AMENDED AND RESTATED AFFILIATE SUBORDINATION AGREEMENT
Exhibit 10.6
AMENDED AND RESTATED AFFILIATE SUBORDINATION AGREEMENT
AMENDED AND RESTATED AFFILIATE SUBORDINATION AGREEMENT, dated as of July 14, 2004 (this “Agreement”), among (i) Austin Ventures III-A, L.P., a Delaware limited partnership, Austin Ventures III-B, L.P., a Delaware limited partnership, Austin Ventures V, L.P., a Delaware limited partnership, Austin Ventures V Affiliates Fund, L.P., a Delaware limited partnership (collectively, and jointly, severally and jointly and severally, “Austin Ventures”), (ii) Capital Resource Lenders II, L.P., a Delaware limited partnership (“Capital Resources”), (iii) ABRY Partners IV, L.P., a Delaware limited partnership, ABRY Investment Partnership, L.P., a Delaware limited partnership (collectively, and jointly, severally and jointly and severally, “ABRY”), (iv) New York Life Capital Partners II, L.P., a Delaware limited partnership (“NYLCAP”), (v) PPM America Private Equity Fund LP, a Delaware limited partnership (“PPM”), (vi) The Northwestern Mutual Life Insurance Company (“NML”), (vii) Hull Family Limited Partnership, a Texas limited partnership (“Hull Partnership”), (viii) Xxxxx Xxxx, individually, (ix) Xxxxxx Xxxxxxx, individually, (x) Xxxxxxx Xxxxxxx, individually, (xi) Xxxxxxx Xxxxxx, individually and (xii) Xxxxxxx Xxxxxxx, individually (Austin Ventures, Capital Resources, ABRY, NYLCAP, PPM, NML, Hull Partnership, Xxxxx Xxxx, Xxxxxx Xxxxxxx, Xxxxxxx Xxxxxxx, Xxxxxxx Xxxxxx, Xxxxxxx Xxxxxxx, collectively the “Subordinated Creditors”, and each a “Subordinated Creditor”), and Fleet National Bank, as Secured Party for the Lenders from time to time party to the credit agreement referred to below (in such capacity, the “Secured Party”). The Secured Party and the other Credit Parties referred to in the Credit Agreement referred to below are sometimes referred to herein collectively as the “Senior Creditor”.
W I T N E S S E T H :
WHEREAS, on August 25, 2003 Monitronics International, Inc., a Texas corporation (the “Borrower”), the Secured Party, Bank of America, N.A., as syndication agent, and the Lenders party thereto entered into a Credit Agreement (as amended, modified, supplemented and/or extended from time to time, the “Credit Agreement”, capitalized terms used herein and not otherwise defined shall have the same meanings herein as in the Credit Agreement), pursuant to which the Lenders agreed, subject to the terms and conditions set forth therein, to make revolving credit loans and term loans to the Borrower (collectively, the “Loans”), such Loans to be evidenced by the Borrower’s Revolving Credit and Term Notes, payable to the order of the respective Lenders (collectively, as amended, modified, supplemented and/or extended from time to time the “Notes”);
WHEREAS, on the date hereof, the Borrower, the Subordinated Creditors and certain other parties are engaging in a series of transactions (collectively, the “Recapitalization”) pursuant to which, among other things, (i) the Borrower will amend its Organizational Documents to cancel its various existing series of preferred stock and create a new, single series of preferred stock, (ii) the Borrower’s principal shareholders will exchange their existing shares of Capital Stock of the Borrower for shares of the new series of preferred stock or for common stock of the Borrower and in connection therewith Borrower will redeem certain existing shares of Preferred Stock for an aggregate redemption price of approximately $5,300,000 and (iii) two of the Borrower’s shareholders will sell shares of the Borrower’s common stock received in the share exchange described above to NYLCAP and PPM;
WHEREAS, on the date hereof, the Borrower, the Administrative Agent and the Required Lenders are entering into a First Amendment to Credit Agreement (the “First Amendment”) to permit the Borrower to effect the Recapitalization, among other things;
WHEREAS, it is a condition to the execution and delivery of the First Amendment by the Administrative Agent and the Required Lenders that the Subordinated Creditors and the Borrower enter into this Agreement;
WHEREAS, the Subordinated Creditors collectively own substantially all of the Capital Stock of the Borrower and will thereby benefit from the making of the Loans under the Credit Agreement; and
WHEREAS, the obligation of the Lenders to make Loans under the Credit Agreement on and after the date hereof is subject to the conditions, among others, that the Subordinated Creditors shall have executed and delivered this Agreement and agreed to the subordination provisions contained herein, and the Subordinated Creditors hereby enter into this Agreement to induce the Lenders to enter into the First Amendment and make the Loans from time to time under the Credit Agreement;
NOW, THEREFORE, in consideration of the willingness of the Administrative Agent and the Required Lenders to enter into the First Amendment and the Lenders to agree, subject to the terms and conditions set forth in the Credit Agreement, to make the Loans to the Borrower from time to time pursuant thereto, and for other good and valuable consideration, receipt and sufficiency of which is hereby acknowledged by the Subordinated Creditors, it is hereby agreed as follows:
1. Representations by Subordinated Creditors.
(a) Each Subordinated Creditor represents and warrants for itself to the Senior Creditor that (i) all Indebtedness of the Borrower to such Subordinated Creditor, if any, is set forth in Schedule 4.4 to the Credit Agreement, (ii) such Indebtedness, if any, is not subject to any currently effective assignment to or subordination in favor of any other Person and that such Subordinated Creditor holds no security therefor, and (iii) the rights associated with the Capital Stock established under the Borrower’s Articles of Incorporation, as amended through the date hereof, or warrants issued by the Borrower to the Subordinated Creditors are the only rights or options held by such Subordinated Creditor to acquire additional shares of any class or series of Capital Stock of the Borrower.
(b) Each Subordinated Creditor that is a business entity is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has all necessary power and authority to enter into this Agreement, to carry out its respective obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by such Subordinated Creditor, the performance by such Subordinated Creditor of its respective obligations hereunder, and the consummation by such Subordinated Creditor of the transactions contemplated hereby have been duly authorized by all requisite limited partnership, corporate, limited liability company or other analogous powers on the part of such Subordinated Creditor that is a business entity. This Agreement has been duly executed and delivered by such Subordinated Creditor, and (assuming due authorization, execution and delivery by the Secured
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Party) this Agreement constitutes the legal, valid and binding obligation of such Subordinated Creditor, enforceable against such Subordinated Creditor in accordance with its terms, except as such enforcement may be limited by applicable Debtor Relief Laws generally and by general equity principles (whether enforcement is sought at law or in equity).
(c) Each Subordinated Creditor agrees and acknowledges that this Agreement is a “subordination agreement” within the meaning of Section 510(a) of the United States Bankruptcy Code, 11 U.S.C §510(a).
2. Subordination; Limitation on Sale Right During an Event of Default.
(a) Subordination. Each Subordinated Creditor hereby subordinates (i) all present and future Indebtedness of the Borrower to such Subordinated Creditor and (ii) any and all obligations or liabilities of the Borrower and any rights of such Subordinated Creditor now existing or hereafter arising, absolute or contingent, arising by contract, at law or otherwise, with respect to dividends payable on the Capital Stock, the purchase, redemption or other acquisition by the Borrower of such Capital Stock and any other amount payable to the holders of such Capital Stock as such (collectively the “Subordinated Indebtedness”), to any and all Indebtedness now or hereafter owing by the Borrower (including any interest accruing after the commencement of any proceeding by or against the Borrower under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, and any other interest that would have accrued but for the commencement of such proceeding, whether or not any such interest is allowed as a claim enforceable against the Borrower in such proceeding) to the Senior Creditor (the “Senior Indebtedness”) to the extent and in the manner hereinafter set forth, and such Subordinated Creditor agrees not to demand, accept or receive any payment in respect of the Subordinated Indebtedness, including, without limitation, any payment received through the exercise of any right of setoff, counterclaim or cross claim, or any collateral therefor, or any right to cause the Borrower to redeem, purchase, assume or otherwise retire the Subordinated Indebtedness, in contravention hereof:
(i) In the event of any insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings in connection therewith, relative to the Borrower or to its creditors, as such, or to its properties, or in the event of any proceedings for voluntary liquidation, dissolution or other winding up of the Borrower, whether or not involving insolvency or bankruptcy, then the Senior Creditor shall be entitled to receive payment in full in cash of all of the Senior Indebtedness before such Subordinated Creditor is entitled to receive any payment in respect of the Subordinated Indebtedness (except securities which are subordinate and junior in right of payment to all Senior Indebtedness then outstanding), and to that end the holder of the Senior Indebtedness shall be entitled to receive for application in payment thereof any payment or distribution of any kind or character, whether in cash or property or securities, which may be payable or deliverable in any such proceedings in respect of the Subordinated Indebtedness; and
(ii) No amount shall be paid (except in securities which are subordinate and junior in right of payment to all Senior Indebtedness then outstanding, it being
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understood that all such securities shall constitute “Subordinated Indebtedness” hereunder), whether in cash, property, or securities or otherwise, and the Subordinated Creditors will not exercise any rights with respect to the Capital Stock, in respect of the Subordinated Indebtedness, except as expressly permitted under the Credit Agreement or the Pledge Agreement.
(b) Limitation on Sale Rights During an Event of Default. Notwithstanding any provision to the contrary in any agreement between the Borrower and the Subordinated Creditors, in the event of the enforcement by the Senior Creditor of its rights during the existence of an Event of Default that shall be continuing after applicable grace and cure periods, the Subordinated Creditors may not exercise any rights under any agreement between the Borrower and the Subordinated Creditors involving rights to block a Change in Control of the Borrower or a public offering of the Borrower’s common stock.
3. Limitations on Remedies. So long as any Senior Indebtedness is outstanding, no Subordinated Creditor shall (i) as a holder of Subordinated Indebtedness commence or join (unless the Senior Creditor shall also join) in any involuntary proceeding against the Borrower or any of its Subsidiaries under any bankruptcy, reorganization, readjustment of debt, arrangement of debt, receivership, liquidation or insolvency law or statute of any federal or state government, or (ii) commence any action or proceeding against the Borrower or any of its Subsidiaries to enforce payment of all or any part of the Subordinated Indebtedness. Notwithstanding the foregoing, nothing contained herein shall prohibit or otherwise restrict the Borrower or any of its Subsidiaries from filing any voluntary proceeding under any bankruptcy, reorganization, readjustment of debt, arrangement of debt, receivership, liquidation or insolvency law or statute of any federal or state government.
4. Delivery of Payments. If, prior to the satisfaction of the Senior Indebtedness in full in cash and the termination of the obligation of the Senior Creditor to make Loans to the Borrower under the Credit Agreement and the documents related thereto, any of the Subordinated Creditors receives any payment with respect to any of the Subordinated Indebtedness (except payment, if any, expressly permitted under the Credit Agreement), or any security for or on account of the Subordinated Indebtedness, such Subordinated Creditor shall forthwith deliver such payment or security to the Secured Party for the benefit of the Senior Creditor, in precisely the form received, except for such Subordinated Creditor’s endorsement when necessary, to be applied in payment of (or if no Default or Event of Default shall then be continuing, to be held by the Senior Creditor as security for) the Senior Indebtedness and until so delivered, such payment or security shall be held in trust by such Subordinated Creditor as the property of the Senior Creditor. In the event of the failure of such Subordinated Creditor to endorse any instrument for the payment of money so received by such Subordinated Creditor, the Secured Party for the benefit of the Senior Creditor is irrevocably appointed attorney for such Subordinated Creditor with full power to make such endorsement and with full power of substitution.
5. Further Assurances. In order to carry out the terms and intent of this Agreement more effectively, the Subordinated Creditors will do all acts and execute all further documents and instruments necessary or convenient to preserve for the Senior Creditor the benefits of this Agreement.
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6. Waivers, etc. No action which the Senior Creditor, or the Borrower, may take or refrain from taking with respect to any Senior Indebtedness, or any note or notes representing the same, or any collateral therefor, including any waiver or release thereof or of any agreement or agreements (including guaranties) in connection therewith, shall affect this Agreement or the obligations of the Subordinated Creditors hereunder. No waiver shall be deemed to be made by the Senior Creditor of any of its rights hereunder unless the same shall be in writing and then only with respect to the specific instance involved, and shall in no way impair or offset the rights of the Senior Creditor or the obligations of the Subordinated Creditors in any other respect or at any other time.
7. Transfer. The Subordinated Creditors may transfer, sell or otherwise dispose of all or a portion of the Subordinated Indebtedness, but only on the condition that a transferee of the Subordinated Indebtedness first becomes a party hereto; provided, however, that in the event that there shall exist an Event of Default under the Credit Agreement on account of the Borrower’s failure to pay principal or interest on any Note when the same is due and payable (whether at maturity, upon acceleration or otherwise) or on account of the Borrower’s failure to perform or comply with any covenant or term contained in Sections 8.16 or 8.17 of the Credit Agreement, and such Event of Default shall be continuing after applicable grace and cure periods, the Subordinated Creditors may not transfer any of the Subordinated Indebtedness without the prior written consent of the Lenders, which consent shall not be unreasonably withheld or delayed.
8. Miscellaneous. This Agreement shall be binding upon the Subordinated Creditors and the Borrower and their respective heirs, legal representatives, successors and assigns and shall inure to the benefit of the Senior Creditor and its legal representatives, successors and assigns (including without limitation any transferee of any Senior Indebtedness). This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of the counterparts shall together constitute one and the same instrument.
9. Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement, including the validity hereof and the rights and obligations of the parties hereunder, shall be governed by, and construed in accordance with, the internal laws (as opposed to the conflicts of law provisions, but including sections 5-1401 and 5-1402 of the general obligations law of the State of New York) and decisions of the State of New York. Each party hereto hereby irrevocably submits to the nonexclusive jurisdiction of any New York or Federal court sitting in the City of New York, New York over any suit, action or proceeding arising out of or relating to this Agreement and waives, to the fullest extent permitted or not prohibited by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
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WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.
10. Amendments to Senior Indebtedness. Notwithstanding anything contained in this Agreement to the contrary, the Senior Creditor shall not, without the prior written consent of the Subordinated Creditors, (a) increase the stated principal amount of the Senior Indebtedness to an amount in excess of the Aggregate Commitment from time to time in effect under the Credit Agreement (up to $470,000,000) plus $47,000,000, or (b) extend the Revolving Loan Maturity Date or the Term Loan Maturity Date or any Incremental Term Loan Maturity Date more than sixty (60) days.
11. Amendment and Restatement. This Agreement amends, restates and supersedes the Affiliate Subordination Agreement dated as of August 25, 2003 among the Borrower, the Subordinated Creditors named therein and the Senior Creditor.
[Signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed instrument as of the date first above written.
| AUSTIN VENTURES III-A, L.P. | ||
| By: |
AV Partners III, L.P., | |
| General Partner | ||
| By: |
/s/ Xxxxxx X. Xxxxxx | |
| Xxxxxx X. Xxxxxx | ||
| Authorized Signatory | ||
| AUSTIN VENTURES III-B, L.P. | ||
| By: |
AV Partners III, L.P., | |
| 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/ Xxxxxx Xxxxxxxx | |
| Its General Partner | ||
| By: |
||
| Name: | ||
| Title: | ||
| NEW YORK LIFE CAPITAL PARTNERS II, L.P. | ||
| By: |
NYLCAP Manager LLC, | |
| Its General Partner | ||
| By: |
/s/ Xxxx X. Xxxxxxxxxx | |||
| Name: Xxxx X. Xxxxxxxxxx | ||||
| Title: |
||||
| PPM AMERICA PRIVATE EQUITY FUND LP | ||
| By: |
PPM America Capital Partners, LLC, | |
| Its General Partner | ||
| By: |
/s/ Xxxxx Xxxxxxx | |
| Name: Xxxxx Xxxxxxx | ||
| Title: Senior Partner | ||
| By: |
/s/ Xxxxxx Xxxxxxxx | |
| Name: Xxxxxx Xxxxxxxx | ||
| Title: Associate | ||
| ABRY PARTNERS IV, L.P. | ||
| By: |
ABRY Capital Partners, L.P., | |
| its general partner | ||
| By: | /s/ Xxx X. Xxxxxxxx | |
| Name: Xxx X. Xxxxxxxx | ||
| Title: | ||
| ABRY INVESTMENT PARTNERSHIP, L.P. | ||
| By: |
ABRY Investment GP, LLC, | |
| its general partner | ||
| By: |
/s/ Xxx X. Xxxxxxxx | |
| Name: Xxx X. Xxxxxxxx | ||
| Title: | ||
| HULL FAMILY LIMITED PARTNERSHIP | ||
| By: |
Xxxxx X. Xxxx Management Trust, | |
| Its General Partner | ||
| By: |
/s/ Xxxxx X. Xxxx | |
| Xxxxx X. Xxxx, Trustee | ||
| /s/ Xxxxx X. Xxxx |
| Xxxxx X. Xxxx, individually |
| c/o Monitronics International, Inc. |
| 00000 Xxxxxxxx Xxxxxxx, Xxxxx 000 |
| Xxxxxx, Xxxxx 00000 |
| /s/ Xxxxxx Xxxxxxx |
| Xxxxxx Xxxxxxx, individually |
| c/o Monitronics International, Inc. |
| 00000 Xxxxxxxx Xxxxxxx, Xxxxx 000 |
| Xxxxxx, Xxxxx 00000 |
| /s/ Xxxxxxx Xxxxxx |
| Xxxxxxx Xxxxxx, individually c/o Monitronics International, Inc. 00000 Xxxxxxxx Xxxxxxx, Xxxxx 000 Xxxxxx, Xxxxx 00000 |
| /s/ Xxxxxxx Xxxxxxx |
| Xxxxxxx Xxxxxxx, individually c/o Monitronics International, Inc. 00000 Xxxxxxxx Xxxxxxx, Xxxxx 000 Xxxxxx, Xxxxx 00000 |
| /s/ Xxxxxxx Xxxxxxx |
| Xxxxxxx Xxxxxxx, individually c/o Monitronics International, Inc. 00000 Xxxxxxxx Xxxxxxx, Xxxxx 000 Xxxxxx, Xxxxx 00000 |
| THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY | ||
| By: | /s/ Xxxxx X. Xxxxxx | |
| Name: Xxxxx X. Xxxxxx | ||
| Title: Its Authorized Representative | ||
| FLEET NATIONAL BANK, as Secured Party | ||
| By: | /s/ Xxxx X. Xxxxx | |
| Name: Xxxx X. Xxxxx | ||
| Title: Senior Vice President | ||
ACKNOWLEDGMENT:
The Borrower hereby acknowledges notice of the within and foregoing Amended and Restated Affiliate Subordination Agreement and agrees to be bound by all of the terms, provisions and conditions hereof.
| MONITRONICS INTERNATIONAL, INC. | ||
| By: | /s/ Xxxxx X. Xxxx | |
| Name: Xxxxx X. Xxxx | ||
| Title: President and CEO | ||
