SECOND AMENDMENT dated as of January 31, 2000 (this
"Amendment"), to the Credit Agreement dated as of February 26,
1999 (the "Credit Agreement"), among PLAYBOY ENTERPRISES,
INC., a Delaware corporation (the "Company"), PEI HOLDINGS,
INC., a Delaware corporation and wholly owned subsidiary of
the Company ("PHI"), the financial institutions from time to
time party thereto (the "Lenders") and CREDIT SUISSE FIRST
BOSTON, a bank organized under the laws of Switzerland, acting
through its New York branch, as administrative agent (in such
capacity, the "Administrative Agent"), as collateral agent and
as issuing bank.
A. The parties hereto have entered into the Credit Agreement,
pursuant to which the Lenders have agreed to extend credit to the Borrower (as
defined in the Credit Agreement) on the terms and subject to the conditions set
forth therein.
B. The Company and PHI have requested that the Lenders agree to
amend certain provisions of the Credit Agreement, and the Lenders are willing,
on the terms and subject to the conditions set forth below, to amend the Credit
Agreement as provided herein.
C. Capitalized terms used and not otherwise defined herein shall
have the meanings assigned to them in the Credit Agreement.
Accordingly, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Amendment of Credit Agreement. The Credit Agreement is
hereby amended as follows:
(a) The Table of Contents of the Credit Agreement is hereby amended
(i) by replacing the words "Annual EBITDA" following "SECTION 6.13" with
"[deleted]" and (ii) by inserting at the end of the list of Exhibits to the
Credit Agreement the following:
"EXHIBIT J Form of Subordination Agreement".
(b) The table in the definition of "Applicable Percentage" in
Section 1.01 of the Credit Agreement is hereby deleted and replaced with the
following table:
Eurodollar ABR
Consolidated Leverage Ratio Spread Spread
- --------------------------- ------ ------
Category 1
- ----------
Greater than or equal to 5.00 to 1.00 3.50% 2.50%
Category 2
- ----------
Less than 5.00 to 1.00 but greater than or equal to 4.00 to 3.25% 2.25%
Eurodollar ABR
Consolidated Leverage Ratio Spread Spread
- --------------------------- ------ ------
1.00
Category 3
- ----------
Less than 4.00 to 1.00 but greater than or equal to 3.00 to 3.00% 2.00%
1.00
Category 4
- ----------
Less than 3.00 to 1.00 2.75% 1.75%
(c) The definition of "Asset Sale" in Section 1.01 of the Credit
Agreement is amended by (i) inserting in clause (vi)(y), after the words "in the
business of the Borrower or the Restricted Subsidiaries within nine months", the
words "(or 36 months, in the case of a Catalog Operations Sale)" and (ii)
inserting in the final sentence thereof, after the words "the aggregate amount
of Net Cash Proceeds", the words "(other than Net Cash Proceeds resulting from a
Catalog Operations Sale)".
(d) The definition of "Consolidated EBITDA" in Section 1.01 of the
Credit Agreement is amended by (i) deleting therefrom the phrase "(x) the
Playboy International Rights Acquisition Fee for such period," and (ii)
replacing clause (ii) of the last sentence thereof with the following:
"(ii) following a Catalog Operations Sale, for any four-fiscal
quarter period that includes a fiscal quarter ending on or prior to
December 31, 2000, Consolidated EBITDA for such period shall be
increased by the product of (x) $1,800,000 and (y) a fraction, the
numerator of which is the number of days in fiscal year 2000
included in such four-fiscal quarter period which occurred after the
consummation of the Catalog Operations Sale and the denominator of
which is three hundred sixty six and (iii) Consolidated EBITDA for
any period shall be increased by the amount of restructuring costs
incurred on or after December 1, 1999 in connection with workforce
reductions to the extent such costs have actually been paid by the
Company and the Restricted Subsidiaries in such period; provided,
that any such increase, together with all other increases made in
the same period or any other period pursuant to this clause (iii),
shall not exceed $3,000,000 in the aggregate.
(e) The definition of "Consolidated Fixed Charge Coverage Ratio" in
Section 1.01 of the Credit Agreement is hereby amended by (i) deleting the word
"Adjusted" in clause (i) thereof, (ii) replacing "and" with a comma at the end
of clause (vi) thereof, (iii) inserting, at the end of clause (vii) thereof
before the final parenthetical phrase in such definition, "and (viii) cash
investments in programming during such period", and (iv) changing "(vii)" to
"(viii)" in the final parenthetical phrase thereof.
(f) The definition of "Playboy Online" is amended by deleting
"Playboy Online, Inc." and replacing such phrase with "Playboy.com, Inc."
(g) The following definitions are added to Section 1.01 of the
Credit Agreement in their appropriate alphabetical positions:
"Catalog Operations Sale" shall mean any sale, transfer or other
disposition of all or substantially all of the catalog sales operations
conducted by Critics' Choice Video, Inc. and the
3
assets and property used to conduct such operations (it being understood that
such assets and property include, but are not limited to, leasehold interests of
Playboy Enterprises International, Inc. and the Company used by Critics' Choice
Video, Inc.).
"SAG Liens" shall mean Liens granted to the Screen Actors Guild by the
Borrower or any Subsidiary in specific items of Product to secure amounts
payable by the Borrower or such Subsidiary to members of the Screen Actors Guild
in respect of the production of such items of Product.
"Second Amendment Effective Date" shall mean the date on which the
amendments provided for in Section 1 of the Second Amendment dated as of January
31, 2000, to this Agreement become effective.
"Subordination Agreement" shall mean a subordination agreement
substantially in the form of Exhibit J hereto, together with such other changes
as the Collateral Agent may deem appropriate.
(h) The following new paragraph (j) is inserted at the end of
Section 2.09 of the Credit Agreement:
(j) The aggregate Revolving Credit Commitments shall be decreased
(i) by $5,000,000 on the Second Amendment Effective Date and (ii) by an
additional $5,000,000 upon the closing of any sale of Equity Interests of
Playboy Online to a person other than the Company or a Subsidiary
consisting of an underwritten primary initial public offering (other than
a public offering pursuant to a registration statement on Form S-8) of the
common stock of Playboy Online pursuant to an effective registration
statement filed with the Securities and Exchange Commission in accordance
with the Securities Act of 1933, as amended (whether alone or in
connection with a secondary public offering).
(i) Section 2.13(c) of the Credit Agreement is amended by (A)
deleting from clause (i) thereof the phrase "in an aggregate amount not greater
than $25,000,000", (B) deleting from clause (ii) thereof the phrase "minus the
aggregate Net Cash proceeds of Equity Issuances referred to in the preceding
clause (i)" and (C) inserting in clause (ii) thereof after the words "the
Company and Restricted Subsidiaries that" the phrase ", after subtracting any
such Net Cash Proceeds used to prepay Term Loans on the Second Amendment
Effective Date,".
(j) Section 2.13(d) of the Credit Agreement is amended by deleting
the date "December 31, 1999" and inserting in its place "December 31, 2000".
(k) Section 6.02(m) of the Credit Agreement is amended by inserting
the phrase "(including SAG Liens)" after the word "Liens" therein.
(l) Section 6.04(e) of the Credit Agreement is amended to read as
follows:
4
"(e) investments in and loans and advances to Playboy Online that
are (A) made during the fiscal year ended December 31, 1999 and that do
not exceed $6,500,000 in the aggregate or (B) made after December 31, 1999
but prior to the initial public offering of Equity Interests of Playboy
Online and that do not exceed $10,000,000 in the aggregate".
(m) Section 6.04(j) of the Credit Agreement is amended to read as
follows:
"(j) investments in and loans and advances to Restricted
Subsidiaries to procure assets, properties or contract rights to be used
in gaming operations, but only to the extent such investments, loans and
advances are made with and do not in the aggregate exceed the cash
proceeds received by the Borrower from a Catalog Operations Sale to
persons other than the Company and the Subsidiaries after the Second
Amendment Effective Date".
(n) Clause (c) of Section 6.05 of the Credit Agreement is amended by
the insertion at the end thereof of the following proviso:
"; provided, that a Catalog Operations Sale may be made for consideration
consisting of cash or publicly-traded Equity Interests in other persons
and shall not be subject to or included in the computation of such
$10,000,000 limit".
(o) The text of Section 6.13 of the Credit Agreement is hereby
replaced with "[deleted]".
(p) The table appearing in Section 6.14 of the Credit Agreement is
hereby replaced with the following table and text:
Date Ratio
----- -----
March 31, 2000 5.95 to 1.00
June 30, 2000 5.95 to 1.00
September 30, 2000 5.95 to 1.00
December 31, 2000 5.95 to 1.00
March 31, 2001 5.95 to 1.00
June 30, 2001 5.75 to 1.00
September 30, 2001 5.50 to 1.00
December 31, 2001 4.50 to 1.00
March 31, 2002 4.00 to 1.00
June 30, 2002 3.50 to 1.00
September 30, 2002 and thereafter 3.00 to 1.00
Notwithstanding the definition of "Consolidated Adjusted EBITDA", in
determining the Consolidated Leverage Ratio, (i) Consolidated Adjusted EBITDA
for the period of three fiscal quarters ended December 31, 1999 shall be deemed
to total $21,000,000 for the purpose of calculating Consolidated Adjusted EBITDA
for the period of four fiscal quarters ended March 31, 2000, (ii) Consolidated
Adjusted EBITDA for the period of two fiscal quarters
5
ended December 31, 1999 shall be deemed to total $23,000,000 for the purpose of
calculating Consolidated Adjusted EBITDA for the period of four fiscal quarters
ended June 30, 2000, and (iii) Consolidated Adjusted EBITDA for the fiscal
quarter ended December 31, 1999 shall be deemed to be $15,000,000 for the
purpose of calculating Consolidated Adjusted EBITDA for the period of four
fiscal quarters ended September 30, 2000."
(q) The table appearing in Section 6.15 of the Credit Agreement is
hereby replaced with the following table:
Date Ratio
----- -----
March 31, 2000 1.75 to 1.00
June 30, 2000 1.75 to 1.00
September 30, 2000 1.75 to 1.00
December 31, 2000 1.60 to 1.00
March 31, 2001 1.65 to 1.00
June 30, 2001 1.75 to 1.00
September 30, 2001 2.00 to 1.00
December 31, 2001 2.25 to 1.00
March 31, 2002 2.50 to 1.00
June 30, 2002 2.75 to 1.00
September 30, 2002 and thereafter 3.00 to 1.00
Notwithstanding the definition of "Consolidated Adjusted EBITDA", in
determining the Consolidated Interest Expense Coverage Ratio under this Section
6.15, (i) Consolidated Adjusted EBITDA for the period of three fiscal quarters
ended December 31, 1999 shall be deemed to total $21,000,000 for the purpose of
calculating Consolidated Adjusted EBITDA for the period of four fiscal quarters
ended March 31, 2000, (ii) Consolidated Adjusted EBITDA for the period of two
fiscal quarters ended December 31, 1999 shall be deemed to total $23,000,000 for
the purpose of calculating Consolidated Adjusted EBITDA for the period of four
fiscal quarters ended June 30, 2000, and (iii) Consolidated Adjusted EBITDA for
the fiscal quarter ended December 31, 1999 shall be deemed to be $15,000,000 for
the purpose of calculating Consolidated Adjusted EBITDA for the period of four
fiscal quarters ended September 30, 2000. In determining the Consolidated
Interest Expense Coverage Ratio under this Section 6.15 for the periods of four
fiscal quarters ended March 31, 2000, June 30, 2000 and September 30, 2000,
respectively, Consolidated Interest Expense for such periods shall be deemed to
be (i) the actual Consolidated Interest Expense for the fiscal quarter ended
March 31, 2000, multiplied by four, (ii) the actual Consolidated Interest
Expense for the period of two fiscal quarters ended June 30, 2000, multiplied by
two, and (iii) the actual Consolidated Interest Expense for the period of three
fiscal quarters ended September 30, 2000, multiplied by four thirds,
respectively."
(r) The table appearing in Section 6.16 of the Credit Agreement is
hereby replaced with the following table:
6
Date Ratio
----- -----
Prior to March 31, 2001 Unlimited
March 31, 2001 0.90 to 1.00
June 30, 2001 0.90 to 1.00
September 30, 2001 0.90 to 1.00
December 31, 2001 1.00 to 1.00
March 31, 2002 1.00 to 1.00
June 30, 2002 1.10 to 1.00
September 30, 2002 1.20 to 1.00
December 31, 2002 and thereafter 1.25 to 1.00
(s) Article VIII of the Credit Agreement is amended by the insertion
at the end of the first paragraph thereof of the following sentence: "The Agents
are further expressly authorized, at their discretion, to execute Subordination
Agreements or other instruments or agreements recognizing the subordination of
the Liens created by the Security Documents to Liens permitted under paragraphs
(m), (p) and (r) of section 6.02 ."
(t) A new Exhibit J, in the form of Exhibit J to this Amendment, is
hereby added to the Credit Agreement.
SECTION 2. Representations and Warranties. Each of the Company and
PHI represents and warrants to each Lender that, on and as of the date hereof,
and after giving effect to the amendments provided for in Section 1 of this
Amendment:
(a) The representations and warranties set forth in Article III of
the Credit Agreement are true and correct in all material respects with
the same effect as if made on and as of the date hereof, except to the
extent such representations and warranties expressly relate to an earlier
date.
(b) No Event of Default or Default has occurred and is continuing.
SECTION 3. Effectiveness. This Amendment shall become effective upon
the execution of counterparts of the signature pages hereto by the Company, PHI,
the Administrative Agent and Lenders constituting the Required Lenders;
provided, that the amendments set forth in Section 1 shall not become effective
until each of the following conditions precedent shall have been satisfied, and
if any of such conditions shall not have been satisfied by February 3, 2000,
then the provisions of Section 1 shall terminate and cease to be of any force or
effect:
(a) The Administrative Agent shall have received from the Borrower
immediately available funds in the amount of $15,000,000 as a prepayment,
without premium or penalty, of the Term Loans. It is agreed that such
prepayment shall be applied ratably to the outstanding Tranche A Term
Borrowings and Tranche B Term Borrowings, and that the amounts allocated
to each of the Tranche A Term Borrowings and the Tranche B Term Borrowings
shall be applied (i) first, to satisfy the installments of principal due
in respect of the Term Borrowings of such class during calendar year
7
2000 and then (ii) pro rata against the remaining scheduled installments
of principal due in respect of the Term Borrowings of such class;
provided, that any amounts that but for this proviso would be used to
prepay Tranche B Term Loans of Lenders listed on Schedule I hereto in
accordance with clause (ii) above, shall be applied to prepay Tranche A
Term Loans in accordance with this sentence.
(b) The Borrower shall have prepaid Revolving Loans to the extent
required under Section 2.13(i) of the Credit Agreement as a result of the
reduction in the Revolving Credit Commitments on the Second Amendment
Effective Date pursuant to Section 2.09(j) of the Credit Agreement as
amended hereby.
(c) The Borrower shall have paid to the Administrative Agent, for
the account of each Lender that shall have executed this Amendment at or
prior to noon New York City time on January 31, 2000, in immediately
available funds, an amendment fee equal to .25% of the aggregate
outstanding Term Loans, Revolving Credit Exposure and unused Revolving
Credit Commitment of such Lender on the date hereof (determined after
giving effect to the prepayments and Commitment reductions that will occur
on the Second Amendment Effective Date, as provided for herein).
(d) The Administrative Agent shall have received (i) such evidence
as the Administrative Agent or Cravath, Swaine & Moore, counsel to the
Administrative Agent, shall reasonably have requested as to the corporate
power and authority of the Company and PHI to enter into and perform their
obligations under this Amendment and (ii) an opinion from each of Paul,
Weiss, Rifkind, Wharton & Garrison, special counsel for the Company and
PHI, and Howard Shapiro, Esq., General Counsel of the Company, in each
case reasonably satisfactory in form and substance to the Administrative
Agent and to Cravath, Swaine & Moore.
The Administrative Agent shall notify the Lenders of the satisfaction of the
foregoing conditions, and such notice shall, in the absence of manifest error,
conclusively evidence the satisfaction of such conditions.
SECTION 4. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
SECTION 5. Expenses. The Borrower shall pay all reasonable
out-of-pocket fees and expenses incurred by the Administrative Agent in
connection with the preparation, negotiation, execution and delivery of this
Amendment, including, but not limited to, the reasonable fees, disbursements and
other charges of Cravath, Swaine & Moore, counsel to the Administrative Agent.
SECTION 6. Counterparts. This Amendment may be executed in any
number of counterparts, each of which shall be an original but all of which,
when taken together, shall constitute but one instrument. Delivery of an
executed counterpart of a signature page of this
8
Amendment by facsimile transmission shall be as effective as delivery of a
manually executed counterpart of this Amendment.
SECTION 7. Headings. Section headings used herein are for
convenience of reference only, are not part of this Amendment and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Amendment.
SECTION 8. Effect of Amendment. Except as specifically stated
herein, the Credit Agreement shall continue in full force and effect in
accordance with the provisions thereof. As used therein, the terms "Agreement",
"herein", "hereunder", "hereinafter", "hereto", "hereof" and words of similar
import shall, unless the context otherwise requires, refer to the Credit
Agreement as modified hereby. Upon effectiveness of this Amendment in accordance
with Section 3, the Required Lenders hereby waive any failure by the Borrower to
comply prior to the Second Amendment Effective Date with the covenants in
Sections 6.13, 6.14, 6.15 and 6.16.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective authorized officers as of the date first
above written.
PLAYBOY ENTERPRISES, INC,
by /s/ Robert D. Campbell
-------------------------------------
Name: Robert D. Campbell
Title: Sr. Vice President, Treasurer
PEI HOLDINGS, INC.,
by /s/ Robert D. Campbell
-------------------------------------
Name: Robert D. Campbell
Title: Treasurer
CREDIT SUISSE FIRST BOSTON, individually
and as Administrative Agent, Collateral
Agent and Issuing Bank,
by /s/ Bill O'Daly
-------------------------------------
Name: Bill O'Daly
Title: Vice President
by /s/ Kristen Lepri
-------------------------------------
Name: Kristen Lepri
Title: Associate
BANK OF AMERICA, N.A.,
by /s/ Peter J. Gates Jr.
-------------------------------------
Name: Peter J. Gates Jr.
Title: Vice President
EATON VANCE SENIOR INCOME TRUST,
By EATON VANCE MANAGEMENT as Investment
Advisor,
by /s/ Payson F. Swaffield
-------------------------------------
Name: Payson F. Swaffield
Title: Vice President
FIRST DOMINION FUNDING II,
by /s/ Andrew Marshak
-------------------------------------
Name: Andrew Marshak
Title: Authorized Signator
FRANKLIN FLOATING RATE TRUST,
by /s/ Chauncey Lufkin
-------------------------------------
Name: Chauncey Lufkin
Title: Vice President
MOUNTAIN CAPITAL CLO I LTD.,
by /s/ Darren P. Riley
-------------------------------------
Name: Darren P. Riley
Title: Director
GALAXY CLO 1999-1, LTD.,
by /s/ Sabur Moini
-------------------------------------
Name: Sabur Moini
Title: Authorized Signatory
HARRIS TRUST & SAVINGS BANK,
by /s/ Scott F. Geik
-------------------------------------
Name: Scott F. Geik
Title: Managing Director
ING BANK,
by /s/ William James
-------------------------------------
Name: William James
Title: Vice President
KZH ING-2 LLC,
by /s/ Peter Chin
-------------------------------------
Name: Peter Chin
Title: Authorized Agent
KZH ING-3 LLC,
by /s/ Peter Chin
-------------------------------------
Name: Peter Chin
Title: Authorized Agent
KZH SOLEIL-2 LLC,
by /s/ Peter Chin
-------------------------------------
Name: Peter Chin
Title: Authorized Agent
LASALLE BANK N.A.,
by /s/ Kyle Freimuth
-------------------------------------
Name: Kyle Freimuth
Title: Assistant Vice President
PPM AMERICA, INC., as Attorney-in-fact, on
behalf of Jackson National Life Insurance
Company,
by /s/ John Walding
-------------------------------------
Name: John Walding
Title: Managing Director
PPM SPYGLASS FUNDING TRUST,
by /s/ Kelly C. Walker
-------------------------------------
Name: Kelly C. Walker
Title: Authorized Agent
SENIOR DEBT PORTFOLIO
by BOSTON MANAGEMENT AND RESEARCH as
Investment Advisor,
by /s/ Payson F. Swaffield
-------------------------------------
Name: Payson F. Swaffield
Title: Vice President
SRF TRADING, INC.,
by /s/ Kelly C. Walker
-------------------------------------
Name: Kelly C. Walker
Title: Vice President
STEIN ROE FLOATING RATE LIMITED LIABILITY
COMPANY,
by /s/ James R. Fellows
-------------------------------------
Name: James R. Fellows
Title: Vice President, Stein Roe &
Farnham Incorporated, as
Advisor to the Stein Roe
Floating Rate Limited
Liability Company
EATON VANCE INSTITUTIONAL SENIOR LOAN FUND,
by: Eaton Vance Management as Investment
Advisor
by /s/ Payson F. Swaffield
-------------------------------------
Name: Payson F. Swaffield
Title: Vice President
13
Schedule I
Declining Lenders
None.