Exhibit 10.27(b)
AMENDED AND RESTATED SEVERANCE AGREEMENT
THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (this "Agreement"),
dated as of September 1, 2008, is by and between Playboy Enterprises, Inc., a
Delaware corporation (the "Company"), and ____________, (the "Executive") and
is, effective as of January 1, 2008, hereby amending, restating and superseding
that prior Severance Agreement between the parties dated November 29, 2001, for
compliance with Section 409A of the Internal Revenue Code of 1986, as amended
(the "Code").
WITNESSETH:
WHEREAS, the Executive is a senior executive or key employee of the
Company and has made and is expected to continue to make major contributions to
the short- and long-term profitability, growth and financial strength of the
Company;
WHEREAS, the Company recognizes that, as is the case for most
publicly-held companies, the possibility of a Change in Control exists;
WHEREAS, the Company desires to assure itself of both present and
future continuity of management and desires to establish certain minimum
severance benefits for certain of its senior executive officers and other key
employees, including the Executive, applicable in the event of a Change in
Control;
WHEREAS, the Company wishes to ensure that its senior executives and
other key employees are not practically disabled from discharging their duties
in respect of a proposed or actual transaction involving a Change in Control;
and
WHEREAS, the Company desires to provide additional inducement for the
Executive to continue to remain in the ongoing employ of the Company;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Certain Defined Terms: In addition to terms defined elsewhere
herein, the following terms have the following meanings when used in this
Agreement with initial capital letters:
(a) "Base Pay" means the Executive's annual base salary at a rate
not less than the Executive's annual fixed or base compensation as in
effect for Executive immediately prior to the occurrence of a Change in
Control or such higher rate as may be determined from time to time by the
Board of Directors of the Company (the "Board") or a Committee thereof.
(b) "Change in Control" means any of the following occurrences
during the Term:
(i) Hugh M. Hefner directly or as beneficial owner and
Christie Hefner cease collectively to hold over 50% of the combined
voting power of the then-outstanding securities entitled to vote
generally in the election of directors of the Company ("Voting
Stock"); or
(ii) except pursuant to a transaction described in the proviso
to Section 1(b)(iv) or (v), a sale, exchange or other disposition of
PLAYBOY Magazine; or
(iii) except pursuant to a transaction described in the
proviso to Section 1(b)(iv) or (v), the liquidation or dissolution
of the Company; or
(iv) the Company is merged, consolidated or reorganized into
or with another corporation or other legal person; provided,
however, that no such merger, consolidation or reorganization will
constitute a Change in Control if the merger, consolidation or
reorganization is initiated by the Company and as a result of such
merger, consolidation or reorganization not less than a majority of
the combined voting power of the then-outstanding securities of the
surviving, resulting or ultimate parent corporation, as the case may
be, immediately after such transaction is held in the aggregate by
persons who held not less than a majority of the combined voting
power of the outstanding Voting Stock of the Company immediately
prior to such transaction; or
(v) the Company sells or otherwise transfers all or
substantially all of its assets to another corporation or other
legal person; provided, however, that no such sale or transfer will
constitute a Change in Control if the sale or transfer is initiated
by the Company and as a result of such sale or transfer not less
than a majority of the combined voting power of the then-outstanding
securities of such corporation or other legal person, as the case
may be, immediately after such sale or transfer is held in the
aggregate by persons who held not less than a majority of the
combined voting power of the outstanding Voting Stock of the Company
immediately prior to such sale or transfer; or
(vi) an equity or other investment in the Company, the result
of which is that Christie Hefner ceases to serve as the Company's
Chief Executive Officer or relinquishes upon request or is divested
of any of the following responsibilities:
(A) functioning as the person primarily responsible for
establishing policy and direction for the Company; or
(B) being the person to whom the senior executives of
the Company report; or
(vii) the adoption by the Board of a resolution that, for
purposes of this Agreement, a Change in Control has occurred.
For purposes of Section 1(b)(i), any Voting Stock beneficially owned (as
such term is defined under Rule 13d-3 or any successor rule or regulation
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) by the Hugh M. Hefner Foundation shall be deemed to be held by
Christie Hefner if and so long as she has sole voting power with respect
to such Voting Stock.
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(c) "Cause" means that, prior to any termination pursuant to Section
3(b) hereof, the Executive shall have:
(i) been convicted of a criminal violation involving
dishonesty, fraud or breach of trust; or
(ii) willfully engaged in misconduct in the performance of
Executive's duties that materially injures the Company or any entity
in which the Company directly or indirectly beneficially owns 50% or
more of the voting securities (a "Subsidiary").
(d) "Disability" means a condition whereby the Executive:
(i) is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months; or
(ii) is, by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months,
receiving income replacement benefits for a period of not less than
3 months under an accident and health plan covering employees of the
Executive's employer.
(e) "Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under any and all employee retirement
income and welfare benefit policies, plans, programs or arrangements in
which Executive is entitled to participate, including without limitation
any stock option, stock purchase, stock appreciation, savings, pension,
supplemental executive retirement, or other retirement income or welfare
benefit, deferred compensation, incentive compensation, group or other
life, health, medical/hospital or other insurance (whether funded by
actual insurance or self-insured by the Company), disability, salary
continuation, executive protection, expense reimbursement and other
employee benefit policies, plans, programs or arrangements that may now
exist or any equivalent successor policies, plans, programs or
arrangements that may be adopted hereafter by the Company, providing
perquisites, benefits and service credit for benefits at least as great in
the aggregate as are provided thereunder immediately prior to a Change in
Control.
(f) "Incentive Pay" means bonus, incentive or other payments of cash
compensation, in addition to Base Pay, made or to be made in regard to
services rendered pursuant to any bonus, incentive, profit-sharing,
performance, discretionary pay or similar agreement, policy, plan, program
or arrangement (whether or not funded) of the Company, or any successor
thereto providing benefits at least as great as the benefits provided
thereunder immediately prior to a Change In Control.
(g) "Potential Change in Control" shall be deemed to have occurred
if the event set forth in any one of the following subsections shall have
occurred:
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(i) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control;
(ii) the Company or any Person publicly announces an intention
to take or to consider taking actions which, if consummated, would
constitute a Change in Control; or
(iii) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has
occurred.
(h) "Potential Change in Control Period" shall commence upon
the occurrence of a Potential Change in Control and shall lapse upon
the occurrence of a Change in Control or, if earlier:
(i) with respect to a Potential Change in Control occurring
pursuant to Section l(f)(i), immediately upon the abandonment or
termination of the applicable agreement;
(ii) with respect to a Potential Change in Control occurring
pursuant to Section l(f)(ii), immediately upon a public announcement
by the applicable party that such party has abandoned its intention
to take or consider taking actions which if consummated would result
in a Change in Control; or
(iii) with respect to a Potential Change in Control occurring
pursuant to Section l(f)(iii), upon the one year anniversary of the
occurrence of a Potential Change in Control (or such earlier date as
may be determined by the Board).
(i) "Severance Period" means the period of time commencing on the
date of each occurrence of a Change in Control and continuing until the
earliest of:
(i) eighteen months following the occurrence of the Change in
Control; or
(ii) the Executive's death;
provided, however, that commencing on each anniversary of the Change in
Control, the Severance Period will automatically be extended for an
additional eighteen months unless, not later than 120 calendar days prior
to such date, either the Company or the Executive shall have given written
notice to the other that the Severance Period is not to be so extended.
(j) "Term" means the period commencing as of the date hereof and
expiring as of the later of:
(i) the close of business on December 31, 2008; or
(ii) the expiration of the Severance Period;
provided, however, that the term of this Agreement will automatically be
extended each year for an additional year unless, not later than September
30 of the immediately preceding year,
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the Company or the Executive shall have given notice that it or the
Executive, as the case may be, does not wish to have the Term extended.
Notwithstanding the foregoing, if, prior to a Change in Control, the
Executive ceases for any reason to be an employee of the Company or any
Subsidiary, thereupon without further action, the Term shall be deemed to
have expired and this Agreement will immediately terminate and be of no
further effect. For purposes of this Section 1(i), the Executive shall not
be deemed to have ceased to be an employee of the Company or any
Subsidiary by reason of the transfer of Executive's employment between the
Company and any Subsidiary, or among any Subsidiaries.
(k) "Targeted Bonus" shall mean the targeted bonus for Executive's
position as set forth in the Company's Executive Incentive Compensation
Plan ("EICP") established for the then applicable fiscal year, which shall
be equal to fifty percent (50%) times the maximum amount which Executive
could earn under the EICP with respect to established quantifiable and
objective financial goals.
2. Operation of Agreement: This Agreement will be effective and
binding immediately upon its execution, but, anything in this Agreement, to the
contrary notwithstanding, will not be operative unless and until a Change in
Control occurs, whereupon without further action this Agreement shall become
immediately operative.
3. Termination Following a Change in Control:
(a) In the event of the occurrence of a Change in Control, the
Executive's employment may be terminated by the Company during the
Severance Period and the Executive shall not be entitled to the benefits
provided by Section 4 only upon the occurrence of one or more of the
following events:
(i) The Executive's death;
(ii) The Executive's Disability; or
(iii) Cause.
If, during the Severance Period, the Executive's employment is terminated
by the Company other than pursuant to Section 3(a)(i), 3(a)(ii) or
3(a)(iii), the Executive will be entitled to the benefits provided by
Section 4 hereof.
(b) In the event of the occurrence of a Change in Control, the
Executive may terminate employment with the Company and any Subsidiary
during the Severance Period with the right to severance compensation as
provided in Section 4 upon the occurrence of one or more of the following
"Good Reason" events (regardless of whether any other reason, other than
Cause as hereinabove provided, for such termination exists or has
occurred, including without limitation other employment) which occur
without the Executive's consent:
(i) the Executive is not elected to, or is removed from, any
elected office of the Company and/or Subsidiary, as the case may be,
which the Executive held immediately prior to the Change of Control;
or
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(ii) the Executive is not re-nominated by the Board as a
Director of the Company (or any successor thereto) if the Executive
shall have been a Director of the Company immediately prior to the
Change in Control; or
(iii) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position,
authority, duties or responsibilities which the Executive held
immediately prior to the Change of Control, or any other action by
the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive; or
(iv) any failure by the Company to comply with any of the
provisions of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive; or
(v) a material reduction in the aggregate of the Executive's
Base Pay and Incentive Pay payable to the Executive by the Company
and any Subsidiary; or
(vi) the failure of a successor/tranferee organization to
assume all duties and obligations of the Company under this
Agreement pursuant to Section 10(a) following the liquidation,
dissolution, merger, consolidation or reorganization of the Company
or transfer of all or substantially all of its business and/or
assets, and where the Executive has no employee/employer
relationship with such successor/transferee organization following
the Change of Control; or
(vii) The Company or any of its Subsidiaries requires the
Executive regularly to perform Executive's duties of employment
beyond a materially different geographic radius from the location of
Executive's employment immediately prior to the Change in Control or
requires the Executive to travel away from Executive's office in the
course of discharging Executive's responsibilities or duties
hereunder at least 50% more (in terms of aggregate days in any
calendar year or in any calendar quarter when annualized for
purposes of comparison to any prior year) than was required of
Executive in any of the three full years immediately prior to the
Change of Control.
(c) A termination by the Company pursuant to Section 3(a) or 3(d) or
by the Executive pursuant to Section 3(b) or 3(d) will not affect any
rights or benefits which the Executive may have pursuant to any agreement,
policy, plan, program or arrangement of the Company providing Employee
Benefits (an "Other Arrangement"), which rights and benefits shall be
governed by the terms thereof, including, without limitation, rights to
payments under the Company's bonus and incentive plans for prior fiscal
years which have been earned but not yet paid to Executive.
Notwithstanding the foregoing, if the Executive has any rights to
severance compensation upon termination of employment under any employment
agreement Executive may have with the Company or any Other Arrangement,
such rights shall, during the Severance Period, be completely superseded
by this Agreement; for the
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avoidance of doubt, Executive can only receive severance compensation
under this Agreement or under the Other Arrangement, not both.
(d) For purposes of this Agreement, a termination of Executive's
employment during a Potential Change in Control Period: (
(i) by the Company other than pursuant to the events described
in Section 3(a)(i), 3(a)(ii) or 3(a)(iii); or
(ii) by Executive following the occurrence of one of the
events described in Section 3(b)(i) through (vii),
shall be deemed to be a termination of Executive's employment during the
Severance Period entitling Executive to benefits provided by Section 4.
4. Severance Compensation:
(a) If, following the occurrence of a Change in Control, the Company
terminates the Executive's employment during the Severance Period other
than pursuant to Section 3(a), or if the Executive terminates Executive's
employment pursuant to Section 3(b), the Company will pay to the Executive
the following:
(i) an amount (the "Severance Payment") equal to three times
the sum of:
(A) Base Pay, plus
(B) the greater of:
(I) the average actual bonus earned by the
Executive pursuant to any annual bonus or incentive plan
maintained by the Company in respect of the three fiscal
years ending immediately prior to the fiscal year in
which occurs such Change in Control (or, such lesser
number of years during which the Executive was employed
by the Company and annualized in the case of any such
bonus paid in respect of a portion of a fiscal year);
and
(II) the Targeted Bonus (determined in accordance
with Section 1(j) of this Agreement
(the greater of Subclause (I) and Subclause (II) being hereinafter
referred to as the "Highest Bonus");
such Severance Payment, as permitted pursuant to Treasury Regulation
Section 1.409A-1(b)(9)(iii), shall be payable in three payments as
follows:
(1) an amount equal to the lesser of:
(a) one (1) times the Executive's annual Base Pay
as of his date of termination; or
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(b) two (2) times the compensation limit of Code
Section 401(a)(17) (i.e., $460,000 for 2008)
shall be paid to Executive in a lump sum payment no later than ten (10)
days following the Executive's date of termination; and
(2) the remainder, which is an amount equal to the Severance Payment
reduced by the amount paid to Executive under Item (1) immediately above,
shall be paid to Executive in a lump sum no later than the seventh month
anniversary of her date of termination; and
(ii) for 36 months following the Termination Date (the
"Continuation Period"), the Company will arrange to provide the
Executive with Employee Benefits that are welfare benefits (but not
stock option, stock purchase, stock appreciation or similar
compensatory benefits) no less favorable than those which the
Executive was receiving or entitled to receive immediately prior to
the Termination Date, including benefits provided under the
Company's Executive Protection Plan. If and to the extent that any
benefit described in this Section 4(a)(ii) is not or cannot be paid
or provided under any policy, plan, program or arrangement of the
Company or any Subsidiary, as the case may be, then the Company will
itself pay or provide for the payment to the Executive, or
Executive's dependents and beneficiaries, of such Employee Benefits.
Without otherwise limiting the purpose or effect of Section 5,
Employee Benefits otherwise receivable by the Executive pursuant to
this Section 4(a)(ii) will be reduced to the extent comparable
welfare benefits are actually received by the Executive from another
employer during the Continuation Period. Such welfare benefits shall
be provided and paid for the Executive per regular payroll period of
the Company commencing with the first payroll period following the
Executive's termination of employment and continuing for 36 month
thereafter. Medical expenses (as defined in Code Section 213(d))
paid pursuant to this subparagraph (ii) are intended to be exempt
from Code Section 409A to the extent permitted under Treasury
Regulation ss.ss.1.409A-1(b)(9)(v)(B) and -3(i)(1)(iv)(B). However,
to the extent any welfare benefits provided pursuant to this
subparagraph (ii) do not qualify for exemption under Code Section
409A, the Company shall provide Executive with a lump sum payment in
an amount equal to the number of months of coverage to which he is
entitled times the then applicable premium for the relevant benefit
plan in which Executive participated. Such lump sum amount will be
paid during the second month following the month in which such
coverage expires.
(iii) Notwithstanding any provision of any annual or long-term
incentive plan to the contrary, the Company shall pay to the
Executive a lump sum amount, in cash, equal to the sum of:
(A) any unpaid incentive compensation which has been
allocated or awarded to the Executive for a completed fiscal
year or other measuring period preceding the Termination Date
under any such plan and which, as of the Termination Date, is
contingent only upon the continued employment of the Executive
to a subsequent date; and
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(B) the product of the Highest Bonus and a fraction, the
numerator of which is the number of days in the fiscal year in
which the Termination Date occurs prior to the Termination
Date and the denominator of which is 365.
Such amount shall be paid to the Executive in accordance with the
terms of the relevant underlying incentive compensation plan at the
time all other executives are paid pursuant to such plan with
respect to any such incentive compensation for such year which
includes Executive's date of termination under this Section 4(a).
(iv) Notwithstanding the terms or conditions of any awards
relating to a grant of restricted shares, all restricted shares
which are not vested as of the Termination Date shall become fully
vested.
(v) The Company shall provide the Executive with outplacement
services suitable to the Executive's position. The Executive shall
commence the outplacement services no later than sixty (60) days
following his termination date under this Section 4(a), but in no
event shall such services be provided beyond December 31 of the
second year following the year of termination or, if earlier, the
first acceptance by the Executive of an offer of employment..
(b) There will be no right of set-off or counterclaim in respect of
any claim, debt or obligation against any payment to or benefit for the
Executive provided for in this Agreement, except as expressly provided in
Section 4(a)(ii).
(c) Without limiting the rights of the Executive at law or in
equity, if the Company fails to make any payment or provide any benefit
required to be made or provided hereunder on a timely basis, the Company
will pay interest on the amount or value thereof at the prime rate in
effect at the First National Bank of Chicago. Such interest will be
payable as it accrues on demand. Any change in such prime rate will be
effective on and as of the date of such change.
(d) Notwithstanding any other provision hereof, the parties'
respective rights and obligations under this Section 4 and under Sections
6 and 7 will survive any termination or expiration of this Agreement
following a Change in Control or the termination of the Executive's
employment following a Change in Control for any reason whatsoever.
5. No Mitigation Obligation: The Company hereby acknowledges that it
will be difficult and may be impossible:
(a) for the Executive to find reasonably comparable employment
following the Termination Date; and
(b) to measure the amount of damages which Executive may suffer as a
result of termination of employment hereunder.
Accordingly, the payment of the severance compensation by the Company to the
Executive in accordance with the terms of this Agreement is hereby acknowledged
by the Company to be reasonable and will be liquidated damages, and the
Executive will not be required to mitigate the
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amount of any payment provided for in this Agreement by seeking other employment
or otherwise, nor will any profits, income, earnings or other benefits from any
source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of the Executive hereunder or otherwise reduce any
payments or benefits to be provided to Executive hereunder, except as expressly
provided in Section 4(a)(ii).
6. Certain Additional Payments by the Company:
(a) In the event that this Agreement becomes operative and it is
determined (as hereafter provided) that any payment or distribution by the
Company or any of its affiliates to or for the benefit of Executive,
whether paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without
limitation any stock option, stock appreciation right or similar right, or
the lapse or termination of any restriction on or the vesting or
exercisability of any of the foregoing (a "Payment"), would be subject to
the excise tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (or any successor provision thereto), or to any similar
tax imposed by state or local law, or any interest or penalties with
respect to such excise tax (such tax or taxes, together with any such
interest and penalties, are hereafter collectively referred to as the
"Excise Tax"), then Executive will be entitled to receive an additional
payment or payments (a "Gross-Up Payment") in an amount such that, after
payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding
anything to the contrary, any Gross-Up Payment pursuant to this Section
6(a) shall be paid no later than December 31 of the year following the
year in which the Executive pays the applicable Excise Tax, and, if the
Executive is a `specified employee', as defined and applied in Code
Section 409A as of the termination date, no earlier than the first day of
the seventh month following such date.
(b) Subject to the provisions of Section 6(f) below, all
determinations required to be made under this Section 6, including whether
an Excise Tax is payable by Executive and the amount of such Excise Tax
and whether a Gross-Up Payment is required and the amount of such Gross-Up
Payment, will be made by a nationally recognized firm of certified public
accountants (the "Accounting Firm") selected by Executive in Executive's
sole discretion. Executive will direct the Accounting Firm to submit its
determination and detailed supporting calculations to both the Company and
Executive within 15 calendar days after the date of the Change in Control
or the date of Executive's termination of employment, if applicable, and
any other such time or times as may be requested by the Company or
Executive. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income tax at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the
Executive's residence on the Termination Date (or if there is no
Termination Date, then the date on which the Gross-Up Payment is
calculated for purposes of this Section 6(b)), net of the maximum
reduction in federal income taxes which could be obtained from deduction
of such state and local taxes. If the Accounting Firm determines that any
Excise Tax is payable by Executive, the Company will pay the required
Gross-Up Payment to Executive within five business days after receipt of
such determination and calculations. If the Accounting Firm
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determines that no Excise Tax is payable by Executive, it will, at the
same time as it makes such determination, furnish Executive with an
opinion that Executive has substantial authority not to report any Excise
Tax on Executive's federal, state, local income or other tax return. Any
determination by the Accounting Firm as to the amount of the Gross-Up
Payment will be binding upon the Company and Executive. As a result of the
uncertainty in the application of Section 4999 of the Code (or any
successor provision thereto) and the possibility of similar uncertainty
regarding applicable state or local tax law at the time of any
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have
been made (an "Underpayment"), consistent with the calculations required
to be made hereunder. In the event that the Company exhausts or fails to
pursue its remedies pursuant to Section 6(f) below and Executive
thereafter is required to make a payment of any Excise Tax, Executive will
direct the Accounting Firm to determine the amount of the Underpayment
that has occurred and to submit its determination and detailed supporting
calculations to both the Company and Executive as promptly as possible.
Any such Underpayment will be promptly paid by the Company to, or for the
benefit of, Executive within five business days after receipt of such
determination and calculations.
(c) The Company and Executive will each provide the Accounting Firm
access to and copies of any books, records and documents in the possession
of the Company or Executive, as the case may be, reasonably requested by
the Accounting Firm, and otherwise cooperate with the Accounting Firm in
connection with the preparation and issuance of the determination
contemplated by Section 6(b) above.
(d) The federal, state and local income or other tax returns filed
by Executive will be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax
payable by Executive. Executive will make proper payment of the amount of
any Excise Tax. If prior to the filing of Executive's federal income tax
return, or corresponding state or local tax return, if relevant, the
Accounting Firm determines that the amount of the Gross-Up Payment should
be reduced, Executive will within five business days pay to the Company
the amount of such reduction.
(e) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by
Section 6(b) and (d) above will be borne by the Company. If such fees and
expenses are initially advanced by Executive, the Company will reimburse
Executive the full amount of such fees and expenses within five business
days after receipt from Executive of a statement therefor and reasonable
evidence of Executive's payment thereof.
(f) Executive will notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
the Company of a Gross-Up Payment. Such notification will be given as
promptly as practicable, but no later than 10 business days after
Executive actually receives notice of such claim, and Executive will
further apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid (in each case, to the extent
known by Executive). Executive will not pay such claim prior to the
earlier of:
(i) the expiration of the 30-calendar-day period following the
date on which Executive gives such notice to the Company; and
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(ii) the date that any payment of amount with respect to such
claim is due.
If the Company notifies Executive in writing prior to the expiration of
such period that it desires to contest such claim, Executive will:
(A) provide the Company with any written records or
documents in Executive's possession relating to such claim
reasonably requested by the Company;
(B) take such action in connection with contesting such
claim as the Company will reasonably request in writing from
time to time, including without limitation accepting legal
representation with respect to such claim by an attorney
competent in respect of the subject matter and reasonably
selected by the Company;
(C) cooperate with the Company in good faith in order
effectively to contest such claim; and
(D) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company will bear and pay directly all costs
and expenses (including interest and penalties) incurred in connection
with such contest and will indemnify and hold harmless Executive, on an
after-tax basis, for and against any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limiting the
foregoing provisions of this Section 6(f), the Company will control all
proceedings taken in connection with the contest of any claim contemplated
by this Section 6(f) and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim (provided that Executive may
participate therein at Executive's own cost and expense) and may, at its
option, either direct Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and Executive
agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company will determine; provided, however,
that if the Company directs Executive to pay the tax claimed and sue for a
refund, the Company will advance the amount of such payment to Executive
on an interest-free basis and will indemnify and hold Executive harmless,
on an after-tax basis, from any excise Tax or income tax, including
interest or penalties with respect thereto, imposed with respect to such
advance; and provided further, however, that any extension of the statute
of limitations relating to payment of taxes for the taxable year of
Executive with respect to which the contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's
control of any such contested claim will be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and Executive will
be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(g) If, after the receipt by Executive of an amount advanced by the
Company pursuant to Section 6(f) above, Executive receives any refund with
respect to such
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claim, Executive will (subject to the Company's complying with the
requirements of Section 6(f) above) promptly pay to the Company the amount
of such refund (together with any interest paid or credited thereon after
any taxes applicable thereto). If, after the receipt by Executive of an
amount advanced by the Company pursuant to Section 6(f) above, a
determination is made that Executive will not be entitled to any refund
with respect to such claim and the Company does not notify Executive in
writing of its intent to contest such denial or refund prior to the
expiration of 30-calendar-days after such determination, then such advance
will be forgiven and will not be required to be repaid and the amount of
such advance will offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid pursuant to this Section 6.
7. Legal Fees and Expenses: If it should appear to the Executive that the
Company has failed to comply with any of its obligations under this Agreement or
in the event that the Company or any other person takes or threatens to take any
action to declare this Agreement void, invalid or unenforceable, or institutes
any litigation or other action or proceeding designed to deny, or to recover
from, the Executive the benefits provided or intended to be provided to the
Executive hereunder, the Company irrevocably authorizes the Executive from time
to time to retain counsel of Executive's choice, at the expense of the Company
as hereafter provided, to advise and represent the Executive in connection with
any such interpretation, enforcement or defense, including without limitation
the initiation or defense of any litigation or other legal action, whether by or
against the Company or any Director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a confidential relationship
shall exist between the Executive and such counsel. The Company will pay and be
solely financially responsible for Executive's out-of-pocket expenses, including
reasonable attorneys' fees and expenses, incurred by the Executive in connection
with any of the foregoing; provided, however, in the case of any such litigation
or other action or proceeding in which the Company or any of its affiliates and
Executive are adverse parties, the Company shall not pay or be responsible for
any such expenses if the Company or any of its affiliates prevails against the
Executive.
8. Employment Rights; Termination Prior to Change in Control: Nothing
expressed or implied in this Agreement will create any right or duty on the part
of the Company or the Executive to have the Executive remain in the employment
of the Company or any Subsidiary prior to or following any Change in Control.
9. Withholding of Taxes: The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as the Company is
required to withhold pursuant to any law or government regulation or ruling.
10. Successors and Binding Agreement:
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise)
to all or substantially all of the business or assets of the Company, by
agreement in form and substance satisfactory to the Executive, expressly
to assume and agree to perform this Agreement in the same manner and
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to the same extent the Company would be required to perform if no such
succession had taken place. This Agreement will be binding upon and inure
to the benefit of the Company and any successor to the Company, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Company whether by
purchase, merger, consolidation, reorganization or otherwise (and such
successor shall thereafter be deemed the "Company" for the purposes of
this Agreement), but will not otherwise be assignable, transferable or
delegable by the Company.
(b) This Agreement will inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided in Sections 10(a) and 10(b) hereof. Without limiting
the generality or effect of the foregoing, the Executive's right to
receive payments hereunder will not be assignable, transferable or
delegable, whether by pledge, garnishment, creation of a security
interest, claims for alimony, or otherwise, other than by a transfer by
Executive's will or by the laws of descent and distribution and, in the
event of any attempted assignment or transfer contrary to this Section
10(c), the Company shall have no liability to pay any amount so attempted
to be assigned, transferred or delegated.
11. Notices: For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five business days
after having been mailed by United States registered mail, return receipt
requested, postage prepaid, or three business days after having been sent by a
nationally recognized overnight courier service such as Federal Express, UPS, or
Purolator, addressed to the Company (to the attention of the Secretary of the
Company) at its principal executive office and to the Executive at Executive's
principal residence, or to such other address as any party may have furnished to
the other in writing and in accordance herewith, except that notices of changes
of address shall be effective only upon receipt.
12. Dispute Resolutions: Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Chicago, Illinois in accordance with the rules of the American Arbitration
Association then in effect; provided, however, that the evidentiary standards
set forth in this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
13. Governing Law: The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to the
principles of conflict of laws of such State.
14. Validity: If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable
or otherwise illegal, the remainder of this Agreement and the application of
such provision to any other person or circumstances will not be affected, and
the provision so held to be invalid, unenforceable or otherwise
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illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
15. Miscellaneous: No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied with respect to the subject matter hereof
have been made by either party which is not set forth expressly in this
Agreement. References to Sections are to references to Sections of this
Agreement. Effective as of the date hereof, this Agreement supersedes and
replaces the prior Severance Agreement entered into between the Executive and
the Company.
16. Counterparts: This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
PLAYBOY ENTERPRISES, INC.,
By:
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Title:
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ACCEPTED and AGREED to:
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Richard Rosenzweig
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