This agreement dated as of July 2, 1999 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 PLAYMATE wall
            and desk calendars.

      b.    "Territory" shall mean the United States, its territories and
            possessions and Canada.

      c.    "Printer's Completion Notice" shall mean a notice delivered to
            Warner and executed by the traffic manger or shipping manager of the
            printer of each issue of the Publication(s) specifying the number of
            copies of the Publication(s) shipped in accordance with Warner's
            instructions.

      d.    "Net Sales" shall mean [with respect to each issue of the
            Publication(s)] the number of copies of the Publication(s) specified
            in each Printer's Completion Notice (as the same may be modified or
            amended by additional information furnished by the printer or
            Publisher) less the number of copies of that issue of the
            Publication(s) returned to Warner pursuant to the provisions of
            paragraph 8.

      e.    "Cover Price" shall mean the suggested retail selling price of the
            Publication(s) (as specified by Publisher on the


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            cover of each copy thereof), as the same may be increased or
            decreased by Publisher during the term of this agreement.

      f.    "Warner's Commission" shall mean a sum equal to a flat rate per net
            sale copy multiplied by all Net Sales of the Publications as
            follows:

            Flat Rate Per Net Sale Copy           Warner's Commission
            ---------------------------           -------------------

            PLAYBOY Magazine              twelve (12 cents) cents ($0.12 USD)
                                          per copy sold; on sales 15%-19.99%
                                          above 500,000 copies the rate is
                                          thirteen (13 cents) cents ($0.13
                                          USD); on sales 20% and above 500,000
                                          copies, the rate will be fifteen (15
                                          cents) cents ($0.15 USD).

            All other PLAYBOY             fifteen (15 cents) cents ($0.15 USD)
            Publications [these           per copy sold; on sales 15%- 19.99%
            are inclusive of:             above 150,000 copies the rate will
            PLAYBOY Specials              be eighteen (18 cents) cents ($0.18
                 (38580)                  USD); on sales 20% and above 150,000
            PLAYBOY Lingerie              copies the rate will be twenty (20
                 (38581)                  cents) cents ($0.20 USD).
            PLAYBOY Presents
                 (38590)
            PLAYBOY Private Collection
                 (38597)]

            Any titles launched during the term of the contract will be reviewed
            and sales levels established as mutually agreed.

            Such flat rates per copy net sale shall be adjusted annually for an
            amount equal to the increase in the Consumer Price Index for Urban
            New York plus two percent (2%) of the flat rate per net copy sold.
            Such adjustments will be effective with the August 2000, August
            2001, August 2002 and August 2003 issues. The compounding of such
            annual adjustments shall not exceed eighteen percent (18%) over the
            duration of the contract period (eighteen


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<PAGE>

            percent (18%) cap for adjustments to flat rates per copy sold).

            A minimum commission of forty-six thousand two hundred dollars
            ($46,200 USD) per issue will apply for PLAYBOY Magazine.

      g.    "Wholesaler Discount" shall mean the discount off the cover price at
            which Warner bills wholesalers for copies of the Publication(s).

      h.    "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.

      i.    "Final Billings" shall mean the cover price, less the Wholesaler
            Discount, multiplied by the Net Sales and less Warner's Commission.

      j.    "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.

      k.    "Off-Sale Date" shall mean the date (designated by Publisher) for
            recall of issues of the Publication(s) from sale at retail outlets,
            provided, however, that the Off-Sale Date shall not be later than
            one (1) day prior to the On-Sale Date of the next succeeding issue
            of the Publication(s).

      l.    (i)   "Term" shall mean the period commencing with the On-Sale Date
                  of the August, 1999 issue of PLAYBOY Magazine and shall
                  continue thereafter for a period of four and one-half (4-1/2)
                  years, terminating on the Off-Sale Date of the January, 2004
                  issue of PLAYBOY Magazine, unless earlier terminated as
                  hereinafter provided.

            (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.


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<PAGE>

            (iii) Publisher shall send Warner written notice of termination at
                  least ninety (90) days prior to the end of the Term (the
                  "Notice Date"). Warner shall have the right, upon the Notice
                  Date, to suspend any further payments to Publisher relating to
                  the Publication(s) in an amount not to exceed the total of (A)
                  the "Overdraft" (as hereinafter defined) as reported on the
                  last payment statement issued to Publisher pursuant to
                  subparagraph 7.h. prior to the Notice Date and (B) the
                  Overdraft as calculated by Warner based upon the sales
                  performance statement last issued to Publisher pursuant to
                  subparagraph 7.g. prior to the Notice Date. The total amount
                  of the Overdrafts as calculated in accordance with (A) and (B)
                  above, shall be recalculated for each payment and sales
                  performance statement thereafter issued to Publisher until the
                  parties are able to effect a final settlement hereunder,
                  provided, however, the parties shall, in the event of such
                  termination, effect final settlement hereunder not later than
                  one hundred fifty (150) days after the Off-Sale Date of the
                  last issue of PLAYBOY Magazine, flat or special, and not later
                  than one hundred eighty (180) days after the Off-Sale Date of
                  the last calendar distributed by Warner hereunder.

            (iv)  The termination provisions set forth in this subparagraph
                  1.l., 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:


                                       4
<PAGE>

            (i)   copies of the Publication(s) furnished by Publisher to
                  subscribers or to Publisher's entertainment operations and

            (ii)  Publications, whether in magazine or pamphlet form, prepared
                  by Publisher for third parties and not distributed in the
                  normal channels of the magazine distribution industry.

      c.    Anything in this agreement to the contrary notwithstanding,
            Publisher shall have the right to service retailers with
            Publication(s), either directly or through national jobbers,
            wholesalers and jobbers, should Warner refuse to do so, subject to
            the following conditions:

            (i)   For any new retailer account (retail stores not serviced by
                  Warner's wholesale distributors), Publisher, to the extent it
                  is not prohibited from doing so, shall supply Warner with a
                  list of such accounts and shall allow Warner to submit a
                  proposal to compete for such business on a competitive service
                  and cost basis.

            (ii)  If Publisher shall be unable to reach an agreement with Warner
                  with respect to the servicing of any such new retailer
                  accounts, Publisher shall not grant the right to service any
                  such accounts to any third party on terms equal to or less
                  favorable than those offered by Warner, and shall give Warner
                  the opportunity to acquire said rights on the best terms
                  offered to Publisher by any third party [such matching right
                  to apply whether or not Warner submits a proposal as set forth
                  in paragraph 2.c.(i) above]. Warner shall have two (2)
                  business days after notice from Publisher to make a proposal
                  which meets or exceeds such third party terms. If Warner and
                  Publisher agree that Warner shall acquire said rights, then
                  any such account shall be serviced by Warner pursuant to the
                  terms hereof, except as such terms may be expressly modified
                  or replaced in a fully executed written amendment hereto. In
                  the event that Warner cannot, does not or will not meet such
                  third party terms, Publisher may grant such rights to the


                                       5
<PAGE>

                  third party, but in no event may Publisher grant such rights
                  to Curtis Circulation Co., Eastern News Distributors, Inc.,
                  ICD/Hearst Corporation, Kable News Co., Inc., Murdoch
                  Magazines Distribution Division, 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.

      d.    Publisher shall not be obligated to maintain the publication of any
            of the Publication(s). Publisher shall have the sole discretion to
            determine the frequency of any of the Publication(s).

      e.    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
            distri-


                                       6
<PAGE>

            bution 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 and binding upon Publisher.

      c.    That Warner shall allow wholesale distributors the privilege of
            returning all unsold copies of the Publication(s) and receiving
            credit at the rate charged therefor, in accordance with the terms,
            conditions and limitations of paragraph 8. hereof.

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. Although 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), Warner
      shall 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


                                       7
<PAGE>

            to them under retail or checkout display allowance ("RDA") programs
            conducted by the Publisher in reference to the Publication(s) as
            previously authorized by Publisher in writing for each retail
            outlet. Such payment to such dealers for retail or checkout display
            allowances shall be charged to the Publisher's account and recovered
            and received by Warner as provided in subparagraph 9.b.(iii) hereof.
            Warner will perform such services pursuant to the terms and
            conditions of the Publisher's RDA contracts on a timely basis and
            will make such payments to such dealers on not less than a calendar
            quarterly basis.

      b.    (i)   For the services to be performed under subparagraph 5.b. and
                  Exhibit A attached hereto and made a part hereof, Publisher
                  agrees to pay Warner an annual fee of twenty-two thousand two
                  hundred dollars ($22,200 USD) for up to thirty-four (34)
                  issues with an average retailer base of four thousand (4,000)
                  retailers per issue. In addition, Warner is entitled to
                  receive a pro rata portion of the annual fee amount for any
                  issue and/or retailer in excess of the thirty-four (34) issues
                  and the retailer base of four thousand (4,000) retailers
                  average per issue. Such annual fee shall be adjusted annually
                  for an amount equal to fifty percent (50%) of the increase in
                  the Consumer Price Index for Urban New York and shall be paid
                  to Warner in twelve (12) equal monthly payments.

            (ii)  As a result of Warner's performing auditing services of RDA
                  claims, Warner is entitled to receive one-third (l/3) of the
                  total savings recovered by Warner on behalf of the Publisher
                  from such audits.

      c.    Publisher, on not less than four (4) months prior written notice to
            Warner to the claim form mail date for the final RDA quarter to be
            administered by Warner, shall 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 War-


                                       8
<PAGE>

            ner administered RDA quarter, but will in no event exceed eight (8)
            monthly payments after such notice.

6.    Credit to Wholesale Distributors

      a.    Warner may extend such credit to wholesale distributors as it may
            determine, and in connection therewith may take such collection
            measures, including, among other things, stopping or holding up
            shipment as it may deem advisable with respect to delinquent
            accounts. Warner shall bear all losses from uncollectable accounts
            and any and all legal fees or other costs or expenses of whatever
            nature whatsoever incurred in respect of the Publication(s) for
            collection or attempted collection, provided that in the event
            Warner gives reasonable notice to Publisher in writing prior to
            shipment to stop or hold up shipments to any wholesale distributor
            and Publisher nevertheless directs such shipments, Publisher shall
            bear the resulting losses of the uncollectable amount only and such
            amounts shall be charged to Publisher's account and recovered by
            Warner as provided in subparagraph 9.b.(v) hereof.

      b.    In the event Publisher shall direct shipment of the Publication(s)
            as aforesaid, Publisher shall have the right, in its own name and at
            its own expense, to institute collection proceedings for such sums
            against any such wholesale distributor and to retain any sums so
            collected. Nothing herein contained, however, shall require Warner
            to institute any such legal action.

7.    Warner Agrees

      a.    To furnish shipping instructions and addressed labels to Publisher a
            reasonable time prior to the shipping date for distribution of the
            Publication(s).

      b.    To bill and collect from wholesale distributors for Warner's own
            account and to designate wholesale distributors and other customers.

      c.    To pay to Publisher the sums specified in paragraph 9.


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<PAGE>

      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 which
            such statement is being rendered versus that of the one prior issue
            and the issue of one year previous.


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<PAGE>

      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 seven (7) 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 Exhibit A 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 Exhibit A 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 transporta-


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<PAGE>

            tion and such handling charges as are required, provided that if
            Warner shall be unable to obtain such full copy returns from any
            wholesaler or other customer, Publisher shall have the right to
            require Warner to stop or hold up shipments of the Publication(s)
            and subject to paragraph 16. hereof, same shall be accepted by
            Publisher as conclusive evidence thereof and Warner is hereby
            authorized at its sole cost and expense to destroy any and all front
            covers or headings representing such returns.

9.    Payment to Publisher

      In consideration of the rights granted to Warner by Publisher hereunder
      and in consideration of Publisher's warranties and representations, Warner
      shall make payment to Publisher of the following:

      a.    (i)   As an advance against any and all sums which may become
                  payable to Publisher pursuant to subparagraph 9.b. with
                  respect to each issue of each Publication, except, as set
                  forth in subparagraph 9.a.(ii) below, an amount equal to sixty
                  percent (60%) of the estimated Net Sales of the average of the
                  last three (3) issues of such Publication for which Final
                  Billings have been determined, payable not later than fourteen
                  (14) days after the On-Sale Date of the issue and upon receipt
                  by Warner of the Printer's Completion Notice. Warner may also
                  withhold an amount equal to the actual charges of the last
                  three (3) net issues for which Final Billings have been
                  determined, for the items in subsections 9.b.(ii) through
                  9.b.(vi) below.

            (ii)  As an advance against any and all sums which may become
                  payable to Publisher pursuant to subparagraph 9.b. with
                  respect to any particular issue of the Publication(s) for
                  which there is a substantial increase in both the print run
                  and the projected Net Sales, an amount to be mutually agreed
                  upon by Warner and Publisher, payable at a mutually agreed
                  upon time.


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<PAGE>

      b.    An amount equal to one hundred percent (100%) of Warner's estimate
            of Final Billings [which estimate of Final Billings shall not
            project estimated returns or other charges for the period sixty (60)
            to one hundred twenty (120) days after the Off-Sale Date of the
            Publication(s)] not later than sixty (60) days from and after the
            Off-Sale Date of that issue of the Publication(s) after Warner shall
            have deducted and retained from such Final Billings (to the extent
            that such amounts have not previously been deducted and retained by
            Warner) an amount equal to:

            (i)   All sums advanced to Publisher pursuant to subparagraph 9.a.
                  above;

            (ii)  All loss and damage adjustments made by Warner pursuant to
                  subparagraph 3.c. above;

            (iii) All amounts allowed as retail display allowances and related
                  administrative fees pursuant to paragraph 5.b. above, if
                  applicable;

            (iv)  All transportation charges advanced by Warner pursuant to
                  subparagraph 3.a. above;

            (v)   All uncollectable amounts and other items properly chargeable
                  to Publisher referred to in paragraph 6. above;

            (vi)  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;


                                       14
<PAGE>

                        2)    there will be a charge of $6.40 USD per cwt. on
                              all second class entry magazines delivered by mail
                              for U.S. and Canada Reshipping Wholesaler
                              Agencies.

                        The charges referred to in subdivision 1) and 2) above
                        are subject to change only with Publisher's prior
                        written approval.

                        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).

            (vii) 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


                                       15
<PAGE>

                  hundred twenty (120) days after the Off-Sale Date of the issue
                  to which the charges relate.

10.   New Titles

      In the event that during the Term hereof Publisher enters into any third
      party agreements for non-PLAYBOY denominated English language
      publications, or Publisher itself publishes such a publication, then such
      publication(s) shall be included under the terms and conditions of this
      agreement, provided that Publisher has the right to so include the
      publication(s) in question. Warner's Commission on such publications will
      be a sum equal to 2.4% of the U.S. cover price of all Net Sales.

11.   Cross-Collateralization/Overdrafts

      The estimated Final Billings of each issue of all Publication(s)
      distributed by Warner pursuant to this agreement shall be treated as a
      unit, it being the intention hereof that if the total of the advance
      payments made by Warner pursuant to subparagraph 9.a. with respect to any
      Publication(s) and the deductible distribution expenses incurred by Warner
      pursuant to subdivisions (ii) through (vii) 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
            af-


                                       16
<PAGE>

            fecting Publisher which, if adversely determined, would impair the
            rights granted to Warner.

      b.    Publisher undertakes to indemnify and hold harmless Warner and its
            officers, agents or representatives and its wholesalers and
            retailers from and against any damages, costs, expenses, judgments,
            settlements, penalties, liabilities or losses of any kind or nature
            (excluding consequential damages, but including reasonable
            attorneys' fees) resulting from any claim, cause of action, suit or
            other proceedings, arising out of claims of copyright or trademark
            infringement, libel, 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 or arising out of the breach or
            alleged breach of any of the foregoing representations or
            warranties. 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 agrees to indemnify, defend and save Publisher harmless of
            and from any and all loss, claims, damages, excluding consequential
            damages, but including reasonable attorneys' fees, which Publisher
            may suffer or incur based on a claim, charge or suit instituted
            against Publisher as a result of any act or omission or commission
            of Warner in performing its services hereunder, other than acts,
            omissions or commissions of Warner undertaken in accordance with
            Publisher's instructions.


                                       17
<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 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.


                                       18
<PAGE>

      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.l. 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.

            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.


                                       19
<PAGE>

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: Publisher
      1271 Avenue of the Americas           730 Fifth Avenue
      New York, NY 10020                    New York, NY 10019

      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
      1271 Avenue of the Americas           Chicago, IL 60611
      New York, NY 10020

16.   Audit Rights

      Publisher may, at its own expense, audit the books and records of Warner
      relative to the distribution of the Publication(s) pursuant to this
      agreement at the place where Warner maintains such books and records in
      order to verify statements rendered to Publisher hereunder. Any such audit
      shall be conducted by a reputable public accountant or Publisher's
      accountant during reasonable business hours in such manner as not to
      interfere


                                       20
<PAGE>

      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.   Integration; Waiver; Modification

      This agreement, including Exhibit A, 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.

18.   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, and nothing herein contained shall give, or is
      intended to give, any rights of any kind to any third persons.

19.   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
<PAGE>

20.   Headings

      The headings in this agreement are for convenience of reference only and
      shall not limit or otherwise affect the meaning hereof.

21.   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.

22.   Arbitration

      Any controversy or claim arising out of or relating to this agreement, or
      any breach of it, shall be settled by arbitration to be held in New York,
      New York in accordance with the Rules of the American Arbitration
      Association, and judgment upon the award rendered by the Arbitrators shall
      be entered in any court having jurisdiction.

23.   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 War-


                                       22
<PAGE>

            ner 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., Eastern
            News Distributors, Inc., ICD/Hearst Corporation, Kable News Co.,
            Inc., Murdoch Magazines Distribution Division or to a current
            subsidiary or current affiliate of any of such companies.

24.   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.

25.   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 ei-


                                       23
<PAGE>

      ther party from any obligation hereunder due and owing to the other party
      up to the date of such termination.

26.   Confidentiality

      a.    Publisher and Warner agree to treat this agreement as proprietary
            information and each agrees not to reveal any of the terms hereof to
            any third party, for any purpose, without the prior written approval
            of the other party, except that each party may disclose this
            agreement to outside accountants performing auditing services for
            such party or except to the extent required by law. Publisher and
            Warner each agree that, after the date hereof, they will take
            whatever steps they deem necessary to carry out the intent of this
            paragraph.

      b.    Any confidential or proprietary information obtained by either party
            from the other in connection with the furnishing of services
            pursuant to this agreement shall be kept confidential and shall not
            be disclosed to any third party without the prior written approval
            of the other party, except to the extent required by law.


      WARNER PUBLISHER SERVICES, INC.

      By /s/ Daniel Rubin
         ------------------------------

      Its President
          -----------------------------


      PLAYBOY ENTERPRISES, INC.

      By /s/ Alex Mironovich
         ------------------------------

      Its President
          -----------------------------


                                       24
<PAGE>

                                    EXHIBIT A
                         ATTACHED TO AND MADE A PART OF
                      AGREEMENT DATED JULY 2, 1999 BETWEEN
                     WARNER PUBLISHER SERVICES, INC. ("WPS")
                                       AND
                        PLAYBOY ENTERPRISES, INC. ("PEI")

                            Warner Publisher Services
                           PEI Circulation Commitments
                                   June, 1999

I.    National Sales and Services Programs

      1.    Distribution Assignments

            A.    PLAYBOY

                  WPS will work the distribution in WPS' base, prime and
                  selected tertiary and secondary agencies, which should
                  represent approximately seventy percent (70%) of WPS' Net
                  Billing Dollars, two (2) times a year as mutually agreed upon
                  with WPS and Playboy.

            B.    Flats (Specials, Lingerie, Presents, Private Collection)

                  WPS will work the distribution of each of the above "flats" in
                  WPS' base, prime and selected tertiary and secondary agencies,
                  which should represent approximately seventy percent (70%) of
                  WPS' Net Billing Dollars, two (2) times a year as mutually
                  agreed upon with WPS and Playboy.

            C.    Calendars (Wall and Desk)

                  WPS will work the distribution of each of the above calendars
                  in WPS' prime agencies, which should represent approximately
                  seventy percent (70%) of WPS' Net Billing Dollars, one (1)
                  time a year.


                                       1
<PAGE>

            D.    New Magazine Launches

                  WPS will work the distribution of any new PEI publication with
                  a frequency of monthly or greater in accordance with the above
                  distribution commitments for PLAYBOY.

                  WPS will work the distribution of any new PEI publication with
                  a frequency of less than monthly in accordance with the above
                  distribution commitments for the flats or the calendars.

            E.    Publisher Sales Programs ("PSP")

                  The above distribution assignments will be scheduled in
                  conjunction with WPS' quarterly Publisher Sales Programs
                  assignment schedule.

            F.    Blitzes (Team Surveys)

                  WPS will include all pertinent PEI titles, as directed by PEI,
                  in survey agencies as determined by WPS on a quarterly basis.

      2.    Marketing Assignments

            WPS will complete a targeted marketing assignment quarterly. Targets
            will be determined by PEI and mutually agreed upon with WPS. WPS
            will make annual marketing calls on not less than two hundred (200)
            retailer chains.

      3.    Point-of-Sale ("POS")

            WPS will complete targeted point-of-sale assignments determined by
            PEI and mutually agreed upon with WPS.

      4.    Telemarketing

            WPS will continue to use the Telemarketing Department to accomplish
            specific objectives in agencies not visited as prime or targeted, as
            mutually agreed upon by PEI and WPS.


                                       2
<PAGE>

      5.    Wholesale Redistribution Program

            WPS will attempt to ensure redistribution of all stock and provide a
            stock and redistribution report for every issue of each flat in all
            agencies with a draw of five hundred (500) copies or more of that
            respective flat.

      6.    Distribution Maintenance Report

            To be provided for each issue of each PEI title in all agencies
            worked.

      7.    Authorization Confirmation Report

            As mutually agreed upon.

      8.    Men's General Interest Magazine Sales Trend Report

            Monthly.

      9.    Magazine Category Sales Trend Reports

            Annually.

      10.   Retail Class of Trade Report

            Annually.

      11.   "Unreasonable Sales" Program

            As mutually agreed upon.

      12.   Affidavit Audit Program

            PLAYBOY will be included on every affidavit audit. Audit agencies
            will be determined and scheduled by WPS quarterly and publisher will
            be advised in advance of each quarter.


                                       3
<PAGE>

      13.   Updated WPS Field Training on PEI Procedures and Policy and Sales
            Techniques

            Publisher access to Warner field staff sales meetings as mutually
            agreed upon.

      14.   Trade Show Support

            WPS will provide personnel support at mutually agreed upon trade
            shows.

      15.   All Assignments Will Be Recapped and Analyzed Promptly

II.   Operational Support Services

            Promotion Services

            o     Retail/whole/trade mailings support
            o     Local promotion support
            o     Material production support
            o     Advertising support

            Censorship

            o     Maintain awareness of censorship activity
            o     Inform, advise and support WPS personnel
            o     Encourage programs for specific markets
            o     Periodic attendance of The Media Coalition meetings and
                  activity reporting

            RDA

            o     Quarterly payment processing
            o     RDA contract maintenance
            o     On-line and/or batch reporting of RDA history and activity
            o     Targeted audits

            Order Regulation

            o     Maintain print order regulation schedule
            o     Enter allotment changes
            o     Manage reorders and billing adjustments


                                       4
<PAGE>

            Traffic

            o     Provide shipping documentation to the bindery
            o     Investigate shortage claims/trace shipments
            o     Input and maintain poly-wrap editions
            o     Process Canadian brokerage claims
                  (additional traffic processing requests will be handled as a
                  premium service)

            ABC Data Gathering and Reporting

            o     Conduct ABC audit mailings semiannually
            o     Recap and provide ABC county/state breakdown on request
            o     Provide WPS ABC sales analyses

            E-Mail Communications Link

            o     WPS client services/PEI communications
            o     PEI/WPS field communications
                  (based on mutually agreed to restrictions)


                                       5