Exhibit 10.32
PREFERRED STOCK SUBORDINATION AGREEMENT
PREFERRED STOCK SUBORDINATION AGREEMENT (this "Agreement") dated as of May
10, 1996 by and among Monitronics International, Inc., a Texas corporation (the
"Company"), Capital Resource Lenders II, L.P., a Delaware limited partnership,
Austin Ventures Ill-A, L.P., a Delaware limited partnership, and Austin Ventures
Ill-B, L.P., a Delaware limited partnership (collectively, the "Purchasers"),
and the holders of Preferred Stock (as defined herein) whose names appear on the
signature pages to this Agreement.
W I T N E S S E T H:
WHEREAS, the parties hereto (other than the Company) are the holders of
certain obligations and securities of the Company and the parties hereto desire
to establish hereby the relative rights and priorities of payment of such
obligations and securities to such parties.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
"Notes" shall mean the 12.0% Senior Subordinated Notes due June 30, 2003
issued by the Company pursuant to the Purchase Agreement, and any notes issued
in exchange therefor or in replacement thereof, as the same may be amended,
modified or supplemented.
"Preferred Stock" shall mean the Company's Preferred Stock, par value $0.01
per share, as authorized on the date of this Agreement.
"Purchase Agreement" shall mean the Senior Subordinated Note and Warrant
Purchase Agreement dated the date hereof by and among the Company and the
Purchasers, as hereinafter amended, modified or supplemented.
"Senior Creditor" shall mean any holder of Senior Obligations as such.
"Senior Obligations" shall mean all indebtedness of the Company for
principal, interest, fees, expenses and other amounts now existing or hereafter
incurred or due and owing under the Notes and/or the Purchase Agreement.
"Subordinated Investor" shall mean any holder of Subordinated Obligations
as such.
"Subordinated Obligations" shall mean any and all obligations or
liabilities of the Company now existing or hereafter arising, absolute or
contingent, arising by contract, at law or otherwise, with respect to (a)
dividends payable on Preferred Stock, (b) the purchase, redemption or other
acquisition of Preferred Stock, and (c) any other amount payable to holders of
Preferred Stock as such.
Unless otherwise defined herein, capitalized terms used in this Agreement shall
have the meanings assigned to them in the Purchase Agreement.
SECTION 2. SUBORDINATION.
2.1 Subordination. Each of the Subordinated Investors agrees, for itself
and each future holder of Subordinated Obligations and for the benefit of all
present and future holders of Senior Obligations, that in the manner and to the
extent set forth in this Section 2, the Subordinated Obligations and the
Preferred Stock are and shall be expressly subordinate and junior in right of
payment to all Senior Obligations.
2.2 Restrictions on Payments. So long as any Senior Obligations are
outstanding, neither the Company nor any of its Subsidiaries will make or cause
to be made, and no Subordinated Investor will demand, accept or receive,
directly or indirectly, any payment (in cash, property, by set-off or otherwise)
on or with respect to Subordinated Obligations (except securities which are
subordinate and junior in right of payment to the Senior Obligations).
2.3 Turn-Over of Payments Received. If any Subordinated Investor receives
any payment or distribution on Subordinated Obligations which it is not entitled
to receive and retain under the provisions of this Section 2, such Subordinated
Investor will hold any amount so received in trust for the Senior Creditors and
shall forthwith remit such payment in the form received (with any necessary
endorsements) to the Senior Creditors.
2.4 Limitations on Remedies. So long as any Senior Obligations are
outstanding, no Subordinated Investor shall (a) commence or join (unless the
Senior Creditors shall also join) in any proceeding against the Company 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 (b) commence any action or proceeding
against the Company or any of its Subsidiaries to enforce payment or to collect
payment of all or any part of the Subordinated Obligations; provided, however,
that this Section 2.4 shall not be construed so as to prevent the Company or any
of its Subsidiaries from filing a voluntary proceeding under any bankruptcy,
reorganization, readjustment of debt, arrangement of debt, restructuring,
liquidation or insolvency law or statute of any federal or state government.
2.5 Subordination Not Affected. A Senior Creditor may at any time and from
time to time, without the consent of or notice to the Subordinated Investors,
without incurring liability to the Subordinated Investors, and without impairing
or releasing the obligations of the Subordinated Investors under this Agreement:
(a) change the manner, place or terms of payment or change the time of payment
of or renew, alter, waive, release or compromise the Senior Obligations or any
security therefor, or amend or modify in any manner any agreement, note,
guaranty or other instrument evidencing or securing or otherwise relating to any
Senior Obligations, except that the Senior Creditors shall not extend the
maturity of the Senior Obligations beyond June 30, 2003 without the written
consent of the Subordinated Investors; (b) exercise or refrain from exercising
any rights against the Company and others (including Subordinated Investors);
and (c) apply any sums by whomsoever paid or howsoever realized to the Senior
Obligations.
-2-
SECTION 3. MISCELLANEOUS.
3.1 Instrument Legend. Any certificate, agreement or instrument evidencing
any of the Subordinated Obligations shall be inscribed with a legend or shall
otherwise conspicuously indicate that the obligations evidenced thereby are
subordinate and junior in right of payment to the Senior Obligations in the
manner and to the extent set forth in this Agreement.
3.2 Transfer of Claims. No Subordinated Investor shall sell, assign or
otherwise transfer, in whole or in part, any Subordinated Obligations or any
interest therein, unless such sale, assignment or transfer is made expressly
subject to and the transferee becomes bound by the terms of this Agreement
applicable to such Subordinated Obligations.
3.3 Waivers by Subordinated Investors. All Senior Obligations shall be
deemed to have been made or incurred in reliance upon this Agreement. The
Subordinated Investors expressly waive all notice of the acceptance by the
Senior Creditors of the subordination and other provisions of this Agreement and
all other notices whatsoever, and expressly waive proof of reliance by the
Senior Creditors upon the subordination and other agreements herein set forth.
The Senior Creditors shall have no liability to the Subordinated Investors for
any and all actions which the Senior Creditors, in good faith and without
willful misconduct or breach of an express obligation to the Subordinated
Investors hereunder, take or omit to take with respect to the agreements or
instruments creating, evidencing or securing Senior Obligations or the
collection of the Senior Obligations.
3.4 Governing Law and Consent to Jurisdiction. This Agreement shall be
construed and interpreted, and the rights and obligations of the parties hereto
determined, in accordance with the laws of The Commonwealth of Massachusetts.
The parties consent to the jurisdiction of the courts of The Commonwealth of
Massachusetts as to any issues related to this Agreement, including the
validity, enforceability, or interpretation thereof, which require judicial
resolution.
3.5 Successors and Assigns. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective transferees,
successors and assigns, including without limitation any receiver, trustee,
custodian, or debtor-in-possession, as holders of Senior Obligations and
Subordinated Obligations.
3.6 Notices. Any notice given hereunder shall be in writing and shall be
deemed to have been validly given to a party hereto (i) three business days
after being deposited in the United States Postal Service as registered or
certified mail, return receipt requested, with proper postage prepaid, and
addressed to such party at its address set forth on Exhibit A to this Agreement,
or at such other address as such party may designate to the other parties by
like notice; or (ii) on the date of delivery at such party's address as
specified above by hand delivery, telex, telegraph or facsimile transmitter.
3.7 Section Titles. The section titles contained in this Agreement are and
shall be without substantive meaning or content of any kind whatsoever, are not
a part of the agreement between the parties hereto, and are provided solely for
convenience of reference.
3.8 Waivers. etc. No failure to exercise and no delay in exercising any
right, power or privilege under this Agreement shall operate as a waiver
thereof; and no single or partial
-3-
exercise of any right, power or privilege under this Agreement shall preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies provided in this Agreement are cumulative
and shall not be exclusive of any rights or remedies provided by other
agreements or by law.
3.9 Amendments. The subordination provisions contained herein are for the
benefit of the holders from time to time of Senior Obligations, and may be
rescinded or cancelled, and except as otherwise expressly provided for herein,
amended or modified, only with the express prior written consent of all holders
of the Senior Obligations and Subordinated Obligations.
3.10 Counterparts. This Agreement may be executed in any number of separate
counterparts, all of which shall constitute one and the same agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-4-
IN WITNESS WHEREOF, this Preferred Stock Subordination Agreement has been
executed by the parties hereto as of the day and year first above set forth.
THE COMPANY
MONITRONICS INTERNATIONAL, INC.
By: /s/ James R. Hull
------------------------------------
Name: James R. Hull
Title: President and C.E.O.
THE PURCHASERS
CAPITAL RESOURCE LENDERS II, L.P.
By: Capital Resource Partners II, L.P.,
its General Partner
By: /s/ illegible signature
------------------------------------
Title: Authorized Representative
AUSTIN VENTURES III-A, L.P.
By: AV Partners III, L.P.
Its General Partner
By:
------------------------------------
Title:
S-1
IN WITNESS WHEREOF, this Preferred Stock Subordination Agreement has been
executed by the parties hereto as of the day and year first above set forth.
THE COMPANY
MONITRONICS INTERNATIONAL, INC.
By:
------------------------------------
Name:
Title:
THE PURCHASERS
CAPITAL RESOURCE LENDERS II, L.P.
By: Capital Resource Partners II, L.P.,
its General Partner
By:
------------------------------------
Title:
AUSTIN VENTURES III-A, L.P.
By: AV Partners III, L.P.
Its General Partner
By: /s/ Blaine F. Wesner
------------------------------------
Title: Authorized Signatory
S-2
AUSTIN VENTURES III-B, L.P.
By: AV Partners III, L.P.
Its General Partner
By: /s/ Blaine F. Wesner
------------------------------------
Title: Authorized Signatory
THE PREFERRED STOCKHOLDERS
AUSTIN VENTURES III-A, L.P.
By: AV Partners III, L.P.
Its General Partner
By: /s/ Blaine F. Wesner
------------------------------------
Title: Authorized Signatory
AUSTIN VENTURES III-B, L.P.
By: AV Partners III, L.P.
Its General Partner
By: /s/ Blaine F. Wesner
------------------------------------
Title: Authorized Signatory
S-3
EXHIBIT A
ADDRESSES
If to the Company: Monitronics, International, Inc.
12801 Stemmons Freeway
Suite 821
Dallas, Texas 75234
Attention: James R. Hull
Fax Number: (214) 484-1393
With a copy to: Glast, Phillips & Murray, P.C.
Suite 2200, L.B. 48
One Galleria Tower
Dallas, Texas 75240-6657
Attention: Mike Parsons, Esq.
Fax Number: (214) 419-8329
If to the Purchasers: Capital Resource Partners
175 Portland Street, Suite 300
Boston, MA 02114
Attention: Stephen M. Jenks
Fax Number: (617) 723-9819
With a copy to: Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, MA 02110
Attention: Andrew E. Taylor, Jr., Esq.
Fax Number: (617) 248-7100
If to the Preferred Stockholders: c/o Austin Ventures
1300 Norwood Tower
114 West Seventh Street
Austin, Texas 78701
Attention: Blaine F. Wesner
Fax Number: (512) 476-3952
With a copy to: Hughes & Luce, L.L.P
111 Congress Avenue
Suite 900
Austin, Texas 78701
Attention: William R. Volk
Fax Number: (512) 482-6859
A-1