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Exhibit 4.10
SUBORDINATION AND INTERCREDITOR AGREEMENT
THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this
"AGREEMENT") is
entered into as of September 9, 2004, by and among LAMINAR
DIRECT CAPITAL, L.P.,
a Delaware limited partnership ("LAMINAR", and, together with
any other Person
that becomes a party hereto as a "Subordinated Creditor"
pursuant to a
Subordinated Creditor Supplement (as hereinafter defined), each,
a "SUBORDINATED
CREDITOR", and collectively, "SUBORDINATED CREDITORS"), SECURUS
TECHNOLOGIES,
INC., a Delaware corporation ("COMPANY"), the Subsidiaries of
Company party
hereto (collectively, "SUBSIDIARY GUARANTORS" and, together with
Company,
collectively, "DEBTORS") and THE BANK OF NEW YORK TRUST COMPANY,
N.A., as
Trustee ("TRUSTEE") under the Indenture (as defined below)
governing the
Company's 11% Second-priority Senior Secured Notes Due 2011 (the
"NOTES").
R E C I T A L S
A. Debtors, Trustee and certain initial purchasers have entered
into a
Purchase Agreement with respect to the initial sale of the Notes
and Debtors and
Trustee have entered into an Indenture dated as of even date
herewith (as the
same may be amended, restated, supplemented or otherwise
modified from time to
time, the "INDENTURE"; capitalized terms used herein and not
otherwise defined
shall have the meanings ascribed to such terms in the Indenture)
pursuant to
which, among other things, the Notes have been issued. All of
Debtors'
obligations to Trustee and the holders of the Notes under the
Indenture and the
other Senior Debt Documents (as hereinafter defined) are
guaranteed by
Subsidiary Guarantors and secured by liens on and security
interests in
substantially all of the now existing and hereafter acquired
personal property
of Debtors (other than accounts receivable, inventory and any
and all proceeds
thereof) and substantially all hereafter acquired real property
of Debtors.
B. Subordinated Creditors are extending credit to Company as
evidenced
by its 17% Senior Subordinated Notes due September 9, 2014, in
the aggregate
principal amount of $40,000,000 (the "INITIAL SUBORDINATED
NOTES"). The
obligations of Company under the Subordinated Note Documents (as
defined herein)
are guaranteed by Subsidiary Guarantors.
C. As an inducement to and as one of the conditions precedent to
the
agreement of Trustee and the holders of the Notes to consummate
the transactions
contemplated by the Purchase Agreement and the Indenture,
Trustee and the
holders of the Notes have required the execution and delivery of
this Agreement
by Subordinated Creditors and Debtors in order to set forth the
relative rights
and priorities of Trustee, the other Senior Creditors and
Subordinated Creditors
under the Senior Debt Documents and the Subordinated Debt
Documents (as
hereinafter defined).
NOW, THEREFORE, in order to induce (i) Trustee to enter into
the Indenture and (ii) the initial purchasers of the Notes to
purchase such
Notes and for other good and
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valuable consideration, the receipt and sufficiency of which
hereby are
acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. The following terms shall have the following
meanings in
this Agreement:
"AGENT" shall mean ING Capital LLC, as Agent for the credit
parties under the ING Loan Documents, or any other Person
appointed by
such credit parties as administrative agent for purposes of the
Senior
Credit Agreement and this Agreement.
"BANKRUPTCY CODE" shall mean Chapter 11 of Title 11 of the
United States Code, as amended from time to time and any
successor
statute and all rules and regulations promulgated
thereunder.
"DISTRIBUTION" shall mean, with respect to any indebtedness,
obligation or security, (a) any payment or distribution by any
Person
of cash, securities or other property, by set-off or otherwise,
on
account of such indebtedness, obligation or security, (b)
any
redemption, purchase or other acquisition of such
indebtedness,
obligation or security by any Person or (c) the granting of any
lien or
security interest to or for the benefit of the holders of
such
indebtedness, obligation or security in or upon any property of
any
Person.
"ENFORCEMENT ACTION" shall mean (a) to take from or for the
account of any Debtor or any guarantor of the Subordinated Debt,
by
set-off or in any other manner, the whole or any part of any
moneys
which may now or hereafter be owing by any such Debtor or any
such
guarantor with respect to the Subordinated Debt, (b) to sue for
payment
of, or to initiate or participate with others in any suit,
action or
proceeding against any such Debtor or any such guarantor to (i)
enforce
payment of or to collect the whole or any part of the
Subordinated Debt
or (ii) commence judicial enforcement of any of the rights and
remedies
under the Subordinated Debt Documents or applicable law with
respect to
the Subordinated Debt, (c) to accelerate the Subordinated Debt,
(d) to
exercise any put option or to cause any such Debtor or any
such
guarantor to honor any redemption or mandatory prepayment
obligation
under any Subordinated Debt Document or (e) to take any action
under
the provisions of any state or federal law, including,
without
limitation, the Uniform Commercial Code, or under any contract
or
agreement, to enforce, foreclose upon, take possession of or
sell any
property or assets of any such Debtor or any such guarantor,
PROVIDED
that the receipt by any Subordinated Creditor of PIK
Subordinated Debt
Payments shall not be deemed to be an Enforcement Action.
"FUNDED DEBT" shall mean with respect to Debtors, on a
consolidated basis and without duplication, as of any
calculation date,
(a) any obligation of such Person for borrowed money,
including,
without limitation, all of the "Obligations" (as defined in the
Senior
Credit Agreement); (b) any obligation of such Person evidenced
by
bonds, debentures, notes or other similar instruments; (c)
any
obligation of such Person to pay the deferred purchase price
of
property or for services (other than in the ordinary course
of
business); (d) any Capitalized Lease Obligation (as defined in
the
Senior Credit
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Agreement); (e) any obligation or liability of others secured by
a Lien
on property owned by such Person, whether or not such obligation
or
liability is assumed; (f) any reimbursement obligations
(contingent or
otherwise) of such Person with respect to letters or credit,
bankers
acceptances and similar instruments issued for the account of
such
Person; (g) any Guaranty (as defined in the Senior Credit
Agreement)
(except items of shareholders' equity or Equity Interests or
surplus or
general contingency or deferred tax reserves); (h) any
financial
obligation of such Person under purchase money mortgages; (i)
any
financial obligation of such Person under asset
securitization
vehicles; (j) any obligations of such Person under conditional
sales
contracts and similar title retention instruments with respect
to
property acquired; and (k) any financial obligation of such
Person as
issuer of Equity Interests redeemable in whole or in part at the
option
of a Person other than such issuer, at a fixed and determinable
date or
upon the occurrence of an event not solely within the control of
such
issuer.
"ING LOAN DOCUMENTS" shall mean the Senior Credit Agreement,
the Loan Documents (as defined in the Senior Credit Agreement)
and all
other agreements, documents and instruments executed from time
to time
in connection therewith, as the same may be amended,
restated,
supplemented or otherwise modified from time to time.
"INTERCREDITOR AGREEMENT" shall mean the Intercreditor
Agreement among Debtors, Agent and Trustee, dated as of even
date
herewith, as the same may be amended, restated, supplemented
or
otherwise modified from time to time.
"JUNIOR OBLIGATIONS" means securities and other obligations
issued by any Debtor in the course of a Proceeding involving
such
Debtor, PROVIDED that such securities or other obligations
are
subordinated to the Senior Debt on terms at least as favorable,
in all
material respects, as the terms and provisions of this
Agreement.
"NOTE PURCHASE AGREEMENT" shall mean that certain Note
Purchase Agreement dated the date hereof among Debtors and
Laminar.
"PIK SUBORDINATED DEBT PAYMENTS" shall mean payments, in the
form of increases of the outstanding principal amount of the
Subordinated Notes, of interest on the Subordinated Debt due
and
payable on a non-accelerated basis in accordance with the terms
of the
Subordinated Debt Documents.
"PERMITTED ENFORCEMENT ACTION" shall mean (a) the acceptance
by any Subordinated Creditor of cash payments of interest to the
extent
that the same is permitted by subsection 2.3(a)(ii) hereof, (b)
the
filing of a lawsuit for payment of, or initiating or
participating with
others in any suit, action or proceeding against any Debtor to
(i)
enforce payment of or to collect the whole or any part of
the
Subordinated Debt or (ii) commence judicial enforcement of any
of the
rights and remedies under the Subordinated Debt Documents or
applicable
law with respect to the Subordinated Debt or (c) the
acceleration of
the Subordinated Debt.
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"PERMITTED REFINANCING" shall mean Funded Debt that is
incurred to refund, refinance, replace, exchange, renew, repay
or
extend the Subordinated Debt (and including any Funded Debt
that
refinances Funded Debt incurred pursuant to a Permitted
Refinancing);
PROVIDED, HOWEVER, that the Funded Debt incurred pursuant to
such
Permitted Refinancing:
(a) shall have a final maturity date that is no
earlier than the final maturity date of the Subordinated
Debt;
(b) shall be in an aggregate principal amount (or if
issued with original issue discount, an aggregate issue
price)
that is equal to or less than the principal amount of the
Subordinated Debt then outstanding;
(c) shall be subject to a subordination agreement
containing provisions that are, in substance, identical to
the
provisions of this Agreement; and
(d) shall not (i) have the effect of (A) increasing
principal, interest, fee or other payment obligations
thereunder, (B) adding collateral or other guarantors (other
than as contemplated as of the Agreement Date with respect
to
the Subordinated Debt), (C) shortening the maturity or
increasing the amortization of the obligations thereunder,
or
(D) making the covenants, defaults or other provisions
thereof
more burdensome in any material respect or (ii) otherwise
have
a material adverse effect on the interests of Senior
Creditors.
"PERSON" shall mean an individual, corporation, partnership,
trust, joint stock company, limited liability company,
unincorporated
organization, other legal entity or joint venture or a
government or
any agency or political subdivision thereof.
"PROCEEDING" shall mean any voluntary or involuntary
insolvency, bankruptcy, receivership, custodianship,
liquidation,
dissolution, reorganization, assignment for the benefit of
creditors,
appointment of a custodian, receiver, trustee or other officer
with
similar powers or any other proceeding for the liquidation,
dissolution
or other winding up of a Person.
"REFINANCING SENIOR DEBT DOCUMENTS" shall mean any financing
documentation which replaces the Indenture and pursuant to which
the
Senior Debt under the Indenture is refinanced, as such
financing
documentation may be amended, restated, supplemented or
otherwise
modified from time to time.
"SENIOR CREDIT AGREEMENT" shall mean the Credit Agreement
among Debtors, Agent and the other credit parties named therein,
dated
as of even date herewith, as the same may be amended,
supplemented or
otherwise modified from time to time.
"SENIOR CREDITORS" shall mean the holders of the Senior
Debt.
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"SENIOR DEBT" shall mean the Obligations with respect to the
Notes and all other obligations, liabilities and indebtedness of
every
nature of Debtors from time to time owed to the Trustee or any
Senior
Creditor under the Senior Debt Documents, including, without
limitation, the principal amount of all debts, claims and
indebtedness,
accrued and unpaid interest and all fees, costs and expenses,
whether
primary, secondary, direct, contingent, fixed or otherwise,
heretofore,
now and from time to time hereafter owing, due or payable,
whether
before or after the filing of a Proceeding under the Bankruptcy
Code
together with (a) any amendments, restatements, modifications,
renewals
or extensions thereof from time to time and (b) any interest
accruing
thereon after the commencement of a Proceeding, without regard
to
whether or not such interest is an allowed claim. Senior Debt
shall be
considered to be outstanding whenever any Note is
outstanding.
"SENIOR DEBT DOCUMENTS" shall mean the Indenture, the Notes
and, after any refinancing of the Senior Debt under the
Indenture, the
Refinancing Senior Debt Documents.
"SENIOR DEFAULT" shall mean any "Default" under the Senior
Debt Documents.
"SUBORDINATED CREDITOR SUPPLEMENT" means a Subordinated
Creditor Supplement substantially in the form of ANNEX A hereto
that is
delivered to Trustee in accordance with subsection 2.6(b)
hereof.
"SUBORDINATED DEBT" shall mean all of the obligations of
Debtors to Subordinated Creditors evidenced by or incurred
pursuant to
the Subordinated Debt Documents.
"SUBORDINATED DEBT DEFAULT" shall mean a default in the
payment of the Subordinated Debt or in the performance of any
term,
covenant or condition contained in the Subordinated Debt
Documents or
any other occurrence permitting Subordinated Creditors to
accelerate
the payment of all or any portion of the Subordinated Debt.
"SUBORDINATED DEBT DEFAULT NOTICE" shall mean a written
notice
from Subordinated Creditors or Company to Trustee pursuant to
which
Trustee is notified of the occurrence of a Subordinated Debt
Default,
which notice incorporates a reasonably detailed description of
such
Subordinated Debt Default and which notice expressly states that
it is
a "Subordinated Debt Default Notice" hereunder.
"SUBORDINATED DEBT DOCUMENTS" shall mean the Subordinated
Notes, the Note Purchase Agreement, any guaranty with respect to
the
Subordinated Debt and all other documents, agreements and
instruments
now existing or hereinafter entered into in connection with any
of the
foregoing or evidencing or pertaining to all or any portion of
the
Subordinated Debt, as each is in effect on the date hereof or
as
modified in accordance with the terms of this Agreement.
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"SUBORDINATED NOTES" shall mean the Initial Subordinated
Notes
and any other notes issued under the Note Purchase
Agreement.
2. SUBORDINATION.
2.1 SUBORDINATION OF SUBORDINATED DEBT TO SENIOR DEBT. Debtors
covenant
and agree, and Subordinated Creditors, by their respective
acceptance of the
Subordinated Debt Documents (whether upon original issue or upon
transfer or
assignment) likewise covenant and agree, notwithstanding
anything to the
contrary contained in any of the Subordinated Debt Documents,
that the payment
of any and all of the Subordinated Debt shall be subordinate and
subject in
right and time of payment, to the extent and in the manner
hereinafter set
forth, to the prior indefeasible payment in full in cash to the
satisfaction of
Senior Creditors of all Senior Debt. Each holder of Senior Debt,
whether such
Senior Debt is now outstanding or hereafter created, incurred,
assumed or
guaranteed, shall be deemed to have acquired Senior Debt in
reliance upon the
provisions contained in this Agreement.
2.2 LIQUIDATION, DISSOLUTION, BANKRUPTCY. In the event of
any
Proceeding involving any Debtor:
(a) All Senior Debt shall first be indefeasibly paid in full
in cash to the satisfaction of Senior Creditors before any
Distribution, whether in cash, securities or other property,
shall be
made to any Subordinated Creditor on account of any Subordinated
Debt.
(b) Any Distribution, whether in cash, securities or other
property which would otherwise, but for the terms hereof, be
payable or
deliverable in respect of the Subordinated Debt (other than
Junior
Obligations) shall be, subject to the provisions of the
Intercreditor
Agreement, paid or delivered directly to Agent or Trustee, as
the case
may be (to be held and/or applied by Agent or Trustee in
accordance
with the terms of the Senior Debt Documents and the
Intercreditor
Agreement), until all Senior Debt is indefeasibly paid in full
in cash
to the satisfaction of Senior Creditors. Each Subordinated
Creditor
irrevocably authorizes, empowers and directs any debtor, debtor
in
possession, receiver, trustee, liquidator, custodian,
conservator or
other Person having authority, to pay or otherwise deliver all
such
Distributions to Agent or Trustee, as the case may be, other
than
Junior Obligations. Each Subordinated Creditor also
irrevocably
authorizes and empowers Agent or Trustee, as the case may be, in
the
name of such Subordinated Creditor, to demand, sue for, collect
and
receive any and all such Distributions, other than Junior
Obligations.
(c) Each Subordinated Creditor agrees not to initiate,
prosecute or participate in any claim, action or other
proceeding
challenging the enforceability, validity, perfection or priority
of the
Senior Debt or any liens and security interests securing the
Senior
Debt.
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(d) Each Subordinated Creditor agrees to execute, verify,
deliver and file any proofs of claim in respect of the
Subordinated
Debt requested by Agent or Trustee, as the case may be, in
connection
with any such Proceeding and hereby irrevocably authorizes,
empowers
and appoints Agent or Trustee its agent and attorney-in-fact to
(i)
execute, verify, deliver and file such proofs of claim upon the
failure
of such Subordinated Creditor promptly to do so prior to 30 days
before
the expiration of the time to file any such proof of claim and
(ii)
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