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Playboy TV International (2) LLC Agreement 12-28-2000

SECOND AMENDMENT TO OPERATING AGREEMENT,

RELEASE OF GUARANTY

AND CONSENT TO TRANSFER

 

FOR

PLAYBOY TV INTERNATIONAL, LLC

A DELAWARE LIMITED LIABILITY COMPANY

 

This Second Amendment to Operating Agreement, Release of Guaranty and

Consent to Transfer (this "Amendment") is entered into as of December 28, 2000,

by and among Playboy Entertainment Group, Inc., a Delaware corporation ("PEGI"),

Playboy Enterprises International, Inc., a Delaware corporation ("PEII"),

Victoria Springs Investments, Ltd., a British Virgin Islands corporation

("VSI"), Hampstead Management Company, Ltd., a company organized under the laws

of the British Virgin Islands ("Hampstead"), Carlton Investments LLC, a Delaware

limited liability company ("Carlton"), and Carlyle Investments LLC, a Delaware

limited liability company ("Carlyle"), and is made with respect to Playboy TV

International, LLC, a Delaware limited liability company (the "Company").

 

A. PEGI and VSI entered into the Operating Agreement the Company as of

August 31, 1999 and the First Amendment thereto as of September 24, 1999 (as

amended, the "Agreement"; all capitalized terms not defined in this Amendment

will have the respective meanings set forth in the Agreement).

 

B. Hampstead Management Company, Ltd., a company organized under the laws

of the British Virgin Islands and an Affiliate of VSI ("Hampstead"), entered

into a Guaranty dated as of August 31, 1999 in favor of PEGI, PEII and the

Company pursuant to which Hampstead guaranteed the obligations of VSI under the

Agreement and the Related Documents (the "Guaranty").

 

C. Carlton and Carlyle are indirectly controlled by Persons that

collectively control VSI and Hampstead, but are not under common control with

VSI and Hampstead.

 

D. VSI wishes to transfer its 80.1% interest in the Company to Carlton and

Carlyle in equal shares and has requested PEGI's consent to such transfer

pursuant to Section 9.1 of the Agreement.

 

E. PEGI is willing to give consent to such transfer provided that Carlton

and Carlyle assume the obligations of VSI under the Agreement and the Related

Documents, are each deemed to be Affiliates of VSI for all purposes under the

Agreement and the Related Documents, and collectively exercise the rights of VSI

under the Agreement.

 

F. Hampstead wishes to transfer and cause its subsidiaries to transfer all

or substantially all of their respective assets to Carlton and Carlyle in equal

shares and has requested that PEII, PEGI and the Company agree to release

Hampstead from its obligations under the Guaranty.

 

<PAGE>

 

G. PEII, PEGI and the Company are willing to release Hampstead from its

obligations under the Guaranty provided that the proposed transfer of assets to

Carlton and Carlyle is consummated and Carlton and Carlyle guaranty the

obligations of the other on the same terms as the Guaranty.

 

H. The parties desire to adopt and approve the following provisions and,

where applicable, incorporate them into the Agreement, effective as of the date

of the transfer of VSI's interest in the Company to Carlton and Carlyle (the

"Effective Date").

 

NOW, THEREFORE, in consideration of the foregoing and the mutual

agreements contained herein, and intending to be legally bound, the parties

agree as follows:

 

1. Consent to Transfer and Release of Guaranty.

 

A. Pursuant to Section 9.1 of the Agreement and subject to the terms of

this Amendment, PEGI consents to the transfer from VSI to Carlton and

Carlyle of its 80.1% interest in PTVI in equal shares and the admission of

each of Carlton and Carlyle as Members of the Company with a Percentage

Interest of 40.05% each. Each of Carlton and Carlyle hereby jointly and

severally assume and agree to perform and discharge all of the obligations

and liabilities of VSI under the Agreement and the Related Documents,

whether arsising before or after the Effective Date. Each of Carlton and

Carlyle agree that each of them and their respective Affiliates are deemed

to be (i) Affiliates of VSI, and (ii) Affiliates of each other, in each

case for all purposes under the Agreement and the Related Documents (and

any agreement or document in connection therewith). In furtherance of the

foregoing, Carlyle and Carlton will be deemed to be Affiliated Members and

VSI Members under the Agreement. Carlyle and Carlton further agree that

they will take all actions collectively under the Agremeent and Related

Documents, including the bringing of any claim or exercising any remedy.

 

B. Subject to the terms of this Agreement, PEII, PEGI and the Company

hereby release Hampstead from its obligations under the Guaranty.

 

C. The forgoing consent and release is subject to each of the following

conditions being true as of the Effective Date: (a) Hampstead will have

transferred and caused its subsidiaries to transfer all or substantially

all of their respective assets to Carlton and Carlyle in equal shares; (b)

each of Carlton and Carlyle will have executed and delivered a Guaranty in

favor of PEII, PEGI and the Company in the form of Exhibit A.

 

2. Amendments to Agreement.

 

A. Section 5.1.3 of the Agreement is amended and restated in its

entirety as follows:

 

"5.1.3 Voting. Except as provided in Section 5.1.4 and in Section

5.3, all matters submitted to the Management Committee will be

decided by a majority vote of the Non-Independent Directors. The

Non-Independent Directors will have voting power in proportion to

the ratio of Percentage Interests held by the Manager appointing

them; provided, however, Non-Independent Directors appointed by

 

<PAGE>

 

Affiliated Members will have voting power in proportion to the

aggregate Percentage Interests held by the Managers appointing them.

All Non-Independent Directors appointed by a Manager (or Managers,

if representing Affiliated Members) will collectively exercise such

voting power and such Manager(s) will designate one of its

Non-Independent Directors to vote on behalf of all Non-Independent

Directors appointed by such Manager(s) in the event of a

disagreement among the Non-Independent Directors appointed by such

Manager(s)."

 

B. Section 5.2.1 of the Agreement is amended and restated in its

entiretly as follows:

 

"5.2.1 VSI and PEGI, together with (or replaced by, as the case may

be) any Affiliates to which such Member transfers all or a portion

of its Membership Interest in compliance with the provisions of this

Agreement, will be referred to as the "VSI Members" or the "PEGI

Members" respectively. For so long as the VSI Members and the PEGI

Members are the only Members and Managers, the Management Committee

will consist of nine members: three Non-Independent Directors

selected collectively by the VSI Members (the "VSI Directors"),

three Non-Independent Directors selected by the PEGI Members (the

"PEGI Directors") and three other Directors (each, an "Independent

Director") selected in accordance with the following sentence. The

VSI Members (acting collectively) and the PEGI Members (acting

collectively) will each select one Independent Director, and the two

Independent Directors will select a third Independent Director;

provided, however, that such third Independent Director will be

mutually acceptable to both the VSI Members (acting collectively)

and the PEGI Members (acting collectively). To qualify as an

Independent Director, a person must have, and continue to have, no

material business, financial or familial relationship with any of

the VSI Members, the PEGI Members or any of their respective

Affiliates or with any officer or executive of any of them. Each of

VSI and PEGI identified its initial Directors prior to the Funding

Date. Each member of the Management Committee is referred to as a

"Director", and, collectively, as the "Directors." A duly-admitted

Manager will have the right to appoint at least one Non-Independent

Director (or such greater number as the Management Committee may

determine); provided, however, that no group of Affiliated Members

will have the right to appoint more than that number of Directors

that could have been appointed by that group's initial holder of the

Membership Interests. A director need not be a resident of the State

of Delaware or a citizen of the United States. To the fullest extent

permitted by law, no Director will be deemed an agent or sub-agent

of the Company. Each Manager, by execution of this Agreement, agrees

to, consents to, and acknowledges the delegation of powers and

authority to such Directors and the Management Committee within the

scope of such Director's and Management Committee's authority as

provided herein. No Director will have the authority in his capacity

as a Director to enter into any Transaction on behalf of the

Company. The Independent Directors will receive compensation as

determined from time to time by the Management Committee and as

reflected in the applicable Annual Budget.

 

<PAGE>

 

(a) At such time as either the VSI Directors or the PEGI

Directors are no longer entitled to exercise a veto on matters that

may be determined by the Independent Directors pursuant to Section

5.3, the Independent Directors will be dismissed from the Management

Committee.

 

C. The references to "VSI" and "PEGI" in the first clause of Section 5.4.4

of the Agreement are hereby replaced with references to "the VSI Members"

and the PEGI Members", respectively.

 

D. Except as otherwise provided herein, all other terms and conditions of

the Agreement will remain in full force and effect.

 

[Remainder of page intentionally left blank]

 

<PAGE>

 

IN WITNESS WHEREOF, the parties have caused their duly authorized officers to

execute this Amendment as of the above date.

 

 

PLAYBOY ENTERTAINMENT GROUP, INC.

 

By:/s/ Jeffrey M. Jenest

---------------------------------

Name: Jeffrey M. Jenest

Title: Executive Vice President

 

 

PLAYBOY ENTERPRISES INTERNATIONAL, INC.

 

By: /s/ Howard Shapiro

---------------------------------

Name: Howard Shapiro

Title: Executive Vice President

 

 

VICTORIA SPRINGS INVESTMENTS LTD.

 

By: /s/ William T. Keon

---------------------------------

Name:

Title:

 

By: /s/ Jose Mizrahi

---------------------------------

Name:

 

 

HAMPSTEAD MANAGEMENT COMPANY, LTD.

 

By: /s/ Jose Mizrahi

---------------------------------

Name:

Title:

 

By: /s/ Harris C. Caston

---------------------------------

Name: Harris C. Caston

Title: Attorney - in - Fact

 

<PAGE>

 

CARLTON INVESTMENTS LLC

 

By: /s/ Cary M. Otazo

---------------------------------

Name: Cary M. Otazo

Title: Assistant Secretary

 

 

CARLYLE INVESTMENTS LLC

 

By: /s/ Cary M. Otazo

---------------------------------

Name: Cary M. Otazo

Title: Assistant Secretary

 

 

Acknowledged and Agreed:

 

PLAYBOY TV INTERNATIONAL, LLC.

 

 

By: /s/ William Fisher

---------------------------------

Name: William Fisher

Title: President