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.
(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:
(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, 2011; 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,
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
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
(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
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 :
