Document:

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                                                               Exhibit 10.4

                               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.

                                    TABLE OF CONTENTS

                                                                            Page

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

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         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

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         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

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         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

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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

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

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         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.

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         "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

<PAGE>   8

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

<PAGE>   9

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.

<PAGE>   10

         "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.

<PAGE>   11

         "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

<PAGE>   12

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.

<PAGE>   13

         "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

<PAGE>   14

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

<PAGE>   15

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

<PAGE>   16

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

<PAGE>   17

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

<PAGE>   18

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.

<PAGE>   19

         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:

<PAGE>   20

               (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

<PAGE>   21

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

<PAGE>   22

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

<PAGE>   23

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

<PAGE>   24

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

<PAGE>   25

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.

<PAGE>   26

               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

<PAGE>   27

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

<PAGE>   28

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

<PAGE>   29

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:

<PAGE>   30

               (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

<PAGE>   31

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

<PAGE>   32

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.

<PAGE>   33

               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

<PAGE>   34

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

<PAGE>   35

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

<PAGE>   36

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

<PAGE>   37

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

<PAGE>   38

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

<PAGE>   39

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:

<PAGE>   40

               (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.

<PAGE>   41

               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

<PAGE>   42

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

<PAGE>   43

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

<PAGE>   44

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

<PAGE>   45

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

<PAGE>   46

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

<PAGE>   47

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

<PAGE>   48

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

<PAGE>   49

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

<PAGE>   50

                    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

<PAGE>   51

    -------------------------------
         Name:  Anthony J. Lynn
         Title: Executive Vice President

                                    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
        -------------           ---------     ---------------------    --------

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

                                    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

<PAGE>   52

(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).

<PAGE>   53

               (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

<PAGE>   54

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.

<PAGE>   55

                                    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;

<PAGE>   56

                    (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

<PAGE>   57

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

<PAGE>   58

         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]<PAGE>   1
                                                               Exhibit 10.5

                         -------------------------
                            PLAYBOY TV INTERNATIONAL
                            PROGRAM SUPPLY AGREEMENT
                         -------------------------

                                      Among
                     PLAYBOY ENTERTAINMENT GROUP, INC.
                                   as Licensor
                                       and
                          PLAYBOY TV INTERNATIONAL LLC
                                       and
                                  PTV U.S., LLC
                                   as Licensee

                                 August 31, 1999

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.

                                TABLE OF CONTENTS

                                                                            Page

1.       DEFINITIONS.........................................................1

2.       GRANT OF LICENSE....................................................7
         2.1      To PTVI....................................................7
                  2.1(a)   Existing Library. ................................7
                  2.1(b)   Licensor Output.  ................................8
                  2.1(c)    "Wall-to-Wall" Material..........................8
         2.2      To PTV U.S.................................................8
         2.3      All Other Rights Retained by Licensor......................8
         2.4      Approved Uses of Company Programming.......................8
                  2.4(a)   Operation of the Channels.........................8
                  2.4(b)   Sub-licensing.....................................9
                  2.4(c)   Editing...........................................9
         2.5      Assignment of Existing Licenses............................9
         2.6      Residuals and Co-Production Payments.......................9
         2.7      Alta Loma Programs........................................10
                  2.7(a)   Option to Acquire Rights.........................10
                  2.7(b)   Programs for Playboy TV "Lite"...................10
         2.8      Exclusive Program Supplier................................10

3.       LICENSE TERM AND MEDIA HOLDBACKS...................................10
         3.1      License Term..............................................10

<PAGE>   2

                  3.1(a)   Program License Agreement........................10
                  3.1(b)   Existing Library Programs........................11
                  3.1(c)   Output Programs.  ...............................11
                  3.1(d)   Licensor Acquired Programs.......................11
         3.2      Holdbacks. ...............................................11
         3.3      Other Home Video Rights...................................11

4.       CENSORSHIP; WITHDRAWAL OF PROGRAMS.................................11
         4.1      Censorship................................................11
         4.2      Withdrawal of Programs....................................12
         4.3      Advertising...............................................12

5.       DELIVERY AND RETURN................................................13
         5.1      Access and Delivery Items.................................13
         5.2      Title to Delivery Materials...............................13

6.       PROGRAM LICENSE FEES...............................................13
         6.1      Existing Program Library and Wallpaper....................13
         6.2      Output Programs...........................................14
                  6.2(a)   General Payment Terms............................14
                  6.2(b)   Production Budget................................14
                  6.2(c)   Licensor Production Obligations..................14
                  6.2(d)   Calculation of License Fee for Output Programs...15
                  6.2(e)   Fixed Percentage. ...............................15
                  6.2(f)   The Reset Mechanism..............................15
                  6.2(g)   Licensee Production Budget Option................16
                  6.2(h)   Production Supply Option.........................16
                  6.2(i)   * * *............................................17
         6.3      Maintenance of Records and Audit Rights...................17

7.       REPRESENTATIONS AND WARRANTIES; INDEMNITIES........................18
         7.1      Representations and Warranties............................18
                  7.1(a)   By Licensor......................................18
                  7.1(b)   By Licensee......................................19
         7.2      Indemnification...........................................19
                  7.2(a)   By Licensor......................................19
                  7.2(b)   By the Licensee..................................20
         7.3      Musical Compositions......................................20
         7.4      Procedure.................................................20
         7.5      Taxes.....................................................21

8.       TERMINATION........................................................21
         8.1      Expiration of Term........................................21
         8.2      Early Termination on Breach...............................21

9.       EFFECTS OF TERMINATION.............................................22
         9.1      Survival of Obligations...................................22
         9.2      Termination of Rights.....................................22
         9.3      Further Assurances........................................23

10.      EQUITABLE RELIEF...................................................23

11.      DISPUTE RESOLUTION.................................................23
         11.1     General Agreement Regarding Dispute Resolution............23
         11.2     Notification and Negotiation..............................23
         11.3     Mediation. ...............................................23
         11.4     Arbitration...............................................24
         11.5     Damages.   ...............................................24
         11.6     Statute of Limitations....................................24
         11.7     Confidential Negotiations.................................24

<PAGE>   3

         11.8     Service of Process; Forum.................................24
         11.9     Additional Provisions to Enforce Awards...................25

12.      MISCELLANEOUS......................................................25
         12.1     Force Majeure.............................................25
         12.2     Binding Effect; No Assignment.............................25
         12.3     Invalidity................................................25
         12.4     Waivers, Remedies Cumulative, Amendments, etc.............26
         12.5     Notices...................................................26
         12.6     Governing Law.............................................27
         12.7     Entire Agreement..........................................27
         12.8     Rules of Construction.....................................28
                  12.8(a)  Headings.........................................28
                  12.8(b)  Tense and Case...................................28
                  12.8(c)  Agreement Negotiated.............................28
         12.9     Counterparts..............................................28
         12.10    Relationship Between the Parties..........................28
         12.11    Time is of the Essence....................................28
         12.12    Effectiveness.............................................28

         THIS PROGRAM SUPPLY AGREEMENT (this "Agreement") is made and entered
into on August 31, 1999, among Playboy Entertainment Group, Inc., a Delaware
corporation ("PEGI"), Playboy TV International LLC, a Delaware limited liability
company ("PTVI"), and PTV U.S., LLC, a Delaware limited liability company ("PTV
U.S.").

                                    RECITALS

         WHEREAS, PTVI and PTV U.S. have been formed to engage in the
business of owning and operating television channels and of selling
television programming to third parties;

         WHEREAS, PEGI and certain of its Affiliates are the owner of certain
rights in and to certain television programs and will acquire certain rights in
and to certain additional television programs, as described herein;

         WHEREAS, PEGI has transferred to PTVI the stock of certain Danish
companies which own rights in certain of the television programs which are
subject to this Agreement, and Licensee has agreed to certain restrictions with
respect to the use of such programs as set forth in this Agreement;

         WHEREAS, PEGI has transferred to PTVI the stock of certain U.K.
companies which own rights in certain of the television programs which are
subject to this Agreement, and Licensee has agreed to certain restrictions with
respect to the use of such programs as set forth in this Agreement;

         WHEREAS, PTVI and PTV U.S. each wish to license from Licensor and
Licensor has agreed to license to PTVI and PTV U.S. certain television
programs in their respective territories, on the terms and conditions set
forth in this Agreement.

         NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, and intending to be legally bound, the parties
agree as follows:

1.       DEFINITIONS.

<PAGE>   4

         In this Agreement (including the Recitals hereto) the following terms
will have the following meanings unless otherwise stated:

         "Actual Net Cash Flow" has the meaning set forth in Section 6.2(g).

         "Acquired Movie" means a program acquired by Licensor (or any of its
Affiliates) from a third party that is at least 60 minutes in length and
represents an edited version of an adult film (i.e., a film which contains
actual sex acts).

         "Affiliate" means any Person, directly or indirectly through one or
more intermediaries, controlling, controlled by, or under common control with
the specified Person. For purposes of the foregoing, "control" (and "controlled"
and "controlling," respectively), as used in the immediately preceding sentence,
means the possession, direct or indirect, 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). Notwithstanding the foregoing, Licensee will not
be deemed an Affiliate of either Licensor or VSI.

         "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.

         "Alta Loma Program" has the meaning set forth in Section 2.7.

         "Annual Budget" has the meaning set forth in the Operating Agreement.

         "Applicable Percentage" has the meaning set forth in Section 6.2(d).

         "Basic Cable" has the meaning currently or hereafter commonly
understood in the television industry, but will also include for all purposes of
this Agreement any broadcast or other transmission (whether by satellite or
otherwise) to television sets or other television devices, now or hereafter
known, of a program service (other than any free television terrestrial
broadcast station) (a) that is included as part of a package of program services
for which members of the public pay a periodic fee for the

<PAGE>   5

right to receive such package of program services, and (b) for which program
service a separate fee is not generally charged for the right to receive the
particular service in question.

         "Business Plan" has the meaning set forth in the Operating Agreement.

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

         "Company Aggregate Revenue" has the meaning set forth in Section
6.2(i)(ii).

         "Company Programming" means, collectively, the Existing Library
Programs, the Output Programs, the Wallpaper and the Supplemental Programs.

         "Delivery Materials" has the meaning set forth in Section 5.1.

         "End Date" has the meaning set forth in Section 3.1(a).

         "Existing Library" means the Existing Playboy Library, the
Existing Spice Library, and the Existing U.K. Library.

         "Existing Playboy Library" means the programs listed on Schedule 2.1(a)
- 1.

         "Existing Spice Library" means the programs listed on Schedule 2.1(a) -
2.

         "Existing U.K. Library" means the programs listed on Schedule 2.1(a) -
3 with respect to PTV U.K. and any and all programs in which HVC owns rights in
the Media in the Territory.

         "Fiscal Year" has the meaning set forth in the Operating Agreement.

         "Fixed Percentage" has the meaning set forth in Section 6.2(e).

         "Force Majeure" has the meaning set forth in Section 12.1.

         "Funding Date" has the meaning set forth in the Operating Agreement.

         "HVC" means Home Video Channel Limited, a company organized under the
laws of England and Wales.

         "License Term" has the meaning set forth in Section 3.1.

         "Licensee" means collectively (i) PTVI and any of its Affiliates that
hold any of the rights licensed hereunder, including the Spice Rights
Subsidiaries and the U.K. Subsidiaries; (ii) PTV US; and (iii) any such
successor or assignee of either of them as may be permitted herein.

         "Licensee Applicable Revenue" has the meaning set forth in Section
6.2(f)(iii).

         "Licensee Indemnified Parties" has the meaning set forth in Section
7.2(a).

         "Licensor" means PEGI and any of its Affiliates that hold any of

<PAGE>   6

the rights licensed hereunder, or such successor or assignee as may be
permitted herein.

         "Licensor-Acquired Programs" has the meaning set forth in Section 3.2.

         "Licensor Applicable Revenue" has the meaning set forth in Section
6.2(f)(ii).

         "Licensor Indemnified Parties" has the meaning set forth in Section
7.2(b).

         "Licensor Shortfall" has the meaning set forth in Section 6.2(c).

         "Licensor Streaming Revenue" has the meaning set forth in Section
6.2(i)(i).

         "Licensor Taxes" has the meaning set forth in Section 7.5.

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

         "Losses" has the meaning set forth in Section 7.1(a).

         "Measurement Year" has the meaning set forth in Section 6.2(i)(i).

         "Media" means all forms of television exhibition, transmission and
distribution whether now existing or developed in the future and whether on a
subscription, pay-per-view or free basis, including but not limited to the
following: (i) conventional VHF or UHF television broadcast, (ii) Basic Cable
and pay cable, (iii) "over the air pay" subscription television (STV), (iv)
direct broadcasting by satellite (DBS), (v) master antenna television systems
(MATV), (vi) multipoint distribution services (MDS), (vii) multichannel
multipoint distribution services (MMDS), (viii) satellite master antenna
television systems (SMATV), and (ix) microwave transmission; provided, however,
that Media will exclude, to the extent applicable, distribution of programs by
Streaming through any form of television.

         "Member" has the meaning set forth in the Operating Agreement.

         "Net Channel Revenues" has the meaning set forth in Section
6.2(e)(viii).

         "Operating Agreement" means the Operating Agreement for Playboy TV
International, LLC, entered into concurrently herewith, as may be amended from
time to time.

         "Option Percentage" has the meaning set forth in Section 6.2(g)(ii).

         "Output Programs" has the meaning set forth in Section 2.1(b).

         "Out Year Programs" has the meaning set forth in Section 3.1(c).

         "Overhead Cap" has the meaning set forth in Section 6.2(b).

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

<PAGE>   7

         "PEI" means Licensor's ultimate parent company, Playboy
Enterprises, Inc., a Delaware corporation.

         "PEII" means Licensor's direct parent company, Playboy Enterprises
International, Inc., a Delaware corporation.

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

         "Plan Net Cash Flow" has the meaning set forth in Section 6.2(g).

         "Production Budget" has the meaning set forth in Section 6.2(b).

         "Production Budget Option" has the meaning set forth in Section 6.2(g).

         "Production Supply Option" has the meaning set forth in Section 6.2(h).

         "Program" means any television program which is, or is scheduled to be,
broadcast or transmitted in the Service, including, but not limited to, any
Company Programming.

         "Program License Fees" has the meaning set forth in Section 6.

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

         "PTV U.K." means Playboy TV U.K./Benelux, Limited, a company
organized under the laws of England and Wales.

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

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

         "PTVLA Program Supply Agreements" means Playboy TV - Latin America
Program Supply Agreement and the AdulTVision - Latin America Program Supply
Agreement, each entered into November 10, 1998 (effective as of June 14, 1996)
between PEGI and PTVLA.

         "PTVLA Territory" is defined in the PTVLA Program Supply Agreements.

         "PTVLA/I" means Playboy TV - Latin American/Iberia, LLC, a Delaware
limited liability company and a subsidiary of PTVI, into which PTVLA will be
merged following the contribution of PTVLA to PTVI.

         "PTVLA Service" means the Spanish-and Portuguese-language television
channel known as "Playboy TV Latin American" which is produced by PTVLA and
will, following the contribution of PTVLA to PTVI and the merger of PTVLA into
PTVLA/I, be co-produced by PTVLA/I and PTV U.S.

         "Remediable Breach" has the meaning set forth in Section 8.2(b).

         "Reset Mechanism" has the meaning set forth in Section 6.2(f).

         "Reset Percentage" has the meaning set forth in Section

<PAGE>   8

6.2(f)(iv).

         "Spice Closing" means March 15, 1999, the date on which the Spice
Transaction was consummated.

         "Spice Rights Licensor" means SEI Inc. ApS, a company formed under
the laws of Denmark and a subsidiary of PEGI.

         "Spice Rights Subsidiaries" means SEI 2 ApS and SEI 3 ApS, each a
company formed under the laws of Denmark, being those companies acquired by the
Licensee pursuant to the Spice Rights Subsidiaries Stock Purchase Agreements of
even date herewith.

         "Spice Transaction" means the merger between PEI and one or more of its
Affiliates with Spice Entertainment Companies, Inc. and one or more of its
Affiliates (collectively, "Spice"), which was consummated pursuant to that
certain Agreement and Plan of Merger dated May 29, 1998.

         "Supplemental Programs" means programming produced or acquired by PTVI
and/or PTV U.S. in accordance with the Operating Agreement, whose primary use is
exhibition on one or more of the Channels.

         "Streaming" means * * *

         "Termination Date" has the meaning set forth in Section 9.2.

         "Territory" means the World, except for the United States and Canada
and their territories and possessions worldwide. For certain Existing Library
Programs and Output Programs, the Territory will exclude certain countries in
the Territory, as set forth in Schedules 2.1(a)-1, 2.1(a)-2, and 2.1(a)-3 hereto
or the extent effecting programs in which HVC owns rights.

         "Threshold Revenue" has the meaning set forth in Section 6.2(e)(viii).

         "Total Applicable Revenue" has the meaning set forth in Section
6.2(f)(iv).

         "Trademark License Agreement" means the Trademark License Agreement
between PEII and PTVI, executed concurrently herewith.

         "TV Lite Venture" has the meaning set forth in Section 6.3(b).

         "U.K. Subsidiaries" means HVC and its subsidiary, PTV U.K.

         "U.S. Hispanic Market" means those cities or regions of the United
States and its territories and possessions with a sufficient number of
Spanish-speaking households such that PTV U.S. elects, now or in the future, to
distribute the PTVLA Service in such city or region.

         "VSI" means Victoria Springs Investments Ltd., a British Virgin
Islands corporation and a member of Licensee.

         "Wallpaper" has the meaning set forth in Section 2.1(a)(iii).

2.       GRANT OF LICENSE.

         2.1 To PTVI. Upon and subject to the terms and conditions set
forth in this Agreement and to Licensor's retained rights described in

<PAGE>   9

Section 2.3, Licensor hereby grants to PTVI and PTVI hereby accepts a license of
exclusive rights under copyright during the License Term in the Media throughout
the Territory to the programs and other material described below.

               2.1(a) Existing Library. Licensor licenses to PTVI all of the
programs comprising the Existing Playboy Library. To the extent the Existing
Playboy Library includes Acquired Movies, such Movies will be licensed to the
appropriate Spice Rights Subsidiary. Rights in the Existing Spice Library and in
the Existing U.K. Library in the Media throughout the Territory have been
provided to PTVI through its acquisition of the Spice Rights Subsidiaries and
the U.K. Subsidiaries. Licensor represents and warrants that the Existing
Library consists of all programs for which Licensor (and/or its Affiliates) owns
rights in the Media in the Territory as of the date hereof, except for the
series known as "Hot Rocks" (which series or the individual programs thereof may
not be licensed by Licensor or its Affiliates to third parties for exhibition in
the Territory), including (but not limited to) "Playboy"-branded programs,
"Spice"-branded programs, adult films licensed by Licensor, and any other
programming, including the Wallpaper (as described in Section 2.1(c)). For
clarity, the parties acknowledge that the Existing Playboy Library includes all
programs produced or acquired by Licensor and/or its Affiliates pursuant to
Licensor's 1998 production budget, the Existing Spice Library includes all
programs (other than programs which are part of the Existing U.K. Library) that
Licensor (or its Affiliates) acquired in the Spice Transaction, and the Existing
U.K. Library includes all programs that Licensor (or its Affiliates) acquired
through the U.K. Subsidiaries . In the event PTVI wishes to exploit any program
for which Licensor has disclosed it, the Spice Rights Subsidiaries, or the U.K.
Subsidiaries does not have all ancillary rights necessary for such exploitation,
Licensor will employ commercially reasonable best efforts to secure the
necessary rights.

               2.1(b) Licensor Output. Each Fiscal Year Licensor will license to
PTVI all of the programs which Licensor and/or its Affiliates produce or for
which Licensor and/or its Affiliates have acquired the rights in the Media in
the Territory during that year (the "Output Programs"). The parties acknowledge
that to the extent the rights to Output Programs are controlled by the Spice
Rights Licensor, Licensor will cause the Spice Rights Licensor to license such
programs to the appropriate Spice Rights Subsidiary. For the avoidance of doubt,
the parties acknowledge that the Output Programs for Fiscal Year 1999 include
those programs produced or acquired by Licensor (or its Affiliates) pursuant to
Licensor's 1999 Production Budget, including those programs produced or acquired
prior to the date of this Agreement. The Output Programs will be similar in
content, style, mix and budget to the Existing Library Programs which were
produced during 1997 and 1998; provided, however, that the parties acknowledge
that the budgets for individual Output Programs may change over time due to
changes in general market conditions (e.g., inflation). Whenever Licensor and/or
its Affiliates acquire the rights to a program (excluding Acquired Movies) for
exploitation in the United States, it will also acquire the rights for such
program in the Media in the Territory, unless such rights are unavailable or are
not available on commercially reasonable terms. If the rights to such program
for the Territory are not available or are not acquired by Licensor, Licensor's
cost to acquire such Program will not be included in the Production Budget (as
defined in Section 6.2(b)). If the rights to such program are not available in
the Media for the Territory on commercially reasonable terms, Licensor will so
notify PTVI, and PTVI will determine whether it wishes to acquire such program.
In the event PTVI instructs Licensor to make such an acquisition, the parties
will make an appropriate adjustment for the impact of such acquisition on the
Production

<PAGE>   10

Budget and the payment by PTVI of the overage. If Licensor is able to acquire
the rights to a program (other than an Acquired Movie) for only a portion of the
Territory, it will so notify PTVI, and Licensor will acquire such rights for
PTVI only if PTVI agrees to the terms of such acquisition.

               2.1(c) "Wall-to-Wall" Material. Licensor will provide PTVI with
copies of, or laboratory access to, all bumpers, promos, interstitials and other
raw materials produced by Licensor and/or its Affiliates for use in its
television business (collectively, the "Wallpaper"). PTVI may exhibit such
materials in the form provided or may modify, edit or utilize them to create
appropriate interstitial and promotional material for the Channels, subject to
the terms and conditions of the Trademark License Agreement.

         2.2 To PTV U.S. Upon and subject to the terms and conditions set
forth in this Agreement and to Licensor's retained rights described in
Section 2.3, Licensor hereby grants to PTV U.S., effective upon the
effective date of the Operating Agreement of PTV U.S., and PTV U.S. will
accept as of such date, a license of exclusive rights under copyright
during the License Term in and to the Existing Playboy Library, Output
Programs and Wallpaper for the sole purposes of exhibiting such material on
the PTVLA Service and distributing and promoting the PTVLA Service in the
Media throughout the U.S. Hispanic Market. PTV U.S. will not have any right
to use the Existing Playboy Library, Output Programs or Wallpaper except in
connection with the operation of the PTVLA Service in the U.S. Hispanic
Market. Pursuant to that certain Distribution Agreement to be entered
between PEGI and PTV U.S., PEGI will be the exclusive sales agent for the
PTVLA Service in the U.S. Hispanic Market.

         2.3 All Other Rights Retained by Licensor. All rights not
expressly granted to PTVI and PTV U.S. hereunder are reserved to Licensor
for its own use and benefit.

         2.4 Approved Uses of Company Programming. PTVI may exploit the
Company Programming as follows:

               2.4(a) Operation of the Channels. Throughout the Territory, PTVI
will have the right to exhibit the Company Programming on the Channels. Licensor
and PTVI acknowledge and agree that the accidental or de minimis "spillover"
into the Territory of transmissions to Licensor customers outside of the
Territory will not be a breach of the grant of rights hereunder and that the
accidental or de minimis "spillover" outside of the Territory of transmissions
to PTVI customers inside the Territory will not be a breach of the grant of
rights hereunder.

               2.4(b) Sub-licensing. PTVI will have the right to license the
Company Programming to third parties for exhibition in the Territory. Except as
otherwise specifically provided herein, such sub-licensing may be conducted in
any manner that PTVI determines. The parties acknowledge that in regions where
Channels exist (or will exist in the future), PTVI may, as it determines in its
sole discretion, sub-license the Company Programs to third parties in "prior
windows" (i.e., before a given program has been exhibited on the Channel(s)), in
"downstream windows" (i.e., after a given program has been exhibited on the
Channel(s)), or in "contemporaneous windows" (i.e., where the program being
licensed to third parties has been carved out of the programming intended for
use on the Channel(s)). PTVI may, in its sole discretion and in compliance with
this Section, utilize sales agents to handle licensing of Company Programming to
third parties; provided, however, without Licensor's prior written consent,
which will not be unreasonably withheld, (i) any such sales agent will be
engaged only on

<PAGE>   11

a territory-by-territory basis; (ii) a sales agent may not enter into any
outright sales or sales of unlimited runs; (iii) all agreements negotiated on
PTVI's behalf by any sales agent will be subject to PTVI's prior approval, and
all contracts will be entered into by PTVI directly with the purchaser, which
must be an end-user (e.g., a broadcaster or DTH operator); (iv) any sales agent
will be compensated on a commissions-only basis; and (v) and any sales agency
agreement must be terminable at will by PTVI on not more than 6 months' notice.

               2.4(c) Editing. Subject to and consistent with the Trademark
License Agreement, Licensee may edit, dub or subtitle in any language, or
otherwise alter Company Programming as necessary to comply with local language
or custom or local broadcasting requirements; provided that PTV U.S. may only
dub or subtitle into Spanish or Portuguese.

         2.5 Assignment of Existing Licenses. Licensor hereby assigns to PTVI
all of Licensor's rights with respect to periods from and after July 1, 1999
under its existing licenses with third parties for the distribution or
exhibition of Existing Library Programs and Output Programs in the Territory in
the Media including the right to receive payments thereunder; provided, however,
that to the extent such existing licenses contain a grant of trademark rights,
such rights will be retained by Licensor and its Affiliates, including all
rights of approval and control. To the extent that Licensor has existing
licenses with third parties which grant such third parties rights for both the
Media and other media not included hereunder, such licenses will be assigned to
PTVI only with respect to the Media. Licensee hereby assumes and agrees to
perform all obligations of Licensor under such licenses arising with respect to
periods from and after July 1, 1999, and all of Licensor's benefits under such
licenses arising with respect to periods from and after July 1, 1999, including
the right to receive payments, will inure to the benefit of PTVI. Without
limiting the generality of the foregoing, PTVI agrees to comply with the terms
of the PTVLA Program Supply Agreements and agrees that it will not exploit
Company Programming in the PTVLA Territory in any manner which conflicts with
such agreements. PTVI will be entitled to receive all revenues generated in the
Territory by the Output Programs produced or acquired pursuant to Licensor's
1999 Production Budget, including revenues collected by Licensor prior to the
date of the Agreement, net of any amounts actually paid by Licensor or its
Affiliates that would have been PTVI's obligation had the Output Programs been
acquired by PTVI on January 1, 1999 (such as residuals, music clearance fees,
etc.). Schedule 2.5 contains a complete list of the program license agreements
which Licensor is assigning to PTVI. Upon termination of this Agreement, the
foregoing assignment of the existing licenses will automatically terminate and
all rights in the assigned licenses arising from and after the date of such
termination will revert to Licensor.

         2.6 Residuals and Co-Production Payments. Licensee will be responsible
for * * * relating to * * * but Licensor will use its commercially reasonable
efforts to * * *. Licensee will be responsible for * * * provided that Licensor
will provide Licensee with * * *

         2.7 Alta Loma Programs. The parties acknowledge that Licensor and/or
its Affiliates produce an additional stream of programs that do not carry the
"Playboy" or "Spice" brands and which do not contain nudity. These programs are
intended for "first run" on domestic television networks or channels other than
Playboy TV, Spice or AdulTVision. Licensor produces and sells such programming
under the Alta Loma banner. This programming stream may consist, from time to
time, of movies, series, and/or specials. (Any such non-nude program, whether
produced by Licensor or one of its

<PAGE>   12

Affiliates, and whether carrying the "Alta Loma" or any other brand, will be
referred to as an "Alta Loma Program").

               2.7(a) Option to Acquire Rights. At any time prior to the start
of principal photography for each Alta Loma Program, Licensor will offer PTVI
the opportunity to pay a license fee equal to * * * of the budget for that
program. If Licensee chooses to pay such license fee, it will obtain the same
rights as if that program were an Output Program (except that the budget for
that program will not be included under the Production Budget for Output
Programs for that year). If PTVI does not choose to obtain a license for a given
Alta Loma Program, PTVI will have the right to act as Licensor's exclusive sales
agent for that program throughout the Territory and will receive a * * *
distribution fee on such sales, plus reimbursement of reasonable costs;
provided, however, that in the event an Alta Loma Program is produced pursuant
to an agreement which gives a third-party co-producer or commissioning network
the right to distribute such program in a region or regions of the Territory (or
otherwise restricts Licensor's right to grant Licensee the right to act as sales
agent for such program), Licensor will pay to PTVI * * * of the total revenue
which Licensor (or its affiliates) receives from the exploitation of such
program in the Media in such region(s).

               2.7(b) Programs for Playboy TV "Lite". * * *

         2.8 Exclusive Program Supplier. Except for Supplemental Programs,
programs acquired by Licensee in the event of a Licensor Shortfall, and programs
acquired by PTVI through its acquisition of the Spice Rights Subsidiaries,
Licensor will be the exclusive supplier of all programming to Licensee.

3.       LICENSE TERM AND MEDIA HOLDBACKS

         3.1 License Term. The term of this Agreement and the license
periods for each type of Company Programming will be as follows:

               3.1(a) Program License Agreement. The term of this Agreement will
commence on the date hereof and run through the date which is the 50th
anniversary hereof (the "End Date"); provided, however, that Licensor may sooner
terminate this Agreement and the license periods described in Sections 3.1(b),
3.1(c), 3.1(d) and 3.1(e) below in the event: (i) Licensee is in material
default of its obligations under this Agreement and such default, if curable, is
not cured with thirty (30) days after Licensee has received written notice
thereof from Licensor (provided such default is not the result of action or
inaction by Licensor as a Member of PTVI; e.g., Licensor's failing to make a
mandatory capital contribution); (ii) PEII has terminated the Trademark License
Agreement; (iii) VSI is in material default of its obligations under the
Operating Agreement and Licensor elects to dissolve PTVI as the result of such
default; or (iv) PTVI is in material default of its obligations under the Stock
Purchase Agreements (as defined in the Operating Agreement) and such default, if
curable, is not cured within thirty (30) days after PTVI has received written
notice thereof from Licensor (provided such default is not the result of action
or inaction by Licensor as a Member of PTVI).

               3.1(b) Existing Library Programs. The license period for each
Existing Library Program (other than as set forth on Schedules 2.1(a)-1,
2.1(a)-2, and 2.1(a)-3) will begin on the date hereof and end on the End Date,
except with respect to programs in which HVC owns rights which will end on the
dates such rights expire.

<PAGE>   13

               3.1(c) Output Programs. The license period for each Output
Program (other than acquired programs) will begin on the date such program is
made available to Licensee pursuant to Section 5.1 and will end on the End Date.
* * *

               3.1(d) Licensor Acquired Programs. The license period for Output
Programs (other than Acquired Movies) which Licensor acquires by license from
third parties will be at least as long as the license period obtained by
Licensor for North America.

         3.2 Holdbacks. Several of the Existing Library and Output Programs will
only be available for exhibition via the Media after an "upstream" window in
home video (i.e., an exhibition period prior to any television exhibition by any
party, including Licensee). Licensor warrants that of the Output Programs
produced each year no more than fifteen (15) hours of series and specials and no
more than fifteen (15) movies (carrying the "Eros," "Impulse" or other brands)
will be subject to such "upstream" home video windows. The extent to which the
Existing Playboy Library is subject to such windows is set forth in Schedule
3.2. The maximum length of the windows going forward from the Execution Date
will be as follows: for Fiscal Year 1, 2 years; for Fiscal Years 2, 3 and 4, 1
year; for all Fiscal Years commencing with Fiscal Year 5, 6 months. At the time
its annual production slate is set, Licensor will deliver to Licensee a list of
the titles to be held back for that year.

         3.3 Other Home Video Rights. Licensor will consult with Licensee prior
to acquiring the rights to a program from a third party for home video
distribution in a region or regions within the Territory where Licensor believes
that the terms for acquiring the television rights for the Territory are not
favorable to Licensee, or the Media rights to such program are not available in
some or all of the Territory. At Licensee's request, Licensor will acquire the
program to the extent it is available. If Licensee does not request such
program, Licensor may nonetheless acquire the video rights.

4.       CENSORSHIP; WITHDRAWAL OF PROGRAMS.

         4.1 Censorship. Licensee is willing to accept and pay for the Existing
Library Programs and Output Programs regardless of censorship regulations or the
potential for same throughout the Territory or in any individual country or
political subdivision within the Territory (or, with respect to PTV U.S., the
U.S. Hispanic Market). Licensee will be obliged either to edit the programming
as supplied by Licensor (subject to Licensor's approval) or blackout the
region(s) where the censorship problem occurs, with all costs of editing and/or
blackout to be borne by Licensee; provided that Licensee will make good faith
efforts to obtain waivers of such restrictions or will permit Licensor to make
such efforts on behalf of Licensee. Without limiting Licensee's rights under
Section 2.4(c), Licensee will only make such cuts or deletions as are necessary
to conform to applicable censorship regulations.

         4.2 Withdrawal of Programs.

               4.2(a) Notwithstanding any other term of this Agreement to the
contrary, Licensor may, in its sole discretion, withdraw any Program if Licensor
determines that the transmission thereof would or might reasonably be expected
to (i) infringe upon the rights of others; (ii) violate the law, court order,
government regulation or other ruling of any governmental agency; or (iii)
subject Licensor to any liability, other than due to a breach by Licensor of its
covenants and representations in this Agreement.

<PAGE>   14

               4.2(b) If Licensor elects to withdraw any Program as set forth in
paragraph 4.2(a) above before any telecast, Licensee will have the right, in its
sole discretion, to require Licensor to deliver another program of comparable
quality (which program will constitute a Program hereunder). If Licensor elects
to withdraw any Program, any transportation, dubbing and assembly costs incurred
and paid by Licensee with respect to the withdrawn Program will be refunded by
Licensor promptly upon Licensee's presentation of reasonable evidence of such
expenditures.

               4.2(c) If a withdrawn Program has been delivered, Licensee will,
at Licensor's request, either promptly erase such program or return it to
Licensor at Licensor's expense.

         4.3 Advertising.

               4.3(a) In all advertising and publicity relating to any Program
or any transmission thereof, Licensee will comply with the advertising and
billing credit requirements furnished by Licensor. Licensee will not make or
permit to be made, in any advertising, publicity or otherwise, any statements
which (i) constitute or may be understood to be an endorsement of any sponsor,
product, article or service by Licensor or any of its Affiliates or by any
person or entity that appears in or otherwise renders any services or provides
any materials for use in any Program or (ii) indicate or may be understood to
indicate the Licensor, any of its Affiliates, or any person that appears in or
otherwise renders any services or provides any materials for use in any Program
is connected or associated with any sponsor, product, article or service.

               4.3(b) Licensee will not advertise or promote, in any
manner, any Program withdrawn by Licensor.

               4.3(c) Licensee will not authorize or permit any excerpt or clip
from any Program to be used for promotional purposes to be in excess of one (1)
minute in length.

               4.3(d) Licensee will not advertise or promote any Program earlier
than sixty (60) days prior to the first day of the month in which the program
will first air.

5.       DELIVERY AND RETURN.

         5.1 Access and Delivery Items. Licensee will have full and immediate
access to all masters and versions of Existing Library Programs, completed
Output Programs and completed Wallpaper. Schedule 5.1 sets forth the other
delivery materials which Licensor will supply to Licensee. Any and all masters,
versions or copies of the Existing Library Programs, Output Programs, Wallpaper
and the items described in Schedule 5.1 will be referred to collectively as the
"Delivery Materials."

         5.2 Title to Delivery Materials. It is expressly agreed that title in
and to any Delivery Material provided to Licensee hereunder will remain in
Licensor at all times and that title, including copyrights therein, will vest in
Licensor upon the creation thereof, subject only to the possession and control
thereof by Licensee from the date of delivery through the end of the related
license period solely for the purposes of exercising its rights hereunder.
Licensee will execute, acknowledge and deliver to Licensor any instruments of
transfer, conveyance or assignment in or to any such Delivery Materials
necessary or desirable to evidence or effectuate Licensor's ownership thereof
and in the event that Licensee fails or

<PAGE>   15

refuses to execute, acknowledge or deliver any such instrument or documents then
Licensor will be deemed to be, and Licensee hereby nominates, constitutes and
appoints Licensor, its true and lawful attorney-in-fact irrevocably to execute
and deliver all such instruments in Licensee's name or otherwise, it being
acknowledged that such power is a power coupled with an interest. Licensee will
not have the right to use any Delivery Materials except in the exercise of the
rights granted to Licensee hereunder and in accordance with all limitations on
said rights as are contained in this Agreement. Notwithstanding the foregoing,
if Licensor wishes to exploit any version of a Program included in the Delivery
Materials that Licensee has caused to be dubbed into another language, Licensor
will reimburse Licensee for * * * of the direct costs of creating such dubbed
version (unless Licensor at such time holds an ownership interest in Licensee of
* * * or more, in which case Licensor will reimburse Licensee for * * * of such
costs).

6. PROGRAM LICENSE FEES. Licensee will pay Licensor program license fees as set
forth below (collectively, the "Program License Fees"), it being agreed that the
full amount of all payments to be made by "Licensee" under this Agreement will
be made by PTVI and that the portion thereof to be paid by PTV US will be paid
by PTV US to PTVI pursuant to arrangements between them:

         6.1 Existing Program Library and Wallpaper. The license fee for the
rights granted hereunder with respect to the Existing Library Programs and the
Wallpaper is included in the Rights Acquisition Fee described in the Operating
Agreement and is payable as set forth in the Operating Agreement.

         6.2 Output Programs.

               6.2(a) General Payment Terms. For the rights granted hereunder
with respect to the Output Programs, Licensee will pay to Licensor a license fee
which will be calculated as a specified percentage of the total cost to Licensor
to produce, or acquire the worldwide rights to, such Output Programs each Fiscal
Year. For each Fiscal Year, the Program License Fee for the Output Programs (as
determined in reference to the Fixed Percentage, Reset Mechanism, Production
Budget Option and Licensor Production Supply Option, as hereinafter defined),
will be paid in * * * payable within ten (10) business days after Licensor
delivers to Licensee the last Program produced or acquired under the Production
Budget for the applicable Fiscal Year; provided, however, in the event that in a
given Fiscal Year PEGI actually spends less than the amount of the Production
Budget for the production and acquisition of Output Programs, the final payment
due with respect to such year will be reduced accordingly. Licensee will pay the
installments that otherwise would have been due on March 20, 1999, June 20, 1999
and September 20, 1999 on the Funding Date.

               6.2(b) Production Budget. Licensor agrees to produce (and/or
acquire the worldwide rights to) Output Programs. For the purposes of
calculating the Program License Fee for the Output Programs, the Output Programs
for Fiscal Year 1 will carry an actual total production/acquisition cost (the
"Production Budget") of no more than * * * The Production Budget for each Fiscal
Year may increase by no more than * * * over the prior Fiscal Year, except by
agreement of Licensor and Licensee. The Production Budget for Fiscal Year 1 will
include overhead of no more than * * *, and overhead may increase in subsequent
Production Budgets by no more than * * * per year (the "Overhead Cap");
provided, however, that in any Fiscal Year that Licensor exercises the
Production Supply Option (as

<PAGE>   16

described in Section 6.2(h)), the overhead in that year's Production Budget will
be reduced pro rata with respect to the overhead that would have been includible
had Licensor not elected the Production Supply Option (without otherwise
affecting the growth of the Overhead Cap in Fiscal Years in which the Production
Supply Option is not in effect).

               6.2(c) Licensor Production Obligations. Licensor warrants that
the annual Production Budget for Output Programs will fund the production and
acquisition of "Playboy"-and "Spice"-type programs only, and not any Alta Loma
programs (as described in Section 6.3). Licensor further warrants that the
style, content, mix and budgets of the Output Programs will be generally
consistent with the current programming of the Playboy TV and Spice channels as
they are constituted in the United States (with respect to the Spice channel,
such Output Programs will be consistent with that channel as modified by
Licensor after the Spice Closing). For purposes of clarity, this means that in
each Fiscal Year (i) the relative number of hours of series, specials, and
movies (taking into account the number of movies acquired by Spice Entertainment
Companies, Inc. in 1998) will be substantially similar to those produced or
acquired by Licensor in 1998 (excluding Alta Loma programs); and (ii) the ratio
of the number of hours of Licensor-produced programs relative to the total
number of hours of Output Programs will be no less than as in 1998. Relevant
information about the current mix of Licensor programming is set forth in
Schedule 6.2(c). In the event Licensor fails to produce Output Programs at a
level of hours and mix which is substantially similar to such levels as
contemplated herein (the "Licensor Shortfall"), Licensee will have the right to
provide for the production and acquisition of a sufficient supply of programs to
replace the Licensor Shortfall. (For the avoidance of doubt, the parties
acknowledge that in the event of a Licensor Shortfall, the Program License Fee
due for such year will be calculated based on the total cost of the Output
Programs actually produced or acquired during such year.)

               6.2(d) Calculation of License Fee for Output Programs. For each
Fiscal Year, the Program License Fee for the Output Programs will be determined
by reference to the Fixed Percentage, Reset Mechanism, Production Budget Option
and Production Supply Option (as defined below). The aggregate amount due with
respect to the percentage of the Production Budget or Licensor Budget Option to
be paid by Licensee as a Program License Fee for the Output Programs pursuant to
this Section (the "Applicable Percentage") is subject to the crediting of
certain amounts pursuant to the Streaming adjustment described in Section
6.2(i), if applicable.

               6.2(e) Fixed Percentage. Unless the Reset Mechanism, Production
Budget Option or Production Supply Option otherwise apply, the annual Program
License Fee for Output Programs will be a "Fixed Percentage" of the Production
Budget for the applicable Fiscal Year, as follows:

                      6.2.(e)(i) For Fiscal Years 1 and 2: * * *

                      6.2.(e)(ii) For Fiscal Year 3: * * *

                      6.2.(e)(iii) For Fiscal Year 4: * * *

                      6.2.(e)(iv) For Fiscal Year 5: * * *

                       6.2.(e)(v) For Fiscal Year 6: * * *

                      6.2.(e)(vi) For Fiscal Year 7: * * *

<PAGE>   17

                      6.2.(e)(vii) For Fiscal Year 8: * * *

                      6.2.(e)(viii) For Fiscal Year 9 and thereafter: * * *;
provided, that in any Fiscal Year commencing in Fiscal Year 9 * * *, and in such
event, Licensor will refund the excess Program License Fee actually paid by
Licensee for such Fiscal Year within thirty (30) days after Licensor issues its
audited financial statements for such year. "Net Channel Revenues" will mean all
revenues received by the Channels as reflected in the audited year end
statements of Licensee, and "Threshold Revenues" will mean the Net Channel
Revenues for Fiscal Year 10; provided, that for any Fiscal Year in which
Licensee * * *

               6.2(f) The Reset Mechanism. For each Fiscal Year commencing with
Fiscal Year 6, Licensee and Licensor will recalculate the percentage of the
Production Budget to be paid by Licensee as the Program License Fee for Output
Programs (the "Reset Mechanism"), using the following method:

                     6.2.(f)(i)      * * *

                     6.2.(f)(ii)     * * *

                     6.2.(f)(iii)    * * *

                     6.2.(f)(iv)     * * *

                     6.2.(f)(v)      * * *

                     * * *

               6.2(g) Licensee Production Budget Option. Starting in Fiscal Year
4, Licensee may choose to fund a reduced percentage of the Production Budget for
a given Fiscal Year (the "Production Budget Option") if either: (i) earnings
before interest and taxes (i.e., EBIT) of Licensee for the Fiscal Year just
ended (according to the audited financial statements of Licensee) (the "Actual
Net Cash Flow") fell below the EBIT projected in the approved Business Plan for
that Fiscal Year (the "Plan Net Cash Flow") by (a) 15% or more for Fiscal Year 4
and (b) 10% or more (in the event Licensor then owns less than 50% of the
percentage interests in Licensee) or by 20% or more (in the event Licensor then
owns at least 50% of the percentage interests in Licensee) for any other Fiscal
Year; or (ii) the product of (y) the absolute value of the amount by which the
Plan Net Cash Flow is greater than the Actual Net Cash Flow multiplied by (z)
Lifford's percentage interest in Licensee as of the first day of the Fiscal Year
then beginning equals One Million Dollars ($1,000,000) or more, as follows:

                     6.2.(g)(i) On or about March 1, Licensee will notify
Licensor of (i) Licensee's Actual Net Cash Flow for the Fiscal Year just
completed and (ii) the Plan Net Cash Flow for that Fiscal Year. If the Actual
Net Cash Flow fell short of the Plan Net Cash Flow so as to satisfy either of
the conditions of Section 6.2(g), Licensee may notify Licensor that Licensee is
exercising the Production Budget Option by the later of March 10 or ten (10)
days after Licensor has received Licensee's audited financial statements for the
previous year.

                     6.2.(g)(ii) Upon exercising the Production Budget
Option, Licensee will be obliged to pay a license fee for the Output Programs
equal to the product of 40% of the Production Budget for that Fiscal Year. This
40% will be referred to as the "Option Percentage." By way of example, if
Licensee timely notifies Licensor that the difference

<PAGE>   18

between the Actual Net Cash Flow for Fiscal Year 5 and the Plan Net Cash Flow
for Fiscal Year 5 satisfies either of the conditions of Section 6.2(g) and that
Licensee is exercising the Production Budget Option, the 40% Option Percentage
will supersede whichever of the Fixed Percentage or the Reset Percentage would
have otherwise been in effect for Fiscal Year 6.

               6.2(h) Production Supply Option. In the event that Licensee
notifies Licensor that it is exercising the Production Budget Option for a given
Fiscal Year, Licensor may elect to supply Output Programs for that Fiscal Year
(the "Production Supply Option"), as follows:

                     6.2.(h)(i) Licensor may elect either: (i) to produce a
slate of programming at the Production Budget for that Fiscal Year, in which
case the Program License Fee will be equal to * * * of the Production Budget; or
(ii) to produce a slate of programming whose budget (the "Licensor Budget
Option") will be equal to * * * of the Production Budget divided by the Fixed
Percentage for that Fiscal Year, in which case the Program License Fee will be
equal to the product of the Fixed Percentage multiplied by the Licensor Budget
Option. If Licensor elects the Licensor Budget Option, the mix of Output
Programs supplied (as described in Section 6.2(c)) must remain substantially
unchanged.

                     6.2.(h)(ii) Licensor will notify Licensee of its
election under the Production Supply Option within ten (10) days of receiving
Licensee's notice it is exercising the Production Budget Option.

                     Example: * * *

                                  6.2(i) * * *

                     6.2.(i)(i) On or about each March 1 (or as soon
thereafter as PEI's audited financial statements are available) Licensor will
notify Licensee of the * * *. To assist Licensee in its budgeting process, on or
about each October 15, Licensor will * * *

                     6.2.(i)(ii) On or about each March 1 (or as soon
thereafter as Licensee's audited financial statements are available) * * *

                     6.2.(i)(iii) * * *

                     6.2.(i)(iv) * * *

               Example: * * *

         6.3 Maintenance of Records and Audit Rights.

               6.3(a) Licensor and Licensee will keep accurate books of account
and records covering all transactions relating to or arising out of this
Agreement, including all items necessary to calculate the Program License Fees
for Output Programs (i.e., the Production Budget and Licensor Applicable Revenue
for Licensor, and Net Channel Revenues, Plan Net Cash Flow and Actual Net Cash
Flow for Licensee). Either party will have the right, within 24 months after the
end of a given Fiscal Year, to inspect the books and records of the other party
in connection with the Program License Fees paid with respect to such Fiscal
Year. Upon receipt of written notice that a party wishes to commence such an
inspection or examination, the other party will permit such party and its
employees, accountants and agents to (i) have reasonable access to and inspect
such books and records during normal business hours upon reasonable notice, and
(ii) to review and copy all such books and records, to the extent relevant to
the calculation

<PAGE>   19

of the Program License Fee. Each party will maintain in good order and condition
all such books and records relating to a given Fiscal Year for not less than
three years after the end of such Fiscal Year, or in the event of a dispute
between the parties, until such dispute is resolved, whichever date is later.
Receipt or acceptance by Licensor, or payment by Licensee, of all or a portion
of the Program License Fee for a given Fiscal Year will not preclude such party
from exercising its rights hereunder.

               6.3(b) If an inspection or examination conducted pursuant to
Section 6.3(a) discloses, or Licensor or Licensee otherwise discover, an
underpayment of Program License Fees, the amount of such underpayment will be
paid by Licensee to Licensor not later than thirty (30) days after the
determination thereof, and, if such underpayment was due to the misstatement by
Licensee of Net Channel Revenues, Actual Net Cash Flow or Plan Net Cash Flow,
then such payment will also include interest from the date the payment should
have been made to and including the date of payment at the Reference Rate in
effect on the date payment should have been made. If such underpayment of
Program License Fees by Licensee is due to Licensee's misstatement of Net
Channel Revenues, Actual Net Cash Flow or Plan Net Cash Flow and such
underpayment is in excess of ten percent (10%) of the aggregate Program License
Fees owed for such Fiscal Year, Licensee will, in addition to paying Licensor
the amount of such underpayment plus interest, reimburse Licensor for all
reasonable costs and expenses of conducting such inspection or examination.

               6.3(c) If an inspection or examination referred to in Section
6.4(a) discloses, or Licensee otherwise discovers, an overpayment of Program
License Fees for a given Fiscal Year, the amount of such overpayment will be
credited against future payments of Program License Fees, unless the period for
which such overpayment was made is the final period covered by this Agreement,
in which case the amount of the overpayment will be paid by Licensor to Licensee
within thirty (30) days after determination thereof. If such overpayment of
Program License Fees is the result of a misstatement by Licensor of the
Production Budget or Licensor Applicable Revenue, and the amount of such
overpayment is in excess of ten percent (10%) of the Program License Fees
actually owed for such Fiscal Year, Licensor will reimburse Licensee for all
reasonable costs and expenses of conducting such inspection or examination.

7.       REPRESENTATIONS AND WARRANTIES; INDEMNITIES.

         7.1 Representations and Warranties.

               7.1(a) By Licensor. Licensor represents and warrants that, except
as set forth in the Schedules hereto: (i) it is duly authorized to enter into
the transactions contemplated by this Agreement; (ii) this Agreement is a valid
and binding obligation of Licensor, enforceable against it in accordance with
its terms; (iii) the performance of Licensor's obligations hereunder does not
violate any agreement, law, rule, or regulation binding on Licensor or
Licensor's charter documents; (iv) subject to Section 7.4, it has, and will
continue to have, all rights in and to the Existing Library Programs, Output
Programs and Wallpaper necessary to fulfill its obligations hereunder (except
that with respect to the Existing Library, no such representation is made as to
any program not listed on Schedules 2.1(a)-1, 2.1(a)-2 and 2.1(a)-3); (v) except
for the license between Licensor and third parties which Licensor is assigning
to Licensee, the Existing Library Programs, Output Programs and Wallpaper are
not subject to licenses which conflict with the rights granted herein, and the
use thereof by Licensee as contemplated herein will not infringe upon the
copyright, literary or dramatic right or right of privacy of any third

<PAGE>   20

party or constitute a libel or slander of any third party; (vi) the licenses
between Licensor and third parties which Licensor is assigning to Licensee are
assignable, valid and enforceable, that the licensees under such licenses have
not pre-paid the license fees, if any, due thereunder (except in accordance with
the terms of such licenses), and, to the best of Licensor's knowledge and
belief, such licensees do not have any claims, offsets or defenses which are
adverse to Licensee's rights hereunder; and (vii) Licensor has disclosed all
material information relating to the rights granted hereunder, and that all such
information is true and correct to the best of Licensor's knowledge and belief.

               7.1(b) By Licensee. Licensee represents and warrants 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 Licensee,
enforceable against it in accordance with its terms; (iii) the performance of
Licensee's obligations hereunder does not violate any agreement, law, rule, or
regulation binding on Licensee or Licensee's charter documents; and (iv) it will
not use the Company Programing except as authorized by this Agreement.

         7.2 Indemnification.

               7.2(a) By Licensor. Licensor will indemnify and hold harmless
Licensee and its and members, managers, directors, officers, shareholders,
employees, agents, representatives and affiliates (collectively, the "Licensee
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 Licensee Indemnified Parties), expenses,
judgements, costs and liabilities (including reasonable attorneys' fees and
costs) (collectively, "Losses") incurred by the Licensee Indemnified Parties
arising from Licensor's breach of any obligation, representation or warranty
contained in this Agreement. Notwithstanding the foregoing any claims for
indemnification that any Licensee Indemnified Parties may have pursuant to this
Section 7.2(a) will exclude claims based on information known by Lifford (or its
Affiliates, including Bloomfield) as of the Funding Date whether or not such
information formed the basis of the issues raised by Bloomfield during Due
Diligence (as defined in the Operating Agreement) and whether or not asserted
prior to the Walk Away Notice (as defined in the Operating Agreement) or
thereafter. In the event of a dispute regarding a claim for indemnification, the
Licensee Indemnified Party will have the burden of proof in establishing the
validity and amount of the claim, and Licensor will have the burden of proof in
establishing any defense to such claim, including but not limited to, a defense
asserted by Licensor that Lifford (or its Affiliates) had knowledge of the
requisite facts. Notwithstanding the foregoing, Licensor will not be obligated
to provide indemnification where there is any admission of guilt by any Licensee
Indemnified Party charged with violation of the law as to the content of any
Company Program.

               7.2(b) By the Licensee. Licensee will indemnify and hold harmless
Licensor and its directors, officers, shareholders, employees, agents,
representatives and affiliates (collectively, the "Licensor Indemnified
Parties"), on or After Tax Basis, from and against all Losses incurred by the
Licensor Indemnified Parties arising from Licensee's breach of any obligation,
representation or warranty contained in this Agreement.

         7.3 Musical Compositions. Licensor warrants and represents that to
the best of its knowledge, information and belief, the performing rights in

<PAGE>   21

all musical compositions contained in the Programs are (a) controlled by a
performing rights society having jurisdiction, (b) controlled by Licensor, or
(c) in the public domain. Licensor does not represent or warrant that Licensee
may exercise the performing rights to said musical compositions without the
payment of a performing rights royalty or license fee. Licensee will be solely
responsible for the payment of such royalty or fee and will hold Licensor free
and harmless therefrom.

         7.4 Procedure. If a claim by a third party is made against an
indemnified party, the indemnified party will promptly notify the indemnifying
party of such claim. Failure to so notify the indemnifying party will not
relieve the indemnifying party of any liability which the indemnifying party
might have, except to the extent that such failure materially prejudices the
indemnifying party's legal rights. The indemnifying party will have thirty (30)
days after receipt of such notice to undertake, conduct and control through
counsel of its own choosing (subject to the approval of the indemnified party,
such approval not to be unreasonably withheld) and at its expense, the
settlement or defense of such claim, and the indemnified party will cooperate
with the indemnifying party in connection therewith; provided, however, that (i)
the indemnifying party will permit the indemnified party to participate in such
settlement or defense through counsel chosen by the indemnified party, provided
that the fees and expenses of such counsel will be borne by the indemnified
party and (ii) the indemnifying party will reimburse the indemnified party for
the full amount of any Loss resulting from such claim and all related expenses
incurred by the indemnified party within the limits of this Section 7 as such
are incurred. If the indemnifying party does not notify the indemnified party
within thirty (30) days after actual receipt of the indemnified party's notice
of a claim of indemnity hereunder that it elects to undertake the defense
thereof (which may be with a reservation of rights by such indemnifying party)
or so notifies the indemnified party but fails to undertake or maintain such
defense promptly and in good faith so that a default is threatened, the
indemnified party will promptly notify the indemnifying party whether it desires
to undertake the defense of such claim. If the indemnifying party does not
within ten (10) business days thereafter elect to undertake the defense thereof,
the indemnified party will have the right to contest, settle or compromise the
claim in the exercise of its reasonable judgment and without prejudice to the
rights of the indemnified party to indemnification hereunder. Notwithstanding
anything contained herein, the indemnified party will not enter into any
settlement or compromise that provides for any remedy other than money damages
without the prior written approval of the indemnifying party, which approval
will not be unreasonably withheld.

         7.5 Taxes. Licensee will pay, without limitation, any tax, levy or
charge howsoever denominated, imposed or levied (excluding only any applicable
net income or franchise taxes ("Licensor Taxes") imposed or levied against
Licensor) by any statute, law, rule or regulation now in effect or hereinafter
enacted including, without limitation, sales, use, property and excise or other
similar taxes, licenses, import permits, state, county, city or other taxes
howsoever denominated relating to or imposed on license fees, rentals,
negatives, tapes or other material, or the right or privilege to use the same in
connection with any Program hereunder whether or not billed or demanded by
Licensor; it being the intent hereof that the Program License Fees will be a net
amount, free and clear of any tax, levy or charge of whatsoever kind or nature
howsoever denominated except: (i) Licensor Taxes; (ii) any tax imposed on
Licensor that would not have been imposed had it engaged only in the
transactions contemplated hereunder; or (iii) any tax for which Licensor (or any
member of its affiliated group) obtains a foreign tax credit or could have

<PAGE>   22

obtained such credit had it sought to. In regard to Licensor Taxes, if Licensee
pays any such tax for Licensor to local tax authorities, it may do so only if it
simultaneously delivers written evidence of such payment (in the form of a tax
payment certificate or other similar document) to allow Licensor to deduct such
tax payment in the United States. To the extent that any such other taxes,
levies, or charges or penalties and interest thereon are paid by Licensor,
Licensee will reimburse Licensor on demand, and on the failure of Licensee to
reimburse Licensor, Licensor will have available to it all of the remedies
provided for herein with respect to unpaid Program License Fees as well as such
other remedies as may be provided by law. If Licensee denies liability for any
tax, levy or charge which Licensor must pay or collect, Licensee will indemnify
Licensor for any liability, penalty or interest which may result and Licensor
will have the immediately aforementioned remedies against Licensee for the
collection of same. Licensor will have no obligation to contest or to dispute
any tax assessed or levied. Licensee will have the right to do so at its sole
cost and expense, and Licensor will provide Licensee with reasonable cooperation
relating to any such contest or dispute.

8.       TERMINATION.

         8.1 Expiration of Term. The License Term is fifty (50) years commencing
on the date of formation of PTVI unless sooner terminated pursuant to the other
provisions of this Section 8.

         8.2 Early Termination on Breach. Licensor may without prejudice to
its other remedies terminate this Agreement by notice in writing to
Licensee on or after the occurrence of any of the following:

               8.2(a) PEII has terminated the Trademark License Agreement;

               8.2(b) Licensor elects to dissolve Licensee as the result of
VSI's (or its Affiliates that are members of Licensee) being in default of its
obligations under the Operating Agreement; or

               8.2(c) PTVI is in material default of its obligations under the
Stock Purchase Agreements (as defined in the Operating Agreement) and such
default, if curable, is not cured within thirty (30) days after PTVI has
received written notice thereof from Licensor (provided such default is not the
result of action or inaction by Licensor as a Member of PTVI).

               A party may without prejudice to its other remedies terminate
this Agreement by notice in writing to the other on or after either of the
following:

               8.2(d) the commission of one or more material breaches of this
Agreement by the other party which are not capable of remedy; provided that in
the case of a breach by the Licensee, such breach is not caused by Licensor as a
Member of PTVI; or

               8.2(e) the commission of a material breach of this Agreement by
the other party 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 thirty (30) day 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

<PAGE>   23

a material adverse effect on the party giving notice of such breach; and further
provided that such breach is not caused by Licensor as a Member of PTVI. The
parties agree that any inadvertent breach relating to Licensor's obligations
with respect to any individual program will constitute a Remediable Breach and
will not constitute grounds for termination hereof if Licensor provides
comparable substitute programming for the applicable program.

9.       EFFECTS OF TERMINATION.

               9.1 Survival of Obligations. The termination of this Agreement
for whatever reason will not affect any provision of this Agreement which is
expressed to survive or operate in the event of its termination and will not
prejudice or affect the rights of either party against the other in respect of
any breach of this Agreement or in respect of any moneys payable by one party to
the other in relation to any period prior to termination.

               9.2 Termination of Rights. Upon the date on which any termination
of this Agreement for whatever reason takes effect (the "Termination Date") all
rights of Licensee hereunder will immediately terminate and automatically revert
to Licensor and Licensee will cease to make any use of the Programs and other
materials provided by Licensor hereunder.

               9.3 Further Assurances. Upon termination of this Agreement, the
parties will perform all other acts which may be necessary or useful to render
effective the termination of Licensee's interests in the Programs and other
materials furnished by Licensor hereunder and Licensee will execute any
assignment, conveyance, acknowledgment or other document that Licensor may
reasonably request relinquishing such interests.

10.      EQUITABLE RELIEF.

         Each of Licensor and Licensee acknowledges that any material breach of
this Agreement by such party, including, by way of example, Licensee's failure
to cease using the any programming supplied hereunder upon the expiration or
termination of this Agreement, will result in irreparable harm to the other
party for which there is no adequate remedy at law. Accordingly, in such event,
Licensor or Licensee, as the case may be, will be entitled to preliminary or
temporary equitable relief in any Federal or State Court of competent
jurisdiction located in Los Angeles County, California pending a final
determination in accordance with Section 11, without the necessity of posting
bond unless otherwise required by applicable law by way of any or all of the
temporary and permanent injunctions and such other relief as any court of
competent jurisdiction may deem just and proper.

11.      DISPUTE RESOLUTION.

         11.1 General Agreement Regarding Dispute Resolution. Any dispute
arising out of or relating to this Agreement will be resolved in accordance with
the procedures specified in this Section 11, which will be the sole and
exclusive procedures for the resolution of any such disputes. The parties intend
that these provisions will be valid, binding, enforceable and irrevocable and
will survive any termination of this Agreement; 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
Licensor to the Program Supply

<PAGE>   24

Agreement, and instead any such dispute will be litigated in a court of law.

         11.2 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.

         11.3 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.

         11.4 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 in Sections 11.2 and 11.3, the other
may initiate binding arbitration before expiration of the above period for
negotiation and mediation. 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.

         11.5 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.

         11.6 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 Section 11.

         11.7 Confidential Negotiations. All negotiations pursuant to
Sections 11.2 and 11.3 are confidential and will be treated as compromise
and settlement negotiations for purposes of applicable rules of evidence.

         11.8 Service of Process; Forum. Each party agrees that service by
registered or certified mail, return receipt requested, delivered to such party
at the address provided in Section 12.6 (Notices) below, will be deemed in every
respect effective service of process upon such person for

<PAGE>   25

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 California has been brought in any inconvenient forum.

         11.9 Additional Provisions to Enforce Awards. 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.

12.      MISCELLANEOUS.

         12.1 Force Majeure. Subject to the right to terminate set forth in
Section 8.2(e), neither party will be liable to the other for any failure or
delay in delivery of Delivery Materials, or the inability to telecast any of the
Programs, due to accident involving breakdown of any satellite or of
transmission facilities or equipment, labor disputes, acts of God, failure of
carriers, failure or delay of laboratories, of or any other cause beyond the
control of such party (each, an event of "Force Majeure") and such performances
will be excused to the extent that it is prevented by reason of any of the
foregoing conditions. Notwithstanding the foregoing, an event of "Force Majeure"
will not include censorship restrictions or any restriction by any jurisdiction
on a party's right to transfer funds. If at the end of the term the Licensor in
good faith determines that any event of Force Majeure materially decreased the
value of this license, Licensor, in Licensor's sole discretion to be exercised
in good faith, may make an adjustment of said license payments.

         12.2 Binding Effect; No Assignment. The provisions of this Agreement
will be binding on and enure to the benefit of the successors of each party
hereto; provided, however, that no party may assign, transfer, pledge,
hypothecate, charge or otherwise dispose of or subcontract any of its rights or
obligations hereunder without the prior written consent of the other party.
Notwithstanding the foregoing: (i) either party may assign its rights and
obligations hereunder to an Affiliate of such party, but the original party will
remain responsible and liable for such Affiliate's compliance with all of such
original party's obligations hereunder, and in the case of an assignment by
Licensor, such Affiliate must be the owner of the rights in the programming and
materials necessary to perform Licensor's obligations hereunder; and (ii) in the
event Lifford (or an Affiliate of Lifford which is then a member of Licensee)
dissolves Licensee due to a breach by Licensor (or an Affiliate of Licensor
which is then a member of Licensee) of the Operating Agreement, Lifford (or such
Affiliate) may cause Licensee's rights hereunder to be assigned to Lifford (or
to an Affiliate of Lifford), provided that Licensee's rights under the Trademark
License Agreement are assigned to the same assignee. Nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective permitted successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.

         12.3 Invalidity. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or

<PAGE>   26

affecting the validity or enforceability of such provisions in any other
jurisdictions.

         12.4 Waivers, Remedies Cumulative, Amendments, etc.

               12.4(a) No failure or delay by any of the parties hereto 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 the parties
hereto of any right, power or privilege preclude any further exercise thereof or
the exercise of any other right, power or privilege.

               12.4(b) Except as otherwise provided in this Agreement, the
rights and remedies herein provided are cumulative and not exclusive of any
rights and remedies provided by law.

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

         12.5 Notices.

               12.5(a) All notices, requests, demands and other communications
required to be given under this Agreement will conclusively be deemed to have
been duly given (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 (with
appropriate answerback), if sent by facsimile transmission or other generally
accepted means of electronic transmission addressed as follows:

                       If to Licensor 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 PTVI or PTV U.S.:

                          Playboy TV International LLC
                          c/o Cisneros Television Group
                       Attention: Director Legal and Business Affairs
                        404 Washington Avenue, 8th Floor
                       Miami Beach, FL 33139
                            United States of America
                           Fax Number: (305) 894-3606

<PAGE>   27

                       With copies to:

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

                                       and

                       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

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

               12.5(b) All notices will be deemed given when received at the
address(es) as provided in paragraph (a) above.

         12.6 Governing Law. ALL QUESTIONS WITH RESPECT TO THIS AGREEMENT AND
THE RIGHTS AND LIABILITIES OF THE PARTIES WILL BE GOVERNED BY THE LAWS OF THE
STATE OF DELAWARE, IRRESPECTIVE OF THE CHOICE OF LAWS PROVISIONS OF DELAWARE OR
OF ANY OTHER JURISDICTION.

         12.7 Entire Agreement. This Agreement, together with its attachments,
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
oral and written, between the parties hereto with respect to the subject matter
hereof.

         12.8 Rules of Construction.

               12.8(a) Headings. The section headings in this Agreement are
inserted only as a matter of convenience, and in no way define, limit, or extend
or interpret the scope of this Agreement or of any particular section.

               12.8(b) Tense and Case. Throughout this Agreement, as the context
may require, references to any word used in one tense or case will include all
other appropriate tenses or cases.

               12.8(c) Agreement Negotiated. The parties hereto 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.

         12.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.

         12.10 Relationship Between the Parties. This Agreement will not be

<PAGE>   28

construed to place the parties in the relationship of partners or joint
venturers.

         12.11 Time is of the Essence. Time will be of the essence with respect
to each and every obligation of Licensee and Licensor hereunder.

         12.12 Effectiveness. This Agreement will be binding on, and
effective with respect to PTVI, as of the date hereof. This Agreement will
be binding on, and effective with respect to PTV U.S., as of the date of it
executes this Agreement.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first above
written.

Date: 8/31/99                  LICENSOR:

                               PLAYBOY ENTERTAINMENT GROUP, INC.

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

Date: 8/31/99                  LICENSEE:

                               PLAYBOY TV INTERNATIONAL LLC

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

Date:                          PTV U.S., LLC
      --------------------

                               By:
                                   -------------------------------
                               Name:
                                     -----------------------------
                               Title:
                                      ----------------------------

ACKNOWLEDGED, ACCEPTED AND AGREED
ON BEHALF OF ALL LICENSOR AFFILIATES:

PLAYBOY ENTERPRISES, INC.

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

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