(CHICAGO, IL) -- Playboy Enterprises, Inc. today said that it signed an agreement to exercise the option it obtained two years ago as part of its purchase of the Spice Entertainment Companies, Inc. This option allows the company to acquire two networks (The Hot Network and The Hot Zone) and the related television assets of Califa Entertainment Group, Inc.

In addition, PEI will acquire a third network (Vivid TV) and related television assets from V.O.D., Inc. (VODI), a separate entity owned by Califa's principals. These channels will be transitioned to the Spice brand, as an extension of the company's strategy to grow its domestic television networks, including its Spice portfolio of networks.

As a result of the deals, the company will:

-- Expect to report $5 million in incremental EBITDA in 2001;
-- Gain access to 36.2 million additional U.S. TV household units bringing to 91.9 million the number of household units that it currently reaches; and
-- Significantly expand the programming options it offers consumers and distributors.


In addition, the company has reached an agreement for a 10-year extension of its current output deal with Vivid Video, Inc. PEI will obtain television rights as well as video-on-demand (VOD) and video streaming rights to take advantage of opportunities that arise as advanced digital technologies proliferate.

Consideration for the Califa transaction is $28.3 million, excluding the outstanding note and non-compete agreement, and for VODI is $41.7 million. These amounts will be paid over 10 years, and a majority of the payments may be made in cash or stock at PEI's option. The consideration for both companies could potentially increase by a total of $12 million should the acquired assets achieve certain performance targets.

The deals are expected to close in July, subject to customary closing conditions.

Additional information regarding this announcement will be available on a conference call, which is being held today, July 2, at 11:00 a.m. EDT/10:00 a.m. CDT, 1-888-787-0444, using the password ``Playboy.'' The call also will be webcast. To listen to the call, visit www.playboyenterprises.com and select the financial information content section.

About Playboy

Playboy Enterprises, Inc. is a brand-driven, international multimedia entertainment company that publishes editions of Playboy magazine around the world; operates Playboy and Spice television networks and distributes programming via home video and DVD globally; licenses the Playboy and Spice trademarks internationally for consumer products; is developing a Playboy- branded, location-based entertainment business anchored by casinos; and operates Playboy.com, a leading men's lifestyle and entertainment Web site.

About Vivid

Vivid Entertainment Group is the leading producer of quality content and other products for the adult entertainment market. Vivid is the first vertically integrated company in the adult sector, with an exclusive global licensing system and Websites such as vivid.com. Califa Entertainment Group and V.O.D., Inc., Vivid's television distribution units, have operated three pay-per-view networks (The Hot Network, The Hot Zone and Vivid TV) which together reach more than 36 million households. In addition, its Vivid Interactive unit is a pioneer in developing advanced programming techniques for formats such as DVD. The company owns an extensive library of more than 1000 features for mature audiences. The three principals of Vivid Entertainment Group are Steven Hirsch, David James and Bill Asher.

This release contains ``forward-looking statements,'' as to expectations, beliefs, plans, objectives and future financial performance, and assumptions underlying or concerning the foregoing. These forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The following are some of the important factors that could cause actual results or outcomes to differ materially from those discussed in the forward- looking statements: (1) foreign, national, state and local government regulation, actions or initiatives, including (a) attempts to limit or otherwise regulate the sale, distribution or transmission of adult-oriented materials, including print, video and online materials, (b) changes in or increased regulation of gaming businesses and the impact of federal and state laws on gaming businesses generally, (c) limitations on the advertisement of tobacco, alcohol and other products which are important sources of advertising revenue, or (d) substantive changes in postal regulations or rates which could increase the Company's postage and distribution costs; (2) increases in paper or printing costs; (3) changes in distribution technology and/or unforeseen delays in the implementation of that technology by the cable and DTH industries, which might affect the Company's plans and assumptions regarding carriage of its networks; (4) increased competition for transponders and channel space and any decline in the Company's access to, and acceptance by, cable and DTH systems or any deterioration in the terms of fee arrangements with operators of these systems; (5) increased competition for advertisers from other publications, media or online providers or any decrease in spending by advertisers, either generally or with respect to the adult male market; (6) effects of the national consolidation of the single-copy magazine distribution system; (7) increasing competition in the cable, DTH and Internet markets; (8) changes in consumer purchasing habits, viewing patterns or fashion trends or changes in the retail sales environment which could reduce demand for the Company's products and impact its advertising revenues; (9) uncertainty of the viability of the online gaming, e-commerce, advertising and subscription businesses; (10) the Company's ability to obtain adequate third-party financing, including equity investments, to fund the Company's online business, and the timing and terms of such financing; (11) reliance on third parties for technology and distribution for the online business; (12) the Company's ability to obtain licenses and approvals under applicable jurisdictional gaming laws and regulations; (13) risks associated with foreign operations, including market acceptance and demand for the Company's products and the products of its licensees, the Company's ability to protect its trademarks and other intellectual property and the Company's ability to manage the risk associated with its exposure to foreign currency exchange rate fluctuations; (14) changes in interest rates; (15) general economic conditions which can negatively impact advertising and consumer spending habits; and (16) attempts by consumers or citizens groups to exclude the Company's programming from local pay television distribution.