-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, fjHFPU9Vb5PpHsBVxQQjMGSeVrtwxgAaK3SKK1v7k5WzVxl5KkGMu2rzw2KUG78N aEJKAyBH0fClIQn4CzwUqg== 0000950124-95-000763.txt : 19950615 0000950124-95-000763.hdr.sgml : 19950615 ACCESSION NUMBER: 0000950124-95-000763 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19950320 EFFECTIVENESS DATE: 19950408 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLAYBOY ENTERPRISES INC CENTRAL INDEX KEY: 0000079114 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 362258830 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 033-58145 FILM NUMBER: 95521918 BUSINESS ADDRESS: STREET 1: 680 N LAKE SHORE DR CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3127518000 S-8 1 FORM S-8 1 As filed with the Securities and Exchange Commission on ___________, 1995 Registration No.33-__________________________________ ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------------- PLAYBOY ENTERPRISES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 36-2258830 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER) 680 NORTH LAKE SHORE DRIVE CHICAGO, ILLINOIS 60611 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) PLAYBOY ENTERPRISES, INC. 1995 STOCK INCENTIVE PLAN (FULL TITLE OF THE PLAN) -------------------- IRMA VILLARREAL SECRETARY PLAYBOY ENTERPRISES, INC. 680 NORTH LAKE SHORE DRIVE CHICAGO, ILLINOIS 60611 (312) 751-8000 (Name, address, including zip code, and telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE Proposed Proposed maximum maximum aggregate Title of each class of Amount to be offering price offering Amount of securities to be registered registered per share price registration fee Class B Common Stock, $.01 par value.... 1,176,750(1) $9.03(2) $10,626,052(3) $3,320.64 Shares
(1) 1,058,750 Class B shares are being offered pursuant to stock options and restricted stock previously granted or issued by the Stock Option Committee of the Board of Directors and 118,000 Class B shares are being offered pursuant to stock options or other awards which may be granted or issued in the future. (2) Reflects the weighted average exercise price of all options and restricted stock previously granted or issued ($9.13 Class B) and all shares offered under options or other awards which may be granted or issued in the future (based on the average of the high and low prices reported in the consolidated reporting system for November 2, 1990 (the "Rule 457 Prices")) ($8.13 Class B). (3) Reflects the sum of the actual aggregate exercise price of options previously granted and the aggregate exercise price of possible future grants based on Rule 457 Prices. ================================================================================ 2 PART II ITEM 3. INCORPORATION OF DOCUMENT BY REFERENCE The Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1994, and its Quarterly Reports on Form 10-Q for the quarterly periods ending September 30, 1994 and December 31, 1994, and the description of the Company's Class A and Class B Common Stock contained in the registration statement on Form 8-A dated May 17, 1990, as amended by Form 8, dated June 7, 1990, are incorporated by reference into this registration statement. Any documents filed by the Company subsequent to the filing of this registration statement pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this registration statement and to be a part hereof from the date of filing of such documents. ITEM 4. DESCRIPTION OF SECURITIES Not Applicable ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL Not Applicable ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Company is a Delaware corporation. Section 145 of the General Corporation Law of the State of Delaware ("GCL") provides that a Delaware corporation has the power to indemnify its officers and directors in certain circumstances. Subsection (a) of Section 145 of the GCL empowers a corporation to indemnify any director or officer, or former director or officer, who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding provided that such director or officer acted in good faith in a manner reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, provided that such director or officer had no cause to believe his or her conduct was unlawful. Subsection (b) of Section 145 empowers a corporation to indemnify any director or officer, or former director or officer, who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses actually and reasonably incurred in connection with the defense or settlement of such action or suit provided that such director or officer acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which such director or officer shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the corporation unless and only to the extent that the Court of Chancery shall determine that despite the adjudication of liability such director or officer is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. Section 145 further provides that to the extent a director or officer of a corporation has been successful in the defense of any action suit or proceeding referred to in subsections (a) and (b) or 3 in the defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorney's fees) actually and reasonably incurred by him or her in connection therewith; that expenses may be advanced subject to an undertaking to reimburse such expenses if the person receiving the advance is ultimately determined not to be entitled to indemnification; that indemnification provided for by Section 145 shall not be deemed exclusive of any other rights to which the indemnified party may be entitled; and empowers the corporation to purchase and maintain insurance on behalf of a director or officer of the corporation against any liability asserted against him or her or incurred by him or her in any such capacity or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liabilities under Section 145. Article TWELFTH of the Company's Restated Certificate of Incorporation provides that directors will be exempt from monetary liabilities in certain circumstances, as follows: "Directors shall not be personally liable to the corporation or its stockholders for monetary damages for breaches of fiduciary duty as a director, except for liability (i) for breach of the director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit." Article VII, Section 6 of the Company's bylaws provides for indemnification of officers and directors of the Company, to the fullest extent permitted by applicable law for all expenses, liability and loss in connection with any action, suit or proceeding while serving as a director or officer of the Company or as an officer, director or employee of any other entity at the request of the Company. Such indemnification continues as to a person who has ceased to be a director or officer, and inures to the benefit of his or her heirs, executors and administrators. The Company is required to indemnify any officer or director in connection with a proceeding initiated by such officer or director only if such proceeding was authorized by the Board. The right to indemnification includes the right to be paid by the Company the expenses incurred in defending any such proceeding in advance of its final disposition subject to receipt by the Company of any required undertaking to repay all amounts so advanced if it shall ultimately be determined that the director or officer is not entitled to be indemnified under the Company's bylaws or otherwise. If an indemnification claim is not paid in full by the Company within ninety days after a written claim has been received by the Company, the claimant may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant is also entitled to be paid the expense of prosecuting that claim. The right to indemnification and payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in the bylaws is not exclusive of any other rights. This section of the bylaws provides further that the Company may maintain insurance to protect any director or officer against any expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss. The Company maintains such insurance for its directors and officers. ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED Not Applicable ITEM 8. EXHIBITS
Exhibit Number Description - ------ ----------- 4.1 Form of certificate for shares of the Company's Class B Common Stock
3 4 (incorporated by reference to Exhibit 1.2 of the Registration Statement on Form 8-A, dated May 17, 1990, as amended by Form 8, dated May 17, 1990) [SEC File No. 1-6813] 4.2 Playboy Enterprises, Inc. 1995 Stock Incentive Plan 4.3 Form of Non-Qualified Stock Option Agreement for Non-Qualified Stock Options which may be granted under the Plan 4.4 Form of Incentive Stock Option Agreement for Incentive Stock Options granted under the Plan 4.5 Form of Restricted Stock Agreement for Restricted Stock issued under the Plan 5.1 Opinion of Counsel 23.1 Consent of Coopers & Lybrand
ITEM 9. UNDERTAKINGS (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the "Securities Act"); (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Form S-3 or Form S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 4 5 (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. 5 6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this registration statement to be signed on its behalf by the undersigned, there unto duly authorized, in the City of Chicago, State of Illinois, on March 15, 1995. PLAYBOY ENTERPRISES, INC. (Registrant) By /s/Howard Shapiro ------------------------------- Howard Shapiro, Executive Vice President, Law and Administration, and General Counsel Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date - --------- ----- ---- /s/ Christie Hefner Chairman and Chief ) - --------------------------------- Executive Officer ) Christie Hefner (Principal Executive Officer) ) ) /s/ David I. Chemerow Executive Vice President, ) - ------------------------------ Finance and Operations ) David I. Chemerow (Principal Financial ) and Accounting Officer) ) ) /s/ Dennis S. Bookshester Director ) - ----------------------------- ) Dennis S. Bookshester ) ) March 15, 1995 ) ------------------ /s/ Robert Kamerschen Director ) - ----------------------------- ) Robert Kamerschen ) ) /s/ John R. Purcell Director ) - --------------------------------- ) John R. Purcell ) ) /s/ Sol Rosenthal Director ) - --------------------------------- ) Sol Rosenthal ) ) /s/ Richard S. Rosenzweig Director and Executive ) - ---------------------------- Vice President ) Richard S. Rosenzweig
6 7 EXHIBIT INDEX
Sequentially Exhibit Numbered Number Description Page - ------ ----------- ------------ 4.1 Form of certificate for shares of the Company's Class B Common Stock (incorporated by reference to Exhibit 1.2 of the Registration Statement on Form 8-A, dated May 17, 1990, as amended by Form 8, dated May 17, 1990) [SEC File No. 1-6813] 4.2 Playboy Enterprises, Inc. 1995 Stock Incentive Plan 4.3 Form of Non-Qualified Stock Option Agreement for Non-Qualified Stock Options which may be granted under the Plan 4.4 Form of Incentive Stock Option Agreement for Incentive Stock Option granted under the Plan 4.5 Form of Restricted Stock Agreement for Restricted Stock issued under the Plan 5.1 Opinion of Counsel 23.1 Consent of Coopers & Lybrand
7 EX-4.2 2 STOCK INCENTIVE PLAN 1 EXHIBIT 4.2 PLAYBOY ENTERPRISES, INC. STOCK INCENTIVE PLAN Playboy Enterprises, Inc., a corporation organized under the laws of the State of Delaware (the "Company"), hereby adopts this Playboy Enterprises, Inc. 1995 Stock Incentive Plan. The purposes of this Plan are as follows: (1) To further the growth, development and financial success of the Company by providing additional incentives to certain of its key employees through the ownership of Company stock and/or rights which recognize such growth, development and financial success. (2) To enable the Company to obtain and retain the services of key employees considered essential to the long-range success of the Company by providing and offering them an opportunity to own stock in the Company and/or rights which will reflect the growth, development and financial success of the Company. ARTICLE I DEFINITIONS Whenever the following terms are used in this Plan they shall have the meaning specified below, unless the context clearly indicates otherwise. Section 1.1 - Board. "Board" shall mean the Board of Directors of the Company. Section 1.2 - Change of Control. "Change of Control" shall mean the occurrence of any of the following events: (i) except in a transaction described in clause (iii) below, Hugh M. Hefner, Christie Hefner, the Hugh M. Hefner 1991 Trust (for so long as Hugh M. Hefner and Christie Hefner are joint trustees or one of them is sole trustee), and the Hugh M. Hefner Foundation (for so long as Hugh M. Hefner and Christie Hefner are joint trustees or one of them is sole trustee) cease collectively to own a majority of the total number of votes that may be cast for the election of directors of the Company; or (ii) a sale of Playboy magazine by the Company; or (iii) the liquidation or dissolution of the Company, or any merger, consolidation or other reorganization involving the Company unless (x) the merger, consolidation or other reorganization is initiated by the Company, and (y) is one in which the stockholders of the Company immediately prior to such reorganization become the majority stockholders of a successor or ultimate parent corporation of the Company resulting from such reorganization and (z) in connection with such event, provision is made for an assumption of outstanding Options and rights or a substitution thereof of a new Option or right in such successor or ultimate parent of substantially equivalent value. Section 1.3 - Code. "Code" shall mean the Internal Revenue Code of 1986, as amended. 2 Section 1.4 - Committee. "Committee" shall mean the Stock Option Committee of the Board of Directors comprised of those members of the Compensation Committee of the Board who are disinterested persons ("Disinterested Persons") within the meaning of Rule 16b-3 which has been adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, as such rule or its equivalent is then in effect ("Rule 16b-3"). Section 1.5 - Common Stock. "Common Stock" shall mean the Class B Common Stock, par value $.01 per share, of the Company. Section 1.6 - Company. "Company" shall mean Playboy Enterprises, Inc., a Delaware Corporation. Section 1.7 - Deferred Stock. "Deferred Stock" shall mean Common Stock awarded under Article VII of the Plan. Section 1.8 - Director. "Director" shall mean a member of the Board. Section 1.9 - Employee. "Employee" shall mean any officer or other employee (as defined in accordance with the Regulations and Revenue Rulings then applicable under Section 3401(c) of the Code) of the Company or any Subsidiary. Section 1.10 - ERISA. "ERISA" shall mean the Employment Retirement Income Security Act of 1974, as amended. Section 1.11 - Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. Section 1.12 - Grantee. "Grantee" shall mean an Employee granted a Performance Award, Dividend Equivalent, Stock Payment or Stock Appreciation Right, or an award of Deferred Stock, under this Plan. Section 1.13 - Incentive Stock Option. "Incentive Stock Option" shall mean an Option which conforms to the applicable provisions of Section 422 of the Code and which is designated as an Incentive Stock Option by the Committee. Section 1.14 - Non-Qualified Option. "Non-Qualified Option" shall mean an Option which is not designated as an Incentive Stock Option by the Committee. Section 1.15 - Officer. "Officer" shall mean an officer of the Company. 2 3 Section 1.16 - Option. "Option" shall mean a stock option granted under Article III of this Plan. An Option granted under this Plan shall, as determined by the Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option. Section 1.17 - Optionee. "Optionee" shall mean an Employee to whom an Option is granted under the Plan. Section 1.18 - Performance Award. "Performance Award" shall mean a cash bonus, stock bonus or other performance or incentive award that is paid in cash, Common Stock or a combination of both, awarded under Article VII of this Plan. Section 1.19 - Plan. "Plan" shall mean the 1995 Stock Incentive Plan of the Company. Section 1.20 - Restricted Stock. "Restricted Stock" shall mean Common Stock awarded under Article VI of this Plan. Section 1.21 - Restricted Stockholder. "Restricted Stockholder" shall mean an Employee granted an award of Restricted Stock under Article VII of this Plan. Section 1.22 - Secretary. "Secretary" shall mean the Secretary of the Company. Section 1.23 - Securities Act. "Securities Act" shall mean the Securities Act of 1933, as amended. Section 1.24 - Stock Payment. "Stock Payment" shall mean (i) a payment in the form of shares of Common Stock, or (ii) an option or other right to purchase shares of Common Stock, as part of a deferred compensation arrangement, made in lieu of all or any portion of the compensation, including without limitation, salary, bonuses and commissions, that would otherwise become payable to a key Employee in cash, awarded under Article VII of this Plan. Section 1.25 - Subsidiary. "Subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Section 1.26 - Termination of Employment. "Termination of Employment" shall mean the time when the employee-employer relationship between the Optionee, Grantee or Restricted Stockholder and the Company or any Subsidiary is terminated, voluntarily or involuntarily, for any reason, with or without Cause (as defined below), including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement, but excluding any termination where there is a simultaneous reemployment 3 4 by the Company or a Subsidiary. The Committee, subject to the definition of Cause below, shall determine the effect of all other matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether particular leaves of absence constitute Terminations of Employment; provided, however, that, with respect to Incentive Stock Options, a leave of absence shall constitute a Termination of Employment if, and to the extent that, such leave of absence interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. For purposes of the Plan, "Cause" shall mean an Employee's (a) gross negligence in the performance of the responsibilities of such Employee's office or position; (b) any act of dishonesty or moral turpitude materially adversely affecting the Company or the Company's reputation; (c) commission of any other willful or intentional act that could reasonably be expected to injure materially the reputation, business or business relationships of the Company or any Subsidiary; or (d) conviction of a felony or of any crime involving moral turpitude, fraud or misrepresentation. ARTICLE II SHARES SUBJECT TO PLAN Section 2.1 - Shares Subject to Plan The shares of stock subject to Options, awards of Restricted Stock, Performance Awards, awards of Deferred Stock, or Stock Payments shall be Common Stock. The aggregate number of shares which may be issued upon exercise of such Options or rights or upon any such awards under the Plan shall not exceed the sum of 1,100,000 shares of Common Stock plus that number of shares of Common Stock pursuant to which options could otherwise be granted under the Company's 1989 Stock Option Plan which, by resolution of the Board, are transferred to this Plan and are no longer eligible for grant under the Company's 1989 Stock Option Plan. Furthermore, the maximum number of shares of Common Stock which may be subject to Options, rights or other awards granted under the Plan to any individual in any calendar year shall not exceed 150,000, and the method of counting such shares shall conform to any requirements applicable to performance-based compensation under Section 162(m) of the Code. The shares of Common Stock issuable upon exercise of such Options or rights or upon any such awards may be either previously authorized but unissued shares or treasury shares. 4 5 Section 2.2 - Unexercised Options and Awards If any Option, or other right to acquire shares of Common Stock under any other award under this Plan, expires or is cancelled without having been fully exercised (including Restricted Stock or any other award that is forfeited before applicable vesting requirements are met or transfer restrictions have lapsed), the number of shares subject to such Option or other right but as to which such Option or other right was not exercised (or vested or delivered without restriction, as the case may be) prior to its expiration or cancellation may again be optioned, granted or awarded hereunder, subject to the limitations of Section 2.1. Section 2.3 - Adjustments in Outstanding Options or Rights Subject to Section 4.2(c), in the event that the outstanding shares of the Common Stock subject to Options or other rights are changed into or exchanged for a different number or kind of shares of the Company or other securities of the Company by reason of a recapitalization, reclassification, stock split, stock dividend or combination of shares or similar transaction, the Committee shall make an appropriate and equitable adjustment in the number and kind of shares as to which all outstanding Options or rights, or portions thereof then unexercised, shall be exercisable, so that the Optionee's, Grantee's or Restricted Stockholder's proportionate interest shall be maintained. Such adjustment shall be made without change in the total price applicable to the unexercised portion of the Option or right (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in price per share; provided, however, that, in the case of Incentive Stock Options, each such adjustment shall be made in such manner as not to constitute a "modification" within the meaning of Section 424(h)(3) of the Code. Any such adjustment made by the Committee shall be final and binding upon all Optionees, Grantees, Restricted Stockholders, the Company or any Subsidiary, their representatives and all other interested persons. Such adjustments will also be made in determining Section 2.1 limitations on maximum number and kind of shares which may be issued on exercise of Options, Restricted Stock or other awards. The shares of Class B Common Stock reserved under this Plan will be reduced as Options, Restricted Stock or other awards are granted or issued so that the aggregate number of any single Class of Stock will never exceed the total amount of shares authorized under the Plan. 5 6 ARTICLE III GRANTING OF OPTIONS Section 3.1 - Eligibility Any key Employee of the Company or a Subsidiary except Hugh M. Hefner shall be eligible to be granted Options. Section 3.2 - Qualification of Incentive Stock Options. No Incentive Stock Option shall be granted unless such Option, when granted, qualifies as an "incentive stock option" under Section 422 of the Code. Without limitation of the foregoing, no person shall be granted an Incentive Stock Option under this Plan if such person, at the time the Incentive Stock Option is granted, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code. Section 3.3 - Granting of Options (a) The Committee shall from time to time, in its absolute discretion: (i) Determine which Employees are "key Employees" and select from among the key Employees (including those to whom Options and/or rights have been previously granted under the Plan or any other stock option or other plan of the Company) such of them as in its opinion should be granted Options; and (ii) Determine for each Employee the number of shares to be subject to such Options; and (iii) Determine whether such Options are to be Incentive Stock Options or Non-Qualified Options; and (iv) Determine the terms and conditions of such Options, consistent with the Plan. (b) Upon the selection of a key Employee to be granted an Option, the Committee shall instruct the Secretary or other authorized officer to execute and deliver a Stock Option Agreement, and may impose such conditions on the grant of such Option as it deems appropriate, not inconsistent with this Plan. Without limiting the generality of the preceding sentence, the Committee may, in its discretion and on 6 7 such terms as it deems appropriate, require as a condition on the grant of an Option to an Employee that the Employee surrender for cancellation some or all of the unexercised Options, awards of Restricted Stock or Deferred Stock, Performance Awards, or Stock Payments or other rights which have been previously granted to him. An Option, the grant of which is conditioned upon such surrender may have an Option price lower (or higher) than the Option price of the surrendered Option, may cover the same (or a lesser or greater) number of shares as the surrendered Option, may contain such other terms as the Committee deems appropriate and shall be exercisable in accordance with its terms, without regard to the number of shares, price, Option period or any other term or condition of such surrendered Option or award. (c) Stock Option Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code. Any Incentive Stock Option granted under this Plan may be modified by the Committee to disqualify such option from treatment as an "incentive stock option" under Section 422 of the Code. ARTICLE IV TERMS OF OPTIONS Section 4.1 - Option Price (a) The price of the shares subject to each Non-Qualified Option shall not be less than 100% of the fair market value of such shares at the end of the business day immediately preceding the day such Option is granted. (b) For purposes of the Plan, the fair market value ("Fair Market Value") of a share of the Company's Common Stock as of a given date shall be: (i) the closing price of a share of such class of the Company's Common Stock on the principal exchange on which shares of the Company's Common Stock are then trading, if any, on the day previous to such date, or, if shares were not traded on the day previous to such date, then on the next preceding trading day during which a sale occurred; or (ii) if such Common Stock is not traded on an exchange but is quoted on NASDAQ or a successor quotation system, (1) the last sales price (if the Company's Common Stock is then listed as a National Market Issue under the NASD National Market System) or (2) the mean between the closing representative bid and asked prices (in all other cases) for the Company's Common Stock on the day previous to such date as reported by NASDAQ or such successor quotation system; or (iii) if such Common Stock is not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the mean between the closing bid and asked prices for 7 8 the Company's Common Stock, on the day previous to such date, as determined in good faith by the Committee; or (iv) if the Company's Common Stock is not publicly traded, the fair market value established by the Committee acting in good faith. (c) The price of the shares subject to Incentive Stock Options shall not be less than the greater of (i) 100% of the Fair Market Value of a share of Common Stock on the date the Incentive Stock Option is granted, or (ii) 110% of the fair market value of a share of Common Stock on the date such Incentive Stock Option is granted in the case of an individual then owning (within the meaning of section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary. Section 4.2 - Commencement of Exercisability; Change of Control (a) Subject to the provisions of Sections 4.2(b) and 9.3, Options shall become exercisable at such times and in such installments (which may be cumulative) as the Committee shall provide in the terms of each individual Option; provided, however, that by a resolution adopted after an Option is granted the Committee may, on such terms and conditions as it may determine to be appropriate and subject to Sections 4.2(b) and 9.3 and except in connection with a Change of Control, accelerate the time at which such Option or any portion thereof may be exercised; provided further, that, to the extent necessary for this Plan to meet the requirements of Rule 16b-3, no Option granted hereunder shall be exercisable for at least six months (or such other period as may be specified in said Rule) after such Option is granted. (b) No portion of an Option which is unexercisable at Termination of Employment shall thereafter become exercisable, except as may be otherwise provided by the Committee either in the Stock Option Agreement or in a resolution adopted following the grant of the Option. Except as limited by requirements of Section 422 of the Code and regulations and rulings thereunder applicable to Incentive Stock Options, the Committee may extend the term of any outstanding Option in connection with any Termination of Employment of the Optionee, or amend any other term or condition of such Option relating to such a termination. (c) If an Optionee is terminated without Cause less than one (1) year after a Change of Control specified in clause (i) or (ii) of the definition thereof, unless the terms of any Option specifically exclude such right, the Optionee shall have the right to exercise such Optionee's Option until expiration thereof pursuant to Section 4.3(a)(ii) with respect to all vested installments of such Option, and with respect to the next installment (if any) of such Option that was unvested on the date of such Termination of Employment. 8 9 Not less than ninety (90) days prior to the effective date of any Change of Control specified in clause (iii) of the definition of such term, the Committee shall give the Employee notice of such event if the Option has then neither been fully exercised nor become unexercisable under Section 4.3, and shall specify in such notice a date prior to the effective date of such event when this Option shall be exercisable with respect to all vested installments thereof, and with respect to the next installment (if any) of such Option that is unvested on the date of such Change of Control. (d) To the extent that the aggregate Fair Market Value of stock with respect to which "incentive stock options" (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by an Optionee during any calendar year (under the Plan and all other incentive stock option plans of the Company and any subsidiary) exceeds $100,000, such Options shall be treated as Non-Qualified Options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking Options into account in the order in which they were granted. For purposes of this Section 4.2(d), the Fair Market Value of stock shall be determined as of the time the Option with respect to such stock is granted. Section 4.3 - Expiration of Options (a) Unless an Option expires earlier pursuant to the terms of a Stock Option Agreement, each Option may be exercised any time until the first of the following events, after which such Option will become unexercisable: (i) The expiration of ten (10) years from the date the Option was granted if the Employee is still employed by the Company or any Subsidiary; or (ii) The expiration of three (3) months from the Employee's Termination of Employment if such Termination of Employment results from such Employee's retirement, or such Employee's being discharged not for Cause, unless the Employee dies within said three- month period; or (iii) The effective date of (i) a Termination of Employment for Cause, (ii) the Employee's resignation, or (iii) a Change of Control specified in clause (iii) of the definition of such term; or (iv) In the case of an Optionee who is disabled (within the meaning of Section 22(e)(3) of the Code), the expiration of one (1) year from the date of the Optionee's Termination of Employment; provided, however, that this subsection (iv) shall not apply if the Optionee dies within said one-year period; or 9 10 (v) One (1) year from the date of the Optionee's death. (b) Subject to the provisions of Section 4.3(a), the Committee shall provide, in the terms of each individual Option, when such Option expires and becomes unexercisable; and (without limiting the generality of the foregoing) the Committee may provide in the terms of individual Options that said Options expire immediately upon a Termination of Employment for any reason. (c) The term of any Incentive Stock Option shall not be more than five (5) years from such date if the Incentive Stock Option is granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of capital stock of the Company or any Subsidiary. Section 4.4 - No Right to Continued Employment Nothing in this Plan or in any Stock Option Agreement hereunder shall confer upon any Optionee any right to continue in the employ of the Company or any Subsidiary or as a director of the Company, or shall interfere with or restrict in any way the rights of the Company and any of its Subsidiaries, which are hereby expressly reserved, to discharge any Optionee at any time for any reason whatsoever, with or without Cause. ARTICLE V EXERCISE OF OPTIONS Section 5.1 - Person Eligible to Exercise (a) Subject to 5.1(b), during the lifetime of the Optionee, only such Optionee (or the spouse or former spouse of such Optionee following transfer of the Option pursuant to a qualified domestic relations order as defined by the Code or Title I of ERISA, or the rules thereunder) may exercise an Option (or any portion thereof) granted to such Optionee. After the death of the Optionee, any exercisable portion of an Option may, within the time frame allowed, be exercised by his personal representative or by any person empowered to do so under the deceased Optionee's will or under the then applicable laws of descent and distribution. To the extent Rule 16b-3 as then in effect permits transfers of Options other than as provided in this Section 5.1(a), the Committee may by resolution amend this Section 5.1(a) or the terms of outstanding options to reflect such other transfer limitation requirements, in the Committee's discretion. 10 11 (b) Should the Optionee be determined under applicable law to have become a disabled person or the equivalent thereof, the Option may, prior to the time when the Option becomes unexercisable under the Plan or the applicable Stock Option Agreement, be exercised by the Optionee's guardian or by any other person empowered to do so under applicable laws of guardianship. For purposes of this section 5.1(b), "disabled person" shall mean a person who (i) because of mental deterioration or physical incapacity is not fully able to manage such person's person or estate or (ii) is mentally ill and who because of such person's mental illness is not fully able to manage such person's person or estate. Section 5.2 - Partial Exercise An exercisable Option may be exercised in whole or in part. However, an Option shall not be exercisable with respect to fractional shares and the Committee may require that, by terms of the Option, a partial exercise be with respect to a minimum number of shares. Section 5.3 - Manner of Exercise All or a portion of an exercisable Option shall be deemed exercised upon delivery of all of the following to the Secretary of the Company or the Secretary's office: (a) A written notice signed by the Optionee (or other person then entitled to exercise such Option or portion), stating that such Option or portion thereof is being exercised and such notice complies with all applicable rules established by the Committee; and (b) Payment in full for the exercised shares: (i) In cash or by certified or cashier's check; or (ii) In shares of the same class of the Company's Common Stock owned by the Optionee. These shares must be duly endorsed for transfer to the Company and will be credited at the Fair Market Value on the date of delivery; or (iii) With the consent of the Committee and at the sole discretion of the Company, by a full recourse promissory note bearing interest (at no less than such rate as shall then preclude the imputation of interest under the Code or successor provision) and payable upon such terms as may be prescribed by the Committee. The Committee may also prescribe the form of such note and the security to be given for such note. No Option may, however, be exercised 11 12 by delivery of a promissory note or by a loan from the Company when or where such loan or other extension of credit is prohibited by law; or (iv) Any combination of the consideration provided in the foregoing subsections (i), (ii), and (iii); or (v) To the extent permitted by law (including then existing interpretations of Rule 16b-3) a "cashless exercise procedure" satisfactory to the Committee which permits the Optionee to deliver an exercise notice to a broker-dealer, who then sells the Option shares, delivers the exercise price and withholding taxes to the Company and delivers the excess funds less commission and withholding taxes to the Optionee; and (c) Such representations and documents as the Committee, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal or state securities laws or regulations. The Committee may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer orders to transfer agents and registrars; and (d) Appropriate proof of the right of such person or persons to exercise the option or portion thereof in the event that the Option or portion thereof shall be exercised pursuant to Section 5.1 by any person or persons other than the Optionee; and (e) Full payment of all amounts which, under federal, state or local law, it is required to withhold upon exercise of the Option. With the consent of the Committee, (i) shares of the Company's Common Stock owned by the Employee duly endorsed for transfer or (ii) subject to the timing requirements of Section 5.4, shares of the Company's Common Stock issuable to the Employee upon exercise of the Option, valued in accordance with Section 4.1(b) of the Plan at the date of Option exercise, may be used to make all or part of such payment. Section 5.4 - Certain Timing Requirements At the discretion of the Committee shares of Common Stock issuable to the Optionee upon exercise of the Option may be used to satisfy the Option exercise price or the tax withholding consequences of such exercise, in the case of persons subject to Section 16 of the Exchange Act and to the extent such limitation is required by Rule 16b-3, as then in effect, only (i) during the period beginning on the third business day following the date of release of the quarterly or annual summary statement of sales and earnings of the Company and ending on the twelfth business 12 13 day following such date or (ii) pursuant to an irrevocable written election by the Optionee to use shares of Common Stock issuable to the Optionee upon exercise of the Option to pay all or part of the Option price or the withholding taxes made at least six months prior to the payment of such Option price or withholding taxes. Section 5.5 - Additional Conditions to Issuance of Stock Certificates The shares of Common Stock issuable and deliverable upon the exercise of an Option shall be fully paid and non-assessable. In addition to satisfaction of the conditions specified in Sections 5.3 and 5.4, the Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions: (a) The completion of any registration or other qualification of such shares under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary or advisable; and (b) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable; and (c) The lapse of such reasonable period of time following the exercise of the Option as the Committee or Board may establish from time to time for reasons of administrative convenience. Section 5.6 - Rights as Stockholders The holders of Options shall not be, nor have any of the rights or privileges of, stockholders of the Company in respect of any shares purchasable upon the exercise of any part of an Option unless and until certificates representing such shares have been issued by the Company to such holders or the Company's stock record books reflect the Optionee as a stockholder pursuant to any book entry procedure approved by the Secretary. The Committee, in its absolute discretion, may impose such other restrictions on the transferability of the shares purchasable upon the exercise of an Option as it deems appropriate. Any such other restriction shall be set forth in the respective Stock Option Agreement and may be referred to on the certificates evidencing such shares. The Committee may require the Employee to give the Company prompt notice of any disposition of shares of Common Stock, acquired by 13 14 exercise of an Incentive Stock Option, within (i) two years from the date of granting such Option or (ii) one year after the transfer of such shares to such Employee. The Committee may direct that the certificates evidencing shares acquired by exercise of an Option refer to such requirement to give prompt notice of disposition. ARTICLE VI AWARD OF RESTRICTED STOCK Section 6.1 - Award of Restricted Stock (a) The Committee shall from time to time, in its absolute discretion: (i) Select from among the key Employees (including Employees who have previously received other awards under this Plan or any other stock option plan of the Company) such of them as in its opinion should be awarded Restricted Stock; and (ii) Determine the purchase price, if any, and other terms and conditions applicable to such Restricted Stock, consistent with this Plan. (b) In all cases, legal consideration meeting the requirements of Delaware law shall be required for each issuance of Restricted Stock. (c) Upon the selection of a key Employee to be awarded Restricted Stock, the Committee shall instruct the Secretary of the Company to issue such Restricted Stock and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate. Section 6.2 - Restricted Stock Agreement Restricted Stock shall be issued only pursuant to a written Restricted Stock Agreement, which shall be executed by the selected key Employee and an authorized officer of the Company and which shall contain such terms and conditions as the Committee shall determine, consistent with this Plan. Section 6.3 - No Right to Continued Employment Nothing in this Plan or in any Restricted Stock Agreement hereunder shall confer on any Restricted Stockholder any right to continue in the employ of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which are hereby expressly reserved, to discharge 14 15 any Restricted Stockholder at any time for any reason whatsoever, with or without good cause. Section 6.4 - Rights as Stockholders Upon delivery of any shares of Restricted Stock that are certificated to the escrow holder pursuant to Section 6.7, and upon issuance thereof, if uncertificated, the Restricted Stockholder shall have, unless otherwise provided by the Committee, all the rights of a stockholder with respect to said shares, subject to the restrictions in the Restricted Stock Agreement, including the right to receive all dividends and other distributions paid or made with respect to the shares; provided, however, that in the discretion of the Committee, any extraordinary distribution with respect to the Common Stock shall be subject to the restrictions set forth in Section 6.5. Section 6.5 - Restrictions All shares of Restricted Stock issued under this Plan (including any shares received by holders thereof with respect to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization) shall, in the terms of each individual Restricted Stock Agreement, be subject to such restrictions as the Committee shall provide, which restrictions may include, without limitation, restrictions concerning voting rights and transferability and restrictions based on duration of employment with the Company or a Subsidiary, Company performance, individual performance, or a change of control; provided, however, that by a resolution adopted after the Restricted Stock is issued, the Committee may, on such terms and conditions as it may determine to be appropriate, remove any or all of the restrictions imposed by the terms of the Restricted Stock Agreement. Restricted Stock may not be sold or encumbered until all restrictions are terminated or expire. Unless provided otherwise by the Committee, if no consideration (other than services) was paid by the Restricted Stockholder upon issuance, a Restricted Stockholder's rights in unvested Restricted Stock shall lapse upon Termination of Employment for any reason at any time or prior to any date the Committee may establish. Section 6.6 - Repurchase of Restricted Stock If consideration (other than services) was paid for Restricted Stock, the Committee shall provide in the terms of each individual Restricted Stock Agreement that the Company shall have the right to repurchase from the Restricted Stockholder the Restricted Stock then subject to restrictions under the Restricted Stock Agreement immediately upon a Termination of Employment at a cash price per share equal to the price paid by the Restricted Stockholder for such Restricted Stock or such other price as may be specified in the Restricted Stock Agreement; provided, however, that 15 16 provision may be made in the Restricted Stock Agreement in the Committee's discretion that no such right of repurchase shall exist in the event of a Termination of Employment without Cause, or following a Change in Control of the Company or because of the Restricted Stockholder's retirement, death or disability, or otherwise. Section 6.7 - Escrow The Secretary of the Company or such other escrow holder as the Committee may appoint shall retain physical custody of each certificate representing Restricted Stock until all of the restrictions imposed under the Restricted Stock Agreement with respect to the shares evidenced by such certificate expire or shall have been removed (or the Secretary shall establish book entry procedures sufficient to prevent unauthorized transfers of the Restricted Stock). Section 6.8 - Legend In order to enforce the restrictions imposed upon shares of Restricted Stock hereunder, the Committee shall cause a legend or legends to be placed on certificates representing all certificated shares of Restricted Stock that are still subject to restrictions under Restricted Stock Agreements, or stop transfer instructions with respect to book entry procedures, which legend, legends or instructions shall make appropriate reference to the conditions imposed hereby. ARTICLE VII PERFORMANCE AWARDS, DEFERRED STOCK, STOCK PAYMENTS Section 7.1 - Performance Awards Any key Employee selected by the Committee may be granted one or more Performance Awards. The value of such Performance Awards may be linked to the market value, book value, net profits or other measure of the value of Common Stock or other specific performance criteria determined to be appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee, or may be based upon the appreciation in the market value, book value, net profits or other measure of the value of a specified number of shares of Common Stock over a fixed period or periods determined by the Committee. In making such determinations, the Committee shall consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular key Employee. Section 7.2 - Stock Payments 16 17 Any key Employee selected by the Committee may receive Stock Payments in the manner determined from time to time by the Committee. The number of shares shall be determined by the Committee and may be based upon the Fair Market Value, book value, net profits or other measure of the value of Common Stock or other specific performance criteria determined appropriate by the Committee, determined on the date such Stock Payment is made or on any date thereafter. Section 7.3 - Deferred Stock Any key Employee selected by the Committee may be granted an award of Deferred Stock in the manner determined from time to time by the Committee. The number of shares of Deferred Stock shall be determined by the Committee and may be linked to the market value, book value, net profits or other measure of the value of Common Stock or other specific performance criteria, in each case on a specified date or dates or over any period or periods determined by the Committee. Common Stock underlying a Deferred Stock award will not be issued until the Deferred Stock award has vested, pursuant to a vesting schedule or performance criteria set by the Committee. Unless otherwise provided by the Committee, a Grantee of Deferred Stock shall have no rights as a Company stockholder with respect to such Deferred Stock until such time as the award has vested and the Common Stock underlying the award has been issued. Section 7.4 - Performance Award Agreement, Deferred Stock Agreement, Stock Payment Agreement Each Performance Award, Deferred Stock Award and/or Stock Payment shall be evidenced by a written agreement, which shall be executed by the Grantee and an authorized Officer of the Company and which shall contain such terms and conditions as the Committee shall determine, consistent with this Plan. Section 7.5 - Term The term of a Performance Award Agreement, Deferred Stock Award and/or Stock Payment shall be set by the Committee in its discretion. Section 7.6 - Exercise Upon Termination of Employment A Performance Award, Deferred Stock Award and/or Stock Payment is exercisable or payable only while the Grantee is an Employee; provided that the Committee may determine that the Performance Award, Deferred Stock Award and/or Stock Payment may be exercised or paid subsequent to Termination of Employment without Cause, or following a Change in Control of the Company specified in clause (i) 17 18 or (ii) of the definition of such term, or because of the Grantee's retirement, death or disability, or otherwise. Section 7.7 - Payment Payment of the amount determined under Section 7.1 above shall be in cash, in Common Stock or a combination of both, as determined by the Committee. To the extent any payment under this Article VII is effected in Common Stock, it shall be made subject to satisfaction of all provisions of Sections 5.3 and 5.5. Section 7.8 - No Right to Continued Employment Nothing in this Plan or in any agreement hereunder shall confer on any Grantee any right to continue in the employ of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which are hereby expressly reserved, to discharge any Grantee at any time for any reason whatsoever, with or without good cause. ARTICLE VIII ADMINISTRATION Section 8.1 - Duties and Powers of Committee It shall be the duty of the Committee to conduct the general administration of the Plan in accordance with its provisions. The Committee shall have the power to interpret the Plan and the agreements pursuant to which Options, awards of Restricted Stock or Deferred Stock, Performance Awards, or Stock Payments are granted and awarded and to adopt such rules for the administration, interpretation and application of the Plan as are consistent herewith and to interpret, amend or revoke any such rules. Any such interpretations and rules in regard to Incentive Stock Options shall be consistent with the basic purpose of the Plan to grant "incentive stock options" within the meaning of Section 422 of the Code. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under this Plan except with respect to matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee. Section 8.2 - Majority Rule The Committee shall act by a majority of its members in attendance at a meeting at which a quorum is present or by a memorandum or other written instrument signed by all members of the Committee. 18 19 Section 8.3 - Compensation; Professional Assistance; Good Faith Actions Members of the Committee shall receive such compensation for their services as members as may be determined by the Board. All expenses and liabilities incurred by members of the Committee in connection with the administration of the Plan shall be borne by the Company. The Committee may employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee, the Company and its Officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all Optionees, Grantees, Restricted Stockholders, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Options or other awards, and all members of the Committee shall be fully protected by the Company in respect to any such action, determination or interpretation. ARTICLE IX OTHER PROVISIONS Section 9.1 - Options and Other Rights Are Not Transferable No Options, Restricted Stock Awards, Deferred Stock Awards, Performance Awards, or Stock Payments or interest under this Plan or part thereof shall be liable for the debts, contracts or engagements of any Optionee, Grantee, Restricted Stockholder or their respective successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section 9.1 shall prevent transfers by will or by the applicable laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of ERISA, or the rules thereunder. Section 9.2 - Amendment, Suspension or Termination of the Plan; Modification of Options The Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board; provided, however, that no such amendment or modification may become effective if it would cause the Plan to fail to meet the applicable requirements of Rule 16b-3, and any 19 20 amendment or modification requiring stockholder approval under applicable provisions of Rule 16b-3 (including applicable provisions, if any, with respect to any increase in the number of shares that may be subject to Options under Section 2.1) shall become effective only after stockholder approval is obtained. Neither the amendment, suspension nor termination of the Plan shall, without the consent of the holder of an Option, Restricted Stock or award, alter or impair any rights or obligations under any such Option, Restricted Stock or award. No Option, Restricted Stock or award may be granted during any period of suspension nor after termination of the Plan, and in no event may any Option be granted under this Plan after the expiration of ten years from the date the Plan is approved by the Company's stockholders under Section 9.3. An Option, Restricted Stock or award shall be subject in all events to the condition that, if at any time the Board shall determine, in its discretion, that the listing, registration or qualification of any of the Company's securities upon any securities exchange or under any law, regulation or other requirement of any governmental authority is necessary or desirable, or that any consent or approval from any governmental authority is necessary or desirable, then the Board may modify the terms of any Option, Restricted Stock or other award granted under the Plan, without the consent of the Optionee, Grantee or Restricted Stockholder in any manner which the Board deems necessary or desirable in order to improve the Company's ability to obtain such listing, registration, qualification, consent or approval. Section 9.3 - Approval of Plan by Stockholders This Plan will be submitted for the approval of the Company's stockholders within 12 months after the date of the Board's initial adoption of the Plan. Options, Performance Awards, or Stock Payments may be granted and Restricted Stock or Deferred Stock may be awarded prior to such stockholder approval, provided that such Options, Performance Awards, or Stock Payments shall not be exercisable and such Restricted Stock or Deferred Stock shall not vest prior to the time when this plan is approved by the stockholders, and provided further, that if such approval has not been obtained at the end of said 12-month period, all Options, Performance Awards, or Stock Payments previously granted and all Restricted Stock or Deferred Stock previously awarded under this Plan shall thereupon be cancelled and become null and void. Section 9.4 - Effect of Plan Upon Other Option and Compensation Plans The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company or any Subsidiary except, as provided in Section 2.1, shares reserved under the Company's 1989 Stock Option Plan, by resolution of the Board, are transferred to this Plan and are no longer eligible for grant under the Company's 1989 Stock Option Plan. Nothing in this Plan shall be construed to limit the right of the Company or any Subsidiary (a) to establish any other forms of 20 21 incentives or compensation for employees of the Company or any Subsidiary or (b) to grant or assume options otherwise than under this Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association. Section 9.5 - No Obligation to Register The Company shall not be deemed, by reason of the granting of any Option or any other award hereunder, to have any obligation to register the shares of Common Stock subject to such Option or award under the Securities Act or to maintain in effect any registration of such shares which may be made at any time under the Securities Act. Section 9.6 - Tax Withholding The Company shall be entitled to require payment in cash or deduction from other compensation payable to each Optionee, Grantee or Restricted Stockholder of any sums required by federal, state or local tax law to be withheld with respect to the issuance, vesting or exercise of any Option, Restricted Stock, Deferred Stock, Performance Award, or Stock Payment. Section 9.7 - Loans The Committee may permit, in its discretion, and subject to the Company's approval, the extension by the Company of one or more loans to key Employees in connection with the exercise or receipt of an Option, Performance Award, or Stock Payment granted under this Plan, or the issuance of Restricted Stock or Deferred Stock awarded under this Plan. The terms and conditions of any such loan shall be set by the Committee, subject to the Company's approval. Section 9.8 - Limitations Applicable to Section 16 Persons and Performance-Based Compensation Notwithstanding any other provision of this Plan, any Option, Performance Award, or Stock Payment granted, or Restricted Stock or Deferred Stock awarded, to a key Employee who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule, and this Plan shall be deemed amended to the extent necessary to conform to such limitations. Furthermore, notwithstanding any other provision of this Plan, any Option, right or award intended to qualify as performance-based compensation as described 21 22 in Section 162(m)(4)(C) of the Code shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as performance-based compensation as described in Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the extent necessary to conform to such requirements. Section 9.9 - Compliance with Laws This Plan, the granting and vesting of Options, Restricted Stock awards, Deferred Stock awards, Performance Awards, or Stock Payments under this Plan and the issuance and delivery of shares of Common Stock and the payment of money under this Plan or under Options, Performance Awards, or Stock Payments granted or Restricted Stock or Deferred Stock awarded hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities laws and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under this Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan, Options, Restricted Stock awards, Deferred Stock awards, Performance Awards, or Stock Payments granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. Section 9.10 - Transfer Restrictions To the extent required for compliance of the Plan with any applicable provisions of Rule 16b-3, shares acquired upon exercise of any Option, award or right under this Plan may not be sold or otherwise transferred for at least six months (or such other period as provided in such Rule) after such acquisition. Section 9.11 - Titles Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan. 22 23 Section 9.12 - Governing Law The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of Playboy Enterprises, Inc. on __________, 199_. Executed on this ____ day of ____________, 199_. _____________________________ Assistant Secretary * * * * I hereby certify that the foregoing Plan was duly approved by the shareholders of Playboy Enterprises, Inc. on __________, 199_. Executed on this ____ day of ____________, 199_. _____________________________ Secretary 23 EX-4.3 3 NON-QUALIFIED STOCK OPTION PLAN 1 EXHIBIT 4.3 PLAYBOY ENTERPRISES, INC. NON-QUALIFIED STOCK OPTION AGREEMENT THIS NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement"), dated ___________ __, 199__, is made by and between PLAYBOY ENTERPRISES, INC., a Delaware corporation (the "Company"), and _____________________, an employee of the Company or a Subsidiary (the "Optionee"): WHEREAS, the Company has established the 1995 Playboy Enterprises, Inc. Stock Incentive Plan (the "Plan"); and WHEREAS, the Company wishes to carry out the Plan (the terms of which are hereby incorporated by reference and made a part of this Agreement, and which shall control in the event of any inconsistency between this Agreement and the Plan on any interpretation of this Agreement); and WHEREAS, the Company wishes to afford the Employee the opportunity to purchase shares of its $.01 par value Class __ Common Stock; and WHEREAS, the Stock Option Committee of the Company's Board of Directors (the "Committee"), appointed to administer the Plan, has determined that it would be in the best interest of the Company to grant the Non-Qualified Option provided for herein to the Optionee as an inducement to enter into or remain in the service of the Company or its Subsidiaries and as an incentive for increased efforts during such service, and has advised the Company thereof and instructed the undersigned officers to issue said Option; NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereby agree as follows: 1 2 ARTICLE I DEFINITIONS Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan. Section 1.1 - Change of Control "Change of Control" shall mean the occurrence of any of the following events: (i) except in a transaction described in clause (iii) below, Hugh M. Hefner, Christie Hefner, the Hugh M. Hefner 1991 Trust (for so long as Hugh M. Hefner and Christie Hefner are joint trustees or one of them is sole trustee thereof), and the Hugh M. Hefner Foundation (for so long as Hugh M. Hefner and Christie Hefner are joint trustees or one of them is sole trustee thereof) cease collectively to own a majority of the total number of votes that may be cast for the election of directors of the Company; or (ii) a sale of Playboy magazine by the Company; or (iii) the liquidation or dissolution of the Company, or any merger, consolidation or other reorganization involving the Company unless (x) the merger, consolidation or other reorganization is initiated by the Company, and (y) is one in which the stockholders of the Company immediately prior to such reorganization become the majority stockholders of a successor or ultimate parent corporation of the Company resulting from such reorganization and (z) in connection with such event, provision is made for an assumption of outstanding Options and rights or a substitution thereof of a new Option or right in such successor or ultimate parent of substantially equivalent value. Section 1.2 - Code "Code" shall mean the Internal Revenue Code of 1986, as amended. Section 1.3 - Common Stock "Common Stock" shall mean the Class B Common Stock, par value $.01 per share, of the Company. Section 1.4 - ERISA 2 3 "ERISA" shall mean the Employment Retirement Income Security Act of 1974, as amended. Section 1.5 - Exchange Act "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. Section 1.6 - Option "Option" shall mean the non-qualified option to purchase Common Stock of the Company granted under this Agreement. Section 1.7 - Plan "Plan" shall mean the 1995 Playboy Enterprises, Inc. Stock Incentive Plan. Section 1.11 - Rule 16b-3 "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended in the future. Section 1.12 - Secretary "Secretary" shall mean the Secretary of the Company. Section 1.13 - Securities Act "Securities Act" shall mean the Securities Act of 1933, as amended. Section 1.15 - Termination of Employment "Termination of Employment" shall mean the time when the employee-employer relationship between the Optionee and the Company or a Subsidiary is terminated for any reason, voluntarily or involuntarily, with or without Cause (as defined below), including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement, but excluding any termination where there is a simultaneous reemployment by the Company or a Subsidiary. The Committee, subject to the definition of Cause below, shall determine the effect of all other matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether particular leaves of absence constitute Terminations of Employment. For purposes of the Plan, "Cause" shall mean an Employee's (a) gross negligence in the performance of the responsibilities of such 3 4 Employee's office or position; (b) any act of dishonesty or moral turpitude materially adversely affecting the Company or the Company's reputation; (c) commission of any other willful or intentional act that could reasonably be expected to injure materially the reputation, business or business relationships of the Company or any Subsidiary; or (d) conviction of a felony or of any crime involving moral turpitude, fraud or misrepresentation. ARTICLE II GRANT OF OPTION Section 2.1 - Grant of Option For good and valuable consideration and subject to the vesting provisions hereof, on the date hereof the Company irrevocably grants to the Optionee the option to purchase any part or all of an aggregate of ________ shares of its $.01 par value Class B Common Stock upon the terms and conditions set forth in this Agreement. Section 2.2 - Purchase Price The purchase price of the shares of stock covered by the Option shall be $_____ per share without commission or other charge, which was not less than 100% of the fair market value of such shares at the end of the business day immediately preceding the day such Option was granted, as determined pursuant to the Plan. Section 2.3 - No Right to Continued Employment Nothing in this Agreement or in the Plan shall confer upon the Optionee any right to continue in the employ of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which are hereby expressly reserved, to discharge the Optionee at any time for any reason whatsoever, with or without cause. Section 2.4 - Adjustments in Option In the event that the outstanding shares of the Common Stock subject to the Option are changed into or exchanged for a different number or kind of shares of the Company or other securities of the Company by reason of a recapitalization, reclassification, stock split, stock dividend or combination of shares or similar transaction, the Committee shall make an appropriate and equitable adjustment in the number and kind of shares as to which the Option, or portions thereof then unexercised, shall be exercisable, to the end that after such event the Optionee's proportionate interest shall be maintained. Such adjustment in the Option shall be 4 5 made without change in the total price applicable to the unexercised portion of the Option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in the Option price per share. Any such adjustment made by the Committee shall be final and binding upon the Optionee, the Company and all other interested persons. ARTICLE III PERIOD OF EXERCISABILITY Section 3.1 - Commencement of Exercisability (a) Subject to Sections 3.3, 3.4 and 5.6, the Option shall become exercisable in four (4) cumulative installments as follows: (i) The first installment shall consist of one-fourth (1/4th) of the shares covered by the Option and shall become exercisable on the first anniversary of the date the Option is granted. (ii) The second installment shall consist of one-fourth (1/4th) of the shares covered by the Option and shall become exercisable on the second anniversary of the date the Option is granted. (iii) The third installment shall consist of one-fourth (1/4th) of the shares covered by the Option and shall become exercisable on the third anniversary of the date the Option is granted. (iv) The fourth installment shall consist of one-fourth (1/4th) of the shares covered by the Option and shall become exercisable on the fourth anniversary of the date the Option is granted. (b) Except as provided in Section 3.4, no portion of the Option which is unexercisable at Termination of Employment shall thereafter become exercisable. Section 3.2 - Duration of Exercisability The installments provided for in Section 3.1 are cumulative. Each such installment which becomes exercisable pursuant to Section 3.1 shall remain exercisable until it becomes unexercisable under Section 3.3. 5 6 Section 3.3 - Expiration of Option Each Option may be exercised any time until the first of the following events, after which such Option will become unexercisable: (a) The expiration of ten (10) years from the date the Option was granted if the Employee is still employed by the Company or any Subsidiary; or (b) The expiration of three (3) months from the Employee's Termination of Employment if such Termination of Employment results from such Employee's retirement, or such Employee's being discharged not for Cause, unless the Employee dies within said three-month period; or (c) The effective date of (i) a Termination of Employment for Cause, (ii) the Employee's resignation, or (iii) a Change of Control specified in clause (iii) of the definition of such term; or (d) In the case of an Optionee who is disabled (within the meaning of Section 22(e)(3) of the Code), the expiration of one (1) year from the date of the Optionee's Termination of Employment; provided, however, that this subsection (d) shall not apply if the Optionee dies within said one-year period; or (e) One (1) year from the date of the Optionee's death. Section 3.4 - Acceleration of Exercisability If an Optionee is terminated without Cause less than one (1) year after a Change of Control specified in clause (i) or (ii) of the definition thereof, unless the terms of any Option specifically exclude such right, the Optionee shall have the right to exercise such Optionee's Option until expiration thereof pursuant to Section 4.3(a)(ii) with respect to all vested installments of such Option, and with respect to the next installment (if any) of such Option that was unvested on the date of such Termination of Employment. Not less than ninety (90) days prior to the effective date of any Change of Control specified in clause (iii) of the definition of such term, the Committee shall give the Employee notice of such event if the Option has then neither been fully exercised nor become unexercisable under Section 4.3, and shall specify in such notice a date prior to the effective date of such event when this Option shall be exercisable with respect to all vested installments thereof, and with respect to the next installment (if any) of such Option that is unvested on the date of such Change of Control. 6 7 ARTICLE IV EXERCISE OF OPTION Section 4.1 - Person Eligible to Exercise (a) Subject to Section 4.1(b), during the lifetime of the Optionee, only such Optionee (or the spouse or former spouse of such Optionee following transfer of the Option pursuant to a qualified domestic relations order as defined by the Code or Title I of ERISA, or the rules thereunder) may exercise the Option (or any portion thereof) granted to such Optionee. After the death of the Optionee, any exercisable portion of the Option may, within the time frame allowed, be exercised by his personal representative or by any person empowered to do so under the deceased Optionee's will or under the then applicable laws of descent and distribution. To the extent Rule 16b-3 as then in effect permits transfers of Options other than as provided in this Section 4.1(a), the Committee may by resolution amend this Section 4.1(a) to reflect such other transfer limitation requirements, in the Committee's discretion. (b) Should the Optionee be determined under applicable law to have become a disabled person or the equivalent thereof, the Option may, prior to the time when the Option becomes unexercisable under the Plan or this Agreement, be exercised by the Optionee's guardian or by any other person empowered to do so under applicable laws of guardianship. For purposes of this Section 4.1(b), "disabled persons" shall mean a person who (i) because of mental deterioration or physical incapacity is not fully able to manage such person's person or estate or (ii) is mentally ill and who because of such person's mental illness is not fully able to manage such person's person or estate. Section 4.2 - Partial Exercise Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3; provided, however, that each partial exercise shall be for not less than one hundred (100) shares (or such lesser number of shares as shall then be the subject of unexercised, vested installments) and shall be for whole shares only. Section 4.3 - Manner of Exercise The Option, or any exercisable portion thereof, must be exercised by delivery of all of the following to the Secretary of the Company or the Secretary's office prior to the time when the Option or such portion becomes unexercisable under Section 3.3: 7 8 (a) A written notice signed by the Optionee (or the other person then entitled to exercise the Option or portion), stating that such Option or portion thereof is being exercised and such notice complies with all applicable rules established by the Committee; and (b) Payment in full for the exercised shares: (i) In cash or by certified or cashier's check for the shares with respect to which such Option or portion is exercised; or (ii) (A) Shares of the same class of the Company's Common Stock owned by the Optionee duly endorsed for transfer to the Company or (B) subject to the timing requirements of Section 4.4, shares of the Company's Common Stock issuable to the Optionee upon exercise of the Option, with a fair market value on the date of Option exercise equal to the aggregate purchase price of the shares with respect to which such Option or portion is exercised; or (iii) With the consent of the Committee and at the sole discretion of the Company, by a full recourse promissory note bearing interest (at no less than such rate as shall then preclude the imputation of interest under the Code or successor provision) and payable upon such terms as may be prescribed by the Committee. The Committee may also prescribe the form of such note and the security to be given for such note. No Option may, however, be exercised by delivery of a promissory note or by a loan from the Company when or where such loan or other extension of credit is prohibited by law; or (iv) Any combination of the consideration provided in the foregoing subparagraphs (i), (ii) and (iii); or (v) To the extent permitted by law (including then existing interpretations of Rule 16b-3) a "cashless exercise procedure" satisfactory to the Committee which permits the Optionee to deliver an exercise notice to a broker-dealer, who then sells the Option shares, delivers the exercise price to the Company and delivers the excess funds less commission to the Optionee; and (c) Such representations and documents as the Committee, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal or state securities laws or regulations. The Committee may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer orders to transfer agents and registrars; and 8 9 (d) In the event the Option or portion shall be exercised pursuant to Section 4.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option; and (e) Full payment to the Company of all amounts which, under federal, state or local tax law, it is required to withhold upon exercise of the Option. With the consent of the Committee, (i) shares of the Company's Common Stock owned by the Optionee duly endorsed for transfer or (ii) subject to the timing requirements of Section 4.4, shares of the Company's Common Stock issuable to the Optionee upon exercise of the Option, valued in accordance with Section 4.1(b) of the Plan at the date of Option exercise, may be used to make all or part of such payment. Section 4.4 - Certain Timing Requirements At the discretion of the Committee shares of Common Stock issuable to the Optionee upon exercise of the Option may be used to satisfy the Option exercise price or the tax withholding consequences of such exercise, in the case of persons subject to Section 16 of the Exchange Act and to the extent such limitation is required by Rule 16b-3, as then in effect, only (i) during the period beginning on the third business day following the date of release of the quarterly or annual summary statement of sales and earnings of the Company and ending on the twelfth business day following such date or (ii) pursuant to an irrevocable written election by the Optionee to use shares of Common Stock issuable to the Optionee upon exercise of the Option to pay all or part of the Option price or the withholding taxes made at least six months prior to the payment of such Option price or withholding taxes. Section 4.5 - Conditions to Issuance of Stock Certificates The shares of Common Stock issuable and deliverable upon the exercise of the Option, or any portion thereof, shall be fully paid and non-assessable. In addition to the requirements of Sections 4.3 and 4.4, the Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions: (a) The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary or advisable; and (b) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable; and 9 10 (c) The lapse of such reasonable period of time following the exercise of the Option as the Committee may from time to time establish for reasons of administrative convenience. Section 4.6 - Rights as Stockholder The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of the Option unless and until certificates representing such shares shall have been issued by the Company to such holder or the Company's stock record books reflect the Optionee as a stockholder pursuant to any book entry procedure approved by the Secretary. ARTICLE V OTHER PROVISIONS Section 5.1 - Administration The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent herewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Optionee, the Company and all other interested persons. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under this Plan except with respect to matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Option. Section 5.2 - Option Not Transferable Neither the Option nor any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Optionee or such Optionee's respective successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section 5.2 shall prevent transfers by will or by the applicable laws of descent and distribution or pursuant to a qualified 10 11 domestic relations order as defined by the Code or Title I of ERISA, or the rules thereunder, or as permitted by Section 4.1. Section 5.3 - Amendment, Suspension or Termination of Plan; Modification of Options An Option shall be subject in all events to the condition that, if at any time, the Board shall determine, in its discretion, that the listing, registration, or qualification of any of the Company's securities upon any securities exchange or under any law, regulation or other requirement of any governmental authority is necessary or desirable, or that any consent or approval from any governmental authority is necessary or desirable, then the Board may modify the terms of the Option granted under this Agreement, without the consent of the Employee, in any manner which the Board deems necessary or desirable in order to improve the Company's ability to obtain such listing, registration, qualification, consent or approval. Section 5.4 - Notices Any notice to be given under the terms of this Agreement will be by registered mail, return receipt requested and if to the Company shall be addressed in care of its Secretary at 680 N. Lake Shore Drive, Chicago, Illinois 60611, and if to the Optionee, shall be addressed to the Optionee at the address given beneath the Optionee's signature hereto. By a notice given pursuant to this Section 5.4, either party may hereafter designate a different address for notices to be given to such Optionee. Any notice which is required to be given to the Optionee shall, if the Optionee is then deceased, be given to the Optionee's personal representative if such representative has previously informed the Company of the Optionee's status and address by written notice under this Section 5.4. Any notice shall be deemed duly given when delivered or, except in connection with notice of exercise under Section 4.3, at such time as delivery is attempted. Section 5.5 - Titles Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. Section 5.6 - Stockholder Approval The Plan will be submitted for approval by the Company's stockholders within twelve (12) months after the date the Plan was initially adopted by the Board. This Option may not be exercised to any extent by anyone prior to the time when the Plan is approved by the stockholders, and if such approval has not been obtained by the end of said twelve-month period, this Option shall thereupon be cancelled and become null and void. 11 12 Section 5.7 - Construction The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto. PLAYBOY ENTERPRISES, INC. By _________________________________ Authorized Representative 680 N. Lake Shore Drive Chicago, Illinois 60611 ____________________________ Optionee ____________________________ ____________________________ Address Optionee's Taxpayer Identification Number: ____________________________ Date of Grant:____________________ Amount of Shares Available Under Option: __________________ Exercise Price:___________________ 12 EX-4.4 4 INCENTIVE STOCK OPTION AGREEMENT 1 EXHIBIT 4.4 PLAYBOY ENTERPRISES, INC. INCENTIVE STOCK OPTION AGREEMENT THIS INCENTIVE STOCK OPTION AGREEMENT (the "Agreement"), dated ___________ __, 199__, is made by and between PLAYBOY ENTERPRISES, INC., a Delaware corporation (the "Company"), and _____________________, an employee of the Company or a Subsidiary (the "Employee"): WHEREAS, the Company has established the 1995 Playboy Enterprises, Inc. Stock Incentive Plan (the "Plan"); and WHEREAS, the Company wishes to carry out the Plan (the terms of which are hereby incorporated by reference and made a part of this Agreement, and which shall control in the event of any inconsistency between this Agreement and the Plan on any interpretation of this Agreement); and WHEREAS, the Company wishes to afford the Employee the opportunity to purchase shares of its $.01 par value Class __ Common Stock; and WHEREAS, the Stock Option Committee of the Company's Board of Directors (the "Committee"), appointed to administer the Plan, has determined that it would be in the best interest of the Company to grant the Incentive Stock Option provided for herein to the Employee as an inducement to remain in the service of the Company or its Subsidiaries and as an incentive for increased efforts during such service, and has advised the Company thereof and instructed the undersigned officers to issue said Option; NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereby agree as follows: 1 2 ARTICLE I DEFINITIONS Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan. Section 1.1 - Change of Control "Change of Control" shall mean the occurrence of any of the following events: (i) except in a transaction described in clause (iii) below, Hugh M. Hefner, Christie Hefner, the Hugh M. Hefner 1991 Trust (for so long as Hugh M. Hefner and Christie Hefner are joint trustees or one of them is sole trustee thereof), and the Hugh M. Hefner Foundation (for so long as Hugh M. Hefner and Christie Hefner are joint trustees or one of them is sole trustee thereof) cease collectively to own a majority of the total number of votes that may be cast for the election of directors of the Company; or (ii) a sale of Playboy magazine by the Company; or (iii) the liquidation or dissolution of the Company, or any merger, consolidation or other reorganization involving the Company unless (x) the merger, consolidation or other reorganization is initiated by the Company, and (y) is one in which the stockholders of the Company immediately prior to such reorganization become the majority stockholders of a successor or ultimate parent corporation of the Company resulting from such reorganization and (z) in connection with such event, provision is made for an assumption of outstanding Options and rights or a substitution thereof of a new Option or right in such successor or ultimate parent of substantially equivalent value. Section 1.2 - Code "Code" shall mean the Internal Revenue Code of 1986, as amended. Section 1.3 - Common Stock "Common Stock" shall mean the Class B Common Stock, par value $.01 per share, of the Company. Section 1.4 - ERISA "ERISA" shall mean the Employment Retirement Income Security Act of 1974, as amended. 2 3 Section 1.5 - Exchange Act "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. Section 1.6 - Option "Option" shall mean the incentive stock option to purchase Common Stock of the Company granted under this Agreement. Section 1.7 - Plan "Plan" shall mean the 1995 Playboy Enterprises, Inc. Stock Incentive Plan. Section 1.8 - Rule 16b-3 "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended in the future. Section 1.9 - Secretary "Secretary" shall mean the Secretary of the Company. Section 1.10 - Securities Act "Securities Act" shall mean the Securities Act of 1933, as amended. Section 1.11 - Termination of Employment "Termination of Employment" shall mean the time when the employee-employer relationship between the Employee and the Company or a Subsidiary is terminated, voluntarily or involuntarily, for any reason, with or without Cause (as defined below), including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement, but excluding any termination where there is a simultaneous reemployment by the Company or a Subsidiary. The Committee, subject to the definition of Cause below, shall determine the effect of all other matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether particular leaves of absence constitute Terminations of Employment; provided, however, that a leave of absence shall constitute a Termination of Employment if, and to the extent that, such leave of absence interrupts employment for purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. For purposes of 3 4 the Plan, "Cause" shall mean an Employee's (a) gross negligence in the performance of the responsibilities of such Employee's office or position; (b) any act of dishonesty or moral turpitude materially adversely affecting the Company or the Company's reputation; (c) commission of any other willful or intentional act that could reasonably be expected to injure materially the reputation, business or business relationships of the Company or any Subsidiary; or (d) conviction of a felony or of any crime involving moral turpitude, fraud or misrepresentation. ARTICLE II GRANT OF OPTION Section 2.1 - Grant of Option For good and valuable consideration and subject to the vesting provisions hereof, on the date hereof the Company irrevocably grants to the Employee the option to purchase any part or all of an aggregate of ________ shares of its $.01 par value Class B Common Stock upon the terms and conditions set forth in this Agreement. Section 2.2 - Purchase Price The purchase price of the shares of stock covered by the Option shall be $_____ per share without commission or other charge, which is not less than the greater of (i) 100% of the fair market value of a share of Common Stock on the date the Incentive Stock Option was granted, or (ii) 110% of the fair market value of a share of Common Stock on the date the Incentive Stock Option was granted in the case of an individual then owning more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary (within the meaning of section 424(d) of the Code), as determined pursuant to the Plan. Section 2.3 - No Right to Continued Employment Nothing in this Agreement or in the Plan shall confer upon the Employee any right to continue in the employ of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which are hereby expressly reserved, to discharge the Employee at any time for any reason whatsoever, with or without cause. Section 2.4 - Adjustments in Option In the event that the outstanding shares of the stock subject to the Option are changed into or exchanged for a different number or kind of shares of the Company or other securities of the Company by reason of a recapitalization, 4 5 reclassification stock split, stock dividend or combination of shares or similar transaction, the Committee shall make an appropriate and equitable adjustment in the number and kind of shares as to which the Option, or portions thereof then unexercised, shall be exercisable, to the end that after such event the Employee's proportionate interest shall be maintained. Such adjustment in the Option shall be made without change in the total price applicable to the unexercised portion of the Option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in the Option price per share; provided, however, that each such adjustment shall be made in such manner as not to constitute a "modification" within the meaning of Section 424(h)(3) of the Code. Any such adjustment made by the Committee shall be final and binding upon the Employee, the Company and all other interested persons. ARTICLE III PERIOD OF EXERCISABILITY Section 3.1 - Commencement of Exercisability (a) Subject to Sections 3.3, 3.4 and 5.6, the Option shall become exercisable in four (4) cumulative installments as follows: (i) The first installment shall consist of one-fourth (1/4th) of the shares covered by the Option and shall become exercisable on the first anniversary of the date the Option is granted. (ii) The second installment shall consist of one-fourth (1/4th) of the shares covered by the Option and shall become exercisable on the second anniversary of the date the Option is granted. (iii) The third installment shall consist of one-fourth (1/4th) of the shares covered by the Option and shall become exercisable on the third anniversary of the date the Option is granted. (iv) The fourth installment shall consist of one-fourth (1/4th) of the shares covered by the Option and shall become exercisable on the fourth anniversary of the date the Option is granted. (b) Except as provided in Section 3.4, no portion of the Option which is unexercisable at Termination of Employment shall thereafter become exercisable. 5 6 Section 3.2 - Duration of Exercisability The installments provided for in Section 3.1 are cumulative. Each such installment which becomes exercisable pursuant to Section 3.1 shall remain exercisable until it becomes unexercisable under Section 3.3. Section 3.3 - Expiration of Option The Option may be exercised any time until the first of the following events, after which such Option will become unexercisable: (a) The expiration of ten (10) years from the date the Option was granted if the Employee is still employed by the Company or any Subsidiary; or (b) If the Employee owned (within the meaning of Section 424(d) of the Code), at the time the Option was granted, more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, any Subsidiary or any Parent Corporation, the expiration of five (5) years from the date the Option was granted; or (c) The expiration of three (3) months from the Employee's Termination of Employment if such Termination of Employment results from such Employee's Retirement, or such Employee's being discharged not for Cause, unless the Employee dies within said three-month period; or (d) The effective date of (i) a Termination of Employment for Cause, (ii) the Employee's resignation, or (iii) a Change of Control specified in clause (iii) of the definition of such term; or (e) In the case of an Employee who is disabled (within the meaning of Section 22(e)(3) of the Code), the expiration of one (1) year from the date of the Employee's Termination of Employment; provided, however, that this subsection (e) shall not apply if the Employee dies within said one-year period; or (f) One (1) year from the date of the Employee's death. Section 3.4 - Acceleration of Exercisability If an Optionee is terminated without Cause less than one (1) year after a Change of Control specified in clause (i) or (ii) of the definition thereof, unless the terms of any Option specifically exclude such right, the Optionee shall have the right to exercise such Optionee's Option until expiration thereof pursuant to Section 4.3(a)(ii) with respect to all vested installments of such Option, and with respect to the next 6 7 installment (if any) of such Option that was unvested on the date of such Termination of Employment. Not less than ninety (90) days prior to the effective date of any Change of Control specified in clause (iii) of the definition of such term, the Committee shall give the Employee notice of such event if the Option has then neither been fully exercised nor become unexercisable under Section 4.3, and shall specify in such notice a date prior to the effective date of such event when this Option shall be exercisable with respect to all vested installments thereof, and with respect to the next installment (if any) of such Option that is unvested on the date of such Change of Control. Section 3.5 - Special Tax Consequences The Employee acknowledges that, to the extent that the aggregate fair market value of stock with respect to which "incentive stock options" (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code), including the Option, are exercisable for the first time by the Employee during any calendar year (under the Plan and all other incentive stock option plans of the Company and any Subsidiary) exceeds $100,000, such Options shall be treated as Non-Qualified Options to the extent required by Section 422 of the Code. The Employee further acknowledges that the rule set forth in the preceding sentence shall be applied by taking Options into account in the order in which they were granted. For purposes of these rules, the fair market value of stock shall be determined as of the time the Option with respect to such stock is granted. ARTICLE IV EXERCISE OF OPTION Section 4.1 - Person Eligible to Exercise (a) Subject to Section 4.1(b), during the lifetime of the Employee, only such Employee (or the spouse or former spouse of such Optionee following transfer of the Option pursuant to a qualified domestic relations order as defined by the Code or Title I of ERISA, or the rules thereunder) may exercise an Option (or any portion thereof) granted to such Employee. After the death of the Employee, any exercisable portion of an Option may, within the time frame allowed, be exercised by his personal representative or by any person empowered to do so under the deceased Employee's will or under the then applicable laws of descent and distribution. To the extent Rule 16b-3 as then in effect permits transfers of Options other than as provided in this Section 4.1(a), the Committee may by resolution amend this Section 4.1(a) to reflect such other transfer limitation requirements, in the Committee's discretion. 7 8 (b) Should the Employee be determined under applicable law to have become a disabled person or the equivalent thereof, the Option may, prior to the time when the Option becomes unexercisable under the Plan or this Agreement, be exercised by the Employee's guardian or by any other person empowered to do so under applicable laws of guardianship. For purposes of this Section 4.1(b), "disabled persons" shall mean a person who (i) because of mental deterioration or physical incapacity is not fully able to manage such person's person or estate or (ii) is mentally ill and who because of such person's mental illness is not fully able to manage such person's person or estate. Section 4.2 - Partial Exercise Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3; provided, however, that each partial exercise shall be for not less than one hundred (100) shares (or such lesser number of shares as shall then be the subject of unexercised, vested installments) and shall be for whole shares only. Section 4.3 - Manner of Exercise The Option, or any exercisable portion thereof, must be exercised by delivery of all of the following to the Secretary of the Company or the Secretary's office prior to the time when the Option or such portion becomes unexercisable under Section 3.3: (a) A written notice signed by the Employee (or the other person then entitled to exercise the Option or portion), stating that such Option or portion thereof is being exercised and such notice complies with all applicable rules established by the Committee; and (b) Payment in full for the exercised shares: (i) In cash or by certified or cashier's check for the shares with respect to which such Option or portion is exercised; or (ii) (A) Shares of the same class of the Company's Common Stock owned by the Employee duly endorsed for transfer to the Company or (B) subject to the timing requirements of Section 4.4, shares of the Company's Common Stock issuable to the Employee upon exercise of the Option, with a fair market value on the date of Option exercise equal to the aggregate purchase price of the shares with respect to which such Option or portion is exercised. The Employee acknowledges that the withholding of shares otherwise issuable upon exercise to pay the exercise price of an ISO or to 8 9 satisfy tax withholding consequences will constitute a "disqualifying disposition" of the ISO under Sections 422(a)(1) and 424(c) of the Code; or (iii) With the consent of the Committee and at the sole discretion of the Company, by a full recourse promissory note bearing interest (at no less than such rate as shall then preclude the imputation of interest under the Code or successor provision) and payable upon such terms as may be prescribed by the Committee. The Committee may also prescribe the form of such note and the security to be given for such note. No Option may, however, be exercised by delivery of a promissory note or by a loan from the Company when or where such loan or other extension of credit is prohibited by law; or (iv) Any combination of the consideration provided in the foregoing subparagraphs (i), (ii) and (iii); or (v) To the extent permitted by law (including then existing interpretations of Rule 16b-3) a "cashless exercise procedure" satisfactory to the Committee which permits the Employee to deliver an exercise notice to a broker-dealer, who then sells the Option shares, delivers the exercise price to the Company and delivers the excess funds less commission to the Employee; and (c) Such representations and documents as the Committee, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal or state securities laws or regulations. The Committee may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer orders to transfer agents and registrars; and (d) In the event the Option or portion shall be exercised pursuant to Section 4.1 by any person or persons other than the Employee, appropriate proof of the right of such person or persons to exercise the Option; and (e) Full payment of all amounts which, under federal, state or local tax law, it is required to withhold upon exercise of the Option. With the consent of the Committee, (i) shares of the Company's Common Stock owned by the Employee duly endorsed for transfer or (ii) subject to the timing requirements of Section 4.4, shares of the Company's Common Stock issuable to the Employee upon exercise of the Option, valued in accordance with Section 4.1(b) of the Plan at the date of Option exercise, may be used to make all or part of such payment. Section 4.4 - Certain Timing Requirements 9 10 At the discretion of the Committee shares of Common Stock issuable to the Employee upon exercise of the Option may be used to satisfy the Option exercise price or the tax withholding consequences of such exercise, in the case of persons subject to Section 16 of the Exchange Act and to the extent such limitation is required by Rule 16b-3, as then in effect, only (i) during the period beginning on the third business day following the date of release of the quarterly or annual summary statement of sales and earnings of the Company and ending on the twelfth business day following such date or (ii) pursuant to an irrevocable written election by the Employee to use shares of Common Stock issuable to the Employee upon exercise of the Option to pay all or part of the Option price or the withholding taxes made at least six months prior to the payment of such Option price or withholding taxes. Section 4.5 - Conditions to Issuance of Stock Certificates The shares of Common Stock issuable and deliverable upon the exercise of the Option, or any portion thereof, shall be fully paid and non-assessable. In addition to the requirements of Sections 4.3 and 4.4, the Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions: (a) The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary or advisable; and (b) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable; and (c) The lapse of such reasonable period of time following the exercise of the Option as the Committee may from time to time establish for reasons of administrative convenience. Section 4.6 - Rights as Stockholder The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of the Option unless and until certificates representing such shares have been issued by the Company to such holder or the Company's stock record books reflect the Employee as a stockholder pursuant to any book entry procedure approved by the Secretary. 10 11 ARTICLE V OTHER PROVISIONS Section 5.1 - Administration The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent herewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Employee, the Company and all other interested persons. Any such interpretations and rules in regard to this Option shall be consistent with the basic purpose of the Plan to grant "incentive stock options" within the meaning of Section 422 of the Code. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under this Plan except with respect to matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Option. Section 5.2 - Option Not Transferable Neither the Option nor any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Employee or such Employee's successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section 5.2 shall prevent transfers by will or by the applicable laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of ERISA, or the rules thereunder, or as permitted by Section 4.1. Section 5.3 - Amendment, Suspension or Termination of Plan; Modification of Options An Option shall be subject in all events to the condition that, if at any time, the Board shall determine, in its discretion, that the listing, registration, or qualification of any of the Company's securities upon any securities exchange or under any law, regulation or other requirement of any governmental authority is necessary or desirable, or that any consent or approval from any governmental authority is necessary or desirable, then the Board may modify the terms of the Option granted under this Agreement, without the consent of the Employee, in any manner 11 12 which the Board deems necessary or desirable in order to improve the Company's ability to obtain such listing, registration, qualification, consent or approval. Section 5.4 - Notices Any notice to be given under the terms of this Agreement to the Company shall be by registered mail, return receipt requested and if to the Company shall be addressed in care of its Secretary at 680 N. Lake Shore Drive, Chicago, Illinois 60611, and if to the Employee, shall be addressed to such Employee at the address given beneath such Employee's signature hereto. By a notice given pursuant to this Section 5.4, either party may hereafter designate a different address for notices to be given to such Employee. Any notice which is required to be given to the Employee shall, if the Employee is then deceased, be given to the Employee's personal representative if such representative has previously informed the Company of such Employee's status and address by written notice under this Section 5.4. Any notice shall be deemed duly given when delivered or, except in connection with notice of exercise under Section 4.3, at such time as delivery is attempted. Section 5.5 - Titles Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. Section 5.6 - Stockholder Approval The Plan will be submitted for approval by the Company's stockholders within twelve (12) months after the date the Plan was initially adopted by the Board. This Option may not be exercised to any extent by anyone prior to the time when the Plan is approved by the stockholders, and if such approval has not been obtained by the end of said twelve-month period, this Option shall thereupon be cancelled and become null and void. Section 5.7 - Construction The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. 12 13 IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto. PLAYBOY ENTERPRISES, INC. By _______________________________ Authorized Representative 680 N. Lake Shore Drive Chicago, Illinois 60611 ____________________________ Employee ____________________________ ____________________________ Address Employee's Taxpayer Identification Number: ____________________________ Date of Grant:____________________ Amount of Shares Available Under Option: __________________ Exercise Price:___________________ 13 EX-4.5 5 RESTRICTED STOCK AGREEMENT 1 EXHIBIT 4.5 PLAYBOY ENTERPRISES, INC. RESTRICTED STOCK AGREEMENT THIS RESTRICTED STOCK AGREEMENT (the "Agreement"), dated ___________ __, 199__ (the "Award Date"), is made by and between PLAYBOY ENTERPRISES, INC., a Delaware corporation (the "Company"), and _____________________, an employee of the Company or a Subsidiary (the "Employee"): WHEREAS, the Company has established the 1995 Playboy Enterprises, Inc. Stock Incentive Plan (the "Plan"); and WHEREAS, the Company wishes to carry out the Plan (the terms of which are hereby incorporated by reference and made a part of this Agreement, and which shall control in the event of any inconsistency between this Agreement and the Plan or any interpretation of this Agreement); and WHEREAS, the Plan provides for the issuance of shares of the Company's Common Stock (as defined hereunder), subject to certain restrictions thereon (hereinafter referred to as "Restricted Stock"); and WHEREAS, the Stock Option Committee of the Company's Board of Directors (the "Committee"), appointed to administer the Plan, has determined that it would be in the best interest of the Company to issue the shares of Restricted Stock provided for herein to the Employee in partial consideration of past services to the Company and/or its Subsidiaries and to provide further incentives for performance and continued service during the vesting periods provided herein, and has advised the Company thereof and instructed the undersigned Officers (as defined hereunder) to issue said Restricted Stock; NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereby agree as follows: 2 ARTICLE I DEFINITIONS Whenever the following terms are used below in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan. Section 1.1 - Change of Control "Change of Control" shall mean the occurrence of any of the following events: (i) except in a transaction described in clause (iii) below, Hugh M. Hefner, Christie Hefner, the Hugh M. Hefner 1991 Trust (for so long as Hugh M. Hefner and Christie Hefner are joint trustees or one of them is sole trustee), and the Hugh M. Hefner Foundation (for so long as Hugh M. Hefner and Christie Hefner are joint trustees or one of them is sole trustee) cease collectively to own a majority of the total number of votes that may be cast for the election of directors of the Company; or (ii) a sale of Playboy magazine by the Company; or (iii) the liquidation or dissolution of the Company, or any merger, consolidation or other reorganization involving the Company unless (x) the merger, consolidation or other reorganization is initiated by the Company, and (y) is one in which the stockholders of the Company immediately prior to such reorganization become the majority stockholders of a successor or ultimate parent corporation of the Company resulting from such reorganization and (z) in connection with such event, provision is made for an assumption of outstanding Options and rights or a substitution thereof of a new Option or right in such successor or ultimate parent of substantially equivalent value. Section 1.2 - Common Stock "Common Stock" shall mean the Class B Common Stock, par value $.01 per share, of the Company. Section 1.3 - Exchange Act "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. Section 1.4 - Plan "Plan" shall mean the 1995 Playboy Enterprises, Inc. Stock Incentive Plan. 2 3 Section 1.5 - Restrictions "Restrictions" shall mean the transferability restrictions imposed upon Restricted Stock under this Agreement. Section 1.6 - Restricted Stock "Restricted Stock" shall mean Common Stock of the Company issued under this Agreement and subject to the Restrictions imposed hereunder. Section 1.7 - Rule 16b-3 "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended in the future. Section 1.8 - Secretary "Secretary" shall mean the Secretary of the Company. Section 1.9 - Securities Act "Securities Act" shall mean the Securities Act of 1933, as amended. Section 1.10 - Termination of Employment "Termination of Employment" shall mean the time when the employee-employer relationship between the Restricted Stockholder and the Company or any Subsidiary is terminated, voluntarily or involuntarily, for any reason, with or without Cause (as defined below), including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement, but excluding any termination where there is simultaneous reemployment by the Company or a Subsidiary. The Committee, subject to the definition of Cause below, shall determine the effect of all other matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether particular leaves of absence constitute Terminations of Employment. For purposes of the Plan, "Cause" shall mean an Employee's (a) gross negligence in the performance of the responsibilities of such Employee's office or position; (b) any act of dishonesty or moral turpitude materially adversely affecting the Company or the Company's reputation; (c) commission of any other willful or intentional act that could reasonably be expected to injure materially the reputation, business or business relationships of the Company or any Subsidiary; or (d) conviction of a felony or of any crime involving moral turpitude, fraud or misrepresentation. 3 4 Section 1.11 - Vested Stock "Vested Stock" shall mean Restricted Stock with respect to which the Employee has satisfied the time or performance vesting standards of the Agreement as specified in Article III. ARTICLE II ISSUANCE OF RESTRICTED STOCK Section 2.1 - Issuance of Restricted Stock In consideration of the Employee's agreement to remain in the employ of the Company until some or all of the Restrictions hereunder shall have lapsed, for past services rendered to the Company and for other good and valuable consideration which the Committee has determined to be equal to not less than the par value of the Restricted Stock issued hereunder, on the date hereof the Company issues to the Employee ____________ shares of its Class B Common Stock, par value $.01 per share, upon the terms, conditions and restrictions set forth in this Agreement. Section 2.2 - No Right to Continued Employment Nothing in this Agreement or in the Plan shall confer upon the Employee any right to continue in the employ of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company or any Subsidiary, which are hereby expressly reserved, to discharge the Employee at any time for any reason whatsoever, with or without Cause. ARTICLE III RESTRICTIONS Section 3.1 - Vesting Period All Restrictions will lapse automatically and Vested Stock will be issued on June 30, 2005, if and only if (i) there has been no Termination of Employment of the Employee for any reason prior to such date, and (ii) there has been no forfeiture of shares due to a Change of Control as specified in Section 3.8 prior to such date. 4 5 Section 3.2 - Accelerated Vesting; Performance Goals Performance goals have been established as a condition to accelerated vesting of the Restricted Stock. The performance goals are based on the Company's "Operating Income" as such term is used and determined by the Company for purposes of the Company's financial reports filed with the Securities and Exchange Commission under the Exchange Act. Operating Income will be measured before any unusual or "one-time" economic or accounting instances which would distort the actual Operating Income of the Company as determined by the Committee, which may rely in its discretion on the Company's publicly reported Operating Income Before One-Time Items. The Restrictions will lapse with respect to specified percentages of the shares of Restricted Stock subject to this award, without duplication, at the end of any fiscal year of the Company, beginning with the fiscal year ended June 30, 1995, during which Operating Income first equals or exceeds each of the following thresholds:
Annual Operating Percentage of Total ---------------- ------------------- Income Goal Restricted Stock Award ----------- ---------------------- ($ million) ----------- 7.5 25% 10.0 25% 15.0 25% 20.0 25%
For example, if no Restrictions have yet lapsed, and the Company's Operating Income equals $8.0 million in a given year, the restrictions would lapse with respect to 25% of the Restricted Stock, whereas if 25% of the Restricted Stock had previously vested no additional Restricted Stock would vest; if in a subsequent fiscal year, Operating Income equals $16.0 million, the restrictions would lapse with respect to an additional 50% of the Restricted Stock, and so on. The lapse of the Restrictions in any year shall be effective only when the Company's independent auditors shall have issued their audit report with respect to such year. Section 3.3 - Right to Payment of Restricted Stock Upon issuance of an independent auditor's report with respect to each fiscal year, a determination will be made as to the amount of Restricted Stock earned, if any, on the basis of the vesting guidelines in Section 3.1 and 3.2 and what Restricted Stock has thereby become Vested Stock. Participants must be employed by the Company or by a Subsidiary as of the last day of each fiscal 5 6 year in order to receive any Vested Stock which may have vested during that year. Unlegended stock certificates will be issued to participants only when the independent audit report confirms that vesting requirements have been satisfied; pending such issuance, Restricted Stock will be held in book entry form by the Company as custodian for the Employee. Unless the Secretary determines that certificates must be issued pursuant to applicable law or contractual obligations, Restricted Stock shall not be issued to the Employee in certificated form. The Secretary of the Company shall establish book entry procedures sufficient to prevent unauthorized transfers of the Restricted Stock. Section 3.4 - Legend The Secretary shall, or shall instruct the Company's transfer agent to, provide stop transfer instructions in the Company's stock records to prevent any transfer of the Restricted Stock for any purpose until the stock is vested. Any certificate that the Secretary or the transfer agent deems necessary to issue to represent shares of Restricted Stock shall, until all restrictions lapse and new certificates are issued pursuant to Section 3.5, bear the following legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING REQUIREMENTS AND MAY BE SUBJECT TO REACQUISITION BY THE COMPANY UNDER THE TERMS OF THAT CERTAIN RESTRICTED STOCK AGREEMENT BY AND BETWEEN PLAYBOY ENTERPRISES, INC. (THE "COMPANY") AND THE HOLDER OF THE SECURITIES. PRIOR TO VESTING OF OWNERSHIP IN THE SECURITIES, THEY MAY NOT BE, DIRECTLY OR INDIRECTLY, OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNDER ANY CIRCUMSTANCES. COPIES OF THE ABOVE REFERENCED AGREEMENT ARE ON FILE AT THE OFFICES OF THE COMPANY AT 680 NORTH LAKE SHORE DRIVE, CHICAGO, IL 60611. Section 3.5 - Lapse of Restrictions Upon the vesting of the shares of Restricted Stock as provided in Sections 3.1 through 3.3 and subject to Sections 4.2 and 4.3, the Company shall cause new certificates to be issued with respect to such Vested Stock and delivered to the Employee or his legal representative, free from the legend provided for in Section 3.4 and any of the other Restrictions. Such Vested Stock shall thereupon cease to be considered Restricted Stock subject to the terms and conditions of this Agreement. Section 3.6 - Restricted Stock Not Transferable 6 7 Prior to the issuance of Vested Stock, no Restricted Stock or any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Employee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect. Section 3.7 - Termination of Employment If there is a Termination of Employment for any reason, whether voluntarily or involuntarily, with or without Cause, by retirement or by reason of death or disability or otherwise, at any time prior to June 30, 2005, the Employee shall forfeit all unvested Restricted Stock, and all Restricted Stock shall, on the effective date of such Termination of Employment, be immediately cancelled and returned to the status of authorized and unissued Common Stock. Notwithstanding the foregoing, if an Employee was employed on the last day of a fiscal year and there is a Termination of Employment of such Employee prior to the issuance of an independent audit report that shows that Restrictions have lapsed with respect to any unvested Restricted Stock during such fiscal year, such Employee shall receive Vested Stock with respect to such Restricted Stock notwithstanding such Termination of Employment. Section 3.8 - Change of Control Upon a Change of Control specified in clause (iii) of the definition thereof, any Restricted Stock that has not vested shall be forfeited on the effective date of such Change of Control, and all Restricted Stock shall, on the effective date of such Change of Control, be immediately cancelled and returned to the status of authorized and unissued Common Stock; provided, however, that a Change of Control specified in clause (i) or (ii) of the definition thereof occurs, such Restricted Stock shall remain outstanding, subject to any remaining Restrictions. Section 3.9 - Changes in Common Stock In the event that the outstanding shares of the Company's Common Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company pursuant to a recapitalization, reclassification, stock split-up, stock dividend, or other combination of shares or similar transaction, any new, additional or different shares or securities which are issued in the name of the Employee as a holder of Restricted Stock shall be considered to be Restricted Stock and shall be subject to all of the Restrictions. 7 8 ARTICLE IV MISCELLANEOUS Section 4.1 - Administration The Committee shall have the power to interpret the Plan, this Agreement and all other documents relating to Restricted Stock and to adopt such rules for the administration, interpretation and application of the Plan as are consistent herewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Employee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or Restricted Stock and all members of the Committee shall be fully protected by the Company in respect to any such action, determination or interpretation. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under this Plan except with respect to matters which under Rule 16b-3 or Section 162(m) of the Internal Revenue Code of 1986, as amended, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee. Section 4.2 - Approval of Plan by Stockholders The Restricted Stock will not vest prior to the approval of the Plan by the stockholders, and, if such approval has not been obtained 12 months after the date of the Board's initial adoption of the Plan, such Restricted Stock shall thereupon be cancelled and become null and void. Section 4.3 - Conditions to Issuance of Stock Certificates The Company shall not be required to issue or deliver any certificate or certificates for Vested Stock pursuant to this Agreement prior to fulfillment of all of the following conditions: (a) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed; and (b) The completion of any registration or other qualification of such shares under any state or Federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary or advisable; and 8 9 (c) The obtaining of any approval or other clearance from any state or Federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable; and (d) Subject to the provisions of Section 4.8 the payment by the Employee of all amounts required to be withheld, under federal, state and local tax laws, with respect to the issuance of Restricted Stock and/or the lapse or removal of any of the Restrictions; and (e) The lapse of such reasonable period of time as the Committee may establish from time to time for reasons of administrative convenience. Section 4.4 - Notices Any notice to be given under the terms of this Agreement will be by registered mail, return receipt requested and if to the Company shall be addressed in care of its Secretary at 680 N. Lake Shore Drive, Chicago, Illinois 60611, and any notice to be given to the Employee shall be addressed to the Employee at the address given beneath the Employee's signature hereto. By a notice given pursuant to this Section 4.4, either party may hereafter designate a different address for notices to be given to the Company or such Employee. Any notice which is required to be given to the Employee shall, if the Employee is then deceased, be given to the Employee's personal representative if such representative has previously informed the Company of such Employee's status and address by written notice under this Section 4.4. Any notice shall have been deemed duly given when received. Section 4.5 - Rights as Stockholder Upon issuance of the Restricted Stock in the name of the Employee, the Employee shall have all the rights of a stockholder with respect to said shares including the right to receive all dividends and other distributions paid or made with respect to the shares. Section 4.6 - Titles Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. Section 4.7 - Amendment 9 10 This Agreement may be amended only by a writing executed by the parties hereto which specifically states that it is amending this Agreement. Section 4.8 - Tax Withholding The Company's obligation (i) to issue or deliver to the Employee any certificate or certificates for Vested Stock or (ii) to pay to the Employee any dividends or make any distributions with respect to the Restricted Stock, is expressly conditioned upon receipt from the Employee, on or prior to the date the same is required to be withheld, of: (a) Full payment (in cash or by check) of any amount that must be withheld by the Company for federal, state and/or local tax purposes; or (b) Subject to the Committee's consent and Section 4.8(c), full payment by delivery to the Company of unrestricted shares of the Company's Common Stock previously owned by the Employee duly endorsed for transfer to the Company by the Employee with an aggregate fair market value equal to the amount that must be withheld by the Company for federal, state and/or local tax purposes; or (c) With respect to the withholding obligation for shares of Restricted Stock that become unrestricted shares of stock as of a certain date (the "Vesting Date"), subject to the Committee's consent and to the timing requirements set forth in this Section 4.8(c), full payment by retention by the Company of a portion of such shares of Restricted Stock which become Vested Stock with an aggregate fair market value (determined as of the Vesting Date) equal to the amount that must be withheld by the Company for federal, state and/or local tax purposes. To the extent such limitation is required by Rule 16b-3, as then in effect, such shares of Restricted Stock which become Vested Stock as of the Vesting Date may be used to satisfy the tax withholding consequences of such lapse of restrictions or vesting only (i) during the period beginning on the third business day following the date of release of the quarterly or annual summary statement of sales and earnings of the Company and ending on the twelfth business day following such date or (ii) pursuant to an irrevocable written election by the Employee to use shares of Restricted Stock which become Vested Stock as of the Vesting Date to pay all or part of the withholding taxes (subject to the approval of the Committee) made at least six months prior to the payment of such withholding taxes; or (d) Subject to the Committee's consent, any combination of payments provided for in the foregoing subsections (a), (b) or (c). 10 11 Section 4.9 - Governing Law The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. IN WITNESS HEREOF, this Agreement has been executed and delivered by the parties hereto. PLAYBOY ENTERPRISES, INC. By ___________________________ Its __________________________ ___________________________ Employee ____________________________ ____________________________ Address ____________________________ Employee Tax I.D. Number Restricted Stock Issued: _______________ shares Par Value of Stock: $.01 per share Date Issued: _________________ 11 EX-5.1 6 LETTER 1 Exhibit 5.1 March 15, 1995 SECURITIES AND EXCHANGE COMMISSION 450 Fifth Street, N.W. Washington, D.C. 20549 Ladies and Gentlemen: I am the Executive Vice President, Law and Administration, and General Counsel to Playboy Enterprises, Inc., a Delaware corporation (the "Company"), and have acted as counsel to the company in connection with the issuance of up to 1,176,750 shares (the "Shares") of the Company's Class B Common Stock, $.01 par value, issuable under the Company's 1995 Stock Incentive Plan (the "Plan") pursuant to a Registration Statement on Form S-8, filed by the Company with the Securities and Exchange Commission on March 20, 1995 (the "Registration Statement"). I am familiar with the proceedings taken and to be taken by the Company in connection with the authorization, issuance and sale of the Common Stock, and for the purposes of this opinion, have assumed such proceedings will be timely completed in the manner presently proposed. In addition, I have examined such documents and such questions of law and fact, including an examination of originals or copies certified or otherwise identified to my satisfaction of such documents, corporate records and instruments as I have deemed necessary or appropriate for purposes of this opinion. Based on the foregoing, it is my opinion that the Common Stock has been duly authorized, and that the Common Stock to be issued or sold pursuant to the Plan has been duly authorized, and that such stock, when issued or sold in accordance with the terms thereof, will be validly issued, fully paid and nonassessable. I hereby consent to the filing of this opinion as an exhibit to the Registration Statement and I further consent to the use of my name under the heading "Legal Matters" in the Prospectus which is part of the Registration Statement. Respectfully submitted, /s/Howard Shapiro ----------------------- Howard Shapiro, Esq. EX-23.1 7 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS We consent to the incorporation by reference in the registration statement of Playboy Enterprises, Inc. on Form S-8 relating to the Playboy Enterprises, Inc. 1995 Stock Incentive Plan of our report dated July 26, 1994, on our audits of the consolidated financial statements and financial statement schedules of Playboy Enterprises, Inc. as of June 30, 1994 and 1993 and for each of the three years in the period ended June 30, 1994, which report is included in the Annual Report on Form 10-K. We also consent to the use of our name and the statements with respect to us appearing under the heading "Experts" in the prospectus that is part of the above-referenced registration statement. /s/Coopers & Lybrand L.L.P. - -------------------------------- Coopers & Lybrand L.L.P. Chicago, Illinois March 16, 1995 -----END PRIVACY-ENHANCED MESSAGE-----