Exhibit 10.7
INTERCREDITOR AGREEMENT
INTERCREDITOR AND SUBORDINATION AGREEMENT (this "Agreement") dated as of
August 25, 2003 by and among Monitronics International, Inc., a Texas
corporation (the "Borrower"), Fleet National Bank, as Administrative Agent for
the Lenders from time to time party to the Credit Agreement referred to below
(the "Administrative Agent"), and The Northwestern Mutual Life Insurance Company
("NML").
RECITALS
WHEREAS, the Borrower, the Administrative Agent, Bank of America, N.A., as
syndication agent, and the Lenders referred to therein are entering into a
Credit Agreement dated as of the date hereof (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 have agreed, subject to the
terms and conditions set forth therein, to make revolving credit loans, swing
line 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"); and
WHEREAS, the Borrower and NML are parties to that certain Subordinated Note
and Warrant Purchase Agreement dated as of January 18, 2002 (the "Original
Purchase Agreement"), whereby NML extended loans to the Borrower in an aggregate
principal amount of Forty Million Dollars ($40,000,000) on the terms and
conditions set forth therein, such loans evidenced by the Borrower's 13.5%
Subordinated Notes Due January 18, 2009, in the aggregate principal amount of
Forty Million Dollars ($40,000,000) issued to NML (collectively, as amended,
modified, supplemented and/or extended from time to time, the "Subordinated
Notes") and warrants to purchase an aggregate of up to 1,133,328 shares of Class
A Common Stock, par value $.01 per share, of the Borrower (the "Warrants"); and
WHEREAS, on the date hereof, concurrently with the funding of the initial
Loans under the Credit Agreement, NML and the Borrower are entering into the
First Amendment to Subordinated Note and Warrant Purchase Agreement (the
"Amendment"; the Amendment and the Original Purchase Agreement being referred to
herein collectively as the "Subordinated Purchase Agreement"), and the Borrower
is redeeming Twenty Million Four Hundred Ninety Thousand Nine Hundred Twenty
Seven Dollars and 10/100 ($20,490,927.10) in principal amount of the
Subordinated Notes and paying such amounts as required under the Original
Purchase Agreement to be paid in connection with such redemption; and
WHEREAS, the obligation of the Lenders to make the Loans is subject to the
condition, among others, that NML shall execute and deliver this Agreement and
subordinate, to the extent and in the manner hereinafter set forth, the
Subordinate Liabilities (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein, the parties hereto agree as follows:
AGREEMENT
Section 1. Definitions.
As used in this Agreement, the terms defined above shall have their
respective meanings set forth above and the following terms shall have the
following meanings:
1.1 "Senior Agreements" shall mean, collectively, the Credit Agreement, the
Notes, the Security Documents and each other Loan Document, in each case, as
amended, restated, modified, supplemented and/or extended from time to time.
1.2 "Senior Event of Default" shall mean the occurrence of any Default or
Event of Default under and as from time to time defined in the Credit Agreement.
1.3 "Senior Lender" or "Senior Lenders" shall mean the Administrative
Agent, each Lender now or hereafter party to the Credit Agreement together with
any other holder of any Senior Obligations, jointly, severally or jointly and
severally, as the context may require.
1.4 "Senior Obligations" shall mean any and all indebtedness of the
Borrower to the Senior Lenders for principal, interest (including, without
limitation, interest and other amounts that would accrue and become due but for
the filing of a petition in bankruptcy or the operation of the automatic stay
under Section 362(a) of Title 11 of the United States Code, as amended, or
similar laws, as now or hereafter in effect, whether or not any such interest or
other amounts is allowed as a claim enforceable against the Borrower in such
proceeding), fees, indemnities, expenses and costs (including costs of
collection, and including fees and expenses accrued during any bankruptcy
proceeding, whether or not such fees and expenses are allowed as a claim
enforceable against the Borrower in such proceeding) and all other amounts,
including amounts advanced to protect the liens and security interests (and/or
the collateral) of the Senior Lenders, in each case as provided under the Senior
Agreements and/or any documents contemplated thereby, direct or indirect,
contingent or non-contingent, secured or unsecured, now existing or hereafter
arising or incurred or now or hereafter due and owing to the Senior Lenders;
provided, that the principal amount (exclusive of interest (including, without
limitation, interest and other amounts that would accrue and become due but for
the filing of a petition in bankruptcy or the operation of the automatic stay
under Section 362(a) of Title 11 of the United States Code, as amended, or
similar laws, as now or hereafter in effect, whether or not any such interest or
other amounts is allowed as a claim enforceable against the Borrower in such
proceeding)) of such indebtedness shall not exceed an amount equal to
$470,000,000, without the prior written consent of the Subordinated Creditors in
accordance with Section 6.2 hereof.
1.5 "Subordinated Creditors" shall mean NML, together with any other holder
of any Subordinate Liabilities.
1.6 "Subordinated Debt Documents" shall mean the Subordinated Purchase
Agreement, the Subordinated Notes and the Warrants, in each case as amended,
restated, modified, supplemented and/or extended from time to time.
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1.7 "Subordinate Liabilities" shall mean all indebtedness of the Borrower
to the Subordinated Creditors for (a) principal of and interest on the
Subordinated Notes, together with any prepayment fees or premiums under the
Subordinated Notes and (b) any and all other indebtedness, liabilities or
obligations of any kind or nature of the Borrower, direct or indirect,
contingent or non-contingent, now existing or hereafter arising or incurred or
now or hereafter due and owing to any Subordinated Creditor under or with
respect to the Subordinated Notes and/or the Subordinated Purchase Agreement,
including without limitation fees, expenses, costs, and post-petition interest
in bankruptcy.
Section 2. Subordination.
2.1 Subordination. So long as any Senior Obligations are outstanding or the
Lenders are obligated to make Loans to the Borrower under the Credit Agreement,
each Subordinated Creditor agrees that the Subordinate Liabilities are and shall
at all times hereafter be expressly subordinate and junior in right of payment
and exercise of remedies to all Senior Obligations in the manner and to the
extent set forth in this Section 2, including but not limited to the occurrence
of redemptions or any other events that would require the Borrower to accelerate
payment in respect of the Subordinate Liabilities. Without limiting the
foregoing, any lien on, security interest in, or mortgage or pledge of or into
any of the assets of the Borrower in favor of or for the benefit of any
Subordinated Creditor, whether now existing or arising in the future, is hereby
expressly made subordinate and junior in priority of payment and right of
enforcement to any liens, security interests, mortgages or pledges of or into
any of the assets of the Borrower, both now existing and arising in the future,
securing any of the Senior Obligations.
2.2 Bankruptcy; Insolvency, etc.
(a) In the event of any insolvency, bankruptcy, receivership,
liquidation, reorganization or other similar proceedings relative to the
Borrower or to its assets, 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, so long as any Senior Obligations are
outstanding, the holders of Senior Obligations shall be entitled in any such
proceedings to receive payment in full in cash of all Senior Obligations before
the Subordinated Creditors are entitled in such proceeding to receive any
payment on account of the Subordinate Liabilities (except for payment in
securities which are subordinate and junior in right of payment to all Senior
Obligations then outstanding), and to that end in any such proceedings, so long
as any Senior Obligations remain outstanding, any payment or distribution of any
kind or character, whether in cash or in other property, to which the
Subordinated Creditors would be entitled but for the provisions hereof (except
for payment in securities which are subordinate and junior in right of payment
to all Senior Obligations then outstanding) shall be delivered to the holders of
Senior Obligations to the extent necessary to make payment in full in cash of
all Senior Obligations remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of Senior Obligations in respect thereof.
(b) So long as any Senior Obligations remain outstanding, the holders
of Senior Obligations (or their representatives) are authorized and empowered,
in any proceedings described in Section 2.2(a), in their own names or in the
names of the Subordinated Creditors, to
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(i) file claims, proofs of claim and other instruments of similar character
reasonably necessary to enforce the obligations of the Borrower in respect of
the Subordinate Liabilities in the event the Subordinated Creditors fail to do
so within 15 days of the due date pertaining thereto; and (ii) receive and apply
to the Senior Obligations every payment or distribution of every kind or
character to which such Subordinated Creditors are entitled in respect thereof
and give acquittance therefor. The Subordinated Creditors will execute and
deliver such other documents and instruments as the holders of the Senior
Obligations, or any agent or representative designated by them may reasonably
request in order to give effect to the foregoing terms of this Section 2.2(b).
Notwithstanding the foregoing, neither this Section 2.2 nor any other provision
of this Agreement, the Subordinated Debt Documents or the Borrower's charter
documents shall be construed to give any holder of Senior Obligations any right
to vote any Subordinated Note, or any shares of common stock of the Borrower
represented by the Warrants or issued pursuant to the exercise of the Warrants
or any claim thereunder or with respect thereto, or any portion of any such
notes, shares or claims, whether in connection with any resolution,
arrangements, plan of reorganization, compromise, settlement, election of
trustees or otherwise.
2.3 Payment Block.
(a) If any default in the payment (a "Payment Default") on account (y)
of any principal of or interest on the Notes, or (z) any fees or other amounts
payable in respect of any Senior Obligations in the aggregate in excess of
$250,000, (in either case, whether at maturity or at a date fixed for prepayment
or by declaration, acceleration or otherwise) occurs or exists, then (i) the
rights of any Subordinated Creditor to receive any payments or other
distributions with respect to the Subordinate Liabilities shall be suspended
from and after the date that such Subordinated Creditor receives from the
Administrative Agent a notice (a "Stop Payment Notice") of such Payment Default,
(ii) immediately following any Payment Default, and without the necessity of
delivery of a Stop Payment Notice, no payment or distribution of any character,
whether in cash, securities or other property (except for payment in securities
which are subordinate and junior in right of payment to all Senior Obligations
then outstanding) shall be made by the Borrower on account of the Subordinate
Liabilities or in respect of the redemption, retirement, purchase or other
acquisition thereof, and (iii) following the receipt by any Subordinated
Creditor of a Stop Payment Notice, no payment or distribution of any character,
whether in cash, securities or other property on account of the Subordinate
Liabilities or in respect of the redemption retirement, purchase or other
acquisition thereof (except for payment in securities which are subordinate and
junior in right of payment to all Senior Obligations then outstanding) shall be
received or accepted by such Subordinated Creditor unless and until such Payment
Default shall have been cured or waived.
(b) If any Senior Event of Default has occurred and is continuing
under circumstances in which Sections 2.2 and 2.3(a) are not applicable, or
would occur after giving effect to any payment in respect of the Subordinate
Liabilities, then (i) the rights of any Subordinated Creditor to receive any
payments or other distributions with respect to the Subordinate Liabilities
shall be suspended from and after the date that such Subordinated Creditor
receives a Stop Payment Notice from the Administrative Agent with respect to
such default, and (ii) from and after the delivery of such a Stop Payment
Notice, no payment or distribution of any character, whether in cash, securities
or other property (except securities
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which are subordinate and junior in right of payment to all Senior Obligations
then outstanding) shall be made by the Borrower, or received or accepted by any
Subordinated Creditor from the Borrower, on account of the Subordinate
Liabilities, or in respect of the redemption, retirement, purchase or other
acquisition thereof, unless and until such default shall have been cured or
waived in writing by the Senior Lenders or 180 days shall have elapsed since the
date upon which such Subordinated Creditor received such Stop Payment Notice,
whichever is earlier; provided, however, that, for purposes of this subsection
(b), the Administrative Agent shall not be permitted to (i) issue a Stop Payment
Notice more than once during any 365 consecutive days, (ii) issue more than four
Stop Payment Notices in the aggregate during the term of this Agreement, or
(iii) use any default existing on the date that any Stop Payment Notice is
issued by it (and with respect to which it had at that time actual knowledge) as
the basis for the issuance of any subsequent Stop Payment Notice; provided,
further, however, that the limitations set forth in the foregoing proviso shall
not be applicable with respect to a Stop Payment that is deemed to be delivered
under this subsection (b) as a result of the delivery by a Subordinated Creditor
of an Acceleration Notice (as defined in Section 2.4 hereof). Unless the
provisions of Sections 2.2 or 2.3(a) become applicable (whether by acceleration
or otherwise), no payment suspension period commenced pursuant to this Section
2(b) shall exceed 180 consecutive days.
(c) Notwithstanding anything to the contrary contained in Section
2.3(b), the Borrower may pay and each Subordinated Creditor may take and retain
any payment on the Subordinate Liabilities before receipt by the Borrower of a
Stop Payment Notice, except for prepayments or redemptions in respect thereof
(whether mandatory or otherwise); provided, however, that in the event that
Section 2.2 or Section 2.3(a) become applicable (whether by acceleration or
otherwise during the pendency of a payment suspension period pursuant to Section
2.3(b)), then the provisions of Section 2.2 or Section 2.3(a), as applicable,
shall become effective without the necessity of delivery of a Stop Payment
Notice. Subject to the proviso in the immediately preceding sentence, the
Borrower shall be entitled to resume the making of any payments otherwise
prohibited under this Section 2.3, including any payments previously suspended,
at such time as the default giving rise to such prohibition shall have been
cured or waived in writing or the applicable period following the date upon
which the Subordinated Creditors received the relevant Stop Payment Notice shall
have elapsed. The making of payments by the Borrower to the extent permitted by
this Agreement (including payments made during the pendency of a Senior Event of
Default when no Stop Payment Notice is in effect) shall not constitute a breach
of Section 8.7 of the Credit Agreement, except for purposes of determining
whether the conditions to lending thereunder have been satisfied.
(d) Notwithstanding anything to the contrary herein, the
Administrative Agent shall not be required to deliver Stop Payment Notices to
Transferees (as hereinafter defined) who have not complied with Section 6.1
hereof.
2.4 Standstill. Each Subordinated Creditor agrees that such Subordinated
Creditor shall not exercise any rights or remedies or take any enforcement
action available upon the occurrence of a default or an event of default or
otherwise under the documents evidencing the Subordinate Liabilities or take any
action toward the collection of any Subordinate Liabilities during the period
(the "Standstill Period") ending on the earliest of (a) the expiration of 90
days following the Subordinated Creditor giving a written notice to the Borrower
and the
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Administrative Agent stating that a default or an event of default under
the Subordinated Debt Documents to which it is a party has occurred and is
continuing and confirming that such Subordinated Creditor intends to exercise
its rights and remedies with respect to such default or event of default, (b)
the date the Senior Lenders accelerate the maturity of the Senior Obligations or
the date the Senior Lenders exercise any foreclosure remedies or proceedings
available to it upon an event of default with respect to the Senior Obligations,
(c) the occurrence of a proceeding described in Section 2.2(a) above, (d) the
date that all of the Senior Obligations shall have been paid in full and the
Senior Agreements are terminated, (e) the date that the Borrower makes any
payment or distribution, other than in the ordinary course of business, in
respect of any indebtedness which is not either Senior Obligations or other
indebtedness which, by its terms, is senior in right of payment to the
Subordinate Liabilities or, if earlier, the date that the Borrower enters into
any agreement to effectuate such a payment of distribution or (f) the date on
which the Borrower consummates a sale of its assets, the proceeds of which have
an aggregate book value in excess of 25% of the book value of the Borrower's
consolidated assets prior to such sale. The failure to make a payment of
principal of, interest on, or fees, costs or expenses relative to any of the
Subordinate Liabilities by reason of any provision of this Agreement shall not
be construed as preventing the occurrence of a default or event of default with
respect to such Subordinate Liabilities. In the event that the Subordinated
Creditors commence the exercise of any rights or remedies or any enforcement
action after the expiration of any Standstill Period imposed pursuant to this
Section 2.4, then the Borrower hereby agrees not to assert, and hereby waives
any right to assert, as a defense or otherwise, that such exercise of rights,
remedies and/or enforcement actions by the Subordinated Creditors are untimely
or that the Subordinated Creditors' delay in commencing such rights, remedies
and/or enforcement actions constitutes a waiver of any of its rights or remedies
or is otherwise commercially unreasonable. Furthermore, the Borrower agrees that
any applicable statute of limitations that would otherwise prevent the
Subordinated Creditors from pursuing any claim with respect to the Subordinate
Liabilities shall be tolled upon the commencement of, and until the expiration
of, any Standstill Period imposed pursuant to this Section 2.4, and the Borrower
hereby agrees not to assert, and hereby waives any right to assert as a defense,
any applicable statute of limitations without giving effect to such tolling.
Notwithstanding the foregoing, no Subordinated Creditor shall be prohibited from
(i) taking any action at any time that is required under applicable law to toll
any applicable statute of limitations that (without giving effect to the
preceding sentence) would otherwise prevent such Subordinated Creditor from
preserving any claim with respect to the Subordinate Liabilities, provided that
such Subordinated Creditor simultaneously provides the Administrative Agent and
the other Subordinated Creditors with written notice thereof; or (ii)
accelerating the maturity of the Subordinated Notes; provided, however, that if
such Subordinated Creditor intends to accelerate the maturity of the
Subordinated Notes at any time prior to the expiration of the applicable
Standstill Period, then (x) such Subordinated Creditor shall provide the
Administrative Agent with written notice prior to such acceleration (an
"Acceleration Notice"), (y) no enforcement action shall be taken by any holder
of Subordinate Liabilities with respect to such acceleration during the
Standstill Period, and (z) such Acceleration Notice shall be deemed also to
constitute a Stop Payment Notice under Section 2.3(b) hereof unless a payment
block pursuant to a Stop Payment Notice under Section 2.3(b) is then in effect.
If any holder of Subordinate Liabilities receives any payment from the Borrower,
such payment shall be deemed to constitute a representation of the Borrower to
the Senior Lenders and the Subordinated Creditors that no Senior Event of
Default exists under the Credit Agreement (and that, after
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giving effect to such payment, no Senior Event of Default will exist), and that
such payment is permitted to be paid by the Borrower under the Credit Agreement
and this Agreement.
2.5 Turn-Over of Payments Received by Subordinated Creditors.
(a) In the event that the Borrower shall make or any Subordinated
Creditor shall receive any payment on the Subordinate Liabilities which the
holders thereof are not permitted to receive and retain pursuant to Sections
2.1, 2.2, 2.3, or 2.4, such payment shall be held in trust by the Subordinated
Creditor receiving same, for the benefit of the Senior Lenders, and shall be
paid over immediately (without necessity of demand) to the Administrative Agent,
for the benefit of the holders of the Senior Obligations, as their respective
interests may appear, for application in accordance with the Senior Agreements
to the payment of all Senior Obligations remaining due and payable until the
same shall have been paid in full in cash, after giving effect to any concurrent
payment or distribution to the holders of such Senior Obligations.
(b) The proceeds of any sale or other disposition (other than to the
Borrower, or any Subsidiary or any Affiliate of the Borrower which has liability
for the Loans) of Subordinate Liabilities in accordance with Section 6.1 hereof,
which may be received by a holder thereof, shall not be treated as a payment to
which the holders of Senior Obligations are entitled under this Agreement.
2.6 Obligations Absolute. The provisions of this Agreement are solely for
the purposes of defining the relative rights of the holders of Senior
Obligations on the one hand and the holders of Subordinate Liabilities on the
other hand, with respect to the enforcement of rights and remedies and priority
of payment of the various obligations of the Borrower to each of them. Nothing
herein shall impair, as between the Borrower and the holder of any Subordinate
Liabilities, the obligations of the Borrower, which are unconditional and
absolute, to pay to the holder thereof the principal and interest thereon and
any other liabilities encompassed in the Subordinate Liabilities, all in
accordance with their respective terms, nor shall anything in this Agreement
prevent the occurrence of any event of default under the Subordinated Debt
Documents, or prevent any Subordinated Creditor from exercising all remedies
otherwise permitted by the Subordinated Debt Documents, applicable law or
otherwise, subject to (a) the rights, if any, of the holders of Senior
Obligations under Section 2.5 of this Agreement to receive cash or property
otherwise payable or deliverable to the Subordinated Creditors, and (b) the
restrictions on the Subordinated Creditors in favor of the holders of Senior
Obligations set forth in Section 2 hereof.
2.7 Subrogation. Upon and subject to the payment in full in cash of the
Senior Obligations, the Subordinated Creditors shall be subrogated to the rights
of the holders of Senior Obligations to receive payments or distributions of
assets of the Borrower applicable to the Senior Obligations until the
Subordinate Liabilities shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of Senior Obligations
to which the Subordinated Creditors would be entitled except for the provisions
of this Agreement shall, as between the Borrower and its creditors other than
the holders of Senior Obligations and the Subordinated Creditors, be deemed to
be a payment on account of the Senior Obligations. Each Subordinated Creditor
hereby waives any claim against the Senior Lenders based on impairment
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of the Subordinated Creditor's rights of subrogation against the Borrower due to
the action or inaction of the Senior Lenders or otherwise.
2.8 Subordination Not Affected. Without the necessity of any reservation of
rights against or any notice to or further assent by the Subordinated Creditors,
(i) any demand for payment of any Senior Obligations made by any holder of
Senior Obligations may be rescinded in whole or in part by such holder, (ii) the
holders of Senior Obligations may exercise or refrain from exercising any rights
and/or remedies against the Borrower and others, if any, liable under the Senior
Obligations, and (iii) the Senior Obligations (including without limitation, the
Credit Agreement, the Notes, the Security Documents and the other Loan
Documents), or any collateral security therefor or right of any nature with
respect thereto, may be amended, extended, modified, continued, accelerated,
compromised, waived, surrendered or released by the holders of the Senior
Obligations, and any agreement or instrument evidencing, securing or otherwise
relating to the Senior Obligations may be amended, extended, modified,
continued, accelerated, compromised, waived, surrendered or released by the
holder thereof, all without impairing, abridging, releasing or affecting in any
manner the subordination of the Subordinate Liabilities to the Senior
Obligations provided for herein; provided, that without the prior written
consent of the Subordinated Creditors (including, for purposes of this Section,
only Transferees who have complied with Section 6.1 hereof), the Senior Lenders
shall not amend or otherwise modify any provision of the Senior Agreements to
(i) expressly prohibit the Borrower from making payments in respect of the
Subordinate Liabilities that, in each case, are permitted to be made under this
Agreement; (ii) expressly prohibit the Borrower from making any amendments or
modifications to the documents relating to the Subordinate Liabilities that are
not prohibited hereby or by the Senior Agreements as in effect on the date
hereof; (iii) to increase the stated applicable pre-default or post-default
interest rate margin by more than 2.00% per annum above the respective stated
margin set forth in the Senior Agreements as in effect on the date hereof; (iv)
to extend any maturity date under the Senior Agreements (as in effect on the
date hereof) more than sixty (60) days; (v) to increase the stated principal
amount of the Senior Obligations to more than the principal amount set forth in
the definition of Senior Obligations or (vi) to shorten the amortization period
of the Loans under the Credit Agreement as in effect on the date hereof, except
to the extent that the shortening of such period results solely from a change in
the maturity date under the Senior Agreement. Without limiting the foregoing,
each Subordinated Creditor waives any and all notice of the creation, amendment,
extension, acceleration, compromise, continuation, waiver, surrender, release or
modification of any nature of any Senior Obligations, and notice of or proof of
reliance by the holders of Senior Obligations upon the subordination provided
for herein. The Senior Obligations shall conclusively be deemed to have been
created, contracted or incurred in reliance upon the provisions of this
Agreement.
2.9 Right To Retain Payment Received. Any payment in respect of the
Subordinate Liabilities which is not required to be held in trust for the
benefit of, or paid over to, the holders of Senior Obligations pursuant to
Section 2.3 or Section 2.5, and which is received by the holders of the
Subordinate Liabilities shall become the sole and absolute property of the
holders of Subordinate Liabilities and shall not, by virtue of the provisions of
this Agreement or otherwise, be subject to any payment over or any distribution
to or claim by any holders of Senior Obligations or any other person.
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Section 3. Notices.
3.1 By the Senior Lenders to the Subordinated Creditors. The Administrative
Agent shall endeavor to provide the Subordinated Creditors with notice of any
Senior Event of Default by the Borrower under the Credit Agreement
simultaneously with giving notice to the Borrower, provided, however, that the
Senior Lenders shall have no liability to the Subordinated Creditors for the
Administrative Agent's failure to provide the Subordinated Creditors with any
such notice(s), and further provided, that the failure to give such notice(s)
shall not alter, amend, or affect the subordination provisions of this
Agreement.
3.2 By the Subordinated Creditors to the Senior Lenders. Each Subordinated
Creditor shall endeavor to provide the Administrative Agent with notice of any
default under the Subordinated Debt Documents simultaneously with giving notice
to the Borrower, provided, however, that no Subordinated Creditor shall have any
liability to the Senior Lenders for such Subordinated Creditor's failure to
provide any notice required under this Section 3.2.
3.3 By the Borrower to the Administrative Agent. The Borrower shall provide
the Administrative Agent with copies of all notices of any default received by
it from any Subordinated Creditor immediately upon its receipt thereof.
3.4 By the Borrower to the Subordinated Creditors. The Borrower shall
provide the Subordinated Creditors with copies of all notices of any default
received by it from any Senior Lender immediately upon its receipt thereof.
Section 4. Representations and Warranties.
4.1 By the Borrower. The Borrower represents and warrants as follows:
(a) Subordinated Purchase Agreement; Subordinated Notes. Attached
hereto as Exhibit A are true, correct and complete copies of the Subordinated
Debt Documents.
(b) No Assignment or Participation in Subordinated Notes. The
Subordinated Creditors are the registered owners of the Subordinated Notes and
the Warrants.
(c) Authorization and Enforceability. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary
corporate action on the part of the Borrower, and this Agreement constitutes a
valid and binding obligation of the Borrower, enforceable against the Borrower
in accordance with its terms.
(d) Subordinated Notes Legended. The Borrower has caused the
Subordinated Notes and the Warrants issued to and held by the Subordinated
Creditors to be affixed with a legend referencing this Agreement and the
subordination provisions hereof.
4.2 By the Subordinated Creditors.
(a) Each Subordinated Creditor hereby represents and warrants that it
has not sold (in whole or in part) or granted any assignments of or
participations in the Subordinated
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Notes or the Warrants; nor has such Subordinated Creditor granted or permitted
to exist any lien or encumbrance of any nature on such Subordinated Notes or
Warrants.
(b) Each Subordinated Creditor hereby acknowledges that this Agreement
is a "subordination agreement" within the meaning of Section 501(a) of the
United States Bankruptcy Code, 11 U.S.C. (S)510(a).
Section 5. Covenants of the Subordinated Creditors.
5.1 Amendment of Subordinated Purchase Agreement and Subordinated Notes.
Neither the Borrower nor the Subordinated Creditors will, without the prior
written consent of the Senior Lenders, amend or consent to the amendment of the
Subordinated Debt Documents if such amendment would (i) increase the principal
amount or interest rate payable by the Borrower in respect of the Subordinated
Notes (except increases in principal amount of the Subordinated Notes as a
result of payment-in-kind interest), and/or the amount of the Subordinate
Liabilities; (ii) change the dates on which payments of principal or interest on
the Subordinated Notes or any other Subordinate Liabilities are due; (iii) amend
existing covenants or the related definitions used therein (by making them more
restrictive), including but not limited to the financial covenants set forth
therein; (iv) amend the definitions of default or event of default appearing in
the Subordinated Debt Documents; (v) add any provisions to the Subordinated Debt
Documents requiring the Borrower to make any additional payments or prepayments
to the Subordinated Creditors or requiring the Borrower to purchase, exchange or
redeem any portion of the Subordinate Liabilities or the Warrants, or (vi) take
any collateral as security for the Subordinate Liabilities.
5.2 Validity and Enforceability of Liens Securing Senior Obligations;
Cooperation with Senior Lenders; Consent to Asset Sales by the Borrower.
(a) The Subordinated Creditors will not in any proceeding, whether in
connection with a bankruptcy or insolvency or other event described in Section
2.2 or otherwise, (i) challenge or contest (or join in any challenge or contest
by any third party) the superiority, priority, validity or enforceability of any
security interest or lien granted to the Administrative Agent and/or the Senior
Lenders pursuant to the Senior Agreements or (ii) challenge the validity or
enforceability of such Senior Agreements, or any provisions thereof. The
Subordinated Creditors hereby waive any right to require the Administrative
Agent or other holders of the Senior Obligations to marshal the collateral for
such Senior Obligations.
(b) Without limiting the foregoing, the Subordinated Creditors will
not challenge or oppose (or join with any party challenging or opposing) or take
any action whatsoever to impair the exercise by the Senior Lenders of the right
granted to the Senior Lenders to move for the appointment of a receiver for the
Borrower.
Section 6. Miscellaneous.
6.1 Transfers. No Subordinated Creditor shall sell, assign or otherwise
transfer, in whole or in part, any Subordinate Liabilities or any interest
therein, to any other person or entity (a "Transferee") unless such Transferee
first signs an acknowledgment in the form of Exhibit B
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hereto and delivers a signed counterpart hereof to each other party hereto,
whereby each such Transferee shall become a party hereto and expressly
acknowledges the subordination provided for herein and agrees to be bound by all
of the terms hereof. The Borrower hereby agrees that any such transfer shall not
affect its obligations under this Agreement and that it will promptly execute
and deliver any such counterpart when requested to do so.
6.2 Modifications. No amendment, modification, termination or waiver of any
provision of this Agreement, or consent to any departure therefrom, shall in any
event be effective without the written concurrence of the Administrative Agent
and the holders of at least a majority of the Subordinated Notes then
outstanding.
6.3 Termination; Reinstatement. This Agreement shall remain in full force
and effect until the payment in full in cash of all Senior Obligations and the
expiration or termination of the obligations of the Lenders to make Loans to the
Borrower under the Senior Agreements, provided, that this Agreement shall
continue to be effective or be reinstated (as the case may be) if at any time
payment of any of the Senior Obligations is refunded or rescinded or must
otherwise be returned by the Senior Lenders upon a bankruptcy, arrangement,
reorganization or similar proceeding for relief of debtors under state or
federal law or otherwise, all as though such payment had not been made.
6.4 Notices. Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given shall be in writing
and shall be deemed to have been given and received the (i) day of sending if
delivered by hand delivery, telegram, telecopy or telex, receipt confirmed, (ii)
one (1) day after being sent, if sent by Federal Express, Express Mail, or other
similar nationally known overnight delivery service, or (iii) three (3) days
after being deposited in the mails, registered or certified with postage
prepaid, and properly addressed. For the purposes hereof, the address of each
party hereto is as set forth under its name on the signature pages hereof, or
such other address as such party may specify by written notice to each other
party.
6.5 Third Party Rights. This Agreement is solely for the benefit of the
Senior Lenders, the Subordinated Creditors and the Borrower, and no other person
shall have any right, benefit, priority or other interest under, or because of
the existence of, this Agreement.
6.6 Counterparts. This Agreement and any amendments, waivers, consents, or
supplements may be executed in any number of counterparts and by the different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute one and the same instrument.
6.7 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
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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 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 6.7.
6.8 Descriptive Headings. The descriptive headings of this Agreement are
for convenience only and shall have no legal effect.
[Signature pages follow]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as an
instrument under seal as of the date first above written.
ADMINISTRATIVE AGENT:
FLEET NATIONAL BANK,
as Administrative Agent for the Senior Lenders
By: /s/ John F. Lynch
-------------------------------------------
Name:
Title:
100 Federal Steet
Boston, MA 02110
Attention: John F. Lynch, Senior Vice President
With a copy to:
Peter M. Palladino, P.C.
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
SUBORDINATED CREDITOR:
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: /s/ Mark Kishler
-------------------------------------------
Name: Mark Kishler
Title: Authorized Representative
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
Attention: Securities Department
Fax: (414) 665-7124
with a copy to:
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
Attention: Tim Otto, Legal Department
Fax: (414) 665-7016
BORROWER:
MONITRONICS INTERNATIONAL, INC.
By: /s/ James R. Hull
-------------------------------------------
James R. Hull, President
12801 Stemmons Freeway, Suite 821
Dallas, TX 75234
with a copy to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, TX 75201
Attention: Christine Hathaway, Esq.
EXHIBIT B
ACKNOWLEDGMENT
The undersigned purchaser, assignee, or transferee of the Subordinate
Liabilities described in Schedule 1 attached hereto, hereby acknowledges the
terms of this Intercreditor and Subordination Agreement and the subordination
provided for herein and agrees to be bound by all of the terms hereof. This
Agreement will be attached to and become part of the Intercreditor and
Subordination Agreement.
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By:
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Its:
--------------------------------------
Date:
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Notice Address:
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Attention:
--------------------------------
Telecopy Number:
--------------------------
Acknowledged and Agreed:
MONITRONICS INTERNATIONAL, INC.
By:
-----------------------------
Name:
Title: