Document:

1

                              EMPLOYMENT AGREEMENT

THIS AGREEMENT is made this 16th day of July, 2001, by and between JAE-TECH
Engineering, Inc., a Colorado corporation (hereinafter called "Company") and
John A. Emrick (hereinafter called "Employee").

                                    RECITALS:

WHEREAS, the Company, located in Colorado Springs, Colorado desires to enter
into an employment relationship with Employee pursuant to the terms and
conditions set forth herein; and

WHEREAS, Employee is willing to accept such employment with the Company,
pursuant to the terms and conditions set forth in this Agreement; and

NOW THEREFORE, the Parties hereto, in consideration of the mutual covenants and
promises hereinafter contained, do hereby agree as follows:

                                      TERMS

1.       EMPLOYMENT  DUTIES. The Company hereby employs Employee as President of
         the Company.  Employee's  duties shall include  carrying out all of the
         functions  as President as defined in the By-laws of the Company and as
         established  by the Board of  Directors  and  performing  all duties as
         President  of the  Company  including:  management  of  the  day to day
         operational  affairs  of the  Company,  scheduling  of work,  obtaining
         additional projects,  approval of all invoices,  billing,  collections,
         preparing  budgets  and  overall   responsibility  for  meeting  Income
         Statement  and  Balance  Sheet  budgets  as  adopted  by the  Board  of
         Directors.

2.       PERFORMANCE.  Employee  agrees to  devote  reasonable  time and  effort
         necessary  to  perform  the  duties  described  in Section 1 above in a
         manner reasonably satisfactory to the Company and to perform such other
         reasonable duties as are assigned to him from time to time by the Board
         of Directors of the Company.

3.       TERM.  The term of this  Agreement  shall be five  (5)  years  from the
         effective  date hereof unless the  Agreement is  terminated  earlier as
         provided  in  Section  7 below.  After  the five  (5) year  term,  this
         Agreement  shall  automatically  renew for periods of one year,  unless
         earlier terminated in accordance with the provisions of Section 7 below
         or unless either party gives written notice,  at least thirty days (30)
         prior to the automatic  renewal  date, of their  intention not to renew
         this Agreement.

4.       COMPENSATION.

In consideration for the services to be rendered by Employee in his capacity
hereunder, Employee shall be compensated as follows:

         a.       An annual  salary  (before  deduction and  withholding  of any
                  taxes, social security or other necessary deductions) of:

o    Year 1 - One Hundred Thousand Dollars ($100,000)
o    Year 2 - One Hundred Twenty Five Thousand Dollars ($125,000) *
o    Year 3 - One Hundred Fifty Thousand Dollars ($150,000) *
o    Year 4 - One Hundred Sixty Five Thousand Dollars ($165,000) *
o    Year 5 - One Hundred Eighty One Thousand Five Hundred Dollars ($181,500) *

                  *Annual  salary in years two  through  year five is the lessor
                  of: the above annual  salary or (ii) five and one half percent
                  (5.5%) of gross annual revenue, determined on an accrual basis
                  as reflected on the Company's financial statements as prepared
                  from  time to  time  in  accordance  with  generally  accepted
                  accounting principles.

                  Employee's  annual salary  increases shall be effective on the
                  first full pay period in July of each year.  Employee's salary
                  shall be payable in equal  installments based on the Company's
                  normal pay periods.

         b.       Employee shall be paid a management  bonus defined as follows:
                  Bonuses during the first three years of this  Agreement  shall
                  be based on a  percentage  of net income  and paid  monthly to
                  Employee within 15 days after month end. The bonus  percentage
                  of annual  adjusted net income (as  reflected on the Company's
                  financial  statements  as  prepared  from  time to time) is as
                  follows:  10% of  adjusted  net  income  less than or equal to
                  $1,000,000,  and  5%  of  adjusted  net  income  greater  than
                  $1,000,000.  The annual period for bonus purposes shall end on
                  June  30th of each  year.  Adjusted  net  income  is  based on
                  collections,  and shall  include  payments  made to parents or
                  affiliates that are based upon  documented  goods and services
                  provided  to the  Company,  but  shall be  determined  without
                  deduction for any undocumented payments for general management
                  fees.

         c.       Employee's  annual salary may be adjusted by mutual consent of
                  the parties at any time during the term of this  Agreement  or
                  any subsequent extension hereof. In addition, the Company will
                  provide the  Employee  with other  employment  benefits as per
                  Section 5 below.

         d.       OPEC CORP., the owner of the Company  (hereafter called OPEC),
                  agrees to sub-contract all existing and future engineering and
                  drafting  projects  to the  Company  as  long  as the  Company
                  remains  a  wholly  owned  subsidiary  of OPEC  and if  OPEC's
                  customers  allow the use of  subcontractors  or the use of the
                  Company.  OPEC  agrees to  accept  and the  Company  agrees to
                  invoice  OPEC at an  amount  equal to 85% of the  amount  OPEC
                  invoices its  customers.  Any and all invoice  adjustments  to
                  OPEC  customers  will  require  a  related  adjustment  in the
                  corresponding Company invoice to OPEC.

         e.       The  Company's  portion  for  administrative,  accounting  and
                  payroll  support  services  provided  by OPEC (based on actual
                  expenses) are to have a maximum dollar limit of the greater of
                  $3,000 per month or 3% of monthly gross revenues.

5.       EMPLOYEE  BENEFITS.  The Company will provide certain group benefits to
         all full time  executive  employees  and agrees that  Employee  will be
         covered  by any such  plans  adopted  by OPEC  while he is a full  time
         employee  if the Company and  Employee  hereby  agrees to submit to any
         medical or other examination and to execute and deliver any application
         or other instrument in writing, reasonably necessary to effectuate such
         plans and benefits. The Company will provide employee life insurance in
         the amount of one hundred fifty thousand dollars  ($150,000),  no later
         than August 15, 2001.  The Company  will pay up to two hundred  dollars
         ($200)  per  month  for  life  insurance  coverage.  If life  insurance
         coverage can not be obtained for two hundred dollars ($200) or less per
         month,  the Company  will pay the  Employee an  additional  two hundred
         dollars ($200) per month.

6.       EXPENSES.  The Company will  reimburse  Employee for all reasonable and
         necessary  business  expenses,  which are  approved  in  advance by the
         Company in writing.

7.       TERMINATION.  Employment  under this  Agreement  may be  terminated  as
         follows:

         a.       Death/Expiration   of  this  Agreement  without  renewal.   By
                  Employee's death or upon the expiration of this Agreement.  In
                  the event of termination under Section 7(a), the Company shall
                  be obligated to pay Employee  his prorated  annual  salary,  a
                  prorated  management bonus and benefits  actually due Employee
                  up to the actual date of death or expiration of the Agreement.

         b.       Total Disability.  For the purpose of this Agreement, the term
                  "total  disability"  means  Employee's  inability,  because of
                  serious physical and/or mental injury,  illness or impairment,
                  certified  by a licensed  medical  doctor in  Colorado  and by
                  supporting  documents as requested by the Company,  to perform
                  his assigned  duties under this Agreement for more than thirty
                  (30)  consecutive  days.  In the  event of  termination  under
                  Section  7(b),  the Company shall be obligated to pay Employee
                  his prorated annual salary,  a prorated  management  bonus and
                  benefits actually due up to the date of disability.

         c.       By  Employee  with  Notice  to  Company.  At the  election  of
                  Employee upon fifteen (15) days written notice to Company.  In
                  the event of termination under Section 7(c), the Company shall
                  only be obligated to pay Employee his prorated  annual  salary
                  up to the actual date of termination and benefits actually due
                  Employee up to the date of termination.  The Company shall not
                  be required to pay Employee any unpaid  management bonus. Upon
                  receipt of such notice from Employee the Company,  at its sole
                  discretion,  may terminate this Agreement  immediately and pay
                  Employee his prorated  annual  salary,  a prorated  management
                  bonus and  benefits  actually  due Employee up to such date of
                  termination.

         d.       By the Company  Without Cause.  Company may terminate  without
                  cause  and for  any  reason  Employee's  employment  with  the
                  Company upon fifteen (15) days written notice to Employee.  If
                  Employee is  terminated  under this Section  7(d), he shall be
                  entitled to be paid his  prorated  annual  salary and prorated
                  management  bonus up to the  actual  date of  termination  and
                  benefits  actually  due  Employee  up to the  actual  date  of
                  termination,  but  not any  additional  management  bonus.  In
                  addition,  employee shall be paid by the Company severance pay
                  of $150,000 over the subsequent twelve months payable in equal
                  installments based on the Company's normal pay periods.

         e.       By  the  Company  With  Cause.  Employee's  employment  may be
                  terminated  for cause at any time  upon five (5) days  written
                  notice to  Employee.  For the purpose of this  Agreement  "for
                  cause"  is  defined  to  include,  but not be  limited  to the
                  following:  (i) willful,  malicious and grossly negligent acts
                  by Employee having the effect or causing  significant  harm to
                  the business  interests  of the  Company;  (ii) the failure of
                  Employee  to devote  full time  energies  and  efforts  to the
                  performance of his duties; (iii) the conviction of Employee of
                  any felony crime;  (iv) the violation of any specific  written
                  direction of the Board of Directors relating to services to be
                  rendered by him or the scope of his duties as  contemplated by
                  this Agreement;  (v) the commission of fraudulent or dishonest
                  act by Employee; (vi) Employees failure, refusal or negligence
                  to  comply  with  the  policies,  procedures,   standards  and
                  regulations  of the Company;  (vii)  failure of the Company to
                  meet minimum revenue  objectives as reflected on the Company's
                  financial statements as prepared from time to time as follows:

o        Year 1 - Total  Revenue of One  Million Two  Hundred  Thousand  Dollars
         ($1,200,000)  of  which  Four  Hundred  Thousand   ($400,000)  must  be
         generated from the Contract  between the Company and QWEST dated May 1,
         2001.
o        Year 2 - Total Revenue of Two Million Dollars ($2,000,000) of which One
         Million  Dollars  ($1,000,000)  must be  generated  from  the  Contract
         between the Company and QWEST dated May 1, 2001.
o        Year 3 - Total Revenue of Two Million Seven  Hundred  Thousand  Dollars
         ($2,700,000)  o Year 4 - Total  Revenue of Three  Million  Five Hundred
         Thousand Dollars  ($3,500,000) o Year 5 - Total Revenue of Four Million
         Three Hundred Thousand Dollars ($4,300,000)

                  (viii) the commission by Employee of any other material breach
                  of this Agreement, and to the extent that this act is curable,
                  Employee  has not cured it, or  initiated a cure,  within five
                  (5) business days following receipt of notice of said material
                  breach.  Any notice to  Employee  shall  specify the facts and
                  circumstances   claimed   to   provide   the  basis  for  such
                  termination.  In the event of  termination  of this  Agreement
                  under this section, the Company shall only be obligated to pay
                  Employee his prorated  annual  salary and prorated  management
                  bonus,  and  benefits  earned or due up to the actual  date of
                  termination.

         f.       Default.   Employee  shall  have  the  option  to  immediately
                  terminate  this Agreement if the Company  materially  breaches
                  this  Agreement,  but only if such breach of this Agreement is
                  not  caused,  directly  or  indirectly,  by  Employee  in  his
                  managerial and fiduciary  capacity under this  Agreement,  and
                  where  the   Company  is   otherwise   capable  of   tendering
                  performance,    and   whereby   Employee's    intentional   or
                  unintentional  acts have caused the  Company,  through lack of
                  work  or  excess  expenditures,  to  be  unable  to  meet  its
                  financial  obligations  under this Agreement.  Upon failure of
                  the  Company  to  meet  any of its  material  obligations  due
                  Employee under this  Agreement or there is material  breach of
                  this  Agreement by the  Company,  and to the extent that it is
                  curable, Employee shall give written notice to the Company and
                  shall  specify  the facts and  circumstances  claimed to be as
                  breach of this  Agreement.  The  Company  shall  have five (5)
                  business days following receipt of such written notice of said
                  material  breach to cure such  breach.  If said  breach is not
                  cured by the Company  within such time period than it shall be
                  deemed as if the Company has  terminated  this  Agreement  and
                  Employee  shall be entitled to severance pay of $150,000 to be
                  paid over the subsequent  twelve month period payable in equal
                  installments based on the Company's normal pay periods.

8.       Agreement Not To Compete.

         a.       Covenant Not To Compete.  The Company and Employee acknowledge
                  and agree that  Employee's  services  will be of a special and
                  unusual character which have a unique value to the Company and
                  OPEC,  the loss of which cannot be adequately  compensated  by
                  damages in an action at law and, if used in  competition  with
                  the Company or OPEC,  could cause  serious harm to the Company
                  and OPEC.  Further,  Employee and the Company  also  recognize
                  that an important part of Employee's duties will be to develop
                  good will for the Company and OPEC through Employee's personal
                  contact with individual and group subscribers of the Company's
                  services,  participants,   agents  and  other  Persons  having
                  business  relationships  with the Company  and OPEC,  and that
                  there is a danger that this good will, a proprietary  asset of
                  the  Company  and OPEC,  may follow  Employee  if and when his
                  relationship  with the  Company  is  terminated.  Accordingly,
                  Employee agrees that he shall not, during the time period that
                  he is  employed  by the  Company  and for a period of one year
                  from the date of the  termination  of such  employment for any
                  reason  whatsoever,  do any of the following:  (i) directly or
                  indirectly,  solicit or otherwise  contact any Person who then
                  receives  or has the right to  receive  or at any  prior  time
                  received  or had the  right  to  receive  from  the  Company's
                  engineering  services  (a  "Subscriber")  for the  purpose  of
                  seeking to obtain any such  Subscriber  as a subscriber  to or
                  beneficiary  of a similar  business  conducted  by any  Person
                  other than the Company;  (ii) directly or  indirectly  employ,
                  hire or  otherwise  engage the services of or associate in any
                  business  with any  Participant  or other Person who is or has
                  been  employed by either the Company or OPEC, or any Affiliate
                  of the  Company  or OPEC,  unless  such  Participant  or other
                  Person shall have ceased to be employed by the Company or OPEC
                  (as the case may be), or the Affiliate of the Company or OPEC,
                  for  at  least  one  year,  or  (iii)   engage,   directly  or
                  indirectly, as a proprietor,  stockholder,  partner, director,
                  officer, employee,  independent contractor or otherwise in the
                  business of providing services in competition with the Company
                  in any state in which the Company provides its services on the
                  date Employee's  employment with the Company is terminated for
                  any reason  whatsoever.  For  purposes  of this  Section  8.a,
                  "Person" means an individual, partnership, corporation, trust,
                  unincorporated   organization,   government,   or   agency  or
                  political  subdivision of a government and "Affiliate" has the
                  meaning  ascribed to such term in Rule 405  promulgated  under
                  the  Securities  Act,  as such  rule is in  effect on the date
                  hereof.

         b.       Enforceability.  The Parties  hereto  agree that to the extent
                  that  any  provision  or  portion  of  Section  8.a.  of  this
                  Agreement shall be held,  found or deemed to be  unreasonable,
                  unlawful   or   unenforceable   by  a   court   of   competent
                  jurisdiction, then any such provision or portion thereof shall
                  be deemed to be modified to the extent necessary in order that
                  any  such  provision  or  portion  thereof  shall  be  legally
                  enforceable to the fullest extent permitted by applicable law;
                  and the  parties  hereto do  further  agree  that any court of
                  competent jurisdiction shall, and the parties hereto do hereby
                  expressly   authorize,   request  and  empower  any  court  of
                  competent  jurisdiction  to,  enforce  any such  provision  or
                  portion  thereof  or to modify any such  provision  or portion
                  thereof in order that any such  provision  or portion  thereof
                  shall  be  enforced  by  such  court  to  the  fullest  extent
                  permitted by applicable law.

         c.       Right  to  Enjoin.   As  the  violation  by  Employee  of  the
                  provisions  of Section  8.a.  of this  Agreement  would  cause
                  irreparable  injury to the Company  and OPEC,  and there is no
                  adequate  remedy at law for such  violation,  the  Company and
                  OPEC shall have the right,  in addition to any other  remedies
                  available at law or in equity,  to enjoin  Employee in a court
                  of equity from violating such provisions

9.       Proprietary   Information.   Employee   shall   treat  as   information
         proprietary  to  the  Company  any  and  all  data  and/or  Proprietary
         Information (as defined below)  discovered  and/or  disclosed and shall
         not, directly or indirectly,  use any such information  and/or data for
         his own benefit or disclose or fail to use its best  efforts to prevent
         the  disclosure  of the same to any  other  person  or  entity  for any
         purpose or reason  whatsoever,  during the term of this Agreement or at
         any time thereafter.

10.      Proprietary  Information Defined.  Proprietary Information includes but
         is   not   limited   to   unique    concepts,    products,    services,
         company/corporate  strategy and business  development,  including plans
         relating to this acquisition,  expansion, marketing, financials, client
         lists and other business information,  operating information, policies,
         practices and processes,  database and networking systems,  information
         relating to employees, customers,  prospective customers and suppliers,
         whether such information is documented, contained electronically and/or
         contained on any other medium.

11.      Reproduction of Proprietary  Information.  Employee  stipulates that he
         will not, at any time, make any reproduction,  copy, abstract,  summary
         and/or  precis  of  the  whole  or  of  any  part  of  any  Proprietary
         Information  without the prior express  written consent of the Company,
         except as necessary to perform his duties hereunder, in which case said
         reproduction,  copy,  abstract,  summary and/or precis shall remain the
         property of the Company.

12.      Confidentiality.  Employee  stipulates  that he shall  keep any and all
         Proprietary Information obtained,  during the term of this Agreement or
         any time  thereafter,  in the strictest of  confidence  and secrecy and
         shall  not  disclose  Proprietary  Information  to  third  parties  and
         further, will not use said Proprietary  Information in competition with
         Employer.

13.      Non-Disclosure.  Employee stipulates that he shall not, during the term
         of this Agreement or any time  thereafter,  in any way or by any means,
         disclose, disseminate and /or distribute any Proprietary Information to
         any third  party  without  the prior  express  written  consent  of the
         Company.

14.      Non-Circumvention.  Employee  stipulates  that he shall not, during the
         term of this  Agreement  or any time  thereafter,  in any way or by any
         means  implement and /or use any Proprietary  Information,  circumvent,
         usurp an  opportunity,  take advantage of and/or benefit from,  through
         the exclusion of the Company, any Proprietary Information obtained.

15.      Injunctive Relief. The Employee recognizes and agrees that, a breach of
         this Agreement will cause irreparable harm to the Company and no amount
         of  monetary  damages  can  adequately  compensate  the Company for the
         injury  that  would be caused  by said  breach.  Accordingly,  Employee
         hereby  stipulates  that should the Company have a good faith reason to
         believe  that  Employee  is  breaching  or taking  steps to breach  any
         material provision of this Agreement then the Company shall be entitled
         to immediate issuance of an ex-parte temporary  restraining order, by a
         Court, enjoining the Employee from engaging in the opposed activities.

16.      Waiver. A Party's failure to insist on compliance or enforcement of any
         provision  of  this   Agreement   shall  not  effect  the  validity  or
         enforceability  or  constitute a waiver of future  enforcement  of that
         provision or any other provision of this Agreement by that Party or any
         other party.

17.      Law,  Jurisdiction  and Venue.  The Parties  hereto  stipulate that any
         dispute  arising out of this  Agreement  shall be  submitted to binding
         arbitration in Colorado  Springs,  Colorado pursuant to the arbitration
         rules  and  regulations,   as  codified  by  the  American  Arbitration
         Association.

18.      Validity.  The invalidity or  unenforceability of any provision in this
         Agreement shall not in any way effect the validity or enforceability of
         any  other  provision  and this  Agreement  shall be  construed  in all
         respects as if such invalid or  unenforceable  provision had never been
         in this Agreement.

19.      Notice. All notices and other communications  provided for or permitted
         hereunder  shall  be  made  by  hand  delivery,  overnight  -  courier,
         certified  or  registered  mail,  postage  prepaid  and return  receipt
         requested, telex or facsimile transmission.

         If to the Company                  If to Employee
         1880 Office Club Pointe            3214 Teardrop Circle
         Colorado Springs, CO  80920        Colorado Springs, CO  80917
         Fax:  719-272-8226                 Fax:  719-597-2060

         All such notices shall be deemed to have been duly given:

         when  delivered,  by hand if  personally  delivered;  and the next day,
         after  being  sent by  overnight  courier;  and  when  received,  if by
         certified or  registered  mail;  and when  received (as  electronically
         acknowledged), if by facsimile transmission.

20.      Amendments.  This  Agreement may be amended,  at any time,  only by the
         written mutual consent of the Parties  hereto,  with any such Amendment
         to be invalid unless it is both written and signed by both Parties.

21.      Legal Fees and Costs.  The Parties  hereby  stipulate and agree that in
         the event that a dispute arises  between the Parties,  relating to this
         Agreement,  and one or both of the Parties deem it necessary to hire an
         attorney to protect its rights and/or  resolve said  dispute,  then the
         prevailing  Party,  in any  action,  shall be  entitled  to recover and
         collect,  from the non-prevailing Party, all reasonable attorney's fees
         and costs incurred.

22.      Entire  Agreement.  This  Agreement  contains the entire  agreement and
         understanding  by and  between  the  Parties  and  no  representations,
         promises,  agreements and/or understandings,  written or oral, relating
         to this Agreement by either Party not contained  herein shall be of any
         force or effect.

23.      Nonassignability.  In  light  of the  unique  personal  services  to be
         performed by the employee hereunder, it is acknowledged and agreed that
         any  proposed or attempted  assignment  or transfer by Employee of this
         Agreement or any of Employee's duties,  responsibilities,  obligations,
         hereunder,  shall be void. The Company may assign this Agreement to any
         parent, subsidiary,  affiliate, or successor of the Company without the
         prior written consent of the Employee.

24.      Survivability.  Employee  hereby  acknowledges  that the  provisions of
         Sections 8-15 above shall survive termination of this Agreement.

                             SIGNATURE PAGE FOLLOWS

IN WITNESS WHEREOF, the Company and Employee have duly executed this Agreement
this ____ day of ________, 2001.

JAE-TECH Engineering       , Inc.                             Employee

----------------------------                         ---------------------------
By: Donald D. Cannella                                        John A. Emrick
Its: CEOCONFORMED COPY

                        FOURTH AMENDMENT dated as of June 1, 2001 (this
                  "Amendment"), to the Credit Agreement dated as of February 26,
                  1999, as amended by the Amendment dated as of January 10,
                  2000, the Second Amendment dated as of January 31, 2000, the
                  Third Amendment dated as of June 9, 2000 (the "Credit
                  Agreement"), among PLAYBOY ENTERPRISES, INC., a Delaware
                  corporation (the "Company"), PEI HOLDINGS, INC., a Delaware
                  corporation and wholly owned subsidiary of the Company
                  ("PHI"), the financial institutions from time to time party
                  thereto (the "Lenders") and CREDIT SUISSE FIRST BOSTON, a bank
                  organized under the laws of Switzerland, acting through its
                  New York branch, as administrative agent (in such capacity,
                  the "Administrative Agent"), as collateral agent and as
                  issuing bank.

            A. The parties hereto have entered into the Credit Agreement,
pursuant to which the Lenders have agreed to extend credit to the Borrower (as
defined in the Credit Agreement) on the terms and subject to the conditions set
forth therein.

            B. The Company and PHI have requested that the Lenders agree to
amend certain provisions of the Credit Agreement, and the Lenders are willing,
on the terms and subject to the conditions set forth below, to amend the Credit
Agreement as provided herein.

            C. Capitalized terms used and not otherwise defined herein shall
have the meanings assigned to them in the Credit Agreement.

            Accordingly, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereto hereby agree as follows:

            SECTION 1. Amendment of Credit Agreement. The Credit Agreement is
hereby amended as follows:

            (a) The table and the paragraph below the table in the definition of
"Applicable Percentage" in Section 1.01 of the Credit Agreement is hereby
deleted and replaced with the following table and paragraph:

<TABLE>
<CAPTION>

                                                                           Eurodollar        ABR
Consolidated Leverage Ratio                                                  Spread        Spread
---------------------------                                                  ------        ------
<S>                                                                          <C>           <C>
Category 1
Greater than or equal to 5.00 to 1.00                                        4.00%         3.00%

Category 2
Less than 5.00 to 1.00 but greater than or equal to 4.50 to 1.00             3.75%         2.75%
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Consolidated Leverage Ratio                                                  Spread        Spread
---------------------------                                                  ------        ------
<S>                                                                          <C>           <C>

Category 3
Less than 4.50 to 1.00 but greater than or equal to 4.00 to 1.00             3.50%         2.50%

Category 4
Less than 4.00 to 1.00 but greater than or equal to 3.00 to 1.00             3.25%         2.25%

Category 5
Less than 3.00 to 1.00                                                       3.00%         2.00%

</TABLE>

; provided, that (i) from June 1, 2001, until the Determination Date following
the delivery of financial statements and certificates for the fiscal quarter
ended September 30, 2001, pursuant to Section 5.03(b), the Applicable Percentage
shall be determined by reference to Category 2; provided, that if the Category
indicated by the financial statements delivered pursuant to Section 5.03(b) for
the applicable fiscal quarter is Category 1, the "Applicable Percentage" for any
such period shall be Category 1; (ii) if the Borrower fails to deliver the
financial statements and certificates pursuant to Section 5.03(a) or (b), the
Applicable Percentage shall continue to be determined by the Category in effect
immediately prior to the date by which such financial statements and
certificates were required to have been delivered under such section and (iii)
except as provided in the preceding clause (i), after the delivery of such
financial statements and certificates, the Applicable Percentage shall be
redetermined by reference to the Category indicated by such financial
statements. Any increase in the interest rates or fees in effect upon the
delivery of the financial statements and certificates pursuant to Section 5.03
(a) or (b) shall be retroactive to (and including) the second Business Day
following the day by which such financial statements and certificates were
required to have been delivered under such section (and the Borrower shall
promptly pay to the Administrative Agent, for distribution to the Lenders, the
amount of such increase allocable to periods for which such interest or fees
shall already have been paid).

            (b) The definition of "Consolidated EBITDA" in Section 1.01 of the
Credit Agreement is hereby amended by inserting the following new sentence at
the end thereof:

            "Solely for purposes of this definition, if at any time on or prior
            to December 31, 2001, (i) the Company has executed a definitive
            purchase agreement providing for the Califa Acquisition, (ii) such
            agreement has not been terminated and (iii) the Califa Acquisition
            has not been consummated, Consolidated EBITDA shall be determined on
            a pro forma basis as if the Califa Acquisition had been completed
            during the fiscal quarter ending June 30, 2001. In addition, solely
            for the purposes of this definition, if, at any time Consolidated
            EBITDA is being determined, the Borrower or any Restricted
            Subsidiary shall have completed an Acquisition or Disposition since
            the beginning of the relevant period (which, for purposes of
            Sections 6.14, 6.15 and 6.16, shall mean the prior four fiscal
            quarters ended on or immediately preceding the relevant date),
            Consolidated EBITDA shall be determined on a pro forma basis as if
            such Acquisition or Disposition had occurred at the beginning of
            such period."

<PAGE>

            (c) The definition of "Consolidated Fixed Charge Coverage Ratio" in
Section 1.01 of the Credit Agreement is hereby amended by inserting the
parenthetical "(other than any cash payments of the Califa Purchase Price,
excluding $250,000 per quarter listed under "Amounts Payable in Cash" on
Schedule 1.01(a) hereto)" at the end of clause (iii) thereof.

            (d)(i) Clause (a) of the definition of "Excess Cash Flow" in Section
1.01 of the Credit Agreement is hereby amended to read in its entirety as
follows:

            "Consolidated Net Income, adjusted to exclude any income, gains or
            losses attributable to any Asset Sale, the proceeds of which are
            required to be applied to prepay Loans under Section 2.13(b); minus"

            (d)(ii) Clause (b) of the definition of "Excess Cash Flow" is hereby
deleted and replaced in its entirety with "(b) any cash payments of the Califa
Purchase Price; plus".

            (e) The parenthetical in clause (e) of the definition of
"Indebtedness" in Section 1.01 of the Credit Agreement is hereby amended by
inserting at the end thereof "and excluding all obligations in respect of the
Califa Purchase Price, as set forth on Schedule 1.01(a)".

            (f) The following definitions shall be inserted in Section 1.01 in
their appropriate alphabetical positions:

            "Califa Acquisition" shall mean the acquisition of substantially all
            the assets of Califa Entertainment Group, Inc., a California
            corporation, and V.O.D., Inc., a California corporation, by the
            Company, pursuant to and on substantially the terms set forth in the
            bank presentation dated April 17, 2001."

            "Califa Purchase Price" shall mean the aggregate amounts payable by
            the Borrower or any Subsidiary in connection with the Califa
            Acquisition, as set forth on Schedule 1.01(a) hereto under the
            headings "Amounts Payable in Cash" and "Amounts Payable in Cash or
            Stock at the Option of the Company". As part of the "Califa Purchase
            Price", the Borrower shall cause Spice to cancel the promissory note
            in the amount of $10,000,000 issued to Spice in 1999."

            (g)(i) Section 2.06(a) is hereby amended by deleting clause (ii) in
its entirety and inserting the following:

            "(ii) on and after the date on which the Playboy International
            Transaction shall be completed, 3.50% per annum, if the Consolidated
            Leverage Ratio is greater than or equal to 5.00 to 1.00, and 3.25%
            per annum, otherwise."

            (g)(ii) Section 2.06(b) is hereby amended by deleting clause (ii) in
its entirety and inserting the following:

            "(ii) on and after the date on which the Playboy International
            Transaction shall be completed, 4.50% per annum, if the Consolidated
            Leverage Ratio is greater than or equal to 5.00 to 1.00, and 4.25%
            per annum, otherwise."

<PAGE>

            (h) Section 5.03 is hereby amended by adding the following new
section (k):

            "(k) within 45 days after the end of each month (other than a month
            ending on a fiscal quarter end), an unaudited report in a form
            reasonably satisfactory to the Administrative Agent setting forth
            (i) the revenues and (ii) the operating income before amortization
            and depreciation of the Company and its consolidated subsidiaries,
            in each case for each business segment, during such month."

            (i) Section 6.05(c) of the Credit Agreement is hereby amended by
deleting the clause "other than the Equity Interests of Restricted Subsidiaries"
and inserting in its place "other than the Equity Interests of Restricted
Subsidiaries (except for VIPress Poland sp. z o.o. and EuroEast Publishing
Ventures, B.V.)".

            (j) The last sentence of Section 6.05 (Mergers, Consolidations and
Sales of Assets) of the Credit Agreement is hereby amended to read in its
entirety as follows:

            "Notwithstanding anything to the contrary in this Section 6.05, the
            Company may consummate the Playboy Merger, the Spice Merger, the
            Stock Transfer, the Playboy International Transaction and the Califa
            Acquisition."

            (k) The table appearing in Section 6.14 (Consolidated Leverage
Ratio) of the Credit Agreement is hereby replaced with the following table:

       "Date                                               Ratio
       -----                                               -----

       June 30, 2001                                       5.25 to 1.00
       September 30, 2001                                  5.25 to 1.00
       December 31, 2001                                   5.35 to 1.00
       March 31, 2002                              5.35 to 1.00
       June 30, 2002                                       4.75 to 1.00
       September 30, 2002                                  4.00 to 1.00
       December 31, 2002                                   3.75 to 1.00
       March 31, 2003                              3.50 to 1.00
       June 30, 2003                                       3.25 to 1.00
       September 30, 2003 and thereafter                   3.00 to 1.00"

            (l) The table appearing in Section 6.15 (Consolidated Interest
Expense Coverage Ratio) of the Credit Agreement is hereby replaced with the
following table:

       "Date                                               Ratio
       -----                                               -----

       June 30, 2001                                       1.75 to 1.00
       September 30, 2001                                  2.00 to 1.00
       December 31, 2001                                   2.00 to 1.00
       March 31, 2002                              2.00 to 1.00
       June 30, 2002                                       2.25 to 1.00

<PAGE>

       September 30, 2002                                  2.50 to 1.00
       December 31, 2002                                   2.75 to 1.00
       March 31, 2003 and thereafter                       3.00 to 1.00"

            (m) The table appearing in Section 6.16 (Consolidated Fixed Charge
Coverage Ratio) of the Credit Agreement is hereby replaced with the following
table:

       "Date                                               Ratio
       -----                                               -----

       June 30, 2001                                       0.90 to 1.00
       September 30, 2001                                  0.90 to 1.00
       December 31, 2001                                   1.00 to 1.00
       March 31, 2002                              1.00 to 1.00
       June 30, 2002                                       1.00 to 1.00
       September 30, 2002                                  1.10 to 1.00
       December 31, 2002                                   1.10 to 1.00
       March 31, 2003                              1.10 to 1.00
       June 30, 2003                                       1.10 to 1.00
       September 30, 2003 and thereafter                   1.25 to 1.00"

            (n) The following new Section 6.18 is hereby inserted at the end of
Article VI of the Credit Agreement:

                  "SECTION 6.18. Cash Payments in Respect of Califa Purchase
            Price. Pay any portion of the Califa Purchase Price set forth on
            Schedule 1.01(a) hereto under the heading "Amounts Payable in Cash
            or Stock at the Option of the Company" other than in common stock of
            the Company unless, on the last day of each of the two consecutive
            fiscal quarters of the Company ended on or immediately preceding the
            date of such payment, the Consolidated Leverage Ratio (after giving
            pro forma effect to any borrowings related to such payments as if
            they had occurred on the last day of the most recently ended fiscal
            quarter) shall not have exceeded 3:00:1.00 for each of such two
            consecutive fiscal quarters."

            (o) Schedule 1.01(a) hereto is hereby added as a new Schedule
1.01(a) to the Credit Agreement.

            SECTION 2. Representations and Warranties. Each of the Company and
PHI represents and warrants to each Lender that, on and as of the date hereof,
and after giving effect to the amendments provided for in Section 1 of this
Amendment:

            (a) The representations and warranties set forth in Article III of
      the Credit Agreement are true and correct in all material respects with
      the same effect as if made on and as of the date hereof, except to the
      extent such representations and warranties expressly relate to an earlier
      date.

            (b) No Event of Default or Default has occurred and is continuing.

<PAGE>

            SECTION 3. Effectiveness. This Amendment shall become effective upon
the execution of counterparts of the signature pages hereto by the Company, PHI,
the Administrative Agent and Lenders constituting the Required Lenders;
provided, that the amendments set forth in Section 1 shall not become effective
until each of the following conditions precedent shall have been satisfied, and
if any of such conditions shall not have been satisfied by August 1, 2001, then
the provisions of Section 1 shall terminate and cease to be of any force or
effect:

            (a) The Borrower shall have paid to the Administrative Agent, for
      the account of each Lender that shall have executed this Amendment at or
      prior to noon, New York City time, on June 1, 2001, in immediately
      available funds, an amendment fee equal to 0.25% of the aggregate
      outstanding Term Loans, Revolving Credit Exposure and unused Revolving
      Credit Commitment of such Lender on the date hereof (determined after
      giving effect to any prepayments and Commitment reductions prior to the
      date of this Amendment).

            (b) The Administrative Agent shall have received such evidence as
      the Administrative Agent or Cravath, Swaine & Moore, counsel to the
      Administrative Agent, shall reasonably have requested as to the corporate
      power and authority of the Company and PHI to enter into and perform their
      obligations under this Amendment reasonably satisfactory in form and
      substance to the Administrative Agent and to Cravath, Swaine & Moore.

The Administrative Agent shall notify the Lenders of the satisfaction of the
foregoing conditions, and such notice shall, in the absence of manifest error,
conclusively evidence the satisfaction of such conditions.

            SECTION 4. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

            SECTION 5. Expenses. The Borrower shall pay all reasonable
out-of-pocket fees and expenses incurred by the Administrative Agent in
connection with the preparation, negotiation, execution and delivery of this
Amendment, including, but not limited to, the reasonable fees, disbursements and
other charges of Cravath, Swaine & Moore, counsel to the Administrative Agent.

            SECTION 6. Counterparts. This Amendment may be executed in any
number of counterparts, each of which shall be an original but all of which,
when taken together, shall constitute but one instrument. Delivery of an
executed counterpart of a signature page of this Amendment by facsimile
transmission shall be as effective as delivery of a manually executed
counterpart of this Amendment.

            SECTION 7. Headings. Section headings used herein are for
convenience of reference only, are not part of this Amendment and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Amendment.

<PAGE>

            SECTION 8. Effect of Amendment. Except as specifically stated
herein, the Credit Agreement shall continue in full force and effect in
accordance with the provisions thereof. As used therein, the terms "Agreement",
"herein", "hereunder", "hereinafter", "hereto", "hereof" and words of similar
import shall, unless the context otherwise requires, refer to the Credit
Agreement as modified hereby.

<PAGE>
                                       8

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

                              PLAYBOY ENTERPRISES, INC,

                                by
                                   /s/ Robert D. Campbell
                                   -------------------------
                                   Name: Robert D. Campbell
                                   Title: Senior Vice President, Treasurer

                              PEI HOLDINGS, INC.,

                                by

                                   /s/ Robert D. Campbell
                                   -------------------------
                                   Name: Robert D. Campbell
                                   Title: Treasurer

                              CREDIT SUISSE FIRST BOSTON, individually and as
                              Administrative Agent, Collateral Agent and Issuing
                              Bank,

                                by
                                   /s/ David L. Sawyer
                                   -------------------
                                   Name: David L. Sawyer
                                   Title: Vice President

                                by
                                   /s/ Lalita Advani
                                   -----------------
                                   Name: Lalita Advani
                                   Title: Assistant Vice President

<PAGE>
                                                                               9

                              BANK OF AMERICA, N.A.,

                                by
                                   /s/ Peter J. Gates, Jr.
                                   -----------------------
                                   Name: Peter J. Gates, Jr.
                                   Title: Senior Vice President

                              GALAXY CLO 1999-1

                                by
                                   /s/ John G. Lapham
                                   ------------------
                                   Name: John G. Lapham
                                   Title: Authorized Agent

                              ING (U.S.) CAPITAL LLC

                                by
                                   /s/ William James
                                   -----------------
                                   Name: William James
                                   Title: Director

                              KZH ING-2 LLC

                                by
                                   /s/ Susan Lee
                                   -------------
                                   Name: Susan Lee
                                   Title: Authorized Agent

                              KZH ING-3 LLC

                                by
                                   /s/ Susan Lee
                                   -------------
                                   Name: Susan Lee
                                   Title: Authorized Agent

<PAGE>
                                                                              10

                              KZH SOLEIL LLC

                                by
                                   /s/ Susan Lee
                                   -------------
                                   Name: Susan Lee
                                   Title: Authorized Agent

                              KZH SOLEIL-2 LLC

                                by
                                   /s/ Susan Lee
                                   -------------
                                   Name: Susan Lee
                                   Title: Authorized Agent

                              LASALLE BANK NATIONAL ASSOCIATION

                                by
                                   /s/ Kyle Freimuth
                                   -----------------
                                   Name: Kyle Freimuth
                                   Title: Vice President

                              MOUNTAIN CAPITAL CLO I, LTD.

                                by
                                   /s/ N. Koike
                                   ------------
                                   Name: N. Koike
                                   Title: Authorized Signatory

                              PPM AMERICA, INC.

                                by
                                   /s/ Michael J. Harrington
                                   -------------------------
                                   Name: Michael J. Harrington
                                   Title: Vice President

                          PPM SPYGLASS FUNDING TRUST

<PAGE>

                                                                              11
                                by
                                   /s/ Ann E. Morris
                                   -----------------
                                   Name: Ann E. Morris
                                   Title: Authorized Agent

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