Exhibit 10.1




                            OPERATING AGREEMENT
                                    FOR
                       PLAYBOY TV INTERNATIONAL, LLC
                    A DELAWARE LIMITED LIABILITY COMPANY
















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.



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                                    TABLE OF CONTENTS


                                                                                    Page


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ARTICLE 1
DEFINITIONS...........................................................................1

ARTICLE 2
ORGANIZATIONAL MATTERS...............................................................10
2.1      Formation...................................................................10
2.2      Name........................................................................10
2.3      Term........................................................................10
2.4      Office and Agent............................................................10
2.5      Addresses of the Members, the Managers, and the Directors...................10
2.6      Purpose of Company..........................................................11

ARTICLE 3
CAPITAL CONTRIBUTIONS................................................................11
3.1      Initial Capital Contribution................................................11
3.2      Additional Capital Contributions............................................11
3.3      Mandatory Additional Capital Contributions..................................11
         3.3.1    Equity Contributions...............................................11
         3.3.2    Funding Contributions..............................................11
3.4      Failure to Make Mandatory Additional Capital Contributions..................12
         3.4.1    Notice ............................................................12
         3.4.2    Remedies...........................................................12
         3.4.3    Other Effects......................................................14
         3.4.4    Remedies Reasonable................................................15
         3.4.5    No Waiver..........................................................15
3.5      Optional Additional Capital Contributions...................................15
3.6      Capital Accounts............................................................15
3.7      No Interest.................................................................15

ARTICLE 4
ALLOCATIONS OF NET INCOME AND NET LOSSES AND DISTRIBUTIONS...........................15
4.1      Allocations of Net Income and Net Loss......................................15
4.2      Distribution of Distributable Cash by the Company...........................16
4.3      Form of Distribution........................................................16
4.4      Restriction on Distributions................................................16
         4.4.1    Restriction.  .....................................................16
         4.4.2    Method of Determination.  .........................................16
         4.4.3    Personal Liability.  ..............................................16
4.5      Return of Distributions.....................................................16

ARTICLE 5
MANAGEMENT AND CONTROL OF THE COMPANY................................................17
5.1      Managers and the Management Committee.......................................17
         5.1.1    Managers...........................................................17
         5.1.2    General Scope of Authority.........................................17
         5.1.3    Voting ............................................................17
         5.1.4    Veto Right.........................................................17
5.2      Members of the Management Committee; Appointment and Removal................19
5.3      Matters Determined by Independent Directors.................................20
5.4      Meetings of the Management Committee........................................20
5.5      Delegation of Authority; President and Other Officers.......................21
         5.5.1    General Power to Delegate Authority................................21
         5.5.2    The President......................................................21
         5.5.3    Duties of the President............................................21
         5.5.4    Additional Officers................................................22
         5.5.5    Officers Serve at the Pleasure of the Management
                    Committee........................................................22
5.6      Interested Party Transactions...............................................22
         5.6.1    Approval...........................................................22
         5.6.2    Termination and Remedies...........................................22
5.7      Performance of Duties; Liability of Managers; Liability of Directors........23
5.8      Offices and Facilities; Staff...............................................23
         5.8.1    Facilities/Company Location........................................23
5.9      Insurance. .................................................................23

ARTICLE 6
BUSINESS PLANS AND ANNUAL BUDGETS; OPERATION OF COMPANY..............................24
6.1      The Business Plan...........................................................24
         6.1.1    The First Business Plan............................................24
         6.1.2    Additions to Business Plan.........................................24
6.2      Annual Budgets..............................................................24
6.3      Carryover Plan or Budget....................................................25
6.4      Operation of Company........................................................25
         6.4.1    Operations During Transition Period.  .............................25
         6.4.2    Absorption of Existing Channels.  .................................25
         6.4.3    German Venture Expenses.  .........................................25
         6.4.4    Services Provided by PEGI.  .......................................25
         6.4.5    Creation of Local Ventures and Provision for Local Partners. ......26
         6.4.6    Supplemental Programs.  ...........................................26
         6.4.7    Playboy TV Lite....................................................27
         6.4.8    Venus and Spice Hot.  .............................................27
         6.4.9    U.S. Activities....................................................28
6.4.10   Certain Tax Matters.........................................................28

ARTICLE 7
RIGHTS ACQUISITION FEE...............................................................28
7.1      Rights Acquisition Fee. ....................................................28
         7.1.1    Payment of Fee.   .................................................28
         7.1.2    Allocation of Fee.  ...............................................29
7.2      Purchase of U.K. Venture, Japan Venture and Danish Companies................29

ARTICLE 8
MEMBERS..............................................................................30
8.1      Limited Liability...........................................................30
8.2      Admission of Additional Members.............................................30
8.3      Withdrawals or Resignations.................................................30
8.4      Termination of Membership Interest..........................................30
8.5      Remuneration To Members.  ..................................................30
8.6      Members Are Not Agents; No Management Authority.............................31
8.7      Meetings of Members.........................................................31
         8.7.1    Power to Call Meetings.............................................31

ARTICLE 9
TRANSFER AND ASSIGNMENT OF INTERESTS.................................................31
9.1      Transfer of Membership Interests............................................31
9.2      Change of Control...........................................................32
         9.2.1    Changes in General.................................................32
         9.2.2    VSI.   ............................................................32
         9.2.3    PEI/PEGI...........................................................32
         9.2.4    Initial Public Offering............................................33
9.3      Substitution of Members.....................................................33
9.4      Effective Date of Permitted Transfers.......................................33
9.5      Rights of Legal Representatives.............................................33
9.6      PEGI Buy-up Option..........................................................33
         9.6.1    Option Expiration Date. ...........................................34
         9.6.2    Exercise of Buy-up Option..........................................34

ARTICLE 10
CONSEQUENCES OF DISSOLUTION..........................................................35
10.1     Disassociation Event........................................................35
         10.1.1   Purchase Price    .................................................35
         10.1.2   Notice of Intent to Purchase.......................................35
         10.1.3   Election to Purchase Less Than All of the Former Member's
                    Interest.........................................................35
         10.1.4   Payment of Purchase Price..........................................35
         10.1.5   Closing of Purchase of Former Member's Interest....................36
         10.1.6   Purchase Terms Varied by Agreement.................................36
10.2     Bankruptcy..................................................................36

ARTICLE 11
ACCOUNTING, RECORDS, REPORTING BY MEMBERS............................................36
11.1     Books and Records...........................................................36
11.2     Delivery to Members and Inspection..........................................37
         11.2.1   Delivery Upon Request.  ...........................................37
         11.2.2   Inspection        .................................................37
         11.2.3   Authorized Persons.................................................37
11.3     Periodic Statements.........................................................38
         11.3.1   Monthly Report    .................................................38
         11.3.2   Annual Report     .................................................38
         11.3.3   Tax Information.  .................................................38
11.4     Financial and Other Information.............................................38
11.5     Filings.   .................................................................38
11.6     Bank Accounts...............................................................38
11.7     Accounting Decisions and Reliance on Others. ...............................39
11.8     Tax Matters for the Company Handled by Management Committee
           and Tax Matters Member....................................................39

ARTICLE 12
DISSOLUTION AND WINDING UP...........................................................39
12.1     Term.      .................................................................39
12.2     Dissolution Events..........................................................39
12.3     Effect of Dissolution.......................................................40
12.4     Dissolution.................................................................41
12.5     Certificate of Dissolution..................................................41
12.6     Winding Up..................................................................41
12.7     Distributions in Kind.......................................................41
12.8     Order of Payment of Liabilities Upon Dissolution............................42
         12.8.1   Distributions to Members...........................................42
         12.8.2   Payment of Debts  .................................................42
12.9     Certificate of Cancellation.................................................42
12.10    No Action for Dissolution...................................................43

ARTICLE 13
INDEMNIFICATION AND INSURANCE........................................................43
13.1     Indemnification of Agents. .................................................43
13.2     Insurance  .................................................................43

ARTICLE 14
NONCOMPETITION.......................................................................44
14.1     Non-competition.............................................................44
14.2     Separate Covenants..........................................................44
14.3     Injunctive Relief...........................................................44
14.4     Outside Businesses.  .......................................................44

ARTICLE 15
MEMBER REPRESENTATIONS AND WARRANTIES................................................45
15.1     Representations and Warranties by Each Member...............................45
         15.1.1   Experience        .................................................45
         15.1.2   No Advertising    .................................................45
         15.1.3   Investment Intent .................................................45
         15.1.4   Purpose of Entity..................................................45
         15.1.5   Economic Risk     .................................................45
         15.1.6   No Registration of Membership Interest.............................45
         15.1.7   Membership Interest in Restricted Security.........................45
         15.1.8   No Obligation to Register..........................................46
         15.1.9   No Disposition in Violation of Law.................................46
         15.1.10  Investment Risk   .................................................46
         15.1.11  Restrictions on Transferability....................................46
         15.1.12  Information Reviewed...............................................46
         15.1.13  No Representations By Company......................................46
         15.1.14  Consultation with Attorney.........................................46
         15.1.15  Tax Consequences  .................................................47
         15.1.16  No Assurance of Tax Benefits.......................................47
15.2     VSI Representations and Warranties.  .......................................47
15.3     PEGI Representations and Warranties.  ......................................47
15.4     Indemnity  .................................................................48

ARTICLE 16
DISPUTE RESOLUTION...................................................................48
16.1      Alternative Dispute Resolution.  ..........................................48
16.2     Notification and Negotiation.  .............................................48
16.3     Mediation.  ................................................................49
16.4     Arbitration.  ..............................................................49
16.5     Damages.   .................................................................49
16.6     Statute of Limitations.  ...................................................49
16.7     Confidential Negotiations.  ................................................49
16.8     Service of Process.  .......................................................49
16.9     Additional Arbitration Provisions.  ........................................50

ARTICLE 17
MISCELLANEOUS........................................................................50
17.1     Superseding Agreements......................................................50
17.2     Documents and Acts..........................................................50
17.3     Time is of the Essence......................................................50
17.4     Remedies Cumulative.........................................................50
17.5     Currency; Payments..........................................................50
17.6     Governing Law...............................................................51
17.7     Assignment; No Third Party Beneficiary......................................51
17.8     Agreement Negotiated........................................................51
17.9     Waivers, Remedies Cumulative, Amendments, etc...............................51
17.10    Notices    .................................................................52
17.11    Public Announcements........................................................53
17.12    Survival   .................................................................53


EXHIBIT A

CAPITAL CONTRIBUTION AND ADDRESSES OF MEMBERS
AS OF AUGUST 31, 1999................................................................A-1

EXHIBIT B

TAX ALLOCATIONS......................................................................B-1

EXHIBIT C

SCHEDULE OF MANDATORY ADDITIONAL CAPITAL CONTRIBUTIONS...............................C-1

EXHIBIT D

BUSINESS PLAN........................................................................D-1

EXHIBIT E

APPRAISED FAIR MARKET VALUE PROCEDURE................................................E-1

EXHIBIT F

ROLL-UP PROCEDURE....................................................................F-1

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                            OPERATING AGREEMENT
                                    FOR
                       PLAYBOY TV INTERNATIONAL, LLC
                    A DELAWARE LIMITED LIABILITY COMPANY

         This Operating Agreement is made and entered into on August 31,
1999 by and between Playboy Entertainment Group, Inc., a Delaware
corporation ("PEGI"), and Victoria Springs Investments Ltd., a British
Virgin Islands corporation ("VSI"), with reference to the following facts:

         A. The parties have formed Playboy TV International, LLC, a
limited liability company under the laws of the State of Delaware.

         B. The parties desire to adopt and approve an operating agreement
for the Company.

         NOW, THEREFORE, the parties by this Agreement set forth the
operating agreement for the Company under the laws of the State of Delaware
upon the terms and subject to the conditions of this Agreement.

                                 ARTICLE 1
                                DEFINITIONS

         When used in this Agreement, the following terms will have the
meanings set forth below:

         "Acquired Interests" has the meaning set forth in Section 7.2.

         "Act" means the Delaware Limited Liability Company Act, as the
same may be amended from time to time.

         "Adult-Oriented" means, with respect to a Service or program, that
such Service or program is erotic in nature and features nudity.

         "Affiliate" means any Person, directly or indirectly through one
or more intermediaries, controlling of, controlled by, or under common
control with the specified Person. The term "control" (and "controlled" and
"controlling," respectively), as used in the immediately preceding
sentence, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of the
specified Person (whether by the holding of shares or other equity
interests, the possession of voting or contract rights or otherwise).

         "After Tax Basis" means a basis such that any payment (the
"Original Payment") received or deemed to have been received by a Person
(the "recipient") will be supplemented by a further payment to the
recipient so that the sum of the two payments will equal the Original
Payment, after taking into account (x) all taxes that would result from the
receipt or accrual of such payments, if legally required, and (y) any
reduction in taxes that would result from the deduction of the expense
indemnified against, if legally permissible. In the event that the expense
indemnified against is used to reduce taxes by way of amortization or
depreciation, payments made on an After Tax Basis will be refunded in each
taxable year of the recipient in which such expense is deductible in an
amount equal to the sum of (i) the tax savings attributable to such
deduction plus (ii) any reduction in taxes that would result from the
deduction of any amounts described in clause (i) as increased hereby. All
payments hereunder will be calculated on the assumptions that the recipient
was subject to tax at the highest marginal rates of tax applicable to such
class of taxpayer and that it could benefit from the deduction of any
expense at such rate of tax. In the event that a taxing authority will
treat any indemnification payment as not includible in gross income or
disallow any deduction taken into account hereunder, the indemnification
will be recomputed and further payments or refunds made.

         "Agent" has the meaning set forth in Section 13.1.

         "Agreement" means this Operating Agreement, as originally executed
and as amended from time to time in accordance with the terms hereof.

         "Agreement Outline" means that certain "Playboy TV International,
LLC Agreement Outline" entered into by and among PEII, PEGI and Bloomfield,
dated as of December 16, 1998, as amended.

         "Annual Budget" has the meaning set forth in Section 6.2.

         "Bankruptcy" with respect to a Member means: (a) the filing of an
application by a Member for, or such Member's consent to, the appointment
of a trustee, receiver, or custodian of such Member's other assets; (b) the
entry of an order for relief with respect to a Member in proceedings under
the United States Bankruptcy Code, as amended or superseded from time to
time; (c) the making by a Member of a general assignment for the benefit of
creditors; (d) the entry of an order, judgment, or decree by any court of
competent jurisdiction appointing a trustee, receiver, or custodian of the
assets of a Member unless the proceedings and the Person appointed are
dismissed within ninety (90) days; or (e) the failure by a Member generally
to pay such Member's debts as the debts become due within the meaning of
Section 303(h)(1) of the United States Bankruptcy Code, as determined by
the Bankruptcy Court, or the admission in writing of such Member's
inability to pay its debts as they become due.

         "Bloomfield" means Bloomfield Mercantile, Inc., a Panamanian
company and the assignor of its rights under the Agreement Outline to VSI.

         "Business Plan" has the meaning set forth in Section 6.1.

         "Capital Account" means with respect to any Member the capital
account that the Company establishes and maintains for such Member pursuant
to Section 3.6 and Article 1 of Exhibit B.

         "Capital Contribution" means the total value of cash and fair
market value of property (including promissory notes or other obligation to
contribute cash or property) contributed and/or services rendered or to be
rendered to the Company by Members.

         "Certificate" means the Certificate of Formation for the Company
originally filed with the Delaware Secretary of State and as amended from
time to time.

         "Channels" mean the television channels operated by the Company or
its subsidiaries, now or in the future (each, a "Channel").

         "Claim" has the meaning set forth in Section 15.2.

         "Code" means the Internal Revenue Code of 1986, as amended from
time to time, the provisions of succeeding law, and to the extent
applicable, the Treasury Regulations.

         "Company" means Playboy TV International, LLC, a Delaware limited
liability company.

         "Corporate Income Taxes" means, with respect to any entity, such
entity's United States Federal and State income taxes and franchise taxes
(however denominated) based on such entity's actual net earnings or any
similar taxes (however denominated) payable by such entity to any
jurisdiction based on such entity's actual net earnings, it being agreed
that any taxes (however denominated) required to be withheld by any
jurisdiction in order to permit the remittance of monies from any such
jurisdiction will not be deemed to be a tax based on the actual net
earnings of such entity.

         "Corporations Code" means the Delaware General Corporation Law, as
amended from time to time, and the provisions of any succeeding law.

         "Danish Companies" means SEI 2 and SEI 3.

         "Defaulting Member" has the meaning set forth in Section 3.4.1.

         "Director" has the meaning set forth in Section 5.2.1.

         "Disassociation Event" means, with respect to any Member, the
Bankruptcy or dissolution of such Member.

         "Dissolution Event" has the meaning set forth in Section 12.2.

         "Distributable Cash" means the amount of cash that the Management
Committee deems available for distribution to the Members, taking into
account all debts, liabilities and obligations of the Company then due and
amounts that the Management Committee deems necessary to place into
reserves for customary and usual claims with respect to the Company's
business and for future operating needs of the Company.

         "Due Diligence" means the right granted to Bloomfield in the
Agreement Outline to investigate matters relevant to the transactions
contemplated in the Agreement Outline.

         "Economic Interest" means a Member's share of one or more of the
Company's Net Income, Net Losses, and distributions of the Company's assets
pursuant to this Agreement and the Act, but will not include any other
rights of a Member, including, but not limited to, the right to vote or
participate in the management, or except as provided in Section 18-305 of
the Act, any right to information concerning the business and affairs, of
the Company.

         "Equity Matching Right" has the meaning set forth in Section
9.2.3.

         "Existing Channel Entities" has the meaning set forth in Section
6.4.2.

         "Existing Library Programs" has the meaning set forth in the
Program Supply Agreement.

         "Fair Market Value" with respect to the Company or to any asset
means the value determined pursuant to Exhibit E.

         "Final First Business Plan" has the meaning set forth in Section
6.1.1.

         "Fiscal Year" means the Company's fiscal year, which will be the
calendar year.

         "Former Member" has the meaning set forth in Section 10.1.

         "Former Member's Interest" has the meaning set forth in Section
10.1.

         "Founders' Price" as of a specified date means, with respect to
the price per 1% Percentage Interest, an amount equal to the sum of PEGI's
and VSI's Capital Contributions through and including such date, divided by
100.

         "Funding Date" means the date which is ten (10) business days
after this Agreement is executed.

         "Funding Side Letter" means the letter agreement of even date
herewith among PEGI, VSI, PTVI, PTVLA, the German Venture and White Oak
Enterprises Ltd. relating to the payment of amounts with respect to
programming and trademark license fees relating to PTVLA, the German
Venture and White Oak Enterprises Ltd. for periods ending on June 30, 1999
and amounts advanced to the U.K. Venture after July 1, 1999 and loaned to
the U.K. Venture before March 31, 1999.

         "German Venture" means Playboy TV - GmbH Germany.

         "Guaranty" means the Guaranty by Hampstead of the obligations
hereunder of VSI, executed concurrently herewith.

         "Hampstead" means Hampstead Management Company Ltd., a British
Virgin Islands corporation.

         "Imagen" means Imagen Satelital, S.A., a corporation formed under
the laws of Argentina.

         "Indemnified Parties" has the meaning set forth in Section 15.2.

         "Indemnifying Party" has the meaning set forth in Section 15.2.

         "Independent Directors" has the meaning set forth in Section
5.2.1.

         "Japan Venture" means The Playboy Channel Japan, Inc., a Japanese
corporation.

         "Licensor" means the licensor under either the Program Supply
Agreement or under the Trademark License Agreement, as the context
dictates.

         "Lifford" means Lifford International Co. Ltd., an International
business company incorporated under the laws of the British Virgin Islands.

         "Local Partner" has the meaning set forth in Section 6.4.5.

         "Majority Interest" means Percentage Interests of one or more
Members that taken together exceed fifty percent (50%) of the aggregate of
all Percentage Interests.

         "Management Committee" has the meaning set forth in Section 5.1.1.

         "Managers" means the Managers of the Company pursuant to Section
18-402 of the Act.

         "Mandatory Additional Capital Contributions" has the meaning set
forth in Section 3.3.2.

         "Mandatory Additional Cash Contribution" has the meaning set forth
in Section 3.3.2.

         "Mandatory Additional Equity Contributions" has the meaning set
forth in Section 3.3.1.

         "Matching Right" has the meaning set forth in Section 9.1.2.

         "Member" means each Person who (a) is an initial signatory to this
Agreement or has been admitted to the Company as a Member in accordance
with this Agreement and (b) has not resigned, withdrawn, been expelled or
dissolved.

         "Membership Interest" means a Member's entire interest in the
Company including the Member's Economic Interest, the right to vote on or
participate in the management, and the right to receive information
concerning the business and affairs, of the Company.

         "Memorandum of Agreement" means that certain Memorandum of
Agreement entered into by and between PEGI and Tohokushinsha Film
Corporation dated as of July 31, 1995, as amended.

         "Net Income" and "Net Losses" have the meanings set forth in
Article 2 of Exhibit B hereto.

         "New Venus" has the meaning set forth in Section 6.4.8(a).

         "New Venus Territory" means Mexico and each country comprising
Central America, South America and the Caribbean Basin. "Caribbean Basin"
means the following territories, and specifically excludes Guadeloupe,
Martinique, and The Netherlands Antilles: Anguilla, Antigua and Barbuda,
Aruba, Barbados, Bermuda, The British Virgin Islands, The Cayman Islands,
Cuba, Dominica, Dominican Republic, Grenada, Haiti, Jamaica, Montserrat,
Puerto Rico, St. Kitts & Nevis, St. Lucia, St. Vincent and the Grenadines,
Trinidad and Tobago, and the Turks, Caicos Islands, and the U.S. Virgin
Islands.

         "Non-Independent Director" means any Director who is not an
Independent Director

         "Offered Asset" has the meaning set forth in Section 9.2.3.

         "Offered Interest" has the meaning set forth in Section 9.1.1.

         "Offered Terms" has the meaning set forth in Section 9.1.2.

         "Option Expiration Date" has the meaning set forth in Section
9.6.1.

         "Option Percentage" has the meaning set forth in Section 9.6.

         "Optional Additional Capital Contribution" has the meaning set
forth in Section 3.5.

         "PEGI" means Playboy Entertainment Group, Inc., a Delaware
corporation.

         "PEGI Directors" has the meaning set forth in Section 5.2.1.

         "PEGI Parent" has the meaning set forth in Section 9.2.3.

         "PEI" means Playboy Enterprises, Inc., a Delaware corporation and
the ultimate parent corporation of PEGI.

         "PEII" means Playboy Enterprises International, Inc., a Delaware
corporation and the direct parent corporation of PEGI.

         "Percentage Interest" means the percentage of a Member set forth
opposite the name of such Member under the column "Member's Percentage
Interest" in Exhibit A hereto, as such percentage may be adjusted from time
to time pursuant to the terms of this Agreement.

         "Person" means an individual, general partnership, limited
partnership, limited liability company, corporation, trust, estate, real
estate investment trust, association or any other entity.

         "Playboy TV Lite" has the meaning set forth in Section 6.4.7.

         "President" means the President of the Company from time to time.

         "Program Supply Agreement" means the Program Supply Agreement
between PEGI and the Company, executed concurrently herewith.

         "Proposed Partner" has the meaning set forth in Section 6.4.5(a).

         "Proposed Terms" has the meaning set forth in Section 9.2.3.

         "PTVH" means Playboy TV Holdings, LLC, a California limited
liability company.

         "PTVLA" means Playboy TV-Latin America, LLC, a California limited
liability company.

         "PTVLA/I" has the meaning set forth in Section 3.3.1.

         "PTV U.S." means PTV U.S., LLC, a Delaware limited liability
company.

         "Reference Rate" means the reference rate as set forth from time
to time by BankAmerica.

         "Related Documents" means this Agreement, the Trademark License
Agreement, the Program Supply Agreement, the Stock Purchase Agreements, and
the Guaranty.

         "Release" means the Termination of Guaranty by and among PEI,
PEGI, PTVLA and Venevision International, Inc., a Florida corporation,
executed concurrently herewith.

         "Remaining Members" has the meaning set forth in Section 10.1.

         "Remediable Breach" has the meaning set forth in Section
12.2.2(b).

         "Rights Acquisition Fee" has the meaning set forth in Section
7.1.1.

         "Securities Act" has the meaning set forth in Section 15.1.6.

         "SEI 2" means SEI 2 ApS, a company formed under the laws of
Denmark.

         "SEI 3" means SEI 3 ApS, a company formed under the laws of
Denmark.

         "Selling Member" has the meaning set forth in Section 9.1.2.

         "Services" means the operation of television channels under the
brand names "Playboy," "Spice" and "AdulTVision" (and variations thereof
permitted under the Trademark License Agreement) in the Territory.

         "Share Purchase Agreement" means that certain Share Purchase
Agreement dated as of November 26, 1998, by and among Playboy TV
U.K./Benelux Limited, PEGI, PEI, Continental Shelf 16 Limited, Flextech
(1992) Limited, British Sky Limited and Sky Ventures Limited, as amended.

         "Southern Cone" means the countries of Argentina, Chile, Peru,
Bolivia, Paraguay, Uruguay and their territories and possessions.

         "Stock Purchase Agreements" means, collectively, (i) the Stock
Purchase Agreement entered into by and between PEGI and the Company as of
the date hereof for the purchase of PEGI's interest in the U.K. Venture
(ii) the Stock Purchase Agreement entered into by and between PEGI and the
Company as of the date hereof for the purchase of PEGI's interest in the
Japan Venture; (iii) the Stock Purchase Agreement entered into by and
between PEGI and the Company for the purchase of PEGI's interest in SEI 2;
and (iv) the Stock Purchase Agreement entered into by and between PEGI and
the Company for the purchase of PEGI's interest in SEI 3.

         "Supplemental Programs" has the meaning set forth in Section
6.4.6.

         "Tax Matters Member" means VSI or such Member's successor as
designated pursuant to Section 11.8.

         "Term" has the meaning set forth in Section 12.1.

         "Territory" means the World, except for the United States and
Canada and their territories and possessions. For certain programs, the
Territory will exclude Bermuda, as set forth in the Program Supply
Agreement.

         "Third Party Buyer" has the meaning set forth in Section 9.1.2.

         "Trademark License Agreement" means the Trademark License
Agreement, to be executed concurrently herewith, between PEII and the
Company relating to the license of certain trademarks.

         "Transfer" has the meaning set forth in Section 9.1.1.

         "Transition Period" has the meaning set forth in Section 6.4.1.

         "Treasury Regulations" has the meaning set forth in Exhibit B.

         "Troy" means Troy Limited, a Bahamian company.

         "U.K. Venture" means Home Video Channel Limited and its subsidiary
Playboy TV U.K./Benelux, Limited, each a company organized under the laws
of England and Wales.

         "US Distribution Agreement" means that certain Distribution
Agreement to be entered into between PEGI and PTV U.S.

         "U.S. Taxable Activity" has the meaning set forth in Section
6.4.9.

         "Venus" means that certain Adult-Oriented television programming
service owned and operated by Imagen, primarily in Argentina.

         "VSI Directors" has the meaning set forth in Section 5.2.1.

         "Walk Away Notice" means that certain letter from Cisneros
Television Group (on behalf of Bloomfield) to PEGI dated February 12, 1999,
in which Bloomfield exercised its Walk Away Right, as defined in the
Agreement Outline.

         "Wallpaper" has the meaning set forth in the Program Supply
Agreement.

         "Year 1" means the 12-month period commencing on the Funding Date;
"Year 2" means the 12-month period commencing on the first anniversary of
the Funding Date; and subsequent years will be identified in analogous
fashion.

                                 ARTICLE 2
                           ORGANIZATIONAL MATTERS

         2.1 Formation. Pursuant to the Act, the Members formed a limited
liability company under the laws of the State of Delaware by causing
Christine Tuthill, an authorized person, to file the Certificate with the
Delaware Secretary of State. The Members ratify and confirm the filing the
Certificate. The rights and liabilities of the Members will be determined
pursuant to the Act and this Agreement. To the extent that the rights or
obligations of any Member are different by reason of any provision of this
Agreement than they would be in the absence of such provision, this
Agreement will, to the extent permitted by the Act, control.

         2.2 Name. The name of the Company will be "Playboy TV
International, LLC." The business of the Company may be conducted under
such name or, upon compliance with applicable laws, any other name
determined by the Management Committee. The President or another designated
officer of the Company will file any fictitious name certificates and
similar filings, and any amendments thereto, that the Management Committee
considers appropriate or advisable. Notwithstanding the foregoing, if PEGI
is no longer a Member, at PEGI's request the Certificate will be amended to
change the name of the Company to a name that does not contain or utilize
any trademarks licensed under the Trademark License Agreement or any
confusingly similar designation or mark.

         2.3 Term. The term of this Agreement will be co-terminus with the
period of duration of the Company provided in the Certificate, unless
extended or sooner terminated as hereinafter provided.

         2.4 Office and Agent. The Company will continuously maintain an
office and registered agent in the State of Delaware as required by the
Act. The principal office of the Company will be as set forth in Section
5.9.1 or such other location as the Management Committee may determine. The
Company also may have such offices, anywhere within and without the State
of Delaware, as the Management Committee from time to time may determine,
or the business of the Company may require. The registered agent will be as
stated in the Certificate or as otherwise determined by the Management
Committee.

         2.5 Addresses of the Members, the Managers, and the Directors. The
respective addresses of the Members are set forth on Exhibit A, which
exhibit will be modified from time to time to reflect changes therein. The
respective addresses of the Managers and the Directors will be maintained
in the books of the Company and made available to any Member, on request.

         2.6 Purpose of Company. The purpose of the Company is to engage in
any lawful activity for which a limited liability company may be organized
under the Act. Notwithstanding the foregoing, without the majority approval
of the Management Committee (and subject to the veto rights of the VSI
Directors and the PEGI Directors under Section 5.1.3), the Company will not
engage in any business other than the business of (i) owning, operating and
distributing the Services in the Territory, (ii) licensing programming to
third parties; and (iii) and such other activities which are ancillary and
related thereto as may be necessary, advisable, or appropriate in the
reasonable opinion of the Management Committee, to further the foregoing
business, including but not limited to the promotion of the Services and
related marketing, distribution and advertising activities.

                                 ARTICLE 3
                           CAPITAL CONTRIBUTIONS

         3.1 Initial Capital Contribution. On the Funding Date, each Member
will contribute such amount as is set forth on Exhibit A as its initial
Capital Contribution to be paid on such date. Both VSI's and PEGI's initial
Capital Contributions will be made in cash. Exhibit A will be further
revised from time to time to reflect any additional contributions made in
accordance with this Agreement.

         3.2 Additional Capital Contributions. Except as specifically
provided in Section 3.3, no Member will be required to make any additional
Capital Contributions.

         3.3 Mandatory Additional Capital Contributions.

               3.3.1 Equity Contributions. VSI will use its reasonable best
efforts to acquire Lifford's interest in PTVLA and Bloomfield's interest in
the German Venture as soon as reasonably practicable. Promptly after the
date of such acquisitions, both VSI and PEGI will contribute to the Company
their equity interests (or those interests belonging to PEGI Affiliates or
VSI Affiliates) in PTVLA and the German Venture at book value (the
"Mandatory Additional Equity Contributions"); provided, however, that VSI
will, until the effective date of the merger of PTVLA into Playboy TV-Latin
America/Iberia, LLC, a Delaware limited liability company ("PTVLA/I"),
retain a 1% membership interest in PTVLA. As of the effective date of such
merger, VSI will contribute such 1% membership interest in PTVLA/I to the
Company.

               3.3.2 Funding Contributions. If necessary to cover the
deficits of the Company, each Member will contribute additional capital pro
rata in accordance with their respective Percentage Interests, with such
capital calls subject to the aggregate maximum (including the initial
Capital Contributions described in Section 3.1) of One Hundred Million
Dollars ($100,000,000) (each, a "Mandatory Additional Cash Contribution";
and, together with the Mandatory Additional Equity Contributions, the
"Mandatory Additional Capital Contributions"). A schedule of anticipated
Mandatory Additional Cash Contributions for the first eight (8) quarters of
the Company's operation, which contributions are expected to occur
quarterly at the beginning of each quarter, will be attached hereto as
Exhibit C upon completion of the Final First Business Plan. Subsequent
Mandatory Additional Cash Contributions will be made as set forth in the
Business Plan, as in effect from time to time. The Company will give
written notice to each Member of each Mandatory Additional Capital
Contribution at least fifteen (15) business days prior to the date due,
stating the amount owed by each Member and the date on which such amount is
due.

         3.4 Failure to Make Mandatory Additional Capital Contributions.

               3.4.1 Notice. If a Member does not timely contribute a
Mandatory Additional Capital Contribution when required, that Member will
be in default under this Agreement (a "Defaulting Member"). In such event,
the Company will send the Defaulting Member written notice of such default,
giving the Defaulting Member fifteen (15) days from the date such notice is
given to contribute the entire amount of the Mandatory Additional Capital
Contribution.

               3.4.2 Remedies. If the Defaulting Member does not contribute
the Mandatory Additional Capital Contribution to the Company within the
periods set forth below, the Management Committee, acting for all purposes
of this Section 3.4.2 without the vote of the Directors appointed by the
Defaulting Member, (i.e., acting by a Majority Interest of the members of
the Management Committee appointed by the non-Defaulting Members) may elect
any one or more of the remedies set forth below. Notwithstanding the
foregoing, in no event will the Management Committee be entitled to elect
more than one remedy if the effect of doing so would be duplicative.

               (a) Apply Payments. If PEGI (or an Affiliate of PEGI which
is then a Member) is the Defaulting Member, the Management Committee may
elect to withhold the amount that the Defaulting Member has failed to
contribute from amounts otherwise payable to PEGI (or an Affiliate of PEGI)
with respect to the Rights Acquisition Fee or under the Program Supply
Agreement or the Trademark License Agreement and to pay such withheld
amount to the Company on behalf of the Defaulting Member. For all purposes
hereunder, the withheld amount will be treated as though it were paid by
the Company to the party entitled to payment thereof and as though the
Defaulting Member made the capital contribution.

               (b) Advance Funds. If the Defaulting Member does not
contribute the Mandatory Additional Capital Contribution within the fifteen
(15) day period following notice from the Company of default, the
Management Committee may elect to permit non-defaulting Members to advance
funds to the Company to cover those amounts that the Defaulting Member
fails to contribute. Amounts that a non-Defaulting Member so advances on
behalf of the Defaulting Member will become a demand loan due and owing
from the Defaulting Member to such non-defaulting Member, bearing interest
at the rate per annum of one hundred fifty (150) basis points above the
Reference Rate as in effect on the date such Mandatory Additional Capital
Contribution was originally due, with such interest being payable monthly.
All cash distributions otherwise distributable to the Defaulting Member
under this Agreement will instead be paid, on the Defaulting Member's
behalf, to the non-Defaulting Members making such advances until such
advances and any accrued but unpaid interest thereon are paid in full. Any
amounts repaid will first be applied to interest and thereafter to
principal. Effective upon a Member becoming a Defaulting Member, such
Member will grant to the non-Defaulting Members who advance funds under
this Section 3.4.2(b) a security interest in its Economic Interest to
secure its obligation to repay such advances and will execute and deliver a
promissory note, security agreement, and such UCC-1 financing statements
and assignments of certificates of membership interest (or other documents
of transfer) in such form as such non-Defaulting Members may reasonably
request.

               (c) Adjust Percentage Interest. If the Defaulting Member
does not, within a further period of ninety (90) days, contribute the
Mandatory Additional Capital Contribution and/or repay in full any advances
made by the non-Defaulting Members, the Member who has made a loan pursuant
to Section 3.4.2(b) may elect to convert all or a portion of such loan
(plus any accrued but unpaid interest thereon) to a Capital Contribution.
Upon such election, the Percentage Interests of the Defaulting Member and
the non-Defaulting Member(s) will be adjusted so that each Member's
Percentage Interest will be a fraction, the numerator of which represents
the amount of such Member's Capital Account and the denominator of which
represents the sum of all Members' Capital Accounts, taking into account
the contribution represented by the conversion of the loan.

               (d) Dissolve. If the Defaulting Member does not contribute
Mandatory Additional Capital Contributions on three (3) occasions, whether
or not consecutive, and the Defaulting Member has failed to cure each such
failure to contribute within the fifteen (15) day period specified in
Section 3.4.1 above, the Management Committee may propose to dissolve the
Company in which event the Company will be wound-up, liquidated and
terminated pursuant to Article 12.

               (e) Purchase Interest. If the Defaulting Member does not
contribute Mandatory Additional Capital Contributions on three (3)
occasions, whether or not consecutive, and the Defaulting Member has failed
to cure each such failure to contribute within the fifteen (15) day period
specified in Section 3.4.1 above, the Management Committee may elect to
permit the Company or the non-Defaulting Members to purchase the Defaulting
Member's entire Membership Interest for the positive balance of such
Member's Capital Account less the total amount owed by such Member to the
Company and non-Defaulting Members in respect of unpaid Mandatory
Additional Capital Contributions or advances by non-Defaulting Members in
respect thereof. Any such purchase of a Member's Percentage Interest will
occur as promptly as practicable following notice of the purchase election
to the Defaulting Member, subject to the receipt of required regulatory
approvals.

               3.4.3 Other Effects.

               (a) No Distributions. A Defaulting Member will have no right
to receive any distributions from the Company until: (i) the principal and
interest of any outstanding loan made by a non-Defaulting Member pursuant
to Section 3.4.2(a) has been repaid; and (ii) to the extent a
non-Defaulting Member elects to convert any such loan to a Capital
Contribution, such non-Defaulting Member has first received distributions
in an amount equal to the amount of such Capital Contribution, plus a
cumulative, compounded return thereon at the rate per annum of one hundred
fifty (150) basis points above the Reference Rate as in effect on the date
such additional capital was contributed. In the event a non-Defaulting
Member receives a distribution of interest on a Capital Contribution
pursuant to clause (ii) of the preceding sentence, the Capital Account of
such non-Defaulting Member will be increased by the amount of such interest
payment.

               (b) No Voting. Except as otherwise provided in this Section
3.4.3(b), if the Management Committee exercises any of the remedies set
forth in paragraphs (d) or (e) of Section 3.4.2, the Defaulting Member
(directly or through the Directors appointed by it) will lose its voting
and approval rights under the Act and this Agreement (unless the Defaulting
Member cures the default and the non-Defaulting Member permits such cure).
Notwithstanding the foregoing, the Directors appointed by the Defaulting
Member will retain their veto rights (to the extent such veto rights were
continuing prior to the exercise of such remedy) with respect to the
matters described in Sections 5.1.4(b) and Section 5.1.4(c). No reduction
in a Member's Membership Interest, pursuant to Section 3.4.2(b) will affect
any of the Defaulting Member's voting or approval rights under this
Agreement (other than to the extent such reduction reduces the voting power
of the Defaulting Member's Directors pursuant to Section 5.2.4).

               (c) No Participation in Management. Except as provided in
Section 3.4.3(b), if the Management Committee exercises any of the remedies
set forth in paragraphs (d) or (e) of Section 3.4.2, the Defaulting Member
will lose its ability (whether as a Member or through the Directors
appointed by it) to actively participate in the management and operations
of the Company until the completion of dissolution and the winding up of
the affairs of the Company, or such time as the Defaulting Member cures (if
the non-Defaulting member thereafter permits the Defaulting Member to cure)
the default or its Percentage Interest is purchased.

               3.4.4 Remedies Reasonable. Each Member acknowledges and
agrees that the remedies described in this Section 3.4 bear a reasonable
relationship to the damages that the Members estimate may be suffered by
the Company and the non-Defaulting Members by reason of the failure of a
Defaulting Member to make Mandatory Additional Capital Contributions and,
subject to the last sentence of the first paragraph of Section 3.4.2, the
election of any or all of the above-described remedies is not unreasonable.

               3.4.5 No Waiver. Subject to the last sentence of the first
paragraph of Section 3.4.2, the election of the Management Committee or of
any non-Defaulting Member to pursue any remedy provided in this Section 3.4
will not be a waiver or limitation of the right of the Management
Committee, the Company or the non-Defaulting Members to pursue an
additional or different remedy available hereunder or of law or equity with
respect to any subsequent default.

         3.5 Optional Additional Capital Contributions. To the extent
approved by the Management Committee (subject to the veto rights of the VSI
Directors and PEGI Directors under Section 5.1.3), from time to time, the
Members may be permitted to make additional Capital Contributions if and to
the extent they so desire, and if the Directors determine that such
additional Capital Contributions are necessary or appropriate for the
conduct of the Company's business, including without limitation, expansion
or diversification (each, an "Optional Additional Capital Contribution").
In that event, the Members will have the opportunity, but not the
obligation, to participate in such Optional Additional Capital
Contributions on a pro rata basis in accordance with their Percentage
Interests. Immediately following such Optional Additional Capital
Contributions, the Percentage Interests will be adjusted to reflect the new
relative proportions of the Capital Accounts of the Members.

         3.6 Capital Accounts. The Company will establish an individual
Capital Account for each Member in accordance with Article 1 of Exhibit B
hereto. If a Member transfers all or a part of its Membership Interest in
accordance with this Agreement, such Member's Capital Account attributable
to the transferred Membership Interest will carry over to the new owner of
such Membership Interest pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(1).

         3.7 No Interest. Except as provided in Section 3.4, no Member will
be entitled to receive any interest on its Capital Contributions.

                                 ARTICLE 4
         ALLOCATIONS OF NET INCOME AND NET LOSSES AND DISTRIBUTIONS

         4.1 Allocations of Net Income and Net Loss. Net Income and Net
Loss will be allocated to the Members in accordance with Article 1 of
Exhibit B.

         4.2 Distribution of Distributable Cash by the Company. Subject to
applicable law and any limitations contained elsewhere in this Agreement,
the Management Committee will cause the Company to distribute Distributable
Cash on a quarterly basis to the Members, which distributions will be made
to the Members in proportion to their Percentage Interests as of the end of
the relevant quarter.

         4.3 Form of Distribution. Except as provided in Section 12.7, a
Member, regardless of the nature of the Member's Capital Contribution, has
no right to demand and receive any distribution from the Company in any
form other than money. No Member may be compelled to accept from the
Company a distribution of any asset in kind in lieu of a proportionate
distribution of money being made to other Members. Except upon a
dissolution and a winding up of the Company, no Member may be compelled to
accept a distribution of any asset in kind.

         4.4 Restriction on Distributions.

               4.4.1 Restriction. No distribution will be made if, after
giving effect to the distribution:

               (a) The Company would not be able to pay its debts as they
become due in the usual course of business.

               (b) The Company's total assets would be less than the sum of
its total liabilities.

               4.4.2 Method of Determination. The Management Committee may
base a determination that a distribution is not prohibited on any of the
following: (i) financial statements prepared on the basis of accounting
practices and principles that are reasonable in the circumstances; (ii) a
fair valuation; or (iii) any other method that is reasonable in the
circumstances.

               Except as provided in Section 18-607(b) of the Act, the
effect of a distribution is measured as of the date the distribution is
authorized if the payment occurs within one hundred twenty (120) days after
the date of authorization, or the date payment is made if it occurs more
than one hundred twenty (120) days of the date of authorization.

               4.4.3 Personal Liability. A Member who receives a
distribution in violation of this Agreement or the Act will be liable to
the Company for the amount of the distribution that exceeds what could have
been distributed without violating this Agreement or the Act. Any Member
who is so liable will be entitled to compel the Company to seek repayment
from each other Member who is so liable.

         4.5 Return of Distributions. Except for distributions made in
violation of the Act or this Agreement, no Member will be obligated to
return any distribution to the Company or pay the amount of any
distribution for the account of the Company or to any creditor of the
Company. The amount of any distribution returned to the Company by a Member
or paid by a Member for the account of the Company or to a creditor of the
Company will be added to the account or accounts from which it was
subtracted when it was distributed to the Member.

                                 ARTICLE 5
                   MANAGEMENT AND CONTROL OF THE COMPANY

         5.1 Managers and the Management Committee.

               5.1.1 Managers. Each Person duly admitted as a Member of the
Company pursuant to this Agreement will be a Manager of the Company until
such Member's Membership Interest has been transferred or terminated or
such Member has withdrawn in accordance with this Agreement. VSI and PEGI
will be the initial Managers of the Company.

               5.1.2 General Scope of Authority. The business and affairs
of the Company will be managed by the Managers through a management
committee consisting of representatives appointed by the Managers, and
through which the Managers will exercise their rights and authority
hereunder (the "Management Committee"). The Management Committee will be
appointed and constituted in the manner provided in Section 5.2 hereof. The
Management Committee will be responsible for all aspects of the operations
and development of the Company and, except as otherwise expressly provided
for in this Agreement, the Management Committee will have exclusive
authority and full discretion with respect to the management of the
business of the Company and will have the exclusive right, power and
authority to cause the Company to do, or cause to be done, all acts and
actions which in its sole judgment are necessary, proper, convenient or
desirable in order to operate and conduct the business of the Company and
to carry out and fulfill the purposes of the Company.

               5.1.3 Voting. Except as provided in Section 5.1.4 and in
Section 5.3, all matters submitted to the Management Committee will be
decided by a majority vote of the Non-Independent Directors. The
Non-Independent Directors will have voting power in proportion to the ratio
of Percentage Interests held by the Manager appointing them. All
Non-Independent Directors appointed by a Manager will collectively exercise
such voting power and each Manager will designate one of its
Non-Independent Directors to vote on behalf of all Non-Independent
Directors appointed by such Manager in the event of a disagreement among
the Non-Independent Directors appointed by such Manager.

               5.1.4 Veto Right. Notwithstanding anything to the contrary
contained in this Agreement: (i) the VSI Directors may (so long as VSI or
any of its Affiliates is a Manager) and the PEGI Directors may (so long as
PEGI or any of its Affiliates is a Manager) veto any decision of the
Management Committee to perform, or cause the Company to perform, any of
the acts or transactions described in subsections (a) and (b) below; and
(ii) the VSI Directors may (so long as VSI and its Affiliates hold, in
aggregate, Percentage Interests equal to at least 10%) and the PEGI
Directors may (so long as PEGI and its Affiliates hold, in aggregate,
Percentage Interests equal to at least 10%) veto any decision of the
Management Committee to perform, or cause the Company to perform, any of
the following acts or transactions:

               (a) any amendment to the Certificate, this Agreement, the
Trademark License Agreement and the Program Supply Agreement;

               (b) any merger or other reorganization of the Company or any
sale of all or substantially all of the assets of the Company;

               (c) the issuance of additional Membership Interests in the
Company or the call for Optional Additional Capital Contributions;

               (d) any distribution by the Company with respect to the
interests therein other than distributions of excess cash (including, but
not limited to, any distribution of non-cash assets);

               (e) the approval of any Company Business Plan or Annual
Budget or of any additions or amendments thereto; provided, however, that
in the event of a Licensor Shortfall (as defined in the Program License
Agreement) the VSI Directors may cause an Annual Budget to be amended to
provide for the production and/or acquisition of sufficient programming to
replace the Licensor Shortfall in a manner reasonably related to the nature
and scope of such Licensor Shortfall without the approval of the PEGI
Directors;

               (f) the Company taking actions that are inconsistent with an
approved Business Plan or Annual Budget, or which are otherwise outside the
ordinary course of business, including but not limited to the incurrence of
indebtedness in excess of the levels contemplated by the applicable
Business Plan or Annual Budget;

               (g) the appointment or dismissal of the President and the
approval of the terms of any employment agreement between the Company and
any senior executive officer;

               (h) the Company entering into any line of business except as
contemplated herein;

               (i) loans by the Company to any Member;

               (j) the Company entering into any transaction with an
Affiliate of any Member (other than the Related Documents, as contemplated
in an approved Business Plan or as provided for in this Agreement);

               (k) except as expressly provided herein, the termination,
dissolution or liquidation of the Company;

               (l) the decision to admit a Local Partner who will acquire
(y) more than a 50% interest in a local venture for the U.K./Benelux
territory or the "GS Territory" or (z) more than a 33% interest in a local
venture for any other region of the Territory (as described in Section
6.4.5);

               (m) the adoption of any different or additional names under
which the Company conducts business, other than the name of any "hot
channel" operated by the Company; or

               (n) the location of the Company's principal offices, if
other than as set forth in Section 5.8.1.

         Notwithstanding the foregoing, if PEGI has not acquired fifty
percent (50%) of the Percentage Interests in the Company prior to the
Option Expiration Date, then thereafter it may not exercise its veto right
with respect to a matter described in clause (h) above.

         5.2 Members of the Management Committee; Appointment and Removal.

               5.2.1 For so long as VSI (or its Affiliates) and PEGI (or
its Affiliates) are the only Members and Managers, the Management Committee
will consist of nine members: three Non-Independent Directors selected by
VSI (the "VSI Directors"), three Non-Independent Directors selected by PEGI
(the "PEGI Directors") and three other Directors (each, an "Independent
Director") selected in accordance with the following sentence. VSI and PEGI
will each select one Independent Director, and the two Independent
Directors will select a third Independent Director; provided, however, that
such third Independent Director will be mutually acceptable to both VSI and
PEGI. To qualify as an Independent Director, a person must have, and
continue to have, no material business, financial or familial relationship
with either VSI or PEGI or their Affiliates or with any officer or
executive thereof. Each of VSI and PEGI will identify the Directors it is
to appoint prior to the Funding Date. Each member of the Management
Committee is referred to as a "Director", and, collectively, as the
"Directors." A duly-admitted Manager will have the right to appoint at
least one Non-Independent Director (or such greater number as the
Management Committee may determine); provided, however, that no group of
Affiliated Members will have the right to appoint more than that number of
Directors that could have been appointed by that group's initial holder of
the Membership Interests. A Director need not be a resident of the State of
Delaware or a citizen of the United States. To the fullest extent permitted
by law, no Director will be deemed an agent or sub-agent of the Company.
Each Manager, by execution of this Agreement, agrees to, consents to, and
acknowledges the delegation of powers and authority to such Directors and
the Management Committee, and to the actions and decisions of such
Directors and the Management Committee within the scope of such Director's
and Management Committee's authority as provided herein. No Director will
have the authority in his capacity as a Director to enter into any
transaction on behalf of the Company. The Independent Directors will
receive compensation as determined from time to time by the Management
Committee and as reflected in the applicable Annual Budget.

               (a) At such time as either the VSI Directors or the PEGI
Directors are no longer entitled to exercise a veto on matters that may be
determined by the Independent Directors pursuant to Section 5.3, the
Independent Directors will be dismissed from the Management Committee.

               5.2.2 Each Manager will have the absolute and unconditional
right from time to time to designate the Directors appointed by it by
delivery of written notice to the Members. A Director may be removed with
or without cause at the sole discretion of the Manager that appointed that
Director by delivery of written notice to the other Manager(s). A vacancy
on the Management Committee may only be filled by the Manager that
originally appointed the Director whose death, disability, removal or
resignation created such vacancy, or, in the case of the third Independent
Director, by the other two Independent Directors. Each Manager will also
have the right to appoint alternates to each Director designated by such
Manager by designating the name of such alternates in a written notice to
the other Manager(s). In case of the absence of a Director, any individual
designated as an alternate for that Director will have the right and power
to exercise all rights and powers of the absent Director.

         5.3 Matters Determined by Independent Directors. If the VSI
Directors or the PEGI Directors exercise their veto power under Section
5.1.3 with respect to * * * such Directors will negotiate in good faith for
a period of fifteen (15) business days in order to resolve the deadlock. If
such negotiations are not successful, then such deadlocked matter will be ***

         5.4 Meetings of the Management Committee.

               5.4.1 Regular quarterly meetings of the Management Committee
will be held without call or notice at such time as will from time to time
be fixed by standing resolution of the Management Committee. Special
meetings of the Management Committee may be held at any time whenever
called by any Director. Written notice of a special meeting of the
Management Committee will be given to the other Directors by the Director
calling the meeting at least three (3) business days before such special
meeting, and such notice will include a proposed agenda for the meeting.
Only matters on the proposed agenda may be put to a vote at such special
meeting. Special meetings may only take place at the Company's principal
offices or in Los Angeles.

               5.4.2 For so long as each of VSI (with its Affiliates, in
aggregate) and PEGI (with its Affiliates, in aggregate) each hold
Percentage Interests equal to at least 10%, the location of the Company's
quarterly Management Committee meetings will rotate among the Company's
offices in Miami Beach, PEGI's headquarters in Beverly Hills, PEI's
headquarters in Chicago and an international location to be determined by
the Management Committee. The presence of Directors representing a Majority
Interest at a duly noticed meeting of the Management Committee will
constitute a quorum for the transaction of business; provided that to
transact business with respect to which the Directors appointed by any
Member have a veto right pursuant to Section 5.1.4, at least one such
Director must be present for a quorum to exist. Directors may participate
in a meeting through the use of conference telephone or similar
communications equipment, and such Directors will be considered present in
person as long as all Directors participating in such meeting can hear one
another.

               5.4.3 Every act of the Management Committee taken at any
meeting of the Management Committee, however called and noticed or wherever
held, will be as valid as though made or performed at a meeting duly held
after regular call and notice, if a quorum is present and if, either before
or after the meeting, each of the Managers not present or who, though
present, has prior to the meeting or at its commencement, protested the
lack of proper notice to such meeting, signs a written waiver of notice or
a written consent to holding such meeting or approval of the minutes
thereof.

               5.4.4 For so long as VSI and PEGI are the only Managers, any
action required or permitted to be taken at any meeting of the Management
Committee may be taken without a meeting if one VSI Director and one PEGI
Director consent thereto in writing, and the writing is filed with the
minutes of proceedings of the Management Committee.

         5.5 Delegation of Authority; President and Other Officers.

               5.5.1 General Power to Delegate Authority. The Management
Committee may delegate the right, power and authority to manage the day-to-day
business, affairs, operations and activities of the Company to the President
(which authority the President may delegate to other Persons), subject to the
ultimate direction, control and supervision of the Management Committee;
provided, however, that no Person will be authorized to take any action or
engage in any activity subject to the veto right of the VSI Directors and PEGI
Directors under Section 5.1.4 or where the approval of a specified Person is
required, without first obtaining the required approvals.

               5.5.2 The President. The Managers intend that the Management
Committee delegate the management of the day-to-day business, affairs,
operations and activities of the Company to a President. The President will be
the most senior executive of the Company and will report directly to the
Management Committee. Subject to the supervisory powers of the Management
Committee, the President will have general and active management of the
business of the Company and will see that all orders and resolutions of the
Management Committee are carried into effect. The President will have the
power to execute any agreements and instruments on behalf of the Company,
except where the execution thereof will be expressly reserved by the
Management Committee or delegated by the Management Committee or the President
to some other officer or agent of the Company. The President will have such
other powers and duties as may be prescribed by the Management Committee or
this Agreement.

               5.5.3 Duties of the President. Unless and until any of the
following duties are delegated to another officer by the Management
Committee, the President's duties will include: preparing the Business Plan
and Annual Budget and presenting them to the Members for approval at least
ninety (90) days prior to commencement of the applicable Fiscal Year;
supervision of all key functions of the Company (including launching and
managing Channels; sales and marketing; program acquisition and production;
strategic planning; accounting and financial planning (including
responsibility for the preparation of business plans and annual budgets);
and legal and business affairs); the ability to hire and fire employees
(except employees with compensation packages worth more than $200,000 per
year, in which case such hiring or termination must be approved by the
Management Committee); expending funds in accordance with the approved
Business Plan and Annual Budgets; reporting to the Management Committee on
a regular basis regarding the operations of the Company; and responding to
reasonable requests for information from any VSI Director or PEGI Director.

               5.5.4 Additional Officers. The Company may have such other
officers with such powers and duties as the Management Committee will
determine from time to time.

               5.5.5 Officers Serve at the Pleasure of the Management
Committee. Subject to whatever rights an officer may have under a contract
of employment with the Company, all officers of the Company will serve at
the pleasure of the Management Committee.

         5.6 Interested Party Transactions.

               5.6.1 Approval. Except for transactions provided for in the
Related Documents, the Company will only engage in a transaction with a
Member or any Affiliate of a Member if the transaction is on terms and
conditions fair and reasonable to the Company and at least as favorable to
the Company as those generally available in a similar transaction between
parties operating at arm's length and is approved by the Management
Committee. A transaction will conclusively be deemed to have met the above
requirements if, after full disclosure, the transaction is unanimously
approved by the Non-Independent Directors. Each Member agrees to disclose
to the Management Committee the nature and extent of the interest of such
Member and its Affiliates in any transaction to be acted on by the
Management Committee pursuant to this Section 5.6.1 prior to such action.
If a Member or an Affiliate thereof engages in a transaction with the
Company, such Member and/or such Affiliate will have the same rights and
obligations with respect thereto as would be the case if a Person who is
not a Member were the other party to such transaction.

               5.6.2 Termination and Remedies. With respect to any contract
between the Company and a Member or any Affiliate of a Member, including
but not limited to every Related Document, the Directors appointed by the
Managers not having an interest in such contract (other than as a Member)
will have the right, acting by majority vote, to determine what actions, if
any, should be taken upon the other party's default and to cause the
Company to exercise any and all remedies it may have under such contract or
applicable law, including without limitation, the termination of such
contract.

         5.7 Performance of Duties; Liability of Managers; Liability of
Directors.

               5.7.1 A Manager will not be liable to the Company or to any
Member for any loss or damage sustained by the Company or any Member,
unless the loss or damage will have been the result of fraud, deceit, gross
negligence, reckless or intentional misconduct, or a knowing violation of
law by the Manager. The Managers will perform their managerial duties in
good faith, in a manner they reasonably believe to be in the best interests
of the Company and its Members, and with such care, including reasonable
inquiry, as an ordinarily prudent person in a like position would use under
similar circumstances. A Manager who so performs the duties of Manager will
not have any liability by reason of being or having been a Manager of the
Company.

               5.7.2 A Director will not be liable to the Company or to any
Member for any loss or damage sustained by the Company or any Member,
unless the loss or damage will have been the result of fraud, deceit, gross
negligence, reckless or intentional misconduct, or a knowing violation of
law by the Director. The Directors will perform their duties in good faith,
in a manner they reasonably believe to be in the best interests of the
Company and its Members, and with such care, including reasonable inquiry,
as an ordinarily prudent person in a like position would use under similar
circumstances. A Director who so performs the duties of Director will not
have any liability by reason of being or having been a Director of the
Company.

         5.8 Offices and Facilities; Staff.

               5.8.1 Facilities/Company Location. The Company will maintain
offices located either with VSI in the Cisneros Television Group office in
Miami Beach or at another location near such office, except for any
regional sales, marketing, production, technical, or management functions
that are appropriately located in one or more places in the Territory. In
the event that the Company's headquarters are located within VSI's offices
or the offices of an Affiliate of VSI, VSI (or its Affiliate) will charge
the Company for the expenses incurred by VSI (or its Affiliate) on account
of the Company's rent and occupancy, determined on a reasonable allocation
basis.

         5.9 Insurance. The Managers will cause the Company to secure
errors and omissions and other customary liability insurance for the
Company covering exhibitions of programming by the Company, which insurance
policies will meet customary standards, and will maintain liability and
other insurance covering the activities of the Company consistent with good
business customs and practices in the Territory and the other locations in
which the Company conducts business. All insurance policies will name each
Member and their respective Affiliates, the Managers, the Directors, the
President and any other officers as named insureds.

                                 ARTICLE 6
          BUSINESS PLANS AND ANNUAL BUDGETS; OPERATION OF COMPANY

         6.1 The Business Plan.

               6.1.1 The First Business Plan. The Management Committee and
the President will conduct the business of the Company in accordance with
the Business Plans and Annual Budgets (each as defined below). Attached
hereto as Exhibit D is the first Business Plan of the Company (as modified
pursuant to the next two sentences and together with additional years added
thereto pursuant to Section 6.1.2, the "Business Plan"). The Members
acknowledge that the first Business Plan needs to be adjusted to reflect
previously agreed (i) changes in assumptions regarding launch dates; (ii)
amounts relating to the final annual budget for 1999 (including the matters
described in the Funding Side Letter); and (iii) changes in assumptions
regarding third party sales for 1999 and 2000 (as so adjusted, the "Final
First Business Plan"). The Members agree to cause the first Business Plan
to be adjusted prior to the Funding Date. The Business Plan is the
financial model for the operation of the Company and the Services. The
Members have, by the execution of this Agreement, approved the first
Business Plan (subject to the preceding two sentences), the Annual Budget
for 1999 and the Capital Contributions contemplated to be made thereunder.

               6.1.2 Additions to Business Plan. At least ninety (90) days
prior to the end of the first year of the Company and at least ninety (90)
days prior to the end of every succeeding year of the Term thereafter, the
President will cause the Company to prepare an additional year of the
Business Plan for review and approval by the Management Committee such that
the Business Plan continues to have five years of coverage throughout the
Term. Such additions to the Business Plan will be substantially similar to
the first Business Plan in scope and detail, will include such additional
information relating to the operating and capital forecasts and budgets of
the Company as the Management Committee may direct from time to time, and
will be accompanied by a report and assessment of the Company's performance
under the preceding five year period of the Business Plan.

         6.2 Annual Budgets. The Business Plan will be updated annually by
a budget (each, an "Annual Budget") for the coming Fiscal Year. The
President will cause the Company to prepare the Annual Budget and present
it to the Management Committee for approval at least ninety (90) days prior
to commencement of the applicable Fiscal Year. The approved Annual Budget
for a given Fiscal Year will supersede the data contained in the Business
Plan for that Fiscal Year. The Annual Budget for fiscal 1999 is included in
the Business Plan attached as Exhibit D. Each new Annual Budget will be
substantially similar to the 1999 Annual Budget in scope and detail, and
will include a projection of required capital contributions for such Fiscal
Year, if any, and such additional information relating to the operating and
capital forecasts and budgets of the Company as the Management Committee
may direct from time to time. Each Annual Budget will be accompanied by a
report and assessment of the Company's performance under the preceding
Annual Budget.

         6.3 Carryover Plan or Budget. In the event the PEGI Directors or
the VSI Directors * * *, the Company will continue to operate in accordance
with the most recently approved Business Plan or Annual Budget, as the case
may be, until * * *

         6.4 Operation of Company.

               6.4.1 Operations During Transition Period. The parties
anticipate that the Company will require a period of approximately six (6)
months after the Funding Date (the "Transition Period") to arrange
appropriate office space and other facilities and services, hire staff and
otherwise be prepared to fully handle the Company's business. During the
Transition Period, PEGI will provide various services to facilitate the
Company's operations (including, but not limited to, program sales, the
servicing of program license agreements and the collection of license fees)
on the Company's behalf and at the Company's direction. Such services will
be at a level which is consistent with the level of services that PEGI has
historically provided for its international operations. The Company will
reimburse PEGI for any direct expenses reasonably incurred in performing
such services during the Transition Period. To the extent VSI or any of its
Affiliates perform services for the Company during the Transition Period,
the Company will also reimburse the entity providing such services for any
direct expenses incurred in performing such services.

               6.4.2 Absorption of Existing Channels. As set forth in
Section 3.1, PEGI and VSI will contribute to the Company their equity
interests in PTVLA and the German Venture, and as set forth in Section 7.2,
the Company will purchase PEGI's interests in the U.K. Venture and the
Japan Venture. (PTVLA, the German Venture, the U.K. Venture and the Japan
Venture will be collectively referred to as the "Existing Channel
Entities").

               6.4.3 German Venture Expenses. Notwithstanding the
Percentage Interests of the Members, VSI and PEGI will each pay the
formation expenses of the German Venture (including the costs associated
with obtaining the necessary operating licenses) on a 50/50 basis.

               6.4.4 Services Provided by PEGI. The Company will be
entitled to purchase from PEGI specific services, as the Company may
determine, which PEGI routinely performs for itself (such as creative
services, the creation of on-air promos, and residual accounting) at PEGI's
actual direct cost, without mark-up.

               6.4.5 Creation of Local Ventures and Provision for Local
Partners. The Company may invite one or more third parties (each a "Local
Partner") to participate as equity owners in the Company's local venture in
a country of the Territory; provided, however, that the Company may only
create a local venture for the primary purpose of operating one or more
Channels in a country and not merely to conduct third party program sales.
The decision to admit a Local Partner will be determined by a majority vote
of the Management Committee, unless such proposed Local Partner will
acquire more than a fifty percent (50%) interest in a local venture for the
U.K./Benelux territory or the "GS Territory" (as defined in that certain
letter agreement between Bloomfield Mercantile, Inc. and PEGI for the
operation of Playboy TV and AdulTVision channels in Germany and Scandinavia
dated October 20, 1997) or more than a thirty-three percent (33%) interest
in a local venture for any other region of the Territory, in which case the
admission of the Local Partner will be subject to the veto rights of the
PEGI Directors and the VSI Directors under Section 5.1.4. The agreement
governing the participation of the Local Partner must include a provision
that restricts the Local Partner's ability to transfer its interest in the
local venture to any Person other than an Affiliate of the original Local
Partner and provide either (i) that any such permitted Affiliate/transferee
must be at least as credit-worthy as the original Local Partner; or (ii)
that such transfer does not release the original Local Partner from its
obligations (including its funding obligations) with respect to the local
venture. Management of each local venture will be controlled by the
Company, and, after admission of a local partner, matters regarding the
local venture of the same type described in Section 5.1.4 will be subject
to the veto rights of the PEGI Directors and the VSI Directors. A Local
Partner may not be any manufacturer of firearms, weapons or explosives; or
any owner, distributor or provider of telephone sex lines, real time
interactive internet sex services, sex clubs or massage parlors.

               (a) Local Partners for the U.K. and Germany. If at a time
when PEGI (alone, or collectively with one or more of its Affiliates) owns
less than a 50% interest in the Company, the Company wishes to admit a
third party as a Local Partner for the U.K./Benelux territory or the GS
Territory (a "Proposed Partner"), and such Proposed Partner is to acquire
an ownership interest in such local venture that exceeds 33%, PEGI may
recommend that the Company not admit such Proposed Partner. If the Company
decides, nonetheless, to admit such Proposed Partner, PEGI may prevent such
Proposed Partner from acquiring more than a 33% interest by acquiring the
percentage interests in excess of 33% that the Proposed Partner would have
purchased, on the same pro rata terms as offered to the Proposed Partner.

               6.4.6 Supplemental Programs. The Company (or its
subsidiaries) may produce and/or acquire programs whose primary use is
exhibition on one or more of the Channels ("Supplemental Programs"). The
Company will engage in such production or acquisition of Supplemental
Programs in conjunction with PTV U.S., which will obtain the United States
distribution rights, if any, to such programs. PTV U.S. will grant to PEGI
the right to distribute such programming in the United States pursuant to
the US Distribution Agreement. The budget for the production/acquisition
cost of Supplemental Programs for each Fiscal Year will be set forth in the
Annual Budget for such Fiscal Year; provided that such budget will not be
less than $1,500,000. The Supplemental Programs will be consistent with the
content, style and production values of the Existing Library Programs and
the Output Programs provided by PEGI to the Company pursuant to the Program
License Agreement. Upon dissolution of the Company, the Supplemental
Programs will become property of PEGI, for a price to be negotiated by PEGI
and the Company; provided that if the parties cannot reach agreement, the
price will be determined through the dispute resolution procedure set forth
in Article 16.

               (a) Produced Supplemental Programs. Unless PEGI otherwise
consents and except as set forth in the rest of this paragraph (a), for any
Supplemental Program produced by the Company, the Company will either
obtain the worldwide rights to such program or will hold sufficient rights
to prevent any third party from exploiting such program. With respect to
any Supplemental Program the Company intends to co-produce with one or more
third parties, the Company will first offer PEGI the opportunity to
co-produce the program with the Company on terms which are as favorable to
the Company as those available from such third party(ies). If PEGI elects
to co-produce such program, PEGI and the Company will each pay that portion
of the budget of such program and otherwise participate in such programs on
terms reasonably and customary for the applicable split of distribution
rights in regions of the Territory between them. If PEGI does not elect to
co-produce such program, the Company may proceed with the third party
co-producers, but such third party co-producers will not acquire the right
to exploit such program using any trademarks licensed to the Company under
the Trademark License Agreement or otherwise associated with the Company.

               (b) Acquired Supplemental Programs. If the Company (or its
subsidiaries) acquires the rights to a program for exploitation in any
region of the Territory, it will also acquire the rights for such program
in the United States, or if it does not acquire such US rights, it will
notify PEGI that such rights are available, and PEGI will determine whether
it wishes to acquire such program. If PEGI wishes to acquire the US
distribution rights to such program it will provide to the Company the
range of acceptable terms, and the Company will use its commercially
reasonable efforts to acquire such US distribution rights on PEGI's behalf.
The Company will not enter into any binding agreement on PEGI's behalf
which is outside such range of acceptable terms without PEGI's prior
written consent.

               6.4.7 Playboy TV Lite. * * *

               6.4.8 Venus and Spice Hot. The parties agree to combine the
current television businesses of Venus and Spice Hot as follows:

               (a) Within one hundred and eighty (180) days after the
Funding Date, VSI will use its best efforts to cause its Affiliate, Imagen,
to form one or more new ventures ("New Venus") with the Company. New Venus
will be owned fifty percent (50%) by Imagen and fifty percent (50%) by the
Company. New Venus will be formed for the purpose of developing, marketing,
programming and distributing channels in the genre of the existing Venus
and Spice Hot channels throughout the New Venus Territory; provided that
New Venus will only distribute such channels in Puerto Rico, the U.S.
Virgin Islands and any other territory or possession of the United States
in the Carribean Basin through Galaxy Latin America (or a subsequent DTH
service) and not through any cable systems. New Venus will not license
programming to third parties, other than through the distribution of the
channels. The parties agree and acknowledge that the formation and
governance of New Venus must be structured in accordance with, and not to
violate, the covenants and other obligations of Imagen's indenture dated
April 30, 1998. The charter documents and other documents governing the
management of and interests in New Venus will be subject to the prior
approval of both VSI and PEGI.

               (b) Imagen will contribute to New Venus the television
rights for the New Venus Territory to the programming controlled by Venus
and the existing Venus distribution contracts. Imagen will provide New
Venus with a royalty-free exclusive license to use the Venus marks in the
New Venus Territory.

               (c) The Company will cause the distribution contracts of
Spice Hot to be contributed to New Venus in a tax efficient manner, and the
Company and PEII will provide New Venus with a royalty-free exclusive
license to use the Spice marks in connection with the operation,
distribution and promotion of the Spice Hot channel in the New Venus
Territory.

               (d) New Venus and Imagen will enter into an agreement
pursuant to which Imagen will act as New Venus' exclusive sales agent in
the Southern Cone.

               (e) New Venus and Troy will enter into an agreement pursuant
to which Troy will act as New Venus's exclusive sales agent in the New
Venus Territory, other than in the Southern Cone.

               (f) Imagen and the Company will enter into a trademark
license agreement pursuant to which Imagen will grant to the Company an
exclusive license to use the Venus name and marks in the Company's
discretion on the Company's "hot" television channels outside of the New
Venus Territory. Such license will bear a royalty of * * * of net channel
revenues.

               (g) The Company will have day-to-day management control of
New Venus, subject to the terms of a "Control Channel Joint Venture" under
the Imagen indenture.

               (h) The Company, through its subsidiary SEI 2, will supply
New Venus with at least * * * of its annual programming requirements, on
terms to be negotiated by the Company and New Venus; provided that the
program license fees per hour of such programming * * * The parties
acknowledge that the programming rights held by SEI 2 exclude certain
territories (e.g., Puerto Rico and the U.S. Virgin Islands) otherwise
included in the New Venus Territory.

               (i) Net profits from New Venus will be split in accordance
with the ownership percentages which Imagen and the Company hold in New
Venus.

               (j) Subject only to compliance with Imagen's indenture
described above, the Company will have the option, exercisable at any time,
to acquire Imagen's interest in New Venus for cash consideration equal to
the Fair Market Value thereof. The Company's option will be binding on any
successor or assign of Imagen in New Venus.

               6.4.9 U.S. Activities. The Company will conduct no
activities that generate income subject to United States Federal income tax
when earned by a foreign corporation or a non-resident alien individual (a
"U.S. Taxable Activity"). VSI and PEGI contemplate conducting certain
activities which may be U.S. Taxable Activities relating to the
distribution of programming and channels in the United States. VSI and PEGI
(either directly or through wholly-owned subsidiaries) intend to form PTV
U.S. as a separate limited liability company to engage in such activities.
The ownership structure and management of PTV U.S. will mirror the
Company's as provided in this Agreement, mutatis muntandis, and
notwithstanding anything to the contrary in this Agreement, any exercise of
rights or remedies that has the effect of altering the relative Percentage
Interests of the Members must be equally exercised with respect to PTV U.S.
VSI and PEGI agree to use best efforts to prepare and execute the charter
documents and other agreements relating to the formation and operation of
PTV U.S. within 30 days from the date hereof.

               6.4.10 Certain Tax Matters. Nothing in this Agreement will
be read to require the Company to conduct its affairs so that: (i) income
from the licensing of programing that might be seen by viewers will be
effectively connected with the conduct of a United States trade or
business; and (ii) income from advertising will be effectively connected
with the conduct of a United States trade or business.

                                 ARTICLE 7
                           RIGHTS ACQUISITION FEE

         7.1 Rights Acquisition Fee.

               7.1.1 Payment of Fee. In exchange for the license of the
Existing Library Programs and the Wallpaper material described in the
Program Supply Agreement, the trademark license for Year 1 through Year 10
described in the Trademark License Agreement and the Acquired Interests
described in Section 7.2, the Company will pay to PEGI a "Rights
Acquisition Fee" of One Hundred Million Dollars ($100,000,000), payable as
follows:

               (a) On the Funding Date:             $30 million

               (b) On the first day of Year 2:      $7.5 million

               (c) On the first day of Year 3:      $5 million

               (d) On the first day of Year 4:      $7.5 million

               (e) On the first day of Year 5:      $25 million

               (f) On the first day of Year 6:      $25 million

               7.1.2 Allocation of Fee. Unless the parties agree otherwise,
the Rights Acquisition Fee will be allocated as follows:

               (a) * * * to the Existing Playboy Library and Wallpaper
(each as defined in the Program Supply Agreement);

               (b) * * * to the trademark license for Year 1 through Year
10 pursuant to the Trademark License Agreement;

               (c) * * * to the interests in the U.K. Venture (as set forth
in Section 7.2, below);

               (d) * * * to the interests in the Japan Venture (as set
forth in Section 7.2, below);

               (e) * * * to the interests in SEI 2 (as set forth in Section
7.2 below); and

               (f) * * * to the interests in SEI 3 (as set forth in Section
7.2 below).

The foregoing allocation will be applied to each installment of the Rights
Acquisition Fee on a pro rata basis.

         7.2 Purchase of U.K. Venture, Japan Venture and Danish Companies.
On the date hereof, PEGI and the Company have entered into the Stock
Purchase Agreements pursuant to which PEGI will transfer, convey and assign
to the Company all of its right, title and interest of any kind in and to
the U.K. Venture, the Japan Venture and the Danish Companies (collectively,
the "Acquired Interests"). The Company will assume PEI's (and its
Affiliates') obligations under the Share Purchase Agreement (relating to
the U.K. Venture) and the Memorandum of Agreement (relating to the Japan
Venture) on the terms set forth in the respective Stock Purchase
Agreements. Schedule 7.2 describes, as of the date hereof, the interests of
PEGI in the U.K. Venture, the Japan Venture and the Danish Companies,
including the type of entity (corporation, partnership, limited liability
company, etc.) and the names and percentage interests of all of the owners
of each entity. The Funding Side Letter sets forth the amount of the funds
advanced by PEGI to the U.K. Venture from and after July 1, 1999, the
amount of the funds loaned to the U.K. Venture prior to March 31, 1999, and
the manner in which such amounts will be paid.

                                 ARTICLE 8
                                  MEMBERS

         8.1 Limited Liability. Except as required under the Act or as
expressly set forth in this Agreement, no Member will be personally liable
for any debt, obligation, or liability of the Company, whether that
liability or obligation arises in contract, tort, or otherwise. In the
event any Member becomes personally liable for any debt, obligation or
liability of the Company arising from any action or approval of the Members
or Management Committee taken without the approval of such Member or the
Directors appointed by such Member or Manager where such approval is
required under the terms hereof, then, in addition to any other rights set
forth herein, the Members or Managers taking or who appointed the Directors
taking such action will indemnify and hold harmless such Member from and
against any liability, loss, claim or damage, including but not limited to,
reasonable attorneys fees and cost, arising from or relating to such
action.

         8.2 Admission of Additional Members. The Management Committee will
approve the admission of new (and the terms of such admission) Members
through the issuance of additional Membership Interests, subject to the
veto rights of the VSI Directors and the PEGI Directors under Section 5.13.
The Management Committee will admit to the Company as additional Members
any Person who acquires a Membership Interest in accordance with Article 9
of this Agreement.

         8.3 Withdrawals or Resignations. No Member may withdraw or resign
from the Company, except as permitted by this Agreement.

         8.4 Termination of Membership Interest. Upon the transfer of a
Member's Membership Interest in violation of this Agreement or the
occurrence of a Disassociation Event, the Membership Interest of a Member
will be terminated by the Management Committee and such Membership Interest
will be purchased by the Company or remaining Members as provided in
Article 10. Each Member acknowledges and agrees that such termination or
purchase of a Membership Interest upon the occurrence of any of the
foregoing events is not unreasonable. The rights of the Company and the
non-breaching Members under this Section will be in addition to, and not in
limitation of, any other rights and remedies which the Company and such
other Members may have at law or equity.

         8.5 Remuneration To Members. Except as otherwise authorized in, or
pursuant to, this Agreement, no Member is entitled to remuneration for
acting in the Company business, subject to the entitlement of Directors,
Managers or Members winding up the affairs of the Company to reasonable
compensation.

         8.6 Members Are Not Agents; No Management Authority. Pursuant to
this Agreement and the Certificate, the management of the Company is vested
in the Managers, who will exercise their authority through the Management
Committee. No Member, acting solely in the capacity of a Member, is an
agent of the Company nor can any Member in such capacity bind nor execute
any instrument on behalf of the Company. The Members will have no power to
participate in the management of the Company except as expressly authorized
by this Agreement and except as expressly required by the Act.

         8.7 Meetings of Members. Meetings of Members may be held at such
date, time and place within or without the State of Delaware as the
Management Committee may fix from time to time. No annual or regular
meetings of Members are required. At any Members' meeting, the President
will preside at the meeting and will act as secretary of the meeting.

               8.7.1 Power to Call Meetings. Unless otherwise prescribed by
the Act, meetings of the Members may be called by the Management Committee
acting by majority vote or by any Member or group of Members holding more
than ten percent (10%) of the Percentage Interests for the purpose of
addressing any matters on which the Members may vote.

                                 ARTICLE 9
                    TRANSFER AND ASSIGNMENT OF INTERESTS

         9.1 Transfer of Membership Interests.

               9.1.1 No Member may transfer, assign, sell, encumber or in
any way alienate or dispose of (each, a "Transfer"), including to an
Affiliate, all of any portion of its Membership Interest (the "Offered
Interest") if such Transfer: (i) would have a material adverse effect on
the other Member or on the Company; (ii) would cause the termination or
dissolution of the Company; or (iii) would cause a termination of the
Program Supply Agreement or of the Trademark License Agreement. If a Member
objects to a proposed Transfer on the grounds set forth above, such dispute
must be resolved prior to the consummation of the proposed Transfer.

               9.1.2 Subject to the provisions of Section 9.1.1, if VSI or
PEGI (or any of their respective Affiliates) (a "Selling Member") wishes to
Transfer all or a part of its Membership Interest to an entity which is not
an Affiliate of such Selling Member (a "Third Party Buyer"), the Selling
Member must first offer to sell the Offered Interest to the non-Selling
Member. If the Selling Member is PEGI (or any of its Affiliates) and the
Option Expiration Date has not occurred, the Offered Terms must disclose
whether and to what extent PEGI (or its Affiliates) intends to exercise the
Buy-up Option in anticipation of such Transfer. If the Selling Member and
the non-Selling Member are not able to reach an agreement after a thirty
(30)-day negotiation period, the Selling Member may Transfer the Offered
Interest to the Third Party Buyer; provided, however, that the Selling
Member must give the non-Selling Member: (i) notice of the terms on which
the Selling Member intends to Transfer the Offered Interest to the Third
Party Buyer (the "Offered Terms") and (ii) the right to acquire the Offered
Interest at the price offered by the Third Party Buyer (the "Matching
Right"); provided that to the extent the Offered Terms include non-cash
consideration, the Matching Right will include the right of the non-Selling
Member to pay, in cash, the Fair Market Value to the Selling Member of such
non-cash items, and the time periods prescribed in this Section will be
adjusted to permit the determination of Fair Market Value; but further
provided, that if such non-cash consideration is a promissory note or
similar financial instrument, the non-Selling Member may substitute an
equivalent instrument. If the non-Selling Member fails to exercise the
Matching Right within thirty (30) days after receiving notice of the
Offered Terms, the Selling Member may Transfer the Offered Interest to the
Third Party Buyer on terms which are at least as favorable to the Selling
Member as the Offered Terms. If the Selling Member and Third Party Buyer do
not execute a definitive and binding agreement for the Transfer of the
Offered Interest within thirty (30) days after the date on which the non-
Selling Member declines to exercise the Matching Right, the Selling Buyer
must again re-offer the Offered Interest to the non-Selling Member in
accordance with the terms in this Section.

         9.2 Change of Control.

               9.2.1 Changes in General. Except as provided in this
Section, a Transfer of the equity or voting interests of a Member or of an
Affiliate of a Member which results, directly or indirectly, in a change of
control of such Member will be permitted so long as such transfer does not
have a material adverse effect on the other Member or the Company.

               9.2.2 VSI. Notwithstanding Section 9.2.1, the parties agree
and acknowledge that a Transfer of the equity or voting interests of VSI or
of an Affiliate that controls VSI (a "VSI Parent") will be permitted, so
long as the following conditions are satisfied: (i) notwithstanding such
transfer, Newhaven Overseas Corp. or another member of the Cisneros Group
of Companies retains the right to appoint VSI's representatives on the
Management Committee; and (ii) following such transfer, VSI remains at
least as credit-worthy as PEI (as determined by a nationally-recognized
credit rating agency), and, if it is not, VSI (or an Affiliate of VSI)
provides PEI and PEGI with satisfactory financial assurances (in the form
of a letter of credit, guaranty or otherwise). The parties agree that a
transfer of VSI to a wholly-owned subsidiary of Ibero-America Media
Partners II, LP or of Ibero-America Media Partners B.V. satisfies clause
(ii) of this Section of 9.2.2.

               9.2.3 PEI/PEGI. The terms of this Section 9.2.3 will apply
so long as VSI and its Affiliates hold, in the aggregate, a Percentage
Interest of not less than * * *. Notwithstanding Section 9.2.1 of this
Section, in the event PEI, or such other Affiliate of PEI that may control
PEGI (a "PEGI Parent"), wishes to Transfer to one or more third parties, * * *

               9.2.4 Initial Public Offering. * * *

         9.3 Substitution of Members. A transferee of a Membership Interest
will have the right to become a substitute Member only if (a) the
requirements of Sections 9.1 and 9.2 and any securities or tax requirements
of this Agreement are met, (b) such Person executes an instrument
satisfactory to the Management Committee accepting and adopting the terms
and provisions of this Agreement, and (c) such Person pays any reasonable
expenses in connection with its admission as a new Member. The admission of
a substitute Member will not result in the release of the Member who
assigned the Membership Interest from any liability that such Member may
have to the Company.

         9.4 Effective Date of Permitted Transfers. Any permitted transfer
of all or any portion of a Membership Interest will be effective as of the
first business day following the date upon which the requirements of
Sections 9.1, 9.2 and 9.3 have been met. The President will promptly
provide the Members with written notice of such transfer. Any transferee of
a Membership Interest will take subject to the restrictions on transfer
imposed by this Agreement.

         9.5 Rights of Legal Representatives. If a Member who is an
individual dies or is adjudged by a court of competent jurisdiction to be
incompetent to manage the Member's person or property, the Member's
executor, administrator, guardian, conservator, or other legal
representative may exercise all of the Member's rights for the purpose of
settling the Member's estate or administering the Member's property,
including any power the Member has under this Agreement to give an assignee
the right to become a Member. If a Member is a corporation or other entity
and is dissolved or terminated, the powers of that Member may be exercised
by its legal representative or successor.

         9.6 PEGI Buy-up Option. Starting on the Funding Date and
continuing through the Option Expiration Date (as defined in Section
9.6.1), PEGI (or its Affiliates who are then Members of the Company) has
the option to acquire up to thirty and one-tenths percent (30.1%) of
additional Membership Interests in the Company by purchasing such
additional Membership Interests from VSI (and any of its Affiliates which
hold Member Interests, collectively); provided, however, that if PEGI (and
its Affiliates, collectively) transfer Membership Interests to any
Person(s) which is not an Affiliate of PEGI, such thirty and one-tenths
percent (30.1%) will be adjusted downward, pro rata, in accordance with the
decline in PEGI's and its Affiliates' aggregate Membership Interests in the
Company (the applicable percentage from time to time being the "Option
Percentage"; and further provided, that if at any time PEGI and its
Affiliates collectively do not own at least five percent (5%) of the total
Membership Interests, the option provided in this Section 9.6 will
terminate. The Percentage Interest of VSI (and its Affiliates) subject to
the option described in this Section 9.6 is referred to as the "Option
Percentage."

               9.6.1 Option Expiration Date. The "Option Expiration Date"
will be the earlier to occur of (i) the last day of Year 10 and (ii) thirty
(30) days after the date on which the Company reaches "cash breakeven" * * *

               9.6.2 Exercise of Buy-up Option. Until the Option Expiration
Date, PEGI (including for the balance of this Section 9.6.2, its Affiliates
who are then Members) may exercise its option to purchase additional
Percentage Interests of the Company up to the Option Percentage from VSI
(including for the balance of this Section 9.6.2, its Affiliates who are
then Members) on December 15 of each year, in increments of * * *;
provided, however, that PEGI may exercise its option: (i) immediately prior
to the Option Expiration Date, with respect to any part or all of the
then-unpurchased portion of the Option Percentage; and (ii) immediately
prior to a transfer that would decrease the Option Percentage, with respect
to that portion of the Option Percentage that would be lost as a
consequence of such transfer. During Year 1, PEGI may buy such additional
percentage interests from VSI at the Founders' Price. During Year 2, Year 3
and Year 4, the price at which PEGI may purchase additional Percentage
Interests from VSI is Founders' Price, plus interest, compounded annually,
at an annual rate equal to the greater of *** with such interest accruing
through the date PEGI pays for such additional Percentage Interests on an
amount equal to the product of the average daily balance (starting from the
Funding Date) of the Members' aggregate unreturned Capital Contributions
multiplied by the Percentage Interest being purchased. In Year 5 through
Year 10, PEGI's buy-in price will be * * * at the time of purchase (as
determined in accordance with Exhibit E). PEGI may pay the purchase price
for the additional Percentage Interests * * *, which election will be set
forth in PEGI's notice that it is exercising its buy-up option. * * * In
the event PEGI fails to timely pay for any additional Percentage Interests
for which it exercised its buy-up option, VSI may elect either: (i) to
terminate PEGI's right to purchase such Percentage Interests; or (ii) to
cause the Company to withhold any payments otherwise due to PEGI under this
Agreement or the Program Supply Agreement and to pay such amounts to VSI
until VSI is paid in full (including interest at the Reference Rate from
the date such payment was due) for such additional interests, and VSI will
then transfer such interests to PEGI.

               (a) If PEGI pays for some or all of its purchase in PEI
stock, such stock will be registered or be subject to normal and customary
registration rights.

                                 ARTICLE 10
                        CONSEQUENCES OF DISSOLUTION
                          OR BANKRUPTCY OF MEMBER

         10.1 Disassociation Event. Upon the occurrence of a Disassociation
Event, the Company will not dissolve. Upon the occurrence of a
Disassociation Event, the Members holding all of the remaining Membership
Interests (the "Remaining Members") and/or, if applicable pursuant to
Section 10.1.3, the Company, will purchase, and the Member whose actions or
conduct resulted in the Disassociation Event ("Former Member") or such
Former Member's legal representative will sell, the Former Member's
Membership Interest ("Former Member's Interest") as provided in this
Section 10.1.

               10.1.1 Purchase Price. The purchase price for the Former
Member's Interest will be the lesser of (i) the positive Capital Account
balance of the Former Member or (ii) the Fair Market Value of the Former
Member's Interest. Notwithstanding the foregoing, if the Disassociation
Event results from a breach of this Agreement by the Former Member, the
purchase price paid by the Remaining Members and/or the Company will be
reduced by an amount equal to the damages suffered by such purchasing
parties as a result of such breach.

               10.1.2 Notice of Intent to Purchase. Within thirty (30) days
after the President has notified the Remaining Members as to the purchase
price of the Former Member's Interest determined in accordance with Section
10.2, each Remaining Member will notify the President in writing of its
desire to purchase a portion of the Former Member's Interest. The failure
of any Remaining Member to submit a notice within the applicable period
will constitute an election on the part of the Member not to purchase any
of the Former Member's Interest. Each Remaining Member so electing to
purchase will be entitled to purchase a portion of the Former Member's
Interest in the same proportion that the Percentage Interest of the
Remaining Member bears to the aggregate of the Percentage Interests of all
of the Remaining Members electing to purchase the Former Member's Interest.

               10.1.3 Election to Purchase Less Than All of the Former
Member's Interest. If any Remaining Member elects to purchase none or less
than all of its pro rata share of the Former Member's Interest, then the
Remaining Members can elect to purchase more than their pro rata share. If
the Remaining Members fail to purchase the entire interest of the Former
Member, the Company will purchase any remaining share of the Former
Member's Interest.

               10.1.4 Payment of Purchase Price. The purchase price will be
paid by the Remaining Members and/or the Company, as the case may be, at
the closing one-fifth (1/5) in cash and the balance of the purchase price
in four equal annual principal installments, plus accrued interest, and be
payable each year on the anniversary date of the closing. Any such payment
by the Company will be made solely out of Distributable Cash allocable to
the Remaining Members. The unpaid principal balance will accrue interest at
the current applicable federal rate as provided in the Code for the month
in which the initial payment is made, but the Company and the Remaining
Members will have the right to prepay in full or in part at any time
without penalty. The obligation to pay the balance due will be evidenced by
a promissory note, and if purchased by a Remaining Member, secured by a
pledge of the Membership Interest being purchased.

               10.1.5 Closing of Purchase of Former Member's Interest. The
closing for the sale of a Former Member's Interest pursuant to this Article
10 will be held on a business day at the principal office of the Company no
later than sixty (60) days after the determination of the purchase price.
At the closing, the Former Member or such Former Member's legal
representative will deliver to the Company or the Remaining Members an
instrument of transfer (containing warranties of title and no encumbrances)
conveying the Former Member's Interest. The Former Member or such Former
Member's legal representative, the Company and the Remaining Members will
do all things and execute and deliver all papers as may be necessary fully
to consummate such sale and purchase in accordance with the terms and
provisions of this Agreement.

               10.1.6 Purchase Terms Varied by Agreement. Nothing contained
herein is intended to prohibit Members from agreeing upon other terms and
conditions for the purchase by the Company or any Member of the Membership
Interest of any Member in the Company desiring to retire, withdraw or
resign, in whole or in part, as a Member.

         10.2 Bankruptcy. Upon the Bankruptcy of a Member, the Membership
Interests of such Member, whether held by such Member, its trustee or other
representative in bankruptcy, will be converted to an Economic Interest.

                                 ARTICLE 11
                 ACCOUNTING, RECORDS, REPORTING BY MEMBERS

         11.1 Books and Records. The books and records of the Company will
be kept, and the financial position and the results of its operations
recorded, in accordance with generally accepted accounting principles as in
effect from time to time and the accounting methods followed for federal
income tax purposes. The books and records of the Company will reflect all
the Company transactions and will be appropriate and adequate for the
Company's business. The Company will maintain at its principal office all
of the following:

               (a) A current list of the full name and last known business
or residence address of each Member, together with the Capital
Contributions, Capital Account and Percentage Interest of each Member;

               (b) A current list of the full name and business or
residence address of each Manager and Director;

               (c) A copy of the Certificate and any and all amendments
thereto together with executed copies of any powers of attorney pursuant to
which amendments thereto have been executed;

               (d) Copies of the Company's federal, state, and local income
tax or information returns and reports, if any, for the six most recent
taxable years;

               (e) A copy of this Agreement and any and all amendments
thereto together with executed copies of any powers of attorney pursuant to
which this Agreement or any amendments thereto have been executed;

               (f) Copies of the financial statements of the Company, if
any, for the six most recent Fiscal Years; and

               (g) The Company's books and records as they relate to the
internal affairs of the Company for at least the current and past four
Fiscal Years.

         11.2 Delivery to Members and Inspection.

               11.2.1 Delivery Upon Request. Upon the request of any Member
for purposes reasonably related to the interest of that Person as a Member,
the President will promptly deliver to the requesting Member, at the
expense of the Company, a copy of the information required to be maintained
by Sections 11.1(a), (b) and (d), and a copy of this Agreement, as amended.
The President will promptly furnish to a Member a copy of any amendment to
the Certificate or this Agreement executed by a Manager or Director
pursuant to a power of attorney from the Member.

               11.2.2 Inspection. Each Member has the right, upon
reasonable request for purposes reasonably related to the interest of the
Person as Member to:

               (a) inspect and copy during normal business hours any of the
Company records described in Sections 11.1(a) through (g); and

               (b) obtain from the President, promptly after their becoming
available, a copy of the Company's federal, state, and local income tax or
information returns for each Fiscal Year.

               11.2.3 Authorized Persons. Any request, inspection or
copying by a Member under this Section 11.2 may be made by that Person or
that Person's agent or attorney.

         11.3 Periodic Statements.

               11.3.1 Monthly Report. The President will cause a monthly
report to be sent to each of the Members not later than thirty (30) days
after the end of each month during a Fiscal Year. The report will contain a
balance sheet as of the last day of such month and an income statement and
statement of changes in financial position for the period then ended. Such
financial statements will be unaudited but will be prepared on a consistent
basis with the Company's audited annual financial statements described
below.

               11.3.2 Annual Report. The President will cause an annual
report to be sent to each of the Members not later than forty-five (45)
days after the close of the Fiscal Year. The report will contain a balance
sheet as of the end of the Fiscal Year and an income statement and
statement of changes in financial position for the Fiscal Year. Such
financial statements will be audited and will be accompanied by the report
thereon prepared by the independent accountants engaged by the Company.

               11.3.3 Tax Information. The President will cause to be
prepared at least annually, at Company expense, information necessary for
the preparation of the Members' federal and state income tax returns. The
President will send or cause to be sent to each Member within forty-five
(45) days after the end of each taxable year such information as is
necessary to complete federal, state, and local income tax or information
returns, and a copy of the Company's federal, state, and local income tax
or information returns for that year.

         11.4 Financial and Other Information. The President will provide
such financial and other information relating to the Company, as a Member
may reasonably request.

         11.5 Filings. The President, at Company expense, will cause the
income tax returns for the Company to be prepared and timely filed with the
appropriate authorities. At least seventy-five (75) days prior to the last
date for timely filing of such returns, the President will deliver to the
Tax Matters Member copies of such returns for their approval prior to the
filing due date. The President, at Company expense, will also cause to be
prepared and timely filed, with appropriate federal and state regulatory
and administrative bodies, amendments to, or restatements of, the
Certificate and all reports required to be filed by the Company with those
entities under the Act or other then current applicable laws, rules, and
regulations. If a Manager or Director required by the Act to execute or
file any document fails, after demand, to do so within a reasonable period
of time or refuses to do so, any other Manager or Member may prepare,
execute and file that document with the Delaware Secretary of State.

         11.6 Bank Accounts. The President will cause the Company to
maintain the funds of the Company in one or more separate bank accounts in
the United States in the name of the Company, and will not permit the funds
of the Company to be commingled in any fashion with the funds of any other
Person.

         11.7 Accounting Decisions and Reliance on Others. All decisions as
to accounting matters, except as otherwise specifically set forth herein,
will be made by the Management Committee. A Manager or Director may rely
upon the advice of the Company's accountants as to whether such decisions
are in accordance with accounting methods followed for federal income tax
purposes.

         11.8 Tax Matters for the Company Handled by Management Committee
and Tax Matters Member. The Management Committee will from time to time
cause the Company to make such tax elections as it deems to be in the best
interests of the Company; provided, however, that so long as PEGI is a
Member, the Management Committee will not (i) file any tax return or (ii)
make any tax election or take any position with respect to any examination
audit or proceeding by a taxing authority that could have an adverse impact
on PEGI, and/or the consolidated tax group in which PEGI participates,
without PEGI's prior written consent, which consent will not be
unreasonably withheld, it being expressly agreed that if such adverse
impact on PEGI or its tax group is not material to such Persons, PEGI will
not withhold its consent. PEGI will respond to any request for its consent
within thirty (30) days after receiving such request in writing, and if
PEGI fails to give such consent, such matter will be determined in
accordance with the dispute resolution procedure set forth in Section 16.
The Tax Matters Member (the equivalent to the Tax Matters Partner as
defined in Code Section 6231) will represent the Company (at the Company's
expense) in connection with all examinations of the Company's affairs by
tax authorities, including resulting judicial and administrative
proceedings, and will expend the Company's funds for professional services
and costs associated therewith. The Tax Matters Member will oversee the
Company's tax affairs in the overall best interests of the Company. If for
any reason the Tax Matters Member can no longer serve in that capacity or
ceases to be a Member or Manager, as the case may be, Members holding a
Majority Interest may designate another to be Tax Matters Member.

                                 ARTICLE 12
                         DISSOLUTION AND WINDING UP

         12.1 Term. The term (the "Term") of the Company will commence on
the date the Certificate is filed with the Secretary of State of Delaware
and terminate on the earlier to occur of the termination of the Company as
provided in the Certificate or the earlier dissolution of the Company
pursuant to the terms of this Article 12.

         12.2 Dissolution Events. The Company may be dissolved prior to the
termination date set forth in the Certificate upon the happening of any of
the following events (each, a "Dissolution Event"):

               12.2.1 For so long as VSI (with its Affiliates, in
aggregate) or PEGI (with its Affiliates, in aggregate) holds Percentage
Interests equal to 10%, such Member may elect to dissolve the Company or
buy out the other Member's Membership Interest (at a price equal to the
lower of Fair Market Value and the positive Capital Account balance of such
Member and its Affiliates) if controlling ownership of the other Member
changes (other than as permitted by, and subject to the conditions of,
Section 9.2); provided, however, that the parties acknowledge that PEI is
publicly held and that no change in its ownership will constitute a change
of control of PEGI as long as PEGI remains a controlled subsidiary of PEI.
Any such dissolution or buy-out will be effective as of such change of
control.

               12.2.2 Any Member may, without prejudice to any other
remedies it may have, elect to dissolve the Company by notice in writing to
the other Members on or after the occurrence of any of the following:

               (a) subject to Section 3.4, the commission of one or more
material breaches of this Agreement by the Company or another Member which
are not capable of remedy, provided that any such breach by the Company is
not caused by the Member its seeking dissolution or any of its Affiliates;

               (b) the commission of a material breach of this Agreement by
the Company or another Member which is capable of remedy (a "Remediable
Breach") which will not have been remedied within a period of thirty (30)
days after the party in breach has been given notice in writing specifying
that Remediable Breach and requiring it to be remedied; provided, however,
that such thirty (30) day period will be extended for such additional
period as will be reasonably necessary if that Remediable Breach is
incapable of remedy within that one month period and during that thirty
(30) day period the party in breach will diligently endeavor to remedy that
Remediable Breach, but only if such extension would not reasonably be
expected to have a material adverse effect on the party giving notice of
such breach and, provided further, that any such breach by the Company was
not caused by the Member seeking dissolution or any of its Affiliates;

               (c) the Bankruptcy, insolvency, general assignment for the
benefit of creditors or similar event of or the appointment of a trustee,
receiver or similar person for any other Member holding Percentage
Interests (collectively with its Affiliates) equal to or greater than ten
percent (10%); or

               (d) the uncured material breach of one or more of the
Related Documents by another Member or the Company, provided that any such
breach by the Company was not caused by the Member seeking dissolution or
any of its Affiliates.

         12.3 Effect of Dissolution. Upon dissolution of the Company, the
Trademark License Agreement and the Program Supply Agreement will
automatically terminate and all rights and obligations of the respective
parties thereunder will terminate, except for any provisions that expressly
survive such termination or claims that have arisen prior to such
termination; provided, however, in the event such dissolution is due to a
breach by PEGI (or an Affiliate of PEGI), then VSI may cause the Trademark
License Agreement and the Program Supply Agreement to be assigned as set
forth in those agreements. Upon dissolution of the Company, each Member
will have the right to compel the Company to be promptly wound-up and
liquidated.

         12.4 Dissolution. The Company will be dissolved, its assets will
be disposed of, and its affairs wound up on the first to occur of the
following:

               (a) Upon the election of the applicable Member(s) following
the happening of any Dissolution Event;

               (b) Upon the entry of a decree of judicial dissolution
pursuant to Section 18-802 of the Act;

               (c) The occurrence of a Disassociation Event and the failure
of the Remaining Members to purchase the Former Member's Interest as
provided in Article 10; or

               (d) The sale of all or substantially all of the assets of
Company.

         12.5 Certificate of Dissolution. As soon as possible following the
occurrence of any of the events specified in Section 12.3, the Directors
appointed by the Members whose breach or Disassociation Event have not
caused the dissolution of the Company or, if none, the Members, will
execute a Certificate of Dissolution in such form as will be prescribed by
the Delaware Secretary of State and file the Certificate of Dissolution as
required by the Act.

         12.6 Winding Up. Upon dissolution, the Company will continue
solely for the purpose of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors. The
Directors appointed the Member whose breach or Disassociation Event have
not caused the dissolution of the Company or, if none, the Members, will be
responsible for overseeing the winding up and liquidation of Company, will
take full account of the liabilities of Company and assets, will either
cause its assets to be sold or distributed, and if sold as promptly as is
consistent with obtaining the fair market value thereof, will cause the
proceeds therefrom, to the extent sufficient therefor, to be applied and
distributed as provided in Section 12.8. The Persons winding up the affairs
of the Company will give written notice of the commencement of winding up
by mail to all known creditors and claimants whose addresses appear on the
records of the Company. The Directors or Members winding up the affairs of
the Company will be entitled to reasonable compensation for such services.

         12.7 Distributions in Kind. Any non-cash asset distributed to one
or more Members will first be valued at its Fair Market Value to determine
the Net Income or Net Loss that would have resulted if such asset were sold
for such value, such Net Income or Net Loss will then be allocated pursuant
to Article 4, and the Members' Capital Accounts will be adjusted to reflect
such allocations. The amount distributed and charged to the Capital Account
of each Member receiving an interest in such distributed asset will be the
Fair Market Value of such interest (net of any liability secured by such
asset that such Member assumes or takes subject to). The Fair Market Value
of such asset will be determined by the Members, or if any Member objects,
by an independent appraiser in accordance with Exhibit E, with a single
appraiser selected by the Members; provided, however, that the Fair Market
Value of the physical embodiment of any intellectual property will be
determined based on its value to a third party (i.e., to a Person other
than the owner of such intellectual property). Except in cases where the
Program Supply Agreement and Trademark License Agreement are not terminated
upon dissolution (as set forth in Section 12.3), PEGI may elect to have
distributed to it in kind or destroyed any assets of the Company that are
Playboy-branded, contain Playboy-identified content or are otherwise
identified as a Playboy-related product.

         12.8 Order of Payment of Liabilities Upon Dissolution.

               12.8.1 Distributions to Members. After determining that all
known debts and liabilities of the Company in the process of winding-up,
including, but not limited to, debts and liabilities to Members that are
creditors of the Company, have been paid or adequately provided for, the
remaining assets will be distributed to the Members in accordance with
their positive Capital Account balances, after taking into account income
and loss allocations for the Company's taxable year during which
liquidation occurs. Such liquidating distributions will be made by the end
of the Company's taxable year in which the Company is liquidated, or, if
later, within ninety (90) days after the date of such liquidation.

               12.8.2 Payment of Debts. The payment of a debt or liability,
whether the whereabouts of the creditor is known or unknown, has been
adequately provided for if the payment has been provided for by either of
the following means:

               (a) Payment thereof has been assumed or guaranteed in good
faith by one or more financially responsible persons or by the United
States government or any agency thereof, and the provision, including the
financial responsibility of the Person, was determined in good faith and
with reasonable care by the Members or Managers to be adequate at the time
of any distribution of the assets pursuant to this Section 12.8.

               (b) The amount of the debt or liability has been deposited
as provided in Section 280 of the Corporations Code.

               This Section 12.8.2 will not prescribe the exclusive means
of making adequate provision for debts and liabilities.

         12.9 Certificate of Cancellation. The Directors, Managers or
Members who filed the Certificate of Dissolution will cause to be filed in
the office of, and on a form prescribed by, the Delaware Secretary of
State, a certificate of cancellation of the Certificate upon the completion
of the winding up of the affairs of the Company.

         12.10 No Action for Dissolution. Except as expressly permitted in
this Agreement, a Member will not take any voluntary action that directly
causes a Dissolution Event. The Members acknowledge that irreparable damage
would be done to the goodwill and reputation of the Company if any Member
should bring an action in court to dissolve the Company under circumstances
where dissolution is not required by Section 12.4. This Agreement has been
drawn carefully to provide fair treatment of all parties. Accordingly,
except where the Managers or Directors have failed to liquidate the Company
as required by this Article 12, each Member hereby waives and renounces its
right to initiate legal action to seek the appointment of a receiver or
trustee to liquidate the Company or to seek a decree of Judicial
dissolution of the Company on the ground that (a) it is not reasonably
practicable to carry on the business of the Company in conformity with this
Agreement, or (b) dissolution is reasonably necessary for the protection of
the rights or interests of the complaining Member. Damages for breach of
this Section 12.10 will be monetary damages only (and not specific
performance), and the damages may be offset against distributions by the
Company to which such Member would otherwise be entitled.

                                 ARTICLE 13
                       INDEMNIFICATION AND INSURANCE

         13.1 Indemnification of Agents. The Company will and hereby agrees
to indemnify any Person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding by
reason of the fact that such Person is or was a Member, Manager, Director,
officer, employee or other agent of the Company or that, being or having
been such a Member, Manager, officer, employee or agent, such Person is or
was serving at the request of the Company as a manager, director, officer,
employee or other agent of another limited liability company, corporation,
partnership, joint venture, trust or other enterprise (all such persons
being referred to hereinafter as an "Agent"), to the fullest extent
permitted by applicable law in effect on the Funding Date and to such
greater extent as applicable law may hereafter from time to time permit.
The Managers will be authorized, on behalf of the Company, to enter into
indemnity agreements from time to time with any Person entitled to be
indemnified by the Company hereunder, upon such terms and conditions as the
Managers deem appropriate in their business judgment.

         13.2 Insurance. The Company will have the power to purchase and
maintain insurance on behalf of any Person who is or was an agent of the
Company against any liability asserted against such Person and incurred by
such Person in any such capacity, or arising out of such Person's status as
an agent, whether or not the Company would have the power to indemnity such
Person against such liability under the provisions of Section 13.1 or under
applicable law.

                                 ARTICLE 14
                               NONCOMPETITION

         14.1 Non-competition. For so long as VSI or PEGI (or any of their
respective Affiliates) is a Member of the Company, or for any time after a
Member transfers its Membership Interest in violation of this Agreement,
such Member and its Affiliates may not:***

         14.2 Separate Covenants. The agreements contained in Section 14.1
will be construed as a series of separate covenants, one for each activity
of the Member, capacity in which the Member is prohibited from competing
and each part of the Territory in which the Company is carrying on such
activity.

         14.3 Injunctive Relief. Each Member acknowledges that (a) the
covenants and the restrictions contained in Section 14.1 are a material
factor to such Member's execution of this Agreement and are necessary and
required for the protection of the Company and the other Members, (b) such
covenants are reasonable and appropriate in scope, (c) such covenants
relate to matters that are of a special, unique and extraordinary character
that gives each of such covenants a special, unique and extraordinary
value, and (d) a breach of any of such covenants will result in irreparable
harm and damages to the Company and the Members in an amount difficult to
ascertain and that cannot be adequately compensated by a monetary award.
Accordingly, in addition to any of the relief to which the Company or the
other Members may be entitled at law or in equity, the Company and the
other Members will be entitled to temporary and/or permanent injunctive
relief from any breach or threatened breach by a Member of the provisions
of Section 14.1 without proof of actual damages that have been or may be
caused to the Company or such other Members by such breach or threatened
breach.

         14.4 Outside Businesses. Except as provided in Section 14.1, any
Member or Affiliate thereof may engage in or possess an interest in other
business ventures of any nature or description, independently or with
others, similar or dissimilar to the business of the Company, and the
Company and the other Members will have no rights by virtue of this
Agreement in and to such independent ventures or the income or profits
derived therefrom, and the pursuit of any such venture will not be deemed
wrongful or improper. No Member or Affiliate thereof will be obligated to
present any particular investment opportunity to the Company, even if such
opportunity is of a character that, if presented to the Company, could be
taken by the Company, and any Member or Affiliate thereof will have the
right to take for its own account, except as expressly provided by this
Agreement, or to recommend to others any such particular investment
opportunity. The provisions of this Section will not in any way limit,
modify or amend the terms of any noncompetition, license or other agreement
that may be entered into between the Company and any Member, which terms
will be binding on the parties thereto.

                                 ARTICLE 15
                   MEMBER REPRESENTATIONS AND WARRANTIES

         15.1 Representations and Warranties by Each Member. Each Member
hereby represents and warrants to, and agrees with, the other Members, and
the Company, as follows:

               15.1.1 Experience. By reason of such Member's business or
financial experience, such Member is capable of evaluating the risks and
merits of an investment in the Membership Interest and of protecting such
Member's own interests in connection with this investment.

               15.1.2 No Advertising. Such Member has not seen, received,
been presented with, or been solicited by any leaflet, public promotional
meeting, newspaper or magazine article or advertisement, radio or
television advertisement, or any other form of advertising or general
solicitation with respect to the sale of the Membership Interest.

               15.1.3 Investment Intent. Such Member is acquiring the
Membership Interest for investment purposes for such Member's own account
only and not with a view to or for sale in connection with any distribution
of all or any part of the Membership Interest. No other Person will have
any direct or indirect beneficial interest in or right to the Membership
Interest.

               15.1.4 Purpose of Entity. Such Member was not organized for
the specific purpose of acquiring the Membership Interest.

               15.1.5 Economic Risk. Such Member is financially able to
bear the economic risk of an investment in the Membership Interest,
including the total loss thereof.

               15.1.6 No Registration of Membership Interest. Such Member
acknowledges that the Membership Interest has not been registered under the
Securities Act of 1933 (as amended, the "Securities Act"), or qualified
under any applicable blue sky laws in reliance, in part, on such Member's
representations, warranties, and agreements herein.

               15.1.7 Membership Interest in Restricted Security. Such
Member understands that the Membership Interest is a "restricted security"
under the Securities Act in that the Membership Interest will be acquired
from the Company in a transaction not involving a public offering, and that
the Membership Interest may be resold without registration under the
Securities Act only in certain limited circumstances and that otherwise the
Membership Interest must be held indefinitely. In this connection, such
Member understands the resale limitations imposed by the Securities Act and
is familiar with Rule 144 thereunder, as presently in effect, and the
conditions which must be met in order for Rule 144 to be available for
resale of "restricted securities".

               15.1.8 No Obligation to Register. Such Member represents,
warrants, and agrees that the Company is under no obligation to register or
qualify the Membership Interest under the Securities Act or under any state
securities law, or to assist such Member in complying with any exemption
from registration and qualification.

               15.1.9 No Disposition in Violation of Law. Without limiting
the representations set forth above, and without limiting the other
provisions of this Agreement relating to the transfer of Membership
Interests, such Member will not make any disposition of all or any part of
the Membership Interest which will result in the violation by such Member
or by the Company of any applicable securities laws.

               15.1.10 Investment Risk. Each Member acknowledges that the
Membership Interest is a speculative investment which involves a
substantial degree of risk of loss by such Member of it's entire investment
in the Company, that such Member understands and takes full cognizance of
the risk factors related to the purchase of the Membership Interest, and
that the Company is newly organized and has no financial or operating
history.

               15.1.11 Restrictions on Transferability. Such Member
acknowledges that there are substantial restrictions on the transferability
of the Membership Interest pursuant to this Agreement, that there is no
public market for the Membership Interest and none is expected to develop,
and that, accordingly, it may not be possible for such Member to liquidate
such Member's investment in the Company.

               15.1.12 Information Reviewed. Such Member has received and
reviewed all information such Member considers necessary or appropriate for
deciding whether to purchase the Membership Interest.

               15.1.13 No Representations By Company. No Person has at any
time represented, guaranteed or warranted to such Member that such Member
may freely transfer the Membership Interest, that a percentage of profit
and/or amount or type of consideration will be realized as a result of an
investment in the Membership Interest, that past performance or experience
on the part of the Managers or any other Person in any way indicates the
predictable results of the ownership of the Membership Interest or of the
overall Company business, that any cash distributions from Company
operations or otherwise will be made to the Members by any specific date or
will be made at all, or that any specific tax benefits will accrue as a
result of an investment in the Company.

               15.1.14 Consultation with Attorney. Such Member has been
advised to consult with such Member's own attorney regarding all legal
matters concerning an investment in the Company and the tax consequences of
participating in the Company, and has done so, to the extent such Member
considers necessary.

               15.1.15 Tax Consequences. Such Member acknowledges that the
tax consequences to such Member of investing in the Company will depend on
such Member's particular circumstances, and such Member will look solely
to, and rely upon, such Member's own advisers with respect to the tax
consequences of this investment.

               15.1.16 No Assurance of Tax Benefits. Such Member
acknowledges that there can be no assurance that the Code or the Treasury
Regulations will not be amended or interpreted in the future in such a
manner so as to deprive the Company and the Members of some or all of the
tax benefits they might now receive, nor that some of the deductions
claimed by the Company or the allocations of items of income, gain, loss,
deduction, or credit among the Members may not be challenged by the
Internal Revenue Service.

         15.2 VSI Representations and Warranties. VSI represents and
warrants, for the benefit of the Company and PEGI, that: (i) it is duly
authorized to enter into the transactions contemplated by this Agreement;
(ii) this Agreement is a valid and binding obligation of VSI, enforceable
against it in accordance with its terms; (iii) in entering into this
Agreement and consummating the transactions contemplated hereunder, it will
not be in breach of any contract to which it is a party or in violation of
any law, regulation, court order or its charter documents; (iv) as of the
date of transfer thereof, VSI (or its Affiliates) will own its interest in
PTVLA, PTVH and the German Venture free and clear of any liens or
encumbrances and will have the power and authority to transfer such
interests to the Company pursuant to the terms of this Agreement; and (v)
that VSI (or its Affiliates) has disclosed all material information
relating to the transactions contemplated hereunder and that all
information provided by VSI (or its Affiliates) in connection with the
negotiation of the transactions contemplated by this Agreement is true and
correct, to the best of VSI's (or its Affiliate's) knowledge and belief.

         15.3 PEGI Representations and Warranties. PEGI represents and
warrants, for the benefit of the Company and VSI, that: (i) it is duly
authorized to enter into the transactions contemplated by this Agreement;
(ii) this Agreement is a valid and binding obligation of PEGI, enforceable
against it in accordance with its terms; (iii) in entering into this
Agreement and consummating the transactions contemplated hereunder, it will
not be in breach of any contract to which it is a party or in violation of
any law, regulation, court order or its charter documents; (iv) that, as of
the date of transfer thereof, PEGI (or its Affiliates) will own all of its
interests in PTVLA, PTVH and the German Venture free and clear of any liens
or encumbrances and will have the power and authority to transfer such
interests to the Company pursuant to the terms of this Agreement; and (v)
that PEGI (or its Affiliates) have disclosed all material information
relating to the transactions contemplated hereunder that all information
provided by PEGI (or its Affiliates) in connection with the negotiation of
the transactions contemplated by this Agreement is true and correct, to the
best of PEGI's (or its Affiliate's) knowledge and belief.

         15.4 Indemnity. Each Member (an "Indemnifying Party") will
indemnify and hold harmless the Company, each and every Manager, each and
every Director, and each and every other Member (and such parties'
directors, officers, shareholders, partners, members, employees, agents,
representatives, and Affiliates) (collectively, the "Indemnified Parties"),
on an After Tax Basis, from and against all claims, losses, damages
(including loss of profits and consequential damages awarded to unrelated
third parties, if any, but excluding loss of profits and consequential
damages otherwise suffered by the Indemnified Parties, if any), expenses,
judgements, costs and liabilities (including reasonable attorneys' fees and
costs) incurred by the Indemnified Parties arising from the Indemnifying
Party's breach of any obligation, representation or warranty contained in
this Agreement. Notwithstanding the foregoing: (i) any claims for
indemnification that VSI (or its Affiliates) may have pursuant to this
Section 15.4 will exclude claims based on information known by VSI (or its
Affiliates or Bloomfield or its Affiliates) as of the Funding Date, whether
or not such information formed the basis of the issues raised by Bloomfield
during Due Diligence and whether or not asserted prior to the Walk Away
Notice or thereafter; and (ii) any claims for indemnification that PEGI may
have pursuant to this Section 15.4 will exclude claims based on information
known by PEGI as of the Funding Date. In the event of a dispute regarding a
claim for indemnification, the Indemnified Party will have the burden of
proof in establishing the validity and amount of the claim, and the
Indemnifying Party will have the burden of proof in establishing any
defense to such claim, including but not limited to, a defense asserted by
PEGI that the applicable Person had knowledge of the requisite facts.

                                 ARTICLE 16
                             DISPUTE RESOLUTION

         16.1 Alternative Dispute Resolution. Any dispute arising out of or
relating to this Agreement will be resolved in accordance with the
procedures specified in this Article 16, which will be the sole and
exclusive procedures for the resolution of any such disputes; provided,
however, that this Article will not apply to any dispute concerning the
validity, ownership or control of the trademarks licensed by PEII to the
Company pursuant to the Trademark License Agreement or the copyrights to
any programming supplied by PEGI pursuant to the Program Supply Agreement,
and instead any such dispute will be litigated in a court of law. The
parties intend that these provisions will be valid, binding, enforceable
and irrevocable and will survive any termination of this Agreement or of
the Related Documents.

         16.2 Notification and Negotiation. The parties will promptly
notify each other in writing of any dispute arising out of or relating to
this Agreement. The parties will attempt in good faith to resolve any
dispute arising out of or relating to this Agreement promptly by
negotiation between executives who have authority to settle the
controversy. All reasonable requests for information made by one party to
the other will be honored. All negotiations pursuant to this clause are
confidential and will be treated as compromise and settlement negotiations
for purposes of applicable rules of evidence.

         16.3 Mediation. If any such dispute remains unresolved within
thirty (30) days of original notice thereof, the parties will endeavor to
resolve any dispute arising out of or relating to this Agreement by
mediation under the CPR Mediation Procedure for Business Disputes. Unless
the parties agree otherwise, the mediator will be selected from the CPR
Panel of Neutrals with notification to CPR.

         16.4 Arbitration. Any controversy or claim arising out of or
relating to this Agreement or the breach, termination or validity thereof,
which remains unresolved forty-five (45) days after appointment of a
mediator, will be settled by arbitration by a sole arbitrator in accordance
with the CPR Non-Administered Arbitration Rules; provided, however, that if
either party will not participate in a non-binding procedure described
above, the other may initiate binding arbitration before expiration of the
above period. The arbitration will be governed by the United States
Arbitration Act, 9 U.S.C. ss. 1-16, and judgment upon the award rendered by
the arbitrator may be entered by any court having jurisdiction thereof. The
place of arbitration will be Los Angeles, California. Pending any final
determination by the arbitrator pursuant to this Section 16.4, a Member may
seek preliminary or temporary relief, if appropriate, in any federal or
state court located in Los Angeles County, California.

         16.5 Damages. Except as expressly provided below, the arbitrator
is not empowered to award damages in excess of compensatory damages and
each party hereby irrevocably waives any right to recover such damages with
respect to any dispute resolved by arbitration. The arbitrator will have
the authority to include, as an item of damages, the costs of arbitration,
including reasonable legal fees and expenses, incurred by the prevailing
party and to apportion such costs among the parties on a claim by claim
basis as such party prevails thereon. For purposes of the foregoing, the
"prevailing party" will mean the party whose final settlement offer (or
other position or monetary claim) prior to the start of arbitration is
closest to the judgement awarded by the arbitrator, regardless of whether
such judgement is entered into in favor of or against such party.

         16.6 Statute of Limitations. The statute of limitations of the
State of California applicable to the commencement of a lawsuit will apply
to the commencement of an arbitration hereunder, except that no defenses
will be available based upon the passage of time during any negotiation or
mediation called for by the preceding paragraphs of this Article 16.

         16.7 Confidential Negotiations. All negotiations pursuant to
Sections 16.2 and 16.3 are confidential and will be treated as compromise
and settlement negotiations for purposes of applicable rules of evidence.

         16.8 Service of Process. Each party agrees that service by
registered or certified mail, return receipt requested, delivered to such
party at the address provided in Section 17.11 (Notices) below, will be
deemed in every respect effective service of process upon such Person for
all purposes of these provisions relating to mediation and arbitration.
Each party irrevocably submits to the jurisdiction of the courts of the
State of California and to any federal court located within such state for
the purpose of any action or judgement with respect to this Agreement,
regardless of where any alleged breach or other action, omission, fact or
occurrence giving rise thereto occurred. Each party hereby irrevocably
waives any claim that any action or proceeding brought in Los Angeles
County, California, has been brought in any inconvenient forum.

         16.9 Additional Arbitration Provisions. The parties will negotiate
in good faith and agree on such further or modified arbitration provisions
as are reasonably necessary for awards and other judgements resulting from
the provisions set forth above to be recognized and enforceable in other
jurisdictions in the Territory.

                                 ARTICLE 17
                               MISCELLANEOUS

         17.1 Superseding Agreements. This Agreement, the Program Supply
Agreement, the Trademark License Agreement, the Stock Purchase Agreements
and the Release, when executed by the parties, will supersede and replace
the Agreement Outline and the Agreement Outline will be of no further force
or effect.

         17.2 Documents and Acts. Each Member agrees to execute and deliver
such additional documents and instruments and to perform such additional
acts as may be necessary or appropriate to effectuate, carry out and
perform all of the terms, provisions, and conditions of this Agreement and
the transactions contemplated hereby.

         17.3 Time is of the Essence. All dates and times in this Agreement
are of the essence.

         17.4 Remedies Cumulative. The remedies under this Agreement are
cumulative and will not exclude any other remedies to which any Person may
be lawfully entitled.

         17.5 Currency; Payments.

               17.5.1 All amounts due from one Member to another Member,
from the Company to one or more Members or from one or more Members to the
Company pursuant to this Agreement and the other Related Documents will be
paid in U.S. Dollars. If any portion of such payment is calculated on the
basis of revenues received in other currencies, such revenues will be
calculated using the exchange rate published in the Wall Street Journal, as
of the business day immediately preceding the date on which the payment
initially is due. Such exchange rate will also apply to any portion of a
payment which is permitted to be deferred, regardless of whether such
deferred payment is represented by a promissory note or other instrument.

               17.5.2 All payments owing pursuant to this Agreement and the
other Related Documents will be made by wire transfer of immediately
available funds, net of any withholding required by applicable law. Each
Member and the Company will from time to time designate one or more
accounts into which such payments will be made and may designate one or
more Affiliates to receive such payments.

               17.5.3 Any payment hereunder or under the other Related
Documents not made when due will bear interest from the date due to and
including the date of payment in full at a rate equal to the Reference Rate
as in effect on the date payment was due.

         17.6 Governing Law. All questions with respect to this Agreement
and the relationships of the parties hereunder will be governed by the
internal laws of the State of Delaware, regardless of the choice of law
principles of the State of Delaware or any other jurisdiction.

         17.7 Assignment; No Third Party Beneficiary. Neither the Company
nor any Member will assign its rights or delegate its obligations hereunder
without written consent of all of the Members except to an Affiliate of the
Company or such Member; provided that no such assignment will relieve the
assignor of its obligations. The provisions of this Agreement are for the
benefit only of the Company and the Members, and no third party may seek to
enforce or benefit from these provisions except that the Persons
indemnified by the Company pursuant to Section 13.1 will be third party
beneficiaries of this Agreement with respect to such Section only and will
have independent standing to enforce or benefit from such Section.

         17.8 Agreement Negotiated. The Members are sophisticated and have
been represented by lawyers throughout the negotiation and execution of
this Agreement who have carefully negotiated the provisions hereof. As a
consequence, the parties do not believe the presumption of California Civil
Code Section 1654 and similar laws or rules relating to the interpretation
of contracts against the drafter of any particular clause should be applied
in this case and therefore waive its effects.

         17.9 Waivers, Remedies Cumulative, Amendments, etc.

               17.9.1 No failure or delay by the Company or any Member in
exercising any right, power or privilege under this Agreement will operate
as a waiver thereof nor will any single or partial exercise by any of them
of any right, power or privilege preclude any further exercise thereof or
the exercise of any other right, power or privilege.

               17.9.2 The rights and remedies herein provided are
cumulative and not exclusive of any rights and remedies provided by law.

               17.9.3 No provision of this Agreement may be amended,
modified, waived, discharged or terminated, other than by the express
written agreement of all of the Members nor may any breach of any provision
of this Agreement be waived or discharged except with the express written
consent of the party(ies) not in breach.

         17.10 Notices. All notices, requests, demands and other
communications required to be given under this Agreement will be in writing
and will conclusively be deemed to have been duly given to each Member (a)
when hand delivered, (b) the next business day if sent by a generally
recognized overnight courier service that provides written acknowledgment
by the addressee of receipt, or (c) when received, if sent by facsimile
(with appropriate answer back) or other generally accepted means of
electronic transmission addressed as follows:

                    if to PEGI to:

                    Playboy Entertainment Group, Inc.
                    Attention:  President
                    9242 Beverly Boulevard
                    Beverly Hills, CA  90210
                    United States of America
                    Fax Number:  (310) 246-4065

                    with a copy to:

                    Playboy Enterprises, Inc.
                    Attention:  General Counsel
                    680 North Lake Shore Drive
                    Chicago, IL  60611
                    United States of America
                    Fax Number:  (312) 266-2042

                    if to VSI to:

                    Victoria Springs Investments Ltd.
                    c/o  Cisneros Television Group
                    Attention: Director Legal and Business Affairs
                    404 Washington Avenue
                    8th Floor
                    Miami Beach, Florida  33139
                    Fax Number:  (305) 894-3606

                    with a copy to:

                    Glenn Dryfoos, Esq.
                    Greenberg Glusker Fields Claman
                       & Machtinger LLP
                    1900 Avenue of the Stars
                    Suite 2100
                    Los Angeles, CA  90067
                    United States of America
                    Fax Number:  (310) 553-0687

                    if to the Company to:

                    Playboy TV International, LLC
                    404 Washington Avenue
                    8th Floor
                    Miami Beach, Florida  33139
                    Fax Number:  (305) 894-3606

                    with copies to PEGI and VSI

or to such other address, or facsimile transmission number as the relevant
addressee may hereafter by notice hereunder substitute.

         17.11 Public Announcements. Unless otherwise mutually agreed by
VSI and PEGI, or as required by law or by the stock exchange on which any
Member's stock, or the stock of any direct or indirect parent of a Member,
is traded, no public announcement will be made by any of the Company, any
Member, any Manager, any Director, the President or any other officer of
the Company or any of their respective Affiliates with respect to the
subject matter of this Agreement.

         17.12 Survival. Notwithstanding the termination of this Agreement,
the dissolution of the Company, or a Member's ceasing to be a Member under
this Agreement, the following sections of this Agreement will survive
indefinitely and be enforceable by PEGI or VSI: Section 12.7, Section 13.1,
Article 16 and this Section 17.12.


               IN WITNESS WHEREOF, the parties have caused their duly
authorized officers to execute this Agreement, effective as of the
Effective Date.


                                      PLAYBOY ENTERTAINMENT GROUP, INC.


                                      By:  /s/ Anthony J. Lynn
                                         ------------------------------------
                                               Name:  Anthony J. Lynn
                                               Title: President


                                      VICTORIA SPRINGS  INVESTMENTS LTD.


                                      By:  /s/ Jay Scharer
                                         ------------------------------------
                                               Name:  Jay Scharer
                                               Title: Attorney-in-fact


                                      By:  /s/ Glenn Dryfoos
                                         ------------------------------------
                                               Name:  Glenn Dryfoos
                                               Title: Attorney-in-fact


ACKNOWLEDGED, ACCEPTED AND AGREED
AS TO SECTIONS 9.2.3, 9.2.4 AND EXHIBIT F:


PLAYBOY ENTERPRISES, INC.

By:  /s/ Anthony J. Lynn
    -------------------------------
         Name:  Anthony J. Lynn
         Title: Executive Vice President



<TABLE>
<CAPTION>

                                                     EXHIBIT A

                                   CAPITAL CONTRIBUTION AND ADDRESSES OF MEMBERS
                                               AS OF AUGUST 31, 1999



                                           Member's               Member's Initial Cash     Percentage
        Member's Name                      Address                Capital Contribution       Interest
        -------------                     ---------               ---------------------     ----------


<S>                                       <C>                        <C>                     <C>
Playboy Entertainment Group,              See Section                $8,756,000              19.9%
Inc.                                      17.11

Victoria Springs Investments              See Section                $35,244,000             80.1%
Ltd.                                      17.11

</TABLE>



                                 EXHIBIT B

                              TAX ALLOCATIONS

                                 ARTICLE 1
                    ALLOCATION OF NET INCOME, NET LOSSES
                     AND OTHER ITEMS AMONG THE MEMBERS

         1.1 Capital Accounts.

               (a) A separate capital account will be maintained for each
Member (a "Capital Account"). Such Member's Capital Account will from time
to time be

                   (i) increased by

(A) the amount of money and the Gross Asset Value of any property
contributed by the Member to the Company (net of liabilities secured by the
property or to which the property is subject), and

(B) the Net Income and any other items of income and gain specially
allocated to the Member under Paragraph 1.3, and

                   (ii) decreased by

(A) the amount of money and the Gross Asset Value of any property
distributed to the Member by the Company (net of liabilities secured by the
property or to which the property is subject), and

(B) the Net Losses and any other items of deduction and loss specially
allocated to the Member under Paragraph 1.3.

               (b) For purposes of this Paragraph 1.1, an assumption of a
Member's unsecured liability by the Company will be treated as a
distribution of money to that Member. An assumption of the Company's
unsecured liability by a Member will be treated as a cash contribution to
the Company by that Member.

               (c) In the event that assets of the Company other than money
are distributed to a Member in liquidation of the Company, or in the event
that assets of the Company other than money are distributed to a Member in
kind, in order to reflect unrealized gain or loss, Capital Accounts for the
Members will be adjusted for the hypothetical "book" gain or loss that
would have been realized by the Company if the distributed assets had been
sold for their Gross Asset Values in a cash sale. In the event of the
liquidation of a Member's interest in the Company, in order to reflect
unrealized gain or loss, Capital Accounts for the Members will be adjusted
for the hypothetical "book" gain or loss that would have been realized by
the Company if all Company assets had been sold for their Gross Asset
Values in a cash sale. Capital Accounts will also be adjusted upon the
constructive termination of the Company as provided under Section 708 of
the Code as required by Section 1.704-1(b)(2)(iv)(1) of the Treasury
Regulations.

         1.2 Allocation of Net Income and Net Losses. After giving effect
to the special allocations set forth in Paragraph 1.3 below, Net Income and
Net Losses of the Company for each Fiscal Year will be allocated to the
Members in accordance with their respective Percentage Interests.

         1.3 Special Allocations. In addition to the special allocation of
net revenues from the Distribution Agreement pursuant to Section 7.4.4, the
following special allocations will be made in the following order:

               (a) Minimum Gain Chargeback. Subject to the exceptions set
forth in Treasury Regulation Section 1.704-2(f), if there is a net decrease
in Company Minimum Gain during a Company Fiscal Year, each Member will be
specially allocated items of income and gain for Capital Account purposes
for such year (and, if necessary, for subsequent years) in an amount equal
to such Member's share of the net decrease in Company Minimum Gain during
such year (which share of such net decrease will be determined under
Treasury Regulation Section 1.704-2(g)(2)). It is intended that this
Paragraph 1.3(a) will constitute a "minimum gain chargeback" as provided by
Treasury Regulation Section 1.704-2(f).

               (b) Member Nonrecourse Debt Minimum Gain Chargeback. Subject
to the exceptions contained in Treasury Regulation Section 1.704-2(i)(4),
if there is a net decrease in Member Nonrecourse Debt Minimum Gain during a
Company Fiscal Year, any Member with a share of such Member Nonrecourse
Debt Minimum Gain (determined in accordance with Treasury Regulation
Section 1.704-2(i)(5)) as of the beginning of such year will be specially
allocated items of income and gain for Capital Account purposes for such
year (and, if necessary, for subsequent years) in an amount equal to such
Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain
(which share of such net decrease will be determined under Treasury
Regulation Sections 1.704-2(i)(4) and 1.704-2(g)(2)). It is intended that
this Paragraph 1.3(b) will constitute a "partner nonrecourse debt minimum
gain chargeback" as provided by Treasury Regulation Section 1.704-2(i)(4).

               (c) Nonrecourse Deductions. Any Nonrecourse Deductions will
be allocated to the Members in accordance with their Percentage Interests.

               (d) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions will be allocated to the Member that takes the Economic Risk of
Loss for the Member Nonrecourse Debt to which such deductions relate as
provided in Treasury Regulation Section 1.704-2(i)(1).

               (e) Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations, or distributions
described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Company
income and gain for Capital Account purposes for such Fiscal Year will be
specially allocated to the Member in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulations, the Adjusted
Capital Account Deficit of the Member as quickly as possible, provided that
an allocation pursuant to this Paragraph 1.3(e) will be made if and only to
the extent that the Member would have an Adjusted Capital Account Deficit
after all other allocations provided for in this Article 1 have been
tentatively made as if this Paragraph 1.3(e) were not in the Agreement.

               (f) Section 754 Adjustment. To the extent any adjustment to
the adjusted tax basis of any Company asset pursuant to Code Section 734(b)
or Code Section 743(b) is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts will be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis) and such gain or
loss will be specially allocated to the Members in a manner consistent with
the manner in which their Capital Accounts are required to be adjusted
pursuant to such section of the Treasury Regulations.

               (g) It is the intent of the allocation provisions of this
Exhibit B that the distributions to the Members pursuant to Article 12 will
be equal to the positive Capital Account balances of the Members (as
determined after taking into account all Capital Account adjustments for
the year prior to any liquidating distributions). If such Capital Account
Balances would otherwise not satisfy the intent described in the preceding
sentence, then the Manager will reallocate items of gross income or
deduction for the year of such liquidating distributions (and, if
necessary, for prior taxable years of the Company for which amended tax
returns can be and are filed) such that, to the extent possible, the
positive Capital Account balances of the Members (as determined after
taking into account all Capital Account adjustments for the year of
liquidation) will be equal to the distributions to be received by the
Members pursuant to Article 12.

         1.4 Allocation of Certain Tax Items.

               (a) Except as otherwise provided in this Paragraph 1.4, all
items of income, gain, loss or deduction for federal, state and local
income tax purposes will be allocated in the same manner as the
corresponding "book" items are allocated under Paragraph 1.2 (as a
component of Net Income or Net Losses), or 1.3.

               (b) In accordance with Code Section 704(c) and the
Regulations thereunder, income, gain, loss and deduction with respect to
any property contributed to the capital of the Company will, solely for tax
purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Company for
federal income tax purposes and the initial Gross Asset Value thereof
(computed in accordance with subparagraph (i) of the definition of the term
Gross Asset Value herein).

               (c) In the event the Gross Asset Value of any Company asset
is adjusted pursuant to subparagraph (ii) or (iv) of the definition of the
term Gross Asset Value, subsequent allocations of income, gain, loss and
deduction with respect to such asset will take account of any variation
between the adjusted basis of such asset for federal income tax purposes
and its Gross Asset Value in the same manner as under Code Section 704(c)
and the Regulations thereunder.

               (d) In the event the Company has in effect an election under
Section 754 of the Code, allocations of income, gain, loss or deduction to
affected Members for federal, state and local tax purposes will take into
account the effect of such election pursuant to applicable provisions of
the Code.

               (e) Any elections or other decisions relating to such
allocations will be made by the Manager in any manner that reasonably
reflects the purpose and intention of this Agreement. Allocations pursuant
to this Paragraph 1.4 are solely for federal, state and local tax purposes
and will comprise the information furnished to such Members in their
Schedule K-1s each year. Except to the extent allocations under this
Paragraph 1.4 are reflected in the allocations of the corresponding "book"
items pursuant to Paragraph 1.2 (as a component of Net Income or Net
Losses), or 1.3, allocations under this Paragraph 1.4 will not affect, or
in any way be taken into account in computing, any Member's Capital Account
or share of Net Income, Net Losses, other items or distributions pursuant
to any provision of this Agreement.

               (f) Subject to subsection (g) below, to the extent possible
any tax credits will be allocated in accordance with each Member's
Percentage Interest.

               (g) All foreign withholding taxes or income taxes paid by
the Company or by any affiliate (or on behalf of the Company or of its
affiliate by a foreign payor) in respect of interest, dividends, rents,
royalties, license fees, service fees or other fixed or determinable annual
or periodical gains, profits and income, or any penalties, inflationary
adjustment, or interest assessed by any taxing authority related to the
failure by the Company or any affiliate (or any foreign payor) to pay (or
withhold) such tax at the proper rate will be charged as an expense
directly to the Party in the amount paid by the Company or other payor on
such item of income as if a proportionate share of each of such items of
income corresponding to the Party's percentage interest in the Company had
been paid directly from the foreign payor to the Party. Distributive shares
of net income or loss will be calculated pursuant to this provision and
correspondingly reflected in the Capital Accounts of the Company.

         1.5 Allocation Between Assignor and Assignee. The portion of the
income, gain, losses, credits, and deductions of the Company for any Fiscal
Year of the Company during which a Membership Interest is assigned by a
Member (or by an assignee or successor in interest to a Member), that is
allocable with respect to such Membership Interest will be apportioned
between the assignor and the assignee of the Membership Interest on
whatever reasonable, consistently applied basis selected by the Manager and
permitted by the applicable Treasury Regulations under Section 706 of the
Code.

                                 ARTICLE 2
                                DEFINITIONS

         As used in this Exhibit B, the following terms will have the
following meaning:

         "Capital Account" will have the meaning set forth in Section 1.1.

         "Company Minimum Gain" with respect to any year means the
"partnership minimum gain" computed in accordance with the principles of
Section 1.704-2(d)(1) of the Treasury Regulations.

         "Depreciation" means, for each Fiscal Year or other period, an
amount equal to the depreciation, amortization, or other cost recovery
deduction allowable for federal income tax purposes with respect to an
asset for such year or other period, except that if the Gross Asset Value
of any asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation will
be an amount which bears the same ratio to such beginning Gross Asset Value
as the federal income tax depreciation, amortization, or other cost
recovery deduction for such year or other period bears to such beginning
adjusted tax basis, provided, however, that if the federal income tax
depreciation, amortization, or other cost recovery deduction for such year
is zero, Depreciation will be determined with reference to such beginning
Gross Asset Value using any reasonable method selected by the Manager.

         "Economic Risk of Loss" will have the meaning provided by Sections
1.704-2(b)(4) and 1.752-2 of the Treasury Regulations.

         "Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:

                    (i) the initial Gross Asset Value of any asset
                    contributed by a Member to the Company will be the
                    gross fair market value of such asset, as determined by
                    the contributing Member and the Company; and

                    (ii) the Gross Asset Value of all Company assets will
                    be adjusted to equal their respective gross fair market
                    values, as determined by the Manager, as of the
                    following times: (a) the acquisition of an additional
                    interest in the Company by any new or existing Member
                    in exchange for more than a de minimis capital
                    contribution; (b) the distribution by the Company to a
                    Member of more than a de minimis amount of Company
                    property as consideration for an interest in the
                    Company, in the case of either (a) or (b), if the
                    Members reasonably determine that such adjustment is
                    necessary or appropriate to reflect the relative
                    economic interests of the Members in the Company within
                    the meaning of Section 1.704-1(b)(2)(i)(g) of the
                    Regulations; and (c) the liquidation of a Member's
                    interest in the Company or the Company within the
                    meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury
                    Regulations;

                    (iii) the Gross Asset Value of any Company asset
                    distributed to any Member will be the gross fair market
                    value of such asset on the date of distribution;

                    (iv) the Gross Asset Values of Company assets will be
                    increased (or decreased) to reflect any adjustments to
                    the adjusted basis of such assets pursuant to Section
                    734(b) or Section 743(b) of the Code, but only to the
                    extent that such adjustments are taken into account in
                    determining Capital Accounts pursuant to Treasury
                    Regulation Section 1.704-1(b)(2)(iv)(m) and Paragraph
                    1.4(g) hereof, provided, however, that Gross Asset
                    Values will not be adjusted pursuant to this
                    subparagraph (iv) to the extent that the Members
                    determine that an adjustment pursuant to subparagraph
                    (ii) of this definition is necessary or appropriate in
                    connection with a transaction that would otherwise
                    result in an adjustment pursuant to this subparagraph
                    (iv); and

                    (v) if the Gross Asset Value of any asset has been
                    determined or adjusted pursuant to subparagraphs (i),
                    (ii) or (iv) hereof, such Gross Asset Value will
                    thereafter be adjusted by the Depreciation taken into
                    account with respect to such asset for purposes of
                    computing gains or losses from the disposition of such
                    asset.

         "Member Nonrecourse Debt" means liabilities of the Company treated
as "partner nonrecourse debt" under Section 1.704-2(b)(4) of the Treasury
Regulations.

         "Member Nonrecourse Debt Minimum Gain" means an amount of gain
characterized as "partner nonrecourse debt minimum gain" under Treasury
Regulation Section 1.704-2(i)(2) and 1.704-2(i)(3).

         "Member Nonrecourse Deductions" in any year means the Company
deductions that are characterized as "partner nonrecourse deductions" under
Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Treasury Regulations.

         "Net Income" and "Net Losses" mean, for each Fiscal Year or other
period, an amount equal to the Company's taxable income or loss, as
applicable for such year or period, determined in accordance with Section
703(a) of the Code (for this purpose, all items of income, gain, loss and
deduction required to be stated separately pursuant to Section 703(a)(1) of
the Code will be included in taxable income or loss), with the following
adjustments: (i) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Net Income or
Net Losses pursuant to this paragraph will be added to such taxable income
or loss; (ii) any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Treasury Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise
taken into account in computing Net Income or Net Losses pursuant to this
paragraph will be subtracted from such taxable income or loss; (iii) in the
event the Gross Asset Value of any Company asset is adjusted pursuant to
subparagraph (ii), (iii) and (iv) of the definition thereof, the amount of
such adjustment will be taken into account as gain or loss from the
disposition of such asset for purposes of computing Net Income or Net
Losses; (iv) gain or loss resulting from the disposition of any Company
asset with respect to which gain or loss is recognized for federal income
tax purposes will be computed by reference to the Gross Asset Value of the
asset disposed of, notwithstanding that the adjusted tax basis of such
asset differs from its Gross Asset Value; (v) in lieu of the depreciation,
amortization, and other cost recovery deductions taken into account in
computing such taxable income or loss, there will be taken into account
Depreciation for such Fiscal Year or other period, computed in accordance
with the definition thereof; and (vi) notwithstanding any other provision
of this paragraph, any items which are specially allocated pursuant to
Paragraph 1.4 hereof will not be taken into account in computing Net Income
and Net Losses.

         "Nonrecourse Deductions" in any year means the Company deductions
that are characterized as "nonrecourse deductions" under Sections
1.704-2(b)(1) and 1.704-2(c) of the Treasury Regulations.

         "Nonrecourse Liabilities" means liabilities of the Company treated
as "nonrecourse liabilities" under Section 1.704-2(b)(3) and 1.752-1(a)(2)
of the Treasury Regulations.

         "Treasury Regulations" means the income tax regulations (including
temporary and proposed) promulgated under the Code.

         Other Definitions. All other capitalized terms used in this
Exhibit B will have the same meaning as in the text of the Agreement.


                                 EXHIBIT C

           SCHEDULE OF MANDATORY ADDITIONAL CAPITAL CONTRIBUTIONS

                               (See attached)





                                 EXHIBIT D

                               BUSINESS PLAN

                               (See attached)

                                   * * *

[eight pages omitted pursuant to confidential treatment request]





                                 EXHIBIT E

                   APPRAISED FAIR MARKET VALUE PROCEDURE

                                   * * *




                                 EXHIBIT F

                             ROLL-UP PROCEDURE


         In the event PEI proposes to sell or otherwise dispose of all or
any portion of the shares of PEGI or of any Affiliate of PEGI or PEI who is
then a Member of the Company (the "PEGI Entity"), whether such shares are
outstanding or newly issued, pursuant to any initial public offering, a
spin-off or other distribution of such shares (each, an "IPO"), VSI may
elect to require that PEI and/or such PEGI Entity cause the Company to be
"rolled up" into such IPO pursuant to the following mechanism:

                                   * * *

[two pages omitted pursuant to confidential treatment request]