Intercreditor Agreement - Bank of America NA and Bank One NA
INTERCREDITOR AGREEMENT
This Intercreditor Agreement is dated as of March 11, 2003 and is
between Bank of America, N.A., as agent, and Bank One, N.A., as trustee.
RECITALS:
A. PEI Holdings, Inc., a Delaware corporation ("Borrower") and
Trustee (defined below) are parties to a certain Indenture of even date herewith
among Trustee, Borrower and the Loan Parties (as amended from time to time in
accordance with Section 7.08 of the Credit Agreement, the "Indenture"),
pertaining to certain senior secured notes due 2010 issued pursuant to the
Indenture evidencing term indebtedness of Borrower in the aggregate principal
amount of $115,000,000.
B. Borrower, BA (defined below) and the other Lenders (defined
below) are parties to a certain Credit Agreement of even date herewith (as
amended, restated or modified from time to time, the "Credit Agreement"),
pursuant to which Lenders have agreed to make loans and extend other financial
accommodations to Borrower.
C. Playboy Enterprises, Inc., Borrower and certain of its
subsidiaries have granted BA and Trustee liens against and security interests in
the Collateral (defined below) as security for payment and performance of the BA
Claim and the Trustee Claim (each as defined below).
D. To induce BA and the other Lenders to enter into the Credit
Agreement and Trustee to enter into the Indenture, BA and Trustee have each
required the other to enter into this Agreement so as to set forth the relative
priority of their respective liens against and security interests in the
Collateral and certain other rights, priorities and limitations on the exercise
of remedies as between BA and Trustee.
THEREFORE, the parties agree as follows:
1. Definitions.
1.1. BA means Bank of America, N.A. in its capacity as administrative
agent under the Credit Agreement and each successor administrative agent under
the Credit Agreement.
1.2. BA Claim means all "Obligations" as defined in the Credit Agreement,
including, without limitation, all sums loaned and advanced to or for the
benefit of Borrower at any time, any interest thereon, including Post-Petition
Interest, any future advances, obligations with respect to letters of credit
issued or guaranteed by any Lender for the account of Borrower, all fees,
indemnification amounts, breakage costs, all amounts owed to BA or any Lender
under or in connection with any Swap Contract (as defined in the Credit
Agreement), and any costs of collection or enforcement, including, without
limitation, reasonable attorneys' and paralegals' fees and costs.
<PAGE>
1.3. BA Documents means the Credit Agreement, each note executed by
Borrower and payable to the order of a Lender, each Collateral Document (as
defined in the Credit Agreement), the Agent Fee Letter (as defined in the Credit
Agreement) and the Loan Guaranties (as defined in the Credit Agreement), each as
amended or supplemented from time to time.
1.4. BA Senior Collateral means the Collateral described in Section 2.1(a)
in which BA has a senior lien or security interest.
1.5. Bankruptcy Code means the United States Bankruptcy Code (11 U.S.C.
ss. 101 et seq.).
1.6. Claim means, as applicable, the BA Claim or the Trustee Claim,
collectively, the "Claims."
1.7. Collateral means all property and interests in property now owned or
hereafter acquired by any Loan Party in or upon which a security interest or
mortgage lien is granted to BA or Trustee under the Security Documents.
1.8. Enforcement Action means with respect to a Claim, the demand for
payment or acceleration of such Claim, the repossession any material amount of
Collateral, the commencement or prosecution of enforcement of any of the rights
and remedies under, as applicable, the Trustee Documents, the BA Documents, or
applicable law with respect to such Claim, including judicial or UCC
foreclosure, provided that Enforcement Action shall not include the filing of a
claim in an Insolvency Proceeding.
1.9. Enforcement Notice means a written notice delivered by the Enforcing
Party to the other Party stating that an "Event of Default" (as defined in the
Indenture or the Credit Agreement, respectively) has occurred and is continuing
and that an Enforcement Period has commenced.
1.10. Enforcing Party means BA in the case of Enforcement Action with
respect to the BA Claim and Trustee in the case of the Enforcement Action with
respect to the Trustee Claim.
1.11. Enforcement Period means the period of time following the receipt by
either Trustee or BA of an Enforcement Notice until the Trustee Claim is Paid In
Full (if the Trustee is the Enforcing Party) or the BA Claim is Paid In Full (if
BA is the Enforcing Party), provided that if (a) the Enforcing Party has not
commenced foreclosure or other direct action to collect its Claim within ninety
(90) days after delivery of the Enforcement Notice or (b) at any time after the
commencement of such foreclosure or other direct action to collect its claim,
the Enforcing Party ceases to prosecute such Enforcement Action with reasonable
diligence, then the Enforcement Period with respect to such Enforcement Notice
shall terminate, provided that if Hefner exercises the Hefner Option (as each of
those terms is defined under the Credit Agreement), the Enforcement Period with
respect to the BA Claim shall be deemed extended by the number of days BA is
required under Section 7.05 of the Credit Agreement (as that section was in
effect as of the date hereof) to forebear in exercising its right to foreclose
the Deed of Trust. A notice to Hefner by either BA or Trustee that Hefner has 30
days to exercise the Hefner Option shall not constitute an Enforcement Notice.
-2-
<PAGE>
1.12. Insolvency Proceeding means 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 any Loan
Party.
1.13. Lenders means the Lenders (including Bank of America, N.A. in its
individual capacity) from time to time under and as defined in the Credit
Agreement.
1.14. Loan Party means Parent, Borrower and each subsidiary of Borrower
which is now or hereafter becomes a party to any Collateral Document as defined
in the Credit Agreement.
1.15. Noteholder means any holder of a Note or Notes.
1.16. Paid In Full means, in the case of the BA Claim, the aggregate
outstanding, unpaid amount of the BA Claim has been paid in full in cash and all
commitments to make loans or extend other financial accommodations have
terminated or, in the case of the Trustee Claim, the aggregate outstanding
unpaid amount of the Trustee Claim has been paid in full in cash or the
requirements of Section 8.02 or 8.03 of the Indenture have been complied with.
1.17. Parent means Playboy Enterprises, Inc., a Delaware corporation and
its successors.
1.18. Party means BA or Trustee.
1.19. Post-Petition Interest means interest at the contract rate under the
BA Documents or the Trustee Documents, as applicable, accruing subsequent to the
filing of any Insolvency Proceeding as to Parent or any Loan Party whether or
not such interest is an allowable claim in any such Insolvency Proceeding.
1.20. Real Estate means the real property commonly known as the Playboy
Mansion encumbered by the Deeds of Trust in favor of BA and Trustee and, subject
to the limitations set forth in the Security Documents, the right to use the
Trademark "Playboy Mansion" in connection with the marketing and use thereof.
1.21. Security Documents means, collectively, the Collateral Documents as
defined in the Credit Agreement and the Security Documents as defined in the
Indenture.
1.22. Trademarks shall have the meaning ascribed thereto in the Security
Documents, provided, however, as used herein, Trademarks shall also include
proceeds thereof.
1.23. Trustee means Bank One, N.A., as trustee, and each successor trustee
under the Indenture.
1.24. Trustee Claim means all "Obligations" (as defined in the Indenture)
of Loan Parties to Trustee as set forth in the Trustee Documents, including,
without limitation, the
-3-
<PAGE>
principal of, interest (including Post-Petition Interest) on and any premium
with respect to the Notes and any other amounts due and owing under the Trust
Documents plus any costs of collection or enforcement, including, without
limitation, reasonable attorneys' and paralegals' costs, fees and any prepayment
premiums.
1.25. Trustee Documents means the Indenture, each of the Notes (as defined
in the Indenture) and each Security Document (as defined in the Indenture), each
as amended or supplemented from time to time.
1.26. Trustee Senior Collateral means the Collateral described in Section
2.1(b) in which Trustee has a senior lien or security interest.
2. Intercreditor Agreement.
2.1. Lien Priorities. Notwithstanding the date, manner or order of
perfection of the security interests and liens granted to BA and Trustee, and
notwithstanding any provisions of the Uniform Commercial Code, or any applicable
law or decision or the BA Documents or the Trustee Documents, or whether either
BA or Trustee holds possession of all or any part of the Collateral, the
following, as between BA and Trustee, shall be the relative priority of the
security interests and liens of BA and Trustee in the Collateral:
(a) BA shall have a first and prior security interest or, as
applicable, mortgage lien, in all Collateral other than the Trademarks.
Trustee shall have a second and subordinate security interest in the
foregoing property and interests in such property and a second priority
and junior mortgage lien against the Real Estate; and
(b) Trustee shall have a first and prior security interest in the
Trademarks whether now owned or hereafter acquired by any Loan Party. BA
shall have a second and subordinate security interest in the Trademarks
whether now owned or hereafter acquired by any Loan Party.
Neither BA nor Trustee shall contest the validity, perfection, priority or
enforceability of any lien or security interest heretofore granted to the other
Party or granted in connection herewith and contemplated hereby. Notwithstanding
any failure of a Party to perfect its security interests in the Collateral or
any other defect in the security interests or obligations owing to such Party,
the priority and rights as between the parties hereto shall be as set forth
herein.
2.2. Distribution of Proceeds of Collateral.
(a) All proceeds of Collateral resulting from the sale or other
disposition of Collateral not in connection with or resulting from any
Enforcement Action or the closing of the sale of the Real Estate at a time
when no Default or Event of Default (each as defined in the Credit
Agreement) has occurred and is then continuing shall be distributed as
follows: (i) if the Collateral is the Real Estate, the proceeds shall be
distributed first to BA to the
-4-
<PAGE>
extent of the amount required, if any, to reduce the amount of the
Obligations to $10,000,000 and the balance, if any, to the Trustee for
application in accordance with the Indenture and (ii) if the Collateral is
not the Real Estate, the proceeds shall be applied in accordance with the
Indenture;
(b) All proceeds of Collateral resulting from any Enforcement
Action, the closing of the sale of the Real Estate or hazard or other
insurance claims when, in any such case, a Default or Event of Default
(each as defined in the Credit Agreement) has occurred and is then
continuing shall be distributed in accordance with the following
procedure, to the extent permitted by law:
(i) All proceeds of BA Senior Collateral shall be paid to BA
for application to the BA Claim with any residual proceeds after the
BA Claim is Paid In Full being paid to Trustee;
(ii) All proceeds of Trustee Senior Collateral shall be paid
to Trustee for application to the Trustee Claim with any residual
proceeds after the Trustee Claim is Paid In Full being paid to BA;
and
(iii) After the BA Claim and the Trustee Claim have been Paid
In Full, the balance of proceeds of Collateral, if any, shall be
paid to Borrower or as otherwise required by applicable law.
(c) Should any payment or distribution be received by either Party
which Party is not permitted to receive and retain pursuant to the terms
hereof, such Party shall receive and hold the same in trust, as trustee,
for the Party entitled to receive and retain such payment, and shall
forthwith deliver the same to such Party in precisely the form received
(except for endorsement or assignment where necessary), for application to
the Claim of such Party and, until so delivered, the recipient shall hold
the same in trust as the property of such Party entitled to the same. If a
Party obligated to make an endorsement or assignment pursuant to the
provisions of this Section 2.2 fails to make any such endorsement or
assignment, the permitted recipient of such payment or distribution, or
any of its officers or employees, is hereby irrevocably authorized to make
the same.
2.3. Enforcement Actions. Each of BA and Trustee agrees not to commence or
take any Enforcement Action until an Enforcement Notice has been given by such
Enforcing Party to the other Party. Subject to the foregoing, BA and Trustee
agree that during an Enforcement Period:
(a) BA may, at its option, take and continue any Enforcement Action
with respect to BA Senior Collateral and realize thereon, without the
prior written consent of Trustee, provided that during any Enforcement
Period with respect to the Trustee Senior Collateral BA shall not commence
or take any
-5-
<PAGE>
Enforcement Action or realize upon the Trustee Senior Collateral without
Trustee's prior written consent.
(b) Trustee may, at its option, take and continue any Enforcement
Action with respect to the Trustee Senior Collateral and realize thereon
without the prior written consent of BA, provided that during any
Enforcement Period with respect to the BA Senior Collateral, Trustee shall
not commence or take any Enforcement Action (including the notification of
account debtors or making any attempt to collect payment therefrom) or
realize upon any of the BA Senior Collateral without BA's prior written
consent.
(c) If both BA and Trustee elect to proceed with Enforcement Action,
then each shall proceed with the Enforcement Action of any security
interests in or liens on any Collateral in which it has a senior lien or
security interest as described in and provided by Section 2.1 without
prejudice to the other Party to join in any proceedings.
(d) Each Enforcing Party shall so notify the other Party at such
time as the Enforcing Party's Claim is Paid in Full.
2.4. Acknowledgment Regarding Trademarks. Notwithstanding any Enforcement
Action by Trustee against the Trademarks or the existence of an Enforcement
Period with respect thereto, Trustee hereby acknowledges and agrees that use of
any of the Trademarks shall be considered genuine with respect to (a) any
distribution of the Inventory; (b) any distribution of work-in-process inventory
completed by BA, its assigns, or any purchaser of any BA Senior Collateral; and
(c) any reproduction, distribution, performance, display or creation of any
derivative work based upon any work protected by the Copyrights (as defined in
the Security Documents) where the work incorporates any Trademark.
2.5. Maximum Amount of Senior Claims. At no time shall the aggregate
principal amount of the BA Claim (including, without limitation, hedging
obligations and swap obligations and the maximum amount available for drawing
under outstanding letters of credit) exceed $40,000,000 plus interest, fees,
costs and expenses, whether or not capitalized, accruing under the Credit
Agreement and advances to preserve, protect or enforce the interests of BA in
the Collateral. At no time shall the aggregate principal amount of the Trustee
Claim exceed $115,000,000 plus interest, fees, costs and expenses, whether or
not capitalized, and advances to preserve, protect or enforce the interests of
Trustee in the Collateral.
2.6. Accountings. BA and Trustee agree to render accountings to the other
upon request, giving effect to the application of proceeds of Collateral as
hereinbefore provided.
2.7. Notices of Defaults. BA and Trustee agree to endeavor to give to the
other copies of any notice of the occurrence of an Event of Default,
respectively, simultaneously with the sending of such notice to Borrower, but
the failure to do so shall not affect the validity of such notice or create a
cause of action against the Party failing to give such notice or create any
-6-
<PAGE>
claim or right on behalf of any third party. The sending or receipt of such
notice shall not obligate the recipient to cure such Event of Default.
2.8. Agency for Perfection. BA and Trustee each hereby appoint each other
as agent for purposes of perfecting their respective security interests and
liens in the Collateral. To the extent that either Party obtains possession of
Collateral in which the other Party has a senior priority under the terms
hereof, the Party having possession shall notify the other Party of such fact
and shall deliver such Collateral to the Party having the senior priority upon
request of such Party. Each Party shall be a bailee for the other Party with
respect to Collateral in such Party's possession. If directed by Borrower, the
bailee Party shall, after the Claim of such bailee Party has been Paid In Full,
deliver the Collateral in its possession to the other Party.
2.9. UCC Notices. In the event that BA or Trustee shall be required by the
Uniform Commercial Code or any other applicable law to give notice to the other
of intended disposition of Collateral, such notice shall be given in accordance
with Section 3.1 hereof and five (5) days' notice shall be deemed to be
commercially reasonable.
2.10. Post Bankruptcy Issues. If any Loan Party shall become the subject
of any Insolvency Proceeding under the Bankruptcy Code and if BA shall desire to
provide financing to such Loan Party under either Section 363 or Section 364 of
the Bankruptcy Code (without obtaining a priority lien under Section 364(d) on
the Trustee Senior Collateral) or BA consents to the use of cash collateral by
such Loan Party under Section 363 of the Bankruptcy Code, Trustee hereby agrees
as follows: (i) adequate notice to Trustee shall have been provided for such
financing if Trustee receives notice two (2) business days prior to the entry of
the order approving such financing and (ii) no objection will be raised by
Trustee to any such financing on the ground of a failure to provide "adequate
protection" for Trustee's junior lien position on the BA Senior Collateral so
long as the terms of such financing do not provide financing in excess of the
amounts or advance rates permitted pursuant to Section 2.5 hereof. For purposes
of this paragraph, notice of a proposed financing shall be deemed given upon the
giving of notice by telegram, facsimile (receipt confirmed) or hand delivery to
the Trustee, at the addresses and locations indicated in Section 3.1. This
Agreement shall be applicable both before and after the filing of any petition
by or against a Loan Party under the Bankruptcy Code and all references herein
to a Loan Party shall be deemed to apply to such Loan Party as
debtor-in-possession and all allocations of payments between BA and Trustee
shall, subject to any court order approving the financing of the Borrower as
debtor-in-possession, continue to be made after the filing thereof on the same
basis that the payments were to be applied prior to the date of the petition.
The Party with the junior priority position hereunder waives any right to (i)
seek relief from the automatic stay under Section 362 of the Bankruptcy Code
with respect to Collateral in which it has a junior lien, unless such relief has
been granted to the Party having the senior priority position hereunder and (ii)
object to any relief from the automatic stay under Section 362 of the Bankruptcy
Code sought by a Party with respect to Collateral in which the Party seeking
such relief has the senior priority position.
2.11. Information Sharing. Upon the occurrence and continuance of an
Enforcement Period, in the event that either BA or Trustee shall, in connection
with any Enforcement Action, receive possession or control of any books and
records which contain information identifying or
-7-
<PAGE>
pertaining to any of the property of any Loan Party in which the other Party has
been granted a lien, it shall notify the other Party that it has received such
books and records and shall, as promptly as practicable thereafter, make
available to the other Party duplicate copies of such books and records in the
same form as the original. All expenses incurred by either BA or Trustee in
performing its obligations under this paragraph shall be borne by Borrower and
shall constitute indebtedness under the respective Party's agreements with
Borrower. The failure of either Party to share information shall not create a
cause of action against the Party failing to share information or create any
claim on behalf of any Loan Party or any third party.
2.12. Obligations of the Loan Parties Unconditional. Nothing contained
herein is intended to or shall impair the obligations, liabilities and
indebtedness of Parent or the Loan Parties, which are absolute and
unconditional, to pay to the Claims as and when the same shall become due and
payable in accordance with the terms of the BA Documents and the Trustee
Documents, as applicable, or to affect the relative rights of Parent and the
Loan Parties and creditors of the Loan Parties other than BA, the Lenders,
Trustee and the Noteholders.
2.13. Reserved.
2.14. Continuing Obligations. This Agreement shall be irrevocable and
shall continue in effect until each Claim has been Paid In Full. This is a
continuing agreement and the Lenders may continue, at any time and without
notice to Trustee, to extend credit to or for the benefit of the Loan Parties on
the faith hereof.
2.15. Certain Waivers. Each of BA and Trustee hereby expressly waives all
notice of the acceptance by the other Party and, as applicable, the Lenders and
the Noteholders of the standstill, subordination and other provisions of this
Agreement and all the notices not specifically required pursuant to the terms of
this Agreement or under the UCC in connection with foreclosure on or sale of
assets whatsoever, and each of BA and Trustee expressly consents to reliance by
the other Party and the Lenders and Noteholders upon the subordination and other
agreements as herein provided. Trustee acknowledges that none of BA or any
Lender has made warranties or representations with respect to the due execution,
legality, validity, completeness or enforceability of the BA Documents or the
collectibility of the BA Claim. Trustee, BA and each Lender shall be entitled to
manage and supervise its financial arrangements with each Loan Party in
accordance with its usual practices, modified from time to time as it deems
appropriate under the circumstances, without affecting the validity or
enforceability of this Agreement; and none of BA or any Lender shall have any
liability to Trustee or any Noteholder for, and Trustee hereby waives any claim
which such Person may now or hereafter have against, BA or any Lender arising
out of any and all actions which BA or any Lender, in good faith, takes or omits
to take (including, without limitation, actions with respect to the creation,
perfection or continuation of liens or security interests in any existing or
future Collateral, actions with respect to the occurrence of a default or event
of default, actions with respect to the foreclosure upon, sale, release, or
depreciation of, or failure to realize upon, any of the Collateral and actions
with respect to the collection of any claim for all or any part of the Trustee
Claim from any account debtor, guarantor or any other person) with respect to
and in accordance with any BA Document or
-8-
<PAGE>
any other agreement related thereto or to the collection of the BA Claim or the
valuation, use, protection or release of the Collateral, so long as any such
actions are taken in a manner consistent with the terms of this Agreement, or
any election of the application of Section 1111(b)(2) of the Bankruptcy Code. BA
acknowledges that none of Trustee or any Noteholder has made warranties or
representations with respect to the due execution, legality, validity,
completeness or enforceability of the Trustee Documents or the collectibility of
the Trustee Claim. BA agrees that Trustee shall have no liability to BA or any
Lender for, and BA hereby waives any claim which such Person may now or
hereafter have against, any Trustee or any Noteholder arising out of any and all
actions which Trustee, in good faith, takes or omits to take (including, without
limitation, actions with respect to the creation, perfection or continuation of
liens or security interests in any existing or future Collateral, actions with
respect to the occurrence of a default or event of default, actions with respect
to the foreclosure upon, sale, release, or depreciation of, or failure to
realize upon, any of the Collateral and actions with respect to the collection
of any claim for all or any part of the Trustee Claim from any account debtor,
guarantor or any other person) with respect to and in accordance with the
Trustee Documents, so long as any such actions are taken in a manner consistent
with the terms of this Agreement, or any election of the application of Section
111(b)(2) of the Bankruptcy Code. Trustee agrees that it will not take any
action to contest the relative rights and duties of any Lender with respect to
any Collateral established in any of the BA Documents. Without limiting any
other provision of this Agreement, (a) by acceptance of a Note, each Noteholder
shall be bound by and deemed to have made and given each of the acknowledgments
and waivers of Trustee set forth in this Section 2.16 and Section 3.4 and (b) by
acceptance of a note or other instrument evidencing any portion of the BA Claim,
each Lender shall be bound by and deemed to have made and given each of the
acknowledgments and waivers of BA set forth in this Section 2.16 and Section
3.4.
2.16. Modifications and Waivers. Any modification or waiver of any
provision of this Agreement, or any consent to any departure by either Party
from the terms hereof, shall not be effective in any event unless the same is in
writing and signed by BA and Trustee, and then such modification, waiver or
consent shall be effective only in the specific instance and for the specific
purpose given. Any notice to or demand on any Party in any event not
specifically required hereunder shall not entitle the Party receiving such
notice or demand to any other or further notice or demand in the same, similar
or other circumstances unless specifically required hereunder. Parent and each
Loan Party hereby acknowledges and agrees that this Agreement may be amended or
otherwise modified without notice to or consent by Parent or any Loan Party.
3. Miscellaneous.
3.1. Representations, Warranties and Covenants. Each Party represents,
warrants and covenants to the other that:
(a) Except as set forth herein and in Section 9.12(b)(ii) of the
Credit Agreement (as in effect on the date hereof), it has not
subordinated and agrees that it will not subordinate at any time while
this Agreements remain in effect, any right, claim or interest of any kind
in or to the Collateral as to which such
-9-
<PAGE>
Party has a senior lien or security interest, and any subordination in
violation of this sub-paragraph shall be null and void;
(b) It has not assigned or transferred any right, claim or interest
of any kind in or to its Claim; and
(c) The execution, delivery and performance by or on behalf of such
Party has been duly authorized by all necessary action, corporate or
otherwise, does not violate any provision of law, governmental regulation,
or any agreement or instrument by which such Party is bound, and requires
no governmental or other consent that has not been obtained.
3.2. Notices. Any notice required or desired to be served, given or
delivered hereunder shall be in writing (including facsimile transmission), and
shall be deemed to have been validly served, given or delivered upon the earlier
of (a) personal delivery to the address set forth below; (b) in the case of
mailed notice, five (5) days after deposit in the United States mails, with
proper postage for certified mail, return receipt requested, prepaid, or in the
case of notice by Federal Express or other reputable overnight courier service,
one (1) Business Day after delivery to such courier service; and (c) in the case
of facsimile transmission, upon transmission with confirmation of receipt, in
any such case addressed to the party to be notified as follows:
If to BA at: Bank of America, N.A.
Agency Management
231 South LaSalle Street
Mail Code: IL 1-231-08-30
Chicago, Illinois 60604
(312) 828-8010
Attention: Linda Lov, Agency Officer
Facsimile Number: (877) 206-1766
With a copy to: Goldberg, Kohn, Bell, Black,
Rosenbloom & Moritz, Ltd.
55 East Monroe Street, Suite 3700
Chicago, Illinois 60603
(312) 201-4000
Attention: David L. Dranoff, Esq.
Facsimile Number: (312) 332-2196
If to Trustee: Bank One, N.A.
1 Bank One Plaza
Chicago, Illinois 60670-0430
(312) 336-9275
Attention: George Reaves
Facsimile Number: (312) 407-8929
-10-
<PAGE>
or to such other address as each party designates to the other in the manner
herein prescribed.
3.3. No Benefit to Third Parties. Except as specifically set forth in
Section 2.4, the terms and provisions of this Agreement shall be for the sole
benefit of BA, the Lenders, Trustee and the Noteholders and their respective
successors and assigns (as permitted by Section 3.7 hereof), and no other
person, firm, entity or corporation shall have any right, benefit, priority or
interest under or because of this Agreement.
3.4. Independent Credit Investigations. Neither of the Parties nor any of
their respective directors, officers, agents or employees nor any Lender or
Noteholder shall be responsible to any other person, firm or corporation, for
the solvency, financial condition or ability of any Loan Party to repay the BA
Claim or the Trustee Claim, or for statements of any Loan Party, oral or
written, or for the validity, sufficiency or enforceability of the BA Claim or
the Trustee Claim, the BA Documents, the Trustee Documents, or any liens or
security interests granted by any Loan Party in connection therewith. Each of
BA, Trustee, Lender and Noteholder has entered into its respective financing
agreements with Loan Parties based upon its own independent investigation, and
makes no warranty or representation to the other Party nor does it rely upon any
representation of the other Lender with respect to matters identified or
referred to in this paragraph. If either Party or any Lender or Noteholder, in
its sole discretion, undertakes, at any time or from time to time, to provide
any such information to another Lender, Noteholder, Trustee or BA, as
applicable, such information shall be given with no representation or warranty
of any kind from such Person and such Person shall be under no obligation (a) to
provide any such information to any other Person at that time or to any Person
on any subsequent occasion or (b) to undertake any investigation not a part of
its regular business routine.
3.5. Amendments to Financing Arrangements or to this Agreement. BA and
Trustee shall each endeavor to notify the other Party of any material amendment
or modification of BA Documents or the Trustee Documents, respectively, but the
failure to do so shall not create a cause of action against the Party failing to
give such notice or create any claim or right on behalf of the other Party. BA
and Trustee shall, upon request of the other Party, provide copies of all such
modifications or amendments and copies of all other documentation relevant to
the Collateral.
3.6. Marshaling of Assets. Trustee hereby waives any and all rights to
have the BA Senior Collateral, or any part thereof, marshaled upon any
foreclosure of any of BA's liens thereon or with respect to any other
Enforcement Action by BA. BA hereby waives any and all rights to have the
Trustee Senior Collateral, or any part thereof, marshaled upon any foreclosure
of the Trustee's liens thereon or with respect to any other Enforcement Action
by Trustee. If any Claim is now or hereafter secured by collateral other than
the Collateral described hereunder, the Party holding such collateral shall have
no obligation to marshal such collateral before enforcing its rights in the
Collateral hereunder, and the other Party shall have no rights hereunder to
share or participate in any proceeds of such other collateral. Each Party shall
have the right, subject to Section 2.3, to take Enforcement Action against
Collateral in such order or in whole or in part and subject to such conditions
as such Enforcing Party determines in its sole discretion.
-11-
<PAGE>
3.7. Successors and Assigns; Replacement Financing, Subordination. This
Agreement shall be binding upon and inure to the benefit of the respective
successors and assigns of each of the Parties, but does not otherwise create,
and shall not be construed as creating, any rights enforceable by any Loan Party
or any other person not a party to this Agreement. Trustee agrees that it will,
at the request of BA or Borrower, enter into an agreement, in the form of this
Agreement, mutatis mutandis, with any party (the "New Lender") to a New Credit
Facility which refinances the BA Claim or refinances, in whole or in part, any
New Credit Facility and such refinancing would not result in a "Default" as
defined in the Indenture or the Credit Agreement, it being understood that (i)
such agreement shall contain provisions substantially similar to those set forth
herein with respect to the subordination of the Trustee's lien on the BA Senior
Collateral and (ii) such agreement shall contain a provision substantially
similar to Section 2.5 which restricts the amount of the BA Claim (as refinanced
by the New Credit Facility) to the amounts set forth in Section 2.5. For the
purpose of this section, "New Credit Facility" shall mean one or more debt
facilities (including, without limitation, the Credit Agreement) or commercial
paper facilities, in each case with banks or other institutional lenders
providing for revolving credit loans, terms loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit and any hedging obligations owing to the lenders thereunder and their
affiliates.
3.8. Agreement Absolute. This Agreement shall be and remain absolute and
unconditional under any and all circumstances, and no act or omission on the
part of any Party to this Agreement shall affect or impair the agreement of the
other Party hereunder. Each of the Parties hereby authorizes the other Party to
(a) change any terms relating to such obligations of and Loan Party to such
Party or the loan agreements relating thereto as such other Party in its
discretion may deem advisable; (b) grant renewals, increases or extensions of
the time for payment of the Claim of such Party; (c) receive notes or other
evidences of the obligations of the Loan Parties to such other Party or
renewals, increases or extensions thereof; and (d) take or omit to take any
action for the enforcement of, or waive any rights with respect to, any
obligation of the Loan Parties to such other Party without invalidating or
impairing any provision hereof.
3.9. Section Titles; Gender. The section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the Parties. The singular
form of any word used in this Agreement shall include the plural form and the
neuter form of any word used in this Agreement shall include the masculine and
feminine forms, and vice versa.
3.10. Right to Purchase BA Claim. Trustee shall have the right,
exercisable by written notice to BA (the "Election Notice") given not later than
thirty (30) days after the date of delivery of an Enforcement Notice by BA or
the Trustee to purchase the BA Claim and all of the right, title and interest of
BA and the Lenders in, to and under the BA Documents for a purchase price equal
to, after payment of BA's closing costs, the amount that would be required to
cause the BA Claim to be Paid In Full as of the Closing Date. Trustee shall
designate in the Election Notice a closing date for the purchase and sale of the
BA Claim (the "Closing Date") which Closing Date shall be a business day not
later than ten (10) days after the date of the Election Notice. If Trustee
elects to purchase the BA Claim as
-12-
<PAGE>
provided in this Section 3.10, Trustee shall complete such purchase and pay in
cash in immediately available funds all amounts due BA pursuant to this Section
3.10 on the Closing Date. The sale of the BA Claim pursuant to this Section 3.10
shall be without recourse, representations or warranties, except that BA shall
certify to Trustee (a) the amount of the BA Claim as of the Closing Date and (b)
that title to the BA Claim is held by BA and the Lenders. The provisions of this
Section 3.10 shall not have the effect of staying or preventing the initiation
or prosecution of Enforcement Action by BA or the Trustee prior to the Closing
Date.
3.11. Governing Law and Forum Selection. This Agreement shall be governed
as to validity, interpretations, enforcement and effect by the laws of the State
of Illinois without giving effect to conflicts of law principles thereunder. All
actions or proceedings in any way, manner or respect, arising out of or from or
related to this Agreement shall be litigated in courts having situs within the
City of Chicago, State of Illinois. Each of BA and Trustee hereby consents and
submits to the jurisdiction of any local, state or federal courts located within
said city and state and waives any right it may have to transfer or change the
venue of any litigation brought by either Party in accordance with this Section
3.11.
3.12. Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be deemed to be an original hereof submissible
into evidence and all of which together shall be deemed to be a single
instrument.
[The Next Page is the Signature Page]
-13-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
BANK OF AMERICA, N.A., as Agent
By /s/ David A. Johanson
------------------------------------
Its David A. Johanson
Vice President
BANK ONE, N.A., as Trustee
By /s/ George N. Reaves
------------------------------------
Its Vice President
-14-
<PAGE>
ACKNOWLEDGMENT
Each of the undersigned hereby acknowledges and agrees to the
foregoing terms and provisions. By executing this Agreement, each of the
undersigned agrees to be bound by the provisions hereof as they relate to the
relative rights of Trustee and BA as between them. Each of the undersigned
further agrees that the terms of this Agreement shall not give the undersigned
any substantive rights vis-a-vis either Trustee or BA.
If either BA or Trustee shall enforce its rights or remedies in
violation of the terms of this Agreement, each of the undersigned agrees that it
shall not use such violation as a defense to any Enforcement Action by either BA
or Trustee nor assert such violation as a counterclaim or basis for set-off or
recoupment against either BA or Trustee.
Dated: March 11, 2003
PEI HOLDINGS, INC.,
a Delaware corporation
By /s/ Robert Campbell
------------------------------------
Its Treasurer
[next page is a signature page]
-15-
<PAGE>
ADULTVISION COMMUNICATIONS, INC.
AFTER DARK VIDEO, INC.
AL ENTERTAINMENT, INC.
ALTA LOMA DISTRIBUTION, INC.
ALTA LOMA ENTERTAINMENT, INC.
CANDLELIGHT MANAGEMENT LLC
By: Playboy TV International, LLC, its Sole Member,
By: Playboy Entertainment Group, Inc., its Sole
Member
CHELSEA COURT HOLDINGS LLC
By: Playboy TV International, LLC, its Sole Member,
By: Playboy Entertainment Group, Inc., its Sole
Member
CLARIDGE ORGANIZATION LLC
By: Playboy TV International, LLC, its Sole Member,
By: Playboy Entertainment Group, Inc., its Sole
Member
CPV PRODUCTIONS, INC.
CYBERSPICE, INC.
IMPULSE PRODUCTIONS, INC.
INDIGO ENTERTAINMENT, INC.
ITASCA HOLDINGS, INC.
LAKE SHORE PRESS, INC.
LIFESTYLE BRANDS, LTD.
MH PICTURES, INC.
MYSTIQUE FILMS, INC.
PLANET PLAYBOY, INC.
PLANET SPICE, INC.
PLAYBOY CLUB OF HOLLYWOOD, INC.
PLAYBOY CLUB OF NEW YORK, INC.
PLAYBOY CLUBS INTERNATIONAL, INC.
PLAYBOY CRUISE GAMING, INC.
PLAYBOY ENTERTAINMENT GROUP, INC.
PLAYBOY GAMING INTERNATIONAL, LTD.
PLAYBOY GAMING NEVADA, INC.
PLAYBOY GAMING UK, LTD.
PLAYBOY JAPAN, INC.
PLAYBOY MODELS, INC.
By /s/ Robert Campbell
------------------------------------------------
Name: Robert Campbell
Title Treasurer
[next page is a signature page]
-16-
<PAGE>
PLAYBOY OF LYONS, INC.
PLAYBOY OF SUSSEX, INC.
PLAYBOY PREFERRED, INC.
PLAYBOY PROPERTIES, INC.
PLAYBOY SHOWS, INC.
PLAYBOY TV INTERNATIONAL, LLC
By: Playboy Entertainment Group, Inc., its Sole
Member
PRECIOUS FILMS, INC.
SPECIAL EDITIONS, LTD.
SPICE DIRECT, INC.
SPICE ENTERTAINMENT, INC.
SPICE INTERNATIONAL, INC.
SPICE NETWORKS, INC.
SPICE PRODUCTIONS, INC.
STEELTON, INC.
TELECOM INTERNATIONAL, INC.
WOMEN PRODUCTIONS, INC.
By /s/ Robert Campbell
----------------------------------------------------
Name: Robert Campbell
Title: Treasurer
PLAYBOY ENTERPRISES, INC.
PLAYBOY ENTERPRISES INTERNATIONAL, INC.
By /s/ Robert Campbell
----------------------------------------------------
Name: Robert Campbell
Title: Senior Vice President, Treasurer and
Strategic Planning
SPICE HOT ENTERTAINMENT, INC.
SPICE PLATINUM ENTERTAINMENT, INC.
By /s/ Alexandra Shepard
----------------------------------------------------
Name: Alexandra Shepard
Title: Senior Vice President and Secretary
-17-