10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number 001-14790

Playboy Enterprises, Inc.

(Exact name of registrant as specified in its charter)

Delaware	36-4249478
(State of incorporation)	(I.R.S. Employer Identification Number)
680 North Lake Shore Drive Chicago, IL	60611
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (312) 751-8000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer þ   Non-accelerated filer o   Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No þ

At April 30, 2010, there were 4,864,102 shares of Class A Common Stock and 28,768,361 shares of Class B Common Stock outstanding.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements,” including statements in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as to expectations, beliefs, plans, objectives and future financial performance, and assumptions underlying or concerning the foregoing. We use words such as “may,” “will,” “would,” “could,” “should,” “believes,” “estimates,” “projects,” “potential,” “expects,” “plans,” “anticipates,” “intends,” “continues” and other similar terminology. These forward-looking statements involve known and unknow n risks, uncertainties and other factors, which could cause our actual results, performance or outcomes to differ materially from those expressed or implied in the forward-looking statements. We want to caution you not to place undue reliance on any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

The following are some of the important factors that could cause our actual results, performance or outcomes to differ materially from those discussed in the forward-looking statements:

(1) Foreign, national, state and local government regulations, actions or initiatives, including:

(a) attempts to limit or otherwise regulate the sale, distribution or transmission of adult-oriented materials, including print, television, video, Internet and mobile materials;

(b) attempts to limit or otherwise regulate the sale or distribution of certain consumer products sold by our licensees, including nutraceuticals and energy drinks; or

(c) limitations on the advertisement of tobacco, alcohol and other products which are important sources of advertising revenue for us;

(2) Risks associated with our foreign operations, including market acceptance and demand for our products and the products of our licensees and other business partners;

(3) Our ability to effectively manage our exposure to foreign currency exchange rate fluctuations;

(4) Further changes in general economic conditions, consumer spending habits, viewing patterns, fashion trends or the retail sales environment, which, in each case, could reduce demand for our programming and products and impact our advertising and licensing revenues;

(5) Our ability to protect our trademarks, copyrights and other intellectual property;

(6) Risks as a distributor of media content, including our becoming subject to claims for defamation, invasion of privacy, negligence, copyright, patent or trademark infringement and other claims based on the nature and content of the materials we distribute;

(7) The risk our outstanding litigation could result in settlements or judgments which are material to us;

(8) Dilution from any potential issuance of common stock or convertible debt in connection with financings or acquisition activities;

(9) Further competition for advertisers from other publications, media or online providers or decreases in spending by advertisers, either generally or with respect to the men’s market;

(10) Competition in the television, men’s magazine, Internet, mobile and product licensing markets;

(11) Attempts by consumers, distributors, merchants or private advocacy groups to exclude our programming or other products from distribution;

(12) Our television, Internet and mobile businesses’ reliance on third parties for technology and distribution, and any changes in that technology, distribution and/or delays in implementation which might affect our plans, assumptions and financial results;

(13) Risks associated with losing access to transponders or technical failure of transponders or other transmitting or playback equipment that is beyond our control;

(14) Competition for channel space on linear or video-on-demand television platforms;

(15) Failure to maintain our agreements with multiple system operators and direct-to-home, or DTH, operators on favorable terms, as well as any decline in our access to households or acceptance by DTH, cable and/or telephone company systems and the possible resulting cancellation of fee arrangements, pressure on splits or other deterioration of contract terms with operators of these systems;

(16) Risks that we may not realize the expected sales and profits and other benefits from acquisitions;

(17) Any charges or costs we incur in connection with restructuring measures we have taken or may take in the future;

(18) Increases in paper, printing, postage or other manufacturing costs;

(19) Effects of the consolidation of the single-copy magazine distribution system in the U.S. and risks associated with the financial stability of major magazine wholesalers;

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(20) Effects of the consolidation and/or bankruptcies of television distribution companies;

(21) Risks associated with the viability of our subscription, ad-supported and e-commerce Internet models;

(22) Our ability to sublet our excess space may be negatively impacted by the market for commercial rental real estate as well as by the global economy generally;

(23) The risk that our common stock could be delisted from the New York Stock Exchange, or NYSE, if we fail to meet the NYSE’s continued listing requirements;

(24) Risks that adverse market conditions in the securities and credit markets may significantly affect our ability to access the capital markets;

(25) The risk that we will be unable to refinance our 3.00% convertible senior subordinated notes due 2025, or convertible notes, or the risk that we will need to refinance our convertible notes, prior to the first put date of March 15, 2012, at significantly higher interest rates;

(26) The risk that we are unable to either extend the maturity date of our existing credit facility beyond the current expiration date of January 31, 2011 or establish a new facility with a later maturity date and acceptable terms; and

(27) Further downward pressure on our operating results and/or further deterioration of economic conditions could result in further impairments of our long-lived assets, including our other intangible assets.

For a detailed discussion of these and other factors that may affect our performance, see Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

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PLAYBOY ENTERPRISES, INC.

FORM 10-Q

TABLE OF CONTENTS

Page
PART I
FINANCIAL INFORMATION
Item 1.	Financial Statements
		Consolidated Statements of Operations and Comprehensive Loss for the Quarters Ended March 31, 2010 and 2009 (Unaudited)	5
		Consolidated Balance Sheets at March 31, 2010 (Unaudited) and December 31, 2009	6
		Condensed Consolidated Statements of Cash Flows for the Quarters Ended March 31, 2010 and 2009 (Unaudited)	7
		Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		22
Item 4.	Controls and Procedures		22
PART II
OTHER INFORMATION
Item 1.	Legal Proceedings		23
Item 1A.	Risk Factors		24
Item 6.	Exhibits		24

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PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PLAYBOY ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

for the Quarters Ended March 31 (Unaudited)

(In thousands, except per share amounts)

	2010			2009
Net revenues	$	52,148		$	61,633
Costs and expenses
Cost of sales		(37,547	)		(50,430	)
Selling and administrative expenses		(11,421	)		(12,538	)
Restructuring expense		(671	)		(3,179	)
Impairment charges		(447	)		(5,518	)
Total costs and expenses		(50,086	)		(71,665	)
Operating income (loss)		2,062			(10,032	)
Nonoperating income (expense)
Investment income		5			33
Interest expense		(2,170	)		(2,147	)
Amortization of deferred financing fees		(164	)		(225	)
Other, net		(59	)		(89	)
Total nonoperating expense		(2,388	)		(2,428	)
Loss before income taxes		(326	)		(12,460	)
Income tax expense		(636	)		(1,202	)
Net loss	$	(962	)	$	(13,662	)
Other comprehensive income (loss)
Unrealized loss on marketable securities		-			(26	)
Foreign currency translation gain (loss)		42			(187	)
Total other comprehensive income (loss)		42			(213	)
Comprehensive loss	$	(920	)	$	(13,875	)
Weighted average number of common shares outstanding
Basic and diluted		33,540			33,388
Basic and diluted loss per common share	$	(0.03	)	$	(0.41	)

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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PLAYBOY ENTERPRISES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	(Unaudited)
	Mar. 31,			Dec. 31,
	2010			2009
Assets
Cash and cash equivalents	$	25,371		$	24,569
Receivables, net of allowance for doubtful accounts of $3,868 and $3,834, respectively		32,890			31,942
Receivables from related parties		2,143			2,897
Inventories		5,296			3,951
Deferred tax asset		1,426			1,487
Prepaid expenses and other current assets		5,410			5,048
Total current assets		72,536			69,894
Property and equipment, net		17,252			18,438
Programming costs, net		45,881			47,516
Trademarks, net		44,164			43,964
Distribution agreements, net of accumulated amortization of $6,895 and $6,751, respectively		11,369			11,513
Deferred tax asset		247			-
Other noncurrent assets		5,158			5,507
Total assets	$	196,607		$	196,832
Liabilities
Acquisition liabilities	$	4,895		$	4,802
Accounts payable		21,403			21,138
Accrued salaries, wages and employee benefits		9,333			10,123
Deferred revenues		30,163			27,417
Other current liabilities and accrued expenses		16,374			17,519
Total current liabilities		82,168			80,999
Financing obligations		105,265			104,128
Acquisition liabilities		476			703
Deferred tax liability		7,926			7,706
Other noncurrent liabilities		23,791			25,592
Total liabilities		219,626			219,128
Shareholders’ deficit
Common stock, $0.01 par value
Class A voting – 7,500,000 shares authorized; 4,864,102 issued		49			49
Class B nonvoting – 75,000,000 shares authorized; 29,130,138 and 29,014,343 issued, respectively		291			289
Capital in excess of par value		260,574			260,379
Accumulated deficit		(275,926	)		(274,964	)
Treasury stock, at cost – 381,971 shares		(5,000	)		(5,000	)
Accumulated other comprehensive loss		(3,007	)		(3,049	)
Total shareholders’ deficit		(23,019	)		(22,296	)
Total liabilities and shareholders’ deficit	$	196,607		$	196,832

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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PLAYBOY ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

for the Quarters Ended March 31 (Unaudited)

(In thousands)

	2010			2009
Cash flows from operating activities
Net loss	$	(962	)	$	(13,662	)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Depreciation of property and equipment		1,222			1,232
Amortization of intangible assets		390			506
Amortization of investments in entertainment programming		6,565			7,986
Amortization of deferred financing fees		164			225
Stock-based compensation		359			178
Noncash interest expense		1,137			1,054
Impairment charges		447			5,518
Deferred income taxes		34			579
Payments of deferred compensation plan		-			(5,133	)
Net change in operating assets and liabilities		(2,799	)		5,483
Investments in entertainment programming		(5,082	)		(7,171	)
Other, net		526			17
Net cash provided by (used for) operating activities		2,001			(3,188	)
Cash flows from investing activities
Purchases of investments		-			(93	)
Proceeds from sales of investments		-			5,575
Additions to property and equipment		(711	)		(1,079	)
Other, net		3			4
Net cash provided by (used for) investing activities		(708	)		4,407
Cash flows from financing activities
Payments of deferred financing fees		-			(173	)
Payments of acquisition liabilities		(250	)		(250	)
Proceeds from stock-based compensation		23			21
Net cash used for financing activities		(227	)		(402	)
Effect of exchange rate changes on cash and cash equivalents		(264	)		(107	)
Net increase in cash and cash equivalents		802			710
Cash and cash equivalents at beginning of period		24,569			25,192
Cash and cash equivalents at end of period	$	25,371		$	25,902

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(A)      Basis of Preparation

The financial information included in these financial statements is unaudited but, in the opinion of management, reflects all normal recurring and other adjustments necessary for a fair presentation of the results for the interim periods. The interim results of operations and cash flows are not necessarily indicative of those results and cash flows for the entire year. These financial statements should be read in conjunction with the financial statements and notes to the financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

(B)      Recently Issued Accounting Standards

In January 2010, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, or ASU No. 2010-06. ASU No. 2010-06 requires additional disclosures about inputs and valuation techniques used to measure fair value as well as disclosures about significant transfers between levels of the fair value hierarchy as defined in FASB Accounting Standard Codification, or ASC, Topic 820, Fair Value Measurements and Disclosures, or ASC Topic 820.We adopted the provisions of ASU No. 2010-06 beginning with the first quarter of 2010, except for the disclosure presenting disaggregated activity within the reconciliation for fair value measurements using significant unobservable inputs (Level 3), which we are required to adopt in the first quarter of 2011. As ASU No. 2010-06 affects disclosures only, the adoption of ASU No. 2010-06 does not affect our results of operations or financial condition.

(C)      Restructuring Expense

In the current year quarter, we implemented a plan to further reduce headcount and real estate lease obligations. As a result of this plan, we recorded a charge of $0.4 million related to a lease termination fee and a workforce reduction of 10 employees, whose positions will be eliminated in the first quarter of 2011. Severance payments under this plan will begin in the first quarter of 2011 and be completed in 2011.

In the fourth quarter of 2009, we implemented a plan to outsource non-editorial functions of Playboy magazine and other domestic publications to American Media, Inc. through its wholly owned subsidiary, American Media Operations, Inc., as well as to reduce other overhead costs. As a result of this plan, we recorded a charge of $3.7 million related to a workforce reduction of 26 employees, most of whose positions were eliminated by the end of the current year quarter, and contract termination fees. Severance payments under this plan began in the fourth quarter of 2009 and will be completed in 2011.

In the second quarter of 2009, we recorded a charge of $9.3 million related to our plan to vacate our leased New York office space. The charge primarily reflected the discounted value of our remaining lease obligation net of estimated sublease income. We recorded additional restructuring charges related to this plan in 2009 representing depreciation of leasehold improvements and furniture and equipment as well as accretion of the difference between the nominal and discounted remaining lease obligation net of estimated sublease income. We expect to record additional restructuring charges, representing depreciation and accretion, of $8.7 million over the remaining approximate nine-year term of the lease, or approximately $1.0 million on average annually. We recorded $0.3 million of these r estructuring charges representing depreciation and accretion during the current year quarter.

In the first quarter of 2009, we implemented a restructuring plan to integrate our print and digital businesses in our Chicago office as well as to streamline operations across the Company, including the elimination of positions.As a result of this plan, we recorded a charge of $2.6 million related to a workforce reduction of 107 employees, whose positions were eliminated by the end of the second quarter of 2009. Severance payments under this plan began in the first quarter of 2009 and were substantially completed by the end of 2009 with some payments continuing into 2010.

In the fourth quarter of 2008, we implemented a restructuring plan to lower overhead costs, primarily related to senior Corporate and Entertainment Group positions. As a result of this plan, we recorded a charge of $4.0 million related to 21 employees, most of whose positions were eliminated in the first quarter of 2009. Payments under this

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plan began in the fourth quarter of 2008 and were largely completed by the end of 2009 with some payments continuing into 2011. We recorded an unfavorable adjustment of $0.9 million during the prior year quarter as result of changes in assumptions for this plan.

In the third quarter of 2008, we implemented a restructuring plan to reduce overhead costs. As a result of this plan, we recorded a charge of $2.2 million related to costs associated with a workforce reduction of 55 employees, most of whose positions were eliminated in the fourth quarter of 2008. Payments under this plan began in the fourth quarter of 2008 and were substantially completed by the end of 2009 with some payments continuing into 2010. We recorded a favorable adjustment of $0.3 million during the prior year quarter as a result of changes in assumptions for this plan.

The following table sets forth the activity and balances of our restructuring reserves, which are included in “Accrued salaries, wages and employee benefits,” “Other current liabilities and accrued expenses” and “Other noncurrent liabilities” on our Consolidated Balance Sheets (in thousands).

	Workforce Reduction			Consolidation of Facilities and Operations			Total
Balance at December 31, 2009	$	4,689		$	10,667		$	15,356
Reserve recorded		90			285			375
Accretion of discount on net lease obligation		-			202			202
Adjustments to previous estimates		(52	)		17			(35	)
Cash payments		(886	)		(1,098	)		(1,984	)
Balance at March 31, 2010	$	3,841		$	10,073		$	13,914

The above table excludes depreciation of leasehold improvements and furniture and equipment related to our leased New York office space.

(D)      Impairment Charges

In accordance with ASC Topic 360, Property, Plant, and Equipment, we conduct impairment testing on long-lived assets, or asset groups, whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. During the first quarter of 2010, we implemented a plan to further reduce our headcount and real estate lease obligations. As a result, we evaluated the related long-lived assets for recoverability. We determined the carrying amount of this asset group was not recoverable and we recorded an impairment charge of $0.4 million in the current year quarter representing the entire net book value of these long-lived assets.

In concert with the integration of our print and digital businesses in the first quarter of 2009, we moved the reporting of our digital business from the Entertainment Group into the Print/Digital Group, which we formerly called the Publishing Group. These businesses were combined in order to better focus on creating brand-consistent content that extends across print and digital platforms. Due to this realignment of our operating segments, which are also our reporting units as defined in ASC Topic 350, Intangibles–Goodwill and Other, or ASC Topic 350, we conducted interim impairment testing of goodwill in accordance with ASC Topic 350. Interim testing of goodwill was also necessitated by lower expected financial results in th e new Print/Digital Group than that of the former Entertainment Group, which contained the digital business’ assets prior to the realignment of our operating segments. We estimated the implied fair value of the goodwill using a combined weighted forecasted-discounted cash flow method and a market multiple approach based in part on our financial results and our expectation of future performance at the time of our impairment testing, which are Level 3 inputs within the fair value hierarchy under ASC Topic 820, as described in Note (I), Fair Value Measurement. As a result of this testing, the implied fair value of goodwill of the Print/Digital operating segment was lower than its carrying value, and we recorded an impairment charge on the entire balance of the Print/Digital Group’s goodwill of $5.5 million in the prior year quarter.

Further downward pressure on our operating results and/or further deterioration of economic conditions could result in additional future impairments of our long-lived assets, including our other intangible assets.

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(E)       Earnings Per Common Share

The following table sets forth the computations of basic and diluted earnings per share, or EPS (in thousands, except per share amounts):

	Quarters Ended
	March 31,
	2010			2009
Numerator:
For basic and diluted EPS – net loss	$	(962	)	$	(13,662	)
Denominator:
For basic and diluted EPS – weighted average shares		33,540			33,388
Basic and diluted loss per common share	$	(0.03	)	$	(0.41	)

The following table sets forth the number of shares related to outstanding options to purchase Class B common stock, or Class B stock, the number of restricted stock units, or RSUs, that provide for the issuance of Class B stock and the potential number of shares of Class B stock contingently issuable under our 3.00% convertible senior subordinated notes due 2025, or convertible notes. These shares were not included in the computations of diluted EPS for the quarters ended March 31, 2010 and 2009, as their inclusion would have been antidilutive (in thousands):

	Quarters Ended
	March 31,
	2010		2009
Stock options		3,687		4,575
RSUs		499		536
Convertible notes		6,758		6,758
Total		10,944		11,869

(F)       Inventories

In 2009, the January and February 2010 issues of Playboy magazine were combined into a double issue. As a result, we have higher inventories at March 31, 2010 compared to December 31, 2009.

The following table sets forth inventories, which are stated at the lower of cost (specific cost and average cost) or fair value (in thousands):

Mar. 31,			Dec. 31,
	2010		2009
Paper	$	1,255	$	1,191
Editorial and other prepublication costs		3,546		2,230
Merchandise finished goods		495		530
Total	$	5,296	$	3,951

(G)      Income Taxes

Our income tax provision consists primarily of foreign income tax, which relates to our international television networks and withholding tax on licensing income, for which we do not receive a current U.S. income tax benefit due to our net operating loss, or NOL, position in the U.S. Our income tax provision also includes deferred federal and state income taxes related to the amortization of goodwill and other indefinite-lived intangibles, which cannot be offset against deferred tax assets due to the indefinite reversal period of the deferred tax liabilities.

We utilize the liability method of accounting for income taxes as set forth in ASC Topic 740, Income Taxes. Additionally, NOL and tax credit carryforwards are reported as deferred income tax assets. The realization of deferred income tax assets is dependent upon future earnings. A valuation allowance is required against deferred

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income tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred income tax assets may not be realized. In making such determination, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial performance. As a result of our cumulative losses in the U.S. and certain foreign jurisdictions, we have concluded that a full valuation allowance should be recorded for such jurisdictions.

At March 31, 2010 and December 31, 2009, we had unrecognized tax benefits of $8.0 million and do not expect this amount to change significantly over the next 12 months. Due to the impact of deferred income tax accounting, the disallowance of these benefits would not affect our effective income tax rate nor would it accelerate the payment of cash to the taxing authorities to an earlier period.

Our continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense.

We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2006 through 2009 tax years generally remain subject to examination by federal and most state taxing authorities. In addition, for all tax years prior to 2006 generating an NOL, taxing authorities can adjust the NOL amount. In our international tax jurisdictions, numerous tax years remain subject to examination by taxing authorities, including tax returns for 2003 and subsequent years.

(H)      Marketable Securities

We account for available-for-sale marketable securities and short-term investments under the specific identification method. We did not purchase or sell any marketable securities or investments during the current year quarter and had no marketable securities or investments on our Consolidated Balance Sheets at March 31, 2010 or December 31, 2009. During the prior year quarter, we purchased $0.1 million of investments and received proceeds of $5.6 million from sales of investments and recorded immaterial gains or losses related to those sales. We recorded immaterial net unrealized holding losses in “Other comprehensive income (loss)” during the prior year quarter.

(I)        Fair Value Measurement

We measure our financial assets and financial liabilities at fair value in accordance with ASC Topic 820. Our financial assets and financial liabilities relate to derivative instruments used to hedge the variability of forecasted cash receipts related to royalty payments denominated in yen and euro. Derivative instruments in asset positions, if any, are included in “Prepaid expenses and other current assets” and derivative instruments in liability positions, if any, are included in “Other current liabilities and accrued expenses” on our Consolidated Balance Sheets.

We utilize the market approach to measure fair value for our assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

ASC Topic 820 includes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on observable or unobservable inputs to valuation techniques that are used to measure fair value. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The fair value hierarchy consists of three levels: Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities; Level 2 – Inputs are quoted prices for similar assets or liabilities in an active market, qu oted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs, which are derived principally from or corroborated by observable market data; and Level 3 – Inputs that are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

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The following table sets forth financial assets and liabilities measured at fair value on a recurring basis and the basis of measurement at March 31, 2010 (in thousands):

	Total Fair Value Measurement			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Derivative assets		$	60		$	-		$	60		$	-

We measure the fair value of our derivative instruments using broker prices, which use inputs that are readily available in public markets or can be derived from information readily available in public markets. These inputs include spot exchange rates and interest rates.

(J)       Financing Obligations

Our financing obligations consisted of the $115.0 million principal amount of convertible notes with a carrying value of $105.3 million at March 31, 2010 and $104.1 million at December 31, 2009.

The fair value of the convertible notes is influenced by changes in market interest rates, the share price of Class B stock and our credit quality. At March 31, 2010, the convertible notes had an estimated fair value of $100.1 million. This fair value was estimated using quoted market prices that are similar to Level 2 inputs within the ASC Topic 820 fair value hierarchy.

(K)      Contingencies

In 2006, we acquired Club Jenna, Inc. and related companies, for which we paid $7.7 million at closing, $1.6 million in 2007, $1.7 million in 2008 and $2.3 million in 2009 with one additional deferred purchase price payment of $4.3 million due in the second quarter of 2010. Pursuant to the acquisition agreement, we are also obligated to make future contingent earnout payments based primarily on DVD sales of existing content of the acquired business over a 10-year period and on content produced by the acquired business during the five-year period after the closing of the acquisition. No earnout payments have been made through March 31, 2010 and no future earnout payments are expected.

In 2005, we acquired an affiliate network of websites. We paid $8.0 million at closing and $2.0 million in each of 2006 and 2007. Pursuant to the acquisition agreement, we were also obligated to make future contingent earnout payments over the five-year period commencing January 1, 2005 based primarily on the financial performance of the acquired business. No earnout payments were made during the current year quarter or the prior year quarter and no future obligations remain.

In 2002, a $4.4 million verdict was entered against us by a state trial court in Texas in a lawsuit with a former publishing licensee. We terminated the license in 1998 due to the licensee’s failure to pay royalties and other amounts due us under the license agreement. We posted a bond in the amount of approximately $9.4 million, which represented the amount of the judgment, costs and estimated pre- and post-judgment interest. We appealed and the Texas State Appellate Court reversed the judgment by the trial court, rendered judgment for us on the majority of plaintiffs’ claims and remanded the remaining claims for a new trial. We filed a petition for review with the Texas Supreme Court. On January 25, 2008, the Texas Supreme Court denied our petition for review. On February 8 , 2008, we filed a petition for rehearing with the Texas Supreme Court. On May 16, 2008, the Texas Supreme Court denied our motion for rehearing. The posted bond has been canceled and the remaining claims were retried. On April 23, 2010, a jury returned a verdict in our favor.

(L)      Benefit Plans

We maintain a practice of paying a separation allowance, which is not funded, under our salary continuation policy to employees with at least five years of continuous service who voluntarily terminate employment with us

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and are at age 60 or thereafter. We made cash payments under this policy of $0.3 million during the quarter ended March 31, 2010 and $0.2 million during the quarter ended March 31, 2009.

(M)      Stock-Based Compensation

The following table sets forth stock-based compensation expense related to stock options, RSUs, other equity awards and our employee stock purchase plan, or ESPP (in thousands):

	Quarters Ended
	March 31,
	2010		2009
Stock options	$	236	$	102
RSUs		78		(23	)
Other equity awards		42		96
ESPP		3		3
Total	$	359	$	178

The total amount of compensation expense recognized reflects the number of stock-based awards that actually vest as of the completion of their respective vesting periods. Upon the vesting of certain stock-based awards, we adjust our stock-based compensation expense to reflect actual versus estimated forfeitures. We recorded an immaterial adjustment during the current year quarter and a favorable adjustment of $0.1 million during the prior year quarter to reflect actual forfeitures for vested stock-based awards.

Stock Options

We estimate the value of stock options on the date of grant using the Lattice Binomial model, or Lattice model. The Lattice model requires extensive analysis of actual exercise and cancellation data and involves a number of complex assumptions including expected volatility, risk-free interest rate, expected dividends and stock option exercises and cancellations.

The following table sets forth the assumptions used for the Lattice model:

	Quarters Ended
	March 31,
	2010			2009
Expected volatility		56% – 98	%		43% – 97	%
Weighted average volatility		73	%		57	%
Risk-free interest rate		0.06% – 5.58	%		0.14% – 4.71	%
Expected dividends		-			-

The expected life of stock options represents the weighted average period the stock options are expected to remain outstanding and is a derived output of the Lattice model. The expected life of stock options is impacted by all of the underlying assumptions and calibration of the Lattice model. The Lattice model assumes that exercise behavior is a function of the stock option’s remaining contractual term, vesting schedule and the extent to which the stock option’s intrinsic value exceeds the exercise price.

During the current year quarter, we granted 39,165 stock options, exercisable for shares of Class B stock, which vest over a one-year period from the grant date and expire 10 years from the grant date. During the prior year quarter, we granted 996,000 stock options, exercisable for shares of Class B stock, which vest ratably over a three-year period from the grant date and expire 10 years from the grant date. The weighted average expected life was 5.6 years for stock options granted during the current year quarter and 6.9 years for stock options granted during the prior year quarter, and the weighted average fair value per share was $1.92 for stock options granted during the current year quarter and $0.73 for stock options granted during the prior year quarter.

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The following table sets forth the activity and balances of our stock options for the current year quarter:

				Weighted
				Average
	Number of			Exercise
	Shares			Price
Outstanding at December 31, 2009		3,808,921			$	7.48
Granted		39,165				3.36
Exercised		(2,000	)			1.25
Forfeited		(126,500	)			24.13
Canceled		(346,671	)			12.34
Outstanding at March 31, 2010		3,372,915			$	6.31

At March 31, 2010, we had $2.1 million of unrecognized stock-based compensation expense related to nonvested stock options, which will be recognized over a weighted average period of 2.9 years.

Restricted Stock Units

During the current year quarter, we granted 22,320 RSUs with a grant-date fair value per share of $3.36, which provide for the issuance of Class B stock vesting over a one-year period from the grant date. During the prior year quarter, we granted 332,000 RSUs with a grant-date fair value per share of $1.25, which provide for the issuance of Class B stock vesting ratably over a three-year period from the grant date.

The following table sets forth the activity and balances of our RSUs for the current year quarter:

				Weighted
					Average
	Number of			Grant-Date
	Shares			Fair Value
Outstanding at December 31, 2009		536,625			$	1.66
Granted		22,320				3.36
Vested		(150,505	)			1.25
Canceled		(4,228	)			1.25
Outstanding at March 31, 2010		404,212			$	1.91

         At March 31, 2010, we had $0.6 million of unrecognized stock-based compensation expense related to nonvested RSUs, which will be recognized over a weighted average period of 2.4 years.

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(N)      Segment Information

The following table sets forth financial information by reportable segment (in thousands):

	Quarters Ended
	March 31,
	2010			2009
Net revenues
Entertainment	$	23,990		$	26,181
Print/Digital		18,230			26,080
Licensing		9,928			9,372
Total	$	52,148		$	61,633
Loss before income taxes
Entertainment	$	3,571		$	2,950
Print/Digital		(1,074	)		(3,628	)
Licensing		6,532			5,606
Corporate		(5,849	)		(6,263	)
Restructuring expense		(671	)		(3,179	)
Impairment charges		(447	)		(5,518	)
Investment income		5			33
Interest expense		(2,170	)		(2,147	)
Amortization of deferred financing fees		(164	)		(225	)
Other, net		(59	)		(89	)
Total	$	(326	)	$	(12,460	)
	Mar. 31,			Dec. 31,
		2010			2009
Identifiable assets
Entertainment	$	80,692		$	82,119
Print/Digital		21,916			21,468
Licensing		6,475			6,040
Corporate		87,524			87,205
Total	$	196,607		$	196,832

(O)      Subsequent Events

We evaluated all of our activity through the issue date of these financial statements and concluded that no subsequent events have occurred that would require recognition in the financial statements or disclosure in the Notes to Condensed Consolidated Financial Statements.

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ITEM 2.          MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion should be read in conjunction with the Condensed Consolidated Financial Statements and accompanying notes in Item 1 of this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

RESULTS OF OPERATIONS

The following table sets forth our results of operations (in millions, except per share amounts):

	Quarters Ended
	March 31,
	2010			2009
Net revenues
Entertainment
Domestic TV	$	13.4		$	13.3
International TV		10.0			11.3
Other		0.6			1.6
Total Entertainment		24.0			26.2
Print/Digital
Domestic magazine		7.1			13.5
International magazine		1.5			1.7
Special editions and other		1.3			1.6
Digital		8.3			9.3
Total Print/Digital		18.2			26.1
Licensing
Consumer products		8.5			7.8
Location-based entertainment		0.9			1.1
Marketing events		0.1			0.1
Other		0.4			0.3
Total Licensing		9.9			9.3
Total net revenues	$	52.1		$	61.6
Net loss
Entertainment
Before programming amortization	$	10.2		$	11.0
Programming amortization		(6.6	)		(8.0	)
Total Entertainment		3.6			3.0
Print/Digital		(1.1	)		(3.6	)
Licensing		6.5			5.6
Corporate		(5.8	)		(6.3	)
Segment income (loss)		3.2			(1.3	)
Restructuring expense		(0.7	)		(3.2	)
Impairment charges		(0.4	)		(5.5	)
Operating income (loss)		2.1			(10.0	)
Nonoperating expense
Interest expense		(2.2	)		(2.1	)
Amortization of deferred financing fees		(0.2	)		(0.3	)
Other, net		-			(0.1	)
Total nonoperating expense		(2.4	)		(2.5	)
Loss before income taxes		(0.3	)		(12.5	)
Income tax expense		(0.7	)		(1.2	)
Net loss	$	(1.0	)	$	(13.7	)
Basic and diluted loss per share	$	(0.03	)	$	(0.41	)

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Overview

Revenues decreased $9.5 million, or 15%, compared to the prior year quarter. The decrease was driven by lower revenues in our Print/Digital Group, which was primarily due to lower Playboy magazine revenues. Also contributing were lower revenues from our Entertainment Group, largely due to lower international TV revenues.

Segment results improved $4.5 million compared to the prior year quarter due to improved results from all of our groups, most significantly from our Print/Digital Group, and lower Corporate expenses largely as a result of our cost-savings initiatives.

Operating results improved $12.1 million compared to the prior year quarter due to the improved segment results discussed above as well as lower impairment charges and restructuring expense.

Net loss improved $12.7 million compared to the prior year quarter primarily due to the operating results previously discussed and lower income tax expense.

Current Economic Conditions

We continue to experience many of the same challenges our partners and competitors in the media industry are facing, namely increased competition for consumers’ attention in the face of shrinking overall spending in the television and print businesses, the migration of advertisers to other platforms and the uncertainty created by the current state of the global economy. In spite of the strength of our brand and products, our licensing business continues to be challenged by trends in the retail environment as well as from the inability of potential location-based entertainment business partners to obtain project financing. We have made significant changes to many of our processes and business activities in order to address the current economic climate and industry challenges and wil l continue to do so. Our goal is to narrow our focus to management of the Playboy brand and lifestyle. We have made progress in building a new business model that will create a leaner organization while using others to accelerate growth and operate more efficiently by finding partners with the size, scope and scale needed to assist us in competing in today’s business environment.

Despite the current economic conditions, we believe we continue to have the liquidity to meet our needs. At March 31, 2010, we had $25.4 million in cash and cash equivalents and there were no borrowings and $0.8 million in letters of credit outstanding under our $30.0 million revolving credit facility, resulting in $29.2 million of available borrowings under this facility. We believe our cash generated from operating activities in addition to our cash and borrowing capacity will be sufficient to meet our liquidity needs through 2011. See “Liquidity and Capital Resources” below.

Entertainment Group

Domestic TV revenues were flat compared to the prior year quarter. An increase in Playboy TV revenues, primarily due to an increase in monthly subscription revenues, was offset by a decrease in video-on-demand, or VOD, revenues primarily due to increased competition from other suppliers and distribution outlets. We expect these trends to continue into the future.

International TV revenues decreased $1.3 million, or 12%, compared to the prior year quarter. The decrease was largely due to lower sales in Europe. Increased competition for customers, particularly in the U.K. where we derive significant revenues, continues to challenge our International TV business. We expect these challenges to continue into the future. Foreign currency exchange rate fluctuations had a favorable effect on International TV revenues compared to the prior year quarter.

Revenues from other businesses decreased $1.0 million, or 59%, compared to the prior year quarter due primarily to lower revenues related to television series produced by our production company, Alta Loma Entertainment.

The group’s segment income increased $0.6 million compared to the prior year quarter as the revenue declines previously discussed were more than offset by lower programming amortization expense and the effects of our cost-savings initiatives.

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Print/Digital Group

Domestic magazine revenues decreased $6.4 million, or 48%, compared to the prior year quarter due in large part to publishing one fewer issue. Playboy magazine published a double issue and recorded revenues reflecting the combined January/February 2010 issue in the fourth quarter of 2009. In the prior year, February was a separate issue with its revenues reflected in the first quarter of 2009. We do not plan to publish another double issue in 2010. Industry dynamics including lower overall spending by advertisers, fewer subscribers and decreasing newsstand sales also contributed to the negative revenue trends in the current year quarter. In response to these industry dynamics, we decided to lower the guaranteed circulation rate bas e (the total newsstand and subscription circulation guaranteed to advertisers) of Playboy magazine to 1.5 million from 2.6 million effective with the January/February 2010 issue.

Subscription revenues decreased $4.5 million, or 48%, compared to the prior year quarter. Current year quarter subscription revenues compared to the prior year quarter were negatively impacted by publishing one fewer issue of Playboy magazine combined with 33% fewer average paid copies served related to our decision to reduce Playboy magazine’s rate base effective with the January/February 2010 issue.

Newsstand revenues decreased $0.4 million, or 35%, compared to the prior year quarter primarily due to publishing one fewer issue compared to the prior year quarter. In addition, the current year quarter reflects continued overall weakness in the newsstand business due to a large number of titles, fewer newsstand outlets and competition from free content on the Internet.

Advertising revenues decreased $1.5 million, or 53%, compared to the prior year quarter. While advertising pages were flat despite publishing one fewer issue in the current year quarter, advertising revenues decreased primarily due to 46% lower average net revenue per page related to the 42% reduction in the rate base. Advertising sales for the 2010 second quarter magazine issues are closed, and we expect to report advertising revenues to be approximately 26% lower and advertising pages to be approximately 55% higher compared to the second quarter of 2009. On a combined basis, Playboy print and digital advertising revenues decreased $1.5 million, or 45%, compared to the prior year quarter, reflecting the reduction in the rate base and lower overall spending by advertisers.

International magazine revenues decreased $0.2 million, or 10%, compared to the prior year quarter due primarily to lower royalties from our European editions. Special editions and other revenues decreased $0.3 million, or 19%, compared to the prior year quarter due mainly to 20% fewer newsstand copies sold. The same industry dynamics that are impacting Playboy magazine in the domestic market are also impacting our other print businesses.

Digital revenues decreased $1.0 million, or 10%, compared to the prior year quarter largely due to a decrease in paysites revenues. Paysites revenues in the current year quarter were lower primarily due to increasing amounts of competing free content available on the Internet combined with a change in the mix of monthly and annual subscriptions. We continue our focus on efforts to increase profitability of our paysites by building traffic and conversions and improving the customer and advertiser experience and our competitive position.

Segment results improved $2.5 million compared to the prior year quarter. Significant reductions in manufacturing, shipping and subscription promotion costs, attributable to the combined issue and our decision to reduce Playboy magazine’s rate base effective with the January/February 2010 issue, contributed to the improvement. These cost reductions combined with other cost-savings initiatives within the group more than offset the lower revenues in the current year quarter.

In November 2009, we entered into an agreement with American Media, Inc. through its wholly owned subsidiary, American Media Operations, Inc., or AMI, to outsource non-editorial functions of Playboy magazine and other domestic publications, including production, circulation, advertising sales, marketing and other support services. We began transitioning these functions in November 2009 and have substantially completed the transition. We have begun to realize certain cost reductions as a result of our agreement with AMI and expect to continue to reduce our cost structure related to manufacturing and marketing and increase domestic magazine revenues from growth in newsstand and advertising sales.

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Licensing Group

Licensing Group revenues increased $0.6 million, or 6%, compared to the prior year quarter. This increase was primarily due to higher consumer products royalties in the current year quarter.

The group’s segment income increased $0.9 million compared to the prior year quarter primarily due to the increase in revenues discussed above.

Corporate

Corporate expenses decreased $0.5 million, or 7%, compared to the prior year quarter primarily due to the results of our cost-savings initiatives.

Restructuring Expense

In the current year quarter, we implemented a plan to further reduce headcount and real estate lease obligations. As a result of this plan, we recorded a charge of $0.4 million related to a lease termination fee and a workforce reduction of 10 employees, whose positions will be eliminated in the first quarter of 2011. Severance payments under this plan will begin in the first quarter of 2011 and be completed in 2011.

In the fourth quarter of 2009, we implemented a plan to outsource non-editorial functions of Playboy magazine and other domestic publications to AMI, as well as to reduce other overhead costs. As a result of this plan, we recorded a charge of $3.7 million related to a workforce reduction of 26 employees, most of whose positions were eliminated by the end of the current year quarter, and contract termination fees. Severance payments under this plan began in the fourth quarter of 2009 and will be completed in 2011.

In the second quarter of 2009, we recorded a charge of $9.3 million related to our plan to vacate our leased New York office space. The charge primarily reflected the discounted value of our remaining lease obligation net of estimated sublease income. We recorded additional restructuring charges related to this plan in 2009 representing depreciation of leasehold improvements and furniture and equipment as well as accretion of the difference between the nominal and discounted remaining lease obligation net of estimated sublease income. We expect to record additional restructuring charges, representing depreciation and accretion, of $8.7 million over the remaining approximate nine-year term of the lease, or approximately $1.0 million on average annually. We recorded $0.3 million of these r estructuring charges representing depreciation and accretion during the current year quarter.

In the first quarter of 2009, we implemented a restructuring plan to integrate our print and digital businesses in our Chicago office as well as to streamline operations across the Company, including the elimination of positions.As a result of this plan, we recorded a charge of $2.6 million related to a workforce reduction of 107 employees, whose positions were eliminated by the end of the second quarter of 2009. Severance payments under this plan began in the first quarter of 2009 and were substantially completed by the end of 2009 with some payments continuing into 2010.

In the fourth quarter of 2008, we implemented a restructuring plan to lower overhead costs, primarily related to senior Corporate and Entertainment Group positions. As a result of this plan, we recorded a charge of $4.0 million related to 21 employees, most of whose positions were eliminated in the first quarter of 2009. Payments under this plan began in the fourth quarter of 2008 and were largely completed by the end of 2009 with some payments continuing into 2011. We recorded an unfavorable adjustment of $0.9 million during the prior year quarter as result of changes in assumptions for this plan.

In the third quarter of 2008, we implemented a restructuring plan to reduce overhead costs. As a result of this plan, we recorded a charge of $2.2 million related to costs associated with a workforce reduction of 55 employees, most of whose positions were eliminated in the fourth quarter of 2008. Payments under this plan began in the fourth quarter of 2008 and were substantially completed by the end of 2009 with some payments continuing into 2010. We recorded a favorable adjustment of $0.3 million during the prior year quarter as a result of changes in assumptions for this plan.

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Impairment Charges

In accordance with Financial Accounting Standards Board, or FASB, Accounting Standard Codification, or ASC, Topic 360, Property, Plant, and Equipment, we conduct impairment testing on long-lived assets, or asset groups, whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. During the current year quarter, we implemented a plan to further reduce our headcount and real estate lease obligations. As a result, we evaluated the related long-lived assets for recoverability. We determined the carrying amount of this asset group was not recoverable and we recorded an impairment charge of $0.4 million in the current year quarter representing the entire net book value of these long-lived asse ts.

In concert with the integration of our print and digital businesses in the first quarter of 2009, we moved the reporting of our digital business from the Entertainment Group into the Print/Digital Group, which we formerly called the Publishing Group. These businesses were combined in order to better focus on creating brand-consistent content that extends across print and digital platforms. Due to this realignment of our operating segments, which are also our reporting units as defined in ASC Topic 350, Intangibles–Goodwill and Other, or ASC Topic 350, we conducted interim impairment testing of goodwill in accordance with ASC Topic 350. Interim testing of goodwill was also necessitated by lower expected financial results in th e new Print/Digital Group than that of the former Entertainment Group, which contained the digital business’ assets prior to the realignment of our operating segments. As a result of this testing, the implied fair value of goodwill of the Print/Digital operating segment was lower than its carrying value, and we recorded an impairment charge on the entire balance of the Print/Digital Group’s goodwill of $5.5 million in the prior year quarter.

We continue to have access to our credit facility after the impairment charges.

Further downward pressure on our operating results and/or further deterioration of economic conditions could result in additional future impairments of our long-lived assets, including our other intangible assets.

Income Tax Expense

Income tax expense decreased $0.5 million compared to the prior year quarter, primarily due to a decrease in foreign income tax obligations.

Our effective income tax rate differs from the U.S. statutory rate. Our income tax provision consists of foreign income tax, which relates to our international television networks and withholding tax on licensing income, for which we do not receive a current U.S. income tax benefit due to our net operating loss position. Our income tax provision also includes deferred federal and state income taxes related to the amortization of goodwill and other indefinite-lived intangibles, which cannot be offset against deferred tax assets due to the indefinite reversal period of the deferred tax liabilities.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2010, we had $25.4 million in cash and cash equivalents compared to $24.6 million in cash and cash equivalents at December 31, 2009. At March 31, 2010 and December 31, 2009, our outstanding debt consisted solely of the $115.0 million principal amount of our 3.00% convertible senior subordinated notes due 2025, or convertible notes, with a carrying value of $105.3 million at March 31, 2010 and $104.1 million at December 31, 2009. The difference between the principal amount of $115.0 million and the financing obligation carrying value reflects the discount associated with applying the estimated 7.75% nonconvertible borrowing rate at the time of issuance of our convertible notes. The total discount will be amortized to interest expense under the effective interest rate method o ver a seven-year term, representing the period beginning on the issuance date of the convertible notes of March 15, 2005 and ending on the first put date of March 15, 2012.

At March 31, 2010, cash generated from our operating activities and existing cash and cash equivalents were fulfilling our liquidity requirements. At March 31, 2010, we also had a $30.0 million credit facility. This facility can be used for revolving borrowings, issuing letters of credit or a combination of both. As of April 30, 2010, there were no borrowings and $0.8 million in letters of credit outstanding under this facility, resulting in $29.2 million of available borrowings under this facility.

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Our future net cash flows from operating activities are dependent on many factors, including industry specific trends and overall economic conditions. As described above, market-driven trends are negatively impacting our revenues, primarily within our mature television and print businesses. We expect that these trends will continue for the foreseeable future. In response to these market-driven trends, we have taken a number of significant actions designed to reduce our overall cost structure and preserve cash flow, some of which are described in “Restructuring Expense” above. We believe cash generated from operations, our existing cash and cash equivalents and funds available under our credit facility will provide sufficient liquidity to fund our operations and meet our expec ted capital expenditure requirements and other contractual obligations as they become due through 2011. A prolonged continuation of the economic and industry trends described above could adversely affect our future net cash flows from operating activities, which could require us to seek other sources of funds.

Holders of our convertible notes may require us to purchase all or a portion of the convertible notes at a purchase price in cash equal to 100% of the principal amount of the convertible notes beginning on the first put date of March 15, 2012. We believe this put option will likely be exercised by holders of our convertible notes because the trading price of the convertible notes is significantly below the put option purchase price. As a result, we expect to be required to refinance this obligation prior to the put date. We cannot be certain whether such refinancing will take the form of debt, equity or a combination thereof. Issuance of debt would likely increase our interest expense, and the issuance of equity could be dilutive to our existing stockholders.

Cash Flows From Operating Activities

Net cash provided by operating activities was $2.0 million in the current year quarter compared to net cash used for operating activities of $3.2 million in the prior year quarter. This favorable variance was primarily due to the operating and nonoperating results previously discussed combined with the distribution of deferred compensation plan balances and a decrease in accounts payable in the prior year quarter, partially offset by decreases in accounts receivable and prepaid expenses and other current assets in the prior year quarter.

Cash Flows From Investing Activities

Net cash used for investing activities was $0.7 million in the current year quarter compared to net cash provided by investing activities of $4.4 million in the prior year quarter. The current year quarter reflected additions of $0.7 million to property and equipment. The prior year quarter reflected net proceeds from sales of investments of $5.5 million related to the termination of our deferred compensation plan combined with additions of $1.1 million to property and equipment.

Cash Flows From Financing Activities

Net cash used for financing activities for the current year quarter was $0.2 million compared to $0.4 million in the prior year quarter. The change reflected $0.2 million of financing fees related to amending our credit facility paid during the prior year quarter.

Effect of Exchange Rate Changes on Cash and Cash Equivalents

The $0.3 million negative effect of foreign currency exchange rates on our cash and cash equivalents during the current year quarter and the $0.1 million negative effect of foreign currency exchange rates on our cash and cash equivalents during the prior year quarter were due to the strengthening of the U.S. dollar against the pound sterling and euro.

RECENTLY ISSUED ACCOUNTING STANDARDS

In January 2010, the FASB issued Accounting Standards Update No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, or ASU No. 2010-06. ASU No. 2010-06 requires additional disclosures about inputs and valuation techniques used to measure fair value as well as disclosures about significant transfers between levels of the fair value hierarchy as defined in ASC Topic 820, Fair Value Measurements and Disclosures.We adopted the provisions of ASU No. 2010-06 beginning with the first quarter of 2010, except for the disclosure presenting disaggregated ac tivity within the reconciliation for fair value measurements using significant unobservable inputs (Level 3), which we are required to adopt in the first quarter of

21

2011. As ASU No. 2010-06 affects disclosures only, the adoption of ASU No. 2010-06 does not affect our results of operations or financial condition.

ITEM 3.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain market risks, including changes in foreign currency exchange rates. We experienced no material change in our exposure to such fluctuations during the quarter ended March 31, 2010. Information regarding market risks as of December 31, 2009 is contained in Item 7A. “Quantitative And Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

At March 31, 2010, we did not have any floating interest rate exposure. As of that date, all of our outstanding debt consisted of the convertible notes, which are fixed-rate obligations. The fair value of the $115.0 million aggregate principal amount of the convertible notes is influenced by changes in market interest rates, the share price of our Class B common stock and our credit quality. At March 31, 2010, the convertible notes had an implied fair value of $100.1 million.

ITEM 4.          CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of the end of the period covered by this quarterly report. Based on such evaluation, our Chief Executive Officer and Interim Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act.

Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

ITEM 1.          LEGAL PROCEEDINGS

On February 17, 1998, Eduardo Gongora, or Gongora, filed suit in state court in Hidalgo County, Texas, against Editorial Caballero SA de CV, or EC, Grupo Siete International, Inc., or GSI, collectively the Editorial Defendants, and us. In the complaint, Gongora alleged that he was injured as a result of the termination of a publishing license agreement, or the License Agreement, between us and EC for the publication of a Mexican edition of Playboy magazine, or the Mexican Edition. We terminated the License Agreement on or about January 29, 1998, due to EC’s failure to pay royalties and other amounts due to us under the License Agreement. On February 18, 1998, the Editorial Defendants filed a cross-claim against us. Gongora alleged that in December 1996 he entered into an o ral agreement with the Editorial Defendants to solicit advertising for the Mexican Edition to be distributed in the U.S. The basis of GSI’s cross-claim was that it was the assignee of EC’s right to distribute the Mexican Edition in the U.S. and other Spanish-speaking Latin American countries outside of Mexico. On May 31, 2002, a jury returned a verdict against us in the amount of $4.4 million. Under the verdict, Gongora was awarded no damages. GSI and EC were awarded $4.1 million in out-of-pocket expenses and approximately $0.3 million for lost profits, even though the jury found that EC had failed to comply with the terms of the License Agreement. On October 24, 2002, the trial court signed a judgment against us for $4.4 million plus pre- and post-judgment interest and costs. On November 22, 2002, we filed post-judgment motions challenging the judgment in the trial court. The trial court overruled those motions and we vigorously pursued an appeal with the State Appellate Court sitting in Corpus Christi challenging the verdict. We posted a bond in the amount of approximately $9.4 million, which represented the amount of the judgment, costs and estimated pre- and post-judgment interest, in connection with the appeal. On May 25, 2006, the State Appellate Court reversed the judgment by the trial court, rendered judgment for us on the majority of the plaintiffs’ claims and remanded the remaining claims for a new trial. On July 14, 2006, the plaintiffs filed a motion for rehearing and en banc reconsideration, which we opposed. On October 12, 2006, the State Appellate Court denied plaintiffs’ motion. On December 27, 2006, we filed a petition for review with the Texas Supreme Court. On January 25, 2008, the Texas Supreme Court denied our petition for review. On February 8, 2008, we filed a petition for rehearing with the Texas Supreme Court. On May 16, 2008, the Texas Supreme Court denied our motion for rehearing. The posted bond has been canceled and the remaining claims were retried. On April 23, 2010, a jury returned a verdict in our favor.

On April 12, 2004, J. Roger Faherty, or Faherty, filed suit in the United States District Court for the Southern District of New York against Spice Entertainment Companies, or Spice, Playboy Enterprises, Inc., or Playboy, Playboy Enterprises International, Inc., or PEII, D. Keith Howington, Anne Howington and Logix Development Corporation, or Logix. The complaint alleges that Faherty is entitled to statutory and contractual indemnification from Playboy, PEII and Spice with respect to defense costs and liabilities incurred by Faherty in connection with litigation that was settled in 2004, or the Logix litigation. The Logix litigation related to a suit brought by Logix, Keith Howington and Anne Howington against Faherty and other parties alleging certain contract and tort causes of action arising out of an agreement between Emerald Media Inc., or EMI, and Logix in which EMI agreed to purchase certain explicit television channels over C-band satellite. The complaint further alleges that Playboy, PEII, Spice, D. Keith Howington, Anne Howington and Logix conspired to deprive Faherty of his alleged right to indemnification by excluding him from the settlement of the Logix litigation. On June 18, 2004, a jury entered a special verdict finding Faherty personally liable for $22.5 million in damages to the plaintiffs in the Logix litigation. A judgment was entered on the verdict on or around August 2, 2004. Faherty filed post-trial motions for a judgment notwithstanding the verdict and a new trial, but these motions were both denied on or about September 21, 2004. On October 20, 2004, Faherty filed a notice of appeal from the verdict. As a result of rulings by the California Court of Appeal and the California Supreme Court as recently as February 13, 2008, Logix’s recovery against Faherty has b een reduced significantly, although certain portions of the case have been set for a retrial. In light of these rulings, however, when coupled with any offset as a result of the settlement of the Logix litigation, any ultimate net recovery by Logix against Faherty will be severely reduced and might be entirely eliminated. In consideration of this appeal, Faherty and Playboy have agreed to continue a temporary stay of the indemnification action filed in the United States District Court for the Southern District of New York through the end of June 2010. In late June 2008, plaintiffs in the Logix litigation filed a motion in the trial court seeking to amend a $40.0 million judgment previously entered on consent against defendant EMI seeking to add Faherty as a judgment debtor. Although the trial court allowed that amendment, that ruling was reversed by the California Court of Appeal on February 18, 2010. In the event Faherty’s indemnification and conspiracy claims go forward against us, we believe they ar e

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without merit and that we have good defenses against them. As such, based on the information known to us to date, we do not believe that it is probable that a material judgment against us will result. In accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 450, Contingencies, no liability has been accrued.

ITEM 1A.        RISK FACTORS

For a detailed discussion of factors that may affect our performance, see Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

ITEM 6.           EXHIBITS

Exhibit Number	Description
*10.1	Agreement for the Provision of Connectivity, Uplinking and Satellite Services on Hotbird, dated March 24, 2010, by and between Arqiva Limited and Satellite Television International B.V.
*10.2	Agreement for the Provision of Connectivity, Uplinking and Satellite Services via the Eurobird 1 satellite, dated March 29, 2010, by and between Arqiva Limited and Playboy TV UK/Benelux Limited
*10.3	First Amendment to the Amended and Restated Program Supply and Trademark License Agreement, dated February 26, 2010, by and between Playboy Entertainment Group, Inc. and Playboy TV–Latin America, LLC
10.4	Amendment to the Amended and Restated Agreement, dated March 11, 2010, by and between Playboy Entertainment Group, Inc. and Spice Hot Entertainment, Inc. and DirecTV, Inc.
10.5	Amendment to the Amended and Restated Agreement, dated April 8, 2010, by and between Playboy Entertainment Group, Inc. and Spice Hot Entertainment, Inc. and DirecTV, Inc.
*10.6	Amendment, dated January 1, 2010, to the Subscription Fulfillment Agreement dated July 1, 1987, as amended, between CDS Global, Inc. and Playboy Enterprises, Inc.
*10.7	Amendment, dated March 1, 2010, to the Subscription Fulfillment Agreement dated July 1, 1987, as amended, between CDS Global, Inc. and Playboy Enterprises, Inc.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

______

* Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		PLAYBOY ENTERPRISES, INC.
		(Registrant)
Date:	May 7, 2010	By	/s/ Robert D. Campbell
			Robert D. Campbell
			Senior Vice President, Treasurer and Strategic Planning, Assistant Secretary and Interim Chief Financial Officer (Authorized Officer and Principal Financial Officer)

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EXHIBIT INDEX

Exhibit Number	Description
*10.1	Agreement for the Provision of Connectivity, Uplinking and Satellite Services on Hotbird, dated March 24, 2010, by and between Arqiva Limited and Satellite Television International B.V.
*10.2	Agreement for the Provision of Connectivity, Uplinking and Satellite Services via the Eurobird 1 satellite, dated March 29, 2010, by and between Arqiva Limited and Playboy TV UK/Benelux Limited
*10.3	First Amendment to the Amended and Restated Program Supply and Trademark License Agreement, dated February 26, 2010, by and between Playboy Entertainment Group, Inc. and Playboy TV–Latin America, LLC
10.4	Amendment to the Amended and Restated Agreement, dated March 11, 2010, by and between Playboy Entertainment Group, Inc. and Spice Hot Entertainment, Inc. and DirecTV, Inc.
10.5	Amendment to the Amended and Restated Agreement, dated April 8, 2010, by and between Playboy Entertainment Group, Inc. and Spice Hot Entertainment, Inc. and DirecTV, Inc.
*10.6	Amendment, dated January 1, 2010, to the Subscription Fulfillment Agreement dated July 1, 1987, as amended, between CDS Global, Inc. and Playboy Enterprises, Inc.
*10.7	Amendment, dated March 1, 2010, to the Subscription Fulfillment Agreement dated July 1, 1987, as amended, between CDS Global, Inc. and Playboy Enterprises, Inc.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

______

* Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934.

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EX-10.1

Exhibit 10.1

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.

DATED 24 MARCH 2010

ARQIVA LIMITED         (1)

AND

SATELLITE TELEVISION INTERNATIONAL B.V. (2)

AGREEMENT FOR THE PROVISION OF CONNECTIVITY, UPLINKING AND SATELLITE SERVICES ON HOTBIRD

ARQIVA LIMITED

Crawley Court

Winchester

Hampshire

SO21 2QA

THIS AGREEMENT is made on the 24th day of March 2010

BETWEEN

(1) ARQIVA LIMITED (registered in England under number 02487597) whose registered office address is at Crawley Court, Winchester, Hampshire SO21 2QA (“Company”);

AND

(2) SATELLITE TELEVISION INTERNATIONAL B.V. whose registered office is at Africa Building, Hoogoorddreef 9, 1101 BA Amsterdam, The Netherlands (registered in the Netherlands under number 34157076) (“Customer”) together (the “Parties”).

RECITALS

(A) The Company is in the business of providing certain satellite and terrestrial services to its customers.

(B) The Customer wishes to engage the Company to supply and the Company has agreed to supply certain satellite services (the “Services”) to the Customer on the terms and subject to the conditions of this Agreement.

(C) The Services that the Company shall provide to the Customer shall include, terrestrial connectivity, MPEG-2/DVB multiplexing, and the provision of uplink facilities and access to Digital Capacity on the Satellite specified in this Agreement.

(D) The Company will procure the Digital Capacity required to provide the Services from the Satellite Provider on the terms and subject to the conditions of the Supply Agreement.

IT IS HEREBY AGREED AS FOLLOWS:

1. DEFINITIONS AND INTERPRETATIONS

In this Agreement unless the context requires otherwise the following terms shall have the following meanings:

“Affiliate” means with respect to one of the Parties, a person or entity that directly, or indirectly through one (1) or more intermediaries, controls, is controlled by, or is under common control with that Party; provided that for the purpose of the foregoing, “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management or policies of a person or entity through the ownership of voting securities or otherwise;

“Agreement” means this agreement together with the

1

Schedules and any appendices as any of the same may be amended from time to time.

“Business Hours” means 09.00 until 17.30 hours local time at the relevant location on any Working Day.

“Channel” means the Customer’s television channel currently known as Private Spice or such other name as the Customer may from time to time determine.

“Commencement Date” means the date upon which this Agreement is executed by the Company having previously been executed by the Customer.

“Commissariaat Voor De Media” means the Commissariaat Voor De Media or any replacement or successor body in the Netherlands and references in this Agreement to Commissariaat Voor De Media shall include references to that replacement or successor body.

“Company Equipment” means any Equipment which is not Customer Equipment that is provided and used by the Company to provide the Service detailed in this Agreement.

“Connectivity” means any circuit required to transfer the Content from the Interface Point to the transmission facilities at the Uplink Site.

“Content” means the material comprised in the Channel provided by the Customer for conveyance by the Service.

“Customer Equipment” means any equipment provided by the Customer to the Company to enable it to provide the Services.

“Digital Capacity” means the digital satellite capacity to be used by the Company to provide the Service, as defined in Paragraph 1.2 of Schedule One.

‘Interface Point’ means the point at which the Content will be made available to the Company, as specified in the Interface Specification.

“Interface Specification” means the technical specifications set out in Schedule Five defining the interface at which the Content will be made available to the Company.

“MCR” means the Company's Master Control

2

Room, located at the Uplink Site.

“Satellite” means the satellite specified in Schedule Six on which the Digital Capacity is provided, or such other Satellite as the Company may use to provide the Services in accordance with Clause 4.2.

“Satellite Provider” means the party which is detailed in Schedule Six from which the Company procures the Digital Capacity.

“Service” means the services described in Schedule One which the Company will provide to the Customer on the terms and subject to the conditions of this Agreement.

“Service Charges” means the service charges to be paid by the Customer for the Service in accordance with the payment terms set out in Clause 6 in the amounts set out in Schedule Two.

“Service Credits” means the service credits which the Customer may claim for Service Interruptions as detailed in Clause 8.1.

“Service Description” means the service description set out in Schedule One which describes the Service that the Company will provide to the Customer.

“Service Interruption” means a service interruption as described in Clause 8.1 which may entitle the Customer to claim Service Credits.

“Service Commencement Date” means the date on which carriage of the Channel and provision of the Service commences, as specified in Schedule One.

“Service Period” means the period commencing on the Service Commencement Date and ending on the Service Termination Date.

“Service Termination Date” means the date on which the carriage of the Channel and provision of the Service ceases, as specified in Schedule One.

“Supply Agreement” means the agreement between the Company and the Satellite Provider under which the Company procures the Digital Capacity.

“Term” means the duration of this Agreement which commences on the Commencement Date or the Services Commencement Date if earlier

3

and terminates on the Service Termination Date.

“Territory” means the territory in which the Customer delivers the Channels to end users which are located within the footprint of and subject to the parameters of the Satellite.

“Transponder” means the Transponder on the Satellite specified in Schedule Six as varied from time to time pursuant to Clause 4.2.

“Uplink Site” means the Company’s Teleports at Chalfont Grove, Bedford, Winchester or such other teleport which the Company may use to provide the Service pursuant to Clause 4.3.

“Working Day” means any day Monday to Friday except for bank and public holidays in England and Wales

“Year” means each complete period of twelve (12) calendar months, commencing with the Service Commencement Date.

1.2 Except where the context otherwise requires words denoting the singular include the plural and vice versa, and words denoting any gender include all genders and words denoting persons include natural persons, firms and corporations and vice versa. This Agreement includes the Schedules attached hereto.

1.3 References in this Agreement to Clauses and Schedules shall unless otherwise provided be references to the Clauses and Schedules of this Agreement.

1.4 Headings are included in this Agreement for ease of reference only and shall not affect the interpretation or construction of this Agreement.

1.5 A reference to any statute, enactment, order, regulation or other similar instrument shall be construed as a reference to the statute, enactment, order, regulation or instrument as amended by any subsequent statute, enactment, order, regulation or instrument or as contained in any subsequent re-enactment of it.

1.6 Except where the context otherwise requires terms and expressions used in this Agreement shall have the same meaning as is commonly ascribed to them in the Broadcasting, Telecommunications and IT industries.

1.7 Any phrase introduced by the word “including”, “include” or any similar expression shall be construed as illustrative and the words following any such word shall not limit the sense of the words preceding such words.

1.8 In the event and to the extent only of any conflict or inconsistency between the Clauses of this Agreement and the Schedules, the Clauses of this Agreement shall prevail.

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2. PURPOSE AND DURATION

2.1 This Agreement shall become effective on and from the Commencement Date and, subject to the early termination provisions set out in Clause 12, shall continue until the end of the Service Period.

2.2 In consideration of the Customer paying the Service Charges to the Company in the amounts and in the manner specified hereunder the Company will provide the Service to the Customer on the terms and subject to the conditions of this Agreement during the Term.

3. THE PARTIES’ OBLIGATIONS

3.1  The Company’s Obligations:

3.1.1 For the duration of the Service Period, the Company shall provide the Service to the Customer in accordance with the Service Description set out in Schedule One, on the terms and subject to the conditions of this Agreement.

3.1.2 The Company will procure, install and maintain the Company Equipment at the Uplink Site in order to perform the Services. The Company Equipment shall remain the property of the Company.

3.1.3 The Company shall procure the supply of the Digital Capacity from the Satellite Provider for use in the provision of the Service.

3.1.4 Subject to the Customer complying with all of its obligations under Clause 3.2.3 in accordance with the required timescale, the Company shall install and operate any Customer Equipment so that it is available for use in the provision of the Service from the Service Commencement Date.

3.1.5 The Company shall obtain and maintain any necessary licence or permission to provide the Service under the Wireless Telegraphy Act 2006 or any successor legislation and all other licenses, consents, or approvals necessary to perform its obligations hereunder, save only to the extent that the Customer is expressly obliged to procure the same pursuant to the terms of this Agreement or by law.

3.1.6 For the avoidance of doubt, the Service does not include and the Company shall not provide installation, commissioning or maintenance of the digital satellite receivers (or “digiboxes”) for end users.

3.2  Customer Obligations

3.2.1 The Customer shall obtain and maintain any necessary licences that may be required in respect of the transmission or carriage of the Content using the Service, including but not limited to any licence required to be issued by the  Commissariaat Voor De Media or any relevant regulatory body within the Territory, or required under the Broadcasting Acts 1990 and 1996 or under any legislation which is applicable within the Territory.

3.2.2 The Customer will supply or procure the supply of all Customer Equipment in accordance with the required timescales to enable the Company to provide the Service on and from the intended Service Commencement Date.  The Customer shall ensure that the Customer Equipment shall comply with the

5

requirements set out in Schedule Three so as to enable the Company to carry out its obligations pursuant to Clause 3.1.  The Company shall operate the Customer Equipment in accordance with operational procedures agreed with the Customer subject to the Customer providing appropriate training for the Company at the Customer’s cost.

3.2.3 In relation to monitoring of the encrypted services the Customer will ensure that any viewing cards forming part of the Customer Equipment are authorised prior to the Service Commencement Date and continue to be authorised for the duration of the Service Period.

3.2.4 The Customer shall use the Service only for the purpose of distributing the Channel in digitally compressed form for reception within the Territory.

3.2.5 The Customer shall pay the Service Charges for the duration of the Service Period in accordance with the provisions of Clause 6 in the amount specified in Schedule Two.

3.2.6 The Customer shall provide such information as the Company and/or the Satellite Provider shall require to enable it to provide the Service in a timely manner and shall ensure that any such information is accurate, complete and up to date.

3.2.7 If and to the extent that the Customer has to attend the Uplink Site or any other premises owned by the Company or any of its subcontractors the Customer will comply with all and any reasonable policies and procedures of which it is given notice including but not limited to those policies and procedures relating to health and safety, access and security.

3.2.8 The Customer shall take out and maintain for the duration of this Agreement appropriate insurance against all risks in relation to the Customer Equipment and shall provide a copy of the cover note and evidence that the last premium has been paid to the Company upon request and shall comply with its obligations stated in Schedule Three in relation to the Customer Equipment.

3.2.9 The Customer shall present the signals which are to be transmitted to the Company as specified in Schedule Five.

3.3 The Company’s Rights

3.3.1 The Company may provide the Service by any particular technical or operational means and/or change the technical or operational means by which it provides the Service at any time during the Service Period provided that any such change does not have a material adverse effect on the provision of the Service which the Company shall continue to provide in accordance with the Service Description set out in Schedule One.

3.3.2 If the Customer is overdue with any payment then, without prejudice to any other right or remedy available to the Company and subject in any event to fourteen (14) days prior written notification by the Company to the Customer of its intention to exercise the rights set out in this Clause, the Company reserves the right to exercise a lien over any Customer Equipment which is at the Uplink Site until the Customer has made such overdue payment in full without settlement or deduction.  For the avoidance of doubt the exercise of any such lien shall not affect the Customer’s obligation to pay any amounts

6

due under this Agreement.

4. PROVISION OF THE SERVICE

4.1  Commencement of the Service

4.1.1 Without prejudice to the Customer’s obligation to pay the Service Charges from the Service Commencement Date, the Company shall not be obliged to commence provision of the Service for so long as any of the following circumstances exist:

(i) a material breach by the Customer of any of its obligations under this Agreement; or

(ii) the failure or unavailability of any satellites, transponders, facilities, services or systems not supplied by the Company under this Agreement, provided that such failure or unavailability is not directly caused by any failure by the Company to carry out any of its obligations pursuant to this Agreement; or

(iii) a request in writing from the Customer to delay commencement of the provision of the Services; or

(iv) the suspension of the Service in accordance with Clause 4.5 of this Agreement.

4.1.2 For the avoidance of doubt and without prejudice to the Customer’s obligation to pay the Service Charges the Company shall not commence provision of the Service until the Customer has met all applicable payment obligations in accordance with Clause 6 and Schedule Two.

4.2  Changes to the Satellite and Transponder

4.2.1 The Parties acknowledge that the Satellite on which the Digital Capacity is made available may be changed by the Satellite Provider to another Satellite at the same orbital slot from time to time, and in such event the Company undertakes to use its reasonable endeavours to minimise any disruption to the Service.

4.2.2 The Parties acknowledge that the Transponder on which the Digital Capacity is made available may be changed by the Satellite Provider to another Transponder on the Satellite from time to time, and in such event the Company undertakes to use its reasonable endeavours to minimise any disruption to the Service.

4.2.3 The Company may change the Satellite and/or Transponder on which the Digital Capacity is provided to any Satellite or Transponder providing reception in the Territory at any time, provided that any such change does not have a material adverse effect on the provision of the Service which the Company shall continue to provide in accordance with the Service Description set out in Schedule One.

4.2.4 In the event that the Satellite Provider changes the Satellite and/or the Transponder in accordance with Clause 4.2.1 or 4.2.2 the Company shall not in any event be held liable for any loss or damage arising out of or caused by such variation unless and to the extent that the Company can recover compensation for such loss or damage from the Satellite provider.  The

7

Company shall pay any compensation recovered from the Satellite Provider to the Customer as soon as reasonably practicable after the Company receives any such compensation.

4.2.5 The Company shall give the Customer as much notice as possible of any changes to be made in accordance with this Clause 4.2.

4.3  Changes to the Service

4.3.1 The Company may change the Uplink Site to any other teleport at any time, provided that any such change shall not have a material adverse effect on the provision of the Service which the Company shall continue to provide in accordance with the Service Description set out in Schedule One.

4.3.2 The Company agrees to use all reasonable endeavours to provide to the Customer such further services as the Customer may reasonably request from time to time during the Term provided that all requests from the Customer for services additional to the Service or requests for a change to the Service requested by the Customer (a “Change”) shall be made in accordance with the following procedure:

(i) The Customer will provide the Company with a written request detailing the precise scope of the Change required and the person within the Customer’s undertaking to whom all correspondence in respect of the Change must be addressed (the "Change Representative").

(ii) The Company will provide the Change Representative with a written report on the proposed Change which will cover feasibility, impact on any time or other schedules contained or referred to in this Agreement, the Clauses, the Schedules, resource requirements and/or any cost effects (the “Change Report”).

(iii) The Change Representative will consider the Change Report and will notify the Company in writing, within ten (10) Working Days of receipt of the Change Report of the Customer’s decision whether or not to request the Company to proceed with the Change.

(iv) If the Parties agree that the proposed Change is acceptable the Parties shall use their reasonable endeavours to carry out the Change.  In the event that either party decides not to proceed, it will give written notice of its decision to the other party within fifteen (15) Working Days following consideration of the Change Report.

(v) The Company reserves the right to charge reasonable costs for preparing the Change Report at a rate to be agreed between the Parties in the event that the Customer submits more than six (6) Change Requests in any Year.

4.3.3 The Company may propose a Change in accordance with the procedure detailed in Clause 4.3.2 above adapted mutatis mutandis to refer to the Company in place of the Customer save that:

(i) The Company will provide the Customer with both a Change Request and Change Report.

(ii) The Customer will consider the Change Request and Change Report and will notify the Company in writing within ten (10) Working Days of

8

receipt of the Change Report of the Customer’s decision whether or not it agrees to the Change.

(iii) If the Parties agree the proposed Change is acceptable the Parties shall use their reasonable endeavours to carry out the Change.

4.3.4 No additions, modifications or alterations to the Service will be valid unless such modifications or alterations are in writing and signed by a duly authorised representative of each party.

4.4           Use of the Service

4.4.1 The Customer will ensure that the Service is used in accordance with such reasonable operating instructions as may be notified in writing or orally (and subsequently confirmed in writing) to the Customer by the Company from time to time and in accordance with all applicable laws and regulations.

4.4.2 The Service shall only be used by the Customer for the purposes set out in this Agreement.

4.5           Suspension of the Service

4.5.1 The Company may suspend the Service immediately if and for so long as:

(i) the Customer has failed to pay the Company any Service Charge or any other sum due under this Agreement in full without set off or deduction by its due payment date and such default has not been remedied within ten (10) days of the date of issue of a written notice from the Company requesting immediate payment of the overdue amount; or

(ii) the Customer is in material breach of any of its obligations under this Agreement and has failed to remedy such breach within  fourteen (14) days of the date of issue of a written notice from the Company stating the breach and the remedy required; or

(iii) the Customer is in breach of its obligations under Clause 9.2; or

(iv) the Company is required or requested to cease or suspend provision of the Service by the Satellite Provider; or

(v) the Company is obliged to comply with an order, regulation, instruction or request of the Government of the United Kingdom or an agency thereof, an emergency services organisation, or other competent international satellite organisation or administrative authority which necessitates such suspension; or

(vi) the Company is reasonably of the opinion that any act or default of the Customer or its agents is likely to cause damage to the Uplink Site the Satellite or any other use of the Satellite.

4.5.2 For the avoidance of doubt, the Customer shall continue to be liable to pay the Service Charges during any period during which the Company has suspended the provision of the Service pursuant to this Clause 4.5.1. If the Company exercises its rights of suspension pursuant to this Clause 4.5.1, it will not operate as a waiver of any right that either party is entitled to under this Agreement or by law.

9

4.5.3 If and to the extent that the Company exercises its right of suspension under Clause 4.5.1 above this will not exclude the Company’s right to terminate this Agreement in accordance with its terms in respect of a breach which has not been remedied or any other event, nor will it prevent the Company from claiming damages from the Customer for breach of this Agreement.

4.6           Planned Interruptions

4.6.1 The Company provides equipment and operational systems to industry standard levels of redundancy and contingency.  However during the Service Period occasional interruptions of Service to the Customer may be required for repairs to or maintenance, testing or improvement of the systems operated by the Company and/or the Satellite Provider (“Planned Interruptions”).  The Company shall, wherever possible give the Customer at least forty eight (48) hours notice of any such Planned Interruption and shall use its reasonable endeavours to minimise any disruption of the Service.

4.6.2 The Company shall not in any event be held liable for any loss or damage arising out of or caused by any Planned Interruptions caused or requested by the Satellite Provider unless and to the extent that the Company can recover compensation for such loss or damage from the Satellite Provider.  The Company shall pay any compensation recovered from the Satellite Provider to the Customer as soon as reasonably practicable after the Company receives any such compensation.

5. INTELLECTUAL PROPERTY RIGHTS AND INDEMNITY

5.1 If in the course of or as a result of the Company providing the Service to the Customer any of the Company’s employees or agents create any document or other material protected by copyright or other intellectual property right (for example a breakdown slate) (the “Created Works”), it is agreed that all legal and beneficial rights in the Created Works will vest in and be owned by the Company, and Customer will have no rights in it beyond a non-exclusive licence to make copies for internal use of any document (but not other material) for the purpose of receiving the Services for the Term.  The Customer and the Company (e.g. regarding grant of licence) will duly execute any assignment or other instrument, which may be necessary to give effect to this provision.  However, should the Company create any promo tional showreel using any materials provided by Customer, the copyright in those materials will remain with the Customer and the Company will seek the Customer’s permission in order to use and broadcast the materials in their promotional showreel.

5.2 The Company shall indemnify the Customer and hold the Customer harmless against all claims liabilities, actions, losses judgments, payments made in settlement, costs (including legal fees) proceedings, and demands of claims from third parties arising from infringement (or alleged infringement) of any patent, design or copyright or other intellectual property right enforceable in the United Kingdom or any other place, arising out of the Created Works or the Company’s use of the Company Equipment to provide the Services.

5.3 The Customer shall notify the Company promptly in writing of any allegation of infringement and any claim (actual or threatened) or action which may give rise to the Company’s obligation to indemnify the Customer.  The Customer shall not make any admission relating to the allegation and shall not settle

10

any such claim or action without the prior written consent of the Company, which consent shall not be unreasonably withheld, delayed or conditioned.  The Customer shall allow the Company to conduct all negotiations and proceedings and at the Company’s cost give the Company all reasonable assistance and information in the defence of any such allegation claim or action.

5.4 If at any time an allegation of infringement of patent, design, or copyright is made, the Company may at its own expense modify the DVB Uplink Equipment supplied by the Company so as to avoid the infringement or may replace such items with non-infringing equipment, provided that such replacement items do not prevent the Customer from receiving the signal or receiving the Services.

5.5 The Company shall not acquire or be deemed to acquire any legal or beneficial right in the Content due to or arising out of its provision of the Service pursuant to this Agreement. The Customer shall indemnify the Company and the Satellite Provider and hold the Company and the Satellite Provider harmless against all claims liabilities, actions, losses judgments, payments made in settlement, costs (including legal fees) proceedings and demands of claims from third parties including the Company’s other customers arising from infringement (or alleged infringement) of any patent, design or copyright or other intellectual property right enforceable in the United Kingdom or any other place, by reason of the Company’s use or possession of the Customer Equipment and/or the use, storage or transmission of the Content.

5.6 The Customer shall indemnify the Company and its Affiliates and hold the Company and its Affiliates harmless from and against any claims incurred by the Company and its Affiliates resulting from or arising out of any material breach by the Customer of the Customer’s obligations in Clause 3 or any breach of the warranties in Clause 9 of this Agreement and further in the event that the use or installation of the Customer Equipment at the Uplink Site causes loss or damage to the Company’s property, or the Company’s Equipment or any of the Company’s customers’ equipment the Customer shall fully indemnify the Company and/or its customer as the case may be in relation to such loss or damage.

5.7 The Company shall notify the Customer promptly in writing of any allegation of infringement and any claim (actual or threatened) or action which may give rise to the Customer's obligation to indemnify the Company.  The Company shall not make any admission relating to the allegation and shall not settle any such claim or action without the prior written consent of the Customer, which consent shall not be unreasonably withheld or delayed.  The Company shall allow the Customer to conduct all negotiations and proceedings and at the Customer’s cost give the Customer all reasonable assistance and information in the defence of any such allegation claim or action.

5.8 If at any time an allegation of infringement of patent, design, or copyright is made, the Customer may at its own expense modify the Customer Equipment so as to avoid the infringement or may replace such items with non-infringing equipment.

5.9 The indemnity in Clause 5.2 does not apply to the extent that infringement is caused by the Customer’s use of the Service for a purpose not permitted by

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this Agreement  with other apparatus not supplied by the Customer.

5.10 The indemnification obligations stated in this Clause 5 shall survive termination of this Agreement.

6. SERVICE CHARGES AND PAYMENT

6.1 The Customer shall pay the Service Charges at the rates, times and frequencies and in the currency as specified in Schedule Two in the manner specified in this Clause 6.

6.2 All Service Charges due under this Agreement shall be payable within fourteen (14) days of the date of the relevant invoice (the “Due Date”) and will be paid in full without any set-off, deduction or withholding of any kind.  The Company may charge daily interest on any outstanding amounts from the Due Date until payment is received in full at a rate equal to 2% per cent per annum above the base rate of National Westminster Bank Plc as current from time to time whether before or after judgment.  In addition the Company may suspend the Service until all Service Charges have been paid in full pursuant to Clause 4.5.1.

6.3 The Company will not charge interest pursuant to Clause 6.2 above on an invoiced amount if the Customer disputes an invoice in good faith provided that the Customer does all of the following:

(a) pays all undisputed amounts on the invoice when they are otherwise due; and

(b) notifies the Company in writing that the invoice is under dispute stating the reason and the amount which is disputed prior to the date when payment would otherwise be due; and

(c) co-operates with the Company to promptly resolve the dispute; and

(d) pays the agreed upon portion of the disputed amount within ten (10) days of resolution of the dispute.

6.4 All Service Charges are exclusive of Value Added Tax and any other applicable taxes which may from time to time be levied at the rates and in the manner specified by prevailing legislation.

6.5 The Company may set off sums due from the Company to the Customer under any agreement (without prejudice to any other rights or remedies) against sums due from the Customer to the Company under this Agreement or any other agreement.

7. SERVICE CREDITS

7.1 The Customer shall be entitled to claim Service Credits in accordance with this Clause 7 for any period of time during the Service Period during which there is a Service Interruption as defined in Clause 8.

7.2 The period of time for which the Customer shall be entitled to claim Service Credits under this Clause 7 shall be equal to the duration of the Service Interruption.

7.3 The Customer’s entitlement to Service Credits shall be calculated by

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multiplying the effective hourly rate of Service Charge by the aggregate number of hours (or parts thereof) of Service Interruptions occurring during the relevant month.

7.4 The Company shall give the Customer an allowance equal to the appropriate Service Credit calculated in accordance with Clause 7.3 above against the Service Charges which would have otherwise been due from the Customer for the future use of the Service or a cash refund equal to the appropriate Service Credit if and to the extent that Service Charges due under this Agreement for such future use of the Service are less than the amount of the Service Credit due.

7.5 For the purpose of calculating the aggregate monthly duration of Service Interruptions only those Service Interruptions notified by and agreed with the Company shall be applicable.

8. SERVICE INTERRUPTIONS

8.1 For the purposes of this Agreement, a “Service Interruption” shall be deemed to have occurred in the event of any of the following:

(i) loss of vision signals; or

(ii) loss of audio signal; or

(iii) degradation in quality of either of the above such that in the reasonable opinion of both Parties, the quality no longer meets the standards normally expected for a service of this type;

provided always that the Service Interruption exists for at least the period specified below:

(i) a single Service Interruption exists for more than ten (10) minutes; or

(ii) the aggregate of all Service Interruptions of less than ten (10) minutes but more than two (2) minutes exceeds thirty (30) minutes in any month; or

(iii) six (6) or more Service Interruptions of less than two (2) minutes occur in a  ten (10) minute period.

8.2           Duration of Service Interruption

8.2.1 The duration of a Service Interruption shall be calculated as follows:

(i) the Service Interruption shall begin from the time at which according to the Company operational log such interruption commenced; and

(ii) the Service Interruption shall end when the Service has been restored and the Company so notifies the Customer.

8.2.2 For the purposes of calculating the Customer’s entitlement to claim Service Credits for Service Interruptions the following shall apply:

(i) where the duration of a single Service Interruption is fifteen (15) minutes or greater, then the duration of the Service Interruption in respect of which the Customer may claim Service Credits shall equal the duration of the Service Interruption;

(ii) where a number of Service Interruptions of between two (2) and

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fifteen (15) minutes are aggregated so as to constitute a Service Interruption, then the duration of the Service Interruption in respect of which the Customer may claim Service Credits shall equal the aggregated duration of all such Service Interruptions;

(iii) where six (6) or more Service Interruptions each of less than two (2) minutes duration occur within a fifteen (15) minute period so as to  constitute a Service Interruption, then the duration of the Service Interruption in respect of which the Customer may claim Service Credits shall be measured from the commencement of the first such Service Interruption until the end of the last Service Interruption.

8.3           Exclusions

8.3.1 Interruptions to the Service which occur due to any of the reasons set out below shall not constitute Service Interruptions and accordingly the duration of any such interruptions shall be discounted from any calculations regarding the availability of the Service and the Company shall have no liability to pay and the Customer shall not be entitled to claim Service Credits for any interruptions which do not constitute Service Interruptions:

(i) the failure or unavailability of any satellites, transponders, facilities, services or systems not supplied by the Company, provided that such failure or unavailability is not caused by any act or omission by the Company; or

(ii) the Satellite Provider revoking any necessary approval for the provision of the Service or suspending the service due to circumstances not caused by any act or omission of the Company; or

(iii) the Satellite Provider suspending the Digital Capacity for routine testing, repair or maintenance of the Satellite; or

(iv) suspensions of the Service pursuant to Clause 4.5; or

(v) any termination of the Service pursuant to Clause 12 or otherwise not caused by any act or omission of the Company; or

(vi) any failure due to breach or omission by the Customer of its obligations under this Agreement; or

(vii) Planned Interruptions to the Service in accordance with Clause 4.6 up to a maximum of one (1) hour per Year, any Planned Interruptions greater than one (1) hour per Year shall be credit events for the purpose of Clause 7 save for those Planned Interruptions caused by the Satellite Provider; or

(vii) any failure due to termination or suspension of the Supply Agreement not caused by any act or omission of the Company; or

(viii) any failure due to force majeure as described in Clause 16.

8.4 Without prejudice to the provisions of Clause 4.5 (suspension) the Company’s liability for Service Interruptions shall be limited exclusively to granting Service Credits or repayments as provided in Clause 7.

9  WARRANTIES

9.1 The Company warrants and undertakes to the Customer that for the duration of the Service Period, it shall:

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(i) comply with all instructions issued by the Satellite Provider that relate to the performance of the Service; and

(ii) provide the Service with reasonable skill and care.

9.2 The Customer warrants and undertakes to the Company that for the duration of the Service Period:

(i) it has the right to transmit the Content within the Territory; and

(ii) the transmission of the Service and the Content within the Territory will not infringe the intellectual property rights or any other proprietary rights of any third party; and

(iii) it shall not include in the Content any material which causes a breach of the rules of the Commissariaat Voor De Media or any relevant regulatory body within the Territory

(iv) it shall make the Company aware of any notices it receives from any other party including but not limited to the Commissariaat Voor De Media or any relevant regulatory body within the Territory in respect of a revocation of the licences held by Customer in respect of the Channel as soon as reasonably practicable following its receipt of such notice.

9.3 The Company and the Customer each represents and warrants to the other that:

(i) it has the right, power and authority to enter into and perform its obligations under this Agreement; and

(ii) it has full capacity and authority and has obtained all necessary consents (including but not limited to, where its procedures so require, the consent of its Parent Company) to enter into and to perform this Agreement and that this Agreement is executed by a duly authorised representative; and

(iii) the fulfilment of its obligations hereunder will not constitute a material violation of any existing applicable law, rule, regulation or order of any governmental authority; and

(iv) all material and necessary or appropriate governmental, public or private consents, permissions, agreements, licences or authorisations to which it is subject have been or will be obtained prior to the Service Commencement Date; and

(v) the execution, delivery and performance of this Agreement shall not violate or conflict with;

· any provision of the by-laws, articles of incorporation or other similar statutory instrument of either party; or

· any law, judgment or order applicable to either party; or

· any material agreement, restriction or obligation to which either party is subject or which constitutes a default under any such

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agreement, restriction or obligation.

10  LIABILITY

10.1 Both Parties accept liability for death or personal injury resulting from its own negligence or that of its employees, sub-contractors or agents or for proven fraud of the relevant party or of its employees or agents acting in the course of their duties.

10.2 The Company warrants that it will provide the Service to the Customer in accordance with the terms of this Agreement.  All other conditions, warranties, terms, undertakings and obligations express or implied by statute (including, without limitation, those of satisfactory quality or of fitness for a particular purpose (even if that purpose is made known expressly or by implication to the Company), common law, custom, trade usage or otherwise and all liabilities (if any) are excluded.

10.3 The Company does not guarantee the continuing availability of the Service. The Company will be responsible as described in this Agreement if a Service is not provided in accordance with the terms of this Agreement. The Company’s only obligation and the Customer’s only remedy in the event of a Service Interruption will be the right to claim Service Credits pursuant to Clause 7 and the right to terminate the Agreement pursuant to Clause 12.10.

10.4 Neither party shall be liable to the other party in contract, tort (including negligence) or otherwise for any:

(a) loss of business; loss of data; loss of profits; loss of goodwill; loss of anticipated savings even when advised of the possibility; loss of revenue or;

(b) any indirect or consequential losses, liabilities or costs.

10.5 Subject to Clause 10.6 and 10.7 below both Parties accept liability in respect of damage to the other’s tangible property resulting from its or its employees' negligence up to an aggregate of *****.

10.6. The Company’s liability in relation to Customer Equipment shall be limited to instances where damage is directly caused due to the Company’s negligence or wilful default up to a maximum aggregate liability per incident of *****.  In all other circumstances the Company shall not accept liability for damage caused to or by Customer Equipment.

10.7 The Company’s liability in relation to Company Equipment located at the Interface Point is limited to ***** in aggregate.  The Company shall not be liable for damage caused by the Company Equipment to the Customer’s buildings or property irrespective of how such damage is caused.

10.8 Other than in respect of Clauses 10.1, 10.4, 10.5, 10.6 and 10.7, either Party’s maximum aggregate liability in contract, tort, negligence or otherwise arising out of, or in connection with, this Agreement will be limited in aggregate to the greater of:

(a) *****; or

(b) the value of the Service Charges paid by the Customer in the twelve

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(12) months preceding the incident which gave rise to the claim under this Agreement.

10.9 Notwithstanding the foregoing, nothing in this Clause 10 shall restrict or limit the Customer’s liability under Clause 5.

11.           DATA PROTECTION

Both Parties shall comply with the Data Protection Act 1998 and, where processing personal data on the other party’s behalf, shall process such data strictly in accordance with such other party’s instructions and put such operational and technological processes in place to safeguard against any unauthorised access, loss, destruction, theft, use or disclosure of the data.

12           TERMINATION

12.1 If either party:

(i) being a company, has a petition presented for its winding up (which is not dismissed within fourteen (14) days of its service) or has a meeting convened to consider a resolution that it be wound up or such a resolution is passed (other than solely for solvent amalgamation or reconstruction) or has a petition presented for the appointment of an administrator or has a receiver or administrative receiver appointed over it or any of its assets or makes any proposal for a voluntary arrangement or any other composition scheme or arrangement with, or assignment for the benefit of, its creditors or is or becomes insolvent within the meaning of s123 Insolvency Act 1986; or

(ii) being an individual (or if a firm or partnership, any of its partners or members), has a petition presented for his bankruptcy, or has a receiver appointed over his affairs, or makes any voluntary arrangement with his creditors or (in the case of a firm or partnership) proposes or has presented against it a petition for its dissolution; or

(iii) in either case undergoes any analogous event in any jurisdiction where it is domiciled,

then the other party may terminate this Agreement by written notice to the other taking immediate effect.

12.2 The Customer acknowledges that the Company has entered into the Supply Agreement with the Satellite Provider under which the Satellite Provider has agreed to provide the Company with access to the Digital Capacity for the purposes of providing the Service to the Customer. The Customer further acknowledges that the Company’s use of the Digital Capacity thereunder is subject at all times to the continuing approval of both the Satellite Provider and the Government of France. The Customer therefore agrees that if any such approval is revoked or withheld by the Satellite Provider or the Government of France for any reason so that the Company can no longer access and use the Digital Capacity to provide the Service to the Customer, then this Agreement shall terminate automatically and the Company and the Customer shall be discharged from all further obligations to each other with effect from the date of such term ination.

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12.3 Either party shall be entitled to terminate this Agreement at any time in the event of the other party being in material breach of any term of this Agreement and, if such breach is capable of remedy, failing to remedy such breach within thirty (30) days of receiving written notice from the non-breaching party that refers to this Clause 12.3 and specifies the breach and the remedial action required.

12.4 This Agreement shall terminate at the end of the Service Period unless either party terminates prior to that date pursuant to a provision of this Agreement.

12.5 The Company may terminate this Agreement without liability in the event that the Satellite Provider terminates the Supply Agreement provided that such termination is not caused by any act or omission of the Company.

12.6 The Company may terminate this Agreement on seven (7) days prior written notice in the event that the Customer has failed to pay the Company any Service Charge or any other sum due under this Agreement in full without set off or deduction by its due payment date and such default has not been remedied within ten (10) days of the date of issue of a written notice from the Company requesting immediate payment of the overdue amount.

12.7 The Customer shall have a one time right to terminate this Agreement on the first anniversary of the Service Commencement Date subject to 3 months prior written notice.

12.8 The Customer may only exercise the termination right In Clause 12.7 above in the event that all of the Customers liabilities and Service Charges due under this Agreement are paid in full without set off or deduction up to the date of termination.

12.9 The Customer may terminate this Agreement immediately upon notice to the Company in the event that in accordance with Clauses 4.2.1 or 4.2.2 a change is made by the Satellite Provider to the Satellite or Transponder on which the Digital Capacity is made available and such change has a material adverse effect on the provision of the Service. For the avoidance of doubt such change shall be considered to be materially adverse if the new Satellite or Transponder on which the Digital Capacity is made available operates with a Equivalent Isotropic Radiated Power (“EIRP”) which is more than 2 dBW lower than the EIRP of the Digital Capacity for more than three (3) locations as indicated in Schedule 6 Part C.

12.10 The Customer may terminate this Agreement:

(i) immediately in the event that a single Service Interruption exists for more than forty eight (48) hours;

(ii) if the aggregate of all Service Interruptions of more than thirty (30) minutes exceeds twenty four (24) hours in any month; or

13           CONSEQUENCES OF TERMINATION

13.1 Upon termination of this Agreement for any reason the Customer will immediately cease to use the Service.

13.2 If the Service is terminated by the Company pursuant to Clauses 12.1 or 12.3

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or by the Customer other than in accordance with Clause 12 all of the Service Charges that would have become due from the Customer pursuant to this Agreement if the Service had not been so terminated shall become immediately due and payable by the Customer, less an allowance for accelerated payment of five (5)  per cent per annum. Such payment will be made by the Customer by way of liquidated and ascertained damages and the amount of such payment is accepted by the Parties as being a genuine pre-estimate of the net losses likely to be suffered by the Company in the event of the Agreement being so terminated.

13.3 On termination of this Agreement for any reason,

(a) any sums due to the Company shall become immediately payable by the Customer without set-off or deduction;

(b) the Company shall provide the Customer with:

(i) a refund for any outstanding Service Credits allowed pursuant to Clause 7; and

(ii) a refund of any Service Charges paid in advance by the Customer under Schedule Two for periods after the termination date of this Agreement during which Service will no longer be provided,

less any sums due from the Customer to the Company; and

(c) either party shall at its cost immediately deliver up any property belonging to the other party which it has no contractual right to retain.

13.4 The provisions of this Agreement which either expressly or by implication have effect after the termination of this Agreement shall continue to be enforceable by the Parties notwithstanding such termination.

14           CONFIDENTIALITY

14.1 "Confidential Information" means information disclosed by one party (the "Disclosing Party") to the other (the "Receiving Party") to the extent that such information is designated as such by the Disclosing Party in writing or relates to the Satellite Provider and/or the business affairs, developments, trade secrets, know-how, personnel, customers or suppliers of the Disclosing Party or such information may reasonably be regarded as the confidential information of the Disclosing Party.

14.2 The Receiving Party undertakes that:

(i) it (and any person employed or engaged by it in connection with this Agreement in the course of such employment or engagement) shall use Confidential Information of the Disclosing Party only for the purposes of this Agreement and shall not disclose any such Confidential Information to any third party without the prior written consent of the Disclosing Party; and

(ii) it shall take all necessary precautions to ensure that all Confidential Information is treated as confidential and is not disclosed (save as aforesaid) or used other than for the purposes of this Agreement.

14.3 Neither the Customer nor any person engaged by it whether as an employee, servant, agent or sub-contractor shall use the Confidential Information for the

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solicitation of business from the Company.

14.4 Each party undertakes to the other to take all such steps as shall from time to time be necessary to ensure compliance with the provisions of Clauses 14.2 and 14.3 by its employees agents consultants and sub-contractors.  For the avoidance of doubt, the Receiving Party acknowledges that the Disclosing Party may require and the Receiving Party shall procure undertakings as to confidentiality directly from its employees in terms no less onerous than the terms contained in this Clause 14.

14.5 Neither party shall advertise or publicly announce its involvement in the Agreement without the prior written consent of the other party.

14.6  The Receiving Party may disclose information:

(i) pursuant to a duty imposed by law or the requirements of a regulatory authority or to obtain or maintain a stock exchange listing but only to the extent so required; and

(ii) to give proper instructions to any professional adviser under an obligation to keep such Confidential Information confidential.

14.7 Confidential Information shall not include, and the obligations contained in this Clause 14 shall not apply, in respect of information:

(i) which was in the public domain at the time of disclosure;

(ii) which, though originally Confidential Information, subsequently falls into the public domain through no fault of the Receiving Party;

(iii) independently developed by the Receiving Party or its employees or agents where such party can show it has no access to that information as Confidential Information of the Disclosing Party received under this Agreement; or

(iv) lawfully in the possession of the Receiving Party at the time of receipt which is subsequently lawfully received from a third party not under an obligation of confidentiality to the Disclosing Party in respect of that information.

14.8 Without prejudice to the generality of Clause 14.7 (i)-(iv) above, information shall not be deemed to be in the public domain by reason only that it is known to only a few of those people to whom it might be of commercial interest and a combination of one or more items of Confidential Information with information in the public domain shall not cause such Confidential Information to be deemed to be in the public domain.

14.9 The obligations contained in this Clause 14 shall continue in force notwithstanding termination of this agreement howsoever occasioned.

15 ASSIGNMENT AND SUBCONTRACTING

15.1 Neither party shall assign any of its rights or other benefits or obligations under this Agreement without the prior written approval of the other party which shall not be unreasonably withheld or delayed.

15.2 The Company may subcontract or delegate the provision of the Service in whole or in part provided the Company obtains the Customer’s consent

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(which shall not be unreasonably delayed or withheld) in which case the Company shall remain primarily liable to fulfil the obligations which it has accepted pursuant to this Agreement.

16  FORCE MAJEURE

16.1 Neither party shall be liable for any loss or damage suffered or incurred by the other arising from the other party’s delay or failure to fulfil or otherwise discharge any of its obligations under this Agreement to the extent that such delay or failure is caused by any cause or circumstance beyond its reasonable control including, but not limited to acts of God, inclement weather, fire, flood, drought, lightning, acts of the party’s contractors or suppliers; natural catastrophe; acts of central or local Government or international or national regulatory authority; national emergencies; riots; war; solar disturbances; sun outages; externally caused interference including rain fade; Satellite component failure including failure or interruption of Satellite propulsion, electrical or other common systems; degradation of the Satellite not within the reasonable control of either of the Parties and the with drawal by the Satellite Provider  of access to the Digital Capacity on the Satellite (“the Force Majeure Event”). The Customer shall notbe required to pay the Service Charges during the period of a Force Majeure Event.

16.2 The party seeking to rely on a Force Majeure Event shall as soon as is reasonably practicable after first becoming aware of the circumstances which gave rise to the Force Majeure Event give full particulars in writing to the other party, including, but not limited to, an estimate as to the length of time the Force Majeure Event may continue and the facts and circumstances giving rise to the Force Majeure Event (the “Force Majeure Notice”) and shall take reasonable steps to mitigate the effect of such Force Majeure Event.  If a Force Majeure Event persists for a continuous period of one (1) month, then either party shall have the right to terminate this Agreement forthwith upon written notice to the other, such termination shall be deemed effective on and from the date of issue of the Force Majeure Notice.

17  NOTICES

17.1 Any notice under or in connection with this Agreement shall be in writing and may be delivered by hand to or sent by first class post or by electronic or facsimile transmission (such electronic or facsimile transmission to be confirmed by letter posted within twelve (12) hours) to the Company Secretary if to the Company at the address of the receiving party set out in this Agreement if to the Customer at Aquis House, Station Road, Hayes, Middlesex UB3 4DX or to any other address notified by the relevant party from time to time.

17.2 Any notice addressed as provided in Clause 17.1 shall be deemed to have been given or made on the second Working Day after posting if sent by first class post, upon delivery if delivered by hand and if sent by electronic mail or facsimile transmission on the next Working Day after the date of transmission provided the sender retains a receipt of electronic mail or the facsimile machine produces a report showing successful transmission to the correct facsimile number.

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18           WAIVER

18.1 No terms or conditions hereof shall be deemed waived and no breach or default excused unless such waiver or excuse shall be in writing and signed by the issuing party.

19           SEVERANCE

19.1 If any provision of this Agreement is found by a court of competent jurisdiction to be invalid or unenforceable, such invalidity or unenforceability shall not affect the other provisions of this Agreement, which shall remain in full force and effect.

20           NO AGENCY

20.1 The Company, in providing the Services to the Customer, is acting only as an independent contractor.  Nothing in this Agreement is intended to or shall operate to create a partnership between the Parties, or to authorise either party to act as an agent for the other.  Neither party shall have authority to act in the name or on behalf of or otherwise to bind the other in any way.  This includes, but is not limited to, the making of any representation or warranty, the assumption of any obligation or liability and the exercise of any right or power.

21           ENTIRE AGREEMENT

21.1 This Agreement constitutes the entire legal and contractual relationship between the Parties relating to the subject matter of this Agreement and except in the case of any fraudulent misrepresentation made by either party in connection with the subject matter of this Agreement and/or save as may be expressly referred to or referenced in this Agreement, supersedes all prior or contemporaneous agreements or representations, written or oral with respect to this Agreement and its subject matter.

22           DISPUTE RESOLUTION PROCEDURE

22.1 Any question or difference which may arise concerning the construction meaning or effect or any matter which arises out of or in connection with this Agreement shall in the first instance be referred to the nominated representatives of the Company and the Customer for discussion and resolution at a meeting convened for that purpose.  The meeting shall take place as soon as reasonably possible and, in any event, within twenty one (21) days of such referral. If the matter is not resolved at this meeting, the escalation will continue through two (2) more levels of management as soon as reasonably possible and, in any event, within a further twenty one (21) days.  If the unresolved matter is having a serious effect on the performance of this Agreement the Parties will use reasonable endeavours to reduce the time for completion of the process.

22.2 Neither party may initiate any legal action until this process has been completed, unless such party has reasonable cause to do so to avoid damage to its business or to protect or preserve any right of action it may have, including without limitation to seek injunctive relief in respect of any

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breach of its intellectual property rights or similar proprietary rights.

22.3 If the dispute is not resolved by escalation in accordance with Clause 22.1 above either party may seek resolution of the dispute through the courts in accordance with Clause 24.

23           VARIATION

23.1 No variation of this Agreement shall be valid unless it is in writing and signed by or on behalf of both Parties.

24           LAW AND JURISDICTION

24.1 This Agreement shall be governed by and construed and interpreted in accordance with English law and without prejudice to Clause 22 (dispute resolution procedure) the Parties hereby submit to the exclusive jurisdiction of the English courts.

25           CONTRACT (RIGHTS OF THIRD PARTIES) ACT 1999

25.1 A person or body who is not a party to this Agreement has no rights under the Contracts (Rights of Third Parties) Act 1999 to rely upon or enforce any terms of this Agreement but this does not affect any rights or remedies of a third party which exist or are available apart from that Act.

26           CUMULATIVE REMEDIES

26.1 The rights and remedies of the Company under this Agreement are cumulative and without prejudice and in addition to any rights or remedies which the Company may have at law or in equity.

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AS WITNESS the hands of the Parties the day and year first before written

Signed for and on behalf of ARQIVA LIMITED by

Signed:	/s/ B. Woolston
Print Name:	B. Woolston
Title:	Commercial Director
Date:	24/3/10

Signed for and on behalf of ARQIVA LIMITED by

Signed:	/s/ Julian M. Portman
Print Name:	J. M. Portman
Title:	Divisional FD
Date:	23/3/10

Signed for and on behalf of SATELLITE TELEVISION INTERNATIONAL B.V. by:

Signed:	/s/ Andrew D. Wren
Print Name:	Andrew D. Wren
Title:	Director
Date:	17 March 2010

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SCHEDULE ONE

SERVICE DESCRIPTION

1.             SERVICE OVERVIEW

1.1  General

The Company will supply Customer with;

1.1.1  Reception of the Service in accordance with Schedule Five.

1.1.2 Multiplexing for one Channel.

1.1.3 Uplink of that Channel to the Transponder to meet the requirements of Schedule Six.

1.2 Digital Capacity

The Company will supply Customer with a digital satellite service within a high bandwidth multiplex in a DVB MCPC configuration, where the total user data rate assigned to Customer for the Channel shall be:

Description	Data rate
Private Spice	3Mbit/s which includes capacity for video, audio channel(s), data channels (if any), teletext, EPG, CA and service information data.

The Company may vary the overall multiplex symbol rate from time to time.

2.             TERM

Description	Service Commencement Date	Service Termination Date
Private Spice	1st November 2009	31st October 2014

The Service will be made available to the Customer 24 hours per day, seven days per week during the Service Period. From 1st October 2009 to 31st October 2009 the Service will be provided free for testing.

3.             SERVICE DESCRIPTION – KEY ELEMENTS

The Company shall provide the following Service elements:

3.1  Reception of the Service as detailed in Schedule Five.

3.2 Provision of access to the Digital Capacity to provide the Service.

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3.3 Multiplexing on a fixed bit rate basis the above stream(s) into a single DVB multiplex.

3.5 Addition of DVB-S compliant Reed Solomon and FEC error correction, and QPSK modulation of an RF carrier by the Transport Stream at the Uplink Site.

3.6 Upconversion, amplification and uplink and provision of access to the Digital Capacity to provide the Service.

4.             SERVICE DESCRIPTION – ANCILLARY ELEMENTS

4.1  Uplink Management and Control

4.1.1 Monitoring of technical parameters of Service, including BER on the Connectivity and EIRP on the uplink as necessary.

4.1.2 Measurement and logging from time to time of C/N and/or C/No  on downlinked signal.

4.1.3  Visual monitoring of all off air programmes within multiplex.

4.1.4 Detailed measurement of vision, audio and data signals as required from time to time.

4.2  Maintenance and Fault Repairs

4.2.1 Faults will be reported to and logged by the MCR.   Details of the nature of  the fault will be recorded.   Fault analysis and engineer call-out will be co-ordinated from the MCR to ensure continuity until the fault is cleared.

4.2.2 Maintenance of the Uplink system is 365 days per year, and all maintenance will be by the Company approved personnel or those of an authorised maintainer.

4.2.3 Where the Company is responsible for a Service outage the Company will issue an incident report.  The target time for delivery of the incident report is one (1) Working Day.

5.             SERVICE PARAMETERS

5.1  Encoding and Multiplexing

Multiplexing of the ASI signal into the DVB Mux

5.2  Uplink

All parameters will be in compliance with DVB-S parameters and the Satellite Provider’s requirements, and in particular, the details set out in Schedule Six.

 5.3  DVB parameters

Multiplexer Transport Stream Rate:	38 Mbits to 42 Mbits
Satellite Inner Coding:	DVB-S Reed Solomon 188, 204
Satellite FEC:	One of the following DVB compliant FEC rates will be applied to the multiplex transport stream ½, 2/3, ¾, 5/6 or 7/8
Satellite Modulation:	QPSK (as per DVB-S standard)
Uplink Symbol Rate:	27.5 MSym or 29.9 MSym

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SCHEDULE TWO

COMMERCIAL TERMS

1.             Payments

Customer shall pay the following Service Charges for the duration of the Service Period:

1.1 ***** per annum with respect to the provision of the Service

1.2 *****

2.             Deposit

*****

3.             Payment Schedule

The Service Charge will be payable monthly in advance, with effect from the Service Commencement Date, the amount(s) due being one twelfth of the annual Service Charges set out in paragraph 1 above. The Company shall invoice for such charges no later than thirty (30) days in advance of the month to which they relate. The due date for payment by the Customer shall be fourteen (14) days before the start of the month to which the payment relates. Any sum falling due on a day which is not a Business Day shall be payable on the immediately preceding Business Day.

4.             VAT

All sums payable under this Agreement are exclusive of VAT or any other taxes which may be applicable, or become applicable at any time. Any such charges will be payable by the Customer upon receipt of a VAT invoice in due form.

27

SCHEDULE THREE

THE CUSTOMER EQUIPMENT

Authorised viewing cards for the television channel carried by the Service; quantity 4

28

SCHEDULE FOUR

CONTACT DETAILS

1.             THE COMPANY :

Notice Address:

Director of Legal Services

Arqiva Limited

Chalfont Grove

Narcot Lane

Chalfont St Peter

Bucks SL9 8TW

United Kingdom

Bank details:

*****

Contact Details:

*****

2.             The Customer:

Notice Address & Billing Address:

Aquis House

Station Road

Hayes

Middlesex

UB3 4DX

Customer Contact Details:

Account Madhurika Walsh

Payments

Operational Ian Nile

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SCHEDULE FIVE

THE INTERFACE SPECIFICATION AND CONNECTIVITY

The Customer shall present the Content as follows:

Interface Point: DMC, Amsterdam (Rack no Rack locations are D19 and D20).

Presentation standard: a pre-encoded and encrypted 3Mbit/s ASI feed conforming to television and video standards ITU-R BT.601 and ITU-R BT.656 and to audio standard AES 3 1992, the audio signals to be embedded.  The service to carry one PAL video signal and one stereo audio signal.

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SCHEDULE SIX

THE SATELLITE AND TRANSPONDER

A.  Satellite Details

1.   Satellite	:	Hot Bird 8
2.   Orbital position	:	13.0 degrees East
3.   Degree of protection	:	Non-Preemptible
4.   Downlink frequency range	:	10.70 GHz – 12.75 GHz
5.   Uplink frequency range	:	12.90 GHz – 18.40 GHz

B.  Orbital Position and Transponder Bandwidth

The satellite providing the allotted capacity shall be maintained by the Satellite Provider within ± 0.1 degrees of its nominal longitude position and shall be kept such that the maximum angle between the equatorial plane and the orbital plane shall not exceed ± 0.1 degrees.

C.  Transponder Details

1.   Transponder number	:	111
2.   Uplink polarisation	:	Vertical
3.   Downlink signal frequency	:	10722.88 MHz
4.   Downlink polarisation	:	Horizontal
5.   Uplink EIRP	:	71.73dBW
6.   Downlink EIRP	:	50.5 dBW at beam center

Table 1 gives the minimum available satellite EIRP that will be provided towards certain defined locations within the transmit coverage area for the whole transponder exploited with a single carrier at the transponder centre frequency.

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Table 1

Hot Bird™ 8 at 13° East

Transmit Coverage

List of Locations and their minimum available EIRP Values

Location		EIRP (dBW)
London, United Kingdom	51°30'N  00°10'W	50
Paris, France	48°52'N  02°20'E	50
Roma, Italy	41°54'N  12°29'E	50
Madrid, Spain	40°24'N  03°41'W	50
Berlin, Germany	52°31'N  13°22'E	50
Sevilla, Spain	37°23'N  05°59'W	49
Palermo, Italy	38°07'N  13°22'E	49
Ródhos, Greece	36°26'N  28°13'E	49
Eskinsehir, Turkey	39°46'N  30°32'E	49
Kijev, Ukraine	50°26'N  30°31'E	49

D.  Satellite Provider

  The Satellite Provider is:

  Eutelsat

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EX-10.2

Exhibit 10.2

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.

DATED 29 MARCH 2010

ARQIVA LIMITED          (1)

AND

PLAYBOY TV UK/BENELUX LIMITED(2)

AGREEMENT FOR THE PROVISION OF CONNECTIVITY, UPLINKING AND SATELLITE SERVICES

ARQIVA LIMITED

Crawley Court

Winchester

Hampshire

SO21 2QA

THIS AGREEMENT is made on the 29th day of March 2010

BETWEEN

(1) ARQIVA LIMITED (registered in England under number 02487597) whose registered office address is at Crawley Court, Winchester, Hampshire SO21 2QA (“Company”);

AND

(2) PLAYBOY TV UK/BENELUX LIMITED (registered in England under number    3000033) whose registered office is at Aquis House, Station Road, Hayes, Middlesex UB3 4DX (“Customer”) together (the “Parties”).

RECITALS

(A) The Company is in the business of providing certain satellite and terrestrial services to its customers.

(B) The Customer wishes to engage the Company to supply and the Company has agreed to supply certain satellite services (the “Services”) to the Customer for use in connection with its television business on the terms and subject to the conditions of this Agreement.

(C) The Services that the Company shall provide to the Customer shall include, MPEG-2/DVB encoding, multiplexing, BSkyB Adaptation, and the provision of uplink facilities and access to Digital Capacity on the Satellite specified in this Agreement.

(D) The Company will procure the Digital Capacity required to provide the Services from the Satellite Provider on the terms and subject to the conditions of the Supply Agreement.

IT IS HEREBY AGREED AS FOLLOWS:

1.             DEFINITIONS AND INTERPRETATIONS

1.1 In this Agreement unless the context requires otherwise the following terms shall have the following meanings:

“Agreement”	means this agreement together with the Schedules and any appendices as any of the same may be amended from time to time.
“Business Hours”	means 09.00 until 17.30 hours local time at the relevant location on any Working Day.
“Channel”	means the Customer’s television channels currently known as Playboy TV, The Adult Channel, Spice Extreme, Climax 1, Climax 2, Climax 3 and Top Shelf TV or such other name as the Customer may from time to time determine.

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“Commencement Date”	means the date upon which this Agreement is executed by the Company having previously been executed by the Customer.
“Company Equipment”	means any Equipment which is not Customer Equipment that is provided and used by the Company to provide the Service detailed in this Agreement;
“Company Compression System”	the digital compression and multiplexing system provided and maintained by the Company and located at the Customer Premises and described in Schedule 1;
“Connectivity”	means any circuit required to transfer the Content from the Interface Point to the transmission facilities at the Uplink Site.
“Content”	means the material comprised in the Channel provided by the Customer for conveyance by the Service.
“Customer Equipment”	means any equipment provided by the Customer to the Company to enable it to provide the Services.
“Customer Premises”	means Aquis House, Station Road, Hayes, Middlesex, UB3 4DX
“Digital Capacity”	means the digital satellite capacity to be used by the Company to provide the Service, as defined in Paragraph 1.2 of Schedule One by reference to the Option Levels set out in Clause 2 of Schedule Seven.
“DTH”	means the distribution of television, radio or data signals by satellite “direct to home” for reception at the homes/premises of individual viewers.
“Encoding”	means the process of creating a single digital composite data stream from either video or audio (or both) programme information.
“Interactive Services”	means the interactive streaming services specified in Schedule Eight.
“Interface Point”	means the point at which the Content will be made available to the Company, as specified in the Interface Specification.
“Interface Specification”	means the technical specifications set out in Schedule Five defining the interface at

2

	which the Content will be made available to the Company.
“MCR”	means the Company's Master Control Room, located at the Uplink Site.
“OFCOM”	means OFCOM or any replacement or successor body and references in this Agreement to OFCOM shall include references to that replacement or successor body.
“Remaining Service”	means the Service which excludes the Digital Capacity which will be provided by the Company to the Customer.
“Satellite”	means the satellite specified in Schedule Six on which the Digital Capacity is provided, or such other Satellite which is designed for DTH services in geostationary orbit located at 28.5 degrees East or a similar orbital slot and having an equivalent footprint as the Company may use to provide the Services in accordance with Clause 4.2.
“Satellite Provider”	means the party which is detailed in Schedule Six from which the Company procures the Digital Capacity.
“Service”	means the services described in Schedule One which the Company will provide to the Customer on the terms and subject to the conditions of this Agreement.
“Service Charges”	means the service charges to be paid by the Customer for the Service in accordance with the payment terms set out in Clause 6 in the amounts set out in Schedule Two.
“Service Credits”	means the service credits which the Customer may claim for Service Interruptions as detailed in Clause 8.1.
“Service Description”	means the service description set out in Schedule One which describes the Service that the Company will provide to the Customer.
“Service Interruption”	means a service interruption as described in Clause 8.1 which may entitle the Customer to claim Service Credits.
“Service Commencement Date”	means the date on which carriage of the Channel and provision of the Service

3

	commences, as specified in Schedule One.
“Service Period”	means the period commencing on the Service Commencement Date and ending on the Service Termination Date.
“Service Termination Date”	means the date on which the carriage of the Channel and provision of the Service ceases, as specified in Schedule One.
“Supply Agreement”	means the agreement between the Company and the Satellite Provider under which the Company procures the Digital Capacity.
“Term”	means the duration of this Agreement which commences on the Commencement Date or the Services Commencement Date if earlier and terminates on the Service Termination Date.
“Territory”	means the territory in which the Customer delivers the Channels to end users which are located within the footprint of and subject to the parameters of the Satellite
“Transponder”	means the Transponder on the Satellite specified in Schedule Six as varied from time to time pursuant to Clause 4.2.
“Uplink Site”	means the Company’s Teleports at Chalfont Grove, Bedford, Winchester or such other teleport which the Company may use to provide the Service pursuant to Clause 4.3.
“Working Day”	means any day Monday to Friday except for bank and public holidays in England and Wales.
“Year”	means each complete period of twelve (12) calendar months, commencing with the Service Commencement Date.

1.2 Except where the context otherwise requires words denoting the singular include the plural and vice versa, and words denoting either gender include both genders and words denoting persons include natural persons, firms and corporations and vice versa. This Agreement includes the Schedules attached hereto and incorporated herein by reference.

1.3 References in this Agreement to Clauses and Schedules shall unless otherwise provided be references to the Clauses and Schedules of this Agreement.

1.4 Headings are included in this Agreement for ease of reference only and shall not affect the interpretation or construction of this Agreement.

4

1.5 A reference to any statute, enactment, order, regulation or other similar instrument shall be construed as a reference to the statute, enactment, order, regulation or instrument as amended by any subsequent statute, enactment, order, regulation or instrument or as contained in any subsequent re-enactment of it.

1.6 Except where the context otherwise requires terms and expressions used in this Agreement shall have the same meaning as is commonly ascribed to them in the Broadcasting, Telecommunications and IT industries.

1.7 Any phrase introduced by the word “including”, “include” or any similar expression shall be construed as illustrative and the words following any such word shall not limit the sense of the words preceding such words.

1.8 In the event and to the extent only of any conflict or inconsistency between the Clauses of this Agreement and the Schedules, the Clauses of this Agreement shall prevail.

2.            PURPOSE AND DURATION

2.1 This Agreement shall become effective on and from the Commencement Date and, subject to the early termination provisions set out in Clause 12, shall continue until the end of the Service Period.

2.2 In consideration of the Customer paying the Service Charges to the Company in the amounts and in the manner specified hereunder the Company will provide the Service to the Customer on the terms and subject to the conditions of this Agreement during the Term.

3. THE PARTIES’ OBLIGATIONS

3.1          The Company’s Obligations:

3.1.1 For the duration of the Service Period, the Company shall provide the Service to the Customer in accordance with the Service Description set out in Schedule One, on the terms and subject to the conditions of this Agreement.

3.1.2 The Company will procure, install and maintain the Company Equipment at the Uplink Site in order to perform the Services. The Company Equipment shall remain the property of the Company.

3.1.3 The Company shall procure the supply of the Digital Capacity from the Satellite Provider for use in the provision of the Service.

3.1.4 Subject to the Customer complying with all of its obligations under Clause 3.2.3 in accordance with the required timescale, the Company shall install and operate any Customer Equipment so that it is available for use in the provision of the Service from the Service Commencement Date.

3.1.5 The Company shall obtain and maintain any necessary licence or permission to provide the Service under the Wireless Telegraphy Act 2006 or any successor legislation and all other licenses, consents, or approvals necessary to perform its obligations hereunder, save only to the extent that the Customer is expressly obliged to procure the same pursuant to the terms of this Agreement or by law.

5

3.1.6 For the avoidance of doubt, the Service does not include and the Company shall not provide installation, commissioning or maintenance of the digital satellite receivers (or “digiboxes”) for end users.

3.2          Customer Obligations

3.2.1 The Customer shall obtain and maintain any necessary licences that may be required in respect of the transmission or carriage of the Content using the Service, including but not limited to any licence required to be issued by OFCOM or any successor body in the United Kingdom or required under the Broadcasting Acts 1990 and 1996 and inform the Company of any material changes thereto as they relate to the licences required pursuant to the Services under this Agreement.

3.2.2 The Customer shall inform the Company prior to the Service Commencement Date of all relevant technical information describing any EPG services with which it is being supplied by BSkyB, including, but not limited to, the programme number and shall advise the Company of any changes to such technical information prior to their becoming effective.

3.2.3 The Customer will supply or procure the supply of all Customer Equipment in accordance with the required timescales to enable the Company to provide the Service on and from the intended Service Commencement Date.  The Customer shall ensure that the Customer Equipment shall comply with the requirements set out in Schedule Three so as to enable the Company to carry out its obligations pursuant to Clause 3.1.  The Company shall operate the Customer Equipment in accordance with operational procedures agreed with the Customer subject to the Customer providing appropriate training for the Company at the Customer’s cost.

3.2.4 In relation to monitoring of the encrypted services the Customer will ensure that any viewing cards forming part of the Customer Equipment are authorised prior to the Service Commencement Date and continue to be authorised for the duration of the Service Period.

3.2.5 Not used.

3.2.6 The Customer shall use the Service only for the purpose of distributing the Channel within the Territory.

3.2.7 The Customer shall pay the Service Charges for the duration of the Service Period in accordance with the provisions of Clause 6 in the amount specified in Schedule Two.

3.2.8 The Customer shall provide such information as the Company and/or the Satellite Provider shall require to enable it (being the Company and/or the Satellite Provider)  to provide the Service in a timely manner and shall ensure that any such information is accurate, complete and up to date.

3.2.9 If and to the extent that the Customer has to attend the Uplink Site or any other premises owned by the Company or any of its subcontractors the Customer will comply with all and any reasonable policies and procedures of which it is given notice including but not limited to those policies and procedures relating to health and safety, access and security.

6

3.2.10 The Customer shall present the signals which are to be transmitted to the Company as specified in Schedule Five.

3.2.11 Where the Company provides the Service at the Customer Premises the Customer shall be responsible for:

3.2.11.1 preparation and maintenance of the Customer Premises in accordance with the specification as detailed in Schedule 1, including but not limited to the provision of suitable accommodation, power supplies and air conditioning for the Company Compression System to be installed at the Customer Premises; and

3.2.11.2 obtaining (and paying any charges or costs for) all necessary planning permissions and landlord approvals and consents (i) to install the Company Compression System at the Customer Premises and (ii) for the connection and operation of the Service at the Customer Premises (for the avoidance of doubt this does not include any planning permissions, landlord approvals and consents for land not occupied or owned by the Customer); and

3.2.11.3 the Company Compression System installed at the Customer Premises and for its proper use in accordance with the Company’s written instructions.  If any part of such Company Compression System is lost, destroyed or damaged by the Customer, its employees, agents or its subcontractors, the Customer shall pay the Company’s cost for its replacement or repair as applicable. The Customer must not interfere with the Company Compression System or permit anybody else to do so; and

3.2.11.4 granting the Company or any of its subcontractors access to the Customer Premises in order to enable the Company or its subcontractors to carry out work necessary for installing and maintaining the Company Compression System and maintaining the Service.  Where possible, the Company will provide notice to the Customer of any access required to the Customer Premises.

3.2.12 If and to the extent that the Company or any of its subcontractors has to attend the Customer Premises or any other premises owned by the Company the Company or its subcontractors will comply with all and any reasonable policies and procedures of which it is given notice including but not limited to those policies and procedures relating to health and safety, access and security.

3.3 The Company’s Rights

3.3.1 The Company may provide the Service by any particular technical or operational means and/or change the technical or operational means by which it provides the Service at any time during the Service Period provided that any such change does not have a material adverse effect on the provision of the Service which the Company shall continue to provide in accordance with the Service Description set out in Schedule One.

7

3.3.2 If the Customer is overdue with any payment then, without prejudice to any other right or remedy available to the Company and subject in any event to fourteen (14) days prior written notification by the Company to the Customer of its intention to exercise the rights set out in this Clause, the Company reserves the right to exercise a lien over any Customer Equipment which is at the Uplink Site until the Customer has made such overdue payment in full without settlement or deduction.  For the avoidance of doubt the exercise of any such lien shall not affect the Customer’s obligation to pay any amounts due under this Agreement.

4.            PROVISION OF THE SERVICE

4.1          Commencement of the Service

4.1.1 Without prejudice to the Customer’s obligation to pay the Service Charges from the Service Commencement Date, the Company shall not be obliged to commence provision of the Service for so long as any of the following circumstances exist:

(i) a material breach by the Customer of any of its obligations under this Agreement; or

(ii) the failure or unavailability of any satellites, transponders, facilities, services or systems (excluding those provided by the Company under this Agreement) provided that such failure or unavailability is not directly caused by any failure by the Company to carry out any of its obligations pursuant to this Agreement; or

(iii) a request in writing from the Customer to delay commencement of the provision of the Services; or

(iv) the suspension of the Service in accordance with Clause 4.5 of this Agreement.

4.1.2 For the avoidance of doubt and without prejudice to the Customer’s obligation to pay the Service Charges the Company shall not commence provision of the Service until the Customer has met all applicable payment obligations in accordance with Clause 6 and Schedule Two.

4.2          Changes to the Satellite and Transponder

4.2.1 The Parties acknowledge that the Satellite on which the Digital Capacity is made available may be changed by the Satellite Provider to another Satellite at the same orbital slot from time to time, and in such event the Company undertakes to use its reasonable endeavours to minimise any disruption to the Service.

4.2.2 The Parties acknowledge that the Transponder on which the Digital Capacity is made available may be changed by the Satellite Provider to another Transponder on the Satellite from time to time, and in such event the Company undertakes to use its reasonable endeavours to minimise any disruption to the Service.

4.2.3 The Company may change the Satellite and/or Transponder on which the Digital Capacity is provided to any Satellite or Transponder providing DTH reception in the Territory at any time, provided that any such change does not have a material adverse effect on the provision of the Service which the

8

Company shall continue to provide in accordance with the Service Description set out in Schedule One.

4.2.4 In the event that the Satellite Provider changes the Satellite and/or the Transponder in accordance with Clause 4.2.1 or 4.2.2 the Company shall not in any event be held liable for any loss or damage arising out of or caused by such variation unless and to the extent that the Company can recover compensation for such loss or damage from the Satellite provider.  The Company shall pay any compensation recovered from the Satellite Provider to the Customer as soon as reasonably practicable after the Company receives any such compensation.

4.2.5 The Company shall give the Customer as much notice as possible of any changes to be made in accordance with this Clause 4.2.

4.3          Changes to the Service

4.3.1 The Company may change the Uplink Site to any other teleport at any time, provided that any such change shall not have a material adverse effect on the provision of the Service which the Company shall continue to provide in accordance with the Service Description set out in Schedule One.

4.3.2 The Company agrees to use all reasonable endeavours to provide to the Customer such further services as the Customer may reasonably request from time to time during the Term provided that all requests from the Customer for services additional to the Service or requests for a change to the Service requested by the Customer (a “Change”) shall be made in accordance with the following procedure:

(i) The Customer will provide the Company with a written request detailing the precise scope of the Change required and the person within the Customer’s undertaking to whom all correspondence in respect of the Change must be addressed (the "Change Representative").

(ii) The Company will provide the Change Representative with a written report on the proposed Change which will cover feasibility, impact on any time or other schedules contained or referred to in this Agreement, the Clauses, the Schedules, resource requirements and/or any cost effects (the “Change Report”).

(iii) The Change Representative will consider the Change Report and will notify the Company in writing, within ten (10) Working Days of receipt of the Change Report of the Customer’s decision whether or not to request the Company to proceed with the Change.

(iv) If the Parties agree that the proposed Change is acceptable the Parties shall use their reasonable endeavours to carry out the Change.  In the event that either party decides not to proceed, it will give written notice of its decision to the other party within fifteen (15) Working Days following consideration of the Change Report.

(v) The Company reserves the right to charge reasonable costs for preparing the Change Report at a rate to be agreed between the Parties in the event that the Customer submits more than six (6) Change Requests in any Year.

4.3.3 The Company may propose a Change in accordance with the procedure

9

detailed in Clause 4.3.2 above adapted mutatis mutandis to refer to the Company in place of the Customer save that:

(i) The Company will provide the Customer with both a Change Request and Change Report.

(ii) The Customer will consider the Change Request and Change Report and will notify the Company in writing within ten (10) Working Days of receipt of the Change Report of the Customer’s decision whether or not it agrees to the Change.

(iii) If the Parties agree the proposed Change is acceptable the Parties shall use their reasonable endeavours to carry out the Change.

4.3.4 No additions, modifications or alterations to the Service will be valid unless such modifications or alterations are in writing and signed by a duly authorised representative of each party.

4.3.5 The Customer will be provided with the Digital Capacity as outlined in Schedule One. From the Service Commencement Date the Company shall provide 2.5Mbit/s of Digital Capacity to the Customer for no charge until the 17th October 2011. After the 17th October 2011 this Digital Capacity will be provided by the Company on a pre-emptible basis (“the Pre-emptible Digital Capacity”). Should the Company require such Pre-emptible Digital Capacity for another customer then the Company will provide the Customer with fifteen (15) Working Days prior written notice of such requirement (the “Notice Period”).  During this Notice Period the Customer may elect in writing to continue to use such Pre-emptible Digital Capacity and in that event from the end of the Notice Period the Service Charge shall increase in accordance with Schedule Two from the day immediately following the expiration of the Notice Period.  If the Customer fails to elect in writing within the Notice Period to continue to use the Pre-emptible Digital Capacity the Company will cease to supply such after the expiration of the Notice Period.

4.3.6 In the first Year of the Contract and subject to availability the Customer shall upon 30 days written notice have a right to purchase up to 3Mbit/s additional Digital Capacity at a charge of ***** per Mbit/s per annum for the remainder of the Term.

4.4          Use of the Service

4.4.1 The Customer will ensure that the Service is used in accordance with such reasonable operating instructions as may be notified in writing or orally (and subsequently confirmed in writing) to the Customer by the Company from time to time and in accordance with all applicable laws and regulations.

4.4.2 The Service shall only be used by the Customer for the purposes set out in this Agreement.

4.4.3        Inadvertent Overspill

10

The Customer acknowledges that the permitted use of the Services provided by the Company pursuant to this Agreement is the transmission of Content within the Territory.

The Customer further acknowledges that the footprint of the Satellite is wider than the Territory and that accordingly the Services can be viewed outside the Territory.

It is the Customer's responsibility to ensure that it has obtained the necessary rights to broadcast the Content and in the event that a third party claim is brought for any of the reasons stated in Clause 9.2 in relation to Content which is viewed outside the Territory the Customer shall fully indemnify the Company as specified in Clause 5.6 in relation to any such third party claims.

4.5           Suspension of the Service

4.5.1 The Company may suspend the Service immediately if and for so long as:

(i) the Customer has failed to pay the Company any Service Charge or any other sum due under this Agreement in full without set off or deduction by its due payment date and such default has not been remedied within five (5) days of the date of issue of a written notice from the Company requesting immediate payment of the overdue amount; or

(ii) the Customer is in material breach of any of its obligations under this Agreement and has failed to remedy such breach within  fourteen (14) days of the date of issue of a written notice from the Company stating the breach and the remedy required; or

(iii) the Customer is in breach of its obligations under Clause 9.2; or

(iv) the Company is required or requested to cease or suspend provision of the Service by the Satellite Provider; or

(v) the Company is obliged to comply with an order, regulation, instruction or request of the Government of the United Kingdom or an agency thereof, an emergency services organisation, or other competent international satellite organisation or administrative authority which necessitates such suspension; or

(vi) the Company is reasonably of the opinion that any act or default of the Customer or its agents is likely to cause damage to the Uplink Site the Satellite or any other use of the Satellite.

4.5.2 For the avoidance of doubt, the Customer shall continue to be liable to pay the Service Charges during any period during which the Company has suspended the provision of the Service pursuant to this Clause 4.5.1. If the Company exercises its rights of suspension pursuant to this Clause 4.5.1, it will not operate as a waiver of any right that either party is entitled to under this Agreement or by law.

4.5.3 If and to the extent that the Company exercises its right of suspension under Clause 4.5.1 above this will not exclude the Company’s right to terminate this Agreement in accordance with its terms in respect of a breach which has not been remedied or any other event, nor will it prevent the Company from claiming damages from the Customer for breach of this Agreement.

11

4.6           Planned Interruptions

4.6.1 The Company provides equipment and operational systems to industry standard levels of redundancy and contingency.  However during the Service Period occasional interruptions of Service to the Customer may be required for repairs to or maintenance, testing or improvement of the systems operated by the Company and/or the Satellite Provider (“Planned Interruptions”).  The Company shall, wherever possible give the Customer at least forty eight (48) hours notice of any such Planned Interruption and shall use its reasonable endeavours to minimise any disruption of the Service.

4.6.2 The Company shall not in any event be held liable for any loss or damage arising out of or caused by any Planned Interruptions caused or requested by the Satellite Provider unless and to the extent that the Company can recover compensation for such loss or damage from the Satellite Provider.  The Company shall pay any compensation recovered from the Satellite Provider to the Customer as soon as reasonably practicable after the Company receives any such compensation.

5.             INTELLECTUAL PROPERTY RIGHTS AND INDEMNITY

5.1 If in the course of or as a result of the Company providing the Service to the Customer any of the Company’s employees or agents create any document or other material protected by copyright or other intellectual property right (for example a breakdown slate) (the “Created Works”), it is agreed that all legal and beneficial rights in the Created Works will vest in and be owned by the Company, and Customer will have no rights in it beyond a non-exclusive licence to make copies for internal use of any document (but not other material) for the purpose of receiving the Services for the Term.  The Customer and the Company (e.g. regarding grant of licence) will duly execute any assignment or other instrument, which may be necessary to give effect to this provision.  However, should the Company create any promotional showreel using any materials provided by Customer, the copyright i n those materials will remain with the Customer and the Company will seek the Customer’s permission in order to use and broadcast the materials in their promotional showreel.

5.2 The Company shall indemnify the Customer and hold the Customer harmless against all claims liabilities, actions, losses judgments, payments made in settlement, costs (including legal fees) proceedings, and demands of claims from third parties arising from infringement (or alleged infringement) of any patent, design or copyright or other intellectual property right enforceable in the United Kingdom or any other place, arising out of the Created Works or the Company’s use of the Company Equipment to provide the Services.

5.3 The Customer shall notify the Company promptly in writing of any allegation of infringement and any claim (actual or threatened) or action which may give rise to the Company’s obligation to indemnify the Customer.  The Customer shall not make any admission relating to the allegation and shall not settle any such claim or action without the prior written consent of the Company, which consent shall not be unreasonably withheld, delayed or conditioned.  The Customer shall allow the Company to conduct all negotiations and proceedings and at the Company’s cost give the Company all reasonable assistance and information in the defence of any such allegation claim or action.

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5.4 If at any time an allegation of infringement of patent, design, or copyright is made, the Company may at its own expense modify the DVB Uplink Equipment supplied by the Company so as to avoid the infringement or may replace such items with non-infringing equipment, provided that such replacement items do not prevent the Customer from receiving the signal or receiving the Services.

5.5 The Company shall not acquire or be deemed to acquire any legal or beneficial right in the Content due to or arising out of its provision of the Service pursuant to this Agreement. The Customer shall indemnify the Company and the Satellite Provider and hold the Company and the Satellite Provider harmless against all claims liabilities, actions, losses judgments, payments made in settlement, costs (including legal fees) proceedings and demands of claims from third parties including the Company’s other customers arising from infringement (or alleged infringement) of any patent, design or copyright or other intellectual property right enforceable in the United Kingdom or any other place, by reason of the Company’s use or possession of the Customer Equipment and/or the use, storage or transmission of the Content.

5.6 The Customer shall indemnify the Company and hold the Company harmless from and against any claims incurred by the Company resulting from or arising out of any material breach of the Customer’s obligations in Clause 3 or any breach of the warranties in Clause 9 of this Agreement and in the event that the use or installation of the Customer Equipment at the Uplink Site causes loss or damage to the Company’s property, the Company’s Equipment or any of the Company’s customers’ equipment the Customer shall fully indemnify the Company and/or its customer as the case may be in relation to such loss or damage.

5.7 The Company shall notify the Customer promptly in writing of any allegation of infringement and any claim (actual or threatened) or action which may give rise to the Customer's obligation to indemnify the Company.  The Company shall not make any admission relating to the allegation and shall not settle any such claim or action without the prior written consent of the Customer, which consent shall not be unreasonably withheld or delayed.  The Company shall allow the Customer to conduct all negotiations and proceedings and at the Customer’s cost give the Customer all reasonable assistance and information in the defence of any such allegation claim or action.

5.8 If at any time an allegation of infringement of patent, design, or copyright is made, the Customer may at its own expense modify the Customer Equipment so as to avoid the infringement or may replace such items with non-infringing equipment.

5.9 The indemnity in Clause 5.2 does not apply to the extent that infringement is caused by the Customer’s use of the Service for a purpose not permitted by this Agreement  with other apparatus not supplied by the Customer.

5.10 The indemnification obligations stated in this Clause 5 shall survive termination of this Agreement.

6.             SERVICE CHARGES AND PAYMENT

6.1 The Customer shall pay the Service Charges at the rates, times and

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frequencies and in the currency as specified in Schedule Two in the manner specified in this Clause 6.

6.2 Not used.

6.3 All Service Charges due under this Agreement shall be payable within fourteen (14) days of the date of the relevant invoice (the “Due Date”) and will be paid in full without any set-off, deduction or withholding of any kind.  The Company may charge daily interest on any outstanding amounts from the Due Date until payment is received in full at a rate equal to 2% per cent per annum above the base rate of National Westminster Bank Plc as current from time to time whether before or after judgment.  In addition the Company may suspend the Service until all Service Charges have been paid in full pursuant to Clause 4.5.1.

6.4 The Company will not charge interest pursuant to Clause 6.3 above on an invoiced amount if the Customer disputes an invoice in good faith provided that the Customer does all of the following:

(a) pays all undisputed amounts on the invoice when they are otherwise due; and

(b) notifies the Company in writing that the invoice is under dispute stating the reason and the amount which is disputed prior to the date when payment would otherwise be due; and

(c) co-operates with the Company to promptly resolve the dispute; and

(d) pays the agreed upon portion of the disputed amount within ten (10) days of resolution of the dispute.

6.5 All Service Charges are exclusive of Value Added Tax and any other applicable taxes which may from time to time be levied at the rates and in the manner specified by prevailing legislation.

6.6 The Company may set off sums due from the Company to the Customer under any agreement (without prejudice to any other rights or remedies) against sums due from the Customer to the Company under this Agreement or any other agreement.

7.             SERVICE CREDITS

7.1 The Customer shall be entitled to claim Service Credits in accordance with this Clause 7 for any period of time during the Service Period during which there is either a Total Service Interruption or Partial Service Interruption as defined in Clause 8.

7.2 The period of time for which the Customer shall be entitled to claim Service Credits under this Clause 7 shall be equal to the duration of the either the Total Service Interruption or Partial Service Interruption as the case may be.

7.3 The Customer’s entitlement to Service Credits shall be calculated as follows:

7.3.1. In the event of a Total Service Interruption:

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Credit  = (ACS /  Number of minutes of Service contracted for that year)  x QPF

7.3.2. In the event of Partial Service Interruption:

Credit  =

(ACS / Number of Channels)   /   (Number of minutes of Service contracted for that year)

x QPF x Number of Channels affected

Where ACS is the applicable annual Service Charge payable under the Agreement and QPF is the duration of the qualifying period of Service Interruption in minutes.

7.4 The Company shall give the Customer an allowance equal to the appropriate Service Credit calculated in accordance with Clause 7.3 above against the Service Charges which would have otherwise been due from the Customer for the future use of the Service or a cash refund equal to the appropriate Service Credit if and to the extent that Service Charges due under this Agreement for such future use of the Service are less than the amount of the Service Credit due.

7.5 For the purpose of calculating the aggregate monthly duration of Service Interruptions only those Service Interruptions notified by and agreed with the Company shall be applicable.

8.             SERVICE INTERRUPTIONS

8.1 For the purposes of this Agreement, a “Total Service Interruption” shall be deemed to have occurred in the event of any of the following:

(i) loss of vision signals on all of the Channels; or

(ii) loss of audio signal on all of the Channels; or

(iii) degradation in quality of either of the above such that in the reasonable opinion of both Parties, the quality no longer meets the standards normally expected for a service of this type on all of the Channels;

a “Partial  Service Interruption” shall be deemed to have occurred in the event of any of the following:

(i) loss of vision signals on some but not all of the Channels; or

(ii) loss of audio signal on some but not all of the Channels; or

(iii) degradation in quality of either of the above such that in the reasonable opinion of both Parties, the quality no longer meets the standards normally expected for a service of this type on some but not all of the Channels;

provided always that the Total or Partial Service Interruption exists for at least the period specified below:

(i) a single Service Interruption exists for more than ten (10) minutes; or

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(ii) the aggregate of all Service Interruptions of less than ten (10) minutes but more than two (2) minutes exceeds thirty (30) minutes in any month; or

(iii) six (6) or more Service Interruptions of less than two (2) minutes occur in a  fifteen (15) minute period.

8.2           Duration of Service Interruption

8.2.1 The duration of a Total or Partial Service Interruption shall be calculated as follows:

(i) the Service Interruption shall begin from the time at which according to the Company operational log such interruption commenced; and

(ii) the Service Interruption shall end when the Service has been restored and the Company so notifies the Customer

8.2.2 For the purposes of calculating the Customer’s entitlement to claim Service Credits for Total or Partial Service Interruptions the following shall apply:

(i) where the duration of a single Total or Partial Service Interruption is fifteen (15) minutes or greater, then the duration of the Service Interruption in respect of which the Customer may claim Service Credits shall equal the duration of the Total or Partial Service Interruption;

(ii) where a number of Total or Partial Service Interruptions of between two (2) and fifteen (15) minutes are aggregated so as to constitute a Service Interruption, then the duration of the Service Interruption in respect of which the Customer may claim Service Credits shall equal the aggregated duration of all such Total or Partial Service Interruptions;

(iii) where six (6) or more Total or Partial Service Interruptions each of less than two (2) minutes duration occur within a fifteen (15) minute period so as to  constitute a Service Interruption, then the duration of the Service Interruption in respect of which the Customer may claim Service Credits shall be measured from the commencement of the first such Service Interruption until the end of the last Service Interruption.

8.3           Exclusions

8.3.1 Interruptions to the Service which occur due to any of the reasons set out below shall not constitute Service Interruptions and accordingly the duration of any such interruptions shall be discounted from any calculations regarding the availability of the Service and the Company shall have no liability to pay and the Customer shall not be entitled to claim Service Credits for any interruptions which do not constitute Service Interruptions:

(i) the failure or unavailability of any satellites, transponders, facilities, services or systems (excluding those provided by the Company under this Agreement) provided that such failure or unavailability is not caused by any act or omission by the Company; or

(ii) the Satellite Provider or the Government of Luxembourg revoking any necessary approval for the provision of the Service or suspending the Service due to circumstances not caused by any act or omission of

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the Company; or

(iii) the Satellite Provider suspending the Digital Capacity for routine testing, repair or maintenance of the Satellite; or

(iv) suspensions of the Service pursuant to Clause 4.5; or

(v) any termination of the Service pursuant to Clause 12 or otherwise (not caused by any act of omission of the Company); or

(vi) any failure due to breach or omission by the Customer of its obligations under this Agreement; or

(vii) Planned Interruptions to the Service in accordance with Clause 4.6 up to a maximum of one (1) hour per Year, any Planned Interruptions greater than one (1) hour per Year shall be credit events for the purpose of Clause 7 save for those Planned Interruptions caused by the Satellite Provider; or

(viii) any failure due to termination or suspension of the Supply Agreement not caused by any act or omission of the Company; or

(ix) any failure due to force majeure as described in Clause 16.

8.4 Without prejudice to the provisions of Clause 4.5 (suspension) the Company’s liability for Service Interruptions shall be limited exclusively to granting Service Credits or repayments as provided in Clause 7.

9. WARRANTIES

9.1 The Company warrants and undertakes to the Customer that for the duration of the Service Period, it shall:

(i) comply with all instructions issued by the Satellite Provider that relate to the performance of the Service; and

(ii) provide the Service with reasonable skill and care.

9.2 The Customer warrants, and undertakes to the Company that for the duration of the Service Period:

(i) it has the right to transmit the Content; and

(ii) it shall ensure that the Content does not contain any material which is defamatory, seditious, blasphemous or which constitutes an injurious falsehood or slander of title or any tort or contempt of court or breach of parliamentary privilege and will not invade the privacy of any person; and

(iii) the transmission of the Service and the Content will not infringe the intellectual property rights or any other proprietary rights of any third party; and

(iv) it shall not include in the Content any material which causes a breach of the rules of OFCOM; and

(v) it shall make the Company aware of any notices it receives from any other party including but not limited to OFCOM or any relevant regulatory body within the Territory in respect of a revocation of the

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licences held by Customer in respect of the Channel as soon as reasonably practicable following its receipt of such notice

9.3 The Company and the Customer each represents and warrants to the other that:

(i) it has the right, power and authority to enter into and perform its     obligations under this Agreement; and

(ii) it has full capacity and authority and has obtained all necessary consents (including but not limited to, where its procedures so require, the consent of its Parent Company) to enter into and to perform this Agreement and that this Agreement is executed by a duly authorised representative; and

(iii) the fulfilment of its obligations hereunder will not constitute a material violation of any existing applicable law, rule, regulation or order of any governmental authority; and

(iv) all material and necessary or appropriate governmental, public or private consents, permissions, agreements, licences or authorisations to which it is subject have been or will be obtained prior to the Service Commencement Date; and

(v) the execution, delivery and performance of this Agreement shall not violate or conflict with;

· any provision of the by-laws, articles of incorporation or other similar statutory instrument of either party; or

· any law, judgment or order applicable to either party; or

· any material agreement, restriction or obligation to which either party is subject or which constitutes a default under any such agreement, restriction or obligation.

10.           LIABILITY

10.1 Both Parties accept liability for death or personal injury resulting from its own negligence or that of its employees, sub-contractors or agents or for proven fraud of the relevant party or of its employees or agents acting in the course of their duties.

10.2 The Company warrants that it will provide the Service to the Customer in accordance with the terms of this Agreement.  All other conditions, warranties, terms, undertakings and obligations express or implied by statute (including, without limitation, those of satisfactory quality or of fitness for a particular purpose (even if that purpose is made known expressly or by implication to the Company), common law, custom, trade usage or otherwise and all liabilities (if any) are excluded.

10.3 The Company does not represent that it will provide the Service free from Service Interruptions during the Term.  The Company will be responsible as described in this Agreement if a Service is not provided in accordance with the terms of this Agreement. The Company’s only obligation and the Customer’s only remedy in the event of a Service Interruption will be the right

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to claim Service Credits pursuant to Clause 7 and the right to Terminate the Agreement pursuant to Clause 12.7.

10.4 Neither party shall be liable to the other party in contract, tort (including negligence) or otherwise for any:

(a) loss of business; loss of data; loss of profits; loss of goodwill; loss of anticipated savings even when advised of the possibility; loss of revenue or;

(b) any indirect or consequential losses, liabilities or costs.

10.5 Subject to Clause 10.6 and 10.7 below both Parties accept liability in respect of damage to the other’s tangible property resulting from its or its employees' negligence up to an aggregate of *****.

10.6. The Company’s liability in relation to Customer Equipment shall be limited to instances where damage is directly caused due to the Company’s negligence or wilful default up to a maximum aggregate liability per incident of *****.  In all other circumstances the Company shall not accept liability for damage caused to or by Customer Equipment.

10.7 The Company’s liability in relation to Company Equipment located at the Interface Point is limited to ***** in aggregate.  The Company shall not be liable for damage caused by the Company Equipment to the Customer’s buildings or property irrespective of how such damage is caused.

10.8 Other than in respect of Clauses 10.1, 10.4, 10.5, 10.6 and 10.7, Either Party’s maximum aggregate liability in contract, tort, negligence or otherwise arising out of, or in connection with, this Agreement will be limited in aggregate to the greater of:

(a) *****; or

(b) the value of the Service Charges paid by the Customer in the twelve (12) months preceding the incident which gave rise to the claim under this Agreement.

10.9 Notwithstanding the foregoing, nothing in this Clause 10 shall restrict or limit the Customer’s liability under Clause 5.

11.          DATA PROTECTION

Both Parties shall comply with the Data Protection Act 1998 and, where processing personal data on the other party’s behalf, shall process such data strictly in accordance with such other party’s instructions and put such operational and technological processes in place to safeguard against any unauthorised access, loss, destruction, theft, use or disclosure of the data.

12.          TERMINATION

12.1 If either party:

(i) being a company, has a petition presented for its winding up (which is not dismissed within fourteen (14) days of its service) or has a meeting convened to consider a resolution that it be wound up or such

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a resolution is passed (other than solely for solvent amalgamation or reconstruction) or has a petition presented for the appointment of an administrator or has a receiver or administrative receiver appointed over it or any of its assets or makes any proposal for a voluntary arrangement or any other composition scheme or arrangement with, or assignment for the benefit of, its creditors or is or becomes insolvent within the meaning of s123 Insolvency Act 1986; or

(ii) being an individual (or if a firm or partnership, any of its partners or members), has a petition presented for his bankruptcy, or has a receiver appointed over his affairs, or makes any voluntary arrangement with his creditors or (in the case of a firm or partnership) proposes or has presented against it a petition for its dissolution; or

(iii) in either case undergoes any analogous event in any jurisdiction where it is domiciled,

then the other party may terminate this Agreement by written notice to the other taking immediate effect.

12.2 The Customer acknowledges that the Company has entered into the Supply Agreement with the Satellite Provider under which the Satellite Provider has agreed to provide the Company with access to the Digital Capacity for the purposes of providing the Service to the Customer. The Customer further acknowledges that the Company’s use of the Digital Capacity thereunder is subject at all times to the continuing approval of both the Satellite Provider and the Government of Luxembourg. The Customer therefore agrees that if any such approval is revoked or withheld by the Satellite Provider or the Government of Luxembourg for any reason so that the Company can no longer access and use the Digital Capacity to provide the Service to the Customer, then this Agreement shall terminate automatically and the Company and the Customer shall be discharged from all further obligations to each other with effect from the date of s uch termination.

12.3 Either party shall be entitled to terminate this Agreement at any time in the event of the other party being in material breach of any term of this Agreement and, if such breach is capable of remedy, failing to remedy such breach within thirty (30) days of receiving written notice from the non-breaching party that refers to this Clause 12.3 and specifies the breach and the remedial action required.

12.4 This Agreement shall terminate at the end of the Service Period unless either party terminates prior to that date pursuant to a provision of this Agreement.

12.5 The Company may terminate this Agreement without liability in the event that the Satellite Provider terminates the Supply Agreement provided that such termination is not caused by any act or omission of the Company.

12.6 The Company may, upon giving the Customer at least ninety (90) days prior written notice, terminate this Agreement on 31 March 2013 and/or 30 September 2013 in respect of all Services other than the Fibre Services without liability in the event that the Supply Agreement is terminated for any reason.

12.7 The Customer may terminate this Agreement:

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(i) immediately in the event that a single Service Interruption exists for more than forty eight (48) hours;

(ii) if the aggregate of all Service Interruptions of more than thirty (30) minutes exceeds twenty four (24) hours in any month.

12.8 The Customer may terminate this Agreement upon written notice after thirty (30) days in the event that in accordance with Clauses 4.2.1 or 4.2.2 a change is made by the Satellite Provider to the Satellite or Transponder on which the Digital Capacity is made available and such change has a material adverse effect on the provision of the Service

13.          CONSEQUENCES OF TERMINATION

13.1 Upon termination of this Agreement for any reason the Customer will immediately cease to use the Service.

13.2 If the Service is terminated by the Company pursuant to Clauses 12.1 or 12.3 or by the Customer other than in accordance with Clause 12 all of the Service Charges that would have become due from the Customer pursuant to this Agreement if the Service had not been so terminated shall become immediately due and payable by the Customer, less an allowance for accelerated payment of five (5) per cent per annum. Such payment will be made by the Customer by way of liquidated and ascertained damages and the amount of such payment is accepted by the Parties as being a genuine pre-estimate of the net losses likely to be suffered by the Company in the event of the Agreement being so terminated.

13.3 On termination of this Agreement for any reason,

(a) any sums due to the Company shall become immediately payable by the Customer without set-off or deduction;

(b) the Company shall provide the Customer with:

(i) a refund for any outstanding Service Credits allowed pursuant to Clause 7; and

(ii) a refund of any Service Charges paid in advance by the Customer under Schedule Two for periods after the termination date of this Agreement during which Service will no longer be provided,

less any sums due from the Customer to the Company; and

(c) either party shall at its cost immediately deliver up any property belonging to the other party which it has no contractual right to retain.

13.4 The provisions of this Agreement which either expressly or by implication have effect after the termination of this Agreement shall continue to be enforceable by the Parties notwithstanding such termination.

14.          CONFIDENTIALITY

14.1 "Confidential Information" means information disclosed by one party (the "Disclosing Party") to the other (the "Receiving Party") to the extent that such information is designated as such by the Disclosing Party in writing or relates to the Satellite Provider and/or the business affairs, developments, trade secrets, know-how, personnel, customers or suppliers of the Disclosing Party

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or such information may reasonably be regarded as the confidential information of the Disclosing Party.

14.2 The Receiving Party undertakes that:

(i) it (and any person employed or engaged by it in connection with this Agreement in the course of such employment or engagement) shall use Confidential Information of the Disclosing Party only for the purposes of this Agreement and shall not disclose any such Confidential Information to any third party without the prior written consent of the Disclosing Party; and

(ii) it shall take all necessary precautions to ensure that all Confidential Information is treated as confidential and is not disclosed (save as aforesaid) or used other than for the purposes of this Agreement.

14.3 Neither the Customer nor any person engaged by it whether as an employee, servant, agent or sub-contractor shall use the Confidential Information for the solicitation of business from the Company.

14.4 Each party undertakes to the other to take all such steps as shall from time to time be necessary to ensure compliance with the provisions of Clauses 14.2 and 14.3 by its employees agents consultants and sub-contractors.  For the avoidance of doubt, the Receiving Party acknowledges that the Disclosing Party may require and the Receiving Party shall procure undertakings as to confidentiality directly from its employees in terms no less onerous than the terms contained in this Clause 14.

14.5 Neither party shall advertise or publicly announce its involvement in the Agreement without the prior written consent of the other party.

14.6  The Receiving Party may disclose information:

(i) pursuant to a duty imposed by law or the requirements of a regulatory authority or to obtain or maintain a stock exchange listing but only to the extent so required; and

(ii) to give proper instructions to any professional adviser under an obligation to keep such Confidential Information confidential.

14.7 Confidential Information shall not include, and the obligations contained in this Clause 14 shall not apply, in respect of information:

(i) which was in the public domain at the time of disclosure;

(ii) which, though originally Confidential Information, subsequently falls into the public domain through no fault of the Receiving Party;

(iii) independently developed by the Receiving Party or its employees or agents where such party can show it has no access to that information as Confidential Information of the Disclosing Party received under this Agreement; or

(iv) lawfully in the possession of the Receiving Party at the time of receipt which is subsequently lawfully received from a third party not under an obligation of confidentiality to the Disclosing Party in respect of that information.

14.8 Without prejudice to the generality of Clause 14.7 (i)-(iv) above, information

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shall not be deemed to be in the public domain by reason only that it is known to only a few of those people to whom it might be of commercial interest and a combination of one or more items of Confidential Information with information in the public domain shall not cause such Confidential Information to be deemed to be in the public domain.

14.9 The obligations contained in this Clause 14 shall continue in force notwithstanding termination of this agreement howsoever occasioned.

15.          ASSIGNMENT AND SUBCONTRACTING

15.1 Neither party shall assign any of its rights or other benefits or obligations under this Agreement without the prior written approval of the other party which shall not be unreasonably withheld or delayed.

15.2 The Company may subcontract or delegate the provision of the Service in whole or in part provided the Company obtains the Customer’s consent (which shall not be unreasonably delayed or withheld) in which case the Company shall remain primarily liable to fulfil the obligations which it has accepted pursuant to this Agreement.

16. FORCE MAJEURE

16.1 Neither party shall be liable for any loss or damage suffered or incurred by the other arising from the other party’s delay or failure to fulfil or otherwise discharge any of its obligations under this Agreement to the extent that such delay or failure is caused by any cause or circumstance beyond its reasonable control including, but not limited to acts of God, inclement weather, fire, flood, drought, lightning, acts of the party’s contractors or suppliers; natural catastrophe; acts of central or local Government or international or national regulatory authority; national emergencies; riots; war; solar disturbances; sun outages; externally caused interference including rain fade; Satellite component failure including failure or interruption of Satellite propulsion, electrical or other common systems; degradation of the Satellite not within the reasonable control of either of the Parties and the with drawal by the Satellite Provider  of access to the Digital Capacity on the Satellite (“the Force Majeure Event”). In the event of any Force Majeure Event, without prejudice to any other remedies available to the Customer, the Customer shall be entitled after thirty (30) days to receive fifty (50%) percent of the Service Credits for any Service Interruption resulting from the Force Majeure Event.

16.2 The party seeking to rely on a Force Majeure Event shall as soon as is reasonably practicable after first becoming aware of the circumstances which gave rise to the Force Majeure Event give full particulars in writing to the other party, including, but not limited to, an estimate as to the length of time the Force Majeure Event may continue and the facts and circumstances giving rise to the Force Majeure Event (the “Force Majeure Notice”) and shall take reasonable steps to mitigate the effect of such Force Majeure Event.  If a Force Majeure Event persists for a continuous period of one (1) month, then either party shall have the right to terminate this Agreement forthwith upon written notice to the other, such termination shall be deemed effective on and from the date of issue of the Force Majeure Notice. For the avoidance of doubt the Customer shall pay fifty (50%) of the Service Charges d uring a Force Majeure Event.

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17.          NOTICES

17.1 Any notice under or in connection with this Agreement shall be in writing and may be delivered by hand to or sent by first class post or by electronic or facsimile transmission (such electronic or facsimile transmission to be confirmed by letter posted within twelve (12) hours) to the Company Secretary at the address of the receiving party set out in this Agreement or to any other address notified by the relevant party from time to time.

17.2 Any notice addressed as provided in Clause 17.1 shall be deemed to have been given or made on the second Working Day after posting if sent by first class post, upon delivery if delivered by hand and if sent by electronic mail or facsimile transmission on the next Working Day after the date of transmission provided the sender retains a receipt of electronic mail or the facsimile machine produces a report showing successful transmission to the correct facsimile number.

18.          WAIVER

18.1 No terms or conditions hereof shall be deemed waived and no breach or default excused unless such waiver or excuse shall be in writing and signed by the issuing party.

19.          SEVERANCE

19.1 If any provision of this Agreement is found by a court of competent jurisdiction to be invalid or unenforceable, such invalidity or unenforceability shall not affect the other provisions of this Agreement, which shall remain in full force and effect.

20.          NO AGENCY

20.1 The Company, in providing the Services to the Customer, is acting only as an independent contractor.  Nothing in this Agreement is intended to or shall operate to create a partnership between the Parties, or to authorise either party to act as an agent for the other.  Neither party shall have authority to act in the name or on behalf of or otherwise to bind the other in any way.  This includes, but is not limited to, the making of any representation or warranty, the assumption of any obligation or liability and the exercise of any right or power.

21.          ENTIRE AGREEMENT

21.1 This Agreement constitutes the entire legal and contractual relationship between the Parties relating to the subject matter of this Agreement and except in the case of any fraudulent misrepresentation made by either party in connection with the subject matter of this Agreement and/or save as may be expressly referred to or referenced in this Agreement, supersedes all prior or contemporaneous agreements or representations, written or oral with respect to this Agreement and its subject matter.

22.          DISPUTE RESOLUTION PROCEDURE

22.1 Any question or difference which may arise concerning the construction meaning or effect or any matter which arises out of or in connection with this

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Agreement shall in the first instance be referred to the nominated representatives of the Company and the Customer for discussion and resolution at a meeting convened for that purpose.  The meeting shall take place as soon as reasonably possible and, in any event, within twenty one (21) days of such referral. If the matter is not resolved at this meeting, the escalation will continue though two (2) more levels of management as soon as reasonably possible and, in any event, within a further twenty one (21) days.  If the unresolved matter is having a serious effect on the performance of this Agreement the Parties will use reasonable endeavours to reduce the time for completion of the process.

22.2 Neither party may initiate any legal action until this process has been completed, unless such party has reasonable cause to do so to avoid damage to its business or to protect or preserve any right of action it may have, including without limitation to seek injunctive relief in respect of any breach of its intellectual property rights or similar proprietary rights.

22.3 If the dispute is not resolved by escalation in accordance with Clause 22.1 above either party may seek resolution of the dispute through the courts in accordance with Clause 24.

23.          VARIATION

23.1 No variation of this Agreement shall be valid unless it is in writing and signed by or on behalf of both Parties.

24.          LAW AND JURISDICTION

24.1 This Agreement shall be governed by and construed and interpreted in accordance with English law and without prejudice to Clause 22 (dispute resolution procedure) the Parties hereby submit to the exclusive jurisdiction of the English courts.

25.          CONTRACT (RIGHTS OF THIRD PARTIES) ACT 1999

25.1 A person or body who is not a party to this Agreement has no rights under the Contracts (Rights of Third Parties) Act 1999 to rely upon or enforce any terms of this Agreement but this does not affect any rights or remedies of a third party which exist or are available apart from that Act.

26.          CUMULATIVE REMEDIES

26.1 The rights and remedies of the Company under this Agreement are cumulative and without prejudice and in addition to any rights or remedies which the Company may have at law or in equity.

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AS WITNESS the hands of the Parties the day and year first before written

Signed for and on behalf of ARQIVA LIMITED by

Signed:	/s/ N. Thompson
Print Name:	N. Thompson
Title:	Divisional MD
Date:	29/3/10
Signed for and on behalf of ARQIVA LIMITED by
Signed:	/s/ Julian M. Portman
Print Name:	J. M. Portman
Title:	Divisional FD
Date:	23/3/10
Signed for and on behalf of PLAYBOY TV UK/BENELUX LIMITED by:
Signed:	/s/ Andrew D. Wren
Print Name:	Andrew D. Wren
Title:	Company Secretary
Date:	17 March 2010

26

SCHEDULE ONE

SERVICE DESCRIPTION

1.             SERVICE OVERVIEW

1.1           General

The Company will supply Customer with;

1.1.1  Connectivity services in accordance with Schedule Five.

1.1.2 Digital encoding, multiplexing, adaptation services, for up to 14 television channels.

1.1.3 Uplink of the Channels to the Transponder to meet the requirements of Schedule Six.

1.2           Digital Capacity

19Mbit/s

2.             TERM

Service Commencement Date:	17/10/2009
Service Termination Date:	16/10/2014

The Service will be made available to the Customer 24 hours per day, seven days per week during the Service Period.

3.             SERVICE DESCRIPTION – KEY ELEMENTS

The Company shall not carry out OFCOM compliance recording.

The following Service elements shall be provided by the Company to Customer;

3.1 The Company will install, maintain and operate the Company Compression System at the Customer Premises and the interface with the Connectivity Service

Equipment

The Company Compression System will consist of the equipment shown in the table below.

Equipment	Number	Manufacturer
Encoders	16	Tandberg
Multiplexes	2	Tandberg
Input router	1	Panacea
Output router	2	DEV
Monitoring IRD	14	Tandberg
DVB TS Monitor	1	Tandberg

27

The system will accept the Customer Signals as 14 SDI inputs.  These inputs will be compressed using a statistical multiplexing algorithm to a combined rate of 19Mbit/s by a 2 for 14 encoding and a 1+1 multiplex system.

The system will include a manual patch panel for use in restoring the service in the event of failure of routers or switchers.

The 19Mbit/s multiplex will be sent over channel [0] on circuit [   ] for onward transmission and uplink to the Eurobird satellite as further detailed.

In addition two (2) Mediasphere servers already installed at the Customer Premises shall be integrated with the Company Compression System.

Installation and Commissioning

The Company will manage the installation of the multiplex system to ensure it is delivered in a high quality and timely manner.  We will appoint a project manager to act as the interface with the Customer during the installation and ensure project milestones are achieved.

The project manager will also work with the Customer to develop the optimal configuration and alignment as set out above for the multiplex and commission the system to that configuration.

Maintenance/Ongoing Support

In the event of any fault with the multiplex the Customer should contact the Company MCR as detailed in Schedule 4.

The Customer will be expected to provide ‘Remote Hands’ support under the direction of MCR staff including:

· Power Cycling equipment.

· Reading front panels or viewing TV monitor and reporting observations.

· Entering commands through front panel controls.

In the event that the Customer requires any changes to the configuration of the multiplex the Company will use all reasonable endeavours to provide on site support as soon as reasonably possible.

3.2 The Company Compression System will Encode 14 TV programme streams with up to two associated stereo audio per stream in compliance with MPEG and DVB-S standards presented in SDI format with embedded audio.

28

3.3 The Company will multiplex on a statistical basis the above streams into a single DVB multiplex with a total bit rate of 19 Mbit/s.

3.4  The service will be Backhauled as detailed in Schedule Five.

3.5 The service will be multiplexed with other channels and the total 33.79Mbit/s data stream will be Adaptation Multiplexed.

3.6 Addition of DVB-S compliant Reed Solomon and FEC error correction, and QPSK modulation of an RF carrier by the Transport Stream at the Uplink Site.

3.7  Upconversion, amplification and uplink of the RF carrier to the Satellite.

3.8  Provision of access to the Digital Capacity to provide the Service.

4.             SERVICE DESCRIPTION – ANCILLARY ELEMENTS

4.1           Uplink Management and Control

4.1.1 Monitoring of technical parameters of Service, including BER on the Connectivity and EIRP on the uplink as necessary.

4.1.2 Measurement and logging from time to time of C/N and/or C/No on downlinked signal.

4.1.3  Visual monitoring of all off air programmes within multiplex.

4.1.4 Detailed measurement of vision, audio and data signals as required from time to time.

4.2           Maintenance and Fault Repairs

4.2.1 Faults will be reported to and logged by the MCR.   Details of the nature of the fault will be recorded.   Fault analysis and engineer call-out will be co-ordinated from the MCR to ensure continuity until the fault is cleared.

4.2.2 Maintenance of the Uplink system is 365 days per year, and all maintenance will be by the Company approved personnel or those of an authorised maintainer.

4.2.3 Where the Company is responsible for a Service outage the Company will issue an incident report.  The target time for delivery of the incident report is one (1) Working Day.

5.             SERVICE PARAMETERS

5.1           Playout

Not Used

5.2           Encoding, Multiplexing & Adaptation

Encoding of the source signal SDI into a DVB MPEG 2 4:2:0 stream. The stream will then be passed through an adaptation hub to enable the Service to be part of the BSkyB platform.

29

5.3           Uplink

All parameters will be in compliance with DVB-S parameters and the Satellite Provider’s requirements, and in particular, the details set out in Schedule Six.

5.4            DVB parameters

Multiplexer Transport Stream Rate:	27.032 Mb/s or 33.79 Mb/s(not incl. 204,188 RS padding)
Satellite Inner Coding:	Reed Solomon 188,204 (as per DVB-S standard)
Satellite FEC:	One of the following DVB compliant FEC rates will be applied to the multiplex transport stream ½, 2/3, ¾, 5/6 or 7/8
Satellite Modulation:	QPSK (as per DVB-S standard)
Uplink Symbol Rate:	22 Ms/s or 27.5 Ms/s

30

SCHEDULE TWO

COMMERCIAL TERMS

1.             Payments

Customer shall pay the following Service Charges for the duration of the Service Period:

*****

2.             Deposit

*****

3.             Payment Schedule

The Service Charge will be payable monthly in advance, with effect from the Service Commencement Date, the amount(s) due being one twelth of the annual Service Charges set out in paragraph 1 above. The Company shall invoice for such charges no later than thirty (30) days in advance of the month to which they relate. The due date for payment by the Customer shall be fourteen (14) days before the start of the month to which the payment relates.

Any sum falling due on a day which is not a Business Day shall be payable on the immediately preceding Business Day.

4.             VAT

All sums payable under this Agreement are exclusive of VAT or any other taxes which may be applicable, or become applicable at any time. Any such charges will be payable by the Customer upon receipt of a VAT invoice in due form.

31

SCHEDULE THREE

THE CUSTOMER EQUIPMENT

None

32

SCHEDULE FOUR

CONTACT DETAILS

1.             THE COMPANY:

Notice Address:

Director of Legal Services

Arqiva Limited

Chalfont Grove

Narcot Lane

Chalfont St Peter

Bucks SL9 8TW

United Kingdom

Bank details:

*****

Contact Details:

*****

2.             The Customer:

Notice Address and Billing Address

Aquis House

Station Road

Hayes

Middlesex

UB3 4DX

Customer Contact Details:

Account Madhurika Walsh

Payments Tammy Childs

Operational Ian Nile

33

SCHEDULE FIVE

THE INTERFACE SPECIFICATION AND CONNECTIVITY

The Customer shall present the Content as follows:

Interface Point:	the Customer Premises
Presentation standard:	conforming to television and video standards ITU-R BT.601 and ITU-R BT.656 and to audio standard AES 3 1992, the audio signals to be embedded.  The service to carry one PAL (625/50) video signal and up to two stereo audio signals.

The Company will provide connectivity from the Interface Point to the Company Sites at Chalfont Grove and Newman Street for the delivery of the DVB-ASI signal from the Company Compression System. The signal will be delivered to each site via DS3 fibres.

34

SCHEDULE SIX

THE SATELLITE AND TRANSPONDER

Company shall provide Digital Capacity for DTH reception in the Territory. Company can at its discretion from time to time use the satellites detailed below.

A.   Satellite Details

1.    Satellite	:	EUROBIRD
2.    Orbital position	:	28.5°East
3.    Degree of protection	:	Non-Preemptible
4.    Downlink Frequency Band	:	10.70 – 12.75 GHz
5.    Uplink Frequency Range	:	12.75 – 14.50 GHz
		17.30 – 18.40 GHz

B.    Orbital Position and Transponder Bandwidth

The satellite providing the allotted capacity shall be maintained by the Satellite Provider within ± 0.1 degrees of its nominal longitude position and shall be kept such that the maximum angle between the equatorial plane and the orbital plane shall not exceed ± 0.1 degrees.

C.    Satellite Provider

SES

D.    Satellite Footprint

Downlink Coverage of EuroBird 1 steerable beam 1

Service may be provided in either of the coverage maps shown below. The Customer should not rely on the information contained in this coverage map.  The Company shall not be liable for any damage or loss sustained by the Customer as a result of the Customer’s reliance on this coverage map which is provided for indication only. For the avoidance of doubt, the fixed coverage beam will be used at the outset of the Service.

35

Steerable Coverage

36

Fixed Coverage

Service will be provided at a level 5dBW lower than the amounts shown below.

37

E. Transmit Service Areas

The Company shall provide the Customer Service within a DVB-S compliant carrier using satellite capacity on Eutelsat’s Eurobird 1 satellite located at orbital position 28.5º East (+/- 0.1 degrees).  The carrier transmitted by the Satellite will have the following expected minimum down link EIRPs at the following locations, assuming clear sky conditions both at the Uplink antenna and receive dish location. The locations are grouped into 3 zones defined as Transmit Service Areas.

Transmit Service Areas

Minimum EIRP over the Transmit Service Area: 49dBW, over Zone 1.

Zone 1 (49 dBW EIRP transmit)

England, East of 4° West

Scotland, South of 56° North

Wales

Copenhagen (Denmark)

Germany

Zone 2 (45 dBW EIRP transmit)

Minimum EIRP over the Transmit Service Area:45dBW, over Zone 2.

Brest (France)

Cork (Ireland)

Genoa (Italy)

Zagreb (Croatia)

Cracow (Poland)

Stockholm (Sweden)

Trandheim (Norway)

38

Zone 3 (38 dBW EIRP transmit)

Minimum EIRP over the Transmit Service Area: 45dBW, over Zone 3.

Porto (Portugal)

Sevilla (Spain)

Barcelona (Spain)

Rome (Italy)

Tirana (Albania)

Lvov (Ukraine)

Vilnius (Lithuania)

Helsinki (Finland)

Kiruna (Sweden)

39

SCHEDULE SEVEN

ENCODING AND BIT RATE OPTIONS

Not used

40

SCHEDULE EIGHT

THE INTERACTIVE SERVICE

The Interactive Service will run at a maximum bit rate of 1.5Mbit/s.  The Company will provide a service whereby applications delivered to them will be loaded onto an interactive television streamer.

The Customer will be responsible for the delivery of all interactive applications.  The Company will only accept open tv files.

Updates to applications will be no more frequent than every 30 seconds.

41

EX-10.3

Exhibit 10.3

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

FIRST AMENDMENT TO THE AMENDED AND RESTATED

PROGRAM SUPPLY AND TRADEMARK LICENSE AGREEMENT

This First Amendment (this “First Amendment”) entered into on February 26, 2010 and effective as of January 1, 2010 (“First Amendment Effective Date”), by and between Playboy Entertainment Group, Inc., a Delaware corporation (“PEGI”) and Playboy TV–Latin America, LLC, a California limited liability company (including its subsidiaries, collectively the “Company”), hereby amends that certain Amended and Restated Program Supply and Trademark License Agreement dated November 10, 2006 (the “Agreement”).  All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Agreement.  This First Amendment is hereby incorporated into the Agreement by reference.

WHEREAS, pursuant to Section 13.4(c) of the Agreement, the parties desire to amend the Agreement as set forth below;

NOW THEREFORE, in consideration of the mutual promises and covenants herein and for other good and valuable consideration the sufficiency and receipt of which are hereby acknowledged, PEGI and PTVLA agree to amend and supplement the Agreement as follows:

1.             DEFINITIONS.  Section 1, Definitions is hereby amended to add new definitions, amend and/or delete certain existing definitions and, amend and restate existing definitions as follows:

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

“Additional Acquired Movies” means those Acquired Movies produced or acquired by Licensor in excess of the 300 Acquired Movies produced or acquired by Licensor in any given Fiscal Year for such Fiscal Year.

“Additional New Programs” means those New Programs originally produced by Licensor in excess of the ninety (90) hours of New Programs produced by Licensor in any given Fiscal Year to be broadcast in such Fiscal Year.

“Company Guaranteed Minimum License Fee” is hereby deleted.

“Company Estimated Monthly License Fee Payment” means ***** per month as payment for the License Fees described in Section 7(A), 7(B) and 7(C) combined adjusted annually for CPI as provided in Section 7; provided that if in any consecutive two (2) Fiscal Years, the amount of New Program hours is less than eighty (80) and the number of Acquired Movies delivered is less than two hundred seventy (270), the Company Estimated Monthly

License Fee Payment shall be adjusted based on the average of the hours delivered during such two years and applicable in the immediately succeeding Fiscal Year.

“Company Estimated Monthly Trademark Royalty Payment” means with respect to the Fiscal Year 2010, the amount of ***** per month as a monthly payment to be applied to the License Fees described in Section 7(D). Every Fiscal Year thereafter, the Company Estimated Monthly Trademark Royalty Payment shall be adjusted based on the actual annual license payable under Section 7 (D).

“Compilations” means compilations of programs with or without new elements (i.e. footage, hostess wrap, graphics, etc.).

“Existing Library” means all Programs for which Licensor (and/or its Affiliates) owns or has obtained the rights in the Media in the Territory which were delivered to and/or used by the Company on or before December 31, 2009.

“New Programs” mean only the new Adult Oriented originally produced (either in house or via the use of a production services agreement with an independent third party) television programs and/or episodic series that are broadcast on Playboy TV in the United States or similar acquired programs that meet the standards of the originally produced programs that have been broadcast on a premium service in the United States but excluding movies and which have been produced within twenty-four (24) months (thirty-six (36) for such off premium acquired Programs) prior to its delivery hereunder. Acquired Movies and Compilations are excluded from the definition of New Programs.  In the event Licensor obtains the rights in the Media in the Territory to a televis ion Program for which Licensor previously had other rights in such Program, such Program shall not be considered a New Program hereunder without the prior consent of the Company.

“Optional Programs” Programs not included in the Existing Library and movies or other programs that are not Acquired Movies or New Programs.

“Overage” means the amount by which the actual License Fees due pursuant to Sections 7(A), 7(B) and 7(C) exceed the Company Estimated Monthly License Fee Payment in any given period of time or the amount by which the actual License Fees due pursuant to Sections 7(D) exceeds the Company Estimated Monthly Trademark Royalty Payment in any given period of time, as applicable.

“Underage” means the amount by which the actual License Fees due pursuant to Sections 7(A), 7(B) and 7(C) is less than (under) the Company Estimated Monthly License Fee Payment in any given period of time or the amount by which the actual License Fees due pursuant to Sections 7(D) is less than (under) the Company Estimated Monthly Trademark Royalty Payment in any given period of time, as applicable.

2.             Section 2.1(a), Existing Library, and Schedule 2.1(a) of the Agreement are hereby deleted in their entirety, and amended and restated as follows:

Page 2 of 7

Existing Library.  Licensor represents and warrants that the Existing Library consists of all Programs for which Licensor (and/or its Affiliates) owns or has obtained the rights in the Media in the Territory, including (but not limited to) Playboy, Spice and Hot Branded Programs and adult films licensed by Licensor and its Affiliates and any other programming or content, including Wallpaper, and the Acquired Movies as set forth on a revised Schedule 2.1(a) that the parties shall execute and incorporate herein as soon as practicable after the date hereof.

3.             Section 2.1(b), New Programs and Exhibit 2.1(b) are hereby deleted in their entirety,  and amended and restated as follows:

New Programs.  Each Fiscal Year Licensor and/or its Affiliates will select and provide ninety (90) hours of New Programs with rights in the Media in the Territory of a similar quality to the programs broadcasted on Playboy TV in the United States and Company shall be obligated to license such Programs; provided that Company shall not be obligated to license more than ninety (90) hours of New Programs pursuant to the terms hereunder.

4.             Section 2.1(c), Acquired Movies is hereby deleted in its entirety, and amended and restated as follows:

(c)           Acquired Movies.  Each Fiscal Year Licensor and/or its Affiliates will select and provide Company three hundred (300) Acquired Movies with rights in the Media in the Territory and Company shall be obligated to license such Programs; provided that Company shall not be obligated to license more than three hundred (300) Acquire Movies pursuant to the terms hereunder.

5.             Section 2.1(e), Program Hour Requirement, is hereby deleted in its entirety, and amended and restated as follows:

(e)           Program Hour Requirement.  Licensor shall make available hereunder (i) not less than fifty (50) hours of New Programs per Fiscal Year; and (ii) not less  than two hundred (200) Acquired Movies per Fiscal Year; provided, however, that the Company acknowledges that Licensor shall not be required to provide the Company with any more than fifty (50) program hours of New Programs, and, two hundred (200) Acquired Movies, for each Fiscal Year during the Term. In the event that Licensor has produced Additional New Programs and/or acquired Additional Acquired Movi es during any Fiscal Year, then during such Fiscal Year, the Company shall have the right but not the obligation to license such Additional New Program or Additional Acquired Movies, as applicable. In addition, Licensor shall have the option to offer and if offered, Company shall have the right but not the obligation to license Optional Programs. The parties acknowledge that if differently rated versions of the same Program or movie are provided to the Company hereunder, such versions shall be counted as only one movie or Program.

6.             Section 2.1(h), Option to Acquire Rights, is hereby deleted in its entirety, and amended and restated as follows:

(h)           Alta Loma Sales Agent.  The Company will have the right to act as Licensor’s exclusive sales agent for the Alta Loma Programs throughout the Territory and will

Page 3 of 7

receive a twenty percent (20%) distribution fee on such sales, net of withholding taxes if applicable, 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 the Company the right to act as sales agent for such program) or Company elects not to act as Licensor’s exclusive sales agent for the Alta Loma Programs, Licensor will pay to the Company twenty percent (20%) of the total revenue which Licensor (or its Affiliates) actually receives from the exploitation of such program in the Media in such region(s) of the Territory.  The Company shall use comm ercially reasonable efforts to distribute Alta Loma Programs in the Territory in regards to any Alta Loma Program for which it has sales and distribution rights.

7.             New Section 2.1(j), Co-Productions, is hereby added at the end of Section 2.1 as follows:

(j)            Co-Productions/Acquisitions. The parties agree to  co-produce each Fiscal Year approximately ***** in local production of television series programming for use in each of their respective territories; provided that, if co-produce, such co-production shall be generally in accordance with the most recent fully executed co-production agreement Schedule 2.1(j) attached hereto. The terms and conditions of the co-production agreement may be modified by the mutual agreement of the parties. Each party will contribute a combined total approximately ***** each to one or more co-productions per Fiscal Year during the Term. It is understood that Company’s contribution to such co-production shall b e counted towards Company’s commitment to spend the Company Produced Programming Budget. The parties agree to cooperate and select projects in a mutually agreeable manner. Each party will select a lead production person (currently Luigi Bordonaro for PEGI and Ariel Taboada on behalf of Company). Such lead production person may be substituted at any time by the applicable party by written notice. Should the parties co-produce less than the approximate total dollar amount and provided that Company Produced Programming from 2009 or thereafter is available and acceptable to Licensor, Licensor will use the difference in its share of such total to acquire an equal amount of such programming. For example, if Licensor has expended ***** on co-production, it will acquire an additional ***** to acquire Company Produced Programming at current rates as adjusted from time to time by mutual agreement.

8.             APPROVED USES OF LICENSED PROGRAMMING. Section 2.2(f), Editing, is hereby deleted in its entirety, and amended and restated as follows:

(f)            Editing.  Subject to and consistent with the terms of Section 3(Trademark License and Quality Control) and Section 5 (Censorship; Withdrawal of Programs), the Company may, at its sole cost and expense, edit, dub or subtitle in Spanish and/or Portuguese, or otherwise alter Licensed Programming as necessary to comply with local language or custom or local broadcasting requirements (“Localized Licensed Programming”). In addition and subject to the respective underlying rights agreements, Company may, with Licensor’s written consent, edit any s eries of Programs in order to create Compilations, “wheels,” or “best of” Programs for use in accordance with the terms and conditions of this Agreement: provided that such Programs are made available to Licensor at no cost other than shipping and duplication. Such edited Programs shall not be considered New Programs hereunder. Such edited Programs and/or altered Licensed Programming, including, without

Page 4 of 7

limitation, the rights to any edited, dubbed or subtitled tracks related thereto, shall be owned exclusively by Licensor subject to the terms of Section 2.5 herein.

9.             APPROVED USES OF LICENSED PROGRAMMING. Section 2.2 (g), Exclusive Supplier, is hereby deleted in its entirety, and amended and restated as follows:

(g)           Exclusive Supplier.  Except for Company Produced Programming and Company Format Programming, Licensor will be the exclusive supplier of Programs on the PTVLA Channels and Spice Channels regardless of whether such Programs are produced and owned by Licensor, or whether Licensor acquires such Programs for the Company, provided, however, that in the event Licensor does not deliver the minimum yearly required amount of Acquired Movies and New Program hours pursuant to Section 2.1 (e) hereunder, Company shall be entitled to license from third parties other than Licensor or its Affiliate other programming or Programs for the PTVLA Channels and Spice Channels.

10.           DELIVERY AND RETURN. Section 6.1, Access and Delivery Items, and Schedule 6.1 are hereby deleted in their entirety and Section 6.1 is amended and restated as follows and Schedule 6.1 is attached hereto:

6.1           Access and Delivery Items.  The Company will have full and immediate access to all Delivery Materials set forth on Schedule 6.1, and other tangible manifestations of the rights licensed hereunder, solely as requested by the Company from Licensor’s Customer Service and Shipping Department, or other designee as Licensor may from time-to-time designate.  Licensor shall provide the Company, at no cost to the Company, with one original copy of each of the Delivery Materials and shall provide the same for all Programs, Acquired Movies, Wallpaper or any other content required to be made available to the Company hereunder from time-to-time during the Term. If more than one (1) master or an HD master is required by Company, Company shall have the option to receive such additional master(s) on loan for a period of sixty (60) days (only if a copy of such master is available at no cost to Licensor) or to pay for additional masters based on the rate card attached in Exhibit 6.1.

11.           DELIVERY AND RETURN. New Section 6.3, Quarterly Deliver, is hereby added at the end of Section 6 as follows:

6.3.           Quarterly Delivery.  Licensor shall deliver approximately twenty-five percent (25%) of the New Programs and twenty-five percent (25%) of the Acquired Movies during each quarter of each Fiscal Year of the Term.

12.           DELIVERY AND RETURN. New Section 6.4, Delivery Commencement Date, is hereby added at the end of Section 6 as follows:

6.4.           Delivery Commencement Date.  Company acknowledges that Licensor is in compliance with all Program requirements for Fiscal Years 2009 and prior and Company releases Licensor from any obligations in connection with such requirements. It is acknowledged that the titles set forth in Schedule 6.4 attached hereto and requested by or delivered to Company, shall be credited towards the Acquired Movies and New Programs, as applicable, for Year 2010.

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13.           PROGRAM AND TRADEMARK LICENSE FEES; OTHER FEES. Section 7, Program and Trademark License Fees; Other Fees, is hereby deleted in its entirety, amended and restated as follows:

7.             PROGRAM AND TRADEMARK LICENSE FEES; OTHER FEES.  The Company will pay to Licensor each Fiscal Year license fees (the “License Fees”) as follows:

(A)           For all New Programs and Additional New Programs: ***** per programming hour, adjusted by CPI annually (defined as twenty two (22) or more minutes per each one-half (1/2) hour of programming when totaled);

(B)           For all Acquired Movies and Additional Acquired Movies: ***** per Acquired Movie or Additional Acquired Movie adjusted by CPI annually;

(C)           For all Optional Programs: ***** per Program hour, adjusted by CPI annually;

(D)           ***** of the Net Revenue of the Company (defined below) plus ***** of the license fees actually received by Company from the exploitation of the PTVLA Channels in Brazil (for clarification, the ***** license fee received by Company from the PTVLA Channels in Brazil shall be allocated ***** to Company and ***** to Licensor) (as used herein, the term “Net Revenue” means PTVLA Channels gross revenues earned and actually collected, less any applicable withholding taxes, excluding (I) the PTVLA Channel Distribution Fee (as defined in the Amended Distribution Agreement); (II) amounts paid to the Company by Playboy.com pursuant to Section 5.1 of the First Amended and Restated Web Site Revenue Share Agreement dated the date hereof among the Company, Playboy.com, Inc., and Claxson Interactive Group Inc.; (III) any revenues from (A) the sublicense of any Unbranded Company Format Programming and Unbranded Company Produced Programming; and (B) revenues from the sales agency provisions from the exploitation of Alta Loma Programs pursuant to Section 2.1(h); (IV) any revenues received by the Company pursuant to that certain Wireless Distribution Agreement dated September 1, 2005 between the Company and Playboy.com, Inc., as amended or any successor digital license agreement; (V) any Playboy Lifestyle Net Revenues; (VI) the PTVLA Portugal Feed Net Revenues; (VII) amounts paid to the Company from Licensor pursuant to Section 7.8;  (VIII) amounts paid to the Company from Licensor pursuant to the Iberia Arrangements as set forth in Section 3.6 of the Company Operating Agreement; (IX)  amounts paid to the Company from Licensor pursuant to Section 2.1(j) herein; and (X) the revenue from Brazil.

(E)            On or before June 30, 2009 (and not thereafter) six percent (6%) of the aggregate Playboy Lifestyle Net Revenue (as described below)(the “Playboy Lifestyle Net Revenue Fee”). As used herein, the term “Playboy Lifestyle Net Revenue” means the gross annual revenues earned and actually collected for the Playboy Lifestyle Business, less any applicable withholding taxes.

The Company Estimated Monthly License Fee Payment and the Company Monthly Estimate Trademark Royalty Payment shall be paid in accordance with Section 7.1.

Commencing January 1, 2011 and for each subsequent twelve (12) month period, the License Fees specified in Sections 7(A), 7(B) and 7(C), the Company Estimated Monthly License Fee Payment shall be adjusted once each Fiscal Year by any change in the CPI and made applicable to the initial monthly payment and each payment thereafter during such Fiscal Year.

Page 6 of 7

Notwithstanding the foregoing, in the event this Agreement is terminated or expires, any License Fees owed to Licensor hereunder shall be adjusted on a pro rata basis based on the date of such termination or expiration during such Fiscal Year.)

14.           PROGRAM AND TRADEMARK LICENSE FEES; OTHER FEES. Section 7.1, Due and Payable, is hereby deleted in its entirety, and amended and restated as follows:

7.1           Due and Payable.  The License Fees shall be due and payable to Licensor as follows:  (i) the Company Estimated Monthly License Fee Payment shall be paid monthly within thirty (30) days after the end of the respective month; (ii) the Company Estimated Monthly Trademark Royalty Payment shall be paid monthly within thirty (30) days after the end of the respective month; (iii) any Overage or Underage shall be accounted for and reported monthly and paid or adjusted, as applicable, semiannually within thirty (30) days thereafter.

15.           MISCELLANEOUS.

15.1.        No Replacement.  Unless otherwise expressly set forth herein, no provision of this First Amendment shall be interpreted to replace or delete any provision of the Agreement.  All provisions of the Agreement, which are not expressly replaced or deleted by this First Amendment, shall remain in full force and effect, and shall, where appropriate, apply to the terms of this First Amendment.  Nothing herein shall affect in any manner any agreement between the parties other than the Agreement.

15.2.        Counterparts.  This First Amendment may be executed in any number of counterparts.  All counterparts shall collectively constitute one and the same agreement.

15.3.        Entire Agreement.  The terms and conditions contained in this First Amendment and the Agreement (including the exhibits and/or schedules attached thereto) constitute the entire agreement between the parties relating to the subject matter and shall supersede all previous communications between the parties with respect to the subject matter of this First Amendment.

IN WITNESS WHEREOF, the parties hereto, intending this First Amendment to be effective as of the First Amendment Effective Date, have caused this First Amendment to be executed by their respective duly authorized officers.

For and on behalf of		For and on behalf of
PLAYBOY ENTERTAINMENT GROUP, INC.		PLAYBOY TV-LATIN AMERICA, LLC
By:	/s/ Steve Smith	By:	/s/ Mariano Varela
Name:	Steve Smith	Name:	Mariano Varela
Title:	EVP	Title:	Managing Director

Page 7 of 7

EX-10.4

Exhibit 10.4

March 11, 2010

DirecTV, Inc.

2230 East Imperial Highway

El Segundo, CA  90245

Attention:  Toby Berlin

Dear Toby:

Reference is made to that certain Amended And Restated Affiliation And License Agreement For DTH Satellite Exhibition Of Programming between DirecTV, Inc. ("Affiliate") and Playboy Entertainment Group and Spice Hot Entertainment, Inc. ("Programmer") made as of August 1, 2007 as extended by the Letter Agreements dated October 12, 2009, November 13, 2009, December 14, 2009, January 14, 2010, and February 12, 2010 (the "Agreement").

Except as modified expressly below, all terms of the Agreement are hereby ratified and remain in full force and effect.  All capitalized terms used herein shall have the meanings ascribed to them as set forth in the Agreement.

Affiliate and Programmer hereby agree to extend the Term of the Agreement as set forth in Paragraph 6.(a) through the earlier of the parties entering into a replacement agreement or April 14, 2010.

Very truly yours,

PLAYBOY ENTERTAINMENT GROUP, INC.		SPICE HOT ENTERTAINMENT, INC.
/s/ Roy Liebrecht		/s/ Roy Liebrecht
By:	Roy J. Liebrecht	By:	Roy J. Liebrecht
Title:	Vice President	Title:	Vice President
	Business & Legal Affairs		Business & Legal Affairs

ACCEPTED AND AGREED:

DIRECTV, INC.

By:	/s/ Toby Berlin
Title:	Toby Berlin
	Vice President, Programming Acquisitions	MSO #7975

EX-10.5

Exhibit 10.5

April 8, 2010

DirecTV, Inc.

2230 East Imperial Highway

El Segundo, CA  90245

Attention:  Toby Berlin

Dear Toby:

Reference is made to that certain Amended And Restated Affiliation And License Agreement For DTH Satellite Exhibition Of Programming between DirecTV, Inc. ("Affiliate") and Playboy Entertainment Group and Spice Hot Entertainment, Inc. ("Programmer") made as of August 1, 2007 as extended by the Letter Agreements dated October 12, 2009, November 13, 2009, December 14, 2009, January 14, 2010, February 12, 2010, and March 11, 2010 (the "Agreement").

Except as modified expressly below, all terms of the Agreement are hereby ratified and remain in full force and effect.  All capitalized terms used herein shall have the meanings ascribed to them as set forth in the Agreement.

Affiliate and Programmer hereby agree to extend the Term of the Agreement as set forth in Paragraph 6.(a) through the earlier of the parties entering into a replacement agreement or July 14, 2010.

Very truly yours,

PLAYBOY ENTERTAINMENT GROUP, INC.		SPICE HOT ENTERTAINMENT, INC.
/s/ Roy Liebrecht		/s/ Roy Liebrecht
By:	Roy J. Liebrecht	By:	Roy J. Liebrecht
Title:	Vice President	Title:	Vice President
	Business & Legal Affairs		Business & Legal Affairs

ACCEPTED AND AGREED:

DIRECTV, INC.

By:	/s/ Toby Berlin
Title:	Vice President
	Programming Acquisitions	MSO #7975

EX-10.6

Exhibit 10.6

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.

NINTH AMENDMENT dated as of January 1, 2010 by and between CDS Global, Inc. (“CDS Global”) with its principal place of business at 1901 Bell Avenue, Des Moines, Iowa 50315-1099, and Playboy Enterprises, Inc. (“Publisher” or “PLY”) with its principal place of business at 680 North Lake Shore Drive, Chicago, Illinois  60611.

WHEREAS, CDS Global and Publisher entered into a Subscription Fulfillment Agreement dated as of July 1, 1987, as amended by an Amendatory Agreement dated as of September 1, 1987; a Letter Agreement for Electronic Presort dated as of June 1, 1988; a Second Amendment dated as of July 1, 1990; a Letter Agreement for CDS’s Destination Entry Program dated as of June 1, 1995; a Third Amendment dated as of July 1, 1996; a Letter Agreement for CDSxpress Moves dated as of July 1, 1996; a Fourth Amendment dated as of June 1, 1997; a Letter Agreement for Internet Services dated as of July 7, 1997; a Special Project (Letter) Agreement dated as of October 1, 1999; a Fifth Amendment dated as of July 1, 2001; a Letter Agreement for E-mail Fulfillment Services dated as of October 1, 2002; a Sixth Amendment dated as of April 1, 2003; a Seventh Amendment dated as of July 1, 2006; a Letter Agreement for access to myCDSdirect.com dated as of August 29, 2006; a Letter Agreement for E-mail Fulfillment Services dated as of February 14, 2007; and an Eighth Amendment dated as of November 1, 2008 (collectively, the “Agreement”); and

WHEREAS, PLY has entered into an Agreement with American Media, Inc. (“AMI”) for AMI to perform circulation management services for PLY’s Magazines fulfilled at CDS Global under an agreement between CDS Global and PLY (the “PLY Agreement”), and CDS Global agrees to accord Annual Basic Service Charge pricing to each of PLY and AMI based on the aggregate number of copies served by the two Publishers, provided that each of PLY and AMI has an Agreement for subscription fulfillment services with CDS Global that is in full force and effect and further provided that all instructions, directions, and similar communications relating to PLY’s magazines are given to CDS Global by AMI; and

WHEREAS, the parties now desire to further amend the Agreement to revise the Basic Service Charge, extend the Term and make other changes as hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, it is agreed by and between the parties hereto as follows:

1.             In conjunction with PLY engaging AMI to perform circulation management services for PLY’s Magazines, Playboy Enterprises, Inc. hereby authorizes CDS Global to disclose PLY’s Confidential Information relating to the Magazines to AMI.

2.             Section 1.1 of the Agreement is hereby amended to add a new subsection (e) to read as follows:

“(e)         In the event Publisher requests CDS Global to deposit qualified subscriber check transactions in Publisher’s bank account via electronic presentment, the following shall apply:

(i)            CDS Global Electronic Check Presentment (“ECP”) Services*:

(1)           Provided that CDS Global and Publisher’s financial institution mutually agree upon a delivery system for the transmission of images, CDS Global will transmit check images (front and back) and MICR data (banking account information) to Publisher’s financial institution.  Publisher and/or its financial institution will determine whether such images will be processed as Automated Clearing House / Accounts Receivable Truncation (ACH/ARC) or Check 21 transactions (Image Exchange or IRD).

(2)           CDS Global will use commercially reasonable methods to securely store source documents for a period of time designated in writing by Publisher after which time CDS Global will destroy the source documents.

*In some instances, CDS Global may need to process the original paper check instead of using ECP.

(ii)           Publisher Responsibilities.

(1)           Publisher shall be responsible for all electronic presentment notices it is required to give to its subscribers/consumers.

(2)           Publisher shall provide to CDS Global written instructions with respect to handling any opt-out requirements.

(c)           CDS Global shall maintain the Magazine’s(s’) subscriber database (the “Database”) which will consist of files on disk and in backup format on cartridges containing subscriber and donor data, Magazine characteristics, specific order data, e-mail addresses, and transaction history.  CDS Global will apply and edit transactions, including cash, credit, credit card, renewal, gift renewal, complimentary, gift and agency orders; payments; cancellations; name and/or address changes; and subscriber adjustments to the Database on an interactive basis (date and time identified at time of application).  Errors will be corrected by CDS Global as promptly as possible on an interactive basis.

(d)           Publisher agrees to:  (i) establish a mutually agreed upon number of post office boxes for incoming mail, and (ii) use forms and mailing components that comply with CDS Global processing equipment and technologies (e.g., imaging, scanning) in accordance with CDS Global’s Package and Processing Guidelines (provided on CD and incorporated herein by reference), including submitting forms to CDS Global for advance approval.  If order forms are received at CDS Global with incorrect scan lines or finder numbers, an additional charge based on the clerical rate set forth in Exhibit A shall apply for the special processing.”

3.             Section 2.1(a) of the Agreement, as previously amended, is hereby amended and restated in its entirety to read as follows:

“2.1         Basic Service Charge.

(a)           Publisher shall pay CDS Global the following annual Service Charge per subscription per Magazine:

Aggregate Number of Labels
per Issue	Annual Service Charge
For All Magazines Combined*	per Subscription per Magazine
0 – 500,000	*****
500,001 – 1,000,000	*****
1,000,001 – 1,500,000	*****
1,500,001 – 2,000,000	*****
2,000,001 – 3,000,000	*****
3,000,001 – 4,500,000	*****
4,500,001 – 6,000,000	*****
6,000,000 and over	*****

* (i) For the purpose of determining the applicable tier for the Annual Service Charge under this Agreement, the Aggregate Number of Labels per Issue for All Magazines Combined will be the sum of those labels generated for the Magazine(s) under this Agreement and for all  magazines fulfilled at CDS Global under an Agreement between CDS Global and AMI (the “AMI Agreement”), such Aggregate Number of Labels per Issue for All Magazines Combined to be determined as described in paragraph (b) of this Section 2.1, provided that (1) this Agreement and the AMI Agreement are in full force and effect (each with CDS Global) and (2) AMI provides all instructions, directions and similar communications relating to PLY’s Magazines and AMI’s magazines to CDS Global.  In the event that AMI discontinues perfo rming circulation management services for PLY, for any reason, and/or AMI discontinues providing the instructions, directions and similar communications relating to the PLY magazines, then each Publisher will fall separately and individually under the Basic Service Charge tiered table set forth in such Publisher’s Agreement with CDS Global.

(ii) For each of PLY and AMI:  For each additional magazine publisher fulfilled at CDS Global for which AMI (1) performs circulation management services and (2) provides all instructions, directions and similar communications for such publisher’s magazines to CDS Global, provided that such publisher is not and for the prior six (6) months has not been a client of CDS Global’s (each an “AMI Client”), then the PLY and AMI Aggregate Number of Labels per Issue for All Magazines Combined for determining the Annual Basic Service Charge rate shall include each such AMI Client’s number of labels.  For the purpose of clarity, it is understood and agreed that each AMI Client shall have entered into a separate agreement with CDS Global with a Basic Service Charge rate table, and the PLY and AMI number of labels will not be included in determining the AMI Client’s number of labels for the Basic Service Charge.  In the event AMI discontinues performing circulation management services for an AMI Client and/or AMI discontinues providing the instructions, directions and similar communications relating to an AMI Client’s magazines to CDS Global, then such AMI Client’s number of labels shall not be included in determining the Aggregate Number of Labels for AMI and PLY.

(iii) In the event any PLY magazine or any AMI Client magazine is sold or otherwise disposed of and the CDS Global agreement with the publisher of such magazine is (partially) assigned for such a magazine to a transferee that does not utilize AMI for circulation management services and/or AMI does not provide all instructions, directions and other communications for such magazine to CDS Global, then such magazine’s number of labels will not be included in determining AMI’s and PLY’s Aggregate Number of Labels.”

4.           Section 2.9(i) of the Agreement is hereby is hereby amended and restated in its entirety to read as follows:  “(i) *****/month/ magazine”.

5.           Section 2.9 of the Agreement, as previously amended, is hereby amended to add a sentence at the end of the paragraph to read as follows:

“REACT Interactive product, RENEWAL EXPertise will be provided to Publisher *****.”

6.           Section 2.17 of the Agreement, as previously amended, is hereby amended and restated in its entirety to read as follows:

“2.17       Change in Charges.

All of the fees and charges set forth in this Agreement, as escalated to the date hereof, shall remain in effect until December 31, 2011.  On January 1, 2012 and on each January 1 thereafter, the fees and charges shall be increased by a percentage equal to the percentage increase in the most recent Consumer Price Index, All Urban Consumers (“CPI-U”),  U.S. City Average, All Items, 1982-84=100, U.S. Department of Labor, publicly available on each Anniversary Date as compared with such Index publicly available on the previous Anniversary

Date; provided however, the maximum increase for each subsequent year shall not exceed ***** above the fees and charges established for the prior twelve (12) month period.”

7.           Section 2.18 of the Agreement is hereby amended to delete the existing language in its entirety and to replace it with the following language:

 “2.18      Premium Fulfillment.

CDS Global will perform premium fulfillment for the Magazines’ DVD, Single Pictorial, Double Pictorial, Playing Cards and Jewel Case premiums (the “Premiums”) for the fees and charges set forth below:

(a)           Pick and Pack (include labels):

(i) Single Pictorial *****

(ii) Double Pictorial *****

(iii) DVD *****

(iv) Jewel Case DVD *****

(v) DVD and Single Pictorial *****

(vi) DVD and Double Pictorial *****

(vii) Playing Cards *****

(b)           Additional Inserts:

1 – 6 inserts *****

7 – 9 inserts *****

10 – 12 inserts *****

(c) Materials *****

(d) Postage Pass through

(e) Receiving of Stock *****

(f) Storage *****

8.           Section II of the Agreement is hereby amended to add a new Section 20 to read as follows:

“2.20       Electronic Check Presentment.

Effective October 1, 2009:  If Publisher requests electronic check presentment Services as described in Section 1.1(e) of this Section II, a charge of ***** per check item transmitted electronically will be charged.*

*In the event of increased costs to CDS Global due to changes imposed by the participating financial institutions and/or the rules and regulations governing such processing, CDS Global will have the right to adjust the charge accordingly.”

9.           Section 5.1 of the Agreement, as previously amended, is hereby amended and restated in its entirety to read as follows:

“5.1         Term.

The Term of this Agreement shall continue until December 31, 2014 unless earlier terminated as hereinafter provided.  Following December 31, 2014, this Agreement shall

then continue from year to year for successive twelve (12) month periods thereafter unless terminated by either party by notice given to the other party not less than ninety (90) days prior to the first, or subsequent, yearly extension.  When used in this Agreement, the term “year” shall mean a consecutive twelve (12) month period.”

10.           Item 3 of Exhibit A is hereby amended and restated in its entirety to read as follows:

“3.           CDS Global will process credit card orders, provided that CDS Global has the capability of handling the requested credit card type, for a charge at the rate of *****.”

11.           The first sentence of Item 16 of Exhibit A is hereby amended and restated in its entirety to read as follows:

“CDS Global will provide the following special accounting Services, if requested by Publisher, for a monthly fee of ***** per Magazine:”

12.           Exhibit A of the Agreement is hereby amended to add a new Item 26 to read as follows:

“26.         Publisher may elect to access its reports, labels, and other data currently provided via the Internet using CDS Global’s Secure File Transfer Protocol Server (the “Secure FTP Server”).  Following execution of this Agreement, Publisher may request CDS Global to place the data on the Secure FTP Server. The existing CDS Global downloading charges set forth elsewhere in this Exhibit A shall apply to data downloaded, prepared, or staged on the Secure FTP Server.  CDS Global will assess no additional fee for Internet access via CDS Global’s Secure FTP Server for Publisher to “pull” the data via FTP.  For CDS Global to “push” the data via FTP, the following charges will apply: (i) file size of less th an 100 million bytes - ***** per file, (ii) file size of 100 million bytes or more - ***** per file.”

13.           Except as expressly amended herein, all other terms and conditions of the Agreement shall remain in full force and effect.

CDS GLOBAL, INC.		PLAYBOY ENTERPRISES, INC.
By:	/s/ Dennis Luther	By:	/s/ Scott G. Stephen
	Dennis Luther		Scott G. Stephen
	(print)		(print)
Title:	Vice President	Title:	EVP Print/Digital Group

EX-10.7

Exhibit 10.7

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.

AMENDMENT NO. 10

This Amendment No. 10 is made as of March 1, 2010 to the Subscription Fulfillment Agreement dated as of July 1, 1987 (the “Agreement”) between CDS Global, Inc. (“CDS Global”) with its principal place of business at 1901 Bell Avenue, Des Moines, Iowa 50315-1099, and Playboy Enterprises, Inc. (“Publisher”) with its principal place of business at 680 North Lake Shore Drive, 15th Floor, Chicago, Illinois  60611.  All terms not otherwise defined herein shall have the meanings ascribed to them in the Agreement.

The Agreement is hereby amended as follows:

1.           Section 2.3 (a) of the Agreement, as previously amended, is hereby amended and restated in its entirety to read as follows:

“(a)           Basic Charge.

Cheshire Labels or Tape*

*****

***** will be added to the Basic Charge when pressure sensitive labels are requested.”

2.           Section 2.3 (f) of the Agreement, as previously amended, is hereby amended and restated in its entirety to read as follows:

“(f)           Two (2) expire pulls (selection) per year will be provided at *****.”

3.           Except as expressly amended herein, all other terms and conditions of the Agreement shall remain in full force and effect.

This Amendment No. 10 is hereby approved and accepted as of the date first above written on behalf of the parties to the Agreement as evidenced by the signatures of their duly authorized representatives:

CDS GLOBAL, INC.		PLAYBOY ENTERPRISES, INC.
By:	/s/ Dennis Luther	By:	/s/ Scott G. Stephen
	Dennis Luther		Scott G. Stephen
	(print)		(print)
Title:	Vice President	Title:	EVP Print/Digital Group

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Scott N. Flanders, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Playboy Enterprises, Inc. for the quarter ended March 31, 2010;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	May 7, 2010		/s/ Scott N. Flanders
		Name:	Scott N. Flanders
		Title:	Chief Executive Officer and Director

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert D. Campbell, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Playboy Enterprises, Inc. for the quarter ended March 31, 2010;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	May 7, 2010		/s/ Robert D. Campbell
		Name:	Robert D. Campbell
		Title:	Senior Vice President, Treasurer and
			Strategic Planning, Assistant Secretary and Interim Chief Financial Officer

EX-32

Exhibit 32

Certification of CEO and CFO Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Playboy Enterprises, Inc. (the "Company") for the quarterly period ended March 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Scott N. Flanders and Robert D. Campbell each hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1)         The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)         The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Scott N. Flanders

Name:  Scott N. Flanders

Title:  Chief Executive Officer

Date:  May 7, 2010

/s/ Robert D. Campbell

Name:  Robert D. Campbell

Title:  Interim Chief Financial Officer

Date:  May 7, 2010

This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of § 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by § 906 has been provided to Playboy Enterprises, Inc. and will be retained by Playboy Enterprises, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.