Document:

<PAGE>   1
                                                                 Exhibit 10.2

                         MEMORANDUM OF SETTLEMENT TERMS

     In connection with the mediation held on June 12, 2000, before James S.
Crawford, Esq. and subsequent negotiations regarding the action in Sacramento
County Superior Court captioned James Kinnicutt, et al. v. Bikers Dream, Inc. et
al. and bearing case number 98AS04185 ("Action"), James Kinnicutt, Susan
Kinnicutt and Bikers Dream of Sacramento (collectively referred to herein as
"plaintiffs") and Bikers Dream, Inc. ("BDI") and William Gresher ("Gresher")
(collectively "defendants") (plaintiffs and defendants are collectively referred
to herein as "the Parties") have reached a settlement on the following terms and
conditions:

     1. Defendants will cause to be paid to plaintiffs the single sum of
$190,000 ("Settlement Amount") in the form of a check made payable to "James
Kinnicutt and Susan Kinnicutt and their counsel of record Stephen L. Davis" and
will also cause the balance of the SBA Loan to plaintiffs ("Loan Balance") to be
fully paid off by way of a single payment in the form of a check made payable to
"James Kinnicutt and Susan Kinnicutt and their counsel of record Stephen L.
Davis and Westamerica." Plaintiffs' counsel will forthwith provide counsel for
defendants with the current amount due to satisfy the Loan Balance.

     2. In return for the payment of the Settlement Amount and the payment of
the Loan Balance, plaintiffs will dismiss the Action with prejudice as to all
defendants. Prior to that dismissal, plaintiffs will enter into a stipulation
that the judgment entered in the Action be vacated in its entirety.

     3. The manner and method pursuant to which the Settlement Amount is
recorded, distributed or allocated is solely the responsibility of plaintiffs
and their counsel of record. Defendants and their attorneys and insurers are not
in any way responsible for any aspect thereof, including but not limited to
liens or claims of third parties to the Settlement Amount.

     4. By signing this document, the parties release any and all known or
unknown claims that have been asserted or could have been asserted against each
other or the parties' insurers relating to, or arising out of, the Action and/or
Bikers Dream of Sacramento and/or any communications between the parties and
expressly agree to waive all rights and remedies available under Civil Code ss.
1542 which states "A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected his settlement
with the debtor." Plaintiffs herein release any and all claims pertaining to
statements about plaintiffs contained in any documents filed by BDI with the
Securities and Exchange Commission, including but not limited to, BDI's Form
10-Q statement for the quarter ended March 31, 2000.

     5. Defendants' settlement of the Action is not in any way an admission of
any wrongdoing, liability or fault of any kind. Defendants deny all liability to
plaintiffs and have settled the Action solely to avoid the nuisance and expense
of litigation.

<PAGE>   2

     6. All of the provisions contained in this memorandum are enforceable
pursuant to C.C.P.ss.664.6 in the Sacramento County Superior Court.

     7. No later than ten (10) days from defendants' counsel's receipt of this
memorandum executed by plaintiffs and on behalf of Bikers Dream of Sacramento,
the parties will execute the further settlement agreement and mutual general
release, the stipulation to vacate the judgment and cause their counsel to
exchange the executed request for dismissal of the Action with prejudice in its
entirety for the check for the Settlement Amount and the check for the Loan
Balance. The execution of the further settlement agreement by the Parties does
not alter the terms contained in this memorandum, all of which are deemed to be
material and enforceable settlement terms.

     8. Each party will bear its own costs and fees incurred in connection with
the Action.

     9. This document may be executed in counterparts by facsimile and the same
shall be deemed an original for all purposes, and taken together shall
constitute one and the same document.

     10. Each party or responsible officer, director, partner or representative
thereof has read this agreement and understands the contents hereof. Each of the
representatives, officers, directors or partners executing this Agreement on
behalf of their respective corporation, trust, partnership, firm or entity is
empowered to do so and thereby binds such respective corporation, trust,
partnership, firm or entity.

     By signing this document, each party represents that it has irrevocably
agreed to settle the Action, pursuant to the above terms, which have been fully
explained to each party by their counsel of record.

Dated:                 , 2000                  BIKERS DREAM OF
         --------------                        SACRAMENTO

                                       By:
                                               -----------------------------
                                               An Authorized Representative with
                                               Binding Irrevocable Settlement
                                               Authority

Dated:                 , 2000                  JAMES KINNICUTT
         --------------

                                       By:
                                               -----------------------------
                                               James Kinnicutt

<PAGE>   3

Dated:                 , 2000                  SUSAN KINNICUTT
         --------------

                                       By:
                                               -----------------------------
                                               Susan Kinnicutt

Dated:                 , 2000                  WILLIAM GRESHER
         --------------

                                       By:
                                               -----------------------------
                                               William Gresher

Dated:                 , 2000                  BIKERS DREAM, INC.
         --------------

                                       By:
                                               -----------------------------
                                               An Authorized Representative with
                                               Binding Irrevocable Settlement
                                               Authority<PAGE>   1
                                                            Exhibit 10.3

                    SETTLEMENT AGREEMENT AND GENERAL RELEASE
                                     PARTIES

     This Settlement Agreement and General Release (hereinafter referred to as
"Agreement") resolves and settles all disputes between James Kinnicutt, Susan
Kinnicutt and Bikers Dream of Sacramento (collectively referred to as
"plaintiffs") and Bikers Dream, Inc. ("BDI") and William Gresher ("Gresher")
(collectively "defendants"). Plaintiffs as defined above and defendants as
defined above are collectively referred to herein as "the parties." This
Agreement is binding upon and shall enure to the benefit of the parties hereto
and all of their respective past and present officers, directors, employees,
agents, representatives, employers, insurers, attorneys, attorneys of record,
accountants, advisors, partners, partnerships, predecessor partnerships,
divisions, subsidiaries, affiliates, shareholders, joint venturers, commonly
controlled corporations, ventures, projects, trusts, other entities, heirs,
successors-in-interest, predecessors-in-interest, legatees and assigns.

                                    RECITALS

     1. This Agreement is made with reference to the following facts:

          1.1 Certain disputes have arisen between the parties hereto.

          1.2 Said disputes include, but are not limited to, the claims for
relief, causes of action, assertions, denials, demands and prayers set forth by
plaintiffs and defendants in that certain civil action filed in the Superior
Court of the State of California, County of Sacramento, bearing Case No.
98AS04185 entitled (in short form) James Kinnicutt, et al. v. Bikers Dream, Inc.
et al. (referred to herein as the "Action"), including but not limited to the
pleadings and all discovery responses served by or on behalf of plaintiffs and
defendants in the Action.

<PAGE>   2

          1.3 There are no other actions, claims or proceedings on file or
otherwise known, asserted or believed to exist as between the parties or any of
them in any forum, or before any Court, agency, arbitral body or other person or
entity and if any of the parties learn of such actions, claims or proceedings,
they will cause such actions, claims or proceedings to be immediately dismissed
with prejudice.

          1.4 It is the intention of the parties to settle and dispose of, fully
and completely and forever, any and all known or unknown claims for relief,
causes of action and demands based upon acts or omissions occurring or not
occurring prior to the date of this Agreement, including but not limited to (a)
any and all claims for relief, causes of action and demands hereafter arising
out of, connected with, relating to, or incidental to any and all claims for
relief, demands, and causes of action that are set forth or that should have or
could have been set forth in the Action as to the parties to this Agreement, and
(b) any and all claims for relief, causes of action and demands that were, could
have been or should have been asserted by plaintiffs against any of the parties
to this Agreement, including but not limited to said party's agents,
representatives, insurers or attorneys by reason of anything asserted in or
connected with the Action and/or Bikers Dream of Sacramento, including but not
limited to all present and future claims of plaintiffs arising out of events,
transactions, acts or omissions alleged in the Action and/or relating to the
sale and repurchase of Bikers Dream of Sacramento, or that have been or could
have been asserted in any other action, including but not limited to, claims
pertaining to statements about plaintiffs contained in any documents filed by
BDI with the Securities and Exchange Commission, including but not limited to,
BDI's form 10Q statement for the quarter ended March 31, 2000.

<PAGE>   3

          1.5 Upon their execution of this Agreement, the parties shall
authorize and cause their respective counsel of record to exchange an executed
Request for Dismissal of the Action in its entirety with prejudice as to all
parties ("Request for Dismissal") and an executed stipulation to vacate the
judgment entered in the Action as to all parties ("Stipulation") in the form
annexed hereto as Exhibits "A" and "B" in return for the checks for the
Settlement Amount and Loan Balance as described in Section 1.6.

          1.6 Defendants shall cause to be paid to plaintiffs the single sum of
one hundred and ninety thousand dollars and no cents ($190,000.00) ("Settlement
Amount") in a single check made payable "James Kinnicutt and Susan Kinnicutt and
their counsel of record Stephen L. Davis." Defendants shall also cause the
balance of the SBA Loan to plaintiffs ("Loan Balance") to be fully paid off by
way of a single payment in the form of check made payable to "James Kinnicutt
and Susan Kinnicutt and their counsel of record Stephen L. Davis and
Westamerica" in the amount of $67,062.66 which is the Loan Balance as of July
28, 2000 according to Westamerica. The checks for the Settlement Amount and Loan
Balance are to be provided to counsel of record for plaintiffs in exchange for
the executed Request for Dismissal and the Stipulation. The manner and method
pursuant to which the Settlement Amount thereafter is recorded, distributed
and/or paid to tax authorities is solely the responsibility of plaintiffs and
their counsel and neither defendants, defendants' lawyers, its insurers nor any
other person or entity affiliated with defendants are in any way responsible for
any aspect thereof including but not limited to claims to the Settlement Amount,
if any, made by lienholders and/or third parties.

                                 GENERAL RELEASE

<PAGE>   4

     2. In consideration of the Mutual General Release as contained herein,
payment of the Settlement Amount and Loan Balance as set forth in section 1.6
above and for other good and valuable consideration expressly described herein,
the receipt of which is acknowledged by each party hereto, the parties promise,
agree and generally release as follows:

          2.1 James Kinnicutt, Susan Kinnicutt and Bikers Dream of Sacramento
hereby release Bikers Dream, Inc. and William Gresher and all of their present
and past partners, associates, employees, and representatives, including but not
limited to Kraig Kavanagh and Jeffrey Simons, and all of their respective past,
present and future officers, directors, agents, employees, representatives,
independent contractors, employers, insurers, attorneys, accountants, advisors,
partners, associates, partnerships, divisions, subsidiaries, affiliates, trusts,
assigns, heirs, legatees, successors-in-interest, predecessors-in-interest,
shareholders, joint venturers, commonly controlled corporations, ventures,
projects, and any other entities, absolutely and forever from all manner of
accounts, actions, suits, liens, debts, dues, damages, claims, causes of action,
claims for relief, claims for bad faith, obligations, appeals, agreements,
judgments, fees, costs, contracts, promises, expenses, bonds, bills, trespasses
and demands of every nature whatsoever in law, admiralty or equity, whether
known or unknown, whether suspected or unsuspected, which plaintiffs ever had,
now have or hereafter may or can have against defendants and any or all of the
above-defined persons and entities based upon acts or omissions occurring or not
occurring prior to the effective date of this Agreement, including but without
limitation, all claims in any way that were, could have been or should have been
asserted in connection with the transactions, occurrences, acts or omissions set
forth, arising out of, done in connection with, or related to the pleadings on
file in the Action, as well as any other present or future claims that arise out
of or relate in any

<PAGE>   5

way to the Action or Bikers Dream of Sacramento or that have
been or could have been asserted in any other action, including but not limited
to, claims pertaining to statements about plaintiffs contained in any documents
filed by BDI with the Securities and Exchange Commission, including but not
limited to, BDI's 10Q statement for the quarter entered March 31, 2000.
Plaintiffs expressly agree to the vacation of the judgment in the Action as to
all parties pursuant to the stipulation annexed hereto as Exhibit "B."
Notwithstanding the foregoing release, BDI shall indemnify and hold harmless
plaintiffs against any claims brought by any third party against plaintiffs
regarding the lease of the property at 1715 I Street, Sacramento between
December 1995 and May 2000.

          2.2 Bikers Dream, Inc. and William Gresher hereby release plaintiffs
and all of their past, present and future officers, directors, agents,
employees, representatives, employers, insurers, attorneys, accountants,
advisors, partners, partnerships, divisions, subsidiaries, affiliates, assigns,
heirs, legatees, successor-in-interest, predecessors-in-interest, shareholders,
joint ventures, commonly controlled corporations, ventures, projects, and other
entities absolutely and forever from all manner of accounts, actions, suits,
liens, debts, dues, damages, claims, causes of action, claims for relief, claims
for bad faith, obligations, appeals, agreements, judgments, fees, costs,
contracts, promises, expenses, bonds, bills, trespasses and demands of every
nature whatsoever in law, admiralty or equity, whether known or unknown, whether
suspected or unsuspected, which BDI or Gresher ever had, now have or hereafter
can have against plaintiffs and any or all of the above defined persons and
entities based upon acts or omissions occurring or not occurring prior to the
effective date of this Agreement, including but without limitation all claims in
any way that were, could have been or should have been asserted in connection
with the transactions, occurrences, acts or omissions set forth, arising

<PAGE>   6

out of, done in connection with, or related to the pleadings on file in the
Action as well as any other present or future claims that arise out of or relate
in any way to the Action or Bikers Dream of Sacramento or that have been or
could have been asserted in any other action.

          2.3 EACH PARTY TO THIS AGREEMENT SPECIFICALLY WAIVES THE BENEFIT OF
THE PROVISIONS OF SECTION 1542 OF THE CIVIL CODE OF THE STATE OF CALIFORNIA AND
SIMILAR LAWS OF ALL OTHER STATES, TERRITORIES OF THE UNITED STATES AND OTHER
JURISDICTIONS. SECTION 1542 OF THE CALIFORNIA CIVIL CODE PROVIDES:

          "A general release does not extend to claims which the creditor does
          not know or suspect to exist in his favor at the time of executing the
          release, which if known by him must have materially affected his
          settlement with the debtor."

                         REPRESENTATIONS AND WARRANTIES

     3. Each of the parties to this Agreement represents and warrants to the
other as follows:

          3.1 Each of the parties has received independent legal advice from
their attorneys with respect to the advisability of executing this Agreement,
the meaning of California Civil Code ss. 1542 and the effect of the waiver of
ss. 1542 provided for by this Agreement.

          3.2 None of the parties has made any statement or representation to
any other party regarding any fact relied upon in entering into this Agreement
and each party specifically states herein that it does not rely upon any
statement, representation or promise of

<PAGE>   7

any of the other parties not contained herein in executing this Agreement or
making the settlement provided for herein.

          3.3 Each of the parties to this Agreement has made such investigation
of the facts pertaining to this Agreement and all the matters pertaining thereto
as it has independently deemed necessary and appropriate.

          3.4 Each of the parties or responsible officer, director or partner
thereof has read this Agreement and understands the contents hereof. Each of the
officers, directors or partners executing this Agreement on behalf of their
respective corporation, trust, partnership or entity is empowered to do so and
thereby binds such respective corporation, trust, partnership or entity.

          3.5 In entering into this Agreement and the settlement provided for
herein, each of the parties assumes all risk of misrepresentation, concealment
or mistake. If any party should subsequently discover that any fact relied upon
by it in entering into this Agreement was untrue or that any fact was concealed
from it or that its understanding of the facts or the law was incorrect, such
party shall not be entitled to any relief in connection herewith including, but
not limited to, the fact that no party shall have any right or claim to set
aside or rescind this Agreement. This Agreement is intended to be and is final
and binding between the parties hereto regardless of any claims of
misrepresentation made without the intention to perform, concealment of fact,
mistake of fact or law or any other circumstances whatsoever.

          3.6 The parties hereto hereby warrant and represent to each other that
there has been no assignment, encumbrance, hypothecation or other complete or
partial transfer of all or any part of any interest in any claim, right, act,
damage, demand, debt, liability, note, accounting, reckoning, obligation, cost,
right of action, claim for relief or cause of action

<PAGE>   8

released herein and further warrant and represent to each other that they are
legally authorized and entitled to settle and release, on their own behalf every
claim, right, act, damage, debt, demand, liability, note, accounting, reckoning,
obligation, cost, right of action, claim for relief or cause of action herein
referred to and released and to give a valid, full and final acquittance
therefore and each party shall indemnify the other, and hold them harmless from
all damages, expenses, costs and attorney fees arising out of any breach of the
representations or warranties contained in this paragraph.

          3.7 No difference, dispute or disagreement between the parties to this
release arising on or subsequent to the effective date of this Agreement shall
in any way affect the finality of this release.

          3.8 Each term of this Agreement is contractual and not merely a
recital.

          3.9 This Agreement, and all of the terms, conditions and provisions
contained herein are enforceable pursuant to C.C.P.ss.664.6 in the Sacramento
County Superior Court.

          3.10 The parties will execute all further and additional documents as
shall be reasonable, convenient, necessary or desirable to carry out the
provisions of this Agreement.

          3.11 None of the parties hereto intends to reserve any claim for
relief, cause of action, claim or demand it has or may have against any of the
other parties from the coverage of this Agreement ("covered claim") including,
but not limited to, any possible claim for malicious prosecution, abuse of
process, lien, or other claims related to or connected with the Action. The fact
that a particular type of claim is not expressly set forth herein is not
intended to be nor shall it be construed to be an intent by any party to reserve
any covered claim against any other party to this Agreement, including but not
limited to, any claim based upon the

<PAGE>   9

Action or relating to or arising from any aspect of Bikers Dream of Sacramento.
Notwithstanding the foregoing, BDI warrants and represents that it is not aware
of any claim or suit by any third party against it relating to the lease of the
property at 1715 I Street.

                              NO ADMISSION OF FAULT

     4. This Agreement includes the settlement of all claims asserted by
plaintiffs which are denied by defendants. Nothing contained herein shall be
construed as an express or implied admission of any kind by any party hereto of
any responsibility, fault or liability of any kind to any other party. Each of
the parties hereto denies any such liability in connection with any claim and
intends hereby solely to avoid the annoyance and expense of additional
litigation. Any attempt by any party, its agents, representatives or anyone
acting on its behalf, to construe this agreement as an admission of
responsibility, fault or liability by defendants, or any of them, is a material
breach of this agreement.

                            ENFORCEMENT OF AGREEMENT

     5. In any proceeding, suit or action brought to enforce any term,
condition, warranty or representation of this Agreement and/or because of any
breach thereof and/or arising out of this Agreement, the prevailing party or
parties shall be entitled to recover from the other party or parties, their
costs of suit and reasonable attorney fees incurred in connection with said
proceeding, suit or action in addition to any and all other available relief.

                                     GENERAL

<PAGE>   10

     6. General Provisions.

          6.1 This Agreement shall in all respects be interpreted, enforced and
governed by and under the laws of the State of California applicable to
instruments, persons, transactions and subject matter which have legal context
and relationship solely within the State of California. The language of this
Agreement and all other documents referred to herein shall be construed as a
whole according to its fair meaning. Venue and jurisdiction with respect to any
acts arising under or in relation to this Agreement shall be exclusively within
the Sacramento County Superior Court, State of California.

          6.2 This Agreement is the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior and
contemporaneous oral and written agreements and discussions, if any, which are
hereby merged into this Agreement. This Agreement may not be amended orally in
any way and may be amended only by an agreement in writing and signed by all
parties thereto. No provision of this Agreement shall be modified or construed
by any practice that is inconsistent with any such provision, and failure by any
party to comply with any such provision or to require any other party to comply
with any provision shall not affect the rights of either to thereafter require
the other party to comply with that or any other provision.

          6.3 Each party has participated in, cooperated in or contributed to
the drafting and preparation of this Agreement. In any construction to be made
of this Agreement, the same shall not be construed for or against any party, but
shall be construed fairly according to its plain meaning.

          6.4 This Agreement may be executed in counterparts and when each party
has signed and delivered at least one counterpart, each counterpart shall be
deemed an original

<PAGE>   11

and, when taken together with other signed counterparts, shall constitute one
agreement which shall be binding and effective as to all parties.

          6.5 Each party shall pay their own legal fees, costs and other
expenses relating to the litigation of the Action referred to in paragraph 1.2
except as provided in paragraph 5.

          6.6 This Agreement shall be effective on the date signed by all
parties and if those signatures are on different dates, the effective date shall
be the date upon which the last signatory signed the Agreement.

          6.7 This Agreement constitutes 11 pages and two (2) exhibits in
addition thereto.

          6.8 Each party or responsible officer or partner or other person
signing on behalf of any person or entity has read this entire agreement and
understands the contents.

Dated:                , 2000                BIKERS DREAM OF SACRAMENTO
      ----------------

                                    By:
                                            ------------------------------------
                                            An authorized representative with
                                            binding irrevocable settlement
                                            authority

Dated:                , 2000
        --------------                      ------------------------------------
                                            JAMES KINNICUTT

Dated:                , 2000
        --------------                      ------------------------------------

                                            SUSAN KINNICUTT

Dated:                , 2000
        --------------                      ------------------------------------
                                            WILLIAM GRESHER

<PAGE>   12

Dated:                , 2000                BIKERS DREAM, INC.
        --------------

                                    By:     ____________________________________
                                            An authorized representative with
                                            binding irrevocable settlement
                                            authority

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