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Exhibit 10.4

Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission.  The
omissions have been indicated by asterisks (“*****”), and the omitted text has
been filed separately with the Securities and Exchange Commission.

TRANSPONDER ENCRYPTION SERVICES CORPORATION
AMENDED AND RESTATED
SATELLITE CAPACITY LEASE

EXECUTED AGREEMENT
 
This Amended and Restated Satellite Capacity Lease (this “Lease”) is entered
into as of September ___, 2009 (the “Execution Date”) and effective as of
October 11, 2009 (the “Effective  Date”) by and between Playboy Entertainment
Group, Inc., a Delaware corporation (“Playboy”), on the one hand, and
Transponder Encryption Services Corporation, a Colorado corporation (“TESC”), on
the other hand, and amends, restates and supersedes that certain Satellite
Capacity Lease by and between Playboy and TESC dated August 21, 2006, as amended
(collectively, the “Prior Agreement”).
 
WHEREAS, TESC is in the business of leasing satellite capacity on satellites it
owns, operates, leases or otherwise accesses or manages.
 
WHEREAS, Playboy desires to lease certain satellite capacity from TESC for the
purpose of transmitting the Services (each as defined below) in a
digitally-compressed and encrypted format for receipt by end users in the
Territory (as defined below).
 
NOW, THEREFORE, in consideration of the benefits conferred upon the parties
hereto and for good and valuable consideration, the sufficiency of which is
hereby acknowledged, the parties mutually agree as follows:
 
1.
CERTAIN DEFINITIONS:

 
The following terms shall have the meanings set forth below:
 
(a)           “Adult” means any programming edited to the “X” standard (also
referred to herein as a version or a rating) or higher (such as XX, XX 1/2 and
XXX), as such standard is commonly referred to in the adult programming
industry.
 
(b)           “Adult Package” means a package including one (1) or both of the
Services with other Adult oriented programming services available to be
purchased by Subscribers as part of a ‘cascaded’ or ‘tiered’ package of multiple
services during the same discrete period of time, including without limitation
the Adult Showcase.
 
(c)           “Adult Showcase” means the package of Adult services currently
transmitted by TESC that consists of not fewer than five (5) Adult programming
services.

(d)           “Affiliate” with respect to either party to this Lease means any
person or entity that directly or indirectly, or through one or more
intermediaries, controls, or is controlled by, or is under common control with a
party to this Lease. For the purposes of this definition, the term

 

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“Control” (including the words “controlling” or “controlled by”) shall mean the
power to direct or cause the direction of the management, policies and/or
affairs of a person or entity whether through the ownership of voting
securities, by contract or otherwise.

(e)           “Contract Year” means each consecutive twelve (12) month period
(or partial period, if any) during the Term commencing on the Effective Date.

(f)           “Distributor” means any multi-channel video program distributor
(as defined in Section 76.1000 of the Federal Communications Commission rules)
of a Service in the Territory that has a multi-channel video distribution
business distributing broadcast and cable network channels.

(g)           “Distributor Affiliate” means an Affiliate of a Distributor which
itself is not a Distributor.

(h)           “Facility” means the reception, compression and uplink
facility(ies) utilized by TESC and/or its Affiliate(s) in Cheyenne, Wyoming;
Gilbert, Arizona, or any additional location(s) in the continental United States
designated in writing by TESC from time to time.

(i)            “Internet” means the publicly available worldwide system of
interconnected computer networks that transmit data by packet switching using
TCP/IP technology(ies).

(j)            “Marks” means the service marks, trademarks, trade names and
logos used in connection with the Services and VOD programs that are owned by
Playboy or its parent corporation Playboy Enterprises, Inc. (“PEI”), including
without limitation “PLAYBOY,” “PLAYMATE,” “PLAYBOY TELEVISION,” “PLAYBOY TV,”
the RABBIT HEAD DESIGN, and “FRESH!”, all of which are being licensed herein for
use only in connection with the transmission of the Services in accordance with
the terms and conditions contained in this Lease.

(k)           “Opt-Out Location” means each geographic area for which TESC
elects, in its sole and absolute discretion, not to distribute Adult programming
of a certain editing standard (as such standard is accepted by the Adult
programming industry) and TESC, in its sole discretion, blocks receipt of one or
both of the Services because of the editing standard or content of the Service;
provided however, that TESC may only block receipt of one or both of the
Services in such a geographic area, so long as TESC blocks receipt of all
comparable programming in such geographic area; provided, further, that the
foregoing proviso shall not apply where the programmer of such comparable
programming agrees to indemnify TESC for its transmission of such programmer’s
programming into any such geographic area and Playboy does not agree to
indemnify TESC for its transmission of the applicable Service.

(l)            “Package Purchase” means the purchase by a Subscriber of and the
intentional authorization by TESC o f the Subscriber to receive, an Adult
Package.

(m)          “Pay-Per-View” or “PPV” means the ability of a Subscriber to
purchase the right to view a program or block of programming provided by Playboy
as part of a Service which is packaged and sold uniquely for PPV viewing for a
single charge for each separate viewing. The length of the block of programming
shall be designated by TESC; provided, that, unless agreed to by both parties
the length of such blocks, with respect to both Services, shall not exceed one
(1) calendar day. If TESC requests the ability to exceed the length limit
described in the previous sentence for

 
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a promotion or other reason, the parties shall both negotiate in good faith
regarding the accommodation of that request.

(n)           “PPV Purchase” means the purchase by a Subscriber of, and the
intentional authorization by TESC of the Subscriber to receive, PPV programming.

(o)           “Services” means the two (2) 24 x 7 linear programming services,
as delivered by Playboy to TESC, to be transmitted to Subscribers pursuant to
this Lease, which Services are: Playboy TV and Fresh!, each as more fully
described in Exhibit A hereto. The term Services includes all components and
parts of any of the Services including, without limitation, all interactive
components, graphics, scrolls or other visual graphics and all portions of the
VBI (or its digital equivalent) and any commercial advertising that may air on
any of the Services. Each one (1) of the two (2) above-listed programming
services may be referred to in this Lease, individually, as a/the “Service.” For
clarity, each use of the term Service in this Lease shall be deemed a reference
to such Service in its entirety unless otherwise specifically denoted.

(p)           “Set-Top Box” means those certain conditional access and control
hardware components that connect to, or are integrated as part of, a television
or other video output display device (including without limitation a computer
monitor to the extent that the computer providing a signal to the monitor has a
video card with a television input with the purpose of the computer being used
as a television; each, a “Display Device”) and also connect to the Transmission
System, the content of which then is displayed on the Display Device, and which
have been commercially adopted for use with the Transmission System for delivery
of television programming services.

(q)           “Signal(s)” means the programming signal or feed containing
programming of the Services including all video, audio, data and other
components as delivered by Playboy to the Facility.

(r)           “Subscriber” means any residential or non-residential location or
person in the Territory that is intentionally authorized by TESC or its designee
to receive any level of television programming service or package of television
programming services via the Transmission System, either directly or through a
Sub-Distributor (as defined below).

(s)           “Subscription Purchase” means the purchase by a Subscriber of, and
the intentional authorization by TESC of the Subscriber to receive, one or both
of the Services from the Transmission System on a monthly subscription basis
that automatically renews for an additional monthly period unless action is
taken by a Subscriber to discontinue the monthly subscription.

(t)            “SVOD” means the receipt by a Subscriber of Service programming
on a subscription VOD basis from a Playboy-selected group of video programs that
are transmitted to Subscribers who have made a Subscription Purchase for that
Service. Such receipt may be at no additional cost (other than the cost of the
subscription of the underlying Service) or may be at an additional charge, as
determined by TESC in its sole discretion, provided however that if TESC elects
to charge an additional fee, such additional fee shall be deemed Gross Revenue
and, thus, subject to the percentage-based Playboy’s Share of Gross Revenues
provisions in Exhibit B of this Lease (but, for clarity, no minimum shall apply
to such additional fee(s)). As of the Effective Date,

 
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Playboy offers SVOD only for Playboy TV. If Playboy makes programming in the
Fresh! Service available on a SVOD basis, TESC shall have the right to transmit
such programming to Subscribers on a SVOD basis in accordance with the terms of
this Lease, and such delivery shall be subject to *****.

(u)           “SVOD Selection” means the selection by a Subscriber of Service
programming on a SVOD basis.

(v)            “Territory” means the United States of America, its territories,
commonwealths and possessions including, without limitation, the District of
Columbia, Puerto Rico and the U.S. Virgin Islands.

(w)           “Transmission System” means the transmission system employed by
TESC to transmit audio, video, data and other programming services to
Subscribers in the Territory whereby the programming satellite signal or feed
is: (i) received by the Facility and (if applicable) is digitized, compressed,
encrypted, and otherwise processed; and (ii) transmitted for reception by
Subscribers via a Set-Top Box. For clarity, the parties agree and acknowledge
that the term Transmission System is inclusive of all transmission systems used
by TESC or a permitted Sub-Distributor under this Lease to transmit the
Services, including any audio, data, and video included therein, including,
without limitation, by means of C-band receive facilities such as SMATV systems
and all forms of wireless and wire-line data distribution technology (including,
by way of example but not limitation, BSS or FSS satellite regardless of
frequency or band, copper wire, fiber optic and/or coaxial cable, IPTV, all
forms of terrestrial wireless and any other technology either now existing or
later developed) provided that such transmission terminates at a Set-Top Box.
The Transmission System shall not include transmission by TESC: (1) to IP
addresses via the Internet (except in connection with TESC transmitting its
audio/visual signal to a Set-Top Box that is IP-enabled (“IPTV”), which is
expressly permitted under this Lease), (2) via the World-Wide-Web, or (3) to
personal mobile and wireless devices other than as expressly permitted under
Section 3(b) below (1, 2 and 3, collectively, the “Transmission System
Exclusions”).

(x)           “Video-On-Demand” or “VOD” means the ability of a Subscriber to
rent a program on an ‘on-demand’ basis, such that the Subscriber can select the
program, begin watching the program at any time, for a limited time, not to
exceed one (1) calendar day, and utilize pause, rewind and fast forward
functionality.

(y)           “VOD Purchase” means the purchase by a Subscriber of, and the
intentional authorization by TESC of the Subscriber’s Set-Top Box to receive a
program, on a VOD basis.

(z)           “World Wide  Web” means the hypertext transfer protocol based,
distributed information system that facilitates sharing information and content
via the Internet.

2.
TERM:

This Lease shall commence on the Effective Date and shall expire thirty (30)
months thereafter, (April 10, 2012) unless terminated earlier in accordance with
Section 11 below (the “Term”).

 
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3.
GRANT OF RIGHTS:

(a)           Satellite Capacity Lease. TESC hereby leases to Playboy, for the
sole purpose of transmitting the Services in a digitally-compressed and
encrypted format, two (2) video channels of capacity on one or more Ku-Band
and/or Ka-Band satellites with full CONUS coverage, which are directly or
indirectly owned, operated, leased or otherwise controlled or employed in whole
or in part by TESC, as such satellite(s) are designated from time to time by
TESC in its sole discretion.

(b)           Transmission. Playboy hereby grants to TESC and its Affiliates,
and TESC hereby accepts, the non-exclusive right, license (including without
limitation the license to all copyright, trademark and other intellectual
property rights appurtenant to the programming comprising the Services) and
obligation throughout the Term (only as specifically set forth in this Lease) to
transmit the Services in the Territory via the Transmission System for
Subscription Purchases, PPV Purchases, Package Purchases, to the extent that
TESC receives programming from Playboy for transmission on a SVOD basis as set
forth below, SVOD Selection and, to the extent that TESC receives programming
from Playboy for transmission on a VOD basis as set forth below, VOD Purchases,
for viewing, exhibition and display by Subscribers. For clarity, TESC shall have
the right to transmit the Services via the Transmission System to (i)
residential locations, including all forms of multiple dwelling unit or communal
living facilities (e.g. apartments, condos, town homes, duplexes, dormitories,
retirement homes, mobile home parks, planned unit developments, master planned
communities, gated residential communities, multiple dwelling units, colleges
and universities and housing cooperatives), (ii) guest facilities (e.g. hotels,
motels, RV parks, truck stops, and assisted living facilities) where the guest
facility provides conditional access or can otherwise ensure the viewers are not
minors, (iii) private [non-commercial] airplanes, recreational vehicles and
commercial hauling vehicles; and (iv) to enable the transfer of any programming
licensed hereunder to handheld devices that can download content from a digital
recording device (but, subject to Section 3(c) below, not mobile phones or other
similar wireless communications devices that could receive and decode the Signal
directly, and not through a receiver or decoder). The aforementioned
notwithstanding, TESC shall have no right to distribute the Services in any
public area. In furtherance of and without limiting the generality of the
foregoing, Playboy agrees and acknowledges that TESC shall have the right to (A)
subject to the requirements of Section 3(f) of this Lease, transmit the Services
in an Adult Package; and (B) authorize and de-authorize IRDs and Set-Top Boxes
to receive the Services as necessary to permit transmission of the Services as
allowed by this Lease.

(c)           Transmission to Computers; Transmission to Mobile Hand-held
Devices. Notwithstanding the final sentence of Section 1(w) above, each of
Playboy and TESC shall use its and their respective good faith efforts to
negotiate and execute an amendment to this Lease, within seventy-five (75) days
of the Effective Date hereof, pursuant to which TESC and/or its Affiliate DISH
Network L.L.C. (“DISH”) may transmit Playboy controlled programming to the
computers of Subscribers who are authenticated purchasers of a Service by
Internet streaming via the World Wide Web and/or ‘pull’ technology. Until such
time as the parties reach written agreement on the scope and terms of such
transmission, no such rights shall be deemed granted hereunder. *****. Playboy
agrees to participate in commercially reasonable discussions regarding
opportunities for TESC to transmit Playboy controlled programming to the mobile
hand-held device(s) (including, without limitation, cellular telephones) of
Subscribers.

 
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(d)           Packaging. TESC shall have the right to include the Services in
the Adult Showcase as well as any other Adult package(s), and to sell the
Services (or either of them) on an a-la-carte basis; provided however, that TESC
shall have the obligation to include Fresh! in the Adult Showcase. To the extent
logically consistent, TESC shall package Fresh! in other PPV packages containing
at least two (2) other Adult services no less favorably than it does any other
XX½ Adult service. For clarity, Playboy acknowledges that it is not logically
consistent to include Fresh! in a package of all XXX services, in a package of
services from a single provider, or a package comprised of services selected by
a Subscriber, so long as the Subscriber has the option to select Fresh!. In
addition, TESC shall have the right but not the obligation, in its sole
discretion, to transmit Playboy TV in packages of non-Adult premium services. In
the case of premium packages, payments between the parties shall be handled as
set forth in Section A of Exhibit B for a Subscription Purchase of Playboy TV,
and shall not be handled as set forth in Section B of Exhibit B. For the purpose
of clarity, the allocation of Gross Revenue shown in the table in Section A of
Exhibit B shall apply and not the Adult Package allocation set forth in Section
B of Exhibit B. Purchases of Playboy TV in connection with such premium packages
shall constitute Subscription Purchases of Playboy TV for purposes of this
Lease.

(e)           Transmitted Programming. Notwithstanding anything to the contrary
contained in this Lease, TESC shall have the right to transmit each of the
Services to Subscribers on each of the following bases: (i) as a subscription
service whereby Subscribers can make Subscription Purchases; (ii) on a PPV basis
whereby Subscribers can make PPV Purchases; (iii) as part of an Adult Package
transmitted for PPV Purchases and/or Subscription Purchases; (iv) if made
available by Playboy, in its sole and absolute discretion, on a video on demand
basis whereby Subscribers can make VOD Purchases; and (v) to the extent made
available by Playboy in its sole and absolute discretion, on a SVOD basis made
available to Subscribers either for no charge or for a fee.

(f)            Signals. In addition to and without limiting the generality of
the grant of rights contained above, TESC shall have the right and license to
receive the Services at the Facility and to digitize, compress or otherwise
technologically manipulate the Signals, as received at the Facility, and
transmit the technologically modified Signals via the Transmission System to
Subscribers in the Territory.

(g)           Transport. In addition to and without limiting the generality of
the grant of rights contained in this Lease, to the extent not prohibited by
Law, TESC and its Affiliate EchoStar Holdings Corporation shall have the right
and the license to transport and arrange for the transport of the Signal for a
Service to third parties who gain rights to such Service independent of TESC
including, without limitation, to cable system operators (both franchised and
non-franchised); provided, that if, within thirty (30) days after receipt by
TESC from Playboy of written notice that any such third party is not complying
with any material requirements, restrictions, or limitations contained in such
party’s agreement with Playboy, the third-party operator still is not complying
with the applicable provision, then TESC shall cease delivery of the Services to
the third-party operator; further provided, that Playboy shall indemnify TESC in
accordance with the Indemnification section of this Lease for any such
termination to the extent that such termination is in breach of Playboy’s
contract with such third party or otherwise unlawful.

 
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(h)           Sub-Distribution. In addition to and without limiting the
generality of the grant of rights contained in this Lease, TESC and its
Affiliate DISH shall have the right and the license to sub-distribute, re-sell
and/or otherwise retransmit the Services to Distributors who do not offer the
Services over platforms that are Transmission System Exclusions (collectively,
“Sub-Distributors”) including, without limitation, cable system operators and
service providers to developments such as master planned communities, gated
residential communities, homeowners’ associations, multiple dwelling units,
colleges and universities, and housing cooperatives (which sub-distribution may
include sub-distribution to parties that may use various technological
methodologies to obtain and distribute the Service including, without
limitation, C-band receive facilities such as SMATV systems and all forms of
wireless and wire-line data distribution technology such as BSS or FSS satellite
regardless of frequency or band, copper wire, fiber optic, or coaxial cable and
all forms of terrestrial wireless either now existing or hereafter developed);
provided, that TESC shall not subdistribute, re-sell, and/or sublicense a
Service to a franchised cable television system that has more than five thousand
(5,000) contiguous Subscribers without the prior written consent of Playboy.
Distribution under this paragraph must be performed by Sub-Distributors (i)
using a method whereby the distribution terminates at a Set-Top Box, (ii) using
a method that does not include the use of technologies that are Transmission
System Exclusions, and (iii) who have technology to provide conditional access
and parental controls protection that is at least equivalent to that used by
TESC.  If, within thirty (30) days after receipt by TESC from Playboy of written
notice that a Sub-Distributor is not complying with an applicable material term
of this Lease, or of TESC otherwise becoming aware that a Sub-Distributor is not
complying with an applicable material term of the Lease, the Sub-Distributor
still is not complying with the applicable term, then TESC shall cease delivery
of the Service to the Sub-Distributor; provided, that TESC shall use reasonable
efforts to immediately cease transmission to any Sub-Distributor that TESC has
knowledge is delivering a Service in violation of applicable Law. All revenues
received by TESC from Sub-Distributors attributable to the Services, and any VOD
Purchases, if applicable, shall be included in the calculation of Gross Revenues
and all Subscribers receiving the Services through Subdistributors shall be
counted for purposes of Section 5(a) of the Lease and Section (C) of Exhibit B.
In addition, TESC shall have the right but not the obligation to receive the
Signals from any other Distributor. TESC shall contractually require that
Sub-Distributors comply with all applicable obligations imposed upon TESC for
distribution of the Services to its Subscribers under the Lease, including
without limitation, Section 5 (DELIVERY AND TRANSMISSION OF THE SERVICES) and
Section 8 (MARKETING AND USE OF MARKS). TESC shall indemnify Playboy in
accordance with the Indemnification section of this Lease for any claims
relating to TESC’s sub-distribution of either Service.

(i)            Marketing. In addition to and without limiting the generality of
the grant of rights contained above, TESC and the retail distribution network of
it or its Affiliates shall have the right and the license, but, except as
expressly provided in this Agreement, not the obligation, to advertise, promote,
publicize, market and offer the Services in the Territory to Subscribers and
potential Subscribers pursuant to the terms and conditions contained in this
Lease.

(j)            Spillover. Notwithstanding the definition of Territory, Playboy
understands and agrees that the Signals, when transmitted from a satellite, may
extend beyond the geographic boundaries of the Territory and that such
‘spill-over,’ in and of itself, shall not constitute a breach of this

 
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Lease; provided that TESC does not knowingly authorize the receipt of the
Services outside the Territory.

(k)           Interactive. TESC and Playboy agree to negotiate in good faith to
transmit a Playboy interactive product. TESC agrees that it shall not treat
Playboy less favorably with respect to an interactive product than it treats
other providers of Adult programming with respect interactive products.

(l)           *****

(m)           Reservation of Rights. Subject to and without limiting subsection
(1) if this Section 3 in any manner whatsoever, all rights not expressly granted
by Playboy to TESC shall be specifically reserved by Playboy. Additionally,
except as expressly set forth in this Agreement, Playboy does not, directly or
by implication, by estoppel or otherwise, grant to TESC any rights or licenses,
and TESC shall not have any ownership rights in any intellectual or tangible
property of Playboy, including derivative works (as defined in the United States
Copyright Act of 1976, Title 17 USC Section 101 et seq.) or any intellectual
property rights related thereto, whether by implication, estoppel, or otherwise.

4.
THE SERVICES:

(a)           The Services. The Services shall consist of the programming set
forth in Exhibit A.

(b)           Limitations. Playboy agrees that no Service (including any
advertising contained in the Service and any Audiotext Spots, as defined below)
will contain religious programming. The Services may only contain spots
promoting Playboy’s audiotext (i.e., “900” number) offerings and live chat
offerings (the “Audiotext Spots”) as follows: (x) if the break is ***** in
length, Audiotext Spots shall not exceed ***** during such break; and (y) if the
break is ***** in length, Audiotext Spots shall not exceed ***** during such
break; provided, that, in either case, Playboy shall not interrupt any movies or
shows to air the Audiotext Spots. Playboy agrees that there shall not be *****
of Audiotext Spots on any of the Services during any ***** period.

(c)           PPV Purchases. Playboy shall schedule the programming contained on
the Services such that it is substantially suitable for PPV Purchases.
Specifically, Playboy shall make reasonable efforts to provide the programming
contained in Playboy TV in ***** and the programming contained in the other
Services in *****; provided that, upon agreement of the parties, such time
period ‘blocks’ may be adjusted.

(d)           Advertising. In addition to Playboy’s right to schedule Audiotext
Spots, Playboy shall have the right to include third party advertising on each
of the Services up to ***** (collectively, “Third Party Advertising”); provided,
that in the event that Playboy includes Third Party Advertising, TESC shall have
the right to ***** via the insertion of its own commercial, promotional or other
announcements (each an “Avail”); *****. “Prohibited Third Party Advertising”
means third party advertising *****. In the event that Playboy includes Third
Party Advertising in the Service(s), Playboy ***** to enable TESC or its
Affiliate to insert its commercial announcements. *****; provided, that nothing
shall prevent Playboy from complying with any court or governmental agency
requirement for distribution of content regarding methods of protecting under
age viewers from gaining access to the Services. The

 
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Services shall not include any advertising or messages which in any way
disparage TESC, any Affiliate of TESC or the Transmission System either
specifically or satellite distribution, generally. *****. Except as specifically
provided herein, Playboy shall not black out any programming that airs on either
of the Services and the Services shall not include any programming for which
Playboy seeks a surcharge or additional fee of any kind. In addition to and
without limiting any other rights and remedies TESC may have, TESC shall have
the right to declare Playboy in breach of this Lease if Playboy violates any of
the foregoing ***** following written notice to Playboy from TESC and Playboy’s
failure to withdraw the programming in question within ***** of receiving the
written notice. No Avail shall: 1) include any advertising or messages which in
any way disparages Playboy or any Affiliate of Playboy, 2) include any calls to
action or similar messages (except with regard to viewer participation related
to the programming on any Service) that Playboy has not agreed to in advance and
in writing, and 3) promote any Adult programming service not affiliated with
Playboy (excluding, for clarity, any advertisements for the Adult Showcase or
other Adult Package or premium package containing a Service).

(e)            Second Service. Playboy agrees that it will not use any of the
Services to nest or incubate another programming service within such Service (a
“Second Service”), nor will it ‘clone’ a Service into a Second Service by
duplicating programming from the Service on to any such Second Service and/or by
removing programming from the Service and distributing it on such Second
Service, unless Playboy grants to TESC the right, exercisable in TESC’s sole
discretion, to transmit the Second Service on terms no less favorable than those
granted to any Distributor of the Second Service. TESC shall have no obligation
to transmit a Second Service. Nothing in this paragraph will prohibit Playboy
from using a branded block of programming on the Services. Notwithstanding the
foregoing, TESC acknowledges that Playboy may cross-utilize up to ***** of the
programming content from Fresh! on one (1) or more other Playboy controlled
service(s), and agrees that such cross-utilization shall not be a breach of this
subsection (e).

(f)            Same Programming Requirement. Taking into account time zone
differences, during the Term each feed of the programming on each of the
Services, as delivered to TESC at a given point in time, shall be the same as
that feed of programming delivered by Playboy to all Distributors in the
Territory at such point in time; except that the Services may contain customized
branding particular to a specific distributor, and that any such customization
does not modify any shows (as opposed to interstitial time between shows) in a
material way. If Playboy does provide any customization, then TESC shall have
the unconditional right to transmit the programming included in the Services
customized in a similar fashion as Playboy is providing to Distributors in the
Territory on the same terms and conditions, and Playboy shall ensure that such
programming is delivered to TESC in accordance with the delivery terms contained
herein. TESC, at its option, shall transmit any additional feeds of the Services
(including, without limitation, any additional time zone feeds or any SAP feeds)
without any reduction of rent earned by TESC provided for in this Lease;
provided, that in the event that Playboy would incur material costs and expenses
to provide TESC any such additional feeds, Playboy shall notify TESC in writing
thereof, and the parties shall discuss, in good faith, the terms and conditions
governing the provision of such additional feed(s) to TESC.

(g)           Closed Captioning. Playboy agrees that during the Term it shall,
at its sole expense, include as part of the Signals closed-captioning and
video-descriptioning to the full extent

 
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required by any current or future federal, state or local law, rule or
regulation (collectively, the “Law”), and to the extent required to ensure that
TESC is in compliance with all such Laws, regardless of whether such Law imposes
the obligation to include closed captioning or video descriptioning, as
applicable, on Playboy or TESC. Playboy acknowledges and agrees that neither
TESC nor any of its Affiliates, shall have any liability in connection with
Playboy’s failure to prepare, insert or include closed-captioning or video
descriptioning, as applicable, in the Services as required by this subsection.
Playboy also agrees to cooperate with TESC on a commercially reasonable basis to
the extent necessary and desirable to establish compliance with any such Laws,
and Playboy shall provide TESC with all documents reasonably necessary for TESC
to demonstrate compliance with such Laws in a timely manner. Claims arising out
of violations of this subsection are subject to the indemnification provisions
of this Lease.

(h)           Rating Information. During the Term, Playboy shall, at its sole
expense, include as part of the Signals ratings information or other such data
in compliance with the voluntary-participation FCC parental ratings guidelines
(the “Ratings Guidelines”) and any applicable Laws that would enable Subscribers
to exercise parental controls over the programming on the Services, and such
ratings information or other data shall be compatible with Set-Top Boxes and
standard industry interactive technology implementing parental controls. Playboy
shall provide complete, accurate program rating data to TESC’s designated data
provider as requested, or as otherwise required in this Lease. Playboy
acknowledges and agrees that neither TESC, nor any of its Affiliates, shall have
any liability in connection with Playboy’s failure to prepare, insert or include
or program rating information in the Services as required by this subsection.
Playboy also agrees to cooperate with TESC on a commercially reasonable basis to
the extent necessary and desirable to establish compliance with any such
guidelines or Laws, and Playboy shall provide TESC with all documents reasonably
necessary for TESC to demonstrate compliance with such guidelines and Laws in a
timely manner. Claims arising out of violations of this subsection are subject
to the indemnification provisions in accordance with the terms of the
“Indemnification” section of this Lease.

(i)            Other Laws. In the event that any programming on a Service is
regulated by any Law other than those specified above that is applicable to TESC
or its Affiliates, then Playboy shall comply with the Law, ensure that the
Services comply with the Law and provide TESC with all documents reasonably
necessary for TESC to demonstrate compliance with the Law in a timely manner.

(j)            Streaming. *****. Playboy shall make commercially reasonable
efforts to differentiate the Service from the content that Playboy streams over
the Internet (excluding the content that Playboy makes available, in conjunction
with Distributors, to the computers of authenticated Playboy TV subscribers).

(k)           Deviation. if for any reason, TESC, in good faith, determines that
a Service includes programming prohibited in this Section 4 (a “Deviation”),
TESC shall provide Playboy with written notice stating the basis for such
Deviation. If such Deviation has not been cured within ninety (90) days from the
date TESC provided such notice, TESC shall have the right, without limiting any
rights or remedies, at its sole option to: 1) preempt the Deviation, if such
Deviation is less than *****, or 2) discontinue transmission of such Service if
such deviation is greater than

 
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*****. The foregoing right shall be in addition to any other rights or remedies
available to TESC in this Lease.

(l)            Preemption. In the event that TESC reasonably determines that an
individual program provided by Playboy as part of a Service has a reasonable
likelihood of materially damaging TESC or any of its Affiliates as a result of
governmental actions or lawsuits brought by third parties, then TESC shall
notify Playboy of the potential issue in writing as soon as practicable. Should
Playboy elect to not remove the program in question from the Service, then TESC
shall have the right to pre-empt the offending program, and to prevent its
transmission to Subscribers.

(m)           Certificate of Compliance. Within thirty (30) days of receipt of a
written request by TESC at any time during the Term (but in no event more than
once per calendar year), Playboy shall deliver to TESC written certification (i)
of its compliance or non-compliance (as the case may be) with this Section 4
signed by an officer of Playboy.

(n)           Remedies. Playboy acknowledges that its substantial compliance
with the material provisions of this Section 4 is of the essence to this Lease.

5.
DELIVERY AND TRANSMISSION OF THE SERVICES:

(a)           TESC’s Transmission Obligation. As of the Effective Date, TESC
already transmits the Services. Subject to and without limiting the Opt Out
Location provisions of this Lease, during the Term, TESC shall make each Service
available to all permitted Subscribers (authorized hereunder) then in good
standing. For clarity, Playboy agrees and understands that, notwithstanding
anything to the contrary set forth herein, TESC has no obligation to transmit
the Services in any manner which is now, or at any time hereafter may be,
prohibited under applicable local, state or federal laws and regulations,
including without limitation statutes, laws, rules, regulations and orders
enforced, administered, promulgated or pronounced by the Federal Communications
Commission or any successor agency thereto, as amended from time to time.

(b)           Delivery by Playboy.

(i)           Delivery of Signals. Playboy shall, at its own cost and expense,
transmit to TESC for receipt by the Facility, the Signals with a high degree of
video and audio quality, which in any event shall be in accordance with TESC’s
reasonable technical requirements and in compliance with industry standards of
the Adult content industry. Further, Playboy shall, at its own cost and expense,
(A) transmit the Signals to the Facility using a domestic communications
satellite commonly used for the transmission of pay television programming which
is receivable at all times during the Term by the Facility without additional
expense to TESC; (B) fully encode and scramble the Signals using technology,
standards, practices and procedures which are generally accepted throughout the
pay television industry; and (C) have in place appropriate back-up transponder
space on a second domestic communications satellite. TESC acknowledges that
Playboy is providing the Signals for the Services to TESC as of the Effective
Date. Except as otherwise expressly provided in this “Delivery by Playboy”
subsection or any other part of the Lease, all costs and expenses incurred with
respect to reception of the Services from the satellite by the Facility and its
transmission shall be borne by TESC.

 
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(ii)           Change in Delivery Method. Playboy may, from time to time, change
the satellite being used for transmission of one or both of the Signals;
provided, that any satellite used by Playboy to transmit a Signal shall be a
domestic communications satellite commonly used for the transmission of pay
television programming that is receivable at all times by the Facility. In the
event of any such proposed change, Playboy shall provide TESC with at least
ninety (90) days’ prior written notice of the proposed effective date of such
proposed change; provided, that if such a change is the result of a force
Majeure, Playboy agrees to provide TESC with written notice as soon as
reasonably practicable. If, as a result of any change as set forth herein, TESC
will incur out-of-pocket expenses for additional satellite receiving or other
equipment needed to receive or transmit a Service, Playboy agrees within ten
(10) days of receiving such notice from TESC of such expenses either to provide
the necessary equipment (at Playboy’s sole discretion) or to contribute a pro
rata portion of such additional equipment expense, which shall be determined by
multiplying the total amount of such expense by a fraction, the numerator of
which shall be one (1) for each affected Service and the denominator of which
shall be the number of cable program services to be received and transmitted by
TESC from such new satellite as of thirty (30) days after the effective date of
such change.

(iii)           Encryption Change. If Playboy proposes to change the method by
which the Signal of a Service is encoded, scrambled or digitized to a method
different from that by which it is encoded, scrambled or digitized as of the
Effective Date, Playboy will give TESC at least ninety (90) days’ prior written
notice of the effective date of such proposed change. If, as a result of such
change, TESC will incur out-of-pocket expenses for additional decryption,
decoding or digitization equipment, Playboy agrees within ten (10) days of
receiving such notice from TESC of such expenses either to provide the necessary
equipment (at Playboy’s sole discretion) or to reimburse TESC for such expenses;
provided, that Playboy’s reimbursement of such expenses shall be pro rated in
the manner set forth in Section 5(b)(ii) above in the event that such additional
decryption, decoding, or digitization equipment is shared among the Services and
other cable program services.

(c)           Programming Schedule. Playboy shall use its commercially
reasonable efforts to provide to TV Guide Data Solutions, Inc. (a subsidiary of
Gemstar-TV Guide International, Inc.) and TV Data (a subsidiary of Tribune Media
Services, Inc.) the metadata information necessary to allow these entities to
provide an accurate description of programming to be included in the Services
(not including the SVOD and VOD offerings.) Guide information for the SVOD and
VOD offerings will be provided in the metadata file that is provided with the
SVOD and VOD programming. Nothing in this paragraph will prevent Playboy from
changing the programming contained on the Services; provided that Playboy will
use commercially reasonable efforts to update guide information on a timely
basis. Playboy shall: (i) ensure that the time blocks available for viewing are
correctly mapped to the length of any given movie or feature, and (ii) provide
complete, accurate and timely program schedules and program rating data to
TESC’s designated data provider (currently Tribune Media Systems), as that data
provider may be changed from time to time, at least eight (8) weeks in advance
of the air date as transmitted by TESC. Playboy will use commercially reasonable
efforts to accommodate a request by TESC to alter the start time of any program
as requested from time to time in advance and in writing by TESC or its
Affiliates. In the event that it is not commercially reasonable for Playboy to
accommodate such a request, the parties will work together in good faith to
resolve the issue that caused TESC to request the start time alteration.

 
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(d)           Transmission by TESC. Playboy acknowledges that TESC may digitize,
compress and encode the Signals and that, on occasion, the Transmission System
may be down for maintenance. Neither such digitizing, compression and encoding,
or such maintenance downtime shall be deemed a prohibited interruption or
alteration of the Services. TESC may provide Subscribers with, and provide the
Services using, VCR or PVR-like functionality.

(e)           Reservation of Rights to Bandwidth. TESC agrees to transmit the
principal video and accompanying audio portions of the Signal (the “Primary
Signal”). TESC reserves all rights in and to, and reserves all rights to use,
all parts of each Signal, other than the Primary Signal, including without
limitation any portions of the bandwidth that may be created or made useable as
a result of the digitization or compression of the Signal and including without
limitation, audio sub-carriers and all lines of the vertical blanking interval
(“VBI”) (and/or its digital equivalent) from the Facility through to
Subscribers. Nothing contained in this Lease shall restrict TESC from using any
and all of the bandwidth of a Signal from the Facility through to Subscribers by
any means or for any purpose so long as the use does not materially degrade or
interfere with the quality of the Primary Signal. Notwithstanding the foregoing,
TESC shall transmit to Subscribers who order the Services: (i) all data or
information that the FCC or any applicable Law requires TESC to transmit in an
industry-standard format reasonably specified by ESC; (ii) up to one (1) second
language audio for the programming then being transmitted; and (iii) program
content advisory materials for the programming then being transmitted (“Required
Materials”). Notwithstanding anything to the contrary contained in this Lease,
TESC shall have the right, but not the obligation, to transmit any material,
information, data, images, sounds or features contained or embedded in or around
any portion of the feed provided to TESC for the Signals that is not part of the
Primary Signal or part of the Required Materials; provided, that such use does
not materially degrade or interfere with the quality of the Primary Signal.

(f)           Embedding. Playboy shall not embed any information, data, images,
sounds or features into or around any portion of the Signal for a Service
(collectively, “Embedded Information”) that is not related to the Service.
Playboy agrees that it shall not include any Embedded Information that cannot be
removed and/or blocked by the Transmission System using equipment then-existing
and available at the Facility. Playboy hereby consents to such removal and
blocking, and agrees to provide to TESC assistance and information reasonably
requested by TESC with respect to the removal and/or blocking, as long as the
removal and/or blocking will not remove, block, interfere with or impede in any
way the Primary Signal or the Required Materials. If TESC removes Embedded
Information, TESC shall have the right to send equivalent information through
some other part of its broadcast system than the Signal. If the equipment
required for removal or blocking is commonly used in the cable television
industry by DBS providers, TESC shall be responsible for obtaining the
equipment. Notwithstanding the foregoing, Playboy agrees that, other than
Required Materials, it shall not include any Embedded Information that would
impede, interfere with or degrade the function of any hardware, software,
firmware or any other equipment or device used by TESC or its Affiliates or
degrade the Primary Signal. Playboy represents that, other than the Required
Materials, it is not currently engaged in embedding any Embedded Information,
and Playboy agrees that is shall provide TESC with ninety (90) days advance
written notice (or such shorter time as is practicable under the circumstances)
of its intention to embed any Embedded Information prior to commencement of such
embedding, which notice shall describe with specificity the information Playboy
intends to embed and the technical placement of the information within a Signal.
Provided that Playboy provides

 
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TESC with notice as required by this Section, and provided that such materials
can be stripped by TESC as set forth in this Section, TESC consents to the
embedding by Playboy of DRM material in the Signals. Further, Playboy agrees
that after commencement of the embedding, it shall provide TESC with at least
one hundred twenty (120) days advance written notice (or, if shorter, the
maximum length of time that is practicable under the circumstances) of its
intention to change any of the Embedded Information and/or the technical
placement of the Embedded Information within a Signal. Notwithstanding the
forgoing, the signal distribution capacity contained within the bandwidth of
each Signal between Playboy’s transmission point and the Facility or other first
downlink facilities shall belong exclusively to Playboy. Notwithstanding
anything to the contrary contained in this Section, Playboy agrees that it shall
embed in the Signal of each of Services program rating data (for standard
definition, such data shall be delivered in accordance with CEA 608-C (or its
then-current successor); for high definition, Playboy shall provide CEA 608-C
(or its then-current successor) compatibility data within CEA-708-B (or its
then-current successor) structures as described in CEA 708-B or its then-current
successor).

(g)           Interruption or Alteration of Services. Except as otherwise
provided herein, the Services shall be transmitted to Subscribers by TESC as
they are delivered by Playboy to TESC, without interruption or alteration.
Playboy acknowledges that TESC or its Affiliates may digitize, compress and
encode the Signals and that, on occasion, the Transmission System may be down
for maintenance (for the minimum amount of time necessary). Neither such
digitizing, compression and encoding, or such maintenance downtime shall be
deemed a prohibited interruption or alteration of a Service. Subject to the
remainder of this Section 5(g), TESC shall not, and shall not authorize other
persons to, copy, tape, or otherwise reproduce any part of a Service for
commercial use without Playboy’s prior written authorization. Neither TESC nor
any person transmitting the Service in accordance herewith shall be responsible
or liable for home recording of all or any part of a Service by Subscribers.
This Section 5(g) will not be deemed to restrict or prohibit Subscribers from
using VCR or PVR-like functionality with respect to the Service (e.g.,
time-shifting, pausing, fast forwarding or rewinding the programming that airs
on the Service), which is expressly permitted.

(h)           Security. TESC shall employ commercially reasonable security
systems to prevent theft, pirating and unauthorized exhibition of the Services.
TESC shall further employ commercially reasonable parental control technology to
protect against minors obtaining access to the Services. TESC shall
contractually require that Sub-Distributors agree to comply with this Section.

(i)            DRM. If TESC implements a digital rights management (“DRM”)
system, TESC shall negotiate in good faith with Playboy to allow Playboy to
participate in the DRM with respect to the Services.

(j)            Public Distribution. TESC shall not knowingly permit, and shall
take appropriate and commercially reasonable precautions to prevent any use of
the Services transmitted by TESC by any party which is not a Subscriber who has
made a Subscription Purchase, PPV Purchase or VOD Purchase, and will further use
reasonable efforts to prevent any public distribution of the Services by
Subscribers to the extent that TESC becomes aware of such distribution. TESC
shall contractually require that Sub-Distributors agree to comply with this
Section.

 
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6.
RENT:

(a)           Rent. TESC shall collect payments from Subscribers in connection
with Subscription Purchases, PPV Purchases, Package Purchases and, if applicable
VOD Purchases and SVOD Selections and shall retain the amounts of Gross Revenues
set forth in Exhibit B as Rent.

(b)           Gross Revenues. For purposes of this Lease, “Gross Revenues” means
the aggregate amount received by TESC, its Affiliates or Sub-Distributors from
Subscribers in connection with PPV Purchases, Subscription Purchases, VOD
Purchases, SVOD Selections and Package Purchases of programming on all of the
Services, including any amounts received as payment for partial months of
Subscription Purchases, but shall not include any amounts collected in
connection with taxes, assessments, or other fees imposed by any governmental or
quasi-governmental authority. Additionally, and without limiting the generality
of the foregoing, the parties agree that Gross Revenues shall not include *****.
The parties agree that TESC may, in its sole discretion, credit the account of
any Subscriber in connection with a cancellation, postponement or delay by the
Subscriber, a technical difficulty which impedes or impairs the Subscriber’s
reception, or any other problem which adversely affects the quality of the
Subscriber’s receipt of a Service (each a “Refund”) and that the amount of any
such Refund shall be deducted from Gross Revenues for purposes of calculating
Gross Revenues. TESC may in its reasonable discretion reduce Gross Revenues to
adjust for ***** from Subscribers, which adjustment may be made in accordance
with TESC’s standard accounting practices for recognition of such ***** (i.e. as
a percentage of revenue across all pay per view orders and not limited to the
Services), but in no event shall such adjustment for ***** exceed *****. TESC
will provide Playboy details of such ***** calculation in the reports described
in Section 7(a). Under no circumstances will any revenues attributable to the
following be regarded as Gross Revenues: (i) revenues from TESC’s and/or any of
its Affiliates’ test sites; provided, that each such test is available for
viewing only by requesting age-verified adults and does not violate any and
complies with all Laws; and (ii) *****; and (iii) equipment fees or charges,
monthly fees or related amounts paid by Subscribers that are not directly
attributable to the viewing of a specific Service (except that monthly
subscription fees payable for viewing an Adult Package shall be included as set
forth in this Lease). TESC agrees that it shall, during the Term, provide to one
location of Playboy’s choosing a free feed of the Services and the other Adult
programming services transmitted by TESC.

(c)           Payment by TESC. Beginning as of the Effective Date, TESC shall
remit to Playboy all amounts of Gross Revenue that it is not entitled to retain
as Rent or otherwise under this Lease no later than sixty (60) days after the
end of each calendar month during which the Reporting Period (as defined in
Exhibit B) during which TESC receives such amounts ends. TESC shall remit such
funds by check made payable to Playboy sent by ordinary mail, overnight courier,
or electronic transfer to the address set forth for payments below the signature
block of this Lease (or such other address as Playboy may direct in writing).
Any amounts not paid by TESC when due shall accrue interest at the rate of one
and one-half percent per month or at the highest lawful rate, whichever shall be
the lesser, compounded monthly from the date such amounts were due until they
are paid.

 
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7.
REPORTS; AUDITS:

(a)           Reports. No later than sixty (60) days after the end of each
calendar month during which a Reporting Period ends during the Term, TESC shall
deliver to Playboy a report setting forth for the corresponding Reporting
Period: (i) Gross Revenues and actual subscribers figures for each unique retail
rate from Subscription Purchases for each Service; (ii) Gross Revenues and
actual buy figures from PPV Purchases for each Service; (iii) Gross Revenues and
actual buy figures, including title by title reporting for each unique retail
rate from Fresh! VOD Purchases; (iv) Gross Revenues and actual buy figures for
each unique retail rate from SVOD Selections; (v) Gross Revenues quotients and
actual buy figures from Package Purchases; (vi) the amount of Rent paid by
Playboy and retained by TESC; (vii) the amount of any monies remitted to Playboy
as Playboy’s share of Gross Revenues (viii) the name and location to whom TESC
is transporting the Signal of the Services.

(b)           Playboy’s Audit Rights. TESC agrees to keep and maintain accurate
books and records of PPV Purchases, Subscription Purchases, Package Purchases,
SVOD Selections, VOD Purchases, Gross Revenues, including in connection with
subdistribution of the Services via Subdistributors. During the Term and for one
(1) year thereafter, Playboy shall have the right, upon at least sixty (60) days
prior written notice, and at Playboy’s expense, to conduct an audit of TESC’s
books and records that are reasonably necessary to verify the accuracy of the
such amounts, compliance with all terms and conditions contained in this Lease
and any reports by TESC; provided, that the audited books and records shall be
limited to only records relating directly to (i) Playboy and (ii) Adult Packages
containing one (1) or both of the Services (provided that, in no event shall
TESC be required to disclose personally identifiable subscriber information to
Playboy or its auditor under any circumstance whatsoever). The audit shall be
conducted by an independent nationally-recognized certified public accounting
firm selected by Playboy and approved by TESC, not to be unreasonably withheld,
conditioned or delayed and the audit firm shall execute a non-disclosure
agreement acceptable to TESC, in its reasonable discretion. TESC hereby approves
Cable Audits Associates for the foregoing purposes. Any audit shall be conducted
during TESC’s regular business hours (such hours to be determined in TESC’s sole
discretion) at TESC’s office where the records are regularly maintained.
Playboy’s right to perform an audit shall be limited to once in any consecutive
twelve (12)-month period, and Playboy shall not be entitled to audit for any
particular time period more than once unless, in each instance, specific
follow-up audits are required because of a bona fide dispute. Any audit shall be
limited to the books and records of the preceding and current year only. Playboy
shall provide the results of any audit to TESC within four (4) months of
completing the audit and any such information shall be deemed the confidential
information of TESC pursuant to the “Confidentiality” section of this Lease. All
TESC reports, books and records, and the results of any audit, shall be deemed
Confidential Information for purposes of the “Confidentiality” section of this
Lease. Playboy shall submit any claims of non-compliance as a result of an audit
to TESC in writing within four (4) months after the auditors leave TESC’s
offices; otherwise, Playboy shall have waived its right to such claim. Any audit
hereunder shall be deemed completed upon the auditors completing their field
work at TESC’s offices (unless TESC fails to reasonably cooperate with the audit
and auditors in terms of provided information required hereunder and excluding
any subsequently discovered data that would have an impact on the auditor’s
findings and report). Any claim as a result of an audit shall be limited to the
current year and the immediate preceding year. In addition, *****, then TESC
shall reimburse Playboy for the reasonable and documented

 
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costs and expenses of Playboy’s inspection and audit. Notwithstanding anything
to the contrary contained in this subsection, under no circumstances shall
Playboy’s auditor be entitled to provide Playboy with any information that
reveals the identity of any third party to the extent such revelation would
violate the confidentiality or other express provisions of any of TESC’s or its
Affiliates’ agreements with third parties.

8.
MARKETING AND USE OF MARKS:

(a)           Marks. Subject to the terms and conditions of this Lease, Playboy
hereby licenses to TESC and its Affiliates, and TESC and its Affiliates shall
have the limited right to use, the Marks to promote the Services and the
Transmission System. Additionally, TESC shall have the right to provide the
Marks to any Affiliate’s third party retail distribution network as well as any
other third parties who are selling the Services by or through TESC or its
Affiliates (including by way of example but not limitation, Sub-Distributors).
TESC acknowledges that the Marks, any other of Playboy’s names, trade names,
service marks, trademarks and/or logos (including, without limitation, the
names, titles or logos of certain programs that appear in the Services and any
subsequently selected names or marks for the Services) are the exclusive
property of Playboy and its suppliers and that neither TESC nor its Affiliates
have or will acquire any proprietary or other rights in the Marks other than the
right to use as set forth in this Lease. TESC further acknowledges the great
value of the goodwill associated with the Marks and the public renown and
recognition of the same, and that the Marks have a distinctiveness and a
secondary meaning that is firmly associated in the minds of the trade and
general public with Playboy, and that any goodwill in the Marks which may be
created through the use of the Marks by TESC or an Affiliate shall inure to the
sole benefit of Playboy. Upon execution of the Lease, Playboy shall provide to
TESC usage guidelines with respect to the use of the Marks. Except as provided
in this Lease, TESC and its Affiliates shall at no time adopt or use, without
Playboy’s prior written consent, any variation of the Marks in contravention of
the usage guidelines, or any word or mark likely to be similar to or confused
with a Mark; provided, that once Playboy has approved a use of a Mark, TESC and
its Affiliates shall have the right to continue use of the Mark in the same or
substantially similar way unless Playboy sends TESC written notice that such
usage is no longer permitted. TESC shall not modify or manipulate a Mark without
the prior consent of Playboy. TESC shall submit to Playboy for approval any of
TESC’s or its Affiliates’ promotional materials mentioning or using the Marks,
other than those mentioning or using the Marks in conformance with the usage
guidelines and other than materials provided by Playboy, if any, which approval
shall not be unreasonably withheld, conditioned or delayed; provided such
materials are otherwise in compliance with this subsection. Uses of the Marks in
routine promotional materials such as program guides, program listings and bill
stuffers, or in a manner previously approved by Playboy, shall be deemed
approved for all subsequent uses unless Playboy specifically notifies TESC to
the contrary. Where approval by Playboy is required, TESC and its Affiliates
shall submit any initial use of the Marks to Playboy for Playboy’s prior written
approval at least ten (10) business days prior to their intended distribution.
Any such approval must be granted or withheld within ten (10) business days of
Playboy’s receipt of materials for approval, provided that a lack of response
from Playboy shall not be deemed disapproval; provided however, that in the
event that Playboy does not reply, TESC may resubmit the materials to Playboy
for approval and failure by Playboy to respond within (5) business days of
Playboy’s receipt of such resubmission shall be deemed approval. Playboy’s
disapproval for the purposes of this Section may be given telephonically. Any

 
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promotional materials provided by Playboy to TESC shall be deemed automatically
approved, but only for the purpose and specific context provided. TESC will not
disseminate any material that does not comply with the requirements of this
subsection (a). TESC shall not make available to any third party all or any part
of the Marks for any sponsorship, advertising, promotional public service, or
commercial announcement of any party, product, or service, nor shall TESC use
any of the Marks for any sponsorship, advertising, promotional public service,
or commercial announcement of any party, product, or service not previously
approved by Playboy.

(b)           Playboy Marketing Assistance. Playboy shall provide to TESC and
its Affiliates, upon TESC’s or its Affiliates’ request, marketing and
promotional advice for purposes of marketing the Services. Further, Playboy will
make available to TESC and its Affiliates, upon the same terms provided to any
other Distributor, promotional, marketing and sales and other Service-related
materials related to the Services which it produces or provides to Distributors,
and will make available to TESC and its Affiliates, at prices not exceeding
Playboy’s actual cost, reasonable quantities of Playboy’s then-available
promotional, marketing and sales materials related to the Services.

(c)           TESC Marketing Assistance. TESC and its Affiliates agree to market
and promote the Services in a comparable manner to how such parties promote and
market other Adult programming services, except for marketing or promotional
campaigns funded by another Adult programmer, provided TESC or its Affiliate
also offer Playboy the opportunity to fund similar promotional campaigns.

(d)           Use of Remotes. The parties acknowledge that Playboy TV has a
dedicated channel on TESC’s EPG co-located adjacent to the Playboy TV broadcast
feed location with embedded interactive triggers whereby a Subscriber can
utilize a remote control to subscribe to (collectively “Self Provisioning”).
Such Self Provisioning is intended to direct a customer to push a button on his
or her remote control in order to subscribe to Playboy TV. Once the customer
clicks on the trigger, the customer is transferred to a screen from which the
customer may make a Subscription Purchase for Playboy TV. TESC and its
Affiliates shall continue to offer Self Provisioning in substantially the same
manner as deployed in the Transmission System as of the Effective Date. *****.

(e)           TESC Identifying Information. In no event will Playboy or any of
its Affiliates directly or indirectly use any TESC Identifying Information in
connection with the marketing or promotion of the Services without TESC’s prior
written approval, which approval may be withheld by TESC its sole discretion.
For purposes of this Lease, “TESC Identifying Information” shall mean any logos,
trademarks, service marks, trade names or other information in any form now or
hereafter used by TESC and/or any of its Affiliates to identify itself or
themselves or any of its or their products and/or services. Playboy shall
provide to TESC, at least thirty (30) days prior to first use, an example of any
advertising or promotional materials to be used by Playboy and/or any of its
Affiliates that directly or indirectly uses any TESC Identifying Information in
connection with the marketing and promotion of the Services, which use has not,
within the past twelve months, been approved by TESC in substantially the form
intended for use. TESC may reject any such materials for any reason or no reason
in its sole and absolute discretion, and Playboy shall not use such rejected
materials. In the event that TESC does not grant written approval of marketing
materials within five (5) business days after receiving them from Playboy,

 
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the marketing materials submitted shall be deemed rejected and Playboy and its
Affiliates shall be prohibited from using such materials. Notwithstanding the
foregoing, Playboy may market and promote the Services as being available on a
“high-powered DBS service” (or words of substantially the same import). Playboy
acknowledges and agrees that the TESC Identifying Information is the exclusive
property of TESC and its Affiliates and that Playboy has not and will not
acquire any proprietary rights therein by reason of this Lease or otherwise.
Except as provided herein, Playboy shall at no time adopt or use, without TESC’s
prior written consent, any variation of TESC Identifying Information, or any
work or mark likely to be similar to or confused therewith. Any and all goodwill
arising from Playboy’s use of the TESC’s Identifying Information shall inure
solely to the benefit of TESC.

(f)            Equitable Relief. Each party agrees that a breach of sections
8(a) or 8(e) will result in the substantial likelihood of irreparable harm and
injury to the harmed party for which monetary damages alone would be an
inadequate remedy, and which damages are difficult to accurately measure.
Accordingly, each party agrees that the damaged party shall have the right, in
addition to any other remedies available to it, to obtain immediate injunctive
relief as well as other allowable equitable relief for any breach or potential
breach of such subsections. The right to equitable relief will be in addition to
any other right or remedy available under this Lease, at law or in equity.

(g)           Marketing by Playboy. Subject to subsection 8(e) above, Playboy
will use commercially reasonable efforts to market and promote the Services to
Subscribers throughout the Territory. Playboy may not undertake marketing tests,
surveys and/or other research using the Subscribers without TESC’s prior written
consent; provided, that, *****, one statistically valid research study examining
Subscribers’ attitudes with respect to the Services, buy rates for the Services
and other relevant data, and shall provide the results of such study to TESC.
All information related to any such study, including without limitation the
results of the study, shall be Confidential Information. In addition, provided
that TESC continues to distribute Playboy TV (on a PPV and subscription basis)
and Fresh! and is not otherwise in un-cured breach (or is in or alleged to be in
breach but has not yet had the benefit of the full cure period provided for in
this Lease) under this Lease, Playboy agrees to *****.

(h)           Marketing Restrictions. Neither TESC nor Playboy shall market or
promote, or attempt to market or promote, purchase of the Services by persons or
entities which they know or have reason to know: (i) are under the age of
eighteen (18) or such other applicable age of majority; (ii) may not legally
purchase the Services or to whom the Services may not legally be sold; or (iii) 
intend to resell the Services or provide the Services to third parties on a
free-to-guest basis. Notwithstanding anything to the contrary contained in this
Lease, TESC shall have absolutely no obligation to (1) authorize, and hereby
expressly retains the right to deauthorize any Set-Top Box which TESC determines
in its sole judgment is: (a) located in or is going to be located in any Op-Out
Location; (b) being used or is going to be used to view the Services in any
Opt-Out Location; or (c) within the control of any person who may not legally
purchase a Service or to whom a Service may not legally be sold, or (2)
authorize a Set-Top Box to receive a Service unless the prospective Subscriber
provides TESC with a street mailing address (i.e., not a post office box).

 
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(i)            Electronic Program Guide. The Services shall be listed on the
electronic program guide (“EPG”) and on applicable web pages in a manner similar
to and no less prominently than other similar Adult oriented television
programming subscription and/or pay per view services transmitted by TESC via
the Transmission System. At such time as is technically feasible and
commercially reasonable (as determined by TESC), TESC agrees to map Playboy TV
adjacent to other premium programming services such as HBO and Showtime. TESC
will explore the feasibility of obtaining preferential listings of the Services
among Adult services. Notwithstanding the foregoing, TESC reserves the right to
(i) enable Subscribers and/or customer service representatives to remove any of
the Services from the Subscribers’ EPGs, and (ii) alter, substitute, delete or
otherwise modify the display of individual program titles on the EPG, as TESC
determines in its sole reasonable discretion.

(j)            Additional Services. If; during the Term, Playboy offers a new
Adult programming service in addition to the Services, Spice: Excess, Club
Jenna, Shorteez, Skin, Playboy en Español and their respective VOD derivatives
(each, an “Additional Service”) to any other Distributor, Playboy shall offer
the Additional Service to TESC on the same terms and conditions as which it was
offered to the other Distributor in compliance with the *****; provided, that,
TESC shall have sixty (60) days from receipt of notice to avail itself of the
Additional Service; provided, further that, the foregoing sixty (60) day period
shall extend for a reasonable period (not to exceed ninety (90) days) in the
event the parties are engaged in good faith negotiations concerning the terms
and conditions appurtenant to the Additional Service or in the event TESC has
sought, in good faith, additional information concerning the terms and
conditions in order that it may make a reasonably informed decision concerning
the Additional Service. Alternatively, with the consent of Playboy, TESC may
replace a Service with the Additional Service, and the terms and conditions of
this Lease shall apply to the Additional Service as if the Additional Service
were the replaced Service.

9.
REPRESENTATIONS AND WARRANTIES:

(a)           Mutual Warranties. Each party represents and warrants to the other
that: (i) it is duly organized, validly existing and in good standing under the
laws of the state or country under which it is organized; (ii) it has the power
and authority to enter into this Lease and to perform fully its obligations
hereunder; (iii) the individual executing this Lease on its behalf has the
authority to do so; and (iv) the obligations created by this Lease, insofar as
they purport to be binding on it, constitute legal, valid and binding
obligations enforceable in accordance with their terms.

(b)           Playboy Warranties. Playboy represents, warrants and covenants to
TESC that:

(i)            it presently has and will continue to have, at all times during
the Term, all rights necessary to grant TESC the rights contracted for by TESC
under this Lease free and clear of all liens, restrictions, charges, claims and
encumbrances.

(ii)           it has obtained and will maintain throughout the Term all
licenses, permits, exemptions, authorizations and consents necessary to fully
perform this Lease.

 
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(iii)           it and the Services presently are, and will remain at all times
during the Term, in full compliance with the Law, including without limitation
all Laws enforced, administered, promulgated or pronounced in the United States
and in the country or countries in which the content for the Services
originated.

(iv)           To the extent necessary to ensure proper copyright clearance,
Playboy has applied for a “through-to-the-viewer” music performance license from
each music performance society, including, without limitation ASCAP, BMI and
SESAC who hold licenses or represent license holders of any musical content
included in any of the Services. Playboy shall use best efforts to obtain a
“through-to-the-viewer” music performance license from those organizations to
the extent they make such license available to Playboy on commercially
reasonable terms. TESC has been informed and understands that Playboy may not
pursue a “through-to-the-viewer” music performance license from SESAC, in such
event Playboy agrees to indemnify, defend and hold TESC and all other TESC
Indemnitees harmless, in accordance with the “Indemnification” section below. If
any music performance society, such as ASCAP, BMI or SESAC refuses to make
available to Playboy a “through-to-the-viewer” music performance license, or
offers such license on commercially unreasonable terms, Playboy shall not be
required to initiate litigation to compel the music performing rights
society(ies) to grant a “through-to-the-viewer” music performance license. lf,
due to court order or other governmental decree from a body of competent
jurisdiction, or as a result of one or more of ASCAP’s or BMI’s failure to offer
one on a commercially reasonable basis, such “through-to-the-viewer” license is
not available to Playboy, Playboy shall continue to maintain a license “through
to the headend” provided such license is available from ASCAP and/or BMI on
commercially reasonable terms. If and when Playboy obtains a
“through-to-the-viewer” music performance license, Playboy shall maintain such
license throughout the Term of the Lease, unless such license is no longer
available due to a court order or other governmental decree from a body of
competent jurisdiction, in which case the terms of this Section shall apply.
Notwithstanding the foregoing, under no circumstances shall TESC be responsible
for any fees related to music performing licenses and Playboy hereby represents
and warrants that Playboy will indemnify, defend, and forever hold harmless TESC
from and against any claims in connection with the Services, and Playboy’s VOD
services, if applicable, by music performance rights societies and others as
provided in the “Indemnification” section below.

(v)           to the best knowledge of Playboy, no third party has or has
claimed any rights which would be inconsistent with the rights granted to TESC
in this Lease;

(vi)           it is under no contractual or other legal obligation that shall
in any way interfere with its full, prompt and complete performance under this
Lease.

(vii)         without limiting the generality of any other provision of this
Lease, no programming on a Service shall knowingly violate 18 USC 2257 or 28 CFR
75 or any successor legislation or code. Playboy has prepared, maintained and
executed, and at all times during the Term and for a period of seven (7) years
thereafter shall, prepare, maintain and execute any documents or records, and
provide TESC with copies of any documents or records (at TESC’s cost and
expense) which are lawfully required or

 
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compelled to be provided by any Court of competent jurisdiction or governmental
or regulatory agency pursuant to or in connection with Title 18, U.S.C. § 2257,
as amended, and/or the associated regulations found at 28 C.F.R. 75.1 et. seq.,
as amended, and/or any successor statute or regulation (collectively, “Section
2257”). Playboy warrants and represents that it is in possession of such
documents and records, and maintains them in accordance with Section 2257.
Playboy shall keep TESC apprised of the physical address where all required
records are compiled and maintained pursuant to Section 2257, and, if lawfully
required or compelled by any Court of competent jurisdiction or governmental or
regulatory agency, shall provide TESC with the full legal name of its records
custodian. If required by law, Playboy will be identified as a “primary
producer” in any and all disclosure statements associated with the Services
pursuant to Section 2257. Playboy further agrees to cooperate with TESC in
connection with any inspections or government inquiries initiated pursuant to
Section 2257 by making such records available to the appropriate Court of
competent jurisdiction or governmental or regulatory agency in full compliance
with the then-applicable provisions of Section 2257. TESC shall have the right
to inspect such documents and records at any time during regular business hours
at Playboy’s location for maintaining the records with five (5) business days’
prior written notice from TESC; provided, that if TESC desires access to the
records in question in connection with an inquiry of any kind from a
governmental agency, then only one (1) business days’ prior written notice from
TESC will be required. No programming on a Service containing “actual sexually
explicit activities” as defined by Section 2257 shall contain material created
prior to July 3, 1995 unless Playboy has documentation that all performers in
such “actual sexually explicit activities” were, at the time the material was
created, over the age of eighteen (18) years.

(viii)           it has procured and shall maintain during the Term, at its sole
expense, broadcasters errors and omissions insurance covering the Services and
all elements thereof, from a nationally recognized insurance carrier having at
least a “Best’s” rating of A- or better, with a per occurrence limit of no less
than $5 million and a maximum self-insured retention of $5,000,000; and further
that (A) such insurance shall remain in full force and effect throughout the
Term; (B) TESC and its Affiliates, and its and their directors, officers,
employees, agents and shareholders, shall be named as additional insureds on the
insurance policy; (C) Playboy shall provide TESC with documentation to such
effect upon the execution hereof; (D) within ten (10) business days after the
expiration of such policy or as soon as otherwise available, Playboy shall
provide TESC with appropriate proof of issuance of a policy continuing in force
and effect the insurance covered by the insurance so expiring; and (E) Playboy
or its insurer shall make reasonable efforts to provide TESC with at least
thirty (30) days prior written notice of any changes in such policy if they
pertain to the specifics of this Lease. Playboy’s indemnity obligations set
forth herein shall not be negated or reduced by virtue of Playboy’s insurance
carrier’s denial of insurance coverage for the occurrence or event which is the
subject matter of the claim or refusal to defend TESC and/or any of its
Affiliates. Compliance by Playboy with the requirements of this section as to
carrying insurance and furnishing proof thereof to TESC shall not relieve
Playboy of its indemnity liability set forth herein or its liability to TESC
specified in any other provision of this Lease.

 
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(c)           TESC’s Warranties. TESC represents, warrants and covenants to
Playboy that TESC presently is, and will remain at all times during the Term, in
material compliance with all Laws that impact TESC’s ability to comply with the
terms of this Lease.

10.
INDEMNIFICATION:

(a)           Playboy’s Indemnification. Playboy shall indemnify, defend and
hold harmless TESC, its Affiliates, and each of their present and future
contractors, subcontractors, authorized distributors, authorized
Sub-Distributors (in compliance with the terms of this Lease), directors,
members, officers, employees and agents, and each of their respective assigns,
heirs successors and legal representatives (collectively, the “TESC
Indemnitees”) from, against and with respect to any and all third-party claims,
losses, damages, lawsuits, judgments, actions, penalties, liabilities, costs and
expenses (including reasonable court costs and outside attorney fees)
(collectively, “Claims”) incurred in connection with any civil, criminal,
administrative and other claims against any of the TESC Indemnities arising out
of or relating to: (i) the actual or alleged breach or default by Playboy of any
provision contained in the Lease; (ii) the content of the Services (including,
without limitation, advertising), including, without limitation, any claims
alleging that the transmission of any content is defamatory, libelous,
slanderous, obscene, or violates or infringes any copyright, trademark, right of
privacy or literary, dramatic or music performance right or any other right of
any person or entity; (iii) the sale or marketing of any products or services
by, through or on the Services (unless the relevant materials are provided by
TESC); (iv) Playboy’s or the Services’ failure to comply with all Laws or any
other act, omission or failure on Playboy’s part that causes TESC or its
Affiliates to violate any Law or court or administrative decree; (v) Playboy’s
failure to have acquired at the pertinent time when all or part of the Services
are made available to Affiliate, good title to, and/or each and every property
right or other right necessary for it to satisfy the obligations imposed on it
pursuant to this Lease; (vi) Playboy’s advertising and marketing of the
Services; (vii) materials relating to the Services, including without limitation
advertising or promotional copy, supplied or permitted by Playboy; and/or (viii)
the delivery by TESC or a Subdistributor of any of the Services to any
geographic area in the Territory.

(b)           Territorial Restrictions. Notwithstanding the requirements of
Section 10(a) above, Playboy’s indemnification obligation pursuant to subsection
l0(a)(viii) only shall not be valid or enforceable with regard to TESC’s
transmission of Fresh! in any jurisdiction for which Playboy reasonably
determines that there is an increased risk level of distribution of one or more
of the Services (each, a “Restricted Territory”), and Playboy notifies TESC in
writing that such increased risk level exists and indemnification is not
available for a Service in any Restricted Territory. Playboy shall promptly
notify TESC of any change in the Law or risk level of which it becomes aware
during the Term that could reasonably be expected to impact TESC’s transmission
of Adult programming to any geographical area in the Territory. Playboy shall
use reasonable efforts to keep apprised of all Laws related to the delivery of
Adult programming.

(c)           TESC’s Indemnification. TESC shall indemnify, defend and hold
harmless each of Playboy, its Affiliates, and each of their present and future
directors, officers, employees and agents, (collectively, the “Playboy
Indemnitees”) from, against and with respect to any and all Claims incurred in
connection with any claim against the Playboy Indemnitees arising out of (i) the
actual or alleged breach or default by TESC of any provision contained in the
Lease and, in

 
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the case of the provisions of Section 8(a) and (b), such indemnity shall be
extended to TESC’s Affiliates using Playboy’s Marks in violation of such
provisions; (ii) any advertising materials created by TESC and inserted in a
Service by TESC (unless the relevant materials are created and inserted at the
direction of Playboy); (iii) third party claims arising from the failure of
TESC’s and/or its Affiliates equipment; and/or (iv) claims arising from an
assertion that technology deployed by TESC and/or its Affiliates is deployed in
violation of any United States patent.

(d)           Claim. The indemnified party shall give the indemnifying party
prompt notice of any Claim to which the foregoing indemnities apply; provided,
that the indemnifying party’s obligations shall not be affected by any delay or
failure in providing such notice unless the indemnifying party reasonably
demonstrates that the defense or settlement of the claim was materially
prejudiced thereby. The indemnifying party shall have the right to control the
litigation, compromise, settlement or other resolution of such claim or
litigation (other than the entry of a guilty plea or similar plea by or on
behalf of the indemnified party in a criminal or quasi-criminal action);
provided, that the indemnifying party may not dispose of or otherwise settle a
claim adverse to an indemnified party without first obtaining the indemnified
party’s consent thereto, which consent shall not be unreasonably withheld,
conditioned or delayed. The indemnified party will cooperate fully, at the
indemnifying party’s expense, with the reasonable requests of the indemnifying
party in the indemnifying party’s defense of such claim or litigation and shall
have the right, but not the obligation, to join in and be represented by its own
counsel, at its own expense. Further, the indemnified party agrees it shall not
issue any statements regarding the facts or issues regarding the claim,
including with regard to any indemnification received hereunder, unless
compelled to do so by a court or government authority of competent jurisdiction.

11.
EARLY TERMINATION RIGHTS:

In addition to all other rights to termination specifically set forth in this
Lease or available at law or in equity, either party shall have the right to
terminate this Lease if the other party has (i) breached any of its material
obligations under this Lease (unless the breach is cured within the thirty
(30)-day period following receipt of notice of the breach; provided, that if a
shorter or longer cure period is provided elsewhere in this Lease for a
particular breach, then such shorter or longer cure period shall apply and, in
the case where immediate termination is provided for elsewhere in this Lease,
immediate termination shall apply. Each party agrees and acknowledges that there
are certain breaches which are incapable of being cured and are therefore not
subject to the thirty (30) day cure period); (ii) filed a petition in
bankruptcy, is unable to pay current bills when due, or has sought relief under
any Law related to its financial condition or its ability to meet its payment
obligations; or (iii) had any involuntary petition in bankruptcy filed against
it, or any relief under any such Law has been sought by any of its creditors,
unless the involuntary petition is dismissed, or the relief is denied, within
sixty (60) days after it has been filed or sought. In addition, TESC shall have
the right to terminate this Lease immediately and without liability (except for
amounts payable to Playboy through the effective date of termination) upon
notice to Playboy if any person or entity who, as of the Effective Date, did not
possess, directly or indirectly, the power to direct or cause the direction of
management or policies of Playboy or of Playboy Enterprises, Inc., whether by
virtue of the ownership of voting stock, by contract or otherwise, later comes
into possession of such power. In addition, TESC shall have the right to

 
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terminate this Lease immediately and without liability (except for amounts
payable to Playboy through the effective date of termination) upon notice to
Playboy if: (I) the delivery of any of the Services by Playboy to TESC is
discontinued or interrupted for a continuous period of fifteen (15) days, (II)
Playboy, or any executive officer or director of Playboy, is convicted in a
court of competent jurisdiction of any criminal offense related to Adult
content, (III) Playboy is found to have failed to comply with any Law related to
Adult content, including, without limitation, the provisions of 18 U.S.C. 2257,
(IV) Playboy is found to have falsified, or Playboy is criminally charged or
indicted for falsifying, any documents, records or reports required by this
Lease or any Law related to Adult content, (V) Playboy is criminally charged or
indicted for, fraud, misrepresentation or illegal action in connection with this
Lease, and/or (vi) Playboy assigns or attempts to assign this Lease in whole or
in part. In addition to and not in limitation of the foregoing, in the event
that TESC determines in good faith, in its sole discretion, that the activities
contemplated under this Lease or any other circumstances, including without
limitation an increase in obscenity prosecutions or citizen protests against
adult-oriented products or services, may: (A) adversely impact the business,
reputation, or goodwill of TESC and/or any of its Affiliates; or (B) result in
the institution of civil, criminal, administrative or other proceedings against
TESC and/or any of its Affiliates, or any of their officers, directors or
employees, TESC will have the right to terminate this Lease after evaluating and
implementing commercially reasonable methods to address TESC’s commercially
reasonable concerns; provided, that TESC may only take action under this
sentence in the event that it treats all providers of similar content in the
same manner. In addition to and not in limitation of the foregoing, and
notwithstanding any other provision of this Lease to the contrary, TESC may
terminate this Lease for any reason or no reason in its sole judgment upon
thirty (30) days advance written notice to Playboy, without any liability to
Playboy whatsoever (other than remitting any portion of Gross Revenues due and
owing Playboy under this Lease as of the date of such termination). If by reason
of regulatory or legislative action or interpretation, TESC’s provision of any
Service programming violates any Law, rule, regulation or order as determined by
a judgment on the merits in a court of competent jurisdiction (a “Judgment”),
then TESC may take such actions as it deems necessary in its sole judgment to
protect the business, reputation, and goodwill of TESC and/or any of its
Affiliates and to prevent the institution of any such proceedings against TESC
and/or any of its Affiliates, including without limitation termination of the
Lease and suspension and/or restriction of the transmission of all or any of the
Service in the Territory or any portion of the Territory or to certain
Subscribers within the Territory, but only in so far as it relates to the
Service or portion of the Service that is the subject of the Judgment. For
clarity, TESC’s right to terminate this Lease shall apply with respect to the
Services on a channel per channel basis (i.e. TESC shall have the right to
terminate this Lease with respect to each Service based upon Playboy’s breach of
this Lease as it relates to each such Service, without terminating this Lease in
whole). For clarity, in lieu of the foregoing, TESC may terminate this Lease as
a whole. Not earlier than fifteen (15) months for the Playboy TV Service, and
not earlier than twelve (12) months for the fresh! Service, from the Effective
Date, Playboy shall have the right to discontinue provision of the applicable
Service, in its sole and absolute discretion, provided, that, Playboy generally
discontinues distribution of such Service to all Distributors contemporaneously
and shall not thereafter re-enter or re-introduce the Service or any
substantially similar service in the market during the remainder of the Term
hereof.

 
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12.           *****

 
13.           NOTICES:

All notices, reports and consents in connection with this Lease shall be in
writing and shall be sent postage prepaid by certified mail, return receipt
requested; by hand delivery; or by Federal Express or similar overnight delivery
service, to the other party at the following address (unless either party at any
time designates another address for itself by notifying the other party by
certified mail, in which case the new address shall be used).

 
To Playboy:
Playboy Entertainment Group, Inc.

2706 Media Center Dr.
Los Angeles, CA 90065
Attention: Scott Flanders, CEO
cc: Senior VP Business & Legal Affairs

 
To TESC:
Transponder Encryption Services Corporation

90 Inverness Circle East
Englewood, Colorado 80112
Attention: President
cc: Office of the General Counsel

Notice, report or consent given by hand delivery shall be deemed given on
delivery. Notice, report or consent given by certified mail, return receipt
requested shall be deemed given the date set forth on the receipt. Notice,
report or consent given by Federal Express or similar overnight delivery service
shall be deemed given on the next business day following delivery of the notice,
report or consent to such service with instructions for overnight delivery.

14.
CONFIDENTIALITY:

(a)           Confidential Information. Neither TESC nor Playboy shall disclose
(orally, in writing, by press release or by public disclosure of any kind or
otherwise) to any third party (other than their respective officers, directors
and employees, in their capacity as such, and on a need-to-know basis, and each
parties’ respective auditors, consultants, financial advisors, lenders,
attorneys and existing and potential third-party financial investors in Playboy,
a Service or TESC, subject to a confidentiality agreement between the relevant
party and such third-party financial investors) any Confidential Information
except: (i) to comply with the Law; (ii) to the extent necessary to comply with
the valid order of an administrative agency or a court of competent
jurisdiction, in which case redacted to the greatest extent possible, in which
event the party making such disclosure shall so notify the other as promptly as
practicable (and, if possible, prior to making such disclosure) and shall seek
confidential treatment of such information; (iii) in order to enforce its rights
pursuant to this Lease; or (iv) if mutually agreed to in writing in advance by
TESC and Playboy. For purposes of this Lease, “Confidential  Information” shall
mean all non-public information disclosed by one party to the other in
connection with this Lease, a Service or transmission of a Service including
without limitation technical information, technical or marketing tests, product
plans, and information with respect to the terms and provisions of this

 
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Lease, including its existence. Playboy acknowledges and agrees that any and all
Subscribers shall be deemed customers of TESC or its Affiliates and that any and
all information relating to Subscribers including without limitation the names,
addresses, and any other personally identifying information of any Subscriber
(“Subscriber Information”) shall be Confidential Information. TESC shall have
absolutely no obligation whatsoever to (and nothing in this Lease shall require
TESC to) disclose Subscriber Information to Playboy or anybody acting on
Playboy’s behalf. If agreed to in writing by both parties in advance, within
thirty (30) days after the execution of this Lease, Playboy and TESC may issue,
either separately or jointly, a press release or public announcement concerning
this Lease; provided, that the content of the press release or public
announcement shall be mutually agreed upon, in writing, by Playboy and TESC
prior to such release.

(b)           Equitable Relief. Each party agrees that a breach of this section
will result in the substantial likelihood of irreparable harm and injury to the
other party for which monetary damages alone would be an inadequate remedy, and
which damages are difficult to accurately measure. Accordingly, each party
agrees that the other party shall have the right, in addition to any other
remedies available to it, to obtain immediate injunctive relief as well as other
allowable equitable relief for any breach or potential breach of this section.
The right to equitable relief will be in addition to any other right or remedy
available under this Lease, at law or in equity.

15.
MISCELLANEOUS:

(a)           Assignment. This Lease shall inure to the benefit of and be
binding upon, the parties hereto and their respective heirs, legal
representatives, successors and assigns. Notwithstanding the foregoing, neither
party may assign or otherwise transfer any of its rights or obligations under
this Lease, in any manner, direct or indirect, contingent or otherwise, in whole
or in part, voluntarily or by operation of law without the prior express written
consent of the other party. Notwithstanding the foregoing, either party (subject
to TESC’s right to terminate the Lease with respect to one or both of the
Services as set forth in Section 11) shall have the right to assign some or all
of its rights and/or obligations under this Lease, without obtaining the consent
of the other party, to (i) an Affiliate and; (ii) a successor entity to its
business, whether by merger or by sale of all or substantially all or its assets
or stock. In the event of any valid assignment of this Lease in accordance with
the terms of this subsection, the assigning party shall remain secondarily
liable to the non-assigning party in the event of any breach or default under
this Lease by the assignee.

(b)           Service Combinations. In the event that Playboy acquires control
of, any other programming service (a “Merger”), if TESC or its Affiliate has (at
the time of the Merger) an agreement regarding distribution or transmission of
the other service (a “Current Contract”), TESC shall have the right to continue
to distribute the other programming service under the Current Contract.

(c)           Limitation of Liability. NOTWITHSTANDING ANYTHING IN THIS LEASE TO
THE CONTRARY, EXCEPT WITH RESPECT TO THE CONFIDENTIALITY AND INDEMNIFICATION
OBLIGATIONS CONTAINED IN THIS LEASE, IN NO EVENT SHALL EITHER PARTY OR ITS
AFFILIATES BE LIABLE FOR ANY INCIDENTAL, INDIRECT, PUNITIVE, SPECIAL OR
CONSEQUENTIAL DAMAGES, WHETHER

 
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FORESEEABLE OR NOT, OCCASIONED BY ANY FAILURE TO PERFORM OR THE BREACH OF ANY
OBLIGATION UNDER THIS LEASE FOR ANY REASON WHATSOEVER, WHETHER BASED ON
NEGLIGENCE OR OTHERWISE AND WHETHER FORESEEABLE OR NOT.

(d)           Governing Law. This Lease and all matters or issues collateral
thereto shall be governed by the Laws of the State of New York, without regard
to the conflict of law rules thereof The Federal and state courts located in the
State of New York shall have exclusive jurisdiction to hear and determine any
claims, disputes, actions or suits which may arise under or out of this Lease
and each party hereby waives its right to make any claim to the contrary.

(e)           Relationship. The relationship of the parties is that of
independent contractors. Nothing in this Lease shall be construed or implied to
create a relationship of agency, partners, affiliates, joint employers, or joint
venturers. Neither party shall have the power or authority to act for the other
in any manner or to create obligations or debts which would be binding on the
other. Neither party shall be responsible for any obligation of the other or be
responsible for any act or omission of the other or any employee of the other.
Each party shall be responsible for all wages, salaries, taxes and expenses
incurred for or by its employees. Neither party shall be, or hold itself out as,
the agent of the other or as joint venturers under this Lease. No Subscriber has
or shall be deemed to have any privity of contract or direct contractual or
other relationship with Playboy and no supplier of advertising or programming or
anything else included in the Service by Playboy shall be deemed to have any
privity of contract or direct contractual or other relationship with TESC or its
Affiliates by virtue of this Lease. Playboy disclaims any present or future
right, interest or estate in or to the transmission facilities of TESC and its
Affiliates, such disclaimer being to acknowledge that neither TESC nor the
facilities of it or its Affiliates are common carriers.

(f)           Force Majeure. Notwithstanding any other provision in this Lease,
neither Playboy nor TESC shall have any liability to the other or any other
person or entity with respect to any failure of Playboy or TESC, as the case may
be, to transmit a Service or perform its obligations under this Lease if the
failure is due to any failure or degradation in performance of TESC’s or
Playboy’s (or either of their Affiliates’) satellite(s) or the or transponders
on such satellite(s) or any failure or degradation of the Transmission System,
or of any scrambling/descrambling equipment or any other equipment owned or
maintained by others (including, without limitation, any automated billing and
authorization system), any failure at the origination and uplinking center used
by Playboy or TESC (including without limitation the Facility), any labor
dispute, fire, flood, riot, legal enactment, government regulation, Act of God,
or any cause beyond the reasonable control of Playboy or TESC, as the case may
be (a “Force Majeure”), and such non-performance shall be excused for the period
of time such failure(s) causes non-performance; provided, however, the parties
mutually agree that it is commercially or technically unfeasible to cure a Force
Majeure with respect to the Transmission System or a satellite with respect to
all programming services affected by the failure of the Transmission System or
the satellite, then either party may terminate this Lease effective upon written
notice to the other party. Playboy acknowledges and agrees that although a
Service may at any given time be uplinked to only one (1) of several satellites,
failure or degradation in any of such satellites may require TESC to reduce the
number of programming services available for allocation among such satellites,
with such reduction including, without limitation, curtailment or termination of
the transmission of

 
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one or both of the Services by TESC, at TESC’s sole discretion; provided that
the Service will be treated on a pari passu basis with any other service of
similar content to the Services. Accordingly, Playboy further acknowledges and
agrees that the provisions set forth in the first sentence of this paragraph
shall apply and shall exculpate TESC and its Affiliates and excuse the
performance of TESC hereunder in the event of a failure or degradation of any of
the satellites or the transponders on any such satellites, regardless of whether
the satellite to which a Service is uplinked at the time of such failure or
degradation is itself the subject of such failure or degradation. If a Service
is interrupted or discontinued as a result of a Force Majeure, TESC shall have
the right, immediately, to insert programming of its choice on the channel
identified with the Service until the Service is fully operational again.

(g)           Severability. The invalidity under applicable Law of any provision
of this Lease shall not affect the validity of any other provision of this
Lease. In the event that any provision in this Lease is determined to be
invalid, unenforceable or illegal, (A) the provision shall be reformed to the
minimum extent necessary to cause the position to be valid, enforceable and
legal while preserving the intent of the parties as expressed in, and the
benefits to the parties provided by, this Lease or (B) if the provision cannot
be so reformed, the provision shall be severed from this Lease and the remainder
of the Lease shall remain effective and shall be construed in accordance with
its terms as if the invalid, unenforceable or illegal provision were not
contained in the Lease.

(h)           Survival. Any provision of this Lease which logically would be
expected to survive termination or expiration of the Lease shall survive
termination or expiration. In addition and not in limitation of the foregoing,
all representations, warranties, covenants, indemnifications, confidentiality
obligations, audit rights and limitations of liability shall survive the
termination or expiration of this Lease for the longer of seven (7) years or the
longest period permissible under applicable Law(s).

(i)           No Inference Against Author. Playboy and TESC each acknowledge
that this Lease was fully negotiated by the parties and, therefore, no provision
of this Lease shall be interpreted against either party because that party or
its legal representative drafted the provision.

(j)           Headings; References. The titles and headings of the sections in
this Lease are for convenience only and shall not in any way affect the
interpretation of this Lease. Any reference in this Lease to a ‘section’ or an
‘exhibit’ shall, unless the context expressly requires otherwise, be a reference
to ‘section’ in, or an ‘exhibit’ to this Lease. Any reference in this Lease to
the singular form of a word shall automatically include the plural form of the
word, if applicable, and any reference to the plural shall include the singular,
if applicable. Forms of the word ‘include’ mean ‘including, without limitation’
and references to ‘hereunder,’ ‘herein,’ ‘hereof,’ and the like, refer to this
Lease.

(k)           Waivers; Cumulative Remedies. The failure of either party to
insist upon strict performance of any provision of this Lease shall not be
construed as a waiver of any subsequent breach of the same or similar nature.
Any waiver of any provision of this Lease must be in writing. All rights and
remedies reserved to either party shall be cumulative and shall not be in
limitation of any other right or remedy which such party may have at law or in
equity.

 
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(l)           Integration. This Lease, including its Exhibits, constitutes the
entire agreement between the parties to this Lease. All exhibits referenced in
this Lease are hereby incorporated in the Lease by this reference. This Lease
may not be modified except in a writing executed by both parties. Except as
expressly provided by this Lease, no party shall be bound by any communications
between them on the subject matter of this Lease unless the communication is
(i) in writing, (ii) bears a date contemporaneous with or subsequent to the date
of this Lease, and (iii) is agreed to by both parties. Upon due execution of
this Lease by both parties, all prior agreements and understandings between the
parties including, without limitation, the Prior Agreement, shall be null and
void. The parties specifically acknowledge there are no unwritten side
agreements or oral agreements between the parties which alter, amend, modify or
supplement this Lease.

(m)           Counterparts. This Lease may be executed in several counterparts,
each of which shall be deemed an original and all such counterparts together
shall constitute but one and the same instrument.

(n)           *****

(o)           Reservation of Rights. All rights that Playboy may have that are
not specifically granted to TESC by this Lease in and to the Service (including,
without limitation all intellectual property rights in the Service) are
expressly reserved, as between TESC and Playboy, to Playboy.

(p)           Clean Slate. TESC and Playboy acknowledge that, with respect to
all amounts due by either party or its Affiliates to the other for obligations
incurred prior to the Effective Date (“Clean Slate Claims”), all payment and
other obligations shall be deemed fully performed, and each party waives and
discharges any claim with respect to any and all Clean Slate Claims.

[Remainder of page intentionally left blank]

 
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IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date
first above written.
TESC:
 
PLAYBOY:
     
Transponder Encryption Services Corporation
 
Playboy Entertainment Group, Inc.
     
By:
/s/ Ira Bahr
 
By:
/s/ Roy Liebrecht
         
Title:
Pres. TESC
 
Title:
V.P. of Business and Legal Affairs

Payment Address:
Playboy Entertainment Group, Inc.
2740 Paysphere Circle
Chicago, IL 60674-2740

 
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TRANSPONDER ENCRYPTION SERVICES CORPORATION
AMENDED AND RESTATED
SATELLITE CAPACITY LEASE

EXHIBIT A

CHANNEL DESCRIPTIONS

PLAYBOY TV

*****

FRESH!

*****

 
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TRANSPONDER ENCRYPTION SERVICES CORPORATION
AMENDED AND RESTATED
SATELLITE CAPACITY LEASE

EXHIBIT B

RENT

A.           Rent. Subject to the provisions of the Lease, TESC shall (i)
collect Gross Revenues in connection with the Services, (ii) retain TESC’s Share
of Gross Revenues as rent for the use of the transponders (“Rent”), and (iii)
remit Playboy’s Share of Gross Revenues to Playboy on a monthly basis as set
forth in Section 6 of the Lease, in accordance with the following table:
 

 
TESC’s Share of Gross Revenues*
Playboy’s Share of Gross Revenues*
Playboy TV
*****
*****
Fresh!
*****
*****

 
* *****
 
B.            *****
 
C.            Reporting Period. For purposes of this Lease, “Reporting Period”
shall mean the period of time between the 22nd day of one calendar month and the
21st day of the following calendar month. TESC may change such period from time
to time in TESC’ s sole judgment.
 
 
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