Exhibit 10.27
FOURTH AMENDED AND RESTATED
SHAREHOLDERS AGREEMENT
Dated as of January 18, 2002
Among
Monitronics International, Inc.
and
The Shareholders and Warrant Holders
of
Monitronics International, Inc. Referred to Herein
TABLE OF CONTENTS
1. Voting Provisions...........................................................2
1A. Composition of Board of Directors.......................................2
1B. Compensation Committee..................................................3
1C. Vacancies, Removal......................................................4
1D. Meetings; Quorum........................................................4
1E. Expenses................................................................5
1F. Indemnification Agreements..............................................5
1G. Special Voting Rights of Holders of Series D Preferred Stock............5
1H. Special Voting Rights of Holders of Series C Preferred Stock............8
1I. Special Covenant of Shareholders........................................8
2. Provisions Relating to Transfers of Company Securities......................8
2A. General Restrictions on Transfers.......................................8
2B. Right of First Refusal..................................................9
2C. Contractual Preemptive Rights..........................................10
2D. Transferees of Capital Stock...........................................12
3. Liquidity Rights; Right of First Offer.....................................12
3A. Sale of the Company....................................................12
3B. Sale Procedure.........................................................13
3C. Cessation of Sale Procedure............................................14
3D. Accepted Sale Proposals................................................14
3E. Best Efforts...........................................................14
3F. Initial Public Offering................................................15
3G. Right of First Offer...................................................15
4. Definitions................................................................16
5. General Provisions.........................................................21
5A. Transfer Conditions....................................................21
5B. Legends on Certificates................................................21
5C. Termination; Amendment and Waiver......................................22
5D. Notices................................................................23
5E. Governing Law..........................................................25
5F. Entire Agreement.......................................................25
5G. Further Assurances.....................................................25
5H. Counterparts...........................................................25
5I. Reorganization.........................................................25
5J. Descriptive Headings...................................................25
5K. Severability...........................................................25
5L. Binding Effect.........................................................26
5M. Exception for Pledge...................................................26
FOURTH AMENDED AND RESTATED
SHAREHOLDERS AGREEMENT
This Fourth Amended and Restated Shareholders 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 the Schedule of Preferred Holders attached hereto (the "Preferred Holders"),
the holders of Warrants listed on the Schedule of Warrant Holders attached
hereto (the "Warrant Holders" and collectively with the Preferred Holders, the
"Purchasers"), the holders of Common Stock of the Company listed on the Schedule
of Common Shareholders attached hereto (the "Common Shareholders" and, together
with the Purchasers and such other parties as may from time to time become
parties hereto, the "Shareholders").
Recitals
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,
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 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, that certain Sixth Amendment Agreement
dated as of April 27, 2001 (the "Sixth Amendment Agreement") and that certain
Seventh Amendment Agreement dated as of January 18, 2002 (the "Seventh 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 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, and (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,
(iii) the Sixth Amendment Agreement and (iv) the Seventh 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 Seventh Amendment Agreement (as so amended, the "Series B
Purchase Agreement"), providing, among
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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 certain
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 (the "Series C Exchange Agreement"), dated as
of April 27, 2001, providing, among other things, for the exchange by certain
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 (the "Series D-1 Purchase Agreement"),
providing, among other things, for the purchase by certain Preferred Holders of
up to 70,000 shares of Series D-1 Preferred Stock.
The Company, the Preferred Holders named therein, the Warrant Holders named
therein and the Common Shareholders named therein are parties to a Third Amended
and Restated Shareholders Agreement, dated as of April 27, 2001 (the "Third
Amended and Restated Shareholders Agreement").
The Company and certain of the Warrant Holders are parties to a
Subordinated Note and Warrant Purchase Agreement, dated as of January 18, 2002
("2001 Note Agreement"), providing, among other things, for the purchase by such
Warrant Holder of warrants (the "2001 Warrants" and, together with the Mezzanine
Warrants and the Preferred B Warrants, the "Warrants") to acquire up to
1,133,328 shares (subject to adjustment as provided in such Warrants) of Class A
Common Stock of the Company.
The parties hereto desire to amend and restate the Third Amended and
Restated Shareholders Agreement in its entirety in order to facilitate the
transactions contemplated by the 2001 Note Agreement.
Capitalized terms not defined elsewhere herein shall have the respective
meanings assigned to them in Part 4 of this Agreement.
The parties hereto agree that the Third Amended and Restated Shareholders
Agreement shall be amended and restated in its entirety by this Agreement, and
the parties further agree as follows:
1. Voting Provisions.
1A. Composition of Board of Directors. The Shareholders agree that in any
election of directors of the Company, they shall vote or act by written consent,
as the case may be, all shares of capital stock of the Company now or hereafter
owned or controlled by them, including all shares that they are entitled to vote
under any voting trust, voting agreement or proxy, to elect a Board of Directors
comprising eight directors designated as follows:
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(a) three directors (each a "Series A Director") shall be
designated by the holders of a majority of the Series A Underlying Common Stock;
provided, that Austin Ventures III will designate two Series A Directors for so
long as Austin Ventures III holds any Series A Underlying Common Stock, and the
remaining Series A Director shall be designated by the holders of a majority of
the Series A Underlying Common Stock;
(b) one director (the "Series B Director") shall be designated by
the holders of a majority of the Preferred B Warrant Shares; provided, that
Austin Ventures V will designate the Series B Director for so long as Austin
Ventures V holds any Preferred B Warrants or Preferred B Warrant Shares;
(c) one director (the "Series C Director,") shall be designated
by the holders of a majority of the Series C Underlying Common Stock; provided,
that Windward will designate the Series C Director for so long as Windward holds
any Series C Underlying Common Stock;
(d) one director (the "Series D Director" and, together with the
Series A Directors, the Series B Director and the Series C Director, the
"Purchaser Directors") shall be designated by the holders of a majority of the
Series D Preferred Stock; provided, that ABRY will designate the Series D
Director for so long as ABRY holds any Series D Underlying Common Stock;
(e) one director (the "President Director") shall be ▇▇▇▇▇ ▇.
▇▇▇▇ ("▇▇▇▇"), for so long as Hull is employed by the Company and, thereafter,
one director shall be designated by the President of the Company; and
(f) one director shall be designated by the holders of the
Mezzanine Warrants (the "Warrant Director"), as provided in Section 7.01(n) of
the Note Agreement.
The initial Series A Directors shall be ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the initial Series B Director shall be ▇▇▇▇
▇▇▇▇▇▇, the initial Series C Director shall be ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, the initial
Series D Director shall be ▇▇▇ ▇▇▇▇▇▇▇▇ and the initial Warrant Director shall
be ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇. The obligation to vote shares in accordance with this
Paragraph 1A shall be specifically applicable to and enforceable against any
transferees of the parties hereto.
1B. Compensation Committee. The Board of Directors shall establish and
maintain a compensation committee comprising ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (or if he is not a
director, a Purchaser Director designated by a majority of the Purchaser
Directors), the Series D Director, Hull, one other director who is not an
officer or employee of the Company designated by a majority of the Purchaser
Directors and a representative of the holders of Mezzanine Warrants in
accordance with Section 7.01(n) of the Note Agreement. The compensation
committee of the Board of Directors will review and make recommendations to the
Board of Directors regarding salaries, bonuses and other compensation and
benefits of officers and key employees of the Company and its subsidiaries, and
will administer any Approved Plan and any other stock option, incentive or
compensation plans or arrangements.
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1C. Vacancies, Removal. In the event of any vacancy in the Board of
Directors, each of the Shareholders agrees to vote all shares of capital stock
owned or controlled by them and to otherwise use their best efforts to fill such
vacancy so that the Board of Directors of the Company will include directors
designated as provided in Paragraph 1A of this Agreement. Each of the
Shareholders agree to vote all shares of capital stock owned or controlled by
them for the removal of (a) any director whenever (but only whenever) there
shall be presented to the Board of Directors the written direction that such
director be removed, signed by the party entitled to designate such director
pursuant to Paragraph 1A of this Agreement, (b) Hull, as the President Director,
whenever (but only whenever) Hull is no longer employed by the Company, and (c)
any other President Director, whenever (but only whenever) the individual
serving as the President Director is no longer the President of the Company.
Each of the parties agrees to use its best efforts to cause designees to be
elected to the Board of Directors as provided in Paragraph 1A of this Agreement.
1D. Meetings; Quorum. The Company agrees to hold meetings of the Board of
Directors at least once quarterly commencing in July 2001. The Company will give
each Preferred Holder (so long as such Preferred Holder holds any Preferred
Stock or Underlying Common Stock) and each Warrant Holder (so long as such
Warrant Holder holds any Warrants or Warrant Shares) written notice at least one
week (72 hours, in the case of a telephone meeting) in advance of all meetings
of the Board of Directors and all meetings of committees of the Board of
Directors, and will permit each such Preferred Holder, Warrant Holder (other
than holders of the 2001 Warrants) and one representative of the holders of the
2001 Warrants, if each such Preferred Holder and Warrant Holder has not
designated a Purchaser Director, to attend meetings of the Board of Directors
and all meetings of committees of the Board of Directors. If a Purchaser
Director designated pursuant to Paragraph 1A of this Agreement is not able to
attend a Board of Directors meeting or a meeting of a committee on which he
serves, the Person(s) entitled to designate such Purchaser Director may
designate any one Person to attend as an observer; provided, however, that (i)
Windward may designate one additional Person to attend as an observer even if
the Series C Director is able to attend the meeting and (ii) ABRY may designate
one additional Person to attend as an observer even if the Series D Director is
able to attend the meeting. Any observer described in either of the two
preceding sentences may be excluded from any meeting to the extent necessary to
preserve any evidentiary privilege. The Company shall furnish each Purchaser
with a copy of the minutes and other records of all meetings and other actions
taken by the Board of Directors and its committees and all written material
given to directors in connection with such meeting at the same time such
materials and information are given to the directors. If the Company proposes to
take any action by written consent in lieu of a meeting of its Board of
Directors or any committee thereof, the Company shall give written notice
thereof to each such Preferred Holder and Warrant Holder prior to the effective
date of such consent describing in reasonable detail the nature and the
substance of such action. The failure of the Company to provide any notice to
any Preferred Holder or Warrant Holder as required pursuant to this Paragraph 1D
shall not have any effect on the validity of any action taken by the Board of
Directors (or committee thereof) at any meeting or by written consent in lieu of
a meeting. The Company will at all times comply with the provisions of Sections
7.01(f), (l) and (n) of the Note Agreement and Sections 7.01(f), (l) and (n) of
the 2001 Note Agreement and the rights of a holder of the 2001 Warrants
contained in this
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Paragraph 1D and Paragraph 1E of this Agreement shall not be duplicative of the
rights of a party to the Note Agreement or the 2001 Note Agreement.
1E. Expenses. The Company shall reimburse all Persons serving as directors
for their actual and reasonable out-of-pocket expenses incurred in attending
meetings of the Board of Directors and all committees thereof and otherwise
incurred in fulfilling their duties as directors. If a Purchaser has not
designated a Purchaser Director or if a Purchaser Director designated pursuant
to Paragraph 1A of this Agreement is unable to attend a meeting of the Board of
Directors or a committee on which he serves, the Company shall reimburse one
representative of the Person(s) entitled to designate such Purchaser Director
for actual and reasonable out-of-pocket expenses incurred in attending meetings
of the Board of Directors and such committees. The Company shall also reimburse
one observer designated by each of Windward, ABRY and the holders of the 2001
Warrants for actual and reasonable out-of-pocket expenses incurred in attending
meetings of the Board of Directors and such committees thereof. Austin Ventures
shall be considered to be one Purchaser for purposes of this Paragraph 1E (but
not for any other purpose).
1F. Indemnification Agreements. On the date hereof and on each later date
that a Purchaser Director or any other director is first elected or appointed to
the Board of Directors, the Company shall enter into an indemnification
agreement in substantially the form attached hereto as Exhibit A with each
Purchaser Director and each other director of the Company who is elected or
appointed to the Board of Directors on such date.
1G. Special Voting Rights of Holders of Series D Preferred Stock. In
addition to any action otherwise required by the Articles of Incorporation or
applicable law, the Company shall not take any of the following actions without
the prior authorization and approval of the holders of a majority of the Series
D Underlying Common Stock (for purpose of this Paragraph 1G only, the
affirmative vote of the Series D Director at a meeting of the Board of Directors
(or his written consent in lieu thereof) shall constitute the authorization and
approval of the holders of a majority of the Series D Underlying Common Stock):
(a) remove or designate the chief executive officer of the
Company;
(b) change the nature of the business or operations of the
Company or any of its Subsidiaries or enter into or allow any of its
Subsidiaries to enter into a line of business other than the purchasing,
monitoring and servicing of security alarm contracts;
(c) authorize or issue, or obligate itself to issue, any Series D
Preferred Stock or any other Company Security (including any Company Security
convertible into or exercisable or exchangeable for any Company Security) that
ranks senior to, or pari passu with, the Series D Preferred Stock as to dividend
or redemption rights or liquidation preferences, other than issuances of Series
D-1 Preferred Stock pursuant to the Series D-1 Purchase Agreement and issuances
of Series D-2 Preferred Stock upon conversion of shares of Series D-1 Preferred
Stock pursuant to the Articles of Incorporation;
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(d) redeem, purchase or otherwise acquire (or pay into or set
aside for a sinking fund for such purpose), or allow any of its Subsidiaries to
redeem, purchase or otherwise acquire, any Company Security (including any
Company Security convertible into or exercisable or exchangeable for any Company
Security) that ranks junior to the Series D Preferred Stock as to dividend or
redemption rights or liquidation preferences (other than (i) a liquidation of
the Company pursuant to Article IV, Part 2 of the Articles of Incorporation or
(ii) the redemption of Series A Preferred Stock, Series B Preferred Stock or
Series C Stock pursuant to Article IV, Part 3 of the Articles of Incorporation);
(e) declare or pay a dividend or distribution of any kind on any
Company Security that ranks junior to the Series D Preferred Stock as to
dividend or redemption rights or liquidation preferences (other than (i)
dividends on Series A Preferred Stock or Series C Preferred Stock paid in shares
of Class A Common Stock pursuant to Article IV, Paragraph 5L of the Articles of
Incorporation, (ii) a liquidation of the Company pursuant to Article IV, Part 2
of the Articles of Incorporation or (iii) the redemption of Series A Preferred
Stock, Series B Preferred Stock or Series C Stock pursuant to Article IV, Part 3
of the Articles of Incorporation);
(f) other than provisions in the definitive documentation
relating to the senior secured credit facility of the Company in effect on the
date hereof, enter into, or allow any of its Subsidiaries to enter into, any
financing transaction or other arrangement with terms and conditions that would
prevent the Company from performing its obligations (other than obligations to
make payments) in respect of the Series D Preferred Stock or Series D Underlying
Common Stock;
(g) other than a Sale of the Company of a type described in
clause (iii) of the definition of Sale of the Company set forth in Part 4 of
this Agreement in which the holders of the Series D Preferred Stock and Series D
Underlying Common Stock are not shareholders of the surviving corporation,
acquire, or permit any Subsidiary to acquire, any Equity Securities or other
interest in any Person or business (whether by a purchase of assets, purchase of
Equity Securities, merger or otherwise), or enter into any joint venture,
involving an aggregate consideration (including, without limitation, the
assumption of liabilities whether direct or indirect) exceeding $50,000,000 in
any one transaction (or series of related transactions);
(h) except as expressly contemplated by this Agreement, make any
amendment to the Articles of Incorporation or the Company's bylaws, or file any
resolution of the Board of Directors with the Texas Secretary of State
containing any provisions, which would increase the number of authorized shares
of the Series D Preferred Stock or adversely affect or otherwise impair the
rights or the relative preferences and priorities of the holders of the Series D
Preferred Stock or Series D Underlying Common Stock under this Agreement, the
Articles of Incorporation, the Company's bylaws or the Registration Rights
Agreement;
(i) enter into, amend, modify or supplement, or permit any
Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, employees, stockholders or Affiliates or with any
individual related by blood, marriage or adoption to any such individual or
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with any entity in which any such Person or individual owns a beneficial
interest, except for customary employment arrangements and benefit programs on
reasonable terms and except as otherwise expressly contemplated by this
Agreement;
(j) establish or acquire any Subsidiaries other than Subsidiaries
which will be wholly owned by the Company;
(k) permit any of its Subsidiaries to issue, sell or have
outstanding any Equity Securities, or rights to acquire Equity Securities, other
than Equity Securities held by the Company or a direct or indirect wholly-owned
Subsidiary of the Company;
(l) except as may be required by the senior lenders of the
Company in the enforcement of their rights during the existence of an event of
default that continues after applicable grace and cure periods under any senior
secured credit facility of the Company in effect from time to time, prior to
June 30, 2003, consummate or agree to consummate a Sale of the Company
(including a Sale of the Company of a type described in clause (ii) or (iii) of
the definition of Sale of the Company set forth in Part 4 of this Agreement)
unless, upon the consummation of such Sale of the Company prior to June 30,
2003, the total cash proceeds received (including dividends paid in cash prior
to such sale) in respect of the Series D Preferred Stock and Series D Underlying
Common Stock exceeds (i) in the case of the consummation of such Sale of the
Company during 2001, the product of (A) 1.75 and (B) the Series D Initial
Investment Amount; (ii) in the case of the consummation of such Sale of the
Company during 2002, the product of (A) 2.00 and (B) the Series D Initial
Investment Amount; and (iii) in the case of the consummation of such Sale of the
Company during 2003, the product of (A) 2.25 and (B) the Series D Initial
Investment Amount; or
(m) except as may be required by the senior lenders of the
Company in the enforcement of their rights during the existence of an event of
default that continues after applicable grace and cure periods under any senior
secured credit facility of the Company in effect from time to time, prior to
June 30, 2003, effect a public offering of Common Stock unless (i) the Common
Stock sold pursuant to such public offering is Class A Common Stock, (ii) the
price per share at which the Class A Common Stock is sold to the public pursuant
to such public offering is not less than $28.00 (as such amount may be adjusted
to reflect any stock split, reverse stock split, stock dividend or other
effective subdivision or combination of Class A Common Stock after the date
hereof) and (iii) the Company redeems the Series D-2 Preferred Stock and, if
required, Series D Underlying Common Stock in accordance with Article IV,
Paragraph 3F of the Articles of Incorporation.
Without limiting the foregoing, except as may be required by the senior
lenders of the Company in the enforcement of their rights during the existence
of an event of default that continues after applicable grace and cure periods
under any senior secured credit facility of the Company in effect from time to
time, each Shareholder agrees that, prior to June 30, 2003, it or he will not
consummate or agree to consummate, or vote to approve or consent to, any Sale of
the Company (including a Sale of the Company of a type described in clause (i)
of the definition of Sale of the Company set forth in Part 4 of this Agreement)
unless, upon the consummation of such Sale of the Company prior to June 30,
2003, the total cash proceeds received (including
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dividends paid in cash prior to such sale) in respect of the Series D Preferred
Stock and Series D Underlying Common Stock exceeds the applicable amount
described in clause (l)(i), (l)(ii) or (l)(iii) above.
1H. Special Voting Rights of Holders of Series C Preferred Stock. In
addition to any action otherwise required by the Articles of Incorporation or
applicable law, except as may be required by the senior lenders of the Company
in the enforcement of their rights during the existence of an event of default
that continues after applicable grace and cure periods under any senior secured
credit facility of the Company in effect from time to time, prior to June 30,
2003, the Company shall not consummate or agree to consummate, and each
Shareholder agrees that it or he will not consummate or agree to consummate, or
vote to approve or consent to, without the prior authorization and approval of
the holders of a majority of the Series C Underlying Common Stock (for purpose
of this Paragraph 1H only, the affirmative vote of the Series C Director at a
meeting of the Board of Directors (or his written consent in lieu thereof) shall
constitute the authorization and approval of the holders of a majority of the
Series C Underlying Common Stock), a Sale of the Company (including a Sale of
the Company of a type described in clause (ii) or (iii) of the definition of
Sale of the Company set forth in Part 4 of this Agreement) unless, upon the
consummation of such Sale of the Company prior to June 30, 2003, the total cash
proceeds received (including dividends paid in cash prior to such sale) in
respect of (a) the Series C Preferred Stock exceeds the aggregate Series C
Redemption Price (as defined in the Articles of Incorporation) for all Series C
Preferred Stock and (b) the Series C-1 Preferred Stock equals the aggregate
Series C-1 Redemption Price (as defined in the Articles of Incorporation) for
all Series C-1 Preferred Stock.
1I. Special Covenant of Shareholders. In the event the Company declares and
pays a dividend or distribution of any kind on any Series C Stock and, as a
result of such dividend or distribution, the definition of each of Applicable
Series C Dividend Rate Per Share and/or the Applicable Revised Series C Dividend
Rate Per Share set forth in Part 8 of the Articles of Incorporation would no
longer be appropriate, each Shareholder (including each holder of the Series C
Stock) shall vote all shares of voting stock held by such Shareholder to approve
an amendment to the Articles of Incorporation to become effective immediately
upon such payment amending the definition of each of Applicable Series C
Dividend Rate Per Share and Applicable Revised Series C Dividend Rate Per Share
set forth in Part 8 of the Articles of Incorporation to change the annual
dividend rate per share payable on each share of Series C Stock consistent with
the intended economics of the Series C Stock.
2. Provisions Relating to Transfers of Company Securities.
2A. General Restrictions on Transfers.
(a) During the term of this Agreement, no shares of Restricted
Stock may be transferred except pursuant to a (i) Permitted Transfer, (ii) sale
that complies with the provisions of Paragraph 2B of this Agreement or (iii) the
Sale of the Company pursuant to Part 3 of this Agreement. Notwithstanding the
foregoing, any transfer of shares of Restricted Stock must comply with the
provisions of Paragraph 2D of this Agreement.
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(b) During the term of this Agreement, (i) no Company Securities
held by Austin Ventures, their Permitted Transferees and their respective
Affiliates may be transferred without the prior written consent of the holders
of a majority of the Underlying Common Stock held by ABRY, their Permitted
Transferees and their respective Affiliates (which consent shall not be
unreasonably withheld) and (ii) no Company Securities held by ABRY, their
Permitted Transferees and their respective Affiliates may be transferred without
the prior written consent of the holders of a majority of the Underlying Common
Stock held by Austin Ventures, their Permitted Transferees and their respective
Affiliates (which consent shall not be unreasonably withheld), except, in each
case, pursuant to (x) a Permitted Transfer, (y) the Sale of the Company or (z) a
pledge of Company Securities to the Lenders as acknowledged by the parties
hereto pursuant to Paragraph 5M of this Agreement.
2B. Right of First Refusal.
(a) Except pursuant to a Permitted Transfer or the Sale of the
Company pursuant to Part 3 of this Agreement, a holder of Restricted Stock may
only sell shares of Restricted Stock to another Person if (i) such holder has
received a bona fide written offer to purchase such shares of Restricted Stock
and (ii) such holder has complied with the provisions of this Paragraph 2B.
Whenever and as often as any holder of Restricted Stock desires to sell any
shares of Restricted Stock pursuant to such a bona fide written offer to
purchase such shares, such holder (for purposes of this Paragraph 2B, the
"Selling Shareholder") shall give written notice (the "Selling Shareholder
Notice") to the Company and to each of the other Shareholders (other than
holders of Series B Preferred Stock) (each, an "Offeree Shareholder") to such
effect, enclosing a copy of such offer and specifying the number of shares of
Restricted Stock that the Selling Shareholder desires to sell, the name of the
Person(s) to whom the Selling Shareholder desires to make such sale and the
consideration per share of Restricted Stock that has been offered in connection
with such offer. Upon receipt of a Selling Shareholder Notice, the Company shall
have the right and option to purchase the shares proposed to be sold for cash at
the purchase price per share specified in such Selling Shareholder Notice,
exercisable for 20 days after the receipt of such Selling Shareholder Notice.
Failure of the Company to respond to such Selling Shareholder Notice within such
20-day period shall be deemed to constitute a notification to the Selling
Shareholder of the Company's decision not to exercise the right and option to
purchase such shares under this Paragraph. If the Company fails to exercise its
first right and option, the Selling Shareholder shall promptly give written
notice to each of the Offeree Shareholder(s) of the Company's failure to
exercise its first right and option. The Offeree Shareholder(s), pro rata in
accordance with their ownership of Underlying Common Stock, Warrant Shares and
shares of Common Stock (without duplication), calculated on a fully diluted
basis, shall have the right and option to purchase the remaining shares proposed
to be sold for cash at the purchase price per share specified in such Selling
Shareholder Notice, exercisable for 10 days after the receipt of the
notification of the expiration of the Company's 20-day option period. Failure of
any Offeree Shareholder to respond to such notification within such 10-day
period shall be deemed to constitute a notification to the Selling Shareholder
of such Offeree Shareholder's decision not to exercise such Offeree
Shareholder's right and option to purchase such shares under this Paragraph 2B.
If any Offeree Shareholder fails to exercise its first right and option, the
Selling Shareholder shall give written notice to each of the other Offeree
Shareholders who has elected to purchase its pro rata share of the shares
proposed to be
9
transferred, and each such Offeree Shareholder shall have the right, exercisable
for a period of five days from the date of the receipt of such notice, to
purchase the remaining shares, pro rata in accordance with their ownership of
Underlying Common Stock, Warrant Shares and shares of Common Stock (without
duplication), calculated on a fully diluted basis, as compared to the Underlying
Common Stock, Warrant Shares and shares of Common Stock (without duplication),
calculated on a fully diluted basis, held by all such electing Offeree
Shareholders, or in such other proportions as they may otherwise agree upon. In
the event the consideration to be paid for each share of Common Stock as set
forth in the Selling Shareholder Notice includes non-cash consideration, the
dollar value of such non-cash consideration shall be its fair market value
("Fair Market Value") as determined by the Company and the holders of a majority
of the outstanding Underlying Common Stock and Warrant Shares. If such parties
are unable to reach an agreement within 15 days after receipt of the Selling
Shareholder Notice, the Fair Market Value of such non-cash consideration will be
determined by an independent appraiser jointly selected by a majority of the
Purchaser Directors and a majority of the remaining directors and the period
within which the Company or an Offeree Shareholder may exercise its right or
option under this Paragraph shall be extended until 10 days after such appraisal
is completed.
(b) The Company and/or each Offeree Shareholder may exercise the
right and option provided above by giving written notice (the "Offeree
Shareholder Notice") of its decision to exercise such right and option to the
Selling Shareholder within the 20- and 10-day periods specified above,
specifying the date (not later than five days from the date of expiration of all
applicable first right and options to purchase shares under this Paragraph) upon
which payment of the purchase price for the shares purchased pursuant to this
Paragraph shall be made. The Selling Shareholder shall deliver to the Company
and/or each Offeree Shareholder at the Company's principal office, one day prior
to the payment date, wire transfer instructions, and on the payment date
specified in the Offeree Shareholder Notice, the certificate or certificates
representing such shares, properly endorsed for transfer, against payment of the
purchase price therefor by the Company and/or each Offeree Shareholder in
immediately available funds.
(c) If all the shares proposed to be transferred are not
purchased by the Company and/or the Offeree Shareholder(s) in accordance with
this Paragraph, the Selling Shareholder shall not be required to sell any of
such shares to the Offeree Shareholder(s), and during the 90-day period
commencing on the expiration of the rights and options provided for in this
Paragraph 2B, the Selling Shareholder may sell all (but not less than all) of
such shares to the transferee named in the Selling Shareholder Notice for a
consideration equal to or greater than the consideration specified in the
Selling Shareholder Notice, free of the restrictions contained in this Paragraph
2B (but subject to the other terms and conditions hereof, including Paragraph 2D
of this Agreement).
(d) For the purposes of calculating the number of shares an
Offeree Shareholder may acquire under this Paragraph 2B, options to acquire
Common Stock pursuant to the Approved Plan held by an Offeree Shareholder shall
be deemed issued and outstanding if such Offeree Shareholder is then an employee
of the Company.
2C. Contractual Preemptive Rights. Notwithstanding any preemptive or
similar rights that any of the parties hereto may have pursuant to any other
agreement, the parties hereto agree
10
that their respective preemptive or similar rights with respect to the issuance
of Company Securities by the Company after the date hereof shall be governed
exclusively by this ▇▇▇▇▇▇▇▇▇ ▇▇, and any such preemptive or similar rights
contained in any other agreement, including without limitation, the Series A
Purchase Agreement, the Series B Purchase Agreement, the Preferred B Warrants,
the Series C Purchase Agreement, the Note Agreement the Mezzanine Warrants, are
hereby terminated and rescinded in their entirety. If prior to a Qualified
Public Offering, the Company shall issue any Company Securities (including any
transfer of previously-issued Company Securities), each holder of Underlying
Common Stock and Warrant Shares and the Hull Family Limited Partnership (the
"Hull Partnership") shall be entitled to purchase the same proportion of such
Company Securities to be issued necessary in order that the aggregate shares of
Common Stock beneficially held by such holder constitute the same percentage of
all Common Stock (assuming, in each case, the conversion, exercise or exchange
of all outstanding Company Securities, including outstanding Company Securities
held by such holder), after the issuance of such Company Securities as before
the issuance thereof; provided, however, (a) if such holder elects to purchase
such Company Securities, such holder shall be required to purchase (i) such
Company Securities on the same terms and conditions as such Company Securities
were issued by the Company and (ii) if more than one type of Company Security is
issued, a pro rata amount of each such Company Security issued and (b) that such
preemptive right shall not apply to (i) Company Securities issued to employees
or consultants to the Company under any Approved Plan, (ii) Company Securities
issued upon the conversion, exercise or exchange of Company Securities to which
the preemptive rights under this Paragraph 2C were previously applicable, (iii)
Company Securities issued in connection with an exercise of the preemptive
rights granted hereunder, (iv) Company Securities issued pursuant to the Series
C Exchange Agreement or the Series D-1 Purchase Agreement, (v) Company
Securities issued upon conversion of the Preferred Stock or exercise of the
Warrants, the 2001 Warrants and the ▇▇▇▇▇▇ Warrant or upon conversion of Class B
Common Stock issued upon exercise of the ▇▇▇▇▇▇ Warrant, (vi) Company Securities
issued as consideration in the merger with or acquisition of another Person,
(vii) Company Securities issued in connection with a public offering, or (viii)
shares of Class A Common Stock issued in payment of dividends on Series A
Preferred Stock or Series C Preferred Stock pursuant to Article IV, Paragraph 5L
of the Articles of Incorporation. A holder of Underlying Common Stock or Warrant
Shares or the Hull Partnership may exercise his or its right under this
▇▇▇▇▇▇▇▇▇ ▇▇ to purchase Company Securities by providing written notice to the
Company within 20 days, and by paying the purchase price therefor at the
principal office of the Company within 30 days, after the receipt of notice from
the Company (which notice by the Company shall be given at least 30 days before
the issuance of the Company Securities) stating the amount of Company Securities
it intends to issue and the price and characteristics thereof. The holder shall
pay such purchase price in immediately available funds. A holder's contractual
preemptive rights hereunder shall be deemed to be exercised immediately prior to
the close of business on the day of payment of the purchase price in accordance
with the foregoing provisions, and at such time such holder shall be treated for
all purposes as the record holder of the Company Securities, as the case may be.
As promptly as practicable (and in any event within 10 days) on or after the
purchase date, the Company shall issue and deliver at its principal office a
certificate or certificates for the number of full shares or amount, whichever
is applicable, of Company Securities together with cash for any fraction of a
share or portion of a Company Security at the purchase price to which the holder
is entitled hereunder.
11
2D. Transferees of Capital Stock. Except as otherwise specifically provided
herein, any transferee or other Person who shall acquire (either voluntarily or
involuntarily, by operation of law or otherwise) any Company Securities from any
party to this Agreement shall be bound by all the terms and conditions of this
Agreement to the same extent as the parties hereto. Any attempted transfer of
Company Securities by any party to this Agreement other than in accordance with
this Agreement shall be null and void and the Company shall refuse to recognize
any such transfer and shall not reflect on its records any change in record
ownership of such Company Securities pursuant to any such transfer. The Company
shall not effect any transfer of Company Securities by any party to this
Agreement until: (i) it has received evidence satisfactory to it that all of the
provisions of this Agreement applicable to such transfer have been complied with
and (ii) each transferee or other Person (and such transferee's or other
Person's spouse) of such Company Securities has executed an addendum agreement
with the parties hereto in the form of Exhibit B attached hereto, agreeing to be
bound hereby. Each transferee of Company Securities shall take such Company
Securities subject to, and be fully bound by, this Agreement with the same
effect as if it were a party hereto, with those rights and obligations hereunder
expressly provided herein.
3. Liquidity Rights; Right of First Offer.
3A. Sale of the Company.
(a) At any time and from time to time after the earlier to occur
of (i) July 31, 2007 or (ii) the receipt by the Company of a Redemption Notice
(as defined in the Articles of Incorporation), the holders of a majority of the
Series D Underlying Common Stock (the "Preferred D Initiating Holders") may
elect, by giving written notice (a "Preferred D Sale Notice") of such election
to the Company to initiate procedures for the Sale of the Company. If a
Preferred D Sale Notice is given in accordance with this Paragraph 3A(a), (A)
all holders of Preferred Stock delivering a Redemption Notice shall be deemed to
have rescinded such Redemption Notice and such Redemption Notice shall have no
further force or effect and (B) the sale procedures set forth below shall apply.
(b) If (i) the Company fails to redeem any shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock (for any
reason, including that the funds of the Company legally available to make such
redemption are insufficient) after the receipt by the Company of a Redemption
Notice (other than a Redemption Notice rescinded as a result of the delivery of
a Preferred D Sale Notice pursuant to Paragraph 3(A)(a) above) on the applicable
redemption date (such date determined without giving effect to Article IV,
Paragraph 3Q of the Articles of Incorporation) and (ii) the holders of Series D
Underlying Common Stock have not at that time elected to pursue the Sale of the
Company in accordance with this Part 3 pursuant to a Preferred D Sale Notice,
the holders of a majority of the outstanding shares of any such series of
Preferred Stock (the "Non-Preferred D Initiating Holders") may elect, by giving
written notice (a "Non-Preferred D Sale Notice") to the Company and each holder
of Series D Stock within 45 days after such redemption date, to initiate
procedures for the Sale of the Company; provided, however, if, within 30 days
after the receipt of a Non-Preferred D Sale Notice (the "Non-Preferred D Notice
Rescission Period"), the holders of a majority of the Series D Underlying Common
Stock deliver a Preferred D Sale Notice to the Company pursuant to
12
Paragraph 3(A)(a), the Non-Preferred D Sale Notice shall immediately be deemed
rescinded and of no further force or effect and the Company shall proceed with
the Sale of the Company process pursuant to this Part 3 in accordance with the
procedures governing a Sale of the Company process initiated by a Preferred D
Sale Notice. If a Non-Preferred D Sale Notice is given but not deemed rescinded
in accordance with this Paragraph 3A(b), (A) all holders of Preferred Stock
delivering a Redemption Notice shall be deemed to have rescinded such Redemption
Notice and such Redemption Notice shall have no further force or effect and (B)
the sale procedures set forth below shall apply.
3B. Sale Procedure.
(a) In the event the Company receives a Preferred D Sale Notice
or a Non-Preferred D Sale Notice (a "Sale Notice"), the Board of Directors
shall, in the case of the receipt of a Preferred D Sale Notice, as promptly as
practicable after receipt of such notice, or, in the case of the receipt of a
Non-Preferred D Sale Notice, as promptly as practicable after the expiration of
the Non-Preferred D Notice Rescission Period, pursue a process, the goal of
which is to bring about the Sale of the Company, by engaging a Qualified
Investment Banker, at the Company's expense, to represent the Company and the
Shareholders in connection with the Sale of the Company and seek indications of
interest, proposals and offers regarding the same ("Sale Proposals"). The
Company and the shareholders of the Company shall use their reasonable best
efforts to facilitate the Sale of the Company process, which will be conducted
at the direction of and controlled, at the Company's expense, by the Initiating
Holders. Without limiting the foregoing, the Initiating Holders may negotiate
with prospective parties to a Sale of the Company and any Sale Proposal, as
modified as a result of such negotiations and however embodied (including in the
form of one or more definitive agreements for execution by the Company and/or
the Shareholders), will continue to constitute a Sale Proposal. If the Sale of
the Company process is initiated by delivery of a Preferred D Sale Notice, then
the "Initiating Holders" will be holders of a majority of the Series D
Underlying Common Stock. If the Sale of the Company process is initiated by
delivery of a Non-Preferred D Sale Notice that is not deemed rescinded, then the
"Initiating Holders" will be holders of a majority of the Underlying Common
Stock, other than the Series D Underlying Common Stock.
(b) During the Sale of the Company process, the Company shall,
from time to time (and not less frequently than once per week), give to each of
the holders of the Underlying Common Stock and 2001 Warrant Shares, a written
update (a "Sale Update") as to the progress of the Sale of the Company process
and describing each Sale Proposal received by the Company or the Qualified
Investment Bank engaged to pursue the Sale of the Company, setting forth the
name of the proposed purchaser, a description of the consideration to be
received upon the Sale of the Company, the proposed date for closing the Sale of
the Company and the other material terms of each Sale Offer. The Company shall
also provide each holder of Underlying Common Stock and 2001 Warrant Shares with
copies of each Sale Proposal together with all such other information pertaining
thereto as may be reasonably be requested by any such holder of Underlying
Common Stock or 2001 Warrant Shares.
(c) At any time during the Sale of the Company process, the
Initiating Holders may direct the Company and/or the other Shareholders to
pursue, accept, decline to
13
pursue, cease to pursue or reject any Sale Proposal and otherwise direct and
control the Sale of the Company process. Nothing herein will prohibit the
Initiating Holders from contemporaneously pursuing, or directing that others
pursue, more than one Sale Proposal.
3C. Cessation of Sale Procedure.
(a) At any time after the Sale of the Company process has been
initiated, the Initiating Holders shall have the right to direct the Company to
cease the solicitation of offers for the Sale of the Company.
(b) If all parties to this Agreement have performed their
obligations under this Part 3 and the Sale of the Company has not been
consummated, the Company (at the election of the Board of Directors) shall have
the right to (i) cease the solicitation of additional Sale Proposals at any time
after the date that is nine months following the date that a Qualified
Investment Banker is engaged and (ii) subject to the terms and conditions of any
agreement into which the Company and/or any Shareholder may have entered into
relating to the Sale of the Company, suspend all efforts to consummate the Sale
of the Company (other than with respect to any Sale Proposal that the Company
and/or the other Shareholders have been directed to pursue or accept pursuant to
Paragraph 3B(c)) at any time after the date that is 12 months following the date
that a Qualified Investment Banker is engaged, in each case by the delivery of
written notice to each Shareholder of the Company's decision. In the event the
Company elects to suspend all effort to consummate the Sale of the Company in
accordance with this Paragraph 3C, the holders of Preferred Stock (as provided
in Paragraphs 3(A)(a) and 3(A)(b)) shall have the right, at any time, to
re-initiate the Sale of the Company process by delivery of a Preferred D Sale
Notice or Non-Preferred D Sale Notice, as applicable, to the Company.
3D. Accepted Sale Proposals. Subject to Paragraph 3G, at any time during
the Sale of the Company process, the Initiating Holders may give the Company
notice to the effect that they have elected that the Company and/or the
Shareholders accept a Sale Proposal (an "Accepted Proposal"). The Company will
then give notice thereof (the "Acceptance Notice") to the other Shareholders.
Within 10 days following receipt of the Acceptance Notice, the Company (and/or
each Shareholder, if the Accepted Proposal is an offer to acquire Company
Securities by sale, merger or otherwise), must accept the Accepted Proposal,
including entering into any related definitive agreement(s) and consummating the
Sale of the Company in accordance with the terms and conditions thereof;
provided, however, that any obligation or other liability of any Shareholder
will be individual to each Shareholder (and not joint or joint and several) and
will be limited to the net amount of proceeds received by such Shareholder from
such Sale.
3E. Best Efforts.
(a) The Company and each Shareholder agree to use reasonable best
efforts to effect the Sale of the Company pursuant to any Accepted Proposal,
including, without limitation, voting all shares of voting stock held by such
Shareholder to approve a sale of assets by the Company followed by the
liquidation and dissolution of the Company, or to adopt a plan of merger or
consolidation by the Company included in the terms of such Accepted Proposal,
and waiving all related dissenters' appraisal and similar rights.
14
(b) During the Sale of the Company process, the Initiating
Holders will act in good faith to conduct such process in a manner designed to
maximize the consideration offered for the equity of the Company; provided,
that, the Initiating Holders may also take into consideration factors such as
the amount and form of consideration to be paid, the timing of, and
contingencies related to, the payment of the consideration to be paid, the
timing of the closing of the Sale of the Company, the likelihood of the
consummation of the Sale of the Company, the nature, type and availability of
financing sources to fund the consideration to be paid and such other reasonable
factors as the Initiating Holders may, in their sole discretion (acting in good
faith as described above), deem to be relevant. Notwithstanding the foregoing,
the Shareholders (other than the Initiating Holders) acknowledge that the
Initiating Holders (i) shall not have any duty to postpone or, once initiated,
suspend the Sale of the Company process and (ii) shall have the sole discretion
(acting in good faith as described above) to (a) take into consideration those
factors set forth in the preceding sentence and such other reasonable factors as
such Initiating Holders deem relevant in evaluating each Sale Proposal and (b)
provided the Initiating Holders have conducted the Sale of the Company process
in the manner described above, accept any Sale Proposal at any time during such
process and to require that the Company and/or the Shareholders agree to
consummate, and consummate, a Sale of the Company pursuant to the provisions of
this Part 3.
3F. Initial Public Offering. Without the prior written consent of the
Initiating Holders, the Company shall not pursue an initial public offering of
Company Securities during the time the Sale of the Company is being sought
pursuant to this Part 3.
3G. Right of First Offer. Promptly following the receipt of any Sale
Notice, the Company shall deliver written notice to Windward of the receipt of
such notice and Windward shall have the right to make an offer to purchase the
Company in accordance with this Paragraph 3G. Windward shall have the right,
exercisable within 30 days of the receipt of the Company's notice, to submit an
offer to purchase the Company by delivering a written proposal (the "Windward
Purchase Proposal") to the Company and the other holders of Company Securities,
which proposal will set forth in reasonable detail the terms and conditions upon
which Windward will agree to purchase the Company in a Sale of the Company,
including the Company Securities or assets to be acquired and the consideration
to be paid. If as a result of the consummation of the Sale of the Company
pursuant to the terms of the Sale Proposal that the Initiating Holders intend to
accept pursuant to Paragraph 3D, (a) the holders of Series D Preferred Stock
would receive an aggregate amount equal to the aggregate Series D Liquidation
Value, (b) the holders of Series C Preferred Stock would receive an aggregate
amount less than the aggregate Series C Liquidation Value and (c) the holders of
Series C-1 Preferred Stock would receive an aggregate amount less than the
aggregate Series C-1 Liquidation Value, the Initiating Holders shall deliver
written notice (the "Windward First Offer Notice") to Windward to such effect
and Windward shall have the right (the "Windward First Offer Purchase Right") to
purchase the Company in accordance with the terms set forth in the Windward
Purchase Proposal. Within 10 days following receipt of the Windward First Offer
Notice, Windward may exercise the Windward First Offer Purchase Right by
delivering written notice (the "Windward Purchase Notice") of such election to
the Company and each of the other Shareholders within 10 days following the
receipt of the Windward First Offer Notice. If Windward elects to exercise the
Windward First Offer Purchase Right, (i) within 10 days following receipt of the
Windward Purchase Notice, the
15
Company (and/or each Shareholder, if the Windward Purchase Proposal is an offer
to acquire Company Securities by sale, merger or otherwise), must accept the
Windward Purchase Proposal, including entering into any related definitive
agreement(s) and consummating the Sale of the Company in accordance with the
terms and conditions thereof and (ii) Windward shall be obligated to purchase
the Company in accordance with the terms set forth in the Windward Purchase
Proposal; provided, however, that any obligation or other liability of any
selling Shareholder will be individual to such Shareholder (and not joint or
joint and several) and will be limited to the net amount of proceeds received by
such Shareholder from such sale; provided, further, that representations, if
any, required by any Shareholder shall be limited to the status of its title to
the interests it is selling. If Windward does not deliver a Windward Purchase
Notice within the 10-day period referred to above, the Initiating Holders shall
have the right to accept any Sale Proposal and effectuate the Sale of the
Company pursuant to this Part 3.
4. Definitions. For the purposes of this Agreement, the following terms
shall have the meanings set forth below:
"1999 Stock Plan" means the Company's 1999 Stock Option Plan, dated
November 3, 1999, which provides for issuance of up to 150,000 shares of Class A
Common Stock.
"2001 Stock Plan" means the Company's 2001 Stock Option Plan, dated
April 27, 2001, which provides for issuance of up to 250,000 shares of Class A
Common Stock.
"ABRY" means ABRY Partners IV, L.P. and ABRY Investment Partnership,
L.P., collectively.
"Affiliate" means with respect to any Person, a Person that directly,
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person, and, in the case of an individual,
includes any relative or spouse of such individual, or any relative or such
spouse, who has the same home as such individual. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Approved Plan" means the 1999 Stock Plan, the 2001 Stock Plan and any
other written stock option, stock purchase or similar incentive plan (or options
to purchase up to 400,000 shares of Class A Common Stock) approved by the Board
of Directors (with a majority of the Purchaser Directors concurring).
"Articles of Incorporation" means the Articles of Incorporation of the
Company, as amended.
"Austin Ventures" means Austin Ventures III and Austin Ventures V,
collectively.
"Austin Ventures III" means Austin Ventures III-A, L.P. and Austin
Ventures III-B, L.P., collectively.
16
"Austin Ventures V" means Austin Ventures V, L.P. and Austin Ventures
V Affiliates Fund, L.P., collectively.
"Board of Directors" means the board of directors of the Company.
"Class A Common Stock" means the Company's Class A Common Stock, par
value $.01 per share.
"Class B Common Stock" means the Company's Class B Common Stock, par
value $.01 per share.
"Common Stock" means the Company's Common Stock, par value $0.01 per
share, more fully described in the Articles of Incorporation.
"Company Security" means any Equity Security of the Company.
"Equity Securities" means 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.
"▇▇▇▇▇▇ Warrant" means the Company's Warrant for the purchase (subject
to adjustment as provided therein) of 367,238 shares of Class B Common Stock,
issued to ▇▇▇▇▇▇ Financial, Inc. pursuant to that certain Warrant Agreement, by
and between the Company and ▇▇▇▇▇▇ Financial, Inc., dated November 10, 1994, as
amended by that certain First Amendment to Warrant Agreement, dated as of June
15, 1998 (the "▇▇▇▇▇▇ Warrant Agreement").
"Mezzanine Warrant Shares" means the shares of Class A Common Stock
issued or issuable upon the exercise of the Mezzanine Warrants and for purposes
of applying this definition only, any Person who holds Mezzanine Warrants shall
be deemed to be the holder of the Mezzanine Warrant Shares obtainable upon the
exercise of such Mezzanine Warrants regardless of any restriction or limitation
on the exercise of such Mezzanine Warrants, such Mezzanine Warrant Shares shall
be deemed to be in existence, and such Person shall be entitled to exercise the
rights of a holder of such Mezzanine Warrant Shares hereunder.
"Permitted Transfer" means (a) in the case of any Shareholder that is
an individual, a transfer of any or all of the shares of Company Securities
owned by such Shareholder to his spouse or children, or to trusts established
for the benefit of his spouse or children, provided that the transferee grants
to the transferor an irrevocable proxy coupled with an interest to vote all of
the shares of Company Securities so transferred and agrees to be bound by all of
the provisions of this Agreement, including, without limitation, Paragraph 2B of
this Agreement; (b) in the case of any Shareholder that is a partnership,
limited liability company, corporation, trust or other entity other than an
individual, a transfer of any or all of the shares of Company Securities owned
by such Shareholder (i) to its Affiliates, (ii) to its general or limited
partners, members, shareholders or beneficiaries, or (iii) to an entity owned by
or organized for the benefit of the general or limited partners, members,
shareholders, officers, directors,
17
employees, Affiliates or beneficiaries of such Shareholder, as applicable;
provided that, in each case, the transferee agrees to be bound by all of the
provisions of this Agreement, including, without limitation, Paragraph 2B of
this Agreement, to the same extent as the transferor was bound, and (c) in the
case of any Shareholder, a pledge of any or all of the shares of Company
Securities owned by such Shareholder to secure the repayment of any bona fide
indebtedness owing by such Shareholder, the Company or any Subsidiary of the
Company to a financial institution, provided that such Shareholder retains the
power to vote the shares of Company Securities so pledged until such time as the
pledgee shall have realized upon the pledge and that the provisions of this
Agreement, including, without limitation, Part 2 of this Agreement, shall be
applicable to the shares of Company Securities so pledged to the same extent
applicable to the transferor.
"Permitted Transferee" means any Person (other than the Company) who
shall acquire any shares of Company Securities in a Permitted Transfer.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, a limited
liability company, an unincorporated organization or other similar entity or
organization or a Governmental Authority.
"Preferred Stock" means the Company's Preferred Stock, par value $0.01
per share, more fully described in the Articles of Incorporation.
"Preferred B Warrant Shares" means the shares of Class A Common Stock
issued or issuable upon the exercise of the Preferred B Warrants and for
purposes of applying this definition only, any Person who holds Preferred B
Warrants shall be deemed to be the holder of the Preferred B Warrant Shares
obtainable upon the exercise of such Preferred B Warrants regardless of any
restriction or limitation on the exercise of such Preferred B Warrants, such
Preferred B Warrant Shares shall be deemed to be in existence, and such Person
shall be entitled to exercise the rights of a holder of such Preferred B Warrant
Shares hereunder.
"Qualified Investment Banker" shall be the investment banking firm
selected by the Initiating Holders from a list of five nationally recognized
investment banking firms (no more than three of which firms, at the time such
list is compiled, shall be engaged, or during the preceding three years shall
have been engaged, by the Company or any Affiliate thereof) compiled by the
Company promptly following the receipt of a Sale Notice.
"Qualified Public Offering" means the sale of the Common Stock in a
firm commitment, underwritten public offering registered under the Securities
Act (other than a registration relating solely to a transaction under Rule 145
of the Securities Act or to an employee benefit plan of the Company) at a price
(prior to underwriters' commissions and expenses) equal to or exceeding $3.00
per share (as adjusted for subdivisions and combinations of shares of Common
Stock and dividends on Class A Common Stock payable in shares of Class A Common
Stock as provided in the Articles of Incorporation).
18
"Restricted Stock" means any Common Stock (other than Underlying
Common Stock or Warrant Shares) now owned or subsequently acquired by any Common
Shareholder or a transferee of a Common Shareholder in a Permitted Transfer.
"Sale of the Company" means either (i) a sale of all or substantially
all of the issued and outstanding Company Securities, (ii) a sale of all or
substantially all of the assets and business of the Company and a liquidation of
the Company following such sale, or (iii) a merger or consolidation of the
Company with or into another Person, in each case for cash or securities.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force and the rules promulgated thereunder.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force and the rules promulgated
thereunder.
"Series A Preferred Stock" means the Company's Series A Preferred
Stock, par value $0.01 per share, more fully described in the Articles of
Incorporation.
"Series A Underlying Common Stock" means the shares of Class A Common
Stock issued or issuable upon the conversion of the Series A Preferred Stock and
for purposes of applying this definition only, any Person who holds any Series A
Preferred Stock shall be deemed to be the holder of the Series A Underlying
Common Stock obtainable upon conversion of such Series A Preferred Stock
regardless of any restriction or limitation on the conversion of such Series A
Preferred Stock, such Series A Underlying Common Stock shall be deemed to be in
existence, and such Person shall be entitled to exercise the rights of a holder
of such Series A Underlying Common Stock hereunder.
"Series B Preferred Stock" means the Company's Series B Preferred
Stock, par value $0.01 per share, more fully described in the Articles of
Incorporation.
"Series C Preferred Stock" means the Company's Series C Preferred
Stock, par value $0.01 per share, more fully described in the Articles of
Incorporation.
"Series C-1 Preferred Stock" means the Company's Series C-1 Preferred
Stock, par value $0.01 per share, more fully described in the Articles of
Incorporation.
"Series C Stock" means either Series C Preferred Stock or Series C-1
Preferred Stock.
"Series C Underlying Common Stock" means the shares of Class A Common
Stock issued or issuable upon the conversion of the Series C Preferred Stock and
for purposes of applying this definition only, any Person who holds any Series C
Preferred Stock shall be deemed to be the holder of the Series C Underlying
Common Stock obtainable upon conversion of such Series C Preferred Stock
regardless of any restriction or limitation on the conversion of such Series C
Preferred Stock, such Series C Underlying Common Stock shall be deemed to be in
existence, and such Person shall be entitled to exercise the rights of a holder
of such Series C Underlying Common Stock hereunder.
19
"Series D Initial Investment Amount" means, as of the date of the
consummation of the Sale of the Company, the aggregate amount paid to the
Company to purchase Series D Preferred Stock pursuant to the Series D-1 Purchase
Agreement.
"Series D Preferred Stock" means either the Company's Series D-1
Preferred Stock, par value $0.01 per share, or the Company's Series D-2
Preferred Stock, par value $0.01 per share, each as more fully described in the
Articles of Incorporation.
"Series D Stock" means either Series D Preferred Stock or Series D
Underlying Common Stock.
"Series D Underlying Common Stock" means the shares of Class A Common
Stock issued or issuable upon the conversion of the Series D-1 Preferred Stock
and for purposes of applying this definition only, any Person who holds any
Series D-1 Preferred Stock shall be deemed to be the holder of the Series D
Underlying Common Stock obtainable upon conversion of such Series D-1 Preferred
Stock regardless of any restriction or limitation on the conversion of such
Series D-1 Preferred Stock, such Series D Underlying Common Stock shall be
deemed to be in existence, and such Person shall be entitled to exercise the
rights of a holder of such Series D Underlying Common Stock hereunder.
"Subsidiary" means any corporation more than 50% of the outstanding
voting securities of which are owned by the Company or any Subsidiary, directly
or indirectly, or a partnership or limited liability company in which the
Company or any Subsidiary is a general partner or manager or holds interests
entitling it to receive more than 50% of the profits or losses of the
partnership or limited liability company.
"transfer" means a sale, assignment, transfer, pledge, encumbrance or
other disposition.
"2001 Warrant Shares" means the shares of Class A Common Stock issued
or issuable upon the exercise of the 2001 Warrants and for purposes of applying
this definition only, any Person who holds 2001 Warrants shall be deemed to be
the holder of the 2001 Warrant Shares obtainable upon the exercise of such 2001
Warrants regardless of any restriction or limitation on the exercise of such
2001 Warrants, such 2001 Warrant Shares shall be deemed to be in existence, and
such Person shall be entitled to exercise the rights of a holder of such 2001
Warrant Shares hereunder.
"Underlying Common Stock" means the Series A Underlying Common Stock,
Series C Underlying Common Stock and Series D Underlying Common Stock,
collectively, and for purposes of applying this definition only, any Person who
holds any Preferred Stock shall be deemed to be the holder of the Underlying
Common Stock obtainable upon conversion of such Preferred Stock regardless of
any restriction or limitation on the conversion of such Preferred Stock, such
Underlying Common Stock shall be deemed to be in existence, and such Person
shall be entitled to exercise the rights of a holder of such Underlying Common
Stock hereunder.
20
"Warrant Shares" means the Mezzanine Warrant Shares, Preferred B
Warrant Shares and 2001 Warrant Shares, collectively, and for purposes of
applying this definition only, any Person who holds Warrants shall be deemed to
be the holder of the Warrant Shares obtainable upon the exercise of such
Warrants regardless of any restriction or limitation on the exercise of such
Warrants, such Warrant Shares shall be deemed to be in existence, and such
Person shall be entitled to exercise the rights of a holder of such Warrant
Shares hereunder.
"Windward" means Windward Capital ▇.▇. ▇▇, LLC and Windward Capital
Partners II, L.P., collectively.
5. General Provisions.
5A. Transfer Conditions. Prior to any proposed transfer of any Preferred
Stock, Warrants, Warrant Shares or Common Stock (other than a transfer not
involving a change in beneficial ownership), unless there is in effect a
registration statement under the Securities Act covering the proposed transfer,
the holder thereof shall give notice to the Company of such holder's intention
to effect such transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer, in reasonable detail, and, if requested
by the Company, shall be accompanied, at such holder's expense, by either (i) a
written opinion of legal counsel who shall be, and whose legal opinion shall be,
reasonably satisfactory to the Company (it being agreed that ▇▇▇▇▇, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
LLP, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ are satisfactory counsel),
addressed to the Company, to the effect that the proposed transfer of the
Preferred Stock, Warrants, Warrant Shares or Common Stock may be effected
without registration under the Securities Act, or (ii) a "no action" letter from
the Securities and Exchange Commission (the "Commission") to the effect that the
transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the holder of such Preferred Stock, Warrants, Warrant Shares
or Common Stock shall be entitled to transfer such Preferred Stock, Warrants,
Warrant Shares or Common Stock in accordance with the terms of the notice
delivered by the holder to the Company and subject to the other provisions of
this Agreement. Each certificate evidencing the Preferred Stock, Warrants,
Warrant Shares or Common Stock transferred as provided above shall bear, except
if such transfer is made pursuant to Rule 144 under the Securities Act, the
appropriate restrictive legend set forth below, except that such certificate
shall not bear such restrictive legend if in the opinion of counsel for such
holder and the Company such legend is not required in order to establish
compliance with any provision of the Securities Act. Notwithstanding the
foregoing, each holder of Preferred Stock, Warrants, Warrant Shares or Common
Stock agrees that it will not request that a transfer of the Preferred Stock,
Warrants, Warrant Shares or Common Stock be made (or that the appropriate
restrictive legend described below hereof be removed from the certificate
evidencing the Preferred Stock, Warrants, Warrant Shares or Common Stock) solely
in reliance on Rule 144(k) under the Securities Act, if as a result of such
proposed transfer the Company would be rendered subject to the reporting
requirements of the Securities Exchange Act.
5B. Legends on Certificates.
21
(a) During the term of this Agreement, the Company shall affix to
each certificate issued on or after the date hereof to a party hereto and
evidencing Preferred Stock, Warrants, Warrant Shares or Common Stock a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SALE, ASSIGNMENT,
TRANSFER, PLEDGE OR OTHER DISPOSITION AND VOTING THEREOF ARE SUBJECT TO
CERTAIN RESTRICTIONS AND AGREEMENTS CONTAINED IN A FOURTH AMENDED AND
RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF JANUARY 18, 2002, AMONG THE
COMPANY AND CERTAIN SHAREHOLDERS AND WARRANT HOLDERS. A COPY OF THE
SHAREHOLDERS AGREEMENT AND ALL APPLICABLE AMENDMENTS THERETO WILL BE
FURNISHED BY THE COMPANY TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT
CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF
BUSINESS OR REGISTERED OFFICE."
(b) During the term of this Agreement, the Company shall not
effect any transfer of Preferred Stock, Warrants, Warrant Shares or Common Stock
evidenced by a certificate issued prior to the date hereof and held by any party
to this Agreement until it has advised the proposed transferee of such Preferred
Stock, Warrants, Warrant Shares or Common Stock that such Preferred Stock,
Warrants, Warrant Shares or Common Stock are subject to the restrictions on
transfer and voting arrangements set forth in this Agreement and provided such
proposed transferee with a copy of this Agreement and any applicable amendments.
The Company shall make a notation on its records and give instructions to any
transfer agent of the Preferred Stock, Warrants, Warrant Shares or Common Stock
in order to implement the restrictions on transfer established in this
Agreement.
5C. Termination; Amendment and Waiver.
(a) This Agreement shall terminate upon the earlier to occur of
(i) the written agreement of (A) the holders of at least 662/3% of the Series A
Underlying Common Stock then outstanding, (B) the holders of at least 662/3% of
the Series C Underlying Common Stock then outstanding, (C) the holders of at
least 662/3% of the Warrant Shares (other than 2001 Warrant Shares), (D) the
holders of at least 662/3% of the Series D Underlying Common Stock then
outstanding, and (E) the holders of at least 662/3% of the 2001 Warrant Shares),
(ii) the acquisition by a single purchaser of all of the issued and outstanding
shares of the Preferred Stock, Underlying Common Stock, Common Stock, Warrants
and Warrant Shares or (iii) the closing of a Qualified Public Offering.
(b) No amendment, modification or waiver of this Agreement or any
provision hereof shall be effective unless made by the written agreement of (i)
the holders of at least 662/3% of the shares of Restricted Stock and at least
662/3% of the shares of Series A Underlying Common Stock, and (ii) (A) in the
case of any amendment, modification or waiver that adversely affects the rights
and interests of any holder or holders of Series D Preferred Stock or Series D
Underlying Common Stock hereunder, or in the case of any amendment,
22
modification or waiver to any provision of Part 3 of this Agreement or the
definition of any defined term set forth in Part 4 of this Agreement which is
used (directly or indirectly by use in the definition of a term that itself is
used in the definition of another term) in Part 3 of this Agreement, at least
662/3% of the shares of the Series D Underlying Common Stock, (B) in the case of
any amendment, modification or waiver that adversely affects the rights or
interests of any holder or holders of Warrants (other than 2001 Warrants) or
Warrant Shares (other than 2001 Warrant Shares) hereunder, at least 662/3% of
the Common Stock issued and issuable upon exercise of the Warrants (other than
2001 Warrants), (C) in the case of any amendment, modification or waiver that
adversely affects the rights or interests of any holder or holders of Series C
Underlying Common Stock hereunder, or in the case of any amendment, modification
or waiver to any provision of Part 3 of this Agreement or the definition of any
defined term set forth in Part 4 of this Agreement which is used (directly or
indirectly by use in the definition of a term that itself is used in the
definition of another term) in Part 3 of this Agreement, at least 662/3% of the
Series C Underlying Common Stock, and (D) in the case of any amendment,
modification or waiver that adversely affects the rights or interests of any
holder or holders of 2001 Warrants or 2001 Warrant Shares hereunder, at least
662/3% of the Common Stock issued and issuable upon exercise of the 2001
Warrants.
5D. 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 the address indicated
below:
To the Company: Monitronics International, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇
With a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
23
To Preferred Holders or Warrant Holders to their addresses set forth on the
Schedule of Preferred Holders or Warrant Holders, as the case may be,
With a copy to: If to Austin Ventures:
▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
and
If to Windward:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
and
If to ABRY:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇
and
If to CRL:
▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
24
and
If to NML:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
To the Common Shareholders, to their addresses set forth on the Schedule of
Common Shareholders, or to such other address or to the attention of such other
Person as the recipient party has specified by prior written notice to the
sending party.
5E. 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.
5F. 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.
5G. Further Assurances. 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 out the intent and purposes
of this Agreement and to consummate the transactions contemplated herein.
5H. 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.
5I. Reorganization. The provisions of this Agreement shall apply to any
Equity Securities resulting from any stock split or reverse stock split, stock
dividend, reclassification, subdivision, consolidation or reorganization of any
shares of Company Securities and to any shares of Company Securities or shares
of Equity Securities of any successor company which may be received by any of
the parties hereto by virtue of their respective ownership of any shares of
Company Securities.
5J. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
5K. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will
25
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
5L. Binding Effect. Except as otherwise expressly provided herein, all
covenants and agreements in this Agreement by or on behalf of any of the parties
hereto will bind and inure to the benefit of the respective heirs, personal
representatives, successors and transferees of the parties hereto whether so
expressed or not. In addition, and whether or not any express assignment has
been made, unless expressly provided otherwise, the provisions of this Agreement
which are (i) for any Preferred Holder's benefit as a purchaser or holder of
shares of Preferred Stock are also for the benefit of, and enforceable by, any
subsequent holder of such Preferred Stock and (ii) for any Warrant Holder's
benefit as a purchaser or holder of Warrants or Warrant Shares are also for the
benefit of, and enforceable by, any subsequent holder of Warrants and Warrant
Shares. Except by operation of law, the Company shall not make any transfer of
any of its rights or obligations hereunder without the prior written consent of
each of the holders of Series A Underlying Common Stock, each of the holders of
the Series C Underlying Common Stock and each of the holders of the Warrants and
Warrant Shares.
5M. Exception for Pledge. The parties acknowledge that pursuant to the
terms of a (a) Third Amended and Restated Pledge Agreement, dated as of January
13, 1999, as amended to date (the "Pledge Agreement"), by and between Austin
Ventures III, Austin Ventures V, Capital Resource Lenders II, L.P. ("CRL"), Hull
Family Limited Partnership, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, individually, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
individually, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, individually, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, individually
(collectively, the "Pledgors") and Canadian Imperial Bank of Commerce, as
Administrative Agent, State Street Bank and Trust Company, for itself and as
Documentation and Collateral Agent (the "Secured Party"), CIBC, Inc., ▇▇▇▇▇▇
Financial, Inc., Chase Bank of Texas, National Association, Union Bank of Texas,
N.A., ▇▇▇▇▇ Fargo Bank (Texas) National Association, LaSalle National Bank and
BankBoston, N.A. (collectively, the "Lenders"), (b) Pledge Agreement, dated as
of April 27, 2001, as amended to date (the "ABRY/Windward/CRL Pledge
Agreement"), by and between ABRY, Windward, CRL and the Lenders, and (c) Pledge
Agreement, dated as of January 18, 2002 (the "NML Pledge Agreement"), by and
between The Northwestern Mutual Life Insurance Company ("NML") and the Lenders,
certain Company Securities, as identified on Schedule I to the Pledge Agreement,
the ABRY/Windward/CRL Pledge Agreement and the NML Pledge Agreement
(collectively, the "Pledged Securities"), have been pledged by the Pledgors,
ABRY, Windward, CRL and NML to the Secured Party for the benefit of the Lenders.
The parties hereto acknowledge and consent to such pledge of the Pledged
Securities and, notwithstanding any provision in this Agreement to the contrary,
hereby agree that any purchaser of such Pledged Securities, including the
Lenders, who acquires the Pledged Securities pursuant to the terms of the Pledge
Agreement, the ABRY/Windward/CRL Pledge Agreement and the NML Pledge Agreement
shall take the Pledged Securities free and clear of all terms of this Agreement
and neither such Persons nor such Pledged Securities shall thereafter be subject
to any term or condition of this Agreement.
* * * *
26
IN WITNESS WHEREOF, the parties have executed this Fourth Amended and
Restated Shareholders Agreement as of the date first above written.
COMPANY:
MONITRONICS INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇,
President
PURCHASERS:
AUSTIN VENTURES III-A, L.P.
By: AV Partners III, L.P.,
Its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Authorized Signatory
AUSTIN VENTURES III-B, L.P.
By: AV Partners III, L.P.,
Its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Authorized Signatory
AUSTIN VENTURES V, L.P.
By: AV Partners V, L.P.,
Its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
General Partner
AUSTIN VENTURES V AFFILIATES FUND, L.P.
By: AV Partners V, L.P.,
Its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
General Partner
CAPITAL RESOURCE LENDERS II, L.P.
By: Capital Resource Partners II, L.P.,
Its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
General Partner
WINDWARD CAPITAL PARTNERS II, L.P.
By: Windward Capital ▇▇ ▇▇, LLC,
Its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Managing Member
WINDWARD CAPITAL ▇▇ ▇▇, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
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/ illegible signature
-----------------------------
Name:
Title: Authorized Agent
ABRY INVESTMENT PARTNERSHIP, L.P.
By: ABRY Investment GP, LLC,
Its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name:
Title: Authorized Agent
THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name:
Title: Authorized Agent
COMMON SHAREHOLDERS:
HULL FAMILY LIMITED PARTNERSHIP, L.P.
By: ▇▇▇▇▇ ▇. ▇▇▇▇ Management Trust,
Its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, Trustee
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
EXHIBIT A TO SHAREHOLDERS AGREEMENT
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Agreement") is executed on and entered
into as of _______________, _____ (the "Effective Date") by and between
Monitronics International, Inc., a Texas corporation (the "Company"), and
________________ ("Director").
The Company is required or permitted under certain circumstances to
indemnify directors of the Company against liability incurred by them in such
capacities or by reason of occupying such position. The Company desires to have
Director serve as a director of the Company, and Director desires to serve,
provided that he is indemnified by the Company. This is the Indemnification
Agreement referred to in the Fourth Amended and Restated Shareholders Agreement
(the "Shareholders Agreement") entered into on January 18, 2002 by the Company
and the Shareholders named therein.
The parties agree as follows:
1. Definitions.
Unless the context requires otherwise, for purposes of this Agreement:
(a) "Act" shall mean the Texas Business Corporation Act, as in effect on
the date of this Agreement and as hereafter amended, and any successor statute;
provided that, for purposes of this Agreement, any amendment of such Act that
reduces the rights of Director will be given effect only to the extent required
by such Act as amended;
(b) the terms "proceedings," "expenses" and other terms defined in Article
2.02-1 of the Act are used herein with the meanings as so defined under the Act;
and
(c) the phrase "serving in a representative capacity at the request of the
Company" means serving at the request of the Company as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary
of another corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise.
2. Indemnity.
(a) The Company agrees to indemnify Director to the fullest extent
permitted by the Act, as soon as practicable but in any event no later than 30
days after receipt by the Company of any claim for indemnity hereunder against
expenses judgments, penalties, fines and amounts paid in settlement (including
all interest, assessments and other charges paid or payable in connection with
or in respect of such expenses, judgments, fines, penalties or amounts paid in
settlement of such proceeding) incurred by or on behalf of Director in
connection with any proceeding in which Director was, is or is threatened to be
a named a party to or witness or other participant in such proceeding because he
is or was a director or officer of the Company or because he is or was serving
in a representative capacity at the request of the Company.
(b) Reasonable expenses incurred by Director in connection with a
proceeding referred to in Paragraph 2A in advance of the final disposition of
the proceeding and without the determination specified in Sections F or G of
Article 2.02-1 of the Act, promptly upon receipt by the Company of:
(i) a written affirmation by Director of his good faith belief that he
has met the standard of conduct necessary for indemnification under the Act; and
(ii) a written undertaking by or on behalf of the Director to repay
the amount paid or reimbursed pursuant to this Paragraph 2B if it is ultimately
determined that he has not met the standard of conduct necessary for
indemnification under the Act or if it is ultimately determined that
indemnification of Director against expenses incurred by him in connection with
that proceeding is prohibited by Section E of Article 2.02-1 of the Act.
(c) This Agreement makes mandatory the indemnification permitted under
Section B of Article 2.02-1 of the Act with respect to expenses incurred in
connection with a proceeding described in such provision and shall be deemed to
constitute authorization of indemnification in the manner required by the Act.
3. Notification and Defense of Claim.
(a) Promptly after receipt by Director of notice of the commencement of any
proceeding in which Director was, is or is threatened to be a named a party to
or witness or other participant in such proceeding, if a claim for indemnity in
connection with such proceeding is to be made against the Company under this
Agreement, will promptly notify the Company of the commencement thereof. With
respect to any such proceeding other than a proceeding brought by or on behalf
of the Company or as to which Director shall have made the determination
provided for in (ii) below, the Company will be entitled to participate therein
at its own expense, and the Company may assume the defense thereof with counsel
satisfactory to Director. After notice from the Company to Director of its
election to assume the defense thereof, the Company will not be liable to
indemnify Director under this Agreement against expenses subsequently incurred
by Director in connection with the defense thereof other than reasonable costs
of investigation or as otherwise provided below. Director shall have the right
to select and employ counsel in a proceeding, but the fees and expenses of such
counsel incurred after notice from the Company of its assumption of the defense
thereof shall be borne by Director unless (i) the employment of such counsel by
Director has been authorized by the Company, (ii) Director shall have reasonably
concluded that there may be a conflict of interest between the Company and
Director in the conduct of the defense of such proceeding, or (iii) the Company
shall not in fact have employed counsel to assume the defense of such action,
and in each case the fees and expenses of counsel shall be subject to the
indemnity provided hereunder by the Company; provided, however, that in the
event any other person indemnified by the Company (unless Director has
reasonably concluded that there may be a conflict of interest between Director
and such other person) is also named or threatened to be named defendant or
respondent in a proceeding referred to in (ii) above, the fees and expenses of
only one counsel employed by Director and all such other persons shall be
subject to indemnity hereunder.
(b) Promptly following receipt by the Company from Director of any claim
for indemnity hereunder, the Company shall in good faith make or cause to be
made any determination as to reasonableness of expenses and determination that
indemnification is permissible as may be required pursuant to the Act and, as
soon as practicable, but in any event no later than 30 days after receipt by the
Company of any claim for indemnity hereunder, following such determination, the
Company shall pay or cause to be paid to Director in cash the amount of the
expenses indemnified hereunder and so determined to be reasonable and
permissible. Such payment shall be made out of the assets of the Company.
4. Miscellaneous.
(a) The Company expressly confirms and agrees that it has entered into this
Agreement in order to induce Director to serve or continue to serve as a
director or in a representative capacity at the request of the Company, and
acknowledges that Director is relying upon this Agreement in continuing in such
capacity and in serving as a director of the Company or in a representative
capacity at the request of the Company hereafter, whether or not Director serves
in any such capacity on the date of this Agreement. All agreements and
obligations of the Company contained herein shall continue during the period
that Director serves as a director of the Company or in a representative
capacity at the request of the Company and thereafter so long as Director shall
be subject to any possible claim or pending, threatened or completed proceeding
by reason of the fact that Director was a director or served in any other
representative capacity.
(b) In the event Director is required to bring any action to enforce his
rights or to collect any amount due him under this Agreement and is successful
in such action, the Company shall reimburse Director for all of Director's fees
and expenses (including, without limitation, reasonable attorney's fees) in
bringing and pursuing such action.
(c) Each of the provisions (including any provision within a single
Paragraph or sentence) of this Agreement is a separate and distinct agreement
and independent of the others, so that if any provision hereof shall be held to
be invalid, illegal or unenforceable for any reason whatsoever, such invalidity
or unenforceability shall not affect the validity or enforceability of the other
provisions hereof and such remaining provisions shall remain enforceable to the
fullest extent permitted by law.
(d) This Agreement shall be interpreted and enforced in accordance with the
internal laws but not the law of conflicts of the State of Texas.
(e) This Agreement and the terms hereof shall be binding upon and inure to
the benefit of the Company and Director, and their respective successors and
assigns.
(f) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provisions hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver.
(g) The-indemnification provided by this Agreement shall not be deemed
exclusive of any other rights to which Director may be entitled under any
provision of the Act, the Articles of Incorporation or bylaws of the Company or
of any other corporation, or any other agreement or otherwise. To the extent
that a change in the Act (whether by statute or judicial decision) permits
greater indemnification by agreement than would be affording currently under the
Company's bylaws and this Agreement, it is the intent of parties hereto that
Director shall enjoy by this Agreement the greater benefits so afforded by such
change.
(h) 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 the address indicated below:
If to the Director:
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Facsimile:
Attn:
If to the Company:
Monitronics International, Inc.
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Attn: President
or to such other address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending party.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the Effective Date.
The Company:
MONITRONICS INTERNATIONAL, INC.
By: _____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇, President
EXHIBIT B TO SHAREHOLDERS AGREEMENT
ADDENDUM AGREEMENT TO FOURTH AMENDED
AND RESTATED SHAREHOLDERS AGREEMENT
This Addendum Agreement is executed on and effective as of _______________,
by and among ____________________ (the "New Shareholder"), the New Shareholder's
Spouse (if any), and Monitronics International, Inc., a Texas corporation (the
"Company").
The Fourth Amended and Restated Shareholders Agreement dated January 18,
2002 (the "Shareholders Agreement") among the Company and certain shareholders
of the Company provides that all persons prior to becoming shareholders of the
Company must enter into an Addendum Agreement binding such person and such
person's spouse (if any) to the Shareholders Agreement to the same extent as if
they were original parties thereto. Capitalized terms used herein but not
otherwise defined shall have the meanings ascribed to them in the Shareholders
Agreement.
Therefore, the New Shareholder and the spouse of the New Shareholder (if
any) hereby agree to be bound by all terms and conditions of the Shareholders
Agreement to the same extent as if they were original signatories to the
Shareholders Agreement and were a [insert type of holder](*). This Addendum
Agreement shall be attached to and become part of the Shareholders Agreement.
NEW SHAREHOLDER:
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Signature
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Spouse of New Shareholder
COMPANY:
MONITRONICS INTERNATIONAL, INC.
By:
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Title:
*In each case where the New Shareholder is a transferee of Company
Securities from a party to the Shareholders Agreement, based upon the type of
Company Security the New Shareholder has acquired, the New Shareholder shall be
deemed either a Preferred Holder, a Warrant Holder and/or a Common Shareholder
with respect to each such Company Security. In all other cases, the New
Shareholder shall be deemed a Common Shareholder.
SCHEDULE OF PREFERRED HOLDERS
Austin Ventures III-A, ▇.▇.
▇▇▇▇▇▇ Ventures III-B, ▇.▇.
▇▇▇▇▇▇ Ventures V, ▇.▇.
▇▇▇▇▇▇ Ventures V Affiliates Fund, L.P.
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Capital Resource Lenders II, L.P.
c/o Capital Resource Partners
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Windward Capital Partners II, L.P.
Windward Capital ▇.▇. ▇▇, LLC
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▇▇▇▇ Partners IV, ▇.▇.
▇▇▇▇ Investment Partnership, L.P.
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SCHEDULE OF WARRANT HOLDERS
Capital Resource Lenders II, L.P.
c/o Capital Resource Partners
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Austin Ventures III-A, ▇.▇.
▇▇▇▇▇▇ Ventures III-B, ▇.▇.
▇▇▇▇▇▇ Ventures V, ▇.▇.
▇▇▇▇▇▇ Ventures V Affiliates Fund, L.P.
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The Northwestern Mutual Life Insurance Company
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Attn: Securities Department
SCHEDULE OF COMMON SHAREHOLDERS
1. Hull Family Limited Partnership, L.P.
c/o Monitronics International, Inc.
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c/o Monitronics International, Inc.
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c/o Monitronics International, Inc.
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c/o Monitronics International, Inc.
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c/o Monitronics International, Inc.
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