<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Playboy Enterprises, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(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 Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[PLAYBOY ENTERPRISES LOGO]
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-----------------
NOVEMBER 14, 1995
As a stockholder of Playboy Enterprises, Inc. (the "Company"), you are hereby
notified of and are cordially invited to attend the Annual Meeting of the
Stockholders of the Company to be held in the Company's New York offices
located at 730 Fifth Avenue, Third Floor, New York, New York 10019 on Tuesday,
November 14, 1995 at 9:30 a.m., local time, for the following purposes:
1. To elect five directors for the ensuing year, or until their successors
are elected and qualified;
2. To approve the Playboy Enterprises, Inc. 1995 Stock Incentive Plan;
3. To ratify the selection of Coopers & Lybrand L.L.P. as independent
auditors for the current fiscal year; and
4. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on September 18, 1995
as the record date for the determination of holders of the Class A Common Stock
entitled to notice of and to vote at the meeting. An alphabetical list of such
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 November 1, 1995 and ending at the close of business on
November 13, 1995 in the Company's New York offices located at 730 Fifth
Avenue, Third Floor, New York, New York 10019. The list shall be available in
the office of the Company's Director of Security. The list shall also be on
display at the annual meeting.
We hope that you will be present at the meeting. If you cannot attend and you
are the owner 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.
September 28, 1995
By Order of the Board of Directors
[SIGNATURE OF IRMA VILLARREAL]
Irma Villarreal
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 $.01 per share
("Class A Stock"), and Class B Common Stock, par value $.01 per share ("Class B
Stock" and together with the Class A Stock, the "Common Stock") of the Company
on or about September 28, 1995 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 November 14, 1995. 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 by giving a subsequently dated
proxy, by written notification to the Secretary of the Company or by appearing
at the meeting and voting the shares. Pursuant to the Company's Restated
Certificate of Incorporation, the Class B Stock has no voting rights with
respect to any matter 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 additional compensation for such
activity. The expenses of solicitation will be borne by the Company. Such
expenses may also include ordinary charges and expenses of brokerage houses and
other fiduciaries for forwarding documents to beneficial owners.
Only holders of record of Class A Stock as of the close of business on
September 18, 1995 will be entitled to vote at the meeting or any adjournment
thereof. As of such date, the Company had outstanding 4,713,954 shares of Class
A Stock, having one vote per share and constituting the Company's only class of
voting securities.
2
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of August 31, 1995, 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 OF
NAME AND ADDRESS CLASS A STOCK PERCENT OF CLASS
---------------- ------------------- ----------------
<S> <C> <C>
Hugh M. Hefner, Trustee
The Hugh M. Hefner 1991 Trust(1)
9242 Beverly Boulevard
Beverly Hills, CA 90210................... 3,321,836 70.47%
</TABLE>
- --------
(1) Mr. Hefner, founder of the Company, Editor-in-Chief of Playboy magazine and
Chairman Emeritus, 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 herein by the Board of Directors.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the meeting, five 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 nor more than ten directors as such number may be fixed by the
Board of Directors (the "Board") from time to time. Effective as of the date of
the annual meeting, the Board intends to fix the number of directors at five.
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.
Abstentions are not included in the tabulation of the voting results on the
election of directors, but are included for purposes of determining whether a
quorum of shares is present at a meeting. 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 a greater number of persons
than are named.
The following information is provided with respect to the nominees for
director.
CHRISTIE HEFNER
Director since 1979
Age 42
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. Ms. Hefner is also a member of the
Board of Directors of Sealy Corporation.
DENNIS S. BOOKSHESTER
Director since 1990
Age 56
Mr. Bookshester is presently 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 which he held from
1984 to February 1989. In addition, Mr. Bookshester is a member of the Board of
Directors of Evans, Inc., Amre, Inc., Fruit of the Loom, Inc. and Sundance
Homes. Mr. Bookshester is a member of the Audit and Compensation Committees of
the Board.
3
<PAGE>
ROBERT KAMERSCHEN
Director since 1988
Age 59
Mr. Kamerschen has been Chairman since January 1989, and since November 1988,
Chief Executive Officer and a member of the Board of Directors of ADVO, Inc., a
company principally involved in direct mail advertising. From December 1987 to
November 1988, Mr. Kamerschen was President and Chief Executive Officer of RKO-
Six Flags Entertainment, Inc., a company principally involved in family
entertainment projects, and a subsidiary of Wesray Capital Corporation. From
1984 to 1987, he was President and Chief Operating Officer of Marketing
Corporation of America, a privately held marketing services and venture capital
firm. He is a director of Micrografx, Inc. Mr. Kamerschen is Chairman of the
Compensation Committee and a member of the Audit Committee of the Board.
SOL ROSENTHAL
Director since 1985
Age 60
Mr. Rosenthal has been a senior partner in the Los Angeles law firm of
Buchalter, Nemer, Fields & Younger since 1974. 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. In addition, Mr. Rosenthal is a director of Artista Management, A.G.
Mr. Rosenthal is Chairman of the Audit Committee and a member of the
Compensation Committee of the Board.
RICHARD S. ROSENZWEIG
Director since 1976
Age 60
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, 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.
COMMITTEES AND COMPENSATION
The Company has a standing Audit Committee of the Board currently comprised
of Messrs. Rosenthal (who is the Chairman), Bookshester, Kamerschen and
Purcell. 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 1995, the Audit Committee held
three meetings.
The Company has a standing Compensation Committee of the Board currently
comprised of Messrs. Kamerschen (who is the Chairman), Bookshester, Purcell and
Rosenthal. Effective June 22, 1995, all authority previously delegated to the
Stock Option Committee of the Board was transferred to the Compensation
Committee and the Stock Option Committee was disbanded. 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 $150,000 and less than $300,000 per year
(except employees who are serving as members of the Board and the Company's
Chief Financial Officer). The Compensation Committee administers the 1989 Stock
Option Plan and the 1995 Stock Incentive Plan (collectively, the "Plans") for
the Company's key employees and has the authority to
4
<PAGE>
determine which employees are "key employees" and thereby eligible to
participate in the Plans. 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 (specifically including Mr.
Hefner) whose salary and bonus equals or exceeds $300,000 per year, and those
individuals mentioned as exceptions immediately above in regard to the approval
authority of the Compensation Committee. During fiscal year 1995, the
Compensation and the Stock Option Committees each held three meetings.
The Company does not have a standing Nominating Committee. During fiscal year
1995, the Board held six meetings. All members of the Board, with the exception
of Mr. John R. Purcell, 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 of which they were members.
Nonemployee directors receive an annual fee of $25,000, pro rated from the
effective date of their election and paid quarterly. An additional fee of $750
is paid for each in-person Board meeting attended by a nonemployee director.
Accordingly, for fiscal year 1995, Messrs. Bookshester, Kamerschen and
Rosenthal received $28,750 and Mr. Purcell received $27,250. Beginning in
October 1992, nonemployee directors also became eligible to participate in the
Company's Deferred Compensation Plan ("DCP"), under which they may elect to
defer any amount between 25% and 100% (in 25% increments) of their annual fees
and per-meeting payments. The amount deferred is credited with interest each
quarter based on the preceding quarter's average composite yield on corporate
bonds as published by Moody's Investors Service, Inc. All amounts deferred and
interest credited are 100% vested immediately and are general unsecured
obligations of the Company. DCP accounts are paid in a lump sum or, in certain
circumstances, in specified installments to directors upon their death or upon
termination of service.
Each nonemployee director is also a participant in the Playboy Enterprises,
Inc. 1991 Non-Qualified Stock Option Plan for Non-Employee Directors (the
"Directors' Plan"). Under the Directors' Plan, each director is granted a
nonqualified stock option to purchase 10,000 shares of Class B Stock. An
aggregate of 80,000 shares of Class B Stock are available for grant under the
Directors' Plan. Each option granted is exercisable in four equal annual
installments beginning on the first anniversary of the date such options were
initially granted. All of such installments are cumulative and may be exercised
in whole or in part. Options granted under the Directors' Plan will generally
expire ten years after the date of grant, though they may expire earlier or be
accelerated under certain circumstances. Shares issued upon exercise of options
granted under the Directors' Plan may be either treasury shares or newly issued
shares. During fiscal year 1995, no options were granted under the Directors'
Plan, and no options have been exercised under the Directors' Plan to date.
5
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of August 31, 1995, 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 7 (the
"Named Executive Officers") 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 investment power with respect to a security (i.e., the power to dispose
or direct the disposition of a security).
<TABLE>
<CAPTION>
SHARES OF PERCENT OF SHARES OF PERCENT OF
NAME OF DIRECTOR OR NAMED CLASS A CLASS A CLASS B CLASS B
EXECUTIVE OFFICER(1) STOCK(2) STOCK STOCK(2) STOCK
------------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Dennis S. Bookshester(3)............. 3,000 * 14,000 *
David I. Chemerow(4)(5).............. 35,800 * 157,200 1.02
Christie Hefner(4)(5)(6)............. 72,274 1.52 285,822 1.84
Hugh M. Hefner(6).................... 3,321,836 70.47 7,965,508 52.14
Robert Kamerschen(3)................. 850 * 12,950 *
Anthony J. Lynn(4)(5)................ 600 * 144,088 *
John R. Purcell(3)(7)................ 5,000 * 25,000 *
Sol Rosenthal(3)..................... 252 * 12,756 *
Richard S. Rosenzweig(4)(5).......... 25,365 * 96,095 *
All Directors and Executive Officers
as a Group (13 persons)(4)(5)....... 3,500,007 71.96 8,915,359 55.27
</TABLE>
- --------
*Less than 1% of the total shares outstanding.
(1) For fiscal year 1995, in addition to Ms. Hefner and Messrs. Chemerow,
Hefner, Lynn and Rosenzweig, the Company's executive officers were: Howard
Shapiro, Executive Vice President, Law and Administration, and General
Counsel; Robert B. Beleson, Senior Vice President and Chief Marketing
Officer; Rebecca S. Maskey, Senior Vice President, Finance; and Martha O.
Lindeman, Vice President, Corporate Communications and Investor Relations.
(2) In each case, beneficial ownership consists of sole voting and investment
power, with the exception of Mr. Kamerschen, who owns all shares jointly
with his wife and Mr. Rosenthal, who owns two shares of Class A Stock and
six shares of Class B Stock as custodian for his son. As of August 31,
1995, all Directors and Executive Officers as a Group shared voting and
investment power over 852 shares of Class A Stock and 2,956 shares of Class
B Stock.
(3) Includes 10,000 shares of Class B Stock which are subject to exercisable
installments of stock option grants made pursuant to the Company's 1991
Non-Qualified Stock Option Plan for Non-Employee Directors (the "Directors'
Plan").
(4) Includes the following shares of Common Stock which are subject to
installments of stock option grants made pursuant to the Company's 1989
Stock Option Plan and the Directors' Plan, which are either exercisable, or
are exercisable within 60 days of August 31, 1995.
<TABLE>
<CAPTION>
NAMED EXECUTIVE
OFFICER CLASS A STOCK CLASS B STOCK
--------------- ------------- -------------
<S> <C> <C>
Mr. Chemerow............ 35,000 105,000
Ms. Hefner.............. 55,000 165,000
Mr. Lynn................ -- 115,938
Mr. Rosenzweig.......... 25,000 75,000
All Directors and
Executive Officers as a
Group
(11 persons)........... 150,000 634,688
</TABLE>
6
<PAGE>
(5) Includes the following shares of Class B Stock which are subject to the
vesting of restricted stock awards made pursuant to the Company's 1995
Stock Incentive Plan.
<TABLE>
<CAPTION>
NAMED EXECUTIVE OFFICER
-----------------------
<S> <C>
Mr. Chemerow......................................................... 30,000
Ms. Hefner........................................................... 75,000
Mr. Lynn............................................................. 26,250
Mr. Rosenzweig....................................................... 20,000
All Directors and Executive Officers as a Group
(8 persons)......................................................... 218,750
</TABLE>
(6) Ms. Hefner is the daughter of Mr. Hefner.
(7) Mr. Purcell has decided not to stand for re-election to the Board.
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation
received by the Company's Chief Executive Officer and the four most highly
compensated executive officers (the "Named Executive Officers") for the last
three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
--------------------------- ----------------------------------------
SECURITIES
UNDERLYING
RESTRICTED OPTIONS
STOCK AWARDS(1) (CLASS B ALL OTHER
NAME AND PRINCIPAL SALARY BONUS (CLASS B STOCK) STOCK) COMPENSATION
POSITION YEAR ($) ($) ($) (#) ($)
------------------ ----- -------- -------- --------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Christie Hefner......... 1995 $467,316(2) $247,006 $684,375 75,000(3) $5,378(4)
Chairman of the Board 1994 448,565 2,803
and 1993 374,998 37,500 6,644
Chief Executive Officer
Anthony J. Lynn......... 1995 483,318(2) 239,531 5,578(4)
Executive Vice 1994 432,677 43,750(5) 6,451
President and 1993 400,010 100,000
President,
Entertainment Group
Hugh M. Hefner.......... 1995 399,600(2) 98,893 5,026(4)
Chairman Emeritus 1994 384,516 4,070
and Editor-in-Chief 1993 370,006 6,644
David I. Chemerow....... 1995 334,800(2) 117,978 273,750 30,000(3) 5,349(4)
Executive Vice 1994 322,161 2,757
President, Finance 1993 309,229 57,641 6,644
and Operations, and
Chief Financial
Officer
Richard S. Rosenzweig... 1995 264,600(2) 81,854 182,500 20,000(3) 4,628(4)
Executive Vice 1994 254,612 5,987
President 1993 244,615 37,720 3,575
</TABLE>
- --------
(1) Values of restricted stock awards under the 1995 Stock Incentive Plan (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 June 30, 1995,
Ms. Hefner held 75,000 shares of restricted Class B Stock, valued at
$590,625; Mr. Lynn held 26,250 shares of restricted Class B Stock, valued
at $206,719; Mr. Chemerow held 30,000 shares of restricted Class B Stock,
valued at $236,250; and Mr. Rosenzweig held 20,000 shares of restricted
Class B Stock, valued at $157,500. Values as of June 30, 1995 of restricted
Class B Stock are based on the closing price of the Class B Stock on June
30, 1995. The restrictions on the stock awards will lapse in increments of
25% of the shares at the end of any fiscal year, beginning with fiscal year
ended June 30, 1995, during which annual operating income first equals or
exceeds $7.5 million; $10.0 million; $15.0 million; and $20.0 million.
Dividends are not paid on Class B Stock.
7
<PAGE>
(2) For fiscal year 1995, base salaries reflect compensation paid over 27 pay
periods as compared to fiscal years 1994 and 1993 in which salaries
reflected compensation paid over 26 pay periods. Base salaries in effect
for Ms. Hefner and Messrs. Hefner, Chemerow and Rosenzweig for fiscal year
1995 were the same as those in effect for fiscal year 1994.
(3) Represents stock option grants under the 1995 Plan which are exercisable in
equal annual increments over a four-year period beginning February 6, 1996.
The options expire on February 6, 2005.
(4) The amounts disclosed include:
(a) Company contributions of $1,253 on behalf of each Named Executive
Officer in fiscal year 1995 under the Company's Employees Investment
Savings Plan.
(b) Company matching contributions of the following amounts in fiscal year
1995 under the Company's Employees Investment Savings Plan on behalf of
Ms. Hefner, $4,125; Mr. Lynn, $4,325; Mr. Hefner, $3,773; Mr. Chemerow,
$4,096; and Mr. Rosenzweig, $3,375.
(5) Represents a stock option grant under the 1989 Stock Option Plan (the "1989
Plan") which is exercisable in equal annual increments over a four-year
period beginning June 30, 1995 and expiring on June 30, 2004. On February
6, 1995, Mr. Lynn exchanged 26,250 options under the 1989 Plan for an equal
number of shares of restricted stock under the 1995 Plan.
OPTION GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS(2) FOR OPTION TERM(3)
----------------------------------------- -------------------
PERCENT OF
TOTAL OPTIONS EXERCISE
OPTIONS GRANTED TO OR BASE
GRANTED EMPLOYEES IN PRICE EXPIRATION
NAME (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ------- ------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Christie Hefner......... 75,000 15% $9.125 2/6/05 $431,156 $1,088,156
David I. Chemerow....... 30,000 6 9.125 2/6/05 172,463 435,263
Richard S. Rosenzweig... 20,000 4 9.125 2/6/05 114,975 290,175
</TABLE>
- --------
(1) Represents stock option grants under the 1995 Plan which are exercisable in
equal annual increments over a four-year period beginning February 6, 1996.
The options expire on February 6, 2005.
(2) The exercise price of the Class B Stock options granted is equal to the
market value of the Company's Class B Stock at the close of business on the
date of the grant. Options generally become exercisable in four equal
annual installments beginning one year after grant. Options generally
expire ten years after grant.
(3) The potential realizable value amounts shown illustrate the values that
might be realized upon exercise immediately prior to the expiration of
their term using 5% and 10% appreciation rates set by the Securities and
Exchange Commission, compounded annually and, therefore, are not intended
to forecast possible future appreciation, if any, of the Company's stock
price. Additionally, these values do not take into consideration the
provisions of the options providing for nontransferability, vesting over a
period of four years or expiration of the options following termination of
employment.
8
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
UNEXERCISED OPTIONS AT MONEY OPTIONS AT FISCAL YEAR-
FISCAL YEAR-END (#) END(1) ($)
------------------------------- --------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------- --------------- ---------------- ---------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
STOCK STOCK STOCK STOCK STOCK STOCK STOCK STOCK
------- ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Christie Hefner
1990 grant............. 50,000 150,000 $65,625 $178,125
1992 grant............. 3,750 11,250 1,250 3,750 2,344 5,625 $781 $1,875
1995 grant............. 75,000 (2)
Anthony J. Lynn
1992 grant............. 105,000 35,000 (2) (2)
1994 grant............. 10,938 32,812 10,938 32,812
David I. Chemerow
1991 grant............. 35,000 105,000 109,375 406,875
1995 grant............. 30,000 (2)
Richard S. Rosenzweig
1990 grant............. 25,000 75,000 32,813 89,063
1995 grant............. 20,000 (2)
</TABLE>
- --------
(1) Based on a closing price for Class A Stock of $8.00 per share and for Class
B Stock of $7.875 per share on June 30, 1995 as reported in the New York
Stock Exchange Composite Listing.
(2) Option exercise price exceeded closing price as of June 30, 1995.
9
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
This report by the Compensation Committee and the Performance Graph on page
12 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 or the Securities Exchange Act of 1934, as amended (the
"Acts"), and they shall not otherwise be deemed filed under such Acts.
The Company's executive compensation programs are administered by the
Compensation Committee of the Board of Directors (the "Committee"). During
fiscal year 1995, the Committee was composed of four directors who never served
as officers of the Company, these being Messrs. Kamerschen (who is the
Chairman), Bookshester, Purcell and Rosenthal.
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 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. While some of the companies in the peer group
chosen for comparison of shareholder returns in the Performance Graph on page
12 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. During fiscal year 1995, the Company sought to maintain
executive salary grade ranges and therefore based salaries slightly above the
median of the data reported in relevant compensation surveys and other
information considered by the Committee. 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 1995,
participants could earn 30% to 75% of their respective July 1, 1994 base
salaries, with the total amount earned calculated based on any one or a
combination of the following financial performance factors: (i) consolidated
operating income and/or cash flow; (ii) group profitability and/or cash flow;
or (iii) individual segment profitability and/or cash flow, with a minimum
level of such profitability and/or cash flow required before payments would be
made. Additionally, consistent with
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a frequently observed practice in the highly competitive publishing, catalog
and entertainment industries, certain top executive officers' compensation
arrangements include participation by the executive in the incremental profits
above a fixed base of the business for which he or she is responsible. Pursuant
to these compensation arrangements, certain executives, including all Named
Executive Officers except Mr. Lynn, were entitled to, and did receive, payouts
under the Program.
LONG-TERM INCENTIVES
Long-term incentive awards are provided by the shareholder-approved 1989
Stock Option Plan and the 1995 Stock Incentive Plan which is subject to
shareholder approval at the November 14, 1995 Annual Meeting of Stockholders.
The 1995 Incentive Stock Plan is more fully described in "Adoption of The
Playboy Enterprises, Inc. 1995 Stock Incentive Plan." The 1989 Stock Option
Plan together with the 1995 Stock Incentive Plan are collectively referred to
herein as the "Plans". The Plans are administered by members of the Committee
who, subject to the terms of the Plans, designate "key employees" of the
Company to whom options and other awards may be granted, the number of shares
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 and
restricted stock awards. 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.
The Committee approved the issuance of up to one million shares of Class B
Stock under the 1995 Stock Incentive Plan. The amount of stock options granted
and restricted stock awarded to Ms. Hefner is consistent with current industry
trends to make a larger amount of the Chief Executive Officer's total
compensation variable and to link compensation to the Company's longer-term
performance. The size of Ms. Hefner's grant was also reviewed by the Company's
compensation consultants, Towers Perrin, and considered to be reasonable given
the size of the Company and the percentage of shares available.
The number of shares granted to the executives under the 1995 Stock Incentive
Plan was based on total job size/salary grade, the executive's contribution to
overall Company performance and his/her ability to impact the long-term success
of the Company. Because these factors also influence the maximum opportunity
levels in the Program, the proportionate size of the stock option grants and
restricted stock awards correlate closely to the participations levels in the
Program.
Under the 1995 Stock Incentive Plan, the number of shares granted to each
executive is equally divided between incentive stock option and restricted
performance shares. This is a fairly common practice with both forms of stock
issues establishing parallel interests between key executives and shareholders
and providing long-term capital accumulation opportunities. In cases where
certain executives had recently been granted stock options per contract or
hiring agreements, these individuals did not participate in the stock option
portion of the 1995 Stock Incentive Plan.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER BASE SALARY AND BONUS
For fiscal year 1995, Ms. Hefner's base salary was not increased consistent
with the Company's policy to maintain salaries of executives and to give
greater emphasis to short- and long-term incentives as a means of increasing
compensation.
Ms. Hefner's bonus payout of $247,006 was calculated according to the 1995
Management Incentive Plan approved by the Committee. Ms. Hefner's maximum bonus
opportunity was 75% of base salary and was based on the Company's financial
results for fiscal year 1995. Seventy-five percent of the bonus was eligible to
be earned based on consolidated operating income and 25% was based on cash flow
from continuing operations. Under the consolidated operating income performance
measure, Ms. Hefner received
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<PAGE>
$162,631 out of a maximum payout of $253,125. Under the cash flow from
continuing operations measure, Ms. Hefner earned the maximum award of $84,375.
Submitted by the
Compensation Committee:
Robert Kamerschen, Chairman
Dennis S. Bookshester
John R. Purcell
Sol Rosenthal
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal year 1995 were Robert
Kamerschen, Chairman, Dennis S. Bookshester, John R. Purcell and Sol Rosenthal.
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, Turner
Broadcasting System, Inc., (Class B Common Stock) and The Walt Disney Company.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG PLAYBOY ENTERPRISES, INC., THE RUSSELL 2000 INDEX AND A PEER GROUP
(PERFORMANCE RESULTS THROUGH 6/30/95)
[LOGO -- PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period PLAYBOY RUSSELL
(Fiscal Year Covered) ENTERPRISES, INC. 2000 INDEX PEER GROUP
- ------------------- ----------------- ---------- ----------
<S> <C> <C> <C>
Measurement Pt-
06/30/90 $100 $100 $100
FYE 06/30/91 $ 98 $101 $ 96
FYE 06/30/92 $129 $116 $119
FYE 06/30/93 $139 $146 $145
FYE 06/30/94 $110 $152 $144
FYE 06/30/95 $129 $183 $181
</TABLE>
* Assumes $100 invested on 06/30/90 in stock or index--including
reinvestment of dividends.
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<PAGE>
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
To aid the Company in retaining its most senior executives and certain other
officers, in February 1991, the Board approved Change in Control Agreements
(the "Agreements"), which provide for the payment of specified benefits to
selected officers in the event their employment terminates after a "change in
control" (defined below) of the Company. Ms. Hefner and Messrs. Chemerow, Lynn
and Rosenzweig are beneficiaries of this program. Each Agreement provides that
(i) a lump-sum cash payment will be made within ten 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 targeted
bonus for the officer's position under the Executive Incentive Compensation
Plan established for the then applicable fiscal year; (ii) the amount of the
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, but
only if the officer would obtain a net after-tax benefit from such reduction;
(iii) 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; (iv) the officer will remain entitled
to the use of a Company-provided automobile for up to a year from the effective
date of termination, or to receive a lump-sum cash payment equal to 12 times
the monthly allowance provided under the Company's Executive Car Lease Program;
(v) it 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 (vi) 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 such 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 such 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 Agreement, "cause" is defined
as conviction of a crime involving dishonesty, fraud or breach of trust, or for
willfully engaging in conduct materially injurious to the Company. The
Agreement also provides 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 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 October 15, 1990, the Company hired Mr. Chemerow under a contract,
the terms of which include that if (1) Mr. Chemerow's employment was terminated
by the Company not for "cause"; or (2) Mr. Chemerow terminates his employment
upon 30 days prior notice of a remediable qualifying event such as a reduction
in aggregate benefits paid to Mr. Chemerow, which is not applied uniformly to
other senior officers; or the requirement by the Company as a condition of
employment to relocate his residence more than 50 miles from the Company's
Chicago offices; or a material diminution of Mr. Chemerow's current duties as
an officer of the Company, then he is entitled to (i) 12 months severance pay;
(ii) all earned but not yet paid incentive compensation; (iii) a pro rata
payment of incentive compensation for the fiscal year in which his employment
termination takes place; and (iv) the continuing right to exercise stock
options granted to him under the Company's 1989 Stock Option Plan exercisable
as of that date, for one year following the date of such termination, plus the
right to exercise a pro rata portion of the next exercisable installment of
stock options available to him.
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<PAGE>
Effective June 1, 1992, the Company hired Anthony J. Lynn, pursuant to 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. During fiscal year 1995,
the Company extended Mr. Lynn's employment contract through June 30, 1998,
unless terminated earlier pursuant to its terms and conditions. Mr. Lynn is to
receive "Base Compensation" ranging from $433,000 to a maximum of $550,000 per
year during the term plus all benefits otherwise accorded to senior executives
of the Company in similar positions. Additionally, Mr. Lynn annually will
receive "Contingent Compensation" of 5% of the amount by which specified pretax
profits for the Company's Entertainment Group exceed $2.35 million.
Mr. Lynn is also entitled to receive an "Equity Bonus" equal to 5% of sums
paid to the Company during the term of his employment agreement (or under
certain circumstances within three months of its termination) in consideration
of the disposition of the Company's equity interest in all or a portion of the
Entertainment Group's businesses to the extent the consideration payable to the
Company exceeds the value of such transferred interest determined by a
specified formula. Mr. Lynn may choose to receive the Equity Bonus in the form
of an equity interest in the untransferred portion of the Entertainment Group
if the Company has retained 25% or more of the group as a whole following any
such disposition.
During the term of the contract, management shall also recommend to the
Compensation Committee the grant of further such options to Mr. Lynn should
such grants be made generally to other members of senior management. On
February 6, 1995, Mr. Lynn exchanged 26,250 options which had been granted
under the 1989 Plan for an equal number of shares of restricted stock under the
1995 Stock Incentive Plan.
Upon termination of his employment, Mr. Lynn is entitled to receive all or a
portion of his Base Compensation, Contingent Compensation, benefits and/or
Equity Bonuses, depending on the date and circumstances of such termination.
TRANSACTIONS WITH MANAGEMENT
The Company owns a 29-room mansion (the "Mansion") located on 5 1/2 acres in
Los Angeles, 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
variety of promotional and marketing purposes. The Mansion generates
substantial publicity and recognition, which increases 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 Mr. Hefner's office and the
residence for his family (the "Hefner Family"). The Mansion has a full-time
staff which maintains it, serves in various capacities at the functions held
there and provides the Hefner Family, their 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 the
Hefner Family'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 the Hefner Family and any of their 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 Family accommodations, including capital
expenditures, that are in excess of normal maintenance for those areas. During
fiscal year 1995, no such improvements were made, and consequently no such
payments were required.
Usage of services and benefits is recorded through a system initially
developed by the auditing and consulting firm of Price Waterhouse 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
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<PAGE>
either party. The monthly rent charged during fiscal year 1995 included the
appraised rent and the per unit value of other benefits described above. Within
three months after the end of the Company's fiscal year, the actual monthly
charge for all such benefits is finally determined for the fiscal year, and Mr.
Hefner pays or receives credit for any difference between the actual amount and
the amount paid. The sum of the actual rent and such other benefits paid by Mr.
Hefner for fiscal year 1995 was calculated to have averaged $46,342 per month.
Effective July 1, 1995, the estimated monthly charge shall be $47,261.
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 $11,975,000 through fiscal year 1995 (including $2,435,240 to
bring the Hefner Family accommodations to a standard similar to the Mansion's
common areas). The Mansion is included in the Company's financial statements as
of June 30, 1995 at a cost, including all improvements and after accumulated
depreciation, of approximately $3,096,000. The Company receives rent from Mr.
Hefner (see above) and pays all operating costs of the Mansion, which were
approximately $3,865,000 in fiscal year 1995 (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
Family and other visitors.
In June 1993, William A. Marovitz brought an opportunity to the Company to
participate in one or more applications for gaming licenses in Greece. Over the
next two years, Mr. Marovitz actively pursued that and other gaming
opportunities on the Company's behalf. In June 1994, the independent members of
the Company's Board of Directors, in recognition of Mr. Marovitz's substantial
time and effort on gaming matters, approved a compensation arrangement for all
of his gaming-related activities to date 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, should the Greek-gaming initiatives result in the opening of a gaming
operation in which the Company has an interest, the independent members of the
Board agreed to pay Mr. Marovitz a success fee of: (1) $25,000 on the date of
such opening; and (2) $100,000 on each of the first, second and third
anniversaries of such opening date, provided that such gaming operations are
ongoing on the date of payment. The Company was part of a consortium (the
"Consortium"), which Mr. Marovitz was instrumental in putting together, that
applied for a gaming license on the island of Rhodes, Greece in June 1995. Mr.
Marovitz and Ms. Hefner were married in July 1995. During fiscal year 1995, the
Company formed a gaming subsidiary to represent the Company's interest in the
Consortium. Director Dennis S. Bookshester and Senior Vice President, Finance,
Rebecca S. Maskey were appointed to serve on the Board of the Consortium. For
Mr. Bookshester's service on that Board, the other members of the Company's
Board approved an annual retainer of $5,000 and an in-person per meeting fee of
$1,250. Ms. Maskey will receive no additional compensation related to her
service on the Board of the Consortium.
During fiscal year 1995, the Company paid Mrs. Kimberley Hefner, wife of Mr.
Hugh Hefner, a $75,000 modeling fee for a pictorial of Mrs. Hefner which ran in
the September 1995 issue of Playboy magazine.
PROPOSAL NO. 2
ADOPTION OF THE
PLAYBOY ENTERPRISES, INC. 1995 STOCK INCENTIVE PLAN
On January 16, 1995 the Board of Directors unanimously approved and adopted,
subject to stockholder approval, the Playboy Enterprises, Inc. 1995 Stock
Incentive Plan (the "Plan"). The Plan is in addition to the Playboy
Enterprises, Inc. 1989 Stock Option Plan (the "1989 Plan"), which was adopted
by the Board of Directors in 1989 and approved by the stockholders on November
7, 1990. The affirmative vote of a majority of the shares of Class A Stock
represented in person or by proxy is required for approval of the Plan. The
following summary of the principal provisions of the Plan is not intended to be
exhaustive and is qualified in its entirety by the terms of the Plan.
GENERAL DESCRIPTION OF THE PLAN
The principal purposes of the Plan are to provide incentives for key
employees of the Company and its subsidiaries through the grant or issuance of
options, restricted stock and other awards, thereby giving them
15
<PAGE>
incentives to enhance the Company's growth, development and financial success,
and to remain in the Company's employ.
Under the Plan, not more than 1,203,000 shares of Class B Stock (including
103,000 shares of Class B Stock which, by resolution of the Board, have been
transferred to the Plan and are no longer eligible for grant under the 1989
Plan) are authorized for issuance upon exercise of options and other awards, or
upon issuance of restricted or deferred stock awards. The maximum number of
shares which may be subject to options, rights or other awards granted under
the Plan to any individual in any calendar year cannot exceed 150,000. If any
portion of an option, restricted stock grant or other award terminates or
lapses unexercised or unvested, or is cancelled, the shares which were subject
to the unexercised portion of such option, restricted stock or other award,
will again be available for issuance under the Plan. On September 20, 1995, the
closing price of a share of Class B Stock on the New York Stock Exchange was
$8.25.
The shares available under the Plan upon exercise of options and other
awards, and for issuance as restricted or deferred stock, may be either
previously authorized but unissued shares or treasury shares. The Plan provides
that the Committee shall make appropriate and equitable adjustments in the
number and kind of shares subject to the Plan and to outstanding grants
thereunder in the event of a stock split, stock dividend or certain other types
of recapitalizations or restructurings.
ELIGIBILITY
Options, restricted stock and other awards under the Plan may be granted to
individuals who are then officers or other employees of the Company or any of
its present or future subsidiaries and who are determined by the Committee to
be key employees. Notwithstanding the foregoing, Hugh M. Hefner is not eligible
to receive options under the Plan. As of September 20, 1995, approximately 46
individuals were eligible to receive awards under the Plan. More than one
option, restricted stock grant or other award may be granted to a key employee.
ADMINISTRATION
The Plan is administered by the Compensation Committee of the Board of
Directors (the "Committee"). The Committee is authorized to determine which
employees are key employees to whom options, restricted stock and other awards
are to be granted and to determine the number of shares to be subject thereto
and the terms and conditions thereof, consistent with the terms of the Plan.
The Committee is also authorized to adopt, amend and revoke rules relating to
the administration of the Plan.
AWARDS UNDER THE PLAN
The Plan provides that the Committee may grant or issue stock options,
restricted stock, deferred stock, performance awards, stock payments and other
stock-related benefits, or any combination thereof. Each grant or issuance will
be set forth in a separate agreement with the person receiving the award and
will indicate the type, amount, terms and conditions of the award. As a
condition to the grant of an option, the Committee may require a key employee
to surrender for cancellation another award previously granted to the employee.
Nonqualified stock options ("NQSOs") provide for the right to purchase Class
B Stock at a specified price which may not be less than fair market value of
such stock at the end of the business day immediately preceding the day such
Option is granted, and usually will become exercisable (in the discretion of
the Committee) in one or more installments after the grant date. NQSOs may be
granted for any term specified by the Committee, provided, that the term of any
NQSOs cannot exceed ten years.
Incentive stock options ("ISOs") are designed to comply with the provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), and will be
subject to restrictions contained in the Code, including exercise prices equal
to at least 100% of fair market value of the Class B Stock on the grant date
and a ten year restriction on their term. ISOs granted to holders of 10% or
more of the Company's voting capital stock must have an exercise price equal to
at least 110% of fair market value of the Class B Stock on the grant date and
can not extend beyond five years. ISOs may be subsequently modified to
disqualify them from
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treatment as an incentive stock option. Incentive stock options that first
become exercisable in any year may not exceed $100,000 in value of underlying
stock, measured at the grant date, and any excess amount will be considered
NQSOs.
Restricted stock may be granted to participants subject to such restrictions
as may be determined by the Committee. Restricted stock may not be sold, or
otherwise transferred or pledged, until restrictions are removed or expire.
Restrictions may be based on duration of employment, Company performance,
individual performance or other factors. Purchasers of restricted stock, unlike
recipients of options, may have voting rights and receive dividends prior to
the time when the restrictions lapse. Unless provided otherwise by the
Committee, if no consideration (other than services) was paid by the restricted
stockholder upon issuance, a restricted stockholder's rights in unvested
restricted stock shall lapse upon termination of employment for any reason at
any time or prior to any date the Committee may establish. If a purchaser gives
consideration other than services for restricted stock, the Company will
generally have a right to repurchase the shares of restricted stock upon
termination of employment. The Committee may also, within its discretion,
provide that a restricted stockholder's rights in unvested restricted stock
shall lapse upon a Change of Control (as defined under "Acceleration of Vesting
and Expiration of Options" below).
Deferred stock may be awarded to participants, typically without payment of
consideration, but subject to vesting conditions based on continued employment
or on performance criteria established by the Committee. Like restricted stock,
deferred stock may not be sold, or otherwise transferred or hypothecated, until
vesting conditions are removed or expire. Unlike restricted stock, deferred
stock will not be issued until the deferred stock award has vested, and
recipients of deferred stock generally will have no voting or dividend rights
prior to the time when vesting conditions are satisfied.
Performance awards may be granted by the Committee to participants. These
awards may be paid in cash or in Class B Stock or in a combination of cash and
Class B Stock. Performance awards may include "phantom" stock awards that
provide for payments based upon increases in the price of the Class B Stock
over a predetermined period. Performance awards may also include bonuses which
may be granted by the Committee and which may be payable in cash or in Class B
Stock or in a combination of cash and Class B Stock.
Stock payments may be granted by the Committee in the form of shares of Class
B Stock or an option or other right to purchase shares of Class B Stock as part
of a deferred compensation arrangement in lieu of all or any part of
compensation, including salary, bonuses and commissions, that would otherwise
be payable to a key employee in cash.
DELIVERY OF EXERCISE PRICE OF OPTIONS
The exercise or purchase price for all options and other rights to acquire
Class B Stock, together with any applicable tax required to be withheld, may be
paid (a) in cash or by certified or cashiers check at the time of exercise or
purchase, (b) in Class B Stock owned by the optionee (or issuable upon exercise
of the option) and having a fair market value on the date of exercise equal to
the aggregate exercise price of the shares to be purchased, (c) with the
approval of the Committee, by delivery of a full recourse promissory note, or
(d) any combination of the foregoing. The Committee may also permit the use of
a "cashless exercise" procedure which permits the optionee to deliver an
exercise notice to a broker-dealer, who then sells the option shares, delivers
the exercise price and withholding taxes to the Company and delivers the excess
funds, less commission and withholding taxes, to the optionee.
ACCELERATION OF VESTING AND EXPIRATION OF OPTIONS
Options granted under the Plan will generally expire (i) ten years from the
date the option was granted or (ii) three months from the employee's
termination of employment as a result of such employee's retirement, or such
employee's being discharged not for cause unless the employee dies within said
three-month period; or (iii) the effective date of (a) a termination of
employment for cause, (b) the employee's resignation, or (c) a Change of
Control specified in clause (iii) of the definition of such term; or (iv) one
year from the employee's termination of employment as a result of the
employee's disability, unless the optionee dies within said one-
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<PAGE>
year period; or (v) one year from the date of the optionee's death. The
Committee may provide for different expiration terms for any option.
The Plan provides that in the event of a Change of Control of the Company
specified in clause (iii) of the definition of such term, all vested
installments of the option and the next installment (if any) of such option
that is unvested on the effective date of such Change of Control will become
immediately exercisable as of a date specified by the Committee. The Plan also
provides that if an optionee is terminated without cause less than one year
after a Change of Control specified in clause (i) or (ii) of the definition of
such term, unless the terms of an option specifically exclude such right, the
optionee shall have the right to exercise such optionee's option with respect
to all vested installments of such option, and with respect to the next
installment (if any) of such option that was unvested on the date of such
termination of employment.
For purposes of the Plan, a "Change of Control" shall mean the occurrence of
any of the following events: (i) except in a transaction described in clause
(iii) below, Hugh M. Hefner, Christie Hefner, the Hugh M. Hefner 1991 Trust
(for so long as Hugh M. Hefner and Christie Hefner are joint trustees or one of
them is sole trustee), and the Hugh M. Hefner Foundation (for so long as Hugh
M. Hefner and Christie Hefner are joint trustees or one of them is sole
trustee) cease collectively to own a majority of the total number of votes that
may be cast for the election of directors of the Company; or (ii) a sale of
Playboy magazine by the Company; or (iii) the liquidation or dissolution of the
Company, or any merger, consolidation or other reorganization involving the
Company unless (x) the merger, consolidation or other reorganization is
initiated by the Company, and (y) is one in which the stockholders of the
Company immediately prior to such reorganization become the majority
stockholders of a successor or ultimate parent corporation of the Company
resulting from such transaction and (z) in connection with such event,
provision is made for an assumption of outstanding options and rights or a
substitution thereof of a new option or right in such successor or ultimate
parent of substantially equivalent value.
AMENDMENT AND TERMINATION
The Plan may be wholly or partially amended or otherwise modified, suspended
or terminated at any time or from time to time by the Board, provided that (i)
no such amendment or modification will be effective if it would cause the Plan
to fail to meet the applicable requirements of Rule 16b-3, and (ii) no
amendment or modification which would require stockholder approval under Rule
16b-3 will be effective until such stockholder approval is obtained. Neither
the amendment, suspension nor termination of the Plan shall, without the
consent of the holder of an option, restricted stock or award, alter or impair
any rights or obligations under any such option, restricted stock or award. No
option, restricted stock or award may be granted during any period of
suspension nor after termination of the Plan, and in no event may any option be
granted under the P!an after the expiration of ten years from the date the Plan
is approved by the Company's stockholders.
TRANSFER RESTRICTIONS
The options, restricted stock awards, deferred stock awards, performance
awards, stock payments and interest under the Plan may not be transferred under
any circumstances, and any attempted disposition thereof shall be null and void
and of no effect, provided that such restrictions on transferability shall not
prevent transfers by will or by the applicable laws of descent and distribution
or pursuant to a qualified domestic relations order as defined by the Code or
Title I of ERISA, or the rules thereunder, and transfers of shares acquired
upon exercise of any option, award or right under the Plan will be permitted to
the extent permitted by Rule 16b-3 as then in effect.
MISCELLANEOUS PROVISIONS
The Plan specifies that the Company may make loans to Plan participants to
enable them to exercise options, purchase shares or realize the benefits of
other awards granted under the Plan. The terms and conditions of such loans, if
any are made, are to be set by the Committee and approved by the Company.
The dates on which options or other awards under the Plan first become
exercisable or vest will be set forth in individual stock option agreements or
other agreements setting forth the terms of the awards.
18
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain of the federal income tax
consequences of certain transactions under the Plan based on federal income tax
laws in effect on August 1, 1995. This summary is not intended to be exhaustive
and does not describe state or local tax consequences.
TAX CONSEQUENCES TO PARTICIPANTS
Nonqualified Stock Options. In general: (i) no income will be recognized by
an optionee at the time a NQSO is granted; (ii) at the time of exercise of a
NQSO, ordinary income will be recognized by the optionee in an amount equal to
the difference between the option price paid for the shares and the fair market
value of the shares if they are nonrestricted on the date of exercise; and
(iii) at the time of sale of shares acquired pursuant to the exercise of a
NQSO, any appreciation (or depreciation) in the value of the shares after the
date of exercise will be treated as either short-term or long-term capital gain
(or loss) depending on how long the shares have been held.
Incentive Stock Options. No income generally will be recognized by an
optionee upon the grant or exercise of an ISO. If shares of Class B Stock are
issued to an optionee pursuant to the exercise of an ISO and no disqualifying
disposition of the shares is made by the optionee within two years after the
date of grant or within one year after the transfer of the shares to the
optionee, then upon the sale of the shares any amount realized in excess of the
option price will be taxed to the optionee as long-term capital gain and any
loss sustained will be a long-term capital loss.
If shares acquired upon the exercise of an ISO are disposed of prior to the
expiration of either holding period described above, the optionee generally
will recognize ordinary income in the year of disposition in an amount equal to
any excess of the fair market value of the shares at the time of exercise (or,
if less, the amount realized on the disposition of the shares if a sale or
exchange) over the option price paid for the shares. Any further gain (or loss)
realized by the optionee generally will be taxed as short-term or long-term
capital gain (or loss) depending on the holding period.
Restricted Stock. A recipient of restricted stock generally will be subject
to tax at ordinary income rates on the fair market value of the shares of
restricted stock (reduced by any amount paid by the recipient for such shares)
at such time as the shares are no longer subject to a risk of forfeiture or
restrictions on transfer for purposes of Section 83 of the Code. However, a
recipient who so elects under Section 83(b) of the Code within 30 days of the
date of transfer of the shares will have taxable ordinary income on the date of
transfer of the shares equal to the excess of the fair market value of the
shares (determined without regard to the risk of forfeiture or restrictions on
transfer) over any purchase price paid for the shares. If a Section 83(b)
election has not been made, any dividends received with respect to shares of
restricted stock that are subject at that time to a risk of forfeiture or
restrictions on transfer generally will be treated as compensation that is
taxable as ordinary income to the recipient.
Deferred Stock. No income generally will be recognized upon the grant of
deferred stock. The recipient of a deferred stock grant generally will be
subject to tax at ordinary income rates on the fair market value of
nonrestricted shares of Class B Stock on the date that such shares are
transferred to the participant under the grant, reduced by any amount paid by
the participant, and the capital gains/loss holding period for such shares will
also commence on such date.
Performance Awards. No income generally will be recognized upon the grant of
a performance award. Upon payment in respect of the earn-out of performance
awards, the recipient generally will be required to include as taxable ordinary
income in the year of receipt an amount equal to the amount of cash received
and the fair market value of any nonrestricted shares of Class B Stock
received.
Stock Payment. A participant who elects to receive shares of Class B Stock in
lieu of other compensation generally will recognize ordinary income at the time
the shares are received in an amount equal to the fair market value of the
shares. A participant who elects to receive NQSOs in lieu of other compensation
generally will be taxed as described above in the case of a recipient of NQSOs.
19
<PAGE>
TAX CONSEQUENCES TO THE COMPANY OR SUBSIDIARY
To the extent that an employee recognizes ordinary income in the
circumstances described above, the Company or the subsidiary for which the
employee performs services will be entitled to a corresponding deduction
provided that, among other things, the income meets the test of reasonableness,
is an ordinary and necessary business expense, is not an "excess parachute
payment" within the meaning of Section 280G of the Code and is not disallowed
by the $1 million limitation on certain executive compensation.
The Company intends generally to comply with other requirements of the
performance-based compensation exclusion under Section 162(m), including option
pricing requirements and requirements governing the administration of the Plan,
so that, upon stockholder approval of the Plan, the deductibility of
compensation paid to top executives thereunder generally is not expected to be
disallowed. The restricted stock granted to date under the Plan will not
qualify as "performance-based" for purposes of Section 162(m), since it will
ultimately vest (assuming continued employment) without regard to the Company's
performance. See "Incentive Plan Benefits" below.
INCENTIVE PLAN BENEFITS
The types of awards which may be granted in the future is subject to the
discretion of the Committee and, therefore, cannot be determined. The following
table sets forth certain information regarding awards granted thus far under
the Plan. All awards have been granted subject to stockholder approval of the
Plan and will be void if such approval is not obtained.
PLAN BENEFITS(1)
AS OF SEPTEMBER 20, 1995
<TABLE>
<CAPTION>
VALUE(2) OF SECURITIES
CLASS B CLASS B UNDERLYING VALUE(3) OF
RESTRICTED RESTRICTED OPTIONS CLASS B
STOCK STOCK AWARDS CLASS B STOCK
NAME AWARDS (#) ($) STOCK (#) OPTIONS ($)
- ---- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Christie Hefner................. 75,000 $ 618,750 75,000 (3)
Anthony J. Lynn................. 26,250 216,563
David I. Chemerow............... 30,000 247,500 30,000 (3)
Richard S. Rosenzweig........... 20,000 165,000 20,000 (3)
Current Executive Officers as a
Group.......................... 248,750 2,052,188 222,500 (3)
All Employees as a Group........ 531,250 4,382,813 482,500 (3)
</TABLE>
- --------
(1) See "Executive Compensation" on page 7 for a description of the terms of
the awards granted to the Named Executive Officers under the Plan. The
restricted stock previously granted under the Plan vests upon the earlier
of June 30, 2005 or the achievement of specified performance objectives
relating to operating income and generally is forfeited upon a Change of
Control specified in clause (iii) of the definition. The options (ISOs)
previously granted under the Plan are generally exercisable in four equal
annual installments.
(2) Based on a closing price for Class B Stock of $8.25 per share on September
20, 1995.
(3) Option exercise price exceeded closing price as of September 20, 1995.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" ADOPTION OF
THE 1995 STOCK INCENTIVE PLAN.
20
<PAGE>
PROPOSAL NO. 3
INDEPENDENT ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee, has
determined that Coopers & Lybrand L.L.P. should continue to serve as auditors
for the Company for the fiscal year ending June 30, 1996. The Board of
Directors recommends that the holders of the Company's Class A Stock vote FOR
ratification of this selection.
A representative of Coopers & Lybrand L.L.P. 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 1995 annual audit as performed by
Coopers & Lybrand L.L.P. is estimated to be approximately $195,000. The final
cost of the fiscal year 1994 annual audit performed by Coopers & Lybrand L.L.P.
was $203,000 with all expenses included.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
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 Securities and Exchange Commission
("SEC") and the New York and Pacific Stock Exchanges. 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 such forms received by it, or written
representations from certain reporting persons that no other reports were
required during the fiscal year ended June 30, 1995, all of the Company's
officers, directors and greater than 10% beneficial owners complied with all
Section 16(a) filing requirements.
ACTION AGAINST DIRECTORS AND OFFICERS
As the Company has disclosed and discussed more fully in its prior proxy
statements, a purported class action suit for unspecified damages filed by a
stockholder in the Circuit Court of Cook County, Illinois, on behalf of an
alleged class composed of those persons who are owners of shares of the common
stock of the Company has been pending since 1990. The suit names as defendants
the Company and the following present and former directors: Christie Hefner,
Hugh M. Hefner, William A. Emerson, John R. Purcell, Robert Kamerschen, Mark H.
McCormack, Richard S. Rosenzweig and Sol Rosenthal. During the third quarter of
fiscal year 1991, the plaintiffs agreed to dismiss this action against Mr.
McCormack. The suit alleges that the individual defendants violated their
fiduciary duty to the class by approving the Company's stock recapitalization
plan, which became effective on June 7, 1990. The suit also requests that the
recapitalization plan be reversed. The Company and most of the individual
defendants have been served and have filed an answer denying all substantive
complaint allegations. In February 1995, the Court granted the Company's motion
for summary judgment and the case was dismissed. Plaintiffs have filed an
appeal. Management believes that the action is without merit and will continue
to defend such action vigorously. In accordance with the Company's bylaws and
Delaware law, the Company has agreed with all individual defendants to advance
the fees and costs they might incur prior to the final disposition of the case,
on the condition that such individuals shall repay the amounts advanced if it
is finally determined that any respective individual is not entitled under
Delaware law to be indemnified by the Company for such expenses.
STOCKHOLDER PROPOSALS FOR THE 1996 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1996 annual meeting
must be received by the Company no later than May 31, 1996 to be considered for
inclusion in its proxy statement and form of proxy relating to that meeting.
Such proposals should be addressed to the Secretary, Playboy Enterprises, Inc.,
680 North Lake Shore Drive, Chicago, Illinois 60611, and, while not required,
it is suggested such proposal be submitted by Certified Mail-Return Receipt
Requested to curtail controversy as to the date of receipt.
21
<PAGE>
ANNUAL REPORT AND FINANCIAL INFORMATION
A copy of the Company's Annual Report to Stockholders, including financial
statements and a substantial portion of the Company's Annual Report on Form 10-
K for fiscal year 1995, is being mailed to each stockholder herewith. A COPY OF
THE COMPANY'S COMPLETE ANNUAL REPORT ON FORM 10-K AND A LIST OF ALL EXHIBITS
THERETO WILL BE SUPPLIED WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN REQUEST
TO IRMA VILLARREAL, OFFICE OF THE SECRETARY, AT THE COMPANY'S PRINCIPAL
EXECUTIVE OFFICES, 680 NORTH LAKE SHORE DRIVE, 15th FLOOR, CHICAGO, ILLINOIS
60611.
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. However, if
other proper matters are presented at the meeting, it is the intention of the
proxy holders named in the enclosed form of proxy to take such action as shall
be 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.
By Order of the Board of Directors
Chicago, Illinois
September 28, 1995
22
<PAGE>
- -
- -
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 NOVEMBER 14, 1995
The undersigned hereby constitutes and appoints CHRISTIE 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 September
18, 1995, at the annual meeting of stockholders of said corporation to be held
November 14, 1995 and at any and all adjournments thereof, 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 herein. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF MS. HEFNER AND MESSRS. BOOKSHESTER, KAMERSCHEN,
ROSENTHAL AND ROSENZWEIG, "FOR" THE APPROVAL OF THE 1995 STOCK INCENTIVE PLAN
AND "FOR" THE APPOINTMENT OF COOPERS & LYBRAND L.L.P.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE>
- - PLAYBOY ENTERPRISES, INC. -
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
[ ]
1. Election of Directors
Nominees: D. Bookshester, C. Hefner, For Withheld
R. Kamerschen, S. Rosenthal, R. Rosenzweig. [_] [_]
------------------------------------------
2. To approve the Playboy Enterprises, Inc. For Against Abstain
1995 Stock Incentive Plan. [_] [_] [_]
3. To ratify the appointment of Coopers &
Lybrand L.L.P. as independent auditors
of the Company for the fiscal year ending For Against Abstain
June 30, 1996. [_] [_] [_]
4. The Proxies are authorized to vote in their discretion upon such other
matters as may properly come before the meeting.
Please mark here if you plan to attend the annual meeting scheduled to be held
at the Company's offices located at 730 Fifth Avenue, Third Floor, New York,
New York. [_]
Dated: __________________, 1995
Signature(s)___________________________________
------------------------------------------------
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.
- - -
