Agreement - Time/Warner Retail Sales & Marketing Inc. and Playboy Enterprises Inc.
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Time/Warner Retail Sales
& Marketing Logo
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A TimeWarner Company
Sports Illustrated Building, 135 West 50th Street, New York, New York 10020-1201
This agreement dated as of January 1, 2006 between Time/Warner Retail Sales &
Marketing Inc. (formerly known as Warner Publisher Services Inc.), a New York
corporation (herein called "Warner"), and Playboy Enterprises, Inc., a Delaware
corporation (herein called "Publisher").
WITNESSETH:
In consideration of the premises and of the mutual covenants and agreements
herein set forth, the parties hereto hereby agree as follows:
1. Definitions
As used in this agreement, the following terms shall have the following
respective meanings:
a. "Publication(s)" shall mean the English language United States
edition of PLAYBOY Magazine, all PLAYBOY denominated magazine
titles, including PLAYBOY Specials, PLAYBOY Presents, PLAYBOY
Lingerie, PLAYBOY Private Collection and one-shots (as that term is
generally understood in the publishing industry) and PLAYBOY
newsstand version wall and desk calendars.
b. "Territory" shall mean the United States, its territories and
possessions and Canada.
c. "Printer's Completion Notice" shall mean a notice delivered to
Warner and executed by the traffic manger or shipping manager of the
printer of each issue of the Publication(s) specifying the number of
copies of the Publication(s) shipped in accordance with Warner's
instructions.
d. "Net Sales" shall mean, with respect to each issue of the
Publication(s), the number of copies of the Publication(s) specified
in each Printer's Completion Notice (as the same may be modified or
amended by additional information furnished by the printer or
Publisher) less the number of copies of that issue of the
Publication(s) returned to Warner pursuant to the provisions of
paragraph 8.
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e. "Cover Price" shall mean the suggested retail selling price of the
Publication(s) (as specified by Publisher on the cover of each copy
thereof), as the same may be increased or decreased by Publisher
during the term of this agreement.
f. "Warner's Commission" shall mean (1) for issues of PLAYBOY magazine
with On-Sale Dates from January 1, 2006 through and including
December 31, 2006 ("Year 1"), a sum equal to ***** of Cover Price
per Net Sale copy, (2) for issues of PLAYBOY magazine with On-Sale
Dates from January 1, 2007 through and including December 31, 2007
("Year 2"), a sum equal to ***** of Cover Price per Net Sale copy,
(3) for issues of PLAYBOY magazine with On-Sale Dates from January
1, 2008 through and including December 31, 2008 ("Year 3"), a sum
equal to ***** of Cover Price per Net Sales copy, and (4) for all
issues of Publications other than PLAYBOY magazine (including
specials, one-shots and newly launched and acquired publications), a
sum equal to ***** of Cover Price per Net Sales copy.
Notwithstanding the foregoing or anything in this agreement to the
contrary, in each of Year 1, Year 2 and Year 3, Warner's Commission
for the five (5) issues of PLAYBOY magazine with the greatest Net
Sales shall be equal to ***** of Cover price per Net Sale copy;
provided that such additional Warner's Commission shall be
determined as soon as final net Sales are determined during such
year.
g. Notwithstanding anything in this agreement to the contrary, in no
event shall Warner's Commission for Year 1, Year 2 or Year 3 be less
than ***** for such year; provided, however, that if the product of
Net Sales multiplied by Cover Price for any such year is less than
*****, then Warner's Commission for such year shall be limited to
***** of Cover Price per Net Sale copy.
h. "Wholesaler Discount" shall mean the discount off the Cover Price
set by Publisher at which Warner bills wholesalers for copies of the
Publication(s).
i. "Gross Billings" shall mean the Cover Price, less the Wholesaler
Discount, multiplied by the number of copies of the Publication(s)
specified on a Printer's Completion Notice and less Warner's
Commission with respect to such number of copies.
j. "Final Billings" shall mean the Cover Price, less the Wholesaler
Discount, multiplied by the Net Sales and less Warner's Commission.
k. "On-Sale Date" shall mean the date (designated by Publisher) on
which each issue of the Publication(s) is to be placed for initial
sale at retail outlets.
l. "Off-Sale Date" shall mean the date (designated by Publisher) for
recall of issues of the Publication(s) from sale at retail outlets.
m. (i) "Term" shall mean the period commencing with the On-Sale Date of
the February 2006 issue of PLAYBOY Magazine and shall continue
thereafter for a period of three (3) years, terminating on the
Off-Sale Date of the January 2009 issue of PLAYBOY Magazine, unless
earlier terminated as hereinafter provided.
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(ii) Notwithstanding any termination of the Term, this agreement
shall continue in full force and effect after the termination
date for the purposes, and only for the purposes, of
distributing the last issue of the Publication(s) and of
handling and crediting returns of unsold copies and making
payments, adjustments and credits, with respect to such
termination date, until the same are completed, made and
settled.
(iii) Publisher shall send Warner written notice of termination at
least forty-five (45) days prior to the end of the Term (the
"Notice Date"). Warner shall have the right, upon the Notice
Date, to suspend any further payments to Publisher relating to
the Publication(s) in an amount not to exceed the total of (A)
the "Overdraft" (as hereinafter defined) as reported on the
last payment statement issued to Publisher pursuant to
subparagraph 7.h prior to the Notice Date and (B) the
Overdraft as calculated by Warner based upon the sales
performance statement last issued to Publisher pursuant to
subparagraph 7.g prior to the Notice Date. The total amount of
the Overdrafts as calculated in accordance with (A) and (B)
above, shall be recalculated for each payment and sales
performance statement thereafter issued to Publisher until the
parties are able to effect a final settlement hereunder,
provided, however, the parties shall, in the event of such
termination, effect final settlement hereunder not later than
one hundred fifty (150) days after the Off-Sale Date of the
last issue of PLAYBOY Magazine, flat or special, and not later
than one hundred eighty (180) days after the Off-Sale Date of
the last calendar distributed by Warner hereunder.
(iv) Notwithstanding anything in this agreement to the contrary,
Publisher may terminate this agreement on the On-Sale Date of
the February 2007 issue of PLAYBOY Magazine, if Warner has
materially breached any provision of Part I of Annex B ("Major
Contract Commitments").
(v) The termination provisions set forth in this subparagraph 1.m,
including the settling of accounts and suspension of payments,
shall be applicable to any termination of this agreement,
including any termination pursuant to subparagraphs 14.b, 14.c
and 24 hereof.
2. Rights Granted
a. Publisher hereby agrees to grant, and does hereby grant, to Warner
for the Term of this agreement and throughout the Territory, the
exclusive right to distribute the Publication(s).
b. The provisions of subparagraph 2.a shall not apply to:
(i) copies of the Publication(s) furnished by Publisher to
subscribers or to Publisher's internal operations and other
miscellaneous cash sales.
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(ii) Publications, whether in magazine or pamphlet form, prepared
by Publisher for third parties and not distributed in the
normal channels of the magazine distribution industry.
c. Anything in this agreement to the contrary notwithstanding,
Publisher shall have the right to service retailers with
Publication(s), either directly or through national jobbers,
wholesalers and jobbers, should Warner refuse to do so, subject to
the following conditions:
(i) For any new retailer account (retail stores not serviced by
Warner's wholesale distributors), Publisher, to the extent it
is not prohibited from doing so, shall supply Warner with a
list of such accounts and shall allow Warner to submit a
proposal to compete for such business on a competitive service
and cost basis.
(ii) If Publisher shall be unable to reach an agreement with Warner
with respect to the servicing of any such new retailer
accounts, Publisher shall not grant the right to service any
such accounts to any third party on terms equal to or less
favorable than those offered by Warner, and shall give Warner
the opportunity to acquire said rights on the best terms
offered to Publisher by any third party (such matching right
to apply whether or not Warner submits a proposal as set forth
in paragraph 2.c(i) above). Warner shall have two (2) business
days after notice from Publisher to make a proposal which
meets or exceeds such third-party terms. If Warner and
Publisher agree that Warner shall acquire said rights, then
any such account shall be serviced by Warner pursuant to the
terms hereof, except as such terms may be expressly modified
or replaced in a fully executed written amendment hereto. In
the event that Warner cannot, does not or will not meet such
third-party terms, Publisher may grant such rights to the
third party, but in no event may Publisher grant such rights
to *****, or a current subsidiary or current affiliate of any
such companies, unless no other means of distribution are
available.
(iii) For retail accounts that wholesaler(s) refuse to serve, or
retail accounts that refuse service from wholesaler(s),
Publisher, if it chooses to award the service of such
business, shall award such service on the same basis as set
forth in subparagraphs 2.c(i) and 2.c(ii) above, except as
provided otherwise in paragraph 23.
(iv) Publisher shall not be obligated to maintain the publication
of any of the Publication(s). Publisher shall have the sole
discretion to determine the frequency of any of the
Publication(s).
(v) In the event Publisher decides to distribute PLAYBOY
denominated non-magazine products through I.D. wholesalers, it
will first negotiate with Warner for such rights. If within
thirty (30) days after notice from Publisher that Publisher
desires such distribution, Publisher and Warner have not
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concluded an agreement, it will be conclusively presumed that
the parties cannot reach an agreement and Publisher will be
free to pursue such distribution free from obligation or
liability to Warner on the condition that if Publisher grants
such distribution rights it will be on terms more favorable to
Publisher than the terms offered by Warner.
3. The Publisher Agrees
a. That upon receipt from Warner of the lists of wholesale distributors
to whom copies of the Publication(s) are to be shipped and the
number of copies, Publisher shall cause to be shipped such
designated number of copies in accordance with said lists and shall
cause to be shipped as far enough in advance of the On-Sale Date of
the respective issues of the Publication(s) as will enable
distribution to and by wholesale distributors by the On-Sale Dates.
Publisher shall pay all transportation charges relating to the
shipment of the Publication(s) to wholesale distributors as
aforesaid, provided that if Publisher shall so request, Warner shall
advance such transportation charges, which transportation charges
shall be recovered by Warner as provided in subparagraph 9.b(iv)
hereof.
b. That Warner may deduct from the payments due Publisher, as provided
in subparagraph 9.b(ii) hereof, amounts attributable to any and all
copies of the Publication(s) lost or damaged in shipment to
wholesale distributors. Subject to the provisions of paragraph 16
hereof, all such loss or damage adjustments made by Warner for the
benefit of said wholesale distributors shall be conclusive on the
question of loss and/or damage, approved by Publisher and binding
upon Publisher.
c. That Warner shall allow wholesale distributors the privilege of
returning all unsold copies of the Publication(s) and receiving
credit at the rate charged therefor, in accordance with the terms,
conditions and limitations of paragraph 8 hereof.
d. That Warner shall be permitted to conduct periodic field audits of
Publisher's customers on behalf of Publisher during the Term and
that Warner shall be entitled to an audit fee for such services
equal to ***** of all funds recovered by Warner on behalf of
Publisher as a result of such audit (the "Audit Fee"). Publisher
further agrees that Warner may deduct the Audit Fee from the
payments due Publisher, as provided in subdivision 9(b)(vi) hereof.
e. To follow Warner's "Terms for Access to Information Systems"
attached as Annex A hereto.
f. That if Warner incurs any expenses hereunder on behalf of Publisher
or the Publications for retail display payments, rack charges,
shortages, freight, reship allowances, or other handling charges,
then Warner may recover, pursuant to subdivision 9(b)(vii) hereof,
any or all such expenses from any advances and/or payments due or
becoming due to Publisher, or, at its option, may require Publisher
to reimburse Warner by check within 30 days following Warner's
request therefor.
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g. To provide Warner, on a timely basis, with notice of all financial
arrangements, whether written or oral, that Publisher agrees to with
a wholesaler.
h. To grant Warner a non-exclusive license to use any logo, trademark
or trade name owned by Publisher for sales and marketing purposes
pursuant to this agreement subject to Publisher's prior approval.
4. Billings and Collections
Publisher hereby grants and assigns to Warner a continuing security
interest in and to all sums which may be paid or are payable to Warner by
wholesalers or other parties as Gross Billings, Final Billings or
otherwise in connection with the exercise by Warner of its rights pursuant
to this agreement. Warner shall not be obligated to segregate any of the
aforesaid sums from any of its other funds, or to pay any interest thereon
to Publisher (other than as may be awarded to Publisher in the event of
non-payment or late payment of such amounts by Warner), and Warner shall
not be considered a trustee, pledgeholder or fiduciary of Publisher as to
such collected funds.
5. Retail Display Allowance
a. Warner shall perform the work of receiving and collating information
from retail magazine dealers and issuing payments on behalf of
Publisher to them for amounts due to them under retail or checkout
display allowance ("RDA") programs conducted by the Publisher in
reference to the Publication(s) as previously authorized by
Publisher in writing for each retail outlet. Such payment to such
dealers for retail or checkout display allowances shall be charged
to the Publisher's account and recovered and received by Warner as
provided in subparagraph 9.b(iii) hereof. Warner will perform such
services pursuant to the terms and conditions of the Publisher's RDA
contracts on a timely basis and will make such payments to such
dealers on not less than a calendar quarterly basis.
b. (i) For the services to be performed under subparagraph 5.b and
Annex B attached hereto and made a part hereof, Publisher
agrees to pay Warner an annual fee of ***** for up to
thirty-seven (37) issues with an average retailer base of
***** retailers per issue. In addition, Warner is entitled to
receive a pro rata portion of the annual fee amount for any
issue and/or retailer in excess of the thirty-seven (37)
issues and the retailer base of ***** retailers average per
issue. Such annual fee shall be adjusted annually for an
amount equal to ***** of the increase in the Consumer Price
Index for Urban New York and shall be paid to Warner in twelve
(12) equal monthly payments.
(ii) As a result of Warner's performing auditing services of RDA
claims, Warner is entitled to receive ***** of the total
savings recovered by Warner on behalf of the Publisher from
such audits.
c. Publisher, on not less than four (4) months' prior written notice to
Warner to the claim form mail date for the final RDA quarter to be
administered by Warner, shall
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have the right to perform the work related to and to administer its
RDA program or use the services of a third party to perform such
work. In which case the payments to be made under subparagraph
5.b(i) will continue for four (4) months after mailing of the claim
forms for the final Warner administered RDA quarter, but will in no
event exceed eight (8) monthly payments after such notice.
6. Credit to Wholesale Distributors
a. Warner will bill Publisher's customers at the Cover Price of the
Publications less the Wholesaler Discount.
b. In the event Publisher's customers make deductions from payments to
Warner for adjustments to Customer Discount or other special
allowances not agreed to by the Publisher, Warner will notify
Publisher of such adjustments and, if Publisher does not resolve the
dispute with Publisher's customer within thirty (30) days of such
notice, then Warner shall deduct from any payments to Publisher
pursuant to subdivision 9(b)(v) hereof, the amount of such
deductions. Warner shall use reasonable efforts to assist Publisher
in Publisher's attempt to resolve such dispute(s) with Publisher's
customer(s). Publisher may direct Warner to hold up or stop future
shipments to the customer.
c. Publisher agrees that Warner shall be entitled to make all decisions
as to which customer to distribute the Publications to, and all
credit and collection decisions with respect to wholesale
distributors, including whether to stop or hold up shipment to
delinquent or uncreditworthy accounts and, if practicable, to secure
substitute accounts, except, in each case, if Publisher directs
Warner otherwise as provided below. Warner shall bear any losses
from uncollectible accounts and all collection expenses
(collectively, the "Credit Risk"), except as provided below. If
Warner determines, in its sole discretion, that a wholesale
distributor(s) poses an unacceptable credit risk to Warner, Warner
may provide notice to Publisher that Warner is no longer willing to
accept the Credit Risk relating to Publications sent to such
wholesaler distributor(s). If Publisher desires to continue shipping
Publications to such wholesale distributor(s) and is willing to
accept the Credit Risk associated therewith, then Publisher shall
provide notice ordering Warner to continue shipping Publications to
such wholesale distributor(s) and indicating that that Publisher
shall accept the Credit Risk relating to Publications sent to such
wholesaler distributor(s), and any such losses sustained by Warner
shall be charged to Publisher's account and recovered by Warner as
provided in subdivision 9(b)(v) hereof. Nothing herein contained,
however, shall require Warner to institute any legal action or
collection proceedings. Publisher agrees and acknowledges that
Warner may, if there is a new or suitable substitute, recommend new
or substitute accounts in place of or in addition to customers that
Warner thinks are inadequate, an unacceptable credit risk, or
irregular in payments. Publisher will adhere to Warner's
recommendation to change customers.
d. Publisher acknowledges that it has significant knowledge about the
wholesale magazine distribution industry and its participants and
that it is aware that many
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wholesale distributors are currently under significant financial
pressure and may currently be, or in the near future become, credit
risks. Publisher further acknowledges that, in the event Warner
requests Publisher to stop or hold shipments as provided in
subparagraph 8(c) hereof, there is a substantial probability that
wholesale distributors affected may constitute a substantial
percentage of wholesale distributors and there may not be
appropriate substitute distributors.
7. Warner Agrees
a. To furnish shipping instructions and addressed labels to Publisher a
reasonable time prior to the shipping date for distribution of the
Publication(s).
b. To bill and collect from wholesale distributors for Warner's own
account and to designate wholesale distributors and other customers.
c. To pay to Publisher the sums specified in paragraph 9.
d. To in good faith consult fully with Publisher's designated
representative(s) with respect to the following, it being
understood, however, that Publisher shall have the final decision
with respect to such matters:
(i) the number of copies of each issue of the Publication(s) to be
printed;
(ii) the number of copies of each issue of the Publication(s) to be
allotted to each wholesale distributor;
(iii) the advertising and promotion campaign for the Publication(s).
e. To designate an employee as the "limited" exclusive Marketing
Director or Marketing Manager for Publisher's Publication(s) and to
designate such employee of Warner to work primarily on coordinating
all distribution relating to Publisher's Publication(s); it being
understood that such designated employee shall perform such services
under Warner's direction and control, that the designation of such
employee shall be in Warner's sole and absolute discretion, that
Warner shall have the sole right to change the employee so
designated and that such employee shall be subject to Publisher's
reasonable right of approval.
Additional activities for other Publishers or other projects shall
be assigned under Warner's direction, control and discretion, but
not to exceed more than twenty percent (20%) of such employee's
total activities.
f. To have Warner's field personnel monitor the sales performance of
the Publication(s) by wholesale distributors.
g. To render to Publisher a sales performance statement for each issue
of the Publication(s) setting forth, in summary form, the issue
date, On-Sale Date and Off-Sale Date, number of copies distributed,
returns received, Net Sales (in both
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numerical and percentage terms) and the sales trend of the
Publication(s) by comparing, in numerical form, the Net Sales of the
issue of the Publication(s) for which such statement is being
rendered versus that of the one prior issue and the issue of one
year previous.
h. To render to Publisher a payment statement for each issue of the
Publication(s) setting forth, in summary form, the appropriate
calculations pursuant to this agreement.
i. Unless modified by Warner's marketing plan as agreed to by
Publisher, to make annual marketing calls on not less than *****
retailer chains. Results of these marketing calls will be reported
to Publisher within fourteen days (14) days of the time the calls
are made.
j. That neither Warner nor any person, firm or corporation controlling,
controlled by or under common control with Warner, shall, during the
Term hereof, distribute the publication entitled *****
k. That Warner shall endeavor to require its wholesalers to promptly
notify Warner of any censorship claims regarding the Publication(s)
and Warner agrees to promptly so notify Publisher of such censorship
claims.
l. To use all reasonable efforts to perform the specific distribution
services set forth in subparagraphs 7.i and 7.k above and the
Circulation Commitments attached as Annex B hereto and made a part
hereof, some of which services have already been implemented. Upon
Warner's receipt of a written notice by Publisher of Warner's
failure to adhere to a particular obligation set forth in
subparagraphs 7.i and 7.k above or Annex B hereto, Warner shall
promptly commence the cure of any such failure and shall complete
such cure in accordance with a mutually agreed upon timetable.
Neither any failure by Warner that is cured in accordance with the
preceding sentence, nor any such failure by Warner with respect to
which Publisher does not send Warner a written notice, shall be
considered a material breach of this agreement. Nothing in this
paragraph 7.1 shall be deemed to affect Publisher's rights under
paragraph 1.m(iv) of this agreement.
8. Returns
a. In determining the sums payable to Publisher, Warner shall be
entitled to deduct returns of each issue of the Publication(s)
shipped to Warner from wholesalers located in the United States of
America and the Dominion of Canada at any time within one hundred
twenty (120) days of the Off-Sale Date of each Publication(s), but
as to the last issue of the Publication(s) distributed pursuant to
this agreement, or any one-shots or special issues which may
hereafter be published by Publisher and distributed by Warner,
Warner may accept returns shipped at any time within one hundred
fifty (150) days of the Off-Sale Date of such issues of the
Publication(s). The aforesaid one hundred twenty (120) and one
hundred fifty (150) day periods shall be subject to extension, if
agreed to by Publisher in advance, by
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reason of delay or delays in mail delivery, "acts of God" or any
other cause beyond the reasonable control of Warner and shall also
be subject to extension if Publisher shall consent in writing to
such extension.
b. Accordingly, in the event Warner shall receive returns of any issue
of the Publication(s) after final payment of such issue has been
determined and paid pursuant to subparagraph 9.b hereof, Warner
shall be entitled to deduct such return at the rate charged therefor
from any remittance due Publisher for any later issues (if any) of
the Publication(s) or, if after termination of this agreement, the
Publisher shall make prompt payment to Warner upon receipt of
Warner's statement regarding such returns. It is the intent and
agreement of the parties that returns of a prior issue can be
deducted from payments made by Warner to Publisher, but only if such
returns are received by Warner within one hundred fifty (150) days
of the Off-Sale Dates of the Publication(s) for which such
deductions are made.
c. Warner may accept returns of unsold copies of the Publication(s) by
means of front covers, headings, affidavits or electronic
notification in form satisfactory to Warner. If Publisher shall
request, in writing, full copy returns, Warner shall use its
reasonable efforts to obtain same and, in such case, Publisher
agrees to pay for return transportation and such handling charges as
are required, provided that if Warner shall be unable to obtain such
full copy returns from any wholesaler or other customer, Publisher
shall have the right to require Warner to stop or hold up shipments
of the Publication(s) and subject to paragraph 16 hereof, same shall
be accepted by Publisher as conclusive evidence thereof and Warner
is hereby authorized at its sole cost and expense to destroy any and
all front covers or headings representing such returns.
9. Payment to Publisher
In consideration of the rights granted to Warner by Publisher hereunder and in
consideration of Publisher's warranties and representations, Warner shall make
payment to Publisher of the following:
a. (i) As an advance against any and all sums which may become
payable to Publisher pursuant to subparagraph 9.b with respect
to each issue of each Publication, except, as set forth in
subparagraph 9.a(ii) below, an amount equal to ***** of the
estimated Net Sales of the average of the last three (3)
issues of such Publication for which Final Billings have been
determined, payable not later than thirty (30) days after the
On-Sale Date of the issue and upon receipt by Warner of the
Printer's Completion Notice. For the final issue of PLAYBOY
Magazine on sale in each year, the advance shall be payable
not later than the last business day of the year of the
On-Sale Date of the issue. Warner may also withhold an amount
equal to the actual charges of the last three (3) net issues
for which Final Billings have been determined, for the items
in subsections 9.b(ii) through 9.b(viii) below.
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(ii) As an advance against any and all sums which may become
payable to Publisher pursuant to subparagraph 9.b with respect
to any particular issue of the Publication(s) for which there
is a substantial increase in both the print run and the
projected Net Sales, an amount to be mutually agreed upon by
Warner and Publisher, payable at a mutually agreed-upon time.
b. An amount equal to ***** of Warner's estimate of Final Billings
(which estimate of Final Billings shall not project estimated
returns or other charges for the period sixty (60) to one hundred
twenty (120) days after the Off-Sale Date of the Publication(s)) not
later than sixty (60) days from and after the Off-Sale Date of that
issue of the Publication(s) after Warner shall have deducted and
retained from such Final Billings (to the extent that such amounts
have not previously been deducted and retained by Warner) an amount
equal to:
(i) All sums advanced to Publisher pursuant to subparagraph 9.a
above;
(ii) All loss and damage adjustments made by Warner pursuant to
subparagraph 3.c. above;
(iii) All amounts allowed as retail display allowances and related
administrative fees pursuant to paragraph 5.b above, if
applicable;
(iv) All transportation charges advanced by Warner pursuant to
subparagraph 3.a above;
(v) All uncollectible amounts and other items properly chargeable
to Publisher referred to in paragraph 6 above;
(vi) The Audit Fee pursuant to paragraph 3.d. above;
(vii) The following special allowances which may be granted by
Warner:
(1) With respect to Reshipping Wholesaler Agencies (defined
as those wholesalers who deliver Publisher's
Publication(s) to retailers via mail or common carrier):
(A) there will be a charge o ***** per cwt. on all
second-class and non-second class entry magazines
delivered via common carrier to retailers for U.S.
and Canada Reshipping Wholesaler Agencies;
(B) there will be a charge of ***** per cwt. on all
second-class entry magazines delivered by mail for
U.S. and Canada Reshipping Wholesaler Agencies.
The charges referred to in subdivision 1) and 2) above
are subject to change only with Publisher's prior
written approval.
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Publisher shall have the right to approve any Wholesaler
Agency defined as a Reshipping Wholesaler Agency for
Publisher's Publication(s) prior to any charges being
incurred by Publisher. Warner will document all
reshipping charges by publication issue and Reshipping
Wholesaler Agency. Warner agrees to monitor the accuracy
of Reshipping Wholesaler Agency claims by auditing each
claiming Reshipping Wholesaler Agency's records not less
than every six (6) months. All reshipping charges
determined by such audit to be inaccurate will be
adjusted within thirty (30) days of the audit. Such
adjustments may be waived only with Publisher's prior
written approval.
(2) A charge of ***** USD will be made if any analysis of
circulation by population for the Publication(s) is
requested and required for the Audit Bureau of
Circulation report. No charge will be made for the State
Circulation analyses, which are customarily made twice a
year for the Publication(s).
(viii) All other proper charges, payments or other reimbursements
due Warner pursuant to the terms of this agreement, including
all returns and other charges of the Publication(s) not
charged to Publisher's account at the time of the payment
specified in this paragraph 9.b is made, shall be charged
against any subsequent payment pursuant to this paragraph
9.b; provided, however, that without Publisher's prior
approval no such charges may be deducted from any payment
made more than one hundred twenty (120) days after the
Off-Sale Date of the issue to which the charges relate.
10. New Titles
In the event that during the Term hereof Publisher enters into any
third-party agreements for non-PLAYBOY denominated English language
publications, or Publisher itself publishes such a publication, then such
publication(s) shall be included under the terms and conditions of this
agreement, provided that Publisher has the right to so include the
publication(s) in question. Warner's Commission on such publications will
be a sum equal to ***** of the U.S. cover price of all Net Sales.
11. Cross-Collateralization/Overdrafts
The estimated Final Billings of each issue of all Publication(s)
distributed by Warner pursuant to this agreement shall be treated as a
unit, it being the intention hereof that if the total of the advance
payments made by Warner pursuant to subparagraph 9.a with respect to any
Publication(s) and the deductible distribution expenses incurred by Warner
pursuant to subdivisions (ii) through (viii) of subparagraph 9.b with
respect to any issue of such Publication(s) shall exceed the Estimated
Final Billings for the same issue of that Publication(s) (the
"Overdraft"), the Overdraft may be deducted by Warner from any advance
and/or payment of Final Billings which Warner may be required to make on
any succeeding issue or issues of the same Publication(s), or any other
Publication(s), the
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distribution rights to which have been granted to Warner by Publisher
under this agreement between Warner and Publisher, or shall be refunded or
paid by Publisher immediately upon demand.
12. Publisher's Warranties; Indemnity
a. Publisher represents and warrants that the rights herein granted to
Warner have not been granted to any other person, firm or
corporation; that it has the right and authority to enter into this
agreement and to perform the obligations hereunder to be performed
by Publisher; and that to the best of Publisher's knowledge, there
are no suits or proceedings pending or threatened against or
affecting Publisher which, if adversely determined, would impair the
rights granted to Warner.
b. Publisher will indemnify and hold harmless Warner and its officers,
agents or representatives and its wholesalers and retailers from and
against any damages, costs, expenses, judgments, settlements,
penalties, liabilities or losses of any kind or nature (excluding
consequential damages, but including reasonable attorneys' fees)
resulting from any claim, cause of action, suit or other
proceedings, arising out of (i) claims of copyright or trademark
infringement, libel, obscenity, violations of rights of privacy,
publicity or other proprietary rights in the title, contents or any
printed matter of the Publication(s), including, but not limited to,
advertisements, pictures, photographs, cartoons, caricatures, either
on the cover or in the text thereof, (ii) the breach or alleged
breach of any of the foregoing representations or warranties or
(iii) any act or omission or commission of Publisher pursuant to
this agreement. If any such suit, proceeding, claim or demand is
brought or made against Warner, Publisher shall undertake the
defense thereof at its expense, provided that if Publisher shall
fail so to do, Warner shall undertake the defense thereof at
Publisher's expense.
c. Warner represents and warrants that it has the right and authority
to enter into this agreement and to perform the obligations
hereunder to be performed by Warner; and that to the best of
Warner's knowledge, there are no suits or proceedings pending or
threatened against or affecting Warner which, if adversely
determined, would impair the services herein to be provided to
Publisher.
d. Warner will indemnify and hold harmless Publisher and its officers,
directors, agents or employees from and against any damages, costs,
expenses, judgments, settlements, penalties, liabilities or losses
of any kind or nature (excluding consequential damages, but
including reasonable attorneys' fees) resulting from any claim,
cause of action, suit or other proceedings, arising out of (i) the
breach or alleged breach of any of the foregoing representations or
warranties or (ii) any act or omission or commission of Warner
pursuant to this agreement. If any such suit, proceeding, claim or
demand is brought or made against Publisher, Warner shall undertake
the defense thereof at its expense, provided that if Warner shall
fail so to do, Publisher shall undertake the defense thereof at
Warner's expense.
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e. Anything in this paragraph 12 to the contrary notwithstanding,
neither party shall be liable to the other party for any such
indemnification unless the party seeking indemnification has
notified the other party of said claim, action, proceeding or demand
as soon as practicable upon receipt of knowledge of same and
afforded the other party the opportunity to defend or participate in
the defense of said claim, action, proceeding or demand, and
further, that no settlement or payment of any claim, action,
proceeding or demand shall be binding on the indemnifying party
unless prior approval and consent is obtained from the indemnifying
party, which said consent will not be unreasonably withheld. Each of
the parties agrees to cooperate with the other in the defense of any
said claim, action, proceeding or demand.
13. Wholesaler/Customer Bankruptcy--Computation of Net Sales
In the event that a designated wholesale distributor or other customer to
which Warner distributes the Publication(s) on Publisher's behalf shall
take advantage of any federal or state insolvency laws for relief of
debtors, including reorganization, or shall cease its business operation
with the effect that such wholesale distributor or other customer shall
not return its unsold copies of the Publication(s), Warner shall use the
records of Net Sales obtained from the wholesaler or customer when
available or Warner shall use the average percent of Net Sales of the
Publication(s) as reported by such wholesale distributor or customer for
the twelve (12) months (or such lesser period if applicable) prior to
those months for which such wholesale distributor or customer shall not
return unsold copies of the Publication(s) shipped to such wholesale
distributor or customer for said months.
14. Assignment
a. This agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, provided that no
assignment of this agreement, voluntary or by operation of law,
shall be binding upon either of the parties hereto without the prior
written consent of the other, which consent shall not be
unreasonably withheld, unless it is an assignment to a parent,
subsidiary, affiliate, or as part of the sale or transfer of all or
substantially all of such party's assets. Notwithstanding this,
Publisher may sell, assign, transfer or otherwise dispose of its
interest in any Publication or any trademark(s) associated therewith
to any third party (whether by means of a sale of assets or equity)
if such third party agrees in writing to assume and be bound by all
the terms and conditions of this agreement to be performed by
Publisher and prior to such sale, assignment, transfer or other
disposition Publisher reimburses Warner the full amount of any
indebtedness owed by Publisher to Warner.
b. Notwithstanding the above, Publisher shall have the right, upon one
hundred twenty (120) days' written notice to Warner, to terminate
this agreement subject to the provisions of subparagraph 1.m above,
in the event of a sale or transfer (by merger or otherwise) of:
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(i) any portion of the stock of Warner to the business entity that
publishes or distributes ***** or anyone holding a direct or
indirect equity interest in such business entity; or
(ii) all or substantially all of the assets of Warner or more than
fifty percent (50%) of the stock of Warner to a third party
whose relationship to Warner immediately prior to such sale or
transfer is other than that of a parent, subsidiary,
affiliated or related company. If Publisher does not elect to
terminate this agreement, the new owners of Warner shall
assume this agreement and carry out all of its terms and
provisions.
c. Notwithstanding subparagraphs 14.a and b above, Publisher shall have
the right to terminate this agreement if:
(i) Warner's business operations and organization is acquired,
merged or otherwise combined with another national
distributor; or
(ii) Warner combines its "back room" functions (e.g., billing,
collections, RDA processing, data processing) with another
national distributor.
Warner shall notify Publisher not less than thirty (30) days prior
to the effective date of (i) or (ii) above. Publisher may terminate
this agreement at any time within the six (6) month period after the
ninety (90) days immediately following the effective date of (i) or
(ii) above. The effective date of such termination will be the
Off-Sale Date of that issue of PLAYBOY Magazine closest to ninety
(90) days following the date of such notification by Publisher.
15. Notices
All notices which either party hereto is required or may desire to give to
the other shall be in writing and sent to the address hereinafter in this
paragraph set forth, or at such other address as may be designated in
writing by any such party in a notice to the other given in the manner
prescribed in this paragraph.
Any notice sent by facsimile shall be deemed received on the date that is
set forth on the confirmation of receipt obtained by the sender, unless
within two (2) business days thereafter the recipient shall have sent to
the sender notice that the facsimile was illegible, in which event the
facsimile shall not be deemed received until the facsimile has been resent
and a new confirmation of receipt has been received by the sender. Any
notice sent by registered mail, return receipt requested, DHL, or other
similar express mail courier, shall be deemed conclusively to have been
given when actually received or refused or upon notification of
non-deliverability by the postal authorities, as the case may be.
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To Warner: To Publisher:
Time/Warner Retail Sales & Marketing Inc. Playboy Enterprises, Inc.
Attention: President Attention: Senior Vice President
Sports Illustrated Building and General Manager
135 West 50th Street, 7th Floor Publishing Division
New York, NY 10020 680 North Lake Shore Drive
Chicago, IL 60611
With a copy to: With a copy to:
Time Inc. Playboy Enterprises, Inc.
Attention: General Counsel Attention: General Counsel
Sports Illustrated Building 680 North Lake Shore Drive
135 West 50th Street, 7th Floor Chicago, IL 60611
New York, NY 10020
16. Audit Rights
Publisher may, at its own expense, audit the books and records of Warner
relative to the distribution of the Publication(s) pursuant to this
agreement at the place where Warner maintains such books and records in
order to verify statements rendered to Publisher hereunder. Any such audit
shall be conducted by a reputable public accountant or Publisher's
accountant during reasonable business hours in such manner as not to
interfere with Warner's normal business activities. A true copy of all
reports made by Publisher's accountant shall be delivered to Warner at the
same time as such respective reports are delivered to Publisher by said
accountant. In no event shall audits be made hereunder more frequently
than twice annually.
17. LIMITATION OF LIABILITY
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, UNDER NO
CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY LOST
PROFITS OR SPECIAL, CONSEQUENTIAL, INDIRECT, CIRCUMSTANTIAL, OR INCIDENTAL
DAMAGES OF ANY KIND. IN NO EVENT SHALL THE LIABILITY OF WARNER HEREUNDER
TO PUBLISHER FOR ANY REASON EXCEED WARNER'S COMMISSION FOR THE PRECEDING
TWELVE (12) MONTH PERIOD (OR SUCH LESSER PERIOD IF LESS THAN TWELVE (12)
MONTHS OF THE ORIGINAL TERM OF THIS AGREEMENT HAS LAPSED); PROVIDED,
HOWEVER, THAT THIS LIMITATION OF LIABILITY SHALL NOT IN ANY WAY LIMIT
WARNER'S LIABILITY TO THE EXTENT THAT THE LIABILITY IS CAUSED BY WARNER'S
WILLFUL MISCONDUCT. PUBLISHER'S LIABILITY TO WARNER IS LIMITED IN THE SAME
MANNER AS DESCRIBED HEREIN.
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18. Integration; Waiver; Modification
This agreement, including Annexes A and B sets forth the full
understanding of the parties and supersedes all earlier understandings and
agreements with respect to the subject matter hereof. No waiver,
modification or cancellation of any term or condition of this agreement
shall be effective unless executed in writing by the party charged
therewith. No written waiver shall excuse the performance of any act other
than those specifically referred to therein.
19. No Partnership, Etc.
This agreement does not constitute and shall not be construed as
constituting a partnership or joint venture between Warner and Publisher.
Neither party shall have any right to obligate or bind the other party in
any manner whatsoever, nor nothing herein contained shall give, or is
intended to give, any rights of any kind to any third persons.
20. Force Majeure
Neither party shall be liable to the other for the failure to fulfill
their obligations hereunder due to reasons beyond their control,
including, by way of example, governmental restrictions, strikes, war,
invasions, civil riot, breakdown of market distribution facilities or
shortages of labor or material. If any such force majeure event shall
prohibit either party from publishing or distributing (as the case may be)
six (6) consecutive issues of the Publication(s), either party shall have
the right to terminate this agreement upon ten (10) business days' written
notice, which notice shall be in accordance with paragraph 15.
21. Headings
The headings in this agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
22. Governing Law
This agreement shall be interpreted and construed in accordance with the
laws of the State of New York applicable to agreements entered into and
entirely performed therein.
23. Arbitration
Any controversy or claim arising out of or relating to this agreement, or
any breach of it, shall be settled by arbitration pursuant to the American
Arbitration Association's ("AAA") Commercial Arbitration Rules then in
effect, as modified hereby. All proceedings relating to such arbitration
shall be held in New York, New York. The parties hereby irrevocably
consent to the exclusive jurisdiction and venue of the courts situated in
the state and county of New York (federal and state) and consent that
judgment upon the award rendered by the Arbitrator(s) shall be entered in
such court.
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24. Wholesaler Relationships
a. If Warner decides to change a wholesaler with which it currently has
a distribution relationship and at least ***** of the retail stores
that sell the Publication(s) in the affected area (the "Affected
Stores") refuse to be serviced by the new wholesaler and such
refusal continues for longer than sixty (60) days following the
change in wholesaler, then within ten (10) days following the end of
such sixty (60) day period Warner shall submit to Publisher a
proposal to compete for the business of the Affected Stores on a
competitive service and cost basis.
b. If Publisher shall be unable to reach an agreement with Warner with
respect to the servicing of the Affected Stores, then Publisher
shall not grant the right to service the Affected Stores to any
third party on terms equal to or less favorable than those offered
by Warner, and shall give Warner the opportunity to acquire said
rights on the best terms offered to Publisher by any third party
(such matching right to apply whether or not Warner submits a
proposal as set forth in paragraph 23.a above). If Warner and
Publisher agree that Warner shall acquire said rights, then the
Affected Stores shall be serviced by Warner pursuant to the terms
hereof, except as such terms may be appropriately modified or
replaced in a fully executed written amendment hereto. In no event
may Publisher grant such rights to *****, or to a current subsidiary
or current affiliate of any of such companies..
25. Defaults and Right to Cure
If either party shall violate any of its obligations or warranties under
the terms of this agreement, the other party shall have the right and
option, but not the duty, to terminate this agreement upon not less than
ninety (90) days' prior written notice; but no neglect or failure to serve
such notice shall be deemed to be a waiver of any breach of any covenant
or stipulation under this agreement. Such termination of this agreement
shall become effective unless the violation complained of shall be
completely remedied to the satisfaction of such other party within such
ninety (90) day period. Nothing in the preceding sentence shall be deemed
to affect Publisher's rights under paragraph 1.m(iv) of this agreement. If
the violation complained of shall be of a kind that a remedy or cure
cannot effectively restore the prior circumstances, then this agreement,
at the option of such other party, shall terminate forthwith upon service
of such notice without any period of grace as aforesaid. The termination
of this agreement shall be without prejudice to any rights that such other
party may otherwise have against the defaulting party under this agreement
or under law.
26. Bankruptcy
If either party shall be adjudicated a bankrupt, shall make any assignment
for the benefit of creditors, shall institute proceedings for voluntary
bankruptcy, shall apply for or consent to the appointment of a receiver,
or if an order shall be entered approving a petition seeking its
reorganization or appointing a receiver of it or its property, then upon
the happening of any one or more of such events, the other party to this
agreement shall have the right to terminate this agreement by giving
written notice of its intention to do so. Any termination
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<PAGE>
of this agreement pursuant to this paragraph 25 shall not release either
party from any obligation hereunder due and owing to the other party up to
the date of such termination.
27. Confidentiality
a. Publisher and Warner agree to treat this agreement as proprietary
information and each agrees not to reveal any of the terms hereof to
any third party, for any purpose, without the prior written approval
of the other party, except that each party may disclose this
agreement to outside accountants performing auditing services for
such party or except to the extent required by law. Publisher and
Warner each agree that, after the date hereof, they will take
whatever steps they deem necessary to carry out the intent of this
paragraph.
b. Any confidential or proprietary information obtained by either party
from the other in connection with the furnishing of services
pursuant to this agreement shall be kept confidential and shall not
be disclosed to any third party without the prior written approval
of the other party, except to the extent required by law.
TIME/WARNER RETAIL SALES & MARKETING INC.
By /s/ Robert J. Bedor
-------------------
Its EVP Robert J. Bedor
PLAYBOY ENTERPRISES, INC.
By /s/ Larry Djerf.
-------------------
Its V.P. Larry Djerf
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Annex A
Attached to and made apart of
Agreement dated as of January 1, 2006
between
Time/Warner Retail Sales & Marketing Inc. ("Warner")
and
Playboy Enterprises, Inc. ("Publisher")
Warner's "Terms For Access to Information Systems"
Publisher's access to and use of Time/Warner Retail Sales & Marketing Inc.'s
("Warner") information systems and data is subject to the following terms and
conditions:
1. Confidentiality.
(a) The information obtained from Warner's information systems (other
than information concerning Publisher's own publications) and data,
and the software, access codes and other devices and materials
provided by Warner to Publisher to access such systems and data
(collectively, the "Confidential Information") contain confidential
business terms, are otherwise confidential to Warner, and the
disclosure thereof would be damaging to Warner.
(b) Any Confidential Information disclosed or provided to Publisher, or
any of its employees, directors, officers, affiliates, agents or
other representatives (collectively, the "Representatives") (i)
shall be kept confidential by Publisher and its Representatives,
(ii) shall not, without Warner's prior written consent (unless such
disclosure is required by applicable law or regulation and the
procedures set forth in clause 1(f) below are followed), be
disclosed, in whole or in part, by Publisher or its Representatives
to any person or entity except as set forth in clause 1(c) below,
and (iii) shall be used by Publisher and its Representatives solely
to monitor and analyze key performance metrics and review general
information pertinent to the magazine category.
(c) Publisher shall allow access to the information systems and disclose
the Confidential Information only to such of its Representatives who
need to know the Confidential Information for the sole purpose of
monitoring and analyzing key performance metrics and who are
informed by Publisher of the confidential nature of the Confidential
Information. In any event, Publisher shall be responsible for any
breach of these Confidential Information provisions by Publisher or
its Representatives.
(d) Except as permitted pursuant to clause l(f) below, without Warner's
prior written consent, Publisher and its Representatives will not
disclose to any other person the fact that it or they have access to
Warner's information systems or that the Confidential Information
has been made available.
Annex A-1
<PAGE>
(e) Neither Warner nor any of its Representatives make any
representation or warranty, express or implied, as to the accuracy
or completeness of the Confidential Information. Publisher agrees
that neither Warner nor any of its Representatives shall have any
liability to Publisher or to any of its Representatives or any other
person relating to or resulting from the use of the Confidential
Information or any errors therein or omissions therefrom.
(f) If Publisher or any of its Representatives becomes legally
compelled, in the written opinion of its counsel, to disclose any of
the Confidential Information, Publisher shall immediately provide
Warner with written notice thereof so that Warner may seek a
protective order or other appropriate remedy and/or waive compliance
with the applicable provisions of this agreement. If such protective
order or other remedy is not obtained, or Warner waives compliance
with the applicable provisions hereunder, Publisher or its
Representative(s), as the case may be, shall disclose only that
portion of the Confidential Information which it is advised in
writing by counsel is legally required to be disclosed and will
cooperate with Warner to obtain an appropriate protective order or
other reliable assurance that confidential treatment will be
accorded the Confidential Information by such tribunal or other
entity.
2. Systems and Data to Be Accessed.
Publisher is authorized to access only the Web-based Data Portal, with
access to Publisher's draw/sale data, display quality index (DQI), rack
data, RDA data, field force automation data, Warner MIS system data, POS
data, competitive share of market data, MSA data (for mutually contracted
wholesalers), and any additional information mutually agreed upon in
writing, between the publisher and Warner. Neither Publisher nor any of
its Representatives shall attempt to access any other systems, data or
functions in Warner's information systems.
3. Person Authorized to Access Systems and Data.
(a) Only those individuals of Publisher and its Representatives
specifically authorized in writing by Warner to access the systems
and data may do so.
(b) If Publisher or any of its Representatives who is granted access to
Warner's information systems or data (i) ceases to be a
Representative of Publisher, or (ii) misplaces, loses or otherwise
fails to maintain possession of its computer, software or access
data or device, or any of the Confidential Information, Publisher
will immediately notify the Warner Publisher Services Help Desk at
(212) 522-1681.
4. Security.
(a) Publisher will access the systems and data in accordance with
Warner's instructions and requirements concerning data security, as
amended from time to time by Warner.
(b) In order to ensure protection of the systems and data, Publisher
shall implement and maintain appropriate security measures including
technical, physical, and organizational controls to ensure the
confidentiality and integrity of the systems and data.
Annex A-2
<PAGE>
(c) Publisher will immediately report any suspected or confirmed
security incident involving the systems or data to Warner's Director
of Information Security by calling the Time Inc. Network Operations
Center at (212) 522-7777 or another number specified by Warner.
(d) On an ongoing basis from time to time and upon reasonable notice to
Publisher, Warner shall be entitled to perform, or to have
performed, an information security review and audit on Publisher's
access and use of Warner's information systems, as coordinated by
Warner's Director of Information Security. Publisher shall implement
any required controls as identified by such information security
review and shall institute appropriate escalation procedures in
order to enable an appropriate response in the event of a security
incident.
(e) Publisher has standard security procedures in place and it will
provide a copy of such procedures to all Representatives who are
granted access to Warner's information systems.
(f) Neither Publisher nor any of its Representatives who are granted
access to the information systems shall use software that is (i) not
owned or validly licensed by such party, (ii) in violation of
third-party rights, including but not limited to copyrights, or
(iii) illegal.
(g) Neither Publisher nor any of its Representatives who are granted
access to the information systems shall attempt to scan Warner's
network or run any other diagnostic tools against any system on
Warner's network without the prior written approval of Warner's
Senior Director of Information Services.
(h) Publisher acknowledges that its access to and use of Warner's
information systems are subject to monitor by Warner and Warner's
policies of use (as same may be modified from time to time).
(i) Both Publisher and all of its Representatives who are granted access
to the information systems shall have current anti-virus software
installed on their computers.
(j) Warner will maintain current anti-virus software on its system.
5. Default.
Warner may immediately terminate Publisher's authorization to access and
use Warner's systems and data if Publisher fails to comply with any of the
terms hereof.
Annex A-3
<PAGE>
Annex B
Attached to and Made Part of
Agreement Dated as of January 1, 2006 between
Time/Warner Retail Sales & Marketing Inc. ("Warner")
and
Playboy Enterprises, Inc. ("PET")
Circulation Action Plan
o *****
Annex B-4