Distribution Agreement - Warner Publisher Services Inc. and Playboy Enterprises Inc.
Warner Publisher Services
Sports Illustrated Building, 135 West 50th Street, New York, New York 10020-1201
This agreement dated as of May 4, 2004 between 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.
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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.
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. *****
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).
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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) *****
(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
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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) 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 sell and 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.
(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:
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(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 Curtis Circulation Co., Comag, Kable News Co., Inc., 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
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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
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.
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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. *****
e. To follow Warner's "Terms for Access to Information Systems"
attached as Annex B hereto.
f. That if Warner incurs any expenses hereunder on behalf of Publisher
or the Publications for retail display payments, rack charges,
shortages, freight, re-ship 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.
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 tradename 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.
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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. *****
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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 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. *****
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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.
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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 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
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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 two
hundred (200) 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 Hustler or
Penthouse and/or any Hustler or Penthouse denominated products. For
purposes of this paragraph 7.j., any publication published by the
publisher of Penthouse or Hustler magazine which bears the name
"Penthouse" or "Hustler," as applicable, on its cover, shall be
deemed to be a Penthouse or Hustler denominated publication.
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 C 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 C hereto, Warner shall
immediately 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.
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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 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,
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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. *****
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(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:
I. With respect to Reshipping Wholesaler Agencies [defined
as those wholesalers who deliver Publisher's
Publication(s) to retailers via mail or common carrier]:
1) there will be a charge of $14.25 USD per cwt. on
all second class and non-second class entry
magazines delivered via common carrier to
retailers for US and Canada Reshipping Wholesaler
Agencies;
2) there will be a charge of $6.40 USD per cwt. on
all second-class entry magazines
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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.
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.
II. A charge of $2,000 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.
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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. *****
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 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
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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, judgements, 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.
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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:
(i) any portion of the stock of Warner to the business entity that
publishes or distributes Penthouse or Hustler magazines 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 other than Time Distribution Services.
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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.
To Warner: To Publisher:
Warner Publisher Services 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
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With a copy to: With a copy to:
Warner Publisher Services, Inc. Playboy Enterprises, Inc.
Attention: Vice President and Attention: General Counsel
General Counsel 680 North Lake Shore Drive
Sports Illustrated Building Chicago, IL 60611
135 West 50th Street, 7th Floor
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. As 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. PUBLISHERS 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, B and C, 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.
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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.
24. Wholesaler Relationships
a. If Warner decides to change a wholesaler with which it currently has
a distribution relationship and at least ten percent (10%) of the
retail stores that sell the Publication(s) in the effected area (the
"Effected 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 Effected 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 Effected Stores, then Publisher
shall not grant the right to service the Effected 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
Effected 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 Curtis Circulation Co., Comag,
Kable News Co., Inc., or to a current subsidiary or current
affiliate of any of such companies.
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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. 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 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
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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.
WARNER PUBLISHER SERVICES INC.
By /s/ Robert J. Bedor
---------------------------------
Its EVP, COO
---------------------------------
PLAYBOY ENTERPRISES, INC.
By /s/ Larry A. Djerf
---------------------------------
Its V.P. Retail Mktg & Sales
---------------------------------