AMENDMENT TO SEVERANCE AGREEMENT
This agreement between Playboy Enterprises, Inc., a Delaware corporation (the
"Company"), and ____________________ (the "Executive") constitutes an amendment,
dated and effective as of August _____, 2000, to the Severance Agreement, dated
as of ____________________, between the Company and the Executive (the
"Severance Agreement"). This amendment was approved in substance by the
Compensation Committee of the Company's Board of Directors at a meeting held on
____________________, 2000. For good and valuable consideration, the receipt of
which is hereby acknowledged by the parties, the Severance Agreement is hereby
amended as follows:
1. The number "12" in the first sentence of Section 4(a)(ii) of the Severance
Agreement is replaced with the number "36".
2. In Section 4(d) of the Severance Agreement, the words "Section 7" are
replaced with the words "Sections 6 and 7".
3. Section 6 of the Severance Agreement is deleted in its entirety and
replaced with the following:
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
1
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.
(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. 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 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
2
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 Ex-
3
cise Tax, and at the request of the Company, provide to the
Company true and correct copies (with any amendments) of
Executive's federal income tax return as filed with the
Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing
authority, and such other documents reasonably requested by
the Company, evidencing such payment. 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 (ii) the
4
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:
(i) provide the Company with any written records or
documents in Executive's possession relating to such
claim reasonably requested by the Company;
(ii) 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;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) 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
5
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 xxx 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 xxx 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 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 Ex-
6
ecutive 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.
The Severance Agreement, except as herein amended, is hereby ratified, confirmed
and approved in all respects.
PLAYBOY ENTERPRISES, INC.
By_________________________________
___________________________________
NAME OF EXECUTIVE
7
