Document:

Second Amendment to Subordinated Note and Warrant Purchase Agreement

 Exhibit 10.19 
  
 SECOND AMENDMENT 
 TO 
 SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT 
  
 This Second Amendment to Subordinated Note and Warrant Purchase Agreement (this “Amendment”), dated as of July 14,
2004 (the “Effective Date”), amends that certain Subordinated Note and Warrant Purchase Agreement dated as of January 18, 2002, as amended by the First Amendment to Subordinated Note and Warrant Purchase Agreement dated August 25, 2003 (as
so amended, the “Original Agreement”) between Monitronics International, Inc. (the “Company”) and The Northwestern Mutual Life Insurance Company (the “Purchaser”). 
  
 A. Pursuant to the Original Agreement, the Company issued and sold to the
Purchaser 13.5% Subordinated Notes due 2009 in the aggregate principal amount of $40,000,000 (the “Notes”) and Common Stock Purchase Warrants to acquire up to an aggregate of 1,133,328 shares of Class A Common Stock, $.01 par value per
share, of the Company. 
  
 B. On the date hereof, the Company and
the holders of substantially all of the Company’s Capital Stock intend to engage in a series of transactions (collectively, the “Recapitalization”) pursuant to which, among other things, (i) the Company will amend its Organizational
Documents to cancel its various existing series of Preferred Stock and create a new, single series of Preferred Stock, (ii) the Company’s principal shareholders will exchange their existing shares of Capital Stock of the Company for shares of
the new series of Preferred Stock or for common stock of the Company and in connection therewith the Company will redeem certain existing shares of Preferred Stock for an aggregate redemption price of approximately $5,300,000 and (iii) two of the
Company’s shareholders will sell shares of the Company’s common stock received in the shares exchange described above to two third parties. 
  
 C. As a condition to the Recapitalization Agreement and in connection with the consummation of the transactions contemplated thereby, the parties hereto
desire to amend the Original Agreement and modify the terms of the Notes that will remain outstanding as hereinafter set forth. 
  
 NOW THEREFORE, in consideration of the premises and the agreements herein contained, and intending to be bound hereby, the parties hereby agree as
follows: 
  
 1. Waivers. 
  
 1.01 Solely in connection with the Recapitalization, the Purchaser hereby
waives the Company’s obligations under the following Sections of the Original Agreement: Section 7.02(c)(i); Section 7.02(f); Section 7.02(h) and Section 7.02(i). 
  
 2. Amendment of Original Agreement. 
  

2.01 Section 1.01 of the Original Agreement shall be amended by adding the following defined terms: 
  
 “First Amendment” means the First
Amendment to Credit Agreement dated as of the First Amendment Closing Date by and among the Company and the Banks party thereto, which amends the Loan Agreement. 
  

 “First Amendment Closing Date” means July 14, 2004. 

 
 “Stock Restriction Agreement”
means a Restricted Stock Ownership Agreement between the Company or a Subsidiary of the Company and an employee thereof, in substantially the form of Exhibit A to this Amendment. 
  
 2.02 Clause (d) of the definition of “Fixed Charges” in Section 1.01 of the Original Agreement is hereby amended
by adding the following provision at the end thereof: 
  
 “; provided, however, that the cash payments made to Windward Capital Partners II, L.P. and Windward Capital LP II, LLC as part of the Recapitalization (as defined in the First Amendment) shall not be considered a Fixed Charge”.

  
 2.03 The definition of “Indebtedness” in Section
1.01 of the Original Agreement is hereby amended by adding the following parenthetical phrase at the end thereof: 
  
 “(it being understood that if mandatorily redeemable Preferred Stock is included within this definition and such Preferred Stock is mandatorily
redeemable only upon the occurrence or satisfaction of specified conditions, such Preferred Stock shall not be considered mandatorily redeemable for the purposes of this clause unless such specified conditions have occurred or been satisfied).”

  
 2.04 The definition of “NOI” in the Section 1.01 of
the Original Agreement is hereby amended by adding the following provision at the end thereof: 
  
 “, plus (e) all transaction expenses paid by Borrower on a one-time basis in connection with the Recapitalization (as defined
in the First Amendment).” 
  
 2.05 Section 7.02(c)(ii) of the
Original Agreement is hereby amended by deleting the term “Effective Date” appearing therein and inserting in lieu thereof the term “First Amendment Closing Date”. 
  
 2.06 Section 7.02(f)(iii) of the Original Agreement is hereby amended by deleting the term “Effective Date”
appearing therein and inserting in lieu thereof the term “First Amendment Closing Date”. 
  
 2.07 Section 7.02(f)(v) of the Original Agreement is hereby amended by (a) adding “and Common Stock” after the words Preferred Stock, (b)
deleting the amount “Fifty Thousand Dollars ($50,000)” appearing therein and inserting in lieu thereof the amount “One Hundred Fifty Thousand Dollars ($150,000)” and (c) adding the following provision at the end thereof:

  
 “; provided, however, that, in addition
to any of the foregoing expenses, the Company may pay or reimburse out-of-pocket expenses incurred by securities holders in the Company to the extent any such expenses are incurred in connection with the 

  

 2 

 
Recapitalization (as defined in the First Amendment), including without limitation expenses incurred by ABRY Partners IV, L.P. and/or Affiliates thereof in
connection with filings made in accordance with the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and for reasonable out-of-pocket attorneys fees and expenses incurred by such entity or entities in connection
therewith.” 
  
 2.08 Section 7.02(f) of the Original
Agreement is hereby amended to add the following: 
  
 “(vi) redemptions of Capital Stock from employees of the Company or a Subsidiary of the Company pursuant to and in accordance with the terms of a Stock Restriction Agreement, provided that the aggregate amount of such
redemptions in any fiscal year of the Company shall not exceed Fifty Thousand Dollars ($50,000),” 
  
 3. Representations and Warranties. 
  
 3.01 Registration Rights. Other than pursuant to the terms of the Fifth Amended and Restated Registration Agreement, dated July 14, 2004, by and among the Company and the Pledgors, the Warrant Agreement, dated
November 10, 1994, between the Company and Heller Financial, Inc., the Affiliate Registration Agreement and the Registration Rights Agreement, dated August 25, 2003, among the Company, Banc of America Securities LLC and Fleet Securities, Inc., no
Person has demand or other rights to cause the Company or any of its Subsidiaries to file any registration statement under the Securities Act relating to any securities of the Company or any of its Subsidiaries or any right to participate in any
such registration statement. 
  
 3.02 Authorization, Validity
and Enforceability. This Amendment has been duly authorized, executed and delivered by the Company and constitutes, and the Original Agreement, as amended by and through the date hereof, and the Notes constitute, legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with their respective terms, except as the enforcement hereof may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of rights of
creditors generally and except to the extent that enforcement of rights and remedies set forth therein may be limited by equitable principles (regardless of whether enforcement is considered in a court of law or a proceeding in equity). 

 
 3.03 Representations and Warranties Incorporated from Loan
Agreement. Each of the representations and warranties (and each associated schedule) given by the Company to the Banks in the Loan Agreement is true and correct in all material respects as of the First Amendment Closing Date. 
  
 3.04 Compliance. The Company is in compliance in all material respects
with all of the terms and provisions set forth in the Original Agreement on its part to be observed or performed on or prior to the date of this Amendment. 
  
 3.05 No Material Adverse Effect. Since March 31, 2004, there has been no change in the assets or liabilities or in the financial or other condition
of the Company or any of its Subsidiaries that could have a Material Adverse Effect. 
  

 3 

 4. Miscellaneous. 
  

4.01 Effect. Except as amended hereby, the Original Agreement shall remain in full force and effect. 
  
 4.02 Defined Terms. All capitalized terms used but not specifically
defined herein shall have the same meanings given such terms in the Original Agreement unless the context clearly indicates or dictates a contrary meaning. 
  
 4.03 Notices. All notices, requests, demands and other communications provided for in this Amendment shall be delivered in compliance with Section
9.03 of the Original Agreement. 
  
 4.04 Costs, Expenses,
Taxes. The Company agrees to pay on demand all costs and expenses of the Purchaser in connection with the preparation, execution and delivery of this Amendment and other instruments and documents to be delivered hereunder. 
  
 4.05 Governing Law. This Amendment shall be governed by, and construed
and enforced in accordance with, the internal laws of the State of New York. 
  
 4.06 Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and each of the parties hereto may execute this
Amendment by signing any of such counterparts. 
  
 [REMAINDER OF
THIS PAGE INTENTIONALLY LEFT BLANK] 
  

 4 

 IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the date first above written.

  

			
	THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
		
	 By:
	 	 /s/ David A. Barras

	 Name:
	 	 David A. Barras

	 Title:
	 	 Its Authorized Representative

	
	MONITRONICS INTERNATIONAL, INC.
		
	 By:
	 	 /s/ James R. Hull

	 Name:
	 	 James R. Hull

	 Title:
	 	 President

  

 Exhibit A 
  
 RESTRICTED STOCK OWNERSHIP AGREEMENT 
  
 This RESTRICTED STOCK OWNERSHIP AGREEMENT (the “Agreement”) is made as of January [4], 2002, by and between
Monitronics International, Inc., a Texas corporation (the “Company”), and                     , an employee of the Company (the
“Employee”). 
  
 WHEREAS, pursuant to this
Agreement, the Company desires to transfer to the Employee                      shares (the “Shares”) of the Company’s Class A
Common Stock, $0.01 par value, per share (the “Common Stock”) which shares shall be subject to certain restrictions as set forth herein and shall be herein referred to as the “Restricted Shares”; and 
  
 WHEREAS, Company and Employee desire to enter into this Agreement to
provide for restrictions on transfer and forfeiture of the Restricted Shares prior to the vesting of such Restricted Shares and removal of such forfeiture restrictions upon vesting of the Restricted Shares. 
  
 NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements set forth herein, together with other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 
  
 1. Purchase of Restricted Shares. Concurrently with execution of this
Agreement, Employee has purchased the Restricted Shares and paid the purchase price of $0.01 per share (the “Purchase Price”). Concurrently with execution of this Agreement and payment of the Purchase Price, Employee shall also execute and
deliver to Company an executed blank Stock Power of Attorney in the form attached hereto as Exhibit “A” with respect to the Restricted Shares. 
  
 2. Repurchase Right. 
  
 2.1 Grant. Employee hereby grants to Company the right (the “Repurchase Right”) exercisable at any time during the
180-day period following the date Employee’s employment by Company is terminated for any reason, to repurchase at the Purchase Price all or any portion of the Restricted Shares in which Employee is not, at the time of his or her termination of
employment, vested in accordance with the Vesting Schedule described in Section 2.3 and set forth in the form attached hereto as Exhibit “B” (such shares to be hereinafter referred to as the “Unvested Shares”). 
  
 2.2 Exercise of the Repurchase Right. The Repurchase
Right shall be exercisable by written notice delivered to Employee prior to the expiration of the 180-day exercise period. The notice shall indicate the number of Unvested Shares to be repurchased and the date on which the repurchase is to be
effected, such date to be not more than 30 days after the date of such notice. The certificates representing the Unvested Shares to be repurchased shall be delivered to Company prior to the close of business on the date specified for the repurchase.
Concurrently with the receipt of such stock certificates, Company shall pay to Employee, in cash or cash equivalents (including the cancellation of any purchase-money indebtedness), an amount 

  

 Exhibit A-1 

 
equal to the Purchase Price previously paid for the Unvested Shares which are to be repurchased from Employee. 
  
 2.3 Termination of the Repurchase Right. The
Repurchase Right shall terminate with respect to any Unvested Shares for which it is not timely exercised under Section 2.2. In addition, the Repurchase Right shall terminate and cease to be exercisable with respect to any and all Unvested Shares in
which Participant vests in accordance with the Vesting Schedule set forth in Exhibit B. 
  
 Notwithstanding the foregoing, the Unvested Shares shall become fully vested and shall no longer be subject to the Repurchase Right upon a “Change of Control.” For purposes of this Agreement, a “Change
of Control” shall have the meaning set forth in Section 10.2. 
  
 2.4 Recapitalization. Any new, substituted or additional securities or other property (including cash paid other than as a regular cash dividend) which is by reason of any “Recapitalization”
distributed with respect to the Unvested Shares shall be immediately subject to the Repurchase Right, but only to the extent the Unvested Shares are at the time covered by such right. Appropriate adjustments to reflect such distribution shall be
made to the number and/or class of Unvested Shares subject to this Agreement and to the price per share to be paid upon the exercise of the Repurchase Right in order to reflect the effect of any such Recapitalization upon Company’s capital
structure; provided, however, that the aggregate purchase price shall remain the same. For purposes of this Agreement, a “Recapitalization” shall mean any stock split, stock dividend, recapitalization, reorganization, combination of
shares, exchange of shares, or other change affecting the outstanding Common Stock as a class without the Company’s receipt of consideration. 
  
 2.5 Corporate Transaction. 
  
 (a) The Repurchase Right shall be assignable by Company to any successor entity of Company in a merger or consolidation, share exchange,
or sale, transfer or other disposition of all or substantially all of the Company’s assets in complete liquidation or dissolution of the Company; subject, however, to termination on the Repurchase Right in accordance with Section 2.3 if a
Change of Control has occurred as a result thereof. However, to the extent the successor entity does not accept such assignment, the Repurchase Right shall lapse immediately prior to the consummation of the transaction with such successor entity.

  
 (b) To the extent the Repurchase Right
remains in effect following any such transaction, such right shall apply to the new capital stock or other property (including any cash payments) received in exchange for the Unvested Shares in consummation of such transaction, but only to the
extent the Unvested Shares are at the time covered by such right. Appropriate adjustments shall be made to the price per share payable upon exercise of the Repurchase Right to reflect the effect of such transaction upon Company’s capital
structure; provided, however, that the aggregate purchase price shall remain the same. 
  
 3. Delivery of Certificates. The certificates representing any Restricted Shares which are subject to the Repurchase Right shall be held in escrow in accordance with the provisions of this Agreement.

  

 4. Shareholder Rights. Until such time as the Company exercises the Repurchase Right, Employee (or
any permitted successor in interest) shall have all the rights of a shareholder (including voting, dividend and liquidation rights) with respect to the Restricted Shares, subject, however, to the transfer restrictions of Sections 5.2 and 6.

  
 5. Securities Law Compliance. 
  
 5.1 Restricted Securities. The Shares have not been
registered under the Securities Act of 1933, as amended (the “1933 Act”), and are being issued to Employee in reliance upon the exemption from such registration provided by, among other exemptions, the nonpublic offering exemption provided
by Section 4(2) of the 1933 Act and, therefore, are subject to restrictions on further transfer under the 1933 Act. Employee hereby confirms that Employee has been informed that the Shares are restricted securities under the 1933 Act and may not be
resold or transferred unless the Shares are first registered under the Federal securities laws or unless an exemption from such registration is available. Accordingly, Employee hereby acknowledges that Employee is prepared to hold the Shares for an
indefinite period and that Employee is aware that Rule 144 issued under the 1933 Act which exempts certain resales of unrestricted securities is not presently available to exempt the resale of the Shares from the registration requirements of the
1933 Act. 
  
 5.2 Disposition of Shares.
Employee shall make no disposition of the Shares, which are not subject to the Repurchase Right, unless and until there is compliance with all of the following requirements: 
  
 (a) Employee shall have provided Company with a written summary of the terms and conditions of the proposed
disposition. 
  
 (b) Employee shall have complied
with all requirements of this Agreement applicable to the disposition of the Shares.(c) Employee shall have provided Company with written assurances, in form and substance satisfactory to Company, that 1. the proposed disposition does not require
registration of the Shares under the 1933 Act or 2. all appropriate action necessary for compliance with the registration requirements of the 1933 Act or any exemption from registration available under the 1933 Act (including Rule 144) has been
taken. 
  
 Company shall not be required (A) to
transfer on its books any Shares which have been sold or transferred in violation of the provisions of this Agreement or (B) to treat as the owner of the Shares, or otherwise to accord voting, dividend or liquidation rights to, any transferee to
whom the Shares have been transferred in contravention of this Agreement. 
  
 5.3 Restrictive Legends. The stock certificates for all the Shares shall be endorsed with the legend set forth in subsection (a) below, and the stock certificates for the Restricted Shares shall be endorsed
with the legend set forth in subsection (b) below: 
  
 (a) “The shares represented by this certificate have not been registered under the Securities Act of 1933. The shares may not be sold or offered for sale in the absence of 3. an effective registration statement for the shares under
such Act, 4. a “no action” letter of the Securities and Exchange Commission with respect to such sale or offer or 5. satisfactory 

  

 
assurances to the Company that registration under such Act is not required with respect to such sale or offer.” 
  
 (b) “The shares represented by this certificate are
unvested and are subject to certain repurchase rights granted to the Company and accordingly may not be sold, assigned, transferred, encumbered, or in any manner disposed of except in conformity with the terms of a written agreement dated January
[4], 2002 between the Company and the registered holder of the shares (or the predecessor in interest to the shares). A copy of such agreement is maintained at the Company’s principal corporate offices.” 
  
 6. Additional Transfer Restrictions. Notwithstanding any other
provision of this Agreement, the Employee shall not transfer, assign, encumber or otherwise dispose of any of the Restricted Shares which are subject to the Repurchase Right. 
  
 7. Escrow. 
  
 7.1 Deposit. Upon issuance, the certificates for the Restricted Shares which are subject to the Repurchase Right shall be deposited
in escrow with the Company to be held in accordance with the provisions of this Section 7. Each deposited certificate shall be accompanied by a duly-executed Stock Power of Attorney in the form of Exhibit “A.” The deposited certificates,
together with any other assets or securities from time to time deposited with Company pursuant to the requirements of this Agreement, shall remain in escrow until such time or times as the certificates (or other assets and securities) are to be
released or otherwise surrendered for cancellation in accordance with 7.3. Upon delivery of the certificates (or other assets and securities) to Company, Employee shall be issued a receipt acknowledging the number of Restricted Shares (or other
assets and securities) delivered in escrow. 
  
 7.2 Recapitalization Reorganization. Any new, substituted or additional securities or other property which is by reason of any Recapitalization as contemplated under Section 2.4, distributed with respect to the Restricted Shares
shall be immediately delivered to Company to be held in escrow under this Section 7, but only to the extent the Restricted Shares are at the time subject to the escrow requirements hereunder. However, all regular cash dividends on the Restricted
Shares (or other securities at the time held in escrow) shall be paid directly to Employee and shall not be held in escrow. 
  
 7.3 Release/Surrender. The Restricted Shares, together with any other assets or securities held in escrow hereunder, shall be
subject to the following terms relating to their release from escrow or their surrender to Company for repurchase and cancellation: 
  
 (a) Should Company elect to exercise the Repurchase Right with respect to any Unvested Shares, then the escrowed certificates for those
Unvested Shares (together with any other assets or securities attributable thereto) shall be surrendered to Company concurrently with the payment to Employee of an amount equal to the aggregate Purchase Price paid for those Unvested Shares, and
Employee shall cease to have any further rights or claims with respect to such Unvested Shares (or other assets or securities attributable thereto). 
  
 (b) Should Company elect not to exercise the Repurchase Right with respect to any Unvested Shares held at the time in escrow hereunder,
then the escrowed 

  

 
certificates for those shares (together with any other assets or securities attributable thereto) shall be immediately released to Employee. 
  
 (c) As the Unvested Shares (or any other assets or
securities attributable thereto) vest in accordance with the Vesting Schedule described in Section 2.3 and set forth in Exhibit “B,” the certificates for those vested shares (as well as all other vested assets and securities) shall be
released from escrow upon Employee’s request, but not more frequently than once every six months. 
  
 (d) All Unvested Shares which vest (and any other vested assets and securities attributable thereto) shall be released within 30 days
after the termination of Employee’s employment with Company for any reason. 
  
 8. Special Tax Election. 
  
 8.1 Section 83(b) Election. Under section 83 of the Internal Revenue Code of 1986 (the “Code”), the excess of the fair market value of the Shares on the date any forfeiture restrictions applicable to
such shares lapse over the Purchase Price paid for such shares will be reportable as ordinary income on the lapse date. For this purpose, the term “forfeiture restrictions,” among other things, includes the right of Company to repurchase
the Unvested Shares pursuant to the Repurchase Right. Employee may elect under section 83(b) of the Code to be taxed at the time the Shares are acquired, rather than when and as such Shares cease to be subject to such forfeiture restrictions. Such
election must be filed with the Internal Revenue Service within 30 days after the date of this Agreement. Regardless of whether the fair market value of the Shares on the date of this Agreement exceeds the Purchase Price paid, the election must be
made to avoid adverse tax consequences in the future. THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT “C” HERETO. EMPLOYEE UNDERSTANDS THAT FAILURE TO MAKE TO MAKE THIS FILING WITHIN THE APPLICABLE 30-DAY PERIOD WILL RESULT IN
THE RECOGNITION OF ORDINARY INCOME AS THE FORFEITURE RESTRICTIONS LAPSE. 
  
 8.2 Filing Responsibility. EMPLOYEE ACKNOWLEDGES THAT IT IS EMPLOYEE’S SOLE RESPONSIBILITY, AND NOT COMPANY’S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF EMPLOYEE REQUESTS
COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF. EMPLOYEE FURTHER ACKNOWLEDGES THAT THE COMPANY RECOMMENDS THAT EMPLOYEE CONSULT WITH A TAX PROFESSIONAL BEFORE MAKING AN ELECTION UNDER SECTION 83(b) OF THE CODE. 

 
 9. Miscellaneous. 
  
 9.1 Assignment. Company may assign the Repurchase
Right to any person or entity selected by the Board. 
  
 9.2 No Employment or Service Contract. Nothing in this Agreement shall confer upon Employee any right to continue in the employment of Company for any period of specific duration or interfere with or otherwise restrict in any way the
rights of Company (or any parent or subsidiary employing or retaining Employee) or of Employee, which rights are hereby 

  

 
expressly reserved by each, to terminate Employee’s employment with Company at any time for any reason, with or without cause. 
  
 9.3 Notices. Any notice required to be given under
this Agreement shall be in writing and shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, registered or certified, postage prepaid and properly addressed to the party entitled to such notice at the address indicated
below such party’s signature line on this Agreement or at such other address as such party may designate by ten days advance written notice under this paragraph to all other parties to this Agreement. 
  
 9.4 No Waiver. The failure of Company in any instance
to exercise the Repurchase Right shall not constitute a waiver of any other repurchase rights that may subsequently arise under the provisions of this Agreement or any other agreement between Company and Employee. No waiver of any breach or
condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature. 
  
 9.5 Cancellation of Shares. If Company shall make available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Restricted Shares to be repurchased in accordance with the provisions of this Agreement, then from and after such time, the person from whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such shares shall be deemed purchased in accordance with the applicable provisions hereof, and Company shall be deemed the owner
and holder of such shares, whether or not the certificates therefor have been delivered as required by this Agreement. 
  
 9.6 Undertaking. Employee hereby agrees to take whatever additional action, including the furnishing of information to the Company,
and execute whatever additional documents Company may deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on either Employee or the Restricted Shares pursuant to the provisions of this
Agreement. 
  
 9.7 Governing Law. This
Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas without resort to that State’s conflict-of-laws rules. 
  
 9.8 Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, Company and its
successors and assigns and upon Employee, Employee’s assigns and the legal representatives, heirs and legatees of Employee’s estate, whether or not any such person shall have become a party to this Agreement and have agreed in writing to
join herein and be bound by the terms hereof. 
  
 9.9 Administration. The Company retains administration rights with respect to this Agreement. These rights include the discretion to i. adopt, amend, and rescind administrative and interpretive rules and regulations relating to the
Agreement; ii. construe the 

  

 
Agreement; and iii. delegate its duties hereunder to such agents as it may appoint from time to time. 
  
 9.10 Taxes. The Company may from time to time, in its
discretion, require Employee to pay to the Company, the amount that the Company deems necessary to satisfy the Company’s current or future obligation to withhold federal, state or local income or other taxes that Employee incurs as a result of
this Agreement. With respect to any required tax withholding, Employee may iv. direct the Company to withhold from the shares of Common Stock to be issued to Employee the number of shares necessary to satisfy the Company’s obligation to
withhold taxes, that determination to be based on the shares’ fair market value at the time as of which such determination is made; v. deliver to the Company sufficient shares of Common Stock to satisfy the Company’s tax withholding
obligations, based on the shares’ fair market value at the time as of which such determination is made; or vi. deliver sufficient cash to the Company to satisfy its tax withholding obligations. If Employee elects to use such a stock withholding
feature, Employee must make the election at the time and in the manner that the Company prescribes. The Company may, at its sole option, deny Employee’s request to satisfy withholding obligations through Common Stock instead of cash. In the
event the Company subsequently determines that the aggregate fair market value of any shares of Common Stock withheld as payment of any tax withholding obligation is insufficient to discharge that tax withholding obligation, then Employee shall pay
to the Company, immediately upon the Company’s request, the amount of that deficiency. Determination of the Common Stock’s fair market value shall be made in good faith by the Company. 
  
 9.11 Amendments. The Company may amend, alter,
suspend, discontinue or terminate this Agreement; provided that, without the consent of Employee, no such Company action may materially and adversely affect the rights of Employee under this Agreement without Employee’s consent. 
  
 9.12 Severability. If any provision of this Agreement
is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions hereof, but such provision shall be fully severable and the Agreement shall be construed and enforced as if the illegal or
invalid provision had never been included herein. 
  
 9.13 No Liability for Good Faith Determinations. The Company and the members of the Board shall not be liable for any act, omission or determination taken or made in good faith with respect to this Agreement or the Restricted Shares
granted hereunder. 
  
 9.14 No Guarantee of
Interests. The Board and the Company do not guarantee the Common Stock of the Company from loss or depreciation. 
  
 10. Definitions. 
  
 10.1 Board means the Company’s Board of Directors. 
  
 10.2 Change in Control means the event that is deemed to have occurred if: i. the Company shall not
be the surviving entity in any merger or consolidation (or survives only as a Subsidiary of an entity other than a previously wholly owned subsidiary of the Company), ii. the Company sells, leases or exchanges or agrees to sell, lease or exchange
all or substantially all 

  

 
of its assets to any other person or entity (other than a wholly-owned subsidiary of the Company), iii. the Company is to be dissolved and liquidated, or iv.
any person or entity, including a “group” as contemplated by Section 13(d)(3) of the Exchange Act (other than any stockholder or holder of warrants or options to acquire capital stock of the Company on the date hereof), acquires or for the
first time controls or is able to vote (directly or through nominees or beneficial ownership) after the date hereof (other than as the direct result of a transfer by descent or distribution of a decedent’s estate) fifty percent (50%) or more of
the deemed issued and outstanding stock of the Company having power ordinarily to vote for directors of the Company (on a fully-diluted, as converted basis). 
  

10.3 Exchange Act means the Securities Exchange Act of 1934, as amended from time to time, including rules thereunder and
successor provisions and rules thereto. 
  
 10.4 Person means any person or entity of any nature whatsoever, specifically including an individual, a firm, a company, a corporation, a partnership, a trust or other entity; a Person, together with that Person’s
“Affiliates” and “Associates” (as those terms are defined in Rule 12b-2 under the Exchange Act), and any Persons acting as a partnership, limited partnership, joint venture, association, syndicate or other group (whether or not
formally organized), or otherwise acting jointly or in concert or in a coordinated or consciously parallel manner (whether or not pursuant to any express agreement), for the purpose of acquiring, holding, voting or disposing of securities of the
Company with such Person, shall be deemed a single “Person.” 
  
 10.5 Subsidiary means with respect to any Person, any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by
that Person. 
  

 IN WITNESS WHEREOF, the parties have executed this Agreement on the date first indicated above.

  

			
	 COMPANY:

	
	 MONITRONICS INTERNATIONAL, INC.

		
	 By:
	 	 
	 Name:
	 	 
	 Title:
	 	 
	
	 EMPLOYEE:

		
	 By:
	 	 
	 Name:
	 	 
	 Title:
	 	 
		
	 	 	 
	 	 	 
	 	 	 
	 (Address)

  

 SPOUSAL ACKNOWLEDGEMENT 
  
 The undersigned spouse of Employee has read and hereby approves the foregoing Restricted Stock Ownership Agreement. In
consideration of Company granting Employee the right to acquire the Shares in accordance with the terms of such Agreement and the Stock Option Agreement, the undersigned hereby agrees to be irrevocably bound by all the terms of such Restricted Stock
Ownership Agreement, including (without limitation) the right of Company’s (or its assignee) to purchase any Restricted Shares in which Employee is not vested. 
  

			
		
	 By:
	 	 
	 Name:
	 	 
		
	 	 	 
	 	 	 
	 	 	 
	 (Address)

  

 EXHIBIT A 
  

STOCK POWER OF ATTORNEY 
  
 FOR VALUE RECEIVED, the undersigned does hereby transfer to             ,
             shares (the “Shares”) of the common stock, par value $0.01 per share, of Monitronics International, Inc., a Texas corporation (the “Company”),
represented by certificate numbers              through              standing in the name of the undersigned on the
books of said Company, and does hereby irrevocably appoint              attorney to transfer the said Shares of stock on the books of said Company, with full power of substitution in
the premises. 
  
 Effective as of:
                     
  

			
		
	 By:
	 	 
		
	 Name:
	 	 

  

 EXHIBIT B 
  

VESTING SCHEDULE 
  

			
	 VESTING DATES

	 	 NUMBER OF
 UNVESTED SHARES VESTING

  

 EXHIBIT C 
  

INTERNAL REVENUE CODE SECTION 83(B) ELECTION FORM 
  

	I.	Directions 

  
 To effectuate an election pursuant to section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”): 
  

	 	A.	Fill in any omitted information on this election form (the “Form”); 

  

	 	B.	Sign and date the Form before a notary public and return one copy of the Form to: 

  
 Mike Meyers 
 12801 Stemmons Freeway 
 Suite 821 
 Dallas, Texas 75234 
  

	 	C.	Mail a copy of the Form to the Service Center where you file your Internal Revenue Service tax return WITHIN 30 DAYS OF RECEIPT OF THE PROPERTY; and 

  

	 	D.	Attach one copy of the Form to your income tax return for calendar year 2002. 

  

	II.	Code Section 83(b) Election 

  

	 	A.	Taxpayer Information 

  

	 	1.	Name:                  

  

	 	2.	Address:                  

  

	 	3.	Taxpayer identification number:              

  

	 	B.	Property Description 

  

			
	 ________________________________
	  	 
		
	 ________________________________
	  	 
		
	 ________________________________
	  	 
		
	 ________________________________
	  	 
		
	 ________________________________
	  	 

  

	 	C.	Date and Taxable Year of Transfer 

  

	 	1.	Property transfer date: January [4] 2002 

  

	 	2.	The taxable year in which property was transferred: Calendar year 2002 

  

	 	D.	The nature of the restriction to which the property is subject 

  
 The property is subject to a repurchase right of the Company which terminates as the shares vest as set forth below: 
  
                         [Fill in vesting schedule] 
                         _____________________

                         _____________________ 
  

	 	E.	Property Valuation 

  

	 	1.	Fair market value of property at time of transfer (determined without regard to restrictions that will lapse, including any substantial risk of forfeiture restrictions): $0.01 per
share 

  

	 	2.	Amount paid for property: $0.01 per share 

  

	 	3.	Excess of fair market value over the amount paid: $0 

  

	 	F.	Attestation 

  
 I elect under section 83(b) of the Code to have $0 included in my ordinary compensation income for taxable year ending December 31, 2002 with respect to
the transfer of the above described property. This amount represents the excess of the fair market value of the property at the time of transfer over the amount paid for such property. I have furnished my employer, for whom services were performed
in connection with the transfer of the property, with a copy of this statement. I am the recipient of the above described property and therefore need not inform a third party transferee of this election. 
  
 SIGNED:
                                     DATE:
                 
 Signature of Taxpayer

  
 On this
             day of             , 200  , before me, a Notary Public in and for
             STATE 
  
 and,
                                    , personally appeared
                                    , acknowledging the

 COUNTY
                                        TAXPAYER

  
 foregoing election to be his act and deed and desires that the
same may be recorded as such. 
  
 Witness my hand and notarial
seal the day and year first above written. 
  

	
	
	 
	 Notary Public

  
 My Commission Expires:

  
 __________________________ 
  

 NOTE: If you make an election pursuant to this Form, copies of the Form must be: 
  

	1.	Mailed within 30 days of receipt of the property to the Service Center where you file your Internal Revenue Service tax return; 

  

	2.	Provided to the representative of the entity for which you performed services as discussed above; 

  

	3.	Attached to your income tax return for the year of transfer.Stock Purchase Agreement

 Exhibit 10.40 
  
 STOCK PURCHASE AGREEMENT 
  
 This Stock Purchase Agreement (this “Agreement”), is entered into as of July 14, 2004, by and among Monitronics International, Inc., a
Texas corporation (the “Company”), New York Life Capital Partners II, L.P., a Delaware limited partnership (“NY Life”), PPM America Private Equity Fund LP, a Delaware limited partnership (“PPM,”
together with NY Life, each a “Purchaser” and collectively the “Purchasers”), Windward Capital Partners II, L.P., a Delaware limited partnership (“Windward LP”), and Windward Capital LP II, LLC, a
Delaware limited liability company (“Windward LLC,” and together with Windward LP, each a “Shareholder” and collectively the “Shareholders”). 
  
 RECITALS 
  
 A. The Company desires to enter into a series of transactions (the “Recapitalization”) pursuant to which it
will change the capital structure of the Company and in connection therewith has entered into a Recapitalization Agreement, dated July 14, 2004, with the security holders named therein (the “Recapitalization Agreement”). 

 
 B. In the Recapitalization, subject to the terms and conditions of the
Recapitalization Agreement, the Shareholders will exchange their shares of the Company’s Series C Preferred Stock, $0.01 par value, and Series C-1 Preferred, $0.01 par value, for an aggregate of 8,333,333 shares of the Company’s Class A
Common Stock, $0.01 par value (the “Shares”), and $5,609,989.40 in cash. 
  
 C. In conjunction with the Recapitalization, the Shareholders desire to sell and convey to each Purchaser the number of Shares set forth opposite such Purchaser’s name on Schedule 1 hereto, and each
Purchaser desires to purchase and acquire the Shares from the Shareholders pursuant to the terms and conditions hereof. 
  
 D. The execution and delivery of this Agreement is a condition precedent to the Recapitalization as provided in the Recapitalization Agreement.

  
 NOW, THEREFORE, in consideration of these premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 
  
 1. Sale and Purchase of the Shares. 
  
 (a) Sale and Purchase of the Shares. In reliance upon the representations, warranties, covenants and agreements contained herein and upon the terms
and subject to the conditions hereinafter set forth, at the Closing (as defined in Section 2(a)), (i) Windward LP shall sell, assign, transfer and convey to NY Life the number of Shares indicated on Schedule 1 hereto (the “NY
Life/Windward LP Shares”) and NY Life shall purchase from Windward LP such NY Life/Windward LP Shares; (ii) Windward LLC shall sell, assign, transfer and convey to NY Life the number of Shares indicated on Schedule 1 hereto (the “NY
Life/Windward LLC Shares”) and NY Life shall purchase from Windward LLC such NY Life/Windward LLC Shares; (iii) Windward LP shall sell, assign, transfer and convey to PPM the number of Shares indicated on Schedule I hereto (the
“PPM/Windward LP Shares”) and PPM shall purchase from Windward 

  

 
LP such PPM/Windward LP Shares and (iv) Windward LLC shall sell, assign, transfer and convey to PPM the number of Shares indicated on Schedule 1 hereto (the
“PPM/Windward LLC Shares”) and PPM shall purchase from Windward LLC such PPM/Windward LLC Shares. 
  
 (b) Amount and Form of Consideration. The consideration to be paid at the Closing by NY Life to Windward LP in consideration of the purchase of the
NY Life/Windward LP Shares shall be an aggregate amount in cash equal to $28,443,600 (the “NY Life/Windward LP Purchase Price”). The consideration to be paid at the Closing by NY Life to Windward LLC in consideration of the purchase
of the NY Life/Windward LLC Shares shall be an aggregate amount in cash equal to $1,556,400 (the “NY Life/Windward LLC Purchase Price”). The consideration to be paid at the Closing by PPM to Windward LP in consideration of the
purchase of the PPM/Windward LP Shares shall be an aggregate amount in cash equal to $18,962,400 (the “PPM/Windward LP Purchase Price”). The consideration to be paid at the Closing by PPM to Windward LLC in consideration of the
purchase of the PPM/Windward LLC Shares shall be an aggregate amount in cash equal to $1,037,598 (the “PPM/Windward LLC Purchase Price”). 
  
 (c) Capitalization. The Company represents and warrants to each Purchaser and Shareholder that the capitalization of the Company immediately prior
to the Closing is as set forth on Exhibit A hereto. The Company represents and warrants to each Purchaser and Shareholder that the capitalization of the Company immediately after the Closing and the consummation of the Recapitalization shall
be as set forth on Exhibit B hereto. 
  
 2. The Closing. 

 
 (a) Closing Date. The closing of the purchase and sale of the
Shares (the “Closing”) shall be held at the offices of Vinson & Elkins L.L.P., 3700 Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas 75201 simultaneously with, but shall be deemed to occur immediately after, the closing of
the Recapitalization as provided in the Recapitalization Agreement. The date of the Closing is referred to herein as the “Closing Date.” 
  
 (b) Method and Timing of Payment. At the Closing, (i) NY Life will pay to Windward LP the NY Life/Windward LP Purchase Price by wire transfer of
immediately available funds to an account designated in writing by Windward LP, (ii) NY Life will pay to Windward LLC the NY Life/Windward LLC Purchase Price by wire transfer of immediately available funds to an account designated in writing by
Windward LLC, (iii) PPM will pay Windward LP the PPM/Windward LP Purchase Price by wire transfer of immediately available funds to an account designated in writing by Windward LP and (iv) PPM will pay Windward LLC the PPM/Windward LLC Purchase Price
by wire transfer of immediately available funds to an account designated in writing by Windward LLC. 
  
 (c) Deliveries by the Company, the Shareholders and the Purchasers. 
  
 (i) At the Closing, the Company shall deliver to each Purchaser an opinion from counsel to the Company, in
form and substance reasonably satisfactory to the Purchasers, dated the Closing Date, substantially in the form attached hereto as Exhibit C. 
  
 (ii) At the Closing, Windward LP shall deliver to NY Life the certificates representing the NY Life/Windward LP Shares being transferred
to NY Life by 

  

 2 

 
Windward LP, free and clear of any lien, pledge or security interest, except for those imposed by the Credit Agreement, dated as of August 25, 2003, by and
among the Company and the several banks and other lender parties thereto (the “Credit Agreement”), together with separate stock powers duly endorsed in blank, and any other documents that in the reasonable judgment of NY Life are
necessary to NY Life’s good and valid title to the NY Life/Windward LP Shares. 
  
 (iii) At the Closing, Windward LP shall deliver to PPM the certificates representing the PPM/Windward LP Shares being transferred to PPM
by Windward LP, free and clear of any lien, pledge or security interest, except for those imposed by the Credit Agreement, together with separate stock powers duly endorsed in blank, and any other documents that in the reasonable judgment of PPM are
necessary to PPM’s good and valid title to the PPM/Windward LP Shares. 
  
 (iv) At the Closing, Windward LLC shall deliver to NY Life the certificates representing the NY Life/Windward LLC Shares being transferred to NY Life by Windward LLC, free and clear of any lien, pledge or security
interest, except for those imposed by the Credit Agreement, together with separate stock powers duly endorsed in blank, and any other documents that in the reasonable judgment of NY Life are necessary to NY Life’s good and valid title to the NY
Life/Windward LLC Shares. 
  
 (v) At the Closing
Windward LLC shall deliver to PPM the certificates representing the PPM/Windward LLC Shares being transferred to PPM by Windward LLC, free and clear of any lien, pledge or security interest, except for those imposed by the Credit Agreement, together
with separate stock powers duly endorsed in blank and any other documents that in the reasonable judgment of PPM are necessary to PPM’s good and valid title to the PPM/Windward LLC Shares. 
  
 (vi) At the Closing, each Purchaser shall deliver to Fleet
National Bank, as Administrative Agent for the lenders from time to time a party to the Credit Agreement, an executed counterpart of the Amended and Restated Pledge Agreement, dated as of the Closing (the “Pledge Agreement,”), and
the Amended and Restated Affiliate Subordination Agreement, dated as of the Closing (the “Subordination Agreement,” and together with this Agreement and the Pledge Agreement, the “Transaction Documents”), together
with the stock certificates representing the Shares issued to such Purchaser and stock powers duly endorsed in blank. 
  
 (vii) At the Closing, NY Life shall deliver: 
  

	 	A.	the NY Life/Windward LP Purchase Price to Windward LP; and 

  

	 	B.	the NY Life/Windward LLC Purchase Price to Windward LLC. 

  
 (viii) At the Closing, PPM shall deliver: 
  

	 	A.	the PPM/Windward LP Purchase Price to Windward LP; and 

  

	 	B.	the PPM/Windward LLC Purchase Price to Windward LLC. 

  

 3 

 3. Purchaser’s Representations and Warranties. 
  
 Each Purchaser hereby represents and warrants, as to itself only and not with respect to any other Purchaser, to the Company
and each Shareholder as follows: 
  
 (a) Organization.
Purchaser has been duly organized and is validly existing as a limited partnership in good standing under the laws of the jurisdiction in which it is organized. 
  

(b) Authorization; Enforcement. Purchaser has all requisite power and authority to authorize, execute, deliver and perform each Transaction
Document. The execution, delivery and performance by Purchaser of each Transaction Document, and the consummation by Purchaser of the transactions contemplated thereby, has been duly authorized by all necessary limited partnership action on the part
of Purchaser, and no further consent or authorization thereafter is presently required by Purchaser. Each Transaction Document has been duly and validly executed and delivered by Purchaser and, assuming the due authorization, execution and delivery
by the other parties thereto, constitutes the valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its respective terms, except to the extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors’ rights and by equitable principles regardless of whether enforcement is sought in equity or at law. 
  
 (c) No Conflicts. The execution and delivery of each Transaction
Document by Purchaser do not, and the performance by Purchaser of its obligations thereunder will not, constitute a violation of, conflict with or result in a default in any material respect under any contract to which Purchaser is a party or by
which Purchaser is bound or any judgment, decree or order applicable to Purchaser. 
  
 (d) No Violations. Neither the execution and delivery of any Transaction Document, nor the performance by Purchaser of its obligations thereunder, will violate in any material respect any provision of law
applicable to Purchaser. 
  
 (e) Consents; Approvals.
Neither the execution, delivery or performance by Purchaser of any Transaction Document, nor the consummation by it of the obligations and transactions contemplated thereby, requires any consent or approval of, authorization by, exemption from,
filing with or notice to any national, federal, state, municipal, local, territorial, foreign or other government or any department, commission, board, bureau, agency, exchange, regulatory authority or instrumentality thereof, or any court,
judicial, administrative or arbitral body or public or private tribunal (each, a “Governmental Entity”) or any other individual, corporation, partnership, joint venture, trust, unincorporated organization, limited liability company
or partnership, or a government or any agency or political subdivision thereof (each, a “Person”). 
  
 (f) Acquisition for Own Account. Purchaser is acquiring the Shares for its own account, for investment and not with a view toward distribution in a
manner which would violate the Securities Act of 1933 (the “Securities Act”); provided, however, that by making the representations herein, Purchaser does not agree to hold any of the Shares for any minimum or other specific
term and reserves the right to dispose of such shares at any time, subject to the 

  

 4 

 
transfer restrictions contained in the Fifth Amended and Restated Shareholders Agreement, dated as of the Closing Date (the “Shareholders
Agreement”), by and among the Company and the Shareholders (as defined therein) and in accordance with or pursuant to an effective registration statement under the Securities Act or in a transaction exempt from or not subject to the
registration requirements of the Securities Act. 
  
 (g) Access
to Information. Purchaser acknowledges that it has reviewed and discussed the Company’s business and affairs with such officers of the Company and others as it has deemed appropriate or desirable in connection with the transactions
contemplated by this Agreement. Purchaser further acknowledges that it has requested, received and reviewed such information, undertaken such investigation and made such further inquiries of officers of the Company and others as it has deemed
appropriate or desirable in connection with such transactions. 
  
 (h) Brokers. There is no broker, investment banker, financial advisor, finder or other Person which has been retained by or is authorized to act on behalf of the Purchaser who might be entitled to any fee or commission for which the
Company, the Purchasers or the Shareholders will be liable in connection with the execution, delivery or performance by the Purchaser of this Agreement. 
  
 (i) Legends. Purchaser hereby acknowledges that each certificate representing the Shares and any other securities issued in respect of such Shares
upon any stock split, stock dividend, recapitalization, merger or similar event (unless no longer required in the written opinion of counsel, which opinion of counsel shall be reasonably satisfactory to the Company, it being agreed that Vinson &
Elkins L.L.P., Kirkland & Ellis LLP, Jenkens & Gilchrist, P.C., Arnold & Porter LLP or Testa, Hurwitz & Thibeault, LLP shall be satisfactory) shall bear a legend substantially in the following form: 
  
 THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM. 

 
 (j) Benefit Plan Investor Status. Either Purchaser is not a
“benefit plan investor” (as such term is defined in 29 C.F.R. 2510.3-101(f)(2)) or, if Purchaser is a benefit plan investor, the plan participants are not permitted to decide whether or how much to invest in particular investment
alternatives, and if Purchaser is a collective investment vehicle, the plans participating therein do not direct the specific investments made by Purchaser. 
  
 4. Shareholder’s Representations and Warranties. 
  
 Each Shareholder hereby represents and warrants, as to itself only and not with respect to any other Shareholder, to the Company and each Purchaser as
follows: 
  
 (a) Organization. Shareholder has been duly
organized and is validly existing as a limited partnership or limited liability company in good standing under the laws of the jurisdiction in which it is chartered or organized. 
  

 5 

 (b) Authorization; Enforcement. Shareholder has all requisite power and authority to authorize,
execute, deliver and perform this Agreement. The execution, delivery and performance by Shareholder of this Agreement, and the consummation by Shareholder of the transactions contemplated hereby, have been duly authorized by all necessary limited
partnership or limited liability company action on the part of Shareholder, and no further consent or authorization thereafter is presently required by Shareholder. This Agreement has been duly and validly executed and delivered by Shareholder and,
assuming the due authorization, execution and delivery by the other parties hereto, constitutes the valid and binding obligation of Shareholder, enforceable against Shareholder in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors’ rights and by equitable principles regardless of whether enforcement is sought in equity
or in law. 
  
 (c) No Conflicts. The execution and delivery
of this Agreement by Shareholder do not, and the performance by Shareholder of its obligations hereunder will not, constitute a violation of, conflict with or result in a default in any material respect under any contract to which Shareholder is a
party or by which Shareholder is bound or any judgment, decree or order applicable to Shareholder. 
  
 (d) No Violations. Neither the execution and delivery of this Agreement, nor the performance by Shareholder of its obligations hereunder, will
violate in any material respect any provision of law applicable to Shareholder. 
  
 (e) Consents; Approvals. Neither the execution, delivery or performance by Shareholder of this Agreement, nor the consummation by it of the obligations and transactions contemplated hereby, requires any consent
or approval of, authorization by, exemption from, filing with or notice to any Governmental Entity or any other Person. 
  
 (f) Brokers. There is no broker, investment banker, financial advisor, finder or other Person which has been retained by or is authorized to act on
behalf of the Shareholder who might be entitled to any fee or commission for which the Company, the Purchasers or the Shareholders will be liable in connection with the execution, delivery or performance by the Shareholder of this Agreement.

  
 (g) Title to Securities. Upon receipt by the
Shareholder of the Company’s Class A Common Stock pursuant to the terms of the Recapitalization Agreement, the Shareholder will be the sole record and beneficial owner of, and will have good and valid title to, the securities listed below its
name on Schedule 1 hereto, free and clear of any lien, pledge, security interest or any restriction on transfer, except for restrictions imposed by applicable securities laws, the Credit Agreement, the Fourth Amended and Restated Shareholders
Agreement, dated as of January 18, 2002, by and among the Company and the Company’s security holders identified therein and the Third Amended and Restated Co Sale Agreement, dated as of January 18, 2002, by and among the Company and the
shareholders party thereto. The Shareholder is not a party to any option, 

  

 6 

 
warrant, purchase right or other contract or commitment with respect to, in each case, the Shares, that (x) will not be terminated at the Closing and (y)
requires the Shareholder to sell, transfer or otherwise dispose of any capital stock of the Company. 
  
 5. Company Representations and Warranties. 
  
 The Company hereby represents and warrants to each Purchaser and each Shareholder as follows: 
  
 (a) Organization. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas and has
all requisite corporate power and authority for the ownership and operation of its properties and for the carrying on of its business as now conducted and as now proposed to be conducted. The Company is duly licensed or qualified and in good
standing as a foreign corporation authorized to do business in all jurisdictions wherein the character of the property owned or leased, or the nature of the activities conducted, by it makes such licensing or qualification necessary, except where
the failure to be so licensed or qualified, either individually or in the aggregate, would not have (or be reasonably likely to have) a material adverse effect on the business, assets, liabilities, condition (financial or otherwise) or results of
operations of the Company or the Company’s ability to perform its obligations under this Agreement. The Company does not own, directly or indirectly, any capital stock or other equity or ownership or proprietary interest in any Person.

  
 (b) Authorization; Enforcement. The Company has all
requisite power and authority to authorize, execute, deliver and perform each Transaction Document. The execution, delivery and performance by the Company of each Transaction Document, and the consummation by the Company of the transactions
contemplated thereby, have been duly authorized by all necessary corporate action on the part of the Company and no further consent or authorization therefore is presently required by the Company. The Transaction Documents have been duly and validly
executed and delivered by the Company and, assuming the due authorization, execution and delivery by the other parties hereto, constitute the valid and binding obligations of the Company, enforceable against the Company in accordance with their
respective terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors’ rights and by equitable principles
regardless of whether enforcement is sought in equity or at law. 
  
 (c) Duly Authorized, Fully Paid and Non-assessable; No Violation of Preemptive Rights. The Shares are duly authorized, validly issued, fully paid and non-assessable, and were not issued in violation of any preemptive rights or any
federal or state securities laws. 
  
 (d) No Conflicts. The
execution and delivery of each Transaction Document by the Company do not, and the performance by the Company of its obligations thereunder will not, constitute a violation of, conflict with or result in a default under (i) the articles of
incorporation of the Company as in effect on the date hereof or as amended and restated at the Closing, substantially in the form attached hereto as Exhibit D (the “Amended and Restated Articles of Incorporation”), or the
bylaws of the Company or (ii) in any material respect, any contract to which the Company is a party or by which the Company is bound or any judgment, decree or order applicable to the Company. 
  

 7 

 (e) No Violations. Neither the execution and delivery of the Transaction Documents nor the
performance by the Company of its obligations thereunder will violate in any material respect any provision of law applicable to the Company. 
  
 (f) Consents; Approvals. Neither the execution, delivery or performance by the Company of any Transaction Document nor the consummation by it of
the obligations and transactions contemplated thereby, requires any consent or approval of, authorization by, exemption from, filing with or notice to any Governmental Entity or any other Person other than (i) the filing of the Amended and Restated
Articles of Incorporation with the Secretary of State of the State of Texas and (ii) the consent of the lenders required under the Credit Agreement. 
  
 (g) Brokers. There is no broker, investment banker, financial advisor, finder or other Person which has been retained by or is authorized to act on
behalf of the Company who might be entitled to any fee or commission for which the Company, the Purchasers or the Shareholders will be liable in connection with the execution, delivery or performance by the Company of this Agreement. 
  
 (h) Financial Statements. The Company has delivered to the Purchasers
true, complete and correct copies of (i) the audited balance sheet of the Company as of June 30, 2003, the related audited statements of income, cash flows and stockholders’ equity of the Company for the fiscal year ended June 30, 2003 and the
related notes thereto, accompanied by a true and correct copy of the report thereon of Ernst & Young LLP, independent public accountants, and (ii) the unaudited balance sheet of the Company as of March 31, 2004 (the “Balance
Sheet”), together with the related unaudited income statement and cash flow statement of the Company for the nine months ended March 31, 2004 (such audited and unaudited financial statements collectively being referred to herein as the
“Financial Statements”), prepared on a basis, and using principles, consistent with the preparation of the audited Financial Statements. The Financial Statements, together with the notes thereto, have been prepared in accordance
with Generally Accepted Accounting Principles (“GAAP”) (except that the unaudited Financial Statements do not contain all footnotes required under GAAP and are subject to normal year-end adjustments, none of which are, individually
or in the aggregate, material) applied on a consistent basis throughout the periods covered thereby (except to the extent disclosed therein or required by changes in GAAP) and fairly present in all material respects the financial condition and the
results of operations of the Company as of the respective dates thereof and for the respective periods covered thereby. 
  
 (i) Title to Properties and Assets. The Company has the full corporate power to own or lease its assets and to carry on its businesses as presently
conducted. The Company has good and valid title to its properties, leaseholds and assets, including the properties, leaseholds and assets reflected in the Financial Statements, except as would not have a Material Adverse Effect. For purposes of this
Agreement, “Material Adverse Effect” shall mean a material adverse effect upon the financial condition, operating results, assets, customer or supplier relations, employee relations or business prospects of the Company taken as a
whole. 
  
 (j) Litigation. Except as set forth on
Schedule 5(j) hereto, there are no actions, suits, claims, investigations or legal, administrative or arbitration proceedings pending or, to the Company’s knowledge, threatened against or affecting the Company or any of its assets,

  

 8 

 
properties, business, operations or prospects which if the subject of an unfavorable decision, ruling or finding would have a Material Adverse Effect, nor
any which question the validity of this Agreement or any action taken or to be taken in connection herewith. 
  
 (k) Taxes. The Company has filed all necessary federal, state and municipal property, income and franchise tax returns and has paid all taxes shown
as due thereon or otherwise owed by them to any taxing authority except those contested in good faith and for which appropriate amounts have been reserved in accordance with GAAP except as would not have a Material Adverse Effect; and there is no
tax deficiency which has been asserted against the Company which would have a Material Adverse Effect. 
  
 (l) Compliance with ERISA. The Company and each ERISA Affiliate (as hereinafter defined) have operated and administered each Plan (as hereinafter
defined) in material compliance with all applicable laws. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA (as hereinafter defined) or the penalty or excise tax provisions of the Internal
Revenue Code of 1986, as amended (the “Code”) relating to employee benefits plans (as defined in Section 3 of ERISA), and no event, transaction or condition has occurred or exists that would reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such
penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than such liabilities or liens as would not, individually or in the aggregate, have a Material Adverse Effect. “ERISA” shall mean the
Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. “ERISA Affiliate” shall mean any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company under Section 414 of the Code. “Plan” shall mean an “employee benefit plan” (as defined in Section 3(3) of ERISA) that is or, within the
preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any
ERISA Affiliate may have any liability. 
  
 (m) Insurance.
All of the properties, assets and operations of the Company of a character usually insured by Persons of established reputation engaged in the same or similar businesses similarly situated are adequately insured, by financially sound and reputable
insurers, against loss, damage or liability except where the failure to be so insured would not have a Material Adverse Effect. 
  
 (n) Foreign Asset Control Regulations. The Company is not, nor will it become, a Person described or designated in the Specially Designated
Nationals and Blocked Persons List of the Office of Foreign Assets Control or Executive Order No. 13244 of September 23, 2001, Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism, 66 Fed.
Reg. 49, 079 (2001), as amended, and, to its knowledge, the Company does not engage nor will it engage in any dealings or transactions, or become otherwise associated, with any such Persons. 
  

 9 

 (o) Status Under Certain Statutes. The Company is not subject to regulation under the Investment
Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the Federal Power Act, as amended. 
  
 (p) No Other Conversion, Preemptive Rights. After the Closing Date, except for (i) the warrants issued to Heller
Financial, Inc., a Delaware corporation (“Heller”), pursuant to the Warrant Agreement, dated as of November 10, 1994, by and between the Company and Heller, as amended, (ii) the warrants issued to The Northwestern Mutual Life
Insurance Company (“NML”) pursuant to the Warrant Agreement, dated as of January 18, 2002, by and between the Company and NML, (iii) the new Series A Preferred Stock, $0.01 par value, to be issued in the Recapitalization and (iv)
options to purchase 92,000 shares of Class A Common Stock, $0.01 par value (the “Common Stock”), issued pursuant to the Company’s 1999 Stock Option Plan, there will be no securities outstanding that are convertible or
exchangeable for the Company’s Common Stock, and there will be no other options, warrants, conversion privileges or other rights (including preemptive rights and rights of first refusal or similar rights other than as described in the
Shareholders Agreement) outstanding to purchase any of the authorized but unissued stock of the Company. 
  
 (q) Disclosure. The registration statements, forms and other documents required to be filed by the Company with the Securities and Exchange
Commission (collectively, including all exhibits thereto, the “Company SEC Reports”) did not at the time they were filed (or if amended or superceded by a filing prior to the date of this Agreement, then as and on the date so
amended or superceded) contain any untrue statement of a material fact or omit a material fact necessary, in light of the circumstances under which they were made, not misleading. 
  
 (r) Undisclosed Liabilities. 
  
 (i) Since the date of the Balance Sheet, the business of the Company has been conducted in the ordinary
course in all material respects, there has been no Material Adverse Effect, and no events have occurred which are reasonably likely to result in a Material Adverse Effect. 
  
 (ii) The Company does not have any material obligation or liability which would be required to be accrued on
the Company’s balance sheet in accordance with GAAP, except (A) obligations under contracts and commitments entered into in the ordinary course of business which are not required to be disclosed thereon, (B) liabilities reflected in the
financial statements of the Company contained in the Company SEC Reports (or the notes thereto), (C) liabilities which have arisen since the date of the Balance Sheet in the ordinary course of business and (D) liabilities which would not have a
Material Adverse Effect. 
  
 6. Certain Conditions. 
  
 (a) The obligation of each Shareholder to consummate the sale of the Shares
to each Purchaser shall be subject to the satisfaction or waiver by such Shareholder of the following conditions: 
  
 (i) the representations and warranties made by each Purchaser in Section 3 hereof shall be true and correct in all material
respects at the Closing Date, and each Purchaser and the Company shall have performed in all material respects all obligations and conditions herein required to have been performed or complied with by it on or prior to the Closing; 
  

 10 

 (ii) each Purchaser shall have made the Closing deliveries as provided in Sections
2(c)(vi)-(viii); 
  
 (iii) the Company shall
have filed the Amended and Restated Articles of Incorporation with the Secretary of State of the State of Texas, which Amended and Restated Articles of Incorporation shall be in full force and effect on the Closing Date; 
  
 (iv) no action, suit, proceeding or investigation by any
Governmental Entity shall be pending or, so far as is known to the Company, the Purchasers or the Shareholders, be threatened, and no Governmental Entity shall have enacted an order or injunction which is in effect, which, in the case of such
action, suit, proceeding, investigation, order or injunction, challenges the transactions contemplated by the Transaction Documents or seeks to restrain or prevent the consummation of the transactions contemplated thereunder; 
  
 (v) the Company shall have obtained any and all consents
(including the consent of the lenders required pursuant to the Credit Agreement), permits and waivers necessary or appropriate for consummation of the transactions contemplated by this Agreement and the Recapitalization Documents (as defined in the
Recapitalization Agreement) (the “Required Consents”); 
  
 (vi) the Recapitalization Documents shall have been executed and delivered by each of the parties thereto; and 
  
 (vii) the closing of the transactions contemplated in the Recapitalization Agreement shall have occurred pursuant to the terms thereof.

  
 (b) The obligation of each Purchaser to consummate the
purchase of the Shares shall be subject to the satisfaction or waiver by such Purchaser of the following conditions: 
  
 (i) the representations and warranties made by the Company in Section 5 hereof shall be true and correct in all material respects
at the Closing Date, and the Company shall have performed in all material respects all obligations and conditions herein required to have been performed or complied with by it on or prior to the Closing; 
  
 (ii) the representations and warranties made by each
Shareholder in Section 4 hereof shall be true and correct in all material respects at the Closing Date, and each Shareholder shall have performed in all material respects all obligations and conditions herein required to have been performed
or complied with by it on or prior to the Closing; 
  
 (iii) the Company shall have made the Closing deliveries as provided in Section 2(c)(i); 
  

 11 

 (iv) each Shareholder shall have made the Closing deliveries as provided in Sections
2(c)(ii)-(v); 
  
 (v) the Company shall have
filed the Amended and Restated Articles of Incorporation with the Secretary of State of the State of Texas, which Amended and Restated Articles of Incorporation shall be in full force and effect on the Closing Date; 
  
 (vi) no action, suit, proceeding or investigation by any
Governmental Entity shall be pending or, so far as is known to the Company, the Purchasers or the Shareholders, be threatened, and no Governmental Entity shall have enacted an order or injunction which is in effect, which, in the case of such
action, suit, proceeding, investigation, order or injunction, challenges the transactions contemplated by the Transaction Documents or seeks to restrain or prevent the consummation of the transactions contemplated thereunder; 
  
 (vii) the Company shall have obtained any and all Required
Consents; 
  
 (viii) the Recapitalization
Documents shall have been executed and delivered by each of the parties thereto; and 
  
 (ix) the closing of the transactions contemplated in the Recapitalization Agreement shall have occurred pursuant to the terms thereof.

  
 7. Specific Performance. 
  
 The parties hereto acknowledge and agree that in the event of any breach of
this Agreement, the other parties hereto would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that, in addition to any other remedy to which the parties hereto may be entitled at law
or in equity, each of the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and/or to compel specific performance of this Agreement in any action. 
  
 8. Expenses. 
  
 The Company will pay all fees and expenses of the parties hereto incurred in connection with the negotiation, preparation
and execution of the Transaction Documents and in connection with the consummation of the transactions contemplated thereby, including, but not limited to legal fees. 
  
 9. Miscellaneous. 
  
 (a) Further Assurances. The Company, each Purchaser and each Shareholder shall take or cause to be taken all such actions as may be necessary or
reasonably desirable in order expeditiously to consummate the transactions contemplated by the Transaction Documents, including, without limitation, executing, acknowledging and delivering consents, assignments, waivers and other documents or
instruments; voting in favor of such transaction; furnishing information and copies of documents; filing applications, reports, returns, filings and other 

  

 12 

 
documents or instruments with Governmental Entities; and otherwise cooperating with the Company. 
  
 (b) Entire Agreement. This Agreement, including all exhibits and
schedules hereto, and the Recapitalization Documents constitute the entire agreement and supersede all prior agreements and understandings, whether oral or written, between the parties hereto with respect to the subject matter hereof and thereof.

  
 (c) Representations and Warranties. None of the parties
has made nor is making any representation, warranty, covenant or agreement, express or implied, other than the explicit representations, warranties, covenants and agreements set forth herein. No promise or inducement for this Agreement has been made
to any party hereto except as set forth herein. This Agreement is being executed by each party freely and voluntarily, and without reliance upon any statement or representation by any other party, any of such other party’s affiliates or any of
their attorneys or agents except as set forth herein. Each party acknowledges and agrees that it is legally competent to enter into this Agreement and accepts full responsibility therefor and has been represented by counsel in the course of the
negotiation of this Agreement. 
  
 (d) Survival of
Representations and Warranties. All agreements, representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Closing, regardless of any investigation by the Purchasers or on behalf of the
Purchasers. 
  
 (e) Successors and Assigns; Assignment.
This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors and permitted assigns. This Agreement may not be assigned by any party hereto without the prior written consent of the other
parties hereto. 
  
 (f) Section Headings. Section headings
contained in this Agreement are for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. 
  
 (g) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall, when executed, be deemed to be an original and
all of which shall be deemed to be one and the same instrument. 
  
 (h) Governing Law. This agreement shall be governed by and construed and enforced in accordance with the laws of the state of Texas, without reference to the conflict of laws principles thereof. 
  

 13 

 (i) Notices. All notices, requests, demands and other communications provided for hereunder shall
be in writing and mailed (by first class registered or certified mail, postage prepaid), telegraphed, sent by express overnight courier service or electronic facsimile transmission with a copy by mail, or delivered to the applicable party at the
addresses indicated below: 
  
 If to the
Company: 
  
 Monitronics International, Inc.

 12801 Stemmons Freeway 
 Suite 821 
 Dallas, Texas 75234 
 Attention: James R. Hull 
 Facsimile No.: (972) 919-1985 
  
 (with copies to): 
  
 Vinson & Elkins L.L.P. 
 2001 Ross Avenue 
 Suite 3700 
 Dallas, Texas 75201 
 Attention: Christine A. Hathaway 
 Facsimile No.: (214) 999-7714 
  
 If to a Purchaser: 
  
 To the address of such Purchaser 
 set forth on the signature page hereof 
  
 If to a Shareholder: 
  
 To the address of such Shareholder 
 set forth on the signature page hereof 
  
 or, as to each of the foregoing, at such other address as shall be designated by such Person
in a written notice to the other party complying as to delivery with the terms of this Section. All such notices or requests, demands and other communications shall, when mailed, telegraphed or sent, respectively, be effective (i) two days after
being deposited in the mail or (ii) one day after being delivered to the telegraph company, deposited with the express overnight courier service or sent by electronic facsimile transmission (with receipt confirmed), respectively, addressed as
aforesaid. 
  
 (j) Waiver. Any waiver by any party of a
breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to
any term of this Agreement or one or more sections shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. 
  
 (k) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, 

  

 14 

 
the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated. 
  
 [The remainder of this page is
intentionally left blank.] 
  

 15 

 IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the date first above written.

  

			
	COMPANY:
	
	MONITRONICS INTERNATIONAL, INC.
		
	By:	 	 /s/ James R. Hull

	 Name:
	 	 James R. Hull

	 Title:
	 	 President and CEO

  

 S-1 

			
	
	PURCHASER:
	
	NEW YORK LIFE CAPITAL PARTNERS II, L.P.
		
	 By:
	 	 NYLCAP Manager LLC, its Investment Manager

		
	 By:
	 	 /s/ John E. Schumacher

	 Name:
	 	 John E. Schumacher

	 Title:
	 	 President and CEO

	
	Address:
	
	51 Madison Avenue
	Suite 3009 (30th Floor)
	New York, New York 10010
	Fax: 212-576-5591
	Attn: John Schumacher
	
	with a copy to:
	
	New York Life Investment Management LLC
	51 Madison Avenue, Room 1104
	New York, New York 10010
	Fax: 212-576-8340
	Attn: Office of General Counsel

  

 S-2 

			
	
	PURCHASER:
	
	PPM AMERICA PRIVATE EQUITY FUND LP
		
	 By:
	 	 PPM America Capital Partners, LLC,
 its general partner

		
	 By:
	 	 /s/ Bruce Saewitz

	 Name:
	 	 Bruce Saewitz

	 Title:
	 	 Senior Partner

		
	By:	 	 /s/ Austin Krumpfes

	 Name:
	 	 Austin Krumpfes

	 Title:
	 	 Associate

	
	Address:
	
	PPM America Private Equity Fund LP
	c/o PPM America Capital Partners, LLC
	225 W. Wacker Drive
	Suite 1200
	Chicago, Illinois 60606
	Fax: 312-634-0044
	Attn: Bruce Saewitz

  

 S-3 

			
	SHAREHOLDER:
	
	WINDWARD CAPITAL PARTNERS II, L.P.
		
	By:	 	 Windward Capital GP II, LLC, its general partner

		
	 By:
	 	 /s/ Peter Scott Macdonald

	 Name:
	 	 Peter Scott Macdonald

	 Title:
	 	 Managing Member

	
	Address:
	
	Windward Capital Partners II, L.P.
	712 Fifth Avenue
	21st Floor
	New York, New York 10019
	Fax: 212-382-6534
	Attn: Peter Macdonald

  

 S-4 

			
	SHAREHOLDER:
	
	WINDWARD CAPITAL LP II, LLC
		
	 By:
	 	 /s/ Peter Scott Macdonald

	 Name:
	 	 Peter Scott Macdonald

	 Title:
	 	 Managing Member

	
	Address:
	
	Windward Capital Partners II, L.P.
	712 Fifth Avenue
	21st Floor
	New York, New York 10019
	Fax: 212-382-6534
	Attn: Peter Macdonald

  

 S-5 

 SCHEDULE 1 
  

					
	 Purchaser

	  	Number of Shares
Purchased from
Windward Capital
Partners II, L.P.

	  	Number of Shares
Purchased from
Windward Capital
LP II, LLC

	 New York Life Capital Partners II, L.P.
	  	4,740,600	  	259,400
	 PPM America Private Equity Fund LP
	  	3,160,400	  	172,933

  

 Schedule 1-1 

 SCHEDULE 5(j) 
  
 At various times in the past the Company has received the following subpoenas or inquiries for information from the listed state attorney
general offices: 
  

	 	1.	Texas In October 2003, the Company received an informal request for a meeting pursuant to the investigatory powers of the attorney general under the Deceptive Trade Practices
Act regarding enforcement of renewal provisions in alarm monitoring agreements and disclosures relating to same. This request for a meeting was abandoned on December 15, 2003. The Company was informed that a subpoena will be issued if the attorney
general is interested in further discussions. Counsel for the Company anticipates no further contact on this matter. 

  

	 	2.	West Virginia In the summer of 2004, a subpoena was issued and served on the Company to which the Company responded and objected in part. In lieu of contesting the validity
of the issuance and scope of the subpoena, the attorney general and the Company agreed that the Company would produce certain limited documentation related to sales materials, relationships with dealers, and contracts used by the Company and others.
Counsel for the Company has informed the Company that he cannot assess the likelihood of further contact on this matter. 

  

	 	3.	Kansas In December 2003, a subpoena for certain documents, primarily related to renewal clause issues, was issued and served on the Company. The Company responded and
objected in part to the subpoena. There has been no contact since the Company’s response/objections were provided, and Counsel for the Company anticipates no further contact on this matter. 

  

	 	4.	Washington In the spring and summer of 2004, the Company received an informal inquiry relating to renewal clause issues. In response to such inquiry, the Company advised the
attorney general that it was committed to non-enforcement of renewal clauses per a new corporate policy. Counsel for the Company has informed the Company that he cannot assess the likelihood of further contact on this matter.

  

	 	5.	Wisconsin In the early fall of 2003, the Company received an informal inquiry from the attorney general. In response to such inquiry, the Company committed itself to speed up
response time to consumer complaint inquiries from the attorney general’s office, to generally augment/improve procedures for resolving customer complaints, and to generally augment/improve procedures to notify customers of the Company’s
purchase/transfer of such customer’s monitoring account. Counsel for the Company anticipates no further contact on this matter. 

  

 Schedule 5(j) - 1 

 EXHIBIT A 
  
 Capitalization Prior to the Closing 
  

										
	 Shareholder

	  	Class of Shares

	  	# of Shares

	  	 # of Fully
Diluted
Common
 Shares on
 an “As
Converted”
 Basis

	  	 Fully Diluted
 Ownership
 Percentage

	 
	 Austin Ventures III-A, L.P.
	  	Series A Preferred	  	2,168,400	  	2,713,213	  	17.181	%
	 	  	Class A Common	  	33,344	  	33,344	  	0.211	%
	 Austin Ventures III-B, L.P.
	  	Series A Preferred	  	1,831,600	  	2,291,792	  	14.513	%
	 	  	Class A Common	  	28,167	  	28,167	  	0.178	%
	 Austin Ventures V, L.P.
	  	Series B Preferred	  	3,809,525	  	—  	  	—  	 
	 Austin Ventures V Affiliates Fund, L.P.
	  	Series B Preferred	  	190,476	  	—  	  	—  	 
					
	 Capital Resource Lenders II, L.P.
	  	Series B Preferred	  	1,000,000	  	—  	  	—  	 
	 	  	Series C Preferred	  	76,182	  	126,332	  	0.800	%
	 	  	Series C-1 Preferred	  	13,590	  	—  	  	—  	 
	 	  	Series D-1 Preferred	  	5,000	  	238,328	  	1.509	%
	 	  	Class A Common	  	688,625	  	688,625	  	4.361	%
					
	 Windward Capital Partners II, L.P.
	  	Series C Preferred	  	1,264,031	  	2,096,116	  	13.274	%
	 	  	Series C-1 Preferred	  	225,492	  	—  	  	—  	 
	 Windward Capital LP II, LLC
	  	Series C Preferred	  	69,162	  	114,690	  	0.726	%
	 	  	Series C-1 Preferred	  	12,338	  	—  	  	—  	 
					
	 ABRY Partners IV, L.P.
	  	Series D-1 Preferred	  	64,959.90	  	3,096,356	  	19.608	%
	 ABRY Investment Partnership, L.P.
	  	Series D-1 Preferred	  	40.10	  	1,912	  	0.012	%
					
	 Hull Family Limited Partnership
	  	Class A Common	  	536,218	  	536,218	  	3.396	%
	 Other Management
	  	Class A Common	  	651,000	  	651,000	  	4.122	%
	 Other Holders
	  	Class A Common	  	321,101	  	321,101	  	2.034	%
					
	 Warrant Shares
	  	 	  	 	  	 	  	 	 
	 Austin Ventures V, L.P.
	  	Class A Common	  	732,724	  	961,327	  	6.088	%
	 Austin Ventures V Affiliates Fund, L.P.
	  	Class A Common	  	36,636	  	48,066	  	0.304	%
	 Capital Resource Lenders II, L.P.
	  	Class A Common	  	192,340	  	252,348	  	1.598	%
	 Northwestern Mutual Life Insurance Company
	  	Class A Common	  	1,133,328	  	1,133,328	  	7.177	%
	 General Electric Capital Corporation
	  	Class B Common	  	367,238	  	367,238	  	2.326	%
					
	 Options
	  	 	  	 	  	 	  	 	 
	 Management
	  	Class A Common	  	92,000	  	92,000	  	0.583	%
	 	  	 	  	 	  	 	  	
	

	 	  	 	  	 	  	 	  	100.000	%
	 	  	 	  	 	  	 	  	
	

  

 A-1 

 EXHIBIT B 
  
 Capitalization After the Closing 
  

								
	 Shareholder

	  	Class of Shares

	 	# of Shares

	  	 Fully Diluted
 Ownership
 Percentage

	 
	 Austin Ventures III-A, L.P.
	  	Series A Preferred	 	3,353,621	  	8.5	 
	 Austin Ventures III-B, L.P.
	  	Series A Preferred	 	2,832,733	  	7.2	 
	 Austin Ventures V, L.P.
	  	Series A Preferred	 	1,905,449	  	4.8	 
	 Austin Ventures V Affiliates Fund, L.P.
	  	Series A Preferred	 	95,272	  	.2	 
	 ABRY Partners IV, L.P.
	  	Class A Common	 	17,121,419	  	43.2	 
	 ABRY Investment Partnership, L.P.
	  	Class A Common	 	10,570	  	—  	 
	 Capital Resource Lenders II, L.P.
	  	Class A Common	 	2,964,585	  	7.8	 
	 New York Life Capital Partners II, L.P.
	  	Class A Common	 	5,000,000	  	12.6	 
	 PPM America Private Equity Fund L.P.
	  	Class A Common	 	3,333,333	  	8.4	 
	 Hull Family Limited Partnership
	  	Class A Common	 	536,218	  	1.4	 
	 Other Management
	  	Class A Common	 	651,000	  	1.6	 
	 Other Holders
	  	Class A Common	 	321,101	  	0.8	 
	 General Electric Capital Corporation
	  	Class B Common (1)	 	366,626	  	0.9	 
	 	  	 	 	
	  	
	

	 	  	 	 	38,491,927	  	 	 
	 Warrant Shares
	  	 	 	 	  	 	 
	 Northwestern Mutual Life Insurance Company
	  	Class A Common	 	1,133,328	  	2.9	 
	 	  	 	 	
	  	
	

	 	  	 	 	39,625,255	  	100.0	%
	 	  	 	 	
	  	
	

	 Options
	  	 	 	 	  	 	 
	 Management (2)
	  	Class A Common	 	92,000	  	 	 

  

	(1)	The Class B Common is non-voting and convertible into an equal number of shares of Class A
Common at the option of the holder. Assumes the exercise of the warrant originally held by Heller Financial, Inc. on a cashless exercise basis following the closing of the Recapitalization. 

  

	(2)	All of the management stock options are currently exercisable. Of these options, 25,000 have
an exercise price of $1.00 per share and 67,000 have an exercise price of $20.00 per share. 

  

 B-1 

 EXHIBIT C 
  
 Form of Opinion of Counsel to the Company 
  
 1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of
Texas and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. To our knowledge, after due inquiry, the Company does not own, directly or indirectly, any
capital stock or other equity interest in any Person. 
  
 2. The
Company has all requisite corporate power and authority to execute and deliver the Transaction Documents to which it is a party and to perform its obligations under the Transaction Documents to which it is a party. 
  
 3. The execution, delivery and performance by the Company of the Transaction
Documents to which it is a party, and the consummation by the Company of the transactions contemplated thereby to be performed by it, have been duly authorized by all necessary corporate action on the part of the Company. The issuance of the Shares
by the Company to the Shareholders in the Recapitalization is not subject to preemptive or other similar statutory or contractual rights arising pursuant to any agreement or instrument, known to us after due inquiry, to which the Company is a party.

  
 4. Each Transaction Document to which the Company is a party
has been duly and validly executed and delivered by the Company and each of the Transaction Documents constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms, but
only to the extent of its respective obligations thereunder and subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws now or hereafter in effect affecting creditor’s rights and remedies
generally, and to general principles of equity, including, to the extent applicable, principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and except to
the extent that rights to indemnification and contribution thereunder may be limited by federal or state securities laws or public policy, and subject to the qualification that we express no opinion as to the enforceability of provisions purporting
to waive the right to trial by jury. 
  
 5. The execution and
delivery of the Transaction Documents by the Company, the consummation by the Company of the transactions contemplated thereby, and the compliance by the Company with the provisions thereof pertaining to the Company will not violate any of the
terms, conditions or provisions of the Amended Articles or bylaws of the Company, or conflict with, constitute a default under, or violate (i) any of the terms, conditions or provisions of any document, agreement or other instrument filed as an
exhibit to the Company’s Registration Statement on Form S-4 (File No. 333-110025) filed with the Securities and Exchange Commission (the “SEC”) on October 10, 2003, Amendment No. 1 to Form S-4 filed with the SEC on January 15, 2004
and Amendment No. 2 to Form S-4 filed with the SEC on May 28, 2004, (ii) any Texas or federal law or regulation (other than federal and state securities laws, as 

  

 C-1 

 
to which we express no opinion in this paragraph) or (iii) any judgment, writ, injunction, decree, order or ruling of any court or governmental authority
binding on the Company of which we are aware after due inquiry. 
  
 6. The Amended Articles have been duly adopted in accordance with the Texas Business Corporation Act, have been duly executed and filed with the Secretary of State of the State of Texas and have become effective in accordance with the
provisions of the Texas Business Corporation Act. 
  
 7. No
consent, approval, waiver, license or authorization, or other action by or filing with any Texas or federal governmental authority is required to be made by the Company in connection with the execution, delivery and performance by the Company of the
Transaction Documents to which it is a party, the consummation by the Company of the transactions contemplated thereby to be performed by the Company, or compliance by the Company with the provisions thereof pertaining to the Company, except (i)
such as may be required by the securities or Blue Sky laws of any state in connection with the offer and sale of the Shares, as to which we express no opinion, (ii) the registrations and filings required to be performed pursuant to the provisions of
the Registration Agreement and (iii) those consents, approvals, waivers, licenses, authorizations, actions and filings that have been obtained or made. 
  
 8. To our knowledge, there is no litigation, proceeding or governmental investigation pending or threatened against the Company, which (i) calls into
question the validity of the Transaction Documents or any action taken or to be taken pursuant thereto or (ii) seeks to prevent the consummation of the transactions contemplated by the Transaction Documents. 
  
 9. As of the date hereof, immediately after the consummation of the
Recapitalization, the authorized capital stock of the Company consists of 80,000,000 shares of Class A Common Stock, $0.01 par value per share (“Class A Stock”), 700,000 shares of Class B Common Stock, $0.01 par value per share
(“Class B Stock”), and 8,247,075 shares of Series A Preferred Stock, $0.01 par value per share (“New Series A Preferred Stock”). As of the date hereof, immediately after the consummation of the Recapitalization, the Company has
outstanding (i) 29,938,226 shares of Class A Stock, (ii) no shares of Class B Stock and (iii) 8,187,075 shares of New Series A Preferred Stock. All of such outstanding shares of capital stock of the Company are duly authorized, validly issued, fully
paid and nonassessable, and all shares of Class A Stock issuable upon conversion of the New Series A Preferred Stock will be, when issued upon conversion of the New Series A Preferred Stock in accordance with the terms thereof, duly authorized,
validly issued, fully paid and nonassessable. To our knowledge, as of the date hereof and immediately after the consummation of the Recapitalization, (i) there are no outstanding securities of the Company convertible into, exchangeable for or
evidencing the right to purchase or subscribe for any shares of capital stock of the Company, other than the New Series A Preferred Stock, and (ii) there are no outstanding or authorized options, warrants, calls, subscriptions, rights, conversion
privileges, commitments or other agreements or rights of any character obligating the Company to issue any shares of capital stock or any securities convertible into or evidencing the right to purchase or subscribe for any shares of such capital
stock other than (a) the warrants issued to The Northwestern Mutual Life Insurance Company pursuant to the terms of the Common Stock Purchase Warrant, dated January 18, 2002, (b) the 

  

 C-2 

 
warrants issued to Heller Financial, Inc., a Delaware corporation (“Heller”), pursuant to the terms of the Warrant Agreement, dated as of November
10, 1994, by and between the Company and Heller, as amended (the “Heller Warrant Agreement”), (c) options to purchase 92,000 shares of Class A Stock issued pursuant to the Company’s 1999 Stock Option Plan and (d) the preemptive rights
and rights of first refusal set forth in the Shareholders Agreement. As of the date hereof and immediately after the consummation of the Recapitalization, except as set forth in the Shareholders Agreement, the Heller Warrant Agreement and the Take
Along/Drag-Along Rights Agreement, dated November 10, 1994, between Austin Ventures III-A, L.P., Austin Ventures III-B, L.P. and Heller, to our knowledge, there are no restrictions on the transfer of shares of capital stock of the Company other than
those imposed by relevant state and federal securities laws. As of the date hereof and immediately after the consummation of the Recapitalization, except as set forth in the Shareholders Agreement, no holder of any security of the Company is
entitled to preemptive or similar statutory or contractual rights, either arising pursuant to any statute or, to our knowledge after due inquiry, any agreement or instrument, to which the Company is a party or which are otherwise binding upon the
Company. 
  
 10. Assuming the accuracy of the representations and
warranties of the Company and the Shareholders in the Recapitalization Agreement and the performance by the Company of the agreements contained in the Recapitalization Agreement, it is not necessary in connection with the offer, issuance and
delivery of the Shares by the Company to the Shareholders pursuant to the Recapitalization Agreement to register the Shares under the Securities Act of 1933, as amended. 
  
 11. The Company is not an “investment company” or a company “controlled” by an “investment
company” within the meaning of the Investment Company Act of 1940, as amended. 
  

 C-3 

 EXHIBIT D 
  
 Form of Amended and Restated Articles of Incorporation 
  

 D-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00069-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00069-of-00352.parquet"}]]