playboy_ex10-1.htm


    


    Exhibit
10.1

     

    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:

     

    
      	
              1.

            	
              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.

            


    

     

    
      	
              2.

            	
              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.”

            


    

     

    
      	
              3.

            	
              Duties and
      Responsibilities.

            


    

     

    
      	
               
      

            	
              (a)

            	
              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. and IMAX Corporation - 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.

            


    

     

    
      	
               
      

            	
              (b)

            	
              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.

            


    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (c)

            	
              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.

            


    

     

    
      	
              4.

            	
              Compensation.

            


    

     

    
      	
               
      

            	
              (a)

            	
              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:

            


    

     

    
      	
               
      

            	
              (i)

            	
              July
      1, 2009 through June 30, 2010:
$875,000;

            


    

     

    
      	
               
      

            	
              (ii)

            	
              July
      1, 2010 through June 30, 2011:
$900,000;

            


    

     

    
      	
               
      

            	
              (iii)

            	
              July
      1, 2011 through June 30, 2012:
$925,000;

            


    

     

    
      	
               
      

            	
              (iv)

            	
              July
      1, 2012 through June 30, 2013:
$950,000;

            


    

     

    
      
        	 	 	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).
	 	 	 
	
                 
      

              	
                (b)

              	
                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.

              


      

    

     

    
      	
               
      

            	
              (c)

            	
              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).

            


    

     

    
      	
               
      

            	
              (d)

            	
              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

            


    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     

    
      
        	 	 	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).
	 	 	 
	
                 
      

              	
                (e)

              	
                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.

              


      

    

     

    
      	
               
      

            	
              (f)

            	
              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.

            


    

     

    
      	
              5.

            	
              Termination of
      Employment Period; Change of
Control.

            


    

     

    
      	
               
      

            	
              5.1

            	
              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:

            


    

     

    
      	
               
      

            	
              (a)

            	
              willful
      failure or refusal by Executive to substantially implement or follow
      material lawful policies or directions of the Board after written notice
      from Company;

            


    

     

    
      	
               
      

            	
              (b)

            	
              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;

            


    

     

    
      	
               
      

            	
              (c)

            	
              material
      breach of this Employment Agreement that results in material harm to the
      Company; or

            


    

     

    
      	
               
      

            	
              (d)

            	
              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.

            


    

     

    
      
        	
                 
      

              	
                 

              	
                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.

              


      

      
 

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              5.2

            	
              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:

            


    

    


    
      	
               
      

            	
              (a)

            	
              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

            


    

     

    
      
        	
                 
      

              	
                (b)

              	
                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

              
	 	 	 
	 	(c)	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;


      

    

     

    
      	
               
      

            	
              (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.

            


    

     

    
      	
               
      

            	
              5.3

            	
              (a)

            	
              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.

            


    

    


    
      	
               
      

            	
              (b)

            	
              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

            


    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     

    
      
        	 	 	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.
	 	 	 
	
                 
      

              	
                5.4

              	
                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:

              


      

    

     

    
      	
               
      

            	
              (a)

            	
              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

            


    

     

    
      	
               
      

            	
              (b)

            	
              a
      pro rata payout at Target under the incentive compensation plan for
      Executive in and only 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;
    plus

            


    

     

    
      	
               
      

            	
              (c)

            	
              the
      premiums on COBRA coverage.

            


    

     

    
      	
               
      

            	
              5.5

            	
              If
      there is a “Change of Control” (as hereinafter defined) within the first
      12 months of the Term, 50% of all outstanding options granted to Executive
      under paragraph 4.(c) hereof will become fully vested and exercisable
      immediately prior to a Change of Control.  Should a Change of
      Control occur during the Term, but after the first 12 months of the Term,
      100% of such options will become fully vested immediately prior to a
      Change in Control.  Should there be a Change of Control at any
      time during the Term, 100% of the restricted stock units granted to
      Executive under paragraph 4.(d) hereof will become fully vested
      immediately prior to a Change of Control.  “Change of Control”
      will mean any of the following occurrences during the
  Term:

            


    

     

    
      	
               
      

            	
              (i)

            	
              Hugh
      M. Hefner, the Hugh M. Hefner 1991 Trust or any trust established by Hugh
      M. Hefner for estate planning purposes cease 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 paragraph 5.5(iii)
      or (iv), the liquidation or dissolution of the Company;
  or

            


    

     

    
      	
               
      

            	
              (iii)

            	
              the
      Company is merged, consolidated or reorganized into or with another
      corporation or other legal entity or person; provided, however, that no
      such merger, consolidation or reorganization will constitute a Change in
      Control if as a result of such merger, consolidation or reorganization
      not

            


    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

     

    
      
        	 	 	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 or other entities that 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
	 	 	 
	
                 
      

              	
                (iv)

              	
                the
      Company sells or otherwise transfers all or substantially all of its
      assets to another corporation or other legal person or entity; provided,
      however, that no such sale or transfer will constitute a Change in Control
      if 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 or other
      entities that 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

              


      

    

     

    
      	
               
      

            	
              (v)

            	
              the
      adoption by the Board of a resolution that, for purposes of this
      Agreement, a Change in Control has
occurred.

            


    

     

    
      	
               
      

            	
              5.6

            	
              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.

            


    

     

    
      	
               
      

            	
              5.7

            	
              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 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 30 days written notice from Executive;
      and

            


    

     

    
      	
               
      

            	
              (ii)

            	
              there
      has occurred any material diminution or reduction in duties, Base Salary,
      healthcare coverage (unless Company reimburses Executive for or provides
      Executive with reasonably comparable healthcare coverage), title,
      authority or responsibilities of Executive, whether in scope or
      nature.

            


    

     

    
      	
              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 places of business in California
      and Illinois.  Executive will engage in such travel and spend
      such time in California, Illinois and such other places as may be
      reasonably necessary or appropriate in furtherance of his duties hereunder
      at the Employer’s expense.  Executive will
  be

            


    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

     

    
      
        	 	 	entitled
      to fly business class on all domestic flights and first class on
      international flights.  If the Board determines to close its
      California office (in favor of maintaining its principal place of business
      in Chicago, Illinois) Executive will relocate to Chicago, in which case
      Executive and Company will negotiate relocation benefits in good
      faith.
	 	 	 
	
                7.

              	
                 

              	
                Miscellaneous.

              


      

    

     

    
      
        	
                 
      

              	
                7.1

              	
                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
      given as set forth herein, with copies delivered as
    follows:

              
	 	 	 


      

    

    
       

      
        
          	
                   
      

                	
                  (a)

                	
                  if
      to Executive:

                
	 	 	 
	 	 	45
      Echo Glen
	 	 	Irvine
      CA 92603
	 	 	 
	 	 	with
      a copy to:
	 	 	 
	 	 	Ziffren
      Brittenham LLP
	 	 	1801
      Century Park West
	 	 	Los
      Angeles CA 90067
	 	 	Attention:
      Bryan Wolf and Jamie Afifi
	 	 	 
	 	(b) 	if
      to the Company:
	 	 	 
	 	 	General
      Counsel
	 	 	Playboy
      Enterprises, Inc.
	 	 	680
      North Lake Shore Drive
	 	 	Chicago
      IL 60611


        

      

    

     

    
      	
               
      

            	
              7.2

            	
              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.

            


    

     

    
      	
               
      

            	
              7.3

            	
              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.

            


    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    
      
        	 	 	 
	
                 
      

              	
                7.4

              	
                Counterparts.
      This Agreement may be 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.

              


      

    

     

    
      	
               
      

            	
              7.5

            	
              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.

            


    

     

    
      	
               
      

            	
              7.6

            	
              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.

            


    

     

    
      
        	
                 
      

              	
                7.7

              	
                Binding Effect.
      This Agreement shall be binding upon, and inure to the benefit of, each
      party’s successors, transferees, heirs and assigns.

              
	 	 	 
	 	7.8 	Confidentiality; Disclosure of
      Information.

   

    

    
      	
               
      

            	
              (a)

            	
              Executive
      recognizes 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 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 as required by
      applicable law or in connection with performance of Executive’s duties and
      responsibilities hereunder or to Executive’s legal and financial advisors
      so long as such advisors agree to be bound by the terms and conditions of
      this paragraph 7.8(a)).  Executive may disclose the existence of
      the obligations under this paragraph 7.8(a) to future
      employers.  If Executive is requested or becomes legally
      compelled to disclose any of the Confidential Information, he, if
      permitted by applicable law, will give prompt notice of such request or
      legal compulsion to Company.  Company may waive compliance with
      this paragraph 7.8(a) 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 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

            


    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

     

    
      
        	 	 	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 paragraph 7.8(a) shall not apply to any information
      that (1) is in the public domain; (2) is or becomes available to the
      public other than as a result of a disclosure by Executive in violation of
      this paragraph 7.8(a); (3) was available to Executive on a
      non-confidential basis prior to the date of this Employment Agreement; (4)
      was already lawfully in Executive’s possession prior to the date of this
      Employment Agreement; or (5) becomes available to Executive on a
      non-confidential basis from a source other than Company (other than
      through a known breach of a confidentiality obligation).  This
      obligation shall continue until such Confidential Information becomes
      publicly available, other than pursuant to a breach of this paragraph
      7.8(a) by the Executive, regardless of whether the Executive continues to
      be employed by the Company.
	 	 	 
	
                 
      

              	
                (b)

              	
                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.

              


      

    

    
       

      
        
          	
                   
      

                	
                  7.9

                	
                  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. § 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. § 101,
    as
	 	 	 


           

          
            
              
              

            

            
              9

              
                

              

            

            
              
              

            

          

          	 	 	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 after a reasonable
      opportunity to review and comment thereon.  Executive will be
      entitled to receive copies of any documents executed by Company to enforce
      or evidence its rights under this paragraph 7.9.  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.”


        

      

      
         

        
          
            	
                     
      

                  	
                    7.10

                  	
                    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, errors and omission and
      general liability policies.
	 	 	 
	 	7.11	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 as 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


          

        

         

        
          
            
            

          

          
            10

            
              

            

          

          
            
            

          

        

      

    

     

    
      
        
          	
                   
      

                	
                   

                	
                  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:


        

      

       

    

    
      	
               
      

            	
              (a)

            	
              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, representative,
      stockholder, or in any other capacity whatsoever) perform any work
      directly competitive in any way to the business of Company or a planned
      business of which Executive is
aware.

            


    

     

    
      	
               
      

            	
              (b)

            	
              During
      Executive’s employment with Company and for one year thereafter, Executive
      may not directly or indirectly entice, 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.

            


    

     

    
      	
               
      

            	
              (c)

            	
              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.

            


    

     

    
      	
               
      

            	
              7.12

            	
              Non-Disparagement;
      Non-Disclosure.

            


    

    


    
      	
               
      

            	
              (a)

            	
              Executive
      and Company hereby agree that during the Employment Period and all times
      thereafter, neither Executive nor Company will make any public statement,
      or engage in any conduct, that is disparaging to the other party or, in
      the case of Company, to any of its executives, officers, directors, or
      shareholders, including, but not limited to, any statement that disparages
      the products, services, finances, financial condition, capabilities or any
      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 paragraph 7.12
      for the making of any truthful statements under oath or in a judicial or
      other proceeding.

            


    

     

    
      	
               
      

            	
              (b)

            	
              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,

            


    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      
        	
                 
      

              	
                 

              	
                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 7.8(a) (1) - (5).  In addition, Executive agrees that
      without Company’s express written approval in each case, Executive will
      not:

              


      

       

    

    
      	
               
      

            	
              i.

            	
              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

            


    

     

    
      	
               
      

            	
              ii.

            	
              grant
      any interviews regarding or concerning the Confidential Information during
      or at any time after the termination of his
  employment.

            


    

     

    


    
      	
               
      

            	
              7.13

            	
              Company
      Authority. 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

                                                            	 
      
	 
      	 
      	 
      	 
      
	 
      	
                                                              Title

                                                            	
                                                                         
      Executive Vice President

                                                            	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                                                                         
      /s/ Scott N. Flanders

                                                            	 
      
	 
      	 
      	
                                                                         
      SCOTT FLANDERS

                                                            	 
      


                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

     

     

     

    
 

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