Exhibit 10.4
EMPLOYMENT
AGREEMENT
EMPLOYMENT
AGREEMENT (“Agreement”), dated as of June 1, 2009,
between Scott Flanders, residing at 45 Echo Glen, Irvine,
California 92603, (“Executive”) and PLAYBOY
ENTERPRISES, INC., a Delaware corporation (“Employer”
or the “Company”), with an office at 680 North Lake
Shore Drive, Chicago, Illinois 60611.
RECITAL
Employer is
primarily engaged in the business of multimedia entertainment.
Employer desires to hire Executive, and Executive desires to be
employed by Employer on the terms and subject to the conditions set
forth below.
In
consideration of the premises and the mutual covenants hereinafter
set forth, the parties hereto hereby agree as follows:
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Employment
of the Executive . Employer hereby agrees to employ
Executive and Executive hereby agrees to be and remain in the
employ of Employer, as the Chief Executive Officer of Employer,
upon the terms and conditions hereinafter set forth.
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Employment
Period . The
term of Executive’s employment under this Agreement (the
“Employment Period”) shall commence July 1, 2009 (the
“Commencement Date”) and remain in effect for four
years (the “Initial Term”) unless terminated as
permitted herein. Thereafter, this Agreement shall
automatically renew for successive one year terms (each a
“Renewal Term”) unless either party provides written
notice of termination at least one year prior to the end of the
Initial Term or Renewal Term, in which case, the Agreement will
terminate at the end of such Initial Term or Renewal
Term. The Initial Term and any Renewal Term(s) shall
collective be the “Term.”
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Duties and
Responsibilities .
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During the
Employment Period, Executive (i) shall have the title of Chief
Executive Officer, (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 materially interfere with
the performance of his duties under this Agreement (provided that
Executive is permitted to serve on the board of directors of
eHealth, Inc. - to the extent that doing so does not create any
conflict of interest with Executive’s obligations or duties
under this Agreement - or other organizations, subject to approval
of the Company’s Board of Directors (the
“Board”), such approval not to be unreasonably
withheld, or engage in endeavors related to the community, his
faith, personal finances and effects 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 a majority of
the Company’s Board.
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Anything in
paragraph 3.(a) above or this Agreement to the contrary
notwithstanding, nothing herein will be construed so as to prevent
or limit the Company’s good faith determination for bona fide
business reasons to cease any or all of its operations or to
operate one or more of any such activities through a joint venture,
third party license or other arrangement with a third
party.
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During the
Employment Period, (i) Executive will report only to the
Company’s Board, (ii) Executive will be the Company’s
most senior and highest ranking executive, (iii) all other Company
senior executives will report to Executive, and (iv) the Chairman
of the Board of the Company will not be an executive of the
Company.
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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, annual base
salary (“Base Salary”) computed at the following
rates:
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July 1, 2009
through June 30, 2010: $875,000;
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July 1, 2010
through June 30, 2011: $900,000;
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July 1, 2011
through June 30, 2012: $925,000;
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July 1, 2012
through June 30, 2013: $950,000;
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payable on a
biweekly basis in accordance with the Employer’s standard
payroll practices. Should the Term be extended beyond
June 30, 2013, Company and Executive will negotiate Base Salary for
any such extension in good faith. In addition, for
fiscal 2010 and each calendar year of the Term thereafter,
Executive will be eligible to participate in a Board approved
incentive compensation plan, with Executive being eligible to earn
up to a maximum potential of 100% of his Base Salary (with
“Target” being 75% of such maximum
potential).
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Executive will
be eligible for a one-time bonus based on Executive’s
performance from the Commencement Date through December 31,
2009. Whether such bonus is payable at all, and, if it
is, the amount thereof (which will be a maximum of 100% of his Base
Salary with Target being 75% of such maximum potential) will be
solely at the discretion of the Board and will be payable, if at
all, on or before January 31, 2010.
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Upon
commencement of Executive’s employment by the Company,
Executive will receive a one-time grant of nonqualified options to
purchase 1,200,000 shares of the Class B common stock of the
Company. This option will be subject to the
Company’s stock option plan and contain the terms and
conditions determined by the Company’s Compensation
Committee. Subject to paragraph 5.5 hereof, the vesting
period of such options will be four years in equal installments
from the date of grant. The strike price of such options
will be the closing price of the Company’s Class B common
stock at the close of business on the date set forth in the grant
by the Company’s Compensation Committee (which is expected to
be the Commencement Date).
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Upon
commencement of Executive’s employment by the Company,
Executive will receive a one-time grant of 150,000 restricted stock
units of the Company’s Class B common stock. This
grant will be subject to the Company’s stock
option
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plan and
contain the terms and conditions determined by the Company’s
Compensation Committee. Subject to paragraph 5.5 hereof,
the vesting period of such grant will be four years in equal
installments from the date of the grant (which is expected to be
the Commencement Date).
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Effective on
the Commencement Date, Executive will be entitled to participate in
the Company’s health benefit plans, together with the
Company’s Executive vacation policy (under which he will be
entitled to five weeks of paid vacation annually), matching 401-K
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 at
the highest level and on terms no less favorable than afforded to
other senior executives of the Company commensurate with
Executive’s level. Should any other executive of
the Company receive a car allowance or reimbursement for club
membership dues, Executive will also be entitled to such
perquisites.
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Subject to
paragraph 6. hereof Company will reimburse Executive for all
reasonable business expenses and Executive will comply with
Company’s travel and entertainment policies in incurring and
seeking reimbursement for such expenses.
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Termination
of Employment Period; Change of Control .
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Employer may,
at any time during the Employment Period by written notice to
Executive (the “Termination Notice”), terminate the
Employment Period for uncured “Cause” effective
immediately. The Termination Notice shall specify the
reason for termination. In such an event,
Executive’s sole remedy shall be to collect all unpaid Base
Salary and all unreimbursed expenses payable for all periods
through the effective date of termination and Executive shall not
be entitled to any compensation or other amount from the Company
after the effective date of termination. For purposes
hereof, “Cause” means a:
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willful failure
or refusal by Executive to substantially implement or follow
material lawful policies or directions of the Board after written
notice from Company;
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willful
commission by Executive of an act of moral turpitude that results
in material harm to the Company; or commission of or conviction for
any felony or any material misdemeanor involving theft, fraud or
other dishonest action that results in material harm to the
Company;
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material breach
of this Employment Agreement that results in material harm to the
Company; or
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material
misrepresentation or material and willful nondisclosure by
Executive that results in material harm to the Company in
connection with performance of Executive’s duties.
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Provided that
in the event any such wrongful conduct is capable of being cured,
Executive will have 14 business days from his receipt of the
Termination Notice to cure such conduct to the reasonable
satisfaction of Company.
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The Company may
terminate this Agreement at any time for any reason, by delivering
a written notice to Executive, effective 30 days after Executive
receives such notice in accordance with the terms
hereof. In such an event, Executive’s sole remedy
shall be:
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to collect all
unpaid Base Salary, accrued incentive compensation, accrued
vacation pay and all unreimbursed expenses payable for all periods
through the effective date of termination; plus
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a severance
payment in the amount of 12 months of Executive’s then Base
Salary (subject to Section 409A of the Internal Revenue Code of
1986, as amended); plus
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a payout of
100% incentive compensation payable at Target under the incentive
compensation plan for Executive in and only in the year of such
termination;
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(the sum of
paragraphs 5.2 (a), (b) and (c) being collectively referred to as
the “Severance Payment”). Company will
reasonably cooperate with Executive to structure the payment of the
Severance Payment in a tax efficient manner. To the
extent allowed by law and requested by Executive, the Severance
Payment will be made in a lump sum within ten days of the effective
date of Executive’s termination. Executive will
have the right to take the Base Salary portion of the Severance
Payment in equal installments over the period set out in paragraph
5.2 (b). As long as Executive is receiving such Base
Salary, he, and to the extent he has family coverage, his family,
will remain covered by Company’s health insurance plan, as
applicable.
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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 six months, or an aggregate period in excess of
six 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 30
days’ prior written notice to Executive to terminate
Executive’s employment under this Agreement whereupon the
applicable provisions of paragraph 5.4 below shall
apply.
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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 licensed 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
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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.
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If
Executive’s employment with the Company is terminated on
account of Executive’s disability as provided for in
paragraph 5.3 above or on account of Executive’s death, then
Executive (or Executive’s estate or personal representative,
as applicable) shall only be entitled to receive, and Company shall
pay to Executive (or Executive’s estate or personal
representative, as applicable) the following amounts:
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all unpaid Base
Salary accrued incentive compensation, accru
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