Subscription Fulfillment Agreement [Amendment No. 5] - Communications Data Services Inc. and Playboy Enterprises International Inc.
Fifth Amendment
to
Playboy Magazine
Subscription Fulfillment Agreement
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission. The
omissions have been indicated by asterisks ("****"), and the omitted text has
been filed separately with the Securities and Exchange Commission.
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FIFTH AMENDMENT dated as of July 1, 2001 by and between COMMUNICATIONS
DATA SERVICES, INC., an Iowa corporation ("CDS"), with its principal office at
1901 Bell Avenue, Des Moines, Iowa 50315-1099, and PLAYBOY ENTERPRISES
INTERNATIONAL, INC. (formerly PLAYBOY ENTERPRISES, INC.), a ________________
corporation (the "Publisher"), with its principal office at 680 North Shore
Drive, Chicago, Illinois 60611.
R E C I T A L S
WHEREAS, CDS and the Publisher entered into a Subscription Fulfillment
Agreement dated as of July 1, 1987, as amended by an Amendatory Agreement dated
as of September 1, 1987; a Letter Agreement for Electronic Presort dated as of
June 1, 1988; a Second Amendment dated as of July 1, 1990; a Letter Agreement
for CDS's Destination Entry Program dated as of June 1, 1995; a Third Amendment
dated as of July 1, 1996; a Letter Agreement for CDSxpress Moves dated as of
July 1, 1996; a Fourth Amendment dated as of June 1, 1997; a Letter Agreement
for Internet Services dated as of July 7, 1997; and a Special Project (Letter)
Agreement dated as of October 1, 1999 (collectively, the "Agreement").
WHEREAS, the parties now desire to further amend the Agreement to revise
certain fees and charges, extend the Term of the Agreement, and make other
changes as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, it is agreed by and between the parties hereto as follows:
1. Section I, CDS Services, of the Agreement is hereby amended to add an
introductory sentence to read as follows:
"The parties mutually agree that CDS will convert the Magazine from
CDS's Batch System to CDS's SERV System after June 30, 2002, with the
first-available date being July 2002. If the Publisher desires to convert
the Magazine to the SERV System in July 2002, it shall notify CDS in
writing within six (6) weeks from the date of this Fifth Amendment. SERV
System Service descriptions that will apply following completion of
conversion of the Magazine to the SERV System are set forth in Attachment
I hereto, which is hereby made a part hereof."
2. Section 2.1, as previously amended, is hereby amended to add "(a)"
before the first paragraph (includes the table), "(b)" before the second
paragraph (billing mechanism), and "(c)" before the third paragraph (change in
number of issues), and Section 2.1 is further amended to add a new paragraph (d)
to read as follows:
"(d) If the number of manually key-entered transactions (from mail
documents received) during a contract year is fewer than 550,000, the
Publisher will receive a discount of two percent (2%) off the Annual
Service Charge per Subscription rate for the following contract year.* If
the number of manually key-entered transactions (from mail documents
received) during a contract year is 550,000 or over 550,000 but below
750,000, the Publisher will receive a discount of one percent (1%) off the
Annual Service Charge per Subscription rate for the following contract
year.* If the number of manually
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key-entered transactions (from mail documents received) during a contract
year is 750,000 or more, no discount shall apply. The Age of Operations
report will be used to determine the number of transactions that were
manually key entered. The foregoing discount provisions are subject to the
Magazine having an active subscription file of at least 2,300,000 during
the contract year.
*The contract year will be measured from July 1 through the following June
30. Tracking of the volume of manually key-entered transactions will
commence on July 1, 2001. Following June 30, 2002 and following each June
30 thereafter, the number of manually key-entered transactions will be
determined for the contract year just ended using the monthly Age of
Operations reports. If the Publisher qualifies for a discount as described
above in this paragraph (d), then the applicable discount will be applied
to the Annual Service Charge per Subscription rate for the next contract
year."
3. Section 2.3 of the Agreement is hereby amended to restate paragraph (e)
in its entirety and to add a new paragraph (f) as follows:
"(e) Two (2) suppression files per year will be provided at no additional
charge to the Publisher, with the understanding that, if requested
by the Publisher, one such suppression file may be used for the
Publisher's June mailing.
(f) One (1) expire pull (selection) per year will be provided at no
additional charge to the Publisher."
4. Section 2.5(a) of the Agreement is hereby amended to add a new item
(xi) to read as follows:
"(xi) Labelaire.............................................****/M
Add one working day to mail date schedule for each 50M
requiring labelaire operations.
If the quantity is less than 500 pieces, the job wll be
charged at the hand rate."
5. Section 2.9 of the Agreement, as previously amended, is hereby amended
to add a sentence at the end of the paragraph to read as follows:
"CDS will provide REACT reports to the Publisher electronically commencing
July 2001. In addition, other fulfillment reports, if requested by the
Publisher, will be provided electronically in a timeframe mutually agreed
upon by both parties."
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6. Section 2.17 of the Agreement, as previously amended, is hereby amended
to add the following sentence at the end of the paragraph to read as follows:
"Notwithstanding the foregoing, all of the fees and charges set forth in
the Agreement as escalated to the date hereof (including all of the fees
and charges set forth in this Fifth Amendment) shall remain in effect
until June 30, 2003, and on July 1, 2003 and each July 1 thereafter will
increase as set forth above."
7. Section 5.1 of the Agreement, as previously amended, is hereby amended
to extend the Term until June 30, 2006.
8. The last sentence of Section 11.3 of the Agreement, as previously
amended, is hereby amended and restated in its entirety to read as follows:
"The representative(s) of both parties may be changed from time to time in
which event the other party shall be notified as promptly as possible,
with the understanding that CDS will use its reasonable best efforts to
notify the Publisher of any such change at least ninety (90) days in
advance, except in the case of resignation or termination of the employee,
and each CDS replacement added to the account management team for the
Publisher's account shall be subject to the approval of the Publisher."
9. Item 5 of Exhibit A, as previously amended, is hereby amended to add
the following sentence at the end:
"CDS will provide upselling scripting capabilities to its customer service
representatives no later than January 1, 2002. The on-going charges to
Publisher for these Services will be mutually agreed upon and comparable
to the charges paid by other CDS clients of comparable size and having
comparable file size, frequency, and number of transactions on an
annualized basis and requiring CDS to perform substantially the same
Services."
10. Internet Services included in the Letter Agreement dated July 7, 1997,
and in the additional Services and fees document entitled "Magazine e-Commerce
Pricing" mailed to Publisher in January 2000, are hereby amended to add the
following:
"CDS agrees to provide the following Internet Service enhancements for the
following fees and charges:
(a) Personal Passwords - Access to inquiry through the personal password
is available with CDS's new Internet product.
(b) Following conversion of the Magazine to CDS's new Web Administration
Tool ("Gemini"), the following pricing will apply in addition to the
existing pricing unless otherwise indicated:
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(i) Web Administration Tool
License Fee....................Included in Monthly "hit" Fee
Replaces current Hosting Fee
(ii) Web Page Design/Changes:
By CDS................. ****/hour; Minimum 2 hour charge
By Publisher........................No Additional Charge
New Web Administration Tool allows Publisher to do its
own page changes/designs and place them into
production.
(iii) Monthly "hit" Fee:
First 12 months following
conversion to Gemini...................****/Publisher/month*
*Prior to the end of the first twelve (12) months following
the Magazine's(s') conversion to Gemini, the parties agree to
review the Monthly "hit" Fee and mutually agree upon the
fee/charges to apply following the first 12 months. Such new
fee/charges will be set forth in an amendment to this
Agreement to be signed by both parties. Notwithstanding the
foregoing, it is agreed that if the number of "hits" for the
Publisher's Magazine(s) exceeds 10,000,000 in any one month,
then the parties will review the pricing in the following
month and pricing adjustments will be agreed upon for the
months remaining in the "First 12 months" during which the
"hit" volume exceeds 10,000,000.
All automated transactions are included in this
pricing (replaces charges for: Automated order,
Automated change of address, Automated missed issue,
Automated inquiry, and Other Automated transactions).
(iv) e-donor renewals and e-bills:
Send e-donor renewals*
(by May 2002).......................****/name selected
Send e-bills*
(by December 31, 2001)..............****/name selected
*Text only"
(c) CDS agrees to provide the capability to print e-mail addresses
and/or personal passwords on bills and renewal notices by December
31, 2001 for the Batch System and by June 30, 2002 for the SERV
System.
11. In the Letter Agreement dated July 7, 1997 regarding Internet Services
and fees and charges, the charge rate set forth in items (g), (h), and (i), as
escalated to the date hereof, are hereby amended to read as follows:
"(g) Customer Service Request.................**** each
(h) Customer Service Response................**** each
(i) Other manual transactions................****each"
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12. Exhibit A to the Agreement is hereby amended to add a new item 24 to
read as follows:
"24. The Publisher agrees to provide CDS with the opportunity to bid
on providing fulfillment for the Publisher's premiums and products."
13. Except as expressly amended hereby, the Agreement shall remain in full
force and effec in accordance with its terms.
13. This Fifth Amendment shall become effective as of the date first above
written.
IN WITNESS WHEREOF, the parties have executed this Fifth Amendment as of
the day and year first above written.
COMMUNICATIONS DATA PLAYBOY ENTERPRISES
SERVICES, INC. INTERNATIONAL, INC.
By /s/ Chris Holt By /s/ Phyllis Rotunno
------------------------------- -------------------------------
(signature) (signature)
Chris Holt Phyllis Rotunno
--------------------------------- -------------------------------
(print or type) (print or type)
Title: Vice President Title: VP Sub Circ
--------------------------- ---------------------------
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Attachment I
CDS SERV SYSTEM SERVICES
The following SERV System Services shall apply commencing upon completion of
conversion of the Magazine to the SERV System:
1. In place and instead of Sections 1.1 through 1.4 of the Agreement, the
following shall apply for the Magazine(s) fulfilled on the SERV System:
1.1-4 S. Caging and Subscriber Database Maintenance.
(a) CDS will receive and open mail from subscribers; remove
and verify amounts of payments; receive and verify payments on agency clearings;
and endorse, encode, and balance payments and deposit same on a daily basis in
the Publisher's bank account. CDS will maintain all necessary activity and cash
controls.
(b) The Magazine's(s') subscriber database (the "Database")
will consist of files on disk and in backup format on magnetic tape containing
subscriber and recipient data, Magazine's(s') characteristics, specific order
data and transaction history. CDS will apply and edit transactions, including
cash, credit, credit card, renewal, gift renewal, complimentary, gift and agency
orders; payments; cancellations; name and/or address changes; and subscriber
adjustments to the Database on an interactive basis (date and time identified at
time of application). Errors will be corrected as promptly as possible on an
interactive basis.
2. In place and instead of Section 1.11 of the Agreement, the
following shall apply for the Magazine(s) fulfilled on the SERV System:
1.11 S. SERV Operating Reports.
CDS will furnish the Publisher with the following SERV Operating
Reports requested by the Publisher. The Publisher may elect to vary the Report
package it receives at any time during the Term of the Agreement upon advance
notice to CDS:
Basic Package of SERV Reports
Report
Number Report Title Frequency
------ ------------ ---------
DAILY MAIL OPENING REPORT.............................Daily
100 ACCOUNTS RECEIVABLE INVENTORY.......................Monthly
110 ACCOUNTS RECEIVABLE BALANCING.......................Monthly
120 DEFERRED INCOME INVENTORY...........................Monthly
130 DEFERRED INCOME BALANCING...........................Monthly
Atachment I-1
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140 EARNED INCOME ADJUSTMENTS..............................Monthly
150 CREDIT PRODUCTION......................................Monthly
160 CREDIT CANCELLATION....................................Monthly
170 CREDIT PAYMENT.........................................Monthly
180 CREDIT PAYMENT ADJUSTMENT..............................Monthly
190 SALES TAX..........................................Quarterly -
may not be needed
191 SALES TAX BY ORDERS, PAYMENTS AND CANCELS..........Quarterly -
may not be needed
200 EXPIRE ANALYSIS........................................Monthly
210 ARREARS ELIGIBILITY..................................Monthly -
may not be needed
220 ORDERS APPLIED BY TERM.................................Monthly
230 CANCELLATIONS APPLIED BY TERM..........................Monthly
240 SOURCE TO SOURCE.......................................Monthly
250 START ISSUE BY SOURCE..................................Monthly
260 AGENCY NET PRODUCTION..................................Monthly
270 AGENCY CANCELLATIONS.................................Monthly -
may not be needed
280 ORDER RESPONSE-NON-RENEWAL KEYS........................Monthly
290 BILLING RESPONSE.......................................Monthly
291 INSTALLMENT BILLING RESPONSE...........................Monthly
300 RENEWAL ANALYSIS.......................................Monthly
310 ABC SALES BY PRICE...............................Semi-annually
320 ABC SALES BY DURATION............................Semi-annually
330 ABC SALES BY CHANNEL.............................Semi-annually
340 ABC SALES BY PREMIUM.............................Semi-annually
350 ISSUES SERVED ON CREDIT CANCELS........................Monthly
360 ARREARS RECLAIMED....................................Monthly -
may not be needed
370 DIRECT MAIL/PHONE AGENCY CANCELS.......................Monthly
Atachment I-2
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380 DIRECT MAIL/PHONE AGENCY REINSTATEMENTS................Monthly
390 ABC LATE PAYMENT.................................Semi-annually
420 ABC CIRCULATION BY ISSUE/EDITION.................Semi-annually
430 ABC ARREARS CIRCULATION..........................Semi-annually
440 ABC CIRCULATION BY STATE/COUNTY..................Semi-annually
450 STATUS OF SUBSCRIPTION COPIES...........................Weekly
470 REFUND LISTING.......................................Bi-weekly
490 ORDER RESPONSE-RENEWAL KEYS............................Monthly
1100 EARNED INCOME......................................Each Label Pull
If the Publisher requests any of the above reports at times other than the
frequency set forth in this Appendix A, CDS will attempt to provide the
report(s) and, if provided, the Publisher will be charged a fee of **** per
report plus a charge based on CDS's prevailing rates for the computer time
required to run the report(s).
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