<PAGE>
 
                           PLAYBOY ENTERPRISES, INC.

                               CHRISTIE HEFNER 
                                 CHAIRMAN AND
                            CHIEF EXECUTIVE OFFICER

                              September 25, 1997

Ms. Helen Isaacson
158 N. Woodland Street
Englewood, NJ 07631


Dear Helen:

It is with great pleasure that I offer you the position of Senior Vice 
President, Product Marketing for Playboy Enterprises, Inc.

You will be reporting directly to me. You will be domiciled at the Playboy 
offices in New York, although you will be expected to do such traveling as may 
be necessary and appropriate for the performance of your duties, especially to 
Chicago where some of the Product Marketing staff is based.

You will be paid a base salary of $300,000 per year, to be paid on a biweekly 
basis on our normal payroll dates. In addition, you are entitled to participate 
in a Board approved incentive plan with a maximum potential of 50% of your base 
salary based upon divisional and Company performance prorated in '98 based on 
start date. To offset the bonus you may be forfeiting, you will receive a bonus 
of $104,000 paid in January half of which ($52,000) is against the '98 incentive
payout.

You will be entitled to participate in all fringe benefits made available to 
Playboy executives. You will also be a member of the Executive Committee of the 
Company. You will be entitled to four weeks' paid vacation.

You will also be granted an option to purchase 50,000 shares of Playboy's Class 
B stock and the right to receive up to 10,000 shares of Class B stock under the 
Company's restricted stock plan, vesting 2,500 shares upon the Company's 
achieving operating income of $15 million and 7,500 shares on the Company's 
achieving

680 North Lake Shore Drive
Chicago, Illinois  60611
312-751-8000
<PAGE>
 
September 23, 1997
Helen Isaacson
Page Two


operating income of $20 million according to the terms and conditions of the 
1995 Playboy Enterprises, Inc. Stock Incentive Plan.

If you should be terminated at any time not for cause (as defined below), you 
will be entitled to receive no less than six months guaranteed severance and up 
to an additional six months if you remain unemployed. "For cause" is defined as 
conviction of a crime involving dishonesty, fraud or breach of trust, or 
engaging in conduct materially injurious to Playboy.

You will be entitled to participate in the "parachute plan" that is described on
page 14 of Playboy's 1996 proxy statement.

If the above is acceptable, please sign, date and return the enclosed copy of 
this letter.

Once again, welcome to the Playboy family. I look forward to working with you.


                                       Sincerely,

                                       /s/ Christie Hefner

                                       Christie Hefner


ACCEPTED:

/s/ Helen Isaacson
--------------------------
Helen Isaacson


September 26, 1997
--------------------------
Date

<PAGE>
 
                           PLAYBOY ENTERPRISES, INC.

                                CHRISTIE HEFNER
                                 Chairman and
                            Chief Executive Officer


                              September 26, 1997

Mr. Garry Saunders
1001 Trophy Hills Drive
Las Vegas, NV 89134

Dear Garry:

It is with great pleasure that I offer you, contingent upon further reference
checking, the position of President - Gaming for Playboy Enterprises, Inc.
reporting directly to me.

You will be paid a base salary of $400,000 per year, to be paid on a biweekly
basis on our normal payroll dates. In addition, you are entitled to participate
in a Board approved executive incentive plan with an annual maximum potential of
60% of your base salary based upon divisional and Company performance. For
FY'98, the bonus will be prorated dependent upon your start date.

You will be a member of the Executive Committee of the Company. You will be 
entitled to four weeks' paid vacation per calendar year. You will be entitled to
participate in any other executive benefits made available to other PEI 
executives.

You will also be entitled to participation in the Company's Executive 1995 Long-
Term Incentive Plan. The long-term incentive plan includes two components: stock
options and restricted stock. Your stock option grant of 75,000 Class B options
vest in 25% increments over a four year period. The stock price of the options
is calculated as the closing price of the Class B stock the day preceding your
start date. You will also be entitled to 15,000 shares of Class B restricted
stock with accelerated vesting based upon financial performance achievement.
Under the restricted stock plan, your first payout of 2500 shares will be earned
upon the Company's achievement of $15 million Operating Income and the second
traunch of 12,500 shares at $20 million Operating Income. The plan, which was
implemented in FY'95, has already

680 North Lake Shore Drive
Chicago, Illinois  60611
312-751-8000

<PAGE>
 
September 26, 1997
Garry Saunders
Page Two

paid out its first two traunches as the initial two targets have been achieved.
Our three-year plan projects the achievement of both traunches over the next two
years. It is my expectation that once this plan successfully ends, it will be
replaced by another similar plan. Garry, as you know, Playboy's future gaming
strategy can potentially have a major impact on PEI's stock price.

If you should be terminated at any time not for cause (as defined below) you
will be entitled to receive no less than six months guaranteed severance and up
to an additional six months if you remain unemployed. "For cause" is defined as
conviction of a crime involving dishonesty, fraud or breach of trust, or
engaging in conduct materially injurious to Playboy.

You will be entitled to participate in the "parachute plan" that is described in
the attached.

I have not attempted to value the profit-sharing plan, the matching 401k plan,
deferred compensation plan or discounted employee stock plan but am providing a
brief description of these programs:

The 401K plan is a company-matching plan that allows for pre-tax contributions.
The Company matches 3.5% on the first 6% of compensation contributed each year.
The exact formula is explained in the attachments. Eligibility begins after the
first year of employment. There are a number of different investment options to
choose from and the plan is administered by Fidelity Investments.

The profit-sharing pool is determined at the end of each fiscal year. Each
employees' share is a function of compensation against the total compensation
pool of participants.

Last year, the Company implemented an Employee Stock Purchase Plan which allows
for the purchase of Playboy Class B stock at a 15% discount (limited to $25,000
or 10% of base salary by the IRS). You would be eligible to participate
immediately.

<PAGE>
 
September 26, 1997
Garry Saunders
Page Three

The Deferred Compensation Plan is another investment opportunity for the
executive group. It allows senior executives to defer a portion of base (from 5-
15%) and variable (up to 50%) compensation as a savings mechanism and to build
future financial security. The value of the account is paid out upon retirement
over a chosen period of time.

If the above is acceptable, please sign, date and return the enclosed copy of
this letter.

Once again, welcome to the Playboy family. I look forward to working with you.

                                   Sincerely,

                                   /s/ Christie Hefner
                                   -----------------------     
                                   Christie Hefner



ACCEPTED:

/s/ Garry Saunders
-----------------------
    Garry Saunders

October 3, 1997
-----------------------
Date