U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SMALL BUSINESS ISSUERS UNDER THE 1934 ACT
UNDER SECTION 12(B) OR 12 (G) OF THE SECURITIES EXCHANGE ACT OF 1934
---------------
PEABODYS COFFEE, INC.
(Name of Small Business Issuer in its Charter)
Nevada 98-0209293
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
3845 Atherton Road, Suite 9
Rocklin, California 95765
(Address of Principal Executive Office (ZipCode)
(916) 632-6090
(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $0.001 Par Value
(Title of Class)
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TABLE OF CONTENTS
PART I (Alternative 2)
Item 1 Description of Business..........................................3
Item 2 Description of Property.........................................17
Item 3 Directors, Executive Officers and Significant Employees.........17
Item 4 Remuneration of Directors and Officers..........................18
Item 5 Security Ownership of Management and Certain Securityholders....19
Item 6 Interest of Management and Others in Certain Transactions.......20
Item 7 Securities Being Offered........................................20
PART II
Item 1 Market Price of and Dividends on the Registrant's Common
Equity and Other Shareholder Matters............................22
Item 2 Legal Proceedings...............................................23
Item 3 Changes in and Disagreements with Accountants...................23
Item 4 Recent Sales of Unregistered Securities.........................24
Item 5 Indemnification of Directors and Officers.......................24
PART F/S......................................................................26
PART III
Item 1 Index to Exhibits.................................................
Item 2 Description of Exhibits...........................................
SIGNATURES......................................................................
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PART I (ALTERNATIVE 2)
EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THIS FORM 10-SB
CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED ("EXCHANGE ACT"), AND PEABODYS
COFFEE, INC. (THE "COMPANY") INTENDS THAT SUCH FORWARD-LOOKING STATEMENTS BE
SUBJECT TO THE SAFE HARBORS CREATED BY THESE STATUTES TO THE EXTENT THEY APPLY.
WHEREVER POSSIBLE WE HAVE IDENTIFIED THESE FORWARD-LOOKING STATEMENTS BY SUCH
WORDS AS "ANTICIPATES," "BELIEVES," "ESTIMATES," "INTENDS," AND SIMILAR
EXPRESSIONS. FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES AND
INCLUDE, BUT ARE NOT LIMITED TO, STATEMENTS OF FUTURE EVENTS AND THE COMPANY'S
PLANS AND EXPECTATIONS. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM SUCH
STATEMENTS.
ALTHOUGH WE BELIEVE THAT THE ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING
STATEMENTS ARE REASONABLE, ANY OF THE ASSUMPTIONS COULD PROVE TO BE INACCURATE.
THERE CAN BE NO ASSURANCE THAT THE RESULTS CONTEMPLATED IN SUCH FORWARD-LOOKING
STATEMENTS WILL BE REALIZED. IN ADDITION, AS DISCLOSED UNDER "ITEM 1.
DESCRIPTION OF BUSINESS-RISK FACTORS AFFECTING THE COMPANY," THE BUSINESS AND
OPERATIONS OF THE COMPANY ARE SUBJECT TO SUBSTANTIAL RISKS WHICH INCREASE THE
UNCERTAINTIES INHERENT IN THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM
10-SB. THE INCLUSION OF SUCH FORWARD-LOOKING INFORMATION SHOULD NOT BE REGARDED
AS A REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT THE FUTURE EVENTS,
PLANS OR EXPECTATIONS CONTEMPLATED BY THE COMPANY WILL BE ACHIEVED.
ITEM 1. DESCRIPTION OF BUSINESS
(FORM 1-A MODEL B ITEM 6)
OVERVIEW
Peabodys Coffee, Inc., a Nevada corporation (the "Company" or "Peabodys"),
is in the business of selling premium specialty coffee drinks. Peabodys sells
its coffee drinks by the use of strategically positioned coffee espresso bars
(kiosks), and its goal is to capitalize on the growth and profitability of the
specialty coffee market.
Peabodys' strategy is to establish and manage espresso coffee bars (kiosks)
in corporate and institutional locations that require low levels of capital
investment, minimal overhead and advertising budgets, and which are simple to
operate. The Company seeks to provide the highest levels of product, quality,
service and consistency by utilizing strict site operating guidelines and other
controls including cash and inventory management, personnel and sales analysis
at each location. Peabodys has determined that the highest level of growth,
stability and return on investment in the specialty coffee market is available
through targeting a "captive" market niche and by avoiding direct competition
with "retail" companies such as Starbucks, Diedrich Coffee, Seattle's Best and
others located in store fronts and shopping centers. Although Peabodys will
employ many of the same management techniques as these large companies, the
Company intends to avoid the high initial investment costs, operating overhead
and advertising budgets associated with "retail" operations.
A key feature of Peabodys' marketing plan is its emphasis on operational
simplicity and ease of
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management. The kiosks, while usually appearing permanent, are portable and
often completely self-contained, with the exception of power. Peabodys' kiosks
provide convenience by "bringing espresso products directly to the consumer"
during the morning, at lunch, and for work breaks, which are all peak coffee
drinking hours. Prime locations of the kiosks are in above average income
employment centers, including corporate offices, industrial facilities, office
buildings, universities, colleges, hospitals and entertainment venues.
The Company is currently operating 28 kiosk outlets and has achieved
profitability at the unit level at 24 of these locations. The three largest
foodservice providers in the United States - Sodexho-Marriott, The Compass
Group, and ARAMARK - are all Peabodys clients. These three venders alone control
more than 8,500 institutional foodservice sites across the country representing
a target market for the Company of approximately $1.3 billion. Given the
diversity of the Company's locations, however, no single client is so large that
the Company is dependent upon its business relationship.
INDUSTRY OVERVIEW
Specialty coffee sales as a percentage of total coffee sales in the United
States have been increasing steadily. According to the National Coffee
Association, a New York-based alliance of 165 coffee concerns, sales of
specialty coffee grew from approximately 17% to almost 30% of total coffee sales
in the United States from 1989 through 1997. According to the National Coffee
Association's 1998 study, 45% of Americans drink coffee. On average they drink
1.4 cups per day. The U.S. coffee market consists of two distinct product
categories: (1) commercial ground roast, mass-merchandised coffee and (2)
specialty coffees, which include gourmet coffees (premium grade arabica coffees
sold in whole bean and ground form) and premium coffees (upscale coffees
mass-marketed by the leading coffee companies).
The specialty coffee industry is expected to increase from $3 billion a
year at present to $5 billion by the turn of the century. The National Coffee
Association forecasts there will be 10,000 coffee houses in the United States by
next year. They estimate that 47 percent of Americans - 108 million people drank
specialty coffee beverages in 1998, up from 80 million in 1997.
Coffee has been harvested and served for over 500 years, but specialty
espresso-based coffee drinks and specialty dark roast coffees are only now
gaining a foothold in new markets. In the U.S., specialty coffee products trace
their development to the Pacific Northwest, specifically Seattle and western
Washington. Through "retail" storefront companies such as Starbucks, espresso
and specialty coffees are quickly gaining a foothold in all of the major
geographical markets throughout North America. An increased number of brand name
recognized storefront locations is also resulting in an increasing demand for
"kiosks" or specialty coffee carts which conveniently bring product to consumers
when they demand it the most, in the morning, at lunch and during work or class
breaks.
Research conducted by the Specialty Coffee Association of America estimates
the total high-end coffee market at approximately $3 billion and is forecasted
to reach $5 billion by 2000. The market has demonstrated that not only do
existing coffee drinkers purchase espresso, but an entirely new consumer base
has been reached, including women in the 17 - 40 age group, higher income
professionals and even high school students. It is not surprising that with this
type of opportunity and high profit margins available to specialty coffee
operators, there is a boom in the retailing of espresso-based coffee products.
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The Company believes that several factors have contributed to the increase
in demand for gourmet coffee including:
o Greater consumer awareness of gourmet coffee as a result of its
increasing availability;
o Increased quality differentiation over commercial grade coffees by
consumers;
o Increased demand for all premium food products, including gourmet
coffee, where the differential in price from the commercial brands is
small compared to the perceived improvement in product quality and
taste;
o Ease of preparation of gourmet coffees resulting from the increased
use of automatic drip coffee makers and home espresso machines; and
o The decline in alcoholic beverage consumption.
COMPANY BACKGROUND
PEABODYS CA
The current business of the Company began with the formation of Peabodys
Coffee, Inc., a California corporation ("Peabodys CA"), in 1995. Co-founder Todd
Tkachuk (who is currently an officer and director with the Company) conceived of
a company which would contract with an institutional food service vendor (the
"client"), such as Marriott, The Compass Group, or ARAMARK, that held the food
service contract for an institutional setting (the "host organization"), such as
a corporate facility, college, university, or hospital. Peabodys CA would
provide turn-key specialty coffee service within the host organization on behalf
of the client. Thus, Peabodys CA represented a comprehensive outsourcing
solution for what is only a small portion of the client's food service business,
yet is an important and highly desired amenity for the host organization.
As with the Company today, Peabodys CA would open a new site in
approximately three weeks, at an all-in cost, including initial inventory and
pre-opening expenses, of less than $30,000. Because physical plant consisted of
a self- contained kiosk that required minimal, if any, tenant improvements, the
Company would relocate to a new site, if necessary, without abandoning a large
fixed investment. In return for its right to provide turn-key specialty coffee
service, Peabodys CA would compensate the food service vendors through
revenue-sharing, typically averaging about 15% of total revenues generated at
the site. This approach resulted in pure profit for the food service vendor,
thus increasing overall margins for the Company's client.
The Peabodys CA model, which is now the model of the Company today, differs
from traditional specialty coffee retailers in the following significant ways:
o No direct competition with Starbucks.
o Access to large numbers of sites through clients who have
relationships already in place with such sites. In fact, existing
Company clients control more than 8,500 such sites in the United
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States alone.
o Captive customer populations at such sites, resulting in no direct
competition at the site level, and hence no need (or expense) for
massive brand promotion to draw consumers
o No real estate costs, and no need to build a real estate pipeline for
future sites -
o Low initial investment to open new sites
o Short time period required to open new sites
o No expenses for utilities or common area maintenance charges.
o Low Fixed costs
o Physical plant that can be relocated easily if necessary
THE COMPANY
Concurrent with Peabodys CA's development of its specialty coffee business,
as described above, the Company was existing as a development stage company
formed for the purpose of mineral exploration and mine development. The Company
was incorporated under the laws of the State of Nevada on July 26, 1989 with the
name Kimberly Mines, Inc. Several months later the Company was the surviving
company in a merger with Blue Ute Mining & Exploration, Inc., a Utah
corporation. On August 15, 1997 the Company changed its name to Mine-A-Max
Corporation. The Company continued to exist as a development stage mining
company until its merger with Peabodys CA in 1999.
THE MERGER
On March 12, 1999, Peabodys CA entered into a Plan and Agreement of
Reorganization (the "Agreement") with the Company. The Agreement provided for a
share exchange in which the Company offered shareholders of Peabodys CA one (1)
share of the Company's common stock in exchange for one (1) share of Peabodys CA
common stock. The shares were offered by the Company in reliance on the
exemption from registration provided by Rule 506 of Regulation D. The Agreement
provided further that, after the Company had acquired a majority of the
outstanding stock of Peabodys CA, the Company would: (i) elect a new board of
directors for the Company composed of the former management of Peabodys CA; (ii)
amend the Company's articles of incorporation to change its name to "Peabodys
Coffee, Inc.;" (iii) amend and restate the Company's bylaws; and (iv) effect a
merger of Peabodys CA into the Company.
On March 15, 1999 the Company filed an Amendment to Articles of
Incorporation with the State of Nevada changing its name from Mine-A-Max
Corporation to Peabodys Coffee, Inc. On June 30, 1999, the Company effected a
merger ("Merger") by filing Articles of Merger in the State of Nevada, with
Peabodys CA as the disappearing corporation and the Company as the surviving
corporation, with the outstanding shares of Peabodys CA converted into shares of
the Company on a one-to-one basis.
In effecting the Merger, the Company did not send a notice of approval of
the Merger and appraisal price of the shares to Peabodys CA shareholders in
accordance with Corp. C. ss. 1301(a) for the exercise
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of dissenters' rights. Consequently, no Peabodys CA shareholders delivered a
demand to exercise dissenters' rights under Corp. C. ss. 1301(b) in connection
with the Merger, and there were no "dissenting shares," as defined in Corp. C.
ss. 1300(b). It is not clear at this time whether any former Peabodys CA
shareholders will seek to enforce their dissenters' rights, and, if so, what the
Company's liability will be.
The Company is in the midst of completing formalities in connection with
the Merger, such as issuing new share certificates to the former holders of
Peabodys CA shares. The Company, as of the date of this filing, has not filed
the proper document to effect the Merger in the State of California, as set
forth in Corp. C. ss. 1108(d). When this document is filed, because more than
six (6) months will have elapsed between the filing of the Articles of Merger in
the State of Nevada and the filing of the proper document in California, the
Merger will be effective in California as of the date of the later filing, all
in accordance with Corp. C. ss. 1108(e). The effect on the Company of this later
effective date is not clear at this time.
BUSINESS STRATEGY AND OPERATION
In order to take advantage of the rapidly growing market for specialty
coffee, the Company has developed a business strategy based on the following key
concepts:
Business and Institutional Locations. The Company believes that by locating
its coffee kiosks in business and institutional areas, the Company will be able
to obtain a significant market share for specialty coffees. The Company expects
to experience both lower competition and reduced advertising and marketing
expenses by installing kiosks in such areas. Kiosks enable the Company to offer
specialty coffees during the peak coffee drinking hours (i.e., morning, lunch
and work breaks). Peabodys' kiosks have a nearby captive audience of employees
and students at business and institutional sites.
Highest Quality Coffee. Peabodys coffee is made to exacting standards,
developed by the Company's coffee experts. The products offered by each kiosk
can be selected to meet the taste and preferences of each locale.
Low Cost Operations. The cost of opening and operating each kiosk is
significantly less expensive than the retail outlets operated by Peabodys'
competition. Each kiosk can achieve profitability virtually immediately with
sales as low as $300.00 per day. Currently, Peabodys per-unit revenue averages
approximately $450.00 per day.
SITE FORMAT AND OPERATIONS
Each existing Peabodys site consists of a kiosk that measures approximately
six feet long, three feet deep, and four feet high (counter level), with related
equipment and display space. Standard equipment on the kiosk includes a
two-group espresso machine, two espresso grinders, a coffee brewer, blender, and
cash register, and display racks for baked goods and other non-coffee items. All
kiosks are equipped with wheels for unit mobility, although at most sites the
kiosk remains in the same location permanently. Under the terms of its
contracts, Peabodys is usually allotted both dry and cold storage space within
the host's commissary facilities, at no charge to the Company.
The typical Peabodys site, which includes the kiosk, related components.
and workspace for employees, occupies a footprint of approximately 100 square
feet. Due to the unique client-host-captive
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consumer model that Peabodys has developed, the Company incurs no rental expense
for this real estate. Likewise, there are no common area maintenance charges,
and all utilities, such as electricity, heat, air conditioning, and water, are
furnished by the host or client at no cost to Peabodys. To achieve greater
impact from the physical plant itself as a merchandising tool, and to enhance
operating efficiencies, Peabodys has refined the look and functionality of its
kiosk and related equipment into a "branded system" to be applied consistently
across all future sites.
Each Peabodys location is staffed with a site manager and from two to eight
baristas (the Italian term for a person skilled in the art of espresso
preparation), depending on the population of the site's captive customer base,
the hours of operation, the mix of hours available from part-time employees, and
similar factors. To assure available staffing at all times, Peabodys is also
building a pool of on-call labor to work on an as-needed basis, much as schools
draw from a pool of substitute teachers to fill in as needs arise. Most baristas
work part-time, typically in four hour intervals. Site managers, all of whom are
full-time employees, serve customers during their shifts in addition to
performing supervisory and administrative duties such as recruiting, hiring, and
supervising staff, assuring compliance with corporate procedures and the
Company's key operating imperatives, taking inventory, and completing daily
performance reports for corporate headquarters. Specific accountabilities for
site managers include quality and service, employee performance, sales, and
profit, and site manager compensation is strongly performance-related, with
execution of the four operating imperatives and over-budget profitability
bringing open-ended gain-share rewards.
Standout site managers, known as "cell leaders," oversee strategic
groupings of sites. Cell leaders remain accountable for their own sites'
performance, but take on additional duties to support the cell, for which they
earn extra compensation. In particular, such duties include: (i) building peer
chemistry within the cell; (ii) participating in training and coaching projects;
(iii) designing and executing local site-specific marketing programs; (iv)
supporting new site openings; and (v) implementing specific initiatives to
support the four key operating imperatives within the cell. Given these
additional responsibilities, cell leaders receive somewhat higher staffing
support at their own sites.
Establishing and maintaining Peabodys' specialty coffee kiosks is relative
simple. The kiosk is compact, modular in design, and completely self-contained.
No significant preparation is needed at the host location other than provision
for electrical power. The kiosk, while usually appearing permanent, is often
completely portable and can be moved from space to space or completely out of a
location. The cost of a complete espresso bar kiosk, including internal
plumbing, equipment, inventory and signage is approximately $30,000. This cost
is significantly less than that of "retail" coffee outlets. In addition, the
design of the kiosk allows the Company to enhance the production and product
offering capabilities of the unit by adding additional modules. Turnaround time
for manufacturing a complete kiosk is approximately four to six weeks.
Significantly, the Company can operate and maintain its kiosk locations
with no rental or lease expenditures. Peabodys pays a percentage of revenue to
the foodservice provider or the host location at an average rate of
approximately 15%.
With respect to the construction of kiosks, the Company utilizes Michaelo
Espresso ("Michaelo") of Seattle, Washington as its kiosk vendor. Capable of
producing new kiosks in 72 hours from order placement, Michaelo can support
rapid unit roll-out by the Company.
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<TABLE>
<CAPTION>
SITE; HOST LOCATION CLIENT DATE OPENED
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IBM Bldg 11; IBM San Jose, CA The Compass Group June 1995
IBM Bldg 55; IBM San Jose, CA The Compass Group October 1997
STL Labs; IBM San Jose, CA The Compass Group April 1996
San Jose City College; SJCC San Jose, CA The Compass Group January 1996
Concord Airport Plaza Concord, CA The Compass Group February 1996
Web TV; IBM San Jose, CA The Compass Group October 1999
EM Building, UCSC Santa Cruz, CA Sodexho-Marriot November 1995
College 10; UCSC Santa Cruz, CA Sodexho-Marriot April 1997
Sisheiner Labs; UCSC Santa Cruz, CA Sodexho-Marriot April 1997
Applied Science, UCSC Santa Cruz, CA Sodexho-Marriot March 1996
Sutter Memorial Hospital Sacramento, CA Sutter Health October 1995
Sutter General Hospital Sacramento, CA Sutter Health October 1995
California State Fair; Cal Expo Sacramento, CA Cal Expo August 1998
College of Education; UNR Reno, NV Sodexho-Marriot August 1998
Library; UNR Reno, NV Sodexho-Marriot December 1997
Lawlor Event Center; UNR Reno, NV Sodexho-Marriot December 1997
Peabodys Lake Tahoe S. Lake Tahoe, CA Peabodys June 1999
Convention Center-Location 1 Reno, NV ARAMARK April 1997
Convention Center-Location 2 Reno, NV ARAMARK April 1997
Livestock Center Reno, NV ARAMARK April 1997
Santa Ana Community College Santa Ana, CA Sodexho-Marriott August 1996
Center Hall, UCSD San Diego, CA UCSD April 1999
Social Science Bldg.; UCSD San Diego, CA UCSD April 1999
Warren Bldg.; UCSD San Diego, CA UCSD April 1999
Physical Plant; UCSD San Diego, CA UCSD April 1999
Nierenburg Hall; UCSD San Diego, CA UCSD April 1999
SDSU-1; San Diego State University San Diego, CA Aztec Shops August 1999
SDSU-2; San Diego State University San Diego, CA Aztec Shops August 1999
</TABLE>
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SUPPLIERS
The Company procures its coffee from Terra Nova Coffee ("Terra Nova") in
Sacramento. Terra Nova is the leading coffee roaster serving central California,
and Peabodys is Terra Nova's largest specialty coffee account. The Company
provides its proprietary specifications for varietals, roast, and grind and
proportions (for brewed coffees) to Terra Nova, which in turn purchases green
beans from qualified sources around the world, and then roasts, blends, and
grinds (for brewed coffees) to Peabodys' specifications. Finished product is
bagged, sealed, and shipped to the Company as ordered. The Company is currently
testing on-site grinding for its brewed coffee, as doing so is expected to: (i)
enhance freshness and quality, (ii) reinforce consumer perceptions of Peabodys
as specialty coffee experts, (iii) add to the pleasing aroma at the site, and
(iv) lead to higher sales of packaged whole beans. From its current facilities,
Terra Nova has sufficient capacity to support Peabodys' growth to approximately
200 sites.
For both its brewed and espresso beverages, the Company uses only the
premium "arabica" species of coffee. At present, brewed coffee consists of 100%
Colombian Supremo, selected because among the approximately 30 varietals of
specialty coffee worldwide, this one commands approximately 40% to 50% of the
premium segment, and is readily available. The Company is testing an expanded
offering of brewed coffee varietals in order to provide greater consumer choice
and, again, enhance consumer perception of Peabodys' expertise in specialty
coffee. Growing regions for such additional varietals include Africa, Indonesia,
and South America. Peabodys' espresso is a special in-house blend of Colombian
Supremo and specialty coffees from Sumatra and Ethiopia. To achieve its unique,
robust flavor, the Company uses a proprietary dark roast, typical of the Pacific
Northwest style. This roast flavor is a key dimension by which Peabodys
distinguishes itself in the marketplace, much as does Starbucks.
Because coffee in green bean form is a commodity, and is thus subject to
commodity price swings caused by weather conditions, political climate, and
similar supply and demand factors, it is sometimes assumed that margins for
specialty coffee companies are vulnerable to the same factors. However, the
price of green coffee represents only a relatively small portion of Peabodys'
cost of goods sold for specialty coffee beverages. As a result, if green coffee
prices were to double, for example, the Company's costs would increase by only
about 5 cents per drink. Given consumers' price inelasticity for specialty
coffee, an increase of such size can generally be passed along to the customer.
Among other menu items, baked goods and fruit smoothies are the most
prominent. Such products are sourced from vendors local to each site. The
Company is analyzing several alternatives to reduce costs, increase shelf-life,
and/or enhance revenues, including lunch/afternoon-oriented products. Juice
drinks, sodas, and bottled waters are purchased at customary wholesale prices
from distributors of such products, who deliver directly to the sites as
ordered.
EXPANSION PLANS
The Company has experienced significant acceptance with institutional
foodservice providers. However, to date the Company's expansion has been
curtailed primarily by capital constraints. The Company's expansion will come
from: (i) adding additional locations under current contracts; (ii) developing
new relationships with additional foodservice providers and (iii) developing
direct contracts with host company facilities that control a significant number
of locations such as large retailers and property owners.
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The Company believes that its most significant growth will come from
expansion of its current contracts. The Company's three largest clients,
Sodexho-Marriott, The Compass Group and ARAMARK control more than 8,500
institutional foodservice sites across the country, representing an aggregate
market to the Company of approximately $1.3 billion.
The Company believes that there is opportunity to acquire existing kiosks
located in key locations. The specialty coffee kiosk industry is extremely
fragmented. The Company estimates that its largest competitor operates twelve
(12) kiosk sites. To date, the Company has acquired seven (7) kiosks from other
companies. Six of the seven have resulted in a positive cash flow at the unit
level to the Company.
The Company has determined that the order of expansion and growth should be
based on several variables: 1) the market potential in terms of gross numbers of
potential kiosk locations which can be inferred by the population of a metro
area and the market's core industrial and commercial base; 2) the level of
maturity for specialty coffee, which the Company closely monitors the regional
growth of Starbucks and other retail chains to take advantage of significant
expenditures in specialty coffee marketing efforts; 3) the leverage that may be
garnered in infrastructure support and management between regions; and 4)
existing catering company contracts which can be easily extended into a new
region.
The Company recently entered into a non-binding letter of intent with
Arrosto Coffee Company LLC ("Arrosto") for the purchase of substantially all the
assets of Arrosto. The primary assets of Arrosto include a roasting facility, a
specialty coffee retail store, and certain trademarks and other intellectual
property which Arrosto licenses to independent operators of kiosks and other
locations. It is anticipated that the Company will pay the purchase price for
the assets in shares of common stock of the Company.
The Company recently entered into a non-binding letter of intent with
Grounds for Enjoyment ("GFE") for the purchase of certain assets GFE. The
primary assets being purchased are four (4) kiosks and site contracts in the
Riverside/San Bernardino, CA area. It is anticipated that the Company will pay
the purchase price for the assets with a combination of cash and shares of
common stock of the Company.
MARKETING STRATEGY
Peabodys' marketing strategy is based on a symbiotic relationship with
foodservice providers and hosts. Recent developments indicate the potential for
direct contracts with host company facilities, particularly where the host
controls a significant number of potential locations such as large retailers and
property owners. The relationship with food service providers and hosts is based
on Peabodys' supplying an espresso bar kiosk in an environment that is not
conducive to traditional retail outlets such as corporate offices, industrial
facilities, office buildings, universities, colleges, hospitals and
entertainment venues. Due to the nature of these centers, traditional
foodservice vendors, such as Sodexho-Marriott and ARAMARK, provide food and
other items to a "captive audience" located at these facilities. Foodservice
vendors or the host sites have offered coffee in the past; however, with the
development of espresso bars and gourmet coffee, these traditional vendors and
hosts have not been able or desirous to fill this market void. The Peabodys
solution is to establish an espresso bar kiosk on site without competing with
the foodservice provider at the facility.
Due to the many benefits Peabodys has to offer foodservice operators and
hosts, Peabodys has had little resistance to opening kiosks. The foodservice
provider or the host facility receives the following
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benefits from entering into a contract with Peabodys:
INCREMENTAL REVENUE STREAM. Peabodys provides on average 15% gross revenue
sharing for the foodservice provider or the host.
INCREASED CUSTOMER BASE. Incremental increase in customer base with new
customers attracted by Peabodys.
NO INVESTMENT REQUIRED. Peabodys provides everything: Plant, equipment,
products, personnel, training, and management.
NO OPERATIONAL INVOLVEMENT. Peabodys takes full responsibility for kiosk
operation.
INCREASED CUSTOMER AND HOST SATISFACTION. Peabodys brings gourmet coffee
that is custom brewed to captive customers at work, hospital,
convention, education, or entertainment locations providing extra
pleasure and convenience for the customer at no cost to the host or
foodservice provider.
Peabodys is specifically targeting the institutional foodservice channel.
The Company estimates that its potential annual available market in the United
States is approximately $1.3 billion from existing clients alone. The Company
has been successful by negotiating contracts with the three largest foodservice
providers in the United States: Sodexho-Marriott, The Compass Group, and
ARAMARK. The Peabodys marketing model allows Peabodys to participate in the fast
growing gourmet coffee market without competing directly with Starbucks and
other retail chains.
On September 30, 1999, the Company entered into a General Agreement with
Elliot, Lane & Associates, Inc. ("Elliot, Lane"), to provide consulting services
to the Company with respect to company expansion, strategic alliances and
investor relations. The Company is currently negotiating a Professional Service
Agreement with Elliot, Lane to provide consulting services with respect to
expansion, strategic alliances and investor relations in European markets.
COMPETITION
The specialty coffee market is extremely competitive and highly fragmented.
With low barriers to entry, competition in the industry is expected to increase
from national and regional chains, franchise operators and local specialty
coffee stores. The Company competes directly against all other premium coffee
roasters, coffeehouses, espresso/coffee bars and mall coffee stores, as well as
against restaurant and beverage outlets that serve coffee and a growing number
of espresso stands, carts and stores. In addition, the Company competes to draw
consumers of standard or commercial coffee to premium coffee. The Company
believe that our customers choose among retailers primarily on the basis of
product quality, service, coffeehouse ambiance, convenience and, to a lesser
extent, on price.
The Company competes with a growing number of specialty coffee retailers
including Starbucks, Coffee Beanery, Caribou, Java City, Diedrich, Tully's, New
World Coffee-Manhattan Bagel, Peet's Coffee and many others. The attractiveness
of the gourmet specialty coffeehouse market may draw additional competitors with
substantially greater financial, marketing and operating resources than us. A
number of
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nationwide coffee manufacturers, such as Kraft General Foods, Proctor & Gamble,
and Nestle, distribute coffee products in supermarkets and convenience stores,
which may serve as substitutes for our coffees.
The performance of individual coffeehouses may also be affected by factors
such as traffic patterns and the type, number and proximity of competing
coffeehouses. In addition, factors such as inflation, increased coffee bean,
food, labor and employee benefit costs and the availability of experienced
management and hourly employees may also adversely affect the specialty coffee
retail business in general and our coffeehouses in particular.
INTELLECTUAL PROPERTY
The Company has a registered service mark for its rhinoceros logo. The
Company is aware of another entity in North Carolina that is utilizing the name
"Peabodys" in the coffee industry. The North Carolina entity has received a
federal trademark registration of the name "Peabodys." While the Company
believes that it has the right to use the name "Peabodys" in the areas in which
it is used by the Company, if it were determined that the Company were not able
to continue utilizing the name "Peabodys," it would have a material adverse
effect on the Company and the Company would have to re-establish any lost
goodwill and name recognition.
EMPLOYEES
The Company currently has 97 employees of which 26 are full-time employees
and 5 of which are administrative.
SEASONALITY
Because the Company serves both hot and cold coffee drinks, the sales of
the Company's products at most Kiosk locations do not appear to be significantly
affected by the seasons. However, those kiosks which are located in educational
facilities are affected by the seasons to the extent that sales are
significantly less when school is not in session.
RISK FACTORS AFFECTING THE COMPANY
COMPLETION OF MERGER. As described above, on June 30, 1999, the Company
effected a merger with Peabodys CA as the disappearing company and the Company
as the surviving company (the "Merger"). The Merger followed a share exchange,
which began on March 12, 1999, through which the Company acquired more than 51%
of the shares of Peabody CA in exchange for its shares, offered to the
shareholders of Peabodys CA on a one-to-one exchange basis. In effecting the
Merger, the Company did not send a notice of approval of the Merger and
appraisal price of the shares to Peabodys CA shareholders in accordance with
Corp. C. ss. 1301(a) for the exercise of dissenters' rights. Consequently, no
Peabodys CA shareholders delivered a demand to exercise dissenters' rights under
Corp. C. ss. 1301(b) in connection with the Merger, and there were no
"dissenting shares," as defined in Corp. C. ss. 1300(b). It is not clear at this
time whether any former Peabodys CA shareholders will seek to enforce their
dissenters' rights,
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<PAGE>
and, if so, what the Company's liability will be.
The Company is in the midst of completing formalities in connection with
the Merger such as issuing new share certificates to the former holders of
Peabodys CA shares. The Company, as of the date of this filing, has not filed
the proper document to effect the Merger in the State of California, as set
forth in Corp. C. ss. 1108(d). When this document is filed, because more than
six (6) months will have elapsed between the filing of the Articles of Merger in
the State of Nevada and the filing of the proper document in California, the
Merger will be effective in California as of the date of the later filing, all
in accordance with Corp. C. ss. 1108(e). The effect on the Company of this later
effective date is not clear at this time.
LATE PAYMENTS RELATING TO DEBT. Pursuant to the Merger, the Company by
operation of law assumed all of the obligations of Peabodys CA. In an earlier
private placement, Peabodys CA offered and sold units, with each unit consisting
of a secured promissory note ("Secured Note") and warrants to purchase common
stock. The Company is now obligated to make quarterly payments on the principal
balance outstanding and to repay such Secured Notes. As of the date hereof, the
Company is in default on the principal balance of the Secured Notes and is
approximately $226,652.00 in arrears on such interest payments relating to the
Secured Notes (such arrears are increasing at the rate of approximately $4,600
per month) and has not repaid any portion of the $367,500.00 principal balance
of the Secured Notes. Under the terms of the Security Agreement relating to the
Secured Notes, a noteholder has the right to (i) declare all principal and
interest immediately due and owing; (ii) exercise its rights and remedies under
the California Commercial Code as a secured creditor having a security interest
in the collateral, which includes, but is not limited to, equipment, inventory,
accounts, trademarks and tradenames and other intellectual property rights (the
"Collateral"), and, in particular, sell any part of the Collateral and (iii)
exercise any other rights or remedies of a secured party under California law.
As of the date hereof, the Company has not received any notice of default
relating to the Secured Notes.
OPERATING LOSSES; LIMITED OPERATING HISTORY; DEVELOPMENT STAGE OF COMPANY.
Prior to the Merger, Peabodys CA had incurred operating losses in each quarter
since its inception and has a significant accumulated deficit. It is anticipated
that the Company will continue to incur losses, until it is able to increase
revenues sufficient to support operations. The Company has a limited history of
operations and has had limited revenue. The Company's success is dependent upon
the successful development and marketing of its services and products, as to
which there is no assurance. Any future success that the Company might enjoy
will depend upon many factors, including factors out of its control or which
cannot be predicted at this time. These factors may include changes in or
increased levels of competition, including the entry of additional competitors
and increased success by existing competitors, changes in general economic
conditions, increases in operating costs, including costs of supplies, personnel
and equipment, reduced margins caused by competitive pressures and other
factors. These conditions may have a materially adverse effect upon the Company
or may force the Company to reduce or curtail operations.
HISTORICAL FINANCIAL STATEMENTS PROVIDED FOR PEABODYS CA. Peabodys CA
retained Nicholson & Olson to audit the Company's financial statements for the
fiscal year ended March 31, 1998. This audit was completed in August 1998 and
the independent auditors' report (a going concern opinion) and the accompanying
March 31, 1998 financial statements are included as Exhibits, in addition to the
financial statements of the Company.
The Company recently changed its fiscal year end from September 30 to March
31. The Company engaged Nicholson & Olson to audit the Company's financial
statements for the fiscal year ended March
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31, 1999. The auditors have issued a going concern opinion in connection with
these financial statements, which are attached hereto as exhibits.
NEED FOR ADDITIONAL CAPITAL. Additional capital will be required to
effectively support the operations and to otherwise implement the Company's
overall business strategy, including rapid growth in designated regions.
However, there can be no assurance that financing will be available when needed
on terms that are acceptable to the Company. The inability to obtain additional
capital will restrict the Company's ability to grow and may reduce the Company's
ability to continue to conduct business operations. If the Company is unable to
obtain additional financing, it will likely be required to curtail its marketing
and development plans and possibly cease its operations. Any additional equity
financing may involve substantial dilution to the Company's then-existing
shareholders.
RELIANCE ON MAJOR CONTRACTS. The Company anticipates that it will enter
into service contracts with several parties that may initially represent a
significant portion of the Company's business. No assurance can be given that
the Company will be able to obtain or maintain such contracts. The Company
anticipates that such contracts may initially be for short-term periods of one
to two years, after which the Company anticipates the contracts will be extended
for a longer period; however, there can be no assurance of such extensions. If
any contracts are terminated and not renewed at the end of the short-term
period, the Company may experience a material decline in revenues.
GENERAL RISKS OF BUSINESS. The Company has formulated its business plans
and strategies based on certain assumptions regarding the size of the specialty
coffee markets, the Company's anticipated share of the market, and the estimated
price and acceptance of the Company's products. Although these assumptions are
based on the best estimates of management, there can be no assurance that the
Company's assessments regarding market size, potential market share of the
Company, the price at which the Company will be able to sell its products,
market acceptance of the Company's products and a variety of other factors will
prove to be correct.
DEPENDENCE ON COFFEE SUPPLIER; FLUCTUATIONS IN AVAILABILITY AND COST OF
GREEN COFFEE. The Company largely depends upon a third-party supplier for whole
bean coffee, although the Company has no contract currently in effect with the
supplier other than purchase orders placed from time to time by the Company. The
Company believes that its relationship with such supplier is good and the
supplier will be able to meet the Company's requirements for coffee during the
foreseeable future. In the event such relationship terminates, the Company
believes that numerous other suppliers can fulfill the Company's supply
requirements. In addition, the Company's supply of coffee may be affected by
fluctuations in the cost and availability of high quality whole coffee beans.
Coffee supply and price are subject to volatility. Coffee of the quality sought
by the Company trades on a negotiated basis at a substantial premium above
commodity coffee pricing, dependent upon supply and demand at the time of
purchase. Supply and price may be affected by multiple factors including
weather, politics, and economics in the producing countries. An increase in the
prices of specialty coffees could have an adverse effect on the Company's
profitability.
COMPETITION. As described above, the Company competes indirectly against
specialty coffee retailers (such as Starbucks, Diedrich Coffee and others),
restaurant and beverage outlets that serve coffee, and directly with a growing
number of espresso stands, carts, and stores in the Company's markets. The
Company's coffee beverages compete directly against all other coffees on the
market, including those sold in supermarkets. The specialty coffee segment is
becoming increasingly competitive. The coffee industry, and particularly the
Company's market of commercial and industrial locations, is dominated by large
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companies such as Sodexho-Marriott, The Compass Group, and ARAMARK, each of whom
have significantly greater financial, marketing, distribution and management
resources than the Company. Competitors with significant economic resources in
both existing nonspecialty and specialty coffee businesses and companies in
retail foodservice businesses could at any time enter the Company's proposed
market with competitive coffee products. The Company competes against both other
specialty retailers and restaurants for store sites, and there can be no
assurance that management will be able to continue to secure adequate sites.
ABILITY TO MANAGE RAPID GROWTH. The success of the Company will require
rapid expansion of its business. Any such expansion could place a significant
strain on the Company's resources and would require the Company to hire
additional personnel to implement additional operating and financial controls
and improve coordination between marketing, administration and finance
functions. The Company would be required to install additional reporting and
management information systems for sales monitoring, inventory control and
financial reporting. There can be no assurance that the Company would be able to
manage any substantial expansion of its business, and a failure to do so could
have a materially adverse effect on the Company's operating results.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a significant
extent upon the continued service of Todd Tkachuk. Loss of the services of Mr.
Tkachuk could have a material adverse effect on the Company's growth, revenues,
and prospective business. The Company does not maintain key-man insurance on the
life of Mr. Tkachuk. In addition, in order to successfully implement and manage
its business plan, the Company will be dependent upon, among other things,
successfully recruiting qualified managerial and sales personnel having
experience in business. Competition for qualified individuals is intense. There
can be no assurance that the Company will be able to find, attract and retain
existing employees or that it will be able to find, attract and retain qualified
personnel on acceptable terms.
LACK OF DIVIDENDS. Peabodys CA has not to date paid any dividends with
respect to its shares of Common Stock and does not intend to pay dividends in
the foreseeable future. Instead, the Company intends to apply any earnings to
the expansion and development of its business.
THIN MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. The Company's Common Stock
has been traded on the OTC Bulletin Board since November 1997. The Company
believes that factors such as announcements of developments related to the
Company's business, fluctuations in the Company's quarterly or annual operating
results, failure to meet securities analysts' expectations, general conditions
in the marketplace and the worldwide economy, developments in intellectual
property rights and developments in the Company's relationships with clients and
suppliers could cause the price of the Company's common stock to fluctuate,
perhaps substantially.
OTC ELIGIBILITY RULE. Recent changes to the rules of the NASD require that
companies trading on the OTC Bulletin Board, such as the Company, must be
reporting issuers under Section 12 of the Securities Exchange Act of 1934, as
amended, in order to maintain price quotation privileges on the OTC Bulletin
Board ("OTC Eligibility Rule"). The Company's failure to obtain clearance of
this Form 10-SB, or inability to file Form 10-KSB's, and other reports required
under Section 13, on a timely basis could result in removal from the OTC
Bulletin Board under the OTC Eligibility Rule, and adversely effect the
marketability of our securities. Furthermore, under the OTC Eligibility Rule,
the Company will no longer qualify for trading privileges on the OTC Bulletin
Board until the staff of the Commission notifies the staff of the NASD that
there are no more comments on this Form 10-SB.
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<PAGE>
The Company anticipates that its securities may be removed from the OTC
Bulletin Board after January 19, 2000, and may trade on the so-called "pink
sheets," until this Form 10-SB is effective with no further comments from the
Securities and Exchange Commission. At that time, the Company will apply for
reinstatement on the OTC Bulletin Board. As a result of the effect of the OTC
Eligibility Rule, the market liquidity for the Company's securities could be
severely adversely affected by limiting the ability of broker-dealers to sell
our securities and the ability of shareholders sell their securities in the
secondary market.
ITEM 2. DESCRIPTION OF PROPERTY
(FORM 1-A MODEL B ITEM 7)
The Company's principal executive offices are located at 3845 Atherton
Road, Suite 9, Rocklin, California, 95765, and its telephone number is (916)
632-6090. The facility is utilized in the following manner: a) administrative
offices, b) professional offices, c) storage and warehousing, and d) product
development. The facility consists of approximately three thousand (3,000)
square feet of office and warehouse space, leased for $ 2,480.00 per month. The
lease expires in September, 2001. The Company believes that its existing
facilities are adequate for its current use.
ITEM 3. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
(FORM 1-A MODEL B ITEM 8)
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers and directors of Peabodys:
Name Age Position
- --------------------------------------------------------------------------------
Barry Gibbons 53 Chairman of the Board of Directors
Todd N. Tkachuk 39 President, Chief Financial Officer, Secretary
and Director
Roman Kujath 66 Director
Directors are elected to serve until the next annual meeting of
stockholders and until their successors are elected and qualified. Directors
serve without cash compensation and without other fixed remuneration. Officers
are elected by the Board of Directors and serve until their successors are
appointed by the Board of Directors. Biographical resumes of each officer and
director are set forth below.
Barry J. Gibbons became a Director and Chairman of the Board of Peabodys CA
in October 1996, and became a Director and Chairman of the Board of the Company
in connection with the Merger. From January 1989 to December 1993, Mr. Gibbons
served as Chief Executive Officer and Chairman of Burger
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King Corporation. From 1984 to 1989, Mr. Gibbons was an employee of Grand
Metropolitan, the U.K.- based international food, drink and retailing group. Mr.
Gibbons graduated from Liverpool University in 1969 with a degree in Economics.
Todd N. Tkachuk was President, Chief Financial Officer, and Secretary of
Peabodys CA since October 1996, and was a Director of that company since its
inception. In connection with the Merger, Mr. Tkachuk became President, Chief
Financial Officer, and Secretary, and a Director, of the Company. Prior to his
involvement with Peabodys, Mr. Tkachuk served as President of Tony's Coffee
Company, a Vancouver, Canada-based specialty coffee company. From 1987 to 1991,
Mr. Tkachuk served as President and CEO of Skytech Data Supply, a wholesale
distributor of computer consumables and peripherals. Mr. Tkachuk holds a B.A. in
Business Management from Western Washington University (1983).
Roman Kujath has been a director of Peabodys CA since June 1998, and of the
Company since the Merger. Mr. Kujath has been president of Roman M. Kujath
Architects, Ltd. since 1975. Mr. Kujath has been responsible for over $1 billion
worth of construction, including the $100 million Place De Ville in Ottawa for
the Campeau Corporation. Mr. Kujath is a member of the Royal Architectural
Institute of Canada, a past corporate member of the American Institute of
Architects, a member of the Architectural Institute of British Columbia and the
Alberta Association of Architects.
ITEM 4. REMUNERATION OF DIRECTORS AND OFFICERS
(FORM 1-A MODEL B ITEM 9)
(a) The following table sets forth the aggregate annual remuneration of each of
the three highest paid persons who are officers or directors for the past fiscal
year.
Name of Capacities in which Aggregate
Individual or Group Remuneration was received Remuneration
- ------------------- ------------------------- ------------
Todd N. Tkachuk Officer and Director $ 73,200.00
($66,000 salary + $7,200
car allowance)
Barry Gibbons Consulting Agreement $42,000.00
(b) There are no ongoing plans or arrangements calling for future remuneration.
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ITEM 5. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
(FORM 1-A MODEL B ITEM 10)
(a) Voting Securities (no other person holds or shares the power to vote the
securities described below.)
NAME AND ADDRESS NUMBER OF PERCENTAGE OF
OF OWNER TITLE OF CLASS SHARES OWNED CLASS(1)
- -------- -------------- ------------ --------
Todd N. Tkachuk Common Stock 403,769 6.1%
1717 Chelsea Way
Roseville, CA 95661
Barry Gibbons Common Stock 620,000 9.4%
6665 S. W. 69th Lane
Miami, FL 33143
Roman Kujath Common Stock 367,797 5.6%
8926 119th Street
Edmonton, Alberta
Canada T5G 1W9
All Officers and Directors Common Stock 1,391,566 21.2%
As a Group(4 persons)
- ---------------------------------
(1) Percentage based on 6,565,477 shares of Common Stock outstanding.
(b) The Company currently has no non-voting securities outstanding.
(c) Options, Warrants and Rights
<TABLE>
<CAPTION>
SECURITIES CALLED FOR BY EXERCISE EXERCISE
NAME OF HOLDER OPTIONS, WARRANTS AND RIGHTS PRICE DATE
- -------------- ---------------------------- ----- ----
<S> <C> <C> <C>
Todd N. Tkachuk 208,500 Shares of Common Stock $0.04 (112,500 shares) fully vested
$0.70 (96,000 shares) vested 1/29/9
Roman Kujath 150,000 Shares of Common Stock $0.80 (20,000 shares) fully vested
$0.70 (60,000 shares) vested 1/29/99
$1.00 (70,000 shares) fully vested
Barry Gibbons 60,000 Shares of Common Stock $0.70 To be determined
All Officers and Dirs. 348,500 Shares of Common Stock $0.04 (112,500 shares)
As a Group(4 persons) $0.70 (216,000 shares
$0.80 (20,000 shares)
</TABLE>
(d) The Company has no parents.
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<PAGE>
ITEM 6. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
(FORM 1-A MODEL B ITEM 11)
The Company pays $3,500 per month to Barry J. Gibbons, doing business as
Festina, for consulting services pursuant to an Executive Services Agreement.
Barry J. Gibbons is also the Chairman of the Board of the Company.
The Company has currently outstanding 302,500 options to purchase common
stock under Peabody CA's 1995 Stock Option Plan, which were assumed by the
Company pursuant to the Merger. Todd Tkachuk, President of the Company, has been
issued 112,500 options at an exercise price of $0.04 per share, of which none
have been exercised. Barry Gibbons, Chairman of the Board, has been issued
100,000 options at an exercise price of $0.04 per share, and has exercised all
100,000 options. Roman Kujath, a Director of the Company, has been issued 20,000
options at an exercise price of $0.80 per share, of which none have been
exercised.
The Company has currently outstanding 444,000 options to purchase common
stock under Peabody CA's 1999 Stock Option Plan, which were assumed by the
Company pursuant to the Merger. Todd Tkachuk has been issued 96,000 such options
at an exercise price of $0.70 per share, none of which have been exercised.
Roman Kujath has been issued 60,000 at an exercise price of $0.70 per share,
none of which have been exercised. Roman Kujath holds warrants for 70,000 shares
of common stock at an exercise price of $1.00 per share.
ITEM 7. SECURITIES BEING REGISTERED
(FORM 1-A MODEL B ITEM 12)
COMMON STOCK
The Company is authorized to issue up to 50,000,000 shares of Common Stock,
par value $.001. As of December 15, 1999, there were outstanding 6,565,477
shares of Common Stock1. Holders of the Common Stock are entitled to one vote
per share on all matters to be voted upon by the stockholders. Holders of Common
Stock are entitled to receive ratably such dividends, if any, as may be declared
by the Board of Directors out of funds legally available therefor. Upon the
liquidation, dissolution, or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets of the Company which are
legally available for distribution after payment of all debts and other
liabilities and liquidation preference of any outstanding Common Stock. Holders
of Common Stock have no preemptive, subscription, redemption or conversion
rights. The outstanding shares of Common Stock are validly issued, fully paid
and nonassessable.
Transfer Agent and Registrar. The Company has engaged Interwest Transfer
Co., Inc., located in Salt Lake City, Utah, as independent transfer agent or
registrar.
- -----------------------
1 Not including approximately 2,054,000 shares of Common Stock issuable upon
exercise of outstanding Options and Warrants, approximately 193,421 shares of
Common Stock issuable upon conversion of outstanding Promissory Notes.
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PREFERRED STOCK
The Company is not authorized to issue preferred stock.
OPTIONS
In connection with the Plan and Agreement of Reorganization, by and between
the Company and Peabodys CA, dated March 12, 1999 (the "Agreement"), and the
Merger following the Agreement in which the Company was the surviving company
and Peabodys CA was the disappearing company, the Company assumed all rights and
obligations with respect to stock options issued by Peabodys CA. Such options
had been issued under Peabody CA's 1995 Stock Option Plan, and 1999 Stock Option
Plan, as well as non-plan option agreements.
There are currently outstanding options to purchase 1,344,000 shares of the
Company's common stock consisting of the following: (i) 302,500 options granted
under Peabodys CA's 1995 Stock Option Plan; (ii) 444,000 options granted under
Peabodys CA's 1999 Stock Option Plan; (iii) 500,000 options granted by the
Company pursuant to a board resolution dated November 1, 1999; and (iv) 97,500
pursuant to other non-plan option agreements, which were originally entered into
by Peabodys CA, and were assumed by the Company in connection with the Agreement
and the Merger.
WARRANTS
Pursuant to the Agreement and the Merger, the Company assumed all rights
and obligations with respect to outstanding warrants of Peabodys CA. There are
currently outstanding warrants for the purchase of 710,000 shares of the
Company's common stock.
CONVERTIBLE SECURITIES
Pursuant to the Agreement and the Merger, the Company assumed all rights
and obligations with respect to outstanding promissory notes, originally issued
by Peabodys CA in connection with an earlier financing, which are convertible
into common stock of the Company. There are currently outstanding convertible
promissory notes which can be converted into 193,421 shares of the Company's
common stock.
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<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
MARKET INFORMATION
The Common Stock is traded in the over-the-counter market with quotations
carried on the National Association of Securities Dealers, Inc's "OTC Bulletin
Board" under the trading symbol "PBDY." Prior to the Merger of Peabodys CA into
the Company, and the associated amendment of the Articles of Incorporation to
change the Company's name, the Company was called Mine-A-Max Corporation, and
traded under the symbol "MAMX" and, for a brief period, "MAMXD." The transfer
agent and registrar for the Company is Interwest Transfer Company, Inc., located
in Salt Lake City, Utah.
The following table sets forth for the periods indicated the high and low
bid prices for shares of the Company's common stock as reported on the OTC
Bulletin Board. These quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not represent actual transactions.
Sales Price (1)
---------------
High Low
---- ---
1997
Fourth Quarter(2) 0.5 0.15625
1998
First Quarter 0.1875 0.04
Second Quarter 0.1875 0.03125
Third Quarter 0.125 0.03
Fourth Quarter 0.06 0.02
1999(3)
First Quarter 3.125(4) 0.020
Second Quarter 3.375 1.000
Third Quarter 1.7188 0.531
(1) The source for data used in this chart is and OTC Quote Summary Report
provided by NASDAQ Trading and Marketing Services.
(2) The Company began trading on the OTC Bulletin Board in approximately
November of 1997.
(3) The Company's trading symbol during 1997 and 1998 was MAMX. In the
first quarter of 1999 the Company changed its trading symbol to PBDY.
(4) On February 26, 1999 the Company effected a 100 to 1 reverse stock
split of its outstanding shares.
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<PAGE>
The Company's Common Stock is not listed on an exchange or NASDAQ, but is
currently traded in the over-the-counter market with price quotes listed on the
OTC Bulletin Board of the National Association of Securities Dealers, Inc
("NASD"). Accordingly, an investor may find it more difficult to dispose of, or
obtain accurate quotations as to the market value of the common stock.
Recent changes to the rules of the NASD require that companies trading on
the OTC Bulletin Board, such as the Company, must be reporting issuers under
Section 12 of the Securities Exchange Act of 1934, as amended, in order to
maintain price quotation privileges on the OTC Bulletin Board ("OTC Eligibility
Rule"). The Company's failure to obtain clearance of this Form 10-SB, or
inability to file Form 10-KSB's, and other reports required under Section 13, on
a timely basis could result in removal from the OTC Bulletin Board under the OTC
Eligibility Rule, and adversely effect the marketability of our securities.
The Company anticipates that its securities may be removed from the OTC
Bulletin Board after January 19, 2000, and may trade on the so-called "pink
sheets," until this Form 10-SB is effective with no further comments from the
Securities and Exchange Commission. At that time, the Company will apply for
reinstatement on the OTC Bulletin Board. As a result of the effect of the OTC
Eligibility Rule, the market liquidity for the Company's securities could be
adversely affected by limiting the ability of broker-dealers to sell our
securities and the ability of shareholders sell their securities in the
secondary market.
HOLDERS
There are approximately 477 holders of the Company's common stock, which is
the only class of stock currently outstanding.
DIVIDENDS
The Company has not paid any cash dividends on its common or preferred
stock and we do not anticipate paying any such cash dividends in the foreseeable
future. Earnings, if any, will be retained to finance future growth. We may
issue shares of common stock and preferred stock in private or public offerings
to obtain financing, capital or to acquire other businesses that can improve our
performance and growth. Issuance and or sales of substantial amounts of common
stock could adversely affect prevailing market prices of our common stock
through dilution.
ITEM 2. LEGAL PROCEEDINGS
There are no legal proceedings to which the Company is a party or to which
its property is subject, nor to the best of management's knowledge are any
material legal proceedings contemplated.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company's principal accountant is Nicholson & Olson, LLP of Roseville,
California. There have been no disagreements between the Company's management
and the Company's accountant.
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<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In September of 1997 the Company issued 3,000,000 shares of its common
stock, at a price of $0.01 per share, in an offering exempt under Rule 504 of
Regulation D promulgated under Section 3(b) of the Securities Act of 1933, as
amended.
In September of 1997 the Company issued 4,500,000 shares of its common
stock, at a price of $0.001 per share, in an offering exempt under Section 4(2)
of the Securities Act of 1933, as amended.
In July of 1998 the Company issued 2,500,000 shares of its common stock, in
exchange for the retirement of promissory notes with principal amounts totaling
$70,000, in an offering exempt under Section 4(2) of the Securities Act of 1933,
as amended.
In January of 1999 the Company issued 350,000 shares of its common stock,
at a price of $0.20 per share, in an offering exempt under Section 4(2) of the
Securities Act of 1933, as amended.
On March 1, 1999 the Company issued 150,000 shares of its common stock, at
a price of $0.15 per share, in an offering exempt under Rule 504 of Regulation D
promulgated under Section 3(b) of the Securities Act, as amended
Pursuant to the share exchange and the Merger, in accordance with the Plan
and Agreement of Reorganization, by and between the Company and Peabodys CA,
dated March 12, 1999, the Company issued 5,829,871 shares of its common stock,
in exchange for shares of Peabodys CA common stock on a one-for-one basis, in an
offering exempt under Rule 506 of Regulation D promulgated under Section 4(2) of
the Securities Act, as amended.
Between March 15, 1999 and June 24, 1999 the Company issued 131,000 shares
of its common stock, at a price of $1.00 per share, in an offering exempt under
Rule 504 of Regulation D promulgated under Section 3(b) of the Securities Act,
as amended.
On September 17, 1999, the Company issued 350,000 shares of its common
stock, at a price of $0.10 per share, in an offering exempt under Rule 504 of
Regulation D promulgated under Section 3(b) of the Securities Act, as amended.
On November 1, 1999, the Company granted options for the purchase of
500,000 shares of its common stock, with an exercise price of $0.50 per share,
pursuant to a resolution of the board of directors, under Section 4(2) of the
Securities Act, as amended.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.751 of the Nevada General Corporation Law allows a corporation
to indemnify any person who was or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, by reason of the
fact that he or she is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of any corporation, partnership, joint
venture, trust, or other enterprise. The Company's bylaws contain
24
<PAGE>
no provisions regarding indemnification of directors.
Nevada law permits the corporation to advance expenses in connection with
defending any such proceedings, provided that the indemnitee undertakes to repay
any such advances if it is later determined that such person was not entitled to
be indemnified by the corporation. The Company's bylaws contain no provisions
regarding the advance of such funds.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in such act, and is
therefore unenforceable.
25
<PAGE>
PART F/S
PEABODYS COFFEE, INC.
(A CALIFORNIA CORPORATION)
INDEPENDENT AUDITOR'S REPORT
AND
FINANCIAL STATEMENTS
YEAR ENDED
MARCH 31, 1999
<PAGE>
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT..................................................1
FINANCIAL STATEMENTS
Balance Sheet........................................................2
Statement of Loss and Accumulated Deficit............................3
Statement of Cash Flows..............................................4
Notes to Financial Statements.....................................5-16
<PAGE>
NICHOLSON
& OLSON
INDEPENDENT AUDITOR'S REPORT
LIMITED LIABILITY PARTNERSHIP
-----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
729 Sunrise Avenue, Suite 303
Roseville, California 95661
(916) 786-7997
To the Board of Directors and
Shareholders of Peabodys Coffee, Inc.
We have audited the accompanying balance sheet of Peabodys Coffee, Inc. (a
California corporation) as of March 31, 1999, and the related statements of
loss, accumulated deficit, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
Except as discussed in the following paragraph, we conducted our audit in
accordance with generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Peabodys Coffee, Inc. as of
March 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency, which raise substantial doubt about its
ability to continue as a going concern. Management's plans regarding those
matters are also described in Note 3. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Nicholson & Olson
Certified Public Accountants
Roseville, California
December 19, 1999
<PAGE>
PEABODYS COFFEE, INC.
BALANCE SHEET
MARCH 31, 1999
ASSETS
Current Assets
Cash $ 4,774
Other receivables 18,198
Inventories 41,191
Prepaid expenses 9,041
-----------
73,204
Property and equipment (net) 423,375
Deposits and other assets 57,976
-----------
Total Assets $ 554,555
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Cash overdraft $ 24,238
Accounts payable 724,944
Accrued expenses 339,930
Capital lease obligations 5,487
Short-term borrowings 17,482
Bridge note financing 372,000
-----------
Total liabilities 1,484,081
-----------
Shareholders' Deficit
Common stock - 35,000,000 shares authorized,
5,829,871 shares issued and outstanding, $.001 par value 2,350,202
Accumulated deficit (3,279,728)
-----------
Total shareholders' deficit (929,526)
-----------
Total Liabilities and Shareholders' Deficit $ 554,555
===========
See accompanying notes to financial statements
-2-
<PAGE>
PEABODYS COFFEE, INC.
STATEMENT OF LOSS AND ACCUMULATED DEFICIT
YEAR ENDED MARCH 31, 1999
Sales $ 1,794,838
Cost of Sales 685,176
-----------
Gross Profit 1,109,662
Operating expenses
Employee compensation and benefits 929,879
General and administrative expenses 257,659
Occupancy 303,101
Director and professional fees 110,325
Depreciation 101,057
Settlement costs and other fees 40,000
-----------
1,742,021
-----------
Operating Loss (632,359)
Interest expense (105,727)
-----------
Net Loss (738,086)
Accumulated Deficit, beginning of year (2,541,642)
-----------
Accumulated Deficit, end of year $(3,279,728)
===========
See accompanying notes to financial statements
-3-
<PAGE>
PEABODYS COFFEE, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(738,086)
Adjustments to reconcile net (loss) to net cash
provided by (applied to) operating activities:
Depreciation and amortization 101,057
Cash (used) provided by changes in operating assets and liabilities:
Increase in receivables (7,723)
Increase in inventories (1,078)
Decrease in prepaid expenses 1,838
Decrease in accounts payable (106,176)
Increase in accrued expenses 41,237
---------
Net cash used by operating activities (708,931)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (37,792)
Additions to deposits and other assets (3,404)
---------
Net cash used by investing activities (41,196)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal reductions of notes payable (78,312)
Net proceeds from sale of stock 830,257
Payments on capital lease obligations (5,069)
---------
Net cash provided by financing activities 746,876
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (3,251)
CASH AND CASH EQUIVALENTS
Beginning of year (16,213)
---------
End of year $ (19,464)
=========
See accompanying notes to financial statements
-4-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Description of Business
- -----------------------
Peabodys Coffee (the "Company") owns and operates retail espresso coffee bar
kiosks in a variety of corporate and institutional locations throughout
California and Nevada. The Company has gained access to this segment of the
specialty coffee market by contracting with existing food service providers such
as Marriott, Aramark, and Eurest Dining Services (formerly Canteen). The
Company's product offerings include: high quality coffee and espresso beverages,
fruit smoothies, pastries, accompaniments, and coffee related accessories.
Estimates and Assumptions
- -------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results may differ from these estimates.
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid instruments with a maturity of three
months or less at the time of purchase to be cash equivalents.
Property and Equipment
- ----------------------
Property and equipment are recorded at cost less depreciation and amortization.
Depreciation and amortization are primarily accounted for on the straight-line
method over the estimated useful lives of the assets, generally ranging from
five to seven years. The amortization of site improvements is based on the
shorter of the lease term or the life of the improvement.
Income Taxes
- ------------
The company has incurred net operating losses from its inception. The tax
benefit from the loss carryforward has been fully offset by a valuation reserve
because use of the future tax benefit is undeterminable at this time since the
Company has suffered recurring losses from operations, has a recurring net
capital deficiency, and is currently issuing stock.
Inventory
- ---------
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
-5-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Compensated Absences
- --------------------
Employees of the Company are entitled to paid vacation depending on job
classification, length of service and other factors. It is impracticable to
estimate the amount of compensation for future absences, and accordingly, no
liability has been recorded in the accompanying financial statements. The
Company's policy is to recognize the costs of compensated absences when actually
paid to employees.
NOTE 2 - RELATED PARTY TRANSACTIONS
During the time period April 1, 1998 through June 29, 1998, the Company
purchased $30,088 of coffee beans from a supplier, Terranova Roasting Co. Inc.,
whose president, Stan Alfonso, was also a board director during the stated time
period. These purchases represented 100% of the total coffee beans purchased for
the time period. At June 29, 1998, $21,797 of purchases was accrued in accounts
payable.
A member of the Company's Board of Directors provided management and other
services to the Company on various business issues. Fees paid for such services
by the Company during the year ended March 31, 1999, were $3,500 monthly. At
year-end, $19,821 was accrued in accounts payable.
A member of the Company's Board of Directors elected on March 8,1999 to convert
$43,000 of loans made to the Company into 61,429 shares of common stock at $0.70
per share. On March 9, 1999, the member elected to convert his shares of Series
B preferred stock into 100,000 shares of common stock.
On May 29,1998, a member of the Company's Board of Directors purchased 75,000
shares of common stock at the purchase price of $.40 per share. In addition, the
director was granted an option to purchase 150,000 shares of common stock. On
March 4, 1999 the director elected to convert $5,000 of loans made to the
Company into 7,143 shares of common stock at $0.70 per share.
In February 1999, the Company issued 444,000 shares of common stock at an option
price of $0.70 per share to various members of Peabody's management.
On March 4, 1999, a member of the Board converted $105,000 of accrued fees and
loans made to the Company into 150,000 shares of common stock at $0.70 per
share.
-6-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 2 - RELATED PARTY TRANSACTIONS (CONTINUED)
As of March 31, 1999 the Company owed to its President $14,625 in accrued wages.
Additionally, there was an amount of $11,042 owed to the Company by its
employees.
NOTE 3 - GOING CONCERN
These statements are presented on the basis that the Company is an on-going
concern. Going concern contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business over a reasonable
length of time. The accompanying financial statements show a loss from the
results of operations of $632,359, that the Company has a shareholders' deficit
of $929,526, and current liabilities exceed current assets by $1,410,877.
Without an infusion of additional capital, the Company's ability to continue
operations is doubtful.
Management's Plan
- -----------------
The Board and management acknowledge the issues raised as to the future of the
Company, and have instituted a three point remedial plan. First, the Company
intends to acquire the assets of a coffee bean roasting company through stock
issue, which would ultimately reduce the cost of goods sold. Second, the Company
intends to undertake a program to induce debt holders to convert debt into
equity and/or discounted amounts. Third, the Company believes that filing as a
"Reporting Company" will facilitate both investment needs and create
opportunities.
NOTE 4 - INVENTORIES
At March 31, 1999, inventories were comprised of the following:
Coffee $12,340
Other merchandise held for sale 15,364
Packaging and other supplies 13,487
-------
$41,191
=======
-7-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 5 - SUBSEQUENT EVENTS
In March 1999, the Company initiated a private placement stock offering which
resulted in the issuance of 131,000 shares of common stock at $1 per share.
In April 1999, the Company purchased the assets of a coffee company in San
Diego, California for $120,000 and 2,500 shares of common stock of the Company.
As of December 19, 1999, the seller was owed $15,000 of the purchase price. The
purchase price has been allocated to the acquired assets on the basis of their
estimated fair value on the date of acquisition. The fair value of the assets
acquired is summarized as follows:
Inventory $ 5,125
Carts and kiosks 75,235
Intangibles 39,640
--------
$120,000
========
On June 30, 1999, Mine-A-Max Corporation, a public shell corporation, acquired
88% of the outstanding stock of Peabodys Coffee, Inc., at which time Peabodys
was merged into Mine-A Max. Twelve percent of Peabodys California shareholders
have dissenter rights, which could be exercised. For accounting purposes the
acquisition will be treated as a recapitalization of Peabodys, with Peabodys as
the acquirer (reverse acquisition). Proforma statements are not provided given
the merger is to be considered a reverse acquisition and not a business
combination. Subsequent to the merger, Peabodys stockholders own 95.82% of the
recapitalized company. The pre-merger balance sheet of Mine-A-Max at June 30,
1999 was as follows:
Cash $ 157
Accounts payable (4,041)
Due to officers (18,838)
Common Stock par
(authorized 50,000,000,
issued 254,606 at $0.01) (128)
Paid in capital (319,502)
Accumulated Deficit 342,352
In August 1999, the Company initiated a private placement stock offering, which
resulted in the issuance of 350,000 shares of common stock at $0.10 per share.
-8-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 6 - PROPERTY AND EQUIPMENT
The Company has satisfactory title to all items of property and equipment
reflected in the accounts relating hereto.
At March 31, 1999, property and equipment were comprised of the following:
Kiosk carts $ 220,773
Kiosk equipment 202,527
Equipment and furniture 181,459
Signage 32,650
Site improvements 50,624
---------
688,033
Less: accumulated depreciation (264,658)
---------
$ 423,375
=========
NOTE 7 - ACCOUNTS PAYABLE
Of the $724,944 in accounts payable at year-end, approximately 68% is due over
90 days.
NOTE 8 - ACCRUED EXPENSES
At March 31, 1999, accrued expenses comprised the following:
Accrued interest on Bridge note financing $198,043
Accrued wages 97,727
Estimated use tax 29,959
Other 14,201
--------
$339,930
========
-9-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 9 - CAPITAL LEASE OBLIGATIONS
The Company leases certain office equipment under agreements classified as
capital leases, with original terms ranging from three to four years. Assets
recorded under capital leases are included in Property and Equipment.
Minimum future payments under non-cancelable lease obligations at March 31, 1999
are as follows:
Fiscal Year ending:
-------------------
2000 $ 5,487
NOTE 10 -SHORT-TERM BORROWINGS
The Company borrowed funds to provide capital requirements on a short-term
basis. These working capital loans are unsecured, non-interest bearing, and had
a March 31, 1999 balance of $17,481.
NOTE 11 - LEASE INFORMATION
The Company entered into a lease agreement on August 25, 1999 for office
facilities through October 2001. Total future minimum lease payments are as
follows:
Fiscal Year Ending:
-------------------
2000 $ 30,486
2001 32,424
2002 19,621
NOTE 12 - BRIDGE NOTE FINANCING (DUE AND PAYABLE ON DECEMBER 31,1998)
In May 1996, the Company issued "units" consisting of secured convertible
promissory notes and warrants to purchase the Company's common stock. The
offering closed August 1996 with $760,000 of notes and warrants sold. At March
31, 1999, $390,000 of principal notes had been converted to common stock, with
an outstanding principal balance of $372,000.
-10-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 12 - BRIDGE NOTE FINANCING (DUE AND PAYABLE ON DECEMBER 31,1998 -
CONTINUED)
In addition, the Company is obligated to make quarterly interest payments on the
principal balance outstanding, at nine percent (9%) per annum and to repay such
principal balance in full on December 31, 1998. As of March 31, 1999, the
Company is approximately $198,043 in arrears on interest payments relating to
the Secured Notes (such arrears are increasing at the rate of approximately
$4,600 per month) and repaid $5,000 of the outstanding principal balance in the
year just ended. Under the terms of the Security Agreement relating to the
Secured Notes, a noteholder has the right to: (a) declare all principal and
interest immediately due and owing, (b) exercise its rights and remedies under
the California Commercial Code as a secured creditor having a security interest
in the collateral, which includes, but is not limited to equipment, inventory,
accounts, trademarks, and tradenames and other intellectual property rights (the
"Collateral"), and, in particular, sell, any part of the Collateral, and (c)
exercise any other rights or remedies of a secured party under California Law.
As of March 31, 1999, the Company has not received any notice of default
relating to the Secured Notes.
In April 1999, $4,500 of principal notes was converted to common stock leaving a
principal balance due of $367,500.
NOTE 13 - SHAREHOLDERS' DEFICIT
COMMON STOCK
On August 18,1998, the board of directors approved and the common stockholders
consented to a one-for-two reverse split of the Company's issued and outstanding
common stock. All common stock data has been restated to give effect to this
reverse stock split.
The Company is authorized to issue up to 35,000,000 shares of common stock, par
value, $.001. As of March 31, 1999 there were 5,829,871 shares of common stock
outstanding. Common stock transactions for the year ending March 31, 1999 were
as follows:
In May 1998, the Company issued a total of 12,500 shares of common stock in
consideration for services rendered (stock issuance costs) totaling $5,000.
In May of 1998, in accordance with the terms of a settlement agreement
819,500 shares of common stock were canceled.
In June 1998, in conjunction with the exercise of bridge note warrants that
were granted in 1995 and 1996, bridge financing notes with a principal of
$126,500 were converted to 230,000 shares of common stock.
-11-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 13 - SHAREHOLDERS' DEFICIT (CONTINUED)
COMMON STOCK - CONTINUED
In July and December 1998, the Company issued a total of 100,000 shares of
common stock for proceeds of $3,040. The stock was issued in connection
with the exercise of stock options held by a director of the Company that
were granted in 1996.
In July 1998, the Company issued 30,000 shares of common stock for proceeds
of $600. The stock was issued in connection with the exercise of warrants
held by a previous lender to the Company that were granted in 1995.
In October 1998, to comply with the securities law of the state of New
York, a total of 5,000 shares of common stock were canceled and rescinded.
Previously received proceeds totaling $5,000 were repaid.
In November 1998, the Company completed a Regulation D504 offering of
925,000 shares of common stock for proceeds of $764,367, net of $145,233 in
stock issuance costs.
In March 1999, certain board members and creditors of the Company agreed to
convert certain notes payable and accounts payable into shares of common
stock. Notes and accounts payable totaling $232,100 were converted to
331,572 shares of common stock.
As of March 31, 1999 Peabodys had not paid any dividends with respect to its
shares of common stock.
Transaction costs are recorded as a reduction to capital raised by the Company.
PREFERRED STOCK
The Company is authorized to issue 15,000,000 shares of preferred stock, par
value $.001. In May 1998, the Company issued 162,500 shares of Series B
preferred stock for $65,000 cash. In March 1999, those holders of Series B
preferred stock elected to convert all preferred stock to shares of common
stock. There were no shares of Series A or B preferred stock outstanding at
March 31, 1999.
In the event the Company issues Series A Preferred Stock, Series A Preferred
stockholders will be entitled to a liquidation preference of $1.73 per share,
voting rights equal to the number of shares of common stock the holder would
receive on conversion and a preemptive right to maintain ownership, with certain
conditions. The Series A Preferred stockholders are not entitled to any dividend
preference, and share proportionally with the holders of common stock and Series
B Preferred, any dividend that may be issued.
-12-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 13 - SHAREHOLDERS' DEFICIT (CONCLUDED)
PREFERRED STOCK (CONTINUED)
The Series A Preferred Stock are convertible into shares of common stock, at the
option of the holder, on a one-for one basis, unless adjusted pursuant to
standard antidilution provisions. The Series A and B are identical except that
Series B stockholders are entitled to a liquidation preference of $0.40 per
share and have no preemptive rights.
NOTE 14 - STOCK OPTION PLANS
Executives and other key employees have been granted options to purchase common
shares, up to an aggregate of 500,000 shares, of the Company's stock under the
1995 Stock Option Plan (the Plan), which was adopted in 1995. In accordance with
the terms of the Plan, the option's maximum term is ten years. Options granted
vest ratably over various time periods. If an option granted under the 1995 Plan
expires or terminates, the shares subject to any unexercised portion of that
option will again become available for the issuance of further options under the
applicable plan. The Board or committee designated by the Board is empowered to
determine the terms and conditions of each option granted under the 1995 Plan.
The exercise price for any option cannot be less than the fair market value of
the common stock on the date of the grant (110% if granted to an employee who
owns 10% or more of the common stock), and the exercise price of a non-statutory
option cannot be less than 85% of the fair market value of the common stock on
the grant date. As of March 31, 1999, options to purchase 500,000 shares of
common stock have been granted under the 1995 Plan at an exercise price ranging
from $0.04 to $0.80 per share.
The Board of Directors of the Company has adopted and approved the 1999 Stock
Option Plan, pursuant to which options to purchase up to an aggregate of 500,000
shares of the Company's common stock can be granted to officers, directors,
employees, consultants, vendors, customers, and others expected to provide
significant services to the Company or its subsidiaries. If an option under the
1999 Plan expires or terminates, the shares subject to any unexercised portion
of that option will again become available for the issuance of further options
under the plan. The plan will terminate on February 8, 2009, and no more options
may be granted under the 1999 Plan once it has been terminated. The Board or
designated committee is empowered to determine the terms and conditions of each
option granted under the 1999 Plan. The exercise price for any option cannot be
less than the fair market value of the common stock on the date of the grant
(110% if granted to an employee who owns 10% or more of the common stock), and
the exercise price of a non-statutory option cannot be less than 85% of the fair
market value of the common stock on the date of grant. As of March 31, 1999,
options to purchase 444,000 shares of common stock have been granted under the
1999 Plan at an exercise price of $0.70 per share.
-13-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 14 - STOCK OPTION PLANS (CONTINUED)
In accordance with the provisions of SFAS 123, the Company applies APB 25 and
related interpretations in accounting for its stock option plans and,
accordingly, does not recognize compensation costs. If the Company had elected
to recognize compensation costs based on the fair value of the options at grant
date the Company's net income would not have changed for the year ended March
31, 1999.
The fair value of each option grant is estimated on the grant date to have no
current value, based upon the facts that the options are restricted, not
transferable nor assignable, and the current financial position of the Company.
An additional 72,500 options were issued during the year ended March 31,1999 to
various individuals who provided significant services to the Company. These
options were not issued in conjunction with either stock option plan.
Options exercised under the 1995 Plan during the year ended March 31, 1999
totaled 100,000 shares at $0.04 per share.
A summary of the status of the Company's employee stock option plans as of March
31, 1999, and changes during the year, is presented below:
Shares
--------
Outstanding at beginning of year (restated) 427,500
Granted 516,500
Exercised (100,000)
--------
Outstanding at end of year 844,000
NOTE 15 - WARRANTS
A summary of the status of the Company's warrants as of March 31, 1999 and
changes during the year is presented below:
Shares
--------
Outstanding at beginning of year (restated) 460,000
Granted 467,500
Exercised (260,000)
--------
Outstanding at end of year 667,500
-14-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 16 - RISKS AND UNCERTAINTIES
The Company largely depends upon a third party supplier for the supply of its
whole bean coffee. The Company believes that its relationship with such supplier
is good and the supplier will be able to meet the Company's requirements for
coffee during the foreseeable future. While the Company seeks to carefully
anticipate its coffee needs, there can be no assurance that supplies and prices
will not be affected by political and social events, the weather in the coffee
growing regions of the world, unexpected demand or other market forces. Green
coffee is an international agriculture commodity product subject to considerable
price fluctuations. The Company's ability to raise sales prices in response to
rising coffee prices may be limited and the Company's profitability could be
adversely affected if coffee prices were to rise substantially.
The Company's success depends to a significant extent upon the continued service
of its President. Loss of the services of the President could have a material
adverse effect on the Company's growth, revenues, and prospective business. The
Company does not maintain key-man life insurance on the President. In addition,
in order to successfully implement and manage its business plan, the Company
will be dependent upon, among other things, successfully recruiting qualified
managerial and sales personnel having experience in business activities.
Competition for qualified individuals is intense. There can be no assurance that
the Company will be able to find, attract and retain existing employees or that
it will be able to find, attract and retain qualified personnel on acceptable
terms.
The success of the Company will require rapid expansion of its business. Any
such expansion could place a significant strain on the Company's resources and
would require the Company to hire additional personnel, implement additional
operating and financial controls and to improve coordination between marketing,
administration and finance functions. The Company would be required to install
additional reporting and management information systems for sales and inventory
monitoring. There can be no assurance that the Company would be able to manage
any substantial portion of its business, and a failure to do so could have a
materially adverse effect on the Company's operating results.
The Company has a registered service mark for its rhinoceros logo. The Company
is aware of another entity in North Carolina that is utilizing the name
"Peabodys" in the coffee industry. The North Carolina entity has received a
federal trademark registration of the name "Peabodys". While the Company
believes that it has the right to use the name "Peabodys", if it were determined
that the Company were not able to continue utilizing the name "Peabodys", it
would have a material adverse effect on the Company and the Company would have
to re-establish any lost goodwill and name recognition.
-15-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 17 - CONCENTRATIONS
As mentioned above, for the year ended March 31, 1999, the Company purchases
100% of its coffee bean inventory from one supplier. The Company believes that
the relationship with such supplier is good and the supplier will be able to
meet the Company's requirements for coffee during the foreseeable future. In the
event such relationship terminates, the Company believes that numerous other
suppliers can fulfill the Company's inventory requirements.
In addition, at March 31, 1999 the Company had twenty-three kiosks in a variety
of locations throughout California and Nevada. The Company had contracted eleven
of these locations with Sodexho-Mariott, three contracts with Aramark, and five
contracts with Eurest Dining Services (formerly Canteen). Peabodys competes
indirectly against specialty retailers, restaurants and beverage outlets that
serve coffee, and directly, with a growing number of espresso stands, carts, and
stores in Northern America metropolitan markets. The specialty coffee segment is
becoming increasingly competitive. Competitors with significant economic
resources in both existing nonspecialty and specialty coffee businesses could at
any time enter the Company's proposed market with competitive coffee products.
There can be no assurance that management will be able to continue to secure and
maintain these retail sites.
The Company's officers and directors own approximately 30% of the outstanding
shares of Common Stock. The Company's dividend policy, as well as other major
decisions such as wages, acquisitions and financing by the Company will be
significantly influenced and controlled by such officers and directors.
-16-
<PAGE>
PEABODYS COFFEE, INC.
(A NEVADA CORPORATION)
INTERIM
FINANCIAL STATEMENTS
UNAUDITED
THREE MONTHS ENDED
JUNE 30, 1999 AND 1998
<PAGE>
TABLE OF CONTENTS
FINANCIAL STATEMENTS
Balance Sheets.......................................................1
Statements of Loss and Accumulated Deficit...........................2
Statement of Cash Flows..............................................3
Notes to Financial Statements......................................4-5
<PAGE>
PEABODYS COFFEE, INC.
BALANCE SHEETS
JUNE 30, 1999 AND 1998
UNAUDITED
<TABLE>
<CAPTION>
ASSETS
1999 1998
----------- -----------
Current Assets
<S> <C> <C>
Other receivables $ 30,056 $ 11,764
Inventories 54,285 41,215
Prepaid expenses 6,339 8,838
----------- -----------
90,680 61,817
Property and equipment (net) 517,873 485,198
Deposits and other assets 331,541 127,930
----------- -----------
Total Assets $ 940,094 $ 674,945
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Cash overdraft $ 121,296 $ 18,262
Accounts payable 789,814 860,420
Accrued expenses 384,818 312,870
Capital lease obligations 4,122 9,420
Short-term borrowings 116,880 77,894
Bridge note financing 367,500 451,500
----------- -----------
Total liabilities 1,784,430 1,730,366
----------- -----------
Shareholders' Deficit
Common stock - 50,000,000 shares
authorized, 6,215,477 shares issued
and outstanding, $.001 par value 2,694,918 1,350,800
Preferred Stock - 15,000,000 shares
authorized, 625,000 issued and
outstanding, $.001 par value -- 250,000
Additional paid-in-capital 319,502 --
Accumulated deficit (3,858,756) (2,656,221)
----------- -----------
Total shareholders' deficit (844,336) (1,055,421)
----------- -----------
Total Liabilities and Shareholders' Deficit $ 940,094 $ 674,945
=========== ===========
</TABLE>
-1-
<PAGE>
PEABODYS COFFEE, INC.
STATEMENTS OF LOSS AND ACCUMULATED DEFICIT
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
UNAUDITED
1999 1998
----------- -----------
Sales $ 571,217 $ 414,378
Cost of Sales 237,227 158,912
----------- -----------
Gross Profit 333,990 255,466
Operating expenses
Employee compensation and benefits 303,251 206,597
General and administrative expenses 79,253 47,437
Occupancy 85,545 68,574
Director and professional fees 60,314 25,097
Depreciation 24,751 23,818
Settlement costs and other fees -- --
----------- -----------
553,114 371,523
----------- -----------
Operating Loss (219,124) (116,057)
Interest expense (19,131) (17,517)
----------- -----------
Net Loss (238,255) (133,574)
Accumulated Deficit, beginning of period (3,620,501) (2,522,647)
----------- -----------
Accumulated Deficit, end of period $(3,858,756) $(2,656,221)
=========== ===========
-2-
<PAGE>
PEABODYS COFFEE, INC.
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1999
UNAUDITED
1999
---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(238,255)
Adjustments to reconcile net (loss) to net cash
provided by (applied to) operating activities:
Depreciation and amortization 24,751
Cash (used) provided by changes in operating
assets and liabilities:
Decrease in receivables (11,858)
Decrease in inventories (13,094)
Increase in prepaid expenses 2,702
Decrease in accounts payable 64,870
Increase in accrued expenses 44,888
---------
Net cash used by operating activities (125,996)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (119,249)
Additions to deposits and other assets (42,147)
---------
Net cash used by investing activities (161,396)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 73,627
Net proceeds from sale of stock 113,298
Payments on capital lease obligations (1,365)
---------
Net cash provided by financing activities 185,560
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENT (101,832)
CASH AND CASH EQUIVALENTS
Beginning of period (19,464)
---------
End of period $(121,296)
=========
-3-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
UNAUDITED
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements and related notes have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, all adjustments of a normal and recurring nature
which were considered necessary for a fair presentation of these financial
statements have been included. It is suggested that these statements are read in
conjunction with the financial statements and footnotes thereto included in the
annual report of the Company on Form 10-KSB for the year ended March 31, 1999.
The results of operations for the period ended June 30, 1999, may not
necessarily be indicative of the operating results for the entire fiscal year.
NOTE 2 - GOING CONCERN
The Company has suffered recurring operating losses and, at June 30, 1999, had a
net deficiency in assets. These conditions raise substantial doubt about the
ability of the Company to continue as a going concern.
Several steps have been taken by the Company in attempt to increase working
capital and improve profitability. In March of 1999, the Company entered into a
"best efforts" agreement with a broker/dealer with the intent of conducting an
offering of securities with anticipated net proceeds of $564,000. Additionally,
the Company continued to solicit its noteholders to convert their debt to equity
securities of the Company. The Company also continued with its expansion in an
effort to offset SG&A overhead by acquiring the assets of Northern Lights Coffee
Company of San Diego in April of 1999.
-4-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
UNAUDITED
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less depreciation and amortization.
Depreciation and amortization are primarily accounted for on the straight-line
method over the estimated useful lives of the assets, generally ranging from
five to seven years. The amortization of site improvements is based on the
shorter of the lease term or the life of the improvement.
The Company has satisfactory title to all items of property and equipment
reflected in the accounts relating hereto.
At June 30, 1999, property and equipment were comprised of the following:
Kiosk carts $ 1,170
Kiosk equipment 500,403
Equipment and furniture 205,263
Signage 37,452
Site improvements 62,993
---------
807,281
Less: accumulated depreciation (289,408)
---------
$ 517,873
=========
-5-
<PAGE>
PEABODYS COFFEE, INC.
(A NEVADA CORPORATION)
INTERIM
FINANCIAL STATEMENTS
UNAUDITED
SIX MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
<PAGE>
TABLE OF CONTENTS
FINANCIAL STATEMENTS
Balance Sheets.......................................................1
Statements of Loss and Accumulated Deficit...........................2
Statement of Cash Flows..............................................3
Notes to Financial Statements......................................4-5
<PAGE>
PEABODYS COFFEE, INC.
BALANCE SHEETS
SEPTEMBER 30, 1999 AND 1998
UNAUDITED
<TABLE>
<CAPTION>
ASSETS
1999 1998
----------- -----------
Current Assets
<S> <C> <C>
Cash $ -- $ 114,783
Other receivables 25,862 9,938
Inventories 52,610 42,881
Prepaid expenses 10,203 9,716
----------- -----------
88,675 177,318
Property and equipment (net) 506,767 470,066
Deposits and other assets 108,764 173,019
----------- -----------
Total Assets $ 704,206 $ 820,403
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Cash overdraft $ 150,640 $ --
Accounts payable 806,940 837,746
Accrued expenses 437,920 338,705
Capital lease obligations 3,037 8,230
Short-term borrowings 171,630 97,894
Bridge note financing 367,500 451,500
----------- -----------
Total liabilities 1,937,667 1,734,075
----------- -----------
Shareholders' Deficit
Common stock - 50,000,000 shares
authorized, 6,565,477 shares issued
and outstanding, $.001 par value 2,498,500 1,622,150
Preferred Stock - 15,000,000 shares
authorized, 625,000 issued and
outstanding, $.001 par value -- 250,000
Additional paid-in-capital 319,502 --
Accumulated deficit (4,051,463) (2,785,822)
----------- -----------
Total shareholders' deficit (1,233,461) (913,672)
----------- -----------
Total Liabilities and Shareholders' Deficit $ 704,206 $ 820,403
=========== ===========
</TABLE>
-1-
<PAGE>
PEABODYS COFFEE, INC.
STATEMENTS OF LOSS AND ACCUMULATED DEFICIT
SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
UNAUDITED
1999 1998
----------- -----------
Sales $ 1,054,785 $ 831,389
Cost of Sales 429,601 307,473
----------- -----------
Gross Profit 625,184 523,916
Operating expenses
Employee compensation and benefits 576,420 417,991
General and administrative expenses 148,724 91,488
Occupancy 152,472 137,850
Director and professional fees 87,748 57,857
Depreciation 49,503 47,636
Settlement costs and other fees -- --
----------- -----------
1,014,867 752,822
----------- -----------
Operating Loss (389,683) (228,906)
Interest expense (41,279) (34,268)
----------- -----------
Net Loss (430,962) (263,174)
Accumulated Deficit, beginning of period (3,620,501) (2,522,648)
----------- -----------
Accumulated Deficit, end of period $(4,051,463) $(2,785,822)
=========== ===========
-2-
<PAGE>
PEABODYS COFFEE, INC.
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30, 1999
UNAUDITED
1999
---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(430,962)
Adjustments to reconcile net (loss) to net cash
provided by (applied to) operating activities:
Depreciation and amortization 49,503
Cash (used) provided by changes in operating
assets and liabilities:
Increase in receivables (7,664)
Increase in inventories (11,419)
Increase in prepaid expenses (1,162)
Increase in accounts payable 81,996
Increase in accrued expenses 97,990
---------
Net cash used by operating activities (221,718)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (132,895)
Additions to deposits and other assets (50,788)
---------
Net cash used by investing activities (183,683)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 128,377
Net proceeds from sale of stock 148,298
Payments on capital lease obligations (2,450)
---------
Net cash provided by financing activities 274,225
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $(131,176)
CASH AND CASH EQUIVALENTS
Beginning of period (19,464)
---------
End of period $(150,640)
=========
-3-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
UNAUDITED
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements and related notes have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, all adjustments of a normal and recurring nature
which were considered necessary for a fair presentation of these financial
statements have been included. It is suggested that these statements are read in
conjunction with the financial statements and footnotes thereto included in the
annual report of the Company on Form 10-KSB for the year ended March 31, 1999.
The results of operations for the period ended September 30, 1999, may not
necessarily be indicative of the operating results for the entire fiscal year.
NOTE 2 - GOING CONCERN
The Company has suffered recurring operating losses and, at September 30, 1999,
had a net deficiency in assets. These conditions raise substantial doubt about
the ability of the Company to continue as a going concern.
Several steps have been taken by the Company in attempt to increase working
capital and improve profitability. In July of 1999 the Company took steps to
reduce inventory levels at its warehousing facilities. In addition, the Company
commenced with a staged plan to reorganize its operating supervision model that
when fully implemented, will eliminate a layer of field management. The Company
continued with its expansion by relocating two of its under performing kiosks to
San Diego State University in an effort to upgrade overall unit performance and
add critical mass to the San Diego market. Also, the Company is continuing to
seek quality expansion opportunities and investment.
-4-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
UNAUDITED
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less depreciation and amortization.
Depreciation and amortization are primarily accounted for on the straight-line
method over the estimated useful lives of the assets, generally ranging from
five to seven years. The amortization of site improvements is based on the
shorter of the lease term or the life of the improvement.
The Company has satisfactory title to all items of property and equipment
reflected in the accounts relating hereto.
At September 30, 1999, property and equipment were comprised of the following:
Kiosk carts $ 1,170
Kiosk equipment 503,887
Equipment and furniture 207,341
Signage 41,095
Site improvements 67,434
---------
820,927
Less: accumulated depreciation (314,160)
---------
$ 506,767
=========
-5-
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
2.1 Plan and Agreement of Reorganization
2.2 Articles of Merger
3(i).1 Articles of Incorporation of Kimberley Mines, Inc.
3(i).2 Certificate of Amendment of Articles of Incorporation (Mine-A-Max
Corp.)
3(i).3 Certificate of Amendment of Articles of Incorporation (Peabodys
Coffee, Inc.)
3(ii).1 Amended and Restated Bylaws of Peabodys Coffee, Inc.
10.1 Peabodys Coffee, Inc. 1995 Stock Option Plan
10.2 Peabodys Coffee, Inc. 1999 Stock Option Plan
10.3 Letter of Intent with Arrosto Coffee Company LLC (formerly 10.2)
10.4 Letter of Intent with Grounds for Enjoyment
10.5 Executive Services Agreement with Barry J. Gibbons (formerly
10.3)
10.6 General Agreement (letter agreement) with Elliot, Lane &
Associates formerly 10.4)
10.7 Proposed Professional Services Agreement with Elliot, Lane &
Associates (formerly 10.5)
27
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
PEABODYS COFFEE, INC.,
A Nevada Corporation
By: /s/
-------------------------------
Todd Tkachuk, President
Date:
-----------------------------
28
PLAN AND AGREEMENT OF REORGANIZATION
AND EXCHANGE BY MINE-A-MAX CORPORATION
OF 5,829,871 SHARES OF ITS COMMON STOCK
FOR 100% OF THE SHARES OF STOCK OF
PEABODYS COFFEE, INC.
Mine-A-Max Corporation, a Nevada corporation, located at 1100-1200 West
73rd Avenue, Vancouver, B.C. V6P 6G5, hereinafter referred to as "Mine-A-Max,"
and Peabodys Coffee, Inc., a California corporation, located at 3845 Atherton
Road, Suite 9, Rocklin, California 95765, hereinafter referred to as "Peabodys"
agree as follows:
RECITALS
WHEREAS, this Plan and Agreement of Reorganization of Mine-A-Max and
Peabodys (the "Agreement") shall be entered into pursuant to the terms and
conditions contained herein. This merger is intended to qualify as a tax-free
reorganization under Section 368(a) of the Code.
WHEREAS, the Board of Peabodys deems it to be in the best interest of the
Company to have 100% of its issued and outstanding shares of Common Stock
acquired by Mine-A-Max. Peabodys will present this Agreement to its shareholders
and recommend its approval. A condition to the closing of this Agreement is that
at least 51% of the outstanding voting shares of Peabodys will enter into the
Subscription Agreement attached hereto as EXHIBIT A;
WHEREAS, in exchange for the outstanding shares of Peabodys, Mine-A-Max
will issue and cause to be delivered to the shareholders of Peabodys, 5,829,871
shares of Common Stock, par value $0.001, of Mine-A-Max.
Article 1: PLAN OF REORGANIZATION
EXCHANGE
Section 1.01. In exchange for the outstanding shares of Peabodys,
Mine-A-Max will issue and cause to be delivered to the shareholders of Peabodys,
5,829,871 shares of Common Stock, par value $0.001, of Mine-A-Max.
Section 1.02. Subject to the conditions precedent set forth herein, the
parties shall execute this Agreement at the offices of Peabodys Coffee, Inc.
located at 3845 Atherton Road, Suite 9, Rocklin, California 95765 on March 12,
1999, or at such other time and place as may be fixed by the mutual consent of
the parties hereto.
Section 1.03. Upon receipt of acceptance of the share exchange by 51% of
the shareholders of Peabodys, the Articles of Incorporation of Mine-A-Max will
be amended to the form attached hereto as EXHIBIT B, the Bylaws of Mine-A-Max
will be restated to
<PAGE>
the form attached hereto as EXHIBIT C, and the Board of Directors of Mine-A-Max
will resign in favor of the Board of Directors listed on EXHIBIT D (the "Initial
Closing Date"). Upon completion of the exchange, Mine-A-Max will issue to the
holders of Peabodys, 5,829,871 shares (the "Final Closing").
Article 2: WARRANTIES AND REPRESENTATIONS
OF MINE-A-MAX CORPORATION
Section 2.01. Mine-A-Max is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Nevada.
Section 2.02. Mine-A-Max has the corporate power and authority to enter
into this Agreement. The execution and delivery by Mine-A-Max of this Agreement
and the consummation by Mine-A-Max of the transactions contemplated hereby have
been duly and validly authorized by all necessary action by the Board of
Directors and stockholders of Mine-A-Max, and no other action on the part of the
Board of Directors or the stockholders of Mine-A-Max is required to authorize
the execution, delivery and performance of this Agreement and the consummation
by Mine-A-Max of the transactions contemplated hereby.
Section 2.03. Mine-A-Max has 254,606 shares of Common Stock issued and
outstanding and 49,745,394 shares of Common Stock authorized and unissued as of
the date of this transaction. Mine-A-Max currently has 50,000 options to
purchase Common Stock outstanding at a price of $1.00 per share. Mine-A-Max has
no other warrants, rights, convertible notes or other convertible securities to
purchase shares of Common Stock of Mine-A-Max or which convert into shares of
Mine-A-Max Common Stock outstanding.
Section 2.04. As of the Final Closing Date, the amount of debt on the books
of Mine-A-Max shall not exceed $20,000.
Section 2.05. All of the issued and outstanding shares of Mine-A-Max Common
Stock are validly issued, fully paid and non-assessable, and have been issued in
compliance with all applicable federal, state and foreign securities laws.
Mine-A-Max currently does not have any shares of Preferred Stock authorized or
outstanding.
Section 2.06. There are no Liens, pledges, chattel mortgages, or other
encumbrances of any kind against the Assets and Properties of Mine-A-Max or the
5,829,871 shares of Common Stock to be issued by Mine-A-Max pursuant to the
transactions contemplated by this Agreement.
Section 2.07. There are no undisclosed interests, present or future, in the
shares to be issued by Mine-A-Max, nor does Mine-A-Max know of any assertion of
such an interest.
Section 2.08. Mine-A-Max is not required by any provision of federal,
state, or local law to take any further action or to seek any governmental
approval of any nature
2
<PAGE>
to effectuate the issuance of the Mine-A-Max shares to the Peabodys'
shareholders.
Section 2.09. There are no provisions of any Contract, indenture, or other
instrument to which Mine-A-Max is a party or to which Mine-A-Max shares would be
subject that would prevent, limit, or condition the issuance of the Mine-A-Max
shares to Peabodys shareholders.
Section 2.10. As required by the Articles of Incorporation, Bylaws, or any
other agreement, corporate resolution or law, Mine-A-Max will provide the
appropriate documentation to Peabodys that it has complied with all terms as may
be necessary to obtain Mine-A-Max stockholder approval prior to the issuance of
shares of Mine-A-Max Common Stock to shareholders of Peabodys pursuant to the
terms of this Agreement.
Section 2.11. Mine-A-Max currently has no Subsidiaries nor any interest in
any other corporation, partnership, or limited liability company. To date all
business activities of Mine-A-Max has been in the field of mineral exploration
and mine development. Mine-A-Max has abandoned all current mining projects.
Section 2.12. Mine-A-Max is in all material respects in compliance with all
terms, conditions and provisions of all applicable Environmental Permits and
Environmental Laws. There are no past, pending or threatened Environmental
Claims against Mine-A-Max and Mine-A-Max does not know of any facts or
circumstances which could reasonably be expected to form the basis for any
Environmental Claim against Mine-A-Max. No releases of Hazardous Materials have
occurred at, from, in, to, on or under any site and no Hazardous Materials are
present in, on, about or migrating to or from any Site that could give rise to
an Environmental Claim against Mine-A-Max.
Section 2.13. Mine-A-Max has maintained adequate business liability
insurance coverage of its Assets and Properties and mining activities and has
delivered a copy of all current policies to Peabodys. There is no claim by
Mine-A-Max pending under any such policies as to which coverage has been
questioned, denied or disputed by the underwriters. All premiums due and payable
under all policies have been paid, and Mine-A-Max is otherwise in material
compliance with the terms of such policies (or other policies providing
substantially similar insurance coverage). Mine-A-Max has no knowledge of any
threatened termination of, or premium increase with respect to, any such
policies. Mine-A-Max has never been denied insurance coverage nor has any
insurance policy of Mine-A-Max ever been cancelled for any reason. Mine-A-Max
has in full force and effect fire and casualty insurance policies sufficient in
amount (subject to reasonable deductibles) to allow it to replace any of its
properties that might be damaged or destroyed.
Section 2.14. Mine-A-Max has delivered to Peabodys the audited balance
sheet of Mine-A-Max at January 31, 1999 and September 30, 1998. The balance
sheet has been prepared in conformity with generally accepted accounting
principles applied on a consistent basis and fairly depicts the financial
position of Mine-A-Max as of the dates set forth in such balance sheet.
3
<PAGE>
Section 2.15. Neither Mine-A-Max, nor any of its officers, directors, or
employees is a party to, nor has been threatened with any litigation or
Governmental proceeding which, if decided adversely to it, would have a material
adverse effect on the business or financial condition of Mine-A-Max, would have
a material adverse effect upon the transaction contemplated hereby, or upon the
financial condition or net worth of Mine-A-Max, or which would create a material
liability on the part of Mine-A-Max.
Section 2.16. Mine-A-Max has filed all federal income Tax Returns and, in
each state where qualified or incorporated, all state income tax or franchise
tax returns which are required to be filed, has paid all Taxes as shown on said
returns as the same have become due, and has paid all assessments received to
the extent that such assessments have become due. None of the tax returns of
Mine-A-Max are subject to any pending IRS audit or inquiry and Mine-A-Max does
not have knowledge of any future audits or inquiries.
Section 2.17. The shares of Common Stock of Mine-A-Max which are to be
issued and delivered to shareholders of Peabodys pursuant to the terms of this
Agreement, when so issued and delivered, will be validly authorized and issued,
and will be fully paid and non-assessable and have been issued in compliance
with federal, state and foreign securities laws. No shareholders of Mine-A-Max
will have any preemptive right of subscription or right of first refusal for
purchase in respect thereof.
Article 3: WARRANTIES AND REPRESENTATIONS
OF PEABODYS COFFEE, INC.
Section 3.01. Peabodys is a corporation duly organized, validly existing
and in good standing under the laws of the State of California.
Section 3.02. Peabodys has the corporate power and authority to enter into
this Agreement.
Section 3.03. By executing this Agreement, Peabodys is acting on its behalf
and that of its shareholders.
Section 3.04. Peabodys has had access to the extent it deems necessary to
the financial information of Mine-A-Max to permit it to evaluate the business of
Mine-A-Max and the merits and risks associated with the purchase of the
Mine-A-Max shares of Common Stock described herein.
Section 3.05. Peabodys recognizes that the Mine-A-Max shares to be acquired
through the exchange must be regarded as speculative and subject to a high
degree of risk. Peabodys has received no assurance whatsoever as to the value of
the Mine-A-Max shares to be issued, nor has Mine-A-Max or any other officer or
director of Mine-A-Max made any representations or promises to Peabodys
regarding any potential appreciation in the value of the Mine-A-Max shares to be
issued.
4
<PAGE>
Article 4: COVENANTS OF
MINE-A-MAX CORPORATION
Section 4.01. At the Final Closing, Mine-A-Max shall undertake to deliver
to shareholders of Peabodys certificates for the Mine-A-Max shares to be issued.
Section 4.02. From the date of execution of this Agreement, Mine-A-Max
shall take no action that would encumber or restrict the Mine-A-Max shares to be
issued.
Section 4.03. Mine-A-Max will file any and all disclosure documents as may
be required by state, federal and foreign securities laws as a result of the
execution and consummation of this Agreement.
Section 4.04. Upon the Initial Closing Date Mine-A-Max will conduct a
Regulation D, Rule 504 offering in the approximate amount of $660,000.
Mine-A-Max will enter into an agreement (the terms of which shall be mutually
agreed to by Peabodys and Mine-A-Max) with Peabodys , to transfer the funds of
the offering to Peabodys for working capital prior to the closing of the merger.
Section 4.05. Upon the Final Closing Date Mine-A-Max will assume all
outstanding options, warrants and convertible promissory notes of Peabodys.
Section 4.06. Mine-A-Max will file necessary documentation with Standard &
Poor's Corporation (or similar organization) and pay the fees to become listed
in the S&P (or similar organization) corporate records. Mine-A-Max will maintain
such listing on a current basis as required by S&P (or similar organization) for
a period of at least three years.
Article 5: COVENANTS OF
PEABODYS COFFEE, INC.
Section 5.01. Following the execution and consummation of this Agreement,
Peabodys will assist Mine-A-Max in the preparation and filing of all disclosure
documents required by state, federal and foreign securities laws.
Section 5.02. Peabodys will continue to solicit the share exchange of its
shareholders beyond the Initial Closing Date until the shareholders of at least
90% of the shares of Peabodys have elected to exchange their shares pursuant to
the terms of this Agreement.
Section 5.03. Upon the Initial Closing Date Peabodys will enter into an
agreement (the terms of which shall be mutually agreed to by Peabodys and
Mine-A-Max) with Peabodys to receive the funds of a Regulation D, Rule 504
offering, in the approximate amount of $660,000, to be conducted by Mine-A-Max.
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Article 6: CONDUCT OF BUSINESS OF
MINE-A-MAX CORPORATION
Section 6.01. As of the date hereof, Mine-A-Max is a development stage
company with no current business operations and will not engage in any business
operations until the closing of this Agreement.
Section 6.02:
(a) Mine-A-Max will allow Peabodys, and its agents, advisors, counsel and
consultants, from the date hereof until consummation of the Agreement,
full access during normal business hours to all books, accounts,
contracts, commitments, and records of every kind of Mine-A-Max in
order that Peabodys may have full opportunity to investigate and make
inquiries of the officers and directors regarding the affairs of
Mine-A-Max.
(b) Peabodys will use any information received pursuant to Section 6.02(a)
only for its own purposes in connection with the consummation of the
transaction contemplated hereby and will not divulge the information
to any persons not so entitled thereto.
Article 7: CONDUCT OF BUSINESS OF
PEABODYS COFFEE, INC.
PENDING CLOSING
Section 7.01:
(a) Peabodys will allow Mine-A-Max, its officers, advisors, consultants,
counsel and agents, from the date hereof until consummation of the
Agreement, full access during normal business hours of all books,
accounts, contracts, commitments, and records of every kind of
Peabodys (except for information deemed by the directors and officers
of Peabodys to be trade secrets and/or other Intellectual Property) in
order that Mine-A-Max may have full opportunity to make such
investigation and make inquiries of the officers and directors,
regarding the affairs of Peabodys.
(b) Mine-A-Max will use any information received under Section 7.01(a)
only for its own purposes in connection with the consummation of the
transaction contemplated hereby and will not divulge the information
to any persons not entitled thereto.
Section 7.02. The Board of Directors of Peabodys will cause Peabodys to
carry on its business in substantially the same manner as heretofore, and to
continue in full force insurance coverage comparable in amount and scope and
coverage regularly maintained by it. Peabodys will use its best efforts to
maintain its business organization
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intact and to retain its present employees, and to maintain its relationship
with suppliers and others having business relationships with it.
Article 8: CONDITIONS PRECEDENT TO
OBLIGATIONS OF MINE-A-MAX CORPORATION
TO CLOSE
Section 8.01. The obligation of Mine-A-Max to consummate the Agreement and
the transactions herein shall be subject to the following conditions precedent:
(a) Representations and warranties of Peabodys contained herein shall be
true as of the Initial Closing Date with the same effect as though
made on the Final Closing Date (the "Final Closing Date"). Peabodys
shall have performed all obligations and complied with all covenants
required by this Agreement to be performed or complied with by
Peabodys prior to the Initial Closing Date. Peabodys shall have
delivered to Mine-A-Max a certificate dated as of the Initial Closing
Date certifying as to the truth of the representations and warranties,
as to the performance of the obligations, and as to the compliance
with the covenants.
(b) The execution of the Subscription Agreement by at least 51% of the
voting shares of Peabodys.
Article 9: CONDITIONS PRECEDENT TO
OBLIGATIONS OF PEABODYS COFFEE, INC.
TO CLOSE
Section 9.01. The obligations of the Board of Directors of Peabodys to
consummate the Agreement and transactions contemplated hereby shall be subject
to the following conditions precedent:
(a) Representations and warranties of Mine-A-Max contained herein shall be
true as of the Initial Closing Date with the same effect as though
made on the Final Closing Date. Mine-A-Max shall have performed all
obligations and complied with all covenants required by this Agreement
to be performed or complied with by them prior to the Initial Closing
Date.
(b) All permits, filings and consents required by any state, federal and
foreign securities regulatory agency for the lawful consummation of
the reorganization and the transactions contemplated hereby shall have
been made or obtained.
(c) On each of the Initial Closing Date and Final Closing Date, there
shall be furnished to Peabodys an opinion from counsel for Mine-A-Max,
dated as of the closing date and in form and substance satisfactory to
counsel for Peabodys to the effect that Mine-A-Max is a corporation
duly organized, validly existing, and in good standing under the laws
of the State of
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Nevada, and that the shares of common stock of Mine-A-Max delivered to
Peabodys on the closing date have been duly authorized, issued, and
delivered and are validly issued and outstanding, fully paid and
non-assessable shares of common stock in Mine-A-Max, issued in
compliance with state, federal and foreign securities laws, and such
other matters as may be reasonably requested by Peabodys.
Article 10: CONSUMMATION OF TRANSACTION
Section 10.01. Peabodys shall deliver to Mine-A-Max, on the Final Closing
Date, one hundred percent (100%) of the issued and outstanding shares of stock
of Peabodys as agent for the shareholders of Peabodys.
Section 10.02. On the Final Closing Date, Mine-A-Max shall deliver
certificates representing up to 5,829,871 shares of common stock in such names
and quantities as directed by Peabodys to the shareholders of Peabodys.
Section 10.03. Mine-A-Max shall pay all of its expenses and costs incident
to the preparation of this Agreement and the transactions contemplated hereby,
including but not limited to the solicitation of shareholders of Peabodys in
connection with the exchange and the Regulation D, Rule 504 offering. Peabodys
shall pay all of its expenses and costs incident to the preparation of this
Agreement and the transactions contemplated hereby.
Article 11: INTERPRETATION, NOTICE AND ENFORCEMENT
Section 11.01. Any notice or other communication required or permitted
hereunder shall be deemed to be properly given when deposited in the United
States mails for transmittal by certified or registered mail, postage prepaid,
first-class mail or via confirmed facsimile, hand delivery or a national
recognized overnight delivery service.
Section 11.02. Except as limited by the provisions of Section 11.03 below,
this Agreement shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties, as well as to the parties.
Section 11.03. Any assignment of this Agreement or the rights hereunder of
any of the parties, without the written consent of the other parties hereto,
shall be void.
Section 11.04. This instrument and the exhibits attached hereto contain the
entire agreement between the parties with respect to the transaction
contemplated hereby. It may be executed in any number of counterparts, each of
which shall be deemed an original, but such counterparts together constitute
only one and the same instrument.
Section 11.05. The validity, interpretation, and performance of this
Agreement shall be controlled by and construed under the laws of the State of
California.
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Section 11.06. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
Article 12: INDEMNIFICATION
Section 12.01. Mine-A-Max will defend, indemnify and hold Peabodys, each of
its officers, directors, shareholders, agents, employees, representative, legal
counsel and independent accountants, harmless against all expenses, costs
(including attorneys' fees) claims, Losses, damages, or Liabilities (or actions
in respect thereof), including any of the foregoing incurred in settlement of
any litigation, commenced or threatened, arising out of, based on or resulting
from any legal action, suit, proceeding, injunction or claim relating to this
Agreement or any of the transactions contemplated hereby, including, but not
limited to, any untrue statement (or alleged untrue statement) of a material
fact contained in the information obtained by Mine-A-Max, or any amendment or
supplement thereto, or based on any omission (or alleged omission) to state
therein, a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading or any violation of any rule or regulation promulgated under the
Securities Act and any state or foreign securities law or regulation applicable
to Mine-A-Max. Mine-A-Max shall reimburse Peabodys, each of its officers,
directors, shareholders, agents, employees, representatives, legal counsel and
independent accountants, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing, or defending any such
claim, loss, damage, liability, or expense arising out of, based on or resulting
from any of the foregoing.
Section 12.02. Peabodys will defend, indemnify and hold Mine-A-Max, each of
its officers, directors, shareholders, agents, employees, representative, legal
counsel and independent accountants, harmless against all expenses, costs
(including attorneys' fees) claims, Losses, damages, or Liabilities (or actions
in respect thereof), including any of the foregoing incurred in settlement of
any litigation, commenced or threatened, arising out of, based on or resulting
from any legal action, suit, proceeding, injunction or claim relating to this
Agreement or any of the transactions contemplated hereby, including, but not
limited to, any untrue statement (or alleged untrue statement) of a material
fact contained in the information obtained by Peabodys, or any amendment or
supplement thereto, or based on any omission (or alleged omission) to state
therein, a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading or any violation of any rule or regulation promulgated under the
Securities Act and any state or foreign securities law or regulation applicable
to Peabodys. Peabodys shall reimburse Mine-A-Max, each of its officers,
directors, shareholders, agents, employees, representatives, legal counsel and
independent accountants, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing, or defending any such
claim, loss, damage, liability, or expense arising out of, based on or resulting
from any of the foregoing.
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ARTICLE 13: DEFINITIONS
13.1. DEFINITIONS. (a) As used in this Agreement, the following defined
terms shall have the meanings indicated below:
"ACTIONS OR PROCEEDINGS" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"AGREEMENT" means this Agreement and Plan of Reorganization, the
Exhibits and the Confidential Offering Circular and Term Sheet and the
certificates and instruments delivered in connection herewith, as the same may
be amended from time to time in accordance with the terms hereof.
"ASSETS AND PROPERTIES" means all assets and properties of every kind,
nature, character and description (whether real, personal or mixed, whether
tangible or intangible, whether absolute, accrued, contingent, fixed or
otherwise and wherever situated), including the goodwill related thereto,
operated, owned or leased by such Person, including cash, cash equivalents,
Investment Assets, accounts and notes receivable, chattel paper, documents,
instruments, general intangibles, real estate, equipment, inventory, goods and
Intellectual Property.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"CONTRACT" means any legally binding agreement, lease, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract or
business arrangement (whether written or oral).
"ENVIRONMENT" means all air, surface water, groundwater, or land,
including land surface or subsurface, including all fish, wildlife, biota and
all other natural resources.
"ENVIRONMENTAL CLAIM" means any and all administrative or judicial
proceedings, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, proceedings, or other communication (written or
oral), whether criminal or civil, pursuant to or relating to any applicable
Environmental Law by any Person (including any Governmental or Regulatory
Authority, private person and citizens' group) based upon, alleging, asserting,
or claiming any actual or potential (i) violation of or liability under any
Environmental Law, (ii) violation of any Environmental Permit or (iii) liability
for investigatory costs, cleanup costs, removal costs, remedial costs, response
costs, natural resource damages, property damage, personal injury, fines, or
penalties arising out of, based on, resulting from, or related to the presence,
Release, or threatened Release into the Environment, of any Hazardous Materials
at any location, including any off-Site location to which Hazardous Materials or
materials containing Hazardous Materials were sent for handling, storage,
treatment, or disposal.
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"ENVIRONMENTAL LAW" means all federal, state, local and foreign
environmental, health and safety Laws, and ordinances and all rules and
regulations promulgated thereunder, civil or criminal Laws relating to
emissions, discharges, releases or threatened releases of Hazardous Materials,
pollutants, contaminants, chemicals, or toxic or hazardous substances or wastes
into the Environment.
"ENVIRONMENTAL PERMIT" means any federal, state, local, provincial, or
foreign permits, licenses, approvals, consents or authorizations required by any
Governmental or Regulatory Authority under or in connection with any
Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority
under any applicable Environmental Law.
"FINAL CLOSING DATE" means the date which the Certificate of Merger is
filed with the Nevada Secretary of State consummating the Merger.
"GOVERNMENTAL OR REGULATORY AUTHORITY" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision, and shall include any stock exchange,
quotation service and the National Association of Securities Dealers.
"HAZARDOUS MATERIALS" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation and transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs),
(b) any chemicals, materials, substances or wastes which are now defined as or
included in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous wastes", "restricted hazardous
wastes", "toxic substances", "toxic pollutants" or words of similar import,
under any Environmental Law; and (c) any other chemical, material, substance or
waste, exposure to which is now prohibited, limited or regulated by any
Governmental or Regulatory Authority.
"INDEBTEDNESS" means all obligations (a) for borrowed money, (b)
evidenced by notes, bonds, debentures or similar instruments, (c) for the
deferred purchase price of goods or services (other than trade payables or
accruals incurred in the ordinary course of business), (d) under capital leases
and (e) in the nature of guarantees of the obligations described in clauses (a)
through (d) above of any other Person.
"INTELLECTUAL PROPERTY" means all trademarks and trademark rights,
trade names and trade name rights, service marks and service mark rights,
service names and service name rights, patents and patent rights, utility models
and utility model rights, copyrights, brand names, trade dress, product designs,
product packaging, business and product names, logos, slogans, rights of
publicity, trade secrets, inventions, processes, formulae, industrial models,
processes, designs, specifications, data, technology, methodologies, computer
programs (including all source codes), any
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other confidential and proprietary right or information, whether or not subject
to statutory registration, and all related technical information, manufacturing,
engineering and technical drawings, know-how and all pending applications for
and registrations of patents, utility models, trademarks, service marks and
copyrights, and the right to sue for past infringement, if any, in connection
with any of the foregoing, and all documents, disks and other media on which any
of the foregoing is stored.
"INITIAL CLOSING DATE" means the date on which Mine-A-Max has obtained
approval by 51% of the voting stock of Peabodys by execution of the Subscription
Agreement and the exhibits attached thereto by such shareholders.
"IRS" means the United States Internal Revenue Service.
"LAW" or "LAWS" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory Authority.
"LIABILITIES" means all Indebtedness, obligations and other
liabilities of a Person, whether absolute, accrued, contingent (or based upon
any contingency), fixed or otherwise, or whether due or to become due which
would be required to be reflected in financial statements prepared in accordance
with GAAP.
"LIENS" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract, title retention Contract or other Contract to
give any of the foregoing.
"LOSS(ES)" means any and all damages, fines, fees, Taxes, penalties,
deficiencies, losses and expenses, including interest, reasonable expenses of
investigation, court costs, reasonable fees and expenses of attorneys,
accountants and other experts or other expenses of litigation or other
proceedings or of any claim, default or assessment (such fees and expenses to
include all fees and expenses, including fees and expenses of attorneys,
incurred in connection with (i) the investigation or defense of any Third Party
Claims or (ii) asserting or disputing any rights under this Agreement against
any party hereto or otherwise).
"OPTION" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person or (ii) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including any rights to
participate in the equity, income or election of directors or officers of such
Person.
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"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SUBSIDIARY" means any Person in which the Company, directly or
indirectly through Subsidiaries or otherwise, beneficially owns at least 50% of
either the equity interest in, or the voting control of, such Person, whether or
not existing on the date hereof.
"TAX" or "TAXES" means all federal, state, local or foreign net or
gross income, sales, use or other taxes of any nature whatever, whether disputed
or not, together with any interest, penalties, additions to tax or additional
amounts with respect thereto.
"TAX RETURNS" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of
the dates set forth below.
MINE-A-MAX CORPORATION PEABODYS COFFEE, INC.
By: ___________________________ By: __________________________
E. Del Thachuk Todd Tkachuk
President President
Dated: ________________________ Dated: _______________________
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EXHIBIT A
SUBSCRIPTION AGREEMENT
15
<PAGE>
EXHIBIT B
AMENDMENT TO THE ARTICLES OF INCORPORATION
16
<PAGE>
EXHIBIT C
RESTATED BYLAWS
17
<PAGE>
EXHIBIT D
The following is a list of the Board of Directors of Mine-A-Max to be elected
upon the approval of 51% of the shareholders of Peabodys Coffee, Inc. in favor
of the share exchange:
Todd Tkachuk
Barry Gibbons
Roman Kujath
William Bossung
E. Del Thachuk
18
ARTICLES OF MERGER
OF
PEABODYS COFFEE, INC.,
A CALIFORNIA CORPORATION
AND
PEABODYS COFFEE, INC.,
A NEVADA CORPORATION
To the Secretary of State
State of Nevada
Pursuant to the provisions of Chapter 92A, Nevada Revised Statutes, the
foreign corporation and the domestic corporation herein named do hereby adopt
the following Articles of Merger.
1. Annexed hereto and made a part hereof is the Plan of Merger (the "Plan
of Merger") for merging Peabodys Coffee, Inc., a business corporation organized
and existing under the laws of the State of California ("Peabodys CA"), with and
into Peabodys Coffee, Inc., a business corporation organized and existing under
the laws of the State of Nevada ("Peabodys NV"). The said Plan of Merger has
been adopted by the Board of Directors of Peabodys CA and by the Board of
Directors of Peabodys NV.
2. A copy of the Plan of Merger can be obtained upon request at the office
of Peabodys NV located at 3845 Atherton Road, Suite 9, Rocklin, California
95765.
3. The merger of Peabodys CA with and into Peabodys NV is permitted by the
laws of the jurisdiction of organization of Peabodys NV and has been authorized
in compliance with said laws, by which Peabodys NV is governed.
4. The said Plan of Merger was approved by the consent of the Board of
Directors and a majority of the outstanding stockholders of Peabodys NV pursuant
to the provisions of the laws of its jurisdiction of organization.
5. No amendments to the Articles of Incorporation of Peabodys NV are
effected by the merger herein provided for.
<PAGE>
6. The merger herein provided for shall become effective in the State of
Nevada on June 30, 1999.
Dated: June 30, 1999 Peabodys Coffee, Inc.,
a California corporation
--------------------------------
By: Todd Tkachuk
Its: President and Secretary
State of California )
) ss.:
County of ____________ )
On _________________, 19__, personally appeared before me, a Notary Public
in and for the State and County aforesaid, Todd Tkachuk, President and Secretary
of Peabodys Coffee, Inc., a California corporation, personally known to me to be
the person whose name is subscribed to the above Articles of Merger in the said
capacity, who acknowledged that he executed the said instrument.
----------------------------------------
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6. The merger herein provided for shall become effective in the State of
Nevada on June 30, 1999.
Dated: June 30, 1999 Peabodys Coffee, Inc.,
a Nevada corporation
--------------------------------
By: Todd Tkachuk
Its: President and Secretary
State of California )
) ss.:
County of ____________ )
On _________________, 19__, personally appeared before me, a Notary Public
in and for the State and County aforesaid, Todd Tkachuk, President and Secretary
of Peabodys Coffee, Inc., a Nevada corporation, personally known to me to be the
person whose name is subscribed to the above Articles of Merger in the said
capacity, who acknowledged that he executed the said instrument.
----------------------------------------
3
ARTICLES OF INCORPORATION
OF
KIMBERLY MINES, INC.
The undersigned incorporator being a natural person more than eighteen (18)
years of age acting as the sole incorporator of the above-named corporation (the
"Corporation") hereby adopts the following articles of incorporation for the
Corporation:
ARTICLE I
NAME
The name of the Corporation shall be: KIMBERLY MINES, INC.
ARTICLE II
PERIOD OF DURATION
The Corporation shall continue in existence perpetually unless sooner
dissolved according to law.
ARTICLE III
PURPOSES AND POWERS
The purposes for which the Corporation is organized are:
(a) To acquire by purchase or otherwise, own, hold, lease, rent, mortgage
or otherwise, to trade with and deal in real estate, lands and interests in
lands and all other property of every kind and nature;
(b) To locate, patent, purchase, lease, exchange, trade for, or otherwise
acquire, and to hold, own, use, operate, work, extend, improve, and develop, and
to sell, exchange, assign, transfer, mortgage, grant security interests in,
lease, or otherwise dispose of, in whole or in part, and wherever situated,
mines, mining rights, and claims, metalliferous lands, quarries, quarry rights,
water, water rights, ditches, reservoirs, oil and gas properties and interests
therein, and any rights, rights of way, easements, privileges, permits, or
franchises suitable or convenience for any of the purposes of the business, and
to deal in the same in every way; to quarry, mine, drill, excavate, produce,
purchase, lease, prospect for, claim, and otherwise acquire, and to process,
refine, and develop, and to sell, exchange, trade, deal in and with, and
otherwise dispose of asbestos, sulphur, silica, felspar, uranium, vanadium, rare
earth, mica, copper, coal, lead, silver, gold, gas, oil, oil shale, and other
minerals, ores, and properties of every kind and nature, and of earth, rock,
sand, shale, and other substances containing mineral and ore deposits; and to
manufacture, produce, purchase, lease, or otherwise acquire, and to use,
operate, improve, repair, replace, and develop, and to sell, trade,
<PAGE>
exchange, lease, and otherwise dispose of any and all materials, machinery,
facilities, appliances, products, equipment, or supplies proper or adapted to be
used in or in connection with or incidental to the prospecting, development,
production, processing, preparation, shipment, and delivery of any of the
foregoing minerals and ores and any by-products therefrom; and to do any and all
things incidental thereto, or necessary, expedient, or proper to be done in
connection with the matters and things set out herein.
(c) To manufacture, use, work, sell and deal in compounds, chemicals,
biologicals, pharmaceuticals, electronics, dry goods, food stuffs, and products
of all types, including the privileges or rights, owned or hereafter acquired by
it for manufacturing, using and vending any machine or machines for
manufacturing, working or producing any or all products, and marketing or
distributing any or all products;
(d) To borrow money and to execute notes and obligations and security
contracts therefore, to lend any of the monies or funds of the Corporation and
to take evidence of indebtedness therefore; and to negotiate loans; to carry on
a general mercantile and merchandise business and to purchase, sell and deal in
such goods, supplies, and merchandise of every kind and nature;
(e) To engage in the export or import business of any goods, supplies, and
merchandise of every kind and nature between the United States and its
territories and possessions and any and all foreign countries or between foreign
countries, as principal or agent;
(f) To do all and everything necessary, suitable, convenient, or proper for
the accomplishment of any of the purposes or the attainment of any one or more
of the objects herein enumerated or incidental to the powers therein named or
which shall at any time appear conducive or expedient for the protection or
benefit of the Corporation, with all the powers hereafter conferred by the laws
under which this Corporation is organized; and
(g) To conduct any lawful business for which a corporation may be organized
under the laws of Nevada.
ARTICLE IV
AUTHORIZED SHARES
The Corporation is authorized to issue a total of 50,000,000 shares
consisting of common stock having a par value of $0.001 per share. The board of
directors of the Corporation shall have authority to authorize the issuance,
from time to time without any vote or other action by the stockholders, of any
or all shares of the Corporation of any class at any time authorized, and any
securities convertible into or exchangeable for such shares, in each case to
such persons and for such consideration and on such terms as the board of
directors from time to time in its discretion lawfully may determine; provided,
however, that the consideration for the issuance of shares of stock of the
Corporation having par value shall not be less than such par value. Shares so
issued, for which the full consideration determined by the board of directors
has been paid to the Corporation, shall be fully paid stock, and the holders of
such stock shall not be liable for any further call or assessment thereon.
No holder of shares of any class of the Corporation or of any security of
obligation convertible into, or of any warrant, option, or right to purchase,
subscribe for, or otherwise
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acquire, shares of any class of the Corporation, whether now or hereafter
authorized, shall, as such holder, have any preemptive right whatsoever to
purchase, subscribe for, or otherwise acquire shares of any class of the
Corporation, whether now or hereafter authorized
Anything herein contained to the contrary notwithstanding, any and all
right, title, interest and claim in and to any dividends declared or other
distributions made by the Corporation, whether in cash, stock, or otherwise,
which are unclaimed by the stockholder entitled thereto for a period of six
years after the close of business on the payment date, shall be and be deemed to
be extinguished and abandoned; and such unclaimed dividends or other
distributions in the possession of the Corporation, its transfer agents, or
other agents or depositories, shall at such time become the absolute property of
the Corporation, free and clear of any and all claims of any person whatsoever.
ARTICLE V
LIMITATION ON LIABILITY
A director or officer of the Corporation shall have no personal liability
to the Corporation or its stockholders for damages for breach of fiduciary duty
as a director or officer, except for damages for breach of fiduciary duty
resulting from (a) acts or omissions which involve intentional misconduct,
fraud, or a knowing violation of law, or (b) the payment of dividends in
violation of section 78.300 of the Nevada Revised Statutes as it may from time
to time be amended or any successor provision thereto.
ARTICLE VI
PRINCIPAL OFFICE AND RESIDENT AGENT
The address of the Corporation's principal office in the state of Nevada is
One East First Street, town of Reno, county of Washoe, state of Nevada. The name
of its initial resident agent in the State of Nevada is The Corporation Trust
Company of Nevada. Either the registered office of the resident agent may be
changed in the manner provided by law.
ARTICLE VII
AMENDMENTS
The Corporation reserves the right to amend, alter, change, or repeal all
or any portion of the provisions contained in these articles of incorporation
from time to time in accordance with the laws of the state of Nevada, and all
rights conferred on stockholders herein arc granted subject to this reservation.
ARTICLE VIII
ADOPTION AND AMENDMENT OF
BYLAWS
The initial bylaws of the Corporation shall be adopted by the board of
directors. The power to alter, amend, or repeal the bylaws or adopt new bylaws
shall be vested in the boars of directors, but the stockholders of the
Corporation may also alter, amend, or repeal the bylaws or adopt new
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bylaws. The bylaws may contain any provisions for the regulation or management
of the affairs of the Corporation not inconsistent with the laws of the state of
Nevada now or hereafter existing.
ARTICLE IX
DIRECTORS
The governing board of the Corporation shall be known as the board of
directors. The number of directors comprising the board of directors shall be
fixed and may be increased or decreased from time to time in the manner provided
in the bylaws of the Corporation, except that at no time shall there be less
than three nor more than nine directors. The original board of directors shall
consist of three persons. The name and address of each person who is to serve as
a director until the first annual meeting of stockholders and until his or her
successor is elected and shall qualify is as follows:
Name Address
---- -------
Janet N. Davison 48 West 300 South
#706 North Tower
Salt Lake City, Utah 84101
Eloise M. Fehr 2127 St. Mary's Drive
Salt Lake City, Utah 84108
George D. Fehr 10 Exchange Place, Suite 610
Salt Lake City, Utah 84111
ARTICLE X
INCORPORATOR
The name and mailing address of the sole incorporator signing these
articles of incorporation is as follows:
Name Address
---- -------
Janet N. Davison 48 West 300 South
#706 North Tower
Salt Lake City, Utah 84101
The undersigned, being the sole incorporator of the Corporation herein
before named, hereby makes and files these articles of incorporation declaring
that the facts herein are true.
DATED this ____ day of _______, 1989.
----------------------------------------
Janet N. Davison
4
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
KIMBERLY MINES, INC.
The undersigned, Shawni Larrabee (President) and Janamarie Riche
(Secretary), officers of Kimberly Mines, Inc., do hereby certify as follows:
That on July 1, 1997, shareholders, acting without a meeting, representing
95% of the issued and outstanding stock of the company, adopted a resolution to
amend the Articles of the Corporation as follows:
Article I which presently reads as follows:
ARTICLE I
The name of the Corporation shall be: KIMBERLY MINES, INC.
Is hereby amended to read as follows:
ARTICLE I
The name of the Corporation shall be: MINE-A-MAX CORPORATION.
The number of shares of the Corporation issued, outstanding and entitled to
vote on the Amendment is 10,865,545, of which 10,322,268 shares were voted in
favor of and consent to the within Amendment.
- --------------------------------- ---------------------------------
Shawni Larrabee, President Janamarie Riche, Secretary
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
MINE-A-MAX CORPORATION
The undersigned, Todd Tkachuk, President and Secretary of Mine-A-Max
Corporation, a Nevada corporation, does hereby certify:
That the Board of Directors of said corporation by unanimous written
consent, adopted a resolution to amend the original articles as follows:
Article I is hereby amended as follows:
ARTICLE I
The name of the corporation shall be Peabodys Coffee, Inc.
The number of shares of the corporation outstanding and entitled to vote on
an amendment to the Articles of Incorporation is 254,606; that the said
change(s) and amendment have been consented to and approved by a majority vote
of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
----------------------------------------
Todd Tkachuk, President and Secretary
AMENDED AND RESTATED BYLAWS
OF
PEABODYS COFFEE, INC.
(Formerly Mine-A-Max Corporation)
---------
Article 1
STOCKHOLDERS
1.1 CERTIFICATES REPRESENTING STOCK. Every holder of stock in the
corporation shall be entitled to have a certificate signed by, or in the name
of, the corporation by the Chairman or Vice-Chairman of the Board of Directors,
if any, or by the President or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
corporation or by agents designated by the Board of Directors, certifying the
number of shares owned by him in the corporation and setting forth any
additional statements that may be required by the General Corporation Law of the
State of Nevada (General Corporation Law). If any such certificate is
countersigned or otherwise authenticated by a transfer agent or transfer clerk,
and by a registrar, a facsimile of the signature of the officers, the transfer
agent or the transfer clerk or the registrar of the corporation may be printed
or lithographed upon the certificate in lieu of the actual signatures. If any
officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on any certificate or certificates shall cease
to be such officer or officers of the corporation before such certificate or
certificates shall have been delivered by the corporation, the certificate or
certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be such officer or officers of the corporation.
Whenever the corporation shall be authorized to issue more than one class
of stock or more than one series of any class of stock, the certificates
representing stock of any such class or series shall set forth thereon the
statements prescribed by the General Corporation Law. Any restrictions on the
transfer or registration of transfer of any shares of stock of any class or
series shall be noted conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the Board of Directors may require the owner of any lost, stolen,
or destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be made
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against it on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of any such new certificate.
1.2 FRACTIONAL SHARE INTERESTS. The corporation is not obliged to but may
execute and deliver a certificate for or including a fraction of a share. In
lieu of executing and delivering a certificate for a fraction of a share, the
corporation may proceed in the manner prescribed by the provisions of Section
78.205 of the General Corporation Law.
1.3 STOCK TRANSFERS. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or certificates for such
shares of stock properly endorsed and the payment of all taxes, if any, due
thereon.
1.4 RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the directors may fix, in advance, a record date, which
shall not be more than sixty days nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. If no record date
is fixed, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held; the record date for determining stockholders entitled to express consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is necessary, shall be the day on which the first written
consent is expressed; and the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at any meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
1.5 MEANING OF CERTAIN TERMS. As used in these Bylaws in respect of the
right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "share of stock" or
"shares of stock" or "stockholder" or "stockholders" refers to an outstanding
share or shares of stock and to a holder or holders of record of outstanding
2
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shares of stock when the corporation is authorized to issue only one class of
shares of stock, and said reference is also intended to include any outstanding
share or shares of stock and any holder or holders of record of outstanding
shares of stock of any class upon which or upon whom the Articles of
Incorporation confers such rights where there are two or more classes or series
of shares of stock or upon which or upon whom the General Corporation Law
confers such rights notwithstanding that the articles of incorporation may
provide for more than one class or series of shares of stock, one or more of
which are limited or denied such rights thereunder; provided, however, that no
such right shall vest in the event of an increase or a decrease in the
authorized number of shares of stock of any class or series which is otherwise
denied voting rights under the provisions of the Articles of Incorporation.
1.6 STOCKHOLDER MEETINGS.
- TIME. The annual meeting shall be held on the date and at the time fixed,
from time to time, by the directors, provided, that the first annual meeting
shall be held on a date within thirteen months after the organization of the
corporation, and each successive annual meeting shall be held on a date within
thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed by the directors.
- PLACE. Annual meetings and special meetings shall be held at such place,
within or outside the State of Nevada, as the directors may, from time to time,
fix.
- CALL. Annual meetings and special meetings may be called by the directors
or by any officer instructed by the directors to call the meeting.
- NOTICE OR WAIVER OF NOTICE. Notice of all meetings shall be in writing
and signed by the President or a Vice-President, or the Secretary, or an
Assistant Secretary, or by such other person or persons as the directors must
designate. The notice must state the purpose or purposes for which the meeting
is called and the time when, and the place, where it is to be held. A copy of
the notice must be either delivered personally or mailed postage prepaid to each
stockholder not less than ten nor more than sixty days before the meeting. If
mailed, it must be directed to the stockholder at his address as it appears upon
the records of the corporation. Any stockholder may waive notice of any meeting
by a writing signed by him, or his duly authorized attorney, either before or
after the meeting; and whenever notice of any kind is required to be given under
the provisions of the General Corporation Law, a waiver thereof in writing and
duly signed whether before or after the time stated therein, shall be deemed
equivalent thereto.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided over
by one of the following officers in the order of seniority and if present and
acting - the Chairman of the Board, if any, the Vice-Chairman of the
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Board, if any, the President, a Vice-President, or, if none of the foregoing is
in office and present and acting, by a chairman to be chosen by the
stockholders. The Secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as secretary of every meeting, but if neither the Secretary
nor an Assistant Secretary is present the Chairman of the meeting shall appoint
a secretary of the meeting.
- PROXY REPRESENTATION. At any meeting of stockholders, any stockholder may
designate another person or persons to act for him by proxy in any manner
described in, or otherwise authorized by, the provisions of Section 78.355 of
the General Corporation Law.
- INSPECTORS. The directors, in advance of any meeting, may, but need not,
appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to appear or act, the
vacancy may be filled by appointment made by the directors in advance of the
meeting or at the meeting by the person presiding thereat. Each inspector, if
any, before entering upon the discharge of his duties, shall take and sign an
oath faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the inspector or inspectors, if any, shall make a report in writing
of any challenge, question or matter determined by him or them and execute a
certificate of any fact found by him or them.
- QUORUM. Stockholders holding at least a majority of the voting power are
necessary to constitute a quorum at a meeting of stockholders for the
transaction of business unless the action to be taken at the meeting shall
require a greater proportion. The stockholders present may adjourn the meeting
despite the absence of a quorum.
- VOTING. Each share of stock shall entitle the holder thereof to one vote.
In the election of directors, a plurality of the votes cast shall elect. Any
other action is approved if the number of votes cast in favor of the action
exceeds the number of votes cast in opposition to the action, except where the
General Corporation Law, the Articles of Incorporation, or these Bylaws
prescribe a different percentage of votes and/or a different exercise of voting
power. In the election of directors, voting need not be by ballot; and, except
as
4
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otherwise may be provided by the General Corporation Law, voting by ballot shall
not be required for any other action.
Stockholders may participate in a meeting of stockholders by means of a
conference telephone or similar method of communication by which all persons
participating in the meeting can hear each other.
1.7 STOCKHOLDER ACTION WITHOUT MEETING. Except as may otherwise be provided
by the General Corporation Law, any action required or permitted to be taken at
a meeting of the stockholders may be taken without a meeting if a written
consent thereto is signed by stockholders holding at least a majority of the
voting power; provided that if a different proportion of voting power is
required for such an action at a meeting, then that proportion of written
consents is required. In no instance where action is authorized by written
consent need a meeting of stockholders be called or noticed.
Article 2
DIRECTORS
2.1 FUNCTIONS AND DEFINITION. The business and affairs of the corporation
shall be managed by the Board of Directors of the corporation. The Board of
Directors shall have authority to fix the compensation of the members thereof
for services in any capacity. The use of the phrase "whole Board" herein refers
to the total number of directors which the corporation would have if there were
no vacancies.
2.2 QUALIFICATIONS AND NUMBER. Each director must be at least 18 years of
age. A director need not be a stockholder or a resident of the State of Nevada.
The initial Board of Directors shall consist of a VARIABLE 5 TO 7 PERSONS.
Thereafter the number of directors constituting the whole board shall be at
least one. Subject to the foregoing limitation and except for the first Board of
Directors, such number may be fixed from time to time by action of the
stockholders or of the directors, or, IF THE NUMBER IS NOT FIXED, THE NUMBER
SHALL BE 7. The number of directors may be increased or decreased by action of
the stockholders or of the directors.
2.3 ELECTION AND TERM. Directors may be elected in the manner prescribed by
the provisions of Sections 78.320 through 78.335 of the General Corporation Law
of Nevada. The first Board of Directors shall hold office until the first
election of directors by stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an election of directors by stockholders, and directors who are
elected in the interim to fill vacancies and newly created
5
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directorships, shall hold office until the next election of directors by
stockholders and until their successors are elected and qualified or until their
earlier resignation or removal. In the interim between elections of directors by
stockholders, newly created directorships and any vacancies in the Board of
Directors, including any vacancies resulting from the removal of directors for
cause or without cause by the stockholders and not filled by said stockholders,
may be filled by the vote of a majority of the remaining directors then in
office, although less than a quorum, or by the sole remaining director.
2.4 MEETINGS.
- TIME. Meetings shall be held at such time as the Board shall fix, except
that the first meeting of a newly elected Board shall be held as soon after its
election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the State
of Nevada as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the time
and place have been fixed. Special meetings may be called by or at the direction
of the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, of
the President, or of a majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for
regular meetings for which the time and place have been fixed. Written, oral, or
any other mode of notice of the time and place shall be given for special
meetings in sufficient time for the convenient assembly of the directors
thereat. Notice if any need not be given to a director or to any member of a
committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein.
- QUORUM AND ACTION. A majority of the directors then in office, at a
meeting duly assembled, shall constitute a quorum. A majority of the directors
present, whether or not a quorum is present, may adjourn a meeting to another
time and place. Except as the Articles of Incorporation or these Bylaws may
otherwise provide, and except as otherwise provided by the General Corporation
Law, the act of the directors holding a majority of the voting power of the
directors, present at a meeting at which a quorum is present, is the act of the
Board. The quorum and voting provisions herein stated shall not be construed as
conflicting with any provisions of the General Corporation Law and these Bylaws
which govern a meeting of directors held to fill vacancies and newly created
directorships in the Board or action of disinterested directors.
Members of the Board or of any committee which may be designated by the
Board may participate in a meeting of the Board or of any such committee, as the
case may be, by means of a telephone conference or similar method of
communication by which all persons participating in the
6
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meeting hear each other. Participation in a meeting by said means constitutes
presence in person at the meeting.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present
and acting, shall preside at all meetings. Otherwise, the Vice-Chairman of the
Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
2.5 REMOVAL OF DIRECTORS. Any or all of the directors may be removed for
cause or without cause in accordance with the provisions of the General
Corporation Law.
2.6 COMMITTEES. Whenever its number consists of two or more, the Board of
Directors may designate one or more committees which have such powers and duties
as the Board shall determine. Any such committee, to the extent provided in the
resolution or resolutions of the Board, shall have and may exercise the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation and may authorize the seal or stamp of the
corporation to be affixed to all papers on which the corporation desires to
place a seal or stamp. Each committee must include at least one director. The
Board of Directors may appoint natural persons who are not directors to serve on
committees.
2.7 WRITTEN ACTION. Any action required or permitted to be taken at a
meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if, before or after the action, a written consent thereto is
signed by all the members of the Board or of the committee, as the case may be.
Article 3
OFFICERS
3.1 The corporation must have a President, a Secretary, and a Treasurer,
and, if deemed necessary, expedient, or desirable by the Board of Directors, a
Chairman of the Board, a Vice-Chairman of the Board, an Executive
Vice-President, one or more other Vice-Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers and
agents with such titles as the resolution choosing them shall designate. Each of
any such officers must be natural persons and must be chosen by the Board of
Directors or chosen in the manner determined by the Board of Directors.
3.2 QUALIFICATIONS. Except as may otherwise be provided in the resolution
choosing him, no officer other than the Chairman of the Board, if any, and the
Vice-Chairman of the Board, if any, need be a director.
7
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Any person may hold two or more offices, as the directors may determine.
3.3 TERM OF OFFICE. Unless otherwise provided in the resolution choosing
him, each officer shall be chosen for a term which shall continue until the
meeting of the Board of Directors following the next annual meeting of
stockholders and until his successor shall have been chosen or until his
resignation or removal before the expiration of his term.
Any officer may be removed, with or without cause, by the Board of
Directors or in the manner determined by the Board.
Any vacancy in any office may be filled by the Board of Directors or in the
manner determined by the Board.
3.4 DUTIES AND AUTHORITY. All officers of the corporation shall have such
authority and perform such duties in the management and operation of the
corporation as shall be prescribed in the resolution designating and choosing
such officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions or instruments may be inconsistent therewith.
Article 4
REGISTERED OFFICE
The location of the initial registered office of the corporation in the
State of Nevada is the address of the initial resident agent of the corporation,
as set forth in the original Articles of Incorporation.
The corporation shall maintain at said registered office a copy, certified
by the Secretary of State of the State of Nevada, of its Articles of
Incorporation, and all amendments thereto, and a copy, certified by the
Secretary of the corporation, of these Bylaws, and all amendments thereto. The
corporation shall also keep at said registered office a stock ledger or a
duplicate stock ledger, revised annually, containing the names, alphabetically
arranged, of all persons who are stockholders of the corporation, showing their
places of residence, if known, and the number of shares held by them
respectively or a statement setting out the name of the custodian of the stock
ledger or duplicate stock ledger, and the present and complete post office
address, including street and number, if any, where such stock ledger or
duplicate stock ledger is kept.
8
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Article 5
CORPORATE SEAL OR STAMP
The corporate seal or stamp shall be in such form as the Board of Directors
may prescribe.
Article 6
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject to
change, by the Board of Directors.
Article 7
CONTROL OVER BYLAWS
The power to amend, alter, and repeal these Bylaws and to make new Bylaws
shall be vested in the Board of Directors subject to the Bylaws, if any, adopted
by the stockholders.
I HEREBY CERTIFY that the foregoing is a full, true, and correct copy of
the Bylaws of a Nevada corporation, as in effect on the date hereof.
WITNESS my hand and the seal or stamp of the corporation.
Dated: ___________________, 1999
------------------------------------
Secretary of Peabodys Coffee, Inc.
(SEAL)
9
PEABODYS COFFEE, INC.
1995 STOCK OPTION PLAN
1. PURPOSE. Peabodys Coffee, Inc. (the "Corporation") 1995 Stock Option
Plan (the "Plan") is intended to provide incentive to key employees, officers,
directors, consultants, advisors and others expected to provide significant
services to the Corporation, to encourage proprietary interest in the
Corporation, to encourage such key employees to remain in the employ of the
Corporation, to attract new employees with outstanding qualifications, and to
afford additional incentive to others to increase their efforts in providing
significant services to the Corporation.
2. DEFINITIONS.
a. "Award" shall mean the grant of an Option, a Stock Appreciation
Right or a Performance Award pursuant to the Plan.
b. "Board" shall mean the Board of Directors of the Corporation.
c. "Code" shall mean the Internal Revenue Code of 1986, as amended.
d. "Committee" shall mean the committee, if any, appointed by the
Board in accordance with Section 4 of the Plan.
e. "Common Stock" shall mean the Common Stock, no par value, of the
Corporation.
f. "Corporation" shall mean Peabodys Coffee, Inc., a California
corporation, and its Subsidiaries.
g. "Disability" shall mean the condition of an Employee or member of
the Board who is unable to perform his or her substantial and material job
duties due to injury or sickness or such other condition as the Board or
Committee may determine in its sole discretion.
h. "Eligible Persons" shall mean officers, directors and employees of,
and consultants and advisors to, the Corporation and other persons expected to
provide significant services to the Corporation. For purposes of this Plan, a
director or a consultant, vendor, customer, or other provider of significant
services to the Corporation shall be deemed to be an Employee, and will be
eligible to receive Non-statutory Stock Options only after finding the value of
the services rendered or be rendered to the Corporation is at least equal to the
value of the options being granted.
i. "Employee" shall mean an individual who is employed (within the
meaning of Code Section 3401 and the regulations thereunder) by the Corporation.
<PAGE>
j. "Exercise Price" shall mean the price per Share of Common Stock. an
Award y exercised. determined by the Board or the Committee, at which an Award
k. "Fair Market Value" shall mean the value of one (1) Share of Common
Stock, determined as follows:
i. If the Shares are traded on an exchange, the price at which
Shares traded at the close of business on the date of valuation;
ii. If the Shares are traded over-the-counter on the NASDAQ
System, the closing price if one is available, or the mean between that bid and
asked prices on said System at the close of business on the date of valuation;
and
iii. If neither (1) nor (2) applies, the fair market value as
determined by the Board or the Committee in good faith. Such determination shall
be conclusive and binding on all persons.
l. "Incentive Stock Option" shall mean an option described in Section
422(b) of the Code.
m. "Non-statutory Stock Option " shall mean an option n t described in
Section 422(b) or 423(b) of the Code.
n. "Option" shall mean any Non-statutory Stock Option or Incentive
Stock Option granted pursuant to the Plan.
o. "Optionee" shall mean any Eligible Person who has received an
Option.
p. "Participant" shall mean any Eligible Person granted an Award under
the Plan.
q. "Plan" shall mean the Peabodys Coffee, Inc. 1995 Stock Option Plan,
as it may be amended from time to time.
r. "Performance Award" shall mean a cash bonus, stock bonus or other
performance or incentive award that is paid in cash, stock or a combination of
both.
s. "Purchase Price" shall mean the Exercise Price times the number of
Shares with respect to which an Award is exercised.
t. "Retirement" shall mean the voluntary termination A employment by
an Employee upon the attainment of age sixty-five (65) and the completion of not
less than twenty (20) years of service with the Corporation or a subsidiary of
the. Corporation.
u. "Share" shall mean one (1) share of Common Stock, adjusted in
accordance with Section 12 of the Plan (if applicable).
v. "Stock Appreciation Right" shall mean the right to receive a number
of Shares or a cash amount, or a combination of Shares and cash, b upon the Fair
Market Value, book value or other measure determined by the Board or the
Committee, as the case may be, pursuant to Section 8 of the Plan.
<PAGE>
w. "Subsidiary" shall mean any corporation at least fifty percent
(50%) of the total combined voting power of which is owned by the Corporation or
by another Subsidiary.
x. "Termination of Employment" shall mean the time when the employee
employer relationship or directorship between the Optionee a the Corporation is
terminated for any reason, with or without cause, including but not limited to
any termination by resignation, discharge, death or retirement-, provided,
however, Termination of Employment shall not include a termination which is a
simultaneous reemployment of the Optionee by the Corporation. The Committee, in
its absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including but not limited to the question
of whether any Termination of Employment was for cause and all questions of
whether particular leaves of absence constitute Termination of Employment. With
respect to Incentive Stock Options, a leave of absence shall constitute a
Termination of Employment if, and to the extent that, such leave of absence
interrupts employment for the purposes of Section, 422(a)(2) of the Code.
3. EFFECTIVE DATE. The Plan was adopted by the Board on July 27, 1995,
subject to the approval by the Corporation's shareholders. Provided that the
Plan is submitted to shareholders for their approval and approved by holders of
a majority of the outstanding shares of Common Stock within one year after
receipt of Board approval, the effective date of the Plan shall be deemed to be
July 27, 1995.
4. ADMINISTRATION. The Plan shall be administered by the Board or a
Committee of the Board consisting of two or more members of the Board. The Board
shall appoint one of the members of the Committee, if there be one, as Chairman
of the Committee. The Committee shall hold meetings at such times and places as
it may determine. Acts of a majority of the Board or Committee, or acts reduced
to or approved in writing by a majority of the members of the Board or the
Committee, shall be the valid acts of the Board or the Committee. The Board, or
the Committee if there be one, shall from time to time at its discretion select
the Eligible Employees and consultants who are to be granted Awards, determine
the number of Shares or cash, or the combination thereof, to be applicable to
such Award, and designate any Options as Incentive Stock Options or
Non-statutory Stock Options, except that no Incentive Stock Option may be
granted to a non-employee director or a non-employee consultant. A member of the
Board or a Committee member shall in no event participate in any determination
relating to Awards held by or to be granted to such Board or Committee member.
The interpretation and construction by the Board, or by the Committee if there
be one, of any provision of the Plan or of any Award granted thereunder shall be
final. No member of the Board or of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Award
granted thereunder. In addition to any right of indemnification provided by the
Articles of Incorporation or Bylaws of the Corporation, such person shall be
indemnified and held harmless by the Corporation from any loss, cost, liability
or expense that may be imposed upon or reasonably incurred by him in connection
with any claim, suit, action or proceeding to which he may be a party by reason
of any action or omission under the Plan.
5. PARTICIPATION. Only Eligible Persons shall be eligible to receive grants
of Awards under the Plan.
6. STOCK. The stock subject to Options granted under the Plan shall be
Shares of the Corporation's authorized but unissued or reacquired Common Stock.
The aggregate number of Shares which may be issued upon exercise of Awards under
the Plan shall not exceed 500,000 shares. The number of Shares subject to Awards
outstanding at any time shall not exceed the number of Shares remaining
available for issuance under the Plan. In the event that any outstanding Award
for any reason expires or is terminated, the Shares allocable to the unexercised
portion of such Award may again be made subject to any Award. The
<PAGE>
limitations established by this Section 6 shall be subject to adjustment in the
manner provided in Section 12 hereof upon the occurrence of an event specified
therein.
7. TERMS AND CONDITIONS OF OPTIONS.
a. STOCK OPTION AGREEMENTS. Options granted to Participants shall be
evidenced by written stock option agreements in such form as the Board or the
Committee shall from time to time determine. Such agreements shall comply with
and be subject to the terms and conditions set forth below.
b. NUMBER OF SHARES. Each Option granted to a Participant shall state
the number of Shares to which it pertains and shall provide for the adjustment
thereof in accordance with the provisions of Section 12 hereof.
c. EXERCISE PRICE. Each Option granted to a Participant shall state
the Exercise Price. The Exercise Price for any Option shall not be less than
eighty-five percent (85%) of the Fair Market Value on the date of grant.
d. MEDIUM AND TIME OF PAYMENT . The Purchase Price for each Option
granted to a Participant shall be payable in full in United States dollars up)n
the exercise of the Option; PROVIDED, HOWEVER, that if the applicable Option
Agreement so provides the Purchase Price may be paid (i) by the surrender of
Shares in good form for transfer, owned by the person exercising the Option and
having a Fair Market Value on the date of exercise equal to the Purchase Price,
or in any combination of cash and Shares, as long as the sum of the cash so paid
and the Fair Market Value of the Shares so surrendered equal the Purchase Price,
(ii) by cancellation of indebtedness owed by the Corporation to the Optionee,
(iii) with a full recourse promissory note executed by the Optionee, or (iv) any
combination of the foregoing. The interest rate and other terms and conditions
of such note shall be determined by the Board or the Committee. The Board or the
Committee may require that the Optionee pledge his or her Shares to the
Corporation for the purpose of securing the payment of such note. In no event
shall the stock certificate(s) representing such Shares by released to the
Optionee until such note shall been paid in full. In the event the Corporation
determines that it is required to withhold state or federal income tax as a
result of the exercise of an Option, as a condition to the exercise thereof, an
Employee may be required to make arrangements satisfactory to the Corporation to
enable it to satisfy such withholding requirements.
e. TERM AND NONTRANSFERABILITY OF OPTIONS. Each Option shall state the
time or times which all or part thereof becomes exercisable, subject to the
following restrictions. No Option shall be exercisable after the expiration of
ten (10) years from the date it was granted. No Option shall be exercisable
except by the Optionee. No Option shall be assignable or transferable, except
pursuant to a qualified domestic relations order as defined in Code Section
414(p) or, in the event of the Optionee's death, by will or the laws of descent
and distribution.
f. TERMINATION OF EMPLOYMENT. EXCEPT BY DEATH. DISABILITY OR
RETIREMENT. Upon any Termination of Employment for any reason other than his or
her death, Disability or Retirement, such Optionee shall have the right, subject
to the restrictions of (e) above, to exercise the Option at any time within
three (3) months after termination of employment, but only to the extent that,
at the date of termination of employment, the Optionee's right to exercise such
Option had accrued pursuant to the terms of the applicable option agreement and
had not previously been exercised; PROVIDED, HOWEVER, that if the Optionee was
terminated as an Employee or removed as a member of the Board for cause (as
defined in the applicable option agreement or as
<PAGE>
determined by the Board or the Committee) any Option not exercised in full prior
to such termination shall be canceled. For this purpose, the employment
relationship shall be treated as continuing intact while the Optionee is on
military leave, sick leave or other bona fide leave of absence (to be determined
in the sole discretion of the Board or the Committee). The foregoing
notwithstanding. in the case of an Incentive Stock Option employment shall not
be deemed to continue beyond the ninetieth (90th) day after the Optionee's
reemployment rights are guaranteed by statute or by contract.
g. DEATH OF OPTIONEE . If an Optionee dies while an Employee or within
three (3) months after any Termination of Employment other than for cause, and
has not fully exercised the Option, then the Option may be exercised in full,
subject to the restrictions of (e) above, at any time within twelve (12) months
after the Optionee's death. by the executors or administrators of his or her
estate or by any person r persons who have acquired the Option directly from the
Optionee by bequest or inheritance, but only to the extent that, at the date of
death, the Optionee's right to exercise such Option had accrued and had not been
forfeited pursuant to the terms of the applicable Option Agreement and had not
previously been exercised.
h. DISABILITY OF OPTIONEE. Upon Termination of Employment for reason
of Disability, such Optionee shall have the right, subject to the restrictions
of (e) above, to exercise the Option at any time within twelve (12) months after
termination of employment, but only to the extent that, at the date of
termination of employment, the Optionee's right to exercise such Option had
accrued pursuant to the terms of the applicable Option Agreement and had not
previously been exercised.
i. RETIREMENT OF OPTIONEE. Upon Retirement, an Optionee shall have the
right, subject to the restrictions of (e) above, to exercise the Option at any
time within three (3) months after termination of employment, but only to the
extent that, at the date of termination of employment, the Optionee's right to
exercise such Option had accrued pursuant to the terms of the applicable Option
Agreement and had not previously been exercised.
j. RIGHTS AS A STOCKHOLDER. An Optionee, or a transferor of an
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his or her Option until the date of the issuance of a stock
certificate for such Shares. No adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities or other property), distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 12 hereof.
k. MODIFICATION. EXTENSION AND RENEWAL OF OPTION. Within the
limitations of the Plan, the Board or the Committee may modify, extend or renew
outstanding Options or accept the cancellation of outstanding Options (to the
extent not previously exercised) for the granting of new Options in substitution
therefor. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, alter or impair any rights or obligations
under any Option previously granted.
l. OTHER PROVISIONS. The stock option agreements authorized under the
Plan may contain such other provisions not inconsistent with the terms of the
Plan (including, without limitation, restrictions upon the exercise of the
Option) as the Committee shall deem advisable.
8. STOCK APPRECIATION RIGHTS.
a. GRANT. Stock Appreciation Rights related or unrelated to Options
may be granted to Eligible Employees:
<PAGE>
(i) at any time if unrelated to an Award or if related to an
Award other than an Incentive Stock Option; or
(ii) only at the time of grant of an Incentive Stock Option if
related thereto.
A Stock Appreciation Right may extend to all or a portion of the Shares covered
by a related Award.
b. EXERCISE OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right
granted in connection with an Award shall be exercisable only at such or times,
and to the extent, that a related Award is exercisable. A Stock Appreciation
Right, granted in connection with an Incentive Stock Option may be exercisable
only when the Fair Market Value of the Shares subject to the Incentive Stock
Option exceeds the Exercise Price of the Incentive Stock Option.
c. PAYMENT.
(a) Upon the exercise of a Stock Appreciation Right, and if such
Stock Appreciation Right is related to an Award surrender of an exercisable
portion of the related Award, the Participant shall be entitled to receive
payment of a amount determined by multiplying:
(i) the difference obtained by subtracting (x) either (A)
the Purchase Price of a Share of Common Stock specified in the related ward, or
(B) if such Stock Appreciation Right is unrelated to an Award, the Fair Market
Value of a Share of Common Stock on the date of grant of the Stock Appreciation
Right, from (y) the Fair Market Value, book value or other measure specified in
the Award of such Stock Appreciation Right of a share of Common Stock n the date
of exercise of such Stock Appreciation Right, by
(ii) the number of shares as to which such Stock
Appreciation Right has been exercised.
(b) The Board or the Committee, as the case may be, in its sole
discretion, may require settlement of the amount determined under paragraph (a)
above solely in cash, solely in shares of Common Stock (valued at Fair Market
Value on the business day next preceding the date of exercise of such Stock
Appreciation Right), or partly in such shares and partly in cash.
d. MAXIMUM STOCK APPRECIATION RIGHT TERM. Each Stock Appreciation
Right and all rights and obligations thereunder shall expire on such date as s
all be determined by the Board or the Committee, but not later than ten (10)
years after the date of the Award thereof, and shall be subject to earlier
termination as provided in the related Award Agreement and Sections 7(f), (g),
(h) and (i).
9. PERFORMANCE AWARDS. One or more Performance Awards may be granted to any
Eligible Employee. The value of such Awards may be linked to the market value,
book value or other measure of the value of the Common Stock or other specific
performance criteria determined appropriate by the Board or the Committee, in
each case on a specified date or over any period determined by the Board or the
Committee, or may be based upon the appreciation in the market value, book value
or other measure of the value of a specified number of shares of Common Stock
over a fixed period determined by the Board or the Committee. In making such
determinations, the Board or the Committee shall consider (among such other
factors as it deems
<PAGE>
relevant in light of the specific type of award) the contributions,
responsibilities and other compensation of the Participant.
10. LIMITATION ON VALUE OF EXERCISABLE SHARES. In the case of Incentive
Stock Options granted hereunder, the aggregate Fair Market Value (determined as
of the date of the grant thereof) of the Shares with respect to which Incentive
Stock Options become exercisable by any employee of the Company for the first
time during any calendar year (under this Plan and all other plans maintained by
the Corporation, its parent or its Subsidiaries) shall not exceed $100,000.
11. TERM OF PLAN. Options may be granted pursuant to the Plan until the
expiration of ten (10) years from the effective date of the Plan.
12. RECAPITALIZATIONS. Subject to any required action by shareholders the
number of Shares covered by the Plan as provided in Section 6 hereof, he number
of Shares covered by each outstanding Award and the Exercise Price thereof shall
be proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a subdivision or consolidation of Shares or the payment of
a stock dividend (but only of Common Stock) or any other increase or decrease in
the number of issued Shares effected without receipt of consideration by the
Corporation. Subject to any required action by stockholders, if the Corporation
is the surviving corporation in any merger or consolidation, each outstanding
Award shall pertain and apply to the securities to which a bolder of the number
of Shares subject to the Award would have been entitled. In the event of a
merger or consolidation in which the Corporation is not the surviving
corporation, the date of exercisability of each outstanding Award shall be
accelerated to a date prior to such merger or consolidation, unless the
agreement of merger or consolidation provides for the assumption of the Award by
the successor to the Corporation. To the extent that the foregoing adjustments
relate to securities of the Corporation, such adjustments shall be made by the
Board or the Committee, whose determination shall be conclusive and binding on
all persons. Except as expressly provided in this Section 12, the Participant
shall have no rights by reason of subdivision or consolidation of shares of
stock of any class, the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class or by reason of any
dissolution, liquidation, merger or consolidation or spin-off of assets or stock
of another corporation, and any issue by the Corporation of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or Exercise Price of Shares subject to an Award. The grant of an
Award pursuant to the Plan shall not affect in any way the right or power to the
Corporation to make adjustments, reclassifications, reorganizations or changes
of its capital or business structure, to merge or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business assets.
13. SECURITIES LAW REQUIREMENTS
a. LEGALITY OF ISSUANCE. The issuance of any Shares u n the exercise
of any Award and the grant of any Award shall be contingent upon the following:
i. the Corporation and the Participant shall have taken all
actions required to register the Shares under the Securities Act of 1933, as
amended (the "Act"), and to qualify the Award and the Shares under any and all
applicable state securities or "blue sky" laws or regulations, or to perfect an
exemption from the respective registration and qualification requirements
thereof;
ii. any applicable listing requirement of any stock exchange on
which the Common Stock is listed shall have been satisfied; and
<PAGE>
iii. any other applicable provision of state or federal law shall
have been satisfied
b. RESTRICTIONS ON TRANSFER. Regardless of whether the offering and
sale of Shares under the plan has been registered under the Act or has been
registered or qualified under the securities laws of any state, the Corporation
may impose restrictions on the sale, pledge or other transfer of such Shares
(including the placement of Appropriate legends on stock certificates) if, in
the judgment or the Corporation and its counsel, such restrictions are necessary
or desirable in order to achieve compliance with the provisions of the Act, the
securities laws of any state or any other law. In the event that the sale of
Shares under the Plan is not registered under the Act but an exemption is
available which required an investment representation or other representation,
each Participant shall be required to represent that such Shares are being
acquired for investment, and not with a view to the sale or distribution
thereof, and to make such other representations as are deemed necessary or
appropriate by the Corporation and its counsel. Any determination by the
Corporation and its counsel in connection with any of the matters set forth in
this Section 13 shall be conclusive and binding on all persons. Stock
certificates evidencing Shares acquired under the Plan pursuant to an
unregistered transaction shall bear the following restrictive legend and such
other restrictive legends as are require or deemed advisable under the
provisions of any applicable law.
"THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). ANY TRANSFER OF SUCH SECURITIES
WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO
SUCH TRANSFER OR IN THE OPINION OF COUNSEL FOR THE ISSUER SUCH REGISTRATION IS
UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT."
c. REGISTRATION OR QUALIFICATION OF SECURITIES. The Corporation may,
but shall not be obligated to, register or qualify the issuance of Awards and/or
the sale of Shares under the Act or any other applicable law. The Corporation
shall not be obligated to take any affirmative action in order to cause the
issuance of Awards or the sale of Shares under the plan to comply with any law.
d. EXCHANGE OF CERTIFICATES. If, in the opinion of the Corporation and
its counsel, any legend placed on a stock certificate representing shares sold
under the Plan is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
14. AMENDMENT OF THE PLAN. The Board or the Committee may from time to
time, with respect to any Shares at the time not subject to Awards, suspend or
discontinue the Plan or revise or amend it in any respect whatsoever except
that, without the approval of the Corporation's stockholders, no such revision
or amendment shall:
a. Materially increase the benefits accruing to participants under the
Plan;
b. Materially increase the number of Shares subject to the Plan;
c. Materially modify the requirements as to eligibility for
participation in the Plan; or
d. Amend this Section 14 to defeat its purpose.
<PAGE>
Notwithstanding the foregoing, the Board may revise or amend the Plan
without stock-holder approval in order to ensure the Plan's compliance with the
Code, any successor provisions of the Code or any other applicable law.
15. APPLICATION OE FUNDS. The proceeds received by the Corporation from the
sale of Common Stock pursuant to the exercise of an Award will be used for
general corporate purposes.
16. EXECUTION. To record the adoption of the Plan in the form set forth
above by the Board as of July 25, 1995, the Corporation has caused this Plan to
be executed in the name and on behalf of the Corporation where provided below by
an officer of the Corporation thereunto duly authorized.
IN WITNESS WHEREOF, the Plan is adopted as of the effective late hereof.
PEABODYS COFFEE, INC.
a California corporation
By:______________________________________
Mark J. Davies, President
<PAGE>
PEABODYS COFFEE, INC.
STOCK OPTION AGREEMENT
(NON-STATUTORY STOCK OPTION)
This Agreement is made and entered into effective as of June 24, 1996, by
and between Peabodys Coffee, Inc., a California corporation (the "Corporation")
, and TODD TKACHUK (the "Optionee").
1. GRANT OF OPTION. The corporation hereby grants to Optionee as of the
date hereof the right and option to purchase, on the terms and conditions
hereinafter set forth, all or any part of an aggregate of 125,000 shares of
Common Stock (the "Option"), subject to adjustment in accordance with the
provisions of Paragraph 18 below. it is understood and acknowledged that the
Option will be a Nonstatutory Stock option which will not qualify as an
Incentive Stock Option under Section 422A of the Code.
2. OPTION PRICE. The price to be paid or Stock upon exercise of the Option
or any part thereof shall be $0.05 per share (the "Purchase Price"), which is
equal to or greater than the Fair Market Value of one share of Stock as of the
date hereof.
3. RIGHT TO EXERCISE. The right to exercise the Option shall accrue
immediately.
4. SECURITIES LAW REQUIREMENTS. No part of the option shall be exercised if
counsel to the Corporation determines that any applicable registration
requirement under the Securities Act of 1933, as amended, or any other
applicable requirement of Federal or state law has not been met.
5. TERM OF OPTION. The Option shall terminate in any event on the earliest
of (a) the ____ day of August, 2006, at 11:59 P.M., (b) the expiration of the
period described in Paragraph 6 below, (c) the expiration of the period
described in Paragraph 7 below, (d) the expiration of the period described in
Paragraph a below, or (e) the expiration of the period described in Paragraph 9
below.
6. EXERCISE FOLLOWING TERMINATION OF EMPLOYMENT. EXCEPT BY DEATH,
DISABILITY OR RETIREMENT. If the Optionee's service with the Corporation
terminates for any reason other than death, disability or retirement, the option
(to the extent it has not previously been exercised and is then exercisable) may
be exercised within the period of three (3) consecutive months commencing
immediately following the date of such termination (but not later than the
termination date set forth in Paragraph 5(a) above). The foregoing
notwithstanding, the Option shall cease to be exercisable on the date of such
termination if the termination is for cause. For this purpose, "cause" shall
mean conviction of a felony, misappropriation of assets of the Corporation or
any subsidiary, continued or repeated insobriety, continued or repeated absence
from service during the usual working hours of the optionee's position for
reason other than disability or sickness, or refusal to carry out the reasonable
directions of the Corporation's Board of Directors.
7. EXERCISE FOLLOWING DEATH. If the Optionee's service with the Corporation
terminates by reason of the Optionee's death, or if the Optionee dies after
termination of service but while the Option would have been exercisable
hereunder, the Option (to the extent it has not previously been exercised and is
then exercisable) may be exercised within three (3) months after the date of
Optionee's death (but not later than the termination date set forth in Paragraph
5 (a) above). The exercise may be made by Optionee's representative or by the
person entitled thereto under Optionee's will or the laws of descent and
distribution; provided that such representative or such person consents in
writing to abide by and be subject to the terms of this Agreement and such
writing is delivered to the President of the Corporation.
<PAGE>
8. EXERCISE FOLLOWING DISABILITY. If the Optionee's service with the
Corporation terminates by reason of the Optionee's disability, the Option (to
the extent not previously exercised and is then exercisable) may be exercised
for a period of twelve (12) months after the date of termination for reason of
disability (but not later than the termination date set forth in Paragraph 5(a)
above).
9. EXERCISE FOLLOWING RETIREMENT. If the Optionee's service with the
Corporation terminates by reason of retirement (the voluntary retirement of
employment upon attainment of 65 years of age and completion of 20 years of
service), the Option (to the extent it has not previously been exercised and is
then exercisable) may be exercised within three (3) consecutive months after the
date of the Optionee's retirement (but not later than the termination date set
forth in Paragraph 5(a) above).
10. TIME OF TERMINATION OF SERVICE. For the purposes of this Agreement,
Optionee's service shall be deemed to have terminated on the earlier of (a) the
date when Optionee's service in fact terminated or (b) the date when the
Optionee gave or received written notice that his or her service is to
terminate.
11. NONTRANSFERABILITY. Unless the Corporation otherwise consents in
writing, the option and all rights and privileges granted hereunder shall be
non-assignable and non-transferable by the Optionee, either voluntarily or by
operation of law, except by will or by operation of the laws of descent and
distribution, shall not be pledged or hypothecated in any way, and shall be
exercisable during lifetime only by the Optionee. Except as otherwise provided
herein, any attempted alienation, assignment, pledge, hypothecation, attachment,
execution or similar process, whether voluntary or involuntary, with respect to
all or any part of the Option or any right thereunder, shall be null and void
and, at the Corporation's option, shall cause all of Optionee's rights under
this Agreement to terminate.
All certificates representing shares of Stock purchased upon the exercise
of the option shall bear the following legend:
"THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). ANY TRANSFER OF SUCH SECURITIES
WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO
SUCH TRANSFER OR IN THE OPINION OF COUNSEL FOR THE ISSUER SUCH REGISTRATION IS
UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT."
12. EFFECT OF EXERCISE. Upon exercise of all or any part of the Option, the
number of shares of Stock subject to option under this Agreement shall be
reduced by the number of shares with respect to which such exercise is made.
13. METHOD OF EXERCISE. Each exercise of the option shall be by means of a
written notice of exercise in substantially the form prescribed from time to
time by the, Board delivered to the Secretary of the Corporation at its
principal office and accompanied by payment in full of the option price for each
share of Stock purchased under the Option. Such notice shall specify the number
of sharer, of Stock with respect to which the Option is exercised and shall be
signed by the person exercising the option. If the option is exercised by a
person other than the Optionee, such notice shall be accompanied by proof,
reasonably satisfactory to the Corporation, of such person's right to exercise
the Option.
The Purchase Price specified in Paragraph 2 above shall be paid in full
upon the exercise of the Option (i) by cash, in United States dollars; by the
surrender of Shares in good form for transfer, owned by the person
<PAGE>
exercising the option and having Fair Market Value on the date of exercise equal
to the Purchase Price, or in any combination of cash and Shares, as long as the
sum of the cash so paid and the Fair Market Value of the Shares so surrendered
equal the Purchase Price; (ii) by cancellation of indebtedness owed by the
Corporation to the Optionee; or (iii) by any combination of the foregoing. The
Board of Directors may, but is not obligated to, accept a secured recourse
promissory note of Optionee (bearing such rate of interest and such other terms
as they may reasonably determine) as payment of the exercise price; provided,
however, no stock certificate representing the shares be released until the note
shall have been paid in full.
14. WITHHOLDING TAXES. If the Optionee is an employee or former employee of
the Corporation when all or part of the option is exercised, the Corporation may
require the Optionee to deliver payment of any withholding taxes (in addition to
the Option exercise price) in cash with respect to the difference between the
option exercise price and the fair market value of the Stock acquired upon
exercise.
15. ISSUANCE OF SHARES. Subject to the foregoing conditions, the
Corporation, as soon as reasonably practicable after receipt of a proper notice
of exercise and without transfer or issue tax or other incidental expense to the
person exercising the Option, shall deliver to such person at the principal
office of the Corporation, or such other location as may be acceptable to the
Corporation and such person, one or more certificates for the shares of Stock
with respect to which the option has been exercised. Such shares shall be fully
paid and nonassessable and shall be issued in the name of such person. However,
at the request of the Optionee, such shares may be issued in the names of the
Optionee and his or her spouse (a) as joint tenants with right of survivorship,
(b) as community property or (c) as tenants in common without right of
survivorship.
16. LIMITATION OF OPTIONEE'S RIGHTS. Neither Optionee nor any person
entitled to exercise the Option shall be or have any of the rights of a
shareholder of the Corporation in respect of any share issuable upon the
exercise of the Option unless and until a certificate or certificates
representing shares of Stock shall have been issued and delivered upon exercise
of the Option in full or in part. No adjustment shall be made for dividends cr
other rights for which the record date is prior to the date such stock
certificates are issued.
17. CONSENT REQUIRED TO TRANSFER. In connection with any underwritten
public offering by the Corporation of is equity securities pursuant to an
effective registration statement filed under the 1933 Act, including the
Corporation's initial public offering, Optionee shall not sell, make any short
sale of, loan, hypothecate, pledge, grant any option for the purchase of, or
otherwise dispose or transfer for value or otherwise agree to engage in any of
the foregoing transactions with respect to, any Stock purchased under the option
without the prior written consent of the Corporation or its underwriters. Such
limitations shall be in effect for such period of time from and after the
effective date of such registration statement as may be requested by the
Corporation or such underwriters.
18. RECAPITALIZATION. Subject to any required action by shareholders, the
number of shares of Stock covered by this Option and the Option Price hereof
specified in Paragraph 2 above shall be proportionately adjusted for any
increase of decrease in the number of issued shares of Stock resulting from a
subdivision or consolidation of Stock or the payment of a stock dividend (but
only of Stock) or any other increase or decrease in the number of issued shares
of Stock effected without receipt of consideration by the Corporation. Subject
to any required action by shareholders, if the Corporation is the surviving
corporation in any merger or consolidation, this option shall pertain and apply
to the securities to which a holder of the number of Stock subject to the Option
would have been entitled. In the event of a merger or consolidation in which the
Corporation is not the surviving corporation, the date of exercisability of this
Option shall be accelerated to a date prior to such merger or consolidation,
unless the agreement of merger or consolidation provides for the assumption of
the option by the
<PAGE>
successor to the Corporation to the extent that the foregoing adjustments relate
to securities of the Corporation, such adjustments shall be made by the Board,
whose determination shall be conclusive and binding on all persons. Except as
expressly provided in this Paragraph 18, the Optionee shall have no rights by
reason of subdivision or consolidation of shares of stock of any class, the
payment of any stock dividend or any other increase or decrease in the number of
shares of stock of any class or by reason of any dissolution, liquidation,
merger or consolidation or spin-off of assets or stock of another corporation,
and any issue by the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or Option
Price of Stock subject to an Option.
19. NOTICES. Any notice to the Corporation Contemplated by this Agreement
shall be addressed to it in care of its President; any notice to the Optionee
shall be addressed to him or her at the address on file with the Corporation on
the date hereof or at such other address as Optionee may hereafter designate in
a writing delivered to the Corporation as provided herein.
20. INTERPRETATION. The interpretation, construction, performance and
enforcement of this Agreement shall lie within the sole discretion of the Board,
and the Board's determination shall be conclusive and binding on all interested
persons.
21. GOVERNING LAW. This Agreement has been made, executed and delivered in,
and the interpretation, performance and enforcement hereof shall be governed by
and construed under the laws of the State of California.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement,
in the case of the Corporation by its duly authorized office, as the day and
year first above written.
Peabodys Coffee, Inc.,
a California corporation
By:__________________________________
Mark J. Davies, President
By:_________________________________
Todd Tkachuk, Secretary
"Optionee"
---------------------------------------
Todd Tkachuk
PEABODYS COFFEE, INC.
1999 STOCK OPTION PLAN
1. PURPOSE. Peabodys Coffee, Inc. (the "Corporation") 1999 Stock Option
Plan (the "Plan") is intended to provide incentive to key employees, officers,
directors, consultants, advisors and others expected to provide significant
services to the Corporation, to encourage proprietary interest in the
Corporation, to encourage such key employees to remain in the employ of the
Corporation, to attract new employees with outstanding qualifications, and to
afford additional incentive to others to increase their efforts in providing
significant services to the Corporation.
2. DEFINITIONS.
a. "Award" shall mean the grant of an Option, a Stock Appreciation
Right or a Performance Award pursuant to the Plan.
b. "Board" shall mean the Board of Directors of the Corporation.
c. "Code" shall mean the Internal Revenue Code of 1986, as amended.
d. "Committee" shall mean the committee, if any, appointed by the
Board in accordance with Section 4 of the Plan.
e. "Common Stock" shall mean the Common Stock, no par value, of the
Corporation.
f. "Corporation" shall mean Peabodys Coffee, Inc., a California
corporation, and its Subsidiaries.
g. "Disability" shall mean the condition of an Employee or member of
the Board who is unable to perform his or her substantial and material job
duties due to injury or sickness or such other condition as the Board or
Committee may determine in its sole discretion.
h. "Eligible Persons" shall mean officers, directors and employees of,
and consultants and advisors to, the Corporation and other persons expected to
provide significant services to the Corporation. For purposes of this Plan, a
director or a consultant, vendor, customer, or other provider of significant
services to the Corporation shall be deemed to be an Employee, and will be
eligible to receive Non-statutory Stock Options only after finding the value of
the services rendered or be rendered to the Corporation is at least equal to the
value of the options being granted.
i. "Employee" shall mean an individual who is employed (within the
meaning of Code Section 3401 and the regulations thereunder) by the Corporation.
<PAGE>
j. "Exercise Price" shall mean the price per Share of Common Stock. an
Award y exercised. determined by the Board or the Committee, at which an Award
k. "Fair Market Value" shall mean the value of one (1) Share of Common
Stock, determined as follows:
i. If the Shares are traded on an exchange, the price at which
Shares traded at the close of business on the date of valuation;
ii. If the Shares are traded over-the-counter on the NASDAQ
System, the closing price if one is available, or the mean between that bid and
asked prices on said System at the close of business on the date of valuation;
and
iii. If neither (1) nor (2) applies, the fair market value as
determined by the Board or the Committee in good faith. Such determination shall
be conclusive and binding on all persons.
l. "Incentive Stock Option" shall mean an option described in Section
422(b) of the Code.
m. "Non-statutory Stock Option " shall mean an option n t described in
Section 422(b) or 423(b) of the Code.
n. "Option" shall mean any Non-statutory Stock Option or Incentive
Stock Option granted pursuant to the Plan.
o. "Optionee" shall mean any Eligible Person who has received an
Option.
p. "Participant" shall mean any Eligible Person granted an Award under
the Plan.
q. "Plan" shall mean the Peabodys Coffee, Inc. 1999 Stock Option Plan,
as it may be amended from time to time.
r. "Performance Award" shall mean a cash bonus, stock bonus or other
performance or incentive award that is paid in cash, stock or a combination of
both.
s. "Purchase Price" shall mean the Exercise Price times the number of
Shares with respect to which an Award is exercised.
t. "Retirement" shall mean the voluntary termination A employment by
an Employee upon the attainment of age sixty-five (65) and the completion of not
less than twenty (20) years of service with the Corporation or a subsidiary of
the. Corporation.
u. "Share" shall mean one (1) share of Common Stock, adjusted in
accordance with Section 12 of the Plan (if applicable).
v. "Stock Appreciation Right" shall mean the right to receive a number
of Shares or a cash amount, or a combination of Shares and cash, b upon the Fair
Market Value, book value or other measure determined by the Board or the
Committee, as the case may be, pursuant to Section 8 of the Plan.
w. "Subsidiary" shall mean any corporation at least fifty percent
(50%) of the total combined voting power of which is owned by the Corporation or
by another Subsidiary.
x. "Termination of Employment" shall mean the time when the employee
employer relationship or directorship between the Optionee a the Corporation is
terminated for any reason, with or without cause, including but not limited to
any termination by resignation, discharge, death or retirement-, provided,
however, Termination of Employment shall not include a termination which is a
simultaneous reemployment of the Optionee by the Corporation. The Committee, in
its absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including but not limited to the question
of whether any Termination of Employment was for cause and all questions of
whether particular leaves of absence constitute Termination of Employment. With
respect to Incentive Stock Options, a leave of absence shall constitute a
Termination of Employment if, and to the extent that, such leave of absence
interrupts employment for the purposes of Section, 422(a)(2) of the Code.
3. EFFECTIVE DATE. The Plan was adopted by the Board on March 12, 1999,
subject to the approval by the Corporation's shareholders. Provided that the
Plan is submitted to shareholders for their approval and approved by holders of
a majority of the outstanding shares of Common Stock within one year after
receipt of Board approval, the effective date of the Plan shall be deemed to be
March 12, 1999.
4. ADMINISTRATION. The Plan shall be administered by the Board or a
Committee of the Board consisting of two or more members of the Board. The Board
shall appoint one of the members of the Committee, if there be one, as Chairman
of the Committee. The Committee shall hold meetings at such times and places as
it may determine. Acts of a majority of the Board or Committee, or acts reduced
to or approved in writing by a majority of the members of the Board or the
Committee, shall be the valid acts of the Board or the Committee. The Board, or
the Committee if there be one, shall from time to time at its discretion select
the Eligible Employees and consultants who are to be granted Awards, determine
the number of Shares or cash, or the combination thereof, to be applicable to
such Award, and designate any Options as Incentive Stock Options or
Non-statutory Stock Options, except that no Incentive Stock Option may be
granted to a non-employee director or a non-employee consultant. A member of the
Board or a Committee member shall in no event participate in any determination
relating to Awards held by or to be granted to such Board or Committee member.
The interpretation and construction by the Board, or by the Committee if there
be one, of any provision of the Plan or of any Award granted thereunder shall be
final. No member of the Board or of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Award
granted thereunder. In addition to any right of indemnification provided by the
Articles of Incorporation or Bylaws of the Corporation, such person shall be
indemnified and held harmless by the Corporation from any loss, cost, liability
or expense that may be imposed upon or reasonably incurred by him in connection
with any claim, suit, action or proceeding to which he may be a party by reason
of any action or omission under the Plan.
5. PARTICIPATION. Only Eligible Persons shall be eligible to receive
grants of Awards under the Plan.
6. STOCK. The stock subject to Options granted under the Plan shall be
Shares of the Corporation's authorized but unissued or reacquired Common Stock.
The aggregate number of Shares which may be issued upon exercise of Awards under
the Plan shall not exceed 500,000 shares. The number of Shares subject to Awards
outstanding at any time shall not exceed the number of Shares remaining
available for issuance under the Plan. In the event that any outstanding Award
for any reason expires or is terminated, the Shares allocable to the unexercised
portion of such Award may again be made subject to any Award. The limitations
established by this Section 6 shall be subject to adjustment in the manner
provided in Section 12 hereof upon the occurrence of an event specified therein.
7. TERMS AND CONDITIONS OF OPTIONS.
a. Stock Option Agreements. Options granted to Participants shall be
evidenced by written stock option agreements in such form as the Board or the
Committee shall from time to time determine. Such agreements shall comply with
and be subject to the terms and conditions set forth below.
b. NUMBER OF SHARES. Each Option granted to a Participant shall state
the number of Shares to which it pertains and shall provide for the adjustment
thereof in accordance with the provisions of Section 12 hereof.
c. EXERCISE PRICE. Each Option granted to a Participant shall state
the Exercise Price. The Exercise Price for any Option shall not be less than
eighty-five percent (85%) of the Fair Market Value on the date of grant.
d. MEDIUM AND TIME OF PAYMENT. The Purchase Price for each Option
granted to a Participant shall be payable in full in United States dollars upon
the exercise of the Option; provided, however, that if the applicable Option
Agreement so provides the Purchase Price may be paid (i) by the surrender of
Shares in good form for transfer, owned by the person exercising the Option and
having a Fair Market Value on the date of exercise equal to the Purchase Price,
or in any combination of cash and Shares, as long as the sum of the cash so paid
and the Fair Market Value of the Shares so surrendered equal the Purchase Price,
(ii) by cancellation of indebtedness owed by the Corporation to the Optionee,
(iii) with a full recourse promissory note executed by the Optionee, or (iv) any
combination of the foregoing. The interest rate and other terms and conditions
of such note shall be determined by the Board or the Committee. The Board or the
Committee may require that the Optionee pledge his or her Shares to the
Corporation for the purpose of securing the payment of such note. In no event
shall the stock certificate(s) representing such Shares by released to the
Optionee until such note shall been paid in full. In the event the Corporation
determines that it is required to withhold state or federal income tax as a
result of the exercise of an Option, as a condition to the exercise thereof, an
Employee may be required to make arrangements satisfactory to the Corporation to
enable it to satisfy such withholding requirements.
<PAGE>
e. TERM AND NONTRANSFERABILITY OF OPTIONS. Each Option shall state the
time or times which all or part thereof becomes exercisable, subject to the
following restrictions. No Option shall be exercisable after the expiration of
ten (10) years from the date it was granted. No Option shall be exercisable
except by the Optionee. No Option shall be assignable or transferable, except
pursuant to a qualified domestic relations order as defined in Code Section
414(p) or, in the event of the Optionee's death, by will or the laws of descent
and distribution.
f. TERMINATION OF EMPLOYMENT. Except by Death. Disability or
Retirement. Upon any Termination of Employment for any reason other than his or
her death, Disability or Retirement, such Optionee shall have the right, subject
to the restrictions of (e) above, to exercise the Option at any time within
three (3) months after termination of employment, but only to the extent that,
at the date of termination of employment, the Optionee's right to exercise such
Option had accrued pursuant to the terms of the applicable option agreement and
had not previously been exercised; provided, however, that if the Optionee was
terminated as an Employee or removed as a member of the Board for cause (as
defined in the applicable option agreement or as determined by the Board or the
Committee) any Option not exercised in full prior to such termination shall be
canceled. For this purpose, the employment relationship shall be treated as
continuing intact while the Optionee is on military leave, sick leave or other
bona fide leave of absence (to be determined in the sole discretion of the Board
or the Committee). The foregoing notwithstanding. in the case of an Incentive
Stock Option employment shall not be deemed to continue beyond the ninetieth
(90th) day after the Optionee's reemployment rights are guaranteed by statute or
by contract.
g. DEATH OF OPTIONEE. If an Optionee dies while an Employee or within
three (3) months after any Termination of Employment other than for cause, and
has not fully exercised the Option, then the Option may be exercised in full,
subject to the restrictions of (e) above, at any time within twelve (12) months
after the Optionee's death. by the executors or administrators of his or her
estate or by any person r persons who have acquired the Option directly from the
Optionee by bequest or inheritance, but only to the extent that, at the date of
death, the Optionee's right to exercise such Option had accrued and had not been
forfeited pursuant to the terms of the applicable Option Agreement and had not
previously been exercised.
h. DISABILITY OF OPTIONEE. Upon Termination of Employment for reason
of Disability, such Optionee shall have the right, subject to the restrictions
of (e) above, to exercise the Option at any time within twelve (12) months after
termination of employment, but only to the extent that, at the date of
termination of employment, the Optionee's right to exercise such Option had
accrued pursuant to the terms of the applicable Option Agreement and had not
previously been exercised.
i. RETIREMENT OF OPTIONEE. Upon Retirement, an Optionee shall have the
right, subject to the restrictions of (e) above, to exercise the Option at any
time within three (3) months after termination of employment, but only to the
extent that, at the date of termination of employment, the Optionee's right to
exercise such Option had accrued pursuant to the terms of the applicable Option
Agreement and had not previously been exercised.
j. RIGHTS AS A STOCKHOLDER. An Optionee, or a transferor of an
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his or her Option until the date of the issuance of a stock
certificate for such Shares. No adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities or other property), distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 12 hereof.
k. MODIFICATION. Extension and Renewal of Option. Within the
limitations of the Plan, the Board or the Committee may modify, extend or renew
outstanding Options or accept the cancellation of outstanding Options (to the
extent not previously exercised) for the granting of new Options in substitution
therefor. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, alter or impair any rights or obligations
under any Option previously granted.
l. OTHER PROVISIONS. The stock option agreements authorized under the
Plan may contain such other provisions not inconsistent with the terms of the
Plan (including, without limitation, restrictions upon the exercise of the
Option) as the Committee shall deem advisable.
8. STOCK APPRECIATION RIGHTS.
a. GRANT. Stock Appreciation Rights related or unrelated to Options
may be granted to Eligible Employees:
(i) at any time if unrelated to an Award or if related to an
Award other than an Incentive Stock Option; or
(ii) only at the time of grant of an Incentive Stock Option if
related thereto.
<PAGE>
A Stock Appreciation Right may extend to all or a portion of the Shares covered
by a related Award.
b. EXERCISE OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right
granted in connection with an Award shall be exercisable only at such or times,
and to the extent, that a related Award is exercisable. A Stock Appreciation
Right, granted in connection with an Incentive Stock Option may be exercisable
only when the Fair Market Value of the Shares subject to the Incentive Stock
Option exceeds the Exercise Price of the Incentive Stock Option.
c. PAYMENT.
(a) Upon the exercise of a Stock Appreciation Right, and if such
Stock Appreciation Right is related to an Award surrender of an exercisable
portion of the related Award, the Participant shall be entitled to receive
payment of a amount determined by multiplying:
(i) the difference obtained by subtracting (x) either (A)
the Purchase Price of a Share of Common Stock specified in the related ward, or
(B) if such Stock Appreciation Right is unrelated to an Award, the Fair Market
Value of a Share of Common Stock on the date of grant of the Stock Appreciation
Right, from (y) the Fair Market Value, book value or other measure specified in
the Award of such Stock Appreciation Right of a share of Common Stock n the date
of exercise of such Stock Appreciation Right, by
(ii) the number of shares as to which such Stock
Appreciation Right has been exercised.
(b) The Board or the Committee, as the case may be, in its sole
discretion, may require settlement of the amount determined under paragraph (a)
above solely in cash, solely in shares of Common Stock (valued at Fair Market
Value on the business day next preceding the date of exercise of such Stock
Appreciation Right), or partly in such shares and partly in cash.
d. MAXIMUM STOCK APPRECIATION RIGHT TERM. Each Stock Appreciation
Right and all rights and obligations thereunder shall expire on such date as s
all be determined by the Board or the Committee, but not later than ten (10)
years after the date of the Award thereof, and shall be subject to earlier
termination as provided in the related Award Agreement and Sections 7(f), (g),
(h) and (i).
9. PERFORMANCE AWARDS. One or more Performance Awards may be granted to
any Eligible Employee. The value of such Awards may be linked to the market
value, book value or other measure of the value of the Common Stock or other
specific performance criteria determined appropriate by the Board or the
Committee, in each case on a specified date or over any period determined by the
Board or the Committee, or may be based upon the appreciation in the market
value, book value or other measure of the value of a specified number of shares
of Common Stock over a fixed period determined by the Board or the Committee. In
making such determinations, the Board or the Committee shall consider (among
such other factors as it deems relevant in light of the specific type of award)
the contributions, responsibilities and other compensation of the Participant.
10. LIMITATION ON VALUE OF EXERCISABLE SHARES. In the case of Incentive
Stock Options granted hereunder, the aggregate Fair Market Value (determined as
of the date of the grant thereof) of the Shares with respect to which Incentive
Stock Options become exercisable by any employee of the Company for the first
time during any calendar year (under this Plan and all other plans maintained by
the Corporation, its parent or its Subsidiaries) shall not exceed $100,000.
11. TERM OF PLAN. Options may be granted pursuant to the Plan until the
expiration of ten (10) years from the effective date of the Plan.
12. RECAPITALIZATIONS. Subject to any required action by shareholders the
number of Shares covered by the Plan as provided in Section 6 hereof, he number
of Shares covered by each outstanding Award and the Exercise Price thereof shall
be proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a subdivision or consolidation of Shares or the payment of
a stock dividend (but only of Common Stock) or any other increase or decrease in
the number of issued Shares effected without receipt of consideration by the
Corporation. Subject to any required action by stockholders, if the Corporation
is the surviving corporation in any merger or consolidation, each outstanding
Award shall pertain and apply to the securities to which a bolder of the number
of Shares subject to the Award would have been entitled. In the event of a
merger or consolidation in which the
10
<PAGE>
Corporation is not the surviving corporation, the date of exercisability of each
outstanding Award shall be accelerated to a date prior to such merger or
consolidation, unless the agreement of merger or consolidation provides for the
assumption of the Award by the successor to the Corporation. To the extent that
the foregoing adjustments relate to securities of the Corporation, such
adjustments shall be made by the Board or the Committee, whose determination
shall be conclusive and binding on all persons. Except as expressly provided in
this Section 12, the Participant shall have no rights by reason of subdivision
or consolidation of shares of stock of any class, the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of
any class or by reason of any dissolution, liquidation, merger or consolidation
or spin-off of assets or stock of another corporation, and any issue by the
Corporation of shares of stock of any class, or securities convertible into
shares of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or Exercise Price of Shares
subject to an Award. The grant of an Award pursuant to the Plan shall not affect
in any way the right or power to the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure, to merge or consolidate or to dissolve, liquidate, sell or transfer
all or any part of its business assets.
13. SECURITIES LAW REQUIREMENTS
a. LEGALITY OF ISSUANCE. The issuance of any Shares u n the exercise
of any Award and the grant of any Award shall be contingent upon the following:
i. the Corporation and the Participant shall have taken all
actions required to register the Shares under the Securities Act of 1933, as
amended (the "Act"), and to qualify the Award and the Shares under any and all
applicable state securities or "blue sky" laws or regulations, or to perfect an
exemption from the respective registration and qualification requirements
thereof;
ii. any applicable listing requirement of any stock exchange on
which the Common Stock is listed shall have been satisfied; and
iii. any other applicable provision of state or federal law shall
have been satisfied
b. RESTRICTIONS ON TRANSFER. Regardless of whether the offering and
sale of Shares under the plan has been registered under the Act or has been
registered or qualified under the securities laws of any state, the Corporation
may impose restrictions on the sale, pledge or other transfer of such Shares
(including the placement of Appropriate legends on stock certificates) if, in
the judgment or the Corporation and its counsel, such restrictions are necessary
or desirable in order to achieve compliance with the provisions of the Act, the
securities laws of any state or any other law. In the event that the sale of
Shares under the Plan is not registered under the Act but an exemption is
available which required an investment representation or other representation,
each Participant shall be required to represent that such Shares are being
acquired for investment, and not with a view to the sale or distribution
thereof, and to make such other representations as are deemed necessary or
appropriate by the Corporation and its counsel. Any determination by the
Corporation and its counsel in connection with any of the matters set forth in
this Section 13 shall be conclusive and binding on all persons. Stock
certificates evidencing Shares acquired under the Plan pursuant to an
unregistered transaction shall bear the following restrictive legend and such
other restrictive legends as are require or deemed advisable under the
provisions of any applicable law.
"THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). ANY TRANSFER OF SUCH SECURITIES
WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO
SUCH TRANSFER OR IN THE OPINION OF COUNSEL FOR THE ISSUER SUCH REGISTRATION IS
UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT."
c. REGISTRATION OR QUALIFICATION OF SECURITIES. The Corporation may,
but shall not be obligated to, register or qualify the issuance of Awards and/or
the sale of Shares under the Act or any other applicable law. The Corporation
shall not be obligated to take any affirmative action in order to cause the
issuance of Awards or the sale of Shares under the plan to comply with any law.
d. EXCHANGE OF CERTIFICATES. If, in the opinion of the Corporation and
its counsel, any legend placed on a stock certificate representing shares sold
under the Plan is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
11
<PAGE>
14. AMENDMENT OF THE PLAN. The Board or the Committee may from time to
time, with respect to any Shares at the time not subject to Awards, suspend or
discontinue the Plan or revise or amend it in any respect whatsoever except
that, without the approval of the Corporation's stockholders, no such revision
or amendment shall:
a. Materially increase the benefits accruing to participants under the
Plan;
b. Materially increase the number of Shares subject to the Plan;
c. Materially modify the requirements as to eligibility for
participation in the Plan; or
d. Amend this Section 14 to defeat its purpose.
Notwithstanding the foregoing, the Board may revise or amend the Plan
without stock-holder approval in order to ensure the Plan's compliance with the
Code, any successor provisions of the Code or any other applicable law.
15. APPLICATION OE FUNDS. The proceeds received by the Corporation from
the sale of Common Stock pursuant to the exercise of an Award will be used for
general corporate purposes.
16. EXECUTION. To record the adoption of the Plan in the form set forth
above by the Board as of March 12, 1999, the Corporation has caused this Plan to
be executed in the name and on behalf of the Corporation where provided below by
an officer of the Corporation thereunto duly authorized.
IN WITNESS WHEREOF, the Plan is adopted as of the effective late hereof.
PEABODYS COFFEE, INC. a California corporation
By:________________________________________
Todd Tkachuk, President
<PAGE>
PEABODYS COFFEE, INC.
STOCK OPTION AGREEMENT
(NON-STATUTORY STOCK OPTION)
This Agreement is made and entered into effective as of
_________________________, by and between Peabodys Coffee, Inc., a California
corporation (the "Corporation") , and ___________________________ (the
"Optionee").
1. GRANT OF OPTION. The corporation hereby grants to Optionee as of the
date hereof the right and option to purchase, on the terms and conditions
hereinafter set forth, all or any part of an aggregate of ____________________
shares of Common Stock (the "Option"), subject to adjustment in accordance with
the provisions of Paragraph 18 below. it is understood and acknowledged that the
Option will be a Nonstatutory Stock option which will not qualify as an
Incentive Stock Option under Section 422A of the Code.
2. OPTION PRICE. The price to be paid or Stock upon exercise of the
Option or any part thereof shall be $_____________ per share (the "Purchase
Price"), which is equal to or greater than the Fair Market Value of one share of
Stock as of the date hereof.
3. RIGHT TO EXERCISE. The right to exercise the Option shall accrue
immediately.
4. SECURITIES LAW REQUIREMENTS. No part of the option shall be exercised
if counsel to the Corporation determines that any applicable registration
requirement under the Securities Act of 1933, as amended, or any other
applicable requirement of Federal or state law has not been met.
5. TERM OF OPTION. The Option shall terminate in any event on the
earliest of (a) the ____ day of __________________________, (b) the expiration
of the period described in Paragraph 6 below, (c) the expiration of the period
described in Paragraph 7 below, (d) the expiration of the period described in
Paragraph a below, or (e) the expiration of the period described in Paragraph 9
below.
6. EXERCISE FOLLOWING TERMINATION OF EMPLOYMENT. Except By Death,
Disability or Retirement. If the Optionee's service with the Corporation
terminates for any reason other than death, disability or retirement, the option
(to the extent it has not previously been exercised and is then exercisable) may
be exercised within the period of three (3) consecutive months commencing
immediately following the date of such termination (but not later than the
termination date set forth in Paragraph 5(a) above). The foregoing
notwithstanding, the Option shall cease to be exercisable on the date of such
termination if the termination is for cause. For this purpose, "cause" shall
mean conviction of a felony, misappropriation of assets of the Corporation or
any subsidiary, continued or repeated insobriety, continued or repeated absence
from service during the usual working hours of the optionee's position for
reason other than disability or sickness, or refusal to carry out the reasonable
directions of the Corporation's Board of Directors.
7. EXERCISE FOLLOWING DEATH. If the Optionee's service with the
Corporation terminates by reason of the Optionee's death, or if the Optionee
dies after termination of service but while the Option would have been
exercisable hereunder, the Option (to the extent it has not previously been
exercised and is then exercisable) may be exercised within three (3) months
after the date of Optionee's death (but not later than the termination date set
forth in Paragraph 5 (a) above). The exercise may be made by Optionee's
representative or by the person entitled thereto under Optionee's will or the
laws of descent and distribution; provided that such representative or such
person consents in writing to abide by and be subject to the terms of this
Agreement and such writing is delivered to the President of the Corporation.
8. EXERCISE FOLLOWING DISABILITY. If the Optionee's service with the
Corporation terminates by reason of the Optionee's disability, the Option (to
the extent not previously exercised and is then exercisable) may be exercised
for a period of twelve (12) months after the date of termination for reason of
disability (but not later than the termination date set forth in Paragraph 5(a)
above).
9. EXERCISE FOLLOWING RETIREMENT. If the Optionee's service with the
Corporation terminates by reason of retirement (the voluntary retirement of
employment upon attainment of 65 years of age and completion of 20 years of
service), the Option (to the extent it has not previously been exercised and is
then exercisable) may be exercised within three (3) consecutive months after the
date of the Optionee's retirement (but not later than the termination date set
forth in Paragraph 5(a) above).
10. TIME OF TERMINATION OF SERVICE. For the purposes of this Agreement,
Optionee's service shall be deemed to have terminated on the earlier of (a) the
date when Optionee's service in fact terminated or (b) the date when the
Optionee gave or received written notice that his or her service is to
terminate.
11. NONTRANSFERABILITY. Unless the Corporation otherwise consents in
writing, the option and all rights and privileges
<PAGE>
granted hereunder shall be non-assignable and non-transferable by the Optionee,
either voluntarily or by operation of law, except by will or by operation of the
laws of descent and distribution, shall not be pledged or hypothecated in any
way, and shall be exercisable during lifetime only by the Optionee. Except as
otherwise provided herein, any attempted alienation, assignment, pledge,
hypothecation, attachment, execution or similar process, whether voluntary or
involuntary, with respect to all or any part of the Option or any right
thereunder, shall be null and void and, at the Corporation's option, shall cause
all of Optionee's rights under this Agreement to terminate.
All certificates representing shares of Stock purchased upon the exercise
of the option shall bear the following legend:
"THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). ANY TRANSFER OF SUCH SECURITIES
WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO
SUCH TRANSFER OR IN THE OPINION OF COUNSEL FOR THE ISSUER SUCH REGISTRATION IS
UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT."
12. EFFECT OF EXERCISE. Upon exercise of all or any part of the Option,
the number of shares of Stock subject to option under this Agreement shall be
reduced by the number of shares with respect to which such exercise is made.
13. METHOD OF EXERCISE. Each exercise of the option shall be by means of a
written notice of exercise in substantially the form prescribed from time to
time by the, Board delivered to the Secretary of the Corporation at its
principal office and accompanied by payment in full of the option price for each
share of Stock purchased under the Option. Such notice shall specify the number
of sharer, of Stock with respect to which the Option is exercised and shall be
signed by the person exercising the option. If the option is exercised by a
person other than the Optionee, such notice shall be accompanied by proof,
reasonably satisfactory to the Corporation, of such person's right to exercise
the Option.
The Purchase Price specified in Paragraph 2 above shall be paid in full
upon the exercise of the Option (i) by cash, in United States dollars; by the
surrender of Shares in good form for transfer, owned by the person exercising
the option and having Fair Market Value on the date of exercise equal to the
Purchase Price, or in any combination of cash and Shares, as long as the sum of
the cash so paid and the Fair Market Value of the Shares so surrendered equal
the Purchase Price; (ii) by cancellation of indebtedness owed by the Corporation
to the Optionee; or (iii) by any combination of the foregoing. The Board of
Directors may, but is not obligated to, accept a secured recourse promissory
note of Optionee (bearing such rate of interest and such other terms as they may
reasonably determine) as payment of the exercise price; provided, however, no
stock certificate representing the shares be released until the note shall have
been paid in full.
14. WITHHOLDING TAXES. If the Optionee is an employee or former employee
of the Corporation when all or part of the option is exercised, the Corporation
may require the Optionee to deliver payment of any withholding taxes (in
addition to the Option exercise price) in cash with respect to the difference
between the option exercise price and the fair market value of the Stock
acquired upon exercise.
15. ISSUANCE OF SHARES. Subject to the foregoing conditions, the
Corporation, as soon as reasonably practicable after receipt of a proper notice
of exercise and without transfer or issue tax or other incidental expense to the
person exercising the Option, shall deliver to such person at the principal
office of the Corporation, or such other location as may be acceptable to the
Corporation and such person, one or more certificates for the shares of Stock
with respect to which the option has been exercised. Such shares shall be fully
paid and nonassessable and shall be issued in the name of such person. However,
at the request of the Optionee, such shares may be issued in the names of the
Optionee and his or her spouse (a) as joint tenants with right of survivorship,
(b) as community property or (c) as tenants in common without right of
survivorship.
16. LIMITATION OF OPTIONEE'S RIGHTS. Neither Optionee nor any person
entitled to exercise the Option shall be or have any of the rights of a
shareholder of the Corporation in respect of any share issuable upon the
exercise of the Option unless and until a certificate or certificates
representing shares of Stock shall have been issued and delivered upon exercise
of the Option in full or in part. No adjustment shall be made for dividends cr
other rights for which the record date is prior to the date such stock
certificates are issued.
17. CONSENT REQUIRED TO TRANSFER. In connection with any underwritten
public offering by the Corporation of is equity securities pursuant to an
effective registration statement filed under the 1933 Act, including the
Corporation's initial public offering, Optionee shall not sell, make any short
sale of, loan, hypothecate, pledge, grant any option for the purchase of, or
otherwise dispose or transfer for value or otherwise agree to engage in any of
the foregoing transactions with respect to, any Stock purchased under the
<PAGE>
option without the prior written consent of the Corporation or its underwriters.
Such limitations shall be in effect for such period of time from and after the
effective date of such registration statement as may be requested by the
Corporation or such underwriters.
18. RECAPITALIZATION. Subject to any required action by shareholders, the
number of shares of Stock covered by this Option and the Option Price hereof
specified in Paragraph 2 above shall be proportionately adjusted for any
increase of decrease in the number of issued shares of Stock resulting from a
subdivision or consolidation of Stock or the payment of a stock dividend (but
only of Stock) or any other increase or decrease in the number of issued shares
of Stock effected without receipt of consideration by the Corporation. Subject
to any required action by shareholders, if the Corporation is the surviving
corporation in any merger or consolidation, this option shall pertain and apply
to the securities to which a holder of the number of Stock subject to the Option
would have been entitled. In the event of a merger or consolidation in which the
Corporation is not the surviving corporation, the date of exercisability of this
Option shall be accelerated to a date prior to such merger or consolidation,
unless the agreement of merger or consolidation provides for the assumption of
the option by the successor to the Corporation to the extent that the foregoing
adjustments relate to securities of the Corporation, such adjustments shall be
made by the Board, whose determination shall be conclusive and binding on all
persons. Except as expressly provided in this Paragraph 18, the Optionee shall
have no rights by reason of subdivision or consolidation of shares of stock of
any class, the payment of any stock dividend or any other increase or decrease
in the number of shares of stock of any class or by reason of any dissolution,
liquidation, merger or consolidation or spin-off of assets or stock of another
corporation, and any issue by the Corporation of shares of stock of any class,
or securities convertible into shares of stock of any class, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number or
Option Price of Stock subject to an Option.
19. NOTICES. Any notice to the Corporation Contemplated by this Agreement
shall be addressed to it in care of its President; any notice to the Optionee
shall be addressed to him or her at the address on file with the Corporation on
the date hereof or at such other address as Optionee may hereafter designate in
a writing delivered to the Corporation as provided herein.
20. INTERPRETATION. The interpretation, construction, performance and
enforcement of this Agreement shall lie within the sole discretion of the Board,
and the Board's determination shall be conclusive and binding on all interested
persons.
21. GOVERNING LAW. This Agreement has been made, executed and delivered
in, and the interpretation, performance and enforcement hereof shall be governed
by and construed under the laws of the State of California.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement,
in the case of the Corporation by its duly authorized office, as the day and
year first above written.
Peabodys Coffee, Inc., a California corporation
By:______________________________________
Todd Tkachuk, President
Optionee"
_________________________________________
_________________________________________
PEABODYS COFFEE, INC.
- --------------------------------------------------------------------------------
3845 Atherton Road, Suite 9
Rocklin, CA 95765
December 17, 1999
Joe Konis
Arrosto Coffee Company LLC
15019 Califa Street
Van Nuys, CA 91411
Dear Mr. Konis:
Peabodys Coffee, Inc. (the "Company") is pleased to submit this Letter of Intent
to acquire the 100% of the assets of Arrosto Coffee Company LLC ("ACC") as
listed on Exhibit A to this letter (the "Assets").
1. As consideration for the Assets, the Company is prepared to offer 2,200,000
shares (subject to Rule 144) of the Company's Common Stock. The Company
will advance a down payment of 50,000 Common Shares within 14 days after
receiving a written undertaking from your council that the 50,000 Common
Shares will be held in trust, pending the completion of due diligence and
the signing of a formal agreement. In the event that the Company is not
satisfied with the outcome of the due diligence review, the 50,000 share
down payment will be returned to the Company immediately for cancellation.
2. The Company will grant to Joe Konis or to another party(s) as instructed by
Joe Konis, the right to acquire an additional 1,000,000 shares of the
Company's common stock at a price per share of US$0.80.
3. All outstanding debts related to the Assets will be cleared, including but
not limited to credit lines, bank loans, lease obligations (with the
exception of real estate leases), with the exception of the GE Capital loan
(the "GE Loan") in the amount of $150,000 and a loan to Chester Semel in
the amount of $25,000 which will be retired interest free on a monthly
payment schedule over a two year term. The Company will not assume any of
the liabilities relating to any of the Assets with the exception of the GE
Loan and ACC will represent and warrant that the Assets are free and clear
of all liens or encumbrances with the exception of the GE Loan.
<PAGE>
4. The Company will receive an equity investment on mutually agreed terms, of
not less than US$100,000 on the closing date.
5. The Company will employ Joe Konis in the capacity of an executive manager
for a period of two years and as such will enter into a contract outlining
the mutually agreed terms, conditions and compensation of said employment.
Partial consideration will include management stock options vested
quarterly over the term of the employment contract.
6. The Company will grant Joe Konis a three-year option to acquire the Arrosto
retail store on Sunset Blvd at a price equal to the store's initial opening
costs plus US$100,000.
7. Prior to closing, the Company agrees that it must eliminate not less than
US$1 million of its current balance sheet debt either by conversion to
equity or debt forgiveness.
8. The parties will each pay their respective legal and accounting fees and
other costs relating to closing.
9. The parties are prepared to proceed immediately to close this transaction
as soon as possible after the following have been completed.
i. A due diligence investigation of the Assets by and to the satisfaction
of the Company.
ii. A definitive purchase agreement shall have been prepared to the
satisfaction of the Company and ACC, incorporating the terms and
conditions contained herein and other mutually agreed to provisions.
iii. The Company's offer is subject to formal approval by the Company's
Board of Directors.
Except as set forth in the following sentence, this letter is a non-binding
expression of our present intent. From the date of your execution of this
letter, ACC and its officers, shareholders and agents agree not to solicit or
entertain any offer or enter into any negotiations with any third party
regarding the purchase of the Assets until the pending negotiations with
Peabodys are concluded by a closing or are otherwise terminated by either of the
parties on ten days written notice, which the parties agree shall not be given
except by mutual agreement prior to January 31, 2000.
- --------------------------------------------------------------------------------
2
<PAGE>
Please indicate your acceptance by signing below and returning a signed
original.
Sincerely,
Todd Tkachuk
President / CEO
ACCEPTED:
ARROSTO COFFEE COMPANY LLC
By:_______________________________ Date: December ___, 1999
Joe Konis
- --------------------------------------------------------------------------------
3
PEABODYS COFFEE, INC.
- --------------------------------------------------------------------------------
3845 ATHERTON ROAD, SUITE 9
ROCKLIN, CA 95765
December 20, 1999
Cliff Young
Grounds For Enjoyment
Riverside, CA
Dear Mr. Young:
Peabodys Coffee, Inc. (the "Company") is pleased to submit this Letter of Intent
to acquire the assets of Grounds For Enjoyment ("GFE") as listed on Exhibit A to
this letter (the "Assets"). The Assets will include but not be limited to the
four Carts / Kiosks and contracts of Riverside County Hospital, Arrowhead
Regional Medical Center (San Bernadino County), Kaiser Fontana Hospital, and
Kaiser Riverside Hospital.
1. As consideration for the Assets, the Company is prepared to offer a
combination of both cash and common stock of the Company as follows:
$175,000 cash and 40,000 shares of the Company's Common Stock (Subject to
Rule 144). The Company will advance a down payment of $5,000 within one
week after receiving a written undertaking from your council that the
$5,000 will be held in trust, pending the completion of due diligence and
the signing of a formal agreement. In the event that the Company is not
satisfied with the outcome of the due diligence review, the $5,000 down
payment will be returned to the Company immediately.
2. All outstanding debts related to the Assets will be cleared, including but
not limited to credit lines, bank loans, lease obligations, accrued tax
obligations and trade payables. The Company will not assume any of the
liabilities relating to any of the Assets and GFE will represent and
warrant that the Assets are free and clear of all liens or encumbrances.
3. The parties will each pay their respective legal and accounting fees and
other costs relating to closing.
7
<PAGE>
4. It is the intention of the Company to trade under one brand name, and that
such name is "Peabodys Coffee" and or any other brand name as the Company
so desires. It is the derived intention, therefore, to convert the GFE
outlets under the name "Grounds For Enjoyment" or any other name, to
"Peabodys Coffee" - or another name determined by the Company.
5. The parties are prepared to proceed immediately to close this transaction
as soon as possible after the following have been completed.
i. A due diligence investigation of the Assets by and to the satisfaction
of the Company.
ii. A definitive purchase agreement shall have been prepared to the
satisfaction the Company and GFE, incorporating the terms and
conditions contained herein and other mutually agreed to provisions.
iii. The Company's offer is contingent upon the transferring of the
abovementioned contracts from GFE to the Company for the four hospital
locations.
iv. The Company's offer is subject to formal approval by the Company's
Board of Directors.
Except as set forth in the following sentence, this letter is a non-binding
expression of our present intent. From the date of your execution of this
letter, GFE and its officers, shareholders and agents agree not to solicit or
entertain any offer or enter into any negotiations with any third party
regarding the purchase of the Assets until the pending negotiations with
Peabodys are concluded by a closing or are otherwise terminated by either of the
parties on ten days written notice, which the parties agree shall not be given
except by mutual agreement prior to February 2, 2000.
Please indicate your acceptance by signing below and returning a signed
original.
Sincerely,
Todd Tkachuk
President / CEO
ACCEPTED:
GROUNDS FOR ENJOYMENT
By:_______________________________ Date: December 3, 1999
Cliff Young
By:_______________________________ Date: December 3, 1999
EXECUTIVE SERVICES AGREEMENT
This Executive Services Agreement (this "AGREEMENT") is entered into as of
December 1, 1998 (the "EFFECTIVE DATE"), by and between Barry J. Gibbons doing
business as Festina ("FESTINA") and Peabodys Coffee, Inc. ("COMPANY").
WHEREAS, the Company desires to retain Festina to provide management and
other services to the Company and Company desires to retain Festina to perform
such services, on the terms and conditions set forth below; and
WHEREAS, the parties agree that Barry J. Gibbons ("BJG"), an employee and
principal owner of Festina, will be the sole provider of the services
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
respective covenants and agreements of the parties contained in this Agreement,
Festina and the Company agree as follows:
1. SERVICES TO BE PROVIDED. BJG's title shall be "Executive Chairman" of the
Company. The duties and responsibilities of BJG during the term of this
Agreement shall include, but not be limited to, serving as Chairman of the Board
of Directors of the Company, communicating with the Company's current and
prospective investors, and such other management services as may be agreed upon
from time to time by BJG and the Board of Directors of the Company
(collectively, such services are referred to herein as the "MANAGEMENT
SERVICES").
2. MONTHLY COMPENSATION. In payment for the performances of the Management
Services during the term of this Agreement, the Company shall pay Festina, on or
before the fifteenth day following the month in which such services were
rendered, cash compensation in monthly installments as follows:
a. INITIAL COMPENSATION PERIOD. From the Effective Date through December
31, 1999, the Company shall pay Festina $3,500.00 per month.
b. SUBSEQUENT COMPENSATION PERIOD. Commencing on January 1, 2000, the
Company shall pay Festina $20,000,00 per month.
3. EQUITY COMPENSATION. Effective as of the Effective Date, the Company shall
grant Festina a nonstatutory stock option to purchase 60,000 shares of common
stock of the Company at a per share exercise price of $0.50 per share (the
"INITIAL OPTION"). The Initial Option shall be subject to a one-year vesting
requirement and shall vest ratably on a monthly basis (i.e., 5,000 shares per
month) with such vesting to commence on the Effective Date. On December 1, 1999,
and each one year anniversary thereafter, provided that neither Festina nor the
Company have terminated this Agreement in accordance with Section 8, the Company
shall grant Festina a nonstatutory stock option to purchase 60,000 shares of
common stock of the Company at a per
<PAGE>
share exercise as determined by a majority of the members of the Board of
Directors of the Company (each, a "SUBSEQUENT OPTION"). The Initial Option and
each of the Subsequent Options, if any, shall be exercisable for a two-year
period commencing on the date each option becomes fully vested (or, the
effective date of the termination of this Agreement, if earlier) in accordance
with the vesting schedule described in this Section 3.
4. PERFORMANCE CASH BONUSES. In addition to the Monthly Compensation and the
Equity Compensation described above, Festina shall also be entitled to the
following cash bonuses based on the achievement of certain milestones described
below:
a. FINANCING BONUS. If, during the term of this Agreement, the Company
receives aggregate proceeds equal to or greater than $1.25 million from third
party investors (excluding any funds received from directors or officers of the
Company), the Company shall immediately pay Festina a cash bonus of $50,000.00
on the date such milestone is achieved.
b. TRADING PRICE BONUS. If, during the term of this Agreement, the average
closing sales price of the common stock of the Company on all domestic
securities exchanges (including, but not limited to, the over-the-counter
market) over any period of sixty consecutive trading days is equal to or greater
than $3.00 per share (as equitably adjusted from time to time for stock splits,
stock dividends, recapitalizations, and similar events), then the Company shall
immediately pay Festina a cash bonus of $50,000.00 on the date which is the
first trading day following the date such milestone is achieved.
c. CHAIRMAN RECRUITING BONUS. If, during the term of this Agreement, BJG
identifies his successor as Chairman of the Board of Directors of the Company
and such person is approved and appointed by a majority of the members of the
Board of Directors of the Company, (i) the Company shall pay Festina a cash
bonus equal in amount to the product of six (6) times Festina's monthly
compensation (as determined in accordance with Section 2) in effect at the time
such successor Chairman is approved and appointed, and (ii) any unvested portion
of the Initial Option or a Subsequent Option, as the case may be, shall
immediately become vested and exercisable for a number of shares equal to fifty
percent (50%) of the total number of shares subject to such option (including
vested and unvested shares), in addition to the vesting of any shares under such
option(s) through the date such successor Chairman is approved and appointed by
a majority of the members of the Board of Directors of the Company.
5. PROPRIETARY INFORMATION. Festina agrees that it and its employees and
affiliates, including, but not limited to, BJG, shall not, without the prior
written consent of a majority of the members of the Board of Directors, disclose
or use for any purpose (except in the course of providing Management Services
under this Agreement) any confidential information or proprietary business
information of the Company.
6. RIGHT TO ADVICE OF COUNSEL. Festina and the Company each acknowledge that
they have consulted with legal counsel or had the opportunity to do so and are
fully aware of their rights
<PAGE>
and obligations under this Agreement. Festina and BJG each understand that the
law firm of Graham & James LLP is acting as counsel to the Company in connection
with the negotiation of this Agreement, and is not acting as counsel for either
Festina or BJG.
7. CONFLICT RESOLUTION. Any disagreement, dispute, controversy or claim arising
out of or relating to this Agreement or the breach hereof (whether sounding in
contract or tort), shall be resolved exclusively and finally by arbitration in
accordance with the following procedures:
a. The arbitration shall be conducted in the city and county of Sacramento,
California, or such other location as the parties mutually agree.
b. The arbitration proceedings will be conducted in accordance with, and
pursuant to, the Labor Arbitration Rules (the "ARBITRATION RULES") of the
American Arbitration Association. In the event of any conflict between the
Arbitration Rules and the provisions of this Section 7, the provisions of this
Section 7 shall control.
c. There will be a single neutral arbitrator ("ARBITRATOR") who will be
selected pursuant to the Arbitration Rules; provided, however, that
notwithstanding the Arbitration Rules, Festina shall have the right to
preemptively challenge any arbitrator that has previously arbitrated any matter
for the Company.
d. The Arbitrator will have the power to grant all appropriate legal and
equitable relief, both by way of interim relief and as a part of the final
award, as may be granted by any court of competent jurisdiction, in order to
carry out the terms of this Agreement (including, without limitation,
declaratory and injunctive relief and damages, but in no event shall the
Arbitrator have the authority to award punitive or exemplary damages). All
awards and orders of the Arbitrator, including interim relief, may be enforced
by any court of competent jurisdiction.
e. The parties intend that the arbitration proceedings be conducted as
expeditiously as possible and that appropriate rights of discovery (including
the right to depose witnesses, submit interrogatories and request documents) be
granted to each party. In that regard, the parties agree to work together in
good faith with the Arbitrator to arrive upon mutually acceptable procedures
regarding the time limits for, and type, amount, scope and degree of, such
rights of discovery and the periods of time within which the matters submitted
to arbitration must be heard and determined by the Arbitrator. If the parties
are unable to so agree, such issues will be submitted to the Arbitrator for his
or her determination. If proper notice of any hearing has been given, the
Arbitrator will have full power to proceed to take evidence or to perform any
other acts necessary to arbitrate the matter in the absence of any party who
fails to appear. At the request of any party, the Arbitrator, attorneys, parties
to the arbitration, witnesses, experts, court reporters or other persons present
at the arbitration shall agree in writing to maintain the strict confidentiality
of the arbitration proceedings.
<PAGE>
f. Notwithstanding the foregoing, a party may apply to a court of competent
jurisdiction within the State of California for relief in the form of a
temporary restraining order or preliminary injunction, or other provisional
remedy pending appointment of an Arbitrator or pending final determination of a
claim through arbitration in accordance with this Section 7. In the event a
dispute is submitted to arbitration hereunder during the term of this Agreement,
the parties shall continue to perform their respective obligations hereunder,
subject to any interim relief that may be ordered by the Arbitrator or by a
court of competent jurisdiction pursuant to the previous sentence.
g. The parties, by written stipulation, may expand or contract the rights,
duties or obligations provided above, or otherwise modify the arbitration
procedures as suits their convenience, consistent with that which is otherwise
permissible within the framework of the Arbitration Rules.
h. The prevailing party (if a prevailing party is determined to exist by
the Arbitrator) in any proceeding or action under this Section 7 shall be
entitled, in addition to any other damages or relief awarded, to an award of
reasonable legal and accounting fees, expenses and other out-of-pocket costs
incurred by such party (including any costs and fees incurred by and payable to
the Arbitrator and any costs incurred in enforcing any such award), not to
exceed such fees incurred by the non-prevailing party regardless of whether such
proceeding or action proceeds to final judgmenet.
i. Any decision or award of the Arbitrator shall be final and binding upon
the parties to the arbitration proceeding except for fraud or failure to provide
a hearing. The parties hereby waive to the extent permitted by law any rights to
appeal or to review of such award by any court or tribunal. The parties agree
that the award of the Arbitrator may be enforced against the parties to the
proceeding or their assets wherever they may be found and that a judgment upon
the award may be entered in any court having jurisdiction thereof.
j. FESTINA HAS READ AND UNDERSTANDS THIS SECTION 7, WHICH DISCUSSES
ARBITRATION. FESTINA UNDERSTANDS THAT BY SIGNING THIS EXECUTIVE SERVICES
AGREEMENT, FESTINA AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR
IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION,
AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF FESTINA'S RIGHTS TO A
JURY TRIAL.
8. TERM AND TERMINATION. The term of this Agreement shall commence on the
Effective Date and shall continue until ninety (90) days following the date on
which either party delivers written notice in accordance with Section 10 to the
other of its desire to terminate this Agreement; provided, however, that Festina
agrees that it may not give written notice of termination to the Company on or
prior to June 30, 1999. Upon termination of this Agreement,
<PAGE>
Festina shall have no rights other than (i) to receive any earned but unpaid
compensation through the effective date of termination, and (ii) the right to
exercise the vested portion of the Initial Option and the vested portion of each
Subsequent Option, if any, subject to the terms and conditions contained in
Section 3 and in the stock option agreement(s) between Festina and the Company.
9. NO ASSIGNMENT. This Agreement and all rights under this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective personal or legal representatives, executors,
administrators, heirs, distributees, devisees, legatees, successors and assigns.
Neither of the parties to this Agreement shall, without the written consent of
the other, assign or transfer this Agreement or any right or obligation under
this Agreement to any other person or entity.
10. NOTICES. For purposes of this Agreement, notices and other communications
provided for in this Agreement shall be in writing and shall be delivered
personally or sent by federal express or Unites States certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Company:
Peabodys Coffee, Inc.
3845 Atherton Road, Suite 9
Rocklin, California 95765
Attn: Todd Tkachuk
If to Festina:
Festina
6665 Southwest 69th Lane
Miami, Florida 33143
Attn: Barry J. Gibbons
or to such other address or the attention of such other person as the recipient
party has previously furnished to the other party in writing in accordance with
this section. Such notices or other communications shall be effective upon
delivery or, if earlier, three days after they have been sent as provided above.
11. INTEGRATION. This Agreement represents the entire agreement and
understanding between the parties as to the subject matter hereof and supersedes
all prior or contemporaneous agreements and correspondence whether written or
oral. No waiver, alternation, or modification of any of the provisions of this
Agreement shall be binding unless in writing and signed by a duly authorized
representative of the party against whom such waiver, alteration, or
modification is sought to be enforced.
<PAGE>
12. WAIVER. Failure or delay on the part of either party hereto to enforce any
right, power, or privilege hereunder shall not be deemed to constitute a waiver
thereof. Additionally, a waiver by either party or a breach of any promise
hereof by the other party shall not operate as or be construed to constitute a
waiver of any subsequent waiver by such other party.
13. SEVERABILITY. Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
14. HEADINGS. The headings of the sections and paragraphs contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of any provision of this Agreement.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal substantive laws, and not the choice of law rules,
of the State of California.
16. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
none of which need contain the signature of more than one party hereto, and each
of which shall be deemed to be an original, and all of which together shall
constitute a single agreement.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the Effective Date.
PEABODYS COFFEE, INC.
---------------------------------------
Todd Tkachuk
President and Chief Executive Officer
FESTINA
---------------------------------------
Barry J. Gibbons
<PAGE>
ADDENDUM TO EXECUTIVE SERVICES AGREEMENT
This Addendum ("Addendum") is to the Executive Services Agreement ("Agreement")
dated 12.01.98 between Barry J. Gibbons ("BJG") doing business as Festina
("Festina") and Peabodys Coffee, Inc. ("Company").
This Addendum is entered into as of 01.01.2000 (the "Effective Date).
All clauses in the 12.01.98 Agreement will stand, with the exceptions of the
following changes:
1. SERVICES TO BE PROVIDED. BJG's title shall be External Director. The duties
and responsibilities during the term of the Agreement and Addendum shall include
general advice and consultancy commensurate with an External Director. These
responsibilities will include attending two scheduled Board Meetings each year,
at a location to be agreed, with appropriate expenses reimbursed.
2. COMPENSATION. In payment for these duties, the Company shall pay Festina cash
compensation of $2,000.00 per month, payable on or before the fifteenth day of
the month in which such services were rendered. Such payments will be made
direct by bankers order. In addition, the Company will grant Festina
nonstatutory options to acquire shares of common stock in the Company only in
line with any future agreed policy for External Directors.
3. ADDITIONAL SERVICES. From time to time, Festina may agree to provide specific
additional consultancy services and/or visits. Such additional services will be
paid for by the Company at the time, at a level agreed before hand in writing,
but at a rate which will not be less than $1,500.00 per day, plus reimbursable
expenses.
4. PERFORMANCE CASH BONUSES. All such provisions noted under Section 4 of the
Agreement are canceled.
5. DIRECTORS LIABILITY INSURANCE. This Addendum is contingent upon the Company
providing appropriate and agreed cover within 60 days of the Effective Date.
6. POTENTIAL CONFLICT OF INTERESTS. The Company acknowledges BJG owns a majority
of the shares of the common stock of Peabodys Ltd., a company based on a similar
concept operating independently of the Company and only in the UK. While the
Company operates only in the US, and Peabodys Ltd. operates only in the UK, and
there are no active discussions internally to the Company, or between those
companies, to merge or acquire interests in the other company, BJG's investment
and involvement in both companies does not threaten to conflict with the
interests of the Company.
In the event that the board of the Company wishes to discuss any
potentially substantive changes to those circumstances, BJG will formally
abstain from such discussions, and such
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abstinence will be minuted. In the event the Company wishes to approach Peabodys
Ltd. with a view to merging, joint venture or acquisition activities, BJG will
immediately offer his resignation under the termination rulings of the
Agreement.
BJG undertakes to use his position to keep both companies informed of
developments in the other company, and will seek informal synergies and the
continued sharing of successful ideas.
IN WITNESS WHEREOF, each of the parties hereto has executed this Addendum
to the Executive Services Agreement as of the Effective Date.
PEABODYS COFFEE, INC.
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Todd Tkachuk
President and Chief Executive Officer
FESTINA
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Barry J. Gibbons
2
[ELLIOTT, LANE & ASSOCIATES, INC. LETTERHEAD]
[Date]
GENERAL AGREEMENT
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Mr. T. Tkachuk
Peabodys Coffee Inc. (PBDY)
3845 Atherton Road, Suite 9
Rocklin, CA 95765
Dear Mr. Gibbons:
This agreement is in relation to your corporation's desire to secure
consultant advisory services in relation to our ability to provide the
assistance required by your corporation.
Elliott, Lane & Associates, Inc. will consult with the company with regard
to developing an action plan and will assist in executing the company's business
plan.
Elliott, Lane & Associates, Inc. will have access to all corporate
information and to its auditors and legal counsel. The company will provide
Elliott, Lane & Associates, Inc. with all the necessary information that it
requires upon request and will not withhold information from Elliott, Lane &
Associates, Inc. Elliot, Lane & Associates, Inc., as part of this agreement,
will provide written and/or verbal reports to the company for any proposed plan
of action, and will only execute a plan of action with the express agreement of
the company.
Immediately upon the signing of this contract and after consulting with the
company, Elliot, Lane & Associates, Inc. will begin to source synergistic merger
and/or acquisition and/or joint venture opportunities for the company, it will
complete due diligence on the target merger and/or acquisition and/or joint
venture candidate(s) and will assist in the negotiations on behalf of the
company. It will also assist with the development of the proforma financial
projections for the developing company post merger and/or acquisition.
Elliot, Lane & Associates, Inc. will help coordinate news releases to the
public which will begin with a prompt news release that Elliot, Lane &
Associates, Inc. has been retained for the above-mentioned services.
In recognition of the above services, Peabodys Coffee, Inc. will pay
Elliot, Lane & Associates, Inc. the following:
PBDY Initials:_____ Page 1 of 3 ELA Initials:_____
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1. Sixty Thousand (60,000) shares of Peabodys Coffee, Inc., freely
tradable common stock as compensation for consulting services. Such
shares will be issued coincident with the signing of this general
agreement.
2. Ten Thousand (10,000) shares of Peabodys Coffee, Inc. restricted (Rule
144 of the Securities Act of 1933) common stock as compensation for
consulting services. Such shares will be issued coincident with the
signing of this general agreement and will have piggy-back
registration rights.
3. Ten percent (10%) of the transaction value in equity and/or cash for
each successful acquisition and/or merger approved and completed by
Peabodys Coffee, Inc., initiated by Elliot, Lane & Associates, Inc.
Such ten percent (10%) of the transaction value will be paid to
Elliot, Lane & Associates, Inc. upon closing of the said acquisition
and/or merger.
4. In the event of a joint venture, initiated by Elliot, Lane &
Associates, Inc. being approved and entered into by Peabodys Coffee,
Inc., Elliot, Lane & Associates, Inc. will be issued Fifty Thousand
(50,000) shares of Peabodys Coffee, Inc. restricted (Rule 144 of the
Securities Act of 1933) common stock. Such shares will be issued
coincident with the signing of the joint venture agreement.
The undersigned parties hereby irrevocably agree not to circumvent, avoid
or bypass each other, whether directly or indirectly, to avoid payment of fees
or commissions, and/or usurp essential confidentiality in any transaction which
any individual or organization revealed by either party to the other, in
connection with any renegotiations, parallel, or third party assignments
thereof. Further, the undersigned parties agree to work together toward a mutual
goal of effecting a business transaction agreeable to all parties.
Nor shall either party disclose or otherwise reveal to any third party, any
confidential information provided by the other, particularly concerning names,
addresses, cable or telefax, fax, email, or other codes, bank information,
references or other means of identification or access or any other proprietary
information, formally or otherwise advised by either party to the other as being
confidential, without specific written approval of the other.
Indemnification, in its broadest meaning and application, will be provided
to Elliot, Lane & Associates, Inc. by Peabodys Coffee, Inc. who hereby agrees to
indemnify, defend and hold harmless Elliot, Lane & Associates, Inc. and all of
its representatives from any and all claims or actions arising out of or in
connection with this general agreement.
This is to apply to this transaction and to any subsequent transaction that
may occur from time to time, for a period of five (5) years from the date
hereof, which is introduced to one party hereto by the other party.
PBDY Initials:_____ Page 2 of 3 ELA Initials:_____
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This general agreement will be effective for _______ year(s), renewable
with mutual consent of both parties.
Agreed and accepted:
By:_______________________________ By:_______________________________
Mark R. Lane Mr. T. Tkachuk
Elliot, Lane & Associates, Inc. Peabodys Coffee, Inc.
PBDY Initials:_____ Page 3 of 3 ELA Initials:_____
PROFESSIONAL SERVICE AGREEMENT
between Peabodys Coffee Inc, (Refereed to as "PBDY")
3845 Atherton Road, Suite 9,
Rocklin,
CA 95765
and Elliott, Lane & Associates, Inc., (Referred to as "ELA")
31951 Sunset Ave,
Laguna Beach,
CA 92677
Whereas, PBDY desires to seek investor relations representation in Germany and
other European countries and,
Whereas, PBDY desires ELA to represent PBDY through its affiliations in Germany
("affiliates") and other European countries for disseminating investor relations
(I.R.) information and creating awareness of PBDY in the European financial
community.
NOW THEREFORE, in consideration of the foregoing and the mutual promises, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. ELA, upon receipt of all documentation listed in Exhibit A attached hereto,
will use its best efforts to seek a listing of PBDY shares on the Tradegate
Stock Exchange, pursuant to the terms of Section 6a. Also, ELA, through its
German affiliates, will distribute and disseminate information exclusively
provided by PBDY to existing and potential shareholders in Europe.
2. ELA will provide such services as listed in Exhibit B for a period of four
months, beginning on the date the full cash and stock fee is received by
ELA, pursuant to the terms of Section 6.
3. PBDY will make a good faith effort to keep ELA informed and advised about
all public information available about PBDY and that information alone will
be the source of information for dissemination and translation to
shareholders or other interested parties in Europe.
4. PBDY will send to ELA three copies of all filings made by PBDY with the
Securities and Exchange Commission, NASD or other Stock Exchanges,
immediately upon filing. One copy of every filing/press release will be
faxed directly to the U.K. office of ELA.
5. PBDY's personnel will be available to ELA's affiliates for periodic
updates, upon reasonable notice.
PBDY Initials:_____ Page 1 ELA Initials:_____
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6. ELA's remuneration for the above services outlined will be as follows:
a) PBDY will pay ELA a total of $42,500 USD in cash. An initial amount
of $5,000 will be paid directly to ELA coincident with the signing of
this agreement, a second amount of $37,500 (being the balance of the
$42,500 cash fee) will be paid to ELA within 30 days of the closing of
the acquisition of Arrosto Coffee by PDBY or in the event of
Investment Capital is secured for PBDY such $37,500 will be paid to
ELA directly from escrow upon the closing the financing.
b) PBDY will issue 100,000 restricted shares (Rule 144 of the
Securities Act of 1933) of common stock, coincident with the signing
of this agreement, to ELA with piggyback registration rights.
7. Special Conditions (Road-Show Presentations):
All road show presentations will be at the Company's request and billed
separately at $4,500 USD per location. Each presentation is usually a
luncheon for up to approximately 40 invited guests/investors. Also, related
cost such as travel and expenses are approximately $1,500 USD per
presentation, for a total cost to the Company of $6,000 per location. We
highly recommend at least two (2) road-show presentations per year.
8. Indemnification.
The Company agrees to indemnify and hold ELA, its attorneys and all of its
officers, directors, employees, affiliates and agents harmless from and
against any and all manner of actions, causes of action, claims, demands,
costs, damages, liabilities, losses, obligations and expenses (including
actual attorney's fees) arising or resulting from or related to ELA's
performance of the services pursuant hereunder, unless they are due to
breach of this agreement or gross negligence or wilful misconduct of ELA.
9. Law, Forum and Jurisdiction.
This agreement shall be construed and interpreted in accordance with the
laws of the State of California. The parties agree that any dispute arising
under or with respect to or in connection with this agreement, whether
during the term of this agreement or at any subsequent time, shall be
resolved fully and exclusively by binding arbitration in accordance with
the commercial rules then in force of the American Arbitration Association
and the proceedings taking place in Santa Ana, California.
10. Attorney's Fees.
In the event that any party institutes any action to enforce this Agreement
or to secure relief from any default hereunder or breach hereof, the
prevailing party shall be entitled to reimbursement from the non-prevailing
party for all costs, including reasonable attorney's fees, incurred in
connection therewith and in enforcing or collecting any judgment rendered
therein.
11. Confidentiality.
PBDY Initials:_____ Page 2 ELA Initials:_____
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The PBDY and ELA agree that unless and until mutually agreed upon, they and
their representatives will hold in strict confidence all data and
information obtained with respect to the other party or any subsidiary
thereof from any representative, officer, director or employee, or from any
books or records or from personal inspection, of such other party, and
shall not use such data or information or disclose the same to others,
except:
(i) to the extent such data or information are a matter of public
knowledge or are required by law to be published; and,
(ii) to the extent that such data or information must be used or
disclosed in order to consummate the transactions contemplated by this
Agreement.
12. Entire Agreement.
This Agreement applies to transactions, which involve successors, assigns,
affiliates or subsidiary companies or entities. This agreement represents
the entire agreement between the parties hereto relating to the subject
matter hereof. This agreement alone fully and completely expresses the
agreement of the parties relating to the subject matter hereof and there
are no other courses of dealing, understandings, agreements,
representations or warranties, written or oral, except as set forth herein.
This Agreement may not be amended or modified, except by a written
agreement signed by all parties hereto.
Wherefore, the parties have executed this Agreement this ____ day of December
1999.
Peabody's Coffee Inc,
By: ____________________________
Name:
ELLIOTT, LANE & ASSOCIATES, INC.
By: ____________________________
Mark Lane, Chairman
PBDY Initials:_____ Page 3 ELA Initials:_____
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EXHIBIT A
INFORMATION REQUIRED FOR LISTING APPROVAL ON A GERMAN STOCK EXCHANGE:
1. The Company=s latest Form 10K or Annual Report *
2. Corporate brochure or corporate overview (if available)
3. Last 6 months press releases *
4. Copies of any media or analyst reports (if available)
5. Standard & Poor listing sheet (if available)
6. A letter on the Company=s letterhead addressed as follows: *
* Mandatory
Dear Sirs,
We hereby apply for a listing on the Tradegate Stock Exchange at as early a date
as possible.
We are looking forward to being a participant in this market as soon as
possible.
Very truly yours,
Peabody's Coffee Inc,
By:______________________________ Date:__________________
Name:
PBDY Initials:_____ Page 4 ELA Initials:_____
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EXHIBIT B
1. Research Report in German. This report is a summary and profile of your
Company (products, services, management-background, outlook, etc.), which
gives potential investors a scenario of your Company. This report will be
sent to about 1,500 potential investors, money managers, stock advisory
groups, journalists and publishers who have an interest in company's
industry and business. Interested parties will have the opportunity of
requesting from us the company's investor relation's kit.
2. Media Work. Articles will be strategically placed in the highest circulated
media that that relates to your Company=s business and the stock and
financial markets in general.
3. Permanent Presswork. Mailing and distribution on all company's press
releases and corporate news translated in German and sent out via e-mail
and/or direct mail.
4. Profile. Your corporate profile will be posted on the Internet via the
TeamWork Kommunikations GmbH directory. Your Company will have its own
portrait page with a link to your original homepage in the USA plus all
corporate news and press releases will be posted in English and German
languages.
5. Internet. Create an Internet presence in Europe by exposing the Company's
web site to various financial and industry-related directories including
one of Germany's most visited financial sites (over 200,000 hit per day).
6. Strategy. Our primary focus is strategic communications -- generating
awareness and understanding of a company among members of the financial
community -- traders, analysts, portfolio managers, brokers and individual
investors; the business community, Press Editors and the general public.
Our goal is to get a company's stock fully valued, increase trading volume,
increase the number of foreign shareholders, expand analyst following and
gain international media publicity for your company.
Optional Services and Costs:
- ----------------------------
* Road Shows. After investors have received information about your
Company, it is recommended that we schedule breakfast and/or lunch
meetings in 2 or 3 European cities (i.e., Hamburg, Frankfurt) with
institutional investors, fund managers and journalists (30 - 50
pre-qualified parties are usually invited).
* Special Conditions (Road-Show Presentations):
- -----------------------------------------------
All road show presentations will be at the company's request and billed
separately at $4,500 USD per location. Each presentation is a luncheon
usually for up to approximately 40 qualified invited guests/investors.
Also, related cost such as travel and expenses are approximately $1,500
USD per presentation, for a total cost to the Company of $6,000 per
location. We highly recommend at least two (2) road-show presentations per
year.
PBDY Initials:_____ Page 5 ELA Initials:_____
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Advertisements. Several "Tombstone-Ads" should be booked to create
interest in your Company in a way that investors can get a free copy of
the research report and media kit mentioned above. This should be done in
several different media and should be over a period of 4 - 8 weeks at a
time when your Company is in a position to issue favorable corporate news
and press releases:
We recommend running these ads in the following 4 German media: (DER
AKTIONAR, BorseOnline, Das Wertpapier, Euro am Sonntag) each with 5 ads
over a 2 two-month period. This campaign would be a total of 20 ads with
an average price per ad of $1,000 to $1,500 plus a 16% VAT tax.
PBDY Initials:_____ Page 6 ELA Initials:_____
