Document:

ex10-27b.htm

 

Exhibit 10.27(b)

 

AMENDED AND RESTATED SEVERANCE AGREEMENT

 

 

THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (this “Agreement”), dated as of September 1, 2008, is by and between Playboy Enterprises, Inc., a Delaware corporation (the “Company”), and ____________, (the “Executive”) and is, effective as
of January 1, 2008, hereby amending, restating and superseding that prior Severance Agreement between the parties dated November 29, 2001, for compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

 

WITNESSETH:

 

WHEREAS, the Executive is a senior executive or key employee of the Company and has made and is expected to continue to make major contributions to the short- and long-term profitability, growth and financial strength of the Company;

 

WHEREAS, the Company recognizes that, as is the case for most publicly-held companies, the possibility of a Change in Control exists;

 

WHEREAS, the Company desires to assure itself of both present and future continuity of management and desires to establish certain minimum severance benefits for certain of its senior executive officers and other key employees, including the Executive, applicable in the event
of a Change in Control;

 

WHEREAS, the Company wishes to ensure that its senior executives and other key employees are not practically disabled from discharging their duties in respect of a proposed or actual transaction involving a Change in Control; and

 

WHEREAS, the Company desires to provide additional inducement for the Executive to continue to remain in the ongoing employ of the Company;

 

NOW, THEREFORE, the Company and the Executive agree as follows:

 

 

1.           Certain Defined Terms:  In addition to terms defined elsewhere
herein, the following terms have the following meanings when used in this Agreement with initial capital letters:

 

(a)           “Base Pay” means the Executive’s annual base salary at a rate not less than the Executive’s annual
fixed or base compensation as in effect for Executive immediately prior to the occurrence of a Change in Control or such higher rate as may be determined from time to time by the Board of Directors of the Company (the “Board”) or a Committee thereof.

 

(b)           “Change in Control” means any of the following occurrences during the Term:

 

(i)            Hugh M. Hefner directly or as beneficial owner and Christie Hefner cease collectively to hold over 50% of the combined voting power of the then-outstanding securities entitled to vote generally in the
election of directors of the Company (“Voting Stock”); or

 

  

 

  

 

(ii)            except pursuant to a transaction described in the proviso to Section 1(b)(iv) or (v), a sale, exchange or other disposition of PLAYBOY Magazine; or

 

(iii)            except pursuant to a transaction described in the proviso to Section 1(b)(iv) or (v), the liquidation or dissolution of the Company; or

 

(iv)            the Company is merged, consolidated or reorganized into or with another corporation or other legal person; provided, however, that no such merger, consolidation or reorganization will constitute a Change
in Control if the merger, consolidation or reorganization is initiated by the Company and as a result of such merger, consolidation or reorganization not less than a majority of the combined voting power of the then-outstanding securities of the surviving, resulting or ultimate parent corporation, as the case may be, immediately after such transaction is held in the aggregate by persons who held not less than a majority of the combined voting power of the outstanding Voting Stock of the Company immediately prior
to such transaction; or

 

(v)            the Company sells or otherwise transfers all or substantially all of its assets to another corporation or other legal person; provided, however, that no such sale or transfer will constitute a Change
in Control if the sale or transfer is initiated by the Company and as a result of such sale or transfer not less than a majority of the combined voting power of the then-outstanding securities of such corporation or other legal person, as the case may be, immediately after such sale or transfer is held in the aggregate by persons who held not less than a majority of the combined voting power of the outstanding Voting Stock of the Company immediately prior to such sale or transfer; or

 

(vi)            an equity or other investment in the Company, the result of which is that Christie Hefner ceases to serve as the Company’s Chief Executive Officer or relinquishes upon request or is divested of
any of the following responsibilities:

 

(A)           functioning as the person primarily responsible for establishing policy and direction for the Company; or

 

(B)           being the person to whom the senior executives of the Company report; or

 

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

 

For purposes of Section 1(b)(i), any Voting Stock beneficially owned (as such term is defined under Rule 13d-3 or any successor rule or regulation under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) by the Hugh
M.  Hefner Foundation shall be deemed to be held by Christie Hefner if and so long as she has sole voting power with respect to such Voting Stock.

 

  

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(c)           “Cause” means that, prior to any termination pursuant to Section 3(b) hereof, the Executive shall have:

 

(i)            been convicted of a criminal violation involving dishonesty, fraud or breach of trust; or

 

(ii)            willfully engaged in misconduct in the performance of Executive’s duties that materially injures the Company or any entity in which the Company directly or indirectly beneficially owns 50% or more
of the voting securities (a “Subsidiary”).

 

(d)           “Disability” means a condition whereby the Executive:

 

(i)            is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months; or

 

(ii)            is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving
income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Executive’s employer.

 

(e)           “Employee Benefits” means the perquisites, benefits and service credit for benefits as provided under any and
all employee retirement income and welfare benefit policies, plans, programs or arrangements in which Executive is entitled to participate, including without limitation any stock option, stock purchase, stock appreciation, savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred compensation, incentive compensation, group or other life, health, medical/hospital or other insurance (whether funded by actual insurance or self-insured by the Company), disability,
salary continuation, executive protection, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter by the Company, providing perquisites, benefits and service credit for benefits at least as great in the aggregate as are provided thereunder immediately prior to a Change in Control.

 

(f)           “Incentive Pay” means bonus, incentive or other payments of cash compensation, in addition to Base Pay, made or
to be made in regard to services rendered pursuant to any bonus, incentive, profit-sharing, performance, discretionary pay or similar agreement, policy, plan, program or arrangement (whether or not funded) of the Company, or any successor thereto providing benefits at least as great as the benefits provided thereunder immediately prior to a Change In Control.

 

(g)           “Potential Change in Control” shall be deemed to have occurred if the event set forth in any one of the following
subsections shall have occurred:

 

  

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(i)            the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;

 

(ii)            the Company or any Person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control; or

 

(iii)            the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

 

(h)           “Potential Change in Control Period” shall commence upon the occurrence of a Potential Change in Control and shall
lapse upon the occurrence of a Change in Control or, if earlier:

 

(i)            with respect to a Potential Change in Control occurring pursuant to Section l(f)(i), immediately upon the abandonment or termination of the applicable agreement;

 

(ii)            with respect to a Potential Change in Control occurring pursuant to Section l(f)(ii), immediately upon a public announcement by the applicable party that such party has abandoned its intention to take
or consider taking actions which if consummated would result in a Change in Control; or

 

(iii)            with respect to a Potential Change in Control occurring pursuant to Section l(f)(iii), upon the one year anniversary of the occurrence of a Potential Change in Control (or such earlier date as may be
determined by the Board).

 

(i)           “Severance Period” means the period of time commencing on the date of each occurrence of a Change in Control and
continuing until the earliest of:

 

(i)            eighteen months following the occurrence of the Change in Control; or

 

(ii)            the Executive’s death;

 

provided, however, that commencing on each anniversary of the Change in Control, the Severance Period will automatically be extended for an additional eighteen months unless, not later than 120 calendar days prior to such date, either the Company or the Executive shall have given written notice to the other that the Severance Period
is not to be so extended.

 

(j)           “Term” means the period commencing as of the date hereof and expiring as of the later of:

 

(i)            the close of business on December 31, 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,

 

  

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the Company or the Executive shall have given notice that it or the Executive, as the case may be, does not wish to have the Term extended.  Notwithstanding the foregoing, if, prior to a Change in Control, the Executive ceases for any reason to be an employee of the Company or any Subsidiary, thereupon without further
action, the Term shall be deemed to have expired and this Agreement will immediately terminate and be of no further effect.  For purposes of this Section 1(i), the Executive shall not be deemed to have ceased to be an employee of the Company or any Subsidiary by reason of the transfer of Executive’s employment between the Company and any Subsidiary, or among any Subsidiaries.

 

(k)           “Targeted Bonus” shall mean the targeted bonus for Executive’s position as set forth in the Company’s
Executive Incentive Compensation Plan (“EICP”) established for the then applicable fiscal year, which shall be equal to fifty percent (50%) times the maximum amount which Executive could earn under the EICP with respect to established quantifiable and objective financial goals.

 

2.           Operation of Agreement:  This Agreement will be effective
and binding immediately upon its execution, but, anything in this Agreement, to the contrary notwithstanding, will not be operative unless and until a Change in Control occurs, whereupon without further action this Agreement shall become immediately operative.

 

3.           Termination Following a Change in Control:

 

(a)           In the event of the occurrence of a Change in Control, the Executive’s employment may be terminated by the Company during the Severance Period and the Executive shall not be entitled to the benefits provided
by Section 4 only upon the occurrence of one or more of the following events:

 

(i)            The Executive’s death;

 

(ii)            The Executive’s Disability; or

 

(iii)            Cause.

 

If, during the Severance Period, the Executive’s employment is terminated by the Company other than pursuant to Section 3(a)(i), 3(a)(ii) or 3(a)(iii), the Executive will be entitled to the benefits provided by Section 4 hereof.

 

(b)           In the event of the occurrence of a Change in Control, the Executive may terminate employment with the Company and any Subsidiary during the Severance Period with the right to severance compensation as provided
in Section 4 upon the occurrence of one or more of the following “Good Reason” events (regardless of whether any other reason, other than Cause as hereinabove provided, for such termination exists or has occurred, including without limitation other employment) which occur without the Executive’s consent:

 

(i)            the Executive is not elected to, or is removed from, any elected office of the Company and/or Subsidiary, as the case may be, which the Executive held immediately prior to the Change of Control; or

 

  

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(ii)            the Executive is not re-nominated by the Board as a Director of the Company (or any successor thereto) if the Executive shall have been a Director of the Company immediately prior to the Change in Control;
or

 

(iii)            the assignment to the Executive of any duties inconsistent in any respect with the Executive’s position, authority, duties or responsibilities which the Executive held immediately prior to the
Change of Control, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; or

 

(iv)            any failure by the Company to comply with any of the provisions of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive; or

 

(v)            a material reduction in the aggregate of the Executive’s Base Pay and Incentive Pay payable to the Executive by the Company and any Subsidiary;  or

 

(vi)            the failure of a successor/tranferee organization to assume all duties and obligations of the Company under this Agreement pursuant to Section 10(a) following the liquidation, dissolution, merger, consolidation
or reorganization of the Company or transfer of all or substantially all of its business and/or assets, and where the Executive has no employee/employer relationship with such successor/transferee organization following the Change of Control; or

 

(vii)            The Company or any of its Subsidiaries requires the Executive regularly to perform Executive’s duties of employment beyond a materially different geographic radius from the location of Executive’s
employment immediately prior to the Change in Control or requires the Executive to travel away from Executive’s office in the course of discharging Executive’s responsibilities or duties hereunder at least 50% more (in terms of aggregate days in any calendar year or in any calendar quarter when annualized for purposes of comparison to any prior year) than was required of Executive in any of the three full years immediately prior to the Change of Control.

 

(c)           A termination by the Company pursuant to Section 3(a) or 3(d) or by the Executive pursuant to Section 3(b) or 3(d) will not affect any rights or benefits which the Executive may have pursuant to any agreement,
policy, plan, program or arrangement of the Company providing Employee Benefits (an “Other Arrangement”), which rights and benefits shall be governed by the terms thereof, including, without limitation, rights to payments under the Company’s bonus and incentive plans for prior fiscal years which have been earned but not yet paid to Executive.  Notwithstanding the foregoing, if the Executive has any rights to severance compensation upon termination of employment under any employment
agreement Executive may have with the Company or any Other Arrangement, such rights shall, during the Severance Period, be completely superseded by this Agreement; for the

 

  

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avoidance of doubt, Executive can only receive severance compensation under this Agreement or under the Other Arrangement, not both.

 

(d)           For purposes of this Agreement, a termination of Executive’s employment during a Potential Change in Control Period: (

 

(i)            by the Company other than pursuant to the events described in Section 3(a)(i), 3(a)(ii) or 3(a)(iii); or

 

(ii)            by Executive following the occurrence of one of the events described in Section 3(b)(i) through (vii),

 

shall be deemed to be a termination of Executive’s employment during the Severance Period entitling Executive to benefits provided by Section 4.

 

4.           Severance Compensation:

 

(a)           If, following the occurrence of a Change in Control, the Company terminates the Executive’s employment during the Severance Period other than pursuant to Section 3(a), or if the Executive terminates Executive’s
employment pursuant to Section 3(b), the Company will pay to the Executive the following:

 

(i)           an amount (the “Severance Payment”) equal to three times the sum of:

 

(A)           Base Pay, plus

 

(B)           the greater of:

 

(I)           the average actual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the three fiscal years ending immediately prior to the fiscal year in which occurs such Change in Control (or, such lesser
number of years during which the Executive was employed by the Company and annualized in the case of any such bonus paid in respect of a portion of a fiscal year); and

 

(II)           the Targeted Bonus (determined in accordance with Section 1(j) of this Agreement

 

(the greater of Subclause (I) and Subclause (II) being hereinafter referred to as the “Highest Bonus”);

 

such Severance Payment, as permitted pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii), shall be payable in three payments as follows:

 

(1)           an amount equal to the lesser of:

 

(a)           one (1) times the Executive’s annual Base Pay as of his date of termination; or

 

  

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(b)           two (2) times the compensation limit of Code Section 401(a)(17) (i.e., $460,000 for 2008)

 

shall be paid to Executive in a lump sum payment no later than ten (10) days following the Executive’s date of termination; and

 

(2)           the remainder, which is an amount equal to the Severance Payment reduced by the amount paid to Executive under Item (1) immediately above, shall be paid to Executive in a lump sum no
later than the seventh month anniversary of her date of termination; and

 

(ii)            for 36 months following the Termination Date (the “Continuation Period”), the Company will arrange to provide the Executive with Employee Benefits that are welfare benefits (but not stock
option, stock purchase, stock appreciation or similar compensatory benefits) no less favorable than those which the Executive was receiving or entitled to receive immediately prior to the Termination Date, including benefits provided under the Company’s Executive Protection Plan.  If and to the extent that any benefit described in this Section 4(a)(ii) is not or cannot be paid or provided under any policy, plan, program or arrangement of the Company or any Subsidiary, as the case may be, then
the Company will itself pay or provide for the payment to the Executive, or Executive’s dependents and beneficiaries, of such Employee Benefits.  Without otherwise limiting the purpose or effect of Section 5, Employee Benefits otherwise receivable by the Executive pursuant to this Section 4(a)(ii) will be reduced to the extent comparable welfare benefits are actually received by the Executive from another employer during the Continuation Period.  Such welfare benefits shall be provided
and paid for the Executive per regular payroll period of the Company commencing with the first payroll period following the Executive’s termination of employment and continuing for 36 month thereafter.  Medical expenses (as defined in Code Section 213(d)) paid pursuant to this subparagraph (ii) are intended to be exempt from Code Section 409A to the extent permitted under Treasury Regulation §§1.409A-1(b)(9)(v)(B) and -3(i)(1)(iv)(B).  However, to the extent any welfare benefits
provided pursuant to this subparagraph (ii) do not qualify for exemption under Code Section 409A, the Company shall provide Executive with a lump sum payment in an amount equal to the number of months of coverage to which he is entitled times the then applicable premium for the relevant benefit plan in which Executive participated.  Such lump sum amount will be paid during the second month following the month in which such coverage expires.

 

(iii)            Notwithstanding any provision of any annual or long-term incentive plan to the contrary, the Company shall pay to the Executive a lump sum amount, in cash, equal to the sum of:

 

(A)           any unpaid incentive compensation which has been allocated or awarded to the Executive for a completed fiscal year or other measuring period preceding the Termination Date under any such plan and which, as of the Termination Date, is contingent only upon the
continued employment of the Executive to a subsequent date; and

 

  

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(B)           the product of the Highest Bonus and a fraction, the numerator of which is the number of days in the fiscal year in which the Termination Date occurs prior to the Termination Date and the denominator of which is 365.

 

Such amount shall be paid to the Executive in accordance with the terms of the relevant underlying incentive compensation plan at the time all other executives are paid pursuant to such plan with respect to any such incentive compensation for such year which includes Executive’s date of termination under this Section 4(a).

 

(iv)            Notwithstanding the terms or conditions of any awards relating to a grant of restricted shares, all restricted shares which are not vested as of the Termination Date shall become fully vested.

 

(v)            The Company shall provide the Executive with outplacement services suitable to the Executive’s position.  The Executive shall commence the outplacement services no later than sixty (60)
days following his termination date under this Section 4(a), but in no event shall such services be provided beyond December 31 of the second year following the year of termination or, if earlier, the first acceptance by the Executive of an offer of employment..

 

(b)           There will be no right of set-off or counterclaim in respect of any claim, debt or obligation against any payment to or benefit for the Executive provided for in this Agreement, except as expressly provided
in Section 4(a)(ii).

 

(c)           Without limiting the rights of the Executive at law or in equity, if the Company fails to make any payment or provide any benefit required to be made or provided hereunder on a timely basis, the Company will
pay interest on the amount or value thereof at the prime rate in effect at the First National Bank of Chicago.  Such interest will be payable as it accrues on demand.  Any change in such prime rate will be effective on and as of the date of such change.

 

(d)           Notwithstanding any other provision hereof, the parties’ respective rights and obligations under this Section 4 and under Sections 6 and 7 will survive any termination or expiration of this Agreement
following a Change in Control or the termination of the Executive’s employment following a Change in Control for any reason whatsoever.

 

5.           No Mitigation Obligation:  The Company hereby acknowledges that
it will be difficult and may be impossible:

 

(a)           for the Executive to find reasonably comparable employment following the Termination Date; and

 

(b)           to measure the amount of damages which Executive may suffer as a result of termination of employment hereunder.

 

Accordingly, the payment of the severance compensation by the Company to the Executive in accordance with the terms of this Agreement is hereby acknowledged by the Company to be reasonable and will be liquidated damages, and the Executive will not be required to mitigate the

 

  

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amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of the Executive hereunder or otherwise reduce any payments or benefits to
be provided to Executive hereunder, except as expressly provided in Section 4(a)(ii).

 

6.           Certain Additional Payments by the Company:

 

(a)           In the event that this Agreement becomes operative and it is determined (as hereafter provided) that any payment or distribution by the Company or any of its affiliates to or for the benefit of Executive, whether
paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a “Payment”), would be subject to
the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (or any successor provision thereto), or to any similar tax imposed by state or local law, or any interest or penalties with respect to such excise tax (such tax or taxes, together with any such interest and penalties, are hereafter collectively referred to as the “Excise Tax”), then Executive will be entitled to receive an additional
payment or payments (a “Gross-Up Payment”) in an amount such that, after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.  Notwithstanding anything to the contrary, any Gross-Up Payment
pursuant to this Section 6(a) shall be paid no later than December 31 of the year following the year in which the Executive pays the applicable Excise Tax, and, if the Executive is a ‘specified employee’, as defined and applied in Code Section 409A as of the termination date, no earlier than the first day of the seventh month following such date.

 

(b)           Subject to the provisions of Section 6(f) below, all determinations required to be made under this Section 6, including whether an Excise Tax is payable by Executive and the amount of such Excise Tax and whether
a Gross-Up Payment is required and the amount of such Gross-Up Payment, will be made by a nationally recognized firm of certified public accountants (the “Accounting Firm”) selected by Executive in Executive’s sole discretion.  Executive will direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Company and Executive within 15 calendar days after the
date of the Change in Control or the date of Executive’s termination of employment, if applicable, and any other such time or times as may be requested by the Company or Executive.  For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in
the state and locality of the Executive’s residence on the Termination Date (or if there is no Termination Date, then the date on which the Gross-Up Payment is calculated for purposes of this Section 6(b)), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.  If the Accounting Firm determines that any Excise Tax is payable by Executive, the Company will pay the required Gross-Up Payment to Executive within five business days
after receipt of such determination and calculations.  If the Accounting Firm

 

  

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determines that no Excise Tax is payable by Executive, it will, at the same time as it makes such determination, furnish Executive with an opinion that Executive has substantial authority not to report any Excise Tax on Executive’s federal, state, local income or other tax return.  Any determination by the Accounting
Firm as to the amount of the Gross-Up Payment will be binding upon the Company and Executive.  As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding applicable state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (an “Underpayment”),
consistent with the calculations required to be made hereunder.  In the event that the Company exhausts or fails to pursue its remedies pursuant to Section 6(f) below and Executive thereafter is required to make a payment of any Excise Tax, Executive will direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and Executive as promptly as possible.  Any such Underpayment
will be promptly paid by the Company to, or for the benefit of, Executive within five business days after receipt of such determination and calculations.

 

(c)           The Company and Executive will each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or Executive, as the case may be, reasonably requested
by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determination contemplated by Section 6(b) above.

 

(d)           The federal, state and local income or other tax returns filed by Executive will be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable
by Executive.  Executive will make proper payment of the amount of any Excise Tax.  If prior to the filing of Executive’s federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, Executive will within five business days pay to the Company the amount of such reduction.

 

(e)           The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Section 6(b) and (d) above will be borne by the Company.  If such
fees and expenses are initially advanced by Executive, the Company will reimburse Executive the full amount of such fees and expenses within five business days after receipt from Executive of a statement therefor and reasonable evidence of Executive’s payment thereof.

 

(f)           Executive will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment.  Such notification will
be given as promptly as practicable, but no later than 10 business days after Executive actually receives notice of such claim, and Executive will further apprise the Company of the nature of such claim and the date on which such claim is requested to be paid (in each case, to the extent known by Executive).  Executive will not pay such claim prior to the earlier of:

 

(i)            the expiration of the 30-calendar-day period following the date on which Executive gives such notice to the Company; and

 

  

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(ii)            the date that any payment of amount with respect to such claim is due.

 

If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive will:

 

(A)           provide the Company with any written records or documents in Executive’s possession relating to such claim reasonably requested by the Company;

 

(B)           take such action in connection with contesting such claim as the Company will reasonably request in writing from time to time, including without limitation accepting legal representation with respect to such claim by an attorney competent in respect of the subject
matter and reasonably selected by the Company;

 

(C)           cooperate with the Company in good faith in order effectively to contest such claim; and

 

(D)           permit the Company to participate in any proceedings relating to such claim;

 

provided, however, that the Company will bear and pay directly all costs and expenses (including interest and penalties) incurred in connection with such contest and will indemnify and hold harmless Executive, on an after-tax basis, for and against any Excise Tax or income tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of costs and expenses.  Without limiting the foregoing provisions of this Section 6(f), the Company will control all proceedings taken in connection with the contest of any claim contemplated by this Section 6(f) and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim (provided that Executive may participate therein at Executive’s
own cost and expense) and may, at its option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company will determine; provided, however, that if the Company directs Executive to pay the tax claimed and sue for a refund, the Company will advance the amount of such payment
to Executive on an interest-free basis and will indemnify and hold Executive harmless, on an after-tax basis, from any excise Tax or income tax, including interest or penalties with respect thereto, imposed with respect to such advance; and provided further, however, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which the contested amount is claimed to be due is limited solely to such contested amount.  Furthermore, the
Company’s control of any such contested claim will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

 

(g)           If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 6(f) above, Executive receives any refund with respect to such

 

  

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claim, Executive will (subject to the Company’s complying with the requirements of Section 6(f) above) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto).  If, after the receipt by Executive of an amount advanced by the Company
pursuant to Section 6(f) above, a determination is made that Executive will not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial or refund prior to the expiration of 30-calendar-days after such determination, then such advance will be forgiven and will not be required to be repaid and the amount of such advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid pursuant to this Section
6.

 

7.           Legal Fees and Expenses:  If it should appear to the Executive
that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void, invalid or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, the Executive the benefits provided or intended to be provided to the Executive hereunder, the Company irrevocably authorizes the Executive from time to time to retain counsel of Executive’s
choice, at the expense of the Company as hereafter provided, to advise and represent the Executive in connection with any such interpretation, enforcement or defense, including without limitation the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, stockholder or other person affiliated with the Company, in any jurisdiction.

 

Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to the Executive’s entering into an attorney-client relationship with such counsel, and in that connection the Company and the Executive agree that a confidential relationship shall exist
between the Executive and such counsel.  The Company will pay and be solely financially responsible for Executive’s out-of-pocket expenses, including reasonable attorneys’ fees and expenses, incurred by the Executive in connection with any of the foregoing; provided, however, in the case of any such litigation or other action or proceeding in which the Company or any of its affiliates and Executive are adverse parties, the Company shall not pay or be responsible for any such expenses if
the Company or any of its affiliates prevails against the Executive.

 

8.           Employment Rights; Termination Prior to Change in Control:  Nothing
expressed or implied in this Agreement will create any right or duty on the part of the Company or the Executive to have the Executive remain in the employment of the Company or any Subsidiary prior to or following any Change in Control.

 

9.           Withholding of Taxes: The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as the Company is required to withhold pursuant to any law or government regulation or ruling.

 

10.           Successors and Binding Agreement:

 

(a)           The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, by
agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and

 

  

13

  

to the same extent the Company would be required to perform if no such succession had taken place.  This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business
or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the “Company” for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company.

 

(b)           This Agreement will inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees.

 

(c)           This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly
provided in Sections 10(a) and 10(b) hereof.  Without limiting the generality or effect of the foregoing, the Executive’s right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, garnishment, creation of a security interest, claims for alimony, or otherwise, other than by a transfer by Executive’s will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 10(c), the Company
shall have no liability to pay any amount so attempted to be assigned, transferred or delegated.

 

11.           Notices: For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five business days after having been mailed by United States registered mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such
as Federal Express, UPS, or Purolator, addressed to the Company (to the attention of the Secretary of the Company) at its principal executive office and to the Executive at Executive’s principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address shall be effective only upon receipt.

 

12.           Dispute Resolutions:  Any dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by arbitration in Chicago, Illinois in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply.  Judgment may be entered on the arbitrator’s award in any court having jurisdiction.

 

13.           Governing Law:  The validity, interpretation, construction
and performance of this Agreement will be governed by and construed in accordance with the substantive laws of the State of Delaware, without giving effect to the principles of conflict of laws of such State.

 

14.           Validity:  If any provision of this Agreement or the application
of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision to any other person or circumstances will not be affected, and the provision so held to be invalid, unenforceable or otherwise

 

  

14

  

illegal will be reformed to the extent (and only to the extent) necessary to make it enforceable, valid or legal.

 

15.           Miscellaneous:  No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Company.  No waiver by either party hereto at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be performed by such other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  No agreements or representations, oral or otherwise,
expressed or implied with respect to the subject matter hereof have been made by either party which is not set forth expressly in this Agreement.  References to Sections are to references to Sections of this Agreement.  Effective as of the date hereof, this Agreement supersedes and replaces the prior Severance Agreement entered into between the Executive and the Company.

 

16.           Counterparts: This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together will constitute one and the same agreement.

 

 

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written.

 

	  	
PLAYBOY ENTERPRISES, INC.,

	 	 
	 	 
	  	
By:
	  	  

	  	
Title:
	  	  

ACCEPTED and AGREED to:

	  	  

 

15ex10-27d.htm

 

 

Exhibit 10.27(d)

Portions of this Exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  The omissions have been indicated by asterisks (“*****”), and the omitted text has been filed separately with the Securities and Exchange Commission.

 

February 9, 2009

 

 

Christie Hefner

CAH LLC

628 North State Street

Chicago, IL 60610

 

Dear Christie:

 

 

This letter, when the enclosed copy has been signed, dated and returned by you, and the revocation period as set forth in paragraph 19. has passed, will evidence the agreement (the “Agreement”) between Playboy Enterprises, Inc. (“Playboy”) and you, regarding your separation as an employee and officer of Playboy
and shall be binding on Playboy and you. You and Playboy agree as follows:

 

 

	
1.a.
	
Your employment with Playboy ended effective January 31, 2009 (the “Employment End Date”). You will receive severance and termination benefits only as described in this Agreement. In particular, and except as provided in paragraph 2., you will receive severance pay in the amount of $2 million. The total severance pay identified in this paragraph includes all severance pay you might otherwise be
entitled to under any policy, plan or practice of Playboy and exceeds any severance pay that you might otherwise be entitled to in consideration of the terms and covenants in this Agreement.

 

 

	
1.b.
	
The severance pay set out in paragraph 1.a. will be made in a lump sum within 10 days after the revocation period set forth in paragraph 19. has expired.

 

 

	
2.a.
	
In the event Playboy enters into an agreement ***** on or before March 31, 2009 (an “Investment Agreement”) which results in a Modified Change of Control, as hereinafter defined, Playboy will pay you the additional sum of $1,712,500 in a lump sum within 10 days after the date on which such Modified Change of Control occurs; provided, however, that if the circumstances of the transaction which forms
the basis for such Modified Change in Control are not circumstances which would also be treated as a “Change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation” for purposes of Treasury Regulation Section 1.409A-3(i)(5), then such additional sum shall instead be paid on October 31, 2010, provided a Modified Change in Control has occurred prior to such date. The term “Modified Change of Control” shall
have the meaning set forth in Section 1(b) of your Amended and Restated Severance Agreement with Playboy dated as of September 1, 2008. (“Severance Agreement”), without regard to Section 1(b)(vi) thereof and, in the

 

  

  

  

 

	
  
	
event any payment is due under this paragraph, you shall also be provided with the protections set forth in Sections 6 and 7 of the Severance Agreement. Any payments made to you in accordance with such Section 6 shall be made when called for under such Section and in no event later than December 31 of the year following the year in which the applicable taxes were paid. Any payments made to you in accordance
with such Section 7 shall (i) be made when called for under such Section and in no event later than December 31 of the year following the year in which the applicable expenses were incurred, and (ii) not affect the amount of any other expenses eligible for reimbursement or in kind benefits to be provided in any other taxable year.

 

 

	
2.b.
	
You will receive a one-time grant of 30,000 Class B shares of Playboy’s common stock within 10 days after the revocation period set forth in paragraph 19. has expired.

 

 

	
3.  
	
You will receive, at the same time you receive the payment under paragraph 1.b. above, a lump sum payment in the amount of $22,211.55, representing 7 vacation carryover days as indicated on Playboy’s payroll system. You certify that the vacation reports submitted by you to payroll are complete and accurate insofar as the number of vacation
days taken by you during the period January 1, 2008 through the Employment End Date.

 

 

	
4.  
	
As of the Employment End Date, you will no longer remain covered by any of Playboy’s health insurance plans, and you will have the right to convert your life insurance and long term disability insurance, applications for which must be made within 31 days following the Employment End Date. All other benefits, including participation in Playboy’s
401(k) plan, will cease as of the Employment End Date.

 

 

	
5.  
	
After the Employment End Date, you may elect to continue your health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA), paying premiums as they become due. Coverage may be continued for you under COBRA for up to 18 months. You may contact Katy O’Mahony, at 312 373 2045 to discuss your coverage.

 

 

	
6.  
	
Any stock options that were granted to you and which were vested as of January 31, 2009 are exercisable through the “Option Expiration Date,” which is the 90th day following January 31, 2009. Any unexercised vested options will automatically expire if not exercised by the Option Expiration Date. Any unvested options and unvested restricted
stock units will be extended on the date hereof until March 31, 2010; provided, however, that (i) none of such options may be exercised after the date hereof, and all of such unvested options and restricted stock units shall lapse and be forfeited on March 31, 2009, unless an Investment Agreement has been entered into by March 31, 2009 pursuant to paragraph 2.a. hereof, and (ii) if such an Investment Agreement has been entered into by March 31, 2009 pursuant to paragraph 2.a. hereof, such options and restricted
stock units shall lapse and be forfeited on March 31, 2010, unless a Modified Change in Control has occurred prior to March 31, 2010. If a Modified Change in Control occurs prior to March 31, 2010, all such unvested options shall become fully vested and may be exercised until March 31, 2010, unless the Company’s outstanding stock options are sooner terminated as part of such Modified Change in Control, and all of such restricted stock units shall become fully vested, regardless of whether any performance
targets have been satisfied. This paragraph 6 shall apply notwithstanding any provision in any stock option plan or agreement to the contrary. Your contact for any option questions is Bob Campbell at 312

 

  

2

  

373 2180. Playboy has provided you with information regarding your stock options and the exercise thereof.

 

	
7.  
	
In addition to the severance payments Playboy has committed to paying her, Playboy will pay Deb Parry the sum of $60,000, net of her applicable tax withholding, payable in equal installments over 12 months, the first of which payments will be made within 10 days after the revocation period set forth in paragraph 19. has expired.

 

 

	
8.  
	
Playboy will reimburse you for all reasonable business expenses incurred by you through January 31, 2009, and charged to your Diners Club Card or other credit cards prior to the payment due date of such credit cards, subject to submission of (I) the credit card bills and (ii) invoices or other supporting documentation indicating the business purpose
of each charge,

 

 

	
9.  
	
Playboy will directly pay to the firm of Willkie Farr & Gallagher LLP, your attorneys, upon submission of a detailed invoice, up to $25,000 to cover your actual legal fees (at your attorneys’ standard hourly rates) and expenses incurred in the negotiation of this Agreement. Such amount will be treated by Playboy as a “working condition
fringe” under Section 132 of the Internal Revenue Code of 1986, as amended, and therefore shall not be treated as taxable income to you.

 

 

	
10.  
	
You shall be under no duty to mitigate any of the amounts received by you hereunder by securing employment with a subsequent employer or otherwise, nor shall any amounts received by you from any subsequent employment or otherwise, if applicable, entitle Playboy to any right to off-set the amount of severance pay or any other amount it owes you in
accordance with the terms of this Agreement.

 

 

	
11.  
	
You acknowledge that, as a result of your position with Playboy, you had access to confidential information and trade secrets of Playboy, including customer and employee identification and contacts, information about customers or vendors, business relationships, contract provisions, pricing, margins, business plans, marketing plans, financial data,
business and customer strategy, techniques, models, software, solutions, discussion guides, personal or performance information about employees, research and development, patent applications and plans or proposals related to the foregoing, which in each instance is: (a) generated or collected by or utilized in the operations of Playboy and relating to the actual or anticipated business or research or development of Playboy or Playboy’s actual or prospective clients; (b) not generally known within the industry;
and (b) of commercial value to Playboy (“Confidential Information”). You will not, without Playboy’s prior written permission, disclose Confidential Information to anyone outside of Playboy, either during or after your employment with Playboy, as long as such matters remain trade secrets or confidential. Confidential Information shall not include any information that: (a) is, or becomes, generally known to the public without breach of the terms of this Agreement; (b) was known to you prior to
your employment with Playboy or learned by you independently of your employment with Playboy; (c) is lawfully obtained from a third party with no duty of confidentiality to Playboy; or is required to be disclosed by law, provided that, you shall if permitted by law promptly inform Playboy of any such situations and shall, if permitted by law, take reasonable steps, at Playboy’s expense, to prevent disclosure of confidential information or trade secrets until Playboy

 

  

3

  

has been informed of such required disclosure and has had a reasonable opportunity to seek a protective order. For purposes of this paragraph:

 

	

12.a.

	

(i)

	
You agree that, at all times following the Employment End Date, you will not (a) engage in any public vilification of, or (b) make any false or disparaging public statements concerning Playboy or any of its officers, directors, shareholders or employees of Playboy, or any of their respective products, brands or trademarks, including management style, methods of doing business, the quality of products and services,
role in the community or treatment of employees.

 

 

	
  
	
(ii)
	
Playboy agrees that, at all times following the Employment End Date, its directors and executive officers will not and Playboy will not knowingly authorize any employee of Playboy to (a) engage in any public vilification of, or (b) make any false, or disparaging public statements concerning you or your management style, methods of doing business, role in the community or treatment of employees.

 

 

	
  
	
(iii)
	
The restrictions set forth in paragraphs 12.a.(i) and 12.a.(ii) shall not apply to truthful or factual statements made as the result of an order from a court, arbitration panel or governmental authority to make such statements, or to truthful or factual statements made in the course of your participation in legal proceedings, or as otherwise required by law.

 

 

	
12.b.
	
For a period of twelve (12) months after the Employment End Date, you will not directly or indirectly:

 

 

	
  
	
(i)
	
work for or provide services to (a) any Adult Entertainment Company, including, but not limited to, ***** anywhere in the United States (“Adult Entertainment Company” shall be defined as a company whose primary business is to own, create, operate, manage and/or act as the licensor of entertainment material or venues of an adult nature (including movies, books, magazines, websites, games, software,
nightclubs, cable television programming, pay per view services, telephone and online services, retail stores and catalogs, or stand-alone casinos not operated as part of resort hotels), that are marketed and sold exclusively to adults 21 years of age and older, or (b) any other company, a primary business of which involves the marketing or sale of consumer products identified by or with the intellectual property or brand name of any Adult Entertainment Company;

 

 

	
  
	
(ii)
	
(a) raid, hire, solicit, or attempt to persuade any employee of Playboy (except Deb Parry) to leave the employ of Playboy; (b) interfere with the performance by any such persons of their duties for Playboy; or (c) communicate with any such persons for the purposes described in items (a) and (b) in this paragraph;

 

  

4

  

 

	
  
	
(iii)
	
interfere with Playboy’s relationship with any person or entity that was a vendor or supplier of Playboy’s during your employment at Playboy; or

 

 

	
  
	
(iv)
	
on behalf of yourself or in conjunction with any other person, company or entity, own (other than less than 3% ownership in a publicly traded company), manage, operate, or participate in the ownership, management, operation, or control of, or be employed by any Adult Entertainment Company.

 

 

For purposes of this paragraph 12 and paragraph 15 hereof, the term “Playboy” includes any of Playboy’s subsidiaries and affiliated companies, and its and their officers, directors, employees and agents.

 

 

	
12.c.
	
You agree that, at all times following the Employment End Date, you will not make commercial use of Playboy’s intellectual property without the prior consent of Playboy.

 

 

	
13.  
	
From and after the Employment End Date and subject to your other employment and vacation commitments, you will make yourself reasonably available to Playboy by telephone or as otherwise provided below to provide reasonable cooperation and assistance to Playboy with respect to (i) transition advice to the new chief executive officer of Playboy (ii)
current litigation concerning Playboy (including attendance at out-of-town proceedings for which travel may be required at the request of Playboy, although satellite or telephone conferences will be used in lieu of such travel where available and practical), and (iii) pending or threatened litigation concerning Playboy which involves areas or matters in which you were involved during your employment. Playboy agrees to pay in advance, either to you or directly, the actual expenses you incur (including reasonable
travel expenses while traveling) as a result of your complying with this paragraph 13., subject to your submission to Playboy of documentation substantiating such expenses as Playboy may reasonably require. It is expressly agreed, however, that notwithstanding Playboy’s policy in connection therewith, you shall be entitled to fly business class when traveling for Playboy and shall be entitled to first-class accommodations, and meals.

 

 

	
14.  
	
Should you die before all the cash payments including wire transfers, checks or similar forms of payment due hereunder have been made, Playboy shall pay the remainder of such amounts to such other person or entity indicated by you to Playboy in writing (with the last such designation prior to your death being the governing election). The treatment
of your stock options in the event of your death shall be governed by the terms of the applicable stock option plans and agreements.

 

 

	
15.a.
	
For and in consideration of your promises made hereunder, Playboy hereby agrees not to sue or make any claim of any kind against you, your heirs, agents, assignees, executors, administrators, beneficiaries, trustees, and personal and legal representatives and anyone who could claim through you, both past and present, and either personally or in any other capacity (the “HEFNER RELEASEES”) before
any agency, court or other forum, and Playboy releases and discharges the HEFNER RELEASEES, and each of them, from all manner of action and actions, cause or causes of action in law or in equity, administrative

 

  

5

  

 

	
  
	
proceedings, suits, claims, debts, liens, sums of money, accounts, reckonings, bonds, bills, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, executions, claims and demands whatsoever, whether known or unknown, arising from acts or omissions of you in connection with your employment and the termination thereof (except those relating to any breach of this
Agreement by you). In addition, for and in consideration of the payments and other benefits provided to you hereunder, you agree not to sue or make any claim of any kind against Playboy, its subsidiaries and affiliated and predecessor companies, its and their successors and assigns and all its and their past and present directors, officers, employees, agents and attorneys, either personally or in their capacity as directors, officers, employees, agents and attorneys (the “PLAYBOY RELEASEES”) before
any agency, court or other forum, and you release and discharge the PLAYBOY RELEASEES, and each of them, from all manner of action and actions, cause or causes of action in law or in equity, administrative proceedings, suits, claims, debts, liens, sums of money, accounts, reckonings, bonds, bills, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, executions, claims and demands whatsoever, whether now known or unknown, arising from acts or omissions of the PLAYBOY
RELEASEES in connection with your employment and the termination thereof. This includes without limitation any and all wage claims, tort claims, contract claims, ERISA claims, wrongful termination claims, retaliation claims, defamation claims, fraud claims, claims under the Age Discrimination in Employment Act, 29 U.S.C. Section 621 at seq., claims under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000, et seq., the Americans with Disabilities Act of 1990, 42 U.S.C. Section 12101,
et seq., and the Family and Medical Leave Act of 1993, 29 U.S.C. Section 2601, et seq., as well as all other federal, state and local statutes and regulations, presently or hereafter enacted, and any other claims, demands or causes of action for monetary or equitable relief, including back pay, front pay, reinstatement, compensatory damages, punitive damages, attorneys’ fees, expenses and costs of litigation. Notwithstanding any other provision of this Agreement, neither this release nor any other provision
of this Agreement shall operate to release Playboy from (i) any such payments or benefits required to be provided under this Agreement, (ii) any such claims relating to any breach of this Agreement by Playboy, or (iii) to the extent arising out of your service as an employee, officer or director of Playboy or any of its subsidiaries or affiliates on or prior to January 31, 2009, any such claims or potential claims for indemnification, advancement or to the benefits of Playboy’s directors’ and officers’
liability insurance policies as in effect from time to time, in accordance with Playboy’s charter or by laws, or under any separate agreement between you and Playboy.

 

 

	
15.b.
	
THIS MEANS THAT, BY SIGNING THIS AGREEMENT, OTHER THAN AS SPECIFICALLY SET FORTH HEREIN, YOU AND PLAYBOY EACH WILL HAVE WAIVED ANY RIGHT YOU OR THEY MAY HAVE HAD TO BRING A LAWSUIT OR MAKE ANY CLAIM, AS SET FORTH IN PARAGRAPH 15.(a) ABOVE, AGAINST THE PLAYBOY RELEASEES OR HEFNER RELEASEES, RESPECTIVELY, BASED ON ANY ACTS OR OMISSIONS OF THE PLAYBOY RELEASEES OR HEFNER RELEASEES, RESPECTIVELY, UP TO THE DATE
OF THE SIGNING OF THIS AGREEMENT. EXCLUDED FROM YOUR AGREEMENT TO RELEASE AND DISCHARGE THE PLAYBOY RELEASEES ARE ANY CLAIMS OR RIGHTS WHICH CANNOT BE WAIVED BY LAW, INCLUDING YOUR RIGHT TO FILE A CHARGE OF DISCRIMINATION WITH AN ADMINISTRATIVE AGENCY OR PARTICIPATE IN ANY AGENCY INVESTIGATIONS. YOU ARE, HOWEVER, WAIVING YOUR RIGHT TO RECOVER ANY MONEY IN CONNECTION WITH SUCH A CHARGE OR INVESTIGATION. YOU ARE ALSO WAIVING YOUR RIGHT TO RECOVER

 

  

6

  

 

	
  
	
MONEY IN CONNECTION WITH A CHARGE FILED BY ANY OTHER INDIVIDUAL OR BY THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION OR ANY OTHER FEDERAL, STATE OR LOCAL AGENCY THAT INVESTIGATES CLAIMS OF DISCRIMINATION.

 

 

	
16.  
	
All payments due to you hereunder shall be subject only to such income tax withholding, payroll taxes and any other withholdings required by law.

 

 

	
17.  
	
All payments due to you hereunder shall be made, at your election, by wire transfer to an account designated by you in writing, and if you elect to provide such instructions, shall be considered to have been “received,” for purposes of this Agreement, when credited to such account. Until and unless you notify Playboy otherwise in writing,
Playboy shall make wire transfers in accordance with the written instructions you provide to us.

 

 

	
18.  
	
If Playboy assigns this Agreement to any other person or entity, such other person or entity must assume this Agreement in writing. Notwithstanding such assignment, Playboy shall remain primarily liable for all obligations under this Agreement (and Playboy may only assign this Agreement in its entirety). Playboy shall give you contemporaneous written
notice of any such assignment.

 

 

	
19.  
	
You also agree that you have entered into this Agreement knowingly and voluntarily and that you have been represented by and have consulted with an attorney in connection with the negotiation and drafting of this Agreement. You understand that you may take up to 21 days to consider this Agreement before signing it. After you sign this Agreement,
you will have 7 days to revoke it if you change your mind. If you want to revoke the Agreement, you must deliver a written revocation to Howard Shapiro, General Counsel, Playboy Enterprises, Inc., 680 North Lake Shore Drive, Chicago, IL 60611 within 7 days after you sign it. If you do not revoke this Agreement, the payments and other consideration referenced in paragraphs 1., 2., 3., and 9. hereof shall be paid as provided herein and the payments referenced in paragraphs 6. through 8., hereof shall be made at
the times provided herein irrespective of whether you revoke this Agreement.

 

 

	
20.  
	
No waiver of any breach of any provision of this Agreement shall be effective unless it is in writing and no waiver shall be construed to be a waiver of any succeeding breach or as a modification of such provision. The provisions or any part thereof of this Agreement shall be severable and if any provision of this Agreement is found by any court
to be unenforceable, in whole or in part, the remainder of this Agreement shall nevertheless be enforceable and binding on the parties. A court may modify any invalid, overbroad or unenforceable term of this Agreement so that such term, as modified, is valid and enforceable under applicable law. Further, you and Playboy each affirmatively state that you have not, will not and cannot rely on any representations not expressly made herein. The terms of this Agreement shall not be amended by you or Playboy except
by the express written consent of Playboy and you. You and Playboy acknowledge that each was represented by counsel and had an equal opportunity to review and/or modify the provisions set forth in this Agreement. Thus, in the event of any misunderstanding, ambiguity or dispute concerning this Agreement’s provisions or their interpretation, no rule of construction shall be applied that would result in having this Agreement interpreted against any party. This Agreement and all rights, remedies, and obligations
hereunder including, but not limited to, matters of construction, validity and performance,

 

  

7

  

shall be governed by the laws of the State of Illinois and any actions arising out of this Agreement shall exclusively be brought in the State of Illinois. Finally, except to the extent specifically otherwise set forth herein, this Agreement embodies the complete understanding between the undersigned parties. No other promises or agreements,
either express or implied, shall be binding unless in writing and signed by these parties.

 

	
21.  
	
In the event of a breach or a threatened breach of this Agreement by you, you acknowledge that Playboy could face irreparable injury which may be difficult to calculate in dollar terms and that Playboy shall be entitled to seek, in addition to remedies otherwise available at law or in equity, temporary restraining orders and. preliminary injunctions
and final injunctions without the posting of a bond enjoining such breach or threatened breath. The prevailing party in any action taken by Playboy to enforce any portion of this Agreement before a trier of fact shall be entitled to all of its reasonable attorney’s fees, expenses and costs incurred as a result of enforcing or defending the claim based upon such portion of this Agreement.

 

 

 

  

8

  

 

If the above is acceptable to you, please sign, date and return an executed original copy of this letter.

 

	  	  	
Very truly yours,
	  
	  	  	  
	  	  	  
	  	  	
PLAYBOY ENTERPRISES, INC.

	  	  	
/s/ Howard Shapiro
	  
	  	  	
Howard Shapiro
	  

 

 

ACCEPTED AND AGREED TO:

 

 

PLAYBOY ENTERPRISES, INC.

 

 

 

	
     /s/ Howard Shapiro
	  
	
By:      Howard Shapiro
	  
	
Title:  Executive Vice President
	  

 

ACCEPTED AND AGREED TO:

 

 

 

	
/s/ Christie Hefner
	  
	
Christie Hefner
	  
	  	  
	
Date: February 9, 2009
	  

 

 

 

9

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