Exhibit 10.27(a)
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) Xxxx X. Xxxxxx directly or as beneficial owner
and Xxxxxxxx Xxxxxx 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 Xxxxxxxx Xxxxxx 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 Xxxx X. Xxxxxx Foundation shall be deemed to
be held by Xxxxxxxx Xxxxxx if and so long as she has sole voting power
with respect to such Voting Stock.
2
(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:
3
(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, 2008; 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,
4
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
5
(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
6
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) fifty percent (50%) of the
Executive's annual Base Pay as of his date of
termination; or
7
(b) two (2) times the compensation limit
of Code Section 401(a)(17) (i.e., $460,000 for
2008)
shall be paid to Executive equally over the number of pay
periods between the Executive's date of termination and the
seventh month anniversary of the Executive's date of
termination; and
(2) an amount, if any, equal to the Executive's
annual Base Pay as of the Executive's date of termination
reduced by the amount paid to the Executive under Item (1)
immediately above will be paid equally over the number of
pay periods between the Executive's seventh month
anniversary of his date of termination and the 12 month
anniversary of his date of termination; and
(3) the remainder, if any, which is an amount
equal to the Severance Payment reduced by the amount paid to
Executive under Items (1) and (2) immediately above, shall
be paid to Executive in a lump sum no later than the seventh
month anniversary of his date of termination;
(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
ss.ss.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.
8
(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
(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:
9
(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 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
10
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 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.
11
(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 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 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
12
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 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.
13
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 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,
14
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 a ny 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
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:
------------------------------
Xxxx Xxxxxxx
15
