Document:

Exhibit 10.3

                    SECOND AMENDMENT TO OPERATING AGREEMENT,
                               RELEASE OF GUARANTY
                             AND CONSENT TO TRANSFER

                                       FOR
                          PLAYBOY TV INTERNATIONAL, LLC
                      A DELAWARE LIMITED LIABILITY COMPANY

      This Second Amendment to Operating Agreement, Release of Guaranty and
Consent to Transfer (this "Amendment") is entered into as of December 28, 2000,
by and among Playboy Entertainment Group, Inc., a Delaware corporation ("PEGI"),
Playboy Enterprises International, Inc., a Delaware corporation ("PEII"),
Victoria Springs Investments, Ltd., a British Virgin Islands corporation
("VSI"), Hampstead Management Company, Ltd., a company organized under the laws
of the British Virgin Islands ("Hampstead"), Carlton Investments LLC, a Delaware
limited liability company ("Carlton"), and Carlyle Investments LLC, a Delaware
limited liability company ("Carlyle"), and is made with respect to Playboy TV
International, LLC, a Delaware limited liability company (the "Company").

      A. PEGI and VSI entered into the Operating Agreement the Company as of
August 31, 1999 and the First Amendment thereto as of September 24, 1999 (as
amended, the "Agreement"; all capitalized terms not defined in this Amendment
will have the respective meanings set forth in the Agreement).

      B. Hampstead Management Company, Ltd., a company organized under the laws
of the British Virgin Islands and an Affiliate of VSI ("Hampstead"), entered
into a Guaranty dated as of August 31, 1999 in favor of PEGI, PEII and the
Company pursuant to which Hampstead guaranteed the obligations of VSI under the
Agreement and the Related Documents (the "Guaranty").

      C. Carlton and Carlyle are indirectly controlled by Persons that
collectively control VSI and Hampstead, but are not under common control with
VSI and Hampstead.

      D. VSI wishes to transfer its 80.1% interest in the Company to Carlton and
Carlyle in equal shares and has requested PEGI's consent to such transfer
pursuant to Section 9.1 of the Agreement.

      E. PEGI is willing to give consent to such transfer provided that Carlton
and Carlyle assume the obligations of VSI under the Agreement and the Related
Documents, are each deemed to be Affiliates of VSI for all purposes under the
Agreement and the Related Documents, and collectively exercise the rights of VSI
under the Agreement.

      F. Hampstead wishes to transfer and cause its subsidiaries to transfer all
or substantially all of their respective assets to Carlton and Carlyle in equal
shares and has requested that PEII, PEGI and the Company agree to release
Hampstead from its obligations under the Guaranty.

<PAGE>

      G. PEII, PEGI and the Company are willing to release Hampstead from its
obligations under the Guaranty provided that the proposed transfer of assets to
Carlton and Carlyle is consummated and Carlton and Carlyle guaranty the
obligations of the other on the same terms as the Guaranty.

      H. The parties desire to adopt and approve the following provisions and,
where applicable, incorporate them into the Agreement, effective as of the date
of the transfer of VSI's interest in the Company to Carlton and Carlyle (the
"Effective Date").

      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.    Consent to Transfer and Release of Guaranty.

      A. Pursuant to Section 9.1 of the Agreement and subject to the terms of
      this Amendment, PEGI consents to the transfer from VSI to Carlton and
      Carlyle of its 80.1% interest in PTVI in equal shares and the admission of
      each of Carlton and Carlyle as Members of the Company with a Percentage
      Interest of 40.05% each. Each of Carlton and Carlyle hereby jointly and
      severally assume and agree to perform and discharge all of the obligations
      and liabilities of VSI under the Agreement and the Related Documents,
      whether arsising before or after the Effective Date. Each of Carlton and
      Carlyle agree that each of them and their respective Affiliates are deemed
      to be (i) Affiliates of VSI, and (ii) Affiliates of each other, in each
      case for all purposes under the Agreement and the Related Documents (and
      any agreement or document in connection therewith). In furtherance of the
      foregoing, Carlyle and Carlton will be deemed to be Affiliated Members and
      VSI Members under the Agreement. Carlyle and Carlton further agree that
      they will take all actions collectively under the Agremeent and Related
      Documents, including the bringing of any claim or exercising any remedy.

      B. Subject to the terms of this Agreement, PEII, PEGI and the Company
      hereby release Hampstead from its obligations under the Guaranty.

      C. The forgoing consent and release is subject to each of the following
      conditions being true as of the Effective Date: (a) Hampstead will have
      transferred and caused its subsidiaries to transfer all or substantially
      all of their respective assets to Carlton and Carlyle in equal shares; (b)
      each of Carlton and Carlyle will have executed and delivered a Guaranty in
      favor of PEII, PEGI and the Company in the form of Exhibit A.

2.    Amendments to Agreement.

      A.    Section 5.1.3 of the Agreement is amended and restated in its
            entirety as follows:

            "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; provided, however, Non-Independent Directors appointed by

<PAGE>

            Affiliated Members will have voting power in proportion to the
            aggregate Percentage Interests held by the Managers appointing them.
            All Non-Independent Directors appointed by a Manager (or Managers,
            if representing Affiliated Members) will collectively exercise such
            voting power and such Manager(s) will designate one of its
            Non-Independent Directors to vote on behalf of all Non-Independent
            Directors appointed by such Manager(s) in the event of a
            disagreement among the Non-Independent Directors appointed by such
            Manager(s)."

      B.    Section 5.2.1 of the Agreement is amended and restated in its
            entiretly as follows:

            "5.2.1 VSI and PEGI, together with (or replaced by, as the case may
            be) any Affiliates to which such Member transfers all or a portion
            of its Membership Interest in compliance with the provisions of this
            Agreement, will be referred to as the "VSI Members" or the "PEGI
            Members" respectively. For so long as the VSI Members and the PEGI
            Members are the only Members and Managers, the Management Committee
            will consist of nine members: three Non-Independent Directors
            selected collectively by the VSI Members (the "VSI Directors"),
            three Non-Independent Directors selected by the PEGI Members (the
            "PEGI Directors") and three other Directors (each, an "Independent
            Director") selected in accordance with the following sentence. The
            VSI Members (acting collectively) and the PEGI Members (acting
            collectively) 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 the VSI Members (acting collectively)
            and the PEGI Members (acting collectively). To qualify as an
            Independent Director, a person must have, and continue to have, no
            material business, financial or familial relationship with any of
            the VSI Members, the PEGI Members or any of their respective
            Affiliates or with any officer or executive of any of them. Each of
            VSI and PEGI identified its initial Directors 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 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.

<PAGE>

                  (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.

      C. The references to "VSI" and "PEGI" in the first clause of Section 5.4.4
      of the Agreement are hereby replaced with references to "the VSI Members"
      and the PEGI Members", respectively.

      D. Except as otherwise provided herein, all other terms and conditions of
      the Agreement will remain in full force and effect.

                  [Remainder of page intentionally left blank]

<PAGE>

IN WITNESS WHEREOF, the parties have caused their duly authorized officers to
execute this Amendment as of the above date.

                                    PLAYBOY ENTERTAINMENT GROUP, INC.

                                    By:/s/ Jeffrey M. Jenest
                                       ---------------------------------
                                          Name:  Jeffrey M. Jenest
                                          Title: Executive Vice President

                                    PLAYBOY ENTERPRISES INTERNATIONAL, INC.

                                    By: /s/ Howard Shapiro
                                       ---------------------------------
                                          Name:  Howard Shapiro
                                          Title: Executive Vice President

                                    VICTORIA SPRINGS INVESTMENTS LTD.

                                    By: /s/ William T. Keon
                                       ---------------------------------
                                          Name:
                                          Title:

                                    By: /s/ Jose Mizrahi
                                       ---------------------------------
                                          Name:

                                    HAMPSTEAD MANAGEMENT COMPANY, LTD.

                                    By: /s/ Jose Mizrahi
                                       ---------------------------------
                                          Name:
                                          Title:

                                    By: /s/ Harris C. Caston
                                       ---------------------------------
                                          Name:  Harris C. Caston
                                          Title: Attorney - in - Fact

<PAGE>

                                    CARLTON INVESTMENTS LLC

                                    By: /s/ Cary M. Otazo
                                       ---------------------------------
                                          Name:  Cary M. Otazo
                                          Title: Assistant Secretary

                                    CARLYLE INVESTMENTS LLC

                                    By: /s/ Cary M. Otazo
                                       ---------------------------------
                                          Name:  Cary M. Otazo
                                          Title: Assistant Secretary

Acknowledged and Agreed:

PLAYBOY TV INTERNATIONAL, LLC.

By: /s/ William Fisher
   ---------------------------------
      Name:  William Fisher
      Title: PresidentExhibit 10.4

            Binding Letter of Intent dated March 7, 2001 amending the
  Operating Agreement, Program Supply Agreement and Trademark License Agreement
                    relating to Playboy TV International, LLC

Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission. Each
omission has been indicated by three asterisks ("***"), and the omitted text has
been filed separately with the Securities and Exchange Commission.

<PAGE>

                            PLAYBOY ENTERPRISES, INC.
                           680 NORTH LAKE SHORE DRIVE
                                CHICAGO, IL 60611

                                  March 7, 2001

Via Electronic and Regular Mail

William Fisher, President
Playboy TV International LLC
404 West Washington Avenue, 8th Floor
Miami Beach, FL 33139

            Re:   Binding Letter of Intent

Dear William:

      This letter (including the attachment hereto, the "Amendment Letter
Agreement") sets forth the binding agreement by and among Playboy Enterprises,
Inc. (on behalf of itself and Playboy Entertainment Group, Inc.), Carlyle
Investments LLC, Carlton Investments LLC and Playboy TV International LLC
("PTVI") (each, a "Party" and collectively, the "Parties") relating to certain
pre-existing agreements among the Parties, on the following terms and
conditions. It is agreed that this letter constitutes an agreement and is
legally binding on the Parties.

1.    Amendment of Pre-existing PTVI Agreements. The Parties agree to amend the
      pre-existing agreements by and among the Parties pursuant to the terms set
      forth in Attachment 1.

2.    Timing. The Parties agree to negotiate in good faith and execute a
      definitive version of the amendments incorporating the terms and
      conditions set forth in Attachment 1 (the "Definitive Amendments"). The
      Parties agree to use their respective best efforts to execute such
      Definitive Amendments as soon as possible. Notwithstanding the intention
      to execute the Definitive Amendments, the Parties agree that the terms of
      Attachment 1 shall be deemed to take effect immediately upon execution of
      this Amendment Letter Agreement.

3.    Default Agreement. This Amendment Letter Agreement constitutes a legally
      binding and enforceable agreement between the Parties hereto with respect
      to the provisions hereof. In the event that the Parties fail to execute
      the Definitive Amendments, the terms of this Amendment Letter Agreement
      shall be deemed the definitive amendments to the pre-existing agreements
      among the Parties. Notwithstanding the foregoing, except as indicated in
      this Amendment Letter Agreement or as subsequently modified in the
      Definitive Amendments, the agreements previously entered into among the
      Parties shall remain in full force and effect.

4.    Confidentiality. Except as provided herein, the existence and the terms of
      this Amendment Letter Agreement and the amendments contemplated herein
      shall be maintained in

<PAGE>

      confidence by the parties hereto and their respective officers, directors
      and employees. Except as compelled to be disclosed by judicial or
      administrative process or by other requirements of law, legal process,
      rule or regulation (including to the extent required in connection with
      any filings made by the parties or their controlling affiliates with the
      Securities and Exchange Commission) all public announcements, notices or
      other communications regarding such matters to third parties, including
      without limitation any disclosure regarding the transactions contemplated
      hereby, shall require the prior approval of all parties.

5.    General. This Letter Agreement shall be governed by, and construed and
      enforced in accordance with, the laws of the State of Delaware, without
      giving effect to principles of conflicts of law. For convenience, this
      Letter Agreement may be signed in more than one counterpart and signature
      pages may be exchanged by facsimile.

                  [Remainder of page intentionally left blank.]

<PAGE>

            If you determine that the foregoing is acceptable, we would
appreciate acknowledgment of that determination by the execution and delivery to
us of the enclosed copy of this letter.

            We look forward to your favorable consideration of this letter.

                                    Very truly yours,

                                    Playboy Enterprises, Inc.

                                    By: /s/ Linda Havard
                                        --------------------------

                                    Name: Linda Havard
                                          ------------------------

                                    Title: Chief Financial Officer
                                           -----------------------

The foregoing is agreed to and accepted.

Carlyle Investments LLC

By:    /s/ Steven Bandel
       --------------------------------

Name:  Steven Bandel
       --------------------------------

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

The foregoing is agreed to and accepted

Carlton Investments LLC

By:    /s/ Steven Bandel
       --------------------------------

Name:  Steven Bandel
       --------------------------------

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

Playboy TV International LLC

By:    /s/ William Fisher
       --------------------------------

Name:  William Fisher
       --------------------------------

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

 .<PAGE>

                                  ATTACHMENT 1

                          AMENDMENTS TO PTVI AGREEMENTS

PARTIES                        (1) Carlyle Investments LLC and Carlton
                               Investments LLC (as successors to VSI,
                               "Carlyle/Carlton"), (2) PEGI, (3) PEI and (4)
                               PTVI.

BACKGROUND                     o     PTVI and PEI, together with Playboy.com,
                                     Inc. and Morehaven Investments, Inc., have
                                     entered into a binding letter of intent of
                                     even date herewith, including the exhibits
                                     attached thereto (the "Letter Agreement")
                                     that, among other things, relates to
                                     PTVI's participation in Playboy.com's
                                     local internet businesses and PTVI's
                                     creation and operation of web pages
                                     promoting the local PTVI channels (the "TV
                                     Web Pages" or "Interim TV Web Sites,"
                                     where applicable, collectively the "TV
                                     Sites")

                               o     The Letter Agreement contains various terms
                                     relating to the creation and operation of
                                     the TV Sites, including content control
                                     matters.

                               o     The Parties have agreed to amend the PTVI
                                     Operating Agreement, the PTVI Program
                                     Supply Agreement and the PTVI Trademark
                                     License Agreement as described in this term
                                     sheet to provide for the funding and
                                     operation of the TV Sites and to reflect
                                     various other agreements of the parties.

                               o     The Parties acknowledge that they have
                                     been negotiating, and continue to
                                     negotiate, certain other amendments to the
                                     PTVI Operating Agreement, the PTVI Program
                                     Supply Agreement and the PTVI Trademark
                                     License Agreement. Notwithstanding the
                                     amendments contained herein, and the
                                     expectation that they will immediately
                                     take effect, the Parties acknowledge that
                                     such negotiations will continue, on a
                                     timely basis and in good faith.

DEFINITIONS                    Certain terms are defined in the body of this
                               term sheet.  Capitalized terms used but not
                               defined in this term sheet will have the
                               meaning given to them in the PTVI Operating
                               Agreement, the PTVI Program Supply Agreement or
                               the PTVI Trademark License Agreement, as
                               applicable.

<PAGE>

AMENDMENTS TO
OPERATING AGREEMENT

FUNDING OBLIGATION;            o     To initially fund the creation and launch
INCREASE TO MAXIMUM                  of the TV Sites, Carlyle/Carlton and PEGI
FUNDING CAP                          will make Capital Contributions to PTVI,
                                     pro rata in accordance with their
                                     respective membership interests, subject to
                                     an aggregate maximum of $5 million (the
                                     "Contribution"). The Contribution will be
                                     funded pursuant to the Web Channel Annual
                                     Budget (defined below) until fully funded.

                               o     The Parties agree that no Member will be
                                     entitled to special or priority
                                     distributions with respect to the
                                     Contribution.

                               o     The Contribution will be in addition to
                                     each Member's obligation to make Mandatory
                                     Additional Cash Contributions, effectively
                                     increasing the maximum aggregate amount of
                                     Mandatory Additional Cash Contributions to
                                     $105 million. The Members will continue to
                                     fund PTVI's deficits with respect of its
                                     other business activities through
                                     Mandatory Additional Cash Contributions as
                                     contemplated by the Operating Agreement.

INDEPENDENT BUDGET             o     The Contribution will be specifically
                                     allocated to the creation and launch of
                                     the TV Sites in an independent budget that
                                     is determined and approved in a manner
                                     consistent with, but not made part of,
                                     PTVI's Annual Budgets (each, a "Web
                                     Channel Annual Budget"). The first Web
                                     Channel Annual Budget will be presented to
                                     PTVI's Management Committee as soon as
                                     reasonably practicable, but not later than
                                     June 15, 2001.

                               o     No funds of PTVI other than the
                                     Contribution will be allocated to fund the
                                     creation and operation of the TV Sites.

ADJUSTMENT TO BUY-UP OPTION    o     For purposes of determining Founders' Price
                                     in connection with an exercise by PEGI of
                                     the Buy-Up Option in Year 2, Year 3 or
                                     Year 4, the Capital Contributions included
                                     in the calculation of Founders' Price will
                                     include the actual amount of the

                                       2
<PAGE>

                                     Contribution made as of the measuring date,
                                     less amounts distributed, if any, to the
                                     Members from costs recouped by PTVI.

                               o     In all other respects, the Buy-Up Option
                                     will remain in full force and effect.

AMENDMENTS TO PROGRAM
SUPPLY AGREEMENT

AMENDMENTS TO                  o     ***
CALCULATION OF PROGRAM
LICENSE FEE

AMENDED SCOPE OF RIGHTS UNDER  o     The scope of the grant of rights under the
PROGRAM SUPPLY AGREEMENT             Program Supply Agreement will be amended
                                     to include the activities expressly
                                     contemplated by the Letter Agreement
                                     (including with respect to the TV Sites)
                                     and to acknowledge that such activities are
                                     subject to the other requirements of such
                                     agreement.

                               o     The duration of such increase in scope will
                                     be co-terminus with the transaction
                                     contemplated by the Letter Agreement,
                                     unless sooner terminated in accordance with
                                     the terms of the Program Supply Agreement.
AMENDMENTS TO
TRADEMARK LICENSE
AGREEMENT

AMENDED SCOPE OF RIGHTS UNDER  o     The scope of the grant of rights under the
TRADEMARK LICENSE                    Trademark License Agreement will be
AGREEMENT                            amended to include the activities
                                     expressly contemplated by the Letter
                                     Agreement (including with respect to the TV
                                     Sites) and to acknowledge that such
                                     activities are subject to the other
                                     requirements of such agreement.

                               o     The duration of such increase in scope will
                                     be co-terminus with the transaction
                                     contemplated by the Letter Agreement,
                                     unless sooner terminated in accordance with
                                     the terms of the Trademark License
                                     Agreement.

                                       3

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