INTERCREDITOR AGREEMENT

This Inter creditor Agreement is dated as of March 11, 2003 and is between Bank of America, N. A., as agent, and Bank One, N. A., as trustee.

RECITALS:

A. PEI Holdings, Inc., a Delaware corporation ("Borrower") and Trustee (defined below) are parties to a certain Indenture of even date herewith among Trustee, Borrower and the Loan Parties (as amended from time to time in accordance with Section 7.08 of the Credit Agreement, the "Indenture"), pertaining to certain senior secured notes due 2010 issued pursuant to the Indenture evidencing term indebtedness of Borrower in the aggregate principal amount of $115,000,000.

B. Borrower, BA (defined below) and the other Lenders (defined below) are parties to a certain Credit Agreement of even date herewith (as amended, restated or modified from time to time, the "Credit Agreement"), pursuant to which Lenders have agreed to make loans and extend other financial accommodations to Borrower.

C. Playboy Enterprises, Inc., Borrower and certain of its subsidiaries have granted BA and Trustee liens against and security interests in the Collateral (defined below) as security for payment and performance of the BA Claim and the Trustee Claim (each as defined below).

D. To induce BA and the other Lenders to enter into the Credit Agreement and Trustee to enter into the Indenture, BA and Trustee have each required the other to enter into this Agreement so as to set forth the relative priority of their respective liens against and security interests in the Collateral and certain other rights, priorities and limitations on the exercise of remedies as between BA and Trustee.

THEREFORE, the parties agree as follows:

1. Definitions.

1.1 BA means Bank of America, N. A. in its capacity as administrative agent under the Credit Agreement and each successor administrative agent under the Credit Agreement.

1.2 BA Claim means all "Obligations" as defined in the Credit Agreement, including, without limitation, all sums loaned and advanced to or for the benefit of Borrower at any time, any interest thereon, including Post-Petition Interest, any future advances, obligations with respect to letters of credit issued or guaranteed by any Lender for the account of Borrower, all fees, indemnification amounts, breakage costs, all amounts owed to BA or any Lender under or in connection with any Swap Contract (as defined in the Credit Agreement), and any costs of collection or enforcement, including, without limitation, reasonable attorneys' and paralegals' fees and costs.

1.3 BA Documents means the Credit Agreement, each note executed by Borrower and payable to the order of a Lender, each Collateral Document (as defined in the Credit Agreement), the Agent Fee Letter (as defined in the Credit Agreement) and the Loan Guaranties (as defined in the Credit Agreement), each as amended or supplemented from time to time.

1.4 BA Senior Collateral means the Collateral described in Section 2.1 (a) in which BA has a senior lien or security interest.

1.5 Bankruptcy Code means the United States Bankruptcy Code (11 U. S. C. ss. 101 et seq.).

1.6 Claim means, as applicable, the BA Claim or the Trustee Claim, collectively, the "Claims."

1.7 Collateral means all property and interests in property now owned or hereafter acquired by any Loan Party in or upon which a security interest or mortgage lien is granted to BA or Trustee under the Security Documents.

1.8 Enforcement Action means with respect to a Claim, the demand for payment or acceleration of such Claim, the repossession any material amount of Collateral, the commencement or prosecution of enforcement of any of the rights and remedies under, as applicable, the Trustee Documents, the BA Documents, or applicable law with respect to such Claim, including judicial or UCC foreclosure, provided that Enforcement Action shall not include the filing of a claim in an Insolvency Proceeding.

1.9 Enforcement Notice means a written notice delivered by the Enforcing Party to the other Party stating that an "Event of Default" as defined in the Indenture or the Credit Agreement, respectively) has occurred and is continuing and that an Enforcement Period has commenced.

1.10 Enforcing Party means BA in the case of Enforcement Action with respect to the BA Claim and Trustee in the case of the Enforcement Action with respect to the Trustee Claim.

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