SUBSCRIPTION AGREEMENT




                            DATED AS OF MARCH 7, 2000

                                 BY AND BETWEEN


                         TITAN MOTORCYCLE CO. OF AMERICA


                                       AND


                             ADVANTAGE FUND II LTD.


                                   ----------


                      SERIES B CONVERTIBLE PREFERRED STOCK


                                       AND


                         COMMON STOCK PURCHASE WARRANTS

                                      -i-
<PAGE>
                             SUBSCRIPTION AGREEMENT

                      SERIES B CONVERTIBLE PREFERRED STOCK
                                       AND
                         COMMON STOCK PURCHASE WARRANTS

                         TITAN MOTORCYCLE CO. OF AMERICA

                                                                            PAGE

1. AGREEMENT TO
   SUBSCRIBE................................................................  1
   (a) Subscription.........................................................  1
   (b) Closing..............................................................  1
   (c) Form of Payment......................................................  2

2. BUYER REPRESENTATIONS, WARRANTIES, ETC...................................  2
   (a) Purchase for Investment..............................................  2
   (b) Accredited Investor..................................................  2
   (c) Reoffers and  Resales................................................  2
   (d) Company Reliance.....................................................  2
   (e) Information Provided.................................................  2
   (f) Absence of Approvals.................................................  3
   (g) Subscription Agreement...............................................  3

3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.................................  3
   (a) Organization and
       Authority............................................................  3
   (b)
       Capitalization.......................................................  3
   (c) Concerning the Shares and the Common Stock...........................  5
   (d) Subscription Agreement and Other Transaction Documents...............  5
   (e) Non-contravention....................................................  5
   (f) Approvals............................................................  6
   (g) Information Provided.................................................  6
   (h) Absence of Certain Changes...........................................  6
   (i) Absence of Certain Proceedings.......................................  7
   (j) Properties...........................................................  7
   (k) Labor Relations......................................................  8
   (l) SEC Filings..........................................................  8
   (m) Absence of Brokers, Finders, Etc.....................................  8
   (n) No Solicitation......................................................  8
   (o) Certain Issuances of Securities......................................  9
   (p) Absence of Rights Agreement..........................................  9

4. CERTAIN COVENANTS AND
   ACKNOWLEDGMENTS..........................................................  9
   (a) Transfer Restrictions................................................  9

                                      -ii-

                                      -19-
<PAGE>
   (b) Restrictive Legend...................................................  9
   (c) Registration Rights Agreement........................................ 11
   (d) Form D............................................................... 11
   (e) Authorization for Trading............................................ 11
   (f) Use of Proceeds...................................................... 11
   (g) Blue Sky Laws........................................................ 11
   (h) Certain Expenses..................................................... 12
   (i) Certain Issuances of Securities...................................... 12
   (j) Certain Selling Restrictions......................................... 13
   (k) Transactions with Affiliates......................................... 14
   (l) Best Efforts......................................................... 14

5. TRANSFER AGENT AGREEMENT................................................. 14
   (a) Transfer Agent Agreement............................................. 14
   (b) Conversion Procedure................................................. 15

6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE................. 15

7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE......................... 15

8. MISCELLANEOUS............................................................ 16
   (a) Governing Law........................................................ 16
   (b) Counterparts......................................................... 16
   (c) Headings, etc........................................................ 17
   (d) Severability......................................................... 17
   (e) Amendments........................................................... 17
   (f) Waivers.............................................................. 17
   (g) Notices.............................................................. 17
   (h) Assignment........................................................... 17
   (i) Survival of Representations and Warranties........................... 18
   (j) Entire Agreement..................................................... 18
   (k) Termination.......................................................... 18
   (l) Further Assurances................................................... 18
   (m) Public Statements, Press Releases, Etc............................... 18
   (n) Construction......................................................... 19


SCHEDULES

Schedule 3(b)     Convertible Securities
Schedule 3(h)     Material Liabilities, Debts or Obligations
Schedule 3(i)     Certain Proceedings
Schedule 3(j)     Claims Against Company Proprietary Rights
Schedule 4(k)     Transactions with Affiliates

                                     -iii-
<PAGE>
ANNEXES

Annex I     Form of Certificate of Designations
Annex II    Form of Common Stock Purchase Warrant
Annex III   Form of Registration Rights Agreement
Annex IV    Form of Transfer Agent Agreement
Annex V     Form of Notice of Conversion of Series B Convertible Preferred Stock
Annex VI    Form of Opinion of Counsel to Be Delivered on Closing Date
Annex VII   Form of Opinion of Nevada Counsel to Be Delivered on Closing Date

                                      -iv-
<PAGE>
                             SUBSCRIPTION AGREEMENT

     THIS  SUBSCRIPTION  AGREEMENT,  dated as of March 7, 2000,  by and  between
TITAN MOTORCYCLE CO. OF AMERICA,  a Nevada  corporation  (the  "Company"),  with
headquarters  located at 2222 West Peoria Avenue,  Phoenix,  Arizona 85029,  and
ADVANTAGE FUND II LTD., a British Virgin Islands corporation (the "Buyer").

                                  WITNESSETH:
                                  -----------

     WHEREAS,  the Buyer wishes to  purchase,  upon the terms and subject to the
conditions of this Agreement, shares of non-voting,  convertible preferred stock
of the Company which will be convertible into shares of Common Stock,  $.001 par
value (the  "Common  Stock"),  of the Company and in  connection  therewith  the
Company is to issue to the Buyer warrants to purchase  shares of Common Stock as
provided in this Agreement; and

     WHEREAS,  the  Company  and the Buyer are  executing  and  delivering  this
Agreement in reliance upon the exemption from securities  registration  afforded
by Rule 506 of Regulation D  ("Regulation  D") as  promulgated by the Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");

     NOW THEREFORE,  in  consideration  of the premises and the mutual covenants
contained  herein and other good and  valuable  consideration,  the  receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

     1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.

     (a) SUBSCRIPTION.  The Buyer hereby agrees to purchase from the Company the
number of shares  (the  "Preferred  Shares") of Series B  Convertible  Preferred
Stock, $.001 par value (the "Preferred  Stock"), of the Company set forth on the
signature page of this  Agreement,  having the terms and conditions as set forth
in the form of the  Certificate  of  Designations  of the  Series B  Convertible
Preferred Stock attached hereto as ANNEX I (the  "Certificate of  Designations")
at the price per share  and for the  aggregate  purchase  price set forth on the
signature page of this Agreement (the "Purchase Price").  In connection with the
purchase of the  Preferred  Shares by the Buyer,  the Company shall issue to the
Buyer Common Stock  Purchase  Warrants in the form  attached  hereto as ANNEX II
(the  "Warrants")  to purchase the number of shares of Common Stock set forth on
the signature page of this  Agreement.  The shares of Common Stock issuable upon
exercise of the Warrants  are  referred to herein as the  "Warrant  Shares." The
Warrant  Shares and the shares of Common Stock  issuable upon  conversion of the
Preferred Shares are referred to herein collectively as the "Common Shares." The
Common Shares and the Preferred  Shares are referred to herein  collectively  as
the "Shares." The Shares and the Warrants are referred to herein collectively as
the  "Securities." As used in this Agreement,  the term "Business Day" means any
day other than a Saturday,  Sunday or other day on which commercial banks in the
City of New York are authorized or required by law to remain closed.

     (b) CLOSING. The issuance and sale of the Preferred Shares and the issuance
of the Warrants (the "Closing") shall occur at 12:00 noon, New York City time on
the date (the "Closing  Date") on which the parties'  respective  conditions set
<PAGE>
forth in Sections 6 and 7 have been satisfied or waived,  or such other mutually
agreed to date and time.  The Closing  shall  occur on the  Closing  Date at the
office of Siller Wilk LLP, 747 Third Avenue,  New York,  New York 10017.  At the
Closing, upon the terms and subject to the conditions of this Agreement, (1) the
Company  shall  issue and  deliver  to the Buyer the  Preferred  Shares  and the
Warrants  against  payment by the Buyer to the Company of an amount equal to the
Purchase  Price,  and (2) the Buyer shall pay to the Company an amount  equal to
the Purchase Price against delivery by the Company to the Buyer of the Preferred
Shares and the  Warrants.  The  certificates  for the  Preferred  Shares and the
Warrants shall be registered in the name of the buyer or its nominee.

     (c) FORM OF  PAYMENT.  Payment  by the Buyer of the  Purchase  Price to the
Company  on the  Closing  Date  shall be made by wire  transfer  of  immediately
available funds to:

          Bank of America
          101 North First Avenue
          Phoenix, Arizona  85003
          ABA# 122101706

          For credit to account No.   000943061181
          For credit to the account of Titan Motorcycle Co. of America
          Reference:  Advantage

     2. BUYER REPRESENTATIONS, WARRANTIES, ETC.

     The Buyer  represents  and warrants to, and covenants and agrees with,  the
Company as follows:

     (a) PURCHASE FOR INVESTMENT.  The Buyer is purchasing the Preferred  Shares
and acquiring the Warrants,  and will acquire the Common Shares upon  conversion
of the  Preferred  Shares or exercise of the  Warrants,  for its own account for
investment  only and not with a view  towards  the public  sale or  distribution
thereof;

     (b) ACCREDITED INVESTOR. The Buyer is an "accredited investor" as that term
is defined in Rule 501 of the General Rules and  Regulations  under the 1933 Act
by reason of Rule 501(a)(3);

     (c) REOFFERS AND RESALES. All subsequent offers and sales of the Securities
by the Buyer shall be made  pursuant to  registration  of the  Securities  being
offered  and  sold  under  the  1933  Act  or  pursuant  to  an  exemption  from
registration;

     (d) COMPANY  RELIANCE.  The Buyer understands that the Preferred Shares are
being offered and sold, the Warrants are being issued, and the Common Shares are
being offered,  in each case to it in reliance on specific  exemptions  from the
registration requirements of United States federal and state securities laws and
that the  Company is relying  upon the truth and  accuracy  of, and the  Buyer's
compliance with, the representations,  warranties,  agreements,  acknowledgments
and  understandings  of the  Buyer set forth  herein in order to  determine  the

                                      -2-
<PAGE>
availability  of such exemptions and the eligibility of the Buyer to acquire the
Preferred Shares and the Warrants and to receive an offer of the Common Shares;

     (e)  INFORMATION  PROVIDED.  The Buyer and its advisors,  if any, have been
furnished with all materials  relating to the business,  finances and operations
of the Company  and  materials  relating to the offer and sale of the  Preferred
Shares and the issuance of the Warrants and the offer of the Common Shares which
have been requested by the Buyer; the Buyer and its advisors,  if any, have been
afforded  the  opportunity  to ask  questions  of the Company and have  received
satisfactory  answers to any such inquiries;  without limiting the generality of
the  foregoing,  the Buyer has had the  opportunity  to obtain and to review the
Company's  (1) Annual Report on Form 10-KSB for the fiscal year ended January 2,
1999 (as amended by Amendment No. 1 thereto on Form 10-KSB/A) (the "1998 10-K"),
(2)  Quarterly  Reports on Form  10-QSB for the fiscal  quarters  ended April 3,
1999, July 3, 1999 and October 2, 1999 (as amended by Amendment No. 1 thereto on
Form  10-QSB/A),  (3) Current  Reports on Form 8-K,  dated  December  28,  1998,
January 8, 1999 and September 17, 1999 and (4)  definitive  proxy  statement for
the Company's 1999 Annual Meeting of Shareholders  held on May 12, 1999, in each
case as filed  with the SEC  (collectively,  the "SEC  Reports");  and the Buyer
understands that its investment in the Shares involves a high degree of risk;

     (f)  ABSENCE OF  APPROVALS.  The Buyer  understands  that no United  States
federal  or state  agency or any other  government  or  governmental  agency has
passed on or made any recommendation or endorsement of the Shares;

     (g)  SUBSCRIPTION  AGREEMENT.   This  Agreement,  the  Registration  Rights
Agreement,  in the form attached hereto as ANNEX III (the  "Registration  Rights
Agreement"),  and the Transfer Agent  Agreement,  in the form attached hereto as
ANNEX IV (the "Transfer Agent Agreement"), have been duly and validly authorized
by the Buyer,  this Agreement has been duly executed and delivered by the Buyer,
and this Agreement is, and the  Registration  Rights  Agreement and the Transfer
Agent  Agreement,  when executed and delivered by the Buyer,  will be, valid and
binding  agreements of the Buyer enforceable in accordance with their respective
terms,  subject  as to  enforceability  to general  principles  of equity and to
bankruptcy,   insolvency,  moratorium  and  other  similar  laws  affecting  the
enforcement of creditors' rights generally; and

     (h) ABSENCE OF BROKERS,  FINDERS,  ETC. No broker, finder or similar person
engaged by the Buyer is entitled to any commission, fee or other compensation in
connection  with the  transactions  contemplated by this Agreement and the Buyer
shall pay, and  indemnify  and hold  harmless the Company  from,  any claim made
against  the Company by any such  person for any such  commission,  fee or other
compensation.

     3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.

     The Company  represents and warrants to, and covenants and agrees with, the
Buyer that:

     (a)  ORGANIZATION  AND AUTHORITY.  Each of the Company and its  subsidiary,
Titan  Motorcycle  GmbH, a corporation  organized under the laws of Germany (the
"Subsidiary"),  is a corporation  duly organized,  validly  existing and in good

                                      -3-
<PAGE>
standing  under  the  laws of its  jurisdiction  of  incorporation,  and has all
requisite  corporate  power and  authority  to (i) own,  lease and  operate  its
properties  and to carry on its  business  as now being  conducted,  and (ii) to
execute,   deliver  and  perform  its  obligations  under  this  Agreement,  the
Certificate of Designations,  the Warrants,  the Registration  Rights Agreement,
the  Transfer  Agent  Agreement,  and the other  agreements  to be executed  and
delivered  by  the  Company  in  connection  herewith,  and  to  consummate  the
transactions  contemplated  hereby  and  thereby.  Each of the  Company  and the
Subsidiary is duly qualified to do business as a foreign  corporation  and is in
good standing in all jurisdictions  wherein such  qualification is necessary and
where  failure  so to  qualify  could  have a  material  adverse  effect  on the
business,  properties,  operations,  condition (financial or other),  results of
operations or prospects of the Company and the Subsidiary, taken as a whole. The
Company has no  subsidiaries  or equity  investment in any person other than the
Subsidiary.

     (b) CAPITALIZATION. The authorized capital stock of the Company consists of
(1)  90,000,000   shares  of  Common  Stock  of  which  17,181,187  shares  were
outstanding on February 29, 2000, all of which are fully paid and nonassessable;
and (2)  10,000,000  shares of Preferred  Stock,  $.001 par value,  of which (A)
4,000 shares are designated as Series A Convertible  Preferred  Stock,  of which
3,973  shares are issued and  outstanding  and (B) 2,000 shares of which will be
designated as Series B Convertible  Preferred  Stock and will be issued pursuant
to this  Agreement  and the other  subscription  agreement  for the  purchase of
shares of Preferred Stock and the acquisition of common stock purchase  warrants
being entered into in connection herewith (the "Other Subscription  Agreement");
and on the Closing Date there will be (x) no material increase from February 29,
2000 in the number of shares of Common Stock outstanding and (y) no issuances of
preferred  stock  except  as issued  pursuant  to this  Agreement  and the Other
Subscription  Agreement.  As of February 29, 2000,  the Company had  outstanding
options, warrants and similar rights entitling the holders to purchase 1,285,000
shares of Common Stock.  Other than as set forth in the preceding,  sentence and
on SCHEDULE 3(B) to this  Agreement,  the Company does not have  outstanding any
material  amount of securities  (or  obligations  to issue any such  securities)
convertible into, exchangeable for or otherwise entitling the holders thereof to
acquire  shares of Common  Stock,  except as disclosed  in the SEC Reports.  The
Company has duly  reserved  from its  authorized  and unissued  shares of Common
Stock  the  full  number  of  shares  required  for (a) all  options,  warrants,
convertible  securities and other rights to acquire shares of Common Stock which
are  outstanding and (b) all shares of Common Stock and options and other rights
to acquire shares of Common Stock which may be issued or granted under the stock
option  and  similar  plans  which  have  been  adopted  by the  Company  or the
Subsidiary.  No  antidilution  or similar  adjustment  affecting any outstanding
class or series of securities will arise by reason of the issuance or conversion
of the  Preferred  Shares or the  issuance or  exercise  of the  Warrants or the
issuance or  conversion  of the shares of  Preferred  Stock and the  issuance or
exercise  of the  warrants  to be  issued  pursuant  to the  Other  Subscription
Agreement.  The  outstanding  shares of Common  Stock and  outstanding  options,
warrants and other securities  convertible  into,  exchangeable for or otherwise
entitling  the holder  thereof to acquire  shares of Common Stock have been duly
authorized and validly issued.  None of such outstanding shares of Common Stock,
options,  warrants  and other  securities  has been issued in  violation  of the
preemptive rights of any securityholder of the Company.  The offers and sales of
the  outstanding  shares of Common  Stock and such  options,  warrants and other
securities were at all relevant times either  registered  under the 1933 Act and
applicable state securities laws or exempt from such requirements. Except as set

                                      -4-
<PAGE>
forth on SCHEDULE  3(B),  no holder of any of the Company's  securities  has any
rights,  "demand," "piggy-back" or otherwise, to have such securities registered
by reason of the intention to file,  filing or effectiveness of the Registration
Statement (as defined in the Registration Rights Agreement).

     (c) CONCERNING  THE SHARES AND THE COMMON STOCK.  The Shares have been duly
authorized.  The Preferred  Shares,  when issued and paid for in accordance with
this  Agreement,  and the Common  Shares,  when  issued upon  conversion  of the
Preferred  Shares or upon exercise of the Warrants,  as the case may be, will be
duly and validly issued,  fully paid and non-assessable and will not subject the
holder thereof to personal  liability by reason of being such holder.  There are
no preemptive or similar  rights of any  stockholder of the Company or any other
person to acquire any of the Shares.  The  Company has duly  reserved  3,686,000
shares of Common  Stock for  conversion  of the  shares of  Preferred  Stock and
exercise of the Warrants and the warrants  issuable in connection with the Other
Subscription  Agreement,  and such shares shall  remain so reserved  (subject to
reduction from time to time for shares of Common Stock issued upon conversion of
shares of Preferred Stock or redemption or other permitted  retirement of shares
of  Preferred  Stock),  and the  Company  shall from time to time  reserve  such
additional  shares of Common Stock as shall be required to be reserved  pursuant
to  the  Certificate  of  Designations,  as  long  as  the  Preferred  Stock  is
convertible,  and  pursuant  to  the  Warrants,  as  long  as the  Warrants  are
exercisable.  The  Common  Stock is listed for  trading  on the Nasdaq  SmallCap
Market ("Nasdaq") and (1) the Company and the Common Stock meet the criteria for
continued  listing and trading on Nasdaq;  (2) the Company has not been notified
since December 1, 1998 by Nasdaq of any failure or potential failure to meet the
criteria for  continued  listing and trading on Nasdaq and (3) no  suspension of
trading in the Common  Stock is in effect.  The Company  knows of no reason that
the Common Shares will not be eligible for listing on Nasdaq.

     (d) SUBSCRIPTION AGREEMENT AND OTHER TRANSACTION DOCUMENTS. This Agreement,
the Certificate of Designations, the Registration Rights Agreement, the Warrants
and the  Transfer  Agent  Agreement  and the other  agreements  and  instruments
contemplated  hereby and thereby  have been duly and validly  authorized  by the
Company,  this Agreement has been duly executed and delivered by the Company and
this Agreement is, and the Registration  Rights Agreement,  the Warrants and the
Transfer Agent Agreement and such other agreements,  when executed and delivered
by  the  Company,  will  be,  valid  and  binding  obligations  of  the  Company
enforceable  in  accordance  with  their   respective   terms,   subject  as  to
enforceability  to general  principles of equity and to bankruptcy,  insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.

     (e)  NON-CONTRAVENTION.  The  execution and delivery by the Company of this
Agreement  and  the  other  documents  contemplated  by this  Agreement  and the
consummation  by the  Company of the  issuance of the  Preferred  Shares and the
Warrants  as  contemplated  by  this  Agreement,   and  the  other  transactions
contemplated  by  this  Agreement,   the   Certificate  of   Designations,   the
Registration Rights Agreement,  the Warrants and the Transfer Agent Agreement do
not and will not,  with or without the giving of notice or the lapse of time, or
both (i) result in any violation of any terms of the Articles of  Incorporation,
as amended,  or By-laws of the Company or the Subsidiary,  (ii) conflict with or
result  in a breach  by the  Company  or the  Subsidiary  of any of the terms or
provisions  of, or constitute a default  under,  or result in the  modification,

                                      -5-
<PAGE>
amendment,  termination or  cancellation  of, result in the  acceleration of any
obligation of the Company or the Subsidiary  under, or result in the creation or
imposition of any lien, security interest, charge or encumbrance upon any of the
properties  or  assets  of  the  Company  or the  Subsidiary  pursuant  to,  any
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company or the  Subsidiary is a party or by which the Company or the  Subsidiary
or any of their respective properties or assets is bound or affected, except for
such  matters  as to  which  consents  have  been  obtained,  (iii)  violate  or
contravene  any  applicable  law, rule or regulation or any  applicable  decree,
judgment or order of any court,  United States federal or state regulatory body,
administrative  agency or other  governmental body having  jurisdiction over the
Company or the  Subsidiary  or any of their  respective  properties or assets or
(iv)  have  any   material   adverse   effect  on  any  permit,   certification,
registration,  approval, consent, license or franchise necessary for the Company
or the Subsidiary to own or lease and operate any of their respective properties
or to conduct any of their  respective  businesses or the ability of the Company
or the Subsidiary to make use thereof.

     (f) APPROVALS.  No  authorization,  approval or consent of, or filing with,
any court, governmental body, regulatory agency,  self-regulatory  organization,
or stock exchange or market or the stockholders of the Company is required to be
obtained or made by the Company for (1) the execution,  delivery and performance
by the  Company  of this  Agreement,  the  Registration  Rights  Agreement,  the
Warrants,  the Transfer Agent Agreement and the other agreements and instruments
contemplated  hereby and thereby,  (2) the execution,  filing and performance by
the Company of the Certificate of Designations, (3) the issuance and sale of the
Preferred  Shares and the  issuance  of the  Warrants  as  contemplated  by this
Agreement  and (4) the issuance of Common  Shares on conversion of the Preferred
Shares or upon the  exercise of the  Warrants,  other than (v) the filing of the
notification  for  listing of  additional  shares  with the Nasdaq  pursuant  to
Section  4(e),  (w) the  filing  of the  Certificate  of  Designations  with the
Secretary of State of the State of Nevada, (x) registration of the resale of the
Common  Shares under the 1933 Act as  contemplated  by the  Registration  Rights
Agreement,  (y) as may be required under  applicable  state  securities or "blue
sky" laws and (z) filing of one or more Forms D with  respect to the  Securities
as required under Regulation D.

     (g) INFORMATION  PROVIDED.  The information  referred to in Section 2(e) of
this Agreement does not contain any untrue  statement of a material fact or omit
to state any material fact necessary in order to make the statements therein, in
the light of the  circumstances  under which they are made, not  misleading,  it
being  understood  that,  for  purposes  of this  Section  3(g),  any  statement
contained in such  information  shall be deemed to be modified or superseded for
purposes of this  Section  3(g) to the extent that a statement  in any  document
included in such information which was prepared or filed with the SEC on a later
date modifies or replaces such statement,  whether or not such later prepared or
filed  statement  so states.  The Company has not filed any reports with the SEC
under the  Securities  Exchange Act of 1934, as amended (the "1934 Act"),  since
January 2, 1999 other than the SEC Reports.

     (h) ABSENCE OF CERTAIN  CHANGES.  Since January 2, 1999,  there has been no
material  adverse  change and no material  adverse  development in the business,
properties, operations, condition (financial or other), results of operations or
prospects  of the  Company  and the  Subsidiary,  taken  as a whole,  except  as
disclosed in the SEC Reports.  Except as permitted by the following  sentence or

                                      -6-
<PAGE>
as and to the extent  disclosed,  reflected or reserved against in the financial
statements of the Company and the notes  thereto  included in the SEC Reports or
on Schedule 3(h) to this  Agreement,  neither the Company nor the Subsidiary has
any  material  (individually  or  in  the  aggregate)   liabilities,   debts  or
obligations whether accrued, absolute,  contingent or otherwise, and whether due
or to become  due.  Subsequent  to January 2, 1999,  neither the Company nor the
Subsidiary  has incurred any  liabilities,  debts or  obligations  of any nature
whatsoever  which are  individually or in the aggregate  material to the Company
and the Subsidiary  taken as a whole,  other than those incurred in the ordinary
course of their respective businesses or disclosed in the SEC Reports.

     (i) ABSENCE OF CERTAIN PROCEEDINGS.  Except as disclosed in the SEC Reports
or on Schedule 3(i) to this  Agreement,  there is no action,  suit,  proceeding,
inquiry or  investigation  before or by any court,  arbitrator,  public board or
body or  governmental  agency  (collectively,  an  "Action")  pending or, to the
knowledge of the Company or the  Subsidiary,  threatened  against the Company or
the  Subsidiary,  in any such case wherein an  unfavorable  decision,  ruling or
finding  would  have  a  material   adverse  effect  on  business,   properties,
operations,  condition (financial or other),  results of operations or prospects
of the  Company  and the  Subsidiary,  taken  as a  whole,  or the  transactions
contemplated  by this Agreement or any of the documents  contemplated  hereby or
which would adversely affect the validity or enforceability of, or the authority
or ability of the Company to perform its  obligations  under,  this Agreement or
any of such other  documents;  neither  the  Company or the  Subsidiary  nor any
director or officer thereof is or has been the subject of any Action involving a
claim of violation of or liability  under federal or state  securities laws or a
claim of breach of fiduciary  duty; the Company does not have pending before the
SEC any request for confidential treatment of information and to the best of the
Company's  knowledge no such  request  will be made by the Company  prior to the
time  the  Registration  Statement  relating  to  the  Common  Shares  which  is
contemplated by the Registration  Rights Agreement is first ordered effective by
the SEC;  and  there has not been,  and to the best of the  Company's  knowledge
there is not pending or contemplated, any investigation by the SEC involving the
Company or any current or former director or officer of the Company.

     (j)  PROPERTIES.  The  Company  and the  Subsidiary  have good  title to or
leasehold  interests in all property real and personal (tangible and intangible)
and  other  assets  owned by them,  free and  clear of all  security  interests,
charges, mortgages, liens or other encumbrances,  except with respect to capital
lease  obligations  and  protective  filings by lessors  and except  such as are
described in the SEC Reports or such as do not materially interfere with the use
of such property made, or proposed to be made, by the Company or the Subsidiary.
The leases,  licenses or other contracts or instruments  under which the Company
and the  Subsidiary  lease,  hold or are entitled to use any  property,  real or
personal, are valid,  subsisting and enforceable with only such exceptions as do
not  materially  interfere with the use of such property made, or proposed to be
made, by the Company or the  Subsidiary.  Neither the Company nor the Subsidiary
has received notice of any material violation of any applicable law,  ordinance,
regulation, order or requirement relating to its owned or leased properties. The
Company  does  not have any  knowledge  of,  and the  Company  has not  given or
received any notice of, any pending conflicts with or infringement of the rights
of others with respect to any Company  Proprietary Rights (as defined herein) or
with respect to any license of Company Proprietary  Rights.  Except as set forth

                                      -7-
<PAGE>
on Schedule 3(j) to this  Agreement,  no action,  suit,  arbitration,  or legal,
administrative or other proceeding or investigation is pending,  or, to the best
knowledge of the Company,  threatened,  which  involves any Company  Proprietary
Rights.  Neither  the  Company nor the  Subsidiary  is subject to any  judgment,
order,  writ,  injunction or decree of any court or any federal,  state,  local,
foreign or other governmental department,  commission,  board, bureau, agency or
instrumentality,  domestic or foreign, or any arbitrator, or has entered into or
is a party  to any  contract  which  restricts  or  impairs  the use of any such
Company  Proprietary  Rights in a manner  which  would have a  material  adverse
effect  on the  use by the  Company  or  the  Subsidiary  of any of the  Company
Proprietary Rights. To the best knowledge of the Company, no Company Proprietary
Rights and no  services  or  products  sold by the  Company  or the  Subsidiary,
conflict with or infringe  upon any  proprietary  rights  available to any third
party. Neither the Company nor the Subsidiary has received written notice of any
pending conflict with or infringement upon such third-party  proprietary rights.
Neither  the  Company  nor  the   Subsidiary   has  entered  into  any  consent,
indemnification,  forbearance  to sue or  settlement  agreement  with respect to
Company  Proprietary  Rights other than in the ordinary  course of business.  No
claims  have been  asserted by any person  with  respect to the  validity of the
Company's or the Subsidiary's  ownership or right to use the Company Proprietary
Rights and, to the best knowledge of the Company,  there is no reasonable  basis
for any such claim to be successful.  To the best knowledge of the Company,  the
Company Proprietary Rights are valid and enforceable.  No registration  relating
to the Company  Proprietary  Rights has  lapsed,  expired or been  abandoned  or
canceled or is the subject of cancellation or other adversarial proceedings, and
all applications therefor are pending and are in good standing,  except for such
lapses,  expirations,  abandonments,  cancellations,  adversarial proceedings or
failures to be in good  standing  which would not,  singly or in the  aggregate,
have  a  material  adverse  effect  on  the  business,  properties,  operations,
condition  (financial  or other),  results of  operations  or  prospects  of the
Company and the  Subsidiary,  taken as a whole.  The Company and the  Subsidiary
have  complied,  in all material  respects,  with their  respective  contractual
obligations  relating to the protection of the Company  Proprietary  Rights used
pursuant  to  licenses.  To the best  knowledge  of the  Company,  no  person is
infringing on or violating the Company  Proprietary  Rights. As used herein, the
term  "Company  Proprietary  Rights"  means all  patents,  patent  applications,
inventions,   trademarks,   trade  names,   applications   for  registration  of
trademarks, service marks, service mark applications,  domain names, copyrights,
know-how,  manufacturing processes, formulae, trade secrets, licenses and rights
in any thereof and any other  intangible  property and assets which are material
to the  businesses  of the  Company  and the  Subsidiary  as now  conducted,  as
proposed to be conducted or as described in this Agreement.

     (k) LABOR  RELATIONS.  Except as disclosed in the SEC Reports,  no material
labor problem exists or, to the knowledge of the Company or the  Subsidiary,  is
imminent with respect to any of the employees of the Company or the Subsidiary.

     (l) SEC  FILINGS.  The Company  has timely  filed  (subject  to  extensions
granted pursuant to Rule 12b-25 under the 1934 Act) all required forms,  reports
and other  documents  required to be filed by the Company with the SEC under the
1934 Act. All of such forms,  reports and other documents complied,  when filed,
in all material respects,  with all applicable  requirements of the 1933 Act and
the 1934 Act.

                                      -8-
<PAGE>
     (m) ABSENCE OF BROKERS,  FINDERS,  ETC. No broker, finder or similar person
is  entitled  to any  commission,  fee or other  compensation  by  reason of the
transactions contemplated by this Agreement other than Reedland Capital Partners
and the Company shall pay, and  indemnify and hold harmless the Buyer from,  any
claim made  against  the Buyer by such  entity or any other  person for any such
commission, fee or other compensation.

     (n) NO SOLICITATION. No form of general solicitation or general advertising
was used by the  Company  or, to the best of its  knowledge,  any  other  person
acting on behalf of the Company,  in respect of or in connection  with the offer
and sale of the  Securities.  Neither the Company  nor,  to its  knowledge,  any
person acting on behalf of the Company has, either directly or indirectly,  sold
or offered for sale to any person any of the  Preferred  Shares or the  Warrants
or, within the six months prior to the date hereof,  any other similar  security
of  the  Company  except  as  contemplated  by  this  Agreement  and  the  Other
Subscription Agreement; and neither the Company nor any person authorized to act
on its  behalf  will sell or offer for sale any  shares  of  Preferred  Stock or
shares of Common Stock or  Warrants,  or solicit any offers to buy any shares of
Preferred  Stock or  shares  of  Common  Stock or  Warrants,  in each case so as
thereby to cause the  issuance  or sale of any of the Shares or the  issuance of
the Warrants to be in violation of Section 5 of the 1933 Act.

     (o) CERTAIN ISSUANCES OF SECURITIES.  The Company has not issued any shares
of Common Stock or shares of any series of preferred  stock or other  securities
convertible into,  exchangeable for or otherwise entitling the holder to acquire
shares of Common Stock which are subject to Rule 4310(c)(25)(H) of the Nasdaq as
in effect from time to time or any successor,  replacement or similar  provision
thereof or of any other  market on which the Common  Stock is listed for trading
(the "Stockholder Approval Rule") and which would be integrated with the sale of
the  Preferred  Shares  to the  Buyer or the  issuance  of  Common  Shares  upon
conversion  thereof  or  upon  exercise  of the  Warrants  for  purposes  of the
Stockholder Approval Rule.

     (p) ABSENCE OF RIGHTS AGREEMENT.  The Company has not adopted a shareholder
rights plan or similar  arrangement  relating  to  accumulations  of  beneficial
ownership of Common Stock or a change in control of the Company.

     4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

     (a) TRANSFER RESTRICTIONS.  The Company and the Buyer acknowledge and agree
that (1) the  Preferred  Shares and the Warrants have not been and are not being
registered  under the provisions of the 1933 Act and,  except as provided in the
Registration  Rights  Agreement with respect to the resale of the Common Shares,
the Common  Shares have not been and are not being  registered  for resale under
the 1933 Act, and the Securities may not be transferred  unless (A) subsequently
registered  for resale  thereunder or (B) the Buyer shall have  delivered to the
Company  an opinion  of  counsel,  reasonably  satisfactory  in form,  scope and
substance  to the  Company,  to the  effect  that the  Securities  to be sold or
transferred  may be sold or  transferred  pursuant  to an  exemption  from  such
registration;  (2) any resale of the  Securities  made in  reliance  on Rule 144
promulgated  under the 1933 Act may be made only in accordance with the terms of
said  Rule and  further,  if said  Rule is not  applicable,  any such  resale of
Securities under  circumstances in which the seller,  or the person through whom
the sale is made,  may be deemed to be an  underwriter,  as that term is used in

                                       -9-
<PAGE>
the 1933 Act, may require  compliance  with some other  exemption under the 1933
Act or the rules and  regulations  of the SEC  thereunder;  and (3)  neither the
Company nor any other person is under any  obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption  thereunder (other than
pursuant  to  Section  4(d)  hereof  and  pursuant  to the  Registration  Rights
Agreement).

     (b)  RESTRICTIVE  LEGEND.  (1) The Buyer  acknowledges  and agrees that the
Preferred Shares shall bear a restrictive  legend in substantially the following
form (and a stop-transfer  order may be placed against transfer of the Preferred
Shares):

     The securities  represented by this  certificate  have not been  registered
     under the  Securities  Act of 1933, as amended.  The  securities  have been
     acquired for investment and may not be sold, transferred or assigned in the
     absence of an effective registration statement for the securities under the
     Securities  Act of 1933,  as amended,  or an opinion of counsel  reasonably
     acceptable to the Company that registration is not required under said Act.

     The number of shares  constituting the portion of the Maximum Share Amount,
     as defined in the  Certificate of  Designations of the Series B Convertible
     Preferred  Stock (the  "Certificate  of  Designations"),  allocated  to the
     shares  represented by this certificate for purposes of conversion  thereof
     is 2,577,000.

     Section 10(b)(3)(a) of the Certificate of Designations  permits a holder of
     the securities  represented by this  certificate to convert such securities
     in accordance with the  Certificate of Designations  without being required
     to surrender  this  certificate to the Company unless all of the securities
     represented hereby are so converted. Consequently,  following conversion of
     any of the securities represented by this certificate, the number of shares
     represented  by this  certificate  may be less  than the  number  of shares
     stated hereon. Upon request of any proposed transferee of this certificate,
     the Company will provide  confirmation of the number of shares evidenced by
     this certificate.

     (2) The Buyer further  acknowledges and agrees that the Warrants shall bear
a restrictive  legend in  substantially  the following form (and a stop-transfer
order may be placed against transfer of the Warrants):

     The securities  represented by this  certificate  have not been  registered
     under the  Securities  Act of 1933, as amended.  The  securities  have been
     acquired for investment  and may not be resold,  transferred or assigned in
     the absence of an effective registration statement for the securities under
     the Securities Act of 1933, as amended, or an opinion of counsel reasonably
     acceptable to the Company that registration is not required under said Act.

     (3) The Buyer further  acknowledges  and agrees that until such time as the
Common Shares have been registered for resale under the 1933 Act as contemplated
by the Registration Rights Agreement, the certificates for the Common Shares may
bear  a  restrictive   legend  in  substantially   the  following  form  (and  a
stop-transfer  order may be placed against  transfer of the certificates for the
Common Shares):

                                      -10-
<PAGE>
     The securities  represented by this  certificate  have not been  registered
     under the  Securities  Act of 1933, as amended.  The  securities  have been
     acquired for investment  and may not be resold,  transferred or assigned in
     the absence of an effective registration statement for the securities under
     the Securities Act of 1933, as amended, or an opinion of counsel reasonably
     acceptable to the Company that registration is not required under said Act.

     (4) Once the  Registration  Statement  required  to be filed by the Company
pursuant to Section 2 of the  Registration  Rights  Agreement  has been declared
effective,  thereafter (1) upon request of the Buyer the Company will substitute
certificates  without  restrictive legend for certificates for any Common Shares
issued prior to the date such  Registration  Statement is declared  effective by
the SEC  which  bear  such  restrictive  legend  and  remove  any  stop-transfer
restriction relating thereto promptly,  but in no event later than three Trading
Days (as defined in the  Certificate of  Designations)  after  surrender of such
certificates  by the Buyer and (2) the Company  shall not place any  restrictive
legend on  certificates  for Common Shares issued on conversion of the Preferred
Shares or upon exercise of the Warrants or impose any stop-transfer  restriction
thereon.

     (c) REGISTRATION  RIGHTS AGREEMENT.  The parties hereto agree to enter into
the Registration Rights Agreement in the form attached hereto as ANNEX III on or
before the Closing Date.

     (d)  FORM  D.  The  Company  agrees  to file a Form D with  respect  to the
Securities as required  under  Regulation D and to provide a copy thereof to the
Buyer promptly after such filing. The Buyer agrees to cooperate with the Company
in connection with such filing and, upon request of the Company,  to provide all
information relating to the Buyer reasonably required for such filing.

     (e) AUTHORIZATION  FOR TRADING;  REPORTING STATUS. On or before the Closing
Date,  the Company shall file a  notification  for listing of additional  shares
with the Nasdaq relating to the Common Shares and shall provide evidence of such
filing to the Buyer. So long as the Buyer beneficially owns any of the Preferred
Shares,  the Warrants or the Common  Shares,  the Company shall file all reports
required  to be filed with the SEC  pursuant  to Section 13 or 15(d) of the 1934
Act and, except for a sale of the Company,  merger or other business combination
effected in accordance with the  Certificate of  Designations  and the Warrants,
the Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations  thereunder
would permit such termination.

     (f) USE OF PROCEEDS. Neither the Company nor the Subsidiary owns or has any
present intention of acquiring any "margin stock" as defined in Regulation G (12
CFR Part 207) of the Board of Governors of the Federal  Reserve System  ("margin
stock").  The proceeds of sale of the Preferred  Shares will be used for general
working capital purposes and in the operation of the Company's business. None of
such  proceeds will be used,  directly or indirectly  (1) to make any loan to or
investment in any other person (other than financing the Company's  subsidiaries
in the  ordinary  course of business or in  connection  with an  acquisition  of
another corporation or business or assets of another corporation or business) or
(2) for the purpose, whether immediate, incidental or ultimate, of purchasing or

                                      -11-
<PAGE>
carrying  any  margin  stock or for the  purpose  of  maintaining,  reducing  or
retiring any indebtedness which was originally incurred to purchase or carry any
stock that is  currently  a margin  stock or for any other  purpose  which might
constitute the  transactions  contemplated by this Agreement a "purpose  credit"
within the  meaning of such  Regulation  G.  Neither  the  Company nor any agent
acting on its behalf has taken or will take any action  which  might  cause this
Agreement  or the  transactions  contemplated  hereby to violate  Regulation  G,
Regulation  T or any other  regulation  of the Board of Governors of the Federal
Reserve  System or to violate  the 1934 Act, in each case as in effect now or as
the same may hereafter be in effect.

     (g) BLUE SKY LAWS.  On or before the Closing  Date,  the Company shall take
such action as shall be necessary to qualify, or to obtain an exemption for, the
Preferred  Shares for sale to the Buyer and the  Warrants  for  issuance  to the
Buyer pursuant to this Agreement and the Common Shares for issuance to the Buyer
on conversion of the Preferred Shares and exercise of the Warrants under such of
the securities or "blue sky" laws of jurisdictions as shall be applicable to the
sale of the Preferred  Shares and the issuance of the Warrants  pursuant to this
Agreement  and the issuance to the Buyer of Common  Shares on  conversion of the
Preferred Shares and exercise of the Warrants.  The Company shall furnish copies
of all filings,  applications,  orders and grants or confirmations of exemptions
relating to such securities or "blue sky" laws on or prior to the Closing Date.

     (h) CERTAIN EXPENSES.  Whether or not the closing occurs, the Company shall
pay or  reimburse  the Buyer for all  reasonable  expenses  (including,  without
limitation,  legal fees and expenses of counsel to the Buyer and the Buyer's due
diligence expenses) not in excess of $25,000 incurred by the Buyer in connection
with this Agreement and the transactions contemplated hereby (in addition to the
payment  of  the  Buyer's  expenses  as  provided  in  the  Registration  Rights
Agreement).  In addition,  the Company shall pay on demand all expenses incurred
by  the  Buyer,   including  reasonable  attorneys'  fees  and  expenses,  as  a
consequence  of,  or in  connection  with (1) the  negotiation,  preparation  or
execution  of any  amendment,  modification  or  waiver of this  Agreement,  the
Certificate of Designations,  the Registration  Rights Agreement,  the Warrants,
the  Transfer  Agent   Agreement  and  the  other   agreements  and  instruments
contemplated  hereby and thereby  requested by the  Company,  (2) any default or
breach of any of the Company's  obligations  set forth in any of such agreements
or  instruments  and (3) the  enforcement  or  restructuring  of any  right  of,
including  the  collection  of any  payments  due,  the Buyer  under any of such
agreements or instruments,  including any action or proceeding  relating to such
enforcement,  or any order,  injunction or other process seeking to restrain the
Company from paying any amount due the Buyer, in which the Buyer prevails.

     (i) CERTAIN  ISSUANCES OF  SECURITIES.  (1) Unless the Company  obtains the
Stockholder Approval (as defined in the Certificate of Designations) or a waiver
thereof  from the Nasdaq,  the Company will not issue any shares of Common Stock
or shares of any other series of preferred stock or other securities convertible
into,  exchangeable for, or otherwise entitling the holder to acquire, shares of
Common  Stock  which  would be subject to the  requirements  of the  Stockholder
Approval  Rule and  which  would be  integrated  with the sale of the  Preferred
Shares and  issuance  of the  Warrants  to the Buyer or the  issuance  of Common
Shares upon conversion of the Preferred  Shares or upon exercise of the Warrants
for purposes of the Stockholder Approval Rule.

                                      -12-
<PAGE>
     (2) During the period from the date of this  Agreement  to the later of (i)
the date which is one year after the Closing Date and (ii) the date on which the
Registration   Statement  shall  have  been  effective  with  the  SEC  for  270
consecutive days, the Company shall not offer,  sell,  contract to sell or issue
(or engage any person to assist the  Company in taking any such  action) (A) any
security  (whether debt or equity) with  conversion or exchange terms similar in
nature  to the  conversion  rights  of  the  Preferred  Stock,  (B)  any  equity
securities  or  securities  convertible  into,  exchangeable  for  or  otherwise
entitling  the holder to acquire,  any Common  Stock at a price below the market
price of the  Common  Stock on the date of such  issuance  (or below an  average
market price for a reasonable  period prior to such  issuance) or (C) any equity
securities or securities which by their terms are convertible into, exchangeable
for or  otherwise  entitle  the holder to acquire,  any Common  Stock at a price
below the market price of the Common Stock on the date of  conversion,  exchange
or other  exercise  thereof (or below an average  market  price for a reasonable
period  prior to such  conversion,  exchange or other  exercise)  (collectively,
"Equity  Securities");  provided,  however, that nothing in this Section 4(i)(2)
shall  prohibit the Company from  issuing  securities  (v) which are equity (not
debt)   securities   issued  in  a  single   transaction   for  aggregate  gross
consideration  of up to  $5,000,000  and  which  (i) are  purchased,  for or are
convertible into or are exercisable for shares of Common Stock, at a fixed price
not more than 20%  below the  market  price of the  Common  Stock on the date of
issuance (or below an average market price for a reasonable period prior to such
issuance),  and (ii) are not subject to any future adjustment related to changes
in the market price of the Common Stock pursuant to which  additional  shares or
other  securities may be issued,  cash payments become due, or the conversion or
exercise price of any convertible  security may be reduced,  other than pursuant
to customary  antidilution  provisions for stock splits and similar events,  (w)
pursuant  to  compensation  plans  or  arrangements  for  employees,  directors,
officers,  advisers or  consultants  of the Company and in  accordance  with the
terms  of such  plans  as in  effect  as of the  date of  this  Agreement  or as
thereafter approved by the Board of Directors of the Company,  (x) upon exercise
of conversion,  exchange, purchase or similar rights issued, granted or given by
the Company and  outstanding  as of the date of this  Agreement and disclosed in
the  SEC  Reports  or  this  Agreement,   (y)  pursuant  to  a  public  offering
underwritten on a firm commitment  basis registered under the 1933 Act or (z) as
part of a transaction  involving a strategic  alliance,  acquisition of stock or
assets,  merger,  collaboration,  joint  venture,  partnership  or other similar
arrangement  of the  Company  with  another  corporation,  partnership  or other
business  entity  which is engaged  in a  business  similar to or related to the
business of the Company,  so long as in the case of this clause (z) the Board of
Directors by resolution  duly adopted (and a copy of which shall be furnished to
the Buyer promptly after adoption)  determines that such issuance is fair to the
holders  of each class and series of  capital  stock of the  Company  and to the
Buyer in respect of its equity  interest in the Company that is  represented  by
the Preferred Shares and the Warrants.

     (3) Subject to the restrictions in Sections 4(i)(1) and 4(i)(2), during the
period from the date of  execution  and  delivery of this  Agreement to the date
which is 180 days  after the later of (i) the date  which is one year  after the
Closing Date and (ii) the date on which the  Registration  Statement  shall have
been  effective  with the SEC for 270  consecutive  days,  the Company shall not

                                      -13-
<PAGE>
offer,  sell,  contract  to sell or issue (or  engage  any  person to assist the
Company in taking any such  action)  any Equity  Securities  without  giving the
Buyer the first right to acquire the Equity  Securities on the same terms as the
Equity Securities are to be offered to other investors;  provided, however, that
this Section  4(i)(3) shall not apply to the offer or sale of Equity  Securities
by the Company in the transactions,  and subject to the conditions, set forth in
clauses  (v),  (w),  (x),  (y) and (z) of the  proviso to the first  sentence of
Section  4(i)(2)  above.  The  Company  shall  give  notice  to the Buyer of the
detailed  terms of the Equity  Securities  proposed to be issued  and,  promptly
after  being  requested  by the Buyer,  such  other  information  as  reasonably
requested  by the Buyer.  Such request by the Buyer shall be made not later than
five Business Days after receipt of such notice from the Company. The Buyer may,
by notice to the Company, exercise such right of first refusal at any time until
the later of (x) ten  Business  Days after such  notice  from the Company to the
Buyer and (y) five  Business  Days after the Company  provides  such  additional
information as shall have been requested by the Buyer.

     (j) CERTAIN SELLING  RESTRICTIONS.  So long as the Company is in compliance
in all material respects with its obligations to the Buyer under this Agreement,
the  Certificate  of  Designations,  the  Warrants and the  Registration  Rights
Agreement, during the 20 consecutive Trading Days (as defined in the Certificate
of Designations) immediately preceding the Initial Reset Date (as defined in the
Certificate  of  Designations)  and each Biannual  Reset Date (as defined in the
Certificate  of  Designations),  the Buyer agrees on its behalf and on behalf of
its Affiliates (as defined in the Certificate of Designations)  that it will not
(1) sell any  shares of Common  Stock on  Nasdaq or any other  market  where the
Common  Stock is then  listed for  trading  unless such sale is made at or above
130%  of  the  Fixed   Conversion  Price  (as  defined  in  the  Certificate  of
Designations)  or (2) engage in any short  sales or other  hedging  transactions
relating to the Common Stock.

     (k) TRANSACTIONS  WITH AFFILIATES.  Except as set forth on Schedule 4(k) to
this  Agreement,  so long as any shares of Preferred  Stock are  outstanding the
Company will not, and will not permit any subsidiary of the Company, directly or
indirectly,  to pay any  funds to or for the  account  of,  make any  investment
(whether by acquisition of stock or indebtedness,  by loan, advance, transfer of
property,  guarantee or other agreement to pay, purchase or service, directly or
indirectly,  any  indebtedness,  or  otherwise)  in,  lease,  sell,  transfer or
otherwise dispose of any assets, tangible or intangible,  to, or participate in,
or effect any  transaction  in connection  with,  any joint  enterprise or other
joint  arrangement  with,  any  Affiliate of the Company  except on terms to the
Company or such  subsidiary no less  favorable than terms that could be obtained
by the Company or such  subsidiary from a person that is not an Affiliate of the
Company, as determined in good faith by the Board of Directors of the Company.

     (l) STOCKHOLDER  APPROVAL.  The Company shall seek and use its best efforts
to obtain at the earlier of (1) the Company's  next regularly  scheduled  Annual
Meeting of Stockholders  and (2) a special meeting of stockholders to be held on
or before June 15, 2000,  Stockholder  Approval of the issuance of all shares of
Preferred Stock issuable  pursuant to the  Certificate of  Designations  and all
shares of Common Stock  issuable upon  conversion of the  Preferred  Stock.  The
Company  shall  prepare  and file  with  the SEC at  least 20 days  prior to the
scheduled  mailing of notice of such meeting  preliminary  proxy materials which
set forth a  proposal  to seek such  Stockholder  Approval.  The  Company  shall
provide  the Buyer an  opportunity  to consult  with the Company  regarding  the

                                      -14-
<PAGE>
content  of such  proxy  materials  insofar  as it  relates  to the  Stockholder
Approval by providing copies of such preliminary proxy materials and any revised
preliminary  proxy  materials to the Buyer a reasonable  period of time prior to
their  filing  with the SEC.  The  Company  shall  furnish  to the Buyer and its
counsel  a copy of its  definitive  proxy  materials  for such  meeting  and any
amendments  or  supplements  thereto  promptly  after  the  same are  mailed  to
stockholders or filed with the SEC.

     (m) BEST EFFORTS.  Each of the parties shall use its best efforts timely to
satisfy each of the  conditions  to the other  party's  obligations  to sell and
purchase the  Preferred  Shares set forth in Section 6 or 7, as the case may be,
of this Agreement on or before the Closing Date.

     5. TRANSFER AGENT AGREEMENT; CONVERSION PROCEDURE.

     (a) TRANSFER AGENT  AGREEMENT.  Prior to the Closing Date, the Company will
(1) execute and deliver the Transfer Agent Agreement in the form attached hereto
as ANNEX IV and thereby irrevocably instruct, Signature Stock Transfer, Inc., as
Transfer Agent and Registrar (the "Transfer  Agent"),  to issue certificates for
the Common Shares from time to time upon conversion of the Preferred  Shares and
exercise of the Warrants in such  amounts as specified  from time to time to the
Transfer Agent in the Notices of Conversion  surrendered in connection with such
conversions  and referred to in Section 5(b) of this  Agreement  and the Form of
Subscription  in the form  attached to the Warrants and (2) appoint the Transfer
Agent the  conversion  agent for the Preferred  Stock and the exercise agent for
the Warrants.  The  certificates  for the Common Shares may bear the restrictive
legend  specified in Section 4(b) of this Agreement prior to registration of the
resale of the Common Shares under the 1933 Act. The  certificates for the Common
Shares shall be  registered in the name of the Buyer or its designee and in such
denominations to be specified by the Buyer in connection with each conversion of
Preferred  Shares or exercise of the  Warrants.  The  Company  warrants  that no
instruction other than (x) such instructions  referred to in this Section 5, (y)
stop transfer  instructions to give effect to Section 4(a) prior to registration
of the resale of the Common  Shares under the 1933 Act and (z) the  instructions
required by Section 3(n) of the  Registration  Rights Agreement will be given by
the Company to the Transfer Agent and that the Common Shares shall  otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement.  Nothing in this Section 5(a) shall limit in any way
the  Buyer's   obligations  and  agreement  to  comply  with  the   registration
requirements  of the 1933 Act upon  resale of the  Common  Shares.  If the Buyer
provides  the Company  with an opinion of counsel,  reasonably  satisfactory  in
form,  scope  and  substance  to  the  Company  and  its  legal  counsel,   that
registration  of a resale by the Buyer of any of the  Securities is not required
under the 1933 Act, the Company  shall  permit the  transfer of such  Securities
and, in the case of the Common  Shares,  in  accordance  with  clause  (1)(B) of
Section 4(a) of this  Agreement,  promptly  instruct the Transfer Agent to issue
upon  transfer  one or  more  share  certificates  in  such  name  and  in  such
denominations as specified by the Buyer within three Business Days after receipt
of such opinion. Nothing in this Section 5(a) shall limit the obligations of the
Company under Section 3(n) of the Registration Rights Agreement.

                                      -15-
<PAGE>
     (b)  CONVERSION  PROCEDURE.  In connection  with the exercise of conversion
rights relating to the Preferred  Shares,  the Buyer or any subsequent holder of
the Preferred  Shares shall  complete,  sign and furnish to the Transfer Agent a
Notice  of  Conversion  of  Series  B  Convertible  Preferred  Stock in the form
attached  hereto as ANNEX V (a  "Conversion  Notice")  and shall  provide a copy
thereof  to  the  Company,   which  actions  shall  be  deemed  to  satisfy  all
requirements of the Certificate of Designations.

     6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE.

     The Buyer  understands that the Company's  obligation to sell the Preferred
Shares  and issue  the  Warrants  to the Buyer  pursuant  to this  Agreement  is
conditioned  upon the satisfaction of the following  conditions  precedent on or
before the Closing Date (any or all of which may be waived by the Company in its
sole discretion):

     (a)  The  receipt  and  acceptance  by the  Company  of this  Agreement  as
evidenced  by  execution  of this  Agreement  by the Company and  delivery of an
executed counterpart of this Agreement to the Buyer or its legal counsel; and

     (b) The accuracy on the Closing Date of the  representations and warranties
of the Buyer  contained in this Agreement as if made on the Closing Date and the
performance  by the Buyer on or before the  Closing  Date of all  covenants  and
agreements of the Buyer required to be performed on or before the Closing Date.

     7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.

     The  Company  understands  that the  Buyer's  obligation  to  purchase  the
Preferred  Shares and acquire the  Warrants on the Closing  Date is  conditioned
upon the  satisfaction  of the following  conditions  precedent on or before the
Closing  Date  (any or all of  which  may be  waived  by the  Buyer  in its sole
discretion):

     (a) The accuracy on the Closing Date of the  representations and warranties
of the Company  contained  in this  Agreement as if made on the Closing Date and
the  performance  by the Company on or before the Closing Date of all  covenants
and agreements of the Company  required to be performed on or before the Closing
Date, and receipt by the Buyer of a certificate,  dated the Closing Date, of the
Chief  Executive  Officer of the Company  confirming such matters and such other
matters as the Buyer may reasonably request;

     (b) The  receipt  by the  Buyer  of  confirmation  of the  filing  with the
Secretary of State of the State of Nevada of the Certificate of Designations;

     (c) The receipt by the Buyer of a  certificate,  dated the Closing Date, of
the Secretary of the Company  certifying (1) the Articles of  Incorporation,  as
amended, and By-Laws of the Company as in effect on the Closing Date and (2) all
resolutions  of the Board of Directors (and  committees  thereof) of the Company
relating to this Agreement and the transactions contemplated hereby;

                                      -16-
<PAGE>
     (d) The Transfer Agent shall have executed and delivered the Transfer Agent
Agreement in the form attached hereto as ANNEX IV; and

     (e) Receipt by the Buyer on the  Closing  Date of (i) an opinion of Snell &
Wilmer L.L.P.,  counsel for the Company,  dated the Closing Date, in form, scope
and substance  reasonably  satisfactory to the Buyer, to the effect set forth in
ANNEX VI attached hereto and (ii) an opinion of James, Driggs,  Walch,  Santoro,
Kearney,  Johnson & Thompson,  Nevada counsel to the Company,  dated the Closing
Date, in form, scope and substance reasonably  satisfactory to the Buyer, to the
effect set forth in ANNEX VII attached hereto.

     8. MISCELLANEOUS.

     (a) GOVERNING LAW. This Agreement  shall be governed by and  interpreted in
accordance with the laws of the State of Arizona.

     (b) COUNTERPARTS. This Agreement may be executed in counterparts and by the
parties hereto on separate counterparts,  all of which together shall constitute
one and the same instrument.  A facsimile transmission of this Agreement bearing
a  signature  on behalf of a party  hereto  shall be legal and  binding  on such
party.  Although  this  Agreement is dated as of the date first set forth above,
the actual date of execution and delivery of this Agreement by each party is the
date set forth below such party's  signature on the signature  page hereof.  Any
reference in this Agreement or in any of the documents executed and delivered by
the  parties  hereto in  connection  herewith to (1) the date of  execution  and
delivery of this  Agreement by the Buyer shall be deemed a reference to the date
set forth below the Buyer's signature on the signature page hereof, (2) the date
of  execution  and delivery of this  Agreement by the Company  shall be deemed a
reference to the date set forth below the  Company's  signature on the signature
page hereof and (3) the date of execution and delivery of this  Agreement or the
date of execution  and  delivery of this  Agreement by the Buyer and the Company
shall be deemed a  reference  to the  later of the  dates  set  forth  below the
signatures of the parties on the signature page hereof.

     (c) HEADINGS, ETC. The headings, captions and footers of this Agreement are
for  convenience  of  reference  and  shall  not form  part of,  or  affect  the
interpretation of, this Agreement.

     (d)  SEVERABILITY.  If any provision of this Agreement  shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or  enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.

     (e)  AMENDMENTS.   No  amendment,   modification,   waiver,   discharge  or
termination  of any provision of this  Agreement nor consent to any departure by
the Buyer or the Company  therefrom  shall in any event be effective  unless the
same shall be in writing and signed by the Company and the holders of a majority
in interest of the  outstanding  shares of  Preferred  Stock,  and then shall be
effective only in the specific  instance and for the purpose for which given. No
course of dealing  between the parties  hereto shall  operate as an amendment of
this Agreement.

                                      -17-
<PAGE>
     (f)  WAIVERS.  Failure of any party to exercise  any right or remedy  under
this  Agreement or otherwise,  or delay by a party in  exercising  such right or
remedy,  or any course of dealings  between the parties,  shall not operate as a
waiver thereof or an amendment hereof,  nor shall any single or partial exercise
of any such right or power,  or any  abandonment or  discontinuance  of steps to
enforce such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.

     (g) NOTICES.  Any notices required or permitted to be given under the terms
of this Agreement shall be delivered  personally  (which shall include telephone
line facsimile  transmission  with answer back  confirmation)  or by courier and
shall be effective  upon  receipt,  in the case of the Company  addressed to the
Company at its address shown in the  introductory  paragraph of this  Agreement,
Attention: Chief Executive Officer (telephone line facsimile transmission number
(602)  331-0941) or, in the case of the Buyer,  at its address or telephone line
facsimile  transmission  number shown on the signature  page of this  Agreement,
with a copy to Genesee  International,  Inc., 10500 N.E. 8th Street, Suite 1920,
Bellevue,  Washington 98004-4332  (telephone line facsimile  transmission number
(425)  462-4645) or such other address or telephone line facsimile  transmission
number as a party shall have provided by notice to the other party in accordance
with this provision.  The Buyer hereby  designates as its address for any notice
required or permitted to be given to the Buyer  pursuant to the  Certificate  of
Designations  the address shown on the signature page of this Agreement,  with a
copy to: Advantage Fund II Ltd., c/o Genesee International, Inc., 10500 N.E. 8th
Street,  Suite 1920,  Bellevue,  Washington  98004-4332  (facsimile number (425)
462-4645), until the Buyer shall designate another address for such purpose.

     (h)  ASSIGNMENT.  Prior to the Closing  Date,  the Buyer may not assign its
rights and  obligations  under this  Agreement.  Any  transfer of the  Preferred
Shares or the  Warrants  by the Buyer  after the  Closing  Date shall be made in
accordance  with Section 4(a) and shall involve at least 200 shares of Preferred
Stock and Warrants to purchase at least 50,000  shares of Common Stock (unless a
lesser  number of shares of  Preferred  Stock or Warrants is then  outstanding);
provided,  however, that there shall be no limitation on the number of shares of
Preferred Stock or the number of shares of Common Stock  represented by Warrants
which are  transferable to Affiliates of the Buyer.  After the Closing Date, the
Buyer  shall  have the right to assign its  rights  and  obligations  under this
Agreement  in  connection  with any  transfer  of the Buyer's  rights  under the
Registration  Rights Agreement by compliance with the provisions of Section 9 of
the Registration Rights Agreement.

     (i)   SURVIVAL  OF   REPRESENTATIONS   AND   WARRANTIES.   The   respective
representations,  warranties,  covenants  and  agreements  of the  Buyer and the
Company  contained  in  this  Agreement  or  made  by  or  on  behalf  of  them,
respectively,  pursuant to this  Agreement  shall  survive  the  delivery of and
payment  for the  Preferred  Shares  and shall  remain in full  force and effect
regardless  of any  investigation  made by or on  behalf  of them or any  person
controlling or advising any of them.

                                      -18-
<PAGE>
     (j) ENTIRE  AGREEMENT.  This  Agreement  and its  Schedules and Annexes set
forth the entire  agreement  between  the  parties  hereto  with  respect to the
subject  matter hereof and supersede all prior  agreements  and  understandings,
whether written or oral, with respect thereto.

     (k)  TERMINATION.  Either  party  shall  have the right to  terminate  this
Agreement  by giving  notice  to the other  party at any time at or prior to the
Closing Date if:

     (1) the other party shall have failed,  refused, or been unable at or prior
to the  date of  such  termination  of  this  Agreement  to  perform  any of its
obligations hereunder;

     (2) any other condition of the terminating party's obligations hereunder is
not fulfilled; or

     (3) the  closing  shall not have  occurred  on a Closing  Date on or before
March 10, 2000, other than solely by reason of a breach of this Agreement by the
terminating party.

Any such termination shall be effective upon the giving of notice thereof by the
terminating  party. Upon such termination,  neither party shall have any further
obligation  to the other party  hereunder;  provided,  however,  that each party
shall  remain  liable for any breach of this  Agreement  or the other  documents
contemplated hereby which occurred on or prior to the date of such termination.

     (l) FURTHER  ASSURANCES.  Each party to this Agreement will perform any and
all acts and execute any and all  documents as may be necessary and proper under
the  circumstances  in order to  accomplish  the  intents  and  purposes of this
Agreement and to carry out its provisions.

     (m) PUBLIC STATEMENTS, PRESS RELEASES, ETC. The Company and the Buyer shall
have the right to approve before issuance any press releases or any other public
statements  with  respect to the  transactions  contemplated  hereby;  provided,
however,  that the Company shall be entitled,  without the prior approval of the
Buyer, to make any press release or other public disclosure with respect to such
transactions as is required by applicable law or Nasdaq regulation (although the
Buyer  shall be  consulted  by the  Company  in  connection  with any such press
release or other  public  disclosure  prior to its release and shall be provided
with a copy thereof).

     (n) CONSTRUCTION.  The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent,  and no rules
of strict construction will be applied against any party.

                                      -19-
<PAGE>
     IN WITNESS WHEREOF,  this Agreement has been duly executed by the Buyer and
the Company by their respective officers or other representatives thereunto duly
authorized on the respective dates set forth below.


NUMBER OF SHARES: 1,500

PRICE PER SHARE:  $1,000.00

AGGREGATE PURCHASE PRICE: $1,500,000.00

NUMBER OF WARRANT SHARES: 187,500


                                     ADVANTAGE FUND II LTD.

                                     By:  Genesee International, Inc.,
                                          as General Manager


                                     By: /s/ Donald R. Morken
                                        ----------------------------------------
                                        Donald R. Morken
                                        President

                                     Date: March 9, 2000
                                          --------------------------------------
                                     Address:  c/o CITCO
                                               Kaya Flamboyan 9
                                               Curacao, Netherlands Antilles

                                               Facsimile No.: 011-599-9732-2008



                                     TITAN MOTORCYCLE CO. OF AMERICA



                                     By: /s/ Francis S. Keery
                                        ----------------------------------------
                                        Name: Francis S. Keery
                                        Title: Chief Executive Officer

                                     Date: March 7, 2000