements in the Preliminary Memorandum and the Final Memorandum under the headings “Certain United States Federal Income Tax Considerations” and “Description of the Notes” fairly and accurately summarize the matters therein described.

 

(n)   This Agreement has been duly authorized, executed and delivered by the Company; the Registration Rights Agreement has been duly authorized by the Company and, assuming due authorization, execution and delivery thereof by the Trustee, when executed and delivered by the Company, will constitute a legal, valid, binding instrument enforceable against the Company in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors’ rights generally from time to time in effect and to general principles of equity); the Indenture has been duly authorized by the Company and, assuming due authorization, execution and delivery thereof by the Trustee, when executed and delivered by the Company, will constitute a legal, valid, binding instrument enforceable against the Company in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors’ rights generally from time to time in effect and to general principles of equity); and the Securities have been duly authorized, and, when executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Initial Purchasers, will have been duly executed and delivered by the Company and will constitute the legal, valid and binding obligations of the Company entitled to the benefits of the Indenture (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors’ rights generally from time to time in effect and to general principles of equity).

 

(o)   No consent, approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein, in the Registration Rights Agreement or in the Indenture, except such as may be required under the blue sky laws of any jurisdiction in which the Securities are offered and sold and, in the case of the Registration Rights Agreement, such as will be obtained under the Act and the Trust Indenture Act.

 

(p)   None of the execution and delivery of this Agreement, the Registration Rights Agreement or the Indenture, the issuance and sale of the Securities, or the consummation of any other of the transactions herein or therein contemplated, or the fulfillment of the terms hereof or thereof will conflict with, result in a breach or violation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to,

 

4

 

(i) the charter or by-laws or comparable constituting documents of the Company or any of its subsidiaries; (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company or any of its subsidiaries is a party or bound or to which its or their property is subject; or (iii) any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or any of its subsidiaries or any of its or their properties.

 

(q)   (i) The historical consolidated financial statements and schedules of the Company and its consolidated subsidiaries, the audited historical consolidated financial statements and schedules of Venoco, Inc. (“Venoco”) and its consolidated subsidiaries and the unaudited historical condensed consolidated financial statements and schedules of Venoco and its consolidated subsidiaries included or incorporated by reference in the Disclosure Package and the Final Memorandum present fairly the financial condition, results of operations and cash flows of the Company and Venoco, as applicable, as of the dates and for the periods indicated and comply as to form with the applicable accounting requirements of Regulation S-X and have been prepared in conformity with generally accepted accounting principles in the United States applied on a consistent basis throughout the periods involved (except as otherwise noted therein); the summary financial data set forth under the caption “Summary—Summary Historical Financial Data” and the selected financial data set forth under the caption “Selected Financial Data” in the Preliminary Memorandum and the Final Memorandum are fairly presented in all material respects and prepared on a basis consistent with the audited and unaudited historical financial statements from which they have been derived. There are no financial statements that are required to be included or incorporated by reference in the Disclosure Package or the Final Memorandum that are not so included or incorporated by reference as required.

 

(r)    There is no action, suit or proceeding before or by any court, arbitrator or governmental agency, body or official, domestic or foreign, now pending or, to the knowledge of the Company and any of its subsidiaries, threatened, to which the Company or any of its subsidiaries is or may be a party or to which the business or property of the Company or any of its subsidiaries is or may be subject, that is reasonably expected to (A) have a Material Adverse Effect, (B) prevent or result in the suspension of the offering and issuance of the Securities, or (C) in any manner draw into question the validity of this Agreement, the Registration Rights Agreement, the Indenture or the consummation of the transactions contemplated hereby and thereby.

 

(s)    Each of the Company and its subsidiaries has (i) legal, valid and defensible title to, or valid leasehold interests in, substantially all of the interests in oil and gas properties underlying the estimates of its net proved reserves contained in the Disclosure Package and the Final Memorandum, (ii) good and marketable title to all other real property owned by such entity and (iii) good and marketable title to all personal property owned by such entity, in each of (i), (ii) and (iii) free and clear of all liens, encumbrances and defects except (x) such as are described in the Disclosure Package and the Final Memorandum, (y) such as arise under or are expressly permitted by the Fifth Amended and Restated Credit Agreement dated as of October 3, 2012 among Venoco, the guarantors party thereto, the lenders party thereto, Citibank, N.A., as administrative agent, Citigroup Global Markets, Inc., as arranger, The Bank of Nova Scotia, as

 

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syndication agent, and KeyBank National Association, as documentation agent (as amended to the date hereof, the “First Lien Credit Agreement”), and the Senior Secured Note Purchase Agreement dated as of October 3, 2012 among Denver Parent Corporation, the purchasers party thereto and Citibank, N.A., as administrative agent and collateral agent (the “Secured Note Purchase Agreement,” and with the 11.50% Indenture, the 8.75% Indenture and the First Lien Credit Agreement, the “Existing Secured Credit Agreements”) or (z) such as do not materially affect the value of the property of the Company and its subsidiaries, taken as a whole, and do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; all real property and buildings held under lease by the Company or any of its subsidiaries are held by such entity under valid, subsisting and enforceable leases, with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries. The working interests derived from oil, gas and mineral leases or mineral interests which constitute a portion of the real property held or leased by the Company and its subsidiaries reflect in all material respects the right of the Company and its subsidiaries to explore, develop or produce hydrocarbons from such real property, and the care taken by the Company and its subsidiaries with respect to acquiring or otherwise procuring such leases, options to lease, drilling rights and concessions or other property interests was generally consistent with standard industry practices in the areas in which the Company and its subsidiaries operate for acquiring or procuring leases and interests therein to explore, develop or produce hydrocarbons.

 

(t)      Neither the Company nor any of its subsidiaries is (i) in violation of the charter or bylaws or comparable constituting documents of such entity, (ii) in violation of any law, statute, ordinance, administrative or governmental rule or regulation applicable to it or of any order, judgment, decree or injunction of any court or governmental agency or body having jurisdiction over the Company, any of its subsidiaries or any of their properties or assets or (iii) in breach, default (or an event which, with notice or lapse of time or both, would constitute such a default) or violation in the performance of any obligation, agreement, covenant or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any agreement, indenture, lease or other agreement or instrument to which it is a party or by which it or any of its properties or assets may be bound, which breach, default or violation in the case of clauses (ii) or (iii) would, if continued, reasonably be expected to have a Material Adverse Effect.

 

(u)     Ernst & Young LLP, who have certified certain financial statements of the Company and its consolidated subsidiaries and delivered their report with respect to the audited consolidated financial statements and schedules included or incorporated by reference in the Disclosure Package and the Final Memorandum, are independent public accountants with respect to the Company in accordance with local accounting rules and within the meaning of the Act.

 

(v)     As of the date hereof, (i) all royalties, rentals, deposits and other amounts owed under the oil and gas leases of the Company or its subsidiaries have been properly and timely paid (other than amounts held in suspense accounts pending routine payments or related to disputes about the proper identification of royalty owners), and no material amount of proceeds from the sale of production attributable to the properties subject to such leases are currently being held in suspense by any purchaser thereof, except where such amounts due

 

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would not, individually or in the aggregate, have a Material Adverse Effect, and (ii) there are no claims under take-or-pay contracts pursuant to which natural gas purchasers have any make-up rights affecting the interests of the Company or its subsidiaries in such properties, except where such claims would not, individually or in the aggregate, have a Material Adverse Effect.

 

(w)  The information underlying the estimates of the proved reserves of the Company and its subsidiaries that was supplied by the Company and its subsidiaries to DeGolyer & McNaughton (“DeGolyer”) for the purposes of preparing the reports of such petroleum engineer referenced in the Disclosure Package and the Final Memorandum (the “Reserve Reports”) and estimates of the proved reserves of the Company and its subsidiaries disclosed in the Disclosure Package and the Final Memorandum, including, production, costs of operation and, to the knowledge of the Company and its subsidiaries, future operations and sales of production, was true and correct in all material respects on the dates such information was provided, and such information was supplied and was prepared in accordance with customary industry practices; and the estimates of such reserves and present value as described in Disclosure Package and the Final Memorandum and reflected in the Reserve Reports are in compliance with the applicable requirements of the rules under the Act. Other than normal production of the reserves, product price fluctuations, and fluctuations of demand for such products, and except as disclosed in the Disclosure Package and the Final Memorandum, the Company and its subsidiaries are not aware of any facts or circumstances that would result in a materially adverse change in the reserves in the aggregate, or the aggregate present value of the future net cash flows therefrom as described in the Disclosure Package and the Final Memorandum and as reflected in the Reserve Reports.

 

(x)   DeGolyer, who has delivered the letter referred to in Section 6(e) hereof, was, as of the date of such report, and is, as of the date hereof, an independent reserve engineer with respect to the Company and its subsidiaries.

 

(y)   At the Closing Date and each settlement date, after giving effect to the transactions contemplated hereby, the Company and each of the subsidiaries will have such consents, easements, rights-of-way, permits or licenses from each person (collectively, “rights-of-way”) as are necessary to conduct its respective business in the manner described, and subject to the limitations contained, in the Disclosure Package and the Final Memorandum, if any, except for (i) qualifications, reservations and encumbrances that would not have a Material Adverse Effect and (ii) such rights-of-way that, if not obtained, would not have, individually or in the aggregate, a Material Adverse Effect; other than as set forth, and subject to the limitations contained, in the Disclosure Package and the Final Memorandum, the Company and each of its subsidiaries has, or at the Closing Date and each settlement date, following consummation of the transactions contemplated hereby will have, fulfilled and performed, in all material respects, its respective obligations with respect to such rights-of-way and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or would result in any impairment of the rights of the holder of any such rights-of-way, except for such revocations, terminations and impairments that individually or in the aggregate, would not have a Material Adverse Effect; and, except as described in the Disclosure Package and the Final Memorandum, if any, none of such rights-of-way contains any restriction that is materially burdensome to the Company and its subsidiaries, individually or in the aggregate.

 

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(z)   There are no stamp or other issuance or transfer taxes or duties or other similar fees or charges required to be paid by the Company or its subsidiaries in connection with the execution and delivery of this Agreement or the issuance or sale of the Securities.

 

(aa)       The Company and each of its subsidiaries has filed (or has obtained extensions with respect to) all material federal, state and local income and franchise tax returns required to be filed through the date hereof, which returns are complete and correct in all material respects, and has timely paid all taxes shown to be due pursuant to such returns. No tax deficiency has been determined adversely to the Company or any of its subsidiaries, and none of the Company or any of its subsidiaries has any knowledge of any tax deficiency or related assessment, fine or penalty that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect, except those that are being contested in good faith and for which adequate reserves have been established in accordance with generally accepted accounting principles.

 

(bb)       No labor problem or dispute with the employees of the Company or any of its subsidiaries exists or is threatened or imminent, and neither the Company nor any of its subsidiaries is aware of any existing or imminent labor disturbance by the employees of any of the Company or any of its subsidiaries’ principal suppliers, contractors or customers, that could have a Material Adverse Effect, except as set forth in or contemplated in the Disclosure Package and the Final Memorandum (exclusive of any supplement thereto).

 

(cc)        No subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiary’s capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary’s property or assets to the Company or any other subsidiary of the Company, except as described in or contemplated in the Disclosure Package or the Final Memorandum (in each case, exclusive of any amendment or supplement thereto).

 

(dd)       The Company and its subsidiaries carry, or are entitled to the benefits of, insurance relating to the business of the Company and its subsidiaries, with reputable insurers, in such amounts and covering such risks as is commercially reasonable, and all such insurance is in full force and effect; the Company and its subsidiaries are in compliance with the terms of such policies and instruments in all material respects; and there are no claims by the Company or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; neither the Company nor any of its subsidiaries has been refused any insurance coverage sought or applied for. The Company and its subsidiaries have received no notice from such insurers that the Company and its subsidiaries will not be able to (i) renew their existing insurance coverage relating to the business of the Company and its subsidiaries as and when such policies expire or (ii) obtain comparable coverage relating to the business of the Company and its subsidiaries as may be necessary or appropriate to conduct such business as now conducted and at a cost that would not be reasonably expected to have a Material Adverse Effect.

 

(ee)        The Company and its subsidiaries possess all such permits, consents, licenses, franchises, certificates and authorizations of governmental or regulatory authorities

 

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(“governmental permits”) as are necessary to own or lease its properties and to conduct its business in the manner described in the Disclosure Package and the Final Memorandum, subject to such qualifications set forth in the Disclosure Package and the Final Memorandum and except for such governmental permits that, if not obtained, would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; the Company and each of its subsidiaries has, and at the Closing Date and each settlement date will be in compliance with the terms and conditions of, all such governmental permits, except where the failure so to comply would not reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect; and no event has occurred that would prevent the governmental permits from being renewed or reissued or which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any impairment of the rights of the holder of any such governmental permit, except for such non-renewals, non-issuances, revocations, terminations and impairments that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(ff)        The interactive data in eXtensible Business Reporting Language (“XBRL”) included or incorporated by reference in the Preliminary Memorandum and the Final Memorandum fairly presents the information called for in all material respects and has been prepared in accordance with the Commission’s rules and guidelines applicable thereto.

 

(gg)        The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences; and (v) the interactive data in XBRL included or incorporated by reference in the Preliminary Memorandum and the Final Memorandum is in compliance with the Commission’s published rules, regulations and guidelines applicable thereto. The Company and each of its subsidiaries’ internal controls over financial reporting are effective and neither the Company nor any of its subsidiaries is aware of any material weakness in their internal control over financial reporting.

 

(hh)       The Company and each of its subsidiaries (i) is in compliance with any and all foreign, federal, state and local laws and regulations relating to the prevention of pollution or the protection of the environment or imposing liability or standards of conduct concerning any Hazardous Material (as hereinafter defined) (“Environmental Laws”), (ii) has received and is in compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses as they are currently being conducted, (iii) has not received written or oral notice of any actual or potential liability under any Environmental Law, and (iv) is not a party to or affected by any pending or, to the knowledge of the Company and its subsidiaries, threatened action, suit or proceeding relating to any alleged violation of any Environmental Law or any actual or alleged release or threatened release or cleanup at any location of any Hazardous Material, except where such noncompliance or deviation from that described in (i)-(iv) above would not, individually or in the aggregate,

 

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reasonably be expected to have a Material Adverse Effect. The term “Hazardous Material” means (A) any “hazardous substance” as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), (B) any “hazardous waste” as defined in the Resource Conservation and Recovery Act, as amended, (C) any petroleum or petroleum product, (D) any polychlorinated biphenyl and (E) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material, waste or substance regulated under any applicable Environmental Law. Neither the Company nor any of its subsidiaries has received written notice that they are currently named as a “potentially responsible party” under CERCLA.

 

(ii)          In the ordinary course of its business, the Company and each of its subsidiaries periodically reviews the effect of Environmental Laws on the business, operations and properties of the Company and its subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures reasonably likely to be required for clean-up, closure of properties or compliance with Environmental Laws, or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such review, the Company and each of its subsidiaries has concluded that such associated costs and liabilities would not, singly or in the aggregate, have a Material Adverse Effect.

 

(jj)         The subsidiaries listed on Annex A attached hereto are the only subsidiaries of the Company.

 

(kk)       None of the following events has occurred or exists: (i) a failure to fulfill the obligations, if any, under the minimum funding standards of Section 302 of the United States Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the regulations and published interpretations thereunder with respect to a Plan, determined without regard to any waiver of such obligations or extension of any amortization period; (ii) an audit or investigation by the Internal Revenue Service, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation or any other federal or state governmental agency or any foreign regulatory agency with respect to the employment or compensation of employees by the Company or any of its subsidiaries that could have a Material Adverse Effect; (iii) any breach of any contractual obligation, or any violation of law or applicable qualification standards, with respect to the employment or compensation of employees by the Company or any of its subsidiaries that could have a Material Adverse Effect. None of the following events has occurred or is reasonably likely to occur: (w) a material increase in the aggregate amount of contributions required to be made to all Plans in the current fiscal year of the Company or any of its subsidiaries compared to the amount of such contributions made in the most recently completed fiscal year of the Company or any of its subsidiaries; (x) a material increase in the “accumulated post-retirement benefit obligations” (within the meaning of Statement of Financial Accounting Standards 106) of the Company or any of its subsidiaries compared to the amount of such obligations in the most recently completed fiscal year of the Company or any of its subsidiaries; (y) any event or condition giving rise to a liability under Title IV of ERISA that could have a Material Adverse Effect; or (z) the filing of a claim by one or more employees or former employees of the Company or any of its subsidiaries related to their employment that could have a Material Adverse Effect. For purposes of this paragraph, the term “Plan” means a plan (within the 

 

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meaning of Section 3(3) of ERISA) subject to Title IV of ERISA with respect to which the Company or any of its subsidiaries may have any liability.

 

(ll)          The operations of the Company and each of its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements and the money laundering statutes, and the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company and its subsidiaries, threatened.

 

(mm)    Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries (i) is currently subject to any sanctions administered imposed by the United States (including any administered or enforced by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”) or (ii) will, directly or indirectly, use the proceeds of this offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person in any manner that will result in a violation of any economic sanctions imposed by the United States (including any administered or enforced by OFAC, the U.S. Department of State, or the Bureau of Industry and Security of the U.S. Department of Commerce), the United Nations Security Council, the European Union, or the United Kingdom (including sanctions administered or controlled by Her Majesty’s Treasury) (collectively, “Sanctions” and such persons, “Sanction Persons”) by, or could result in the imposition of Sanctions against, any person (including any person participating in the offering, whether as underwriter, advisor, investor or otherwise).

 

(nn)       Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries, is a person that is, or is 50% or more owned or otherwise controlled by a person that is: (i) the subject of any Sanctions; or (ii) located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions that broadly prohibit dealings with that country or territory (currently, Cuba, Iran, North Korea, Sudan, and Syria) (collectively, “Sanctioned Countries” and each, a “Sanctioned Country”).

 

(oo)       Except as has been disclosed to the Initial Purchasers or is not material to the analysis under any Sanctions, neither the Company nor any of its subsidiaries has engaged in any dealings or transactions with or for the benefit of a Sanctioned Person, or with or in a Sanctioned Country, in the preceding three years, nor does the Company or any of its subsidiaries have any plans to increase its dealings or transactions with Sanctioned Persons, or with or in Sanctioned Countries.

 

(pp)       Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or Affiliate of the Company or any of its subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”), including, without limitation, making use of the

 

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mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA; and the Company, its subsidiaries and, to the knowledge of the Company, its Affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.

 

(qq)       The Company and each of its subsidiaries owns, possesses, licenses or has other rights to use, on reasonable terms, all patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, technology, know-how and other intellectual property (collectively, the “Intellectual Property”) necessary for the conduct of each of its respective business as now conducted or as proposed in the Disclosure Package and the Final Memorandum to be conducted and there is no pending or, to the knowledge of the Company and each of its subsidiaries, threatened action, suit, proceeding or claim by others challenging the Company or any of its subsidiaries’ respective rights in or to any such Intellectual Property, and the Company and each of its subsidiaries is unaware of any facts which would form a reasonable basis for any such claim.

 

(rr)         There are no agreements, contracts, indentures, leases or other instruments that are required to be described in the Disclosure Package or the Final Memorandum that are not described as required by the Act. Each contract, document or other agreement described in the Disclosure Package or the Final Memorandum is in full force and effect and is valid and enforceable by and against the Company and its subsidiaries, as the case may be, in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws relating to or affecting creditors’ rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as would not reasonably be expected to have a Material Adverse Effect. The statements included in the Disclosure Package and the Final Memorandum insofar as such statements summarize legal matters, agreements, documents or proceedings discussed therein, are accurate summaries of such legal matters, agreements, documents or proceedings in all material respects.

 

(ss)        Any statistical and market-related data included in the Disclosure Package or the Final Memorandum are based on or derived from sources that the Company and its subsidiaries believe to be reliable and accurate and, to the extent required, the Company and its subsidiaries have obtained the written consent to the use of such data from such sources.

 

(tt)         Each of the statements made by the Company in the Disclosure Package and the Final Memorandum (and any supplements thereto) within the coverage of Rule 175(b) under the Act and any statements made in support thereof or related thereto was made or will be made with a reasonable basis and in good faith.

 

(uu)       Any certificate signed by any officer of the Company and delivered to the Representatives or counsel for the Initial Purchasers in connection with the offering of the

 

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Securities shall be deemed a representation and warranty by the Company, as to matters covered thereby, to each Initial Purchaser.

 

2.     Purchase and Sale. Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company agrees to sell to each Initial Purchaser, and each Initial Purchaser agrees, severally and not jointly, to purchase from the Company, at a purchase price of 95.554% of the principal amount thereof, plus accrued interest and amortization of original issue discount, if any, from August 9, 2013 to the Closing Date, the principal amount of Securities set forth opposite such Initial Purchaser’s name in Schedule I hereto.

 

3.     Delivery and Payment. Delivery of and payment for the Securities shall be made at the offices of Latham & Watkins LLP, 811 Main Street, Suite 3700, Houston, Texas 77002 at 10:00 A.M., New York City time, on August 15, 2013, or at such time on such later date not more than three Business Days after the foregoing date as the Representatives shall designate, which date and time may be postponed by agreement between the Representatives and the Company or as provided in Section 9 hereof (such date and time of delivery and payment for the Securities being called herein the “Closing Date”). Delivery of the Securities shall be made to the Representatives for the respective accounts of the several Initial Purchasers against payment by the several Initial Purchasers through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to the account specified by the Company. Delivery of the Securities shall be made through the facilities of The Depository Trust Company unless the Representatives shall otherwise instruct.

 

4.     Offering by Initial Purchasers. (a) Each Initial Purchaser acknowledges that the Securities have not been and will not be registered under the Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Act.

 

(b) Each Initial Purchaser, severally and not jointly, represents and warrants to and agrees with the Company that:

 

(i)            it has not offered or sold, and will not offer or sell, any Securities within the United States or to, or for the account or benefit of, U.S. persons (x) as part of their distribution at any time or (y) otherwise until 40 days after the later of the commencement of the offering and the date of the closing of the offering except:

 

(A)                               to those it reasonably believes to be “qualified institutional buyers” (as defined in Rule 144A under the Act) or

 

(B)                               in accordance with Rule 903 of Regulation S;

 

(ii)           neither it nor any person acting on its behalf has made or will make offers or sales of the Securities in the United States by means of any form of general solicitation or general advertising (within the meaning of Regulation D) in the United States;

 

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(iii)          in connection with each sale pursuant to Section 4(b)(i)(A), it has taken or will take reasonable steps to ensure that the purchaser of such Securities is aware that such sale may be made in reliance on Rule 144A;

 

(iv)          neither it, nor any of its Affiliates nor any person acting on its or their behalf has engaged or will engage in any directed selling efforts (within the meaning of Regulation S) with respect to the Securities;

 

(v)           it is an “accredited investor” (as defined in Rule 501(a) of Regulation D);

 

(vi)          it has complied and will comply with the offering restrictions requirement of Regulation S;

 

(vii)         at or prior to the confirmation of sale of Securities (other than a sale of Securities pursuant to Section 4(b)(i)(A) of this Agreement), it shall have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from it during the distribution compliance period (within the meaning of Regulation S) a confirmation or notice to substantially the following effect:

 

“The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the “Act”) and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the date of closing of the offering, except in either case in accordance with Regulation S or Rule 144A under the Act. Additional restrictions on the offer and sale of the Securities are described in the offering memorandum for the Securities. Terms used in this paragraph have the meanings given to them by Regulation S.”;

 

(viii)        it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of any Securities, in circumstances in which Section 21(1) of the FSMA does not apply to the Company;

 

(ix)          it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom; and

 

(x)           in relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation

 

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Date”), it has not made and will not make an offer to the public of any Securities which are the subject of the offering contemplated by this Agreement in that Relevant Member State, except that it is permitted to have made and may make an offer to the public in that Relevant Member State of any Securities at any time with effect from and including the Relevant Implementation Date under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

 

(A)                               to legal entities which are

 

(B)          qualified investors as defined in the Prospectus Directive;

 

(C)                               to fewer than 100, or, if the Relevant Member State has implemented the relevant provisions of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the Representatives for any such offer;

 

(D)                               in any other circumstances falling within Article 3(2) of the Prospectus Directive;

 

provided that no such offer of Securities shall require the Company or any Initial Purchaser to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive. For the purposes of this provision, the expression an “offer to the public” in relation to any Securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any Securities to be offered so as to enable an investor to decide to purchase any Securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU;

 

5.     Agreements. The Company agrees with each Initial Purchaser that:

 

(a) The Company will furnish to each Initial Purchaser and to counsel for the Initial Purchasers, without charge, during the period referred to in Section 5(c) below, as many copies of the materials contained in the Disclosure Package and the Final Memorandum and any amendments and supplements thereto as they may reasonably request.

 

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(b)   The Company will prepare a final term sheet, containing solely a description of final terms of the Securities and the offering thereof, in the form approved by you and attached as Schedule II hereto.

 

(c)   The Company will not amend or supplement the Disclosure Package or the Final Memorandum other than by filing documents under the Exchange Act that are incorporated by reference therein, without the prior written consent of the Representatives; provided, however, that prior to the completion of the distribution of the Securities by the Initial Purchasers (as defined by the Initial Purchasers), the Company will not file any document under the Exchange Act that is incorporated by reference in the Disclosure Package or the Final Memorandum unless, prior to such proposed filing, the Company has furnished the Representatives with a copy of such document for their review and the Representatives have not reasonably objected to the filing of such document. The Company will promptly advise the Representatives when any document filed under the Exchange Act that is incorporated by reference in the Disclosure Package or the Final Memorandum shall have been filed with the Commission.

 

(d)   If at any time prior to the completion of the sale of the Securities by the Initial Purchasers (as determined by the Representatives), any event occurs as a result of which the Disclosure Package or the Final Memorandum, as then amended or supplemented, would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made or the circumstances then prevailing, not misleading, or if it should be necessary to amend or supplement the Disclosure Package or the Final Memorandum to comply with applicable law, the Company will promptly (i) notify the Representatives of any such event; (ii) subject to the requirements of Section 5(c), prepare an amendment or supplement that will correct such statement or omission or effect such compliance; and (iii) supply any supplemented or amended Disclosure Package or Final Memorandum to the several Initial Purchasers and counsel for the Initial Purchasers without charge in such quantities as they may reasonably request.

 

(e)   Without the prior written consent of the Representatives, the Company has not given and will not give to any prospective purchaser of the Securities any written information concerning the offering of the Securities other than materials contained in the Disclosure Package, the Final Memorandum or any other offering materials prepared by or with the prior written consent of the Representatives.

 

(f)    The Company will arrange, if necessary, for the qualification of the Securities for sale by the Initial Purchasers under the laws of such jurisdictions as the Representatives may designate (including Japan and certain provinces of Canada) and will maintain such qualifications in effect so long as required for the sale of the Securities; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Securities, in any jurisdiction where it is not now so subject. The Company will promptly advise the Representatives of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose.

 

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(g)   The Company will not, and will not permit any of its Affiliates to, resell any Securities that have been acquired by any of them.

 

(h)   None of the Company, its Affiliates, or any person acting on its or their behalf will, directly or indirectly, make offers or sales of any security, or solicit offers to buy any security, under circumstances that would require the registration of the Securities under the Act.

 

(i)    None of the Company, its Affiliates, or any person acting on its or their behalf will engage in any directed selling efforts (within the meaning of Regulation S) with respect to the Securities; and each of them will comply with the offering restrictions requirement of Regulation S.

 

(j)    None of the Company, its Affiliates, or any person acting on its or their behalf will engage in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer or sale of the Securities in the United States.

 

(k)   For so long as any of the Securities are outstanding and are “restricted securities” within the meaning of Rule 144(a)(3) under the Act, the Company, during any period in which it is not subject to and in compliance with Section 13 or 15(d) of the Exchange Act or it is not exempt from such reporting requirements pursuant to and in compliance with Rule 12g3-2(b) under the Exchange Act, will provide to each holder of such restricted securities and to each prospective purchaser (as designated by such holder) of such restricted securities, upon the request of such holder or prospective purchaser, any information required to be provided by Rule 144A(d)(4) under the Act. This covenant is intended to be for the benefit of the holders, and the prospective purchasers designated by such holders, from time to time of such restricted securities.

 

(l)    The Company will cooperate with the Representatives and use its best efforts to permit the Securities to be eligible for clearance and settlement through The Depository Trust Company.

 

(m)  The Company will not for a period of 60 days following the Execution Time, without the prior written consent of Citigroup offer, sell, contract to sell, pledge, otherwise dispose of, or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the Company or any Affiliate of the Company or any person in privity with the Company or any Affiliate of the Company), directly or indirectly, or announce the offering, of any debt securities issued or guaranteed by the Company (other than the Securities).

 

(n)   The Company will not take, directly or indirectly, any action designed to, or that would constitute or that might reasonably be expected to, cause or result, under the Exchange Act or otherwise, in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.

 

(o)   The Company will, for a period of twelve months following the Execution Time, furnish to the Representatives (i) all reports or other communications (financial or other)

 

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generally made available to its shareholders, and deliver such reports and communications to the Representatives as soon as they are available, unless such documents are furnished to or filed with the Commission or any securities exchange on which any class of securities of the Company is listed and generally made available to the public and (ii) such additional information concerning the business and financial condition of the Company as the Representatives may from time to time reasonably request (such statements to be on a consolidated basis to the extent the accounts of the Company and its subsidiaries are consolidated in reports furnished to its shareholders).

 

(p)   The Company will comply with all applicable securities and other laws, rules and regulations, and use its best efforts to cause the Company’s directors and officers, in their capacities as such, to comply with such laws, rules and regulations.

 

(q)   The Company agrees to pay the costs and expenses relating to the following matters: (i) the preparation of the Indenture and the Registration Rights Agreement and the issuance of the Securities and the fees of the Trustee; (ii) the preparation, printing or reproduction of the materials contained in the Disclosure Package and the Final Memorandum and each amendment or supplement to either of them; (iii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the materials contained in the Disclosure Package and the Final Memorandum, and all amendments or supplements to either of them, as may, in each case, be reasonably requested for use in connection with the offering and sale of the Securities; (iv) the preparation, printing, authentication, issuance and delivery of the Securities; (v) any stamp or transfer taxes in connection with the original issuance and sale of the Securities; (vi) the printing (or reproduction) and delivery of this Agreement, any blue sky memorandum and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Securities; (vii) any registration or qualification of the Securities for offer and sale under the securities or blue sky laws of the several states, Japan, the provinces of Canada and any other jurisdictions specified pursuant to Section 5(e) (including filing fees and the reasonable fees and expenses of counsel for the Initial Purchasers relating to such registration and qualification); (viii) admitting the Securities for trading on the PORTAL Market; (ix) the transportation and other expenses incurred by or on behalf of Company representatives in connection with presentations to prospective purchasers of the Securities, including any aircraft chartered in connection with such presentations; (x) the fees and expenses of the Company’s accountants and the fees and expenses of counsel (including local and special counsel) for the Company; and (xi) all other costs and expenses incident to the performance by the Company of its obligations hereunder.

 

6.      Conditions to the Obligations of the Initial Purchasers. The obligations of the Initial Purchasers to purchase the Securities shall be subject to the accuracy of the representations and warranties of the Company contained herein at the Execution Time and the Closing Date, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions:

 

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(a) The Company shall have requested and caused Bracewell & Giuliani LLP, counsel for the Company, to furnish to the Representatives its opinion, dated the Closing Date and addressed to the Representatives, substantially in the form set forth in Annex B hereto.

 

(b) The Representatives shall have received from Latham & Watkins LLP, counsel for the Initial Purchasers, such opinion or opinions, dated the Closing Date and addressed to the Representatives, with respect to the issuance and sale of the Securities, the Indenture, the Registration Rights Agreement, the Disclosure Package, the Final Memorandum (as amended or supplemented at the Closing Date) and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters.

 

(c) The Company shall have furnished to the Representatives a certificate of the Company, signed by (x) the Chairman of the Board or the President and (y) the principal financial or accounting officer of the Company, dated the Closing Date, to the effect that the signers of such certificate have carefully examined the Disclosure Package and the Final Memorandum and any supplements or amendments thereto, and this Agreement and that:

 

(i)            the representations and warranties of the Company in this Agreement are true and correct on and as of the Closing Date with the same effect as if made on the Closing Date, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date; and

 

(ii)           since the date of the most recent financial statements included or incorporated by reference in the Disclosure Package and the Final Memorandum (exclusive of any amendment or supplement thereto), there has been no material adverse change in the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Disclosure Package and the Final Memorandum (exclusive of any amendment or supplement thereto).

 

(d) At the Execution Time and at the Closing Date, the Company and Venoco each shall have requested and caused Ernst & Young LLP to furnish to the Representatives letters, dated respectively as of the Execution Time and as of the Closing Date, in form and substance satisfactory to the Representatives and confirming that they are independent accountants within the meaning of the Exchange Act and the applicable published rules.

 

(e) At the Execution Time and at the Closing Date, the Company shall have requested and caused DeGolyer to furnish to the Representatives letters, dated respectively as of the Execution Time and as of the Closing Date, in form and substance satisfactory to the Representatives.

 

(f) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Disclosure Package (exclusive of any amendment or supplement thereto) and the Final Memorandum (exclusive of any amendment or supplement thereto), there

 

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shall not have been (i) any change or decrease specified in the letter or letters referred to in paragraph (d) of this Section 6; or (ii) any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Disclosure Package and the Final Memorandum (exclusive of any amendment or supplement thereto), the effect of which, in any case referred to in clause (i) or (ii) above, is, in the sole judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated in the Disclosure Package and the Final Memorandum (exclusive of any amendment or supplement thereto).

 

(g)     The Securities shall have been designated as PORTAL-eligible securities in accordance with the rules and regulations of FINRA and the Securities shall be eligible for clearance and settlement through The Depository Trust Company.

 

(h)     Subsequent to the Execution Time, there shall not have been any decrease in the rating of any of the debt securities of the Company or Venoco by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 3(a)(62) under the Exchange Act) or any notice given of any intended or potential decrease in any such rating or of a possible change in any such rating that does not indicate the direction of the possible change.

 

(i)      Prior to the Closing Date, the Company shall have furnished to the Representatives such further information, certificates and documents as the Representatives may reasonably request.

 

If any of the conditions specified in this Section 6 shall not have been fulfilled when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be reasonably satisfactory in form and substance to the Representatives and counsel for the Initial Purchasers, this Agreement and all obligations of the Initial Purchasers hereunder may be canceled at, or at any time prior to, the Closing Date by the Representatives. Notice of such cancellation shall be given to the Company in writing or by telephone or facsimile confirmed in writing.

 

The documents required to be delivered by this Section 6 will be delivered at the office of Latham & Watkins LLP, counsel for the Initial Purchasers, at 811 Main Street, Suite 3700, Houston, Texas 77002, on the Closing Date.

 

7.      Reimbursement of Expenses. If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Initial Purchasers set forth in Section 6 hereof is not satisfied, because of any termination pursuant to Section 10 hereof or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof other than by reason of a default by any of the Initial Purchasers, the Company will reimburse the Initial Purchasers severally through Citigroup on demand for all expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the proposed purchase and sale of the Securities.

 

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8.      Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Initial Purchaser, the directors, officers, employees, Affiliates and agents of each Initial Purchaser and each person who controls any Initial Purchaser within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other U.S. federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Memorandum, the Final Memorandum, any Issuer Written Information or any other written information used by or on behalf of the Company in connection with the offer or sale of the Securities, or in any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by it in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made in the Preliminary Memorandum or the Final Memorandum, or in any amendment thereof or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Initial Purchaser through the Representatives specifically for inclusion therein. This indemnity agreement will be in addition to any liability that the Company may otherwise have.

 

(b)   Each Initial Purchaser severally, and not jointly, agrees to indemnify and hold harmless the Company and each of its directors, each of its officers, and each person who controls the Company within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity to each Initial Purchaser, but only with reference to written information relating to such Initial Purchaser furnished to the Company by or on behalf of such Initial Purchaser through the Representatives specifically for inclusion in the Preliminary Memorandum or the Final Memorandum (or in any amendment or supplement thereto). This indemnity agreement will be in addition to any liability that any Initial Purchaser may otherwise have. The Company acknowledges that (i) the statements set forth in the last paragraph of the cover page and (ii) the 9th and 10th paragraph under the heading “Plan of Distribution” in the Preliminary Memorandum and the Final Memorandum constitute the only information furnished in writing by or on behalf of the Initial Purchasers for inclusion in the Preliminary Memorandum or the Final Memorandum or in any amendment or supplement thereto.

 

(c)   Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided

 

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in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party’s choice at the indemnifying party’s expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be satisfactory to the indemnified party. Notwithstanding the indemnifying party’s election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party; (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action; or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding and does not include any statements as to or any findings of fault, culpability or failure to act by or on behalf of any indemnified party.

 

(d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 8 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company on the one hand and the Initial Purchasers on the other severally agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending any loss, claim, damage, liability or action) (collectively “Losses”) to which the Company and one or more of the Initial Purchasers may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and by the Initial Purchasers on the other from the offering of the Securities; provided, however, that in no case shall any Initial Purchaser be responsible for any amount in excess of the purchase discount or commission applicable to the Securities purchased by such Initial Purchaser hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Initial Purchasers severally shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Initial Purchasers on the other in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the offering (before deducting expenses) received by it, and benefits received by the Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions. Relative fault shall be 

 

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determined by reference to, among other things, whether any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information provided by the Company on the one hand or the Initial Purchasers on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Initial Purchasers agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation that does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls an Initial Purchaser within the meaning of either the Act or the Exchange Act and each director, officer, employee, Affiliate and agent of an Initial Purchaser shall have the same rights to contribution as such Initial Purchaser, and each person who controls the Company within the meaning of either the Act or the Exchange Act and each officer and director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d).

 

9.     Default by an Initial Purchaser. If any one or more Initial Purchasers shall fail to purchase and pay for any of the Securities agreed to be purchased by such Initial Purchaser hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Initial Purchasers shall be obligated severally to take up and pay for (in the respective proportions which the principal amount of Securities set forth opposite their names in Schedule I hereto bears to the aggregate principal amount of Securities set forth opposite the names of all the remaining Initial Purchasers) the Securities which the defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase; provided, however, that in the event that the aggregate principal amount of Securities which the defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase shall exceed 10% of the aggregate principal amount of Securities set forth in Schedule I hereto, the remaining Initial Purchasers shall have the right to purchase all, but shall not be under any obligation to purchase any, of the Securities, and if such nondefaulting Initial Purchasers do not purchase all the Securities, this Agreement will terminate without liability to any nondefaulting Initial Purchaser or the Company. In the event of a default by any Initial Purchaser as set forth in this Section 9, the Closing Date shall be postponed for such period, not exceeding five Business Days, as the Representatives shall determine in order that the required changes in the Final Memorandum or in any other documents or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting Initial Purchaser of its liability, if any, to the Company or any nondefaulting Initial Purchaser for damages occasioned by its default hereunder.

 

10.  Termination. This Agreement shall be subject to termination in the absolute discretion of the Representatives, by notice given to the Company prior to delivery of and payment for the Securities, if at any time prior to such time (i) trading in securities generally on the New York Stock Exchange shall have been suspended or limited or minimum prices shall have been established on such exchange; (ii) a banking moratorium shall have been declared either by U.S. federal or New York State authorities; or (iii) there shall have occurred any

 

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outbreak or escalation of hostilities, declaration by the United States of a national emergency or war or other calamity or crisis the effect of which on financial markets is such as to make it, in the sole judgment of the Representatives, impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated in the Disclosure Package and the Final Memorandum (exclusive of any amendment or supplement thereto).

 

11.  Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company or its officers and of the Initial Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Initial Purchasers or the Company or any of the indemnified persons referred to in Section 8 hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 7 and 8 hereof shall survive the termination or cancellation of this Agreement.

 

12.  Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Representatives, will be mailed, delivered or telefaxed to the Citigroup General Counsel (fax no.: (212) 816-7912) and confirmed to Citigroup at 388 Greenwich Street, New York, New York 10013, Attention: General Counsel, and to Merrill Lynch, Pierce, Fenner & Smith Incorporated, 50 Rockefeller Plaza, New York, New York 10020, Attn: High Yield Legal Department, fax no. 917-267-7085; or, if sent to the Company, will be mailed, delivered or telefaxed to (303) 626-8315, and confirmed to it at 370 17th Street, Suite 3900, Denver, Colorado 80202, attention of the Legal Department.

 

13.  Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the indemnified persons referred to in Section 8 hereof and their respective successors, and, except as expressly set forth in Section 5(k) hereof, no other person will have any right or obligation hereunder.

 

14.  Integration. This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company and the Initial Purchasers, or any of them, with respect to the subject matter hereof.

 

15.  Applicable Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York.

 

16.  Waiver of Jury Trial. The Company hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

 

17.  No Fiduciary Duty. The Company hereby acknowledges that (a) the purchase and sale of the Securities pursuant to this Agreement is an arm’s-length commercial transaction between the Company, on the one hand, and the Initial Purchasers and any Affiliate through which it may be acting, on the other, (b) the Initial Purchasers are acting as principal and not as an agent or fiduciary of the Company and (c) the Company’s engagement of the Initial Purchasers in connection with the offering and the process leading up to the offering is as independent contractors and not in any other capacity. Furthermore, the Company agrees that it

 

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is solely responsible for making its own judgments in connection with the offering (irrespective of whether any of the Initial Purchasers has advised or is currently advising the Company on related or other matters). The Company agrees that they will not claim that the Initial Purchasers have rendered advisory services of any nature or respect, or owe an agency, fiduciary or similar duty to the Company, in connection with such transaction or the process leading thereto.

 

18.    Currency. Each reference in this Agreement to U.S. dollars (the “relevant currency”), including by use of the symbol “$”,is of the essence. To the fullest extent permitted by law, the obligation of the Company in respect of any amount due under this Agreement will, notwithstanding any payment in any other currency (whether pursuant to a judgment or otherwise), be discharged only to the extent of the amount in the relevant currency that the party entitled to receive such payment may, in accordance with its normal procedures, purchase with the sum paid in such other currency (after any premium and costs of exchange) on the Business Day immediately following the day on which such party receives such payment. If the amount in the relevant currency that may be so purchased for any reason falls short of the amount originally due, the Company will pay such additional amounts, in the relevant currency, as may be necessary to compensate for the shortfall. Any obligation of the Company not discharged by such payment will, to the fullest extent permitted by applicable law, be due as a separate and independent obligation and, until discharged as provided herein, will continue in full force and effect.

 

19.    Waiver of Immunity. To the extent that the Company has or hereafter may acquire any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction of any court or from set-off or any legal process (whether service or notice, attachment in aid or otherwise) with respect to itself or any of its property, the Company hereby irrevocably waives and agrees not to plead or claim such immunity in respect of its obligations under this Agreement.

 

20.    Waiver of Tax Confidentiality. Notwithstanding anything herein to the contrary, purchasers of the Securities (and each employee, representative or other agent of a purchaser) may disclose to any and all persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of any transaction contemplated herein and all materials of any kind (including opinions or other tax analyses) that are provided to the purchasers of the Securities relating to such U.S. tax treatment and U.S tax structure, other than any information for which nondisclosure is reasonably necessary in order to comply with applicable securities laws.

 

21.    Counterparts. This Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement.

 

22.    Headings. The section headings used herein are for convenience only and shall not affect the construction hereof.

 

23.    Definitions. The terms that follow, when used in this Agreement, shall have the meanings indicated.

 

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“Affiliate” shall have the meaning specified in Rule 501(b) of Regulation D.

 

“Business Day” shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in The City of New York.

 

“Citigroup” shall mean Citigroup Global Markets Inc.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended. 

 

“Commission” shall mean the Securities and Exchange Commission.

 

“Disclosure Package” shall mean (i) the Preliminary Memorandum, as amended or supplemented at the Execution Time, together with (ii) the final term sheet prepared pursuant to Section 5(b) hereto and in the form attached as Schedule II hereto and (iii) any Issuer Written Information.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.

 

“Execution Time” shall mean the date and time that this Agreement is executed and delivered by the parties hereto.

 

“FINRA” shall mean the Financial Industry Regulatory Authority.

 

“Investment Company Act” shall mean the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission promulgated thereunder.

 

“Issuer Written Information” shall mean any writings in addition to the Preliminary Memorandum that the parties expressly agree in writing to treat as part of the Disclosure Package.

 

“PORTAL” shall mean the Private Offerings, Resales and Trading through Automated Linkages system of FINRA.

 

“Regulation D” shall mean Regulation D under the Act. 

 

“Regulation S” shall mean Regulation S under the Act.

 

“Regulation S-X” shall mean Regulation S-X under the Act.

 

“Trust Indenture Act” shall mean the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission promulgated thereunder.

 

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If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among the Company and the several Initial Purchasers.

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
DENVER PARENT CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Terry L. Anderson
    
	
 
    	
 
    	
Name: Terry L. Anderson
    
	
 
    	
 
    	
Title: General Counsel and Secretary
    
	
 
    	
 
    
	
 
    	
 
    
	
The foregoing Agreement is hereby
   confirmed and accepted as of the
   date first above written.
    	
 
    
	
 
    	
 
    
	
By: Citigroup Global Markets Inc.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Robert Waldman
    	
 
    
	
 
    	
Name: Robert Waldman
    	
 
    
	
 
    	
Title: Vice President
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
By: Merrill Lynch, Pierce, Fenner & Smith

Incorporated
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ J. Lex Maultsby
    	
 
    
	
 
    	
Name: J. Lex Maultsby
    	
 
    
	
 
    	
Title: Managing Director
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
For itself and the other   several

Initial Purchasers named   in

Schedule I to the   foregoing Agreement.
    	
 
    

 

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