<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Preliminary Proxy Statement
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to Rule 14a-11(c) or 14a-12
Playboy Enterprises, Inc.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[PLAYBOY LOGO]
----------------
Notice of Annual Meeting of Stockholders
----------------
May 10, 2000
As a stockholder of Playboy Enterprises, Inc. (the "Company"), you are
notified of and cordially invited to attend the Annual Meeting of Stockholders
of the Company to be held at the Company's New York offices located at 730
Fifth Avenue, New York, New York 10019, on Wednesday, May 10, 2000 at 9:30
a.m., local time, for the following purposes:
1. To elect seven directors for the ensuing year, or until their successors
are elected and qualified;
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
auditors for fiscal year 2000; and
3. To transact any other business that may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 13, 2000 as
the record date for the determination of the holders of Class A Common Stock
entitled to notice of and to vote at the meeting. An alphabetical list of
those stockholders, their addresses and number of shares owned shall be on
display for all purposes germane to the meeting during ordinary business hours
starting at 10:00 a.m on April 28, 2000 and ending at the close of business on
May 9, 2000 in the Company's New York offices. The list shall be available in
the Company's Security Office. The list shall also be on display at the
meeting.
We hope that you will be present at the meeting. If you cannot attend and
you are a holder of Class A Common Stock, please date and sign the enclosed
proxy card and return it at your earliest convenience in the envelope provided
so that your shares will be represented. The envelope requires no postage if
mailed in the United States.
April 14, 2000
By Order of the Board of Directors
[Signature]
Howard Shapiro
Secretary
<PAGE>
PLAYBOY ENTERPRISES, INC.
680 North Lake Shore Drive
Chicago, Illinois 60611
----------------
Proxy Statement
----------------
SOLICITATION OF PROXIES
This Proxy Statement is being mailed by Playboy Enterprises, Inc. (the
"Company") to all holders of Class A Common Stock, par value $0.01 per share
(the "Class A Stock"), and Class B Common Stock, par value $0.01 per share
(the "Class B Stock" and, together with the Class A Stock, the "Common
Stock"), of the Company on or about April 14, 2000 in connection with the
solicitation by the Board of Directors of the Company of proxies to be used at
the annual meeting of stockholders to be held May 10, 2000. Each proxy duly
executed and received prior to the meeting will be voted according to its
terms. At any time before the proxy is voted, it may be revoked either by
giving a later proxy, by written notification to the Secretary of the Company,
or by appearing at the meeting and voting the shares. Under the Company's
Amended and Restated Certificate of Incorporation, the Class B Stock has no
voting rights with respect to the matters to be presented at the annual
meeting.
The solicitation of proxies will be primarily by mail. Proxies may also be
solicited personally and by telephone by officers and full-time employees of
the Company, none of whom will receive any additional compensation for this
activity. The expenses of solicitation will be borne by the Company. These
expenses may also include ordinary charges and expenses of brokerage houses
and other fiduciaries for forwarding documents to beneficial owners.
Only stockholders of record as of the close of business on March 13, 2000
will be entitled to vote at the meeting or any adjournment of the meeting. As
of that date, the Company had outstanding 4,859,102 shares of Class A Stock,
having one vote per share and constituting the Company's only class of voting
securities.
1
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS
As of February 29, 2000, the only party known to the Company to be the
beneficial owner of 5% or more of the Company's voting securities was:
<TABLE>
<CAPTION>
Number of Shares Percent
Name and Address of Class A Stock of Class
- ---------------- ---------------- --------
<S> <C> <C>
Hugh M. Hefner, Trustee
The Hugh M. Hefner 1991 Trust(l)
9242 Beverly Boulevard
Beverly Hills, CA 90210............................... 3,381,836 69.60%
</TABLE>
- --------
(1) Mr. Hefner, founder of the Company and Editor-in-Chief, owns these shares
through The Hugh M. Hefner 1991 Trust. Mr. Hefner has sole investment and
voting power over these shares of Class A Stock.
Mr. Hefner intends to vote his shares in accordance with the
recommendations made in this Proxy Statement by the Board of Directors.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the meeting, seven directors will be elected to serve until the next
ensuing annual meeting of stockholders or until their respective successors
are duly elected and qualified. The Company's bylaws allow for the election of
not fewer than five and not more than ten directors and, within this
limitation, allow the number of directors to be fixed by the Board of
Directors of the Company (the "Board") from time to time. The Board is
currently comprised of seven directors. The affirmative vote of the holders of
a majority of the Class A Stock represented in person or by proxy is required
to elect each of the nominees. Each nominee is currently a director of the
Company. If, for any reason, any nominee is not a candidate at the time of
election (which is not expected to occur), it is intended that the proxies
will be voted for the election of the other nominees named and may be voted
for any substituted nominees. Proxies may not be voted for more than seven
persons.
THE BOARD RECOMMENDS THAT HOLDERS OF THE COMPANY'S CLASS A STOCK VOTE "FOR"
EACH OF THE NOMINEES LISTED BELOW.
The following information is provided with respect to each of the nominees
for director:
CHRISTIE HEFNER
Director since 1979
Age 47
Ms. Hefner was appointed Chairman of the Board and Chief Executive Officer
of the Company in November 1988. From September 1986 to November 1988, she was
Vice Chairman of the Board, President and Chief Operating Officer. From
February 1984 to September 1986, she was President and Chief Operating
Officer; she had been President since April 1982. From January 1978 to April
1982, she was a Corporate Vice President. She joined the Company in 1975 as
Special Assistant to the Chairman of the Board. In addition, Ms. Hefner is a
member of the Board of Directors of Telocity. Ms. Hefner is the daughter of
Hugh M. Hefner, Editor-in-Chief.
DENNIS S. BOOKSHESTER
Director since 1990
Age 61
Mr. Bookshester is currently the acting Chief Executive Officer of Fruit of
the Loom, Inc., a company principally engaged in the production of basic
apparel for consumers ranging from infants to senior citizens, and has been
Chairman of the Board of Cutanix Corporation, a company principally engaged in
scientific skin
2
<PAGE>
research, since November 1997. Prior to his current positions, Mr. Bookshester
was an independent business consultant. From December 1990 to May 1991, he
served as Chief Executive Officer of Zale Corporation, a company principally
involved in the retail sale of jewelry. Mr. Bookshester was Corporate Vice
Chairman, Chairman and Chief Executive Officer of the Retail Group of Carson
Pirie Scott & Co., positions he held from 1984 to 1989. In addition, Mr.
Bookshester is a member of the Board of Directors of Fruit of the Loom, Inc.
and Elder Beerman Stores Corp. Mr. Bookshester is on the Visiting Committee of
the University of Chicago Graduate School of Business. Mr. Bookshester is
Chairman of the Audit Committee of the Board and is a member of the
Compensation Committee of the Board.
DAVID I. CHEMEROW
Director since 1996
Age 48
Mr. Chemerow has been President and Chief Operating Officer of SOLDOUT.com,
Inc. since September 1999. SOLDOUT.com, Inc. is a premium event and
entertainment resource, specializing in sold out and hard-to-obtain tickets
and personalized entertainment packages for sports, theater, cultural and
other events. Prior to his current position, Mr. Chemerow was President and
Chief Operating Officer of GT Interactive Software Corp., a company
principally engaged in publishing computer games, since April 1998; he was
Executive Vice President and Chief Operating Officer from May 1997 to April
1998. Prior to that, he was Executive Vice President and Chief Financial
Officer of ENTEX Information Services, Inc., from April 1996. Prior to joining
ENTEX, he was Executive Vice President, Finance and Operations, and Chief
Financial Officer of the Company from 1990. From 1988 to 1990, he served as
President of Beechwood Capital Corporation, an investment company involved in
acquiring and operating businesses. Mr. Chemerow is also a member of the Board
of Directors of Dunham's Athleisure Corporation. Mr. Chemerow is a member of
the Audit Committee of the Board.
DONALD G. DRAPKIN
Director since 1997
Age 52
Mr. Drapkin has been a Director and Vice Chairman of MacAndrews & Forbes
Holdings Inc. and various of its affiliates since 1987. Prior to joining
MacAndrews & Forbes, Mr. Drapkin was a partner in the law firm of Skadden,
Arps, Slate, Meagher & Flom in New York from 1977 to 1987. Mr. Drapkin also is
a member of the Board of Directors of Algos Pharmaceutical Corporation,
Anthracite Capital, Inc., BlackRock Asset Investors, The Molson Companies
Limited, Nexell Therapeutics Inc., Playboy.com, Inc., Revlon Consumer Products
Corporation, Revlon, Inc., Wedcom, Inc. and Weider Nutrition International,
Inc. Mr. Drapkin is a member of the Compensation Committee of the Board.
SOL ROSENTHAL
Director since 1985
Age 65
Mr. Rosenthal has been Of Counsel to the Los Angeles law firm of Blanc
Williams Johnston & Kronstadt, L.L.P. since May 1996. Prior to that, he was a
senior partner in the law firm of Buchalter, Nemer, Fields & Younger from 1974
through April 1996. He has served as an Arbitrator in entertainment industry
disputes since 1977 and as the Writers Guild-Association of Talent Agents
Negotiator since 1978. Mr. Rosenthal is a former member of the Board of
Governors, Academy of Television Arts & Sciences, on which he served from 1990
to 1992; he is a former President of the Beverly Hills Bar Association and a
former President of the Los Angeles Copyright Society. Mr. Rosenthal is
Chairman of the Compensation Committee of the Board.
RICHARD S. ROSENZWEIG
Director since 1973
Age 64
Mr. Rosenzweig has been Executive Vice President of the Company since
November 1988. From May 1982 to November 1988, he was Executive Vice
President, Office of the Chairman, and from July 1980 to May 1982,
3
<PAGE>
he was Executive Vice President, Corporate Affairs. Before that, from January
1977 to June 1980, he had been Executive Vice President, West Coast
Operations. His other positions with the Company have included Executive Vice
President, Publications Group, and Associate Publisher, Playboy magazine. He
has been with the Company since 1958.
SIR BRIAN WOLFSON
Director since 1996
Age 64
Sir Brian Wolfson served as Chairman of Global Health Alternatives Inc., a
company principally involved in health products, from October 1995 to February
1998. From January 1986 to June 1995, he served as Chairman of Wembley plc, a
company engaged in the sports and entertainment industry. From 1967 to 1970,
he served as joint managing director of Granada Group. He is currently
Chairman of the Board of Directors of Fruit of the Loom, Inc. and Kepner-
Tregoe Inc., a member of the Board of Directors of Autotote Inc., and a
Governor of the Joseph H. Lauder Institute of the University of Pennsylvania.
Sir Brian Wolfson is a member of the Audit Committee of the Board.
COMMITTEES AND COMPENSATION
The Company has a standing Audit Committee of the Board currently comprised
of Messrs. Bookshester (who is the Chairman) and Chemerow and Sir Brian
Wolfson. The principal functions of the Audit Committee are to consider and
recommend the selection of independent public accountants to audit the
Company's financial statements, to review the Company's internal accounting
policies and controls, to review with the independent accountants the scope of
their audit and their recommendations and comments with respect to internal
controls and accounting systems, and to reinforce the independence of the
independent accountants. During fiscal year 1999, the Audit Committee held
four meetings.
The Company has a standing Compensation Committee of the Board currently
comprised of Messrs. Rosenthal (who is the Chairman), Bookshester and Drapkin.
The functions of the Compensation Committee include approving compensation,
salary or termination arrangements and all proposed contracts and transactions
with employees whose salaries and bonuses are more than $250,000 and less than
$400,000 per year (except employees who are corporate officers). The
Compensation Committee is also responsible for reviewing and making
recommendations to the Board concerning employee benefit programs,
compensation, salary or termination arrangements and all proposed contracts
and transactions with any employee (including Mr. Hefner) whose salary and
bonus equals or exceeds $400,000 per year, and those individuals mentioned as
exceptions immediately above in regard to the approval authority of the
Compensation Committee. The Compensation Committee administers the 1995 Stock
Incentive Plan, as amended and restated (the "1995 Plan"), for the Company's
key employees and has the authority to determine which employees are "key
employees" and thereby eligible to participate in the 1995 Plan. The
Compensation Committee also administers the Company's Employee Stock Purchase
Plan, as amended (the "Purchase Plan"). During fiscal year 1999, the
Compensation Committee held six meetings.
The Company does not have a standing Nominating Committee of the Board.
From time to time, the Board creates other committees to address Company
matters.
During fiscal year 1999, the Board held eight meetings. Every member of the
Board attended 75% or more of the aggregate of the total number of all
meetings held during the fiscal year by the Board and the committees on which
that member served during that period.
Non-employee directors receive an annual fee of $25,000 prorated from the
effective date of their election and earned quarterly. They can elect to
receive this annual fee in cash and/or in Class B Stock. An additional fee of
$1,000 worth of Class B Stock is earned for each in-person Board meeting
attended by a non-employee
4
<PAGE>
director. Accordingly, for fiscal year 1999, Messrs. Bookshester, Chemerow,
Drapkin and Rosenthal and Sir Brian Wolfson earned compensation of $31,000,
$30,000, $30,000, $31,000 and $31,000, respectively. Since October 1992, non-
employee directors have also been eligible to participate in the Company's
Deferred Compensation Plan for non-employee directors, under which they may
elect to defer portions of their annual fees and per-meeting payments. All
amounts deferred and interest credited are 100% vested immediately and are
general unsecured obligations of the Company.
Each non-employee director is also a participant in the Playboy
Enterprises, Inc. 1991 Non-Qualified Stock Option Plan for Non-Employee
Directors (the "1991 Plan"). Under the 1991 Plan, each director is granted a
non-qualified stock option to purchase shares of Class B Stock. An aggregate
of 80,000 shares of Class B Stock were available for grant under the 1991
Plan. Each option is exercisable in four equal annual installments, beginning
on the first anniversary of the date that options were initially granted,
unless accelerated under certain circumstances set forth in the 1991 Plan. All
installments are cumulative and may be exercised in whole or in part. Options
granted under the 1991 Plan generally expire 10 years after the date of grant,
though they may expire earlier. Shares issued upon the exercise of options
granted under the 1991 Plan may be either treasury shares or newly issued
shares.
EXECUTIVE OFFICERS
The following information is provided with respect to the executive
officers of the Company, other than Ms. Hefner and Mr. Rosenzweig for whom the
information is provided above under the caption "ELECTION OF DIRECTORS".
LINDA G. HAVARD
Executive Vice President, Finance and Operations, and Chief Financial Officer
Age 45
Ms. Havard was appointed to her present position in May 1997. From August
1982 to May 1997, she held various financial and management positions at
Atlantic Richfield Company ("ARCO"). From October 1996 to May 1997, Ms. Havard
served as ARCO's Senior Vice President in the Global Energy Ventures division.
She also served as ARCO's Vice President of Corporate Planning from January
1994 to December 1996. Her other positions with ARCO included Vice President,
Finance, Planning and Control, ARCO Transportation Co. and President, ARCO
Pipe Line Co.
HUGH M. HEFNER
Editor-in-Chief
Age 74
Mr. Hefner founded the Company in 1953. He was appointed to his present
position in November 1988. From October 1976 to November 1988, Mr. Hefner
served as Chairman of the Board and Chief Executive Officer, and before that
he served as Chairman, President and Chief Executive Officer. Mr. Hefner is
the father of Christie Hefner, Chairman of the Board and Chief Executive
Officer.
HELEN ISAACSON
Senior Vice President and President, Product Marketing Group
Age 53
Ms. Isaacson was appointed to her present position in October 1997. From
January 1997 to October 1997, she served as Executive Vice President of
worldwide licensing at the Marvel Comics Group, an entertainment company. From
November 1991 to December 1996, Ms. Isaacson served as Senior Vice President
of international licensing and merchandising at Turner Home Entertainment, a
wholly-owned subsidiary of Time Warner, Inc.
5
<PAGE>
MARTHA O. LINDEMAN
Senior Vice President, Corporate Communications and Investor Relations
Age 49
Ms. Lindeman was appointed to her present position in September 1998. From
1992 to 1998, she served as Vice President, Corporate Communications and
Investor Relations. From 1986 to 1992, she served as Manager of Communications
at the Tribune Company, a leading information and entertainment company.
ANTHONY J. LYNN
Executive Vice President and President, Entertainment Group
Age 47
Mr. Lynn was appointed to his present position in June 1992. From 1991 to
1992, he served as President of international television distribution and
worldwide pay television at MGM-Pathe Communications Co., where he was
Executive Vice President from 1987 to 1991. During 1987, he served as
President of Cable, Pay T.V. and Home Video at Coca Cola Telecommunications,
Inc.
ALEX MIRONOVICH
Executive Vice President and President, Publishing Group
Age 47
Mr. Mironovich was appointed to his present position in February 1999. From
1998 to 1999, he was employed at Meredith Corporation where he served as Group
Publisher. From 1993 to 1998, he served as Associate Publisher and then
Publisher of Better Homes and Gardens.
GARRY W. SAUNDERS
Executive Vice President and President, Casino Gaming Group
Age 48
Mr. Saunders was appointed to his present position in March 1998 after
serving as an independent consultant to the Company from October 1997. From
July 1995 to July 1997, he served as Executive Vice President and Director of
Gaming Operations at ITT Caesars World, a casino resort corporation. From
February 1994 to July 1995, he served as Executive Vice President and Director
of Gaming Operations of ITT Sheraton, a hotel and casino company. From 1987 to
1993, he served as Executive Vice President of the Sands Hotel and Casino in
Atlantic City.
HOWARD SHAPIRO
Executive Vice President, Law and Administration, General Counsel and
Secretary
Age 52
Mr. Shapiro was appointed to his present position in May 1996. From
September 1989 to May 1996, he served as Executive Vice President, Law and
Administration, and General Counsel. From May 1985 to September 1989, Mr.
Shapiro served as Senior Vice President, Law and Administration, and General
Counsel. From July 1984 to May 1985, he served as Senior Vice President and
General Counsel. From September 1983 to July 1984, he served as Vice President
and General Counsel. From May 1981 to September 1983, he served as Corporate
Counsel. From June 1978 to May 1981, he served as Division Counsel. From
November 1973 to June 1978, he served as Staff Counsel.
6
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of February 29, 2000, the number and
percentage of shares of Common Stock beneficially owned by each Director, by
each Executive Officer named in the Summary Compensation Table on page 11 and
by all Directors and Executive Officers as a Group. As used in this Proxy
Statement, "beneficially owned" means the sole or shared power to vote or
direct the voting of a security and/or the sole or shared power to dispose or
direct the disposition of a security.
<TABLE>
<CAPTION>
Name of Director or
Named Executive Shares of Percent of Shares of Percent of
Officer(1) Class A Stock(2) Class A Stock Class B Stock(2) Class B Stock
- ------------------- ---------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
Dennis S.
Bookshester(3)(4)...... 3,000 * 26,563 *
David I. Chemerow(3)(4). 800 * 42,200 *
Donald G. Drapkin(3)(4). 0 * 10,000 *
Christie Hefner(3)(4)... 72,274 1.49 704,178 3.56
Hugh M. Hefner.......... 3,381,836 69.60 5,965,508 30.82
Anthony J. Lynn(3)(4)... 600 * 224,899 1.15
Alex Mironovich(3)(4)... 0 * 25,000 *
Sol Rosenthal(3)(4)..... 252 * 26,220 *
Richard S.
Rosenzweig(3)(4)....... 365 * 85,047 *
Garry W. Saunders(3)(4). 0 * 60,000 *
Sir Brian Wolfson(3)(4). 2,500 * 15,592 *
All Directors and
Executive Officers as a
Group (16
persons)(3)(4)......... 3,461,692 71.17 7,463,733 36.62
</TABLE>
- --------
* Less than 1% of the total shares outstanding.
(1) For fiscal year 1999, in addition to Ms. Hefner, Mr. Hefner, Mr. Lynn, Mr.
Mironovich and Mr. Saunders, the Company's executive officers were: Linda
G. Havard, Helen Isaacson, Herbert M. Laney (who terminated his employment
in March 2000), Martha O. Lindeman, Richard S. Rosenzweig and Howard
Shapiro.
(2) In each case, beneficial ownership consists of sole voting and investment
power, with the exception of Mr. Rosenthal, who owns two shares of Class A
Stock and six shares of Class B Stock as custodian for his son. Mr.
Rosenthal disclaims beneficial ownership of these shares. As of February
29, 2000, all Directors and Executive Officers as a Group shared voting
and investment power over 52 shares of Class A Stock and 169 shares of
Class B Stock.
(3) Includes the following shares of Common Stock which are subject to
installments of stock option grants made under the Company's 1989 Stock
Option Plan (the "1989 Plan"), the 1995 Plan and the 1991 Plan, which were
either exercisable on February 29, 2000, or are exercisable within 60 days
of February 29, 2000.
<TABLE>
<CAPTION>
Director or Named Executive Officer Class A Stock Class B Stock
----------------------------------- ------------- -------------
<S> <C> <C>
Dennis S. Bookshester........................... 0 17,500
David I. Chemerow............................... 0 7,500
Donald G. Drapkin............................... 0 5,000
Christie Hefner................................. 5,000 392,415
Anthony J. Lynn................................. 0 191,250
Alex Mironovich................................. 0 10,000
Sol Rosenthal................................... 0 17,500
Richard S. Rosenzweig........................... 0 27,500
Garry W. Saunders............................... 0 26,250
Sir Brian Wolfson............................... 0 10,000
All Directors and Executive Officers as a Group
(15 persons)................................... 5,000 844,915
</TABLE>
7
<PAGE>
(4) Includes the following shares of Class B Stock which are subject to the
vesting of restricted stock awards made under the 1995 Plan and the 1997
Equity Plan for Non-Employee Directors of Playboy Enterprises, Inc., as
amended.
<TABLE>
<CAPTION>
Director or Named Executive Officer Initial Grant Unvested Portion
----------------------------------- ------------- ----------------
<S> <C> <C>
Dennis S. Bookshester........................ 5,000 5,000
David I. Chemerow............................ 5,000 5,000
Donald G. Drapkin............................ 5,000 5,000
Christie Hefner.............................. 75,000 37,500
Anthony J. Lynn.............................. 26,250 13,124
Alex Mironovich.............................. 15,000 15,000
Sol Rosenthal................................ 5,000 5,000
Richard S. Rosenzweig........................ 20,000 10,000
Garry W. Saunders............................ 15,000 15,000
Sir Brian Wolfson............................ 5,000 5,000
All Directors and Executive Officers as a
Group (15 persons).......................... 273,750 179,374
</TABLE>
8
<PAGE>
EXECUTIVE COMPENSATION
The following tables set forth information regarding the compensation
received by the Company's Chief Executive Officer and the other four most
highly compensated executive officers, determined by reference to fiscal year
1999 (the "Named Executive Officers"). The first table ("Compensation Earned
During and With Respect to Fiscal Years and Transition Period") reflects
salary and bonus, as well as the value of restricted stock awards and stock
options granted in prior years but which vested with respect to or through the
indicated fiscal years and transition period. The second, third and fourth
tables ("Summary Compensation Table," "Option Grants in Last Fiscal Year" and
"Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values")
are in the format dictated by the applicable rules of the Securities and
Exchange Commission ("SEC"). The Summary Compensation Table reflects salary,
bonus and other compensation earned in the designated fiscal years and
transition period as well as stock options and restricted stock awards granted
(without regard to vesting) in those fiscal years and transition period. The
Option Grants in Last Fiscal Year table explains in more detail the terms and
hypothetical values of stock options granted to the Named Executive Officers
during fiscal year 1999. The Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values table reflects certain information regarding
exercised stock options and vested and unvested stock options held as of
December 31, 1999 and the value of those options as of that date.
COMPENSATION EARNED DURING AND WITH RESPECT TO
FISCAL YEARS AND TRANSITION PERIOD
<TABLE>
<CAPTION>
Annual Compensation Vesting of Long-Term Compensation
------------------- ------------------------------------------------------
Value of Estimated Fiscal Year- Fiscal Year-
Vested Tax Liability End Value of End Value of
Class B with Respect Class A Stock Class B Stock
Restricted to Vesting Underlying Underlying
Name and Stock of Restricted Exercisable Exercisable
Principal Position Year (1) Salary Bonus Awards Stock Options(2)(3) Options(2)(3)
- ------------------ -------- -------- ---------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Christie Hefner......... 1999 $550,000 $ 110,042 $ 65,625 $2,426,797
Chairman of the Board 1998 499,989 198,197 680,625 3,187,538
and
Chief Executive Officer 1997.5 249,990 391,875 1,706,849
1997 499,980 178,781 $217,969(5) $70,731(5) 261,250 855,546
Anthony J. Lynn......... 1999 550,000 1,775,629 2,976,641
Executive Vice 1998 524,996 1,190,750 2,356,484
President and
President, 1997.5 262,496 340,800 1,295,415
Entertainment
Group 1997 524,992 757,700 76,295(5) 27,047(5) 582,561
Hugh M. Hefner.......... 1999 750,000 60,023
Editor-in-Chief 1998 749,998 118,918
1997.5 374,995
1997 419,978 106,792
Alex Mironovich(4)...... 1999 361,539 156,000
Executive Vice
President and
President, Publishing
Group
Garry W. Saunders(4).... 1999 410,000
Executive Vice 1998 330,765
President and
President, Casino
Gaming Group
</TABLE>
- --------
(1) The transition period for the six months ending December 31, 1997 is
identified as 1997.5 for purposes of this table and included 13 pay
periods.
(2) Value of stock options under the 1989 Plan and the 1995 Plan that were
exercisable as of the respective year-end and transition period-end are
based on the difference between the closing price of Class A Stock or
Class B Stock, as applicable, on December 31 of fiscal years 1999 and 1998
and of the transition period and on June 30 of fiscal year 1997, and the
exercise price of the option. The closing price of the Class A Stock was
$20 1/2 on December 31, 1999, $19 1/8 at December 31, 1998, $13 7/8 at
December 31, 1997 and
9
<PAGE>
$11 1/2 at June 30, 1997. The closing price of the Class B Stock was $24
5/16 on December 31, 1999, $20 15/16 at December 31, 1998, $15 11/16 at
December 31, 1997 and $11 9/16 at June 30, 1997.
(3) The period-to-period increase or decrease in value of stock underlying
exercisable options is a function of both fluctuations in the market price
of Class A Stock and Class B Stock underlying options and the vesting or
exercise of options. The following tables reflect, for period-to-period
fluctuations in the value of Class A Stock and Class B Stock underlying
options, the amount of the fluctuation attributable to appreciation or
depreciation in the market value of the stock and the amount of any
increase or decrease attributable to the vesting of additional options or
exercise of options.
Class A Stock
<TABLE>
<CAPTION>
1998 to 1999 Decrease in Value 1997.5 to 1998 Increase in Value 1997 to 1997.5 Increase in Value
---------------------------------- -------------------------------- --------------------------------
Depreciation Exercise Appreciation Vesting Appreciation Vesting
Name of Stock of Options Total of Stock of Options Total of Stock of Options Total
- ---- ------------ ---------- --------- ------------ ---------- -------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ms. Hefner......... $(50,937) $(564,063) $(615,000) $288,750 $ 0 $288,750 $130,625 $ 0 $130,625
</TABLE>
Class B Stock
<TABLE>
<CAPTION>
1998 to 1999 1997.5 to 1998 Increase in 1997 to 1997.5
Increase (Decrease) in Value Value Increase in Value
---------------------------------------- ------------------------------ -------------------------
Appre- Vesting Appre- Vesting Appre- Vesting
ciation Exercise of of ciation of of ciation of
Name of Stock Options Options Total Stock Options Total of Stock Options Total
- ---- -------- ----------- -------- --------- ---------- -------- ---------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ms. Hefner.......... $629,532 $(2,273,438) $883,165 $(760,741) $1,348,627 $132,062 $1,480,689 $835,313 $15,990 $851,303
Mr. Lynn............ 620,157 0 0 620,157 964,687 96,382 1,061,069 712,854 0 712,854
Mr. Saunders........ 79,036 (285,286) 206,250 0
</TABLE>
--------
(4) Mr. Mironovich and Mr. Saunders joined the Company in February 1999 and
March 1998, respectively. Accordingly, compensation information is not
provided for periods prior to their employment with the Company.
(5) Values of vested restricted stock awards are based on the closing price of
Class B Stock on August 7, 1997, the date on which restrictions lapsed
with respect to 25% of the shares because the Company's annual operating
income for fiscal year 1997 exceeded $10.0 million. As a result of that
vesting, each of the indicated Named Executive Officers became liable for
payment of taxes owed on the value of those vested shares. The Company did
not withhold shares of restricted stock to satisfy, or otherwise fund, the
tax obligations related to vesting.
10
<PAGE>
SUMMARY COMPENSATION TABLE
The following table reflects salary, bonus and other compensation earned in
the last three fiscal years and the six-month transition period ended December
31, 1997, as well as stock options and restricted stock awards granted
(without regard to vesting) in those fiscal years and that transition period.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
------------------- ---------------------
Securities
Class B Underlying All
Restricted Options Other
Name and Principal Stock Class B Compen-
Position Year(1) Salary Bonus Awards(2) Stock sation
- ------------------ ------- -------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Christie Hefner......... 1999 $550,000 $ 110,042 650,000(4) $30,151(9)
Chairman of the Board
and 1998 499,989 198,197 19,587
Chief Executive Officer 1997.5 249,990 3,709
1997 499,980 178,781 75,000(5) 11,007
Anthony J. Lynn......... 1999 550,000 1,775,629 15,000(6) 64,891(9)
Executive Vice
President 1998 524,996 1,190,750 7,688
and President,
Entertainment Group 1997.5 262,496 340,800 2,834
1997 524,992 757,700 11,315
Hugh M. Hefner.......... 1999 750,000 60,023 9,564(9)
Editor-in-Chief 1998 749,998 118,918 7,688
1997.5 374,995 2,389
1997 419,978 106,792 11,057
Alex Mironovich(3)...... 1999 361,539 156,000 $339,375 25,000(7) 12,654(9)
Executive Vice
President and
President, Publishing
Group
Garry W. Saunders(3).... 1999 410,000 15,000(6) 18,314(9)
Executive Vice
President and 1998 330,765 240,000 75,000(8) 96,987
President, Casino
Gaming Group
</TABLE>
- --------
(1) The transition period for the six months ending December 31, 1997 is
identified as 1997.5 for purposes of this table and included 13 pay
periods.
(2) Values of restricted stock awards under the 1995 Plan shown in the Summary
Compensation Table are based on the closing price of Class B Stock on the
date of grant. As of December 31, 1999, Ms. Hefner held 37,500 shares of
restricted Class B Stock, which were valued at $911,719, and Mr. Lynn held
13,124 shares of restricted Class B Stock, which were valued at $319,077.
The restrictions on the stock awards granted to Ms. Hefner and Mr. Lynn
lapse in increments of 25% of the shares at the end of any fiscal year
during which annual operating income first equals or exceeds $15 million
and $20 million, in each case after deducting expenses related to the
vesting of restricted shares at that income level. As of December 31,
1999, Mr. Mironovich and Mr. Saunders each held 15,000 shares of
restricted Class B Stock, which were valued at $364,688. The restrictions
on the stock awards granted to Mr. Mironovich and Mr. Saunders lapse in
increments of 17% and 83% of the shares at the end of any fiscal year
during which annual operating income first equals or exceeds $15 million
and $20 million, respectively, in each case after deducting expenses
related to the vesting of restricted shares at that income level. Mr.
Hefner does not hold any shares of restricted Class B Stock. Dividends are
not paid on restricted Class B Stock.
(3) Mr. Mironovich and Mr. Saunders joined the Company in February 1999 and
March 1998, respectively. Accordingly, compensation information is not
provided for periods prior to their employment with the Company.
(4) Represents a non-qualified stock option granted in fiscal year 1999 under
the 1995 Plan with differing exercise prices, ranging from $21.00 to
$31.50 (100% to 150% of fair market value on the date of grant). The
option expires on January 19, 2009. Of the 650,000 options granted,
170,000 were immediately exercisable. The remaining 480,000 options will
become exercisable in 25% increments annually, beginning January 19, 2000.
11
<PAGE>
(5) Represents two stock options granted in fiscal year 1997 under the 1995
Plan. The first option is an incentive stock option for 6,779 shares of
Class B Stock, with an exercise price of $16.225 (110% of fair market
value on the date of grant), and an expiration date of July 1, 2001. The
second option is a non-qualified stock option for 68,221 shares of Class B
Stock, with an exercise price of $14.75 (100% of fair market value on the
date of grant), and an expiration date of July 1, 2006. Both options are
exercisable in equal annual increments over a four-year period beginning
July 1, 1997.
(6) Represents a non-qualified stock option granted in fiscal year 1999 under
the 1995 Plan. The option has an exercise price of $21.00 (100% of fair
market value on the date of grant), an expiration date of January 19,
2009, and is exercisable in equal annual increments over a two-year period
beginning January 19, 2000.
(7) Represents two stock options granted in fiscal year 1999 under the 1995
Plan. The first option is an incentive option for 10,000 shares of Class B
Stock, with an exercise price of $22.625 (100% of fair market value on the
date of grant), an expiration date of February 1, 2009, and is exercisable
in equal annual increments over a four-year period beginning February 1,
2000. The second option is a non-qualified stock option for 15,000 shares
of Class B Stock, with an exercise price of $22.625 (100% of fair market
value on the date of grant), an expiration date of February 1, 2009, and
is exercisable in equal annual increments over a two-year period beginning
February 1, 2000.
(8) Represents an incentive stock option granted in fiscal year 1998 under the
1995 Plan. The option has an exercise price of $16.00 (100% of the fair
market value on the date of grant), an expiration date of March 2, 2008,
and is exercisable in equal annual increments over a four-year period
beginning March 2, 1999.
(9) The amounts disclosed include:
(a) Company profit-sharing contributions of $3,964 on behalf of Ms. Hefner,
Mr. Lynn, Mr. Hefner and Mr. Saunders in fiscal year 1999 under the
Company's Employees Investment Savings Plan.
(b) Company 401(k) matching contributions of $5,600 on behalf of Ms.
Hefner, Mr. Lynn, Mr. Hefner and Mr. Saunders in fiscal year 1999 under
the Company's Employees Investment Savings Plan.
(c) Company deferred compensation matching contributions of $20,587 on
behalf of Ms. Hefner, $55,327 on behalf of Mr. Lynn, $12,654 on behalf
of Mr. Mironovich and $8,750 on behalf of Mr. Saunders in fiscal year
1999 under the Company's Deferred Compensation Plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
At Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
---------------------------------------------------- --------------------------
Number of Percent of Total
Securities Options Granted
Underlying to Employees Exercise Expiration
Name Options Granted in Fiscal Year Price Date 5% 10%
- ---- --------------- ---------------- -------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Christie Hefner (1)..... 308,000 30.56% $21.00 1/19/09 $ 4,074,840 $ 10,284,120
170,000 16.87 26.25 1/19/09 1,356,600 4,783,800
172,000 17.06 31.50 1/19/09 469,560 3,937,080
Anthony J. Lynn (2)..... 15,000 1.49 21.00 1/19/09 198,450 500,850
Alex Mironovich (3)..... 25,000 2.48 22.625 2/1/09 356,344 899,344
Garry W. Saunders (2)... 15,000 1.49 21.00 1/19/09 198,450 500,850
</TABLE>
- --------
(1) Represents a non-qualified stock option granted in fiscal year 1999 under
the 1995 Plan with differing exercise prices, ranging from $21.00 to
$31.50 (100% to 150% of fair market value on the date of grant). The
option expires on January 19, 2009. Of the 650,000 options granted,
170,000 were immediately exercisable. The remaining 480,000 options will
become exercisable in 25% increments annually, beginning January 19, 2000.
(2) Represents a non-qualified stock option granted in fiscal year 1999 under
the 1995 Plan. The option has an exercise price of $21.00 (100% of fair
market value on the date of grant), an expiration date of January 19,
2009, and is exercisable in equal annual increments over a two-year period
beginning January 19, 2000.
12
<PAGE>
(3) Represents two stock options granted in fiscal year 1999 under the 1995
Plan. The first option is an incentive option for 10,000 shares of Class B
Stock, with an exercise price of $22.625 (100% of fair market value on the
date of grant), an expiration date of February 1, 2009, and is exercisable
in equal annual increments over a four-year period beginning February 1,
2000. The second option is a non-qualified stock option for 15,000 shares
of Class B Stock, with an exercise price of $22.625 (100% of fair market
value on the date of grant), an expiration date of February 1, 2009, and is
exercisable in equal increments over a two-year period beginning February
1, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying
Unexercised Options at Fiscal Value of Unexercised in-the-Money
Year-End Options at Fiscal Year-End(1)
Shares Acquired ----------------------------------- ----------------------------------
on Exercise Value Realized Exercisable Unexercisable(2) Exercisable Unexercisable
--------------- ------------------- --------------- ------------------- ----------------- ----------------
Class A Class B Class A Class B Class A Class B Class A Class B Class A Class B Class A Class B
Stock Stock Stock Stock Stock Stock Stock Stock Stock Stock Stock Stock
------- ------- -------- ---------- ------- ------- -------- ---------- ------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Christie Hefner
Fiscal Year 1990
grant.......... 50,000 150,000 $564,063 $2,273,438
Fiscal Year 1992
grant.......... 5,000 15,000 $65,625 $254,063
Fiscal Year 1995
grant.......... 75,000 1,079,217
Fiscal Year 1997
grant.......... 56,250 18,750 530,392 $176,797
Fiscal Year 1999
grant.......... 170,000 138,000 563,125 457,125
Fiscal Year 1999
grant.......... 342,000 (3)
Anthony J. Lynn
Fiscal Year 1992
grant.......... 140,000 2,213,750
Fiscal Year 1994
grant.......... 43,750 762,891
Fiscal Year 1999
grant.......... 15,000 49,688
Alex Mironovich
Fiscal Year 1999
grant.......... 25,000 42,188
Garry W. Saunders
Fiscal Year 1998
grant.......... 18,750 285,286 56,250 467,578
Fiscal Year 1999
grant.......... 15,000 49,688
</TABLE>
- -------
(1) Based on a closing price for Class A Stock of $20 1/2 per share and for
Class B Stock of $24 5/16 per share on December 31, 1999 as reported in the
New York Stock Exchange Composite Listing.
(2) Shares are unexercisable due to vesting provisions.
(3) Option exercise price exceeded closing price as of December 31, 1999.
13
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
This report by the Compensation Committee and the Performance Graph on page
17 shall not be deemed to be incorporated by reference by any general
statement which incorporates by reference this Proxy Statement into any filing
under the Securities Act of 1933, as amended, or the Securities Exchange Act
of 1934, as amended (the "Acts"), and they shall not otherwise be deemed filed
under the Acts.
The Company's executive compensation programs are administered by the
Compensation Committee of the Board of Directors (the "Committee"). Messrs.
Rosenthal (who is the Chairman), Bookshester and Drapkin served as members of
the Committee during the entire fiscal year 1999. None of these three
directors has ever served as an officer of the Company.
The Company's executive compensation programs are designed to help the
Company achieve its business objectives by:
. setting levels of compensation designed to attract and retain superior
executives in a highly competitive environment;
. providing incentive compensation that varies directly with both Company
financial performance and individual contribution to that performance;
and
. linking compensation to elements which affect short- and long-term share
performance.
Consequently, the Committee considers its primary mission to structure and
administer a range of compensation programs designed to enable the Company to
attract and retain executive talent in a highly competitive marketplace, well-
known for its individually tailored packages. The Committee periodically
evaluates the competitiveness of its executive compensation programs, using
information drawn from a variety of sources, including published survey data,
information supplied by consultants and the Company's own experience in
recruiting and retaining executives. Following are the criteria considered by
the Committee in establishing compensation programs and the factors considered
in determining the compensation of executives.
Base Salary
The base salaries and salary ranges for executives are determined in
relation to competitive market data and level of responsibility and are
subject to periodic review by outside executive compensation consultants.
Salary ranges are reviewed on an annual basis taking into consideration, among
other things, the financial performance of the Company, and are adjusted as
the Committee deems necessary. Executives' salaries are reviewed on an annual
basis, and salary changes are based upon individual performance with
consideration given to each executive's total compensation package and
external market data. While some of the companies in the peer group chosen for
comparison of shareholder returns in the Performance Graph on page 17 may be
included in the surveys and information considered by the Committee in setting
executives' salaries, there is no set peer group against which those salaries
are measured. Instead, the Committee reviews broad-based industry salary data,
which typically exclude financial services and not-for-profit companies, and,
when available, will examine industry-specific data relative to a particular
position. For fiscal year 1999, the Company continued the practice of
restraining base salaries and salary grade ranges. This is consistent with the
Company's current philosophy of focusing less on fixed compensation and more
on variable performance-based compensation in the form of short and long-term
incentives.
Short-Term Incentives
Executives are eligible for annual bonuses under the Company's Executive
Incentive Compensation Program (the "Program"). For fiscal year 1999,
participants could earn 25% to 100% of their respective
January 1, 1999 base salaries. The total bonus amount earned was calculated
based on earnings before interest,
14
<PAGE>
taxes, depreciation and amortization ("EBITDA") and may also be based in part
on group or individual segment profitability and/or cash flows, with a
threshold level of performance required before payments would be made. Under
these compensation arrangements, certain executives, including all Named
Executive Officers except Messrs. Lynn and Saunders, were entitled to payouts
under the Program. For fiscal year 1999, Ms. Hefner, Mr. Hefner, Mr.
Mironovich, Ms. Havard, Ms. Lindeman, Mr. Rosenzweig and Mr. Shapiro will
receive payouts under the Program. Messrs. Lynn and Saunders each have a
special compensation plan and they do not participate in the Program. See
"EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS AND INCENTIVE COMPENSATION
PLANS."
Long-Term Incentives
Long-term incentive awards are provided by the 1995 Plan. The 1995 Plan is
administered by members of the Committee who, subject to the terms of the 1995
Plan, designate "key employees" of the Company to whom options and other
awards may be granted, the number of shares of Class B Stock to be covered by
each option or other stock award, the time or times at which the options may
be exercised, the vesting of awards, and other administrative functions. Thus
far, the Committee has granted incentive stock options, non-qualified stock
options and restricted stock awards under the 1995 Plan. The grants are
designed to further the growth, development and financial success of the
Company by providing additional incentives to key employees and assisting them
to become owners of capital stock of the Company and thus to benefit directly
from its growth, development and financial success. Stock option grants and
restricted stock awards also enable the Company to attract and retain the
services of executives considered essential to the long-range success of the
Company by providing them with a competitive compensation package and an
opportunity to become owners of capital stock of the Company.
Chairman and Chief Executive Officer Compensation
Effective January 1, 2000, Ms. Hefner's annual salary remained $550,000. In
making this decision, the Committee considered, among other things, the
Company's overall financial and operational performance over the last few
fiscal years. The Compensation Committee also reviewed competitive market data
and, consistent with its general approach to salaries, attempted to place Ms.
Hefner's salary slightly above the median of the data reported in relevant
compensation surveys and other information considered by the Committee.
Ms. Hefner's bonus payout of $110,042 was calculated according to the
Program. Ms. Hefner's maximum bonus opportunity was 100% of her base salary.
Her bonus was based on achievement of profitability targets for fiscal year
1999. The Company achieved only some of its targets and, therefore, only a
portion of the maximum bonus will be paid to her.
Deductibility of Compensation
In 1993, changes were made to the federal corporate income tax law to limit
the ability of public companies to deduct compensation in excess of $1 million
paid annually to the five most highly compensated executive officers. There
are exemptions from this limit, including compensation that is based on the
attainment of performance goals that are established by the Committee and
approved by the Company's stockholders and forms of current compensation
provided under a binding contract pre-dating the new tax law. It is the
Committee's policy to seek to qualify executive compensation for deductibility
to the extent that this policy is consistent with the Company's overall
objectives in attracting, motivating and retaining its executives. The
Committee believes that grants of stock options under the 1995 Plan and grants
of restricted stock made to executive officers under the 1995 Plan during
fiscal year 1999 qualify as stockholder-approved performance-based
compensation and,
therefore, will be fully deductible when an option is exercised or the
restricted stock vests. Grants of restricted stock made under the 1995 Plan
prior to fiscal year 1997, however, do not qualify as stockholder-approved
performance-based compensation and, therefore, will not be fully deductible to
the extent that the compensation, when added to other non-exempt compensation
for a particular executive, exceeds the limit in any tax year. The
15
<PAGE>
Committee believes that, based upon current compensation levels, compensation
paid in fiscal year 1999 should be fully deductible.
Submitted by the Compensation Committee:
Sol Rosenthal, Chairman
Dennis S. Bookshester
Donald G. Drapkin
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal year 1999 were Sol
Rosenthal, Dennis S. Bookshester and Donald G. Drapkin, none of whom has
served at any time as an officer or employee of the Company or any of its
subsidiaries.
16
<PAGE>
PERFORMANCE GRAPH
The following graph is a comparison of the yearly percentage change in the
Company's total shareholder return on its Class B Stock, with the cumulative
total return of the Russell 2000 Stock Index and an index of peer companies
selected by the Company consisting of companies engaged in lines of business
similar to its own. In addition to the Company, these companies are: McGraw-
Hill Inc., Meredith Corporation, Time Warner Inc., Tribune Company and The
Walt Disney Company.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG PLAYBOY ENTERPRISES, INC., THE RUSSELL 2000 INDEX
AND A PEER GROUP
Plot Points for Playboy Performance Graph
Playboy Peer Russell
Enterprises Group 2000
----------- ------- -------
12/94 $100.00 $100.00 $100.00
12/95 79.76 122.58 128.44
12/96 92.86 140.16 149.77
12/97 149.40 212.25 183.23
12/98 199.40 265.81 178.09
12/99 231.55 302.99 212.98
- --------
*$100 invested on 12/31/94 in stock or index - including reinvestment of
dividends. Fiscal year ending December 31.
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
AND INCENTIVE COMPENSATION PLANS
To aid the Company in retaining its most senior executives and certain
other officers, the Board approved Change in Control Agreements (the
"Agreements"), which provide for the payment of specified benefits to selected
officers if their employment terminates after a "change in control" (defined
below) of the Company. Christie Hefner, Anthony J. Lynn, Alex Mironovich and
Garry W. Saunders are beneficiaries of this program. Each Agreement provides
that:
. a lump-sum cash payment will be made within 10 days following
termination, equal to 300% of the sum of the officer's annual base
salary in effect immediately prior to the occurrence of the change in
control and the maximum bonus for the officer's position under the
Program established for the then applicable fiscal year;
17
<PAGE>
. the amount of the lump-sum cash payment would be subject to reduction so
that no portion would be subject to the excise tax provision of the
Internal Revenue Code of 1986, as amended (the "Code"), but only if the
officer would obtain a net after-tax benefit from this reduction;
. the officer will be allowed to continue his or her participation in then
existing welfare benefit plans, such as medical insurance, for up to a
year from the effective date of termination;
. the Agreement will have an initial five-year term, automatically
extended on each anniversary of its execution unless the Company or the
officer gives notice that it or the officer does not wish to extend the
Agreement; and
. payments become due and benefits are provided if, within 18 months after
a change in control, the employee is involuntarily terminated for
reasons other than death, disability or "cause" (defined below), or
voluntarily terminates employment for certain reasons.
A "change in control" is defined as (1) any liquidation or dissolution of
the Company; (2) a sale, exchange or other disposition of Playboy magazine;
(3) any occurrence by which The Hugh M. Hefner 1991 Trust and Christie Hefner
(who is deemed to hold shares beneficially owned by the Trust to the extent
Ms. Hefner has sole voting power with respect to those shares) cease,
collectively, to hold at least 50% of the Company's stock entitled to vote
generally in the election of Company directors; and (4) the merger,
consolidation or reorganization of the Company, or sale of all or
substantially all of the Company's assets, unless the transaction is initiated
by the Company and, as a result of the transaction, not less than a majority
of the combined voting power of the securities of the surviving or transferee
corporation is held 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 the transaction.
Under the Agreements, "cause" is defined as conviction of a crime involving
dishonesty, fraud or breach of trust, or willful engagement in conduct
materially injurious to the Company. The Agreements also provide that the
reasons for which the officer may voluntarily terminate employment without
forfeiture of benefits include failure to maintain the officer in the position
held prior to the change in control, removal of the officer from the Board,
assignment to the officer of duties materially inconsistent with the
authorities and responsibilities exercised prior to the change in control, an
aggregate reduction in the officer's cash compensation, a termination or
reduction in scope or value of the officer's employee benefits, a good-faith
determination by the officer that, as a result of a change in circumstances
following a change in control, the officer is unable to carry out the
authorities or responsibilities of the officer's position, or requiring the
officer to perform duties beyond a 50-mile radius from the place of the
officer's employment immediately prior to the change in control, or to travel
at least 50% more than was previously required in any of the three years prior
to the change in control.
Effective June 1, 1992, the Company hired Anthony J. Lynn, under an
employment contract, as President of its Entertainment Group. Mr. Lynn is
charged with the responsibility of managing the Entertainment Group's
television, home video and international operations. Mr. Lynn's employment
contract, as amended, extends through June 30, 2000, unless terminated earlier
under its terms and conditions. Mr. Lynn is to receive "Base Compensation"
ranging from $525,000 (for fiscal year 1998) to a maximum of $550,000 per year
(beginning with fiscal year 1999) during the amended term plus all benefits
otherwise accorded to senior executives of the Company in similar positions
other than the Program. During the term of the contract, management shall also
recommend to the Compensation Committee the grant of further options to Mr.
Lynn should grants be made generally to other members of senior management.
Upon termination of his employment, Mr. Lynn is entitled to receive all or a
portion of his Base Compensation and benefits, depending on the date and
circumstances of termination. If the Company terminates Mr. Lynn without
cause, he is entitled to receive a one-time payment equal to his Base
Compensation in the year in which the termination occurs.
Mr. Lynn may also receive compensation under the Playboy Enterprises, Inc.
Incentive Compensation Plan for Anthony J. Lynn (the "Lynn Plan"), which
provides Mr. Lynn with the opportunity to receive compensation
18
<PAGE>
based on the performance of the Company's Entertainment Group. The Lynn Plan
also provides Mr. Lynn with a cash bonus in the event of certain dispositions
of the equity or assets of the Entertainment Group.
The Lynn Plan entitles Mr. Lynn to receive contingent compensation for each
fiscal year ("Contingent Compensation") equal to 5% of the amount by which the
Entertainment Group's Pre-tax Profits for the fiscal year exceed $2.35
million; provided that, if the sum of his base salary plus that fiscal year's
Contingent Compensation equals $2,000,000, any additional Contingent
Compensation payable to Mr. Lynn for that fiscal year will equal 2.5% of the
amount by which the Entertainment Group's Pre-tax Profits exceed $2.35
million. The Entertainment Group's Pre-tax Profits is defined under the Lynn
Plan as the amount, if any, by which the total net revenues of the
Entertainment Group exceeds all reasonable and applicable operating expenses
attributable to them, in accordance with Generally Accepted Accounting
Principles computed consistent with methods utilized by the Company and the
Company's outside auditors in the preparation of the Company's audited
financial statements. In computing the Pre-tax Profits of the Entertainment
Group for any fiscal year, there shall be allowed all fair and reasonable
allocation of items of revenue and expenses between divisions, subsidiaries
and affiliates of the Company, including, but not limited to, intercompany
sales, expenses such as rent, occupancy, general administrative and personnel
salaries, technology, insurance, employee benefits costs, security, payroll
processing, legal and tax advisory fees, depreciation, profit sharing and
auditing expenses. In addition, the effect of any One Time Gain or Loss
(defined below) accounted for as part of the Entertainment Group shall be
amortized evenly over four years, beginning in the month of occurrence, for
purposes of calculating Pre-tax Profits for any fiscal year, regardless of how
the transaction is accounted for under Generally Accepted Accounting
Principles. A "One Time Gain or Loss" is a gain or loss resulting from a
transaction not in the ordinary course of business and which does not result
in an Equity Bonus (as described below). Profits or losses from any other
fiscal year shall not, except as described above for One Time Gains or Losses,
be carried over or back to any other fiscal year or otherwise be taken into
consideration in computing the Pre-tax Profits of a particular fiscal year.
The Lynn Plan entitles Mr. Lynn to receive Contingent Compensation for fiscal
year 1997, the six-month transition period ended December 31, 1997, fiscal
year 1998, fiscal year 1999 and the first half of fiscal year 2000, and for
each fiscal year after June 30, 2000 unless notice is given by the
Compensation Committee to Mr. Lynn that the provisions of the Lynn Plan
pertaining to Contingent Compensation will not apply to the specified fiscal
year after fiscal year 2000. Mr. Lynn's Contingent Compensation with respect
to fiscal year 1999 was $1,775,629.
If Mr. Lynn's employment is terminated "for cause," Mr. Lynn will receive
all Contingent Compensation payable with respect to all periods prior to the
fiscal year during which the Company notifies Mr. Lynn that his employment is
terminated. If Mr. Lynn's employment is terminated because of Mr. Lynn's death
or disability, he (or his estate or personal representative, as applicable)
will receive all unpaid Contingent Compensation payable with respect to all
periods prior to the fiscal year during which death or disability occurs plus
a prorated percentage of the Contingent Compensation for that fiscal year. If
Mr. Lynn's employment is terminated by the Company without cause, he will
receive 100% of the Contingent Compensation to which Mr. Lynn would have been
entitled for and only for the year in which the termination occurs, reduced by
amounts payable to Mr. Lynn under Mr. Lynn's Change in Control Agreement
(described above).
If the Company directly or indirectly sells, transfers or otherwise
disposes of an equity interest in Playboy Entertainment Group, Inc. ("PEGI")
or all or a portion of the assets comprising the Playboy Entertainment Group
operations (except sales of assets or operations that contributed less than
25% of the Group's total Pre-tax Profits in the immediately preceding fiscal
year or less than a 25% equity interest) to a third party (including a sale to
the public) during Mr. Lynn's employment or within three (3) months following
the termination of Mr. Lynn's employment (an "Equity Disposition
Transaction"), then Mr. Lynn will receive a one-time Equity Bonus equal to the
product of EB Pre-tax Profits times the Remaining Term. "EB Pre-tax Profits"
is defined in the Lynn Plan as (i) in the case of the sale, transfer or other
disposition of an equity interest in PEGI entitling Mr. Lynn to an Equity
Bonus, the total Pre-tax Profits of PEGI for the fiscal year immediately
preceding the Equity Disposition Transaction times the fully-diluted
percentage equity interest in PEGI acquired by the third party, and (ii) in
the case of a sale, transfer or other disposition of all or a portion of the
assets comprising the Entertainment Group entitling Mr. Lynn to an Equity
Bonus, that portion of the Pre-tax Profits of the
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Entertainment Group generated or attributable to the assets for the fiscal
year immediately preceding the Equity Disposition Transaction. "Remaining
Term" is defined in the Lynn Plan as the lesser of (i) three (3) or (ii) the
number arrived at by dividing by 12 the number of full months remaining in Mr.
Lynn's employment term. The payment of the Equity Bonus, if any, will be in
addition to any Contingent Compensation payable to Mr. Lynn under the Lynn
Plan. The Equity Bonus will be payable only in connection with an Equity
Distribution which constitutes a bona fide transfer of an equity interest in
PEGI or a bona fide sale of assets and will not be payable in connection with
any other transaction (whether in the form of joint ventures, co-productions
or otherwise) which represents a financing transaction. The Company is
prohibited from structuring a transaction which would otherwise qualify as a
sale or distribution of any equity interest in PEGI or a sale of assets of the
Entertainment Group as a financing transaction for the purpose of frustrating
the provisions of the Lynn Plan.
Effective February 1, 1999, the Company hired Alex Mironovich, under an
employment contract, as President of its Publishing Group. Under his
employment contract, Mr. Mironovich receives an annual base salary of $400,000
and is entitled to participate in the Program at a maximum level, prorated for
fiscal year 1999 based on his start date, of 70% of his base salary earned.
Mr. Mironovich is also entitled to participate in the Company's 1995 Plan.
Under the 1995 Plan, Mr. Mironovich received a stock option grant to purchase
15,000 shares of Class B Stock. This option will vest in equal installments
over two years. Mr. Mironovich is also entitled to participate in the
Company's existing restricted stock plan which entitles him to 2,500 shares
and 12,500 shares of Class B Stock upon the Company's achieving targets of $15
million and $20 million in annual operating income, respectively. Mr.
Mironovich also received an additional stock option grant to purchase 10,000
shares of Class B Stock. This option will vest in equal installments over four
years. If Mr. Mironovich's employment is terminated at any time not "for
cause," he will be entitled to receive guaranteed severance equal to twelve
months' salary. "For cause" is defined as conviction of a crime involving
dishonesty, fraud or breach of trust, or engaging in conduct materially
injurious to the Company.
Effective March 1998, the Company hired Garry W. Saunders as President of
its Casino Gaming Group and entered into an employment contract. Mr. Saunders
receives an annual base salary of $410,000 and, in fiscal years 1999 and 2000,
participates in a special incentive/bonus plan (the "Saunders Plan"). The
Saunders Plan has two parts. The first part has a maximum opportunity of
$100,000 based on EBITDA and/or casino gaming profitability. The second part
of the Saunders Plan has bonus payouts based on signing new casino gaming
contracts, property openings and first year project profits. Payouts under
this part of the Saunders Plan are based on the size and number of deals. Mr.
Saunders received no payout in 1999. Mr. Saunders is also entitled to
participate in the Company's 1995 Plan. Under the 1995 Plan, Mr. Saunders
received a stock option grant to purchase 75,000 shares of Class B Stock which
will vest in 25% increments over a four-year period. Mr. Saunders is also
entitled to participate in the Company's existing restricted stock plan which
entitles him to 2,500 shares and 12,500 shares of Class B Stock upon the
Company's achieving targets of $15 million and $20 million in annual operating
income, respectively. If Mr. Saunders' employment is terminated at any time
not "for cause," he will be entitled to receive guaranteed severance equal to
no less than six months' salary and up to an additional six months' salary if
he remains unemployed. "For cause" is defined as conviction of a crime
involving dishonesty, fraud or breach of trust, or engaging in conduct
materially injurious to the Company.
TRANSACTIONS WITH MANAGEMENT
The Company owns a 29-room mansion (the "Mansion") located on 5 1/2 acres
in Holmby Hills, California, which is used for various corporate activities,
including serving as a valuable location for video production and magazine
photography, business meetings, enhancing the Company's image, charitable
functions and a wide
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variety of promotional and marketing purposes. The Mansion generates
substantial publicity and recognition which increase public awareness of the
Company and its products and services. Facilities at the Mansion include a
tennis court, swimming pool, gymnasium and other recreational facilities as
well as extensive film, video, sound and security systems. The Mansion also
includes accommodations for guests and serves as Hugh M. Hefner's office and
residence (the "Hefner Residence"). The Mansion has a full-time staff which
maintains it, serves in various capacities at the functions held there and
provides Mr. Hefner, his guests and the Company's guests with meals, beverages
and other services.
Under a 1979 lease entered into with the Company, the annual rent for Mr.
Hefner's basic Mansion accommodations, and the Mansion's facilities, utilities
and attendant services is to be determined by independent expert appraisals
based on comparable hotel accommodations. In addition, Mr. Hefner is required
to pay the sum of the per unit value of nonbusiness meals, beverages and other
benefits received by Mr. Hefner and his personal guests. Standard food and
beverage unit values are determined by independent expert appraisals based on
fair market values. Valuations for both basic accommodations and standard food
and beverage units are to be reappraised every three years, with annual
adjustments made on the basis of appropriate consumer price index figures in
other years. Mr. Hefner is also responsible for the cost of all improvements
in any Hefner Residence accommodations, including capital expenditures, that
are in excess of normal maintenance for those areas.
Usage of services and benefits is recorded through a system initially
developed by the auditing and consulting firm of PricewaterhouseCoopers LLP
and now administered (with appropriate modifications approved by the Audit and
Compensation Committees of the Board) by the Company. The lease, effective as
of July 1, 1979, had an initial term ending June 30, 1981, and continues for
ensuing 12-month periods unless terminated by either party. To accommodate the
change in fiscal years, Mr. Hefner's lease continued for only a six-month
period through December 31, 1998. At December 31, 1998, the lease renewed
automatically and will continue to renew automatically for 12-month periods
under the terms of the lease described above. The rent charged during fiscal
year 1999 included the appraised rent and the per unit value of other benefits
described above. Within 120 days after the end of the Company's fiscal year,
the actual charge for all benefits is finally determined for the fiscal year.
Mr. Hefner pays or receives credit for any difference between the amount
finally determined and the amount he paid over the course of the year. The sum
of the actual rent and other benefits payable for fiscal year 1999 was
estimated by the Company to be $617,000, and Mr. Hefner paid that amount
during fiscal year 1999.
The Company purchased the Mansion in 1971 for $1,050,000 and in the
intervening years has made substantial capital improvements at a cost of
approximately $12,915,000 through fiscal year 1999 (including approximately
$2,493,000 to bring the Hefner Residence accommodations to a standard similar
to the Mansion's common areas). The Mansion is included in the Company's
financial statements as of December 31, 1999 at a cost, including all
improvements and after accumulated depreciation, of approximately $2,285,000.
The Company receives rent from Mr. Hefner (see above) and pays all operating
costs of the Mansion, which were approximately $4,395,000 in fiscal year 1999
(net of rent received from Mr. Hefner), including depreciation, taxes and
security charges related to the protection of the Mansion, employees located
there, business guests, the Hefner Residence and other visitors.
In June 1993, William A. Marovitz, Ms. Hefner's spouse since July 1995,
brought an opportunity to the Company to participate in one or more
applications for gaming licenses in Greece. In June 1994, the independent
members of the Board, in recognition of Mr. Marovitz' substantial time and
effort on gaming matters, approved a compensation arrangement for all of his
gaming-related activities to that time and all of his future activities
relating to gaming opportunities in Greece. In consideration for past and
future services, the Company paid Mr. Marovitz $125,000 in February 1995. In
addition, the independent members of the Board agreed to pay Mr. Marovitz a
success fee of: (1) $25,000 on the date of opening of gaming operations, which
occurred in April 1999; and (2) $100,000 on each of the first, second and
third anniversaries of the opening date, provided that gaming operations under
the Company's trademarks are ongoing on the date of payment.
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PROPOSAL NO. 2
INDEPENDENT AUDITORS
The Board, upon the recommendation of the Audit Committee, has determined
that PricewaterhouseCoopers LLP should continue to serve as auditors for the
Company for the fiscal year ending December 31, 2000.
THE BOARD RECOMMENDS THAT THE HOLDERS OF THE COMPANY'S CLASS A STOCK VOTE
"FOR" RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITORS FOR THE CURRENT FISCAL YEAR.
A representative of PricewaterhouseCoopers LLP will be present at the
annual meeting and will be available to respond to appropriate questions from
stockholders. The representative will be allowed to make a statement regarding
appropriate issues, should he or she wish to do so. The fees and expenses
incurred by the Company for the fiscal year 1999 annual audit as performed by
PricewaterhouseCoopers LLP are estimated to be approximately $243,000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors and persons who own more than 10% of a
registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the SEC and the New York Stock
Exchange and Pacific Exchange. Officers, directors and greater than 10%
beneficial owners are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on the Company's
review of the copies of the forms received by it, or written representations
from certain reporting persons that no other reports were required during the
fiscal year 1999, all of the Company's officers, directors and greater than
10% beneficial owners complied with all Section 16(a) filing requirements
except that Linda G. Havard, Hugh M. Hefner, Helen Isaacson, Martha O.
Lindeman, Anthony J. Lynn and Richard S. Rosenzweig each filed one late Form 4
reporting one transaction, and Herbert M. Laney and Garry W. Saunders each
filed two late Form 4's, each form reporting one transaction.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2001 annual
meeting must be received by the Company no later than December 16, 2000, to be
considered for inclusion in its proxy statement and form of proxy relating to
that meeting; provided, however, that if the 2001 annual meeting is held on a
date that is more than 30 days before or after the anniversary of the 2000
annual meeting, then proposals of stockholders intended to be presented at the
2001 annual meeting must be received by the Company a reasonable time before
the proxy solicitation is made. Proposals should be addressed to the
Secretary, Playboy Enterprises, Inc., 680 North Lake Shore Drive, Chicago,
Illinois 60611, and, while not required, should be submitted by Certified Mail
Return Receipt Requested to confirm the date of receipt.
ANNUAL REPORT AND FINANCIAL INFORMATION
A copy of the Company's Annual Report on Form 10-K for fiscal year 1999,
including financial statements, was mailed to each stockholder on April 14,
2000.
OTHER BUSINESS
As of the date of this Proxy Statement, management knows of no other
business that will be presented for consideration at the annual meeting. If,
however, other proper matters are presented at the meeting, it is the
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intention of the proxy holders named in the enclosed form of proxy to take
action in accordance with their best judgment. All matters to be voted upon by
stockholders require a majority vote of the shares of Class A Stock
represented in person or by proxy. The quorum requirement for convening the
meeting is a majority of the outstanding Class A Stock. Properly executed
proxies that are marked "withheld" (in the case of director elections) or
"abstain" or are held in street name by brokers that are not voted on one or
more particular proposals (if otherwise voted on at least one proposal) will
be counted for purposes of determining whether a quorum is present at the
meeting. "Withhelds" (in the case of director elections) and abstentions (with
respect to all other matters) will have the same effect as a vote against the
proposal to which it applies. Broker non-votes will be treated neither as a
vote for nor as a vote against any of the proposals to which those broker non-
votes apply.
By Order of the Board of Directors
Chicago, Illinois
April 14, 2000
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PROXY PROXY
PLAYBOY ENTERPRISES, INC.
This Proxy is Solicited on Behalf of the Board of Directors for
the Annual Meeting of Stockholders to be held on May 10, 2000
The undersigned hereby constitutes and appoints CHRISTIE A. HEFNER and HOWARD
SHAPIRO, and each of them, as Proxies, each with full power of substitution,
to vote for the undersigned all of the shares of Class A Common Stock of
PLAYBOY ENTERPRISES, INC. registered in the name of the undersigned, as of
March 13, 2000, at the annual meeting of stockholders of Playboy Enterprises,
Inc. to be held May 10, 2000 and at any and all adjournments of that meeting,
upon the following matters, which are more fully described in the Proxy
Statement.
The right to revoke this proxy at any time before it is voted is reserved.
When properly executed, this proxy will be voted or withheld in accordance
with the specifications made in this proxy. IF NOT OTHERWISE SPECIFIED, THIS
PROXY WILL BE VOTED "FOR" THE ELECTION OF MS. HEFNER AND MESSRS. BOOKSHESTER,
CHEMEROW, DRAPKIN, ROSENTHAL, ROSENZWEIG AND WOLFSON AS DIRECTORS; AND "FOR"
RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
AUDITORS.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed on reverse side.)
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PLAYBOY ENTERPRISES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
1. Election of Directors: Nominees: 01-D. Bookshester, 02-D. Chemerow, 03-D.
Drapkin, 04-C. Hefner, 05-S. Rosenthal, 06-R. Rosenzweig, 07-B. Wolfson. To
withhold authority to vote for one or more (but less than all) nominees,
write such nominee(s) name below and mark "For All Except Nominee(s)
Written Below" to the right.
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For all [_] Withhold All [_] For all Except Nominee(s) Written Below [_]
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
auditors of Playboy Enterprises, Inc. for the current fiscal year.
For [_] Against [_] Abstain [_]
The Proxies are authorized to vote in their discretion upon such other
matters as may properly come before the meeting.
Signature(s) ___________________________
Dated:______________, 2000.
________________________________________
The signature to this proxy should
conform exactly to the name as shown.
When shares are held by joint tenant, all
such tenants must sign.
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* FOLD AND DETACH HERE *
