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EXHIBIT 10.3
AGREEMENT AND PLAN OF BUSINESS COMBINATION
THIS AGREEMENT entered into this 15th day of Sept. 2000, by and between American
Eagle Motorcycle Company Inc., a California corporation (AEM), and Yankee
Engineuity Products Division, a California sole proprietorship (YEPD);
WITNESSETH, WHEREAS AEM is a motorcycle manufacturing corporation which for some
time has been in the process of evaluating various businesses for acquisition;
and YE is a distributor of its own line of Billet motorcycle parts; and
FURTHER WHEREAS, AEM and YEPD mutually desire to enter into a business
combination whereby AEM will purchase the Motorcycle Products Division of YEPD.
NOW THEREFORE, for valuable consideration and upon the mutual representations,
warranties, covenants, conditions and agreements contained herein, the parties
agree as follows:
1. Plan of Business Combination - It is the agreement and intention of all
parties hereto that all of the outstanding ownership of YEPD shall be
exchanged hereunder solely for voting common stock of AEM, and it is
also the intention and understanding of all parties hereto that this
transaction shall qualify as a tax-free reorganization under Section
368(a)(1)(B) of the Internal Revenue Code of 1954, as amended, and any
related sections there under.
2. Restricted Securities - All common shares of AEM issued incident to this
business combination shall be "restricted securities" as defined in
relevant federal and state securities laws and regulations, basically
meaning that such shares will not be registered under either state or
federal securities laws and will be taken by the owners of YEPD for
long-term investment are not with a present view toward further sale,
disposition or transfer thereof; and accordingly any future transfer or
disposition of such shares must either be (i) registered under relevant
federal and state securities laws, or (ii) satisfy an appropriate
exemption from such registration such as rule 144 of the Securities Act
of 1933, as amended.
3. Exchange of Securities - All parties hereto agree that all of the
outstanding ownership of YEPD shall be exchanged for 32,500 common
shares of AEM. Upon completion of this exchange of shares, YEPD shall
become a wholly owned subsidiary of AEM.
4. Delivery of Certificate - On the Closing date of this business
combination, YEPD shall deliver all ownership documentation duly
endorsed for transfer pursuant hereto, and simultaneously thereto AEM
shall deliver certificates of AEM common shares to complete this
transaction.
5. This agreement shall be approved by each company as required by law.
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6. Conduct of Business - Between the date of this Agreement and the
Closing Date hereof, YEPD shall conduct its business operations in a
normal and customary manner in accordance with existing business
operations in a normal and customary manner in accordance with existing
business practices and policies.
7. Due Diligence Investigation - Between the date of this Agreement and
the Closing date hereof, AEM and YEPD may directly make such
investigation of each other and their respective business and
operations, affairs and financial positions; and the officers of each
corporation hereto shall furnish to each other whatever financial and
operational data and other information with respect to each other as
reasonably requested by the other party. Neither AEM nor YEPD shall
disclose any private or confidential information on the other party,
which was obtained or discovered in connection with their respective
due diligence review and investigation of each other incident hereto.
8. Representations and Warranties of Parties - The parties jointly and
severally represent and warrant to the other the following:
a. AEM has outstanding capital stock of Approx. 1,582,500 common
shares, and all common shares of AEM have been validly issued and
are fully paid and nonassessable, and no such shares has been issued
in violation of any preemptive or similar rights.
b. AEM is a duly organized corporation validly existing and in good
standing under the respective laws of the State of California, with
full corporate power and authority to own and operate it's
properties and assets and carry on any business presently and
formerly conducted by it.
c. YEPD is a properly organized sole proprietorship, validly existing
and in good sanding under the laws of California, with full
corporate power and authority to own and operate it's properties and
assets and carry on any business presently and formerly conducted by
it.
d. This Agreement is a valid and binding agreement of each party
hereto, and compliance with the terms of this Agreement by each
party hereto will not result in (i) a breach or default under the
Articles or Bylaws of either party or (ii) a breach or violation
under any lien, pledge, security interest or other encumbrance on
assets to which either party is subject.
e. Neither company is subject to any pending litigation or governmental
proceedings not reflected in their financial statements or otherwise
disclosed to the other party incident to negotiating this Agreement.
f. The Management of each company executing this Agreement is duly
authorized to execute this Agreement on behalf of their respective
corporation.
g. All company record books, minute books and financial statements of
each party in existence prior to the closing date shall be made
available to the other party prior to closing of this business
combination.
h. As of the date hereof, and at Closing Date both companies hereto
will have to the best of their knowledge and abilities, disclosed to
each other all events, conditions and facts materially affecting the
business and prospects of each company hereto.
9. Convenants of both parties - AEM and YEPD, both convenant, warrant and
agree that from the date hereof to closing date, each party hereto shall:
(i) Conduct its business and operations in the usual, normal and
ordinary course of business;
(ii) Neither party shall declare any cash or stock dividends: nor
shall they make any distribution by way of dividend,
redemption, or otherwise;
(iii) Each party hereto agrees to approve this agreement as soon as
reasonably practicable after the date hereof.
10. Survival of Representations - All representations, covenants and
warranties contained herein shall survive the Closing Date of this Agreement and
the consummation of the transactions hereby for two years from the date hereof.
11. Closing - Upon the Closing of this Agreement, the following
transactions shall occur or have occurred, all of which shall be deemed to be
simultaneous:
a. YEPD shall have delivered to AEM all ownership documentation of
YEPD, duly endorsed thereon for exchange pursuant to this
agreement;
b. AEM shall deliver the required certificates of its common stock to
YEPD or its assigns.
c. Each party hereto shall deliver at the Closing Date certified
copies of resolutions of each party which adopted and approved this
business combination;
d. The Effective Date of this business combination shall be the
Closing Date hereof.
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12. General
(a). Notices - Any and all notices provided for in this Agreement shall
be in writing and hand-delivered or sent by certified mail,
directed as follows:
To AEM: Greg Spak
2350 Technology Pkwy.
Hollister, CA 95023
To YEPD: Duncan Keller
1520 A. West San Carlos
San Jose, CA 95126
(b). Parties in Interest and Assignment - This Agreement shall inure
to the benefit of and bind the parties hereto, and their
respective successors, legal representatives and authorized
assigns; provided, however, that no party hereto shall assign any
interest herein without the express written consent of all other
parties hereto.
(c). Expenses - In the event this business combination is not
consummated for any reason or purpose whatsoever, each party
hereto shall pay its or his own expenses incident to negotiation
of, preparation for or any other matters related hereto.
(d). Waiver - Any failure on the part of a party hereto to comply with
any term, obligation or condition of this Agreement may be waived
in writing by the other parties hereto.
(e). Governing Law - the laws of the State of California shall govern
this Agreement.
(f). Severability - If any part of this Agreement is deemed to be
unenforceable, the balance of the Agreement shall remain in full
force and effect.
(g). Entire Agreement - This Agreement constitutes the entire agreement
for this business combination, and supercedes and cancels any
prior agreement or understanding, written or oral; and this
Agreement cannot be modified or amended unless by mutual written
consent of all parties hereto. Except as listed in Addendum A.
Addendum A
1. In lieu of additional stock, AEM will pay YEPD approximately
$22,000 for past services.
2. AEM will purchase YEPD's product inventory for approximately
$20,000. YEPD insures all inventory purchased is of Current
designs and saleable.
3. Duncan Keller shall receive the following yearly royalties:
a. 3% - up to $500,000 in product sales
b. 2% - $500,001 to $1,500,000
c. 1% - over $1,500,001
These royalties will be in effect for 5 years and pay ability
agreement will be automatically renewed unless terminated in
writing by either party.
13. Use of Yankee Engineuity Name - AEM will have exclusive right to use
the Yankee Engineuity name in Sales and Marketing of motorcycle parts and
accessories.
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14. Termination - This agreement and the transactions contemplated hereby
may be terminated anytime prior to Closing hereof by
a. Written mutual consent of both parties hereto
b. By either party hereto if there has been a material breach by the
other party of any term of this Agreement and such material breach
is not cured by the breaching party within 30 days of notification
in writing of such breach by the non-breaching party or has not been
waived or cured by the effective date of the pending IPO of buyer
c. By either party hereto if a material condition of the Closing hereof
has not been satisfied or cannot occur unless waived by the other
party, or
d. At the option of either party hereto if the Closing has not taken
place by December 31, 2000
IN WITNESS WHEREOF, the above parties hereto have executed this agreement as of
the day and year first written above written.
Yankee Engineuity American Eagle Motorcycle
By /s/ DUNCAN KELLER /s/ GREG SPAK
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Its Owner Its President
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