Board of Directors' Deferred Compensation Plan - Playboy Enterprises Inc.
PLAYBOY ENTERPRISES, INC.
Board of Directors'
Deferred Compensation Plan
Effective: October 1, 1992
Amended and Restated: January 1, 1998
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PLAYBOY ENTERPRISES' INC.
Board of Directors'
Deferred Compensation Plan
I. PURPOSE
II. DEFINITIONS
III. ELIGIBILITY; PARTICIPATION LIMITS
IV. BENEFITS
V. CLAIM FOR BENEFITS PROCEDURE
VI. ADMINISTRATION
VII. AMENDMENT AND TERMINATION
VIII. MISCELLANEOUS
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PLAYBOY ENTERPRISES, INC.
Board of Directors
Deferred Compensation Plan
Playboy Enterprises, Inc. hereby amends and restates in its entirety,
effective as of January 1, 1998, the Playboy Enterprises, Inc. Board of
Directors' Deferred Compensation Plan, which was originally established
effective October 1, 1992.
I. PURPOSE
The purpose of the Playboy Enterprises, Inc. Board of Directors' Deferred
Compensation Plan is to provide a means whereby the Company may afford
certain members of the Board of Directors an opportunity to defer Director
Fees otherwise payable in cash or stock, and thereby encourage their
productive efforts on behalf of the Company. By providing a means whereby
Director Fees may be deferred into the future, the Plan will further the
growth and development of the Company and aid in attracting and retaining
Directors of exceptional ability.
II. DEFINITIONS
2.01 "Administrative Committee" and "Committee" mean the Committee
appointed pursuant to Article VI to manage and administer the Plan.
2.02 "Age" means the Director's chronological age on the relevant date.
2.03 "Agreement" means the Playboy Enterprises, Inc. Deferred Compensation
Election Agreement, executed between a Director and the Company,
whereby a Director agrees to defer all or a portion of his/her
Director Fees pursuant to the provisions of the Plan, and the Company
agrees to make benefit payments in accordance with the provisions of
the Plan.
2.04 "Beneficiary" means the person, persons or trust designated
Beneficiary pursuant to Section 4.09.
2.05 "Change in Control" means the occurrence of any one of the following
events:
a) Hugh M. Hefner and Christie Ann Hefner cease, collectively, to
beneficially own at least fifty percent (50%) of the combined
voting power of the then-outstanding securities entitled to vote
generally in the election of Directors of the Company ("Voting
Stock") (for purposes of this Subsection, Voting Stock
beneficially owned [as such term is defined under Rule 13d-3, or
any successor rule or regulation, under the Securities Exchange
Act of 1943, as amended] by the Hugh M. Hefner Foundation shall be
deemed to be beneficially owned by Christie Ann Hefner if and so
long as she has sole voting power with respect to such Voting
Stock); or
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b) except as provided in Section 2.05(f), a sale, exchange, or other
disposition of Playboy Magazine; or
c) except as provided in Section 2.05(f), any liquidation or dissolution of
the Company; or
d) except as provided in Section 2.05(f), the Company is merged,
consolidated, or reorganized into or with another corporation or other
legal person; or
e) except as provided in Section 2.05(f), the Company sells or otherwise
transfers all or substantially all of its assets to another corporation
or other legal person;
f) provided, however, that no such merger, consolidation, reorganization,
sale, or transfer will constitute a Change in Control if the merger,
consolidation, reorganization, sale, or transfer is initiated by the
Company and as a result of such merger, consolidation, reorganization,
sale, or transfer not less than a majority of the combined voting power
of the then-outstanding securities of the surviving, resulting, or
ultimate parent corporation or other legal person, as the case may be,
immediately after such transaction, is held in the aggregate by persons
who held not less than a majority of the combined voting power of the
outstanding Voting Stock of the Company immediately prior to such
merger, consolidation, reorganization, sale, or transfer.
2.06 "Company" means Playboy Enterprises, Inc., a Delaware corporation, and its
successors and assigns.
2.07 "Compensation" means cash remuneration paid pursuant to this Plan for
services rendered prior to the date paid.
2.08 "Deferred Compensation Account" means the accounting record(s) maintained
by the Company for each Participant, pursuant to Article III. Separate
Deferred Compensation Account(s) shall be utilized solely as a device for
the measurement and determination of the amount to be paid to the
Participant pursuant to this Plan, and shall be subject to Section 7.02
hereof. Notwithstanding the provisions of Section 8.09, a Participant's
Deferred Compensation Account shall not constitute or be treated as a trust
fund or escrow arrangement of any kind.
2.09 "Deferred Compensation Plan Trust" and "Trust" mean the Deferred
Compensation Plan Trust, an irrevocable grantor trust or trusts established
by the Company, in accordance with Section 8.09, with an independent
trustee for the benefit of persons entitled to receive payments under this
Plan and any other deferred compensation plan or plans which the Company
chooses, from time to time, to operate through the Trust.
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2.10 "Determination Date" means the date on which the amount of a Participant's
Deferred Compensation Account is determined as provided in Article III
hereof. For Plan Years beginning prior to January 1, 1998, the last day of
each fiscal quarter and the date of a Participant's Termination of Service
shall be a Determination Date. For Plan Years beginning on or after January
1, 1998, the last day of each calendar quarter and the date of
a Participant's Termination of Service shall be a Determination Date.
2.11 "Director Fees" for purposes of this Plan shall be the total of the
Director's fees and other remuneration for services rendered as a member of
the Board of Directors during a Plan Year, including Retainer Fees and
Meeting Fees. Director Fees shall not include any amounts paid that are not
strictly for personal services, such as expense reimbursements.
2.12 "Fair Market Value" means either (a) the closing price of a share of Common
Stock as reported on the New York Stock Exchange (the "NYSE") on the date
as of which such value is being determined, or, if there are no reported
transactions for such date, on the next preceding date for which
transactions were reported, as published in the Midwest Edition of The Wall
Street Journal, or (b) if there is no reporting of transactions on the
NYSE, the fair market value of a share of Common Stock as determined by the
Board from time to time.
2.13 "Interest Crediting Rate," "Interest" and "Moody's" mean the average yield
on corporate bonds for the preceding calendar quarter. For purposes of this
Section, the average yield on corporate bonds means the composite average
yield of industrial and public utility bonds, rated Aaa through Baa, as
determined from Moody's Bond Record published monthly by Moody's Investor's
Service, Inc. (or any successor thereto), or, if such yield is no longer
available, a substantially similar average selected by the Committee.
2.14 "IRC" means the Internal Revenue Code of 1986, as amended.
2.15 "Meeting Fees" means the compensation payable to a Director with regard to
the number of Board or Committee meetings attended, or Committee positions
held, as determined by the Board from time to time.
2.16 "Participant" means a member of the Board of Directors of the Company who
is not an employee of the Company who is eligible to participate in the
Plan pursuant to Section 3.01, and who enters into an Agreement.
2.17 "Plan" means the Playboy Enterprises, Inc. Board of Directors' Deferred
Compensation Plan, as in effect and amended from time to time.
2.18 "Plan Year" means the Company's fiscal year, for the period from October 1,
1992, to June 30, 1997. For the period from July 1, 1997, to December 31,
1997, Plan Year shall mean a six month period beginning on July 1, 1997,
and ending on December 31, 1997. For periods beginning on or after January
1, 1998, Plan Year shall mean a calendar year.
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2.19 "Retainer Fees" means the portion of a Director's annual compensation
that is payable without regard to the number of Board or committee
meetings attended or committee positions, as determined by the Board
from time to time.
2.20 "Retirement Date" and "Retirement" mean the date of termination of
service of a Director for reasons other than death but after he/she
(i) attains age sixty (60) and has five (5) or more years of service
as a Director of the Company.
2.21 "Tax Funded" means that the interest of a Participant in the Plan will
be includable in the gross income of the Participant for federal
income tax purposes prior to actual receipt of Plan benefits by the
Participant.
2.22 "Termination of Service" means the Director's ceasing his/her service
as a member of the Board of Directors of the Company (the "Board") for
any reason whatsoever, including by reason of Retirement or death.
III. ELIGIBILITY; PARTICIPATION LIMITS
3.01 Eligibility and Participation. A Director who is not an employee of
the Company may elect to participate in the Plan by filing an
Agreement with the Company as follows:
a) In the initial year of eligibility, a Director who elects to
participate in the Plan must file an Agreement with the Company
at least ten (10) days prior to the beginning of the calendar
quarter in which the Director's Fees to be deferred are otherwise
earned. For all years subsequent to the initial year of
eligibility, a director who elects to participate in the Plan
must file an Agreement with the Company at least ten (10) days
prior to the beginning of the Plan Year in which the Director's
Fees to be deferred are otherwise earned;
b) A Director may elect to defer any component of his or her
Director Fees. A Director who elects to defer the Meeting Fees
component of his or her Director Fees, must defer one hundred
percent (100%) of his or her Meeting Fees. A deferral of any
amount less than one hundred percent (100%) of the Participant's
Meeting Fees is not permitted under the Plan. A Director may
also elect to defer all or a portion of the Retainer Fees
component of his or her Director Fees. A Director may elect to
defer in twenty-five percent (25%) increments up to one hundred
percent (100%) of the Retainer Fees component of his or her
Director Fees; and
c) The Agreement shall be irrevocable upon acceptance by the
Company.
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A Director who does not file an Agreement for a Plan Year shall be eligible
to participate in a subsequent Plan Year. Notwithstanding the foregoing,
the amount credited to the Deferred Compensation Account of a Director who
was previously a participant in the executives' Deferred Compensation Plan
will be automatically transferred into this Plan, unless such transfer is
expressly prohibited by the terms of such other plan, whether or not such
Director shall otherwise elect to make deferral contributions hereunder.
3.02 Timing of Deferral Credits. The amount of Director Fees that a Participant
elects to defer in the Agreement shall cause an equivalent reduction in
his/her Director Fees, and shall be credited to the Director's Deferred
Compensation Account throughout the Plan Year as the Participant is paid
(or would have been paid) any remaining non-deferred portion of his/her
Director Fees for the Plan Year.
3.03 Vesting. A Participant shall be one hundred percent (100%) vested in
his/her Deferred Compensation Account.
3.04 Determination of Account. Each Director's Deferred Compensation Account as
of each Determination Date shall consist of the balance of the
Participant's Deferred Compensation Account as of the immediately preceding
Determination Date, adjusted for:
. additional Director Fees deferrals pursuant to Section 3.01,
. distributions (if any); and
. the appropriate investment earnings and gains and/or losses and expenses
pursuant to Section 3.05.
All adjustments and earnings related thereto, will be determined on a daily
basis.
3.05 Deferred Compensation Account Investment Options. The Administrative
Committee shall designate from time to time one or more investment options
in which Deferred Compensation Accounts may be deemed invested. A
Participant (or Beneficiary of a deceased Participant) shall allocate his
or her Deferred Compensation Account among the deemed investment options
(in 1% increments) by filing with the Administrative Committee an
investment allocation election. For the Plan Year beginning January 1, 1998
and until changed by the Administrative Committee, the Administrative
Committee has designated the following phantom investment options:
a) Moody's Bond Index Option.
b) Balanced Equity/Bond Option.
c) Growth & Income Equity Option.
d) Large Cap Equity Option.
e) Aggressive Growth Equity Option.
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f) International Equity Option.
g) Playboy Enterprises, Inc. Common Stock Units Option
Any such investment allocation election shall be made initially in the
Agreement and shall be subject to such rules as the Administrative
Committee may prescribe, including, without limitation, rules concerning
the manner of making investment allocation elections and, subject to
Section 3.06, the frequency and timing of changing such investment
allocation elections. Meeting Fees deferred pursuant to Section 3.01 must
be deemed invested in the Playboy Enterprises, Inc. Common Stock Units
Option. Retainer Fees deferred pursuant to Section 3.01 may be deemed
invested in any of the phantom investment options available in this Section
3.05.
The Administrative Committee shall have the sole discretion to determine
the number of investment options to be designated hereunder and the nature
of the options and may change or eliminate the investment options provided
hereunder from time to time. For each investment option, other than the
Moody's Bond Index Option and the Playboy Enterprises, Inc. Common Stock
Units Option, the Administrative Committee shall, in its sole discretion,
select a mutual fund, or an investment index, or shall create a phantom
portfolio of such investments as it deems appropriate, to constitute the
investment option. The Company may, but is under no obligation to acquire
any investment or otherwise set aside assets for the deemed investment of
Deferred Compensation Accounts hereunder. The Administrative Committee
shall determine the amount and rate of investment gains or losses with
respect to any such investment option for any period, and may take into
account deemed expenses which would be incurred if actual investments were
made.
3.06 Playboy Enterprises, Inc. Common Stock Units Option. Amounts deemed
invested in the Playboy Enterprises Inc. Common Stock Units Option shall
initially be deemed invested in a number of phantom shares (the "Stock
Units") of Class B Common Stock of the Company ("Shares") equal to the
quotient of (i) the amount deemed invested divided by (ii) the Fair
Market Value on the date the amount is deemed so invested. Whenever a
dividend (other than a dividend payable in the form of Shares) is declared
with respect to the outstanding Shares, the number of Stock Units credited
to the Participant shall be increased by the number of Stock Units,
determined by dividing (i) the product of (A) the number of Stock Units
credited to the Participant under the Plan on the related dividend record
date and (B) the amount of any cash dividend declared by the Company on a
Share (or, in the case of any dividend distributable in property other than
Shares, the per share value of such dividend, as determined by the Company
for purposes of income tax reporting) by (ii) the Fair Market Value on the
related dividend payment date. In the case of any dividend declared on
Shares which is payable in Shares, the amount credited to a Participant's
deemed investment in the Playboy Enterprises, Inc. Common Stock Units
Option shall be increased by the number of Stock Units equal to the product
of (i) the number of Stock Units credited to the Participant
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under the Plan on the related dividend record date and (ii) the number
of Shares distributable as a dividend on a Share. In the event of any
change in the number or kind of outstanding Shares by reason of any
recapitalization, reorganization, merger, consolidation, stock split
or any similar change affecting the Shares, other than a stock
dividend as provided above, the Committee shall make an appropriate
adjustment in the number of Stock Units credited to the Participant.
No shares of Class B Common Stock will actually be held (either by
issuance or purchase) with respect to any investment in the Playboy
Enterprises, Inc. Common Stock Units Option.
3.07 Change of Investment Election. Effective as of any January 1, April 1,
July 1, October 1 (or if the New York Stock Exchange is not open for
trading on such day, the close of the last business day of the prior
month on which the New York Stock Exchange was open for trading) a
Participant may elect by a written notice delivered to the
Administrative Committee no later than the 20th day of the prior
calendar month, to transfer all or any portion of his or her deemed
investment and/or change the manner in which his or her future
deferrals are deemed invested among the then-available investment
options. However, once deferrals are made or investment earnings are
credited into the Playboy Enterprises, Inc. Common Stock Units
investment alternative, such amounts may not be transferred out of
this investment option.
IV. DISTRIBUTIONS
4.01 Distribution on Retirement. Upon a Participant's Termination of
Service on or after a Retirement Date, distribution of the
Participant's Deferred Compensation Account, determined under Section
3.04, as of the Determination Date coincident with or next following
such Retirement Date, shall be made or commence. The distribution
shall be made as designated by the Participant in his/her Agreement,
subject to Section 4.04. In the event a distribution is made pursuant
to this Section 4.01, the Participant shall immediately cease to be
eligible for any other benefit provided under this Plan.
4.02 Distribution on Death. Upon the death of a Participant prior to the
distribution of all of his or her Deferred Compensation Accounts,
distribution of the unpaid balance of the Deferred Compensation
Accounts shall be made or continue to be made to such Participant's
Beneficiary. If the distribution of the Participant's Deferred
Compensation Accounts had not yet commenced as of the date of his or
her death, distribution to the Beneficiary shall be made or commence
as soon as practical and in any event within 90 days following the
Participant's death. The method of distribution shall be as
designated by the Participant in his/her Agreement, subject to
Section 4.04.
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4.03 Distribution on Termination of Service. Unless otherwise directed by
the Administrative Committee, upon the Termination of Service of a
Participant prior to his or her Retirement Date for reasons other than
death, distribution of the Participant's Deferred Compensation
Accounts shall be made as soon as practical after such Termination of
Service, in a single lump sum, notwithstanding the provisions of
Section 4.04(a) and (b). Upon a Termination of Service prior to his or
her Retirement Date or death, the Participant shall immediately cease
to be eligible for any other benefit provided under this Plan.
4.04 Method of Timing of Distribution.
a) Election-in Agreement. Except in the case of a Termination of
Service prior to the Participant's Retirement Date for reasons
other than death or Disability, distribution of a Participant's
Deferred Compensation Accounts shall be made in a lump sum or
installments, as elected by the Participant in the Agreement
relating to each respective Deferred Compensation Account.
Installment payments shall be made quarterly over a period of
either ten (10) years or fifteen (15) years, as elected by the
Participant in the Agreement. The amount of each installment shall
be equal to the quotient obtained by dividing the balance of the
Deferred Compensation Account being distributed in installments by
the number of installments remaining to be paid, including the
current installment.
b) Election to Change Method of Distribution. A Participant may, by
written request filed with the Administrative Committee at least
thirteen (13) months prior to the distribution or commencement of
distribution of a Deferred Compensation Account, change the method
of distribution elected with respect to a Deferred Compensation
Account to any other method permitted under Section 4.04(a),
provided that such request shall not be effective unless and until
approved by the Committee. After a Participant's death, the
Participant's Beneficiary may petition the Administrative
Committee requesting an acceleration of benefit payments otherwise
due to be paid to the Beneficiary. The Administrative Committee,
in its sole discretion, but taking into account the cash needs of
the Beneficiary, may grant such request.
c) Notwithstanding any payment method elected by a Participant or
Beneficiary, the Company may, in its sole discretion, elect to pay
any Deferred Compensation Account whose balance is less than
$10,000 in a lump sum.
4.05 Withholding; Employment Taxes. To the extent required by the law in
effect at the time payments are made, the Company shall withhold any
taxes required to be withheld by the federal, or any state or local,
government.
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4.06 Commencement of Payments. Unless otherwise provided, payments under
this Plan shall commence as soon as practicable following the
Participant's eligibility for payment, but in no event later than
ninety (90) days following receipt of notice by the Administrative
Committee of an event which entitles a Participant or a Beneficiary to
payments under this Plan, or at such other date as may be
determined by the Administrative Committee in its sole discretion.
4.07 Hardship Distributions; Cessation of Deferrals. In the event that the
Administrative Committee, upon written petition of the Participant
(or, after the Participant's death, the written petition of his or her
Beneficiary), determines in its sole discretion that the Participant
(or his or her Beneficiary) has suffered a Hardship, the Company may
distribute to the Participant (or his or her Beneficiary) as soon as
reasonably practicable following such determination, an amount, not in
excess of the value of the Participant's Deferred Compensation
Accounts, necessary to satisfy the Hardship. Notwithstanding the
foregoing, the Administrative Committee will not make any distribution
under this Section 4.07 if such distribution would subject the
Participant to liability under Section 16(b) of the Securities
Exchange Act of 1934. For purposes of this Plan, "Hardship" is a
sudden and immediate financial need that could not reasonably have
been foreseen by the Participant (or his or her Beneficiary), caused
by an event beyond the control of the Participant (or Beneficiary),
and which would result in severe financial hardship which the
Participant (or Beneficiary) cannot satisfy from other resources
reasonably available to the Participant (or Beneficiary), such as may
result from accident, sudden illness or death of an immediate family
member, or casualty loss. Financial needs arising from foreseeable
events, such as the purchase of a residence or educational expenses,
shall not be considered Hardships. A Participant who receives a
Hardship distribution pursuant to this Section 4.07, shall also cease
making deferrals of Director Fees until the calendar quarter next
following or coincident with a twelve (12) month period which begins
on the date the Hardship distribution is made. A Director who is
required to cease making deferrals due to the receipt of a Hardship
distribution, shall be permitted to begin making deferrals into this
Plan by filing a new Agreement with the Company. The new Agreement
must be filed with the Company at least thirty (30) days prior to the
calendar quarter in which deferrals are to commence.
4.08 Change in Control Distribution Election. If there is a Change in
Control, there notwithstanding any other provision of this Plan:
a) Any active non-employee Director may, at any time during the
thirty-six (36) month period immediately following such Change in
Control, elect to receive an immediate lump sum payment of the
balance of his or her Deferred Compensation Accounts, reduced by a
penalty equal to ten percent (10%) of the value of the
Participant's remaining Deferred Compensation Accounts. The ten
percent (10%) penalty amount shall be permanently forfeited. In the
event no such request is made by a Participant, the Participant's
Deferred Compensation Accounts shall be paid in accordance with the
provisions of this Article IV. Any active non-employee Director who
elects to receive an
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immediate lump sum payment pursuant to this Section 4.08, shall not
be eligible to make any additional deferrals into this Plan until the
calendar quarter next following or coincident with a twelve (12)
month period which begins on the date a lump sum payment is received.
b) Any retired non-employee Director or any Beneficiary of a deceased
Participant may, at any time during the thirty-six (36) month period
immediately following such Change in Control, elect to receive an
immediate lump sum payment of the balance of his or her Deferred
Compensation Accounts, reduced by a penalty equal to five percent
(5%) of the value of the remaining Deferred Compensation Accounts.
The five percent (5%) penalty amount shall be permanently forfeited.
In the event no such request is made by a retired non-employee
Director or Beneficiary, the Deferred Compensation Accounts shall be
paid in accordance with the provisions of this Article IV.
c) Notwithstanding the foregoing, no election under Section 4.08(a) or
4.08(b) shall be effective until at least six months after the most
recent election made by such Participant under Section 4.04(a) or
4.04(b).
4.09 Recipients of Payments; Designation of Beneficiary. All payments to be
made by the Company under the Plan shall be made to the Participant during
his/her lifetime, provided that if the Participant dies prior to the
commencement or completion of such payments, then all subsequent payments
under the Plan shall be made by the Company to the Beneficiary determined
in accordance with this Section 4.09. The Participant shall designate a
Beneficiary by filing a written notice of such designation with the
Administrative Committee in such form as the Committee requires and may
include contingent Beneficiaries The Participant may from time-to-time
change the designated Beneficiaries by filing a new designation in writing
with the Committee. (In community property states, the spouse of a married
Participant shall join in any designation of a Beneficiary other than the
spouse). If no designation is in effect at the time any benefits payable
under this Plan become due, the Beneficiary shall be the spouse of the
Participant, or if no spouse is then living, the executor(s) or
administrator(s) of the Participant's estate.
4.10. Preservation of Interim Distribution Benefit Elections. If a Participant
who had been a participant in the Company's Deferred Compensation Plan,
and whose account balance under such plan has been transferred to this
Plan under Section 3.01 hereof, has made a valid election or elections
with respect to all or a portion of the amounts so transferred under
Section 4.05 (Interim Distribution Benefit) of such Deferred Compensation
Plan, such election(s) shall be preserved and given effect by the
Administrative Committee. For purposes of applying this provision: (a) the
Administrative Committee shall refer to Section 4.05 of the Deferred
Compensation Plan; and (b) references in such Section to the
"Administrative Committee" shall be deemed to refer to this Plan's
Administrative Committee. Nothing in this Section 4.10 shall be
interpreted so as to permit any Participant, including a former
participant in the Company's Deferred Compensation Plan, to
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make any similar election with respect to any amounts subject to
deferral under this Plan.
4.11. Distributions in Cash. All distributions of Deferred Compensation
Accounts shall be paid in United States dollars.
V. CLAIM FOR BENEFITS PROCEDURE
5.01 Claim for Benefits. Any claim for benefits under the Plan shall be
made in writing to the Committee. If such claim for benefits is
wholly or partially denied by the Committee, the Committee shall,
within a reasonable period of time, but not later than sixty (60)
days after receipt of the claim, notify the claimant of the denial
of the claim. Such notice of denial shall be in writing and shall
contain:
a) The specific reason or reasons for the denial of the claim;
b) A reference to the relevant Plan provisions upon which the
denial is based;
c) A description of any additional material or information
necessary for the claimant to perfect the claim, together with
an explanation of why such material or information is necessary;
and
d) An explanation of the Plan's claim review procedure.
5.02 Request for Review of a Denial of a Claim for Benefits. Upon the
receipt by the claimant of written notice of the denial of a claim,
the claimant may within ninety (90) days file a written request to
the Committee, requesting a review of the denial of the claim, which
review shall include a hearing if deemed necessary by the Committee.
In connection with the claimant's appeal of the denial of his/her
claim, he/she may review relevant documents and may submit issues
and comments in writing. To provide for fair review and a full
record, the claimant must submit in writing all facts, reasons and
arguments in support of his/her position within the time allowed for
filing a written request for review. All issues and matters not
raised for review will be deemed waived by the claimant.
5.03 Decision Upon Review of a Denial of a Claim for Benefits. The
Committee shall render a decision on the claim review promptly, but
no more than sixty (60) days after the receipt of the claimant's
request for review, unless special circumstances (such as the need
to hold a hearing) require an extension of time, in which case the
sixty (60) day period shall be extended to one hundred-twenty (120)
days. Such decision shall:
a) Include specific reasons for the decision;
b) Be written in a manner calculated to be understood by the
claimant; and
c) Contain specific references to the relevant Plan provisions upon
which the decision is based.
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The decision of the Committee shall be final and binding in all
respects on the Company, the claimant and any other person claiming an
interest in the Plan through or on behalf of the claimant. No
litigation may be commenced by or on behalf of a claimant with respect
to this Plan until after the claim and review process described in
this Article V has been exhausted. Judicial review of Committee action
shall be limited to whether the Committee acted in an arbitrary and
capricious manner.
VI. ADMINISTRATION
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6.01 Plan Administrative Committee. The Plan shall be administered by the
Compensation Committee of the Board, except to the extent that action
is required by a committee of non-employee Directors under Rule 16b-3
under the Securities Exchange Act of 1934. The Administrative
Committee may assign duties to an officer or other employees of the
Company, and may delegate such duties as it sees fit. A member of the
Administrative Committee who is also a Participant shall not be
involved in the decisions of the Administrative Committee regarding
any determination of any specific claim for benefit with respect to
himself or herself.
6.02 General Rights, Powers and Duties of Administrative Committee. The
Administrative Committee shall be responsible for the management,
operation and administration of the Plan. In addition to any powers,
rights and duties set forth elsewhere in the Plan, it shall have
complete discretion to exercise the following powers and duties:
a) To adopt such rules and regulations consistent with the
provisions of the Plan as it deems necessary for the proper and
efficient administration of the Plan;
b) To administer the Plan in accordance with its terms and any rules
and regulations it establishes;
c) To maintain records concerning the Plan sufficient to prepare
reports, returns, and other information required by the Plan or
by law;
d) To construe and interpret the Plan, and to resolve all questions
arising under the Plan;
e) To direct the Company to pay benefits under the Plan, and to give
such other directions and instructions as may be necessary for
the proper administration of the Plan;
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f) To employ or retain agents, attorneys, actuaries, accountants or other
persons, who may also be Participants in the Plan or be employed by or
represent the Company, as it deems necessary for the effective
exercise of its duties, and may delegate to such persons any power and
duties, both ministerial and discretionary, as it may deem necessary
and appropriate, and the Committee shall be responsible for the
prudent monitoring of their performance; and
g) To be responsible for the preparation, filing, and disclosure on
behalf of the Plan of such documents and reports as are required by
any applicable federal or state law.
6.03 Information to be Furnished to Committee. The records of the Company shall
be determinative of each Participant's period of service as a Director,
Termination of Service, personal data, and Director Fees. Participants and
their Beneficiaries shall furnish to the Committee such evidence, data or
information, and execute such documents as the Committee requests.
6.04 Responsibility. No member of the Administrative Committee shall be liable
to any person for any action taken or omitted in connection with the
administration of this Plan unless attributable to his/her own fraud or
willful misconduct (or that of the Committee, in which he/she
participated); nor shall the Company be liable to any person for any such
action unless attributable to fraud or willful misconduct on the part of a
Director, officer or employee of the Company. Further, the Company shall
hold harmless and defend any individual in the employment of the Company,
and any Director of the Company who has or exercises any administrative
responsibility with respect to the Plan against any claim, action, or
liability asserted against him/her in connection with any action or failure
to act regarding the Plan, except as and to the extent such liability may
be based upon the individual's own willful misconduct or fraud; provided,
however, that to the extent required by Delaware General Corporation law,
the payment by the Company of such defense-related expenses under this
Section to any such person shall be made prior to the final disposition of
the subject proceeding only upon delivery to the Company of an undertaking,
by or on behalf of such person, to repay all amounts so advanced if it
shall ultimately be determined that such persons is not entitled to this
indemnification. This indemnification shall not duplicate, but may
supplement, any coverage available under any applicable insurance coverage.
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VII. AMENDMENT AND TERMINATION
-------------------------
7.01 Amendment. The Plan may be amended in whole or in part by a written
instrument adopted by the Board of Directors of the Company at any
time. Notice of any material amendment shall be given in writing to
the Administrative Committee and to each Participant, retired
Participant and each Beneficiary of a deceased Participant. No
amendment shall retroactively decrease either the balance of a
Participant's Deferred Compensation Account or a Participant's
interest in his/her Deferred Compensation Account as existing
immediately prior to the later of the effective date or adoption date
of such amendment.
7.02 Company's Right to Terminate. The Company reserves the sole right
to terminate, by action of its Board of Directors, the Plan and/or the
Agreement pertaining to a Participant at any time prior to the
commencement of payment of his/her benefits. In the event of any such
termination, a Participant shall be deemed to have incurred a
Termination of Service, and his/her Deferred Compensation Account
shall be paid in the manner provided in Section 4.03.
7.03 Special Termination. Any other provision of the Plan to the contrary
notwithstanding, the Plan shall terminate:
a) If the Plan is held to be Tax Funded by a federal court, and
appeals from that holding are no longer timely or have been
exhausted. The Company may terminate the Plan if it determines,
based on a legal opinion which is satisfactory to the Company,
that either judicial authority or the opinion of the U.S.
Treasury Department or Internal Revenue Service (as expressed in
proposed or final regulations, advisory opinions or rulings, or
similar administrative announcements) creates a significant risk
that the Plan will be held to be Tax Funded, and failure to
amend or terminate the Plan could subject the Company or the
Participant to material penalties. Upon any such termination, the
Company may:
i. Transfer the rights and obligations of the Participants and
the Company to a new plan established by the Company, which
is not deemed to be Tax Funded, but which is substantially
similar to this Plan, if the Company determines that it is
possible to establish such a Plan;
ii. If the Company, in its sole discretion, determines that it
is not possible to establish the Plan in (a) above, each
Participant shall be paid a lump sum equal to the value of
his/her Deferred Compensation Account;
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iii. Pay a lump sum benefit equal to the value of the Deferred
Compensation Account to a Participant to the extent that a
federal court has held that the interest of the Participant
in the Plan is includable in the gross income of the
Participant for federal income tax purposes prior to actual
payment of Plan benefits.
b) In the event of a Change in Control. Upon such termination, each
Participant shall be deemed to have incurred a Termination of
Service, and the value of his/her Deferred Compensation Account
shall be paid to him in the manner provided in Section 4.03.
A lump sum payment to be made in accordance with this Section shall be
subject to the provisions of Section 4.06.
VIII. MISCELLANEOUS
-------------
8.01 No Implied Rights. Neither the establishment of the Plan nor any
amendment thereof shall be construed as giving any Participant,
Beneficiary, or any other person any legal or equitable right unless
such right shall be specifically provided for in the Plan or conferred
by specific action of the Company in accordance with the terms and
provisions of the Plan. Except as expressly provided in this Plan,
the Company shall not be required or be liable to make any payment
under this Plan.
8.02 No Right to Company Assets. Neither the Participant nor any other
person shall acquire by reason of the Plan any right in or title to
any assets, funds or property of the Company whatsoever, including,
without limiting the generality of the foregoing, any specific funds,
assets or other property which the Company, in its sole discretion,
may set aside in anticipation of a liability hereunder. Any benefits
which become payable hereunder shall be paid from the general assets
of the Company. The Participant and his/her Beneficiary shall have
only a contractual right to the amounts, if any, payable hereunder,
unsecured by any asset of the Company. Nothing contained in the Plan
constitutes a guarantee by the Company that the assets of the Company
shall be sufficient to pay any benefits to any person.
8.03 No Right to Continuing Service. Nothing herein shall constitute a
contract of continuing service or in any manner obligate the Company
to continue the personal services of the Participant, or obligate the
Participant to continue as a member of the Board of Directors of the
Company, or as a limitation of the right of Company shareholders to
terminate the services of the Participant. Nothing herein shall be
construed as fixing or regulating the Director Fees or other
remuneration payable to the Participant.
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8.04 Offset. If at the time payments or installments of payments are to be
made hereunder, the Participant, retired Participant or Beneficiary is
indebted or obligated to the Company, then the payments remaining to
be made to the Participant, retired Participant or Beneficiary may, at
the discretion of the Company, be reduced by the amount of such
indebtedness or obligation. However, an election by the Company not to
reduce any such payment or payments will not constitute a waiver of
its claim, or prohibit or otherwise impair the Company's right to
offset future payments for such indebtedness or obligation.
8.05 Non-assignability. Neither the Participant nor any other person shall
have any voluntary or involuntary right to commute, sell, assign,
pledge, anticipate, mortgage or otherwise encumber, transfer,
hypothecate, or convey in advance of actual receipt the amounts, if
any, payable hereunder, or any part thereof, which are expressly
declared to be unassignable and non-transferable. No part of the
amounts payable shall be, prior to actual payment, subject to seizure
or sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by the Participant or any other person, or
be transferrable by operation of law in the event of the Participant's
or any other person's bankruptcy or insolvency.
8.06 Gender and Number. Wherever appropriate herein, the masculine may mean
feminine and the singular may mean the plural, or vice versa.
8.07 Notice. Any notice required or permitted to be given under the Plan
shall be sufficient if in writing and hand delivered, or sent by
registered or certified mail, and if given to the Company, delivered
to the principal office of the Company, directed to the attention of
the Administrative Committee. Such notice shall be deemed given as of
the date of delivery, or, if delivery is made by mail, as of the date
shown on the postmark or the receipt for registration or
certification.
8.08 Governing Laws. The Plan shall be construed and administered according
to the laws of the State of Illinois.
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8.09 Deferred Compensation Plan Trust. The Company may establish a Trust
with (an) independent trustee(s), and shall comply with the terms of
the Trust. The Company may transfer to the trustee(s) an amount of
cash, marketable securities, or other property acceptable to the
trustee(s) ("Trust Property") equal in value to all or a portion of
the amount necessary, calculated in accordance with the terms of the
Trust, to pay the Company's obligations under the Plan (the "Funding
Amount"), and may make additional transfers to the trustees as may be
necessary in order to maintain the Funding Amount. Trust Property so
transferred shall be held, managed, and disbursed by the trustee(s) in
accordance with the terms of the Trust. To the extent that Trust
Property shall be used to pay the Company's obligations under the
Plan, such payments shall discharge obligations of the Company;
however, the Company shall continue to be liable for amounts not paid
by the Trust. Trust Property will nevertheless be subject to the
claims of the Company's creditors in the event of bankruptcy or
insolvency of the Company, and the Director's rights under the Plan
and Trust shall at all times be subject to the provisions of Section
8.02.
IN WITNESS WHEREOF, the Company has adopted and restated the Playboy
Enterprises, Inc. Board of Directors' Deferred Compensation Plan originally
effective October 1, 1992, as of January 1, 1998.
PLAYBOY ENTERPRISES, INC.
By: /s/ Robert D. Campbell
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Its: Vice President, Treasurer and
Assistant Secretary
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