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Sample Business Contracts

Distribution Agreement - Warner Publisher Services Inc. and Playboy Enterprises Inc.

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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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<PAGE>

            (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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<PAGE>

                  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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<PAGE>

      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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<PAGE>

      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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<PAGE>

      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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<PAGE>

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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<PAGE>

      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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<PAGE>

            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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<PAGE>

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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<PAGE>

            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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<PAGE>

            (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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<PAGE>

                              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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<PAGE>

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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<PAGE>

            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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<PAGE>

      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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<PAGE>

            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.


                                       20
<PAGE>

                  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


                                       21
<PAGE>

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.


                                       22
<PAGE>

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.


                                       23
<PAGE>

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.


                                       24
<PAGE>

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


                                       25
<PAGE>

            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
    ---------------------------------