John Fairfax Holdings Limited
ACN 008 663 161

FAIRFAX PROPOSED CONTRACTUAL FRAMEWORK

Fairfax’s proposal is based on three contracts: home distributor, retail distributor and retailer. An authorised newsagent will be offered all three contracts, which each newsagent can either retain or sell (subject to terms). For practical reasons, we will require the two distributor contracts for the same territory to be held by the same person.

Contracts for existing operators will have a three-year term, with an option for an extension for a further two years which would normally be extended in the absence of any significant industry change. A one year notice of termination would apply, but can only be issued by Fairfax after the first three years. For new purchasers, a three-year term will be offered, with a one-year notice period.

All existing operators would be granted a year’s moratorium on commissions on their existing territories: that is, in essence, no change until 1 July 2000. After that time some might rise or fall slightly, depending on whether set criteria are achieved. We believe that the criteria are reasonable and achievable and are based on current best practice. Existing operators will have until 1 July 2000 to meet the standards set in the criteria. Any new purchasers who buy a contract will have to meet the criteria as soon as practical and the moratorium does not apply. The criteria and commission details will be issued shortly.

1. Home distributor

This contract will cover home delivery within each existing territory. It will be offered to all existing authorised newsagents. It can be sold, subject to Fairfax approval. One entity can own up to five home distributor contracts, and Fairfax would consider requests to merge non-viable territories within one contract. A home distributor contract must be held with a retail distributor contract for the same territory. (Separation would only be allowed in highly unusual circumstances).

Performance criteria will include having a basic marketing plan for growing deliveries, having appropriate distribution equipment, achievement of reasonable customer service levels and EDI capability.

2. Retail distributor

This contract will cover retail distribution within each existing territory. It will be offered to all existing authorised newsagents, covering all existing subs. The contract can be traded, subject to Fairfax approval. One entity could own up to five retail distribution contracts, non-viable territories could be merged within one contract. This contract must be held with the home distribution contract for the same Fairfax territory.

A retail distributor will be required to deliver to all retailers Fairfax nominates within their territory. The retail distributor will manage the supply for all non-direct accounts and may be asked to deliver to certain direct account retailers as well. A retailer would have only limited ability to switch from Fairfax’s designated retail distributor (it might be due to poor service and would require Fairfax’s approval). If there has been a serious unresolvable dispute, Fairfax may require another nearby retail distributor to deliver to a particular retailer.

3. Retailer

A retail contract is a four-wall contract offered to all existing retailers. Volume and performance criteria will define retailers into three categories.

This will be offered to existing authorised newsagents, and must be held in conjunction with home and retail distribution contracts. A specialist offers advanced newsagent service, including advanced display and promotion, full EDI capability, a basic marketing plan, as well as home and retail distribution. Newsagents will have 12 months to meet these standards to stay on their current commission level.

Retailer Category B - "news retailer"

This will be available to a major retailer which offers many but not all newsagent services. New entrants or existing subs can apply for this contract if performance and volume criteria are met (see "upgrade" below). This contract may be awarded as a direct or indirect account.

Retailer Category C - "general retailer"

This will be offered to all existing subs, with the commission set at 12.5 per cent during the moratorium and then performance (eg display) and volume criteria will apply from 1 July 2000 and commissions can grow or shrink from the existing rate. Volumes will be averaged and could lead to downward or upward adjustments.

Applicants for new direct outlets will need to satisfy a list of publicly available criteria. These criteria will include: the volume of Fairfax product, trading hours, display status, full EDI, credit and payment terms, and superior supply and returns management. Fairfax will take into account the commercial impact on Fairfax’s overall distribution network. Chain stores will be required to receive a local delivery to fit in with Fairfax’s zoned advertising needs. Applicants will be required to pass a six months’ probation, during which time they would be on "general retailer" terms.

Please note that the above description is an outline only and is not intended to be an exhaustive explanation. Fairfax may make modifications to its proposal as it proceeds to implementation.

Lookalikes are deregulated from 1 July this year. From this date, Fairfax will deal with lookalikes based on Fairfax’s own commercial assessment and criteria. If a lookalike wishes to apply for "news retailer" status (as they would not have home and retail distribution) based on Fairfax’s published criteria, there is a process for them to follow (as per "upgrade" above).

Magazines are deregulated from 1 July this year. From this date, Fairfax will require newsagents to deal individually with magazines distributed by Fairfax on the same commission and territory basis as presently exist under the authorisation.

Fairfax > Corporate Affairs & Media Releases > Announcements > PROPOSED CONTRACT SYSTEM FOR NEWSAGENTS - PROPOSED CONTRACTUAL FRAMEWORK