Exhibit 10.27(c)
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement"), dated as
of September 1, 2008, is by and between ROBERT MEYERS (the "Executive"), and
PLAYBOY ENTERPRISES, INC., a Delaware corporation (the "Employer" or the
"Company"), hereby amending, restating and superseding that prior Employment
Agreement between the parties dated September 15, 2006 (the "Original
Agreement"), for compliance with Section 409A of the Internal Revenue Code of
1986 (the "Code").
RECITALS
WHEREAS, Employer is primarily engaged in the business of multimedia
entertainment. Employer desires to continue employment with Executive, and
Executive desires to continue his employment with Employer on the terms and
subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto hereby agree as follows:
1. Employment of the Executive. Employer hereby agrees to continue
employing Executive and Executive hereby agrees to remain in the employ of
Employer, as an Executive Vice President of Employer, upon the terms and
conditions hereinafter set forth.
2. Employment Period. As provided in the Original Agreement, the term
of Executive's employment under this Agreement (the "Employment Period")
commenced as of September 15, 2006 (the "Commencement Date") and, subject to
earlier termination as provided pursuant to Section 5 below, shall continue for
a period of three years (the "Initial Period") after the Commencement Date.
Unless earlier terminated pursuant to Section 5 below, at the end of the Initial
Period, the parties will determine whether or not to renew this Agreement, and,
if so, on what terms and conditions.
3. Duties and Responsibilities. During the Employment Period, Executive
(i) shall have the title of Executive Vice President and President, Media Group,
(ii) shall devote his full business time and attention and expend his best
efforts, energies and skills on a full-time basis to the business of the
Company, and shall not engage in any other activity that would interfere with
the performance of his duties under this Agreement (provided that Executive is
permitted to serve on the board of directors of Double Click - to the extent
that doing so does not create any conflict of interest with Executive's
obligations or duties under this Agreement--other organizations, subject to
approval of the Company's Chief Executive Officer (CEO), or engage in endeavors
related to the community, his faith and other charitable functions which do not
materially interfere with the performance of his duties hereunder) and (iii)
shall perform such duties, and comply with all reasonable directions and
instructions of the Company's CEO.
(a) During the Employment Period, Executive's responsibilities
will include all pay and free cable and satellite broadcast television,
home video and theatrical entertainment development activities of the
Company, and the associated production, programming and distribution
activities, the Company's online, radio and wireless activities and the
Company's publishing activities (other than international publishing);
provided, however, that the foregoing will not be construed so as to
prevent or limit the
Company's good faith determination for bona fide business reasons to
operate one or more of any such activities through a joint venture, third
party license or other arrangement with a third party, subject to Section
5(e)(ii) below.
(b) During the Employment Period, Executive will report to the
Company's CEO and will be the Company's most senior executive in regard to
those responsibilities set forth in paragraph (a) immediately above.
4. Compensation.
(a) Base Salary. For all services rendered and required to be
rendered by, covenants of and restrictions in respect to Executive, under
this Agreement, Employer shall pay to Executive during and with respect to
the Employment Period, and Executive agrees to accept a base salary
computed at a rate of $721,000.28 (which became effective as of December
29, 2007) per annum ("Base Salary"), payable on a biweekly basis in
accordance with the Employer's standard payroll practices.
(b) Incentive Program. Executive shall also be eligible to
participate in a Board of Directors' approved incentive compensation plan,
as in place from time to time, with Executive's being eligible to earn up
to a maximum potential of 100% of his Base Salary. The incentive
compensation will be based in part (50%) on the Company's fiscal year net
income performance as determined by the CEO and the Company's Board of
Directors and in part (50%) on Media Group financial performance
established by the CEO in consultation with Executive. Subject to Section
5 hereof and as provided in the Original Agreement, incentive compensation
for fiscal years 2006 and 2009 will be prorated based on Executive's
initial hire date of September 15, 2006.
(c) Equity Awards. As provided in the Original Agreement, for
calendar year 2008 and 2009, Executive will be granted 20,000 deferred
stock awards subject to the terms and conditions determined by the
Company's Compensation Committee of the Company's Board of Directors
consistent with the terms and conditions of deferred stock awards to other
executive officers of the Company (which will include performance goals
based on the Company's operating income as such term is used and
determined by the Company for purposes of the Company's rolling three year
plan). Any such deferred stock awards shall be paid to Executive in a lump
sum no later than March 15 of the year following the year in which such
awards vest.
(d) Other Benefits. Executive will continue to be entitled to
participate in the Company's health benefit plans, Executive vacation
policy, matching 401-K plan, deferred compensation plan and similar plans
in effect from time to time. Executive's participation in the foregoing
plans, perquisites and travel and entertainment policy will be on terms no
less favorable than afforded to other executives of the Company
commensurate with Executive's level.
5. Termination of Employment Period; Change of Control.
(a) Termination by the Company for Cause. Employer may, at any
time during the Employment Period by notice to Executive (the "Termination
Notice"),
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terminate the Employment Period for "Cause" effective immediately. The
Termination Notice shall specify the Cause for termination. In such an
event, Executive shall not be entitled to any compensation or other amount
from the Company from the effective date of termination. For purposes
hereof, for "Cause" means a:
(i) willful failure or refusal by Executive to implement or
follow lawful policies or directions of the CEO or Board of
Directors after notice from Company;
(ii) commission by Executive of an act of moral turpitude or
act bringing disgrace or disrepute to the Company, or commission
of/conviction for any felony or any misdemeanor involving theft,
fraud or other dishonest action or event that results in harm to the
Company;
(iii) material violation of this Employment Agreement; and
(iv) material misrepresentation or material and willful
non-disclosure by Executive to the Company in connection with
performance of Executive duties.
Provided that in the event any such wrongful conduct is capable of being
cured, Executive will have fifteen (15) days from his receipt of the
Termination Notice to cure such conduct to the reasonable satisfaction of
Company.
(b) Termination by the Company Without Cause. The Company may
terminate this Agreement at any time, by delivering a notice to Executive,
without Cause, effective thirty (30) days after Executive receives such
notice in accordance with the terms hereof. In such an event, Executive's
sole remedy shall be:
(i) To collect all unpaid Base Salary and all unreimbursed
expenses payable for all periods through the effective date of
termination; plus
(ii) A severance payment in the sum of twelve (12) months of
Executive's then Base Salary; plus
(iii) A prorata payout under the incentive compensation plan
for Executive in the year of such termination in an amount equal to
the fraction, the numerator of calendar days from the beginning of
the year of such termination through the effective date of
termination and the denominator of which is 365.
(the sum of subparagraphs (i), (ii) and (iii) immediately above being
collectively referred to as the "Severance Payment"). With respect to the
amounts due:
(A) under subparagraph (i) immediately above, such
amount shall be payable in a lump sum no later than ten (10)
days following the effective date of the termination under
this paragraph (b);
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(B) under subparagraph (ii) immediately above, such
amount shall be payable in a lump sum on the first day of the
seventh month following the date of the termination under this
paragraph (b); and
(C) under subparagraph (iii) immediately above, such
amount shall be payable 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 paragraph
(b).
(c) Executive's Disability.
(i) Determination of Disability. In the event Executive
becomes totally disabled or disabled such that he is rendered unable
to perform substantially all of his usual duties for Company, and if
such disability shall persist for a continuous period in excess of
three months, or an aggregate period in excess of three months in
any one fiscal year, Company shall have the right at any time after
the end of such period during continuance of Executive's disability
by the delivery of not less than thirty (30) days' prior written
notice to Executive to terminate Executive's employment under this
Agreement whereupon the applicable provisions of subparagraph (ii)
immediately below shall apply. For purposes of this Agreement, if
Executive and Company shall disagree as to whether Executive is
totally disabled, or disabled such that he is rendered unable to
perform substantially all of his usual duties for Company as set
forth above, or as to the date at which time such total disability
began, the decision of a license medical practitioner, mutually
agreed upon by the parties, shall be binding as to both questions.
If the parties cannot agree as to the identity of the licensed
medical practitioner, Executive shall select a licensed medical
practitioner of his choice and the Company shall select a licensed
medical practitioner of its choice. The two licensed medical
practitioners so selected shall select a third licensed medical
practitioner, which third individual shall resolve either or both of
the questions referred to above and which resolution shall be
binding upon the parties.
(ii) Termination Due to Disability. If Executive's employment
with the Company is terminated on account of Executive's disability
as provided for in subparagraph (i) immediately above, then
Executive shall only be entitled to receive, and Company shall pay
to Executive (or Executive's estate or personal representative, as
applicable) the following amounts:
(A) all unpaid Base Salary and all unreimbursed
expenses payable for all periods through the effective date of
termination; plus
(B) the sum of six months of Executive's then Base
Salary; plus
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(C) a pro rata payout under the incentive compensation
plan for Executive in the year of such termination in an
amount equal to the fraction, the numerator of which is the
number of calendar days from the beginning of the year of such
termination through the effective date of termination and the
denominator of which is 365.
With respect to the amounts due as a result of your disability:
(I) under Clause (A) immediately above, such
amount shall be payable in a lump sum no later than ten
(10) days following the effective date of the
Executive's termination due to disability;
(II) under Clause (B) immediately above, such
amount shall be payable in a lump sum on the first day
of the seventh month following the date of the
Executive's termination due to disability; and
(III) under Clause (C) immediately above, such
amount shall be payable 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
due to disability.
(d) Executive's Death. If Executive's employment with the Company
is terminated on account of Executive's death, then Executive's estate or
personal representative, as applicable, shall only be entitled to receive,
and Company shall pay to Executive's estate or personal representative, as
applicable, the following amounts:
(i) all unpaid Base Salary and all unreimbursed expenses
payable for all periods through the effective date of termination;
plus
(ii) the sum of six {6) months of Executive's then Base
Salary; plus
(iii) a pro rata payout under the incentive compensation plan
for Executive in the year of such termination in an amount equal to
the fraction, the numerator of which is the number of calendar days
from the beginning of the year of such termination through the
effective date of termination and the denominator of which is 365.
With respect to the amounts due as a result of your death:
(A) under subparagraph (i) immediately above, such
amount shall be payable in a lump sum no later than ten (10)
days following the effective date of the Executive's death;
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(B) under subparagraph (ii) immediately above, such
amount shall be payable in a lump sum no later than ten (10)
days following the effective date of the Executive's death;
and
(C) under subparagraph (iii) immediately above, such
amount shall be payable 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 death.
(e) Resignation by Executive for Good Reason. Executive shall
have the right to terminate his employment under this Agreement and
receive the Severance Payment by the delivery of written notice to Company
within thirty (30) days after any of the events hereinbelow defined as
Good Reason. For purposes hereof, "Good Reason" means that:
(i) the Company has materially breached this Agreement and
the Company has failed to cure such breach after thirty (30) days
written notice from Executive;
(ii) there has occurred any material diminution or reduction
in duties of Executive, whether in scope or nature;
(iii) Executive fails to report directly to the CEO of the
Company (or reports to a CEO other than Christie Hefner);
(iv) there has occurred a Change in Control (as defined in
the Severance Agreement referenced in paragraph (1) immediately
below);
(v) the Company sells or otherwise transfers all or
substantially all of its media assets in a single transaction or
series of transactions, except if, and only for so long as, the
Company, directly or indirectly, continues to own a controlling
interest in the buyer or transferee; or
(vi) the Company permanently closes its New York office. With
respect to the Severance Payment due, the specific amount due:
(A) under Section 5(b)(i), such amount shall be
payable in a lump sum no later than ten (10) days following
the effective date of the Executive's resignation under this
paragraph (e);
(B) under Section 5(b)(ii), such amount shall be
payable in a lump sum on the first day of the seventh month
following the date of the Executive's resignation under this
paragraph (e); and
(C) under Section 5(b)(iii), such amount shall be
payable in accordance with the terms of the relevant
underlying incentive compensation plan at the time all other
executives are paid pursuant to
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such plan with respect to any such incentive compensation for
such year which includes Executive's date of resignation under
this paragraph (e).
(f) Severance Agreement (Change of Control). The Company is party
to a certain severance agreement with certain executives of the Company
("the Severance Agreement") a copy of which is attached hereto as Exhibit
A. The Company will enter into a Severance Agreement on substantially the
same terms upon the execution hereof by Executive. Notwithstanding
anything to the contrary, if the Executive has any rights to severance
compensation upon involuntary termination of employment under any
Severance Agreement (i.e., parachute agreement or change of control
agreement) Executive may have with the Company or any other arrangement,
any such rights under this Agreement shall be completely superseded by
such Severance Agreement; for the avoidance of doubt, Executive can only
receive severance compensation under this Agreement or under the Severance
Agreement, not both.
(g) No Offset or Mitigation. If Executive's employment with
Company is terminated for any reason, Company will have no right of
offset, nor will Executive be under any duty or obligation to seek
alternative or substitute employment at any time after the effective date
of such termination or otherwise mitigate any amounts payable by Company
to Executive.
6. Location of Executive's Activities. Executive's place of business in
the performance of his duties and obligations under this Agreement shall be
split principally between the Employer's place of business in Glendale,
California and New York, New York. Notwithstanding the preceding sentence,
Executive will engage in such travel and spend such time in other places,
including Chicago, as may be necessary or appropriate in furtherance of his
duties hereunder at the Employer's expense.
7. Miscellaneous.
(a) Notices. All notices, requests, demands, consents, and other
communications required or permitted to be given or made hereunder shall
be in writing and shall be deemed to have been duly given and received,
(i) if delivered by hand, the day it is so delivered, (ii) if mailed via
the United States mail, certified first class mail, postage prepaid,
return receipt requested, five business days after it is mailed, or (iii)
if sent by a nationally recognized overnight courier for next business day
delivery, the business day after it is sent, to the party to whom the same
is so given or made, at the address of such party as set forth at the head
of this Agreement, which address may be changed by notice to the other
party hereto duly give as set forth herein, with copies delivered as
follows:
if to Executive:
640 West End Avenue, #9B
New York, NY 10024
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with a copy to:
Ted Schachter
Schachter Entertainment
1157 South Beverly Drive Los
Angeles, CA 90035
if to the Company:
General Counsel
Playboy Enterprises, Inc.
680 North Lake Shore Drive
Chicago, Illinois 60611
(b) Governing Law; Jurisdiction. This agreement shall be governed
by, and construed and enforced in accordance with, the substantive and
procedural laws of the State of Illinois. Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts located in Cook County, Illinois, and waives any claim based upon
forum non-conveniens.
(c) Headings. All descriptive headings in this agreement are
inserted for convenience only and shall be disregarded in construing or
applying any provision of this Agreement.
(d) Counterparts. This Agreement maybe executed in counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
(e) Severability. If any provision of this Agreement, or part
thereof, is held to be unenforceable, the remainder of such provision and
this Agreement, as the case may be, shall nevertheless remain in full
force and effect.
(f) Entire Agreement and Representation. This Agreement contains
the entire agreement and understanding between Employee and Executive with
respect to the subject matter hereof. This Agreement supersedes any prior
agreement between the parties relating to the subject matter hereof.
Except as otherwise provided herein, this Agreement cannot be changed or
terminated except by an instrument in writing signed by the parties
hereto.
(g) Binding Effect. This Agreement shall be binding upon, and
insure to the benefit of, each parties' successors, transferees, heirs and
assigns.
(h) Confidentiality; Disclosure of Information.
(i) Confidentiality. Executive recognized and acknowledges
that he will have access to Confidential Information (as defined
below) relating to the business or interests of Company or of
persons with whom Company may have business relationships. Except as
permitted herein or as may be approved by
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Company from time to time, Executive will not during the Employment
Period or at any time thereafter, use or disclose to any other
person or entity, any Confidential Information of Company (except s
required by applicable law or in connection with performance of
Executive's duties and responsibilities hereunder). If Executive is
requested or becomes legally compelled to disclose any of the
Confidential Information, he will give prompt notice of such request
or legal compulsion to Company. Company may waive compliance with
this subparagraph (i) or will provide Executive with legal counsel
at no cost to Executive to seek an appropriate remedy; provided
however Executive may disclose any Confidential Information in the
event notwithstanding all such efforts of the Company and such legal
counsel Executive if compelled by court order to do so. The term
"Confidential Information" means information relating to Company's
business affairs, proprietary technology, trade secrets, patented
processes, research and development data, know-how, market studies
and forecasts, competitive analyses, pricing policies, executive
lists, employment agreements (other than this Employment Agreement),
personnel policies, the substance of agreements with customers,
suppliers and others, marketing arrangements, customer lists,
commercial arrangements, or any other information relating to
Company's business which is treated as confidential or proprietary
by Company in accordance with its policies. Notwithstanding the
immediately preceding sentence, the provisions of this subparagraph
(i) shall not apply to any information that (A) is in the public
domain; (B) is or becomes available to the public other than as a
result of a disclosure by Executive in violation of this
subparagraph (i); (C) was available to Executive on a
non-confidential basis prior to the date of this Employment
Agreement; (D) was already lawfully in Executive's possession prior
to the date of this Employment Agreement; or (E) becomes available
to Executive on a non-confidential basis from a source other than
Company. This obligation shall continue until such Confidential
Information becomes publicly available, other than pursuant to a
breach of this subparagraph (i) by the Executive, regardless of
whether the Executive continues to be employed by the Company.
(ii) Company Property. It is further agreed and understood by
and between the parties to this Agreement that all "Company
Materials," which include, but are not limited to, computers,
computer software, computer disks, tapes, printouts, source, HTML
and other codes, flowcharts, schematics, designs, graphics,
drawings, photographs, charts, graphs, notebooks, customer lists,
sound recordings, other tangible or intangible manifestation of
content, and all other documents whether printed, typewritten,
handwritten, electronic, or stored on computer disks, tapes, hard
drives, or any other tangible medium, as well as samples,
prototypes, models, products and the like shall be the exclusive
property of Company and, upon termination of Executive's employment
with Company, and/or upon the written request of Company, all
Company Materials, including copies thereof, as well as all other
Company property then in Executive's possession or control, shall be
returned to and left with Company.
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(i) Copyright. Executive acknowledges that all original works of
authorship by Executive, whether created alone or jointly with others,
relating to the Executive's employment with the Company, and which are
protectable by copyright, are "works made for hire" within the meaning of
the United States Copyright Act, 17 U.S.C. Section 101, as amended, and
the copyright of which shall be owned solely, completely and exclusively
by Company. If any such work is considered to be a work not included in
the categories of work covered by the United States Copyright Act, 17
U.S.C. Section 101, as amended, such work is hereby conveyed and
transferred completely and exclusively to Company. Executive hereby
irrevocably designates counsel to Company as Executive's agent and
attorney-in-fact to do all lawful acts necessary to apply for and obtain
patents and copyrights and to enforce Company's rights under this section,
provided that such counsel shall take any such actions only after
Executive has been requested in writing to do such acts by Company and
failed to promptly do so. This Paragraph 7.9 shall survive the termination
of this Agreement. Any conveyance of copyright hereunder includes all
rights of paternity, integrity, disclosure and withdrawal and any other
rights that may be known as or referred to as "moral rights."
(j) Indemnification. Company recognizes that the activities within
the scope of Executive's employment create the potential in some
jurisdictions of civil or even criminal actions being brought against
Executive. To the fullest extent permitted by law, Company shall
indemnify, defend, protect and hold Executive harmless from and against
all claims, demands, causes of action, actions, suits, costs, damages,
penalties, fines, liabilities, losses and expenses, whether civil or
criminal, including, without limitation, reasonable attorneys' and
consultant's fees and expenses arising out of or resulting from the
performance of Executive's duties within the scope of Executive's
employment. Company will include Executive as a named insured on Company's
directors and officers liability policy.
(k) Non-Competition and Non-Solicitation. Executive acknowledges
that Company has invested substantial time, money and resources in the
development and retention of its Confidential Information (including trade
secrets), customers, accounts and business partners, and further
acknowledges that during the course of Executive's employment with
Company, Executive will have access to Company's Confidential Information
(including trade secrets), and will be introduced to existing and
prospective customers, vendors, cable operators, accounts and business
partners of Company. Executive acknowledges and agrees that any and all
"goodwill" associated with any existing or prospective customer, vendor,
cable operator, account or business partner belongs exclusively to
Company, including, but not limited to, any goodwill created s a result or
direct or indirect contacts or relationships between Executive and any
existing or prospective customers, vendors, cable operators, accounts or
business partners. Additionally, the parties acknowledge and agree that
Executive possesses skills that are special, unique or extraordinary and
that the value of Company depends upon his use of such skills on its
behalf. In recognition of this, Executive covenants and agrees that:
(i) Noncompetition. During Executive's employment with
Company, Executive may not, without prior written consent of Company
(whether as an executive, agent, servant, owner, partner,
consultant, independent contractor,
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representative, stockholder, or in any other capacity whatsoever)
perform any work directly competitive in any way to the business of
Company or a substantially planned business that Executive is aware
of during Executive's employment with Company on behalf of any
entity or person other than Company (including Executive).
(ii) Nonsolicitation of Employees. During Executive's
employment with Company and for one year thereafter, Executive may
not notice, solicit or encourage any Company employee to leave the
employ of the Company or any independent contractor to sever its
engagement with Company, absent prior written consent from Company.
(iii) Nonsolicitation of Customers. During Executive's
employment with Company and for one year thereafter, Executive may
not, directly or indirectly, entice, solicit or encourage any
customer or prospective customer of Company to cease doing business
with Company, reduce its relationship with Company or refrain from
establishing or expanding a relationship with Company.
(l) Non-Disparagement Non-Disclosure.
(i) Nondisparagement. Executive and Company hereby agree
that during the Employment Period and all times thereafter, neither
Executive or Company will make any public statement, or engage in
any conduct, that is disparaging to the other party or, in the case
of Company, any of its Executives, officers, directors, or
shareholders known to Executive, including, but not limited to, any
statement that disparages the products, services, finances,
financial condition, capabilities or other aspect of the business of
Company and the capabilities of Executive. Notwithstanding any term
to the contrary herein, neither Executive nor Company shall be in
breach of this subparagraph (i) for the making of any truthful
statements under oath.
(ii) Nondisclosure. Executive will not directly or indirectly
be the source of disclosing, by publishing or by granting
interviews, of any Confidential Information (which is known to
Executive to be confidential) concerning the personal, social or
business activities of Company, its affiliates or the executives and
principals and the officers, directors, agents and Executives of all
the foregoing during or at any time after the termination of
Executive's employment, subject to the exceptions specified in
Section 7(11)(0. In addition, Executive agrees that without
Company's express written approval in each case, Executive will not:
(A) write, be the source of or contribute to any
articles, stories, books, screenplays or any other
communication or publicity of any kind (written or otherwise)
or deliver lectures in any way regarding or concerning the
Confidential Information, or
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(B) grant any interviews regarding or concerning the
Confidential Information during or at any time after the
termination of his employment.
(m) Representations and Warranties. The execution, delivery and
performance of this Agreement by the Company has been duly authorized by
all necessary corporate action of the Company and this Agreement
constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.
Playboy Enterprises, Inc.
By: /s/ Howard Shapiro
-------------------------
Howard Shapiro
/s/ R. Meyers
-------------------------
Robert Meyers
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EXHIBIT A
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 Robert Meyers, (the "Executive") and is,
effective as of January 1, 2008, hereby amending, restating and superseding that
prior Severance Agreement between the parties dated September 15, 2006, 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 Heftier 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
14
held by Christie Hefner if and so long as she has sole voting power with respect
to such Voting Stock.
(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.
15
(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:
(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 1(0(0, immediately upon the abandonment or
termination of the applicable agreement;
(ii) with respect to a Potential Change in Control occurring
pursuant to Section 1(0(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 1(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
16
(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, 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
17
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
(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
18
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 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
19
(the greater of Subclause (I) and Subclause (II) being hereinafter
referred to as the "Highest Bonus");
such Severance Payment shall be payable in a lump sum on the seventh month
anniversary of the Executive's date of termination;
(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 Sections 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
(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
20
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
21
reasonable and will be liquidated damages, and the Executive will not be
required to mitigate the 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-
22
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
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 Finn 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
23
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
(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(1) 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 haluiless,
on an after-tax basis, from any excise Tax or income tax, including
interest or penalties with respect thereto, imposed with respect to
24
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 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 6W 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
25
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 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
I0(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
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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
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.
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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: /s/ Howard Shapiro
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Title: EVP
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ACCEPTED and AGREED to:
/s/ R. Meyers
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Robert Meyers
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