Exhibit 10.9(i)
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Agreement") is dated as of March 11,
2003 and is between Playboy Entertainment Group, Inc., a Delaware corporation
("Company"), and Bank of America, N.A., as agent for "Lenders" (as defined
below).
W I T N E S S E T H
WHEREAS, pursuant to a Credit Agreement of even date herewith (as
the same may be amended, modified or supplemented from time to time, the "Credit
Agreement") among PEI Holdings, Inc. ("Borrower"), the various financial
institutions as are, or may from time to time become, parties thereto
("Lenders"), and Bank of America, N.A., as a Lender and as agent for the Lenders
("Agent"), Lenders have extended commitments to make credit extensions to
Borrower;
WHEREAS, pursuant to a Master Corporate Guaranty of even date
herewith (as the same may be amended, modified or supplemented from time to
time, the "Guaranty") among Company, various other affiliates of Borrower,
Lenders and Agent, Company has guaranteed the Borrower Obligations (as defined
in the Guaranty);
WHEREAS, it is a condition precedent to the making of the initial
Credit Extension and extension of other financial accommodations under the
Credit Agreement that Company shall have granted the pledge and security
interests contemplated by this Agreement, and Company desires to grant such
pledge and security interests in order to induce Lenders to extend credit to
Borrower under the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and provide other financial accommodations under
the Credit Agreement, Company hereby agrees with Agent, for the benefit of Agent
and Lenders as follows:
1. Reference to Credit Agreement. Terms defined in the Credit
Agreement and not otherwise defined herein shall have the respective meanings
provided for in the Credit Agreement. In addition, "Permitted Liens" means those
Liens permitted by Section 7.01 of the Credit Agreement.
2. Pledge. To secure the payment and performance of the "Secured
Obligations" (as defined in Section 3 below), Company hereby pledges and
hypothecates to Agent, for the benefit of Agent and Lenders, and grants to
Agent, for the benefit of Agent and Lenders, a security interest in, the
following (the "Pledged Collateral"):
(a) all of Company's right, title and interest as the sole member in
Playboy TV International, LLC (the "LLC") in the membership interests or units
in the LLC (the "Pledged Membership Interests") and the certificates, if any,
representing the Pledged Membership Interests, including without limitation, all
of Company's right to receive
distributions at any time or from time to time of cash and other property, real,
personal or mixed, from the LLC upon complete or partial liquidation thereof or
otherwise;
(b) all additional membership interests and other equity securities
of the LLC at any time acquired by Company in any manner, and the certificates,
if any, representing such additional membership interests and other equity
securities (and any such additional membership interests and other equity
securities shall constitute part of the Pledged Membership Interests under this
Agreement), and all membership interest distributions, cash distributions, cash,
instruments and other rights, property or proceeds and products from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such membership interests; and
(c) all proceeds of any of the foregoing.
3. Security for Obligations. This Agreement secures the payment and
performance of the Obligations (as defined in the Credit Agreement) and the
obligations of Company under this Agreement and the Guaranty (all such debts,
obligations and liabilities of Company being collectively called the "Secured
Obligations").
4. Delivery of Pledged Collateral. All certificates, if any,
representing or evidencing the Pledged Collateral shall be delivered to and held
by or on behalf of Agent pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed undated
instruments of transfer or assignment in blank, all in form and substance
reasonably satisfactory to Agent. Agent shall have the right, at any time in its
discretion and without notice to Company if an Event of Default has occurred and
is continuing to transfer to or to register in the name of Agent or any of its
nominees any or all of the Pledged Collateral. In addition, in connection with
the exercise of its remedies pursuant to Section 12 below following the
occurrence and during the continuance of an Event of Default, Agent shall have
the right to exchange certificates or instruments representing or evidencing
Pledged Collateral for certificates or instruments of smaller or larger
denominations.
5. Representations and Warranties. Company represents and warrants
as follows:
(a) Schedule I hereto completely and accurately sets forth the
number of the issued and outstanding membership interests of the LLC held by
Company as of the Closing Date. The Pledged Membership Interests held by Company
constitute the percentage of the issued and outstanding membership interests of
the LLC set forth on Schedule I hereto as of the Closing Date.
(b) Upon the filing of all appropriate financing statements under
the UCC and the agreement by the LLC that it will comply with instructions
originated by Agent without further consent by Company, all steps necessary to
create and perfect a valid and
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perfected first priority security interest in the Pledged Collateral in favor of
Agent, securing the payment of the Secured Obligations, will have been taken.
(c) No consent of any other Person and no consent, authorization,
approval or other action by, and no notice to or filing with, any Governmental
Authority is required either (i) for the pledge by Company of the Pledged
Collateral pursuant to this Agreement or for the execution, delivery or
performance of this Agreement by Company or (ii) for the exercise by Agent of
the voting or other rights provided for in this Agreement or the remedies in
respect of the Pledged Collateral pursuant to this Agreement (except (i) as has
already been obtained or taken , (ii) as may be required in connection with any
disposition of the Pledged Collateral by laws affecting the offering and sale of
securities generally and (iii) as to which the failure of which to obtain would
not be reasonably likely to have a Material Adverse Effect).
(d) None of the Pledged Membership Interests constitutes margin
stock, as defined in Regulation U of the Board of Governors of the Federal
Reserve System.
(e) As of the date hereof, there are no certificates, instruments or
other documents evidencing the Pledged Collateral.
6. Further Assurances.
(a) Company will, from time to time, at Company's expense, and upon
Agent's reasonable request, promptly execute and deliver all further instruments
and documents and take all further action that may be reasonably necessary, in
order to perfect and protect any security interest granted or purported to be
granted hereby, to enable Agent to exercise and enforce the rights and remedies
of Agent hereunder with respect to any Pledged Collateral or to carry out the
provisions and purposes hereof. Without limiting the generality of the
foregoing, Company will: (i) upon Agent's reasonable request, appear in and
defend any action or proceeding that may affect Company's title to or Agent's
security interest in the Pledged Collateral; and (ii) promptly after the
purchase or other acquisition thereof, deliver to Agent all Pledged Membership
Interests hereunder.
(b) Company will, promptly upon request, provide to Agent all
information and evidence it may reasonably request concerning the Pledged
Collateral to enable Agent to enforce the provisions of this Agreement.
(c) Company will, promptly upon the purchase or acquisition of any
additional membership interests of the LLC, deliver to Agent such Pledged
Membership Interests as required by Section 4 above, together with the other
documents required under Section 4 above.
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7. Voting Rights; Distributions; Etc.
(a) So long as no Event of Default shall have occurred and is
continuing and Agent shall not have delivered to Company notice of its election
to exercise the rights set forth in subsection (b) below:
(i) Company shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof; provided, however, that Company shall not exercise or shall
refrain from exercising any such right if, in Agent's reasonable judgment,
such action or inaction would have a material adverse effect on the value
of the Pledged Collateral taken as a whole or any material part thereof.
(ii) To the extent permitted under the Credit Agreement, Company
shall be entitled to receive (A) any cash distribution and other cash
distributions paid or payable with respect to any of the Pledged
Collateral, and (B) any and all instruments, chattel paper and other
rights, property or proceeds and products (other than cash or checks)
received, receivable or otherwise distributed in respect of any Pledged
Collateral.
(b) If an Event of Default has occurred and is continuing:
(i) All rights of Company to exercise the voting and other
consensual rights which Company would otherwise be entitled to exercise
pursuant to subsection 7(a)(i), shall cease to be effective upon notice by
Agent to Company of Agent's intent to exercise its rights hereunder, and
upon delivery of such notice become vested in Agent who shall thereupon
have the sole right to exercise such voting and other consensual rights.
In order to effect the foregoing, Company hereby grants Agent an
irrevocable proxy to vote the Pledged Collateral and Company agrees to
execute such other proxies as Agent shall reasonably require.
(ii) All rights of Company to receive and retain any cash
distribution and other distributions shall cease upon notice by Agent to
Company and any such cash distribution or other distributions paid or
payable with respect to any of the Pledged Collateral shall be paid to
Agent and held by Agent to secure the Secured Obligations until the
earlier of (a) such time as such Event of Default is cured or waived and
(b) such time as the Required Lenders elect to apply such cash
distribution and other distributions to the Secured Obligations (any such
application to be in such order and manner set forth in Section 8.03 of
the Credit Agreement). All cash distributions and distributions which are
received by Company contrary to the provisions of this subsection 7(b)
shall be received in trust for the benefit of Agent, shall be segregated
from other funds of Company and shall be forthwith paid over to Agent as
Pledged Collateral in the same form as so received (with any necessary
endorsement).
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8. Transfers and Other Liens; Additional Membership Interests.
(a) Except as permitted under the Credit Agreement and the other
Loan Documents, Company agrees that Company will not (i) encumber, sell, assign
(by operation of law or otherwise) or otherwise dispose of, or grant any option
with respect to, any of the Pledged Collateral or (ii) enter into any other
Contractual Obligations (including without limitation any voting or member
agreement) which could reasonably be expected to restrict or inhibit Agent's
rights or ability to vote or sell or otherwise dispose of the Pledged Collateral
or any part thereof after the occurrence of an Event of Default.
(b) Company agrees that it will not cause the LLC to issue any
membership interests or other securities (including any warrants, options,
subscriptions or other Contractual Obligations for the purchase of membership
interests or securities convertible into membership interests) in addition to or
in substitution for the Pledged Membership Interests.
9. Agent Appointed Attorney-in-Fact. Company hereby irrevocably
appoints Agent as Company's attorney-in-fact effective during the continuance of
an Event of Default, with full authority in the place and stead of Company and
in the name of Company, Agent or otherwise, from time to time in Agent's
discretion to take any action (including completion and presentation of any
proxy) and to execute any instrument that Agent may deem necessary or advisable
to accomplish the purposes of this Agreement, including, without limitation (but
subject to the other provisions hereof), to (i) receive, endorse and collect all
instruments made payable to Company representing any distribution in respect of
the Pledged Collateral or any part thereof; (ii) exercise the voting and other
consensual rights pertaining to the Pledged Collateral; and (iii) sell,
transfer, pledge, make any agreement with respect to or otherwise deal with any
of the Pledged Collateral as fully and completely as though Agent was the
absolute owner thereof for all purposes, and to do, at Agent's option and
Company's expense, at any time or from time to time, all acts and things that
Agent deems necessary to protect, preserve or realize upon the Pledged
Collateral. Company hereby ratifies and approves all acts of Agent made or taken
pursuant to this Section 9. Except as specifically set forth in Section 11
hereof, neither Agent nor any Person designated by Agent shall be liable for any
acts or omissions or for any error of judgment or mistake of fact or law. This
power of attorney, being coupled with an interest, shall be irrevocable until
all Secured Obligations shall have been paid in full and the Credit Agreement
shall have been terminated.
10. Agent May Perform. If Company fails to perform any agreement
contained herein, Agent may itself perform, or cause performance of, such
agreement, and the expenses of Agent incurred in connection therewith shall be
payable by Company under Section 15 hereof, and be a part of the Secured
Obligations.
11. Limitation on Duty of Agent with Respect to the Pledged
Collateral. The powers conferred on Agent hereunder are solely to protect its
interest in the Pledged Collateral and shall not impose any duty on it to
exercise any such powers. Except for the
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safe custody of any Pledged Collateral in its possession and the accounting for
monies actually received by it hereunder, Agent shall have no duty with respect
to any Pledged Collateral in its possession (or in the possession of any agent
or bailee). Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if it takes such
action for that purpose as Company reasonably requests in writing, but failure
of Agent to comply with any such request at any time shall not of itself be
deemed a failure to exercise reasonable care. It is expressly agreed that Agent
shall have no responsibility for (i) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other matters relative
to any Pledged Collateral, whether or not Agent has or is deemed to have
knowledge of such matters, or (ii) taking any necessary steps to preserve rights
against any parties with respect to any Pledged Collateral, but Agent may do so
and, subject to Section 15, all expenses incurred in connection therewith shall
be payable by and for the sole account of Company.
12. Remedies upon Event of Default. If any Event of Default shall
have occurred and is continuing:
(a) Agent may exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party under the Uniform
Commercial Code (the "UCC") in effect in the State of Illinois at that time,
whether or not the UCC applies to the affected Pledged Collateral, and Agent may
also, without notice except as specified below, sell the Pledged Collateral or
any part thereof in one or more parcels at public or private sale, at any
exchange, broker's board or at any of Agent's offices or elsewhere, for cash, on
credit, or for future delivery, at such price or prices and upon such other
terms as Agent deems commercially reasonable. Company agrees that, to the extent
notice of sale shall be required by law, at least ten (10) days' prior written
notice to Company of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
At any sale of the Pledged Collateral, if permitted by law, Agent may bid (which
bid may be, in whole or in part, in the form of cancellation of indebtedness)
for the purchase of the Pledged Collateral or any portion thereof. Agent shall
not be obligated to make any sale of Pledged Collateral regardless of notice of
sale having been given. Agent may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(b) Company recognizes that Agent may be unable to effect a public
sale of all or part of the Pledged Collateral and may be compelled to resort to
one or more private sales to a restricted group of purchasers who will be
obligated to agree, among other things, to acquire such Pledged Collateral for
their own account, for investment and not with a view to the distribution or
resale thereof. Company acknowledges that any such private sales may be at
prices and on terms less favorable to the seller than if sold at public sales
and agrees that such private sales shall be deemed to have been made in a
commercially reasonable manner. To the extent permitted by law, Company hereby
specifically waives all rights of
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redemption, stay or appraisal which Company has or may have under any law now
existing or hereafter enacted.
13. Remedies Cumulative. No failure on the part of Agent to
exercise, and no delay in exercising and no course of dealing with respect to,
any power, privilege or right under the other Loan Documents or this Agreement
shall operate as a waiver thereof; nor shall any single or partial exercise by
Agent of any power, privilege or right under any of the other Loan Documents or
this Agreement preclude any other or further exercise thereof or the exercise of
any other such power, privilege or right. The powers, privileges and rights in
this Agreement and the Loan Documents are cumulative and are not exclusive of
any other remedies provided by law.
14. Application of Proceeds. If an Event of Default has occurred and
is continuing, the proceeds of any sale of, or other realization upon, all or
any part of the Pledged Collateral shall be applied as provided in Section 8.03
of the Credit Agreement.
15. Expenses. Subject to the provisions of Section 10.04 of the
Credit Agreement, Company shall promptly pay to Agent all reasonable costs and
expenses of Agent (including reasonable Attorney Costs) in connection with
protecting or perfecting Agent's security interest in the Pledged Collateral or
in connection with any matters contemplated by or arising out of this Agreement
(including without limitation the enforcement of this Agreement), the Credit
Agreement or any of the other Loan Documents.
16. Termination of Security Interests; Release of Collateral. Upon
payment and performance in full of all Secured Obligations and termination of
the Credit Agreement, the security interests granted herein shall automatically
terminate and all rights to the Pledged Collateral shall revert to Company. Upon
such termination of the security interests or release of any Pledged Collateral,
Agent will, at the expense of Company, return to Company all Pledged Collateral
then in Agent's possession and execute and deliver to Company such documents as
Company shall reasonably request to evidence the termination of the security
interests or the release of such Pledged Collateral which has not yet
theretofore been sold or otherwise applied or released. Such release shall be
without recourse or warranty to Agent.
17. Amendments, Waivers and Consents. No amendment, modification,
termination or waiver of any provision of this Agreement, or consent to any
departure by Company therefrom, shall in any event be effective without the
written concurrence of Agent and Company.
18. Notices. All notices, requests and other communications
hereunder shall be given to Company at the facsimile number and address set
forth on the signature page hereof and to Agent in accordance with Schedule
10.02 of the Credit Agreement.
19. Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and
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assigns, except that Company may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of Agent and
each Lender.
20. Waiver. In addition to any other waivers herein, Company waives
to the greatest extent it may lawfully do so, and agrees that it shall not at
any time insist upon, plead or in any manner whatever claim or take the benefit
or advantage of, any appraisal, valuation, stay, extension, marshalling of
assets, redemption or similar law, or exemption, whether now or at any time
hereafter in force, which may delay, prevent or otherwise affect the performance
by Company of its obligations under, or the enforcement by Agent of, this
Agreement. Company hereby waives diligence, presentment and demand (whether for
nonpayment or protest or of acceptance, maturity, extension of time, change in
nature or form of the Secured Obligations, acceptance of further security,
release of further security, composition or agreement arrived at as to the
amount of, or the terms of the Secured Obligations, notice of adverse change in
Company's or any other Person's financial condition or any other fact which
might materially increase the risk to Company) with respect to any of the
Secured Obligations or all other demands whatsoever. Company hereby waives, to
the extent it may lawfully do so, any requirement on the part of any holder of
any Note to mitigate the damages resulting from any default under any Note.
21. Applicable Law.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF ILLINOIS APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED, THAT COMPANY AND AGENT SHALL
RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS
SITTING IN COOK COUNTY, ILLINOIS OR OF THE UNITED STATES FOR THE NORTHERN
DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, COMPANY
AND Agent CONSENT, FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. COMPANY AND Agent IRREVOCABLY WAIVE
ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN
DOCUMENT OR OTHER DOCUMENT RELATED THERETO. COMPANY AND Agent WAIVE PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY
OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.
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22. Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH
RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR
TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
23. Failure or Indulgence Not Waiver; Remedies Cumulative;
Severability.
(a) No failure or delay on the part of Agent or any Lender in the
exercise of, and no course of dealing with respect to, any power, right or
privilege under the Credit Agreement or this Agreement or any other Loan
Document shall impair such power, right or privilege or be construed to be a
waiver of any Default or Event of Default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or any other right, power or privilege. All rights
and remedies existing under the Credit Agreement, this Agreement, the other Loan
Documents or by law afforded are cumulative to, and not exclusive of, any rights
or remedies otherwise available and shall be available to Agent until the
Secured Obligations have been indefeasibly paid in full and the termination of
all Commitments.
(b) The invalidity, illegality or unenforceability of any provision
in or obligation under this Agreement shall not affect or impair the validity,
legality or enforceability of the remaining provisions or obligations under this
Agreement.
24. Survival of Representations. All representations and warranties
of Company contained in this Agreement shall survive the execution and delivery
of this Agreement.
25. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
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Witness the due execution hereof by the duly authorized officer of
the undersigned as of the day first above written.
PLAYBOY ENTERTAINMENT GROUP, INC.
By /s/ Robert Campbell
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Its Treasurer
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Address for notices:
Playboy Entertainment Group, Inc.
c/o PEI Holdings, Inc.
680 North Lake Shore Drive
Chicago, Illinois 60611
Attn: Executive Vice President,
Finance and Operations and
Chief Financial Officer
Facsimile: (312) 649-1395
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SCHEDULE I
TO PLEDGE AGREEMENT
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Ownership Percentage of Percentage of
Interest Interest Interest Pledged
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Playboy TV International, LLC 100% 100%
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