Document:

exhibit_10-5.htm

     

    EXHIBIT
10.5

     

     

    

      2009
EQUITY INCENTIVE PLAN

      PERFORMANCE
SHARES AGREEMENT

      (U.S.
SERVICE PROVIDERS)

      

       

      Grant
# ________

      

      NOTICE OF
GRANT

      

      Participant
Name:  [NAME]

       

      Participant
Address:  [ADDRESS]

       

      

       

      Taleo
Corporation (the “Company”) hereby awards you (the “Participant”), the number of
performance shares indicated below (the “Performance Shares”) under the
Company’s 2009 Equity Incentive Plan (the “Plan”).  Unless otherwise
defined herein, the terms used but not defined in this Performance Shares
Agreement (the “Award Agreement,” including this Notice of Grant and Appendix A
hereto) will have the same defined assigned to them in the Plan. Subject to the
provisions of Appendix A (attached hereto) and of the Plan, the principal
features of this Award are as follows:

       

       

      Date of
Grant                                    ______________________________________                            

       

      Vesting
Commencement
Date         ______________________________________                                                       

       

      Number of
Performance
Shares       ______________________________________                                                         

       

      

       

      Vesting
Schedule:

      

      Subject
to any acceleration provisions contained in the Plan or set forth below, the
Performance Shares will vest in accordance with the following
schedule:

       

      [One-fourth
(1/4th) of the
Performance Shares shall vest on the one (1) year anniversary of the Vesting
Commencement Date, and thereafter one-sixteenth (1/16th) of the
Performance Shares shall vest on each quarterly anniversary of the Vesting
Commencement Date, subject to Participant’s remaining a Service Provider through
each applicable vesting date.]*

       

      *Except
as otherwise provided in Appendix A [TO BE INCLUDED UNLESS THE COMPENSATION
COMMITTEE DETERMINES OTHERWISE: or in an employment or other agreement entered
into on or prior to the Date of Grant between the Company and Participant as
referenced in Section 3 of Appendix A], in the event Participant ceases to
be a Service Provider for any or no reason before Participant vests in the
Performance Shares, the unvested Performance Shares will immediately be
forfeited and Participant’s right to acquire any Shares thereunder will
immediately terminate.

      

       

      PLEASE BE SURE TO READ ALL OF
APPENDIX A, WHICH CONTAINS THE SPECIFIC TERMS AND CONDITIONS OF THIS AWARD
AGREEMENT.

       

      
        
          
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      Participant
and the Company agree that this Award of Performance Shares is granted under and
governed by the terms and conditions of the Plan and this Award Agreement,
including this Notice of Grant and the Terms and Conditions of Performance
Shares, attached hereto as Appendix A, all of which are made a part of this
document.  Participant has reviewed the Plan and this Award Agreement
in their entirety, has had an opportunity to obtain the advice of counsel prior
to executing this Award Agreement and fully understands all provisions of the
Plan and Award Agreement.  Participant hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions relating to the Plan and Award
Agreement.  Participant further agrees to notify the Company upon any
change in the residence address indicated above.

       

       

      Participant
acknowledges and agrees that by clicking the [“ACCEPT”]OR[“ACKNOWLEDGE”] button
on the E*TRADE on-line grant agreement response page, it will act as
Participant’s electronic signature to this Award Agreement and will constitute
Participant’s acknowledgement of and agreement with all of the terms and
conditions of the Performance Shares, as set forth in this Award Agreement and
the Plan.  Participant may, if he or she prefers, sign, date and
return to the Company a paper copy of this Award Agreement.

       

      

       

      

       

      TALEO
CORPORATION

       

      

       

      By: _________________________________                                                     

       [NAME]

      

      Title: ________________________________                                                     

      

      
        
          
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      APPENDIX
A

       

      TERMS AND CONDITIONS OF PERFORMANCE
SHARES

       

      1.           Grant.  The
Company hereby grants to the Participant named in the Notice of Grant of this
Award Agreement under the Plan an Award of Performance Shares, subject to all of
the terms and conditions in this Award Agreement and the Plan, which is
incorporated herein by reference.  Subject to Section 20(c) of the
Plan, in the event of a conflict between the terms and conditions of the Plan
and the terms and conditions of this Award Agreement, the terms and conditions
of the Plan will prevail.

       

      2.           Company’s Obligation to
Pay.  Each Performance Share represents the right to receive a
Share on the date it vests (or at such later time indicated in this Award
Agreement).  Unless and until the Performance Shares will have vested
in the manner set forth in Sections 3 or 4 of this Award Agreement or
Section 15 of the Plan, Participant will have no right to payment of any such
Performance Shares.  Prior to actual payment of any vested Performance
Shares, such Performance Shares will represent an unsecured obligation of the
Company, payable (if at all) only from the general assets of the
Company.  Any Performance Shares that vest will be paid to Participant
(or in the event of Participant’s death, to his or her to his or her properly
designated beneficiary or estate) in whole Shares, subject to Participant
satisfying any applicable tax withholding obligations as set forth in Section 7
of this Award Agreement.  No fractional Shares shall be issued under
this Award Agreement.  Subject to the provisions of Section 4 of this
Award Agreement, such vested Performance Shares will be paid in Shares upon or
as soon as practicable after vesting, but in each such case within the period
ending no later than sixty (60) days from the vesting date.  In no
event will Participant be permitted, directly or indirectly, to specify the
taxable year of payment of any Performance Shares payable under this
Agreement.

       

      3.           Vesting
Schedule.  Except as provided in Section 4 of this Award
Agreement and Section 15 of the Plan, and subject to Section 5 of this Award
Agreement, the Performance Shares awarded by this Award Agreement will vest in
accordance with the vesting provisions set forth in the Notice of Grant attached
this Award Agreement [TO BE INCLUDED UNLESS COMPENSATION COMMITTEE DETERMINES
OTHERWISE AND MODIFIED AS NEEDED TO CONFORM TO THE APPLICABLE VESTING
ACCELERATION PROVISIONS: which shall be deemed to include any acceleration of
vesting provisions included in Participant’s written employment or other written
agreement with the Company entered into on or prior to the Date of Grant that
applies to performance shares, restricted stock units and/or restricted stock
(each of which such provision is incorporated by reference herein)], subject to
Section 15 of the Plan.  Performance Shares scheduled to vest on
a certain date or upon the occurrence of a certain condition will not vest in
Participant in accordance with any of the provisions of this Award Agreement,
unless Participant will have been continuously a Service Provider from the Date
of Grant until the date such vesting occurs.

      
        
          
             

          

           

        

        
           

          
            

          

        

        
           

        

      

       

      4.           Acceleration of
Vesting.

       

      (a)           Administrator
Discretion.  The Administrator, in its discretion, may
accelerate the vesting of the balance, or some lesser portion of the balance, of
the unvested Performance Shares at any time, subject to the terms of the
Plan.  If so accelerated, such Performance Shares will be considered
as having vested as of the date specified by the
Administrator.  Subject to the provisions of this Section 4 and
Section 5 of this Award Agreement, if the Administrator, in its discretion,
accelerates the vesting of the balance, or some lesser portion of the balance,
of the Performance Shares, the payment of such accelerated Performance Shares
shall be made as provided in Section 2; provided, however, if the
Performance Shares are “deferred compensation” within the meaning of Section
409A, the payment of such accelerated Performance Shares nevertheless shall be
made at the same time or times as if such Performance Shares had vested in
accordance with the vesting schedule set forth in Section 3 of this
Agreement, including any necessary application of Section 4(b) of this
Agreement (whether or not the Participant remains a Service Provider as of such
date(s)).  Notwithstanding the foregoing, any delay in payment
pursuant to this Section 4(a) will cease upon the Participant’s death and
such payment will be made as soon as practicable after the date of Participant’s
death (and in all cases within ninety (90) days following such
death).  For purposes of this Award Agreement, “Section 409A” means
Section 409A of the Code, and any proposed, temporary or final Treasury
Regulations and Internal Revenue Service guidance thereunder, as each may be
amended from time to time.

       

      (b)           Termination as a Service
Provider.  Notwithstanding anything in the Plan or this Award
Agreement to the contrary, if the vesting of the balance, or some lesser portion
of the balance, of the Performance Shares is accelerated in connection with the
Participant’s termination as a Service Provider, such accelerated Performance
Shares will not be payable by virtue of such acceleration until and unless the
Participant has a “separation from service” within the meaning of Section
409A.  Further, and notwithstanding anything in the Plan or this Award
Agreement to the contrary, if the vesting of the balance, or some lesser portion
of the balance, of the Performance Shares is accelerated in connection with
Participant’s termination as a Service Provider (provided that such termination
is a “separation from service” within the meaning of Section 409A, as determined
by the Company), other
than due to death, and if (x) Participant is a “specified employee” within the
meaning of Section 409A at the time of such termination as a Service Provider
and (y) the payment of such accelerated Performance Shares will result in the
imposition of additional tax under Section 409A if paid to Participant on or
within the six (6) month period following Participant’s termination as a Service
Provider, then the payment of such accelerated the Performance Shares will not
be made until the date six (6) months and one (1) day following the date of
Participant’s termination as a Service Provider, unless the Participant dies
following his or her termination as a Service Provider, in which case, the
Performance Shares will be paid in Shares to the Participant’s estate or
properly designated beneficiary as soon as practicable following his or her
death (and in all cases within ninety (90) days of Participant’s death).

       

      (c)           Change in
Control.  Notwithstanding anything in the Plan or this Award
Agreement to the contrary, if the vesting of all or a portion of the Performance
Shares accelerate (a) pursuant to Section 15(c) of the Plan in the event of a
Change in Control that is not a “change in control” within the meaning of
Section 409A or (b) pursuant to any other plan or agreement
that

      
        
          
             

          

           

        

        
           

          
            

          

        

        
           

        

      

       

      provides
for acceleration in the event of a change in control that is not a “change in
control” within the meaning of Section 409A, then the payment of such
accelerated portion of the Performance Shares will be made in accordance with
the timing of payment rules that apply to discretionary accelerations under
Section 4(a) of this Award Agreement.  If the vesting of all or a
portion of the Performance Shares accelerate in the event of a Change in Control
that is a “change in control” within the meaning of Section 409A, then the
payment of such accelerated Performance Shares shall be paid no later than the
date that is sixty (60) days from the vesting date.

       

      (d)           It
is the intent of this Award Agreement to comply with the requirements of Section
409A so that none of the Performance Shares provided under this Award Agreement
or Shares issuable thereunder will be subject to the additional tax imposed
under Section 409A, and any ambiguities herein will be interpreted to so
comply.

       

      5.           Forfeiture upon Termination
of Status as a Service Provider.  Notwithstanding any contrary
provision of this Award Agreement, the balance of the Performance
Shares that have not vested as of the time of Participant’s termination as
a Service Provider for any or no reason will be forfeited and automatically
transferred to and reacquired by the Company at no cost to the Company and
Participant’s right to acquire any Shares hereunder will immediately
terminate.

       

      6.           Death of
Participant.  Any distribution or delivery to be made to
Participant under this Award Agreement will, if Participant is then deceased, be
made to Participant’s designated beneficiary, provided such beneficiary has been
designated prior to Participant’s death in a form acceptable to the
Administrator, or if no beneficiary survives Participant, the administrator or
executor of Participant’s estate (or such other person to whom the Performance
Shares are transferred pursuant to the Participant’s will or in accordance with
the laws of descent and distribution).  Any such transferee must
furnish the Company with (a) written notice of his or her status as
transferee, (b) evidence satisfactory to the Company to establish the
validity of the transfer and compliance with any laws or regulations pertaining
to said transfer and (c) written acceptance of the terms and conditions of this
Award as set forth in this Award Agreement.

       

      7.           Withholding of
Taxes. 
Notwithstanding any contrary provision of this Award Agreement, no certificate
representing the Shares will be issued to Participant, unless and until
satisfactory arrangements (as determined by the Administrator) will have been
made by Participant with respect to the payment of income, employment and other
taxes which the Company determines must be withheld with respect to such
Shares.  If Participant fails to make satisfactory arrangements for
the payment of any required tax withholding obligations hereunder at the time
any applicable Performance Shares otherwise are scheduled to vest pursuant to
this Award Agreement, Participant will permanently forfeit such Performance
Shares and any right to receive Shares thereunder and the Performance Shares
will be returned to the Company at no cost to the Company.

       

      Until and
unless the Administrator determines otherwise, when Shares are issued as payment
for Performance Shares, the Company (or the employing Parent or Subsidiary) will
withhold a portion of the Shares that have an aggregate market value sufficient
to pay the minimum federal, state, local and foreign income, employment, social
insurance, payroll tax and any other applicable taxes required to be withheld by
the Company (or the employing Parent or Subsidiary) with respect

       

      
        
          
             

          

           

        

        
           

          
            

          

        

        
           

        

      

      to the
Shares or with respect to which the Participant has agreed to bear
responsibility (the “Tax Obligations”), unless the Company, in its sole
discretion, requires the Participant to make alternate arrangements satisfactory
to the Company for such withholdings in advance of the arising of any
withholding obligations. No fractional Shares will be withheld or issued
pursuant to the grant of Performance Shares and the issuance of Shares
thereunder; instead, the number of any Shares withheld pursuant to this Section
7 will be rounded down to the nearest whole Share and, unless determined
otherwise by the Company, any additional withholding necessary for this reason
will be done by the Company through the Participant’s paycheck or through direct
payment by the Participant to the Company in the form of cash, check or other
cash equivalent.

       

      In
addition and to the maximum extent permitted by law, after consultation with the
Company’s Compliance Officer (as defined in the Company’s Insider Trading
Policy), the Administrator, in its sole discretion and pursuant to such
procedures as it may specify from time to time, may require Participant to
satisfy the Tax Obligations, in whole or in part (without limitation) by
(a) paying cash or remitting a check or providing other cash equivalent,
(b) withholding an amount necessary to pay the applicable taxes from the
Participant’s paycheck, (c) having the Company withhold otherwise deliverable
Shares having a Fair Market Value equal to the minimum amount required to be
withheld, (d) delivering to the Company already vested and owned Shares
having a Fair Market Value equal to the amount required to be withheld,
(e) selling a sufficient number of such Shares otherwise deliverable to
Participant through such means as the Company may determine in its sole
discretion (whether through a broker or otherwise) equal to the amount required
to be withheld, or (f) a combination thereof. In addition and to the
maximum extent permitted by law, the Company (or the employing Parent or
Subsidiary) has the right to retain without notice from salary or other amounts
payable to the Participant, cash having a sufficient value to satisfy the Tax
Obligations that cannot be satisfied through the withholding of otherwise
deliverable Shares.  In addition and to the maximum extent permitted
by law, the Company (or the employing Parent or Subsidiary) has the right to
retain without notice from salary or other amounts payable to the Participant,
cash having a sufficient value to satisfy Tax Obligations that cannot be
satisfied through the withholding of otherwise deliverable Shares.  By
accepting this Award, the Participant expressly consents to the withholding of
Shares, and to any cash or Share withholding as provided for in this
Section.  All income and other taxes related to the Performance Share
award and any Shares delivered in payment thereof are the sole responsibility of
the Participant.

       

      8.           Rights as
Stockholder.  Neither Participant nor any person claiming under
or through Participant will have any of the rights or privileges of a
stockholder of the Company in respect of any Shares deliverable hereunder unless
and until certificates representing such Shares (which may be in book entry
form) will have been issued, recorded on the records of the Company or its
transfer agents or registrars, and delivered to Participant (including through
electronic delivery to a brokerage account).  After such issuance,
recordation and delivery, Participant will have all the rights of a stockholder
of the Company with respect to voting such Shares and receipt of dividends and
distributions on such Shares.

       

      9.           No Guarantee of Continued
Service.

       

      (a)           No Effect on Employment or
Service.  The Participant’s service with the Company and any
Parent or Subsidiary is on an at-will basis only, subject to the provisions
of

      
        
          
             

          

           

        

        
           

          
            

          

        

        
           

        

      

       

      Applicable
Law.  Accordingly, subject to any written, express employment contract
with the Participant, nothing in this Award Agreement or the Plan shall confer
upon the Participant any right to continue to be employed by or in service to
the Company or any Parent or Subsidiary or shall interfere with or restrict in
any way the rights of the Company or the employing Parent or Subsidiary, which
are hereby expressly reserved, to terminate the employment or service of the
Participant at any time for any reason whatsoever, with or without good
cause.  Such reservation of rights can be modified only in an express
written contract executed by a duly authorized officer of the Company or the
Parent or Subsidiary employing the Participant.

       

      (b)           Acknowledgement.  PARTICIPANT ACKNOWLEDGES AND AGREES
THAT THE VESTING OF THE PERFORMANCE SHARES PURSUANT TO THE VESTING SCHEDULE
HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE
COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS AWARD OF PERFORMANCE SHARES
OR ACQUIRING SHARES HEREUNDER.  PARTICIPANT FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AWARD AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND
THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S
RIGHT OR THE RIGHT OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR
RETAINING PARTICIPANT) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE
PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

       

      10.           Changes in Performance
Shares.  In the event that as a result of any dividend or other
distribution (whether in the form of cash, Shares, other securities or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or exchange
of Shares or other securities of the Company, or other change in the corporate
structure of the Company affecting the Shares, the Performance Shares will be
increased, reduced or otherwise affected, and by virtue of any such event the
Participant will in his or her capacity as owner of unvested Performance Shares
which have been awarded to him or her (the “Prior Performance Shares”) be
entitled to new or additional or different shares of stock, cash or other
securities or property (other than rights or warrants to purchase securities);
such new or additional or different shares, cash or securities or property will
thereupon be considered to be unvested Performance Shares and will be subject to
all of the conditions and restrictions that were applicable to the Prior
Performance Shares pursuant to this Award Agreement and the Plan.  If
the Participant receives rights or warrants with respect to any Prior
Performance Shares, such rights or warrants may be held or exercised by the
Participant, provided that until such exercise any such rights or warrants and
after such exercise any shares or other securities acquired by the exercise of
such rights or warrants will be considered to be unvested Performance Shares and
will be subject to all of the conditions and restrictions which were applicable
to the Prior Performance Shares pursuant to the Plan and this Award
Agreement.  The Administrator in its absolute discretion at any time
may accelerate the vesting of all or any portion of such new or additional
shares of stock, cash or

      
        
          
             

          

           

        

        
           

          
            

          

        

        
           

        

      

       

      securities,
rights or warrants to purchase securities or shares or other securities acquired
by the exercise of such rights or warrants; provided, however, that the payment
of such new or additional awards shall be made in accordance with the same
timing of payment rules applicable to Prior Performance Shares.

       

      11.           Address for
Notices.  Any notice to be given to the Company under the terms
of this Award Agreement will be addressed to the Company, in care of its
Secretary, at Taleo Corporation, 4140 Dublin Boulevard, Suite 400, Dublin,
California 94568, or at such other address as the Company may hereafter
designate in writing.

       

      12.           Grant is Not
Transferable.  Except to the limited extent provided in
Section 6 of this Award Agreement, this grant and the rights and privileges
conferred hereby will not be transferred, assigned, pledged or hypothecated in
any way (whether by operation of law or otherwise) and will not be subject to
sale under execution, attachment or similar process.  Upon any attempt
to transfer, assign, pledge, hypothecate or otherwise dispose of this grant, or
any right or privilege conferred hereby, or upon any attempted sale under any
execution, attachment or similar process, this grant and the rights and
privileges conferred hereby immediately will become null and void.

       

      13.           Binding
Agreement.  Subject to the limitation on the transferability of
this grant contained herein, this Award Agreement will be binding upon and inure
to the benefit of the heirs, legatees, legal representatives, successors and
assigns of the parties hereto.

       

      14.           Additional Conditions to
Issuance of Shares.  The Company shall not be required to issue
any certificate or certificates for Shares hereunder prior to fulfillment of all
the following conditions:  (a) the admission of such Shares to
listing on all stock exchanges on which such class of stock is then listed;
(b) the completion of any registration or other qualification of such
Shares under any U.S. state or federal law or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body, which the Administrator shall, in its absolute discretion, deem necessary
or advisable; (c) the obtaining of any approval or other clearance from any
U.S. state or federal governmental agency or any other governmental regulatory
body, which the Administrator shall, in its absolute discretion, determine to be
necessary or advisable; and (d) the lapse of such reasonable period of time
following the date of vesting of the Performance Shares as the Administrator may
establish from time to time for reasons of administrative convenience. Where the
Company determines that the delivery of the payment of any Shares will violate
federal securities laws or other applicable laws, the Company will defer
delivery until the earliest date at which the Company reasonably anticipates
that the delivery of Shares will no longer cause such violation.  The
Company will make all reasonable efforts to meet the requirements of any such
state or federal law or securities exchange and to obtain any such consent or
approval of any such governmental authority.

       

      15.           Restrictions on Sale of
Securities.  The Shares issued as payment for vested
Performance Shares under this Award Agreement will be registered under U.S.
federal securities laws and will be freely tradable upon
receipt.  However, Participant’s subsequent sale of the Shares may be
subject to any market blackout-period that may be imposed by the Company and
must comply with the Company’s insider trading policies, and any other
applicable securities laws.

      
        
          
             

          

           

        

        
           

          
            

          

        

        
           

        

      

       

      16.           Plan
Governs.  This Award Agreement is subject to all terms and
provisions of the Plan.  In the event of a conflict between one or
more provisions of this Award Agreement and one or more provisions of the Plan,
the provisions of the Plan will govern.  Capitalized terms used and
not defined in this Award Agreement will have the meaning set forth in the
Plan.

       

      17.           Administrator
Authority.  The Administrator will have the power to interpret
the Plan and this Award Agreement and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith and to interpret or revoke any such rules (including, but not limited
to, the determination of whether or not any Performance Shares have
vested).  All actions taken and all interpretations and determinations
made by the Administrator in good faith will be final and binding upon
Participant, the Company and all other interested persons.  No member
of the Administrator will be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or this Award
Agreement.

       

      18.           Electronic
Delivery.  The Company may, in its sole discretion, decide to
deliver any documents related to Performance Shares awarded under the Plan or
future Performance Shares that may be awarded under the Plan by electronic means
or request Participant’s consent to participate in the Plan by electronic
means.  Participant hereby consents to receive such documents by
electronic delivery and agrees to participate in the Plan through any on-line or
electronic system established and maintained by the Company or another third
party designated by the Company.

       

      19.           Captions.  Captions
provided herein are for convenience only and are not to serve as a basis for
interpretation or construction of this Award Agreement.

       

      20.           Agreement
Severable.  In the event that any provision in this Award
Agreement will be held invalid or unenforceable, such provision will be
severable from, and such invalidity or unenforceability will not be construed to
have any effect on, the remaining provisions of this Award
Agreement.

       

      21.           Entire Agreement;
Modifications to the Agreement.  This Award Agreement, together
with the provisions of any written agreement between Participant and the Company
that has been incorporated by reference herein by Section 3 of this Award
Agreement (whether entered into prior to or contemporaneously with this Award
Agreement), constitutes the entire understanding of the parties on the subjects
covered.  Participant expressly warrants that he or she is not
accepting this Award Agreement in reliance on any promises, representations, or
inducements other than those contained herein.  Modifications to this
Award Agreement or the Plan can be made only in an express written contract
executed by a duly authorized officer of the Company.  Notwithstanding
anything to the contrary in the Plan or this Award Agreement, the Company
reserves the right to revise this Award Agreement as it deems necessary or
advisable, in its sole discretion and without the consent of Participant, to
comply with Section 409A or to otherwise avoid imposition of any additional tax
or income recognition under Section 409A in connection to this Award of
Performance Shares.  Each payment and
benefit payable under this Award Agreement is intended to constitute separate
payments for purposes of Section 1.409A-2(b)(2) of the Treasury
Regulations.

      
        
          
             

          

           

        

        
           

          
            

          

        

        
           

        

      

       

      22.           Amendment, Suspension or
Termination of the Plan.  By accepting this Award, Participant
expressly warrants that he or she has received an Award of Performance Shares
under the Plan, and has received, read and understood a description of the
Plan.  Participant understands that the Plan is discretionary in
nature and may be amended, suspended or terminated by the Company at any
time.

       

      23.           Governing
Law.  This Award Agreement will be governed by the laws of the
State of California, without giving effect to the conflict of law principles
thereof.  For purposes of litigating any dispute that arises under
this Award of Performance Shares or this Award Agreement, the parties hereby
submit to and consent to the jurisdiction of the State of California, and agree that such
litigation will be conducted in the courts of Alameda County, California, or the federal courts for
the United States for the Northern District of California, and no other courts,
where this Award of Performance Shares is made and/or to be
performed.

       

      24.           Labor
Law.  By accepting this Award, the Participant acknowledges
that: (a) the grant of this Award is a one-time benefit which does not create
any contractual or other right to receive future grants of Performance Shares,
or benefits in lieu of Performance Shares; (b) all determinations with respect
to any future grants, including, but not limited to, the times when the
Performance Shares shall be granted, the number of Performance Shares subject to
each Award and the time or times when the Performance Shares shall vest, will be
at the sole discretion of the Company; (c) the Participant’s participation in
the Plan is voluntary; (d) the value of these Performance Shares is an
extraordinary item of compensation which is outside the scope of the
Participant’s employment contract, if any; (e) this award of Performance Shares
is not part of the Participant’s normal or expected compensation for purposes of
calculating any severance, resignation, redundancy, end of service payments,
bonuses, long-service awards, pension or retirement benefits or similar
payments; (f) the vesting of these Performance Shares will cease upon
termination of employment for any reason except as may otherwise be explicitly
provided in the Plan or this Award Agreement; (g) the future value of the
underlying Shares is unknown and cannot be predicted with certainty; (h) these
Performance Shares have been granted to the Participant in the Participant’s
status as a Service Provider of the Company or its Parent or one of its
Subsidiaries; (i) any claims resulting from this Award of Performance Shares
shall be enforceable, if at all, against the Company; and (j) there shall be no
additional obligations for any Parent or Subsidiary employing the Participant as
a result of these Performance Shares.

       

      25.           Disclosure of Participant
Information.  By accepting this Award of Performance Shares,
the Participant consents to the collection, use and transfer of personal data as
described in this Section 25.  The Participant understands that the
Company and its Parent and Subsidiaries hold certain personal information about
him or her, including his or her name, home address and telephone number, date
of birth, social security or identity number, salary, nationality, job title,
any shares of stock or directorships held in the Company, details of all awards
of Performance Shares or any other entitlement to shares of stock awarded,
canceled, exercised, vested, unvested or outstanding in his or her favor, for
the purpose of managing and administering the Plan (“Data”).  The
Participant further understands that the Company and/or its Parent and/or its
Subsidiaries will transfer Data among themselves as necessary for the purpose of
implementation, administration and management of his or her participation in the
Plan, and that the Company and/or any of its Parent

      
        
          
             

          

           

        

        
           

          
            

          

        

        
           

        

      

       

      and/or
Subsidiaries may each further transfer Data to any third parties assisting the
Company in the implementation, administration and management of the
Plan.  The Participant understands that these recipients may be
located in the European Economic Area, or elsewhere, such as in the U.S. or
Asia.  The Participant authorizes the Company to receive, possess,
use, retain and transfer the Data in electronic or other form, for the purposes
of implementing, administering and managing his or her participation in the
Plan, including any requisite transfer to a broker or other third party with
whom he or she may elect to deposit any Shares of stock acquired from this Award
of Performance Shares of such Data as may be required for the administration of
the Plan and/or the subsequent holding of Shares on his or her
behalf.  The Participant understands that he or she may, at any time,
view the Data, require any necessary amendments to the Data or withdraw the
consent herein in writing by contacting the Human Resources department for the
Company and/or its applicable Parent or Subsidiary.

       

      26.           Language.  If
Participant has received this Award Agreement or any other document related to
the Plan translated into a language other than English and if the translated
version is different than the English version, the English version will
control.

       

      

      o   0   oex10_4.htm

Exhibit 10.4

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (“Agreement”), dated as of June 1, 2009, between Scott Flanders, residing at 45 Echo Glen, Irvine, California 92603, (“Executive”) and PLAYBOY ENTERPRISES, INC., a Delaware corporation (“Employer” or the “Company”), with an office at 680 North Lake Shore Drive, Chicago,
Illinois 60611.

RECITAL

Employer is primarily engaged in the business of multimedia entertainment. Employer desires to hire Executive, and Executive desires to be employed by Employer on the terms and subject to the conditions set forth below.

In consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto hereby agree as follows:

	
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. - 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.

  

  

  

	
  
	
(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 maybe executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

	
  
	
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

  

9

  

 

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 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
	  

 

 

12

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