EXHIBIT 10.26
SEVENTH AMENDMENT AGREEMENT
This Seventh Amendment Agreement (the "Agreement") is entered into as
of January 18, 2002 by and among Monitronics International, Inc., a Texas
corporation (the "Company"), the holders of Preferred Stock listed on Schedule
of Preferred Holders attached hereto (the "Preferred Holders"), the holders of
Common Stock Purchase Warrants listed on the Schedule of Warrant Holders
attached hereto (the "Warrant Holders"), the holders of Common Stock listed on
the Schedule of Common Shareholders attached hereto (the "Common Shareholders"
and, together with the Preferred Holders and the Warrant Holders, the "Security
Holders").
Recitals
The Company and certain of the Security Holders are parties to, among
other agreements, the Preferred Stock Subordination Agreement, dated as of May
10, 1996 as amended by that certain Amendment Agreement, dated as of November
22, 1996 (the "First Amendment Agreement"), that certain Second Amendment
Agreement, dated as of May 19, 1997 (the "Second Amendment Agreement"), that
certain Transfer, Assignment and Assumption Agreement and Third Amendment
Agreement, dated as of January 1, 1998 (the "Third Amendment Agreement"), that
certain Transfer, Assignment and Assumption Agreement and Fourth Amendment
Agreement, dated as of July 22, 1998 (the "Fourth Amendment Agreement"), that
certain Fifth Amendment Agreement dated as of March 9, 1999 (the "Fifth
Amendment Agreement"), and that certain Sixth Amendment Agreement dated as of
April 27, 2001 (the "Sixth Amendment Agreement") (as so amended the "Preferred
Subordination Agreement").
The Company and certain of the Preferred Holders are parties to a Stock
Purchase Agreement, dated as of October 21, 1994, as amended by that certain
Amendment No. 1 to Stock Purchase Agreement, dated as of November 10, 1994, that
certain Amendment No. 2 to Stock Purchase Agreement, dated as of May 10, 1996,
the First Amendment Agreement, the Second Amendment Agreement, the Third
Amendment Agreement, that certain Consent to Various Actions under Various
Documents, dated as of May 13, 1998, that certain Consent to Various Actions
under Various Documents and Amendment to Stock Purchase Agreement, dated as of
January 6, 1999, and the Sixth Amendment Agreement (as so amended, the "Series A
Purchase Agreement"), providing, among other things, for the purchase by such
Preferred Holders of 4,000,000 shares of Series A Preferred Stock of the
Company.
The Company and certain of the Common Stockholders are parties to an
Amended and Restated Affiliate Registration Agreement, dated May 19, 1996, as
amended by the First Amendment Agreement, the Second Amendment Agreement, the
Third Amendment Agreement and the Fourth Amendment Agreement (as so amended, the
"Affiliate Registration Agreement").
The Company and certain of the Warrant Holders are parties to a Senior
Subordinated Note and Warrant Purchase Agreement, dated as of May 10, 1996, as
supplemented and modified by (i) the Senior Subordinated Note and Warrant
Purchase Agreement, dated as of November 22, 1996, (ii) the Senior Subordinated
Note and Warrant Purchase Agreement, dated as of May 19, 1997, as amended by
that certain Amendment, dated as of March 13, 1998, that certain Second
Amendment, dated as of January 13, 1999, that certain Termination of Put Rights,
dated as of June 15, 1998, that certain Third Amendment, dated as of March 9,
1999, and that certain Fourth Amendment, dated as of February 4, 2000 and (iii)
the Sixth Amendment Agreement (as so supplemented and modified, the "Note
Agreement"), providing, among other things, for the purchase by such Warrant
Holders of warrants (the "Mezzanine Warrants") to acquire up to 569,757 shares
(subject to adjustment as provided in such Warrants) of Class A Common Stock of
the Company.
The Company and certain of the Preferred Holders are parties to a
Series B Preferred Stock Purchase Agreement, dated as of May 19, 1997, as
amended by the Third Amendment Agreement, that certain Termination of Put
Rights, dated as of June 15, 1998 and the Sixth Amendment Agreement (as so
amended, the "Series B Purchase Agreement"), providing, among other things, for
the purchase by such Preferred Holders of 5,000,000 shares of Series B Preferred
Stock and warrants (the "Preferred B Warrants") to acquire up to 961,700 shares
(subject to adjustment as provided in such Warrants) of Class A Common Stock of
the Company.
The Company and certain of the Preferred Holders are parties to a
Series C Preferred Stock Purchase Agreement (the "Series C Purchase Agreement"),
dated as of February 22, 1999, providing, among other things, for the purchase
by such Preferred Holders of 1,409,375 shares of Series C Preferred Stock of the
Company.
The Company and certain of the Preferred Holders are parties to a
Series C Preferred Stock Exchange Agreement, dated as of April 27, 2001,
providing, among other things, for the exchange by such Preferred Holders of
1,409,375 shares of Series C Preferred Stock of the Company for 1,409,375 shares
of Series C Preferred Stock and 251,420 shares of Series C-1 Preferred Stock of
the Company.
The Company and certain of the Preferred Holders have entered into a
Series D-1 Preferred Stock Purchase Agreement, dated as of April 27, 2001, as
amended by that certain First Amendment to Series D-1 Preferred Stock Purchase
Agreement, dated as of January 18, 2002 (as so amended, the "Series D-1 Purchase
Agreement"), providing, among other things, for the purchase by such Preferred
Holders of up to 70,000 shares of Series D-1 Preferred Stock of the Company.
The Company and the Security Holders are parties to a Fourth Amended
and Restated Shareholders Agreement, dated as of January 18, 2002 (as in effect
from time to time, the "Shareholders Agreement").
The Company and a certain Warrant Holder are parties to a Subordinated
Note and Warrant Purchase Agreement, dated as of January 18, 2002 (the "2001
Note Agreement"), providing, among other things, for the purchase by such
Warrant Holder (referred to herein as the "Purchaser") of (i) $40 million of the
Company's 13.5% Subordinated Notes (the "Subordinated Notes") and (ii) warrants
(the "2001 Warrants") to acquire up to 1,133,328 shares (subject to adjustment
as provided by such Warrants) of Class A Common Stock of the Company (the "2001
Warrant Shares").
The parties hereto desire to take the actions contemplated by this
Agreement in order to facilitate the transactions contemplated by the 2001 Note
Agreement.
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Capitalized terms not defined elsewhere herein shall have the
respective meanings assigned to them in the Shareholders Agreement or in the
Articles of Incorporation of the Company, as amended (the "Articles of
Incorporation"), as applicable.
In consideration of the premises and the agreements herein contained,
and intending to be bound hereby, the parties hereby agree as follows:
1. Addition of Purchaser as a Party to the Preferred Subordination
Agreement. The parties hereto hereby consent to and approve of the addition of
the Purchaser as a party to the Preferred Subordination Agreement, and
acknowledge and agree that such Purchaser shall be bound by all of the terms and
conditions of such agreement, as amended hereby and as from time to time in
effect, and that such terms and conditions shall inure to the benefit of the
Purchaser.
2. Amendments to the Preferred Subordination Agreement.
(a) The parties hereto that are parties to the Preferred
Subordination Agreement hereby agree that the Preferred Subordination Agreement
shall be amended as follows:
(i) Section 1 shall be amended by deleting the definitions of
the terms "Notes" and "Purchase Agreement' in their entirety and substituting
the following in lieu thereof:
"'Notes' shall mean (i) the 12.0% Senior Subordinated Notes due
June 30, 2007 and (ii) the 13.5% Subordinated Notes due 2009
issued by the Company pursuant to the Purchase Agreements, and
any notes issued in exchange therefore or in replacement thereof,
as the same may be amended, modified or supplemented."
"'Purchase Agreements' shall mean (i) the Senior Subordinated
Note and Warrant Purchase Agreement, dated as of May 10, 1996, as
supplemented and modified by (a) the Senior Subordinated Note and
Warrant Purchase Agreement, dated as of November 22, 1996, (b)
the Senior Subordinated Note and Warrant Purchase Agreement,
dated as of May 19, 1997, as amended by that certain Amendment,
dated as of March 13, 1998, that certain Second Amendment, dated
as of January 13, 1999, that certain Termination of Put Rights,
dated as of June 15, 1998, that certain Third Amendment, dated as
of March 9, 1999, and that certain Fourth Amendment, dated as of
February 4, 2000, (c) the Sixth Amendment Agreement, dated as of
April 27, 2001, and (d) the Seventh Amendment Agreement, dated as
of January 18, 2002 and (ii) the Subordinated Note and Warrant
Purchase Agreement, dated as of January 18, 2002."
(ii) Section 2.5 shall be amended by deleting "June 30, 2003"
and replacing it with "January 18, 2009."
(iii) Exhibit A shall be amended by adding the following notice
information for the Purchaser:
3
"The Northwestern Mutual Life Insurance Company
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Facsimile: 000-000-0000
Attn: Securities Department
With a copy to:
Xxxxxx Xxxxxx & Xxxxx
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Facsimile: 312-258-5600
Attn: Xxxxxx Xxxxx"
(iv) Exhibt A shall be further amended by deleting the notice
information for Glast, Xxxxxxxx & Xxxxxx, P.C. and Xxxxxx & Xxxx, L.L.P. and
substituting the following in lieu thereof, respectively:
"Xxxxxx & Xxxxxx L.L.P.
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxxx
Fax Number: (000) 000-0000"
"Xxxxxx & Xxxxxx L.L.P.
One American Center
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Xxxx
Fax Number: (000) 000-0000"
(b) Except as amended hereby, the Preferred Subordination Agreement
shall remain in full force and effect.
3. Amendments to the Series A Purchase Agreement.
(a) The parties hereto that are parties to the Series A Purchase
Agreement hereby agree that the Series A Purchase Agreement shall be amended as
follows:
(i) All references to the term "Notes" in the Series A
Purchase Agreement shall be deemed to include the "Subordinated Notes" (as such
term is defined herein).
(ii) All references to the term "Mezzanine Warrants" in the
Series A Purchase Agreement shall be deemed to include the "2001 Warrants" (as
such term is defined herein).
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(iii) All references to the term "Mezzanine Warrant Shares" in
the Series A Purchase Agreement shall be deemed to include the "2001 Warrant
Shares" ( as such term is defined herein).
(iv) All references to the term "Note Agreement" in the Series
A Purchase Agreement, shall be deemed to include the "2001 Note Agreement" (as
such term is defined herein).
(v) Section 4D(iv) shall be amended by deleting such
subsection in its entirety and substituting in lieu thereof:
"(iv) the Company from issuing (A) Class A Common Stock
pursuant to the 1999 Stock Plan and the 2001 Stock Plan (as in
effect on January 18, 2002), (B) Class A Common Stock upon
conversion of shares of Series A Preferred Stock pursuant to the
Articles of Incorporation, (C) Class A Common Stock upon
conversion of shares of Series B Preferred Stock pursuant to the
Articles of Incorporation, (D) Class A Common Stock upon
conversion of shares of Series C Preferred Stock pursuant to the
Articles of Incorporation, (E) Class A Common Stock and Series
D-2 Preferred Stock upon conversion of the Series D-1 Preferred
Stock pursuant to the Articles of Incorporation, (F) the issuance
of the Warrant Shares upon the exercise of the Warrants
(capitalized terms used in this clause (F) shall have the
meanings ascribed to them in the Articles of Incorporation), or
(G) Class A Common Stock issuable upon conversion of any
outstanding Class B Common Stock."
(vi) Section 7J shall be amended by requiring that a copy of
any notice delivered to the Company under the Stock Purchase Agreement should be
sent to the Company's counsel as set forth below:
"Xxxxxx & Xxxxxx L.L.P.
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxxxx X. Xxxxxxxx"
(b) Except as amended hereby, the Series A Purchase Agreement shall
remain in full force and effect.
4. Amendments to the Series B Purchase Agreement.
(a) The parties hereto that are parties to the Series B Purchase
Agreement hereby agree that the Series B Purchase Agreement shall be amended as
follows:
(i) Section 7D(ii) shall amended by deleting such section in
its entirety and substituting the following in lieu thereof:
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"(iv) the Company from issuing (A) Class A Common Stock
pursuant to the 1999 Stock Plan and the 2001 Stock Plan (as in
effect on January 18, 2002), (B) Class A Common Stock upon
conversion of shares of Series A Preferred Stock pursuant to the
Articles of Incorporation, (C) Class A Common Stock upon
conversion of shares of Series B Preferred Stock pursuant to the
Articles of Incorporation, (D) Class A Common Stock upon
conversion of shares of Series C Preferred Stock pursuant to the
Articles of Incorporation, (E) Class A Common Stock and Series
D-2 Preferred Stock upon conversion of the Series D-1 Preferred
Stock pursuant to the Articles of Incorporation, (F) the issuance
of the Warrant Shares upon the exercise of the Warrants
(capitalized terms used in this clause (F) shall have the
meanings ascribed to them in the Articles of Incorporation), or
(G) Class A Common Stock issuable upon conversion of any
outstanding Class B Common Stock."
(ii) Section 11E shall be amended by deleting the notice
address for Glast, Xxxxxxxx & Xxxxxx, P.C. in its entirety and substituting the
following in lieu thereof:
"Xxxxxx & Xxxxxx L.L.P.
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxxxx X. Xxxxxxxx"
(b) Except as amended hereby, the Series B Purchase Agreement shall
remain in full force and effect.
5. Amendments to the Affiliate Registration Agreement.
(a) The parties that are parties to the Affiliated Registration
Agreement hereby agree that the Affiliate Registration Agreement shall be
amended as follows:
(i) All references to the term "Warrants" in the Affiliate
Registration Agreement shall be deemed to include the "2001 Warrants" (as such
term is defined herein).
(ii) All references to the term "Warrant Shares" in the
Affiliate Registration Agreement shall be deemed to include the "2001 Warrant
Shares" (as such term is defined herein).
(iii) All references to the term "Note Agreement" in the
Affiliate Registration Agreement shall be deemed to include the 2001 Note
Agreement (as such term is defined herein).
(iv) All references to the term "Underlying Common Stock" in
the Affiliate Registration Agreement shall be deemed to include the shares of
Class A Common Stock issued or issuable upon the conversion of the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and
the Series D-1 Preferred Stock.
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(v) Section 6(c) shall be amended by deleting the notice
address for Glast, Xxxxxxxx & Xxxxxx, P.C. in its entirety and substituting the
following in lieu thereof:
"Xxxxxx & Xxxxxx L.L.P.
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxxxx X. Xxxxxxxx"
(b) Except as amended hereby, the Affiliate Registration Agreement
shall remain in full force and effect.
6. Amendments to the Note Agreement.
(a) The parties hereto that are parties to the Note Agreement hereby
agree that the Note Agreement shall be amended as follows:
(i) Section 1.01 shall be amended by deleting the definitions
of "Change in Control," "Class A Preferred Stock," Class B Preferred Stock,"
"Net Operating Income," "Purchasers" and "Qualified IPO" and inserting the
following:
"'Change in Control' means any transaction or any event as a
result of which (i) any one or more Persons (other than a
Purchaser or a stockholder or a holder of warrants or options to
acquire capital stock of the Company on the closing date of the
Subordinated Note Agreement) acquires or for the first time
controls or is able to vote (directly or through nominees or
beneficial ownership) after the closing date of the Subordinated
Note Agreement (other than as the direct result of a transfer by
descent or distribution of a decedent's estate) fifty percent
(50%) or more of the deemed issued and outstanding stock of the
Company having power ordinarily to vote for directors of the
Company (on a fully-diluted, as converted basis); or (ii) Austin
Ventures and its Affiliates no longer own at least twenty-five
percent (25%) of the then issued and outstanding shares of the
Class A Common Stock of the Company, calculated on a
fully-diluted, as converted basis; or (iii) Xxxxx X. Xxxx is no
longer the chief executive officer of the Company and the Company
has not obtained a replacement chief executive officer,
satisfactory to the Purchasers in their reasonable judgment,
within 120 days of Xx. Xxxx'x ceasing to so serve."
"'Net Operating Income' for any period means Net Income for such
period, plus an amount equal to the aggregate of all taxes,
depreciation, amortization and interest expense for such period
(in each case to the extent deducted in determining Net Income
for such period), plus, solely for the fiscal year ended June 30,
2002, up to five hundred fifty thousand dollars ($550,000) in one
time expenses attributable to the Company's
7
proposed Rule 144A offering if such offering is terminated prior
to June 30, 2002 minus Out of Holdback Revenue and extraordinary
income."
"'Preferred Stock' shall mean the Company's preferred stock, $.01
par value per share, as authorized by the Company's Articles of
Incorporation as filed and in effect on April 27, 2001, and as
the same may be amended from time to time."
"Purchasers" means and shall include CRL, Austin III-A, Austin
III-B (with respect to each entity, for as long as such entity
holds any of the Notes or Warrants) and any other holder or
holders from time to time of any of the Notes or Warrants.
"Qualified IPO means a firm commitment underwritten public
offering of shares of the Company's Common Stock in which (i) the
aggregate proceeds to the Company and/or any shareholders
participating in the offering, if any, are at least $20 million
and (ii) the aggregate market valuation of the Company's Common
Stock is then not less than $60 million."
"'Series A Preferred Stock' means the 4,000,000 shares of the
Company's Series A Preferred Stock, $.01 par value per share,
outstanding as of January 18, 2002."
"'Series B Preferred Stock' means the Company's Series B
Preferred Stock, $.01 par value per share, outstanding as of
January 18, 2002."
"'Series C Preferred Stock' means the 1,409,375 shares of the
Company's Series C Preferred Stock, $.01 par value per share,
outstanding as of January 18, 2002."
"'Series C-1 Preferred Stock' means the 251,420 shares of the
Company's Series C-1 Preferred Stock, $.01 par value per share,
outstanding as of January 18, 2002."
"'Series D-1 Preferred Stock' means the 70,000 shares of the
Company's Series D-1 Preferred Stock, $.01 par value per share,
outstanding as of January 18, 2002."
"'Series D-2 Preferred Stock' means the 70,000 shares of the
Company's Series D-2 Preferred Stock, $.01 par value per share,
authorized by the Company's Articles of Incorporation as filed
and in effect on April 27, 2001, and as the same may be amended
from time to time."
"'Subordinated Note Agreement' means the Subordinated Note and
Warrant Purchase Agreement dated January 18, 2002 between the
Company and The Northwestern Mutual Life Insurance Company."
8
(ii) Section 2.12 shall be amended by deleting such subsection
in its entirety and substituting the following in lieu thereof:
"Subordination. The indebtedness evidenced by the Notes and the
rights and remedies of the Purchasers under this Agreement shall
be subordinate and junior to certain Indebtedness of the Company
to the Banks in the manner and to the extent provided in the
Fifth Amended and Restated Intercreditor and Subordination
Agreement dated January 18, 2002 by and among the Banks, the
Company and the Purchasers (the "Subordination Agreement")."
(iii) Section 3.09 shall be amended by deleting such subsection
in its entirety and substituting the following in lieu thereof:
"Right to Purchase New Mezzanine Securities. Prior to issuing any
Subordinated Debt after the Closing Date that is not issued in
connection with any capital stock or similar security, including
without limitation, securities containing equity features and
securities containing profit participation features, or any
security convertible or exchangeable, with or without
consideration, into or for any stock or similar security, or any
security carrying any warrant or right to subscribe for or
purchase any stock or similar security, or any such warrant or
right (such Subordinated Debt herein referred to as "Mezzanine
Securities"), of the Company or any of its Subsidiaries to any
Person, the Company will first give, or cause such Subsidiary to
give to each of the holders of the Warrants and the Warrant
Shares the right to purchase, on the same terms, the same
proportion of the Mezzanine Securities proposed to be sold by the
Company or such Subsidiary as the number of Warrants and Warrant
Shares owned by such holder bears to the total number of shares
of Outstanding Common Stock at that time. Persons electing to
purchase Mezzanine Securities pursuant to this Section shall also
be entitled to purchase (pro rata according to their holdings of
Warrants and Warrant Shares) offered Mezzanine Securities that
other holders decline to purchase. Any such right of purchase
shall be exercisable for a period of twenty (20) days after the
holders receive written notice of a proposed issuance of
Mezzanine Securities (and any such notice by the Company or a
Subsidiary shall be given not less than twenty (20) no more than
ninety (90) days prior to any such issuance). The Company shall
be entitled to sell any Mezzanine Securities not purchased by the
holders of Warrants and Warrant Shares pursuant to this Section
3.09: (i) during the period ending six (6) months after the date
of the Company's notice to such holders and (ii) at not less than
the same price and upon terms not materially less favorable to
the Company than those offered to the holders of Warrants and
Warrant Shares, but may not otherwise sell such Mezzanine
Securities without renewed compliance with this Section 3.09."
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(iv) Section 3.10 is deleted in its entirety.
(v) Section 3.11 shall be amended by deleting such subsection
in its entirety and substituting the following in lieu thereof:
"Termination Upon Qualified IPO. Each of the Purchasers' right to
purchase new Mezzanine Securities set forth in Section 3.09 shall
terminate immediately prior to the closing of a Qualified IPO."
(vi) Section 7.01(p) is deleted in its entirety.
(vii) Section 7.01(r) shall be amended by deleting such
subsection in its entirety and substituting the following in lieu thereof:
"Maximum Total Debt to Annualized Net Operating Income Ratio.
Maintain a ratio of (i) Total Debt outstanding as of the end of
the month immediately preceding the last day of each fiscal
quarter of the Company to (ii) an amount equal to four (4) times
Net Operating Income for the three months ending on the last day
of such fiscal quarter of not greater than the following ratios
for the periods indicated (such compliance to be determined as of
the last day of each fiscal quarter of the Company ending during
such period):
Maximum Ratio of Total Debt to
Four times (4x) trailing three
Period months' Net Operating Income
------ ----------------------------
From the Closing Date through
December 31, 2002 4.31 to 1
From January 1, 2003 through
December 31, 2003 4.03 to 1
From January 1, 2004 through
June 30, 2004 3.74 to 1
Thereafter 3.45 to 1"
(viii) Section 7.01(s) shall be amended by deleting such
subsection in its entirety and substituting the following in lieu thereof:
"Maximum Total Senior Debt to Annualized Net Operating Income
Ratio. Maintain a ratio of (i) Total Senior Debt outstanding as
of the end of the immediately preceding month to (ii) an amount
equal to twelve (12) times Net Operating Income for the month
then ending of not greater than the following ratios for the
periods indicated (such compliance to be determined as of the
last day of any month ending during such period):
10
Maximum Ratio of Total Senior
Debt to Twelve times (12x) Net
---
Period Operating Income for Month then Ending
------ --------------------------------------
From the Closing Date through
January 31, 2002 4.31 to 1
From February 1, 2002 through
December 31, 2002 3.74 to 1
From January 1, 2003 through
December 31, 2003 3.45 to 1
Thereafter 3.16 to 1"
(ix) Section 7.01(v) shall be amended by deleting such
subsection in its entirety and substituting the following in lieu thereof:
"Minimum Fixed Charge Coverage Ratio. Maintain a ratio of
(i) an amount equal to Net Operating Income for the period of
twelve (12) consecutive months ended on the date of determination
to (ii) Fixed Charges for the same twelve (12) month period of
not less than the following ratios for the periods indicated
(such compliance to be determined as of the last day of each
fiscal quarter of the Company ending during such period):
Period Fixed Charge Coverage Ratio
------ ---------------------------
From the Closing Date through
December 31, 2003 1.49 to 1
From January 1, 2004 through
June 30, 2004 1.06 to 1
Thereafter 0.89 to 1"
(x) Section 7.02(b) shall be amended by deleting such
subsection in its entirety and substituting the following in lieu thereof:
"Indebtedness. Without the prior written consent of the
Purchasers, create, incur, assume, or suffer to exist, or permit
any Subsidiary to create, incur, assume or suffer to exist, any
liability with respect to Indebtedness for borrowed money
(including, without limitation, the amount of any purchase price
which is secured by a purchase money security interest) other
than (i) Senior Debt in an amount not to exceed $359,500,000
11
million, (ii) the Notes, (iii) Holdback Debt incurred in the
ordinary course of business, (iv) the Company's 13.5%
Subordinated Notes issued pursuant to the Subordinated Note
Agreement and (v) an unlimited amount of Junior Subordinated Debt
(excluding any amounts referenced in clause (iv))outstanding at
any time on a consolidated basis, provided that the incurrence
and maintenance of all such Indebtedness does not result in the
Company's or any Subsidiary's failure to comply with any of the
other provisions of Article VII hereof."
(xi) Section 7.02(c) shall be amended be deleting the
reference to $1,150,000 and inserting $1,725,000 in lieu thereof.
(xii) Section 7.02(f)(vi) shall be amended by deleting such
subsection in its entirety and substituting the following in lieu thereof:
"acquisitions of assets, capital stock or other property which
individually and in the aggregate are not material to the Company
or such Subsidiary (assets, capital stock and other property with
a fair market value of less than $100,000 acquired in any
one-year period in the aggregate shall not be deemed "material");
provided, however, that each such acquisition can be made in
compliance with the other terms of this Agreement, including,
without limitation, Section 7.02(l); and provided further,
however, that this Section 7.02(f)(vi) shall not prohibit the
acquisition (either directly or indirectly through the purchase
of 100% of the outstanding ownership interests of a Person) of
alarm system monitoring contracts in the ordinary course of
business."
(xiii) Section 7.02(g)(iv) shall be amended by deleting such
subsection in its entirety and substituting the following in lieu thereof:
"(iv) the Company from issuing (A) Class A Common Stock pursuant
to the 1999 Stock Plan and the 2001 Stock Plan (as in effect on
January 18, 2002), (B) Class A Common Stock upon conversion of
shares of Series A Preferred Stock pursuant to the Articles of
Incorporation, (C) Class A Common Stock upon conversion of shares
of Series B Preferred Stock pursuant to the Articles of
Incorporation, (D) Class A Common Stock upon conversion of shares
of Series C Preferred Stock pursuant to the Articles of
Incorporation, (E) Class A Common Stock and Series D-2 Preferred
Stock upon conversion of the Series D-1 Preferred Stock pursuant
to the Articles of Incorporation, (F) the issuance of the Warrant
Shares upon the exercise of the Warrants (capitalized terms used
in this clause (F) shall have the meanings ascribed to them in
the Articles of Incorporation), or (G) Class A Common Stock
issuable upon conversion of any outstanding Class B Common
Stock;"
(xiv) Section 7.02(l) shall be amended by deleting such
subsection in its entirety and substituting the following in lieu thereof:
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"During the fiscal year ending June 30, 2002 and during each
fiscal year thereafter, the Company will not, and will not permit
any Subsidiary to, make any Capital Expenditure if, after giving
effect thereto, the aggregate amount of all Capital Expenditures
made by the Company and its Subsidiaries during such fiscal year
would exceed Three Million Four Hundred Fifty Thousand Dollars
($3,450,000), provided, that the Company may, during the fiscal
year ending June 30, 2002 and during any fiscal year thereafter,
carry forward up to Four Hundred Thousand Dollars ($400,000) of
permitted but unused Capital Expenditures from the immediately
preceding fiscal year, and provided further, that in no event
shall Capital Expenditures exceed Three Million Eight Hundred
Fifty Thousand Dollars ($3,850,000) in any such fiscal year."
(xv) Section 7.03(c) shall be amended by replacing the
reference to Purchasers therein with the phrase "holders of sixty-six and
two-thirds percent (66 2/3%) in principal amount of Notes then outstanding."
(xvi) Section 7.03(e) shall be amended by deleting the phrase
"and setting forth the calculation of "Borrowing Base" under the Loan
Agreement."
(xvii) Section 9.03 shall be amended by deleting the notice
information for Glast, Xxxxxxxx & Xxxxxx, P.C. and substituting the following in
lieu thereof:
"Xxxxxx & Xxxxxx L.L.P.
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxxx
Telecopy No.: (000) 000-0000"
(xviii) Section 8.01(c) shall be amended by deleting such
subsection in its entirety and substituting in lieu thereof:
"(c) The Company (i) shall default in the performance of any
covenant contained in Sections 7.01(r), (s), (t) and (v) or
Sections 7.02(a), (b) or (g) or Section 7.03(a) or (ii) shall
default in the performance of any other covenant contained in
Section 7.02 and such default shall remain unremedied for ten
(10) days; or"
(xix) Section 8.01 shall be amended by adding an additional
subsection (j) as set forth below:
"(j) Any event of default shall exist under the Subordinated Note
Agreement and shall not be cured within any applicable grace or
cure period."
(b) Except as amended hereby, the Note Agreement shall remain in
full force and effect.
13
7. Consents, Waivers and Non-Contravention. Subject to compliance by
the Purchaser with the terms of this Agreement, each of the Security Holders
(other than the Purchaser) hereby (a) consents to the issuance of the 2001 Notes
and 2001 Warrants to the Purchaser pursuant to the terms of the 2001 Note
Agreement and the adoption of the Articles of Amendment of the Company's
Articles of Incorporation, (b) agrees that such issuance and adoption will not
constitute a breach or default under any of the Series A Purchase Agreement, the
Series B Purchase Agreement, the Series C Purchase Agreement, the Series D-1
Purchase Agreement, the Note Agreement or the Credit Agreement (c) agrees that
the issuance of 522,953 shares of Class A Common Stock to employees of the
Company in connection with the anti-dilution adjustments made in connection with
the transactions contemplated by the Subordinated Note Agreement (the
"Restricted Shares") will not trigger any anti-dilution provisions under the
Series A Purchase Agreement, the Series B Purchase Agreement, the Note
Agreement, the Preferred B Warrants, the Xxxxxx Warrant Agreement, the Mezzanine
Warrants, the 2001 Warrants or any other agreement, (d) agrees that the issuance
of the Restricted Shares shall not be deemed to be an issuance of Additional
Shares of Common Stock for purposes of determining the number of Fully Diluted
Shares of Common Stock and (e) waives any preemptive or similar rights arising
as a result of such issuances and adoption that such Security Holder may have
pursuant to any other agreement.
8. Miscellaneous.
(a) Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally or by
cable, telex, facsimile transmission, telegram or overnight delivery service, or
72 hours after having been mailed by certified or registered mail, return
receipt requested and postage prepaid, to the recipient. Such notices, demands
and other communications will be sent to each party at such party's address set
forth on the Schedule of Preferred Holders, Schedule of Warrant Holders or
Schedule of Common Shareholders, as the case may be.
(b) Governing Law. The construction, validity and interpretation of
this Agreement will be governed by the internal laws of the State of Texas
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Texas or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Texas.
(c) Entire Agreement. This Agreement and the addendum, exhibits and
schedules hereto embody the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings relating to such subject matter.
(d) Amendment and Waiver. No amendment, modification or waiver of
this Agreement or any provision hereof shall be effective unless made by the
written agreement of all of the parties hereto.
(e) Further Assurance. Each party to this Agreement hereby covenants
and agrees, without the necessity of any further consideration, to execute and
deliver any and all such further documents and take any and all such other
actions as may be necessary or appropriate to carry
14
out the intent and purposes of this Agreement and to consummate the transactions
contemplated herein.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
be one and the same document.
(g) Descriptive Headings. The descriptive headings of this Agreement
are inserted for conveniences only and do not constitute a part of this
Agreement.
* * * *
15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY:
MONITRONICS INTERNATIONAL, INC.
By: /s/ Xxxxx X. Xxxx
------------------------------------
Xxxxx X. Xxxx,
President and CEO
SECURITY HOLDERS:
AUSTIN VENTURES III-A, L.P.
By: AV Partners III, L.P.,
Its General Partner
By: /s/ Xxxxxx X. Xxxxxx
------------------------------
Xxxxxx X. Xxxxxx,
Authorized Signatory
AUSTIN VENTURES III-B, L.P.
By: AV Partners III, L.P.,
Its General Partner
By: /s/ Xxxxxx X. Xxxxxx
------------------------------
Xxxxxx X. Xxxxxx,
Authorized Signatory
AUSTIN VENTURES V. L.P.
By: AV Partners V, L.P.,
Its General Partner
By: /s/ Xxxxxx X. Xxxxxx
------------------------------
Xxxxxx X. Xxxxxx,
General Partner
AUSTIN VENTURES V AFFILIATES FUND, L.P.
By: AV Partners V. L.P.,
Its General Partner
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Xxxxxx X. Xxxxxx,
General Partner
CAPITAL RESOURCE LENDERS II, L.P.
By: Capital Resource Partners II, L.P.,
Its General Partner
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------
Xxxxxxx X. Xxxxx
General Partner
WINDWARD CAPITAL PARTNERS II, L.P.
By: Windward Capital XX XX, LLC,
Its General Partner
By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------------
Xxxxx X. Xxxxxxxxx,
Managing Member
WINDWARD CAPITAL XX XX, LLC
By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------------------
Xxxxx X. Xxxxxxxxx,
Managing Member
ABRY PARTNERS IV, L.P.
By: ABRY Capital Partners, L.P.,
Its General Partner
By: ABRY Capital Partners, LLC,
Its General Partner
By: /s/ Xxx Xxxxxxxx
------------------------
Name: Xxx Xxxxxxxx
Title:
ABRY INVESTMENT PARTNERSHIP, L.P.
By: ABRY Investment GP, LLC,
Its General Partner
By: /s/ Xxx Xxxxxxxx
------------------------------
Name: Xxx Xxxxxxxx
Title:
HULL FAMILY LIMITED PARTNERSHIP, L.P.
By: Xxxxx X. Xxxx Management Trust,
Its General Partner
By: /s/ Xxxxx X. Xxxx
------------------------------
Xxxxx X. Xxxx, Trustee
/s/ Xxxxxx X. Xxxxxxx
----------------------------------------
XXXXXX X. XXXXXXX
/s/ Xxxxxxx Xxxxxx
----------------------------------------
XXXXXXX XXXXXX
/s/ Xxxxxxx Xxxxxxx
----------------------------------------
XXXXXXX XXXXXXX
/s/ Xxxxxxx Xxxxxxx
----------------------------------------
XXXXXXX XXXXXXX
PURCHASER:
THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Authorized Representative
SCHEDULE OF PREFERRED HOLDERS
Austin Ventures III-A, X.X.
Xxxxxx Ventures III-B, X.X.
Xxxxxx Ventures V, X.X.
Xxxxxx Ventures V Affiliates Fund, L.P.
000 Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx
Capital Resource Lenders II, L.P.
c/o Capital Resource Partners
00 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx
Windward Capital Partners II, L.P.
Windward Capital II L.P., LLC
0000 Xxxxxx xx xxx Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxxx
ABRY Partners IV, X.X.
XXXX Investment Partnership, L.P.
00 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxx Xxxxxxxx
SCHEDULE OF WARRANT HOLDERS
Capital Resource Lenders II, L.P.
c/o Capital Resource Partners
00 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx
Xxxxxx Ventures III-A, X.X.
Xxxxxx Ventures III-B, X.X.
Xxxxxx Ventures V, X.X.
Xxxxxx Ventures V Affiliates Fund, L.P.
000 Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx
The Northwestern Mutual Life Insurance Company
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Securities Department
SCHEDULE OF COMMON SHAREHOLDERS
1. Hull Family Limited Partnership, L.P.
c/o Monitronics International, Inc.
00000 Xxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
2. Xxxxxxx Xxxxxx
c/o Monitronics International, Inc.
00000 Xxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
3. Xxxxxxx Xxxxxxx
c/o Monitronics International, Inc.
00000 Xxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
4. Xxxxxxx Xxxxxxx
c/o Monitronics International, Inc.
00000 Xxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
