Exhibit 4.1(j)
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 One, N.A., as Trustee ("Trustee") under the Indenture (as
defined below).
W I T N E S S E T H
WHEREAS, Company and Trustee have entered into an Indenture of even
date herewith (as the same may be amended, modified or supplemented from time to
time, the "Indenture") among PEI Holdings, Inc. ("PEI"), Company, various other
affiliates of PEI, and Trustee, governing the terms of certain Senior Secured
Notes ("Notes") issued by PEI;
WHEREAS, it is required under the Indenture 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
facilitate the issuance of the Notes;
NOW, THEREFORE, in consideration of the premises set forth herein
and for other good and valuable consideration, receipt and sufficiency of which
are hereby acknowledged, Company hereby agrees with Trustee, for the benefit of
Trustee and Holders as follows:
1. Reference to Indenture. Terms defined in the Indenture and not
otherwise defined herein shall have the respective meanings provided for in the
Indenture. In addition, "Permitted Liens" means those Liens permitted by Section
4.08 of the Indenture.
2. Pledge. To secure the payment and performance of the "Secured
Obligations" (as defined in Section 3 below), Company hereby pledges and
hypothecates to Trustee, for the benefit of Trustee and Holders, and grants to
Trustee, for the benefit of Trustee and Holders, 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
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(c) all proceeds of any of the foregoing.
3. Secured Obligations. This Agreement secures the payment and
performance of Company's obligations under the Indenture and each Security
Document including, without limitation, this Agreement (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, to the extent not
delivered to and held by Bank of America, N.A., as Agent ("Administrative
Agent") under the Credit Agreement in accordance with the Collateral Documents
(as defined in the Credit Agreement) ("BA Security Documents"), be delivered to
and held by or on behalf of Trustee, 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 Trustee. Trustee 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 Trustee or any of its
nominees any or all of the Pledged Collateral. In addition, in connection with
the exercise of the remedies pursuant to Section 12 below following the
occurrence and during the continuance of an Event of Default, Trustee 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 date hereof. 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 date hereof.
(b) Upon the filing of all appropriate financing statements under
the Uniform Commercial Code, all steps necessary to create and perfect a valid
and perfected second priority security interest in the Pledged Collateral in
favor of Trustee, 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 (as defined in the Credit Agreement) 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 Trustee 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, (iii) as to which the
failure of which to obtain would not be reasonably likely to have a Material
Adverse Effect (as defined in the Security Agreement
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dated as of the date hereof between Company and Trustee) and (iv) as set forth
in the Intercreditor Agreement).
(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
Trustee'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 Trustee to exercise and enforce the
rights and remedies of Trustee 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 Trustee's reasonable
request, appear in and defend any action or proceeding that may affect Company's
title to or Trustee's security interest in the Pledged Collateral; and (ii)
promptly after the purchase or other acquisition thereof, deliver to Trustee, to
the extent not delivered to and held by the Administrative Agent pursuant to the
BA Security Documents, all Pledged Membership Interests hereunder.
(b) Company will, promptly upon request, provide to Trustee all
information and evidence it may reasonably request concerning the Pledged
Collateral to enable Trustee 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 Trustee, to the extent
not delivered to and held by the Administrative Agent pursuant to the BA
Security Documents, such Pledged Membership Interests as required by Section 4
above, together with the other documents required under Section 4 above.
7. Voting Rights; Distributions; Etc.
(a) So long as no Event of Default shall have occurred and is
continuing and Trustee 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 Trustee'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.
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(ii) To the extent permitted under the Indenture, Company shall be
entitled to receive (A) any cash distributions 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
Trustee to Company of Trustee's intent to exercise its rights hereunder,
and upon delivery of such notice become vested in Trustee who shall
thereupon have the sole right to exercise such voting and other consensual
rights, subject to the rights of the Administrative Agent under the BA
Security Documents and the Intercreditor Agreement. In order to effect the
foregoing, Company hereby grants Trustee an irrevocable proxy to vote the
Pledged Collateral and Company agrees to execute such other proxies as
Trustee shall reasonably require.
(ii) All rights of Company to receive and retain any cash
distributions and other distributions shall cease upon notice by Trustee
to Company and any such cash distributions or other distributions paid or
payable with respect to any of the Pledged Collateral, subject to the
rights of the Administrative Agent under the BA Security Documents and the
Intercreditor Agreement, shall be paid to Trustee and held by Trustee 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 Trustee
elects to apply such cash distributions and other distributions to the
Secured Obligations (any such application to be in such order and manner
set forth in Section 6.10 of the Indenture). 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
Trustee, shall be segregated from other funds of Company and shall be
forthwith paid over to Trustee as Pledged Collateral in the same form as
so received (with any necessary endorsement) to the extent not paid to the
Administrative Agent pursuant to the BA Security Documents and the
Intercreditor Agreement.
8. Transfers and Other Liens; Additional Membership Interests.
(a) Except as permitted under the Indenture and the Security
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
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Trustee'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. Attorney-in-Fact. Company hereby irrevocably appoints Trustee 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, Trustee or Holders or otherwise, from time to time in Trustee's
discretion to take any action (including completion and presentation of any
proxy) and to execute any instrument that Trustee 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 Trustee was the absolute owner thereof for all purposes, and to do, at
Trustee's option and Company's expense, at any time or from time to time, all
acts and things that Trustee deems necessary to protect, preserve or realize
upon the Pledged Collateral. Company hereby ratifies and approves all acts of
Trustee made or taken pursuant to this Section 9. Except as specifically set
forth in Section 11 hereof, neither Trustee nor any Person designated by Trustee
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.
10. Trustee May Perform. If Company fails to perform any agreement
contained herein, Trustee may itself perform, or cause performance of, such
agreement, and the expenses of Trustee 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 Trustee with Respect to the Pledged
Collateral. The powers conferred on Trustee 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 safe custody of any Pledged Collateral
in its possession and the accounting for monies actually received by it
hereunder, Trustee shall have no duty with respect to any Pledged Collateral in
its possession (or in the possession of any agent or bailee). Trustee 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 Trustee 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 Trustee 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
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not Trustee 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 Trustee 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) Trustee 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 Trustee
may also, without notice except as specified below, cause the Pledged Collateral
or any part thereof to be sold in one or more parcels at public or private sale,
at any exchange, broker's board or at any of Trustee's offices or elsewhere, for
cash, on credit, or for future delivery, at such price or prices and upon such
other terms as Trustee 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,
Trustee may bid (which bid may be, in whole or in part, in the form of discharge
of the Secured Obligations) for the purchase of the Pledged Collateral or any
portion thereof. Trustee shall not be obligated to cause to make any sale of
Pledged Collateral regardless of notice of sale having been given. Trustee may
cause to 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 Trustee 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 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 Trustee to
exercise, and no delay in exercising and no course of dealing with respect to,
any power, privilege or right under the Indenture or this Agreement or other
Security Documents shall operate as a waiver thereof; nor shall any single or
partial exercise by Trustee of any power, privilege or right under the Indenture
or this Agreement or any of the other Security Documents 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 Indenture and
other
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Security 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 6.10
of the Indenture.
15. Expenses. Company shall promptly pay to Trustee all reasonable
costs and expenses of Trustee (including reasonable Attorney Costs) in
connection with protecting or perfecting Trustee'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 Indenture or any of the other Security Documents.
16. Termination of Security Interests; Release of Collateral. Upon
payment and performance in full of all Secured Obligations, 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, Trustee will, at the
expense of Company, return to Company all Pledged Collateral then in Trustee'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 Trustee.
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 Trustee 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 Trustee in accordance with Section
12.03 of the Indenture.
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 assigns, except that Company may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Trustee and each Holder.
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 Trustee 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,
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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 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 TRUSTEE SHALL
RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
INDENTURE OR ANY OTHER SECURITY DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF ILLINOIS SITTING IN XXXX COUNTY, ILLINOIS OR OF THE UNITED STATES FOR
THE NORTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, COMPANY AND Trustee CONSENT, FOR THEMSELVES AND IN RESPECT OF THEIR
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. COMPANY AND Trustee
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 THE INDENTURE OR ANY SECURITY DOCUMENT OR OTHER DOCUMENT RELATED THERETO.
COMPANY AND Trustee 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.
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 THE INDENTURE OR ANY SECURITY 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 THE INDENTURE OR ANY SECURITY 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
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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 Trustee or any Holder in the
exercise of, and no course of dealing with respect to, any power, right or
privilege under the Indenture or this Agreement or any other Security 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 Indenture, this Agreement, the other Security Documents or by
law afforded are cumulative to, and not exclusive of, any rights or remedies
otherwise available and shall be available to Trustee until the Secured
Obligations have been indefeasibly paid in full.
(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/ Xxxxxx Xxxxxxxx
------------------------------------
Its Treasurer
Address For Notices:
Playboy Entertainment Group, Inc.
c/o PEI Holdings, Inc.
000 Xxxxx Xxxx Xxxxx Xxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
Attn: Senior Vice President -
Treasurer and Strategic Planning
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BANK ONE, N.A.
as Trustee
By /s/ Xxxxxx X. Xxxxxx
------------------------------------
Its Vice President
Address for notices:
1 Bank One Plaza
Mail Code IL1-0430
Xxxxxxx, XX 00000-0000
Fax: 000-000-0000
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SCHEDULE I
TO PLEDGE AGREEMENT
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Ownership Percentage Percentage of
Interest of Interest Interest Pledged
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Playboy TV International, LLC 100% 100%
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