SCHEDULE 14C
(Rule 14C-101)
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE
SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
/X/ Preliminary Information Statement / / Confidential, for use of the
Commission only (as permitted by
/ / Definitive Information Statement Rule 14c-5(d)(2))
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 14c-5(g)
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 number:
-------------------------------------------------------------------------------
(3) Filing party:
-------------------------------------------------------------------------------
(4) Date filed:
-------------------------------------------------------------------------------
[PLAYBOY ENTERPRISES, INC. LOGO]
680 North Lake Shore Drive
Chicago, Illinois 60611
________________
Notice of Action by Written Consent
_________________
Dear Stockholder:
We would like to inform you of important corporate actions that
have recently been taken.
As previously announced, on March 11, 2003, we completed the
private offering of $115 million aggregate principal amount of senior
secured notes of PEI Holdings, Inc., or Holdings, a wholly owned subsidiary
of ours. In connection with the sale of these notes, we restructured the
outstanding indebtedness of Playboy.com, Inc. owed to Hugh M. Hefner, our
founder and Editor-in-Chief, by extinguishing that indebtedness in exchange
for shares of two series of preferred stock of Holdings and cash. The
shares of Holdings preferred stock that Mr. Hefner received at the time of
the closing of the note offering will be exchanged for a new series of our
preferred stock that is convertible into shares of our Class B common stock
and for additional shares of our Class B common stock when the corporate
actions described in the attached Information Statement take effect. The
terms of the preferred stock and the exchange are described in more detail
in the Information Statement.
Our amended and restated certificate of incorporation, or charter,
currently does not permit us to issue preferred stock. As a result, we are
amending our charter to authorize undesignated preferred stock so that we can
issue shares of preferred stock to Mr. Hefner in exchange for the shares of
preferred stock of Holdings that he now owns and to give us greater flexibility
in raising capital, structuring transactions that involve the issuance of
preferred stock, engaging in future acquisitions and other corporate purposes.
Under Delaware law, approval of the amendment to our charter requires the
affirmative vote of a majority of the outstanding shares of our voting stock. In
addition, under the rules of the New York Stock Exchange, the approval of a
majority of the outstanding shares of our voting stock is required prior to the
issuance to Mr. Hefner of shares of our Class B common stock and shares of
preferred stock convertible into shares of our Class B common stock. Mr. Hefner,
as trustee for The Hugh M. Hefner 1991 Trust, has sole investment and voting
power over approximately 69.53% of our outstanding voting stock, which is
sufficient for stockholder approval of these matters. On March 11, 2003, Mr.
Hefner approved these actions by written consent. As a result, no action is
required on your part. We are furnishing this Information Statement to you
solely for the purpose of informing you that we have taken these actions, as we
are required to do under the Securities Exchange Act of 1934, as amended, and
Delaware law. Please read the Information Statement carefully. We thank you for
your continued support.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
Sincerely,
Christie Hefner
Chairman and Chief Executive Officer
April , 2003
PLAYBOY ENTERPRISES, INC.
680 North Lake Shore Drive
Chicago, Illinois 60611
________________
Preliminary Information Statement
_________________
We are furnishing this Information Statement to you in connection
with the approval by our Board of Directors of the matters described below
and the subsequent approval of these matters by written consent of the
holder of a majority of our outstanding shares of voting stock, which we
refer to in this Information Statement as the written consent. The
following actions were approved in the written consent:
1. an amendment to our amended and restated certificate of
incorporation, which we refer to in this Information Statement
as the charter amendment, to authorize undesignated preferred
stock; and
2. our issuance, which we sometimes refer to in this Information
Statement as the Playboy stock issuance, to Hugh M. Hefner, our
founder and Editor-in-Chief, of shares of our Class B common
stock and shares of a new series of our preferred stock that is
convertible into shares of our Class B common stock, in
exchange for shares of preferred stock of PEI Holdings, Inc.,
or Holdings, a wholly owned subsidiary of ours, that Mr. Hefner
currently owns.
The charter amendment and the Playboy stock issuance are part of a
transaction, which we refer to in this Information Statement as the Hefner
debt restructuring, in which we agreed, pursuant to the terms of an exchange
agreement, dated as of March 11, 2003, between us, Holdings, Playboy.com, Inc.
and Mr. Hefner, to restructure the outstanding indebtedness of Playboy.com
owed to Mr. Hefner. This Information Statement more fully describes the terms
and conditions of the proposed charter amendment and the Playboy stock
issuance. You are urged to read this Information Statement thoroughly.
Our Board of Directors has adopted a resolution that sets forth and
declares advisable the charter amendment and the Playboy stock issuance. Mr.
Hefner, as trustee for The Hugh M. Hefner 1991 Trust, has sole investment and
voting power over approximately 69.53% of our outstanding voting stock, which
is sufficient for stockholder approval of these matters under the Delaware
General Corporation Law, or the DGCL, and the rules of the New York Stock
Exchange. On March 11, 2003, Mr. Hefner approved these actions by written
consent. As a result, no action is required on your part. We are furnishing
this Information Statement to you solely for the purpose of informing you that
we have taken these actions, as we are required to do under the Securities
Exchange Act of 1934, as amended, and the DGCL.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND
US A PROXY.
Our Class A common stock will continue to trade on the New York Stock
Exchange under the trading symbol "PLAA" and our Class B common stock will
continue to trade on the New York Stock Exchange under the trading symbol
"PLA."
This Information Statement is being mailed on or about April , 2003,
to holders of record on March 17, 2003, of shares of our Class A common stock
and Class B common stock.
We intend to take all necessary action to effect the charter
amendment on or after April , 2003 (20 days from the date of the mailing of
this Information Statement). We intend to take all actions necessary to effect
the Playboy stock issuance as soon as practicable following the effectiveness
of the charter amendment.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS........................................................1
ACTIONS TAKEN BY WRITTEN CONSENT.............................................3
DESCRIPTION OF CAPITAL STOCK.................................................6
PLAYBOY STOCK OWNERSHIP.....................................................11
WHERE YOU CAN FIND MORE INFORMATION.........................................13
EXHIBIT A - CHARTER AMENDMENT..............................................A-1
QUESTIONS AND ANSWERS
Q1. Why are you amending the charter of Playboy Enterprises, Inc.?
A1. Our charter currently does not permit the issuance of preferred stock. We
are now amending our charter to authorize undesignated preferred stock, with
a limitation of 10,000,000 authorized shares. The charter amendment will
allow us to complete the Hefner debt restructuring and provides us with
greater flexibility in our capital structure.
As we previously announced, on March 11, 2003, we completed the private
offering of $115 million aggregate principal amount of senior secured notes of
Holdings. In connection with the sale of these notes, we restructured the
outstanding indebtedness of Playboy.com owed to Mr. Hefner by extinguishing
that indebtedness in exchange for shares of two series of preferred stock of
Holdings and cash. As part of the Hefner debt restructuring, we agreed to
exchange the shares of preferred stock of Holdings for shares of our Class B
common stock and 1,674 shares of a new series of our preferred stock that is
convertible into shares of our Class B common stock. In order to enable us to
issue preferred stock in this exchange, we need to amend our charter. As soon
as practicable following the effectiveness of the charter amendment, our Board
of Directors will designate a new series of preferred stock as Series A
Convertible Preferred Stock, which we refer to in this Information Statement
as the Playboy Convertible Preferred Stock.
In addition to allowing us to complete the Hefner debt restructuring,
having undesignated preferred stock available for issuance will provide us
with greater flexibility in raising capital, structuring transactions that
involve the issuance of preferred stock, engaging in future acquisitions and
other corporate purposes. As a general matter, we will be able to issue shares
of preferred stock, up to the maximum number of authorized shares, without any
further action by stockholders.
Q2. What approval is required in connection with the charter amendment and the
Playboy stock issuance?
A2. Approval of the charter amendment under the DGCL requires the affirmative
vote of the holders of a majority of the outstanding shares of our voting
stock. Under the rules of the New York Stock Exchange, the approval of a
majority of the outstanding shares of our voting stock is required prior to
the Playboy stock issuance because the number of shares of Class B common
stock to be issued to Mr. Hefner, together with the number of shares of Class
B common stock into which the Playboy Convertible Preferred Stock may be
converted, exceeds one percent of the number of shares of Class B common stock
outstanding before the Playboy stock issuance.
Q3. Is my vote needed to approve the charter amendment or the Playboy stock
issuance?
A3. No. The DGCL allows stockholders to act by written consent instead of
holding a meeting, unless prohibited by a company's certificate of
incorporation. Our charter does not prohibit stockholder action by written
consent. In fact, our bylaws expressly provide that any action which is
required to or may be taken at a meeting of stockholders may be taken by
written consent in lieu of a meeting. Mr. Hefner, through The Hugh M. Hefner
1991 Trust, has sole investment and voting power over approximately 69.53% of
our outstanding voting stock, which is sufficient for stockholder approval of
the charter amendment and the Playboy stock issuance. Because Mr. Hefner has
signed the written consent approving these matters, no action is required on
your part. APPROVAL OF THE MATTERS DESCRIBED IN THIS INFORMATION STATEMENT HAS
BEEN OBTAINED WITHOUT THE VOTE OF ANY OTHER STOCKHOLDER. For additional
information regarding the written consent, see the section of this Information
Statement entitled "Actions Taken By Written Consent -- Approval Necessary;
Stockholder Action" on page 5.
Q4. When do you expect the charter amendment to take effect and when will you
issue the shares of Class B common stock and Playboy Convertible Preferred
Stock?
A4. We expect the charter amendment to take effect on or after April , 2003
(20 calendar days from the date of the mailing of this Information Statement).
As soon as practicable after the effective date of the charter amendment, our
Board of Directors will designate the Playboy Convertible Preferred Stock and,
thereafter, we will complete the Hefner debt restructuring by issuing shares
of our Class B common stock and Playboy Convertible Preferred Stock to Mr.
Hefner in exchange for the shares of preferred stock of Holdings he now owns.
For additional information regarding timing of these actions, see the section
of this Information Statement entitled "Actions Taken By Written Consent --
Timing" on page 5.
Q5. Do you have any plans to issue any other shares of preferred stock?
A5. No. Except as for the issuance of 1,674 shares of Playboy Convertible
Preferred Stock to Mr. Hefner in exchange for his shares of preferred stock of
Holdings, we are not presently considering any transaction involving the
issuance of preferred stock nor are there any plans, proposals, negotiations,
agreements or understandings to issue or to make any acquisition utilizing
preferred stock. However, opportunities requiring prompt action may arise,
such as favorable market conditions existing for the sale of a particular type
of preferred stock. Our Board of Directors believes that the potential delay
and expense in seeking stockholder approval for a specific issuance of
preferred stock could deprive us and our stockholders of the ability
effectively to benefit from such an opportunity or cause the loss of
attractive financing arrangements.
Q6. What is the tax impact to me of the charter amendment and the Playboy
stock issuance?
A6. None. Your shares are not being sold or exchanged in connection with the
matters described in this Information Statement, so there is no taxable
transaction related to your shares. For additional information regarding the
tax consequences of the charter amendment and the Playboy stock issuance, see
the section of this Information Statement entitled "Actions Taken By Written
Consent -- Material Federal Income Tax Consequences" on page 6.
Q7. Am I entitled to dissenter's rights in connection with the charter
amendment or the Playboy stock issuance?
A7. No appraisal rights are available under the DGCL in connection with the
matters described in this Information Statement. For additional information
regarding stockholders' appraisal rights, see the section of this Information
Statement entitled "Actions Taken By Written Consent -- Dissenters' Rights of
Appraisal" on page 6.
Q8. Whom can I call with questions about the charter amendment or the Playboy
stock issuance?
A8. You should contact our Investor Relations Department by phone at (312)
373-2430, or by mail addressed to Playboy Enterprises, Inc., Investor
Relations Department, 680 North Lake Shore Drive, Chicago, Illinois 60611,
with any questions about the charter amendment or the Playboy stock issuance.
2
ACTIONS TAKEN BY WRITTEN CONSENT
Background and Board Action
As previously announced, on March 11, 2003, we completed the private
offering of $115 million in aggregate principal amount of senior secured notes
by Holdings. As a condition to the sale of these notes, we were required by
the purchasers of the notes to restructure the outstanding indebtedness of
Playboy.com owed to Mr. Hefner by converting such debt into equity of Playboy
Enterprises, Inc.
Our Board of Directors appointed a special committee of independent
directors to evaluate, negotiate and determine the terms of the Hefner debt
restructuring on our behalf. The special committee approved the Hefner debt
restructuring on the terms described below and recommended to the full Board
of Directors that it approve the Hefner debt restructuring on those terms,
which it did. In connection with their respective approvals of the Hefner debt
restructuring, the special committee and the Board of Directors received an
opinion from an independent financial advisor of national standing retained by
the special committee to the effect that the Hefner debt restructuring was
fair to us from a financial point of view.
At the time of the Hefner debt restructuring, Playboy.com had an
aggregate of approximately $27.2 million of outstanding indebtedness to Mr.
Hefner in the form of three promissory notes. Upon the closing of the note
offering, Playboy.com's debt to Mr. Hefner was restructured as follows:
o a $10 million promissory note payable by Playboy.com to Mr.
Hefner was extinguished in exchange for 1,000 shares of Series
A preferred stock of Holdings with a stated value of $10,000
per share, which we refer to as the Holdings Series A Preferred
Stock; and
o the other two promissory notes payable by Playboy.com to Mr.
Hefner, in a combined principal amount of approximately $17.235
million, were extinguished in exchange for $500,000 in cash and
1,674 shares of Series B preferred stock of Holdings with a
stated value of $10,000 per share, which we refer to as the
Holdings Series B Preferred Stock.
Pursuant to the terms of the exchange agreement and the certificate
of designation governing the Holdings Series A Preferred Stock, we are
required to exchange the Holdings Series A Preferred Stock for shares of our
Class B common stock. Pursuant to the terms of the exchange agreement and the
certificate of designation governing the Holdings Series B Preferred Stock, we
are required to exchange the Holdings Series B Preferred Stock for shares of
Playboy Convertible Preferred Stock.
Holdings will be required to redeem the Holdings Series A Preferred
Stock in September 2010, unless exchanged earlier for our Class B common stock
as provided by the terms of the Holdings Series A Preferred Stock, and the
Holdings Series A Preferred Stock will pay an annual dividend of 8%, payable
semi-annually. The dividend will be payable in cash, provided that if the
exchange of the Holdings Series A Preferred Stock for shares of our Class B
common stock has not occurred prior to the 90th day following the original
issuance of the Holdings Series A Preferred Stock, dividends accruing after
that date will be paid through the issuance of additional shares of Holdings
Series A Preferred Stock. The number of shares of our Class B common stock
issued in the exchange will be determined by dividing (a) the sum of the
aggregate stated value of the then outstanding shares of Holdings Series A
Preferred Stock and the amount of accrued and unpaid dividends by (b) the
weighted average closing price of our Class B common stock during the 90-day
period prior to the date of the charter amendment.
Holdings will be required to redeem the Holdings Series B Preferred
Stock in September 2010, unless exchanged earlier for shares of our Playboy
Convertible Preferred Stock as provided by the terms of the Holdings Series B
Preferred Stock, and the Holdings Series B Preferred Stock will pay an annual
cash dividend of 8%, payable semi-annually. Each share of Holdings Series B
Preferred Stock will be exchanged for one share of Playboy Convertible
Preferred Stock plus an amount equal to any accrued but unpaid dividends. The
shares of our Playboy Convertible Preferred Stock to be issued in exchange for
the Holdings Series B Preferred Stock will have the same terms as the Holdings
Series B Preferred Stock, except that they will be convertible at the option
of the holder into shares of our Class B common stock. For more information
3
regarding the terms of the Playboy Convertible Preferred Stock, see the
section of this Information Statement entitled "Description of Capital Stock
-- Preferred Stock."
Some Possible Effects of the Charter Amendment
In addition to allowing us to complete the Hefner debt restructuring,
we believe that the authorization to issue undesignated preferred stock is
necessary to provide us with, among other things, greater flexibility in
raising capital, structuring transactions that involve the issuance of
preferred stock, engaging in future acquisitions and other corporate purposes.
We believe that the undesignated preferred stock will provide us with a capital
structure better suited to meet our short- and long-term capital needs.
The authorized and unissued preferred stock would be available for
issuance from time to time as determined by our Board of Directors for any
proper corporate purpose. Such purposes might include issuance in public or
private sale for cash as a means of obtaining capital for use in our business
and operations and issuance as part or all of the consideration required to be
paid by us for acquisitions or other businesses or properties. The timing and
terms of the issuance of preferred stock to be issued in connection with any
such transactions would depend on a number of factors, including economic and
market conditions at the time of the specific transactions, our business,
financial condition, strategic goals, the particular circumstances of the
transaction in which the shares are issued and other factors. Furthermore,
except as may be required for a particular issuance under applicable laws or
the securities market on which our securities are then listed or quoted, the
preferred stock may be issued upon the approval of the Board of Directors,
without any further vote or action on the part of our stockholders.
We can use the preferred stock with our common stock, or instead of
our common stock, in connection with future acquisitions, raising new capital,
planning future financing transactions or for other corporate purposes. The
preferred stock would be particularly useful for such purposes since our Board
of Directors would have the authority to choose the exact terms of the class
or series to respond to investor preferences, developments in types of
preferred stock, market conditions and the nature of the specific transaction,
except that our Board of Directors would be prohibited from issuing any shares
of preferred stock with any voting rights or that are convertible into shares
of our Class A common stock. When seeking additional financing or capital, it
may be advantageous to us in some cases to structure a transaction which
provides for the issuance of equity rather than debt, although the equity may
require the payment of dividends rather than the payment of interest on debt
instruments. Furthermore, if an acquisition involves another entity which has
an outstanding class or series of preferred stock, the availability of
preferred stock which can be offered in exchange for that security will
provide us with the flexibility to appropriately structure the transaction in
a manner which may facilitate the negotiation and the consummation of such
transaction.
The issuance of preferred stock may have a dilutive effect on the
equity of the holders of our Class A common stock and Class B common stock.
Any shares of preferred stock that we issue likely would have preference over
our Class A common stock and Class B common stock with respect to dividends
and other distributions and could have redemption or conversion features. The
Playboy Convertible Preferred Stock that we will issue to Mr. Hefner will rank
senior to our common stock with respect to dividends, liquidations and other
distributions and will be convertible into shares of our Class B common stock.
Amendment to Our Charter
Our charter currently authorizes 7,500,000 shares of Class A common
stock, par value $.01 per share, and 30,000,000 shares of Class B common
stock, par value $.01 per share. As of February 28, 2003, there were 4,864,102
shares of our Class A Common Stock and 21,424,706 shares of our Class B common
stock issued and outstanding.
On or after April , 2003 (20 days after the date of the mailing of
this Information Statement), we will amend our charter. The charter amendment
will authorize 10,000,000 shares of undesignated preferred stock. As soon as
practicable after the effectiveness of the charter amendment, our Board of
Directors will designate 1,674 of shares of preferred stock as Playboy
Convertible Preferred Stock. There will be no change to the number of
authorized shares of Class A common stock and Class B common stock as a result
of the charter amendment. A copy of the charter amendment is attached as
4
Exhibit A to this Information Statement. For more information regarding our
authorized capital stock, see the section of this Information Statement
entitled "Description of Capital Stock."
Issuance of Class B Common Stock and Playboy Convertible Preferred Stock
After our Board of Directors designates the Playboy Convertible
Preferred Stock, we will complete the Hefner debt restructuring by issuing to
Mr. Hefner shares of our Class B common stock and Playboy Convertible
Preferred Stock in exchange for the shares of Holdings Series A Preferred
Stock and Holdings Series B Preferred Stock he now owns. For more information
regarding the timing of the Playboy stock issuance, see the section of this
Information Statement entitled "Actions Taken By Written Consent -- Timing."
Approval Necessary; Stockholder Action
Under the DGCL, approval of an amendment to a company's certificate
of incorporation requires the affirmative vote of the holders of a majority of
the outstanding shares of the company's voting stock. Under the rules of the
New York Stock Exchange, approval of a majority of the outstanding shares of a
company's voting stock is required prior to the issuance of common stock, or
of securities convertible into or exercisable for common stock, to:
o a director, officer or substantial security holder of the company,
each of whom is referred to as a related party;
o a subsidiary, affiliate or other closely-related person of a related
party; or
o any company or entity in which a related party has a substantial
direct or indirect interest
if the number of shares of common stock to be issued, or if the number of
shares of common stock into which the securities may be convertible or
exercisable, exceeds either one percent of the number of shares of common
stock or one percent of the voting power outstanding before the issuance. We
are required to obtain stockholder approval under the rules of the New York
Stock Exchange because Mr. Hefner is a related party under these rules and the
number of shares of Class B common stock to be issued to Mr. Hefner in
exchange for his shares of Holdings Series A Preferred Stock, together with
the number of shares of Class B common stock into which the Playboy
Convertible Preferred Stock to be issued to Mr. Hefner may be converted, will
exceed one percent of the number of shares of our Class B common stock
outstanding before the issuance.
Section 228 of the DGCL permits stockholders to approve any action
that would be taken at any annual or special meeting without a meeting by
written consent of the holders of the minimum number of votes that would be
necessary to authorize the action at a meeting. In addition, our bylaws
expressly provide that any action that is required to or may be taken at a
meeting of stockholders may be taken by written consent in lieu of a meeting.
Our Class A common stock is the only class of our common stock entitled to
vote on the charter amendment and the Playboy stock issuance. Mr. Hefner, as
trustee of The Hugh M. Hefner 1991 Trust, has sole investment and voting power
over approximately 69.53% of our outstanding voting stock, which is sufficient
for stockholder approval of the charter amendment and the Playboy stock
issuance. Mr. Hefner has signed a written stockholder's consent approving
these matters. As a result, no action is required on your part.
APPROVAL OF THE MATTERS DESCRIBED IN THIS INFORMATION STATEMENT HAS
BEEN OBTAINED WITHOUT THE VOTE OF ANY OTHER STOCKHOLDER. WE ARE NOT ASKING YOU
FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
Timing
The charter amendment will be effected by the filing of a certificate
of amendment to our charter with the Secretary of State of the State of
Delaware on or after April , 2003 (20 days after the date of the mailing of
this Information Statement). The charter amendment will take effect upon such
filing.
5
As soon as practicable following the effectiveness of the charter
amendment, our Board of Directors will designate the Playboy Convertible
Preferred Stock and, thereafter, we will complete the Hefner debt
restructuring by issuing shares of our Class B common stock and Playboy
Convertible Preferred Stock to Mr. Hefner in exchange for the shares of
Holdings Series A Preferred Stock and Holdings Series B Preferred Stock he now
owns.
Interests of Certain Persons
Mr. Hefner approved the charter amendment and Playboy stock issuance
by written consent. On March 11, 2003, the date of the written consent, Mr.
Hefner had sole investment and voting power over approximately 69.53% of our
outstanding voting stock. Mr. Hefner founded Playboy in 1953 and currently
serves as our Editor-in-Chief. As part of the Hefner debt restructuring, Mr.
Hefner will receive shares of our Class B common stock and Playboy Convertible
Preferred Stock.
Material Federal Income Tax Consequences
Neither the charter amendment nor the Playboy stock issuance will be
a taxable transaction to our stockholders as the outstanding shares of Class A
common stock and Class B common stock are not being sold or exchanged in
connection with these actions. These actions will not have material adverse
tax consequences to us.
Dissenters' Rights of Appraisal
No appraisal rights are or will be available under the DGCL in
connection with the matters described in this Information Statement.
DESCRIPTION OF CAPITAL STOCK
General.
Our currently authorized capital stock consists of 37,500,000 shares
of common stock, of which 7,500,000 shares are Class A common stock, par value
$0.01 per share, and 30,000,000 shares are Class B common stock, par value
$0.01 per share. After effectiveness of the charter amendment, our authorized
capital stock will include 10,000,000 shares of preferred stock, par value
$0.01 per share. All outstanding shares of our Class A common stock and Class
B common stock are validly issued, fully paid and non-assessable. Shares of
our Class A common stock are traded on the New York Stock Exchange under the
symbol "PLAA" and shares of our Class B common stock are traded on the New
York Stock Exchange under the symbol "PLA." On April , 2003, the most recent
practicable day before the printing of this Information Statement, our Class A
common stock closed at $ per share and our Class B common stock closed at $
per share.
Common Stock
Voting. Each share of Class A common stock entitles its holder to one
vote on all matters submitted to the stockholders, including the election of
directors. Each share of Class B common stock has no voting rights, other than
those as described below or as required by law. Under the DGCL, holders of
Class B common stock are entitled to vote on proposals to increase or decrease
the number of authorized shares of Class B common stock, to change the par
value of the Class B common stock or to alter or change the powers,
preferences or special rights of the shares of Class B common stock which may
affect them adversely.
Dividends and Other Distributions (including distributions upon
liquidation or sale of Playboy Enterprises, Inc.). Each share of Class A
common stock and Class B common stock is equal with respect to dividends and
other distributions in cash, stock or property (including distributions upon
our liquidation, dissolution or winding up of our affairs), except as
described below. Subject to the rights of any outstanding series of our
preferred stock, dividends or other distributions payable on our common stock
in shares of stock will be made to all holders of our common stock and may be
made either (a) in shares of Class B common stock or any security other than
Class A common stock to the record holders of both Class A common stock and
Class B common stock, or (b) in shares of Class A common stock to the record
holders of Class A common stock and shares of Class B common stock to the
record holders of Class B common stock. In no event will either Class A common
stock or Class B common stock be split, divided or combined unless the other
is proportionately split, divided or combined.
6
Non-Convertibility. Neither the Class A common stock nor the Class B
common stock is convertible into the other, or any of our other securities.
Minority Protection Transactions. If any person or group acquires
beneficial ownership of additional Class A common stock (other than upon
original issuance by us, by operation of law, by will or the laws of descent
and distribution, by gift or by foreclosure of a bona fide loan), or any
persons holding Class A common stock form a group, and the acquisition or
formation results in that person or group owning 10% or more of the Class A
common stock then outstanding, which we refer to as a "Related Person," and
the Related Person does not then own an equal or greater percentage of all
outstanding shares of Class B common stock, the Related Person must, within a
90-day period beginning the day after becoming a Related Person, make a public
tender offer to acquire additional shares of Class B common stock, which we
refer to as a "Minority Protection Transaction." For purposes of this
provision, "beneficial ownership" and "group" have the respective meanings of
those terms as used in Rule 13d-3 and Rule 15d-5(b) under the Exchange Act or
any successor statute or regulations.
In a Minority Protection Transaction, the Related Person must offer
to acquire from the holders of Class B common stock that number of shares of
additional Class B common stock, which we refer to as the "Additional Shares,"
determined by (1) multiplying the percentage of outstanding Class A common
stock beneficially owned by the Related Person by the total number of shares
of Class B common stock outstanding on the date the person or group became a
Related Person, and (2) subtracting the total number of shares of Class B
common stock beneficially owned by the Related Person on that date (including
shares acquired on that date or before the time the person or group became a
Related Person). The Related Person must acquire all shares validly tendered
or, if the number of shares tendered exceeds the number determined under the
formula, a proportionate amount from each tendering holder.
The offer price for any shares required to be purchased by the
Related Person in a Minority Protection Transaction is the greater of (1) the
highest price per share paid by the Related Person for any share of Class A
common stock in the six-month period ending on the date the person or group
became a Related Person, or (2) the highest bid price of a share of the Class
A common stock or Class B common stock on the New York Stock Exchange on the
date the person or group became a Related Person.
A Minority Protection Transaction will also be required by any
Related Person, and any other person or group beneficially owning 10% or more
of the outstanding Class A common stock, which we refer to as an "Interested
Common Stockholder," that acquires additional Class A common stock (other than
upon issuance or sale by us, by operation of law, by will or the laws of
descent and distribution, by gift or by foreclosure of a bona fide loan) or
joins with other persons to form a group, whenever an additional acquisition
or formation results in the Related Person or Interested Common Stockholder
owning the next highest integral multiple of 5% (e.g. 15%, 20%, 25%, etc.) of
the outstanding Class A common stock and the Related Person or Interested
Common Stockholder does not own an equal or greater percentage of all
outstanding shares of Class B common stock. The Related Person or Interested
Common Stockholder will be required to extend an offer to buy that number of
Additional Shares prescribed by the formula stated above, and must acquire all
shares validly tendered or a proportionate amount as specified above at the
price determined above, even if a previous offer resulted in fewer shares of
Class B common stock being tendered than the previous offer included.
The requirement to engage in a Minority Protection Transaction is
satisfied by making the requisite offer and purchasing validly tendered
shares, even if the number of shares tendered is less than the number of
shares included in the required offer. The penalty applicable to any Related
Person or Interested Common Stockholder that fails to make a required offer,
or to purchase shares validly tendered (after proration, if any), is to
suspend automatically the voting rights of the shares of Class A common stock
owned by the Related Person or Interested Common Stockholder until completion
of the required offer or until divestiture of the shares of Class A common
stock that triggered the offer requirement. Neither the Minority Protection
Transaction requirement nor the related penalty apply to any increase in
percentage ownership of Class A common stock resulting solely from a change in
the total amount of Class A common stock outstanding.
7
Similar requirements apply to any purchases by us, except that any
treasury shares will be included in the calculations. All calculations are
based upon numbers of shares reported by us in out most recent annual or
quarterly report filed under the Exchange Act, or any current report filed on
Form 8-K.
This provision of our charter may be amended in a manner adversely
affecting the holders of Class B common stock (including amendments effected
in any merger or consolidation involving us) only if the amendment is approved
by a majority vote of holders of Class B common stock who are not Related
Persons or Interested Common Stockholders.
Preemptive Rights. Our common stock does not carry any preemptive
rights enabling a holder to subscribe for or receive shares of any class of
our common stock or any other securities convertible into shares of any class
of our common stock.
Mergers and Acquisitions. Each holder of Class B common stock will be
entitled to receive the same per share consideration as the per share
consideration, if any, received by any holder of the Class A common stock in a
merger or consolidation of us (whether or not we are the surviving
corporation). Any issuance of shares of Class A common stock in a merger or
other acquisition transaction must be approved by the holders of a majority of
the shares of Class A common stock unless shares of Class B common stock are
also issued in the transaction and the quotient determined by dividing the
number of shares of Class B common stock to be so issued by the number of
shares of Class A common stock to be so issued is at least equal to the
quotient determined, immediately before the transaction, by dividing the total
number of outstanding shares of Class B common stock by the total number of
outstanding shares of Class A common stock and Class B common stock taken
together.
Preferred Stock
Upon effectiveness of the charter amendment, we will be authorized to
issue up to 10,000,000 shares of preferred stock. Except for the shares to be
designated as Playboy Convertible Preferred Stock and issued to Mr. Hefner in
connection with the Hefner debt restructuring, the preferred stock will be
undesignated and the rights, preferences, qualifications, limitations and
restrictions will not be fixed. Our Board of Directors will be authorized to:
o issue these shares, without any future stockholder action or
approval, in one or more classes or series;
o establish from time to time the number of shares to be included
in each series; and
o fix the rights, preferences and privileges of the shares of
each wholly unissued series and any of its qualifications,
limitations or restrictions;
provided, however, that any such series of preferred stock shall not have any
voting powers, except as required by law or in the event of failure to pay
dividends, and shall in no event be convertible into shares of our Class A
common stock.
Series A Convertible Preferred Stock.
As soon as practicable following the effectiveness of the
charter amendment, which we expect will be on or after April , 2003
(20 days from the date of mailing of this Information Statement), our
Board of Directors will designate 1,674 shares of preferred stock as
Series A Convertible Preferred Stock, which we have been referring to
as Playboy Convertible Preferred Stock, with a stated value per share
of $10,000. This designation will become effective upon the filing of
a certificate of designations for the Playboy Convertible Preferred
Stock with the Secretary of State of the State of Delaware.
Voting. Except as required by law, each share of Playboy
Convertible Preferred Stock will have no voting rights, other than
with respect to any matters required to be submitted to a vote of the
holders of shares of our Class B common stock under applicable law.
In these votes, the holders of outstanding shares of Playboy
Convertible Preferred Stock will vote together with the holders of
shares of our Class B common stock as a single class and will be
entitled to the number of votes per share of Playboy Convertible
8
Preferred Stock equal to the number of shares of Class B common stock
into which such share of Playboy Convertible Preferred Stock is
convertible at the time. Under the DGCL, holders of Playboy
Convertible Preferred Stock will be entitled to vote on proposals to
increase or decrease the number of authorized shares of Playboy
Convertible Preferred Stock, to change the par or stated value of the
Playboy Convertible Preferred Stock or to alter or change the powers,
preferences or special rights of the shares of Playboy Convertible
Preferred Stock which may affect them adversely.
Dividends. Holders of Playboy Convertible Preferred Stock will
be entitled to receive cumulative cash dividends at an annual rate of
8%, payable semi-annually. If the payment in cash of dividends due on
the Playboy Convertible Preferred Stock is prohibited by the terms of
the indenture governing the notes issued by Holdings, no cash
dividends shall be paid or payable on the Playboy Convertible
Preferred Stock until such time as the payment of dividends in cash
is no longer prohibited by the terms of that indenture. In the event
that the payment in cash of dividends is so prohibited, we may, at
our option, pay any dividend due on the Playboy Convertible Preferred
Stock in shares of our Class B common stock.
We will be prohibited from declaring or paying dividends on our
Class A common stock or our Class B common stock or on any other
capital stock ranking junior to the Playboy Convertible Preferred
Stock as to dividends unless and until full cumulative dividends on
the shares of Playboy Convertible Preferred Stock in respect of all
past semi-annual dividends have been paid and the full amount of
dividends on the shares of Playboy Convertible Preferred Stock in
respect of the then current semi-annual dividend period shall have
been declared in full and sums set aside for the payment thereof.
Liquidation Preference. Upon our liquidation, dissolution or
winding up of our affairs, whether voluntary or involuntary, each
holder of Playboy Convertible Preferred Stock would be entitled to
receive, out of our assets available for distribution to
stockholders, an amount on such date equal to $10,000 per share of
Playboy Convertible Preferred Stock plus any accrued and unpaid
dividends. This payment will be paid before any distribution is made
on our Class A common stock, Class B common stock or any other
security ranking junior to the Playboy Convertible Preferred Stock,
but will be subject to the rights of our creditors and holders of our
securities that rank senior to or on a parity as to liquidation with
the Playboy Convertible Preferred Stock.
Optional Conversion. Each share of Playboy Convertible
Preferred Stock will be convertible at any time, at the option of the
holder, into shares of our Class B common stock at a price, which we
refer to as the conversion price, equal to 125% of the weighted
average closing price of our Class B common stock over the 90-day
period prior to the exchange of the Holdings Series B Preferred Stock
for Playboy Convertible Preferred Stock.
Mandatory Conversion. After the date that is three years after
the date of the exchange of the Holdings Series B Preferred Stock for
Playboy Convertible Preferred Stock, if at anytime the weighted
average closing price of our Class B common stock for 15 consecutive
trading days equals or exceeds 150% of the conversion price, we will
have the option, by delivering a written notice to holders of shares
of Playboy Convertible Preferred Stock provided within five business
days after the end of such 15 day period, to convert any or all
shares of Playboy Convertible Preferred Stock into the number of
shares of Class B common stock determined by dividing (a) the sum of
the aggregate stated value of such Playboy Convertible Preferred
Stock ($16.735 million) and the amount of accrued and unpaid
dividends by (b) the conversion price.
Effect of Optional or Mandatory Conversion. From and after the
effective date of any optional or mandatory conversion of shares of
Playboy Convertible Preferred Stock, such converted shares will no
longer be deemed outstanding, dividends with respect to such shares
will cease to accumulate, all rights whatsoever with respect to the
shares so converted will terminate and the holders entitled to
receive Class B common stock will be treated for all purposes as the
record holder of such Class B common stock as of and after the
effective date.
Adjustment to Conversion Price. The formula for determining the
conversion price will be subject to adjustment, without duplication,
from time to time upon the occurrence of certain events, including:
9
o the payment of stock dividends in shares of Class B
common stock;
o any dividend or other distribution declared, paid or
made on or in respect of our Class B common stock;
o subdivisions, splits and combinations of our Class B
common stock;
o any capital reorganization of us, any reclassification
of our stock or any merger or consolidation of us with
or into any other person; and
o distributions of Class B common shares on Class B common
shares.
Final Redemption. On September 15, 2010, we will be required to
redeem all shares of Playboy Convertible Preferred Stock that are
then outstanding at a redemption price equal to $10,000 per share
plus the amount of accrued and unpaid dividends. The final redemption
price may be paid, at our option, in either (i) cash, (ii) shares of
our Class B common stock or (iii) any combination of cash and shares
of Class B common stock. If we elect to pay the final redemption
price in shares of our Class B common stock, the number of such
shares to which a holder of shares of Playboy Convertible Preferred
Stock will be entitled will be determined by dividing (a) the sum of
the aggregate stated value of such Playboy Convertible Preferred
Stock ($16.735 million) and the amount of accrued and unpaid
dividends by (b) the weighted average closing price of our Class B
common stock over the 90-day period prior to September 15, 2010.
Transfer Agent and Registrar.
The transfer agent and registrar for our capital stock is LaSalle
Bank National Association.
10
PLAYBOY STOCK OWNERSHIP
Playboy Stock Ownership by Certain Beneficial Owners
The following table provides information about the only person who we
believe, based on a review of filings with the Securities and Exchange
Commission, as of February 28, 2003, beneficially owns more than 5% of our
outstanding Class A common stock. Our Class A common stock is the only class
of our common stock entitled to vote on the matters described in this
Information Statement.
Number of Shares of Percent
Name and Address Class A Common Stock of Class
------------------------- --------------------- -----------
Hugh M. Hefner, Trustee(1)........................ 3,381,836 69.53%
The Hugh M. Hefner 1991 Trust
2706 Media Center Drive,
Los Angeles, California 90065
___________
(1) Mr. Hefner, our founder 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.
Playboy Stock Ownership by Directors and Executive Officers
The following table shows, as of February 28, 2003, the amount of
common stock beneficially owned by each of our directors and by each of the
next four most highly compensated executive officers during the year ended
December 31, 2002 and by all directors and executive officers as a group. In
general, "beneficial ownership" includes those shares over which a director or
executive officer has the power to vote, or the power to transfer, and stock
options that are currently exercisable or will become exercisable within 60
days of February 28, 2003. Except as otherwise noted, the persons named in the
table below have sole voting and investment power with respect to all shares
shown as beneficially owned by them.
Shares of Percent of Shares of Percent of
Class A Class A Class B Class B
Name (1) Common Stock Common Stock Common Stock Common Stock
-------------- -------------- ------------- ------------- -------------
Dennis S. Bookshester(2)........................ 3,000 * 36,563 *
David I. Chemerow(2)............................ 800 * 55,398 *
Donald G. Drapkin(2)............................ 0 * 27,500 *
James L. English(2)............................. 0 * 79,862 *
Linda G. Havard(2).............................. 0 * 184,709 *
Christie Hefner(2).............................. 72,274 1.49 1,126,275 5.07
Hugh M. Hefner(3)............................... 3,381,836 69.53 6,192,486 28.90
Jerome H. Kern.................................. 0 * 5,964 *
Sol Rosenthal(2)................................ 252 * 37,827 *
Richard S. Rosenzweig(2)........................ 365 * 159,114 *
Sir Brian Wolfson(2)............................ 2,500 * 26,649 *
All Directors and Executive Officers as a
group (16 persons)(2)(3)........................ 3,461,042 71.15 8,287,847 36.24
___________
* Less than 1% of the total shares outstanding.
(1) 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 common stock and six shares of Class B common stock as custodian for
his son. Mr. Rosenthal disclaims beneficial ownership of these shares. As
of February 28, 2003, all directors and executive officers as a group
11
shared voting and investment power over two shares of Class A common
stock and six shares of Class B common stock.
(2) Includes the following shares of our Class B common stock that are
subject to installments of stock option grants made under the Playboy
Enterprises, Inc. 1989 Stock Option Plan, as amended, which we call the
1989 Stock Option Plan, the Amended and Restated Playboy Enterprises,
Inc. 1995 Stock Incentive Plan, which we call the 1995 Stock Incentive
Plan, the 1991 Directors' Stock Option Plan and the 1997 Equity Plan,
which were either exercisable on February 28, 2003, or are exercisable
within 60 days of February 28, 2003.
Class B Common
Name Stock
-------- -----------------
-----------------
Dennis S. Bookshester.................................................. 17,500
David I. Chemerow...................................................... 17,500
Donald G. Drapkin...................................................... 22,500
James L. English....................................................... 60,500
Linda G. Havard........................................................ 155,000
Christie Hefner........................................................ 799,386
Jerome H. Kern......................................................... 0
Sol Rosenthal.......................................................... 17,500
Richard S. Rosenzweig.................................................. 100,000
Sir Brian Wolfson...................................................... 17,500
All Directors and Executive Officers as a group (16 persons)........... 1,445,886
(3) Excludes the shares of Class B common stock that will be issued to Mr.
Hefner in connection with the Hefner debt restructuring as well as the
shares of Class B common stock into which the Playboy Convertible
Preferred Stock to be issued to Mr. Hefner in connection with the Hefner
debt restructuring may be converted.
12
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy and information
statements and other information with the SEC. The public may read and copy
any materials we file with the SEC at the SEC's Public Reference Room at 450
Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information
on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC.
13
EXHIBIT A
---------
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
PLAYBOY ENTERPRISES, INC.
-----------------------------------------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
-----------------------------------------------------------
PLAYBOY ENTERPRISES, INC., a corporation duly organized and existing
under the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify that:
FIRST: The first paragraph of Article FOURTH of the Amended and
Restated Certificate of Incorporation of the Corporation is hereby amended to
read in its entirety as follows:
"The total number of shares of all classes of capital stock
which the corporation shall have authority to issue is Forty
Seven Million Five Hundred Thousand (47,500,000) consisting of:
(i) Seven Million Five Hundred Thousand (7,500,000) shares of
Class A Common Stock of the par value of One Cent ($.01) per
share, (ii) Thirty Million (30,000,000) shares of Class B
Common Stock of the par value of One Cent ($.01) per share and
(iii) Ten Million (10,000,000) shares of Preferred Stock of the
par value of One Cent ($.01) per share."
SECOND: The following paragraph is to be inserted as a new subsection
E entitled "Terms of Preferred Stock" of Article FOURTH of the Amended and
Restated Certificate of Incorporation of the Corporation:
"The Board of Directors is expressly authorized to provide for
the issuance of all or any shares of the Preferred Stock in one
or more classes or series, and to fix for each such class or
series such voting powers, full or limited, or no voting
powers, and such distinctive designations, preferences and
relative, participating, optional or other special rights and
such qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions
adopted by the Board of Directors providing for the issuance of
such class or series and as may be permitted by the General
Corporation Law of the State of Delaware, including, without
limitation, the authority to provide that any such class or
series may be (i) subject to redemption at such time or times
and at such price or prices; (ii) entitled to receive dividends
(which may be cumulative or non-cumulative) at such rates, on
such conditions, and at such times, and payable in preference
to, or in such relation to, the dividends payable on any other
class or classes or any other series; (iii) entitled to such
rights upon the dissolution of, or upon any distribution of the
assets of, the Corporation; or (iv) convertible into, or
exchangeable for, shares of any other class or classes of
stock, or of any other series of the same or any other class or
classes of stock, of the Corporation at such price or prices or
at such rates of exchange and with such adjustments; all as may
be stated in such resolution or resolutions. Notwithstanding
the foregoing, any such Preferred Stock shall not have any
voting powers, except as required by law or in the event of
failure to pay dividends, and shall in no event be convertible
into shares of Class A Common Stock."
THIRD: The foregoing amendments to the Amended and Restated
Certificate of Incorporation of the Corporation were duly adopted in
accordance with the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
A-1
IN WITNESS WHEREOF, Playboy Enterprises, Inc. has caused this
Certificate of Amendment to be executed by its duly authorized officer this __
day of _____________, 2003.
PLAYBOY ENTERPRISES, INC.
By: __________________________________________
Name: Howard Shapiro
Title: Executive Vice President, Law and
Administration, General Counsel and
Secretary
A-2