Exhibit 10.3

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.

EXECUTION COPY

                            SATELLITE CAPACITY LEASE

      This  Satellite  Capacity Lease (the "Lease") is entered into as of August
21, 2006 (the  "Effective  Date") by and between  Playboy  Entertainment  Group,
Inc.,  a Delaware  corporation,  and Spice Hot  Entertainment,  Inc., a Delaware
corporation  (collectively,   "Playboy"),  on  the  one  hand,  and  Transponder
Encryption Services  Corporation,  a Colorado corporation ("TESC"), on the other
hand.

                                    RECITALS

A. TESC is in the business of leasing  satellite  capacity on  satellites  using
Ku-Band and/or Ka-Band frequencies.

B. Playboy desires to lease certain satellite capacity from TESC for the purpose
of transmitting the Services in a digitally-compressed  and encrypted format for
receipt by end users in the Territory.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties mutually agree as follows:

                                      LEASE

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,  as such  standard  is  commonly
referred to in the Adult programming industry).

(b) "Adult  Package"  means a package of some or all 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 as
described below.

(c)  "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 "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.


Confidential and Proprietary                                        Page 1 of 30
<PAGE>

(d) *****

(e) "Contract Year" means the twelve (12) month period during the Term following
the *****  Commencement  Date or any anniversary of the *****  Commencement Date
(as such term is defined in Section 5(a) of this Lease).

(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)
operated by TESC or its Affiliate in Cheyenne, Wyoming; Gilbert, Arizona, or any
additional location(s) in the continental United States designated by TESC.

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

(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, "SPICE XCESS," "CLUB JENNA," "SHORTEEZ" 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  Locations"  means the  geographic  areas for which TESC makes the
determination  that it should  not  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 more
Services because of the editing standard or content of the Service,  pursuant to
Section 10(b) of this Lease; provided, that TESC must block receipt of any other
programming  service of the same editing standard in such geographic area during
the period  that any Service is blocked.  Any  locations  to which TESC blocks a
Service shall be an "Opt-Out Location" for purposes of this Lease. *****

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

(m) "PCOD" means the receipt by a Subscriber  of a video program on a Service on
a 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.  As of the Effective Date,  Playboy offers PCOD only for
Playboy TV. If Playboy makes other  programming  in the Services  available on a
PCOD  basis,  TESC  shall  have  the  right  to  transmit  such  programming  to
Subscribers on a PCOD basis in accordance with the terms of this Lease, and such
delivery shall be covered by the terms of the "Most Favored  Nations" section of
this Lease.

(n) "PCOD Selection" means the selection by a Subscriber of a video program on a
Service on a PCOD basis.


TESC Confidential and Proprietary                                   Page 2 of 30
<PAGE>

(o)  "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 (i) the
length of the block of Playboy TV shall not exceed (1) calendar day and (ii) the
length of the block of the other  Services  shall not exceed four (4) hours.  If
TESC  requests the ability to exceed the length limit  described in the previous
sentence for a promotion or other reason,  the parties  shall both  negotiate in
good faith regarding the accommodation of that request.

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

(q)  "Services"  means  the  five  (5) 24 x 7 linear  programming  services,  as
delivered by Playboy to TESC, to be transmitted to Subscribers  pursuant to this
Lease for PPV Purchases and Subscription Purchases, which Services are: "Playboy
TV," "Spice  Xcess,"  "Club  Jenna,"  "Shorteez"  and  "Fresh!" all as more full
described in Exhibit A. 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,  all as part of the 24 x 7 linear services.  Any individual
one of the above-listed programming services may be referred to in this Lease as
a "Service."

(r) "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 ("Display Device")  (including 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) 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  to  viewers at a  residential  or, if  permitted  herein,
commercial location.

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

(t) "Subscriber" means any residential or non-residential  location or person in
the Territory that is  intentionally  authorized by TESC 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).

(u)  "Subscription  Purchase"  means the  purchase by a  Subscriber  of, and the
intentional  authorization by TESC of the Subscriber to receive,  one or more 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.

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


TESC Confidential and Proprietary                                   Page 3 of 30
<PAGE>

(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 or coaxial  cable;  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:  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,  which shall be permitted under this Lease),  2)
via the World-Wide-Web, 3) or to personal mobile and wireless devices (except as
allowed by Section 3(b) (1, 2 and 3 being "Transmission System Exclusions").

(x) "Video-On-Demand" or "VOD" means the ability of a Subscriber to purchase the
right to view a program on an "on demand"  basis,  such that the  Subscriber can
select the  program,  begin  watching  the program at any time,  and have 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 terminate  three (3) years
after the *****  Commencement  Date (as such term is defined in Section  5(a) of
this Lease),  unless terminated earlier in accordance with Section 11 below (the
"Term"), but in no event shall the Lease Term extend beyond June 30, 2010 unless
mutually agreed to in writing by both Parties.

3. GRANT OF RIGHTS:

(a)  Satellite  Capacity  Lease.  TESC hereby  leases to Playboy  five (5) video
channels of capacity on one or more Ku-Band and/or Ka-Band  satellites 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,  for  the  sole  purpose  of
transmitting the Services in a digitally-compressed and encrypted format.

(b) Transmission. Playboy hereby grants to TESC and its Affiliates, and TESC and
its Affiliates accept, the non-exclusive  right, license and obligation (only as
specifically  set  forth in this  Lease) to  transmit  the  Services  (including
without   limitation  the  license  to  all   copyright,   trademark  and  other
intellectual  property  rights  appurtenant  to the  programming  comprising the
Services)  throughout the Term in the Territory via the Transmission  System for
Subscription Purchases, PPV Purchases, Package Purchases, PCOD 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


TESC Confidential and Proprietary                                   Page 4 of 30
<PAGE>

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)  handheld  devices  that  can  download  content  from a  digital
recording  device (not mobile  phones or other similar  wireless  communications
devices  that could  receive and decode the Signal  directly,  and not through a
receiver or decoder),  and (iv) vehicles  (e.g.  cars,  airplanes,  recreational
vehicles  and  commercial  hauling  vehicles).  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 1(b) of
this Lease and the requirements of Section 3(f) below,  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. Playboy shall use good faith efforts to work with
TESC  to  develop   opportunities  for  TESC  to  transmit  Playboy   controlled
programming to the computers of Subscribers by Internet  streaming and/or "push"
and "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.

(d) *****

(e) *****

(f) Adult Packages.  The parties  acknowledge  that TESC currently  transmits an
Adult Showcase that has five (5) Adult programming  services.  If TESC continues
to transmit  the Adult  Showcase,  it shall  contain no more than five (5) Adult
services and shall include the following three (3) Services:  Club Jenna,  Spice
Xcess  and  Shorteez.  If either  party  desires  to  change  one or more of the
Services  included in the Adult  Showcase,  the parties shall  negotiate in good
faith  regarding  the change;  provided,  that the parties agree that Playboy TV
shall not be  included  in the Adult  Showcase.  TESC may  transmit  other Adult
Packages from time to time that contain at least the same percentage of Services
as in the Adult  Showcase.  ***** In  addition  to TESC's  right to package  the
Services in Adult Packages as set forth in this subsection,  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.

(g) 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


TESC Confidential and Proprietary                                   Page 5 of 30
<PAGE>

available by Playboy,  on a video on demand basis whereby  Subscribers  can make
VOD  Purchases;  and (v) if made  available  by  Playboy,  on a PCOD  basis made
available to Subscribers either for no charge or for a fee.

(h) 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.

(i) 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
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 the  Services
independent of TESC including,  without  limitation,  to cable system  operators
(both franchised and  non-franchised);  provided,  that if, within 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 this  Lease,  the  third-party  operator  still  is not  complying  with  the
applicable  term,  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.

(j) Sub-Distribution.  In addition to and without limiting the generality of the
grant of rights  contained  in this  Lease,  TESC  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  3,000  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,  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


TESC Confidential and Proprietary                                   Page 6 of 30
<PAGE>

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 Distributor.

(k) 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
pursuant to the terms and conditions contained in this Agreement.

(l) 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 Lease;  provided that TESC
does not  intentionally  authorize  the  receipt  of the  Services  outside  the
Territory.

(m) 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.

4. THE SERVICES:

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

(b) *****

(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 four (4) hour blocks and the  programming  contained  in the other
Services in ninety (90) minute blocks.

(d) *****

(e) Second  Service.  Playboy agrees that it will not use any of the Services to
nest or  incubate  another  programming  service  within the  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.

(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


TESC Confidential and Proprietary                                   Page 7 of 30
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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  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 set forth in the "Indemnification" section 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) No Streaming.  Playboy agrees that it and its Affiliates  will not, and that
it and its Affiliates  will not authorize or permit  (either  through a grant of
rights or through  acquiescence)  any third  party to,  exhibit,  distribute  or
"stream," including, without limitation on a time delayed,


TESC Confidential and Proprietary                                   Page 8 of 30
<PAGE>

basis,  a simulcast of any of the Services over the public  Internet  during the
six (6) month period commencing on the ***** Commencement Date.

(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 discontinue transmission of such Service. *****

(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 not remove
the program in question  from the  Service,  then TESC has the right to pre-empt
the offending program, and to prevent its transmission to Subscribers.

(m)  Certificate  of  Compliance.  Within thirty (30) days after the last day of
each Contract Year or upon written  request by TESC at any time during the Term,
Playboy shall  deliver to TESC written  certification  (i) of its  compliance or
non-compliance  (as the case may be) with this  "The  Services"  section  of the
Lease signed by an officer of Playboy.  The  certification  shall also include a
description of the means and mechanisms Playboy used to determine whether it has
complied or failed to comply with the "The Services" section of this Lease.

(n) Remedies.  Playboy  acknowledges that compliance with the provisions of this
Section 4 is material to this Lease,  and that any  remedial  measure  specified
herein is bargained for, not as a penalty but rather as a reasonable  allocation
of damages which would otherwise be difficult to ascertain. Any remedy specified
herein  shall be in addition  to and not in  limitation  of any other  rights or
legal or equitable remedies TESC may otherwise have.

5. DELIVERY AND TRANSMISSION OF THE SERVICES:

(a) TESC's  Transmission  Obligation.  As of the  Effective  Date,  TESC already
transmits  Playboy TV. Subject to Playboy's  compliance with the signal delivery
obligations  contained in this Lease, each of Playboy's obligations contained in
this Section 5, TESC's right to designate  Opt-Out Locations ***** and the other
provisions of this Lease, TESC shall commence transmitting the Spice Xcess, Club
Jenna, Shorteez and Fresh! Services (collectively,  the "New Services") and make
the New Services available to private  residential  Subscribers for Subscription
Purchase and PPV Purchase no later than October 11, 2006 (the  "Planned  Initial
Transmission Date"). ***** For clarity,  Playboy agrees and understands that (i)
TESC shall have no  obligation  to  transmit  the New  Services on or before the
Planned  Initial  Transmission  Date unless TESC has been  provided  the testing
period set forth in Section 5(b)(i) below and TESC's engineers feel that each of
the New Services is ready to be transmitted,  (ii) TESC shall have no obligation
to  transmit  any of the New  Services  *****  Notwithstanding  anything  to the
contrary  set forth  herein,  Playboy  acknowledges  and agrees that 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,


TESC Confidential and Proprietary                                   Page 9 of 30
<PAGE>

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 Playboy TV and Spice Ultimate to TESC as of
the Effective  Date. No later than September 20, 2006,  Playboy shall deliver to
TESC both the Signals of, and primary and secondary integrated receiver decoders
("IRDs") capable of decoding,  the Signals for the New Services.  Playboy agrees
and acknowledges that TESC's  transmission and of the New Services are expressly
contingent  upon Playboy  providing the IRDs and TESC having the period  between
September  20, 2006 and October 11, 2006 to test the Signals of the New Services
and upon Playboy's  compliance  with all of the  requirements  contained in this
Section 5(b).  The Signals shall be deemed  delivered to TESC when received in a
form technically  acceptable to TESC. 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.

      (ii) Change in Delivery Method. Playboy may, from time to time, change the
satellite being used for  transmission of one or more 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 date on which
the Service is first  transmitted  by TESC (or, in the case of Playboy TV, as of
the  Effective  Date),  Playboy  will give TESC at least ninety


TESC Confidential and Proprietary                                  Page 10 of 30
<PAGE>

(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.  Network  uses  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 PCOD and VOD  offerings.)  Guide  information for the PCOD and VOD
offerings  will be provided in the metadata  file that is provided with the PCOD
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 sale 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 including without limitation,  for the New Services, the date on
which such Services are first 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.

(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 TESC; (ii) up to one (1) second
language audio for the  programming  then being  transmitted;  and (iii)


TESC Confidential and Proprietary                                  Page 11 of 30
<PAGE>

program content advisory  materials for the programming  then being  transmitted
("Required Materials").  If and when TESC institutes a digital rights management
program, TESC and Playboy will negotiate in good faith regarding the institution
of the  program.  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
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; for high
definition,  Playboy shall provide CEA 608-C compatibility data within CEA-708-B
structures as described in CEA 708-B).

(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


TESC Confidential and Proprietary                                  Page 12 of 30
<PAGE>

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.  TESC shall contractually require
that Sub-Distributors agree to comply with this Section.

(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  system  ("DRM"),  TESC
shall  negotiate in good faith with Playboy to allow Playboy to  participate  in
the DRM with  respect to the  Services.  TESC shall  contractually  require that
Sub-Distributors agree to comply with this Section.

(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.

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 PCOD 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,  PCOD  Selections and Package  Purchases of programming on all of the
Services (as allowed in Section 3 of this Lease), including any amounts received
as  payment  for  fractional  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 any additional  charges  imposed by TESC or its
Affiliates on Subscribers for orders placed,  or payments made, by telephone and
ANI ("Automatic Number  Identification") or such other means provided by TESC or
its Affiliates in connection  with  Subscriber  ordering of, or payment for, the
Services  for  which  TESC  may from  time to time  impose  a  separate  charge;
provided, that any such charge is no greater than the ordering or payment charge
for  services  similar  to the  Services  and that the  charge is  substantially
similar to the cost associated with the ordering system's use. The parties agree
that TESC may, in its sole  discretion,  credit the account of any


TESC Confidential and Proprietary                                  Page 13 of 30
<PAGE>

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 for purposes of calculating Gross Revenues.  *****
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 ***** 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.  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.

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 Reporting  Period:  (i) ***** (ii) Gross
Revenues for Playboy TV; (iii) Gross  Revenues from  Subscription  Purchases for
each  applicable  Service;  (iv)  Gross  Revenues  from PPV  Purchases  for each
applicable  Service;  (v) Gross Revenues from VOD Purchases for each  applicable
Service;  (vi) Gross Revenues from PCOD Selections for each applicable  Service;
(vii) Gross Revenues from Package  Purchases;  (viii) the amount of Rent payable
by Playboy; *****(xii) the amount of any monies remitted to Playboy as Playboy's
share of Gross Revenues *****

(b) Playboy's Audit Rights. TESC agrees to keep and maintain materially accurate
books and records of PPV Purchases,  Subscription Purchases,  Package Purchases,
PCOD Selections,  VOD Purchases, Gross Revenues, Rent, ***** 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 or its  Affiliates'  books and records that are  reasonably  necessary to
verify the accuracy of the such amounts and any reports by TESC; provided,  that
the audited books and records shall be limited to records  relating  directly to
Playboy, Adult Packages containing one or more Services (except that in no event
shall  TESC  be  required  to  disclose   personally   identifiable   subscriber
information)  or the  Services.  The audit shall be conducted by an  independent
nationally-recognized certified public accounting firm approved by TESC, and the
audit firm shall execute a non-disclosure  agreement  acceptable to TESC, in its
reasonable  discretion.  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


TESC Confidential and Proprietary                                  Page 14 of 30
<PAGE>

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
conducting 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  three (3) months  after the  auditors  leave  TESC's
offices, or else Playboy shall have waived its right to such claim. Any claim as
a result of an audit  shall be limited  to the  current  year and the  immediate
preceding year. ***** Notwithstanding anything to the contrary contained in this
subsection,   under  no  circumstances   shall  Playboy  be  provided  with  any
information  that  reveals the  identity  of any third party or actual  contract
language 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


TESC Confidential and Proprietary                                  Page 15 of 30
<PAGE>

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  approval.  Playboy's  disapproval  for the purposes of this
Section  may be given  telephonically.  Any  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).

(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
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 or its  Affiliates  agree to  market  and
promote the  Services in a  comparable  manner to how they  promote  other Adult
programming  except for  marketing or  promotional  campaigns  funded by another
Adult  programmer;  provided  TESC or its  Affiliates  also  offer  Playboy  the
opportunity to fund similar promotional campaigns.

(d) *****

(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  exactly  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,  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


TESC Confidential and Proprietary                                  Page 16 of 30
<PAGE>

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; *****

(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).

(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  on  the
Transmission System. 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  and  Playboy en Espanol (an
"Additional  Service") to any  Distributor,  Playboy shall offer the  Additional
Service to TESC on the same terms and  conditions as which it was offered to the
Distributor in compliance with the "Most Favored Nations" section of this Lease.
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  one  of the  New
Services.

9. REPRESENTATIONS AND WARRANTIES:


TESC Confidential and Proprietary                                  Page 17 of 30
<PAGE>

(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.

      (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.  If, 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


TESC Confidential and Proprietary                                  Page 18 of 30
<PAGE>

      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 Sections 4(i), 9(b)(iii) or 10(a)
      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 which are required by Title 18,  U.S.C.  ss. 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  ("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  agrees to appoint a "record  custodian" as required under Section
      2257,  and will keep  TESC  apprised  of the  physical  address  where all
      required  records are compiled and  maintained  pursuant to Section  2257,
      along with the full  legal name of the  records  custodian.  Playboy  will
      display a conspicuous  disclosure  statement on all  depictions of `actual
      sexually  explicit  conduct'  contained  in the  Services  as  required by
      Section 2257,  which  statement  identifies the records  custodian for the
      content and describes the physical  location where the records relating to
      the content may be inspected as required under applicable law. 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.
      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  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,  and in accordance with
      industry  standards,  of no less  than $5  million  per  occurrence  and a
      maximum  self-insured  retention of $5,000,000 or such other  retention as
      agreed to by TESC in its sole and  absolute  discretion;  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


TESC Confidential and Proprietary                                  Page 19 of 30
<PAGE>

            expiration   of  such  policy,   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 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.

(c) TESC's Warranties. TESC represents,  warrants and covenants to Playboy that,
to the best of its  knowledge,  TESC  presently is, and will remain at all times
during the Term,  in  material  compliance  with all  material  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  attorneys' 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
breach 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 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,  except as limited herein below,
which indemnification obligation contained in (viii) above shall cover any claim
based on a violation of any Law,  whether civil or criminal law whether  brought
by a governmental authority or a private party.

(b) *****


TESC Confidential and Proprietary                                  Page 20 of 30
<PAGE>

(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 breach or default
by TESC of any provision contained in the Lease; (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 equipment; and/or (iv) claims arising from an
assertion  that  technology  deployed by TESC is deployed  in  violation  of any
United States patent.

(d) Claim. The indemnified party shall give the indemnifying party prompt notice
of any claim or litigation 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 of law or government authority.

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.  Either party shall have the right to


TESC Confidential and Proprietary                                  Page 21 of 30
<PAGE>

terminate this Lease in accordance with Section 15(f) of this Lease in the event
of a Force  Majeure.  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:  (i) if the
delivery  of  any of  the  Services  by  Playboy  to  TESC  is  discontinued  or
interrupted for a continuous  period of fifteen (15) days,  (ii) if 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)
if Playboy  fails to comply  with any Law related to Adult  content,  including,
without  limitation,  the provisions of 18 U.S.C.  2257, (iv) if TESC reasonably
believes  that  Playboy  has  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) if TESC reasonably believes that
there is evidence of, or Playboy is criminally  charged or indicted for,  fraud,
misrepresentation  or illegal action in connection with this Lease, ***** and/or
(vii)  upon  any  assignment  by  Playboy  of all or any part of the  Lease.  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. 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 the Services  with respect to a particular  channel or set of
channels based upon Playboy's breach of this Lease as it relates to such channel
or channels without terminating this Lease in whole). *****

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).


TESC Confidential and Proprietary                                  Page 22 of 30
<PAGE>

                  To Playboy:       Playboy Entertainment Group, Inc.
                                    2706 Media Center Dr.
                                    Los Angeles, CA 90065
                                    Attention: Jim Griffiths, President
                                    cc: Senior VP Business & Legal Affairs

                  To TESC:          Transponder Encryption Services Corporation
                                    90 Inverness Circle East
                                    Englewood, Colorado 80112
                                    Attention: Mark Jackson, 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.


TESC Confidential and Proprietary                                  Page 23 of 30
<PAGE>

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 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 more 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


TESC Confidential and Proprietary                                  Page 24 of 30
<PAGE>

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 be relieved of all  obligations  arising  after the
assignment,  and the  non-assigning  party shall look solely to the assignee for
enforcement of such obligations.

(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 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
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 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


TESC Confidential and Proprietary                                  Page 25 of 30
<PAGE>

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,  that if TESC determines in its sole
discretion  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  and so notifies  Playboy,  then either party may  terminate  this
Lease  effective  upon  written  notice to the other party,  *****.  The parties
acknowledge  and agree that although a Service may at any given time be uplinked
to  only  one 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 all of the  satellites,  with  such  reduction
including, without limitation, curtailment or termination of the transmission of
one or more 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.

(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,


TESC Confidential and Proprietary                                  Page 26 of 30
<PAGE>

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.

(l)  Integration.   This  Lease,   together  with  any  documents  and  exhibits
specifically referred to in this Lease,  constitute 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.  On  execution  of this  Lease,  all prior
agreements  and  understandings  between the parties 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) Right of Offset.  TESC shall have the right to offset,  against any payments
due or deliverable to Playboy in this Lease,  any amounts owed by Playboy or any
of its  Affiliates  to TESC or any of its  Affiliates  under  this  Lease or the
agreement to transmit Playboy en Espanol.

(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) *****

                  [Remainder of page intentionally left blank]


TESC Confidential and Proprietary                                  Page 27 of 30
<PAGE>

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: Mark Jackson                              By: James Griffiths
    ------------                                  ------------------------------

Title: President                              Title: President
       ---------                                     ---------------------------


                                              Spice Hot Entertainment, Inc.

                                              By: James Griffiths
                                                  ------------------------------

                                              Title: President
                                                     ---------------------------

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


TESC Confidential and Proprietary                                  Page 28 of 30
<PAGE>

                   TRANSPONDER ENCRYPTION SERVICES CORPORATION
                            SATELLITE CAPACITY LEASE

                                    EXHIBIT A

                              CHANNEL DESCRIPTIONS

PLAYBOY TV

*****

CLUB JENNA

*****

SPICE XCESS

*****

FRESH!

*****
SHORTEEZ

*****


TESC Confidential and Proprietary                                  Page 29 of 30
<PAGE>

                   TRANSPONDER ENCRYPTION SERVICES CORPORATION
                            SATELLITE CAPACITY LEASE

                                    EXHIBIT B

                                      *****


TESC Confidential and Proprietary                                  Page 30 of 30