PLAYBOY ENTERPRISES, INC. June 17, 1998 Mr. Patrick Keery President TITAN MOTORCYCLE COMPANY OF AMERICA 2222 West Peoria Avenue Phoenix, AZ 85029 RE: PLAYBOY 45TH ANNIVERSARY LIMITED EDITION MOTORCYCLES Dear Mr. Keery: This letter, when the enclosed...

                            PLAYBOY ENTERPRISES, INC.


                                  June 17, 1998


Xx. Xxxxxxx Xxxxx
President
TITAN MOTORCYCLE COMPANY OF AMERICA
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000

            RE: PLAYBOY 45TH ANNIVERSARY LIMITED EDITION MOTORCYCLES

Dear Xx. Xxxxx:

     This letter, when the enclosed copy has been signed,  dated and returned by
you, will evidence the agreement between Playboy Enterprises,  Inc. ("Licensor")
and Titan Motorcycle Company of America ("Licensee") concerning the manufacture,
sale and  distribution  of  motorcycles  bearing  trademarks and images owned by
Licensor as described below. Our agreement is as follows.

1.   Licensee  acknowledges  that Licensor owns the marks  PLAYBOY,  RABBIT HEAD
     DESIGN,  PLAYBOY  2000,  and the image of XXXXXXX  XXXXXX (ON THE KNEES) in
     SILHOUETTE  and other images from the Playboy art and photo  archives  (the
     trademarks  and  images  are   collectively   referred  to  herein  as  the
     "Trademarks"  and "Images"  respectively)  and recognizes and  acknowledges
     that  the  Trademarks  and  Images  are   internationally   well-known  and
     recognized by the general public and are associated in the public mind with
     Licensor and are designations in which Licensor has acquired a considerable
     and valuable goodwill.

2.   Except as  hereinafter  provided,  Licensor  hereby  grants to Licensee and
     Licensee hereby accepts, a non-sublicensable, non-exclusive, non-assignable
     right (the  "License") to utilize the  Trademarks and Images in the design,
     manufacture,   advertisement,   distribution   and  sale  of  Playboy  45th
     anniversary limited edition motorcycles (the "Products")  through, and only
     through,  retail stores located in, and only in, the United States,  Canada
     and Japan (the  "Territory") or to wholesalers which will sell the Products
     to,  and  only  to,  retail  stores  located  in the  Territory.  Under  no
     circumstances  may  Licensee  advertise,  sell or  distribute  the Products
     outside of the Territory.  Other countries may be added to the Territory on
     a case-by-case basis and only upon the prior written approval of Licensor.

3.   Licensee may  manufacture  and produce no more than one hundred (100) Units
     of the Products for sale and distribution  plus two (2) units which must be
     manufactured  and  produced  at the start of  production  and which must be
     called PLAYBOY  PROOFS (the  "Proofs").  However,  no more than twenty (20)
     units of the Products  may be  distributed  and sold into Japan.  The first
     Proof shall be numbered "1 of 2" and the second  Proof shall be numbered "2
     of 2." Both Proofs shall be given to Licensor  free of charge no later than
     September 31, 1998.

4.   Licensee's  rights under this agreement will commence June 1, 1998 and will
     expire not later  than  December  31,  1999  unless  sooner  terminated  as
     provided under this agreement.

5.   For all purposes under this  agreement,  a "License  Quarter" shall be each
     consecutive  three (3) month  period  except that the first  (1st)  License
     Quarter  shall be the four (4) month period  commencing on June 1, 1998 and
     ending at midnight  central standard time on September 30, 1998, and if the
     expiration or  termination  of the License and this  agreement is effective
     other than on December  31,  1999,  then the final period of less than four
     (4) or three (3) months ending on the effective date of such  expiration or
     termination shall be deemed to be a License Quarter.

6.   Subject to Licensor's  prior  approval as  hereinafter  required,  Licensee
     shall commence the design,  manufacture,  advertising,  promotion, sale and
     distribution  of or for the Products as soon as  practicable  after June 1,
     1998, but in no event later than September 1, 1998. If Licensee fails to do
     so by such date,  Licensor may treat such  failure as an incurable  default
     under this agreement.

7.   Within  forty-five  (45)  days  after  the  end of  each  License  Quarter,
     including the "Sell-Off  Period" (if any),  Licensee  shall pay to Licensor
     the following royalties ("Earned Royalties"):

     a.   Two and  one-half  percent (2 1/2%) of "Net Sales" of the first twenty
          (20) units of the Products sold  (specifically  excluding the Proofs),
          but in no event will the Earned  Royalties  for such first twenty (20)
          units be less  than  Seven  Hundred  and  Seventy-Five  United  States
          Dollars (U.S.$775) per unit of the Products sold.

     b.   Five percent (5%) of Net Sales of the remaining  units of the Products
          sold, but in no event will the Earned  Royalties for the  twenty-first
          (21st)  through  thirtieth  (30th) units of the Products  sold be less
          than One  Thousand  Five  Hundred  and  Fifty  United  States  Dollars
          (U.S.$1,550) per unit of such  twenty-first  (21st) through  thirtieth
          (30th) units of the Products sold.

     c.   Five  Percent  (5%) of Net Sales of the  Products on units  thirty-one
          (31) through one hundred (100).  Licensor and Licensee shall negotiate
          in good faith the  establish  a minimum  Earned  Royalty for each such
          unit  sold.  In the  event  Licensor  and  Licensee  do not or  cannot
          establish  such minimum on or before ten (10)  business days after the

                                        2

          sale of the thirtieth (30th) unit, the minimum Earned Royalty for each
          such unit will be One Thousand  Five  Hundred  United  States  Dollars
          (U.S.$1,500) per unit sold.

          Net Sales shall mean the  invoice  price  charged by Licensee  for the
          Products  less: (i) refunds,  credits and allowances  actually made or
          allowed to  customers  for returned  Products;  (ii)  customary  trade
          discounts (including  anticipations) afforded to and actually taken by
          customers against payment for the Products;  and (iii) value added tax
          assessed on sales (only where applicable).

8.   Along with each Earned Royalty payment remitted to Licensor, Licensee shall
     furnish to Licensor or its designee a complete and accurate  statement in a
     format  acceptable  to  Licensor  and  certified  to be true  by the  Chief
     Financial Officer of Licensee  (hereinafter referred to as the "Statement")
     showing for such License Quarter:  (a) a listing of Licensee's  accounts in
     the Territory and the units and description of all of the Products sold and
     distributed to each such account or otherwise disposed of by Licensee;  (b)
     the computations of Net Sales on all such sales; and (c) the computation of
     Earned Royalties and the amount of Earned Royalties due and payable.

9.   a.   The  Products  to be  sold  and  distributed  will  be of the  highest
          quality.  The Products will not be sold or distributed  until Licensee
          has confirmed  that Licensor has approved the Products,  including any
          and all packaging,  artwork, printing,  advertising,  sales, marketing
          and promotional  materials,  fixtures and displays (or any other items
          bearing the Trademarks or Images  intended for use in connection  with
          this agreement). Licensee shall submit samples of the Products and all
          marketing  materials to Licensor  for its approval  prior to the sale,
          distribution or advertising thereof. If, within five (5) business days
          of  Licensor's  receipt of such samples,  Licensor has not  responded,
          then Licensor shall be deemed to have disapproved of such samples. If,
          however,  Licensor has approved of such samples, then the Products and
          marketing materials thereafter will conform to the approved samples.

     b.   Licensee's  policy of sale or  distribution of the Products will never
          reflect  adversely upon the good name of Licensor.  Licensee shall not
          obtain any right, title or interest whatsoever in or to the Trademarks
          and Images by virtue of its use of the  Trademarks  and  Images  under
          this  agreement or otherwise and all  additional  goodwill  associated
          with the Trademarks and Images which is created through Licensee's use
          of such  Trademarks  and Images  shall inure  solely to the benefit of
          Licensor.

     c.   Licensee  shall affix or imprint  legibly on the Products or packaging
          for the Products such  trademark and  copyright  notices,  legends and
          disclaimers  a  Licensor  directs.   The  Products  shall  contain  no
          advertising unless approved in advance by Licensor.

                                        3

     d.   All rights not  specifically  granted to Licensee under this agreement
          are reserved by Licensor.

10.  Licensee shall:  (i) keep accurate books of account and records  (including
     but not limited to utilization  of  consecutively  numbered  invoices which
     reconcile to each Statement and  Licensee's  general  ledger)  covering all
     transactions  relating to or arising out of this agreement (which books and
     records  shall  be  maintained  separately  from  Licensee's  documentation
     relating to other items  manufactured  or sold by Licensee) and (ii) permit
     Licensor or its nominees, employees, agents or representatives to have full
     access to, to inspect such books and records at all reasonable hours of the
     day, to conduct an examination  of and to copy (at Licensor's  expense) all
     such books and records. Licensee shall maintain in good order and condition
     all  such  books  and  records  for a period  of two (2)  years  after  the
     expiration or  termination  of this agreement or, in the event of a dispute
     between the parties hereto, until such dispute is resolved,  whichever date
     is later.  Receipt or  acceptance  by Licensor of any  Statement  furnished
     pursuant  hereto or any sums paid by Licensee  hereunder shall not preclude
     Licensor from  questioning the correctness  thereof at any time, and if one
     or more  inconsistencies  or mistakes  are  discovered  by Licensor in such
     Statement,  it or they shall be rectified in an amended Statement  received
     by  Licensor  no later  than ten (10)  days  after the date of  receipt  by
     Licensee of notice of that which should be rectified.

11.  If any  inspection  or  examination  referred to in  Paragraph  10.  hereof
     discloses,  or Licensor or Licensee otherwise discovers, an underpayment of
     Earned Royalties, the amount of such underpayment shall be paid by Licensee
     to  Licensor  no later than  thirty  (30) days  after  receipt of notice or
     knowledge  thereof by  Licensee.  In the event of such an  underpayment  by
     Licensee in excess of nine percent  (9%),  then Licensor may elect to treat
     such  occurrence as an incurable  default by Licensee under this agreement.
     If such  inspection or  examination:  (i) discloses or Licensor or Licensee
     otherwise  discovers an overpayment of Earned  Royalties the amount of such
     overpayment  shall  be  credited  against  future  payment  of  any  Earned
     Royalties  or,  in the  event  of the  expiration  or  termination  of this
     agreement and there is or are no such future payments, such amount shall be
     paid by  Licensor  to  Licensee  not later than  thirty (30) days after the
     discovery  thereof by  Licensor,  subject to  Licensor's  rights of setoff,
     recoupment and  counterclaim or (ii) reveals that for the period covered by
     such  inspection or  examination  there is an error of five percent (5%) or
     more in the Earned  Royalties  previously  reported on the  Statement(s) as
     being due from  Licensee,  all expenses  involved in the conducting of such
     inspection or examination shall be borne by Licensee. Licensee shall pay to
     Licensor  the  amount of such  expenses  no later  than ten (10) days after
     Licensee's  receipt of Licensor's  invoice therefor.  If such error is less
     than five percent (5%), such expenses shall be borne by Licensor.

12.  Upon the expiration or termination of this agreement, and provided Licensee
     is in full  compliance  with  the  terms  and  conditions  of  this  letter
     agreement,  and  provided  Licensee is not in arrears in the payment of any
     Earned  Royalties,  Licensee may, for a period of five (5) months after the
     effective  date of  expiration  or  termination  (the  "Sell-Off  Period"),

                                        4

     dispose   of,   through   Licensee's   existing,   recognized   network  of
     distribution,  any  remaining  inventory  of the  Products  that  have been
     approved  by Licensor  and that are in process or on hand at the  effective
     date of such expiration or termination.  Any new promotional,  marketing or
     other  materials  used  during  the  Sell-Off  Period  are  subject  to the
     approvals and conditions  set forth in Paragraph 9. above.  It is expressly
     understood  and  agreed  by  Licensee  that the  Sell-Off  Period  shall be
     considered a separate accounting period for the purpose of computing Earned
     Royalties  due to Licensor for sales during such period.  Such sales during
     the Sell-Off Period shall not be applied  against any Earned  Royalties due
     or payable prior to the Sell-Off Period.

13.  Licensor  shall have the option,  in regard to any  Products  which  remain
     unsold  after the  Sell-Off  Period has ended,  to require  Licensee to, at
     Licensee's cost, either:  (i) sell such remaining  inventory to Licensor at
     cost; (ii) destroy such remaining inventory, in which case a certificate of
     destruction   will  be  provided  to  Licensor   signed  by  an  authorized
     representative  of  Licensee;  or (iii)  remove  from  such  inventory  and
     destroy,  at  Licensee's  sole cost all  Trademarks  and Images and provide
     Licensor with evidence of such removal and destruction.

14.  Licensee  will obtain and  maintain,  at  Licensee's  own expense,  product
     liability  insurance  satisfactory  to Licensor  in the  minimum  amount of
     Twenty  Million  United  States  Dollars  (U.S.$20,000,000)  of primary and
     umbrella coverage from one or more insurance companies,  each with a Best's
     rating of "A" (or  better),  and  qualified  to  transact  business  in the
     Territory (each such insurance policy shall name each of the Indemnitees as
     additional insureds by reason of the indemnity contained in Paragraph 15.a.
     hereof and shall evidence the insurer's agreement that such insurance shall
     not be amended,  canceled,  terminated or permitted to lapse without thirty
     (30) days' prior written notice to Licensor),  and provide  Licensor with a
     certificate  of such insurance upon execution of this agreement by Licensee
     and on each  anniversary  date of the grant or issuance of each such policy
     during the terms of this agreement and the Sell-Off Period  evidencing that
     each such policy has not been altered with  respect to the  Indemnitees  in
     any way  whatsoever  nor permitted to lapse for any reason,  and evidencing
     the payment of premium of each such policy.  Licensee  will cause each such
     policy to be in full  force and  effect  prior to the  commencement  of any
     design, manufacture,  advertising, promotion, sale, distribution or dealing
     with any or all of the Products  whatsoever and will cause each such policy
     to remain in effect for 10 years after the -- expiration or  termination of
     this agreement.  Failure by Licensee to obtain the required insurance prior
     to such  commencement  or failure by Licensee to  adequately  maintain such
     insurance  during .the term of this agreement and the Sell-Off Period shall
     be an incurable default by Licensee under this agreement.

15.  a.   Except as provided in Paragraph 15.b. below,  Licensee will indemnify,
          defend and hold Licensor, its parent, subsidiaries and affiliates, and
          its  and  their   respective   officers,   directors,   employees  and
          shareholders  harmless  from any claims,  suits,  losses,  injuries or
          damages (including  without limitation  attorneys' fees and litigation
          expenses) arising out of

                                        5

          or in  connection  with:  (a) the  design,  manufacture,  advertising,
          promotion,  sale or  distribution  of or any other dealing  whatsoever
          with the Products or Materials;  (b) any alleged  action or failure to
          act  whatsoever by Licensee;  (c) any alleged  defect in any or all of
          the Products; (d) any alleged non-conformity to or non-compliance with
          any  law  pertaining  to the  design,  quality,  safety,  advertising,
          promotion or  marketing  of any or all of the Products or  advertising
          material;  or (e) any  breach by  Licensee  of any of its  obligations
          hereunder.

     b.   Licensor will indemnify, defend and hold Licensee harmless against any
          claims or suits arising  solely and directly out of the authorized use
          by  Licensee  of the  Trademarks,  Images or  material  received  from
          Licensor as set forth under this agreement  provided  prompt notice is
          given to  Licensor  of any such claim or suit,  but in no event  shall
          such  indemnification  include  consequential  or incidental  damages.
          Licensor  shall have the option to settle or to undertake  and conduct
          the defense of any suit so brought.  Licensee expressly represents and
          agrees that no  compromise  or  settlement of any claim or suit or any
          preliminary  negotiations  with  respect  to any  such  compromise  or
          settlement,  shall be made or entered into by Licensee except with and
          under the  special  written  consent  and  instructions  of  Licensor.
          Licensee  will  cooperate  fully with  Licensor in defending  any such
          action.

16.  a.   Except as  otherwise  provided in this  agreement,  if Licensee  shall
          violate any of the terms or conditions hereof or default on any of its
          duties,  obligations or warranties hereunder,  Licensor shall have the
          right and option,  but not the duty, to terminate the License and this
          agreement upon not less than ten (10) days' prior written notice,  but
          no neglect or  failure  to serve such  notice  shall be deemed to be a
          waiver of any such violation or default. Such termination shall become
          effective  unless such  violation or default  described in such notice
          shall be completely  remedied to the  satisfaction  of Licensor within
          such ten (10) day period.

     b.   Notwithstanding  the  provisions of Paragraph  16.a.  hereof,  if such
          violation  or  default:  (a) is of a kind that a remedy or cure cannot
          effectively  restore the prior  circumstances;  or (b) is described in
          this  agreement  as an  incurable  default,  then the License and this
          agreement  shall  terminate upon receipt by Licensee of written notice
          thereof  without  any  period  of  remedy  or  cure  whatsoever.   The
          termination  of the  License  and  this  agreement  shall  be  without
          prejudice to any rights that Licensor  otherwise has against  Licensee
          under this agreement or under law.

17.  The expiration or termination of this agreement shall not relieve  Licensee
     of any  obligations  incurred  prior or  subsequent  to such  expiration or
     termination; nor shall expiration or termination impair or prejudice any of
     the  rights  of  Licensor  or  Licensee,  respectively,  accruing  prior or
     subsequent thereto.

                                        6

18.  Not more than ninety (90),  but not less than thirty (30) days prior to the
     expiration of this agreement,  or within ten (10) days after (i) receipt of
     notice of  termination  or (ii) the happening of any event that  terminates
     this agreement where no such notice may be required, Licensee shall furnish
     to  Licensor a  complete  and  accurate  statement  showing  the number and
     description  of all  Products on hand.  Licensor or its  authorized  agents
     shall have the right to conduct a physical inspection and take inventory to
     ascertain or verify such  inventory  and  statement.  Licensor  retains all
     other legal and equitable  rights it may have in the  circumstances,  which
     rights are hereby reserved.

19.  If Licensee  files a petition in bankruptcy or is adjudicated a bankrupt or
     if a petition in bankruptcy is filed against Licensee, or if Licensee shall
     become  insolvent  or shall  agree to make or makes an  assignment  for the
     benefit of creditors or an arrangement  pursuant to any bankruptcy  law, or
     if  Licensee  discontinues  business,  or it a receiver  is  appointed  for
     Licensee, this agreement will automatically terminate without the necessity
     of any notice whatsoever.  If this agreement is so terminated,  Licensee or
     its receivers,  representatives,  agents or the like shall have no right to
     sell,  exploit or enter into any deal with respect to the  Products  except
     with and under the special written consent and instruction of Licensor.

20.  If any  term or  provision  of this  agreement  or its  application  to any
     circumstances shall be adjudged illegal,  unenforceable or invalid and such
     adjudication  has  become  final  and  non-appealable,  such  provision  or
     application shall be deemed deleted without affecting the remainder of this
     agreement.

21.  Nothing  herein  contained  shall be  construed to place the parties in the
     relationship as partners or joint venturers and Licensee will have no power
     to obligate or bind Licensor in any manner whatsoever.

22.  This agreement represents the entire understanding of the parties.  None of
     the terms of this agreement can be waived or modified  except by an express
     agreement   in  writing   assigned   by  the   parties  and  there  are  no
     representations, promises, warranties, covenants or undertakings other than
     those contained in this agreement.  No custom or practice of the parties at
     variance  with the terms  hereof shall  constitute  a waiver of  Licensor's
     right to  demand  exact  compliance  with any of the  terms or the delay by
     either party in enforcing, any of its rights under this agreement shall not
     be deemed as  constituting  a waiver or a  modification  thereof and either
     party may, within the time provided by applicable law, commence appropriate
     proceedings  to enforce any or all such rights.  No person  firm,  group or
     corporation  other  than  Licensee,   Licensor,   their   subsidiaries  and
     affiliates  shall be  deemed  to have  acquired  any  rights  by  reason of
     anything contained in this agreement.

23.  Licensor,  in entering  into this  agreement,  is relying  upon the skills,
     reputation and personnel of Licensee.  This  agreement and all rights,  and
     duties under this agreement are personal to Licensee and shall not, without
     the prior written consent of Licensor, be assigned,  mortgaged or otherwise
     encumbered by Licensee.

                                        7

24.  Licensor may assign this agreement to any of its subsidiaries or affiliates
     or to  any  entity  that  succeeds  to  the  interest  of  Licensor  in the
     Trademarks  or Images  without the  consent of Licensee  and shall have the
     right to  nominate  any other  person,  company or  corporation  to receive
     royalty income or to undertake the  obligations of Licensor under the terms
     of this agreement whether or not this agreement is so assigned.

25.  a.   In this  agreement  where the  consent  or  approval  of  Licensor  is
          required to any action of  Licensee,  such  consent or approval  shall
          only be effective if granted in writing by Licensor.

     b.   Unless otherwise expressly  indicated in this agreement,  each notice,
          request,   approval,   consent,  payment  and  Statement  (hereinafter
          referred  to as a  "Submission")  specifically  provided  for in  this
          agreement  shall be in writing and shall be  considered  effective  or
          received  the  earliest of: (i) five (5) days after the date when such
          Submission  is mailed by  certified  or  registered  mail with postage
          prepaid to the party hereto at the address set forth  below;  (ii) two
          (2)  business  days  after the date when  such  Submission  is sent by
          overnight  courier service  addressed to such party at such address or
          the date  indicated  as  received  on the  overnight  courier  service
          confirmation  receipt,   whichever  is  earlier;   (iii),  except  for
          payments,  when such Submission is sent by facsimile addressed to such
          party at such  address and the sender  thereof  requests  and receives
          written  confirmation  from such party that such  Submission  has been
          received  and is  legible;  or (iv) when such  Submission  is actually
          received by such party at such address:

                  Licensor at:      000 Xxxxx Xxxx Xxxxx Xxxxx
                                    Xxxxxxx, XX 00000
                                    Attention: Xxxxx Xxxxx

                  With a copy to:   000 Xxxxx Xxxx Xxxxx Xxxxx
                                    Xxxxxxx, Xxxxxxxx 00000
                                    Attention:  General Counsel

                  Licensee at:      0000 Xxxx Xxxxxx
                                    Xxxxxxx, XX 00000
                                    Attn:    Xx. Xxxxxxx Xxxxx, President
                                          or Xx. Xxxxx Xxxxx, Chairman

26.  This agreement shall be governed by and  interpreted  under the laws of the
     State of  Illinois  without  regard to its  conflicts  of laws  provisions.
     Licensee hereby submits to personal jurisdiction in Cook County,  Illinois.
     The  parties  hereto  agree  that any and all  disputes  arising  out of or
     relating in any way to this  agreement  shall be  litigated  only in courts
     sitting in Cook County, Illinois.

                                        8

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

ACCEPTED AND AGREED TO:                 Very truly yours,

TITAN MOTORCYCLE COMPANY OF AMERICA     PLAYBOY ENTERPRISES, INC.


By: /s/ Xxxxxxx X. Xxxxx                By: /s/ [illegible]
    -------------------------------         -------------------------------
Title: CEO                              Title: V.P.
       ----------------------------            ----------------------------
Date: 6/18/97                           Date: 6/17/98
      -----------------------------           -----------------------------

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